As filed with the Securities and Exchange Commission on September 17, 1999
Registration Nos. 333-________-01
333-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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FIRST STAR CAPITAL TRUST
FIRST STAR BANCORP, INC.
------------------------
(Name of Small Business Issuers in Their Charters)
Delaware Requested
Pennsylvania 6035 23-2753108
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(States or Other Jurisdictions (Primary SIC No.) (I.R.S. Employer
of Incorporation or Organization) Identification Nos.)
First Star Bancorp, Inc. First Star Capital Trust
418 West Broad Street, c/o Bankers Trust (Delaware)
Bethlehem, Pennsylvania 18018 1101 Centre Road, Suite 200, Trust Department
(610) 691-2233 Wilmington, Delaware 19805
(302) 636-3301
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(Address and Telephone Number of Principal Executive Offices)
Mr. Joseph T. Svetik
Chief Executive Officer
First Star Bancorp, Inc.
418 West Broad Street, Bethlehem, Pennsylvania 18018
(610) 691-2233
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(Name, address and telephone number of agent for service)
Please send copies of all communications to:
John J. Spidi, Esq. Jeffrey Waldon, Esq.
Gregory A. Gehlmann, Esq. Wesley Kelso, Esq.
MALIZIA SPIDI & FISCH, PC STEVENS & LEE, PC
1301 K Street, N.W., Suite 700 East One Penn Square
Washington, D.C. 20005 Lancaster, Pennsylvania 17608
(202) 434-4660 (610) 964-1480
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
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 registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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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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<S> <C> <C> <C> <C>
__.__% Preferred Securities of First Star 1,380,000 $10.00 $13,800,000 $3,836.40
Capital Trust (1)
__.__% Junior Subordinated Debentures of
First Star Bancorp, Inc. (2)
Guarantee of First Star 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 First Star 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 First Star Capital Trust; (2)__.__% Junior Subordinated Debentures
of First Star Bancorp, Inc.; and (3) a Guarantee of First Star 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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Information in this prospectus is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus does not constitute an offer to sell, or the
solicitation of an offer to buy, any of the securities to any person in any
jurisdiction in which the offer, solicitation or sale would be unlawful.
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PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED _____________ __, 1999
[LOGO]
$12,000,000
First Star Capital Trust
_.__% Preferred Securities
(Liquidation Amount $10 per Preferred Security)
guaranteed by
First Star Bancorp, Inc.
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First Star Capital Trust: First Star Capital Trust is a subsidiary of First Star
Bancorp, Inc. and is a Delaware business trust. The Offering: In connection with
this offering, the Trust will:
o sell preferred securities to the public and common securities to First Star
Bancorp, Inc.,
o use the proceeds from these sales to buy an equal principal amount of _.__%
junior subordinated debentures due December 31, 2029 issued by First Star
Bancorp, Inc. and
o distribute the cash payments it receives on the junior subordinated
debentures to the holders of the preferred and common securities.
The preferred securities represent undivided beneficial interests in
the assets of the Trust. For each preferred security that you own, you will be
entitled to receive cumulative cash distributions at an annual rate of _.__% of
the $10 liquidation amount, payable quarterly on the last business day of March,
June, September and December, beginning on ______________, 1999. We may defer
payment of distributions at any time for periods of up to 20 consecutive
quarters. The preferred securities mature on __________, 2029. The Trust may
redeem the preferred securities, at a redemption price of $10 per preferred
security plus accrued and unpaid distributions, at any time on or after
___________, 2004, or earlier under certain circumstances.
We will fully and unconditionally guarantee the preferred securities
based on its obligations under a guarantee, a trust declaration and an
indenture.
There is currently no public market for the preferred securities. We
expect the preferred securities to be quoted on the Nasdaq National Market under
the symbol "FSANP."
================================
You should carefully read the factors set forth in "Risk Factors" beginning on
page ___.
These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other governmental agency.
Neither the Securities and Exchange Commission, the Federal Deposit Insurance
Corporation, the Pennsylvania Department of Banking, nor any state securities
regulator has approved or disapproved these securities or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
Per Preferred Security Total
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Public Offering Price....................... $ $
Underwriting Discounts and Commissions...... $ $
Proceeds to Trust before expenses........... $ $
This offering is for $12,000,000 of preferred securities of the Trust; however,
Hopper Soliday, a division of Tucker Anthony Incorporated, has a 30-day option
to purchase up to an additional $1,800,000 of preferred securities at the same
price and on the same terms, solely to cover over-allotments, if any.
Hopper Soliday
A Division of Tucker Anthony Incorporated
______________, 1999
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[MAP PAGE]
Forward-looking statements relating to future performance or expectations
We have used "forward-looking statements" in this prospectus. Words
such as "believes," "expects," "may," "will," "should," "projected,"
"contemplates" or "anticipates" may constitute forward-looking statements. These
statements are within the meaning of the Private Securities Litigation Reform
Act of 1995 and are subject to risks and uncertainties that could cause our
actual results to differ materially. We have used these statements to describe
our expectations and estimates throughout this prospectus.
Our actual results could vary materially from the future results
covered in our forward-looking statements. The statements in the "Risk Factors"
section are cautionary statements identifying important factors, including
certain risks and uncertainties, that could cause our results to vary materially
from the future results covered in such forward-looking statements. Other
factors, such as the general state of the United States economy, could also
cause actual results to vary materially from the future results covered in such
forward-looking statements. We disclaim any obligation to announce publicly
future events or developments that affect the forward-looking statements in this
prospectus.
Activities that may maintain or stabilize the market price of the preferred
securities
In connection with this offering and in compliance with applicable law and
industry practice, the underwriters may overallot or effect transactions which
stabilize, maintain or otherwise affect the market price of the preferred
securities at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, purchasing preferred securities
to cover syndicate short positions and imposing penalty bids. These stabilizing
transactions, if commenced by the underwriters, may be discontinued at any time.
See "Underwriting."
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SUMMARY
To understand this offering fully, you should read this entire
prospectus carefully, including the financial statements and the notes to the
consolidated financial statements of First Star Bancorp, Inc.
References in this document to "we", "us", and "our" refer to First
Star Bancorp, Inc. In certain instances where appropriate, "we", "us", or "our"
refers collectively to First Star Bancorp, Inc. and First Star Savings Bank. A
reference to the "bank" refers to First Star Savings Bank.
First Star Bancorp, Inc.
We are a bank holding company, organized under the laws of the
Commonwealth of Pennsylvania in 1993. Our principal activity is holding all of
the stock of First Star Savings Bank. Our bank is a Pennsylvania-chartered stock
savings bank which traces its origins to 1893. The bank's principal business
consists of attracting deposits from the general public and originating loans
secured by residential properties.
Our bank conducts its operations through our main office located in
Bethlehem, Pennsylvania, and five branch offices located throughout the Lehigh
Valley in Bath, Palmer, Allentown, Nazareth and Alburtis. During the past twenty
years, the economy of the Lehigh Valley has shifted from one principally
dominated by manufacturing to an economy characterized by a diverse group of
industries including service and distribution firms, health care, technology,
manufacturing and retail firms. Although we currently do not have any plans to
do so, we would look to add branch locations in contiguous market areas with
customer bases that would be receptive to our strategy if economical
opportunities become available.
At June 30, 1999, we had total assets of $363.7 million, deposits of
$190.1 million and total stockholders' equity of $15.5 million. Since June 30,
1996, our assets, loans and deposits have grown at annual compounded rates of
26.1%, 8.5%, and 18.5%, respectively. Over that same period, our net income has
grown at an annual compounded rate of 27.2%, and our return on average equity
has increased from 12.9% for fiscal 1996 to 15.9% for fiscal 1999.
We have built our bank around a strategy of being a low-cost provider
of savings opportunities in our market area. We believe that our customers value
competitively priced products, and by building a culture of expense control and
efficiency, we have been able to pass these savings on to our customers by
providing attractive deposit rates and loan products.
Our principal executive office is located at 418 West Broad Street,
Bethlehem, Pennsylvania. Our telephone number is (610) 691-2233.
First Star Capital Trust
The Trust is a Delaware business trust which we created solely to:
o issue and sell the preferred securities and the common
securities;
o use the proceeds it receives from the sale of the common
securities and preferred securities to purchase the junior
subordinated debentures from us;
o distribute the cash payments it receives on the junior
subordinated debentures to the holders of the preferred and
common securities; and
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o engage in other activities that are incidental to the activities
described above.
The Trust will issue all of the preferred securities to purchasers in
the offering and will issue all of the common securities to us. The common
securities will represent an aggregate liquidation amount equal to at least 3%
of the total capital of the Trust.
The junior subordinated debentures will be the only assets of the
Trust, and our payments to the Trust under the junior subordinated debentures
will be the Trust's sole source of revenue.
The Offering
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<S> <C>
The Issuer........................... First Star Capital Trust, a Delaware statutory business trust.
The Securities that are being
Offered.......................... 1,200,000 preferred securities having a liquidation amount of $10
per preferred security. The preferred securities represent preferred
undivided beneficial interests in the assets of the Trust, which will
consist solely of junior subordinated debentures. We will guarantee
payments on the preferred securities to the extent of funds in the
Trust. We have granted Hopper Soliday an option, exercisable
within 30 days after the date of the offering, to purchase up to an
additional 180,000 preferred securities at the initial offering price,
solely to cover over-allotments, if any.
The Offering Price................... $10 per preferred security.
The Payment of
Distributions.................... The Trust will pay distributions to you on each preferred security at
an annual rate of __.__%. The distributions will be cumulative,
will accumulate from December 31, 1999, and will be payable in
arrears at the end of each calendar quarter, commencing _________
__, 1999.
Junior Subordinated
Debentures....................... The Trust will invest the proceeds from the issuance of the
preferred securities and the common securities in an equivalent
amount of our __.__% junior subordinated debentures.
Maturity............................. The junior subordinated debentures are scheduled to mature on
____________ __, 2029 unless we voluntarily shorten the maturity
date to a date not earlier than ____________, 2004. We will not
shorten the maturity date unless we have received prior approval if
it is then required under the applicable regulatory requirements.
The Trust must redeem the preferred securities when the junior
subordinated debentures are paid on the maturity date, or following
any earlier redemption of the junior subordinated debentures.
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<CAPTION>
<S> <C>
We have the Option to Extend
the Interest Payment
Period........................... At any time we are not in default under the junior subordinated
debentures, we may defer payments of interest on the junior
subordinated debentures for up to 20 consecutive quarters, but not
beyond their stated maturity date. The Trust would defer quarterly distributions
on the preferred securities while we are deferring payment on the junior
subordinated debentures. Deferred quarterly distributions will accumulate
additional distributions at an annual rate of __.__% compounded quarterly.
During any period that we are deferring interest payments, we may not declare or
pay any cash distributions on our capital stock or debt securities that are of equal
or lower rank than the junior subordinated debentures. After the end of any period in
which we are deferring interest payments, if we have paid all deferred and current
interest under the junior subordinated debentures, we may defer interest payments
again. If we defer interest payments, you will be required to include deferred
interest income in your gross income for United States federal income tax purposes
before you have received deferred interest payments.
Redemption of the Preferred
Securities is Possible........... The Trust may redeem the preferred securities in whole or in part if
we repay the junior subordinated debentures. Subject to any
regulatory approval that may then be required, we may redeem the
junior subordinated debentures prior to their scheduled maturity (1)
on or after ___________, 2004, in whole at any time or in part
from time to time, or (2) at any time, in whole, but not in part,
within 90 days after:
o certain tax events occur or become likely to occur;
o the Trust is or becomes likely to be deemed to be an investment
company; or
o there is a change in the regulatory capital treatment of the
preferred securities
Upon any redemption of the junior subordinated debentures we will use the
cash proceeds of the redemption to pay you a liquidation amount for the preferred
securities. The liquidation amount you will receive will be $10 per preferred
security plus any accrued and unpaid distributions to the date of redemption.
How the Securities will Rank
in Right of Payment.............. The preferred securities will rank equally with the common
securities. The Trust will pay distributions on the preferred
securities and the common securities pro rata. However, if we
default by failing to pay interest payments on the junior
subordinated debentures then no distributions on the common
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<CAPTION>
<S> <C>
securities will be paid until all accumulated and unpaid distributions on
the preferred securities have been paid.
Our obligations under the junior subordinated debentures are unsecured and
generally will rank junior in priority to our senior and other subordinated
indebtedness. If we create any new trusts similar to the Trust, then the junior
subordinated debentures will rank equally with any other junior subordinated
debentures we issue to such trusts.
Our obligations under the guarantee are unsecured and will rank junior to our
senior and other subordinated indebtedness. If we issue any guarantees
in the future relating to preferred securities issued by new trusts, then the
guarantee issued in this transaction will rank equally with those guarantees.
Because we are a holding company, the junior subordinated debentures and the
guarantee will effectively be subordinated to all existing and future liabilities of
our subsidiaries.
The Junior Subordinated
Debentures May Be
Distributed to You............... Under certain circumstances and after we obtain any necessary
regulatory approvals, we may dissolve the Trust. If we dissolve the
Trust, after satisfaction of any of the Trust's liabilities to creditors,
the Trust will distribute your pro rata share of the junior
subordinated debentures to you in liquidation of the Trust.
Our Guarantee of
Payments......................... We will fully and unconditionally guarantee the preferred securities
based on:
o our obligations to make payments on the junior subordinated
debentures;
o our obligations under a guarantee executed for the benefit of the
holders of the preferred securities; and
o our obligations under the trust agreement.
If we do not make payments on the junior subordinated debentures, the Trust will
not have sufficient funds to make payments on the preferred securities. The guarantee
does not cover payments when the Trust does not have sufficient funds.
Limited Voting Rights................ You will have no voting rights except in limited circumstances.
The Use of Proceeds.................. The Trust will invest all of the proceeds from the sale of the preferred and the
common securities in our junior subordinated
debentures. We intend to use the net proceeds from our sale of the
junior subordinated debentures to make a contribution to the bank
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<CAPTION>
<S> <C>
to fund its operations and growth, including an investment in back- office
systems technology designed to further increase operating efficiencies, and for
general corporate purposes. Initially, we may leverage the capital by investing in
mortgage-backed and agency securities and funding these purchases with borrowings.
Listing of the Preferred
Securities....................... Application has been made to have the preferred securities listed on
the Nasdaq National Market under the symbol "FSANP." If
approved for listing, we expect trading to commence within 30 days
after the preferred securities are first issued.
Book-entry........................... The preferred securities will be represented by a global security that will
be deposited with and registered in the name of The Depository
Trust Company, New York, New York, or its nominee. This means that you will not receive a
certificate for your preferred securities.
ERISA Considerations................. You must carefully consider the information set forth under
"Certain ERISA Considerations."
Risk Factors
Before purchasing the preferred securities offered by this prospectus, you
should carefully consider the "Risk Factors" beginning on page ___.
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SELECTED CONSOLIDATED FINANCIAL DATA
The following is our selected consolidated information. This information is
only a summary, and you should read it together with our consolidated financial
statements and the notes beginning on page F-1.
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At or For the Years Ended June 30,
-------------------------------------------
1999 1998 1997
---- ---- ----
(Dollars in thousands,
except per share data)
<S> <C> <C> <C>
Selected Results of Operations:
Net interest income.................................. $7,684 $6,630 $5,787
Provision for loan losses............................ 423 385 220
Non-interest income.................................. 796 1,760 720
Non-interest expenses................................ 3,974 3,582 4,036(2)
Net income(1)........................................ 2,566 2,816 1,509
Less preferred dividends............................. (43) (45) (44)
Net income applicable to common stockholders......... 2,523 2,771 1,465
Per Share Data(3):
Earnings per common share- basic..................... $ 6.90 $ 7.68 $ 4.00
Earnings per common share - diluted.................. 3.76 4.15 2.53
Book value per share, fully diluted.................. 27.90 27.55 23.55
Selected Balance Sheet Data:
Total Assets......................................... 363,706 315,802 270,899
Loans receivable, net(4)............................. 184,264 176,386 149,476
Securities available for sale........................ 160,438 123,759 103,271
Total Deposits....................................... 190,148 145,096 118,662
Advances from Federal Home Loan Bank................. 146,180 144,485 129,400
Subordinated debentures.............................. 5,480 5,480 5,480
Total Stockholders' equity........................... 15,476 15,113 12,015
Performance Ratios:
Return on average assets............................. 0.75 0.97 0.68
Return on average equity............................. 15.85 19.81 13.37
Net interest margin ................................. 2.26 2.32 2.67
Efficiency ratio .................................... 46.86 42.69 50.58(5)
Asset Quality Ratios:
Nonperforming loans to total loans .................. 1.22 1.91 2.72
Allowance for loan losses to total loans............. 0.96 0.84 0.77
Allowance for loan losses to nonperforming
loans............................................. 77.4 43.6 27.8
First Star Bancorp Capital Ratios:
Average stockholders' equity to average assets....... 4.70 4.90 5.12
Leverage ratio....................................... 4.72 4.93 5.22
Tier 1 risk-based capital ratio...................... 7.92 8.88 8.81
Total risk-based capital ratio....................... 10.89 12.85 13.74
</TABLE>
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(1) Excluding the write-off of $111,000, net of income taxes, related to an
attempted merger/conversion transaction to acquire Nesquehonig Savings Bank
that was abandoned, net income for fiscal 1999 would have been $2,631,000.
(2) Includes a non-recurring expense of $745,000 for a one-time deposit
insurance premium to recapitalize the SAIF.
(3) Adjusted for two 20% stock dividends declared during fiscal 1998.
(4) Does not include loans available for sale of $1,468,000 and $1,654,000 at
June 30, 1997 and 1996.
(5) Does not include the non-recurring expense of $745,000 for a one-time
deposit insurance premium to recapitalize the SAIF.
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RISK FACTORS
An investment in the preferred securities involves a number of risks,
some of which relate to the terms of the preferred securities or the junior
subordinated debentures and others of which relate to us and our business. You
should carefully review the following information about these risks together
with other information contained in this prospectus before deciding whether this
investment is suitable for you.
Risk Factors Relating to the Preferred Securities
Our obligations under the guarantee and under the junior subordinated debentures
will be deeply subordinated and we will pay our other debt obligations before we
pay you.
Our obligations under the junior subordinated debentures and the
guarantee are unsecured and are subordinate in right of payment to all of our
existing and future senior debt, subordinated debt and additional senior
obligations, which totaled $151.7 million at June 30, 1999, excluding $190
million of deposits. The issuance of the junior subordinated debentures will
raise our debt to total capital ratio to 50.8%, 56.0% if Hopper Soliday
exercises the over-allotment option. In addition, after the issuance of the
junior subordinated debentures, our pre-tax interest coverage ratio will be
approximately 3.56x, 3.30x if Hopper Soliday exercises the over-allotment
option. Neither the indenture governing the junior subordinated debentures, nor
the trust agreement and guarantee relating to the preferred securities, limit
our ability to incur additional indebtedness, including indebtedness that ranks
senior to the junior subordinated debentures and guarantee.
The junior subordinated debentures and the guarantee also are
effectively subordinated to all existing and future liabilities of our
subsidiary, First Star Savings Bank. The bank will pay its creditors before it
pays dividends to us, and the bank's creditors will generally have priority over
us and you in any distribution of the bank's assets in a liquidation,
reorganization or other transaction. In the event that distributions from the
bank to us are not sufficient to cover our payment obligations under the junior
subordinated debentures or the guarantee, we may be unable to make those
payments. See "Description of Junior Subordinated Debentures -- Subordination"
on page ___ and "Business of First Star Savings Bank -- Sources of Funds --
Borrowings" and "-- Subordinated Debentures" on page ___.
If we do not make payments on the junior subordinated debentures, the Trust will
not be able to make payments on the preferred securities and the guarantee will
not apply.
The ability of the Trust to timely pay amounts due on the preferred
securities depends solely upon our making the related payments on the junior
subordinated debentures when due. If we default on our obligation to pay
principal of or interest on the junior subordinated debentures, the Trust will
not have sufficient funds to pay distributions on, or the $10 liquidation amount
of, the preferred securities.
In that event, you would not be able to rely on the guarantee for
payment because the guarantee applies only when the Trust has funds available
for payment. Instead, you or the property trustee would have to sue us to
enforce the property trustee's rights under the indenture relating to the
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junior subordinated debentures. See "Relationship Among the Preferred
Securities, the Junior Subordinated Debentures, and the Guarantee" on page ___.
Payments on the junior subordinated debentures by us to the Trust will depend
primarily on any dividends we may receive from the bank, which may be limited by
regulations and debt covenants.
The Trust will depend solely on our payments on the junior subordinated
debentures in paying amounts due on the preferred securities. We are a separate
legal entity from the bank and do not have significant operations of our own.
Therefore, we will depend primarily on any dividends we receive from the bank to
pay interest on the junior subordinated debentures to the Trust. In addition,
the dividends we receive from the bank will also continue to be used to pay
interest on our subordinated debt and dividends on our preferred stock. The
payment of dividends by the bank may be limited by regulations and debt
covenants. For a more complete discussion, see the immediately following risk
information and information under "Description of the Preferred Securities" on
page ___ and "Description of Junior Subordinated Debentures -- Subordination" on
page ___.
We may defer interest payments under the junior subordinated debentures, which
could have adverse tax consequences for you.
So long as we are not in default, we may defer the payment of interest
on the junior subordinated debentures at any time for up to 20 consecutive
quarters. Any deferral, however, could not extend beyond the stated maturity
date of the junior subordinated debentures. During any period in which we were
deferring interest payments, the Trust would defer quarterly distributions on
the preferred securities. Deferred distributions would accumulate with interest
at the annual rate of __% compounded quarterly from the normal distribution
payment date.
During each period in which we were deferring interest payments, the
United States federal income tax laws would require you to accrue and recognize
income in the form of original issue discount on your pro rata share of the
interest accruing on the junior subordinated debentures held by the Trust. As a
result, you would be subject to United States federal income tax on this income
before you would have received cash distributions on the preferred securities.
In addition, during a deferral period:
o you would not receive the deferred cash distributions if you
sold the preferred securities before the record date for
payment of the deferred distributions, even if you held the
preferred securities on the last day of a quarter, and
o your tax basis in the preferred securities would increase by
the amount of accrued but unpaid distributions. If you sold
the preferred securities during a deferral period, your
increased tax basis would increase the amount of any capital
loss that you might have otherwise realized on the sale. A
capital loss, except in certain limited circumstances, cannot
be applied to offset ordinary income.
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See "Description of Junior Subordinated Debentures -- Option to Extend Interest
Payment Period" on page ___ and "United States Federal Income Tax Consequences
- -- Interest Income and Original Issue Discount" on page ___.
The preferred securities may be redeemed prior to maturity; you may be taxed on
the proceeds at the time of redemption and you may not be able to reinvest the
proceeds at the same or a higher rate of return.
Under the following circumstances, we may redeem the junior
subordinated debentures prior to maturity:
o We may redeem the junior subordinated debentures within 90
days after the occurrence of the events described in
"Description of Preferred Securities -- Redemption" on page
___ at any time during the life of the Trust.
o In addition, we may redeem the junior subordinated debentures
prior to maturity at any time after _______________, 2004, so
long as we have obtained any approvals from regulatory
agencies that are required at that time.
If we redeem the junior subordinated debentures, the Trust will redeem
the preferred securities. Under current United States federal income tax law,
the redemption of the preferred securities would be a taxable event to you. In
addition, you may not be able to reinvest the money you receive in an investment
with a similar or higher expected rate of return. See "Description of Preferred
Securities -- Redemption" on page ___ and "United States Federal Income Tax
Consequences -- Receipt of Junior Subordinated Debentures or Cash Upon
Liquidation of the Trust" on page ___ and "-- Sales of Preferred Securities" on
page ___.
We may require you to exchange your preferred securities for junior subordinated
debentures; this may have adverse tax consequences for you and the junior
subordinated debentures may trade at a lower price than the price you paid for
the preferred securities.
We may dissolve the Trust at any time before its expiration. In such an
event, the trustees will, after paying the creditors of the Trust, distribute
your share of the junior subordinated debentures to you.
We cannot predict the market prices for the junior subordinated
debentures that would be distributed upon the dissolution of the Trust.
Accordingly, the junior subordinated debentures that you receive in a
distribution, or the preferred securities that you hold pending the
distribution, may trade at a lower price than the price you paid to purchase the
preferred securities. Because you may receive junior subordinated debentures,
your decision whether to invest in the preferred securities should also be made
with regard to the junior subordinated debentures. You should carefully review
all of the information regarding the junior subordinated debentures contained in
this prospectus.
Under current United States federal income tax laws, a distribution of
junior subordinated debentures to you upon the dissolution of the Trust would
not be a taxable event for you. If, however,
11
<PAGE>
the Trust were taxable as a corporation at the time of its dissolution, then a
distribution of junior subordinated debentures to you may be a taxable event for
you.
See "Description of Preferred Securities -- Liquidation Distribution
Upon Dissolution" on page ___ and "United States Federal Income Tax Consequences
- -- Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of the
Trust" on page ___.
You will have only limited voting rights, and we can amend the trust agreement
without your consent.
You will have limited voting rights as a holder of the preferred
securities. Your voting rights will relate only to the modification of the
preferred securities and the exercise of the Trust's rights as holder of the
junior subordinated debentures. You will not usually be able to appoint, remove
or replace the property trustee or the Delaware trustee because these rights
generally reside with us as the holder of the common securities. However, if an
event of default under the trust agreement occurs and is continuing the holders
of at least a majority in aggregate liquidation amount of the preferred
securities may remove the trustees. Even if it would adversely affect your
rights, we, together with the property trustee and the administrators may amend
the trust agreement without your consent to ensure that the Trust will be
classified as a grantor trust for United States federal income tax purposes. See
"Description of Preferred Securities -- Voting Rights; Amendment of Trust
Agreement" on page ___.
The market price for the preferred securities may decline after you invest.
There is no current public market for the preferred securities.
Although we have been advised that Hopper Soliday intends to make a market in
the preferred securities, it is not obligated to do so and any market making may
be interrupted or discontinued at any time without any notice at its sole
discretion. There is no guarantee that an active public market will develop for
the preferred securities. Even if an active public market does develop, there is
no guarantee that the market price for the preferred securities will equal or
exceed the price you paid in this offering. See "Market for the Preferred
Securities" on page ___.
The preferred securities may not trade at a price that accurately
reflects the value of accrued but unpaid interest on the underlying junior
subordinated debentures. In addition to other circumstances, our deferral of
interest payments on the junior subordinated debentures may cause the market
price for the preferred securities to decline.
The holders of the preferred securities and the junior subordinated debentures
are not protected by covenants in the indenture and the trust agreement.
Neither the indenture, which sets forth the terms of the junior
subordinated debentures, nor the trust agreement, which sets forth the terms of
the preferred securities and the common securities, protects holders of junior
subordinated debentures or the preferred securities, respectively, in the event
we experience significant adverse changes in our financial condition or results
of operations. In addition, neither the indenture nor the trust agreement limits
our ability or the ability of any subsidiary to incur additional indebtedness.
Therefore, the provisions of these governing instruments should not
12
<PAGE>
be considered a significant factor in evaluating whether we will comply with our
obligations under the junior subordinated debentures or the guarantee.
The preferred securities are not insured.
Neither the Bank Insurance Fund of the Federal Deposit Insurance
Corporation, the Savings Association Insurance Fund of the Federal Deposit
Insurance Corporation, nor any other governmental agency has insured the
preferred securities.
Risk Factors Relating to First Star Bancorp
Future changes in interest rates may reduce our profits.
Our ability to make a profit largely depends on our net interest
income, which could be negatively affected by changes in interest rates. Net
interest income is the difference between:
o the interest income we earn on our interest-earning assets, such
as mortgage loans and investment securities; and
o the interest expense we pay on our interest-bearing liabilities,
such as deposits and amounts we borrow.
Most of our mortgage loans have rates of interest which are fixed for
the life of the loan and are generally originated for periods of up to 30 years,
while our deposit accounts have significantly shorter periods to maturity.
Because our interest-earning assets generally have fixed rates of interest and
have longer effective maturities than our interest-bearing liabilities, the
yield on our interest-earning assets generally will adjust more slowly to
changes in interest rates than the cost of our interest-bearing liabilities,
which are primarily time deposits. As a result, our net interest income may be
reduced when interest rates increase significantly for long periods of time. In
addition, rising interest rates may reduce our earnings because there may be a
lack of customer demand for loans. Declining interest rates may also reduce our
net interest income if adjustable rate or fixed rate mortgage loans are
refinanced at reduced rates or paid off earlier than expected, and we reinvest
these funds in assets which earn us a lower rate of interest. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Management of Interest Rate Risk and Market Risk" on page ___.
Our allowance for loan losses may not be adequate to cover actual losses.
Like all financial institutions, we maintain an allowance for loan
losses to provide for loan defaults and non-performance. Our allowance for loan
losses may not be adequate to cover actual loan losses, and future provisions
for loan losses could materially and adversely affect our operating results. Our
allowance for loan losses is based on prior experience, as well as an evaluation
of the risks in the current portfolio, and is maintained at a level considered
adequate by management to absorb anticipated losses. The amount of future losses
is susceptible to changes in economic, operating and other conditions, including
changes in interest rates that may be beyond our control, and these losses may
exceed current estimates. State and federal regulatory agencies, as an integral
part of their examination
13
<PAGE>
process, review our loans and allowance for loan losses. We believe that our
allowance for loan losses is adequate to cover anticipated losses. There can be
no assurance, however, that we will not further increase the allowance for loan
losses or that regulators will not require us to increase this allowance.
Either of these occurrences could adversely affect our earnings.
Whether or not we make a profit is influenced by the health of our local
economy.
Our success depends to a certain extent upon the general economic
conditions of the local markets that we serve. Unlike larger banks that are more
geographically diversified, we provide banking services primarily to customers
in the markets in which we have branches, so any decline in the economy of
Pennsylvania or the Lehigh Valley in particular could have an adverse impact on
us. Our financial results, the credit quality of our existing loan portfolio,
and the ability to generate new loans with acceptable yield and credit
characteristics may be adversely affected by changes in prevailing economic
conditions, including declines in real estate values and rapid changes in
interest rates. Although economic conditions in our market area are strong,
there can be no assurance that these conditions will continue, or that negative
trends and developments will not adversely affect us. See "Business of First
Star Savings Bank - Market Area and Competition" on page ___.
Changes in general economic conditions and monetary policies may affect the
financial institutions industry as a whole, which will not only impact us
directly, but by affecting the condition of financial institutions whose fixed
income securities we hold in our investment portfolio, could affect us
indirectly as well by reducing the credit quality of these holdings.
Conditions beyond our control may have a significant impact on our
financial condition and results of operations, including:
o the strength of credit demand by customers;
o fiscal and debt management policies of the federal government;
o the monetary policy of the Federal Reserve Board;
o the introduction and growth of new investment instruments by
non-bank financial competitors; and
o changes in rules and regulations governing the payment of
interest on deposit accounts.
We hold approximately $40.9 million in corporate bonds and both rated
and unrated trust preferred securities of financial institutions in our
investment portfolio. To the extent the general economic conditions discussed
above affect our financial condition and results of operations, they may also
have a broader affect on the industry as a whole. As a result, the credit
quality of these investments may deteriorate, which may have an impact on our
financial condition and results of operations as well.
14
<PAGE>
The amount of common stock held by our executive officers and directors gives
them influence over the election of our Board of Directors and other matters
that require stockholder approval.
A total of 334,799 shares of our common stock, or 51.2% of the common
stock outstanding at June 30, 1999, is beneficially owned by our directors and
executive officers. See "Principal Security Holders" on page ___. Therefore, if
they vote together, our directors and executive officers have the ability to
exert significant influence over the election of our Board of Directors and
other corporate actions requiring stockholder approval, including the adoption
of proposals made by stockholders.
Future laws or regulations could hurt our profitability.
We operate in a highly regulated industry. We are regulated by the
Federal Reserve Board, and our bank is regulated by the FDIC and the
Pennsylvania Department of Banking. Federal and state banking laws and
regulations govern matters ranging from the regulation of certain debt
obligations, changes in the control of bank holding companies, and the
maintenance of adequate capital to the general business operations and financial
conditions of our bank, including permissible types, amounts and terms of loans
and investments, the amount of reserves maintained against deposits,
restrictions on dividends, establishment of branch offices and the maximum rate
of interest that may be charged by law. These and other restrictions limit the
manner in which we can conduct our business and obtain financing, and could
reduce our profitability.
If we do not compete successfully against other financial institutions in our
market area, our profitability will be hurt.
We operate in a competitive environment. In the market areas in which
we compete, other savings banks, commercial banks, savings and loan
associations, credit unions, finance companies, mutual funds, insurance
companies and brokerage and investment banking firms and other financial
intermediaries offer similar services. Many of these competitors have
substantially greater resources and lending limits and may offer certain
services that we do not currently provide. In addition, some of the non-bank
competitors are not subject to the same extensive regulations that govern our
business. Our profitability depends on our ability to compete successfully in
our market area. See "Business of First Star Savings Bank - Market Area and
Competition" on page ___.
We cannot predict how changes in technology will affect our business
The financial services market, including banking services, is
increasingly affected by advances in technology, including developments in:
o telecommunications;
o data processing;
o automation;
o internet-based banking;
15
<PAGE>
o telebanking; and
o debit cards and so-called "smart cards."
Our ability to compete successfully in the future will depend on
whether we can anticipate and respond to technological changes. To develop these
and other new technologies we will likely have to make additional capital
investments. Although we continually invest in new technology, we cannot assure
you that we will have sufficient resources or access to the necessary
proprietary technology to remain competitive in the future.
If our computer systems do not work properly with the Year 2000 date, we may not
be able to continue running our business properly.
Rapid and accurate data processing is essential to our operations.
Data processing is also essential to most other financial institutions and many
other companies. Many computer programs that can only distinguish the final two
digits of the year entered are expected to read entries for the year 2000 as the
year 1900 and compute payment, interest or delinquency based on the wrong date
or are expected to be unable to compute payment, interest or delinquency.
Failure to resolve year 2000 issues presents the following risks to us:
(1) we could lose customers to other financial institutions,
resulting in a loss of revenue, if our third party service
bureau is unable to process properly customer transactions;
(2) governmental agencies, such as the Federal Home Loan Bank, and
correspondent banks could fail to provide funds to us, which
could materially impair our liquidity and affect our ability
to fund loans and deposit withdrawals;
(3) concern on the part of depositors that year 2000 issues could
impair access to their deposit account balances could result
in our experiencing deposit outflows prior to December 31,
1999; and
(4) we could incur increased personnel costs if additional staff
is required to perform functions that inoperative systems
would have otherwise performed.
Most of our material data processing that could be affected by this
problem is provided by a third party service bureau. If our third party service
bureau does not resolve this problem, we would likely experience significant
data processing delays, mistakes or failures. These delays, mistakes or failures
could have a significant adverse impact on our financial condition and
profitability. In addition, if our significant suppliers of utilities are not
adequately prepared for year 2000 they may be unable to provide the necessary
service to drive our data systems or provide sufficient sanitary conditions for
our offices. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Year 2000 Readiness Disclosure" on page ___.
16
<PAGE>
USE OF PROCEEDS
The Trust will use all of the proceeds from the sale of the preferred
securities and common securities to purchase junior subordinated debentures from
us. We intend to use the net proceeds from the sale of the junior subordinated
debentures estimated to be $___ million ($___ million if the over-allotment
option is exercised in full):
o to make a contribution to the bank to fund its operations and
growth, including an investment in back-office systems
technology designed to further increase operating
efficiencies;
o financing growth, which may include expansion of our lending
and investment activities, one or more branch acquisitions,
acquisitions of other financial institutions, or acquisitions
of other financial services companies; and
o for general corporate purposes.
Until opportunities to invest the funds in our core business become
available, we may leverage the capital by employing an investment strategy of
purchasing mortgage-backed and agency securities and funding these purchases
with borrowings, in order to improve our overall return to stockholders and help
offset the cost of this capital.
MARKET FOR THE PREFERRED SECURITIES
Prior to this offering, there has been no market for the preferred
securities. Following the completion of the offering, we anticipate that the
preferred securities will be traded on the Nasdaq National Market. We expect
that Hopper Soliday will make a market in the preferred securities. Making a
market may include the solicitation of potential buyers and sellers in order to
match buy and sell orders. However, Hopper Soliday will not be obligated with
respect to these efforts and any market making may be interrupted or
discontinued at any time without any notice at its sole discretion.
The development of an active trading market depends on the existence of
willing buyers and sellers. There is no guarantee that an active or liquid
public trading market will develop for the preferred securities or whether
continued quotation of the preferred securities on the Nasdaq National Market
will be possible. Due to the small size of the offering, it is highly unlikely
that an active trading market will develop and be maintained. You could have
difficulty disposing of the preferred securities, and you should not view the
preferred securities as a short term investment. You may not be able to sell the
preferred securities at a price equal to or above the price you paid.
17
<PAGE>
CAPITALIZATION
The following table presents our consolidated capitalization (1) at
June 30, 1999 and (2) as adjusted to give effect to the consummation of the
offering of preferred securities.
<TABLE>
<CAPTION>
Actual, at June 30, 1999 Pro Forma Consolidated
------------------------ ----------------------
(Dollars in thousands)
<S> <C> <C>
Advances from Federal Home Loan Bank $146,180 $146,180
Convertible subordinated debt .................. 5,480 5,480
Guaranteed preferred beneficial interests in
subordinated debt(1)............................ -- 12,000
------- -------
151,660 163,660
------- -------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 2,500,000
shares authorized; 43,592 outstanding........ -- --
Common stock, $1.00 par value, 10,000,000
shares authorized; 375,404 outstanding....... 375 375
Additional paid-in capital...................... 8,465 8,465
Retained earnings............................... 8,300 8,300
Employee stock ownership plan debt............ (200) (200)
Accumulated other comprehensive
income (loss).............................. (1,464) (1,464)
------- -------
Total stockholders' equity...................... 15,476 15,476
-------- -------
Total capitalization............................ $167,136 $179,136
======= =======
FIRST STAR BANCORP CAPITAL
RATIOS:
Tier 1 risk-based capital ratio................. 7.92% 9.99%(2)
Total risk-based capital ratio.................. 10.89% 13.12%(2)
Leverage ratio.................................. 4.72% 6.08%(2)
FIRST STAR SAVINGS BANK CAPITAL
RATIOS:
Tier 1 risk-based capital ratio................. 9.34% 11.79%(2)
Total risk-based capital ratio.................. 10.18% 12.06%(2)
Leverage ratio.................................. 5.54% 7.14%(2)
</TABLE>
- --------------
(1) Preferred securities representing beneficial interests in an aggregate
principal amount of $12,000,000 of the Junior Subordinated Debentures
of First Star Bancorp.
(2) Assumes $12,000,000 from the proceeds of the offering of the preferred
securities are invested in assets with a 100% risk weighting under the
risk-based capital rules.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following is our selected consolidated financial information. This
information is only a summary, and you should read it together with our
consolidated financial statements and notes beginning on page F-1.
Selected Financial Data
<TABLE>
<CAPTION>
At June 30,
----------------------------------------------------
1999 1998 1997
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Balance Sheet
Total Assets.................................... $363,706 $315,802 $270,899
Loans receivable, net........................... 184,264 176,386 149,476
Securities available for sale................... 160,438 123,759 103,271
Cash and cash equivalents....................... 3,078 2,080 3,310
Total Deposits.................................. 190,148 145,096 118,662
FHLB advances................................... 146,180 144,485 129,400
Subordinated debentures......................... 5,480 5,480 5,480
Total Stockholders' equity...................... 15,476 15,113 12,015
Book value per share, fully
diluted(1).................................... $27.90 $27.55 $23.55
Other Data
Number of:
Real estate loans outstanding................... 3,258 2,928 2,812
Deposit accounts................................ 18,616 15,967 14,394
Offices......................................... 6 6 6
</TABLE>
- ------------------------
(1) Adjusted for two 20% stock dividends declared during fiscal year ended June
30, 1998.
19
<PAGE>
Summary of Operations
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------
1999 1998 1997
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Interest income......................................... $25,064 $21,240 $16,193
Interest expense........................................ 17,380 14,610 10,406
------ ------ ------
Net interest income................................... 7,684 6,630 5,787
Provision for loan losses............................... 423 385 220
------- ------- -------
Net interest income after provision
for loan losses..................................... 7,261 6,245 5,567
Non-interest income..................................... 796 1,760 720
Non-interest expenses(1)................................ 3,974 3,582 4,036
------ ------ ------
Income before income taxes.............................. 4,083 4,423 2,251
Provision for income taxes.............................. 1,517 1,607 742
------ ------ -------
Net income(2)......................................... 2,566 2,816 1,509
------ ------ ------
Less preferred dividends................................ (43) (45) (44)
------ ------ ------
Net income applicable to common
stockholders.......................................... $ 2,523 $ 2,771 $ 1,465
====== ====== ======
Earnings per common share -- basic(3)................... $ 6.90 $ 7.68 $ 4.00
Earnings per common share -- diluted(3)................. $ 3.76 $ 4.15 $ 2.53
</TABLE>
- ---------------------
(1) Includes a non-recurring expense of $745,000 for the year ended June 30,
1997 for a one-time deposit insurance premium to recapitalize the SAIF.
(2) Excluding the write-off of $111,000, net of income taxes, related to an
attempted merger/conversion transaction to acquire Nesquehonig Savings Bank
that was abandoned, net income for fiscal 1999 would have been $2,631,000.
(3) Adjusted for two 20% stock dividends declared during fiscal 1998.
20
<PAGE>
Selected Financial Ratios
<TABLE>
<CAPTION>
At or For the Year Ended
June 30,
------------------------------------------------
1999 1998 1997(2)
--------------- --------------- ----------------
<S> <C> <C> <C>
Performance Ratios(1):
Return on average assets (net income
divided by average total assets)......................... 0.75% 0.97% 0.68%
Return on average equity (net income divided by
average equity)......................................... 15.85 19.81 13.37
Net interest rate spread................................... 2.02 2.06 2.43
Net interest margin(3)..................................... 2.26 2.32 2.67
Efficiency ratio........................................... 46.86 42.69 50.58(4)
Asset Quality Ratios:
Non-performing loans to total loans........................ 1.22 1.91 2.72
Allowance for loan losses to total loans................... 0.96 0.84 0.77
Allowance for loan losses to nonperforming loans........... 77.4 43.6 27.8
First Star Bancorp Capital Ratios:
Average stockholders' equity to average assets............. 4.70 4.90 5.12
Tier 1 risk-based capital ratio............................ 7.92 8.88 8.81
Total risk-based capital ratio............................. 10.89 12.85 13.74
Leverage ratio............................................. 4.72 4.93 5.22
</TABLE>
- --------------
(1) Such ratios include the effect of the write-off of $111,000 ($65,000 after
income taxes) related to an attempted merger/conversion transaction with
Nesquehonig Savings Bank that was abandoned in 1999.
(2) For 1997, return on average assets and return on average equity, excluding
the effect of the special assessment to recapitalize the SAIF, were .88%
and 17.21%, respectively.
(3) Net interest income as a percentage of average interest-earning assets.
(4) Does not include the non-recurring expense of $745,000 for a one-time
deposit insurance premium to recapitalize the SAIF.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
General
Management's discussion and analysis is intended to assist you in
understanding our financial condition and results of operations. The information
in this section should also be read with our consolidated financial statements
and notes to the consolidated financial statements beginning on page F-1.
Our results of operations depend primarily on our net interest income,
which is determined by (i) the difference between rates of interest we earn on
our interest-earning assets and the rates we pay on interest-bearing liabilities
(interest rate spread), and (ii) the relative amounts of interest-earning assets
and interest-bearing liabilities. Our results of operations are also affected by
non-interest income, including income from loan and deposit account service
charges, gains and losses from the sale of available for sale securities and by
non-interest expense, including, primarily, compensation and employee benefits,
federal deposit insurance premiums, office occupancy cost, and data processing
cost. Our results of operations are also affected significantly by general and
economic and competitive conditions, particularly changes in market interest
rates, government policies and actions of regulatory authorities, all of which
are beyond our control.
Financial Condition
General. Total assets increased to $363.7 million at June 30, 1999,
from $315.8 million at June 30, 1998, an increase of $47.9 million or 15.2%. The
increase in total assets was attributable primarily to an increase in deposits
which increased by $45.1 million, or 31.1%, to $190.2 million from $145.1
million at June 30, 1998. These funds were used to invest primarily in available
for sale securities which increased by $36.6 million, or 30%, to $160.4 million
from $123.8 million at June 30, 1998. Loans receivable increased from $176.4
million to $184.3 million, an increase of $7.9 million, or 4.5%. Total cash and
cash equivalents increased to $3.1 million at June 30, 1999 from $2.1 million at
June 30, 1998, an increase of $1.0 million, or 47.6%.
Securities Available for Sale. All of our investments are classified as
"available for sale." Available for sale securities increased by $36.6 million,
or 30%, to $160.4 million from $123.8 million at June 30, 1998.
22
<PAGE>
The following table sets forth the carrying value of our investments.
See Note 2 to our consolidated financial statements beginning on page F-1.
<TABLE>
<CAPTION>
At June 30,
----------------------------------------------------
1999 1998 1997
---------------- -------------- ------------------
(In thousands)
<S> <C> <C> <C>
Securities Available for Sale:
U.S. Government and Federal Agencies............... $ 5,350 $ 15,763 $ 16,996
Mortgage-backed securities ........................ 81,217 76,035 74,736
Corporate debt securities.......................... 27,376 10,379 9,806
Trust preferred securities......................... 41,269 19,826 --
Marketable equity securities....................... 5,226 1,756 1,733
-------- -------- --------
Total securities available for sale................ $160,438 $123,759 $103,271
======== ======== ========
</TABLE>
The following table sets forth certain information regarding scheduled
maturities, carrying values, approximate fair values, and weighted average
yields for our investments at June 30, 1999 by contractual maturity. The
following table does not take into consideration the effects of scheduled
repayments or the effects of possible prepayments.
<TABLE>
<CAPTION>
Total Investment
One Year or Less One to Five Years Five to Ten Years More than Ten Years Securities
-------------------------------------- ----------------- --------------------- -------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield Value Yield
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and Federal
agencies.................. $ -- --% $ -- --% $ 995 7.09% $ 4,355 8.20% $ 5,350 7.99%
Mortgage-backed securities.. 35 6.71 1,453 6.39 1,632 7.06 78,097 6.03 81,217 6.05
Corporate debt securities... 2,365 6.86 13,523 7.33 9,844 7.99 1,644 8.24 27,376 7.82
Trust preferred securities.. 1,941 5.53 -- 5.35 39,328 6.73 41,269 6.68
Marketable equity securities -- -- -- -- -- -- 5,226 5.35 5,226 5.35
------ ------- ------- -------- --------
Total investments......... $2,400 6.85% $16,917 7.15% $12,471 7.59% $128,650 6.37% $160,438 6.55%
====== ======= ======= ======== ========
</TABLE>
Loans Receivable. Loans receivable increased to $184.3 million at June
30, 1999 from $176.4 million at June 30, 1998, an increase of $7.9 million, or
4.5%.
23
<PAGE>
The following table sets forth information concerning the types of
loans held by us, excluding loans held for sale.
<TABLE>
<CAPTION>
At June 30,
-------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Type of Loans:
Real Estate:
1-4 family........... $151,542 80.58% $146,808 81.92% $127,054 83.11% $128,335 87.38% $128,614 80.05%
Construction......... 800 0.43 110 0.06 1,231 0.80 895 0.61 12,208 7.60
Multi-family and
commercial........ 26,891 14.30 21,838 12.18 11,155 7.30 6,000 4.09 5,743 3.57
Commercial leases ... 813 0.43 1,496 0.84 1,897 1.24 1,345 0.92 2,009 1.25
Consumer Loans:
Home equity.......... 7,059 3.75 7,905 4.41 9,349 6.12 9,071 6.18 10,735 6.68
Auto loans........... 301 0.16 329 0.18 218 0.14 220 0.15 323 0.20
Other................ 656 0.35 728 0.41 1,976 1.29 983 0.67 1,042 0.65
-------- ------ ------- ------ -------- ------ -------- ------ -------- ------
Total loans............ 188,062 100.00% 179,214 100.00% 152,880 100.00% 146,849 100.00% 160,674 100.00%
-------- ====== ------- ====== -------- ====== --------- ====== -------- ======
Less:
Loans in process..... (605) (66) (927) (446) (4,180)
Deferred loan
origination
fees and costs.... (1,421) (1,273) (1,321) (1,090) (1,215)
Allowance for loan
losses............. (1,772) (1,489) (1,156) (1,014) (859)
-------- -------- -------- -------- --------
Total loans, net....... $184,264 $176,386 $149,476 $144,299 $154,420
======== ======== ======== ======== ========
</TABLE>
The following information contains information concerning changes in
the amount of loans held by us.
<TABLE>
<CAPTION>
For the Years Ended
June 30,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- ------------- ------------- ------------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total gross loans receivable at
beginning of period.................. $179,214 $152,880 $146,849 $160,674 $139,296
------- ------- ------- ------- -------
Loans originated:
1 to 4 family residential............ 42,182 32,399 16,241 22,754 36,464
Construction......................... 1,034 385 1,056 767 11,302
Multi-family and commercial
real estate........................ 11,769 21,909 9,564 2,079 2,911
Home equity and second
mortgages.......................... 4,211 2,733 4,522 3,662 4,766
Other consumer....................... 906 878 1,015 785 1,088
-------- -------- -------- --------- --------
Total loans originated............. 60,102 58,304 32,398 30,047 56,531
-------- -------- -------- --------- --------
Loans securitized and repayments:
Total loans securitized.............. 4,028 7,034 -- 10,784 --
Loan principal repayments.......... 47,226 24,936 26,367 33,088 35,153
-------- -------- -------- -------- --------
Total loans securitized and repayments 51,254 31,970 26,367 43,872 35,153
-------- -------- -------- -------- --------
Total gross loans receivable
at end of period................... $188,062 $179,214 $152,880 $146,849 $160,674
======= ======= ======= ======= =======
</TABLE>
24
<PAGE>
Deposits. Deposits increased to $190.1 million at June 30, 1999, from
$145.1 million at June 30, 1998, an increase of $45 million or 31.0%. This
increase in deposits is concentrated primarily in certificates of deposit which
increased by $38.9 million to $143 million from $104.1 million, due to our
matching rate program whereby we matched any competitors published interest
rates on deposit accounts.
Regular savings, money market demand and NOW accounts constituted $47.1
million, or 24.8%, of our deposit portfolio at June 30, 1999. Certificates of
deposit constituted $143.0 million or 75.2% of the deposit portfolio of which
$18.5 million or 9.7% of the deposit portfolio were certificates of deposit with
balances of $100,000 or more. Such deposits are offered at negotiated rates. As
of June 30, 1999, we had $1.3 million in brokered deposits.
At June 30, 1999 our deposits were represented by the various types of
deposit programs described below.
<TABLE>
<CAPTION>
Interest Minimum Balance as of Percentage of
Category Term Rate(1) Amount June 30, 1999 Total Deposits
- -------- ---- ------- ------ ------------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Non-interest demand accounts......... None --% $ 250 $ 1,871 0.98%
NOW accounts......................... None 2.10 750 14,089 7.41
Passbook and club accounts........... None 2.79 100 11,566 6.08
Money market demand.................. None 2.91 1,000 19,592 10.30
Certificates of Deposit:
Fixed Term, Fixed-rate............ 91 Days 4.40 1,000 1,548 0.81
Fixed Term, Fixed-rate............ 6-12 months 4.50 1,000 76,202 40.06
Fixed Term, Fixed-rate............ 13-30 months 4.93 1,000 37,221 19.56
Fixed Term, Fixed-rate............ 31-48 months 4.74 1,000 5,672 2.98
Fixed Term, Fixed-rate............ 49-60 months 4.88 1,000 11,422 6.03
IRA deposits......................... None -- -- 10,965 5.76
Accrued interest on deposits 68 0.03%
-------- -------
Total $190,216 100.00%
======== =======
</TABLE>
- ------------
(1) Interest rate offerings as of June 30, 1999.
The following table sets forth our time deposits classified by interest
rate at the dates indicated.
At June 30,
-----------------------------
1999 1998 1997
--------- -------- ---------
(In thousands)
Interest Rate
4.00% or less............................ $ 155 $ -- $ --
4.01-6.00%............................... 126,547 67,287 68,215
6.01-8.00%............................... 16,088 36,532 16,167
8.01% or more............................ 240 242 1,057
Accrued interest on certificate accounts.... 56 63 45
-------- ------- -------
Total $143,086 $104,124 $85,484
======== ======== =======
25
<PAGE>
The following table sets forth the amount and maturities of our time
deposits classified by interest rate at June 30, 1999.
Amount Due
---------------------------------------------------
After
Interest Rate June 30, June 30, June 30, June 30,
2000 2001 2002 2003 Total
---- ---- ---- ---- -----
(In thousands)
4.00% or less ........... $ 155 $ -- $ -- $ -- $ 155
4.01-6.00% .............. 98,612 20,242 2,419 5,274 126,547
6.01-8.00% .............. 11,179 1,557 1,020 2,332 16,088
8.01 or more ............ 222 18 -- -- 240
Accrued interest on
certificate accounts .. 43 9 1 3 56
-------- -------- -------- -------- --------
Total ................. $110,211 $ 21,826 $ 3,440 $ 7,609 $143,086
======== ======== ======== ======== ========
The following table indicates the amount of our certificates of
deposits of $100,000 or more by time remaining until maturity as of June 30,
1999.
Certificates
Maturity Period of Deposits
-------------
(In thousands)
Within three months............... $ 8,531
Three through six months.......... 3,571
Six through twelve months......... 3,833
Over twelve months................ 2,549
-------
$18,484
=======
Borrowings. Advances from the Federal Home Loan Bank increased to
$146.2 million at June 30, 1999, from $144.5 million at June 30, 1998, an
increase of $1.7 million or 1.2%. In addition to providing funding for our
lending activities, we utilize advances from the Federal Home Loan Bank to
purchase investment securities, taking advantage of the spread to increase net
interest income.
The following table sets forth the terms of our short-term Federal Home
Loan Bank advances.
During the
Year Ended June 30
--------------------------------
1999 1998 1997
-------- ------- -------
(Dollars in thousands)
Average balance outstanding ................ $15,927 $31,481 $38,214
Maximum balance at end of any month ........ 34,435 45,020 55,567
Balance outstanding end of period .......... 18,325 27,936 55,567
Weighted average rate during period......... 5.77% 5.90% 5.80%
Weighted average rate at end of period...... 5.42% 5.73% 5.56%
26
<PAGE>
Stockholders' Equity. Stockholders' equity increased to $15.5 million
at June 30, 1999, from $15.1 million at June 30, 1998, an increase of
approximately $400,000 or 2.6%. The increase is mainly attributable to net
income from operations which was substantially offset by an increase in the
unrealized loss on securities available for sale, due to an increase in market
rates of interest.
Results of Operations for the Fiscal Years Ended June 30, 1999 and 1998
General. The largest components of our total income and total expenses
are interest items. As a result, our earnings are greatly influenced by our net
interest income, which is determined by the difference between the interest
earned on our interest-earning assets and the rates paid on our interest-bearing
liabilities (interest rate spread) as well as by the relative amounts of its
interest-earning assets and interest-bearing liabilities.
Like most savings banks, our interest income and cost of funds are
substantially affected by general economic conditions and by policies of
regulatory authorities of the state and federal government. Because a
significant portion of our assets consist of fixed rate loans, increases in
interest costs will result in a decline in our net interest income.
Results of Operations. We recorded net income of $2,566,000 for the
fiscal year ended June 30, 1999, representing an 8.9% decrease from the
$2,816,000 net income recorded for the fiscal year ended June 30, 1998. The
decrease from June 30, 1998, is mainly attributable to a decrease of $995,000 in
the gains realized on the sale of securities and an increase of $392,000 in
other expense which was partially offset by an increase of $1,054,000 in net
interest income.
Our securities available for sale portfolio includes corporate debt
securities issued by Singer Co. Singer Co. is most recognized as a maker of
sewing machines throughout the world. On September 13, 1999, Singer filed for
Chapter 11 bankruptcy protection. As of June 30, 1999, the bonds had an adjusted
cost basis of $304,000 and a fair value of $235,000. The fair market value of
the bonds at September 16, 1999 was estimated at $122,000. We intend to evaluate
the potential impairment of these bonds and expect to write-down the bonds for
the quarter ended September 30, 1999. Such write-down will have a negative
impact on earnings. See "- Other Income."
Net Interest Income. Net interest income is the most significant
component of our income from operations. Net interest income is the difference
between interest we receive on our interest-earning assets, primarily loans and
securities, and interest we pay on our interest-bearing liabilities, primarily
deposits and borrowings from the Federal Home Loan Bank.
Net interest income depends on the volume of and rates earned on
interest-earning assets and the volume of and rates paid on interest-bearing
liabilities. Net interest income increased $1.1 million or 15.9% for the fiscal
year ended June 30, 1999. Although the average balances increased during fiscal
1999 and 1998, our net interest rate spread and net interest margin remained
relatively stable, decreasing four and six basis points, respectively.
Total Interest Income. For the fiscal year ended June 30, 1999, total
interest income increased to $25.1 million from $21.2 million for fiscal year
ended June 30, 1998. This increase of $3.9 million or 18.4% is due to an
increase in income on loans receivable to $14.4 million for the
27
<PAGE>
fiscal year ended June 30, 1999 as compared to $13.2 million for the fiscal year
ended June 30, 1998 and to an increase in income on investment securities to
$10.5 million for fiscal 1999 from $7.9 million for fiscal 1998. During the same
time periods the average balance on loans receivable increased by $13.1 million
to $184.1 million for the fiscal year ended June 30, 1999 from $171 million for
the fiscal year ended June 30, 1998, and the average balance on investment
securities increased by $40.9 million to $155.3 million for fiscal 1999 from
$114.4 million for fiscal 1998.
Total Interest Expense. Total interest expense increased to $17.4
million for the fiscal year ended June 30, 1999 from $14.6 million for the
fiscal year ended June 30, 1998. The two components of total interest expense
are interest on deposits, which increased by $1.8 million for the fiscal year
ended June 30, 1999 to $8.4 million from $6.6 million for the fiscal year ended
June 30, 1998 and interest on borrowings, which increased by $1 million for the
fiscal year ended June 30, 1998 to $8.9 million from $7.9 million for the fiscal
year ended June 30, 1998.
Provision For Loan Losses. We review the allowance for loan losses in
relation to (i) our past loan loss experience, (ii) known and inherent risks in
our portfolio, (iii) adverse situations that may affect the borrower's ability
to repay, (iv) the estimated value of any underlying collateral, and (v) current
economic conditions. Management believes the allowance for loan losses is at a
level that is adequate to provide for estimated losses. However, there can be no
assurance that further additions will not be made to the allowance and that such
losses will not exceed the estimated amount.
The provision for loan losses was $423,000 for the fiscal year ended
June 30, 1999, as compared to $385,000 for the fiscal year ended June 30, 1998.
The amount charged to operations and the related balance in the allowance for
loan losses is based on periodic reviews of the portfolio by management. At its
current level, the allowance for loan losses represents 0.95% of loans
outstanding at June 30, 1999 as compared to 0.84% of loans outstanding at June
30, 1998.
Other Income. Included in other income are loan servicing income, gains
or losses on sales of securities available for sale, and other miscellaneous
sources of operating income.
During the fiscal year ended June 30, 1999, other income decreased to
$796,000 from $1,760,000 for the fiscal year ended June 30, 1998. The decrease
was mainly attributable to a decrease in the amount of gains realized on the
sale of securities which was $156,000 for the fiscal year ended June 30, 1999
and $1,151,000 for the fiscal year ended June 30, 1998. Also included in other
income were gains realized on the sale of real estate owned of $77,000 and
$101,000 for the fiscal years ended June 30, 1999 and 1998, respectively.
We expect to record an impairment loss in our securities available for
sale portfolio during the quarter ending September 30, 1999 due to the
bankruptcy of Singer Co. as previously discussed. See "- Results of Operations."
Operating Expenses. Total operating expenses increased $392,000 or
10.9% to $3,974,000 for the fiscal year ended June 30, 1999, as compared to
$3,582,000 for the fiscal year ended June 30, 1998.
28
<PAGE>
The primary component of operating expenses was salaries and employee
benefits which increased $337,000 or 18.1% to $2,202,000 from $1,865,000 for the
fiscal year ended June 30, 1998. Also included in 1999 was one-time charge off
of $111,000, net of income taxes, relating to the canceled merger/conversion
with Nesquehonig Savings Bank. Management continues to monitor operating
expenses and reduce or eliminate such expenses where possible. The ratio of
operating expense to average assets for fiscal 1999 and fiscal 1998 was 1.13%
and 1.24% respectively. Excluding expenses related to the attempted
merger/conversion with Nesquehonig Savings Bank of $111,000, the ratio of
operating expense to average assets for fiscal 1999 would be 1.12%.
Comparison of Operating Results for the Fiscal Years Ended June 30, 1998 and
1997
Results of Operations. We recorded net income of $2,816,000 for the
fiscal year ended June 30, 1998, representing a 86.6% increase from the
$1,509,000 net income recorded for the fiscal year ended June 30, 1997. The
increase from June 30, 1997, is mainly attributable to an increase of $843,000
in net interest income, an increase in gains realized on the sale of
mortgage-backed securities of $804,000 and a decrease of $454,000 in total
operating expenses as a result of the $745,000 SAIF assessment in 1997.
Net Interest Income. Net interest income increased $843,000 of 14.6%
due to an increase in the average balances, despite decreases in the net
interest rate spread and interest margin of 37 and 35 basis points,
respectively.
Total Interest Income. For the fiscal year ended June 30, 1998, total
interest income increased to $21.2 million from $16.2 million for fiscal year
ended June 30, 1997. This increase of $5 million or 30.86% is due primarily to
an increase in income on loans receivable to $13.2 million for the fiscal year
ended June 30, 1998 as compared to $11.9 million for the fiscal year ended June
30, 1997 and to an increase in income on investment securities to $8.0 million
for fiscal 1998 from $4.4 million for fiscal 1997. During the same time periods
the average balance on loans receivable increased by $20.3 million to $171
million for the fiscal year ended June 30, 1998 from $150.7 million for the
fiscal year ended June 30, 1997, and the average balance on investment
securities increased by $48.8 million to $114.4 million for fiscal 1998 from
$65.6 million for fiscal 1997.
Total Interest Expense. Total interest expense increased to $14.6
million for the fiscal year ended June 30, 1998 from $10.4 million for the
fiscal year ended June 30, 1997. The two components of total interest expense
are interest on deposits, which increased by $1.1 million for the fiscal year
ended June 30, 1998 to $6.6 million from $5.5 million for the fiscal year ended
June 30, 1997 and interest on borrowings, which increased by $3.1 million for
the fiscal year ended June 30, 1998 to $8 million from $4.9 million for the
fiscal year ended June 30, 1997. These increases are attributable to increases
in the volume of both deposits and borrowings as described previously as well as
an increase in the cost of deposits and borrowings due to an increase in market
rates of interest.
Provision For Loan Losses. The provision for loan losses was $385,000
for the fiscal year ended June 30, 1998, as compared to $220,000 for the fiscal
year ended June 30, 1997. The amount charged to operations and the related
balance in the allowance for loan losses based on periodic reviews of the
portfolio by management. The allowance for loan losses represented 0.84% of
loans outstanding at June 30, 1998 as compared to 0.76% of loans outstanding at
June 30, 1997. This
29
<PAGE>
increase of $165,000 is a result of increased lending activity during the fiscal
year ended June 30, 1998.
Other Income. Included in other income are loan servicing income, gains
or losses on sales of mortgage-backed securities and other investments, and
other miscellaneous sources of operating income.
During the fiscal year ended June 30, 1998, other income increased to
$1,760,000 from $720,000 for the fiscal year ended June 30, 1997. The increase
is mainly attributable to increases in the amount of gains realized on the sale
of mortgage-backed and investment securities which were $1,151,000 for the
fiscal year ended June 30, 1998 and $283,000 for the fiscal year ended June 30,
1997. Also included in other income were gains realized on the sale of real
estate owned of $101,000 and $73,000 for the fiscal years ended June 30, 1998
and 1997, respectively. Loan servicing income increased by $59,000 to $285,000
for fiscal year ended June 30, 1998 from $226,000 for fiscal year ended June 30,
1997 primarily attributable to an increase in the loan volume serviced.
Operating Expenses. Total operating expenses decreased $454,000 or
11.3% to $3,582,000 for the fiscal year ended June 30, 1998, as compared to
$4,036,000 for the fiscal year ended June 30, 1997.
The primary component of operating expenses was salaries and employee
benefits which increased $276,000 or 17.3% to $1,865,000 from $1,589,000 for the
fiscal year ended June 30, 1997. In addition, total bonuses paid to senior
executive officers increased $67,000 or 137% to $116,000 from $49,000 for the
fiscal year ended June 30, 1997. The primary reason for the decrease in
operating expenses during fiscal 1998 from fiscal 1997 was due to a special
charge of $745,000 levied on September 30, 1996 against all SAIF member
financial institutions to recapitalize the SAIF fund. Management continues to
monitor operating expenses and to reduce or eliminate such expenses where
possible. The ratio of operating expense to average assets for fiscal 1998 and
fiscal 1997 was 1.24% and 1.83%, respectively.
30
<PAGE>
Average Balance Sheet
The following table sets forth certain information relating to our
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated. Average balances are derived from
month-end balances. Management does not believe that the use of month-end
balances instead of daily average balances has caused any material differences
in the information presented.
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------------------------------------------
1999 1998 1997
------------------------------- ------------------------------ -------------------------------
Interest Average Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost Balance Expense Cost Balance Expense Cost
------- ------- ---- ------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets (Dollars in thousands)
Interest-earning assets:
Loans receivable(1)............... $184,068 $14,358 7.80% $170,991 $13,234 7.84% $150,727 $11,852 7.84%
Investment and mortgage-backed
securities(2)................... 155,304 10,706 6.89 114,451 8,006 6.78 65,616 4,341 6.75
-------- ------ -------- ------- -------- -------
Total interest-earning assets.... 339,372 25,064 7.39 285,442 21,240 7.44 216,343 16,193 7.48
Non-interest-earning assets........ 5,225 4,162 4,318
-------- -------- ---------
Total assets..................... $344,597 $289,604 $220,661
======== ======= =======
Liabilities and Stockholders'
Equity
Interest-bearing liabilities:
NOW accounts . .................... $ 13,744 $ 320 2.32% $ 14,250 $ 311 2.18% $ 13,036 $ 267 2.05%
Passbook and club accounts......... 11,377 306 2.69 10,427 283 2.71 10,029 278 2.78
Money market demand accounts....... 17,402 788 4.53 12,902 572 4.43 9,991 420 4.20
Certificates of deposit............ 128,683 7,028 5.46 96,108 5,472 5.69 81,745 4,504 5.51
Short-term and long-term
borrowings ..................... 152,608 8,938 5.86 137,734 7,972 5.79 91,328 4,937 5.51
-------- ------- -------- ------- -------- ------
Total interest-bearing liabilities. 323,814 17,380 5.37% 271,421 14,610 5.38% 206,129 10,406 5.05%
-------- ------- -------- ------- -------- ------
Non-interest-bearing liabilities... 4,603 4,271 3,239
-------- -------- --------
Total liabilities................ 328,417 275,692 209,368
Stockholders' equity............... 16,180 14,212 11,293
-------- -------- --------
Total liabilities and
stockholders' equity .......... $344,597 $289,604 $220,661
======== ======== ========
Net interest income................ $ 7,684 $ 6,630 $ 5,787
======= ======= =======
Interest rate spread(3)............ 2.02 2.06 2.43
==== ==== ====
Net interest margin(4)............. 2.26 2.32 2.67
==== ==== ====
Ratio of average interest-earning
assets to average interest-bearing
liabilities.............. 104.80 105.28 104.95
====== ====== ======
</TABLE>
- ---------------------------------
(1) Average balances include non-accrual loans.
(2) Includes interest-bearing deposits in other financial institutions.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.
31
<PAGE>
Rate/Volume Analysis
The table below sets forth certain information regarding changes in our
interest income and interest expense for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume; (ii)
changes in rates; (iii) changes in rate and volume.
Year Ended June 30,
1999 vs. 1998
-----------------------------------
Increase/(Decrease)
Due to
-----------------------------------
Rate/
Volume Rate Volume Total
------ ---- ------ -----
Interest-earning assets:
Loans receivable ....................... $1,025 $ (68) $ 167 $1,124
Investment and mortgage-backed
securities ......................... 2,770 126 (196) 2,700
------ ------ ------ ------
Total interest-earning assets ....... 3,795 58 (29) 3,824
------ ------ ------ ------
Interest-bearing liabilities:
NOW and money market deposits .......... 188 33 4 225
Savings and certificate accounts ....... 1,880 (223) (78) 1,579
Short-term and long-term borrowings ... 861 96 9 966
------ ------ ------ ------
Total interest-bearing liabilities .. 2,929 (94) (65) 2,770
------ ------ ------ ------
Increase (decrease) in net interest
income ................................. $ 866 $ 152 $ 36 $1,054
====== ====== ====== ======
Interest Rate Risk
Because the majority of our assets and liabilities are sensitive to
changes in interest rates, our most significant form of market risk is interest
rate risk. Our exposure to interest rate risk results from the difference in
maturities on interest-bearing liabilities and interest-earning assets and the
volatility of interest rates.
We are vulnerable to an increase in interest rates to the extent that
interest-bearing liabilities mature or reprice more rapidly than
interest-earning assets. In the current market, we primarily originate
long-term, fixed rate loans secured by single-family residences. Our primary
source of funds has been deposits with substantially shorter maturities. While
having interest-bearing liabilities that reprice more frequently than
interest-earning assets is generally beneficial to net interest income during a
period of declining interest rates, this type of an asset/liability mismatch is
generally detrimental during periods of rising interest rates.
32
<PAGE>
Our Board of Directors reviews our asset and liability policy on an
annual basis. The Board of Directors meets quarterly to review interest rate
risk and trends, as well as liquidity and capital ratios and requirements.
Management administers the policies and determinations of the Board of Directors
with respect to our asset and liability goals and strategies.
To manage the interest rate risk on our mortgage loan portfolio, we
emphasize the origination of adjustable-rate loans and sell a portion of our
fixed-rate mortgage loan originations. At June 30, 1999, adjustable-rate
mortgage loans totaled $52.1 million or 28.2% of our total loan portfolio. To
manage interest rate risk, we also maintain a portfolio of liquid assets which
includes investment securities and mortgage-backed securities. Maintaining
liquid assets, however, tends to reduce potential net income because liquid
assets usually provide a lower yield than other interest-earning assets. As an
asset/liability management tool, we may use alternative sources of funding if
deposit pricing in our local market area is not acceptable.
Net Portfolio Value. We utilize various asset/liability models to help
us monitor our sensitivity to changes in interest rates, notably net portfolio
value ("NPV") analysis. NPV is the difference between incoming and outgoing
discounted cash flows from assets, liabilities, and off- balance sheet
contracts. Our interest rate risk is measured as the change to its NPV as a
result of hypothetical 100-400 basis point changes in market interest rates. We
calculate the NPV quarterly.
The following table presents our NPV at June 30, 1999.
Changes
in Market $ %
Interest Rates NPV Amount Change Change in NPV NPV Ratio(1)
-------------- ---------- ------ ------------- ------------
(basis points) (Dollars in thousands)
+400 964 -22,443 -95.9 0.29%
+300 8,063 -15,374 -65.6 2.38%
+200 13,816 -9,620 -41.0 3.98%
+100 19,008 -4,429 -18.9 5.34%
0 23,437 -- -- 6.44%
-100 26,704 3,267 13.9 7.19%
-200 26,758 3,321 14.2 7.10%
-300 26,134 2,697 11.5 6.84%
-400 26,802 3,365 14.4 6.89%
(1) Calculated as the estimated NPV divided by present value of total assets.
33
<PAGE>
Net Interest Income. The following table presents the effect on our net
interest income as a result of hypothetical 100-400 basis point changes in
market interest rates at June 30, 1999.
Changes
in Market $ Change in % Change in
Interest Rates Net Interest Income Net Interest Income
-------------- ------------------- -------------------
(basis points) (in thousands)
+400 -3,758 -44.0
+300 -2,565 -30.0
+200 -1,445 -16.9
+100 -416 -4.9
0 -- --
-100 -603 -7.1
-200 -1,114 -13.0
-300 -1,444 -16.9
-400 -1,555 -18.2
Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, prepayments and deposit run- offs and should not be relied upon
as indicative of actual results. Certain shortcomings are inherent in such
computations. Although certain assets and liabilities may have similar
maturities or periods of repricing, they may react at different times and in
different degrees to changes in market rates of interest. The interest rates on
certain types of assets and liabilities may fluctuate in advance of changes in
market interest rates, while rates on other types of assets and liabilities may
lag behind changes in market interest rates. In the event of a change in
interest rates, prepayments and early withdrawal levels could deviate
significantly from those assumed in making the calculations set forth above.
Additionally, an increased credit risk may result as many borrowers may be
unable to service their debt in the event of an interest rate increase.
Non-Performing Assets
We place all loans that are 90 days or more delinquent, or sooner, if
the collection of principal or interest becomes doubtful, on non-accrual status.
At June 30, 1999, our non-performing assets were $3.3 million as compared to
$4.5 million at June 30, 1998, a decrease of $1,200,000 or 26.7%. The ratio of
non-performing assets to total assets was 0.90% at June 30, 1999 compared to
1.44% at June 30, 1998.
34
<PAGE>
The following table sets forth information regarding non-performing
loans and real estate owned, as of the dates indicated. For the year ended June
30, 1999, interest income that would have been recorded on loans accounted for
on a nonaccrual basis under the original terms of such loans was immaterial.
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Non-performing loans:
Mortgage loans:
1-4 family residential real estate .... $1,954 $2,645 $3,166 $3,689 $2,206
Construction .......................... -- -- -- 106 106
Multi-family and commercial ........... -- 336 336 -- 33
Commercial loans and leases ............. 302 334 333 333 --
Consumer loans:
Home equity ........................... 28 100 287 174 180
Other consumer ........................ 5 -- 41 90 76
------ ------ ------ ------ ------
Total non-performing loans .............. 2,289 3,415 4,163 4,392 2,601
Real estate owned ....................... 969 1,129 767 259 506
------ ------ ------ ------ ------
Total non-performing assets ............. $3,258 $4,544 $4,930 $4,651 $3,107
====== ====== ====== ====== ======
Total non-performing loans to total loans 1.22% 1.91% 2.72% 2.99% 1.62%
Total non-performing assets to
total assets .......................... 0.90% 1.44% 1.82% 2.56% 1.67%
</TABLE>
Real estate owned consists of properties acquired by foreclosure and is
stated at fair value less cost to sell at the date of acquisition. Real estate
owned decreased to $969,000 at June 30, 1999, from $1,129,000 at June 30, 1998.
At June 30, 1999, real estate owned consisted of ten single-family dwelling
units and one multi-family dwelling unit. Nine of these properties are located
in the Pocono mountains.
Liquidity and Capital Resources
We have pursued a policy of maintaining an adequate level of liquidity
to generate sufficient cash to fund current loan demand, meet deposit
withdrawals, pay operating expenses and fund debt obligations. The obligations
associated with the preferred securities issued in this offering will add to the
level of liquidity we will need to maintain. Cash for these short-term and
long-term needs is generated through deposits (including the use of brokered
deposits), funds borrowed from the Federal Home Loan Bank, the sale and maturity
of investment securities, cash flows generated from operations, and collections
of principal payments and prepayments of outstanding loans. Loan principal
repayments are a relatively stable source of funds while deposit flows are
influenced significantly by general interest rates and money market conditions.
Borrowings are also used to compensate for reductions in other sources of funds
such as deposits as well as to fund the expansion
35
<PAGE>
of loan volume. In the event that they provide less expensive funds, brokered
savings deposits are used as well.
As a member of the Federal Home Loan Bank System, we may borrow from
the Federal Home Loan Bank of Pittsburgh. At June 30, 1999, we had outstanding
from the Federal Home Loan Bank of Pittsburgh advances equal to $146.2 million
as compared to the $144.5 million in outstanding advances at June 30, 1998. Such
borrowings, as a percentage of our total assets, equaled 40.2% at June 30, 1999
and 45.8% at June 30, 1998. Within certain guidelines, the policies of Federal
Home Loan Bank of Pittsburgh are flexible with respect to the borrowing limits
of a member institution. At June 30, 1999, our maximum borrowing capacity was
approximately $202.2 million.
At June 30, 1999, we had outstanding loan commitments, including
undisbursed lines of credit of approximately $12.8 million. We believe that
normal cash flow from principal and interest payments on our loan portfolio will
be sufficient to meet these loan commitments. No other significant commitments
existed at June 30, 1999.
Regulatory Capital. First Star Savings Bank is subject to regulatory
capital requirements by the Federal Deposit Insurance Corporation ("FDIC"). To
be deemed "adequately capitalized" the FDIC has three minimum regulatory capital
ratios: a leverage capital ratio equal to 4% of adjusted total assets; a Tier 1
risk-based capital ratio equal to 4% of risk-based assets; and total risk-based
capital equal to 8% of risk-based assets.
The following table sets forth the bank's regulatory capital position
at June 30, 1999, as compared to the minimum regulatory capital requirements
imposed on us by the FDIC.
Amount Percentage
------ ----------
(Dollars in thousands)
Leverage Ratio:
Actual capital............................ $19,750 5.54%
Regulatory requirement.................... 14,265 4.00
------- ----
Excess.................................... $ 5,485 1.54%
======= ====
Tier 1 Risk-Based Capital:
Actual Capital............................ $19,750 9.34%
Regulatory requirement.................... 8,457 4.00
------- ----
Excess.................................... $11,293 5.34%
======= ====
Total Risk-Based Capital:
Actual Capital............................ $21,522 10.18%
Regulatory requirement.................... 16,914 8.00
------ ----
Excess.................................... $ 4,608 2.18%
======= ====
For First Star Bancorp's capital ratios, see "Capitalization."
36
<PAGE>
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering changes in the relative purchasing power
of money over time due to inflation.
Unlike most industrial companies, substantially all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the
prices of goods and service as measured by the consumer price index.
Year 2000 Readiness Disclosure
Rapid and accurate data processing is essential to our operations. Many
computer programs that can only distinguish the final two digits of the year
entered (a common programming practice in prior years) are expected to read
entries for the year 2000 as the year 1900 or as zero and incorrectly attempt to
compute payment, interest, delinquency and other data.
The following discussion of the implications of the year 2000 problem
for us contains numerous forward looking statements based on inherently
uncertain information. The cost of the project and the date on which we plan to
complete the internal year 2000 modifications are based on management's best
estimates, which are derived utilizing a number of assumptions of future events
including the continued availability of internal and external resources, third
party modifications and other factors. However, there can be no guarantee that
these statements will be achieved and actual results could differ. Moreover,
although management believes it will be able to make the necessary modifications
in advance, there can be no guarantee that failure to modify the systems would
not have a material adverse effect on us.
We place a high degree of reliance on computer systems of third
parties, such as customers, suppliers, and other financial and governmental
institutions. Although we are assessing the readiness of these third parties and
preparing contingency plans, there can be no guarantee that the failure of these
third parties to modify their systems in advance of December 31, 1999 would not
have a material adverse affect on us.
Our year 2000 plan was presented to our Board of Directors in March
1998. The plan was developed using the guidelines outlined in the Federal
Financial Institutions Examination Council's "The Effect of Year 2000 on
Computer Systems" and the mission critical system testing and implementation has
been completed. The Year 2000 Committee is responsible for the plan with the
Board of Directors receiving year 2000 progress reports on a quarterly basis.
Our primary operating software is through our third party service
bureau, Bisys, Inc. We have maintained ongoing contact with this vendor so that
modification of the software for year 2000 readiness is a top priority. The
modification of the software has been accomplished. We have performed
significant testing of the software utilized by Bisys, Inc. with successful
results. Bisys, Inc.
37
<PAGE>
has represented that the software currently being utilized for our current
operations is year 2000 compliant. We have participated in proxy testing of
Bisys, Inc. with another financial institution in our area. Proxy testing is a
cooperative effort of a number of financial institutions that use the same
service for a third party service bureau.
We have contacted all other material vendors and suppliers regarding
their year 2000 readiness. Each of these third parties has delivered written
assurance to us that year 2000 will not be an issue or that the issue will be
satisfactorily resolved prior to the end of 1999. Appropriate testing, if
possible, and any related contingency plans would be performed in the third and
fourth quarters of 1999. We have contacted all significant customers and
non-information technology suppliers (i.e. utility systems, telephone systems,
etc.), regarding their year 2000 state of readiness with significant customers
and non-information technology suppliers. Such parties have indicated that they
have established year 2000 plans and are in various stages of remediation and
testing. We are unable to test the year 2000 readiness of our significant
suppliers of utilities. We are relying on the utility companies' internal
testing and representations to provide the required services that drive our data
systems. We are currently determining what recourse we would have from such
parties if they do not resolve the year 2000 issues. All software that is
considered mission critical has been tested.
We mailed questionnaires to approximately 45 commercial real estate
loan customers, and 40 questionnaires were returned. Such customers represent
35.7% of the total commercial loans outstanding at June 30, 1999. These
questionnaires were based on Appendix A of Guidance Concerning the Year 2000
Impact on Customers, Federal Financial Institutions Examination Council (FFIEC)
Interagency Statement, March 17, 1998. This questionnaire is also used in the
underwriting for new commercial loans. Our Year 2000 Committee members reviewed
the responses with the appropriate commercial loan officer to rate the
customers' risk levels based on the type of business and the type of loan and
collateral. We have received favorable questionnaire responses from our
borrowers. Borrowers have established year 2000 plans and are testing software
and contacting vendors and suppliers and plan to be ready for year 2000. Several
borrowers are real estate holding companies that have minimal risk.
Individual mortgage loan and consumer loan customers were not contacted
as a practical matter; it was deemed to be beyond the scope of our testing
parameters, because most of these are individuals with adequate collateral on
the loans.
Costs will be incurred to replace certain non-compliant software and
hardware. We do not anticipate that direct costs for renovating or replacing
non-compliant hardware and software will exceed $25,000 of which approximately
$13,700 had been expended as of June 30, 1999. No assurance can be given that
the year 2000 plan will be completed successfully by the year 2000, in which
event we could incur significant costs. If Bisys, Inc. fails to maintain its
system in a compliant state or incurs other obstacles prior to year 2000, we
would likely experience significant data processing delays, mistakes or
failures. These delays, mistakes or failures could have a significant adverse
impact on our financial condition and results of operations.
We are monitoring Bisys, Inc. to evaluate whether its data processing
system will fail and are being provided with periodic updates on the status of
testing and upgrades being made by the service bureau. If Bisys, Inc. fails, we
will attempt to locate an alternative service bureau that is year 2000
38
<PAGE>
compliant. If we are unsuccessful, we will enter deposit and loan transactions
by hand in our general ledger and compute loan payments and deposit balances and
interest in our existing computer system. We are able to do this because of our
relatively small number of loan and deposit accounts and our internal
bookkeeping system. Our computer systems are independently able to generate
labels and mailings for all of our customers. If this labor intensive approach
is necessary, our management and employees will become much less efficient.
However, we believe that we would be able to operate in this manner for a
limited time, until our existing service bureau, or replacement bureau, is able
to provide data processing services. If very few financial institution service
bureaus were operating in the year 2000, their replacement costs, assuming we
could negotiate an agreement, could be material. We are currently determining
what recourse we would have from Bisys, Inc. if it does not resolve the year
2000 issues.
As part of our contingency planning, we will increase our liquidity to
accommodate any possible increase in customer demand for cash during the start
of 2000. To ensure maximum staffing, employees may not take vacation from
December 27, 1999 through January 14, 2000 (other than bank holidays).
The most reasonably likely worst case scenario is that some areas where
we have branch offices located will experience blackouts if utility service
companies are unable to provide necessary service to drive our data systems or
provide sufficient sanitary conditions to our offices. In the event that this
would happen, we would be unable to open the affected branches, and customers
would be directed to other branch locations and business would be transacted
manually.
Successful and timely completion of the year 2000 project is based on
management's best estimates derived from various assumptions of future events,
which are inherently uncertain, including the progress and results of Bisys,
Inc., testing plans, and all vendors, suppliers and customer readiness.
Despite the best efforts of management to address this issue, the vast
number of external entities that have direct and indirect business relationships
with us, such as customers, vendors, payment system providers and other
financial institution, makes it impossible to assure that a failure to achieve
compliance by one or more of these entities would not have material adverse
impact on our operations.
Recent Accounting Pronouncements
Accounting for Derivative Instruments and Hedging Activities. In June
1998 the Financial Standards Accounting Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This statement establishes accounting and reporting for derivative
instruments, including certain instruments embedded in other contracts, and for
hedging activities. It requires that any entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. During July 1999, the FASB issued SFAS No. 137,
which delayed the effective date of this statement for one year, to fiscal years
beginning after June 15, 2001. The adoption of this statement is not expected to
have a significant impact on the financial condition or operations of the bank.
39
<PAGE>
Mortgage Banking Activities. In October 1998, the FASB issued SFAS No.
134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise." This statement became effective for the Bank July 1, 1999. The
adoption of this statement is not expected to have a significant impact on the
financial condition or results of operations of the Bank.
Business Combinations. In December 1998, the FASB issued an invitation
to comment on a document entitled "Methods of Accounting for Business
Combinations: Recommendations of the G4+1 for Achieving Convergence."
Subsequently, in April 1999, the FASB tentatively agreed to eliminate the
pooling-of-interests method of accounting for business combinations. In reaching
its conclusion, the FASB commented that the use of two methods, purchase and
pooling-of-interests, makes it difficult for users to compare the financial
statements of companies engaged in business combinations, and that the pooling
method is inconsistent with the general concept of fair value associated with
acquisitions. Accordingly, the FASB concluded that there should be a single
method of accounting for all business combinations, and that method is the
purchase method. As a general rule, the purchase method establishes a new
accounting basis for the assets and liabilities acquired based on fair value and
recognizes goodwill (positive or negative). Goodwill, the difference between the
purchase price and total value of the assets and liabilities obtained, is an
intangible asset that must be amortized over future periods. Regarding
transition, the FASB tentatively concluded that all business combinations
reported before final issuance of the new standard, as well as all combinations
in process at the time the new standard is issued should be accounted for under
APB 16 as a pooling, if the pooling criteria within that standard are met. The
FASB expects to issue an Exposure Draft during 1999, but has not yet indicated
when it expects to issue the final standard.
BUSINESS OF FIRST STAR BANCORP, INC.
AND FIRST STAR SAVINGS BANK
General
First Star Bancorp was formed in March 10, 1993 as a
Pennsylvania-chartered corporation to be the holding company and sole
stockholder for First Star Savings Bank. The holding company structure
facilitates: (i) diversification into non-banking activities, (ii) acquisitions
of other financial institutions, such as savings institutions, (iii) expansion
within existing and into new market areas, and (iv) stock repurchases without
adverse tax consequences. There are, however, no present plans regarding
diversification, acquisitions, expansion or repurchases.
Our office is located at 418 West Broad Street, Bethlehem,
Pennsylvania. Our telephone number is (610) 691-2233.
First Star Savings Bank is a Pennsylvania-chartered stock savings bank
which traces its origins to 1893. Our principal business consists of attracting
deposits from the general public and originating loans secured by residential
properties. Our business is conducted through our main office located in
Bethlehem, Pennsylvania and five branch offices.
In May 1987, we converted from the mutual to the stock form of
ownership. In December of 1989, we issued and sold shares of First Star Savings
Bank Series A Convertible Preferred Stock in a
40
<PAGE>
private offering to nine individuals, all of whom were directors of First Star.
On July 27, 1993, we converted to a state chartered savings bank.
The principal sources of funds for our activities are deposits,
payments on loans and borrowings from the FHLB of Pittsburgh. Funds are used
principally for the origination of adjustable-rate mortgage loans, but also for
the origination of fixed-rate mortgage loans, secured by first mortgages on one-
to four-family residences located in our local communities, and for the purchase
of securities. One- to four-family mortgage loans totaled $151.5 million, or
80.6% of our total loans receivable portfolio at June 30, 1999. Our principal
sources of revenue are interest received on loans and on investments and our
principal expense is interest paid on deposits.
Market Area
Our offices are located in Bath, Bethlehem, Palmer, Allentown, Nazareth
and Alburtis, which are all located within Lehigh and Northampton Counties. Our
market area includes the counties of Lehigh, Northampton, Carbon, Bucks and,
Monroe in their entireties. Carbon, Lehigh and Northampton Counties make up the
metropolitan area known locally as the Lehigh Valley. The population of this
area in 1990 was 595,000. The largest industry groups, ranked by number of
employees, include service industries, manufacturing, retail trade and
government. Monroe County is relatively sparsely populated, while Bucks County,
considered part of metropolitan Philadelphia, is densely populated, reporting
over 544,000 residents in 1990.
Allentown, Bethlehem and Easton are the principal cities of the Lehigh
Valley (Pennsylvania), which has an aggregate population of approximately
650,000. During the past twenty years, the economy of the Lehigh Valley has
shifted from one principally dominated by manufacturing, especially the steel
industry, to an economy characterized by a diverse group of industries including
service and distribution firms, health care, high technology, manufacturing and
retailing firms. Major employers include Air Products and Chemicals, Lehigh
Valley Hospital Center, Dun & Bradstreet, Prudential Insurance Company, Lucent
Technologies and Lehigh University. As of June 1999, unemployment in Lehigh and
Northampton Counties was 3.9% and 4.0%, respectively. An interstate highway
network through the Lehigh Valley benefits the local economy by providing
convenient access to New York, New England and Philadelphia.
Lending Activities
Most of our loans are mortgage loans which are secured by one- to
four-family residences and to a lesser extent, commercial real estate. We also
make construction loans, as well as consumer (including home equity, automobile
and unsecured business) loans. In the current interest rate environment, most of
the loans we originate have fixed rates of interest.
Mortgage Loans
One- to Four-Family Residential Loans. Our primary lending activity
consists of originating one- to four-family residential mortgage loans secured
by property located in our market areas. About 31.3% of our loan portfolio is
comprised of adjustable-rate loans which we retain for our portfolio. The
remainder consists of fixed-rate loans which we originate either to resell in
the secondary market
41
<PAGE>
or to retain in our portfolio, depending on the yield on
the loan and on our asset/liability management objectives. Residential real
estate loans often remain outstanding for significantly shorter periods than
their contractual terms because borrowers may refinance or repay loans at their
option.
The interest rate on our ARM loans is based on an index plus a stated
margin. We usually offer discounted initial interest rates on ARM loans.
Borrowers qualify for the ARM loan at the initial interest rate. However, ARM
loan borrowers are, for loan approval, required to meet lower income- to-debt
ratios than those required for fixed-rate loans. ARM loans provide for periodic
interest rate adjustments upward or downward of up to 2% per adjustment. The
interest rate generally may not increase more than 6% over the life of the loan.
Our ARM loans typically reprice annually, after the initial adjustment period of
one year, three years or five years, with most loans having terms to maturity of
30 years. ARM loans are offered to all applicants; however, in a relatively low
interest rate environment, borrowers may prefer a fixed-rate to ARM loans.
Our fixed-rate loans generally have terms of 10, 15 or 30 years with
principal and interest payments calculated using up to a 30-year amortization
period. Loans originated with a loan-to-value ratio in excess of 80% require
private mortgage insurance. The maximum loan-to-value ratio on mortgage loans
secured by non-owner occupied properties generally is limited to 80%. We conform
our loans to the standards that are used in the mortgage industry allowing our
loans to be readily sold in the secondary market. We currently retain servicing
rights to those loans sold in the secondary market. At June 30, 1999, we had no
loans specifically identified as held for sale.
ARM loans decrease the risk associated with changes in interest rates
by periodically repricing, but involve other risks because as interest rates
increase, the underlying payments by the borrower increase, thus increasing the
potential for default by the borrower. At the same time, the marketability of
the underlying collateral may be adversely affected by higher interest rates.
Upward adjustment of the contractual interest rate is also limited by the
maximum periodic and lifetime interest rate adjustment permitted by the loan
documents, and, therefore is potentially limited in effectiveness during periods
of rapidly rising interest rates.
Mortgage loans originated and held by us generally include due-on-sale
clauses. This gives us the right to deem the loan immediately due and payable in
the event the borrower transfers ownership of the property securing the mortgage
loan without our consent.
Multi-Family and Commercial Real Estate Loans. Multi-family and
commercial loans generally have a loan-to-value ratio of 80% or less. These
loans do not have terms greater than 30 years. Our multi-family loans are
secured by primarily properties with five to ten units. Commercial real estate
loans are secured by office buildings, churches and other commercial properties.
Multi-family and commercial real estate lending entails significant
additional risks compared to residential property lending. These loans typically
involve large loan balances to single borrowers or groups of related borrowers.
The repayment of these loans typically is dependent on the successful operation
of the real estate project securing the loan. These risks can be significantly
affected by supply and demand conditions in the market for office and retail
space and may also be subject to adverse conditions in the economy. To minimize
these risks, we generally limit this type of lending to
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<PAGE>
our market area and/or to borrowers who are otherwise well known to us. Most
construction loans convert to permanent loans with us after 6 months.
Residential Construction Loans. We make residential construction loans
on one- to four-family residential property to the individuals who will be the
owners and occupants upon completion of construction. Upon completion of
construction, such loans are classified as one- to four-family loans. Only
interest payments are required during construction and these are to be paid from
the borrower's own funds. These loans are underwritten using the same criteria
as applied in the underwriting of one- to four-family mortgage loans. The
maximum loan-to-value ratio is 80%. Upon completion of construction, regular
principal and interest payments commence.
Commercial Leases. We invest in loans secured by commercial equipment
leases, primarily medical equipment. Such leases generally have fixed rates of
interest and are for terms of five years. A number of such leases were produced
by a single entity. See "Management's Discussion and Analysis -- Financial
Condition -- Non-Performing Assets."
Consumer Loans. We offer consumer loans in order to provide a wider
range of financial services to our customers and because these loans provide
higher interest rates and shorter terms than many of our other loans. Our
consumer loans consist primarily of home equity, direct automobile loans,
unsecured lines of credit, and savings account loans.
Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans that are unsecured or secured by
assets that depreciate rapidly. Repossessed collateral for a defaulted consumer
loan may not be sufficient for repayment of the outstanding loan, and the
remaining deficiency may not be collectible.
Loan Approval Authority and Underwriting. Our senior loan committee,
which is comprised of the President, Senior Vice President, Vice President of
Lending, and Servicing Manager approves all commercial loans and all mortgage
loans over $400,000. The loan committee has authority to approve loans in any
category up to 40% of the loans to one borrower limit. Loan requests above this
amount must be approved by the Board of Directors.
Upon receipt of a completed loan application from a prospective
borrower, a credit report is ordered. Income and certain other information is
verified. If necessary, additional financial information may be requested. An
appraisal or other estimate of value of the real estate intended to be used as
security for the proposed loan is obtained. Appraisals are processed by
independent fee appraisers. Private mortgage insurance will also be required in
certain instances.
Construction loans are made on individual properties. Funds advanced
during the construction phase are held in a loans-in-process account and
disbursed at various stages of completion, following physical inspection of the
construction by a loan officer or appraiser.
Either title insurance or a title opinion is generally required on all
real estate loans. Borrowers also must obtain fire and casualty insurance. Flood
insurance is also required on loans secured by property which is located in a
flood zone.
43
<PAGE>
Loan Commitments. Written commitments are given to prospective
borrowers on all approved real estate loans. Generally, the commitment requires
acceptance within 60 days of the loan application. Loan commitments in excess of
this period may be issued upon payment of a non-refundable fee or upon agreement
on an interest rate float, allowing us to adjust the interest rate on the loan.
At June 30, 1999, commitments to cover originations of mortgage and commercial
loans totaled $6.7 million.
Loans to One Borrower. The maximum amount of loans which we may make to
any one borrower may not exceed 15% of our unimpaired capital and unimpaired
surplus. We may lend an additional 10% of our unimpaired capital and unimpaired
surplus if the loan is fully secured by readily marketable collateral. Our
maximum loan to one borrower limit was $3.3 million at June 30, 1999. At June
30, 1999, each of our five largest lending relationships had outstanding loan
balances of between $1.3 million and $2.9 million. All of these loans were
performing in accordance with their terms.
Non-Performing and Problem Assets
Loan Delinquencies. When a mortgage loan becomes 15 days past due, a
notice of nonpayment is sent to the borrower. After the loan becomes 30 days
past due, another notice of nonpayment is sent to the borrower. If the loan
continues in a delinquent status for 90 days past due and no repayment plan is
in effect, foreclosure proceedings will be initiated. The borrower will be
notified when foreclosure is commenced.
Loans are reviewed on a monthly basis and are placed on a non-accrual
status when, in our opinion, the collection of additional interest is doubtful.
Interest accrued and unpaid at the time a loan is placed on nonaccrual status is
charged against interest income. Subsequent interest payments, if any, are
either applied to the outstanding principal balance or recorded as interest
income, depending on the assessment of the ultimate collectibility of the loan.
Classified Assets. The classification policies of the Pennsylvania
Department of Banking and FDIC regulations provide for a classification system
for problem assets of savings associations which covers all problem assets.
Under this classification system, problem assets of savings institutions such as
ours are classified as "substandard," "doubtful," or "loss." An asset is
considered substandard if it is inadequately protected by the current net worth
and paying capacity of the borrower or of the collateral pledged, if any.
Substandard assets include those characterized by the "distinct possibility"
that the institution will sustain "some loss" if the deficiencies are not
corrected. Assets classified as doubtful have all of the weaknesses inherent in
those classified substandard, with the added characteristic that the weaknesses
present make "collection or liquidation in full," on the basis of currently
existing facts, conditions, and values, "highly questionable and improbable."
Assets classified as loss are those considered "uncollectible" and of such
little value that their continuance as assets without the establishment of a
specific loss reserve is not warranted. Assets may be designated "special
mention" because of potential weakness that do not currently warrant
classification in one of the aforementioned categories.
When we classify problem assets as either substandard or doubtful, we
may establish general allowances for loan losses in an amount deemed prudent by
management. General allowances
44
<PAGE>
represent loss allowances which have been established to recognize the inherent
risk associated with lending activities, but which, unlike specific allowances,
have not been allocated to particular problem assets. When we classify problem
assets as loss, we are required either to establish a specific allowance for
losses equal to 100% of that portion of the asset so classified or to charge off
such amount. Our determination as to the classification of our assets and the
amount of its valuation allowances is subject to review by the Pennsylvania
Department of Banking and the FDIC, which may order the establishment of
additional general or specific loss allowances. A portion of general loss
allowances established to cover possible losses related to assets classified as
substandard or doubtful may be included in determining a savings association's
regulatory capital. Specific valuation allowances for loan losses generally do
not qualify as regulatory capital.
At June 30, 1999, we had loans classified as special mention,
substandard, doubtful and loss as follows:
At
June 30,
1999
----
(In thousands)
Special mention............................. $ 216
Substandard................................. 3,039
Doubtful assets............................. 77
Loss assets................................. 181
------
Total.................................. $3,513
======
Allowance for Loan Losses. A provision for loan losses is charged to
operations based on management's evaluation of the losses incurred in our loan
portfolio. The evaluation, including a review of all loans on which full
collectibility of interest and principal may not be reasonably assured,
considers: (i) our past loan loss experience, (ii) known and inherent risks in
our portfolio, (iii) adverse situations that may affect the borrower's ability
to repay, (iv) the estimated value of any underlying collateral, and (v) current
economic conditions.
We monitor our allowance for loan losses and make additions to the
allowance as economic conditions dictate. Although we maintain our allowance for
loan losses at a level that we consider adequate for the inherent risk of loss
in our loan portfolio, future losses could exceed estimated amounts and
additional provisions for loan losses could be required. In addition, our
determination as to the amount of allowance for loan losses is subject to review
by the Pennsylvania Department of Banking and the FDIC, as part of their
examination process. After a review of the information available, the
Pennsylvania Department of Banking and the FDIC might require the establishment
of an additional allowance.
The following table illustrates the allocation of the allowance for
loan losses for each category of loans. The allocation of the allowance to each
category is not necessarily indicative of future losses in any particular
category and does not restrict our use of the allowance to absorb losses in
other loan categories.
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<PAGE>
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------- ---------------- ---------------- ------------------ --------------------
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
At end of period allocated to:
One-to four-family......... $1,133 63.94% $ 992 66.62% $ 817 70.67% $ 836 82.45% $650 75.58%
Construction............... -- -- -- -- -- -- 16 1.58 30 3.49
Multi-family and
commercial real estate... 592 33.41 395 26.53 231 19.98 117 11.54 130 15.12
Commercial leases.......... 41 2.31 93 6.25 89 7.70 34 3.35 27 3.14
Consumer................... 6 0.34 9 0.60 19 1.65 11 1.08 23 2.67
------ ------ ------ ------ ------ ------ ------ ------ ---- ------
Total allowance...... $1,772 100.00% $1,489 100.00% $1,156 100.00% $1,014 100.00% $860 100.00%
====== ====== ====== ====== ====== ====== ====== ====== ==== ======
</TABLE>
The following table sets forth information with respect to our
allowance for loan losses at the dates and for the periods indicated:
<TABLE>
<CAPTION>
At June 30,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total loans outstanding .................. $184,264 $176,386 $149,476 $144,299 $154,420
======== ======== ======== ======== ========
Average loans outstanding ................ $184,068 $170,991 $150,727 $155,594 $150,989
======== ======== ======== ======== ========
Allowance balance (at beginning of period) 1,489 1,156 1,014 860 839
Provision for loan losses ................ 423 385 220 244 104
Net charge-offs:
1-4 family residential ................. 98 43 78 79 83
Construction ........................... -- -- -- -- --
Multi-family and commercial real estate 9 -- -- -- --
Commercial leases ...................... 29 -- -- -- --
Consumer ............................... 4 9 -- 11 --
-------- -------- -------- -------- --------
Allowance balance (at end of period) ..... $ 1,772 $ 1,489 $ 1,156 $ 1,014 $ 860
======== ======== ======== ======== ========
Allowance for loan losses as a percent of
total loans outstanding ................ 0.95% 0.84% 0.77% 0.68% 0.53%
Allowance for loan losses as a percent of
non-performing loans ................... 77.4% 43.6% 27.8% 23.1% 33.1%
Net loans charged off as a percent of
average loans outstanding .............. 0.08% 0.03% 0.05% 0.04% 0.06%
</TABLE>
Real Estate Owned. At June 30, 1999, we had 11 properties with an
aggregate book value of $969,000 in real estate owned. The largest real estate
owned property had a book value of $201,529 at June 30, 1999 and consisted of a
single family dwelling located in the Pocono Mountain section of Northeastern
Pennsylvania. Of the total amount of real estate owned, $709,000, or 73% of the
total consisted of nine single family dwellings located in the Pocono Mountain
section of Northeastern Pennsylvania.
Investment Activities
Investment Securities. We classify our investment securities as
"available-for-sale" or "held- to-maturity" in accordance with SFAS No. 115. At
June 30, 1999, all investment securities were classified as available for sale.
At June 30, 1999, our investment portfolio policy permitted investments in
instruments such as: (i) U.S. Treasury obligations, (ii) U.S. federal agency or
federally
46
<PAGE>
sponsored agency obligations, (iii) local municipal obligations, (iv)
mortgage-backed securities, (v) banker's acceptances, (vi) certificates of
deposit, (vii) federal funds, including FHLB overnight and term deposits (up to
six months), and (viii) corporate bonds, commercial paper and mortgage
derivative products. Our Board of Directors may authorize additional
investments.
At June 30, 1999, our investment securities portfolio did not contain
securities of any issuer with an aggregate book value in excess of 10% of our
equity, excluding those issued by the United States government agencies and a
$2.0 million investment in each of the following issuers' trust preferred
securities: Northern Trust Corp, National Commerce Bank and Mercantile Bancorp,
Inc.
Mortgage-Backed Securities. To supplement lending activities, we have
invested in residential mortgage-backed securities and collateralized mortgage
obligations. Mortgage-backed securities can serve as collateral for borrowings
and, through repayments, as a source of liquidity. Mortgage-backed securities
represent a participation interest in a pool of single-family or other type of
mortgages. Principal and interest payments are passed from the mortgage
originators, through intermediaries (generally quasi-governmental agencies) that
pool and repackage the participation interests in the form of securities, to
investors such as us. The quasi-governmental agencies guarantee the payment of
principal and interest to investors and include the Federal Home Loan Mortgage
Corporation ("FHLMC"), the Government National Mortgage Association ("GNMA"),
and Federal National Mortgage Association ("FNMA").
At June 30, 1999, our entire mortgaged-backed securities portfolio was
classified as "available- for-sale." Each security was issued by GNMA, FHLMC or
FNMA. Expected maturities will differ from contractual maturities due to
scheduled repayments and because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
Mortgage-backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed-rate or
adjustable-rate mortgage loans. Mortgage-backed securities are generally
referred to as mortgage participation certificates or pass-through certificates.
The interest rate risk characteristics of the underlying pool of mortgages
(i.e., fixed-rate or adjustable-rate) and the prepayment risk, are passed on to
the certificate holder. The life of a mortgage-backed pass-through security is
equal to the life of the underlying mortgages. Mortgage-backed securities issued
by FHLMC and GNMA make up a majority of the passthrough certificates market.
We have not experienced any significant changes in the payment patterns
of our mortgage-backed securities portfolio in the last few years.
Sources of Funds
We use primarily deposits and FHLB borrowings as our major external
sources of funds for lending and other investment purposes. Funds are also
derived from the receipt of payments on loans and prepayment of loans and
maturities of investment securities and mortgage-backed securities and, to a
much lesser extent, borrowings and operations. Scheduled loan principal
repayments are a relatively
47
<PAGE>
stable source of funds, while deposit inflows and outflows and loan prepayments
are significantly influenced by general interest rates and market conditions.
Deposits. Consumer and commercial deposits are attracted principally
from within our primary market area through the offering of a selection of
deposit instruments including checking accounts, regular savings accounts, money
market accounts, and term certificate accounts. IRA accounts are also offered.
Deposit account terms vary according to the minimum balance required, the time
period the funds must remain on deposit, and the interest rate.
The interest rates paid by us on deposits are set weekly at the
direction of our senior management. Interest rates are determined based on our
liquidity requirements, interest rates paid by our competitors, and our growth
goals and applicable regulatory restrictions and requirements.
Borrowings. Advances may be obtained from the FHLB of Pittsburgh to
supplement our supply of lendable funds. Advances from the FHLB of Pittsburgh
are typically secured by a pledge of our stock in the FHLB of Pittsburgh,
substantially all of our first mortgage loans and other assets. Each FHLB credit
program has its own interest rate (which may be fixed or adjustable) and range
of maturities. At June 30, 1999, we could borrow up to $202.2 million from the
FHLB of Pittsburgh. If the need arises, we may also access the Federal Reserve
Bank discount window to supplement our supply of lendable funds and to meet
deposit withdrawal requirements. At June 30, 1999, borrowings from the FHLB of
Pittsburgh totaled $146.2 million ($18.3 million of which were short-term
borrowings maturing before June 30, 2000).
Subordinated Debentures. During the year ended June 30, 1992, the bank
issued $1,590,000 of Adjustable-Rate Mandatorily Convertible Subordinated
Debentures due in the year 2002 (the "Debentures"). The Debentures were assumed
by First Star Bancorp at the time of its formation. Interest on the Debentures
is 2% over the prime rate, adjustable monthly. Interest is payable on the
Debentures on the first day of each month. The Debentures will automatically
convert into Permanent Noncumulative Convertible Preferred Stock, Series A
("Series A Preferred Stock" (see Note 11 to the consolidated financial
statements)) of First Star Bancorp on January 1, 2002, unless previously
converted. The Debentures may be converted into Series A Preferred Stock at any
time, at either our option or the option of the holder, unless previously
redeemed, at a conversion price of one share per $9.864 principal amount of
Debenture, subject to adjustment in certain events. Each share of Series A
Preferred Stock is convertible into one share of our common stock, subject to
the limitations of our restated articles of incorporation.
The Debentures are redeemable, in whole or in part, on not less than 30
days' notice at our option at various redemption prices. The Debentures are
subordinated in right of payment to all of our present and future senior
indebtedness.
On December 31, 1996, we sold $4,000,000 of Adjustable-Rate Mandatorily
Convertible Subordinated Debentures due in the year 2008 (the "1996
Debentures"). Interest on the 1996 Debentures is 1% below the prime rate,
adjustable monthly. Interest is payable on the 1996 Debentures on the first day
of each month. The 1996 Debentures will automatically convert into Permanent
Noncumulative Convertible Preferred Stock, Series B ("Series B Preferred Stock")
of First Star Bancorp on December 31, 2008, unless previously converted. The
1996 Debentures may be
48
<PAGE>
converted into Series B Preferred Stock at any time by the holder or by First
Star Bancorp, unless previously redeemed, at a conversion price of one share per
$24.281 principal amount of 1996 Debenture, subject to adjustment in certain
events. The Series B Preferred Stock is convertible into one share of our common
stock, subject to the limitations of our restated articles of incorporation.
The 1996 Debentures are redeemable at par value prior to maturity only
with the proceeds from the sale of common or perpetual preferred stock, unless
otherwise approved by the Board of Governors of the Federal Reserve System. The
1996 Debentures are subordinated in right of payment to all of our present and
future senior indebtedness.
During the year ended June 30, 1992, $110,000 of the 1992 Debentures
were converted into Series A Preferred Stock. At June 30, 1999, $1,480,000 of
the 1992 Debentures and $4,000,000 of the 1996 Debentures remained outstanding.
All Debentures are includable as Tier 2 capital for determining our
compliance with regulatory capital requirements, subject to certain limitations
(see Note 19 to the consolidated financial statements). Upon conversion, the
Debentures become Tier 1 capital.
Competition
Competition for deposits comes from other insured financial
institutions such as commercial banks, thrift institutions, credit unions,
finance companies, and multi-state regional banks in our market areas.
Competition for funds also includes a number of insurance products sold by local
agents and investment products such as mutual funds and other securities sold by
local and regional brokers. Loan competition varies depending upon market
conditions and comes from commercial banks, thrift institutions, credit unions
and mortgage bankers.
Properties
We own three of our six offices and lease three of them. The net book
value of this real property at June 30, 1999, was $461,000. Our total investment
in office equipment had a net book value of $138,000 at June 30, 1999.
49
<PAGE>
<TABLE>
<CAPTION>
Year Total Book Owned
Address Opened Investment Value or Leased
------- ------ ---------- ----- ---------
MAIN OFFICE:
<S> <C> <C> <C> <C>
418 West Broad Street 1952 1,962,303 274,061 Owned
Bethlehem, PA 18018
BRANCH OFFICES:
358 South Walnut Street 1986 80,446 10,605 Leased(1)
Bath, PA 18014
3590 Northwood Avenue 1987 153,092 -0- Leased(2)
Palmer, PA 18043
14 South Main Street 1989 5,894 2,065 Leased(3)
Nazareth, PA 18064
471-497 Wabash Street 1994 211,132 144,786 Owned
Allentown, PA 18103
11 North Main Street 1997 196,660 167,272 Owned
Alburtis, PA 18011
</TABLE>
- -------------
(1) Expires May 2001. Option to renew for an additional three-year term.
(2) Expires June 2008. Option to renew for an additional ten-year term.
(3) Expires June 2000. Option to renew for an additional one-year term.
Personnel
At June 30, 1999 we had 43 full-time employees and 7 part-time
employees. None of our employees are represented by a collective bargaining
group. We believe that our relationship with our employees is good.
Additional Subsidiary Activity
First Star Bancorp has two direct subsidiaries: First Star Savings and
Integrated Financial Corp. Integrated Financial Corp. primarily manages a
property acquired at a sheriff sale and holds an investment in a limited
partnership. Furthermore, Integrated Financial Corp. has one wholly owned
subsidiary, Integrated Abstract, Inc., which is substantially inactive.
50
<PAGE>
Legal Proceedings
We are, from time to time, a party to legal proceedings arising in the
ordinary course of our business, including legal proceedings to enforce our
rights against borrowers. We are not a party to any legal proceedings which are
expected to have a material adverse effect on our financial statements.
MANAGEMENT OF FIRST STAR BANCORP, INC.
Directors and Executive Officers
Our Board of Directors is composed of six members, each of whom serves
for a term of three years, with approximately one-third of the directors elected
each year. Our charter and bylaws require that directors be divided into three
classes, as nearly equal in number as possible. Our officers are elected
annually by our board and serve at the board's discretion.
The following table sets forth information with respect to our
directors and executive officers.
<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially
Age at Year First Current Owned at Percent
June 30, Elected Term June 30, of
Name 1999 Director Expires 1999(1) Class(2)
- ---- ---- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Harold J. Suess.................. 78 1964 2000 5,828(3) 1.5%
Stephen M. Szy................... 54 1987 2000 3,864(4) 1.0
Joseph T. Svetik................. 50 1987 2001 101,438(5)(6) 22.1
Paul J. Sebastian................ 56 1986 2001 97,574(6)(7) 21.2
Mark Parseghian, Jr.............. 71 1974 1999 4,190(8) 1.1
Tighe Scott...................... 50 1987 1999 121,905(9) 25.4
</TABLE>
- ------------------------------
(1) Except as otherwise noted below, the named individual effectively
exercises sole voting and investment power over the shares beneficially
owned.
(2) Assumes the full conversion of the 1992 Debentures and the 1996
Debentures into Series A and Series B Preferred Stock, respectively,
and full conversion of Series A and Series B Preferred Stock into
common stock.
(3) Includes 2,027 shares of the Series A Preferred Stock.
(4) Includes 1,013 shares of the Series A Preferred Stock.
(5) Includes 9,792 shares which may be received upon the exercise of stock
options which are immediately exercisable, 8,617 shares of the Series A
Preferred Stock, 38,522 shares of Series A Preferred Stock receivable
upon conversion of 1992 Debentures and 27,799 shares of Series B
Preferred Stock receivable upon conversion of 1996 Debentures.
(6) Excludes 47,429 shares of common stock held by the First Star Bancorp,
Inc. Employee Stock Ownership Plan for which such person serves as plan
trustee and exercises shared voting and investment power. Shares which
are unallocated to participating employees (47,429 shares) and shares
for which no voting direction is received are voted by the plan
trustees as directed by the Board of Directors or the ESOP Committee.
The individuals serving as plan trustees disclaim beneficial ownership
of stock held under the ESOP.
(7) Includes 14,828 shares which may be received upon the exercise of stock
options which are immediately exercisable, 8,617 shares of the Series A
Preferred Stock, 29,399 shares of Series A Preferred Stock receivable
upon conversion of 1992 Debentures and 31,917 shares of Series B
Preferred Stock receivable upon conversion of 1996 Debentures.
51
<PAGE>
(8) Includes 1,267 shares held by Mr. Parseghian's wife and 2,059 shares of
Series B Preferred Stock receivable upon conversion of 1996 Debentures
also held by Mr. Parseghian's wife.
(9) Includes 19,261 shares of the Series A Preferred Stock and 64,880
shares of Series A Preferred Stock receivable upon conversion of 1992
Debentures and 19,548 shares of Series B Preferred Stock receivable
upon conversion of 1996 Debentures. Tighe Scott is the brother of Neil
Scott and the son of Amelio Scott.
The business experience during at least the past five years for each of
the directors is as follows:
Mark Parseghian, Jr. For more than the past five years, Mr. Parseghian
has been self- employed as a consultant to companies engaged in the construction
industry.
Tighe J. Scott. For more than the past five years, Mr. Scott has been
Vice President of Operations of Scotty's Fashion, Inc. an apparel manufacturer
located in Pen Argyl, Pennsylvania.
Paul J. Sebastian. Mr. Sebastian became Senior Vice President of the
bank in October 1989 and Chairman of the Board of Directors of First Star
Bancorp in August 1997. From December 1986, through August 1991, Mr. Sebastian
was a principal in Professional Services Group of America, Inc., Allentown,
Pennsylvania, which provides financial services to individuals and businesses.
Prior to that, Mr. Sebastian had been a Registered Representative with Shearson
Lehman Brothers Inc. in Allentown, Pennsylvania, since February 1983. From
November 1981 to February 1983, Mr. Sebastian was Chief Financial Officer of
First Federal Savings Bank, Pottstown, Pennsylvania. From August 1976 to
November 1981, Mr. Sebastian was an Examiner with the Federal Home Loan Bank
Board, Pittsburgh, Pennsylvania. Mr. Sebastian is a certified public accountant.
Harold J. Suess. Retired for the past several years, Mr. Suess is a
prior President of Bethlehem Fence Works. From 1990 until his retirement, he was
Chairman of the Board of that company.
Joseph T. Svetik. Mr. Svetik became Chairman of the Board of the bank
in August 1997. Upon its formation in 1993, Mr. Svetik became President and
Chief Executive Officer of First Star Bancorp. Mr. Svetik became President and
Chief Executive Officer of the bank in November 1990. Prior to that date, Mr.
Svetik was Executive Vice President and Chief Executive Officer of the bank.
Prior to his employment by the bank, Mr. Svetik was Vice President, Treasurer
and Chief Financial Officer of Third Federal Savings Bank, Newtown,
Pennsylvania. Mr. Svetik is a certified public accountant.
Stephen M. Szy. For more than the past five years, Mr. Szy has been
self-employed as a public accountant in Hellertown, Pennsylvania.
Meetings and Committees of the Board of Directors
First Star Bancorp's Board of Directors holds regular monthly meetings
and special meetings when needed. During the fiscal year ended June 30, 1999,
the Board met 12 times. No director attended fewer than 75% of the total number
of Board meetings held during the fiscal year ended June 30, 1999, and the total
number of meetings held by all committees of the Board on which the director
served during such year.
52
<PAGE>
The Board of Directors has a number of standing committees, including
an Executive Committee, an Audit Committee and a Compensation Committee.
The Executive Committee, except as limited by our bylaws, has the full
authority of the Board of Directors when the Board of Directors is not in
session. The current members of the Executive Committee are Directors Sebastian,
Svetik and Szy. The Executive Committee did not meet during the fiscal year
ended June 30, 1999.
The Audit Committee reviews our records and affairs to determine our
financial condition and reviews with management and the independent auditors the
systems of internal control. This committee approves the scope of the audit
procedures employed by our independent auditors and meets with the auditors to
discuss the results of their audit. The Audit Committee reports to the Board of
Directors with respect to the foregoing matters and recommends annually the
selection of our independent auditors. The current members of the Audit
Committee are Directors Parseghian and Szy. During the fiscal year ended June
30, 1999, the Audit Committee met four times.
The Compensation Committee is responsible for reviewing and
establishing compensation for all officers and employees of First Star Bancorp
and also administers First Star Bancorp's Employee Stock Compensation Program.
The current members of the Compensation Committee are Directors Parseghian,
Scott, and Suess. This Committee met twice during the fiscal year ended June 30,
1999.
The full Board of Directors acts as a nominating committee for the
annual selection of nominees to the Board of Directors. Only its nominations,
and those of any stockholder delivered to the Secretary of First Star Bancorp at
least 60 days in advance of the Annual Meeting, shall be voted on at the Annual
Meeting. In its capacity as the Nominating Committee, the Board of Directors
held one meeting during the fiscal year ended June 30, 1999.
Director Compensation
Each director is paid monthly. Total aggregate fees paid to the
directors for the year ended June 30, 1999 were $30,675. Since January 1, 1998,
each outside director has been paid a monthly fee of $450 for each meeting
attended.
In addition, non-officer directors receive an annual cash bonus based
upon the performance of First Star Savings. During fiscal 1999, each
non-employee director received a cash bonus of $2,000.
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by our chief executive officer and
senior vice president at June 30, 1999, 1998 and 1997. No other employee earned
in excess of $100,000 during the periods indicated.
53
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------------
Stock Based
Fiscal Other Annual Compensation All Other
Name and Principal Position Year Salary Bonus Compensation(1) # of Options Compensation
- --------------------------- ---- ------ ----- --------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph T. Svetik 1999 $180,961 $41,000 -- -- $25,640(2)
Director, President and CEO 1998 149,581 58,026 -- -- 26,175(2)
1997 133,519 24,450 -- -- 23,370(2)
Paul J. Sebastian 1999 174,213 41,000 -- -- 25,695(3)
Director, Senior Vice President 1998 142,103 58,026 -- -- 25,614(3)
1997 126,843 24,450 -- -- 23,391(3)
</TABLE>
- ------------
(1) Other annual compensation does not equal the lesser of $50,000 or 10% of
the total of individual's annual salary and bonus.
(2) Includes First Star matching contributions of $1,640, $2,175 and $870 under
the 401(k) Plan and First Star contributions of $24,000, $24,000 and
$22,500 made pursuant to the Employee Stock Ownership Plan during 1999,
1998 and 1997, respectively.
(3) Includes First Star matching contributions of $1,695, $1,614 and $1,652
under the 401(k) Plan and First Star contributions of $24,000, $24,000 and
$21,739 made pursuant to the Employee Stock Ownership Plan during 1999,
1998 and 1997, respectively.
Stock Option Plans. We have established an Employee Stock Compensation
Program pursuant to which stock options may be granted to officers and key
employees. See note 10 to our consolidated financial statements beginning on
page F-1. The following table sets forth information concerning options granted
under this program.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
---------------------------------------------------------------------------------
Value of
Shares Number of Options In-the-money Options
Acquired on Value at Fiscal Year-End(#) at Fiscal Year-End($)
Name Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable(3)
- ---- ------------ -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Joseph T. Svetik 1,584 $94,248(1) 9,792 / 0 $501,112 / 0
Paul J. Sebastian 1,300 78,650(2) 14,828 / 0 766,302 / 0
</TABLE>
- ----------------
(1) Based upon the difference between the option exercise price and the market
price of stock of $68.00 per share as of August 17, 1998.
(2) Based upon the difference between the option exercise price and the market
price of stock of $69.00 per share as of December 17, 1998.
(3) Based upon the difference between the option exercise price and the market
price of stock of $61.00 per share as of June 30, 1999.
Employment Agreements. We have entered into employment agreements with
Joseph T. Svetik and Paul J. Sebastian. Each agreement has a five-year term.
Each agreement is automatically extended each year, provided no notice has been
given by either the bank or that employee to terminate employment, so that the
number of years remaining in each agreement remains at five. The agreements are
terminable by us for "cause" as defined in the agreements. If we terminate the
54
<PAGE>
individual without cause or such person terminates for good reason, he will be
entitled to two times his salary for the remainder of the term of the contract.
Employee Stock Ownership Plan. We have established an employee stock
ownership plan, the ESOP, for the exclusive benefit of participating employees
of ours, to be implemented upon the completion of the conversion. Participating
employees are employees who have completed one year of service with us or our
subsidiary and have attained the age of 21.
Contributions to the ESOP and shares released from the suspense account
are allocated among participants on the basis of total compensation. All
participants must be employed at least 1,000 hours in a plan year, or have
terminated employment following death, disability or retirement, in order to
receive an allocation. Participant benefits become vested in plan allocations
following five years of participation in the plan. Employment prior to the
adoption of the ESOP shall be credited for the purposes of vesting. Vesting will
be accelerated upon retirement, death, disability, change in control of First
Star Bancorp, or termination of the ESOP. Forfeitures will be reallocated to
participants on the same basis as other contributions in the plan year. Benefits
may be payable in the form of a lump sum upon retirement, death, disability or
separation from service. Our contributions to the ESOP are discretionary and may
cause a reduction in other forms of compensation. Therefore, benefits payable
under the ESOP cannot be estimated.
The Board of Directors appointed directors Svetik and Sebastian to
serve as ESOP administrators and to serve as the initial ESOP Trustees. The
Board of Directors or the ESOP Committee may instruct the ESOP Trustees
regarding investments of funds contributed to the ESOP. The ESOP Trustees must
vote all allocated shares held in the ESOP in accordance with the instructions
of the participating employees. Unallocated shares and allocated shares for
which no timely direction is received will be voted by the ESOP Trustees as
directed by the Board of Directors or the ESOP Committee, subject to the
Trustees' fiduciary duties.
Certain Related Transactions
We grant loans to our officers, directors and employees. These loans
are made in the ordinary course of business and upon the same terms, including
collateral, as those prevailing at the time for comparable transactions and do
not involve more than the normal risk of collectibility or present any other
unfavorable features. Loans to officers and directors and their affiliates
amounted to $3.8 million or 24.6% of our total equity, at June 30, 1999. All of
these loans were current at June 30, 1999.
PRINCIPAL SECURITY HOLDERS
We know of no person or entity other than those set forth below who is
a beneficial owner of more than 5% of our common stock. The following table
assumes the full conversion of the 1992 and 1996 Debentures into Series A
Preferred Stock and Series B Preferred Stock, respectively, and full conversion
of the Series A and B Preferred Stock into common stock. The following table
sets forth, as of June 30, 1999, certain information as to those persons who
were beneficial owners of more than 5% of our outstanding shares of common stock
and as to such stock beneficially owned by all of our officers and directors of
as a group, as calculated from the lists of our stockholders.
55
<PAGE>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Class
- ---------------- ------------------------ -----
Neil Scott (2)(3)
315 Pennsylvania Avenue
Pen Argyl, Pennsylvania 18072........... 38,411 9.4%
Amelio Scott (2)(4)
205 David Avenue
Pen Argyl, Pennsylvania 18072........... 32,830 8.2%
Tighe Scott (2)(5)
Hemlock Lane Star Route
Saylorsburg, Pennsylvania 18353......... 121,905 25.4%
Paul J. Sebastian (6)(7)
418 West Broad Street
Bethlehem, Pennsylvania 18018........... 97,574 21.2%
Joseph T. Svetik (6)(8)
418 West Broad Street
Bethlehem, Pennsylvania 18018........... 101,438 22.1%
First Star Bancorp, Inc.(9)
Employee Stock Ownership Plan
418 West Broad Street
Bethlehem, Pennsylvania 18018........... 69,050 17.4%
All directors and executive officers as a
group (6 persons) (6)(10)................ 334,799 51.2%
- -----------------
(1) Includes shares of common stock owned by corporations or foundations in
which the stockholder, director or officer is an officer or major
stockholder or by spouses, or as a custodian or trustee for minor children,
over which shares the named individual or all officers and directors as a
group effectively exercise sole voting and investment power, unless
otherwise indicated. Also includes shares of common stock that may be
obtained through the conversion or exercise of other securities. Absent the
conversion or exercise of other securities, all directors and executive
officers as a group held 56,520 shares of common stock at June 30, 1999.
(2) Amelio Scott and Neil Scott are father and son, respectively. Tighe Scott,
a director of First Star Bancorp, is also a son of Amelio Scott.
(3) Includes 15,206 shares of common stock issuable upon conversion of Series A
Preferred Stock which is issuable upon conversion of Debentures and 19,562
shares of common stock issuable upon conversion of Series B Preferred Stock
which is issuable upon conversion of Debentures.
(4) Includes 24,710 shares of common stock issuable upon conversion of Series B
Preferred Stock which is issuable upon conversion of Debentures.
56
<PAGE>
(5) Includes 84,141 shares of common stock issuable upon conversion of Series A
Preferred Stock (including Debentures that are convertible into Series A
Preferred Stock) and 19,548 shares of common stock issuable upon conversion
of Series B Preferred Stock (including Debentures that are convertible into
Series B Preferred Stock).
(6) Excludes 47,429 shares of common stock held by the First Star Bancorp, Inc.
Employee Stock Ownership Plan for which such person serves as plan trustee
and exercises shared voting and investment power. Shares which are
unallocated to participating employees (47,429 shares) and shares for which
no voting direction is received are voted by the plan trustees as directed
by the Board of Directors or the ESOP Committee. The individuals serving as
plan trustees disclaim beneficial ownership of stock held under the ESOP.
(7) Includes 14,828 shares of common stock which may be acquired through the
exercise of stock options which are immediately exercisable. Also includes
38,016 shares of common stock issuable upon conversion of Series A
Preferred Stock (including Debentures that are convertible into Series A
Preferred Stock) and 31,917 shares of common stock issuable upon conversion
of Series B Preferred Stock which is issuable upon conversion of
Debentures.
(8) Includes 9,792 shares of common stock which may be acquired through the
exercise of stock options which are immediately exercisable. Also includes
47,139 shares of common stock issuable upon conversion of Series A
Preferred Stock (including Debentures that are convertible into Series A
Preferred Stock) and 27,799 shares of common stock issuable upon conversion
of Series B Preferred Stock which is issuable upon conversion of
Debentures.
(9) Includes 21,621 shares of common stock issuable upon conversion of Series B
Preferred Stock which is issuable upon conversion of Debentures.
(10) Includes 24,620 shares of common stock which may be acquired through the
exercise of stock options which are immediately exercisable. Also includes
shares over which officers and directors exercise joint voting and
investment power with certain members of their families, 172,336 shares of
common stock issuable upon conversion of Series A Preferred Stock
(including Debentures that are convertible into Series A Preferred Stock)
and 81,323 shares of common stock issuable upon conversion of Series B
Preferred Stock which is issuable upon conversion of Debentures.
REGULATION
Set forth below is a brief description of material laws which relate to
us. The description is not complete and is qualified in its entirety by
references to applicable laws and regulation.
Regulation of First Star Savings Bank
General. As a Pennsylvania chartered, SAIF-insured savings bank, the
bank is subject to extensive regulation and examination by the Pennsylvania
Department of Banking, the FDIC, which insures its deposits to the maximum
extent permitted by law, and to a much lesser extent, by the
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Federal Reserve. The federal and state laws and regulations which are applicable
to banks regulate, among other things, the scope of their business, their
investments, the reserves required to be kept against deposits, the timing of
the availability of deposited funds and the nature and amount of and collateral
for certain loans. The laws and regulations governing the bank generally have
been promulgated to protect depositors and not for the purpose of protecting
stockholders. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Any change in such regulation, whether by the
Pennsylvania Department of Banking, the FDIC or the United States Congress could
have a material adverse impact on the bank and its operations.
Pennsylvania Savings Bank Law. The Pennsylvania Banking Code ("Banking
Code") contains detailed provisions governing the organization, location of
offices, rights and responsibilities of trustees, officers, and employees, as
well as corporate powers, savings and investment operations and other aspects of
the bank and its affairs. The Banking Code delegates extensive rule-making power
and administrative discretion to the Pennsylvania Department of Banking so that
the supervision and regulation of state chartered savings banks may be flexible
and readily responsive to changes in economic conditions and in savings and
lending practices.
One of the purposes of the Banking Code is to provide savings banks
with the opportunity to be fully competitive with each other and with other
financial institutions existing under other state, federal and foreign laws. To
this end, the Banking Code provides state-chartered savings banks with all of
the powers enjoyed by federal savings and loan associations, subject to
regulation by the Pennsylvania Department of Banking. The Federal Deposit
Insurance Act (the "FDIA"), however, prohibits state chartered institutions from
making new investments, loans, or becoming involved in activities as principal
and equity investments which are not permitted for national banks unless (1) the
FDIC determines the activity or investment does not pose a significant risk of
loss to the SAIF and (2) the savings bank meets all capital requirements.
Accordingly, the ability of the Banking Code to provide additional operating
authority to us is limited by the FDIA.
The Pennsylvania Department of Banking generally examines each savings
bank not less frequently than once every two years. The Banking Code permits the
Pennsylvania Department of Banking to accept the examinations and reports of the
FDIC in lieu of the Pennsylvania Department of Banking's examination. The
present practice is for the Pennsylvania Department of Banking to conduct
individual examinations. The Pennsylvania Department of Banking may order any
savings bank to discontinue any violation of law or unsafe or unsound business
practice and may direct any trustee, officer, attorney or employee of a savings
bank engaged in an objectionable activity, after the Pennsylvania Department of
Banking has ordered the activity to be terminated, to show cause at a hearing
before the Pennsylvania Department of Banking why such person should not be
removed.
Interstate Acquisitions. The Commonwealth of Pennsylvania has enacted
legislation regarding the acquisition of commercial banks, bank holding
companies, savings banks and savings and loan associations located in
Pennsylvania by institutions located outside of Pennsylvania. The statute
dealing with savings institutions authorizes (i) a savings bank, savings and
loan association or holding company thereof located in another state (a "foreign
institution") to acquire the voting stock of, merge or consolidate with, or
purchase assets and assume liabilities of, a Pennsylvania-chartered savings bank
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and (ii) the establishment of branches in Pennsylvania by foreign institutions,
in each case subject to certain conditions including (A) reciprocal legislation
in the state in which the foreign institution seeking entry into Pennsylvania is
located permitting comparable entry by Pennsylvania savings institutions and (B)
approval by the Pennsylvania Department of Banking. Pennsylvania law also
provides for nationwide branching by Pennsylvania-chartered savings banks and
savings and loan associations, subject to the Pennsylvania Department of
Banking's approval and certain other conditions.
On September 29, 1994, the United States Congress enacted the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Law"), which amended various federal banking laws to provide
for nationwide interstate banking, interstate bank mergers and interstate
branching. The Interstate Banking Law allows the acquisition by a bank holding
company of a bank located in another state.
Pennsylvania has enacted legislation authorizing full interstate
branching for state- chartered financial institutions. This legislation allows
out-of-state banks to branch into Pennsylvania either by buying an existing bank
or converting it into a branch or by setting up a de novo branch. The
legislation also allows state-chartered banks the same rights as federally
chartered banks to branch into other states that allow interstate branching.
Deposit Insurance. The FDIC is an independent federal agency that
insures the deposits, up to prescribed statutory limits, of federally insured
banks and savings institutions and safeguards the safety and soundness of the
banking and savings industries. Two separate insurance funds, the Bank Insurance
Fund ("BIF") for commercial banks, state savings banks and some federal savings
banks, and the SAIF for savings associations, are maintained and administered by
the FDIC. First Star Savings, which was previously a state savings association,
remains a member of the SAIF and its deposit accounts are insured by the FDIC,
up to the prescribed limits. The FDIC has examination authority over all insured
depository institutions, including the bank, and has under certain circumstances
authority to initiate enforcement actions against federally insured savings
institutions to safeguard safety and soundness and the deposit insurance fund.
Assessments. As a member of the SAIF, the bank paid an insurance
premium to the FDIC equal to a minimum of 0.23% of its total deposits during
1996 and prior years. In 1996, the annual insurance premium for most BIF members
was lowered to $2,000. The lower insurance premiums for BIF members placed SAIF
members at a competitive disadvantage to BIF members.
Effective December 31, 1996, federal law was revised to mandate a
one-time special assessment on SAIF members such as the bank of approximately
0.657% of deposits held on March 31, 1995. Beginning January 1, 1997, the
deposit insurance assessment for most SAIF members was reduced to 0.064% of
deposits on an annual basis through the end of 1999. During this same period,
BIF members will be assessed approximately 0.013% of deposits. After 1999,
assessments for BIF and SAIF members should be the same. It is expected that
these continuing assessments for both SAIF and BIF members will be used to repay
outstanding Financing Corporation bond obligations.
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Regulatory Capital Requirements. The FDIC has promulgated regulations
and adopted a statement of policy prescribing the capital adequacy requirements
for state-chartered banks, some of which, like the bank, are not members of the
Federal Reserve. At June 30, 1999, the bank exceeded all regulatory capital
requirements and was classified as "well capitalized."
The FDIC's capital regulations establish a minimum 3% Tier 1 leverage
capital requirement for the most highly-rated state-chartered, non-member banks;
other banks must maintain a minimum Tier 1 leverage ratio of 4%. The FDIC
defines a highly-rated bank as one that is not anticipating or experiencing
significant growth and has well diversified risk, including no undue interest
rate risk exposure, excellent asset quality, high liquidity, good earnings and
which the FDIC, in general, considers a strong banking organization, rated
composite 1 under the Uniform Financial Institutions Rating System. Leverage or
core capital is defined as the sum of common stockholders' equity (including
retained earnings), noncumulative perpetual preferred stock and related surplus,
and minority interests in consolidated subsidiaries, minus all intangible assets
other than certain qualifying supervisory goodwill, and certain purchased
mortgage servicing rights and purchased credit and relationships.
The FDIC also requires that savings banks meet a risk-based capital
standard. The risk-based capital standard for savings banks requires the
maintenance of total capital (which is defined as Tier I capital and
supplementary (Tier 2) capital) to risk weighted assets of 8%. In determining
the amount of risk-weighted assets, all assets, plus certain off balance sheet
assets, are multiplied by a risk-weight of 0% to 100%, based on the risks the
FDIC believes are inherent in the type of asset or item.
The components of Tier 1 capital are equivalent to those discussed
above under the 4% leverage standard. The components of supplementary (Tier 2)
capital include certain perpetual preferred stock, certain mandatory convertible
securities, certain subordinated debt and intermediate preferred stock and
general allowances for loan and lease losses. Allowance for loan and lease
losses includable in supplementary capital is limited to a maximum of 1.25% of
risk-weighted assets. Overall, the amount of capital counted toward
supplementary capital cannot exceed 100% of core capital.
A bank which has less than the minimum leverage capital requirement is
subject to various capital plan and activities restriction requirements. The
FDIC's regulation also provides that any insured depository institution with a
ratio of Tier 1 capital to total assets that is less than 2.0% is deemed to be
operating in an unsafe or unsound condition pursuant to Section 8(a) of the FDIA
and could be subject to potential termination of deposit insurance.
The bank is also subject to similar Pennsylvania Department of Banking
guidelines. The components and requirements of leverage and risk-based capital
are substantially the same as those defined by the FDIC.
The bank was in compliance in both the FDIC and Pennsylvania capital
requirements at June 30, 1999.
Prompt Corrective Action. Federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized,
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and critically undercapitalized) and to take certain mandatory supervisory
actions, and are authorized to take other discretionary actions, with respect to
institutions in the three undercapitalized categories, the severity of which
will depend upon the capital category in which the institution is placed.
The capital levels established for each of the categories are as
follows:
<TABLE>
<CAPTION>
Total
Risk-Based Tier 1 Risk-
Capital Category Tier 1 Capital Capital Based Capital
- ---------------- ---------- ----------- ----------
<S> <C> <C> <C>
Well Capitalized 5% or more 10% or more 6% or more
Adequately
Capitalized 4% or more* 8% or more 4% or more
Undercapitalized less than 4% less than 8% less than 4%
Significantly
Undercapitalized less than 3% less than 6% less than 3%
Critically 2% or less
Undercapitalized tangible equity -- --
</TABLE>
- -----------
* For institutions with the highest CAMEL rating, the required Tier 1 capital
ratio is 3%.
For purposes of the regulation, the term "tangible equity" includes
core capital elements counted as Tier 1 Capital for purposes of the risk-based
capital standards, plus the amount of outstanding cumulative perpetual preferred
stock (including related surplus), minus all intangible assets with certain
exceptions. A depository institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital position if it
receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency. A
bank holding company must guarantee that a subsidiary depository institution
meets its capital restoration plan, subject to certain limitations. The
obligation of a controlling holding company to fund a capital restoration plan
is limited to the lesser of 5% of an undercapitalized subsidiary's assets or the
amount required to meet regulatory capital requirements. An undercapitalized
institution is also generally prohibited from increasing its average total
assets, making acquisitions, establishing any branches, or engaging in any new
line of business, except in accordance with an accepted capital restoration plan
or with the approval of the FDIC.
At June 30, 1999, the bank had the requisite capital levels to qualify
as well capitalized while First Star Bancorp was adequately capitalized under
such measures.
Community Reinvestment. Under the Community Reinvestment Act ("CRA"),
as implemented by FDIC regulations, a savings association has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending
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requirements or programs for financial institutions nor does it limit an
institution's discretion to develop the types of products and services that it
believes are best suited to its particular community, consistent with the CRA.
The CRA requires the FDIC, in connection with its examination of a savings bank,
to assess the institution's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such institution, and to provide a written evaluation of an institution's CRA
performance utilizing a four tiered descriptive rating system. The bank received
a "satisfactory" rating in its last CRA examination in August, 1999.
Transactions With Affiliates. Generally, restrictions on transactions
with affiliates require that transactions between a savings association or its
subsidiaries and its affiliates be on terms as favorable to the bank as
transactions with non-affiliates. In addition, certain of these transactions are
restricted to a percentage of the bank's capital. Affiliates of the bank include
First Star Bancorp and any company which would be under common control with the
bank.
The bank's authority to extend credit to executive officers, trustees
and 10% stockholders, as well as entities such persons control are currently
governed by Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O
promulgated by the Federal Reserve Board. Among other things, these regulations
require such loans to be made on terms substantially similar to those offered to
unaffiliated individuals, place limits on the amount of loans the bank may make
to such persons based, in part, on the bank's capital position, and require
certain approval procedures to be followed. See, however, "Management of First
Star Bancorp, Inc. - Certain Related Transactions."
Federal Home Loan Bank System. The bank is a member of the FHLB of
Pittsburgh, which is one of 12 regional FHLBs that administers the home
financing credit function of savings associations. Each FHLB serves as a reserve
or central bank for its members within its assigned region. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the Board of Trustees of the FHLB.
As a member, the bank is required to purchase and maintain stock in the
FHLB of Pittsburgh in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year. At June 30, 1999, the bank had $7.9 million in FHLB
stock, which was in compliance with this requirement.
The FHLBs are required to provide funds for the resolution of troubled
savings associations and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
in low and moderate income housing projects. These contributions have adversely
affected the level of FHLB dividends paid and could continue to do so in the
future. For the year ended June 30, 1999, dividends paid by the FHLB of
Pittsburgh to the bank totaled approximately $508,000.
Federal Reserve System. The Federal Reserve requires all depository
institutions to maintain non-interest bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal time deposits. The balances maintained to
meet the reserve requirements imposed by the Federal Reserve may be used to
satisfy the liquidity
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requirements that are imposed by the Pennsylvania Department of Banking. At June
30, 1999, the bank met its reserve requirements.
Savings associations have authority to borrow from the Federal Reserve
Bank "discount window," but Federal Reserve policy generally requires savings
associations to exhaust all sources before borrowing from the Federal Reserve.
The bank had no discount window borrowings at June 30, 1999.
Regulation of First Star Bancorp
General. First Star Bancorp, as a bank holding company, is subject to
regulation and supervision by the Board of Governors of the Federal Reserve and
by the Pennsylvania Department of Banking. This regulation is generally intended
to ensure that First Star Bancorp limits its activities to those allowed by law
and that it operates in a safe and sound manner without endangering the
financial health of its subsidiary banks. First Star Bancorp will be required to
file annually a report of its operations with, and is subject to examination by,
the Federal Reserve and the Pennsylvania Department of Banking.
BHCA Activities and Other Limitations. The Bank Holding Company Act of
1956, as amended ("BHCA"), prohibits a bank holding company from acquiring
direct or indirect ownership or control of more than 5% of the voting shares of
any bank, or increasing such ownership or control of any bank, without prior
approval of the Federal Reserve. In determining whether to authorize a bank
holding company (or a company that will become a bank holding company) to
acquire control of a bank, the Federal Reserve takes into consideration the
financial and managerial resources of the bank holding company, as well as those
of the bank to be acquired, and considers whether the acquisition is likely to
have anti-competitive effects or other adverse effects. No approval under the
BHCA is required, however, for a bank holding company already owning or
controlling 50% or more of the voting shares of a bank to acquire additional
shares of such bank.
The BHCA also prohibits a bank holding company, with certain
exceptions, from acquiring more than 5% of the voting shares of any company that
is not a bank and from engaging in any business other than banking or managing
or controlling banks. Under the BHCA, the Federal Reserve is authorized to
approve the ownership of shares by a bank holding company in any company, the
activities of which the Federal Reserve has determined to be so closely related
to banking or to managing or controlling banks as to be a proper incident
thereto. In making such determinations, the Federal Reserve is required to weigh
expected benefits to the public, such as greater convenience, increased
competition or gains in efficiency, against the possible adverse effects, such
as undue concentration of resources, decreased or unfair competition, conflicts
of interest or unsound banking practices.
The Federal Reserve has by regulation determined that certain
activities are closely related to banking within the meaning of the BHCA. These
activities include those of operating a mortgage company, a finance company, a
credit card company, a factoring company, a trust company or a savings
association; performing certain data processing operations; providing limited
securities brokerage services; acting as an investment or financial advisor;
leasing personal property on a full-payout (and, to a limited extent, less than
full-payout), non-operating basis; providing tax planning and
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preparation services; operating a collection agency; and providing certain
courier services. The Federal Reserve also has determined that certain other
activities, including real estate brokerage and syndication, land development,
property management and underwriting of life insurance not related to credit
transactions, are not closely related to banking and a proper incident thereto.
Regulatory Capital Requirements. The Federal Reserve has adopted
capital adequacy guidelines pursuant to which it assesses the adequacy of
capital in examining and supervising a bank holding company and in analyzing
applications to it under the BHCA. The Federal Reserve capital adequacy
guidelines are similar to those imposed on the bank by the FDIC. See "Regulation
of First Star Savings Bank - Regulatory Capital Requirements."
In addition, at the holding company level, our subordinated debt is
included in Tier 2 capital, subject to certain limitations. If not converted
prior to maturity at the option of either the holder or us, the subordinated
debentures will automatically convert at maturity into permanent noncumulative
preferred stock. Upon that conversion, the debentures would become Tier 1
capital. We have $1,480,000 in subordinated debentures scheduled to mature on
January 1, 2002 and an additional $4,000,000 in subordinated debentures
scheduled to mature on December 31, 2008. If all of our subordinated debt had
been converted into preferred stock at June 30, 1999, our leverage ratio would
have been 6.22%, our Tier 1 risk-based capital ratio would have been 10.55% and
our total risk-based capital ratio would have been 11.38%.
The preferred securities will be, to a certain extent, includable as
Tier 1 capital.
Commitments to Affiliated Depository Institutions. Under Federal
Reserve policy, First Star Bancorp will be expected to act as a source of
financial strength to the bank and to commit resources to support the bank in
circumstances when it might not do so absent such policy. The enforceability and
precise scope of this policy is unclear, however, in light of recent judicial
precedent. However, should the bank require the support of additional capital
resources, it should be anticipated that First Star Bancorp will be required to
respond with any such resources available to it.
Restrictions Applicable to Pennsylvania-Chartered Holding Companies.
First Star Bancorp is subject to such regulations as the Pennsylvania Department
of Banking may from time to time prescribe. No holding company regulations have
been issued to date.
FIRST STAR CAPITAL TRUST
The Trust is a statutory business trust formed under Delaware law
pursuant to:
o the initial trust agreement, dated as of August 24, 1999,
executed by us, as depositor, and by the Delaware trustee; and
o the Certificate of Trust filed with the Secretary of State of the
State of Delaware on ________, 1999.
The initial trust agreement will be amended and restated in its
entirety substantially in the form filed as an exhibit to the registration
statement of which this prospectus forms a part. The trust
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agreement will be qualified as an indenture under the Trust Indenture Act. The
Trust will issue all of the preferred securities to purchasers in the offering
described in this prospectus. We will acquire all of the common securities
issued by the Trust, which will represent an aggregate liquidation amount equal
to at least 3% of the total capital of the Trust. The common securities will be
equal in right to payments with the preferred securities, except that upon the
occurrence and during the continuance of an event of default under the Trust
Agreement resulting from a debenture event of default, our rights as holder of
the common securities to payment in respect of distributions and payments upon
liquidation, redemption or otherwise will be subordinated to your right to
payments as a holder of the preferred securities. See "Description of the
Preferred Securities -- Subordination of Common Securities."
The Trust exists for the purpose of:
o issuing the preferred securities and common securities
representing undivided beneficial interests in its assets,
o investing the gross proceeds of the preferred securities and the
common securities in the junior subordinated debentures issued by
us, and
o engaging in activities that are incidental to the activities
described above.
The junior subordinated debentures will be the only assets of the Trust
and payments under the junior subordinated debentures will be the only revenue
of the Trust. The Trust has a term of 30 years, but may dissolve earlier as
provided in the trust agreement. The address of the Trust is c/o Bankers Trust
(Delaware), 1101 Centre Road, Suite 200, Trust Department, Wilmington, Delaware
19805, and the telephone number is (302) 636-3301.
The trustees and the administrators will conduct the affairs of the
Trust. We will select two individuals who are our employees, officers or
affiliates to be the administrators of the Trust. The property trustee will be a
financial institution that is not our affiliate and will serve as institutional
trustee under the Trust Agreement and as indenture trustee for purposes of
compliance with the Trust Indenture Act. Bankers Trust Company, a state
chartered trust company organized under the laws of the State of New York, will
be the property trustee until we decide to remove or replace it. For purposes of
compliance with the provisions of the Trust Indenture Act, Bankers Trust Company
will also act as guarantee trustee under the Guarantee and as trustee under the
Indenture. The Delaware trustee will be an entity that maintains its principal
place of business in the State of Delaware. Bankers Trust (Delaware), a Delaware
banking corporation, will act as Delaware trustee.
The property trustee will hold the junior subordinated debentures for
the benefit of the holders of the preferred securities and the common securities
and in such capacity will have the power to exercise all rights, powers and
privileges under the indenture. The property trustee will also maintain
exclusive control of a segregated noninterest-bearing bank account, the property
account, to hold all payments made under the junior subordinated debentures for
the benefit of the holders of the preferred securities and the common
securities. The property trustee will make payments of distributions and
payments on liquidation, redemption and otherwise to the holders of the
preferred securities and the common securities out of funds from the property
account. The guarantee trustee will hold the
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guarantee for the benefit of the holders of the preferred securities. We, as the
holder of all the common securities, will have the right to appoint, remove or
replace any trustee and to increase or decrease the number of trustees. We will
pay all fees and expenses related to the Trust and the offering of the preferred
securities and the common securities.
Your rights as a holder of the preferred securities, including economic
rights, rights to information and voting rights, are set forth in the trust
agreement, the Delaware Business Trust Act and the Trust Indenture Act. See
"Description of the Preferred Securities."
The address of the Delaware trustee is Bankers Trust (Delaware), 1101
Centre Road, Suite 200, Trust Department, Wilmington, Delaware 19805, and the
telephone number is (302) 636-3301.
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, and the telephone number is (212) 250-2500.
ACCOUNTING TREATMENT
For financial reporting purposes, we will treat First Star Capital
Trust as our subsidiary. Accordingly, we will include the accounts of First Star
Capital Trust in our consolidated financial statements. We will present the
preferred securities as a separate category in our consolidated statements of
financial condition under the caption "Guaranteed Preferred Beneficial Interests
in Subordinated Debt," and we will include appropriate disclosures about the
preferred securities, the guarantee and the junior subordinated debentures in
the notes to our consolidated financial statements. For financial reporting
purposes, we will record distributions on the preferred securities as interest
expense in our consolidated statements of income.
DESCRIPTION OF PREFERRED SECURITIES
The Trust will issue the preferred securities and the common securities
under the trust agreement for the Trust. The preferred securities will represent
preferred undivided beneficial interests in the assets of the Trust, and you
will be entitled 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 describes certain provisions of the preferred securities
and the trust agreement and is not complete. You should read the form of the
trust agreement, which is filed as an exhibit to the registration statement of
which this prospectus is a part. Wherever particular defined terms of the trust
agreement are referred to in this prospectus, such defined terms are
incorporated herein by reference. A copy of the form of the trust agreement is
also available upon request from the trustees.
General
The preferred securities will be limited to $12,000,000 liquidation
amount (as defined in the trust agreement) outstanding (which amount may be
increased by up to $1,800,000 liquidation amount of preferred securities for
exercise of the over-allotment option). See "Underwriting." The preferred
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securities will rank equally, and payments will be made 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 Trust and held by the property trustee in trust for your benefit and the
benefit of the holders of the common securities. The guarantee we will execute
for the benefit of the holders of the preferred securities will be subordinated
to most of our other obligations and liabilities. The guarantee will not
guarantee payment of distributions or amounts payable on redemption or
liquidation of the preferred securities if the Trust does not have funds on hand
available to make such payments. See "Description of Guarantee."
Distributions
You will receive distributions on each preferred security at the annual
rate of ____% of the stated liquidation amount of $10, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year, to
record holders at the close of business on the 15th day of March, June,
September and December (whether or not a business day) next preceding the
relevant distribution date. Each date on which distributions will be paid is
referred to as a distribution date in this prospectus. Distributions on the
preferred securities will be cumulative. Distributions will accumulate from
______ __, 1999. The first distribution date for the preferred securities will
be __________ __, 1999. 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 annual rate by four. If any date on which distributions are
payable is not a business day, then payment will be made on the next succeeding
day that is a business day (without any additional distributions or other
payment because of the delay), except that, if such business day falls in the
next calendar year, the payment will be made on the immediately preceding
business day.
So long as we are not in default, we may defer the payment of interest
on the junior subordinated debentures at any time for one or more extension
periods. No extension period may exceed 20 consecutive quarters. No extension
period may extend beyond the maturity date of the junior subordinated
debentures. As a consequence of any deferral by us, quarterly distributions on
the preferred securities will be deferred by the Trust during the extension
period. Distributions to which you are entitled will accumulate additional
distributions thereon at the annual rate of ____ %, compounded quarterly from
the relevant payment date, 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 annual rate by four.
During any extension period, we may not (1) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of our capital stock or (2) make any
payment of principal, interest or premium on or repay, repurchase or redeem any
of our debt securities that rank equally in all respects with or junior in
interest to the junior subordinated debentures, of which there are none as of
the date of this prospectus. These prohibitions, however, do not apply to:
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o repurchases, redemptions or other acquisitions of our capital
stock in connection with any employment contract, benefit plan
or other similar arrangement, a dividend reinvestment or
stockholder stock purchase plan or the issuance of our capital
stock (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction
entered into prior to the applicable extension period;
o a reclassification, exchange or conversion of any class or
series of our capital stock (or any capital stock of our
subsidiaries) for any class or series of our capital stock or
of any class or series of our indebtedness for any class or
series of our capital stock;
o the purchase of fractional interests in shares of our capital
stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or
exchanged;
o any declaration of a dividend in connection with any
stockholders' 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
o 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
equally with or junior to such stock.
Before the end of an extension period, we may further defer the payment
of interest. Upon the termination of an extension period and the payment of all
amounts then due, we may elect to begin a new extension period. We must give the
trustees notice of our election of an extension period at least one business day
prior to the earlier of (1) the date the distributions on the preferred
securities would have been payable but for the election to begin the extension
period and (2) the date the property trustee is required to give you notice of
the record date or the date the distributions are payable, but in any event not
less than one business day prior to the record date. The property trustee will
give you notice of our election to begin a new extension period. Subject to the
foregoing, there is no limitation on the number of times that we 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."
We currently do not intend to exercise our right to defer payments of
interest by extending the interest payment period on the junior subordinated
debentures.
The revenue of the Trust available for distribution to you will be
limited to payments under the junior subordinated debentures, which the Trust
will purchase with the proceeds of this offering of preferred securities. See
"Description of Junior Subordinated Debentures." If we do not make payments on
the junior subordinated debentures, the Trust will 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 Trust has funds legally available for and cash
sufficient to make such payments) is guaranteed by us on a limited basis as
described in this prospectus under "Description of Guarantee."
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Redemption
If we redeem the junior subordinated debentures, the Trust will redeem
a proportionate amount of the preferred and common securities. We may redeem the
junior subordinated debentures (1) on or after _________, 2004 in whole at any
time or in part from time to time, or (2) 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."
"Tax Event" means the receipt by the Trust of an opinion of our counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including an announced prospective change) in, the laws (or any
regulations thereunder) of the United States or a 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:
o the 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;
o interest payable by us on the junior subordinated debentures
is not, or within 90 days of the delivery of such opinion will
not be, deductible by us, in whole or in part, for United
States federal income tax purposes; or
o the Trust is, or will be within 90 days of the delivery of
such opinion, subject to more than an insignificant amount of
other taxes, duties or other governmental charges.
See "United States Federal Income Tax Consequences -- Pending Tax
Litigation Affecting the Preferred Securities" for discussion of pending United
States Tax Court litigation that, if decided adversely to the taxpayer, could
give rise to a Tax Event, which would permit us to redeem the junior
subordinated debentures prior to ________________, 2004.
If a Tax Event described in the first or third circumstances above has
occurred and is continuing and the Trust holds of all the junior subordinated
debentures, we will pay on the junior subordinated debentures any additional
amounts as may be necessary so that the amount of distributions then due and
payable by the Trust on the outstanding preferred securities and common
securities of the Trust will not be reduced as a result of any additional taxes,
duties and other governmental charges to which the Trust has become subject as a
result of a Tax Event.
"Investment Company Event" means the receipt by the Trust of an opinion
of our 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 Trust is, or will
be, considered an
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"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act").
"Capital Treatment Event" means the reasonable determination by us
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,
there is more than an insubstantial risk that we 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 by the
Federal Reserve, for purposes of the risk-based capital adequacy guidelines of
the Federal Reserve, as then in effect and applicable to us. The Federal Reserve
has determined that the proceeds of certain qualifying securities like the
preferred securities will qualify as Tier 1 capital for us only up to an amount
not to exceed, when taken together with all of our cumulative preferred stock,
if any, 25% of our Tier 1 capital.
Redemption Procedures
The Trust will only redeem preferred securities if we have redeemed
junior subordinated debentures. The Trust may redeem preferred securities only
in an amount equal to the funds it has on hand and legally available to pay the
redemption price. The redemption price for each security will equal $10 plus
accumulated but unpaid distributions as of the redemption date and the related
amount of the premium, if any, paid by us upon the concurrent redemption of some
or all of the junior subordinated debentures.
Unless payment of the redemption price is withheld or refused and not
paid either by the Trust or us pursuant to the guarantee, additional interest
will stop accruing on those preferred securities called for redemption on the
date they are called for redemption.
Notice of any redemption will be mailed to you at your address as it
appears on the securities register maintained by the property trustee at least
30 days but not more than 60 days before the redemption date. If notice of
redemption has been given, then, by 12:00 noon, Eastern time, on the redemption
date, to the extent funds are available for payment, the property trustee will,
for preferred securities held in book-entry form:
o deposit irrevocably with The Depository Trust Company ("DTC")
funds sufficient to pay the applicable redemption price; and
o give DTC irrevocable instructions and authority to pay the
redemption price to you.
For preferred securities not held in book-entry form, the property
trustee will, to the extent funds are available for payment:
o irrevocably deposit with the paying agent for the preferred
securities funds sufficient to pay the applicable redemption
price; and
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o give the paying agent irrevocable instructions and authority to
pay the redemption price to you once you surrender your
certificates evidencing the preferred securities.
Notwithstanding the foregoing, distributions payable on or prior to the
redemption date for any preferred securities called for redemption will be
payable to the holders on the relevant record dates for those distributions.
Once notice of redemption is given and funds are deposited as required,
then all of your rights with respect to the preferred securities called for
redemption will cease, except for your right to receive the redemption price,
but without interest after the date of redemption.
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 day that is a business day (without any interest or other
payment for the delay), except that, if the next business day falls in the next
calendar year, payment will be made on the immediately preceding business day.
In payment of the redemption price for the preferred securities called
for redemption is improperly withheld or refused and not paid, either by the
Trust or by us pursuant to the guarantee, interest on those preferred securities
will continue to accumulate at the then applicable rate, from the redemption
date originally established to the date the payment is actually made. In this
case, the actual payment date will be the redemption date for purposes of
calculating the redemption price.
If less than all the junior subordinated debentures are going to be
redeemed, then the aggregate liquidation amount of the preferred and common
securities to be redeemed shall be allocated based upon the respective
liquidation amounts of each class, with 97% being allocated to the preferred
securities and 3% being allocated to the common securities, except in the case
of an event of default. See "-- Subordination of Common Securities." The
property trustee will select the particular preferred securities to be redeemed
not more than 60 days before the redemption date by any method the property
trustee deems fair and appropriate, or if the preferred securities are then held
in book-entry form, in accordance with DTC's customary procedures.
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 will be made on a proportionate basis, based on the aggregate
liquidation amount of each class of securities. However, if a debenture event of
default has occurred and is continuing as a result of any failure by us to make
an interest or principal payment on the junior subordinated debentures, then no
payment of any distribution on, or redemption price of, or liquidation
distribution in respect of, the common securities may be made, unless all unpaid
amounts due on the preferred securities have been paid in full or provided for,
as appropriate.
If there is an event of default under the trust agreement that results
from an event of default on the junior subordinated debentures, we, as the
holders of the common securities, will have no right to act with respect to the
event of default under the trust agreement until the effects of all events of
default under the trust agreement regarding the preferred securities have been
cured, waived or otherwise eliminated. Until that time, the property trustee
will act solely on your behalf and not on behalf of the
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holders of the common securities. See "-- Events of Default; Notice" and
"Description of Junior Subordinated Debentures -- Debenture Events of Default."
Liquidation Distribution Upon Dissolution
We will have the right to dissolve the Trust at any time, and, after
paying all the expenses and liabilities of the Trust, distribute the junior
subordinated debentures to you. However, because the proceeds from the preferred
securities offering may be counted as up to 25% of our Tier 1 capital and
dissolution of the Trust could impact our overall capital structure, we may only
dissolve the Trust if we have received prior approval of the Federal Reserve, if
then required.
Pursuant to the trust agreement, the Trust will dissolve upon
expiration of its term, on _____________, 2034. Early dissolution will occur
upon the occurrence of any of the following:
o the bankruptcy of First Star Bancorp;
o the filing of a certificate of dissolution, or its equivalent, of
First Star Bancorp;
o our delivery of a written direction to the property trustee to
dissolve the Trust, which we may do in our discretion;
o the entry of a court order for the dissolution of the Trust; or
o the redemption of all the preferred securities in connection with
the redemption of all the preferred and common securities as
described under "- Redemption."
In the event of a dissolution, after the Trust pays all amounts owed to
its creditors, the holders of the preferred and common securities will be
entitled to receive:
o junior subordinated debentures, if the dissolution does not arise
from redemption of the junior subordinated debentures, in an
aggregate principal amount equal to the aggregate liquidation
amount of the preferred and common securities; or
o cash, if distribution of junior subordinated debentures is not
practical or if the dissolution arises from the redemption of the
junior subordinated debentures.
In the event of a cash payment, you will receive an amount equal to the
liquidation amount of the preferred securities, plus accumulated and unpaid
distributions to the date of the liquidation distribution. If the liquidation
distribution can be paid only in part because the Trust has insufficient assets
available for payment, then the holders of the preferred and common securities
will be paid on a proportionate basis. However, if an event of default under the
junior subordinated debentures has occurred and is continuing as a result of our
failure to make interest or principal payments to the Trust when due, you will
receive a liquidation distribution on your preferred securities before we
receive a liquidation distribution on our common securities. See
"--Subordination of Common Securities."
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Events of Default; Notice
Any one of the following events constitutes an event of default under
the trust agreement with respect to the preferred and common securities.
o the occurrence of a event of default with respect to the junior
subordinated debentures (see "Description of Junior Subordinated
Debentures -- Debenture Events of Default");
o default by the Trust in the payment of any distribution when it
becomes due and payable, and the continuation of such default for
a period of 30 days;
o default by the Trust in the payment of any redemption price of
any preferred security or common security when it becomes due and
payable;
o default in the performance, or breach, in any material respect,
of any covenant or warranty given by the Trust in the trust
agreement (other than a default or breach in the performance of a
covenant or warranty which is addressed by either the second or
third events of default listed above), and the continuation of
such default or breach for a period of 60 days after the holders
of at least 25% in aggregate liquidation amount of the
outstanding preferred securities have given to the property
trustee, the Delaware trustee and us 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
o the occurrence of bankruptcy or insolvency with respect to the
property trustee if a successor property trustee has not been
appointed within 90 days of the bankruptcy or insolvency.
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 the event of default to you, to us, and to the administrators, unless
the event of default has been cured or waived. Along with the administrators, we
are required to file annual certificates with the property trustee declaring
whether or not we and they are in compliance with all the conditions and
covenants applicable to us and to them under the trust agreement.
Removal of Trustees; Appointment of Successors
The holders of at least a majority in aggregate liquidation amount of
the outstanding preferred securities may remove the property trustee or the
Delaware trustee for cause or, if an event of default with respect to the junior
subordinated debentures has occurred and is continuing, with or without cause.
If a trustee is removed by the holders of the outstanding preferred securities,
the successor may be appointed by the holders of at least 25% in aggregate
liquidation amount of preferred securities. If a trustee resigns, such trustee
will appoint its successor. If a trustee fails to appoint a successor, the
holders of at least 25% in aggregate liquidation amount of the outstanding
preferred securities may appoint a successor. If a successor has not been
appointed, we, any holder of preferred securities, or
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the other trustee may petition a court in the State of Delaware to appoint a
successor. Any successor Delaware trustee must meet the applicable requirements
of Delaware law. Any successor property trustee must be a national or
state-chartered bank that at the time of appointment has:
o securities rated in one of the three highest rating categories by
a nationally recognized statistical rating organization; and
o capital and surplus of at least $50,000,000.
No resignation or removal of a trustee and no appointment of a
successor trustee will be effective until the successor trustee delivers its
written acceptance of the appointment.
Merger or Consolidation of 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 the trustee is a
party, or any entity succeeding to all or substantially all of the corporate
trust business of the trustee, will be the successor of that trustee under the
trust agreement, provided that entity is otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may, at our request 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:
o the successor entity (1) expressly assumes all the obligations of
the Trust with respect to the preferred securities or (2)
substitutes for the preferred securities other securities having
substantially the same terms as the preferred securities so long
as the substitute preferred securities have the same priority as
the preferred securities with respect to distributions and
payments upon liquidation, redemption and otherwise;
o a trustee of the successor entity, possessing the same powers and
duties as the property trustee, is appointed to hold the junior
subordinated debentures;
o the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the preferred securities
(including any substitute preferred securities) to be downgraded
by any nationally recognized statistical rating organization, if
then rated;
o the 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 substitute preferred securities) in any
material respect;
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o the successor entity has a purpose substantially identical to
that of the Trust;
o prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Trust has received an opinion
from independent counsel experienced in these matters to the
effect that (1) the merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely
affect your rights, preference and privileges as a holder of
preferred securities (including any substitute preferred
securities) in any material respect, and (2) following the
merger, consolidation, amalgamation, replacement, conveyance
transfer or lease, neither the Trust nor the successor entity
will be required to register as an investment company under the
Investment Company Act; and
o we or any permitted successor or assignee own all the common
securities of the successor entity and guarantee the obligations
of the successor entity under the successor securities at least
to the extent provided by the guarantee.
Notwithstanding the foregoing, the Trust may not, except with the
consent of all holders of the preferred securities, consolidate, amalgamate,
merge with or into, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to, any other entity or
permit any other entity to consolidate, amalgamate, merge with or into or
replace it if such consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease would cause the Trust or the successor entity to be taxable as
a corporation for United States federal income tax purposes.
Voting Rights; Amendment of Trust Agreement
Except as provided below and under "--Removal of Trustees; Appointment
of Successors" and "Description of Guarantee -- Amendments and Assignment" and
as otherwise required by law and the trust agreement, you will have no voting
rights.
We, the property trustee and the administrators, may amend the trust
agreement without your consent in order to:
o 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 your interests; or
o modify, eliminate or add to any provisions of the trust agreement
as may be necessary to ensure that the Trust will not be taxable
as a corporation for United States federal income tax purposes at
any time that any preferred or common securities are outstanding
or to ensure that the Trust will not be required to register as
an "investment company" under the Investment Company Act.
With the consent of holders of not less than a majority in aggregate
liquidation amount of the preferred securities, we, the property trustee and the
administrators may amend any provision of the
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trust agreement so long as the trustees have received an opinion of counsel that
the amendment or the exercise of any power granted to the trustees by the
amendment will not:
o affect the Trust's status as a grantor trust exempt from taxation
for United States federal income tax purposes; or
o the Trust's exemption from status as an "investment company"
under the Investment Company Act.
However, without the consent of each holder of preferred securities or
common securities affected thereby, the trust agreement may not be amended to:
o change the amount or timing of any distribution on the preferred
and common securities or otherwise adversely affect the amount of
any distribution required to be made in respect of the preferred
and common securities as of a specified date; or
o restrict your right or our right as the holders of common
securities to institute suit for the enforcement of any payment
on or after such date.
So long as any junior subordinated debentures are held by the Trust,
the property trustee will not:
o 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;
o waive any past default that is waivable under the indenture;
o exercise any right to rescind or annul a declaration that the
principal of all the junior subordinated debentures shall be due
and payable; or
o 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 aggregate
liquidation amount of the outstanding preferred securities, or,
if a consent under the 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 you of any notice of default with respect to the junior subordinated
debentures. In addition to obtaining your approval as described above, before
taking any of the actions listed above, the property trustee will obtain an
opinion of counsel experienced in such matters to the effect that the Trust will
not be taxable as a corporation for United States federal income tax purposes on
account of such action.
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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 you are entitled to vote, or of any matter upon which action by
your written consent is to be taken, to be given to you in the manner set forth
in the trust agreement.
Your vote or consent will not be required to redeem and cancel
preferred securities.
If we or any of our affiliates or the trustees or any of their
affiliates own any preferred securities, those preferred securities will not be
treated as outstanding for purposes of the votes or consents described above.
Expenses and Taxes
In the indenture, we have agreed to pay:
o all debts and obligations of the Trust (other than distributions
on the preferred and common securities);
o any and all taxes and all costs and expenses with respect thereto
(other than United States withholding taxes) to which the Trust
might become subject; and
o all costs and expenses of the Trust, including the costs and
expenses of:
1) the trustees, and
2) the organization and operation of the Trust.
Our payment obligations under the indenture are for the benefit of, and
shall be enforceable by, any creditor of the Trust to whom any of these debts,
obligations, costs, expenses and taxes are owed. Any creditor may enforce these
obligations directly against us, and we have irrevocably waived any right or
remedy to require that any creditor take any action against the Trust or any
other person before proceeding against us. We have also agreed in the indenture
to execute any additional agreements as may be necessary or desirable to give
full effect to the foregoing.
Book Entry, Delivery and Form
DTC will act as securities depository for the preferred securities. The
Trust will issue one or more fully registered global preferred securities
certificates in the name of Cede & Co. (DTC's nominee). These certificates will
represent the total aggregate number of preferred securities. The Trust will
deposit these certificates with DTC or a custodian appointed by DTC. The Trust
will not issue certificates to you for the preferred securities that you
purchase, unless DTC's services are discontinued.
Ownership of beneficial interests in a global security deposited with
DTC is limited to participants that have accounts with DTC. Access to the DTC
system is also available to indirect
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participants, such as securities brokers and dealers, banks and trust companies,
that may hold interests through a direct participant. Upon the issuance of the
global security, DTC will credit the accounts of direct participants with their
respective amounts of preferred securities represented by the global security by
its book-entry system. If you purchase preferred securities within the DTC
system, the purchase must be made by or through a direct participant. You, as
the actual owner of the preferred securities, are the "beneficial owner." Your
beneficial ownership interest will be recorded on the direct or indirect
participant's records, and DTC will have no knowledge of your individual
ownership.
You will not receive written confirmation from DTC of your purchases.
The direct or indirect participant through whom you purchased the preferred
securities should send you written confirmations providing details of your
transactions, as well as periodic statements of your holdings. The participants
are responsible for keeping accurate account of the holdings of their customers
like you.
Transfers of ownership interests in the preferred securities will be
accomplished by entries made on the books of participants acting on your behalf.
The laws of some states may require that specified purchasers of
securities take physical delivery of the securities in definitive form. These
laws may impair the ability to transfer beneficial interests in the global
certificate representing the preferred securities.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by direct
participants and indirect participants to you will be governed by arrangements
among them, and any statutory or regulatory requirements that may be in effect
from time to time.
Redemption notices will be sent to DTC. If less than all of the
preferred securities are being redeemed, DTC will reduce each direct
participant's holdings of preferred securities in accordance with its
procedures.
In those cases where a vote by the holders of the preferred securities
is required, neither DTC nor Cede & Co. will itself consent or vote. Under its
usual procedures, DTC would mail an omnibus proxy to the Trust as soon as
possible after the record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants to whose accounts the
preferred securities are credited on the record date, which are identified in a
listing attached to the omnibus proxy.
The Trust will make distribution payments on the preferred securities
directly to DTC. DTC's practice is to credit direct participants' accounts on
the relevant payment date in accordance with their respective holdings shown on
DTC's records, unless DTC has reason to believe that it will not receive payment
on such payment date.
Payments by participants (whether direct participants or indirect
participants) to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name." These payments will be
the responsibility of the participant and not of DTC, the Trust or First Star
Bancorp.
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As the beneficial owner in a global preferred securities certificate,
you will not be entitled to receive physical delivery of preferred securities.
You will not be considered an owner or a holder under the trust agreement.
Instead, DTC will be considered the sole owner or holder of the preferred
securities. Accordingly, you must rely on the procedures of DTC and, if you are
not a direct participant, on the procedures of the indirect participant through
which you own your interest, to exercise any of your rights under the preferred
securities.
DTC may discontinue providing its services as securities depositary
with respect to the preferred securities at any time by giving written notice to
the property trustee, the Delaware trustee and us that it is no longer willing,
or no longer able, to provide its services. In the event that we are not able to
obtain a successor securities depositary within 90 days, we will print and
deliver preferred securities certificates. In addition, we may, at our
discretion, decide to discontinue the book-entry system with respect to the
preferred securities. In that event, we will print and deliver certificates for
the preferred securities to you.
DTC has advised the Trust and us as follows:
o DTC is a limited purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve, 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;
o 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;
o participants include securities brokers and dealers (such as
Hopper Soliday), banks, trust companies and clearing corporations
and may include certain other organizations;
o certain participants (or their representatives), together with
other entities, own DTC; and
o 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 Hopper Soliday
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 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
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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 holder entitled thereto at such address as appears
on the securities register for the preferred and common securities. 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 Trust, but only upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The 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.
Obligations and Duties of 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 your request unless it is offered
reasonable indemnity against the costs, expenses and liabilities that it might
incur.
For information concerning the relationships between the property
trustee and us, see "Description of Junior Subordinated Debentures --
Information Concerning the Debenture Trustee."
Miscellaneous
The administrators and the property trustee are authorized and directed
to conduct the affairs of and to operate the Trust in such a way that:
o the junior subordinated debentures will be treated as our
indebtedness for United States federal income tax purposes, and
o the Trust will not be;
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a) required to register as an "investment company" under the
Investment Company Act; or
b) taxable as a corporation for United States federal income
tax purposes.
To achieve these purposes, the administrators, the property trustee,
and we, as holders of the common securities, are authorized to take any action
that they and we determine to be necessary or desirable for such purposes, as
long as such action does not materially adversely affect your interests and is
not inconsistent with applicable law, the certificate of trust or the trust
agreement.
You will not have preemptive or similar rights.
The Trust may not borrow money, issue debt or mortgage or pledge any of
its assets.
Subject to applicable law (including, without limitation, United States
federal securities laws), we or our 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.
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 will be issued under the indenture
between Bankers Trust Company, the debenture trustee, and us. The following
summary of the terms and provisions of the junior subordinated debentures and
the indenture is not complete. You should read the form of the indenture that is
filed as an exhibit to the registration statement of which this prospectus is a
part. Whenever particular defined terms of the indenture (as amended or
supplemented from time to time) are referred to in this prospectus, those
defined terms are incorporated into this prospectus by reference. A copy of the
form of indenture is available from the debenture trustee upon request.
General
The Trust will invest the proceeds of the issuance of the preferred
securities, together with the consideration paid by us for the common
securities, in the junior subordinated debentures issued by us. The junior
subordinated debentures are subordinated, unsecured debt under the indenture and
will bear interest, accruing from ___________ __, 1999, 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, commencing ___________
__, 1999, 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 Trust,
each junior subordinated debenture will be registered
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in the name of the Trust and held by the property trustee in trust for you and
us, as the holders of the common 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
annual rate by four. If any date on which interest is payable to the junior
subordinated debentures is not a business day, then payment of the interest
payable on such date will be made on the next business day (without any interest
or other payment in respect of any such delay), or, if the next business day
falls in the next calendar year, such payment will be made on the immediately
preceding business day.
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 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. The amount of additional
interest payable for any full interest period will be computed by dividing the
annual rate 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, if applicable, any additional sums we pay on the
junior subordinated debentures following a Tax Event (as defined under
"Description of Preferred Securities -- Redemption") that may be required so
that distributions payable by the Trust will not be reduced by any additional
taxes, duties or other governmental changes resulting from such Tax Event.
The junior subordinated debentures will mature on _____________, 2029,
subject to our right to shorten the maturity date at any time to any date not
earlier than ___________, 2004, if we have received prior approval of the
Federal Reserve, if then required under applicable capital guidelines or
policies of the Federal Reserve. In the event we elect to shorten the maturity
of the junior subordinated debentures, we will give notice to the registered
holders of the junior subordinated debentures, the debenture trustee and the
Trust at least 90 days before the new maturity date. The property trustee will
give you notice of the shortening of the stated maturity of the junior
subordinated debentures at least 30 but not more than 60 days before the new
maturity date.
The junior subordinated debentures will be unsecured and will rank
junior and be subordinate in right of payment to all of our senior indebtedness,
including the outstanding subordinated debentures. The junior subordinated
debentures will not be subject to a sinking fund. The indenture does not limit
our ability to incur or issue other secured or unsecured debt, including senior
indebtedness, whether under the junior subordinated debentures or any existing
or other indenture that we may enter into in the future or otherwise. See "--
Subordination."
Option to Extend Interest Payment Period
So long as we are not in default, we may defer the payment of interest
on the junior subordinated debentures at any time for one or more "extension
periods." No extension period may exceed 20 consecutive quarters. No extension
period may extend beyond the maturity date of the
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junior subordinated debentures. During any extension period we have the right to
make partial payments of interest on any interest payment date. At the end of an
extension period, we will pay all interest then accrued and unpaid, together
with interest on that amount, compounded quarterly, at the annual rate of
______%. During an extension period, interest will continue to accrue and
holders of junior subordinated debentures (or holders of preferred securities)
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 extension period, we may not:
o make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any of our debt
securities that rank equally in all respects with or junior in
interest to the junior subordinated debentures, or
o declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect
to, any of our capital stock, except that we may:
(a) repurchase, redeem or make other acquisitions of shares
of our capital stock 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 our capital
stock (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) take any necessary action in connection with any
reclassification, exchange or conversion of any class
or series of our capital stock (or any capital stock of
a subsidiary of ours) or of any class or series of our
indebtedness for any class or series of our capital
stock;
(c) purchase fractional interests in shares of our capital
stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted
or exchanged;
(d) declare a dividend in connection with any stockholders'
rights plan, or issue rights, stock or other property
under any stockholders' rights plan, or redeem or
repurchase rights pursuant thereto; and
(e) declare a 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 equally with or junior
to such stock.
Before the termination of any extension period, we may further defer
the payment of interest, provided that no extension period may exceed 20
consecutive quarters or extend beyond the stated
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maturity of the junior subordinated debentures. Upon the termination of any
extension period and the payment of all amounts then due, we may elect to begin
a new extension period subject to the above conditions. No interest will be due
and payable during an extension period, except at its end. As long as the junior
subordinated debentures are held by the Trust, we will give the property trustee
notice of an extension period at least one business day prior to the earlier of
(1) the date a distribution on the preferred securities would have been payable
but for our election to begin an extension period and (2) the date the property
trustee is required to give you notice of the record date or the date such
distribution is payable, but in any event not less than one business day prior
to such record date. The property trustee will give you notice of our election
to begin a new extension period. There is no limitation on the number of times
that we may elect to begin an extension period.
Redemption
We have the right, after receipt of prior approval of the Federal
Reserve, if approval is then required, to redeem the junior subordinated
debentures prior to maturity at our option:
o on or after _________________, 2004, in whole at any time or in
part from time to time, or
o 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 either case, the redemption price will equal 100% of the principal
amount of the junior subordinated debentures to be redeemed, plus accrued and
unpaid interest, to the date of redemption (including any additional interest on
any additional sums we pay following a Tax Event as described below under
"--Additional Sums"). The proceeds of any redemption will be used by the Trust
to redeem a proportionate amount of the preferred securities.
Additional Sums
We have covenanted in the indenture that, if and for so long as the
Trust is the holder of all junior subordinated debentures and the Trust is
required to pay any additional taxes, duties or other governmental charges as a
result of a Tax Event, we will pay as additional sums on the junior subordinated
debentures such amounts as may be required so that the distributions payable by
the 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 Trust. If the junior subordinated debentures are distributed to you
in connection with the involuntary or voluntary dissolution or liquidation of
the Trust, they will be issued in the form of one or more global certificates.
In that event, we expect that the depositary arrangements for and payment on the
junior
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subordinated debentures will be substantially identical to those in effect for
the preferred securities. See "Description of Preferred Securities -- Book
Entry, Delivery and Form."
If DTC is at any time unwilling or unable to continue as depositary and
we do not appoint a successor depositary within 90 days of receipt of notice
from DTC to such effect, we will cause the junior subordinated debentures to be
issued in definitive form to you. In that event, principal and interest will be
payable, the transfer of the junior subordinated debentures will be registerable
without service charge upon payment of any taxes and other governmental charges,
and the 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 we
appoint. We may also, at our option, make payment of interest by check mailed to
the address of the persons entitled to payment under the junior subordinated
debentures. A holder of $1 million or more in aggregate principal amount of
junior subordinated debentures, however, 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.
In the event of any redemption, neither we, nor the debenture trustee,
will be required to:
o 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
o 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 of
the debenture not to be redeemed.
Any monies deposited with the debenture trustee or any paying agent, or
then held by us 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 this principal (and premium, if any) or interest has become
due and payable shall, at our request, be repaid to us and the holder of such
junior subordinated debenture shall thereafter look, as a general unsecured
creditor, only to us for payment thereof.
Restrictions on Certain Payments; Certain Covenants of the Company
We have covenanted that if at any time:
o we have actual knowledge of any event of default under the junior
subordinated debentures that we have not taken reasonable steps to cure;
o we are in default with respect to our payment of any obligations under the
guarantee, if the junior subordinated debentures are then held by the
Trust, or
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o we have given notice of our election of an extension period and have not
rescinded such notice, or the extension period, or any extension thereof,
is continuing,
then we will not:
o make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any of our debt securities that rank
equally in all respects with, or junior in interest to, the junior
subordinated debentures; or
o declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect
to, any of our capital stock, except that we may:
(a) repurchase, redeem or make other acquisitions of shares
of our capital stock 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 our capital
stock (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) take any necessary action in connection with any
reclassification, exchange or conversion of any class
or series of our capital stock (or any capital stock
of any subsidiary of ours) for any class or series of
our capital stock or of any class or series of our
indebtedness for any class or series of our capital
stock;
(c) purchase fractional interests in shares of our
capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security
being converted or exchanged;
(d) declare a dividend in connection with any
stockholders' rights plan, or issue rights, stock or
other property under any stockholders' rights plan,
or redeem or repurchase rights pursuant thereto; or
(e) declare a 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 equally
with or junior to such stock.
We have covenanted in the indenture:
o to continue to hold, directly or indirectly, 100% of the common
securities, provided that certain successors may succeed to our
ownership of the common securities;
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o as holder of the common securities, not to voluntarily terminate,
windup or liquidate the Trust, other than:
(a) in connection with a distribution of junior subordinated
debentures to the holders of the preferred securities in
liquidation of the Trust; or
(b) in connection with certain mergers, consolidations or
amalgamations permitted by the trust agreement; and
o to use reasonable efforts, consistent with the terms and
provisions of the trust agreement, to cause the Trust to continue
not to be taxable as a corporation for United States federal
income tax purposes.
Modification of Indenture
From time to time, we 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 indenture to:
o evidence our succession to another corporation or association and
the assumption by that corporation or association of our
obligations under the junior subordinated debentures;
o add further covenants, restrictions or conditions for the
protection of holders of the junior subordinated debentures;
o cure ambiguities or correct the junior subordinated debentures in
the case of defects or inconsistencies in the provisions thereof,
so long as any cure or correction does not adversely affect the
interest of the holders of the junior subordinated debentures in
any material respect;
o change the terms of the junior subordinated debentures to
facilitate the issuance of the junior subordinated debentures in
certificated or other definitive form;
o evidence or provide for the appointment of a successor debenture
trustee; or
o qualify, or maintain the qualification of, the indenture under
the Trust Indenture Act.
We and the debenture trustee, with the consent of the holders of not
less than a majority in principal amount of the junior subordinated debentures,
may modify the indenture in a manner affecting the rights of the holders of the
junior subordinated debentures. However, the consent of all holders of junior
subordinated debenture is required to:
o change the stated maturity of, or any installment of interest on,
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,
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or the currency in which, any such amount is payable, or impair
the right to institute suit for the enforcement of any payment on
junior subordinated debentures; or
o reduce the percentage of principal amount of junior subordinated
debentures which would be required to consent to any modification
of, or waiver of rights under, the indenture.
Furthermore, so long as any of the preferred securities remain
outstanding, no modification may be made that adversely affects you in any
material respect, and no termination of the indenture may occur, and no waiver
of any event of default or compliance with any covenant under the indenture may
be effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation amount of the 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.
Debenture Events of Default
Any one or more of the following described events with respect to the
junior subordinated debentures that has occurred and is continuing is an "event
of default" with respect to the junior subordinated debentures:
o failure to pay any interest on the junior subordinated debentures
when due and continuance of this default for a period of 30 days
(subject to the deferral of any due date in the case of an
extension period); or
o failure to pay any principal of or premium, if any, on the junior
subordinated debentures when due; or
o failure to observe or perform certain other covenants contained
in the indenture for 90 days after written notice of such failure
to us from the debenture trustee or the holders of at least 25%
in aggregate outstanding principal amount of the outstanding
junior subordinated debentures; or
o the occurrence of the appointment of a receiver or other similar
official in any liquidation, insolvency or similar proceeding
with respect to us or all or substantially all of our 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.
As described in "Description of Preferred Securities -- Events of
Default; Notice," the occurrence of an event of default in respect of the junior
subordinated debentures will also constitute an event of default in respect of
the preferred 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
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not less than 25% in aggregate principal amount of outstanding junior
subordinated debentures may declare the principal due and payable immediately
upon a 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 this default has been cured and a sum sufficient to pay all matured
installments of interest and principal (and premium on, if any) due otherwise
than by acceleration has been deposited with the debenture trustee) or a default
in respect of a covenant or provision which under the indenture cannot be
modified or amended without the consent of the holder of each outstanding junior
subordinated debenture affected by the default. See "-- Modification of Junior
Subordinated Indenture." We are required to give an annual certificate to the
debenture trustee declaring whether or not we are in compliance with all the
conditions and covenants applicable to us under the indenture.
If an 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 indenture, to
be due and payable and to enforce its other rights as a creditor with respect to
the junior subordinated debentures.
Enforcement Rights by Holders of Preferred Securities
If an event of default on the junior subordinated debentures has
occurred and is continuing because of our failure to pay interest or principal
on the junior subordinated debentures when due, you may institute a legal action
against us for enforcement of payment to you of the principal of or interest on
the junior subordinated debentures in an amount equal to the aggregate
liquidation amount of the preferred securities you hold. We may not amend the
indenture to remove your right to bring this direct legal action without your
prior written consent. We will have the right under the indenture to set-off any
payment we make to you in connection with such a legal action.
You will not be able to exercise directly any remedies available to the
holders of the junior subordinated debentures except as described in the
preceding paragraph. See "Description of Preferred Securities -- Events of
Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
We may not consolidate with or merge into any other entity or convey,
transfer or lease our properties and assets substantially as an entirety to any
entity, and no entity may consolidate with or
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merge into us or convey, transfer or lease its properties and assets
substantially as an entirety to us, unless:
o the successor entity is organized under the laws of the United
States or any state or the District of Columbia, and such
successor entity expressly assumes our obligations in respect of
the junior subordinated debentures; provided, however, that
nothing in the indenture shall be deemed to restrict or prohibit,
and no supplemental indenture shall be required in the case of
the merger of a bank (as defined below) with and into a bank or
us, the consolidation of banks into a bank or us, or the sale or
other disposition of all or substantially all of the assets of
any bank to another bank or us, if, in any such case in which we
are not the surviving, resulting or acquiring entity, we would
own, directly or indirectly, at least 80% of the voting
securities of the bank (and of any other bank any voting
securities of which are owned, directly indirectly, by such bank)
surviving such merger, resulting from such consolidation or
acquiring such assets;
o immediately after giving effect thereto, no event of default with
respect to the junior subordinated debentures, and no event
which, after notice or lapse of time or both, would constitute an
event of default with respect to the junior subordinated
debentures, has occurred and is continuing; and
o certain other conditions as prescribed in the indenture are
satisfied.
For purposes of the first bullet point above, the term "bank" means
each of:
o any banking subsidiary of ours the consolidated assets of which
constitute 20% or more of our consolidated assets and our
consolidated subsidiaries;
o any other banking subsidiary designated as a bank pursuant to a
board resolution and set forth in an officers' certificate
delivered to the trustee; and
o any subsidiary of ours that owns, directly or indirectly, any
voting securities, or options, warrants or rights to subscribe
for or purchase voting securities, of any bank under the first
and second bullet points above and in the case of all three
bullet points their respective successors (whether by
consolidation, merger, conversion, transfer of substantially all
their assets and business or otherwise) so long as any such
successor is a banking subsidiary (in the case of the first and
second bullet point) or a subsidiary (in the case of the third
bullet point) of ours.
The provisions of the indenture do not give holders of the junior
subordinated debentures protection if we are involved in a highly leveraged or
other transaction that may adversely affect holders of the junior subordinated
debentures.
Satisfaction and Discharge
The indenture will cease to be of further effect and we will deemed to
have satisfied and discharged the indenture when:
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o all junior subordinated debentures not previously delivered to
the debenture trustee for cancellation (1) have become due and
payable, or (2) will become due and payable at the stated
maturity within one year;
o we deposit or cause to be deposited with the debenture trustee
funds, in trust, for the purpose and in an amount sufficient to
pay and discharge the entire indebtedness on the junior
subordinated debentures not previously delivered to the debenture
trustee for cancellation, for the principal (and premium, if any)
and interest to the date of the deposit or to the stated maturity
or redemption date; and
o we have paid all other sums payable by us under the indenture and
we have delivered applicable certificates and opinions affirming
our compliance with all of our obligations.
Subordination
The junior subordinated debentures will be subordinate and junior in
right of payment, to the extent set forth in the indenture, to all of our senior
indebtedness (as defined below). We may not make payment of principal, including
redemption payments, or interest on the junior subordinated debentures if:
o any amount due on our senior indebtedness is not paid when due
and the default has not been cured or waived; or
o the maturity of any of our senior indebtedness has been
accelerated because of a default and the acceleration has not
been rescinded.
As used herein, "senior indebtedness" means, whether recourse is to all
or a portion of our assets and whether or not contingent:
o every obligation of ours for money borrowed;
o every obligation of ours evidenced by bonds, debentures, notes or
other similar instrument, including obligations incurred in
connection with the acquisition of property, assets or
businesses;
o every reimbursement obligation of ours with respect to letters of
credit, bankers' acceptance or similar facilities issued for our
account;
o every obligation of ours 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);
o every capital lease obligation of ours;
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o every obligation of ours 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 foreign exchange
rate contracts, commodity contracts and similar arrangements; and
o every obligation of the type referred to above of another person
and all dividends of another person the payment of which, in
either case, we have guaranteed or are responsible or liable,
directly or indirectly, as obligor or otherwise.
However, senior indebtedness shall not include any of the following:
o any obligations which, by their terms, are expressly stated to
rank equally in right of payment with, to not be superior in
right of payment to, the junior subordinated debentures;
o any of our senior indebtedness 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 us;
o any indebtedness of ours to any of our subsidiaries;
o indebtedness to executive officers or directors, or
o any indebtedness in respect of debt securities issued to any
trust, or a trustee of such trust, partnership or other entity
affiliated with us that is a financing entity of ours in
connection with the issuance by such financing entity of
securities that are similar to the preferred securities.
As of June 30, 1999, the senior indebtedness was approximately $151.7
million, excluding $190 million of deposits. All senior indebtedness (including
any interest thereon accruing after the commencement of any such proceedings)
must first be paid in full before any payment or distribution, whether in cash,
securities or other property, can be made on the junior subordinated debentures
in the event of:
o certain events of bankruptcy, dissolution or liquidation of us or
another holder of the common securities;
o any proceeding for our liquidation, dissolution or other winding
up, voluntary or involuntary, whether or not involving insolvency
or bankrupt proceedings;
o any assignment by us for the benefit of creditors; or
o any other marshaling of our assets.
In that 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
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provisions) be payable or deliverable in respect of the junior subordinated
debentures will be paid directly to the holders of senior indebtedness in
accordance with the priorities then existing 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 proceeding described above, after payment in full
of all sums owed on our senior indebtedness, the holders of junior subordinated
debentures, together with the holders of our obligations that rank equal with
the junior subordinated debentures, will be entitled to be paid from our
remaining assets. This payment will be made before any payment or other
distribution, whether in cash, property or otherwise, will be made on account of
any capital stock or obligations ranking junior to the junior subordinated
debentures and such other obligations. If payment or distribution on account of
the junior subordinated debentures of any character or security, whether in
cash, securities or other property, is received by any holder of any junior
subordinated debentures in contravention of the procedures described above, 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 our
senior indebtedness to the extent necessary to pay all such senior indebtedness
in full.
The subordination of the junior subordinated debentures will not
prevent the occurrence of any event of default on the junior subordinated
debentures.
The indenture places no limitation on the amount of additional senior
indebtedness that we may incur. We expect from time to time to incur additional
senior indebtedness.
Information Concerning the Debenture Trustee
The debenture trustee, outside of the occurrence and continuation of a
default in the performance of our obligations under the junior subordinated
debentures, is under no obligation to exercise any of the powers vested in it at
the request of any holder of junior subordinated debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
that it might incur. 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.
Bankers Trust Company, the debenture trustee, may serve from time to
time as trustee under other indentures or trust agreements with us or our
subsidiaries relating to other issues of our securities. In addition, we as well
as certain of our affiliates may have other banking relationships with Bankers
Trust Company and its affiliates.
Governing Law
The indenture and the junior subordinated debentures will be governed
by and construed in accordance with the laws of the State of New York.
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DESCRIPTION OF GUARANTEE
We will execute and deliver the guarantee in connection with the
issuance of preferred securities by the Trust for your benefit. Bankers Trust
Company will act as guarantee trustee under the guarantee. The following summary
of certain provisions of the guarantee is not complete. You should read the form
of the guarantee, which is filed as an exhibit to the registration statement of
which this prospectus is a part. A copy of the form of guarantee is available
upon request from the guarantee trustee.
General
We will irrevocably agree to pay in full on a subordinated basis, to
the extent set forth in the guarantee, the guarantee payments, as described
below, to you, as and when due, regardless of any defense, right of set-off or
counterclaim that the 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 Trust, will be subject to the guarantee:
o any accrued and unpaid distributions required to be paid on
such preferred securities, to the extent that the Trust has
funds on hand available therefor at such time;
o the redemption price with respect to any preferred securities
called for redemption, to the extent that the Trust has funds
on hand available for its payment at such time; and
o upon a voluntary or involuntary dissolution, termination,
winding up or liquidation of the Trust (unless the junior
subordinated debentures are distributed to you), the lessor
of:
(a) the aggregate of the liquidation amount and all
accumulated and unpaid distributions to the date of
payment, to the extent that the Trust has funds on
hand available for their payment; and
(b) the amount of assets of the Trust remaining available
for distribution to you on liquidation of the Trust.
Our obligation to make a guarantee payment may be satisfied by our
direct payment to you or by causing the Trust to pay these amounts to you.
The guarantee will be an irrevocable guarantee of payment on a
subordinated basis of the Trust's obligations under the preferred securities,
but will apply only to the extent that the Trust has funds sufficient to make
such payments, and is not a guarantee of collection.
If we do not make payments on the junior subordinated debentures held
by the Trust, the Trust will not be able to pay any amounts payable in respect
of the preferred securities and will not have funds legally available for these
payments. The guarantee will rank subordinate and junior in right of payment to
all of our senior indebtedness. See " -- Status of the Guarantee." The guarantee
does not
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limit our ability to incur or issue other secured or unsecured debt, including
senior indebtedness, whether under the indenture or any other indenture that we
may enter into in the future or otherwise.
Status of the Guarantee
The guarantee will constitute our unsecured obligation and will rank
subordinate and junior in right of payment to all of our senior indebtedness in
the same manner as the junior subordinated debentures.
The guarantee will constitute a guarantee of payment and not of
collection. This means that the guarantee trustee may institute a legal
proceeding directly against us as the guarantor to enforce its rights under the
guarantee without first instituting a legal proceeding against any other person
or entity. The guarantee will not be discharged except by payment of the
guarantee payments in full to the extent not paid by the Trust or distribution
of the junior subordinated debentures to the holders of the preferred
securities.
Amendments and Assignment
Except for changes which do not materially adversely affect your rights
(in which case no consent will be required), the guarantee may not be amended
without the prior approval of the holders of a majority of the aggregate
liquidation amount of the outstanding preferred securities. The manner of
obtaining any such approval is set forth under "Description of Preferred
Securities -- Voting Rights; Amendment of Trust Agreement." All guarantees and
agreements contained in the guarantee shall bind our successors, assigns,
receivers, trustees and representatives and shall inure to your benefit.
Events of Default
An event of default under the guarantee will occur if we fail to
perform any of our payment or other obligations under the guarantee, 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.
You may institute a legal proceeding directly against us to enforce
your rights under the guarantee without first instituting a legal proceeding
against the Trust, the guarantee trustee or any other person or entity.
We are required, as guarantor, to give an annual certificate to the
guarantee trustee declaring whether or not we are in compliance with all the
conditions and covenants applicable to us under the guarantee.
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Information Concerning the Guarantee Trustee
The guarantee trustee, other than during the occurrence and continuance
of a default by us 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 at
your request, unless it is offered reasonable indemnity by such holder against
the costs, expenses and liabilities that it might incur. For information
concerning our relationship with Bankers Trust Company, as guarantee trustee,
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 Trust, or upon distribution of junior subordinated debentures
to you and the other 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 you must restore payment of any
sums paid to you 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
We have irrevocably guaranteed, on a subordinate basis all of the
Trust's obligations under the preferred securities to the extent set forth under
"Description of Guarantee." Taken together, our obligations under the junior
subordinated debentures, the 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 all
the other documents constitutes the guarantee. Only the combined operation of
these documents has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations in respect of the preferred
securities.
If and to the extent that we do not make payments on the junior
subordinated debentures, the 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 Trust does not have sufficient funds to pay such amounts. In
that event, your remedy is to institute a legal proceeding directly against us
for enforcement of our payment obligations
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under the junior subordinated debentures having a principal amount equal to the
liquidation amount of the preferred securities you hold. See "Description of
Junior Subordinated Debenture -- Enforcement Rights by Holders of Preferred
Securities."
Our obligations 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 we make the payments on the junior subordinated debentures
when they are due, the Trust should have funds sufficient to cover distributions
and other payments distributable on the preferred securities, primarily because:
o 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;
o 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;
o we will pay any and all costs, expenses and liabilities of the
Trust except the Trust's obligations to you and the holders of
the common securities; and
o the trust agreement further provides that the Trust will not
engage in any activity that is not consistent with the limited
purposes of the Trust.
Notwithstanding anything to the contrary in the indenture, we have the
right to set-off any payment we are otherwise required to make thereunder
against and to the extent we have previously made, or are concurrently on the
date of such payment making, a payment under the guarantee.
Enforcement Rights of Holders of Preferred Securities
You may institute a legal proceeding directly against us to enforce
your rights under the guarantee without first instituting a legal proceeding
against the guarantee trustee, the Trust or any other person or entity. See
"Description of Guarantee."
A default or event of default under any of our senior indebtedness
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
our senior indebtedness, the subordination provisions of the 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 on
senior indebtedness has been cured or waived. See "Description of Junior
Subordinated Debentures -- Subordination."
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Limited Purpose of Trust
The preferred securities represent preferred undivided beneficial
interests in the assets of the Trust, and the Trust exists for the sole purpose
of issuing the preferred securities and common securities and investing the
proceeds from their issuance in the junior subordinated debentures. A principal
difference between your rights as a holder of preferred securities and a holder
of a junior subordinated debenture is that a holder of a junior subordinated
debenture is entitled to receive from us payments on junior subordinated
debentures held, while you are entitled to receive distributions or other
amounts distributable with respect to the preferred securities from the Trust
(or from us under the Guarantee) only if and to the extent the Trust has funds
available for the payment of such distributions.
Rights Upon Dissolution
Upon any voluntary or involuntary dissolution of the Trust, other than
any such dissolution involving the distribution of the junior subordinated
debentures, after satisfaction of liabilities to creditors of the Trust as
required by applicable law, you will be entitled to receive, out of assets held
by the Trust, the liquidation distribution in cash. See "Description of
Preferred Securities -- Liquidation Distribution Upon Dissolution." If we are
voluntarily or involuntarily liquidated or declare bankruptcy, the Trust, as
registered holder of the junior subordinated debentures, will be our
subordinated creditor, subordinated and junior in right of payment to all our
senior indebtedness as set forth in the indenture, but entitled to receive
payment in full of all amounts payable with respect to the junior subordinated
debentures before any of our stockholders receive payments or distributions.
Since we are the guarantor under the guarantee and have agreed under the
indenture to pay all costs, expenses and liabilities of the Trust (other than
the Trust's obligations to you and the holders of the common securities), your
position as a holder of the preferred securities and the position of a holder of
such junior subordinated debentures relative to other creditors and to our
stockholders in the event of our liquidation or bankruptcy are expected to be
substantially the same.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General
The preferred securities and payments on the preferred securities
generally are subject to taxation. Therefore, you should consider the tax
consequences of owning and receiving payments on the preferred securities as
they specifically relate to you before acquiring them.
We have engaged Malizia Spidi & Fisch, PC, Washington, D.C., as special
tax counsel ("Tax Counsel") to review the following discussion. In the opinion
of Tax Counsel, the following discussion summarizes the principal aspects of the
U.S. federal income tax treatment of beneficial owners ("Owners") of preferred
securities.
The following discussion is general and may not apply to your
particular circumstances for any of the following (or other) reasons:
o This summary is based on federal tax laws in effect as of the
date of this prospectus which are all subject to change at any
time. Changes to any of these laws may be
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applied retroactively which may cause the tax consequences to
become substantially different from the consequences described
below.
o This summary discusses only preferred securities you acquire at
original issuance at the original offering price and hold as
capital assets (within the meaning of federal tax law). It does
not discuss all of the tax consequences that may be relevant to
Owners who are subject to special rules, such as banks, thrift
institutions, real estate investment trusts, regulated investment
companies, insurance companies, brokers and dealers in securities
or currencies, certain securities traders, tax-exempt
organizations and certain other financial institutions. This
discussion also does not discuss tax consequences that may be
relevant to an Owner in light of the Owner's particular
circumstances, such as an Owner holding a preferred security as a
position in a straddle, hedging, conversion or other integrated
investment.
o This summary does not address:
(a) The income tax consequences to stockholders in, partners of,
or beneficiaries of, a holder of preferred securities;
(b) the United States alternative minimum tax consequences of
purchasing, owning and disposing of preferred securities; or
(c) any state, local or foreign tax consequences of purchasing,
owning, holding or disposing of preferred securities.
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 transaction described herein. Accordingly, we cannot assure you
that the IRS will not challenge the opinion expressed herein or that a court
would not rule in favor of the IRS.
You must consult your own tax advisors regarding the tax consequences
of purchasing, owning, holding, or disposing of the preferred securities because
the following discussion may not apply to you.
U.S. Holders
In General. For purposes of the following discussion, a "U.S. Holder"
means:
o a citizen or individual resident of the United States;
o a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof;
o an estate the income of which is includible in its gross income
for U.S. federal income tax purposes without regard to its
source; or
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o a trust if a court within the United States is able to
exercise primary supervision over its administration and at
least one United States person has the authority to control
all substantial decisions of the trust.
Characterization of the Trust. Under current law and assuming
compliance with the terms of the trust agreement, the Trust will be
characterized for United States federal income tax purposes as a grantor trust.
Accordingly, for United States federal income tax purposes, if you, as a U.S.
Holder, purchase a preferred security you will be considered the owner of an
undivided interest in the junior subordinated debentures owned by the Trust, and
you will be required to include all income or gain recognized for United States
federal income tax purposes with respect to your share of the junior
subordinated debentures on your income tax return.
Characterization of the Junior Subordinated Debentures. We intend to
take the position that, under current law, the junior subordinated debentures
are our debt for United States federal income tax purposes. We, along with the
Trust and you (by acceptance of a beneficial interest in a preferred security)
agree to treat the junior subordinated debentures as debt of First Star Bancorp
and the preferred securities as evidence of a beneficial ownership interest in
the Trust. We cannot assure you, however, that our position will not be
challenged by the IRS or, if challenged, that a challenge will not be
successful. Tax Counsel has not given us an opinion as to whether the junior
subordinated debentures will be classified as our debt for U.S. federal income
tax purposes. The remainder of this discussion assumes that the junior
subordinated debentures will be classified as our debt for United States federal
income tax purposes.
Interest Income and Original Issue Discount. Under the terms of the
junior subordinated debentures, we have the ability to defer payments of
interest from time to time by extending the interest payment period for a period
not exceeding 20 consecutive quarterly periods, but not beyond the maturity of
the junior subordinated debentures. Treasury Regulations provide that debt
instruments like the junior subordinated debentures will not be considered
issued with original issue discount ("OID") even if their issuer can defer
payments of interest if the likelihood of any deferral is "remote."
We have concluded, and this discussion assumes, that, as of the date of
this prospectus, the likelihood of our deferring payments of interest is
"remote" within the meaning of the applicable Treasury regulations. Our
conclusion is based in part on the fact that exercising that option would
prevent us from declaring dividends on our preferred and common stock and would
prevent us from making any payments with respect to debt securities that rank
equally with or junior to the junior subordinated debentures. Therefore, the
junior subordinated debentures should not be treated as issued with OID by
reason of our deferral option. Rather, you will be taxed on stated interest on
the junior subordinated debentures when it is paid or accrued in accordance with
your method of accounting for income tax purposes. You should note, however,
that no published rulings or any other published authorities of the IRS have
addressed this issue and that Tax Counsel has not given us an opinion as to
whether the junior subordinated debentures will be treated as issued with OID.
Accordingly, it is possible that the IRS could take a position contrary to our
interpretation described herein.
If we exercise our option to defer payments of interest, the junior
subordinated debentures would be treated as redeemed and reissued for OID
purposes. The sum of the remaining interest
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payments (and any insignificant OID) on the junior subordinated debentures would
thereafter be treated as OID. The OID would accrue, and be includible in your
taxable income, on an economic accrual basis (regardless of your method of
accounting for income tax purposes) over the remaining term of the junior
subordinated debentures (including any period of interest deferral), without
regard to the timing of payments under the junior subordinated debentures.
Subsequent distributions of interest on the junior subordinated debentures
generally would not be taxable. The amount of OID that would accrue in any
period would generally equal the amount of interest that accrued on the junior
subordinated debentures in that period at the stated interest rate.
Consequently, during any period of interest deferral, you will include OID in
gross income in advance of the receipt of cash, and if you dispose of a
preferred security prior to the record date for payment of distributions on the
junior subordinated debentures following that period, you will be subject to
income tax on OID accrued through the date of disposition (and not previously
included in income), but you will not receive cash from the Trust with respect
to the OID.
Characterization of Income. Because the income underlying the preferred
securities will not be characterized as dividends for income tax purposes, if
you are a corporate holder of the preferred securities you will not be entitled
to a dividends-received deduction for any income you recognize with respect to
the preferred securities.
Market Discount and Bond Premium. Under certain circumstances, you may
be considered to have acquired your undivided interests in the junior
subordinated debentures with market discount or bond premium (as each phrase is
defined for United States federal income tax purposes).
Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of
the Trust. Under certain circumstances described above (See "Description of the
Preferred Securities -- Liquidation Distribution Upon Dissolution"), the Trust
may distribute the junior subordinated debentures to you in exchange for your
preferred securities and in liquidation of the Trust. Except as discussed below,
such a distribution would not be a taxable event for United States federal
income tax purposes, and you would have an aggregate adjusted basis in the
junior subordinated debentures you receive for United States federal income tax
purposes equal to your aggregate adjusted basis in your preferred securities.
For United States federal income tax purposes, your holding period in the junior
subordinated debentures you receive in such a liquidation of the Trust would
include the period during which you held the preferred securities. If, however,
the relevant event is a Tax Event that results in the Trust being treated as an
association taxable as a corporation, the distribution would likely constitute a
taxable event to you for United States federal income tax purposes.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), we may redeem junior subordinated debentures for cash
and distribute the proceeds of such redemption to you in redemption of your
preferred securities. Such a redemption would be taxable for United States
federal income tax purposes, and you would recognize gain or loss as if you had
sold the preferred securities for cash. See "-- Sales of Preferred Securities"
below.
Sales of Preferred Securities. If you sell preferred securities, you
will generally recognize gain or loss equal to the difference between your
adjusted basis in the preferred securities and the amount realized on the sale
of such preferred securities. Your adjusted basis in the preferred securities
generally will be the initial purchase price, increased by OID previously
included (or currently
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includible) in your 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 we first exercise our
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
you have held the preferred securities as a capital asset for more than one year
prior to the date of disposition.
If you dispose of your preferred securities between record dates for
payments of distributions thereon, you will be required to include accrued but
unpaid interest (or OID) on the junior subordinated debentures through the date
of disposition in your taxable income for United States federal income tax
purposes (notwithstanding that you may receive a separate payment from the
purchaser with respect to accrued interest). You may deduct that amount from the
sales proceeds received (including the separate payment, if any, with respect to
accrued interest) for the preferred securities (or as to OID only, to add such
amount to your adjusted tax basis in the preferred securities). To the extent
the selling price is less than your adjusted tax basis (which will include
accrued but unpaid OID if any), you will recognize a capital loss. Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States federal income tax purposes.
Pending Tax Litigation Affecting the Preferred Securities
In 1998, a taxpayer filed a petition in the United States Tax Court
contesting the IRS's disallowance of interest deductions that taxpayer claimed
in respect of securities issued in 1993 and 1994 that are, in some respects,
similar to the preferred securities. (Enron Corp. v. Commissioner, Docket No.
6149-98, filed April 1, 1998). An adverse decision by the Tax Court concerning
the deductibility of such interest may cause a Tax Event. Such a Tax Event would
give us the right to redeem the junior subordinated debentures. See "Description
of Junior Subordinated Debentures -- Redemption" and "Description of Preferred
Securities -- Liquidation Distribution Upon Dissolution."
Non-U.S. Holders
The following discussion applies to you if you are not a U.S. Holder as
described above.
Payments to you, as a non-U.S. Holder, on a preferred security will
generally not be subject to withholding of income tax, provided that:
o you did not (directly or indirectly, actually or constructively)
own 10% or more of the total combined voting power of all classes
of our stock entitled to vote;
o you are not a controlled foreign corporation that is related to
us through stock ownership; and
o either (a) you certify to the Trust or its agent under penalties
of perjury, that you are not a U.S. Holder and provide your name
and address, or (b) a securities clearing organization, bank or
other financial institution that holds customers' securities in
the ordinary course of its trade or business, and holds the
preferred security in such capacity, certifies to the Trust or
its agent, under penalties of perjury, that it requires and has
received such a statement from you or another financial
institution between it
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and you in the chain of ownership, and furnishes the Trust or its
agent with a copy of the statement.
As discussed above, it is possible that changes in the law affecting
the federal income tax consequences of the junior subordinated debentures could
adversely affect our ability to deduct interest payable on the junior
subordinated debentures. Changes in the law could also cause the junior
subordinated debentures to be classified as our equity (rather than our debt)
for United States federal income tax purposes. This might cause the income
derived from the junior subordinated debentures to be characterized as
dividends, generally subject to a 30% income tax (on a withholding basis) when
paid to you if you are not a U.S. Holder, rather than as interest which, as
discussed above, generally is exempt from income tax in the hands of a person
who is not a U.S. Holder. However, according to new Treasury Regulations that
become effective January 1, 2001, the 30% income tax withholding may not be
required if certain requirements are met.
A non-U.S. Holder will generally not be subject to withholding of
income tax on any gain realized upon the sale or other disposition of a
preferred security.
If you hold the preferred securities in connection with the active
conduct of a United States trade or business, you will generally be subject to
income tax on all income and gains recognized with respect to your proportionate
share of the junior subordinated debentures.
Information Reporting
In general, information reporting requirements will apply to payments
made on, and proceeds from the sale of, the preferred securities held by a
noncorporate U.S. Holder within the United States. In addition, payments made
on, and payments of the proceeds from the sale of, the preferred securities to
or through the United States office of a broker are subject to information
reporting unless you certify as to your non-U.S. Holder status or otherwise
establish an exemption from information reporting and backup withholding. See
"--Backup Withholding." Taxable income on the preferred securities for a
calendar year should be reported to U.S. Holders on the appropriate forms by the
following January 31st.
Backup Withholding
Payments made on, and proceeds from the sale of, the preferred
securities may be subject to a "backup" withholding tax of 31% unless you comply
with certain identification or exemption requirements. Any amounts withheld will
generally be allowed as a credit against your income tax liability, or refunded,
provided the required information is provided to the IRS.
The preceding discussion is only a summary and does not address the
consequences to particular person of the purchase, ownership and disposition of
the preferred securities. You must contact your own tax advisor to determine
your particular tax consequences.
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ERISA CONSIDERATIONS
We and certain of our affiliates 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 that are
subject to ERISA and individual retirement accounts ("IRAs"). The purchase of
the preferred securities by an employee benefit plan or IRA that is subject to
the fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions under Section 4975(e)(1) of the Code and with respect to which we, or
any affiliate of ours 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, fiduciary or IRA holder, proposing to acquire
any preferred securities for such a plan or IRA should consult with legal
counsel.
UNDERWRITING
Subject to the terms and conditions stated in the underwriting
agreement dated ____________, 1999 among us, the Trust, and Hopper Soliday, a
division of Tucker Anthony Incorporated, as the representative of the
underwriters named below, the underwriters have agreed to purchase, and the
Trust has agreed to sell to the underwriters, the following respective aggregate
liquidation amount of the preferred securities at the public offering price less
the underwriting discounts and commissions set forth on the cover page of this
prospectus. If one underwriter is not able to sell all of the preferred
securities that it has agreed to buy from us, no other underwriter is
responsible for those unsold preferred securities.
Underwriter: Liquidation Amount of
Preferred Securities:
Hopper Soliday, A Division of Tucker Anthony
Incorporated...................................... $
----------
Total $12,000,000
The underwriting agreement provides that the obligations of the
underwriters to purchase the preferred securities that are being offered are
subject to approval of legal matters by counsel and to other conditions.
Hopper Soliday proposes to offer some of the preferred securities
directly to the public at the public offering price set forth on the cover page
of this prospectus and some of the preferred securities to certain dealers at
the public offering price less a concession not in excess of $____ per preferred
security. Hopper Soliday may allow, and the dealers may reallow, a concession
not in excess of $____ per preferred security on sales to other dealers. After
the public offering, the offering price and other selling terms may be changed
by Hopper Soliday. We have also agreed to pay a financial advisory fee of
$25,000 to Hopper Soliday.
104
<PAGE>
We have granted to Hopper Soliday an option, exercisable for up to 30
days after the date of the underwriting agreement, to purchase up to an
additional $1,800,000 aggregate liquidation amount of the preferred securities
at the public offering price set forth on the cover page less underwriting
discounts and commissions. To the extent that Hopper Soliday exercises this
option, we will be obligated to sell that aggregate liquidation amount of
preferred securities to Hopper Soliday. Hopper Soliday may exercise this option
only to cover over-allotments made in connection with this offering. If
purchased, Hopper Soliday will offer the additional preferred securities on the
same terms as those on which the $12,000,000 aggregate liquidation amount of the
preferred securities is being offered.
In connection with the offering the underwriters may purchase and sell
shares of the preferred securities in the open market. These transactions may
include over-allotment, syndicate covering transactions and stabilizing
transactions. Over-allotment involves syndicate sales of the preferred
securities in excess of the aggregate liquidation amount of preferred securities
to be purchased by the underwriters in the offering, which creates a syndicate
short position. Syndicate covering transaction involve purchases of the
preferred securities in the open market after the distribution has been
completed in order to cover syndicate short positions. Stabilizing transactions
consist of bids or purchases of the preferred securities made for the purpose of
preventing or retarding a decline in the market price of the preferred
securities while the offering is in progress.
The underwriters may also impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when the
preferred securities originally sold by that syndicate member are purchased in a
stabilizing transaction or syndicate covering transaction to cover syndicate
short positions. The imposition of a penalty bid may have an effective on the
price of the preferred securities to the extent that it may discourage resales
of the preferred securities.
Any of these transactions may cause the price of the preferred
securities to be higher than it would otherwise be in the absence of the
transactions. These transactions, if commenced, 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 our junior subordinated debentures, the
underwriting agreement provides that we will pay as compensation to the
underwriters for arranging the investment of such proceeds an amount of $_____
per preferred security (or $_____ in the aggregate, $_______ if the
over-allotment option is exercised in full).
Because the National Association of Securities Dealers, Inc. is
expected to view the preferred securities as interests in a direct participation
program, this offering 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. We have applied to have the preferred securities
approved for quotation on the Nasdaq National Market. Hopper Soliday has advised
the Trust and us that it intends to make a market in the preferred securities.
However, it is not obligated to do so and such market making may be interrupted
or discontinued at any time without notice at its sole discretion. See "Market
for the Preferred Securities."
105
<PAGE>
We have agreed to indemnify Hopper Soliday against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
Hopper Soliday may in the future perform various services for us,
including investment banking services, for which it may receive customary fees.
LEGAL AND TAX MATTERS
The validity of the Guarantee and the Junior Subordinated Debentures
and certain tax matters will passed upon by Malizia Spidi & Fisch, PC,
Washington, D.C., counsel to First Star Bancorp. Certain legal matters for
Hopper Soliday, a division of Tucker Anthony Incorporated, will be passed upon
by Stevens & Lee, PC, Reading, Pennsylvania. Certain matters of Delaware law
relating to the validity of the preferred securities, the enforceability of the
Trust Agreement and the creation of the Trust will be passed upon by Richards,
Layton & Finger, special Delaware counsel to First Star Bancorp and the Trust.
Malizia Spidi & Fisch, PC and Stevens & Lee, PC will rely as to certain matters
of Delaware law on the opinion of Richards, Layton & Finger.
EXPERTS
The consolidated financial statements of First Star Bancorp, Inc. and
subsidiaries as of June 30, 1999 and 1998 and for each of the two years in the
period ended June 30, 1999, appearing in this prospectus have been audited by
Beard & Company, Inc., independent auditors, as set forth in their report
thereon which appears elsewhere, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
On March 23, 1999, our Board of Directors unanimously determined that
it would discontinue the engagement of Deloitte & Touche, LLP as our independent
auditors and determined that we would engage Beard & Company, Inc., Certified
Public Accountants, Allentown, Pennsylvania, as our auditors for the fiscal year
ending June 30, 1999. Beard & Company, Inc. was also engaged to audit
our financial statements for the fiscal year ended June 30, 1998.
There were no disagreements with Deloitte & Touche, LLP as to any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure. The report of Deloitte & Touche, LLP on the
financial statements for the fiscal year ended June 30, 1998, the last fiscal
year audited by Deloitte & Touche, LLP did not contain an adverse opinion or
disclaimer and was not modified as to uncertainty, audit scope or accounting
principles.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form SB-2 under
the Securities Act of 1933, as amended, with respect to the preferred securities
offered in this document. As permitted by the rules and regulations of the SEC,
this document does not contain all the information set forth in the registration
statement. Such information can be examined without charge at the public
reference facilities of the SEC located at 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies of such material can be obtained from the SEC at
prescribed rates. The address for this Web site is "http://www.sec.gov". The
statements contained in this document as to the contents of any contract or
106
<PAGE>
other document filed as an exhibit to the Form SB-2 are, of necessity, brief
descriptions and are not necessarily complete; each such statement is qualified
by reference to such contract or document.
A copy of the articles and bylaws of each of First Star Bancorp and
First Star Savings may be obtained promptly and without charge from First Star
Savings by contacting Ruth Doncsecz, Secretary, First Star Bancorp, Inc., 418
West Broad Street, Bethlehem, Pennsylvania 18018 at (610) 691-2333.
107
<PAGE>
First Star Bancorp, Inc.
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report................................................. F-1
Consolidated Balance Sheets as of June 30, 1999 and 1998..................... F-2
Consolidated Statements of Income for the Years Ended June 30, 1999 and 1998 F-3
Consolidated Statements of Stockholders' Equity for the Years
Ended June 30, 1999 and 1998 .................................... F-4
Consolidated Statements of Cash Flows for the Years Ended June 30, 1999
and 1998 ........................................................... F-5
Notes to Consolidated Financial Statements................................... F-7
</TABLE>
All schedules are omitted because the required information is either
not applicable or is included in the consolidated financial statements or
related notes.
108
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Trustees
First Star Bancorp, Inc.
Bethlehem, Pennsylvania
We have audited the accompanying consolidated balance sheets of
First Star Bancorp, Inc. and its subsidiaries as of June 30, 1999 and 1998, and
the related consolidated statements of income, 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.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of First
Star Bancorp, Inc. and its subsidiaries as of June 30, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/BEARD & COMPANY, INC.
Allentown, Pennsylvania
August 4, 1999
F-1
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
June 30, 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
(In Thousands, Except Share Data)
ASSETS
<S> <C> <C>
Cash and due from banks $ 1,352 $ 1,222
Interest-bearing demand deposits 1,726 858
------------------------------------
Cash and cash equivalents 3,078 2,080
Securities available for sale 160,438 123,759
Loans receivable, net of allowance for loan losses
1999 $ 1,772; 1998 $ 1,489 184,264 176,386
Bank premises and equipment, net 599 687
Foreclosed real estate 969 1,129
Accrued interest receivable 2,567 2,404
Federal Home Loan Bank stock, at cost 7,935 7,378
Deferred income taxes 1,625 23
Cash surrender value of life insurance 1,710 1,583
Prepaid expenses and other assets 521 373
------------------------------------
Total assets $ 363,706 $ 315,802
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 190,148 $ 145,096
Advances from Federal Home Loan Bank 146,180 144,485
Convertible subordinated debentures 5,480 5,480
Other borrowed funds 594 647
Advances by borrowers for taxes and insurance 3,418 3,168
Accrued interest payable 801 785
Accrued expenses and other liabilities 1,609 1,028
------------------------------------
Total liabilities 348,230 300,689
------------------------------------
Stockholders' equity:
Convertible preferred stock, no par value; authorized 2,500,000
shares; issued and outstanding 43,592 shares - -
Common stock, par value $ 1 per share; authorized 10,000,000
shares; issued and outstanding 1999 375,404 shares; 1998
372,084 shares 375 372
Surplus 8,465 8,451
Retained earnings 8,300 5,777
Employee Stock Ownership Plan debt (200) (300)
Accumulated other comprehensive income (loss) (1,464) 813
------------------------------------
Total stockholders' equity 15,476 15,113
------------------------------------
Total liabilities and stockholders' equity $ 363,706 $ 315,802
====================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Years Ended June 30, 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
(In Thousands, Except Per Share Data)
<S> <C> <C>
Interest income:
Loans receivable, including fees $ 14,358 $ 13,234
Securities 10,535 7,881
Other 171 125
------------------------------------
Total interest income 25,064 21,240
------------------------------------
Interest expense:
Deposits 8,442 6,638
Short-term borrowings 46 37
Long-term borrowings 8,892 7,935
------------------------------------
Total interest expense 17,380 14,610
------------------------------------
Net interest income 7,684 6,630
Provision for loan losses 423 385
------------------------------------
Net interest income after provision for loan losses 7,261 6,245
------------------------------------
Other income:
Service fees 316 285
Realized gain on sale of:
Securities 156 1,151
Foreclosed real estate 77 101
Other 247 223
------------------------------------
Total other income 796 1,760
------------------------------------
Other expenses:
Salaries and employee benefits 2,202 1,865
Occupancy and equipment 424 470
Federal deposit insurance premium 89 78
Data processing costs 173 144
Professional fees 204 216
Terminated merger costs 111 -
Advertising 103 121
Other 668 688
------------------------------------
Total other expenses 3,974 3,582
------------------------------------
Income before income taxes 4,083 4,423
Income taxes 1,517 1,607
------------------------------------
Net income 2,566 2,816
Dividends on preferred stock (43) (45)
------------------------------------
Net income applicable to common stockholders $ 2,523 $ 2,771
====================================
Basic earnings per share $ 6.90 $ 7.68
====================================
Diluted earnings per share $ 3.76 $ 4.15
====================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years Ended June 30, 1999 and 1998 (In Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Employee Accumulated
Stock Other
Preferred Common Retained Ownership Comprehensive
Stock Stock Surplus Earnings Plan Debt Income (Loss) Total
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1997 $ - $ 258 $ 3,061 $ 8,541 $ (400) $ 555 $ 12,015
-------------
Comprehensive income:
Net income - - - 2,816 - - 2,816
Change in net unrealized
gains (losses) on
securities available
for sale - - - - - 258 258
-------------
Total comprehensive
income 3,074
-------------
Stock dividends - 114 5,390 (5,504) - - -
Repayment of ESOP debt - - - - 100 - 100
Cash dividends paid:
Preferred stock - - - (45) - - (45)
Common stock - - - (31) - - (31)
----------------------------------------------------------------------------------------------------
Balance, June 30, 1998 - 372 8,451 5,777 (300) 813 15,113
-------------
Comprehensive income:
Net income - - - 2,566 - - 2,566
Change in net unrealized
gains (losses) on
securities available
for sale - - - - - (2,277) (2,277)
-------------
Total comprehensive
income 289
-------------
Exercise of stock options - 3 14 - - - 17
Repayment of ESOP debt - - - - 100 - 100
Cash dividends paid on
preferred stock - - - (43) - - (43)
----------------------------------------------------------------------------------------------------
Balance, June 30, 1999 $ - $ 375 $ 8,465 $ 8,300 $ (200) $ (1,464) $ 15,476
====================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Years Ended June 30, 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,566 $ 2,816
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 423 385
Provision for depreciation and amortization 130 110
Net gain on foreclosed real estate (77) (101)
Net realized gains on sales of securities (156) (1,151)
Net accretion of securities premiums and discounts (865) (696)
Deferred income taxes (189) 35
Change in assets and liabilities:
(Increase) decrease in:
Accrued interest receivable (163) 272
Prepaid expenses and other assets (148) (122)
Increase in:
Accrued expenses and other liabilities 581 68
Accrued interest payable 16 125
--------------------------------
Net cash provided by operating activities 2,118 1,741
--------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale (84,872) (84,680)
Proceeds from sale of securities available for sale 12,034 37,271
Proceeds from maturities of and principal repayments on
securities available for sale 37,518 36,204
Net increase in Federal Home Loan Bank stock (557) (408)
Proceeds from the sale of foreclosed real estate 942 1,236
Net (increase) in loans (13,034) (34,758)
Purchases of bank premises and equipment (42) (69)
(Increase) decrease in cash surrender value of life insurance policies (127) 197
--------------------------------
Net cash used in investing activities (48,138) (45,007)
--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 45,052 26,434
Repayment of ESOP debt 100 100
Proceeds from Federal Home Loan Bank advances 63,654 159,788
Repayment of Federal Home Loan Bank advances (61,959) (144,703)
Repayment of other borrowed money (53) (25)
Increase in advances from borrowers for taxes and insurance 250 518
Proceeds from the exercise of stock options 17 -
Dividends paid (43) (76)
--------------------------------
Net cash provided by financing activities 47,018 42,036
--------------------------------
Net increase (decrease) in cash and cash equivalents 998 (1,230)
Cash and cash equivalents:
Beginning 2,080 3,310
--------------------------------
Ending $ 3,078 $ 2,080
================================
</TABLE>
F-5
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Years Ended June 30, 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest on deposits, advances and other borrowed money $ 17,364 $ 14,485
=============================
Income taxes $ 1,079 $ 1,721
=============================
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Loans swapped for mortgage-backed securities $ 4,028 $ 7,034
=============================
Transfer of loans to foreclosed real estate $ 705 $ 1,497
=============================
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
- --------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES
Nature of operations:
First Star Bancorp, Inc. (the "Company") is the parent holding
company and sole stockholder of First Star Savings Bank (the
"Bank"). The Bank is a Pennsylvania chartered stock savings bank
which provides lending and depository services to the Lehigh
Valley through its six branch locations (Bethlehem, Bath, Palmer,
Nazareth, Allentown and Alburtis). The Bank is supervised and
regulated by the Pennsylvania Department of Banking and the
Federal Deposit Insurance Corporation ("FDIC"). The Bank's
deposits are insured by the FDIC.
Principles of consolidation:
The consolidated financial statements of the Company include the
accounts of the Bank and Integrated Financial Corporation,
wholly-owned subsidiaries of the Company, and Integrated Abstract
Incorporated, a wholly-owned subsidiary of Integrated Financial
Corporation. All intercompany transactions and balances have been
eliminated in consolidation.
Estimates:
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Presentation of cash flows:
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks and interest bearing
demand deposits.
Securities:
Securities classified as available for sale are those securities
that the Company intends to hold for an indefinite period of time
but not necessarily to maturity. Any decision to sell a security
classified as available for sale would be based on various
factors, including significant movement in interest rates, changes
in maturity mix of the Company's assets and liabilities, liquidity
needs, regulatory capital considerations and other similar
factors. Securities available for sale are carried at fair value.
Unrealized gains or losses are reported as increases or decreases
in other comprehensive income, net of the related deferred tax
effect. Realized gains or losses, determined on the basis of the
cost of the specific securities sold, are included in earnings.
Premiums and discounts are recognized in interest income using the
interest method over the period to maturity.
F-7
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
- --------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities (continued):
Management determines the appropriate classification of debt
securities at the time of purchase and re-evaluates such
designation as of each balance sheet date.
Federal law requires a member institution of the Federal Home Loan
Bank System to hold stock of its district Federal Home Loan Bank
according to a predetermined formula. The stock is carried at
cost.
Loans receivable:
Loans receivable that management has the intent and ability to
hold for the foreseeable future or until maturity or payoff are
stated at their outstanding unpaid principal balances, net of an
allowance for loan losses and any deferred fees. Interest income
is accrued on the unpaid principal balance. Loan origination fees
are deferred and recognized as an adjustment of the yield
(interest income) of the related loans. The Company is generally
amortizing these amounts over the contractual life of the loan.
A loan is generally considered impaired when it is probable the
Company will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan
agreement. Loans which are deemed to be impaired are reported at
the present value of expected future cash flows using the loans
effective interest rate, or as a practical expedient, at the fair
value of the collateral if the loan is collateral dependent.
The accrual of interest is generally discontinued when the
contractual payment of principal or interest has become 90 days
past due or management has serious doubts about further
collectibility of principal or interest, even though the loan is
currently performing. A loan may remain on accrual status if it is
in the process of collection and is either guaranteed or well
secured. When a loan is placed on nonaccrual status, unpaid
interest credited to income in the current year is reversed and
unpaid interest accrued in prior years is charged against the
allowance for loan losses. Interest received on nonaccrual loans
generally is either applied against principal or reported as
interest income, according to management's judgment as to the
collectibility of principal. Generally, loans are restored to
accrual status when the obligation is brought current, has
performed in accordance with the contractual terms for a
reasonable period of time and the ultimate collectibility of the
total contractual principal and interest is no longer in doubt.
F-8
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
- --------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for loan losses:
The allowance for loan losses is established through provisions
for loan losses charged against income. Loans deemed to be
uncollectible are charged against the allowance for loan losses,
and subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is maintained at a level considered
adequate to provide for losses that can be reasonably anticipated.
Management's periodic evaluation of the adequacy of the allowance
is based on the Company's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may
affect the borrower's ability to repay, the estimated value of any
underlying collateral, composition of the loan portfolio, current
economic conditions and other relevant factors. This evaluation is
inherently subjective as it requires material estimates that may
be susceptible to significant change.
Bank premises and equipment:
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on the straight-line method
over the assets' estimated useful lives.
Cash surrender value of life insurance:
The Bank is the beneficiary of insurance policies on the lives of
certain officers of the Bank.
Foreclosed real estate:
Foreclosed real estate is comprised of property acquired through a
foreclosure proceeding or acceptance of a deed-in-lieu of
foreclosure. Foreclosed assets initially are recorded at fair
value, net of estimated selling costs, at the date of foreclosure,
establishing a new cost basis. After foreclosure, valuations are
periodically performed by management and the assets are carried at
the lower of cost or fair value minus estimated costs to sell.
Revenues and expenses from operations and changes in the valuation
allowance are included in other expenses.
Advertising costs:
The Company follows the policy of charging the costs of
advertising to expense as incurred.
F-9
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
- --------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income taxes:
Deferred income taxes are provided on the liability method whereby
deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities
and their tax basis. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more
likely than not that some portion of the deferred tax assets will
not be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of
enactment.
Off-balance sheet financial instruments:
In the ordinary course of business, the Company has entered into
off-balance sheet financial instruments consisting of commitments
to extend credit and letters of credit. Such financial instruments
are recorded in the balance sheet when they are funded.
Earnings per common share:
Basic earnings per share represents income available to common
stockholders divided by the weighted-average number of common
shares outstanding during the period, excluding unearned ESOP
shares. Diluted earnings per share reflects additional common
shares that would have been outstanding if dilutive potential
common shares had been issued, as well as any adjustment to income
that would result from the assumed issuance. Potential common
shares that may be issued by the Company relate to convertible
subordinated debentures, convertible preferred stock and
outstanding stock options. Potential common shares that may be
issued related to stock options are determined using the treasury
stock method. Per share amounts have been adjusted to give
retroactive effect to stock dividends declared in the year ended
June 30, 1998.
Segment reporting:
The Company acts as an independent community financial services
provider, and offers traditional banking and related financial
services to individual, business and government customers. Through
its branch and automated teller machine network, the Bank offers a
full array of commercial and retail financial services, including
the taking of time, savings and demand deposits; the making of
commercial, consumer and mortgage loans; and the providing of
other financial services.
Management does not separately allocate expenses, including the
cost of funding loan demand, between the commercial and retail
operations of the Company. As such, discrete financial information
is not available and segment reporting would not be meaningful.
Reclassifications:
Certain amounts in prior period financial statements have been
reclassified to conform with the presentation used in the 1999
financial statements. These reclassifications had no effect on net
income.
F-10
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
- --------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New accounting standard:
The Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging
Activities", in June 1998. The Company is required to adopt the
Statement on July 1, 2001, as amended by Statement No. 137. The
adoption of the Statement is not expected to have a significant
impact on the financial condition or results of operations of the
Company.
2
- --------------------------------------------------------------------------------
SECURITIES
The amortized cost and approximate fair value of securities available
for sale as of June 30, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Available for sale securities:
June 30, 1999:
U.S. Government
corporations and
agencies securities $ 5,530 $ 17 $ (197) $ 5,350
State and municipal
securities 936 - (12) 924
Mortgage-backed securities 81,816 440 (1,039) 81,217
Corporate securities 27,345 81 (974) 26,452
Trust preferred securities 42,075 172 (978) 41,269
Marketable equity securities 5,217 138 (129) 5,226
-----------------------------------------------------------------
$ 162,919 $ 848 $ (3,329) $ 160,438
=================================================================
</TABLE>
F-11
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
- --------------------------------------------------------------------------------
SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Available for sale securities:
June 30, 1998:
U.S. Government
corporations and
agencies securities $ 15,710 $ 137 $ (84) $ 15,763
State and municipal
securities 15 - - 15
Mortgage-backed securities 75,067 980 (12) 76,035
Corporate securities 10,427 161 (224) 10,364
Trust preferred securities 19,826 - - 19,826
Marketable equity securities 1,505 251 - 1,756
-----------------------------------------------------------------
$ 122,550 $ 1,529 $ (320) $ 123,759
=================================================================
</TABLE>
The amortized cost and fair value of securities as of June 30, 1999, by
contractual maturity, are shown below. Expected maturities may differ
from contractual maturities because the securities may be called or
prepaid with or without any penalties.
<TABLE>
<CAPTION>
Available For Sale
----------------------------------
Amortized Fair
Cost Value
----------------------------------
(In Thousands)
<S> <C> <C>
Due in one year or less $ 2,368 $ 2,365
Due after one year through five years 16,049 15,464
Due after five years through ten years 11,196 10,839
Due after ten years 46,273 45,327
----------------------------------
75,886 73,995
Mortgage-backed securities 81,816 81,217
Marketable equity securities 5,217 5,226
----------------------------------
$ 162,919 $ 160,438
==================================
</TABLE>
F-12
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
- --------------------------------------------------------------------------------
SECURITIES (CONTINUED)
Gross gains of $ 156,000 and gross losses of $ -0- were realized on
sales of securities in the year ended June 30, 1999. Gross gains of $
1,151,000 and gross losses of $ -0- were realized on sales of
securities in the year ended June 30, 1998.
Securities with a carrying value of $ 33,633,000 at June 30, 1999 were
pledged to secure advances from the Federal Home Loan Bank.
3
- --------------------------------------------------------------------------------
LOANS RECEIVABLE
The composition of net loans receivable at June 30, 1999 and 1998 is as
follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------------
(In Thousands)
<S> <C> <C>
First mortgage residential loans $ 153,089 $ 149,286
Construction loans 800 110
Commercial leases purchased 813 1,496
Consumer loans 656 728
Home equity loans 7,059 7,905
Automobile loans 301 329
Commercial real estate loans 25,344 19,360
------------------------------------
Total loans 188,062 179,214
------------------------------------
Less:
Loans in process (605) (66)
Unearned net loan fees and origination costs (1,421) (1,273)
Allowance for loan losses (1,772) (1,489)
------------------------------------
(3,798) (2,828)
------------------------------------
Net loans $ 184,264 $ 176,386
====================================
</TABLE>
F-13
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
- --------------------------------------------------------------------------------
LOANS RECEIVABLE (CONTINUED)
The following table presents changes in the allowance for loan losses
for the years ended June 30:
1999 1998
-----------------------------
(In Thousands)
Balance, beginning $ 1,489 $ 1,156
Provision for loan losses 423 385
Charge-offs (143) (57)
Recoveries 3 5
-----------------------------
Balance, ending $ 1,772 $ 1,489
=============================
At June 30, 1999 and 1998, as a result of loan sales and swaps, the
Bank was servicing loans for others amounting to approximately $
31,584,000 and $ 33,802,000 respectively. Servicing loans for others
generally consists of collecting mortgage payments, maintaining escrow
accounts, disbursing payments to investors and foreclosure processing.
Loan servicing income is recorded on the accrual basis and includes
servicing fees from investors and certain charges collected from
borrowers, such as late payment fees. Custodial escrow balances
maintained in connection with the foregoing loan servicing and included
in advances by borrowers for taxes and insurance were approximately $
578,000 and $ 602,000 at June 30, 1999 and 1998 respectively.
Nonperforming loans (which include loans in excess of 90 days
delinquent) at June 30, 1999 and 1998 amounted to approximately $
2,289,000 and $ 3,415,000 respectively. The reserve for delinquent
interest on loans totaled $ 217,000 and $ 320,000 at June 30, 1999 and
1998 respectively. Revenue that would have been earned if nonperforming
loans were accruing interest approximated $ 116,000 and $ 217,000 for
the years ended June 30, 1999 and 1998 respectively. None of these
loans at June 30, 1999 and 1998 are considered impaired.
F-14
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
- --------------------------------------------------------------------------------
BANK PREMISES AND EQUIPMENT
The components of bank premises and equipment at June 30, 1999 and 1998
are as follows:
1999 1998
---------------------------
(In Thousands)
Land and buildings $ 963 $ 961
Furniture, fixtures and equipment 1,379 1,339
Leasehold improvements 241 241
---------------------------
2,583 2,541
Less accumulated depreciation 1,984 1,854
---------------------------
$ 599 $ 687
===========================
5
- --------------------------------------------------------------------------------
DEPOSITS
Deposits and their respective effective rate of interest at June 30,
1999 and 1998 consist of the following major classifications:
<TABLE>
<CAPTION>
1999 1998
----------------------------------------------------------------------------------
Effective Effective
Rate Of Rate Of
Amount Percent Interest Amount Percent Interest
----------------------------------------------------------------------------------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing checking $ 1,871 1.0 % - % $ 1,524 1.0 % - %
NOW accounts 14,089 7.4 2.37 12,691 8.8 2.12
Money market accounts 19,592 10.3 4.41 15,352 10.6 4.22
Passbook and club accounts 11,566 6.1 2.73 11,468 7.9 2.72
Certificates of deposit 143,030 75.2 5.34 104,061 71.7 5.83
------------------------------- -----------------------------
Total deposits $ 190,148 100.0 % $ 145,096 100.0 %
=============================== =============================
Weighted average cost 4.81 % 5.05 %
================== ================
</TABLE>
The aggregate amount of certificates of deposit with a minimum
denomination of $ 100,000 was approximately $ 18,484,000 and $
15,840,000 at June 30, 1999 and 1998 respectively.
At June 30, 1999 and 1998, the Bank had included in certificates of
deposit approximately $ 1,318,000 and $ 689,000 respectively, in
brokered deposits.
F-15
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
- --------------------------------------------------------------------------------
DEPOSITS (CONTINUED)
The scheduled maturities of certificates of deposit for fiscal years
subsequent to June 30, 1999 are as follows (in thousands):
Amount Percent
-----------------------------------
2000 $ 110,168 77.0 %
2001 21,818 15.3
2002 3,439 2.4
2003 - 2004 6,791 4.7
Thereafter 814 0.6
---------------------------------
$ 143,030 100.0 %
=================================
A summary of interest expense on deposits is as follows:
Years Ended June 30,
1999 1998
-------------------------------
(In Thousands)
NOW $ 320 $ 311
Money market demand 788 572
Passbook and club 306 283
Certificates of deposit 7,028 5,472
-------------------------------
$ 8,442 $ 6,638
===============================
F-16
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
- --------------------------------------------------------------------------------
OTHER BORROWED FUNDS AND LONG-TERM DEBT
Federal Home Loan Bank advances at June 30, 1999 and 1998 consist of
the following (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------------------------------------------------------------------
Maturity Amount Rate Amount Rate
------------------------------ ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
0-12 months $ 18,325 5.42 % $ 27,936 5.73 %
13-24 months 6,000 5.93 7,328 5.90
25-36 months 42,500 5.79 6,000 5.93
37-48 months 45,000 5.70 42,500 5.79
49-60 months 12,000 5.19 45,000 5.68
Over 60 months 22,355 6.03 15,721 6.44
-------------------- --------------------
Total $ 146,180 5.71 % $ 144,485 5.83 %
=====================================================================
</TABLE>
Included in above are three convertible notes which total $ 42,500,000
where the Federal Home Loan Bank has the option to convert the notes at
a rate equal to the three month libor plus .03 on a quarterly basis.
Also, included is a $ 30,000,000 convertible note where the Federal
Home Loan Bank has the option to convert to a three-month libor rate
plus .03 if the three-month libor exceeds 6.5%. If converted, the Bank
may prepay these notes without penalty.
The advances are secured by qualifying assets of the Bank which
includes the Federal Home Loan Bank stock, mortgage-backed securities
and first mortgage loans. The Bank has a maximum borrowing capacity
with the Federal Home Loan Bank of approximately $ 202,200,000, of
which $ 146,180,000 was outstanding at June 30, 1999.
F-17
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
- --------------------------------------------------------------------------------
SUBORDINATED DEBENTURES
During the year ended June 30, 1992, the Bank issued $ 1,590,000 of
Adjustable-Rate Mandatorily Convertible Subordinated Debentures due in
the year 2002 (the "Debentures"). At the formation of the holding
company, the Debentures were assumed by the Company. Interest on the
Debentures is 2% over the prime rate, adjustable monthly. Interest is
payable on the Debentures on the first day of each month. The
Debentures will automatically convert into Permanent Noncumulative
Convertible Preferred Stock, Series A ("Series A Preferred Stock" (see
Note 11)) of the Company on January 1, 2002, unless previously
converted. The Debentures may be converted into Series A Preferred
Stock at any time, at the option of either the Company or the holder of
the Debenture, unless previously redeemed, at a conversion price of one
share per $ 9.864 principal amount of Debenture subject to adjustment
in certain events. During the year ended June 30, 1992, $ 110,000 of
the Debentures were converted to the Series A Preferred Stock.
The Debentures are redeemable in whole or in part, on not less than 30
days' notice at the option of the Company at par. The Debentures are
subordinated in right of payment to all present and future Senior
Indebtedness of the Company.
On December 31, 1996, the Company sold $ 4,000,000 of Adjustable-Rate
Mandatorily Convertible Subordinated Debentures due in the year 2008
(the "1996 Debentures"). Interest on the 1996 Debentures is 1% under
the prime rate, adjustable monthly. Interest is payable on the 1996
Debentures on the first day of each month. The 1996 Debentures will
automatically convert into Permanent Noncumulative Convertible
Preferred Stock, Series B ("Series B Preferred Stock") of the Company
on December 31, 2008, unless previously converted. The 1996 Debentures
may be converted into Series B Preferred Stock at any time by the
holder or after two years by the Company, unless previously redeemed,
at a conversion price of one share per $ 24.281 principal amount of
1996 Debenture subject to adjustment in certain events.
The 1996 Debentures are redeemable at par value prior to maturity by
the Company only with the proceeds from the sale of common or perpetual
preferred stock, unless otherwise approved by the Board of Governors of
the Federal Reserve System. The 1996 Debentures are subordinated in
right of payment to all present and future Senior Indebtedness of the
Company.
F-18
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
- --------------------------------------------------------------------------------
SUBORDINATED DEBENTURES (CONTINUED)
At June 30, 1999 and 1998, $ 1,480,000 of the 1992 Debentures and $
4,000,000 of the 1996 Debentures remain outstanding. Substantially all
of the subordinated debentures are held by related parties which
includes directors, executive officers, principal stockholders, their
immediate families and affiliated companies.
All debentures are includable as Tier 2 capital for determining the
Company's compliance with regulatory capital requirements (see Note
19). Upon conversion, the Debentures become Tier 1 capital.
8
- --------------------------------------------------------------------------------
OTHER BORROWED MONEY
On December 31, 1987, the Bank entered into an agreement to transfer $
2,016,000 of loans with a weighted average interest rate of 8.07% to
another institution subject to certain recourse provisions. At June 30,
1999 and 1998, these loans had outstanding balances of $ 594,000 and $
647,000 respectively. The Bank is responsible for the collection of
principal and interest payments, for which it receives a servicing fee,
and remits the net proceeds to the transferee on a monthly basis. The
Bank is contingently liable for the collection of these loans and their
collectibility has been considered in the determination of the
provision for loan losses.
9
- --------------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS)
The Bank adopted SFAS No. 130, "Reporting Comprehensive Income", as of
July 1, 1998. Accounting principles generally require that recognized
revenue, expenses, gains and losses be included in net income. Although
certain changes in assets and liabilities, such as unrealized gains and
losses on available for sale securities, are reported as a separate
component of the equity section of the balance sheet, such items, along
with net income, are components of comprehensive income. The adoption
of SFAS No. 130 had no effect on the Bank's net income or stockholders'
equity.
F-19
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9
- --------------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS) (CONTINUED)
The components of other comprehensive income (loss) and related tax
effects for the years ended June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------------
(In Thousands)
<S> <C> <C>
Unrealized holding gains (losses) on available for sale securities $ (3,534) $ 1,541
Less reclassification adjustment for gains included in net income 156 1,151
----------------------------------
Net unrealized gains (losses) (3,690) 390
Tax effect 1,413 132
----------------------------------
Net of tax amount $ (2,277) $ 258
==================================
</TABLE>
10
- --------------------------------------------------------------------------------
STOCK OPTION PLANS
The Company grants options under the Employee Stock Compensation
Program (the "Program") to certain officers and key employees. The
Program has reserved 34,662 shares of common stock for options. Options
granted under the Program are exercisable for a term no longer than 10
years from the date of grant, are generally not transferable and will
terminate within a period of time following termination of employment
with the Company.
A summary of options activity, adjusted for stock dividends, for the
years ended June 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Exercise Price
----------------------------------------------
$ 9.47 $ 5.37 Total
----------------------------------------------
<S> <C> <C> <C>
Options outstanding, June 30, 1997 and 1998 3,744 25,146 28,890
Options exercised - (3,319) (3,319)
----------------------------------------------
Options outstanding, June 30, 1999 3,744 21,827 25,571
==============================================
</TABLE>
All options were exercisable at June 30, 1999 and 1998. The weighted
average contractual life of stock options outstanding as of June 30,
1999 is 2.3 years. The weighted average exercise price as of June 30,
1999 is $ 5.97.
F-20
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11
- --------------------------------------------------------------------------------
ISSUANCE OF PREFERRED STOCK
In December 1989, the Company issued 32,440 shares, of Permanent
Noncumulative Preferred Stock, Series A, for $ 9.864 per share pursuant
to the restated articles of incorporation of the Company, as adjusted
for stock dividends. During the year ended June 30, 1992, an additional
11,152 shares, as adjusted for stock dividends, of Series A Preferred
Stock were issued upon the conversion of subordinated debentures. Each
share of Preferred Stock is convertible into 1 share of common stock of
the Company subject to the limitations of the Company's restated
articles of incorporation. The dividend pay rate for Series A Preferred
Stock is 2% over the prime rate adjusted monthly. The dividend pay rate
for Series B Preferred Stock is 1% under the prime rate, adjusted
monthly.
12
- --------------------------------------------------------------------------------
LEASE COMMITMENTS AND TOTAL RENTAL EXPENSE
The Bank leases office space for certain branch offices. Future minimum
lease payments by year and in the aggregate, under noncancellable
operating leases with initial or remaining terms of one year or more,
consisted of the following at June 30, 1999 (in thousands):
2000 $ 72
2001 66
2002 48
2003 48
2004 48
Thereafter 192
-----------
$ 474
===========
The total rental expense included in the statements of income for the
years ended June 30, 1999 and 1998 is $ 72,000 and $ 71,000
respectively.
F-21
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13
- --------------------------------------------------------------------------------
EMPLOYEE BENEFIT PLANS
The Bank has an Employee Stock Ownership Plan ("ESOP") which covers all
employees who have met certain eligibility requirements. The Plan
requires the Bank to make a 15% contribution annually based on eligible
participants' compensation. The Bank's contribution to the ESOP was $
172,000 and $ 152,000 for the years ended June 30, 1999 and 1998
respectively.
The ESOP borrowed $ 400,000 on December 31, 1996 from the Company. The
debt, which has a balance of $ 200,000 and $ 300,000 at June 30, 1999
and 1998 respectively, accrues interest at prime plus 1% and is due on
July 1, 2000. As of June 30, 1999 and 1998, the ESOP held 47,429 and
47,417 shares of the Company's common stock and $ 525,000 of the
Company's subordinated debentures due December 31, 2008 as described in
Note 7. In the event a terminated Plan participant desires to sell
their shares of the Bank's stock, or for certain employees who elect to
diversify their account balances, the Company may be required to
purchase the shares from the participant at their fair market value.
The loan obligation of the ESOP is considered unearned employee benefit
expense and, as such, is recorded as a reduction of the Company's
stockholders' equity. The Bank's contribution to the ESOP is used to
repay the loan principal and interest.
The Bank has a 401(k) savings plan (the "401(k) Plan") for all
qualified employees. Employees can contribute up to 5% of their
compensation and the Company provides discretionary matching
contributions. The Company's contribution to the 401(k) Plan was $
9,000 and $ 12,000 for the years ended June 30, 1999 and 1998
respectively.
F-22
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14
- --------------------------------------------------------------------------------
INCOME TAXES
The components of income tax expense for the years ended June 30, 1999
and 1998 are as follows:
1999 1998
-----------------------------
(In Thousands)
Federal:
Current $ 1,429 $ 1,240
Deferred (189) 35
-----------------------------
1,240 1,275
State, current 277 332
-----------------------------
$ 1,517 $ 1,607
=============================
The provision for income taxes includes $ 64,000 and $ 472,000 in 1999
and 1998 respectively, of income taxes related to gains on sales of
securities.
A reconciliation of the statutory income tax at a rate of 34% to the
income tax expense included in the statements of income is as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
1999 1998
-------------------------------------------------------
% Of % Of
Pretax Pretax
Amount Income Amount Income
-------------------------------------------------------
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Tax at statutory rate $ 1,388 34.0 % $ 1,504 34.0 %
State income taxes (net of federal tax
benefit) 183 4.5 219 5.0
Other (54) (1.3) (116) (2.7)
-------------------------------------------------------
$ 1,517 37.2 % $ 1,607 36.3 %
=======================================================
</TABLE>
F-23
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14
- --------------------------------------------------------------------------------
INCOME TAXES (CONTINUED)
The net deferred tax asset consisted of the following components as of
June 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-----------------------------
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Bank premises and equipment $ 57 $ 54
Deferred loan fees 160 216
Deferred compensation 104 79
Allowance for loan losses 357 210
Unrealized losses on securities available for sale 1,017 -
-----------------------------
1,695 559
-----------------------------
Deferred tax liabilities:
Unrealized gains on securities available for sale - (396)
Other (70) (140)
-----------------------------
(70) (536)
-----------------------------
Net deferred tax asset $ 1,625 $ 23
=============================
</TABLE>
Retained earnings include $ 636,000 at June 30, 1999 and 1998, for
which no provision for federal income tax has been made. These amounts
represent deductions for bad debt reserves for tax purposes which were
only allowed to savings institutions which met certain definitional
tests prescribed by the Internal Revenue Code of 1986, as amended. The
Small Business Job Protection Act of 1996 eliminates the special bad
debt deduction granted solely to thrifts. Under the terms of the Act,
there would be no recapture of the pre-1988 (base year) reserves.
However, these pre-1988 reserves would be subject to recapture under
the rules of the Internal Revenue Code if the Bank itself pays a cash
dividend in excess of earnings and profits, or liquidates. The Act also
provides for the recapture of deductions arising from "applicable
excess reserve" defined as the total amount of reserve over the base
year reserve. The Bank's total reserve exceeds the base year reserve
and deferred taxes have been provided for this excess.
F-24
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15
- --------------------------------------------------------------------------------
EARNINGS PER SHARE
The following table sets forth the computations of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Year Ended June 30, 1999
----------------------------------------------------
Per
Income Shares Share
(Numerator) (Denominator) Amount
----------------------------------------------------
(Dollars In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Basic earnings per share:
Net income applicable to common
stockholders $ 2,523 365,904 $ 6.90
===============
Effect of dilutive securities:
Stock options - 24,282
Convertible preferred stock 43 43,592
Convertible subordinated debentures 252 314,772
--------------------------------------
Diluted earnings per share:
Net income applicable to common stock-
holders and assumed conversions $ 2,818 748,550 $ 3.76
====================================================
</TABLE>
F-25
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15
- --------------------------------------------------------------------------------
EARNINGS PER SHARE (CONTINUED)
The following table sets forth the computations of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Year Ended June 30, 1998
----------------------------------------------------
Per
Income Shares Share
(Numerator) (Denominator) Amount
----------------------------------------------------
(Dollars In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Basic earnings per share:
Net income applicable to common
stockholders $ 2,771 360,656 $ 7.68
===============
Effect of dilutive securities:
Stock options - 24,733
Convertible preferred stock 45 43,592
Convertible subordinated debentures 268 314,772
--------------------------------------
Diluted earnings per share:
Net income applicable to common stock-
holders and assumed conversions $ 3,084 743,753 $ 4.15
====================================================
</TABLE>
16
- --------------------------------------------------------------------------------
TRANSACTIONS WITH EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL
STOCKHOLDERS
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors,
executive officers, principal stockholders, their immediate families
and affiliated companies (commonly referred to as related parties), on
the same terms including interest rates and collateral, as those
prevailing at the time for comparable transactions with others. At June
30, 1999 and 1998, these persons were indebted to the Bank for loans
totaling $ 3,506,000 and $ 2,767,000 respectively. During the year
ended June 30, 1999, $ 1,298,000 of new loans were made and repayments
totaled $ 559,000.
F-26
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and letters of credit. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheets.
The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and letters of credit is represented by the contractual amount
of those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.
A summary of the Bank's financial instrument commitments at June 30,
1999 and 1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------------
(In Thousands)
<S> <C> <C>
Commitments to grant loans $ 6,743 $ 3,546
Unfunded commitments under lines of credit 5,357 5,671
Outstanding letters of credit 733 497
</TABLE>
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. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a fee. The Bank evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on
management's credit evaluation. Collateral held varies, but includes
principally residential or commercial real estate.
Outstanding letters of credit written are conditional commitments
issued by the Bank to guarantee the performance of a customer to a
third party. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending other loan
commitments.
F-27
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18
- --------------------------------------------------------------------------------
CONCENTRATION OF CREDIT RISK
The Bank grants loans to customers primarily located in the eastern
part of the State of Pennsylvania. The concentration of credit by type
of loan is set forth in Note 3. Although the Bank has a diversified
loan portfolio, its debtors' ability to honor their contracts is
influenced by the region's economy. The Bank also has a concentration
in corporate bonds and both rated and unrated trust preferred
securities of financial institutions in their investment portfolio in
Note 2. To the extent general economic conditions effect financial
institutions, they may impact the credit quality of these investments.
19
- --------------------------------------------------------------------------------
REGULATORY MATTERS
The Company and the Bank 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
consolidated financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Company
must meet specific capital guidelines that involve quantitative
measures of the Company's assets, liabilities and certain off-balance
sheet items as calculated under regulatory accounting practices. The
Company's capital amounts and classification 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 to maintain minimum amounts and ratios
(set forth below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets, and of Tier 1 capital to average
assets. Management believes, as of June 30, 1999, that the Company
meets all capital adequacy requirements to which it is subject.
As of June 30, 1999, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. There are
no conditions or events since that notification that management
believes have changed the Bank's category.
F-28
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19
- --------------------------------------------------------------------------------
REGULATORY MATTERS (CONTINUED)
The Bank's actual capital amounts and ratios at June 30, 1999 and 1998
and the minimum amounts and ratios required for capital adequacy
purposes and to be well capitalized under the prompt corrective action
provisions are as follows:
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
----------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
----------------------------------------------------------------------
(Dollar Amounts In Thousands)
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1999:
Total capital (to risk weighted assets) $ 21,522 10.18 % $ =>16,914 =>8.0 % $ =>21,143 =>10.0%
Tier I capital (to risk weighted assets) 19,750 9.34 => 8,457 =>4.0 =>12,686 => 6.0
Tier I capital (to average assets) 19,750 5.54 =>14,265 =>4.0 =>17,831 => 5.0
As of June 30, 1998:
Total capital (to risk weighted assets) $ 18,943 12.05 % $ =>12,577 =>8.0 % $ =>15,721 =>10.0%
Tier I capital (to risk weighted assets) 17,454 11.10 => 6,288 =>4.0 => 9,432 => 6.0
Tier I capital (to average assets) 17,454 5.95 =>11,740 =>4.0 =>14,675 => 5.0
</TABLE>
The Company's total risk-based capital, Tier 1 risk-based capital and
leverage capital ratios are 10.89%, 7.92% and 4.72% respectively at
June 30, 1999 and 12.85%, 8.88% and 4.93% respectively at June 30,
1998.
Under Pennsylvania banking law, the Bank is subject to certain
restrictions on the amount of dividends that it may declare without
prior regulatory approval. At June 30, 1999, $ 14,992,000 of retained
earnings were available for dividends without prior regulatory
approval, subject to the regulatory capital requirements discussed
above.
F-29
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20
- --------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management uses its best judgment in estimating the fair value of the
Company's financial instruments; however, there are inherent weaknesses
in any estimation technique. Therefore, for substantially all financial
instruments, the fair value estimates herein are not necessarily
indicative of the amounts the Company could have realized in a sales
transaction on the dates indicated. The estimated fair value amounts
have been measured as of their respective year ends, and have not been
reevaluated or updated for purposes of these financial statements
subsequent to those respective dates. As such, the estimated fair
values of these financial instruments subsequent to the respective
reporting dates may be different than the amounts reported at each year
end.
The following information should not be interpreted as an estimate of
the fair value of the entire Company since a fair value calculation is
only provided for a limited portion of the Company's assets. Due to a
wide range of valuation techniques and the degree of subjectivity used
in making the estimates, comparisons between the Company's disclosures
and those of other companies may not be meaningful. The following
methods and assumptions were used to estimate the fair values of the
Company's financial instruments at June 30, 1999 and 1998:
Cash and cash equivalents:
The carrying amounts of cash and cash equivalents approximate
their fair value.
Securities:
Fair values for securities are based on quoted market prices,
where available. If quoted market prices are not available,
fair values are based on quoted market prices of comparable
securities.
Loans receivable:
For variable-rate loans that reprice frequently and which
entail no significant changes in credit risk, fair values are
based on carrying values. The fair value of fixed rate loans
are estimated using discounted cash flow analyses, at interest
rates currently offered for loans with similar terms to
borrowers of similar credit quality.
Accrued interest receivable:
The carrying amount of accrued interest receivable
approximates fair value.
Deposit liabilities:
Fair values for demand deposits, savings accounts and certain
money market deposits are, by definition, equal to the amount
payable on demand at the reporting date. Fair values of
fixed-maturity certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates
currently being offered on similar instruments with similar
maturities.
F-30
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20
- --------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Advances from Federal Home Loan Bank, subordinated debentures and
other borrowed funds:
Fair values for these borrowings are estimated by discounting
future cash flows using interest rates currently offered on
borrowings with similar remaining maturities.
Accrued interest payable:
The carrying amount of accrued interest payable approximates
fair value.
Off-balance sheet instruments:
Fair value of commitments to extend credit and letters of
credit are estimated using the fees currently charged to enter
into similar agreements, taking into account market interest
rates, the remaining terms and present credit worthiness of
the counterparties.
The estimated fair values of the Company's financial instruments at
June 30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 3,078 $ 3,078 $ 2,080 $ 2,080
Securities available for sale 160,438 160,438 123,759 123,759
Loans receivable 184,264 178,212 176,386 181,977
Federal Home Loan Bank stock 7,935 7,935 7,378 7,378
Accrued interest receivable 2,567 2,567 2,404 2,404
Liabilities:
Non-interest bearing checking 1,871 1,871 1,524 1,524
NOW accounts 14,089 14,089 12,691 12,691
Money market demand accounts 19,592 19,592 15,352 15,352
Passbook and club accounts 11,566 11,566 11,468 11,468
Certificates of deposit 143,030 144,337 104,061 104,741
Advances from Federal Home Loan Bank 146,180 142,616 144,485 145,412
Subordinated debentures 5,480 5,480 5,480 5,480
Other borrowed funds 594 594 647 647
Accrued interest payable 801 801 785 785
Off-balance sheet financial instruments - - - -
</TABLE>
F-31
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21
- --------------------------------------------------------------------------------
FIRST STAR BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION
<TABLE>
<CAPTION>
Balance Sheets
June 30,
1999 1998
-----------------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Cash on deposit in bank subsidiary $ 140 $ 14
Interest bearing deposit with another institution 23 97
Securities available for sale 1,932 1,572
Loans receivable, net 358 379
Investment in subsidiaries 18,474 18,349
Other assets 324 300
-----------------------------------
$ 21,251 $ 20,711
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accrued expenses and other liabilities $ 38 $ 37
Intercompany payables 257 81
Subordinated debentures 5,480 5,480
-----------------------------------
Total liabilities 5,775 5,598
STOCKHOLDERS' EQUITY 15,476 15,113
-----------------------------------
$ 21,251 $ 20,711
===================================
</TABLE>
F-32
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21
- --------------------------------------------------------------------------------
FIRST STAR BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Statements of Income
Year Ended June 30,
1999 1998
----------------------------------
(In Thousands)
<S> <C> <C>
Income:
Dividends from bank subsidiary $ 300 $ 300
Interest income 141 169
Rental income, intercompany 88 88
Gain on sale of securities 4 63
----------------------------------
533 620
----------------------------------
Expenses:
Interest 227 455
Other 29 27
----------------------------------
256 482
----------------------------------
Income before income taxes 277 138
Income tax expense 111 55
----------------------------------
166 83
Equity in undistributed earnings of subsidiaries 2,400 2,733
----------------------------------
Net income $ 2,566 $ 2,816
==================================
</TABLE>
F-33
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21
- --------------------------------------------------------------------------------
FIRST STAR BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Statements of Cash Flows
Year Ended June 30,
1999 1998
----------------------------------
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,566 $ 2,816
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiaries (2,400) (2,733)
Net realized gain on sale of securities (4) (63)
Other, net 264 118
----------------------------------
Net cash provided by operating activities 426 138
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of securities available for sale 44 120
Purchase of securities available for sale (513) (1,460)
Net decrease in loans - 1,465
Capital contribution to First Star Savings Bank 21 (400)
----------------------------------
Net cash used in investing activities (448) (275)
----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised 17 -
Repayment of ESOP debt 100 100
Cash dividends paid (43) (76)
----------------------------------
Net cash provided by financing activities 74 24
----------------------------------
Increase (decrease) in cash and cash equivalents 52 (113)
Cash and cash equivalents:
Beginning 111 224
----------------------------------
Ending $ 163 $ 111
==================================
</TABLE>
F-34
<PAGE>
FIRST STAR BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22
- --------------------------------------------------------------------------------
TERMINATED MERGER
On August 19, 1998, the Company and Nesquehoning Savings Bank,
Nesquehoning, Pennsylvania, signed an agreement to convert Nesquehoning
Savings Bank to a stock form of organization and simultaneously merge
it with the Bank. In 1999, the pending merger failed to obtain
regulatory approval and the merger agreement was terminated.
Accordingly, costs incurred related to the merger of $ 111,000 were
expensed in the year ended June 30, 1999.
23
- --------------------------------------------------------------------------------
CONTINGENCIES
The Company is involved in various claims and lawsuits, arising in the
normal course of business. Management believes that any financial
resposibility that may be incurred in settlement of such claims and
lawsuits would not be material to the Company's financial position.
F-35
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
================================================================================ ==================================================
You should rely only on the information
contained in this prospectus or that to which we
have referred you. We have not authorized
anyone to provide you with information that is [Logo]
different. This prospectus does not constitute an
offer to sell, or the solicitation of an offer to buy,
any of the securities offered hereby to any person
in any jurisdiction in which the offer or
solicitation would be unlawful. You should not
assume that the information provided by this $12,000,000
prospectus is accurate as of any date after the
date of this prospectus.
--------------------
TABLE OF CONTENTS
Page First Star Capital Trust
----
Summary....................................................
The Offering...............................................
Selected Consolidated Financial Data....................... __.__% Preferred Securities
Risk Factors............................................... (Liquidation Amount $10
Use of Proceeds............................................ per Preferred Security)
Market for the Preferred Securities........................
Capitalization.............................................
Selected Consolidated Financial and Other Data............. Guaranteed By
Management's Discussion and Analysis of
Financial Condition and Results of Operation.............
Business of First Star Bancorp, Inc.
and First Star Savings Bank.............................. First Star Bancorp, Inc.
Management of First Star Bancorp, Inc......................
Principal Security Holders.................................
Regulation................................................. ---------------
First Star Capital Trust...................................
Accounting Treatment....................................... PROSPECTUS
Description of Preferred Securities........................
Description of Junior Subordinated Debentures.............. ---------------
Description of Guarantee...................................
Relationship Among the Preferred Securities,
the Junior Subordinated Debentures and the
Guarantee ...............................................
United States Federal Income Tax Consequences..............
ERISA Considerations.......................................
Underwriting............................................... Hopper Soliday
Legal and Tax Matters...................................... A Division of Tucker Anthony
Experts.................................................... Incorporated
Where You Can Find Additional Information..................
Index to Consolidated Financial Statements ................ _______________ ___, 1999
Until the later of ____________________, 1999, or 90 days
after commencement of the offering of preferred securities,
all dealers that buy, sell or trade these securities, whether
or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the
obligation of dealers to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments
or subscriptions.
================================================================================ ==================================================
</TABLE>
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors.
Sections 1741 through 1747 of the Pennsylvania Business Corporation Act
sets forth circumstances under which directors, officers, employees and agents
may be insured or indemnified against liability which they may incur in their
capacities as such.
The Articles of Incorporation of First Star Bancorp, Inc. (the
"Articles") attached as Exhibit 3(i) hereto, requires indemnification of
directors, officers and employees to the fullest extent permitted by
Pennsylvania law.
First Star Bancorp, Inc. ("First Star") may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of First Star or is or was serving at the request of First Star as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not First Star would have the power to indemnify him against such
liability under the provisions of the Articles.
Item 25. Other Expenses of Issuance and Distribution
* Legal Services .......................................... $ 50,000
* Printing Costs........................................... 25,000
* Accounting Fees.......................................... 25,000
* SEC Registration Fee..................................... 3,836
* Nasdaq Listing Fees...................................... 38,750
* Trustee Fees and Expenses................................ 20,000
* Blue Sky fees and Expenses............................... 10,000
* Miscellaneous Expenses................................... 12,414
--------
* TOTAL.................................................... $ 185,000
=======
- ---------------
* Estimated.
Item 26. Recent Sales of Unregistered Securities.
Not Applicable
Item 27. Exhibits:
The exhibits filed as part of this Registration Statement are as
follows:
1 Form of Underwriting Agreement*
3(i) Articles of Incorporation of First Star Bancorp, Inc.**
3(ii) Bylaws of First Star Bancorp, Inc.**
4.1 Form of Junior Subordinated Debenture
4.2 Form of Junior Subordinated Debenture Certificate
(included in Exhibit 4.1)
4.3 Trust Agreement
4.4 Form of Amended and Restated Trust Agreement
<PAGE>
4.5 Form of Preferred Security (included in Exhibit 4.4)
4.6 Form of Guarantee Agreement
5.1 Opinion of Richards, Layton & Finger
5.2 Opinion of Malizia Spidi & Fisch, PC
8.1 Form of Tax Opinion of Malizia Spidi & Fisch, PC
10 Form of Employment Agreement of Joseph T. Svetik and
Paul J. Sebastian
16 Letter of Deloitte & Touche, LLP*
23.1 Consent of Beard & Company, Inc.
23.2 Consent of Richards, Layton & Finger
(included in Exhibit 5.1)
23.3 Consent of Malizia Spidi & Fisch, PC
(contained in its opinions filed as Exhibits 5.2 and 8.1)
24 Power of Attorney (reference is made to the signature page)
27 Financial Data Schedule***
* To be filed by amendment
** Incorporated by reference to the identically numbered
exhibits to the Registration Statement on Form SB-2 filed
with the Commission on September 28, 1998.
*** Electronic filing only
Item 28. Undertakings
The undersigned registrants hereby undertake:
(1) insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuers pursuant to the foregoing provisions, or
otherwise, the small business issuers 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 such liabilities (other than
the payment by the small business issuers of expenses incurred or paid by a
director, officer or controlling person of the small business issuers 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 small business issuers will, unless in the opinion of their
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(2) that, for purposes of determining any liability under the
Securities Act, 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 small business issuers 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;
and
(3) that, for the purpose of determining any liability under the
Securities Act, 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 to
be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in Bethlehem,
Pennsylvania, on September 17, 1999.
FIRST STAR BANCORP, INC.
By: /s/ Joseph T. Svetik
--------------------------------
Joseph T. Svetik
President and Director
(Duly Authorized Representative)
We the undersigned directors and officers of First Star Bancorp, Inc.
do hereby severally constitute and appoint Joseph T. Svetik our true and lawful
attorney and agent, to do any and all things and acts in our names in the
capacities indicated below and to execute all instruments for us and in our
names in the capacities indicated below which said Joseph T. Svetik may deem
necessary or advisable to enable First Star Bancorp, Inc. to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with the registration
statement on Form SB-2, including specifically but not limited to, power and
authority to sign for us or any of us, in our names in the capacities indicated
below, the registration statement and any and all amendments (including
post-effective amendments) thereto; and we hereby ratify and confirm all that
Joseph T. Svetik shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated as of September 17, 1999.
<TABLE>
<CAPTION>
<S> <C>
/s/ Joseph T. Svetik /s/ Paul J. Sebastian
- ----------------------------------------------- ----------------------------------
Joseph T. Svetik Paul J. Sebastian
President, Chief Executive Officer and Director Chairman of the Board and Director
(Principal Executive Officer)
/s/ Mark Parseghian, Jr. /s/ Tighe J. Scott
- ----------------------------------------------- ----------------------------------
Mark Parseghian, Jr. Tighe J. Scott
Director Director
- ----------------------------------------------- ----------------------------------
Harold J. Suess Stephen M. Szy
Director Director
/s/ Michael Styer
- -----------------------------------------------
Michael Styer
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, First Star
Capital Trust certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Wilmington, Delaware on September 17, 1999.
FIRST STAR CAPITAL TRUST
By: /s/Joseph T. Svetik
-------------------------------------
Joseph T. Svetik
(Duly Authorized Representative)
By: /s/Paul J. Sebastian
-------------------------------------
Paul J. Sebastian
(Duly Authorized Representative)
EXHIBIT 4.1
<PAGE>
FORM OF
JUNIOR SUBORDINATED INDENTURE
Between
FIRST STAR BANCORP, INC.
and
BANKERS TRUST COMPANY
(as Trustee)
dated as of
___________, __ 1999
<PAGE>
FIRST STAR CAPITAL TRUST
Certain Sections of this Junior Subordinated Indenture relating
to Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Junior Subordinated
Act Section Indenture Section
----------- -----------------
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
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
SECTION 1.1. Definitions.................................................................. 1
SECTION 1.2. Compliance Certificate and Opinions.......................................... 12
SECTION 1.3. Forms of Documents Delivered to Trustee...................................... 12
SECTION 1.4. Acts of Holders.............................................................. 13
SECTION 1.5. Notices, Etc. to Trustee and Company......................................... 15
SECTION 1.6. Notice to Holders; Waiver.................................................... 16
SECTION 1.7. Conflict with Trust Indenture Act............................................ 16
SECTION 1.8. Effect of Headings and Table of Contents..................................... 16
SECTION 1.9. Successors and Assigns....................................................... 16
SECTION 1.10. Separability Clause.......................................................... 17
SECTION 1.11. Benefits of Indenture........................................................ 17
SECTION 1.12. Governing Law................................................................ 17
SECTION 1.13. Non-Business Days............................................................ 17
ARTICLE II. SECURITY FORMS
SECTION 2.1. Forms Generally.............................................................. 17
SECTION 2.2. Form of Face of Security..................................................... 18
SECTION 2.3. Form of Reverse of Security.................................................. 23
SECTION 2.4. Additional Provisions Required in Global Security............................ 26
SECTION 2.5. Form of Trustee's Certificate of Authentication ............................. 26
ARTICLE III. THE SECURITIES
SECTION 3.1. Title and Terms.............................................................. 26
SECTION 3.2. Denominations................................................................ 27
SECTION 3.3. Execution, Authentication, Delivery and Dating............................... 27
SECTION 3.4. Temporary Securities......................................................... 29
SECTION 3.5. Global Securities............................................................ 29
SECTION 3.6. Registration, Transfer and Exchange Generally; Certain
Transfers and Exchanges; Securities Act Legends......................... 31
SECTION 3.7. Mutilated, Lost and Stolen Securities........................................ 33
SECTION 3.8. Payment of Interest and Additional Interest; Interest
Rights Preserved........................................................ 34
SECTION 3.9. Persons Deemed Owners........................................................ 36
SECTION 3.10. Cancellation................................................................. 36
SECTION 3.11. Computation of Interest...................................................... 36
SECTION 3.12. Deferrals of Interest Payment Dates.......................................... 37
SECTION 3.13. Right of Set-Off............................................................. 38
SECTION 3.14. Agreed Tax Treatment......................................................... 38
SECTION 3.15. CUSIP Numbers................................................................ 38
SECTION 3.16. Shortening of Stated Maturity................................................ 39
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IV. SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture...................................... 39
SECTION 4.2. Application of Trust Money................................................... 40
ARTICLE V. REMEDIES
SECTION 5.1. Events of Default............................................................ 40
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment........................... 41
SECTION 5.3. Collection of Indebtedness and Suits for
Enforcement by Trustee.................................................. 42
SECTION 5.4. Trustee May File Proofs of Claim............................................. 43
SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities................... 44
SECTION 5.6. Application of Money Collected............................................... 44
SECTION 5.7. Limitation on Suits.......................................................... 45
SECTION 5.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest; Direct Action by Holders
of Preferred Securities................................................. 45
SECTION 5.9. Restoration of Rights and Remedies........................................... 46
SECTION 5.10. Rights and Remedies Cumulative............................................... 46
SECTION 5.11. Delay or Omission Not Waiver................................................. 46
SECTION 5.12. Control by Holders........................................................... 47
SECTION 5.13. Waiver of Past Defaults...................................................... 47
SECTION 5.14. Undertaking for Costs........................................................ 48
SECTION 5.15. Waiver of Usury, Stay or Extension Laws...................................... 48
ARTICLE VI. THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.......................................... 48
SECTION 6.2. Notice of Defaults........................................................... 50
SECTION 6.3. Certain Rights of Trustee.................................................... 50
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities....................... 51
SECTION 6.5. May Hold Securities.......................................................... 51
SECTION 6.6. Money Held in Trust.......................................................... 51
SECTION 6.7. Compensation and Reimbursements.............................................. 52
SECTION 6.8. Disqualification; Conflicting Interests...................................... 53
SECTION 6.9. Corporate Trustee Required; Eligibility...................................... 53
SECTION 6.10. Resignation and Removal; Appointment of Successor............................ 53
SECTION 6.11. Acceptance of Appointment by Successor....................................... 55
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.................. 55
SECTION 6.13. Preferential Collection of Claims Against Company............................ 56
SECTION 6.14. Appointment of Authenticating Agent.......................................... 56
ARTICLE VII. HOLDERS LISTS AND REPORTS BY TRUSTEE,
PAYING AGENT AND COMPANY
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.................... 57
SECTION 7.2. Preservation of Information, Communications to Holders ...................... 58
SECTION 7.3. Reports by Trustee and Paying Agent.......................................... 58
SECTION 7.4. Reports by Company........................................................... 59
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, Etc., Only on Certain Terms......................... 59
SECTION 8.2. Successor Company Substituted................................................ 60
ARTICLE IX. SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of Holders........................... 61
SECTION 9.2. Supplemental Indentures With Consent of Holders.............................. 62
SECTION 9.3. Execution of Supplemental Indentures......................................... 63
SECTION 9.4. Effect of Supplemental Indentures............................................ 63
SECTION 9.5. Conformity with Trust Indenture Act.......................................... 63
SECTION 9.6. Reference in Securities to Supplemental Indentures........................... 63
ARTICLE X. COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest................................... 64
SECTION 10.2. Maintenance of Office or Agency.............................................. 64
SECTION 10.3. Money for Security Payments to be Held in Trust.............................. 64
SECTION 10.4. Statement as to Compliance................................................... 66
SECTION 10.5. Waiver of Certain Covenants.................................................. 66
SECTION 10.6. Additional Sums.............................................................. 66
SECTION 10.7. Additional Covenants......................................................... 67
SECTION 10.8. Federal Tax Reports.......................................................... 68
ARTICLE XI. REDEMPTION OF SECURITIES
SECTION 11.1. Applicability of This Article................................................ 68
SECTION 11.2. Election to Redeem; Notice to Trustee........................................ 69
SECTION 11.3. Selection of Securities to be Redeemed....................................... 69
SECTION 11.4. Notice of Redemption......................................................... 69
SECTION 11.5. Deposit of Redemption Price.................................................. 70
SECTION 11.6. Payment of Securities Called for Redemption.................................. 71
SECTION 11.7. Right of Redemption of Securities Initially Issued
to the Issuer Trust..................................................... 71
ARTICLE XII. SINKING FUNDS
Sinking Funds................................................................ 72
ARTICLE XIII. SUBORDINATION OF SECURITIES
SECTION 13.1. Securities Subordinate to Senior Indebtedness................................ 72
SECTION 13.2. No Payment When Senior Indebtedness in Default;
Payment Over of Proceeds Upon Dissolution, Etc.......................... 72
SECTION 13.3 Payment Permitted If No Default.............................................. 74
SECTION 13.4. Subrogation to Rights of Holders of Senior Indebtedness...................... 74
SECTION 13.5. Provisions Solely to Define Relative Rights.................................. 75
SECTION 13.6. Trustee to Effectuate Subordination.......................................... 75
SECTION 13.7. No Waiver of Subordination Provisions........................................ 75
</TABLE>
iv
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<TABLE>
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Page
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<S> <C> <C>
SECTION 13.8. Notice to Trustee............................................................ 76
SECTION 13.9. Reliance on Judicial Order or Certificate of Liquidating Agent............... 76
SECTION 13.10. Trustee Not Fiduciary for Holders of Senior Indebtedness..................... 77
SECTION 13.11. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights........................................ 77
SECTION 13.12. Article Applicable to Paying Agents.......................................... 77
SECTION 13.13. Certain Conversions or Exchanges Deemed Payment.............................. 77
ANNEX A Form of Restricted Securities Certificate.................................... 80
</TABLE>
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JUNIOR SUBORDINATED INDENTURE
-----------------------------
THIS JUNIOR SUBORDINATED INDENTURE, dated as of ____________ __, 1999,
between FIRST STAR BANCORP, INC., a Pennsylvania Corporation (the "Company"),
having its principal office at 418 West Broad Street, Bethlehem, Pennsylvania
18018 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
deferrable interest debentures due _______________ __, 2029 (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 First Star 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:
(a) the terms defined in this Article I 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;
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(c) the words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation";
(d) 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;
(e) whenever the context may require, any gender shall be deemed to
include the other;
(f) 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
(g) 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 similar to the Trust
Securities will qualify as Tier 1 capital of the Company up to an amount not to
exceed, when taken together with all cumulative preferred stock of the Company,
if any, 25% of the Company'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
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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.
"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 (a) a Saturday or Sunday, (b) a
day on which banking institutions in the Commonwealth of Pennsylvania 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 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
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<PAGE>
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.
"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.
"Common Stock" means the common stock, $1.00 par value per share, of
the Company.
"Company" means the Person named as the "Company" in the preamble of
this instrument until a successor entity shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor entity.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by any Chairman of the Board
of Directors, any Vice Chairman of the Board of Directors, its President or a
Vice President, and by its Chief Financial Officer, its Treasurer, its Secretary
or an Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date hereof is located at Four Albany Street, 4th Floor, New
York, New York 10006.
"Creditor" has the meaning specified in Section 6.7.
"Defaulted Interest" has the meaning specified in Section 3.8.
"Delaware Trustee" means, with respect to the Issuer Trust, the Person
identified as the "Delaware Trustee" in the Trust Agreement, solely in its
capacity as Delaware Trustee of the Issuer Trust under the Trust Agreement and
not in its individual capacity, or its successor in interest in such capacity,
or any successor Delaware trustee appointed as therein provided.
"Depositary" means, with respect to the Securities issuable or issued
in whole or in part in the form of one or more Global Securities, the Person
designated as Depositary by the Company pursuant to Section 3.1 (or any
successor thereto).
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<PAGE>
"Discount Security" means any security that provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2.
"Dollar" or "$" 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
successor statute thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 1.4.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"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.
"Guarantee" means, with respect to the Issuer Trust, the Guarantee
Agreement, dated ___________ __, 1999, 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 Securities.
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<PAGE>
"Investment Company Act" means the Investment Company Act of 1940 and
any successor statute 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 rendered by 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 of the
Issuer Trust.
"Issuer Trust" has the meaning specified in the first recital of this
Indenture.
"Liquidation Amount" has the meaning assigned in the Trust Agreement.
"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 of the Board, Chief Executive Officer,
President or a Vice President, and by the Chief Financial Officer, 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;
(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;
6
<PAGE>
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:
(a) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) 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
(c) Securities in substitution for or in lieu of other
Securities which 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
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Trustee shall be entitled to accept such Officers' Certificate as
conclusive evidence of the facts therein set forth and of the fact
that all Securities not listed therein are Outstanding for the purpose
of any such determination.
"Paying Agent" means the Trustee or any Person authorized by the
Company to pay the principal of (or premium, if any) or interest on, or other
amounts in respect of any Securities on behalf of the Company.
"Person" means any individual, partnership, trust, unincorporated
organization or entity (as defined herein) 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.
"Principal Subsidiary Bank" means each of (a) First Star Savings Bank,
(b) any other banking subsidiary of the Company the consolidated assets of which
constitute 20% or more of the consolidated assets of the Company and its
consolidated subsidiaries, (c) any other banking subsidiary designated as a
Principal Subsidiary Bank pursuant to a Board Resolution and set forth in an
Officers' Certificate delivered to the Trustee, and (d) any subsidiary of the
Company that owns, directly or indirectly, any voting securities, or options,
warrants or rights to subscribe for or purchase voting securities, of any
Principal Subsidiary Bank under clause (a), (b) or (c), and in the case of
clause (a), (b), (c) or (d) their respective successors (whether by
consolidation, merger, conversion, transfer of substantially all their assets
and business or otherwise) so long as any such successor is a banking subsidiary
(in the case of clause (a), (b) or (c)) or a subsidiary (in the case of clause
(d)) of the Company.
"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.
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<PAGE>
"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, principal, 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(c) to bear a Restricted Securities Legend.
"Restricted Securities Certificate" means a certificate substantially
in the form set forth in Annex A.
"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, $1.00 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 (a) are deemed to
be transferred with such shares of such Common Stock, (b) are not exercisable,
and (c) 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 and any successor
statute thereto, in each case as amended from time to time.
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<PAGE>
"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, (a) every obligation of
the Company for money borrowed; (b) 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
and including all sums payabe to the Trustee under Section 6.7 hereunder; (c)
every reimbursement obligation of the Company with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of the
Company; (d) 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); (e) every
capital lease obligation of the Company; (f) 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 (g)
every obligation of the type referred to in clauses (a) through (f) 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. Senior Indebtedness shall not include (a) 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, (b) 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,
(c) any indebtedness of the Company to any of its subsidiaries, (d) indebtedness
to any executive officer or director of the Company, or (e) 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 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
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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 rendered by 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 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 (a) 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, (b) 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 (c) 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 ___________ __, 1999, 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 preamble 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 amended
by the Trust Indenture Reform Act of 1990, or any successor statute, in each
case as amended from time to time, except as provided in Section 9.5.
"Trust Securities" has the meaning specified in the first recital of
this Indenture.
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"Vice President," when used with respect to the Company, means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
SECTION 1.2. Compliance Certificate and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent
(including covenants compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent (including covenants compliance with
which 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:
(a) 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;
(b) 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;
(c) 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
(d) 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.
(a) 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
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<PAGE>
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.
(b) 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.
(c) 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, 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 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 1.4.
(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
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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 Section 1.4(f) shall not apply with respect to, the
giving or making of any notice, declaration, request or direction referred to in
Section 1.4(g). If any record date is set pursuant to this Section 1.4(f), 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, however, 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 Section 1.4(f)
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 Section
1.4(f) (whereupon the record date previously set shall automatically and with no
action by any Person be canceled and of no effect), and nothing in this Section
1.4(f) 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 Section 1.4(f),
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.
(g) 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(b), 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
Section 1.4(g), 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, however, 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.
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<PAGE>
Nothing in this Section 1.4(g) 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 Section 1.4(g) (whereupon the record date previously
set shall automatically and with no action by any Person be canceled and of no
effect) and nothing in this Section 1.4(g) 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 Section 1.4(g), 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.
(h) With respect to any record date set pursuant to this Section 1.4,
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 Section 1.4(h). Notwithstanding the foregoing, no Expiration Date shall
be later than the 180th day after the applicable record date.
(i) 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,
(a) 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
(b) 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
15
<PAGE>
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.
16
<PAGE>
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.
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.
(a) 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
17
<PAGE>
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.
(b) The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
(c) 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.
FIRST STAR BANCORP, INC. ______% Junior Subordinated Deferrable
Interest Debentures due _________ __, 2029
[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 AN 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
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<PAGE>
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. $
FIRST STAR BANCORP, INC., a Pennsylvania 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 First
Star Capital Trust, or registered assigns, the principal sum of _________
Dollars on ___________, 2029, 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 provided that the Company may
shorten the Stated Maturity of the principal of this Security to a date not
earlier than _________ __, 2004. The Company further promises to pay interest on
said principal from _______________, 1999, 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 ____________________, 1999
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
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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 a reclassification, 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,
20
<PAGE>
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 First Star Capital Trust, or
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
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<PAGE>
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 or facsimile 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.
FIRST STAR 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:
BANKERS TRUST COMPANY,
as Trustee
By:
----------------------------------------
Name:
Title:
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<PAGE>
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 ___________ __, 1999 (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, if
not defined in the Indenture, in the Amended and Restated Trust Agreement dated
as of ___________ __, 1999 (as modified, amended or supplemented from time to
time the "Trust Agreement"), relating to First Star 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 (a) on or after
_________, 2004 in whole at any time or in part from time to time, or (b) 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 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
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<PAGE>
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 (a) of the amount of principal so declared due and
payable and (b) of 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
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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.
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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
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.
(a) The aggregate principal amount of Securities that may be
authenticated and delivered under this Indenture is $14,214,000.
(b) Subject to Section 3.16, the Securities' Stated Maturity shall be
____________ __, 2029.
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(c) The Securities, established pursuant to a Board Resolution, shall
bear interest at a per annum rate equal to _.___% from _______ __, 1999 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 _________ __, 1999, 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.
(d) The principal of (and premium, if any) 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) 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 report from the trustee not later than 15 calendar days prior to the
date on which the interest is payable, the at such place and to such account as
may be designated by the Person entitled thereto as specified in the Security
Register.
(e) Securities may 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.
(f) 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 $10 and any integral multiple thereof.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
(a) 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, 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.
(b) 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
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individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of such Securities. At any time and from time to time after the
execution and delivery of this Indenture, the Company may deliver Securities
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Securities, and the
Trustee in accordance with the Company Order shall authenticate and deliver such
Securities. 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,
(i) 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;
(ii) 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
(iii) 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.
(c) 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.
(d) Notwithstanding the provisions of Section 3.1 and Section 3.3 (b),
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 Section 3.3(b) 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.
(e) Each Security shall be dated the date of its authentication.
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(f) 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.
SECTION 3.4. Temporary Securities.
(a) 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.
(b) 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
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<PAGE>
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 within 90 days of receipt of
such notice from the Depositary, (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
canceled 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 canceled 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 canceled, 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 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.
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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 and
bearing such restrictive legends as may be required by this Indenture.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations, of like tenor and aggregate
principal amount and bearing such restrictive legends as may be required by this
Indenture, 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.
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, exchange or register the transfer of
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
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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) as
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, however, 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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(c) Restricted Securities Legend. Except as set forth below, all
Securities shall bear a Restricted Securities Legend:
(i) subject to the following clauses of this Section 3.6(c), a Security
or any portion thereof that is exchanged, upon transfer or otherwise,
for a Global Security or any portion thereof shall bear the Restricted
Securities Legend while represented thereby;
(ii) subject to the following clauses of this Section 3.6(c), a new
Security which is not a Global Security and is issued in exchange for
another Security (including a Global Security) or any portion thereof,
upon transfer or otherwise, shall, if such new Security is required
pursuant to Section 3.6(b)(ii) or (iii) to be issued in the form of a
Restricted Security, bear a Restricted Securities Legend;
(iii) a new Security (other than a Global Security) that does not bear
a Restricted Security Legend may be issued in exchange for or in lieu
of a Restricted Security or any portion thereof that bears such a
legend if, in the Company's judgement, placing such a legend upon such
new Security is not necessary to ensure compliance with the
registration requirements of the Securities Act, and the Trustee, at
the written direction of the Company in the form of an Officer's
Certificate, shall authenticate and deliver such a new Security as
provided in this Article III:
(iv) notwithstanding the foregoing provisions of this Section 3.6(c), a
Successor Security of a Security that does not bear a Restricted
Securities Legend shall not bear such form of legend unless the
Company has reasonable cause to believe that such Successor Security
is a "restricted security" within the meaning of Rule 144, in which
case the Trustee, at the written direction of the Company in the form
of an Officer's Certificate, shall authenticate and deliver a new
Security bearing a Restricted Securities Legend in exchange for such
successor Security as provided in this Article III; and
(v) Securities distributed to a holder of Preferred Securities upon
dissolution of an Issuer Trust shall bear a Restricted Securities Legend
if the Preferred Securities so held bear a similar legend.
SECTION 3.7. Mutilated, Lost and Stolen Securities.
(a) If any mutilated Security, including any temporary Securities, 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.
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(b) 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 or a
protected 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.
(c) 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.
(d) 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.
(e) 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.
(f) 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.
(a) 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.
(b) 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
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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 (i) or
(ii) below:
(i) 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 (ii).
(ii) 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 (ii), such payment shall be deemed practicable
by the Trustee.
(c) 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
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rights to interest accrued and unpaid, and to accrue interest, that were carried
by such other Security.
SECTION 3.9. Persons Deemed Owners.
(a) 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 none of the Company,
the Trustee or any agent of the Company or the Trustee shall be affected by
notice to the contrary.
(b) 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 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.
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SECTION 3.12. Deferrals of Interest Payment Dates.
(a) 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 interest periods that equal 20 consecutive quarterly periods 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 a reclassification, 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 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
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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 (x)
the next succeeding date on which Distributions (as defined in the Trust
Agreement) on the Preferred Securities of the Issuer Trust would be payable but
for such deferral, and (y) 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.
(b) 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 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 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.
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SECTION 3.16. Shortening of Stated Maturity.
The Company shall have the right to shorten the Stated Maturity of the
principal of the Securities at any time to any date not earlier than _________
__, 2004, provided that the Company shall give notice to the Holders, the
Trustee and, in the case of Securities issued to an Issuer Trust, the Issuer
Trust of such shortening no less than 90 days prior to the effectiveness,
thereof.
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
(a) either
(i) all Securities theretofore authenticated and delivered (other
than (A) Securities that have been destroyed, lost or stolen and that
have been replaced or paid as provided in Section 3.7 and (B) 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
(ii) all such Securities not theretofore delivered to the
Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their Stated Maturity
within one year of the date of deposit, or
(C) 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
(ii)(A), (B) or (C) 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
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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;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company including all sums payable to the Trustee under Section
6.7 hereunder; and
(c) 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.
(d) 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 under Section 6.14 and, if money
shall have been deposited with the Trustee pursuant to subclause (ii) of clause
(a) 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), 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):
(a) 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
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(b) default in the payment of the principal of (or premium, if
any, on) any Security at its Stated Maturity;
(c) 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 (a "Notice of Default"),
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
(d) 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.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default (other than an Event of Default specified in
Section 5.1(d)) 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, however, 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(d) 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.
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(b) 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 V
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:
(i) 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
(ii) 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 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 (a)
and (b) above of this Section 5.2.
(d) 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:
(i) 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
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(ii) default is made in the payment of the principal of (and
premium, if any, on) any Security at the Stated Maturity thereof, then
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.
(b) 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.
(c) 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 the Holders and any predecessor to the Trustee under
Section 6.7 allowed in any such judicial or administrative proceedings;
and
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(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 V 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 (and 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;
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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.
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:
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
as herein before provided;
(b) 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;
(c) 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;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) 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
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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(a) or 5.1(b), to institute a suit directly against the
Company for enforcement of payment to such holder of principal of (and 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 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.
(a) 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.
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(b) Every right and remedy given by this Article V 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:
(a) such direction shall not be in conflict with any rule of
law or with this Indenture,
(b) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction, and
(c) 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.
(a) 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:
(i) 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
(ii) 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 thereby.
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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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(i) 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
(ii) 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.
(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
(i) this subsection shall not be construed to limit the
effect of subsection (a) of this Section 6.1(a);
(ii) 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
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of 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.
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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 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(c), 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 6.2, 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
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with such request or direction; provided, however, that nothing herein shall
relieve the Trustee of its obligations upon the occurrence of an Event of
Default that has not been cured or waived to exercise with respect to the
Securities such of the rights and powers vested in the Trustee by this
Indenture, and to use the same degree of care and skill in exercising such
rights and powers as a reasonably prudent person would use under the
circumstances in the conduct of his own affairs.
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, indenture,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. Neither the
Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of the Securities or the proceeds thereof.
SECTION 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Securities
Registrar or such other agent.
SECTION 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
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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, bad faith or willful misconduct.
(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 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, bad faith
or willful misconduct, 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.
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(e) The Holders and the Company agree that the Trustee shall have a
first priority lien against all monies and property held by the Trustee prior to
the Holders to secure the obligations of the Company to the Trustee under this
Section 6.7.
(f) When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 5.1(d) 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, and
shall comply fully with, 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 with respect to the Securities
issued hereunder which shall be:
(a) a Person 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 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.
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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, with reasonable notice, 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:
(i) 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
(ii) 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
(iii) 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, (x) the Company, acting pursuant to the authority of a
Board Resolution, may remove the Trustee with respect to the Securities issued
hereunder, or (y) 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
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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.
(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 Section 6.11(a).
(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 VI.
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
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entity shall be otherwise qualified and eligible under this Article VI, without
the execution or filing of any paper or any further act on the part of any of
the parties hereto. In case any Securities shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
SECTION 6.13. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent.
(a) 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 6.14, such Authenticating Agent shall resign immediately in the manner
and with the effect specified in this Section 6.14.
(b) 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
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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.
(c) 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.
(d) 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.
(e) If an appointment is made pursuant to this Section 6.14, the
Securities may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities referred to in the within mentioned
Indenture.
Dated: BANKERS TRUST COMPANY,
as Trustee
By:
-----------------------------------------
As Authenticating Agent
Name:
Title:
By:
-----------------------------------------
As Authenticating Agent
Name:
Title:
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ARTICLE VII
HOLDERS 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 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.
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(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 January 31, 2001.
(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:
(a) 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 Trustee, the due and punctual
payment of the principal of (and premium, if any), and interest
(including any
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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; provided, however, that nothing
herein shall be deemed to restrict or prohibit, and no supplemental
indenture shall be required in the case of, the merger of a Principal
Subsidiary Bank with and into a Principal Subsidiary Bank or the
Company, the consolidation of Principal Subsidiary Banks into a
Principal Subsidiary Bank or the Company, or the sale or other
disposition of all or substantially all of the assets of any Principal
Subsidiary Bank (and of any other Principal Subsidiary Bank and any
voting securities of which are owned, directly or indirectly, by such
Principal Subsidiary Bank) surviving such merger, resulting from such
consolidation or acquiring such assets;
(b) 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
(c) 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 (a) 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.
(a) 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.
(b) 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
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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.
(c) 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.
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:
(a) 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;
(b) 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;
(c) to facilitate the issuance of Securities in certificated or other
definitive form;
(d) 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;
(e) to add any additional Events of Default for the benefit of the
Holders of the Securities;
(f) 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;
(g) 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 (g) 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
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any of the Preferred Securities issued by the Issuer Trust shall remain
outstanding, the holders of such Preferred Securities;
(h) 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
(i) 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, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(a) 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
(b) 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
(c) modify any of the provisions of this Section 9.2, 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;
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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 IX 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, 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 IX,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article IX shall
conform to the requirements of the Trust Indenture Act as then in effect.
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SECTION 9.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX may, and shall if required by
the Company, bear a notation in form approved by the Company as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest.
The Company covenants and agrees 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.
(a) 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.
(b) The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in each
Place of Payment for 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.
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SECTION 10.3. Money for Security Payments to be Held in Trust.
(a) 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.
(b) 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.
(c) 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:
(i) 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;
(ii) 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 (including Additional Interest) in respect of any
Security;
(iii) 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
(iv) comply with the provisions of the Trust Indenture Act applicable to
it as a Paying Agent.
(d) 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 terms as those upon which such
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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.
(e) 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 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(c) or
9.1(d) 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,
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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: (a)
the Issuer Trust is the Holder of all of the Outstanding Securities, and (b) a
Tax Event described in clause (a) or (c) 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 Amount (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 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 (a) declare or pay any dividends or distributions on, or redeem
purchase, acquire or make a liquidation payment with respect to, any shares of
the Company's capital stock, or (b) make any payment of principal of or interest
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu in all respects with or junior in interest to the
Securities, (other than (i) 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, (ii) as a result of a reclassification, 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
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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, (iii) 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, (iv) 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 (v) 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 (A) there shall have occurred any event (x) 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 (y)
which the Company shall not have taken reasonable steps to cure, (B) 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 (C) 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 (a) 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, (b) as holder of such Common Securities, not to voluntarily
terminate, windup or liquidate the Issuer Trust, other than (i) in connection
with a distribution of the Securities to the holders of the Preferred Securities
in liquidation of the Issuer Trust, or (ii) in connection with certain mergers,
consolidations or amalgamations permitted by the Trust Agreement, and (c) 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.
SECTION 10.8. Federal Tax Reports.
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.
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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 XI,
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.
(a) 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.
(b) 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.
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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.
SECTION 11.6. Payment of Securities Called for Redemption.
(a) 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.
(b) 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.
(c) 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.
(a) The Company, at its option, may redeem such Securities (i) on or
after _________ __, 2004, 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),
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in each case at a Redemption Price specified in such Security, together with
accrued interest (including Additional Interest) to the Redemption Date.
(b) 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 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.
(a) 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.
(b) 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
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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.
(c) 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 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.
(d) 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
73
<PAGE>
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.
(e) 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.
(f) 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 XIII 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
74
<PAGE>
provisions of this Article to the holders of Senior Indebtedness by Holders of
the Securities or the 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 XIII 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 XIII 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 XIII 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 XIII and appoints the Trustee his or her attorney-in-fact for
any and all such purposes.
SECTION 13.7. No Waiver of Subordination Provisions.
(a) 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.
(b) Without in any way limiting the generality of Section 13.7(a), 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 XIII or
75
<PAGE>
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.
SECTION 13.8. Notice to Trustee.
(a) 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 XIII 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.
(b) 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.
76
<PAGE>
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 XIII.
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.
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 XIII 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
77
<PAGE>
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 (a) shares of any stock of any class of the Company, and (b) 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.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
78
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
Attest:
FIRST STAR BANCORP, INC.
By:
-------------------------------
Name:
Title:
Attest:
BANKERS TRUST COMPANY, as
Trustee
By:
-------------------------------
Name:
Title:
79
<PAGE>
ANNEX A
FORM OF RESTRICTED SECURITIES CERTIFICATE
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Section 3.6(b) of
the Indenture referred to below)
[ ],
as Securities Registrar
[address]
RE: Junior Subordinated Debentures of First Star Bancorp, Inc.
(the "Securities")
Reference is made to the Junior Subordinated Indenture, dated as of
______ __, 1999 (the "Indenture"), between First Star Bancorp, Inc., a
Pennsylvania corporation, and Bankers Trust Company, as Trustee. Terms used
herein and defined in the Indenture or in Regulation S, Rule 144A or Rule 144
under the U.S. Securities Act of 1933, as amended (the "Securities Act") are
used here as so defined.
This certificate relates to $________ aggregate principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s).
CERTIFICATE No(s).
CURRENTLY IN GLOBAL FORM: Yes ___ No ___ (check one)
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (a) it is the sole beneficial owner
of the Specified Securities or (b) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner."
If the Specified Securities are represented by a Global Security, they are held
through a Depositary or an Agent Member in the name of the Undersigned, as or on
behalf of the Owner. If the Specified Securities are not represented by a Global
Security, they are registered in the name of the Undersigned, as or on behalf of
the Owner.
80
<PAGE>
The Owner has requested that the Specified Securities be transferred to
a person (the "Transferee") who will take delivery in the form of a Restricted
Security. In connection with such transfer, the Owner hereby certifies that,
unless such transfer is being effected pursuant to an effective registration
statement under the Securities Act, it is being effected in accordance with Rule
144A, Rule 904 of Regulation S or Rule 144 under the Securities Act and all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies that:
(a) Rule 144A Transfers. If the transfer is being effected in
accordance with Rule 144A:
(i) the Specified Securities are being transferred to a person
that the Owner and any person acting on its behalf reasonably believe
is a "qualified institutional buyer" within the meaning of Rule 144A,
acquiring for its own account or for the account of a qualified
institutional buyer; and
(ii) the owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner
may be relying on Rule 144A in connection with the transfer; and
(b) Rule 904 Transfer. If the transfer is being effected in accordance
with Rule 904:
(i) the Owner is not a distributor of the Securities, an
affiliate of the Company or any such distributor or a person acting in
behalf of any of the foregoing;
(ii) the offer of the Specified Securities was not made to a
person in the United States;
(iii) either;
(A) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and any
person acting on its behalf reasonably believed that the
Transferee was outside the United States, or
(B) the transaction is being executed in, on or
through the facilities of the Eurobond market, as regulated by
the Association of International Bond Dealers, or another
designated offshore securities market and neither the Owner
nor any person acting on its behalf know that the transaction
has been prearranged with a buyer in the United States;
(iv) no directed selling efforts within the meaning of Rule
902 of Regulation S have been made in the United States by or on behalf
of the Owner or any affiliate thereof; and
(v) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
81
<PAGE>
(c) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144;
(i) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule 144)
has elapsed since the date the Specified Securities were acquired from
the Company or from an affiliate (as such term is defined in Rule 144)
of the Company, whichever is later, and is being effected in accordance
with the applicable amount, manner of sale and notice requirements of
paragraphs (e), (f) and (h) of Rule 144;
(ii) the transfer is occurring after a holding period by the
Owner of at least three years has elapsed since the date the Specified
Securities were acquired from the Company or from an affiliate (as such
term is defined in Rule 144) of the Company, whichever is later, and
the Owner is not, and during the preceding three months has not been,
an affiliate of the Company; or
(iii) the Owner is a Qualified Institutional Buyer under Rule
144A or has acquired the Securities otherwise in accordance with
Sections (1), (2) or (3) hereof and is transferring the Securities to
an institutional accredited investor in a transaction exempt from the
requirements of the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Underwriters (as defined in the
Trust Agreement relating to the Issuer Trust to which the Securities were
initially issued).
(Print the name of the Undersigned, as such term is defined in the
second paragraph of this certificate)
Dated: By:
----------------------------- -------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership of fiduciary, the title of the
person signing on behalf of the Undersigned must be stated.)
82
EXHIBIT 4.3
<PAGE>
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of August 24, 1999 (the "Trust
Agreement"), among (i) FIRST STAR BANCORP, INC., a Pennsylvania 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 "First Star
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 SB-2 (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
1
<PAGE>
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
Underwriting Agreement relating to the Preferred Securities, among the Trust,
the Depositor and the Underwriter 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 Joseph T. Svetik and Paul J. Sebastian, 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.)
2
<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.
FIRST STAR BANCORP, INC.,
as Depositor
By: /s/Joseph T. Svetik
------------------------------------------
Name: Joseph T. Svetik
Title: President and Chief Executive Officer
BANKERS TRUST (DELAWARE),
as Trustee
By:/s/M. Lisa Wilkins
------------------------------------------
Name: M. Lisa Wilkins
Title: Assistant Secretary
3
EXHIBIT 4.4
<PAGE>
FORM OF
AMENDED AND RESTATED
TRUST AGREEMENT
Among
FIRST STAR BANCORP, INC.
BANKERS TRUST COMPANY
(as Property Trustee)
and
BANKERS TRUST (DELAWARE)
(as Delaware Trustee)
dated as of
______________ ___, 1999
FIRST STAR CAPITAL TRUST
<PAGE>
FIRST STAR 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>
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
----
ARTICLE I. DEFINED TERMS
<S> <C> <C>
SECTION 1.1. Defined Terms.......................................................... 1
ARTICLE II. CONTINUATION OF THE ISSUER TRUST
SECTION 2.1. Name................................................................... 12
SECTION 2.2. Office of the Delaware Trustee;
Principal Place of Business....................................... 12
SECTION 2.3. Initial Contribution of Trust Property,
Organizational Expenses........................................... 12
SECTION 2.4. Issuance of the Preferred Securities................................... 12
SECTION 2.5. Issuance of the Common Securities;
Subscription and Purchase of Junior
Subordinated Debentures........................................... 13
SECTION 2.6. Declaration of Trust................................................... 13
SECTION 2.7. Authorization to Enter into Certain Transactions....................... 14
SECTION 2.8. Assets of Trust........................................................ 17
SECTION 2.9. Title to Trust Property................................................ 17
ARTICLE III. PAYMENT ACCOUNT
SECTION 3.1. Payment Account........................................................ 17
ARTICLE IV. DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions.......................................................... 18
SECTION 4.2. Redemption............................................................. 19
SECTION 4.3. Subordination of Common Securities..................................... 21
SECTION 4.4. Payment Procedures..................................................... 22
SECTION 4.5. Tax Returns and Reports................................................ 22
SECTION 4.6. Payment of Taxes, Duties, Etc. of the Issuer Trust..................... 22
SECTION 4.7. Payments under Indenture or Pursuant to Direct Actions................. 23
SECTION 4.8. Liability of the Holder of Common Securities........................... 23
ARTICLE V. TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership...................................................... 23
SECTION 5.2. The Trust Securities Certificates...................................... 23
SECTION 5.3. Execution and Delivery of Trust Securities Certificates................ 24
SECTION 5.4. Global Preferred Security.............................................. 24
SECTION 5.5. Registration of Transfer and Exchange Generally;
Certain Transfers and Exchanges; Preferred
Securities Certificates........................................... 25
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SECTION 5.6. Mutilated, Destroyed, Lost or Stolen
Trust Securities Certificates..................................... 27
SECTION 5.7. Persons Deemed Holders................................................. 27
SECTION 5.8. Access to List of Holders' Names and Addresses......................... 27
SECTION 5.9. Maintenance of Office or Agency........................................ 27
SECTION 5.10. Appointment of Paying Agent............................................ 28
SECTION 5.11. Ownership of Common Securities by Depositor............................ 28
SECTION 5.12. Notices to Clearing Agency............................................. 28
SECTION 5.13. Rights of Holders...................................................... 29
ARTICLE VI. ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Holder's Voting Rights.................................. 31
SECTION 6.2. Notice of Meetings..................................................... 32
SECTION 6.3. Meetings of Holders.................................................... 32
SECTION 6.4. Voting Rights.......................................................... 32
SECTION 6.5. Proxies, etc........................................................... 32
SECTION 6.6. Holder Action by Written Consent....................................... 33
SECTION 6.7 Record Date for Voting and Other Purposes............................. 33
SECTION 6.8. Acts of Holders........................................................ 33
SECTION 6.9. Inspection of Records.................................................. 34
ARTICLE VII. REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the Property Trustee
and the Delaware Trustee.......................................... 34
SECTION 7.2. Representations and Warranties of the Depositor........................ 35
ARTICLE VIII. THE ISSUER TRUSTEES; THE ADMINISTRATORS
SECTION 8.1. Certain Duties and Responsibilities.................................... 36
SECTION 8.2. Certain Notices........................................................ 38
SECTION 8.3. Certain Rights of Property Trustee..................................... 38
SECTION 8.4. Not Responsible for Recitals or Issuance of Securities................. 40
SECTION 8.5. May Hold Securities.................................................... 40
SECTION 8.6. Compensation; Indemnity; Fees.......................................... 40
SECTION 8.7. Corporate Property Trustee Required;
Eligibility of Trustees and Administrators........................ 41
SECTION 8.8. Conflicting Interests.................................................. 42
SECTION 8.9. Co-Trustees and Separate Trustee....................................... 42
SECTION 8.10. Resignation and Removal; Appointment of Successor...................... 43
SECTION 8.11. Acceptance of Appointment by Successor................................. 44
SECTION 8.12. Merger, Conversion, Consolidation or
Succession to Business............................................ 45
SECTION 8.13. Preferential Collection of Claims
Against Depositor or Issuer Trust................................. 45
SECTION 8.14. Trustee May File Proofs of Claim....................................... 45
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SECTION 8.15. Reports by the Property Trustee........................................ 46
SECTION 8.16. Reports to the Property Trustee........................................ 46
SECTION 8.17. Evidence of Compliance with Conditions Precedent....................... 47
SECTION 8.18. Number of Issuer Trustees.............................................. 47
SECTION 8.19. Delegation of Power.................................................... 47
SECTION 8.20. Appointment of Administrators.......................................... 47
ARTICLE IX. DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date....................................... 48
SECTION 9.2. Early Dissolution...................................................... 48
SECTION 9.3. Termination............................................................ 49
SECTION 9.4. Liquidation............................................................ 49
SECTION 9.5. Mergers, Consolidations, Amalgamations
or Replacements of the Issuer Trust............................... 50
ARTICLE X. MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders........................................ 51
SECTION 10.2. Amendment.............................................................. 52
SECTION 10.3. Separability........................................................... 53
SECTION 10.4. Governing Law.......................................................... 53
SECTION 10.5. Payments Due on Non-Business Day....................................... 53
SECTION 10.6. Successors............................................................. 53
SECTION 10.7. Headings............................................................... 54
SECTION 10.8. Reports, Notices and Demands........................................... 54
SECTION 10.9. Agreement Not to Petition.............................................. 54
SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture Act................. 55
SECTION 10.11. Acceptance of Terms of Trust Agreement,
Guarantee and Indenture........................................... 56
SECTION 10.12. Counterparts........................................................... 56
Exhibit A Certificate of Trust 1
Exhibit B Form of Certificate Depositary Agreement 2
Exhibit C Form of Common Securities Certificate 3
Exhibit D Form of Preferred Securities Certificate 5
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AMENDED AND RESTATED TRUST AGREEMENT
This Amended and Restated Trust Agreement, dated as of ____________
__, 1999, (this "Trust Agreement"), is among (i) First Star Bancorp, Inc., a
Pennsylvania 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"), (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 August 24,
1999 (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 August 24, 1999 (the "Certificate of Trust"), a
copy of which is attached hereto 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;
<PAGE>
(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;
(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.
"25% Capital Limitation" means the limitation imposed by the
Federal Reserve that the proceeds of certain qualifying securities similar to
the Trust Securities will qualify as Tier 1 capital of the issuer up to an
amount not to exceed, when taken together with all cumulative preferred stock of
the Depositor, if any, 25% of the Depositor's Tier 1 capital, or any subsequent
limitation adopted by the Federal Reserve.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities of a
given Liquidation Amount and/or for a given period, the amount of Additional
Interest (as defined in the Indenture) paid by the Depositor on a Like Amount of
Junior Subordinated 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 Administrators being Joseph T. Svetik and Paul J.
Sebastian.
"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.
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<PAGE>
"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 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 for purposes of this Trust Agreement, 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 Pennsylvania 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.
3
<PAGE>
"Capital Treatment Event" means, in respect of the 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 the 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) 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
Depositor.
"Cede" means Cede & Co.
"Certificate Depositary Agreement" means the agreement among the
Issuer Trust, the Depositor and the Depositary, as the initial Clearing Agency,
dated as of the Closing Date, substantially in the form attached hereto 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 Exchange Act. The Depositary shall be the
initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the 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 hereto as
Exhibit C.
"Common Security" means an undivided beneficial interest in the
assets of the Issuer Trust, having a Liquidation Amount of $10 and having the
rights provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
4
<PAGE>
"Corporate Trust Office" means (a) with respect to the Property
Trustee or the Debenture Trustee, 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, and (b)
with respect to the Delaware Trustee, the principal office of the Delaware
Trustee located at E.A. Delle Donne Corporate Center, Montgomery Building, 1011
Centre Road, Suite 200, Wilmington, Delaware 19805-1266.
"Debenture Event of Default" means an "Event of Default" as defined
in the Indenture.
"Debenture Redemption Date" means, with respect to any Junior
Subordinated Debentures to be redeemed under the Indenture, the date fixed for
redemption of such Junior Subordinated Debentures under the Indenture.
"Debenture Trustee" means Bankers Trust Company, a New York banking
corporation and any successor, as trustee under the Indenture.
"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.
"Direct Action" has the meaning specified in Section 5.13(c).
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.1.
"Early Termination Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default;
5
<PAGE>
(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;
(c) default by the Issuer Trust in the payment of any Redemption
Price of any Trust Security when it becomes due and payable;
(d) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Issuer Trust 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.
"Extension Period" has the meaning specified in Section 4.1.
"Federal Reserve" means the Board of Governors of the Federal
Reserve System.
"Firm Securities" means an aggregate Liquidation Amount of
$12,000,000 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 guarantee 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/are registered in the Securities Register; any such Person shall
be a beneficial owner within the meaning of the Delaware Business Trust Act.
6
<PAGE>
"Indenture" means the Junior Subordinated Indenture, dated as of
_______ __, 1999, 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, rendered by 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 First Star 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 ___________ __, 2029, which date may be shortened once at any
time by the Depositor to any date not earlier than ____________ __, 2004 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 $10 per Trust
Security.
"Liquidation Date" means the date on which Junior Subordinated
Debentures or the Liquidation Distributions 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).
7
<PAGE>
"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 a Vice President, and by the
Chief Financial Officer, the Treasurer, an Assistant Treasurer, the Secretary or
an Assistant Secretary, of the Depositor, and delivered to the appropriate
Issuer Trustee. 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
$1,800,000 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.
"Option Preferred Securities Certificate" means the certificate
evidencing ownership of Preferred Securities issued if the Underwriter exercises
its option described in Section 2.4, which certificate shall be substantially in
the form attached hereto as Exhibit D.
"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;
8
<PAGE>
(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 and 5.6; 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 or any
Issuer Trustee shall be disregarded and deemed not to be Outstanding, except
that (i) 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 (ii) 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 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 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 hereto 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
9
<PAGE>
$10 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.
"Prospectus" means the final prospectus covering the Preferred
Securities, Junior Subordinated Debentures and the Guarantee Agreement.
"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 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 Certificate" 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
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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.
"Successor Preferred Security" has the meaning specified in Section
9.5.
"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 (a) 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, (b) 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 (c) 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.
"Time of Delivery" means 9:00 a.m. Eastern Standard Time, either
(a) with respect to the Firm Securities or the Common Securities, on the fourth
Business Day (unless postponed in accordance with the provisions of Section 4 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 (b) 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 (a) all Exhibits hereto, and (b) for all
purposes of this Amended and Restated Trust Agreement and any such modification,
amendment or supplement, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this Amended and Restated Trust Agreement and
any modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990, 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.
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"Underwriters" has the meaning specified in the Underwriting
Agreement.
"Underwriting Agreement" means the Underwriting Agreement, dated as
of _______ __, 1999, 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 "First Star
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), E. A. Delle Donne Corporate Center, Montgomery
Building, 1011 Centre Road, Suite 200, Wilmington, DE 19805-1266, 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 Bankers Trust
(Delaware), E. A. Delle Donne Corporate Center, Montgomery Building, 1011 Centre
Road, Suite 200, Wilmington, DE 19805-1266, Attention: Lisa Wilkins.
SECTION 2.3. Initial Contribution of Trust Property, Organizational
Expenses.
The Issuer Trustees acknowledge receipt in trust from the Depositor
in connection with this Trust Agreement of the sum of $1, 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 _______ __, 1999, 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 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
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of 1,200,000 Firm Securities having an aggregate Liquidation Amount of
$12,000,000, against receipt of the aggregate purchase price of such Preferred
Securities of $12,000,000, 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 5.3 and deliver to the Underwriters, Option Preferred
Securities Certificates, registered in the names requested by the Underwriters,
up to 180,000 Option Preferred Securities having an aggregate Liquidation Amount
of up to $1,800,000, against receipt of the aggregate purchase price of such
Option Securities of up to $1,800,000, 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 execute in
accordance with Section 5.3 and the Property Trustee shall authenticate in
accordance with Section 5.3 and deliver to the Depositor, Common Securities
Certificates, registered in the name of the Depositor, in an aggregate amount of
36,000 Common Securities having an aggregate Liquidation Amount of $360,000
against receipt by the Property Trustee of the aggregate purchase price of such
Common Securities of $360,000 by the Property Trustee. In the event of any
exercise of an over-allotment option requiring issuance of additional Option
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 Issuer Trust and having an aggregate principal amount equal to
$12,360,000, plus, in the event of any exercise of the over-allotment option (a)
a corresponding additional number of Junior Subordinated Debentures not
exceeding an aggregate principal amount of $1,800,000 and (b) 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 $12,360,000, plus any corresponding over-allotment option amount (being the
sum of the amounts delivered to the Property Trustee pursuant to (a) the second
sentence of Section 2.4, and (b) the first and second sentences of this Section
2.5) and receive the Junior Subordinated Debentures on behalf of the Issuer
Trust.
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, convenient 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
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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 Administrators shall not be trustees or
fiduciaries with respect to the Issuer Trust and this Trust Agreement shall be
construed in a manner consistent with such intent. The Property Trustee shall
have the right, power and authority 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
2.7 and in accordance with the following provisions (i) and (ii), the Issuer
Trustees and the Administrators shall act as follows:
(i) Each Administrator shall have the power and authority and is
hereby authorized and directed 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) execute the Trust Securities on behalf of the Issuer
Trust in accordance with this Trust Agreement;
(D) 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;
(E) the application for a taxpayer identification number
for the Issuer Trust;
(F) 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;
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(G) cause the Issuer Trust to enter into, and execute,
deliver and perform on behalf of the Issuer Trust all agreements,
instruments, certificates or other documents as such Administrator
deems necessary or incidental to the purposes and functions of the
Issuer Trust; and
(H) any action incidental to the foregoing as the
Administrators may from time to time determine is necessary or
advisable to give effect to the terms of this Trust Agreement.
(ii) The Property Trustee shall have the power and authority, and
is hereby authorized and directed, to act on behalf of the Issuer Trust with
respect to the following matters:
(A) establish and maintain the Payment Account;
(B) receive, hold and exercise all of the rights, powers
and privileges of the holder of the Junior Subordinated Debentures;
(C) receive and collect interest, principal and any other
payments made in respect of the Junior Subordinated Debentures in
the Payment Account;
(D) distribute amounts owed to the Holders in respect of
the Trust Securities in accordance with the terms of this Trust
Agreement;
(E) act as Paying Agent and/or Securities Registrar to the
extent appointed as such hereunder;
(F) send 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) distribute the Trust Property in accordance with the
terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
wind-up the affairs of and liquidate the Issuer Trust and prepare,
execute and file the certificate of cancellation with the Secretary
of State of the State of Delaware;
(I) after an Event of Default (other than under paragraph
(b), (c) 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; and
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(J) take any action incidental or convenient to the
foregoing as the Property Trustee may from time to time determine
is necessary or advisable to give effect to the terms of this Trust
Agreement;
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 (in each case acting on behalf of the
Issuer Trust) 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 and filing by the Issuer Trust with
the Commission, and the execution and delivery, on behalf of the
Issuer Trust, 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 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 offer and 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 preparation and filing by the Issuer Trust with
the Commission and the execution on behalf of the Issuer Trust of a
registration statement on Form 8-A relating to
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the registration of the Preferred Securities under Section 12(b)
or 12(g) of the Exchange Act, as amended, including any
amendments thereto;
(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; and
(vi) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
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 federal 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 Issuer Trust and shall be held and administered by the Property Trustee (in
its capacity as such) 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
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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.
(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 _________ __, 1999, and, except
in the event (and to the extent) that the Depositor exercises its
right to defer the payment of interest on the Junior Subordinated
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 ___________ ___, 1999. 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), except
that if such Business Day is in the next succeeding calendar year,
payment of such Distributions shall be made on the immediately
preceding Business Day, in either case 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.
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(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 ____________ ___, 2029. As a consequence of any such
deferral, quarterly Distributions on the Trust Securities by the
Issuer 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 the
rate per annum by four. 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 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 Securities 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);
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(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.
(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 Owners 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 Holders 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 Securities Register for the Trust
Securities on the relevant record dates for the related Distribution Dates. If
notice of redemption shall have been given and funds deposited as required,
then, upon the date of such deposit, all rights of Holders holding Trust
Securities so called for redemption will cease, except the right of such Holders
to receive the Redemption Price and any Distributions payable in respect of the
Trust Securities on or prior to the Redemption Date, but without interest, and
such Trust 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),
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except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case,
with the same force and effect as if made on such date. 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(a) or 5.1(b)
of the Indenture shall have occurred and be continuing, no payment of any
Distribution (including any Additional Amounts, if applicable) on, or Redemption
Price of, or Liquidation Distribution 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 Additional Amounts, if
applicable) on all Outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto, or, in the case of payment of the Redemption
Price, the full amount of such Redemption Price on all Outstanding Preferred
Securities 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, or Liquidation Distribution in respect
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
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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, if
applicable) in respect of the Preferred Securities shall be made by check mailed
to the address of the Person entitled thereto as such address shall appear on
the Securities Register or, if the Preferred Securities are held by a Clearing
Agency, such Distributions shall be made to the Clearing Agency in immediately
available funds, which 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.
SECTION 4.5. Tax Returns and Reports.
The Administrators shall prepare and file (or cause to be prepared
and filed), 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 (i)
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 (ii) 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 Code, as amended. Such information shall include the amount
of original issue discount includible in income for each outstanding Preferred
Security during such year.
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, at the written direction of an Administrator or the
Depositor, 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.
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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 (or any
Owner related thereto) 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(c) of the Indenture
regarding allocation of expenses.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership.
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 Cede & Co.
as the Depositary's nominee 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.
On the Closing Date, and on the Option Closing Date if applicable,
an Administrator shall cause Trust Securities Certificates, in an aggregate
Liquidation Amount as provided in Sections 2.4 and 2.5, as the case may be, to
be executed on behalf of the Issuer Trust and delivered to the Property Trustee
and upon such delivery the Property Trustee shall authenticate such Trust
Securities Certificates and deliver such Trust Securities Certificates upon the
written order of the Issuer Trust, executed by an Administrator thereof, without
further corporate action by the Issuer Trust, in authorized denominations, and
whereupon the Trust Securities evidenced by such Trust Securities Certificates
shall be duly and validly issued undivided beneficial interests in the assets of
the Issuer Trust and entitled to the benefits of this Trust Agreement.
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, Cede, or other nominee thereof unless
(i) such Clearing Agency advises the Depositor and the Issuer Trustees 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,
within 90 days of receipt of such notice from the Depositary, (ii) the Depositor
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 canceled, 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 Property Trustee shall, subject to
Section 5.4(b) and as otherwise provided in this Article V, authenticate and
deliver and an Administrator shall execute 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.
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(d) Every Preferred Security registered, executed, authenticated
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 executed, 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 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 Trust 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, an Administrator shall execute and the Property Trustee shall
authenticate 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 Liquidation 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
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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 Preferred Securities are so surrendered for exchange, an Administrator shall
execute and the Property Trustee shall authenticate 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 interest, 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.
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 Preferred
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.
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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
or a protected 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 authenticate, 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 Securities 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 Administrators, the Securities Registrar
or the Depositor shall treat the Person in whose name any Trust Securities are
registered in the Securities Register 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.
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 for such purposes. The Property Trustee shall give prompt
written notice to the Depositor, the Administrators and the Holders of any
change in the location of the Securities Register or any such office or agency.
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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 appointed by
the Property Trustee, 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.
On the Closing Date, and on the Option Closing Date if applicable,
the Depositor shall acquire and retain beneficial and record ownership of the
Common Securities. Neither the Depositor nor any successor Holder of the Common
Securities may transfer less than all of the Common Securities, and the
Depositor or any Successor Holder may transfer the Common Securities only (a) 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 (b) 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
other attempted transfer of the Common Securities shall be void. The
Administrators shall cause each Common Securities 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
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Certificate, the Administrators and the Property Trustee 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 all Trust Property shall be vested at all
times in the Issuer Trust and shall be held and administered by 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 validly issued, fully paid and
nonassessable undivided beneficial interests in the Trust Property. 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.
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 affected thereby. 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(a) or 5.1(b) of the Indenture, any Holder of Preferred Securities
shall have the right to institute a proceeding directly against the Depositor,
pursuant to Section 5.8 of the Indenture, for enforcement of payment to such
Holder of the principal amount of or interest on 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) of this Trust Agreement, 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.
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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 Property Trustee, or executing any trust or power
conferred on the Debenture 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 Property Trustee
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.
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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.
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 $10 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
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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
other action, the Administrators (or the Property Trustee if the Administrators
are unable or unwilling to act) 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.
(a) 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 6.8.
(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 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.
(c) The ownership of Trust Securities shall be proved by the
Securities Register.
(d) 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
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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.
(e) 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.
(f) 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.
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 (and any successors
thereto at the time of their appointment), 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, 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).
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(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 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 the 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
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(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 Administrators otherwise existing at law or in equity, are
agreed by the Depositor and the Holders to replace 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
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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;
(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;
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(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.
In the event the Property Trustee receives notice of the
Depositor's exercise of its right to shorten the stated maturity of the Junior
Subordinated Debentures as provided in Section 3.16 of the Indenture, the
Property Trustee shall give notice of such shortening of the stated maturity to
the Holders at least 30 but not more than 60 days before the effective date
thereof.
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
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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 action
until such instructions are received, and (iii) shall be fully protected in
acting in accordance with such instructions; and
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(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 (excluding income taxes, other than
taxes referred to in Sections 4.5 and 4.6
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hereunder), 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 Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Indemnified Person by reason of
bad faith, negligence or willful misconduct with respect to such acts or
omissions. The indemnification provided to an Indemnified Party in this Trust
Agreement shall not be exclusive and nothing in this Trust Agreement shall limit
any indemnification for actions taken in connection with this Trust Agreement or
otherwise which may be available or provided to such Indemnified Party under
other sources.
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 VIII. 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.
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(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.
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.
(a) 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.
(b) 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.
(c) 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:
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(i) The Trust Securities shall be executed and delivered
by one or more Administrators and authenticated by the Property Trustee, 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.
(ii) 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.
(iii) The Property Trustee at any time, by an instrument
in writing executed by it, with the written concurrence of the Depositor, may
accept the resignation of or remove any co-trustee or separate trustee appointed
under this Section, and, in case a Debenture Event of Default has occurred and
is continuing, the Property Trustee shall have power to accept the resignation
of, or remove, any such co-trustee or separate trustee without the concurrence
of the Depositor. Upon the written request of the Property Trustee, the
Depositor shall join with the Property Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to effectuate
such resignation or removal. A successor to any co-trustee or separate trustee
so resigned or removed may be appointed in the manner provided in this Section
8.9.
(iv) 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.
(v) The Property Trustee shall not be liable by reason
of any act of a co-trustee or separate trustee.
(vi) 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.
(a) No resignation or removal of any Issuer Trustee (the "Relevant
Trustee") and no appointment of a successor Issuer Trustee pursuant to this
Article VIII shall become effective until the acceptance of appointment by the
successor Issuer Trustee in accordance with the applicable requirements of
Section 8.11.
(b) Subject to Section 8.10(a), a Relevant Trustee may resign at
any time by giving written notice thereof to the Holders. The Relevant Trustee
shall appoint a successor by requesting from at least three Persons meeting the
eligibility requirements its expenses and charges to serve as the successor
Issuer Trustee on a form provided by the Administrators, and selecting the
Person who agrees to the lowest expenses and charges subject to the prior
consent of the Depositor which consent
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shall not be unreasonably withheld. If the instrument of acceptance by the
successor Issuer 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
Issuer Trustee.
(c) 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.
(d) If a resigning Relevant Trustee shall fail to appoint a
successor, or 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 Preferred Securities, by Act of
the Holders of record of not less than 25% aggregate Liquidation Amount of the
Preferred Securities than Outstanding delivered to such Relevant Trustee, shall
promptly appoint a successor Issuer Trustee or Trustees, and such successor
Issuer Trustee shall comply with the applicable requirements of Section 8.11. If
no successor Issuer Trustee shall have been so appointed by the Holders of the
Preferred 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 Issuer Trustee.
(e) The Property Trustee shall give notice of each resignation and
each removal of a Relevant Trustee and each appointment of a successor Issuer
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.
(f) 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 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 Delaware Trustee, set forth
in Section 8.7).
SECTION 8.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Issuer
Trustee, the retiring Relevant Trustee and each such successor Issuer Trustee
with respect to the Trust Securities shall execute, acknowledge and deliver an
instrument wherein each successor Issuer 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 Issuer Trustee all the
rights, powers, trusts and duties of the retiring Relevant 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 Issuer 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 Issuer Trustee
such
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Relevant Trustee shall duly assign, transfer and deliver to such successor
Issuer Trustee all Trust Property, all proceeds thereof and money held by such
Relevant Trustee hereunder with respect to the Trust Securities and the Issuer
Trust.
(b) Upon request of any such successor Issuer Trustee, the Issuer
Trust shall execute any and all instruments for more fully and certainly vesting
in and confirming to such successor Issuer Trustee all such rights, powers and
trusts referred to in the first or second preceding paragraph, as the case may
be.
(c) No successor Issuer Trustee shall accept its appointment unless
at the time of such acceptance such successor Issuer Trustee shall be qualified
and eligible under this Article VIII.
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 VIII, 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 Junior Subordinated Debentures or 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 the Issuer Trust (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 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
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(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 the Property Trustee.
(a) Within 60 days of January 31 of each year commencing with
January 31, 2001, 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 January 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 the Property Trustee a certificate
specifying whether such Person is in compliance with all the terms and covenants
applicable to such Person hereunder.
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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, in which event the
number of Issuer Trustees shall be one.
(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 dissolve, terminate or annul the Issuer Trust or terminate this Trust
Agreement.
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.
(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
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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 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 _______ __, 2034 (the "Expiration Date").
SECTION 9.2. Early Dissolution.
The first to occur of any of the following events is an "Early
Termination Event", upon the occurrence of which the Issuer Trust shall
dissolve:
(a) the occurrence of any Bankruptcy Event with respect to the
Depositor unless the Depositor shall transfer the Common Securities as provided
by Section 5.11, in which case this provision shall refer instead to any
Bankruptcy Event with respect to the successor Holder of the Common Securities;
(b) delivery of the written direction to the Property Trustee from
the Holder of the Common Securities 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 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 Holder 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
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(d) the entry of an order for dissolution of the Issuer Trust by a
court of competent jurisdiction.
SECTION 9.3. Termination.
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 reporting obligations with respect to the Issuer Trust or the Holders and
(d) the filing of a certificate of cancellation with the Delaware Secretary of
State pursuant to Section 3810 of the Delaware Business Trust Act.
SECTION 9.4. Liquidation.
(a) If an Early Termination Event specified in clause (a), (b) or
(d) of Section 9.2 occurs or upon the Expiration Date, the 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.
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(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 9.2 occurs, the Trust Property shall be liquidated, and the Issuer Trust
shall be liquidated 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 the Liquidation Amount per Trust Security plus accumulated and
unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If, upon any such dissolution, the 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,
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 liquidation 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.
(e) Following the dissolution of the Issuer Trust and after the
completion of the winding up of the affairs of the Issuer Trust, the Delaware
Trustee shall file a certificate of cancellation with the Delaware Secretary of
State.
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 and Section 9.4. 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, but without the consent of the
Delaware Trustee or the Property Trustee, 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 (a) such successor
entity either (i) expressly assumes all of the obligations of the Issuer Trust
with respect to the Preferred Securities or (ii) substitutes for the
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Preferred Securities other securities having substantially the same terms as the
Preferred Securities (the "Successor Preferred 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, (b) a trustee of such successor entity possessing the same powers and
duties as the Property Trustee is appointed to hold the Junior Subordinated
Debentures, (c) 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,
(d) 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, (e) such successor entity has a purpose substantially
identical to that of the Issuer Trust, (f) 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 (i) 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 Preferred Securities) in any material respect, and (ii) 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 (g) the
Depositor or any permitted transferee to whom it has transferred the Common
Securities hereunder owns all of the common securities of such successor entity
and guarantees the obligations of such successor entity under the Successor
Preferred 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. Any merger or similar agreement shall be executed by the
Administrators on behalf of the Issuer Trust.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders.
Except as set forth in Section 9.2, the bankruptcy, dissolution,
termination, death or incapacity of any Person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement or dissolve, terminate or annul the Issuer Trust, 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.
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SECTION 10.2. Amendment.
(a) This Trust Agreement may be amended from time to time by the
Property Trustee, the Administrators and the Holders of a Majority in
Liquidation Amount of the Common Securities, without the consent of 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 6.1(c) or Section 10.2(c), any
provision of this Trust Agreement may be amended by the Property Trustee, the
Administrators, and the Holders of a Majority in Liquidation Amount of the
Common Securities 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. Notwithstanding any other provision herein,
without the unanimous consent of the Holders (such consent being obtained in
accordance with Section 6.3 or 6.6) this Section 10.2(c) may not be amended.
(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.
(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.
52
<PAGE>
(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 pursuant to Section
10.2(a) 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, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
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)), except that,if such Business Day is in
the next succeeding calendar year, payment on any Trust Security shall be made
on the immediately preceding Business Day, in each case, 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.
53
<PAGE>
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.
(a) 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 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, (i) 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 (ii) in the case of the
Holder of Common Securities or the Depositor, to First Star Bancorp, Inc., 418
West Broad Street, Pennsylvania 18018, Attention: Office of the Secretary,
facsimile no.: (610) 691-5658 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.
(b) 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 terminated 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
54
<PAGE>
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
Depositor 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
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 Issuer 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 January
31 of each year, commencing January 31, 1999, 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
55
<PAGE>
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.
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.
SECTION 10.12. Counterparts.
This Trust Agreement may contain more than one counterpart of the
signature page and this Trust Agreement may be executed by the affixing of the
signature of each of the Issuer Trustees to one of such counterpart signature
pages. All of such counterpart signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature paper.
56
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Trust
Agreement to be executed as of the day and year first above written.
FIRST STAR 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:
- ------------------------------
Joseph T. Svetik
- ------------------------------
Paul J. Sebastian
57
<PAGE>
EXHIBIT A
[INSERT CERTIFICATE OF TRUST FILED WITH DELAWARE SECRETARY OF STATE]
1
<PAGE>
EXHIBIT B
[INSERT FORM OF CERTIFICATE DEPOSITARY AGREEMENT]
2
<PAGE>
EXHIBIT C
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
Certificate Number Number of Common Securities
C-__
Certificate Evidencing Common Securities
of
First Star Capital Trust
______% Common Securities
(liquidation amount $10 per Common Security)
First Star Capital Trust, a statutory business trust created under
the laws of the State of Delaware (the "Issuer Trust"), hereby certifies that
First Star 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 $10 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 _______________, 1999, as the same may be
amended from time to time (the "Trust Agreement") among First Star 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.
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.
3
<PAGE>
IN WITNESS WHEREOF, one of the Administrators of the Issuer Trust
has executed this certificate this ___ day of ______________, ____.
FIRST STAR CAPITAL TRUST
By:
--------------------------------------
Name:
Administrator
AUTHENTICATED AND REGISTERED:
BANKERS TRUST COMPANY,
as Property Trustee and Securities Registrar
By:
------------------------------
Name:
Signatory Officer
4
<PAGE>
EXHIBIT D
[IF THE PREFERRED SECURITY CERTIFICATE IS TO BE A GLOBAL PREFERRED
SECURITY CERTIFICATE, INSERT -- This Preferred Security Certificate is a Global
Preferred Security 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 Security 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 First Star 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.]
5
<PAGE>
CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES
P-__
CUSIP NO. ________________________
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
FIRST STAR CAPITAL TRUST
_____% PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
First Star Capital Trust, a statutory business trust created 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 designated the First Star Capital
Trust _____% Preferred Securities (liquidation amount $10 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
________, 1999, as the same may be amended from time to time (the "Trust
Agreement"), among First Star 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 First Star Bancorp, Inc., a
Pennsylvania corporation, and Bankers Trust Company, as guarantee trustee, dated
as of ____________, 1999, as the same may be amended from time to time, (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.
6
<PAGE>
IN WITNESS WHEREOF, one of the Administrators of the Issuer Trust
has executed this certificate this _______ day of ____________, 1999.
FIRST STAR CAPITAL TRUST
By:
--------------------------------------
Name:
Administrator
AUTHENTICATED AND REGISTERED:
BANKERS TRUST COMPANY,
as Property Trustee and Securities Registrar
By:
------------------------------
Name:
Authorized Signatory
7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Security Certificate 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.
8
EXHIBIT 4.6
<PAGE>
- --------------------------------------------------------------------------------
FORM OF
GUARANTEE AGREEMENT
Between
FIRST STAR BANCORP, INC.
(as Guarantor)
and
BANKERS TRUST COMPANY
(as Trustee)
dated as of
____________ __, 1999
- --------------------------------------------------------------------------------
<PAGE>
FIRST STAR 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>
ARTICLE I. DEFINITIONS
Section 1.1. Definitions............................................................ 2
ARTICLE II. TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application....................................... 5
Section 2.2. List of Holders........................................................ 5
Section 2.3. Reports by the Guarantee Trustee....................................... 6
Section 2.4. Periodic Reports to the Guarantee Trustee.............................. 6
Section 2.5. Evidence of Compliance with Conditions Precedent....................... 6
Section 2.6. Events of Default; Waiver.............................................. 6
Section 2.7. Event of Default; Notice............................................... 7
Section 2.8. Conflicting Interests.................................................. 7
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
Section 3.1. Powers and Duties of the Guarantee Trustee............................. 7
Section 3.2. Certain Rights of the Guarantee Trustee................................ 9
Section 3.3. Indemnity.............................................................. 10
Section 3.4. Expenses............................................................... 11
ARTICLE IV. GUARANTEE TRUSTEE
Section 4.1. Guarantee Trustee; Eligibility......................................... 11
Section 4.2. Appointment, Removal and Resignation
of the Guarantee Trustee.......................................... 11
ARTICLE V. GUARANTEE
Section 5.1. Guarantee.............................................................. 12
Section 5.2. Waiver of Notice and Demand............................................ 13
Section 5.3. Obligations Not Affected............................................... 13
Section 5.4. Rights of Holders...................................................... 14
Section 5.5. Guarantee of Payment................................................... 14
Section 5.6. Subrogation............................................................ 14
Section 5.7. Independent Obligations................................................ 15
ARTICLE VI. COVENANTS AND SUBORDINATION
Section 6.1. Subordination.......................................................... 15
Section 6.2. Pari Passu Guarantees.................................................. 15
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VII. TERMINATION
Section 7.1. Termination............................................................ 15
ARTICLE VIII. MISCELLANEOUS
Section 8.1. Successors and Assigns................................................. 16
Section 8.2. Amendments............................................................. 16
Section 8.3. Notices................................................................ 16
Section 8.4. Benefit................................................................ 17
Section 8.5. Interpretation......................................................... 17
Section 8.6. Governing Law.......................................................... 18
Section 8.7. Counterparts........................................................... 18
</TABLE>
- ii -
<PAGE>
GUARANTEE AGREEMENT
-------------------
This GUARANTEE AGREEMENT, dated as of ____________ __, 1999 (this
"Guarantee Agreement") is executed and delivered by FIRST STAR BANCORP, INC., a
Pennsylvania corporation (the "Guarantor"), having its principal office at 418
West Broad Street, Bethlehem, Pennsylvania 18018, 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 First Star 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 ____________ __, 1999, among First Star 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 $13,800,000 aggregate
Liquidation Amount (as defined herein) of its _.___% Preferred Securities,
Liquidation Amount $10 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 ___________ __, 2029 (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 the 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 the 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.
1
<PAGE>
ARTICLE I. DEFINITIONS
SECTION 1.1. Definitions.
As used in this Guarantee Agreement, the terms set forth below
shall, unless the context otherwise requires, have the following meanings.
Capitalized 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 Amount" 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. 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.
"Delaware Trustee" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"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 ____________ __, 1999 and payable quarterly in arrears on
March 31, June 30, September 30, and December 31 of each year, commencing
_____________ __, 1999, at the annual rate of _.___% of the Liquidation Amount.
"Event of Default" means (a) a default by the Guarantor in any of
its payment obligations under this Guarantee Agreement, or (b) 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: (a) 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, (b) 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 (c) upon a voluntary or
2
<PAGE>
involuntary termination, winding-up or liquidation of the Issuer Trust, unless
the Junior Subordinated Debentures are distributed to the Holders, the lesser of
(i) 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 (ii) 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 preamble 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.
"Indenture" means the Junior Subordinated Indenture dated as of
__________ __, 1999, between First Star 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 preamble of
this Guarantee Agreement.
"Issuer Trustees" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Junior Subordinated Debentures" shall have the meaning specified
in the first recital of this Guarantee Agreement.
"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 an Additional Amount to Holders of
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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.
"Liquidation Amount" means the stated amount of $10 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.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman of the Board and Chief Executive Officer,
President or a Vice President, and by the Chief Financial Officer, 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 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.
"Property Trustee" 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
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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, principal, 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 this Guarantee Agreement, 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" shall have the meaning specified in the recitals
to this Guarantee Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939,as
amended by the Trust Indenture Reform Act of 1990, or any successor statute, in
each case as amended from time to time.
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 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.
SECTION 2.2. List of Holders.
(a) The Guarantor will furnish or cause to be furnished
to the Guarantee Trustee:
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(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.
Within 60 days of January 31 of each year, commencing January 31,
2001, 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.
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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 (i) a Responsible Officer charged with
the administration of this Guarantee Agreement shall have received written
notice of such Event of Default, or (ii) a Responsible Officer of the Guarantee
Trustee charged with administration of the Trust Agreement shall have obtained
actual knowledge thereof.
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 to a Holder exercising
his or her rights pursuant to Section 5.4(d) 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.
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(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 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 bad faith or 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;
(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
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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.
SECTION 3.2. Certain Rights of the 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 written advice or opinion of such legal counsel with respect to
legal matters shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted to be taken by it hereunder in good
faith and in accordance with such advice or opinion. Such legal counsel may be
legal counsel to the Guarantor or any of its Affiliates and may be one of its
employees. The Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement from any
court of competent jurisdiction.
(v) the Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Guarantee Agreement at the request or direction of any Holder, unless such
Holder shall have provided to the Guarantee Trustee such security and indemnity
as would satisfy a reasonable person in the position of the Guarantee Trustee,
against the costs, expenses (including attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by the
Guarantee Trustee; provided, however, that nothing herein shall relieve the
Guarantee Trustee of its obligations upon the occurrence of an Event of Default
that has not been cured or waived to exercise the rights and powers vested in
the Guarantee Trustee
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by this Guarantee, and to use the same degree of care and skill in exercising
such rights and powers as a reasonably prudent person would use under the
circumstances in the conduct of his own affairs.
(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. Nothing herein shall
be construed as limiting or restricting the right of the Guarantor to bring any
action directly against any agent or attorney appointed by the Guarantee Trustee
for any negligence or willful misconduct on the part of such agent or attorney.
(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 (which, for
purposes of this Section 3.3 shall include its directors, officers, employees
and agents) for, and to hold the Guarantee Trustee harmless against, any loss,
liability or expense, including reasonable attorney fees and expenses, incurred
without negligence, willful misconduct or bad faith on the part of the Guarantee
Trustee, arising out of or in connection with the acceptance or administration
of this Guarantee Agreement, including the reasonable costs and expenses of
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defending against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
SECTION 3.4. Expenses.
The Guarantor shall promptly reimburse the Guarantee Trustee for its
reasonable expenses and costs (including reasonable attorneys' or agents' fees
and expenses) 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 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 IV
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.
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(b) Subject to Section 4.2(a), 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.
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.
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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;
(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
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(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: (a) this Guarantee
Agreement will be deposited with the Guarantee Trustee to be held for the
benefit of the Holders; (b) the Guarantee Trustee has the right to enforce this
Guarantee Agreement on behalf of the Holders; (c) 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 (d) 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, if 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.
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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 (a) full payment of the Redemption Price of all Preferred
Securities, (b) the distribution of Junior Subordinated Debentures to the
Holders in exchange for all of the Preferred Securities or (c) 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
the Preferred Securities or this Guarantee Agreement.
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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
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:
First Star Bancorp, Inc.
418 West Broad Street
Bethlehem, Pennsylvania 18018
Facsimile No.: (610) 691-5658
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:
16
<PAGE>
c/o First Star Bancorp, Inc.
418 West Broad Street
Bethlehem, Pennsylvania 18018
Facsimile No.: (610) 691-5658
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) 250-6392
Attention: Corporate Trust and Agency Services
(c) if given to the Guarantee Trustee:
Bankers Trust Company
Four Albany Street - 4th Floor
New York, New York 10006
Facsimile No.: (212) 250-6392
Attention: Corporate Trust and Agency 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
the Guarantee Trustee 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;
17
<PAGE>
(b) a term defined anywhere in this Guarantee Agreement
has the same meaning throughout;
(c) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented
or amended from time to time;
(d) all references in this Guarantee Agreement to Articles
and Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and
vice versa; and
(g) the masculine, feminine or neuter genders used herein
shall include the masculine, feminine and neuter genders.
SECTION 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.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
18
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first above written.
FIRST STAR BANCORP, INC.
By:
-------------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Guarantee Trustee
and not in its individual
capacity
By:
-------------------------------------
Name:
Title:
19
EXHIBIT 5.1
<PAGE>
[Richards, Layton & Finger, PA Letterhead]
September 17, 1999
First Star Capital Trust
c/o First Star Bancorp., Inc.
418 West Broad Street
Bethlehem, Pennsylvania 18018
Re: First Star Capital Trust
------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for First Star Bancorp, Inc., a
Pennsylvania corporation (the "Company"), and First Star Capital Trust, a
Delaware business trust (the "Trust"), in connection with the matters set forth
herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of originals or copies of the
following:
(a) The Certificate of Trust of the Trust, as filed with
the Secretary of State on August 24, 1999;
(b) The Trust Agreement of the Trust, dated as of August 24,
1999, among the Company and the trustees of the Trust named therein;
(c) The Registration Statement (the "Registration Statement")
on Form SB- 2, including a preliminary prospectus with respect to the Trust (the
"Prospectus"), relating to the Preferred Securities of the Trust representing
undivided beneficial interests in the assets of the Trust (each, a "Preferred
Security" and collectively, the "Preferred Securities"), as filed by the Company
and the Trust with the Securities and Exchange Commission on September 17, 1999;
<PAGE>
First Star Capital Trust
September 17, 1999
Page 2
(d) A form of Amended and Restated Trust Agreement for the
Trust, to be entered into between the Company, the trustees of the Trust named
therein, and the holders, from time to time, of the Preferred Securities
(including the Exhibits C and D thereto) (the "Trust Agreement"), to be filed as
an exhibit to the Registration Statement; and
(e) A Certificate of Good Standing for the Trust, dated
September 15, 1999, obtained from the Secretary of State.
With respect to all documents examined by us, we have assumed
(i) the authenticity of all documents submitted to us as authentic originals,
(ii) the conformity with the originals of all documents submitted to us as
copies or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the
Trust Agreement and the Certificate of Trust are in full force and effect and
have not been amended, (ii) except to the extent provided in paragraph 1 below,
the due organization or due formation, as the case may be, and valid existence
in good standing of each party to the documents examined by us under the laws of
the jurisdiction governing its creation, organization or formation, (iii) the
legal capacity of natural persons who are parties to the documents examined by
us, (iv) that each of the parties to the documents examined by us has the power
and authority to execute and deliver, and to perform its obligations under, such
documents, (v) the due authorization, execution and delivery by all parties
thereto of all documents examined by us, (vi) the receipt by each Person to whom
a Preferred Security is to be issued by the Trust (collectively, the "Preferred
Security Holders") of a Preferred Securities Certificate for such Preferred
Security and the payment for such Preferred Security, in accordance with the
Trust Agreement and Prospectus, and (vii) that the Preferred Securities are
issued and sold to the Preferred Security Holders in accordance with the Trust
Agreement and the Prospectus. We have not participated in the preparation of the
Registration Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware,
and we have not considered and express no opinion on the laws of any other
jurisdiction, including federal laws and rules and regulations relating thereto.
Our opinions are rendered only with respect to Delaware laws and rules,
regulations and orders thereunder which are currently in effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Business Trust Act.
<PAGE>
First Star Capital Trust
September 17, 1999
Page 3
2. The Preferred Securities of the Trust will represent valid
and, subject to the qualifications set forth in paragraph 3 below, fully paid
and nonassessable undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the
Trust, will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Trust Agreement.
We consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement. We hereby
consent to the use of our name under the heading "Legal and Tax Matters" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/Richards, Layton & Finger, PA
EXHIBIT 5.2
<PAGE>
MALIZIA SPIDI & FISCH, PC
ATTORNEYS AT LAW
1301 K STREET, N.W. 637 KENNARD ROAD
SUITE 700 EAST STATE COLLEGE, PENNSYLVANIA 16801
WASHINGTON, D.C. 20005 (814) 466-6625
(202) 434-4660 FACSIMILE: (814) 466-6703
FACSIMILE: (202) 434-4661
September 17, 1999
Board of Trustees
First Star Bancorp, Inc.
418 West Broad Street
Bethlehem, Pennsylvania 18018
Ladies and Gentlemen:
We have acted as counsel to First Star Bancorp, Inc. (the "Company") in
connection with the preparation and filing by the Company and First Star Capital
Trust (the "Trust") of a registration statement (the "Registration Statement")
on Form SB-2 under the Securities Act of 1933, as amended (the "Act"), with
respect to the offer and sale of certain of the Trust's Preferred Securities
(liquidation amount $10 per Preferred Security) (the "Preferred Securities") and
certain of the Company's Junior Subordinated Debentures (the "Debentures") and
the related Guarantee Agreement by and between the Company and Bankers Trust
Company, as trustee (the "Guarantee"). In connection therewith, you have
requested our opinion as to certain matters referred to below.
In our capacity as such counsel, we have familiarized ourselves with
the actions taken by the Company in connection with the registration of the
Debentures and the Guarantee. We have examined the originals or certified copies
of such records, agreements, certificates of public officials and others, and
such other documents, including the Registration Statement, as we have deemed
relevant and necessary as a basis for the opinions hereinafter expressed. In
such examination, we have assumed the genuineness of all signatures on original
documents and the authenticity of all documents submitted to us as originals,
the conformity to original documents of all copies submitted to us as conformed
or photostatic copies, and the authenticity of the originals of such latter
documents. We are attorneys admitted to practice before the courts of the United
States and the courts of the Commonwealth of Pennsylvania and, accordingly, we
express no opinion with respect to matters governed by the laws of any
jurisdiction other than the federal laws of the United States or the internal
laws of the Commonwealth of Pennsylvania.
Based upon and subject to the foregoing, we are of the opinion that,
when issued (with respect to the Debentures), or executed and delivered (with
respect to the Guarantee), as set forth in the Registration Statement, the
Debentures and the Guarantee will be the valid and binding obligations of the
Company, enforceable in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws
<PAGE>
Board of Trustees
September 17, 1999
Page Two
relating to or affecting the enforcement of creditors' rights generally or the
rights of creditors of bank holding companies the accounts of whose subsidiaries
are insured by the Federal Deposit Insurance Corporation or by general equity
principles, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
We consent to the references to this opinion and to Malizia Spidi &
Fisch, PC in the Prospectus included as part of the Registration Statement under
the caption "Legal and Tax Matters" and to the inclusion of this opinion as an
exhibit to the Registration Statement.
Very truly yours,
/s/Malizia Spidi & Fisch, PC
----------------------------
MALIZIA SPIDI & FISCH, PC
EXHIBIT 8.1
<PAGE>
[FORM OF FEDERAL TAX OPINION]
, 1999
- ---------- ---
Board of Directors
First Star Bancorp, Inc.
418 West Broad Street
Bethlehem, Pennsylvania 18018
Dear Board Members:
We have acted as special tax counsel to First Star Bancorp, Inc. (the
"Company") and to First Star Capital Trust (the "Trust") in connection with the
registration statement of the Company and the Trust on Form SB-2, for the
Company and the Trust, respectively), as amended ("Registration Statement"), of
which a prospectus ("Prospectus") is a part, filed by the Company and the Trust
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended. This opinion is furnished pursuant to the requirements
of Item 601(b)(8) of Regulation S-B.
For the purposes of rendering this opinion, we have reviewed and relied
upon the Registration Statement and such other documents and instruments as we
deemed necessary for the rendering of this opinion. In our examination of
relevant documents, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as copies, the authenticity
of such copies and the accuracy and completeness of all corporate records made
available to us by the Company and the Trust.
Based solely upon our review of such documents, and upon such information
as the Company has provided to us (which we have not attempted to verify in any
respect), and reliance upon such documents and information, subject to the
limitations, qualifications, and assumptions set forth herein, we hereby adopt
and incorporate by reference the opinion set forth in the Prospectus under the
caption "United States Federal Income Tax Consequences."
Our opinion is limited to the federal income tax matters described above
and does not address any other federal income tax considerations or any state,
local, foreign, or other tax considerations. If any of the information on which
we have relied is incorrect, or if changes in the relevant facts occur after the
date hereof, our opinion could be affected thereby. Moreover, our opinion is
based on the Internal Revenue Code of 1986, as amended, applicable
<PAGE>
Board of Directors
First Star Bancorp, Inc.
, 1999
- ---------- ---
Page 2
Treasury regulations promulgated thereunder, and Internal Revenue Service
rulings, procedures, and other pronouncements published by the United States
Internal Revenue Service. These authorities are all subject to change, and such
change may be made with retroactive effect. We can give no assurance that, after
such change, our opinion would not be different. We undertake no responsibility
to update or supplement our opinion. This opinion is not binding on the Internal
Revenue Service, and there can be no assurance, and none is hereby given, that
the Internal Revenue Service will not take a position contrary to one or more of
the positions reflected in the foregoing opinion, or that our opinion will be
upheld by the courts if challenged by the Internal Revenue Service.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the use of our name in the Prospectus
under the captions "United States Federal Income Tax Consequences" and "Legal
and Tax Matters".
Sincerely,
MALIZIA SPIDI & FISCH, PC
EXHIBIT 10
<PAGE>
FORM OF
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the ___ day of _________, 19___, by and
between Greater Bethlehem Savings and Loan Association, a savings and loan
association organized under the laws of the Commonwealth of Pennsylvania (the
"Association"), and (the "Executive").
WITNESSETH:
WHEREAS, the Association and the Executive desire to enter into this
Agreement whereby the Executive will be employed by, and will render services
to, the Association on the terms and conditions hereinafter set forth;
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Employment.
----------
The Association hereby employs the Executive, and the Executive hereby
accepts such employment, for the period stated in Section 3 and upon the other
terms and conditions herein provided.
2. Position and Duties.
-------------------
During the Employment Period (as defined in Section 3(a)), the
Executive shall serve as _________________ of the Association and shall perform
such managerial duties and responsibilities for the Association as the Board of
Directors of the Association may direct in accordance with the Bylaws of the
Association. Throughout the Employment Period, and except for illness, vacation
periods and leaves of absence granted by the Association (if any), the Executive
shall devote all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder, and, subject to Section 7(g) (i),
accept such office or offices to which he may be elected by the Board of
Directors of the Association.
3. Term.
----
a. Period of Employment.
--------------------
The Employment Period of the Executive's employment under this
Agreement shall be the approximately five year period commencing on _________
___, 19__, and shall, unless sooner terminated by the death of the Executive,
mutual agreement or pursuant to Section 7, continue through _________ ___, 19__,
(such period being herein referred to as the "Employment Period"), provided,
however, subject to Section 3 (b), and if the Employment Period has not been
terminated by the death of the Executive, by mutual agreement or pursuant to
Section 7, that on
1
<PAGE>
each _________ during the Employment Period, the Employment Period shall be
extended for one year, so that at all times the Employment Period on each
_________ during the term of this Agreement shall be an unexpired period of five
years. The last day of the Employment Period, as from time to time extended, and
without regard to any early termination pursuant to Section 7, is hereinafter
referred to as the "Expiration Date."
b. Termination of Automatic Extension.
----------------------------------
The Executive or Association may elect to terminate the automatic
extension of the Employment Period set forth in subsection 3 (a) by giving
written notice of such election on or before _________ of any calendar year.
Upon effectiveness of any notice given hereunder, Executive's employment under
this Agreement shall terminate on the Expiration Date (as last extended) or such
earlier date as may be determined pursuant to Section 7.
4. Compensation.
------------
a. Salary and Incentive Compensation.
---------------------------------
For all services rendered by the Executive in any capacity during the
Employment Period under this Agreement, the Executive shall be paid as
compensation as set forth on Schedule A attached hereto. Such compensation shall
be payable in the manner and at the time specified by the Board of Directors.
b. Reimbursement of Expenses.
-------------------------
The Association shall pay or reimburse the Executive, in accordance
with the Association's policies and requirements, for all reasonable travel and
other expenses incurred by the Executive in performing his obligations under
this Agreement.
5. Participation in Incentive Compensation and Benefit Plans.
---------------------------------------------------------
In addition to the compensation provided under this Agreement, the
Executive (or his beneficiary) may be, or may become entitled to benefits under
any executive or contingent compensation plan, stock option, restricted stock or
stock purchase plan, retirement income or pension plan, supplemental or excess
benefit plan, group hospitalization, health care, or sick leave plan, life or
other insurance or death benefit plan, travel and accident insurance, vacation
plan, or other present or future group employee benefit plan or program of the
Association for which executive employees of the Association generally are
eligible, and the Executive shall be eligible to receive, with respect to the
Employment Period, all benefits and emoluments for which he is eligible under
any such benefit plan or program of the Association in accordance with the
provisions and requirements of any such plan or program.
2
<PAGE>
6. Vacation and Sick Leave.
-----------------------
Executive shall be entitled to be compensated for annual vacation,
personal and sick leave in accordance with attached appendix.
7. Termination or Suspension of Employment.
---------------------------------------
a. Termination without Cause.
-------------------------
Notwithstanding anything to the contrary contained in this Agreement,
subject to Executive receiving the Compensation set forth in subsection (4) of
this Section 7 and subject to the termination provisions set forth herein, only
the Association's Board of Directors may terminate the Executive's employment
under this Agreement at any time. Termination of Executive's employment under
this subsection shall be deemed a breach of this Agreement by the Association.
b. Termination with Cause.
----------------------
The Association's Board of Directors may terminate the Executive's
employment under this Agreement at any time "for cause." The Executive shall
have no right to receive compensation or other benefits for any period after
termination for cause. The term "for cause" shall include the Executive's
personal dishonesty, incompetency, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach of any
provisions of the Agreement. If the Association's Board of Directors determines
that Executive's employment under this Agreement shall be terminated for cause,
then the Board shall forthwith provide Executive with a written notice of said
determination. The notice shall contain a detailed statement of the facts which
constitute the particulars of the cause for termination. As used herein, the
term "incompetency" shall mean the determination by a court that the Executive
is unable to manage his own affairs by reason of insanity, imbecility or feeble
mindedness.
c. Suspension Pursuant to Notice.
-----------------------------
If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice served by
the Federal Home Loan Bank Board ("FHLBB") or the Federal Savings and Loan
Insurance Corporation ("FSLIC") under Section 5 (d) (4) (D) or Section 5 (d) (5)
(A) of the Home Owner's Loan Act (12 U.S.C. 1464 (d) (4) (D) and 5 (d) (5) (A))
or under Section 407 (g) (4) or Section 407 (h) of the National Housing Act (12
U.S.C. 1730 (g) (4) and (h)), the Association's obligations under this Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Association may in
its discretion (i) pay the Executive all or part of the compensation withheld
while the Association's obligations under this Agreement were suspended
3
<PAGE>
and (ii) reinstate (in whole or in part) any of the Association's obligations
under this agreement which were suspended.
d. Termination Pursuant to Order.
-----------------------------
If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order of the
FHLBB or FSLIC issued under Section 5 (d) (4) (E) or Section 5 (d) (5) (A) of
the Home Owner's Act (12 U.S.C. 1464 (d) (4) (E) and (d) (5) (A)) or under
section 407 (g) (5) or Section 407 (h) of the National Housing Act (12 U.S.C.
1730 (g) (5) and (h)), all obligations of the Association under this Agreement
shall terminate as of the effective date of the order, but vested rights of the
Association and Executive shall not be affected.
e. Termination Upon Default Under National Housing Act.
---------------------------------------------------
If the Association is in default (as defined in Section 401 (d) of the
National Housing Act), all obligations under this Agreement shall terminate as
of the date of default, but this subsection shall not affect any vested rights
of the Association and Executive.
f. Termination by FSLIC or FHLBB.
-----------------------------
All obligations under this Agreement shall be terminated, except to the
extent determined that continuation of this Agreement is necessary for the
continued operation of the institution, (i) by FSLIC at the time FSLIC enters
into an agreement to provide assistance to or on behalf of the Association under
the authority contained in Section 406 (f) of the National Housing Act; or (ii)
by the FHLBB at the time the FHLBB or its Principal Supervisory Agent (as
defined in 12 C.F.R. 561.35) approves a supervisory merger to resolve problems
related to operation of the Association or when the Association is determined by
the FHLBB to be in an unsafe or unsound condition. Any rights of the Association
or Executive that have already vested, however, shall not be affected by such
action.
g. Termination by Executive.
------------------------
The Executive shall be entitled to terminate his employment hereunder
for "good reason." Any termination of employment hereunder under any of the
following circumstances shall be good reason, the occurrence of any of which
shall be deemed a breach of this Agreement by the Association:
(i) without the express written Consent of the
Executive, the Executive is assigned any duties inconsistent with his
Positions, duties, responsibilities and status with the Association as
in effect on the date hereof, or his titles as in effect on the date
hereof are changed or the Executive is removed or not reelected to any
of such Positions, except in connection with the termination of the
Executive's employment pursuant to
4
<PAGE>
subsections (b), (c), (d), (e) or (f) of this Section 7, or as a result
of his total disability (as defined in subsection (i) below) or death;
(ii) the salary of the Executive set forth in Section
4, as the same hereafter may be increased from time to time, is
reduced;
(iii) the Association fails to continue for the
Executive any benefit or compensation plan providing the Executive with
substantially similar benefits to those plans in which the Executive is
participating as of the date hereof or in which the Executive
hereinafter may participate;
(iv) the Association shall fail to observe or perform
any covenant or agreement in t is Agreement to be observed or performed
by the Association; or
(v) a change in control (as defined below) of the
Association occurs.
For the purpose of this Agreement, a "change in control of the
Association" shall mean a change in control whether by stock transfer, sale of
assets, merger, consolidation or otherwise; provided that, without limitation,
such a change of control shall be deemed to have occurred if (1) any Person (as
defined in Section 11 (d) below) other than those Persons in control of
Association on the date hereof, acquires the power, directly or indirectly, to
direct the management of policies of the Association or to vote 25% or more of
any class of voting securities of the Association; or (2) within any period of
three consecutive years during the term of this Agreement, individuals who at
the beginning of such period constitute the Board of Directors of the
Association cease for any reason to constitute at least a majority thereof.
h. Remedies for Termination.
Upon termination of the Executive's employment under this Agreement
pursuant to subsections (a) or (9) of this Section 7, the Executive shall
receive until the Expiration Date:
(i) 200% of the salary set forth in Section 4, as the
same may have been from time to time, payment of which shall be at the
time provided for in this Agreement as if the Executive's employment
under this Agreement has not terminated;
(ii) annually, an amount equal to the average of the
three highest annual incentive compensation payments made to Executive
by the Association prior to the termination pursuant to subsection (a)
or the event giving Executive the right to terminate his employment
under subsection (g); and
(iii) medical care, pension and similar benefits, at
no cost to Executive, substantially comparable to those furnished to
Executive by the Association immediately prior to termination of
employment hereunder.
5
<PAGE>
Any payment made by Association under this Section shall be deemed to
constitute liquidated damages and not a penalty for the Association's breach of
this Agreement. Executive shall not be required to mitigate his damage hereunder
by seeking employment or otherwise.
i. Disability Termination.
----------------------
In the event that the Executive is totally disabled prior to the
Expiration Date of this Agreement, the Association shall have the right to
terminate Executive's employment on ten (10) days written notice to Executive,
provided the Association shall pay the Executive a disability benefit which is
equal to the salary provided in Section 4, as the same may have been increased
from time to time, received by Executive at the commencement of the Executive's
total disability, reduced by the sum of (i) the amount of any benefits to which
the Executive may be entitled with respect to the same period under any
disability plan or pension plan, including related supplemental and excess
benefits plans or agreements, of the Association and (ii) the disability
benefits payable under any government regulated plan including workers'
compensation benefits. Payment of such disability benefit shall commence with
the week coincident with the termination of Executive's employment under this
Agreement and shall continue until the earlier of the Expiration Date or the
Executive's death. During any period the Executive shall be entitled to receive
disability payments from the Association, to the extent that he is physically
and mentally able to do so, he shall furnish information and assistance to the
Association, and, in addition, upon reasonable request in writing from time to
time, he shall make himself available to the Association to undertake reasonable
assignments with the dignity, importance, and scope of his prior position and
his physical and metal health. As used in this Agreement, the term "total
disability" shall mean the complete inability of the Executive to perform all of
his duties under this Agreement as determined by an independent physician
selected with the approval of the Board of Directors and the Executive.
8. Withholding of Taxes.
--------------------
The Association may withhold from any payments under this Agreement all
applicable taxes, as shall be required pursuant to any law of governmental
regulation or ruling.
9. Prior Agreements.
----------------
This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matter hereof, supersedes all
prior and contemporaneous agreement and understandings and any prior employment
agreement between the Association the Executive.
10. Consolidation or Merger.
-----------------------
Nothing in this Agreement shall preclude the Association from
consolidating or merging into or with, or transferring all or substantially all
of its assets to, any Person which assumes this Agreement and all obligations of
the Association hereunder. Upon such a consolidation, merger
6
<PAGE>
or transfer of assets and assumption, the term "Association" shall refer to such
other Person and this Agreement shall continue in full force and effect.
11. General Provisions.
------------------
a. Non-Assignability.
-----------------
Neither this Agreement nor any right or interest hereunder shall be
assignable by the Executive without the Association's prior written consent;
provided, however, that nothing in the subsection 11 (a) shall preclude the
executors, administrators, or other legal representatives of the estate of the
Executive from assigning any rights hereunder to the Person or Persons entitled
thereto under the Executive's will or, in case of intestacy, to the Person or
Persons entitled thereto under the laws of intestacy applicable to the
Executive's estate.
b. No Attachment.
-------------
Except as otherwise required by law, no right to receive payment under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
c. Binding Agreement.
-----------------
This Agreement shall be binding upon and inure to the benefit of the
Executive and the Association, the Executive's heirs, executors and assigns and
the Association's successors and assigns.
d. "Person" Defined.
----------------
"Person" as used herein means a natural person, joint venture,
cooperation, sole proprietorship, trust, estate, partnership, cooperative,
association; organization, government or governmental entity, or other entity.
12. Amendment.
---------
No amendment or modification of this Agreement shall be deemed
effective unless and until executed in writing.
13. Severability.
------------
If for any reason any provision of this Agreement shall be held
invalid, such invalidity shall not affect any other provision of this Agreement
not held so invalid, and all other such provisions
7
<PAGE>
shall to the full extent consistent with law continue in full force and effect.
If any such provision shall be held invalid in part, such invalidity shall in no
way affect the rest of such provisions held so invalid, and the rest of such
provision, together with all other provisions of this Agreement, shall likewise
to the full extent consistent with law continue in full force and effect.
14. Headings.
--------
The headings are included solely for convenience of reference and shall
not control the meaning or interpretation of any of the provisions of this
Agreement.
15. Interpretation.
--------------
If any provision of this Agreement shall be the subject of a dispute
between the Association and the Executive and a court or arbitration to which
such dispute has been brought shall be unable to resolve which of two reasonable
interpretations of such provision is the proper interpretation thereof, then the
interpretation most favorable to the Executive shall control.
16. Governing Law.
-------------
This Agreement has been executed and delivered in the Commonwealth of
Pennsylvania and its validity, interpretation, performance and enforcement shall
be governed by and construed in accordance with the laws thereof applicable to
contracts executed and to be wholly performed in Pennsylvania.
17. Consent to Jurisdiction.
-----------------------
Executive and the Association irrevocably consent to the exclusive
jurisdiction of the Courts of the Common Pleas of Lehigh County, Pennsylvania
and/or the United States District Court for the Eastern District of Pennsylvania
in any action or proceeding pursuant to this Agreement and agree to service of
process in accordance with Section 18 herein.
18. Notices.
-------
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered by hand
or mailed, certified or registered mail, return receipt requested, with postage
prepaid, to the following addresses or to such other address as either party may
designate by like notice:
A. If to Executive, to:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
8
<PAGE>
B. If to Association, to:
Greater Bethlehem Savings And Loan Association
418 West Broad Street
Bethlehem, PA 18018
C. In all cases, with copies to:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
and to such other or additional person or Persons as either party shall have
designated to the other party in writing by like notice.
19. Reimbursement of Expenses.
-------------------------
In the event the Association or any party other than the Executive
asserts that this Agreement, in whole or in part, is unenforceable or invalid
and such assertion relates to or involves a "change in control" pursuant to
Section 7 (g) (v) hereof, then the Association shall reimburse Executive for any
costs and expenses including, without limitation, legal fees, incurred by
Executive in enforcing this Agreement or defending its validity. In all other
instances pursuant to which reimbursement for expenses is sought hereunder, such
reimbursement shall be limited to $10,000.
9
EXHIBIT 23.1
<PAGE>
[BEARD & COMPANY, INC. LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement (Form SB-2)
of First Star Capital Trust and First Star Bancorp, Inc. and the related
prospectus of our report, dated August 4, 1999, relating to the consolidated
financial statements of First Star Bancorp, Inc. and its subsidiaries included
therein. We also consent to the reference to our Firm under the caption
"Experts" in the prospectus.
/s/ BEARD & COMPANY, INC.
---------------------------------
Beard & Company, Inc.
Allentown, Pennsylvania
September 16, 1999
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
REGISTRATION STATMENT ON FORM SB-2 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<CIK> 0000900625
<NAME> FIRST STAR BANCORP INC
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,352
<INT-BEARING-DEPOSITS> 1,726
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 160,438
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 186,036
<ALLOWANCE> 1,772
<TOTAL-ASSETS> 363,706
<DEPOSITS> 190,148
<SHORT-TERM> 574
<LIABILITIES-OTHER> 5,828
<LONG-TERM> 151,660
0
0
<COMMON> 375
<OTHER-SE> 15,101
<TOTAL-LIABILITIES-AND-EQUITY> 363,706
<INTEREST-LOAN> 14,358
<INTEREST-INVEST> 10,535
<INTEREST-OTHER> 171
<INTEREST-TOTAL> 25,064
<INTEREST-DEPOSIT> 8,442
<INTEREST-EXPENSE> 17,280
<INTEREST-INCOME-NET> 7,684
<LOAN-LOSSES> 423
<SECURITIES-GAINS> 156
<EXPENSE-OTHER> 3,974
<INCOME-PRETAX> 4,083
<INCOME-PRE-EXTRAORDINARY> 2,523
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,523
<EPS-BASIC> 6.90
<EPS-DILUTED> 3.76
<YIELD-ACTUAL> 2.26
<LOANS-NON> 2,289
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,489
<CHARGE-OFFS> 143
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 1,772
<ALLOWANCE-DOMESTIC> 1,772
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
