As filed with the Securities and Exchange Commission on ,January 25, 2002
Registration No.Nos. 333-76632 and 333-76632-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 1
To
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COMMUNITY TRUST BANCORP, INC. CTBI PREFERRED CAPITAL TRUST II
(Exact name of Co-Registrant as specified in its charter) (Exact name of Co-Registrant as specified in its charter)
Kentucky Delaware
(State or other jurisdiction of incorporation or organization) (State or other jurisdiction of incorporation or organization)
61-0979818 51-6523259
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
346 North Mayo Trail, Pikeville, Kentucky 41501, (606) 432-1414
(Address, including zip code, and telephone number, including area code, of
Co-Registrants' principal executive offices)
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Jean R. Hale
Vice Chairman, President and Chief Executive Officer
346 North Mayo Trail, Pikeville, Kentucky 41501, (606) 432-1414
(Name, Address, including zip code, and telephone number, including area code,
of agent for service for Co-Registrants)
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Copies to:
Ivan M. Diamond, Esq. Fred A. Summer, Esq.
Greenebaum Doll & McDonald PLLC Squire, Sanders & Dempsey L.L.P.
3300 National City Tower 41 South High Street
Louisville, Kentucky 40202 Columbus, Ohio 43215
(502) 589-4200 (614) 365-2743
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Amount to Proposed maximum Proposed maximum Amount of
Title of each class of be offering price aggregate registration
securities to be registered registered per unit offering price fee (1)
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%8.25% Cumulative Trust Preferred Securities of
CTBI Preferred Capital Trust II................ 1,000,000 $25.002,500,000 $10.00 $25,000,000 $5,975 (2)
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8.25% Subordinated Debentures due 2032 of
Community Trust Bancorp, Inc. Securities (2)(3)(4) None
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Guarantee of Preferred Securities (2)(4)(3)(5)....... None
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(1) The registration fee is calculated in accordance with Rule 457(a), (i) and
(n) of the Securities Act of 1933.
(2) The registration fee was paid in connection with the initial filing of this
Registration Statement.
(3) This Registration Statement is deemed to cover the %8.25% Subordinated
Debentures due 2032 of Community Trust Bancorp, Inc., the rights of holders
of the %8.25% Subordinated Debentures of Community Trust Bancorp, Inc. under
the Indenture, and the rights of holders of the Preferred Securities under
the Trust Agreement, the Guarantee and the Expense Agreement entered into
by Community Trust Bancorp, Inc.
(3)(4) The %8.25% Subordinated Debentures will be purchased by CTBI Preferred
Capital Trust II with the proceeds from the sale of the Preferred
Securities. Such securities may later be distributed for no additional
consideration to the holders of the Preferred Securities of CTBI Preferred
Capital Trust II upon its dissolution and the distribution of its assets.
(4)(5) No separate consideration will be received for the Guarantee.
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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 Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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SUBJECT TO COMPLETION. DATED JANUARY 11, 2002
PROSPECTUS
1,000,0002,500,000 Preferred Securities
CTBI PREFERRED CAPITAL TRUST II
%8.25% Cumulative Trust Preferred Securities
(Liquidation Amount $25$10 Per Preferred Security)
Fully, irrevocably and unconditionally guaranteed
on a subordinated basis, as described in this prospectus, by
[LOGO] Community Trust Bancorp, Inc.
CTBI Preferred Capital Trust II is offering 1,000,0002,500,000 preferred securities
at $25$10 per security. CTBI Preferred Capital Trust II will purchase %8.25%
subordinated debentures of Community Trust Bancorp, Inc. using the proceeds
from its offering of the preferred securities. The subordinated debentures have
the same payment terms as the preferred securities.
We have applied to have the preferred securities approved for listing on the
American Stock Exchange under the symbol "BPF". Trading is expected to commence
on or prior to deliverywithin 15 days of the issuance of the preferred securities.
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Investing in the preferred securities involves risks. See "Risk Factors"
beginning on page 10.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of those securities or determined that
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The preferred securities are not savings accounts, deposits or obligations
of any bank and are not insured by the Bank Insurance Fund of the Federal
Deposit Insurance Corporation or any other governmental agency.
Per Preferred
Security Total
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Public offering price.................................................. $25.00$10.00 $25,000,000
Underwriting commission to be paid by Community Trust Bancorp, Inc. (1) $ 0.40 $ 1,000,000
Proceeds before expenses, to CTBI Preferred Capital Trust II.......... $25.00II............................ $10.00 $25,000,000
(1) This is a firm commitment underwriting. Because the proceeds of the sale of
the preferred securities will be invested in the subordinated debentures,
we have agreed to pay the underwriters asthe compensation set forth above for
arranging the investment of the proceeds of this offering in the debentures, $ per
preferred security (or, in the aggregate, $ ).debentures.
The underwriters expect to deliver the preferred securities in book-entry
form only through The Depository Trust Company on or about ,February 1, 2002.
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J.J.B. Hilliard, W.L. Lyons, Inc. Ferris, Baker Watts
Incorporated
The date of this Prospectus is ,January 28, 2002
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
[LOGO] COMMUNITY TRUST(R)
BANCORP, INC.
[MAP]
Tug Valley Market
South Williamson
Mt. Sterling Market Williamson, W.Va.
Ashland Market Ashland Mt. Sterling
MarketAshland Versailles Market
Russell Hamlin Market Mt. SterlingVernon Market Frankfort
Alum Creek, W.Va. Mt. Vernon Versailles
Campbellsville Market Ft. Gay, W.Va.
Pikeville Market
Campbellsville Hamlin, W.Va. Elkhorn CityPikeville Market Whitesburg Market
Columbia MarrowboneElkhorn City Isom
Greensburg Harrodsburg Market MouthcardMarrowbone Jenkins
Jamestown Harrodsburg PhelpsMouthcard Neon
Lebanon PikevillePhelps Whitesburg
Somerset Hazard Market Pikeville
Hazard Virgie
Hazard Williamsburg Market
Flemingsburg Market Richmond Market Corbin
Ewing Lexington Market BereaRichmond Market London
Flemingsburg Lexington Berea Williamsburg
Richmond Williamsburg
Floyd/Knott Co. Market Middlesboro Market Summersville Market Winchester Market
Hindman Middlesboro Summersbille, W.Va.Summersville Market Winchester
Prestonsburg Pineville Summersbille, W.Va.
building communities . . . built on trust(R)
TABLE OF CONTENTS
Page
----
Summary...................................................................... 1
Risk Factors................................................................. 10
Special Note Regarding Forward-Looking Statements............................ 17
Use of Proceeds.............................................................. 18
Capitalization............................................................... 18
Accounting Treatment......................................................... 19
Regulatory Treatment......................................................... 20
Management................................................................... 20
Description of the Trust..................................................... 22
Description of the Preferred Securities...................................... 23
Description of the Debentures................................................ 36
Book-Entry Issuance.......................................................... 44
Description of the Guarantee................................................. 45
Relationship Among the Preferred Securities, the Debentures and the Guarantee 48
Federal Income Tax Consequences.............................................. 49
ERISA Considerations......................................................... 53
Underwriting................................................................. 54
Legal Matters................................................................ 56
Experts...................................................................... 56
Where You Can Find More Information.......................................... 56
Documents Incorporated by Reference.......................................... 57
About this Prospectus:
. You should only rely on the information contained or incorporated by
reference in this prospectus. We have not, and the underwriters have not,
authorized any person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not
rely on it.
. We are not, and our underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted.
. You should assume that the information appearing in this prospectus is
accurate as of the date on the front cover of this prospectus only.
. This prospectus does not constitute an offer to sell, or the solicitation
of any offer to buy, any securities other than the securities to which it
relates.
SUMMARY
This summary highlights information contained elsewhere in, or incorporated
by reference into, this prospectus. Because this is a summary, it may not
contain all of the information that is important to you. Therefore, you should
also read the more detailed information set forth in this prospectus, our
financial statements and the other information that is incorporated by
reference in this prospectus, before making a decision to invest in the
preferred securities. The words "we," "our," and "us" refer to Community Trust
Bancorp, Inc. and its wholly-owned subsidiaries, unless we indicate otherwise.
Community Trust Bancorp, Inc.
Overview:
We are a bank holding company headquartered in Pikeville, Kentucky that
provides commercial and retail banking services in eastern, central and south
central Kentucky and southern West Virginia. Our principal bank operating
subsidiary is Community Trust Bank, N.A, which, along with recently acquired
Citizens National Bank & Trust of Hazard, operates a total of 74 banking
locations in 29 counties. Trust Company of Kentucky, N.A. is our other
principal operating subsidiary, which is headquartered in Lexington, Kentucky
and offers a wide range of trust and investment services, including brokerage
services. At September 30, 2001, we had total assets of $2.4 billion, total
deposits of $2.1 billion and total shareholders' equity of $190.8 million, and
Trust Company of Kentucky had approximately $822$820 million of total assets under
management. We will become the largest bank holding company headquartered in
Kentucky assuming the completion of the recently announced BB&T Corporation's
acquisition of Area Bancshares Corporation. Our common stock is listed on the
Nasdaq National Market under the symbol "CTBI."
We attribute our successful operations, growth and profitability to the
following:
. We began operations in 1903 in Pikeville, Kentucky as Pikeville National
Bank. In 1987, we began an acquisition program to diversify away from the
local area's reliance on the coal industry. We have since acquired 14
banks and 17 branches operating in 5 independent markets throughout the
region and changed the name of our primary bank subsidiary to Community
Trust Bank to properly reflect the different communities we serve. These
acquisitions have been consistent with our plan to expand our footprint by
adding banking locations within contiguous markets to increase in-market
synergies and operational efficiencies.
. We emphasize customer service and pursue long-term relationships with both
our commercial and retail customers. With a solid reputation and broad
range of financial products, we continue to capitalize on our tradition of
attention to customer service. We believe this attention positively
differentiates us from our larger regional bank competitors.
. One of the core strengths of our company is our experienced management
team. Combined, our seven member executive management team has over 180
years of banking experience, with 104 of those years being with Community
Trust Bank.
. As a result of internal growth and acquisitions, from 1996 through 2000,
our average annual loan growth rate was 8.8% and our average annual
deposit growth rate was 6.5%.
. From 1996 through 2000, our average annual book value per share growth
rate was 7.2% and our average annual dividends per share growth rate was
8.5%.
1
Our Business Strategy:
Organizational structure promoting decentralized-decision making and
"community bank" philosophy. We believe that our "community bank" operating
philosophy provides us with a competitive advantage in the communities we
serve. We divide our operations into four geographic regions headed by regional
presidents and divide the regions into markets headed by market presidents.
Subject to standardized policies and procedures with centralized monitoring and
established controls, we delegate to our local market presidents
decision-making authority with regard to each of the following functions:
. loan and deposit pricing;
. loan approval;
. staff employment;
. sales leadership roles;
. marketing budget and charitable contributions; and
. customer service.
Centralized operational and support functions to improve customer service,
increase efficiency and effectively manage credit risk. Unlike many community
banks, we have the asset size and employee depth required to provide products
and services that are competitive with the regional and super regional
financial service providers. Technology has enabled us to consolidate and
centralize our operations, improve our consolidated credit risk management
capabilities and offer a wider range of products and services. Most
importantly, we have improved our ability to provide superior, personal
service, the trademark of independent community banks, by significantly
decreasing local market operational responsibilities.
Commercial banking strategic focus on small and medium-sized, locally-owned
and operated businesses. Our target commercial customers are typically
locally-owned and operated businesses with borrowing needs of less than $1
million. However, with a legal lending limit in excess of $19$27 million at
September 30, 2001, we are often able to compete effectively for larger credits
with our regional bank peers. Our product line includes:
. secured and unsecured lending;
. cash management services;
. letters of credit; and
. specialized lending products, such as asset based financing, USDA and SBA
programs, and equipment lease financing.
At September 30, 2001, the total outstanding principal balance of our
commercial loan portfolio was $862 million, representing approximately 50% of
our total loan portfolio.
Full service branch network and consumer banking. We have 74 banking
locations in 29 counties. Consistent with our "community bank" philosophy, we
are accessible to our customers via the branch network. In addition to normal
banking transaction services, our branch network provides customer access to
consumer lenders, mortgage lenders, commercial lenders, trust and investment
services and safe deposit boxes. To meet the demand for alternative delivery
channels, we also offer:
. internet banking;
. an ATM network;
. debit cards; and
. 24-hour voice response telephone bank.
2
Efficient and professional management of trust and investment services. Our
trust subsidiary provides trust and investment management services to clients
throughout the bank's footprint. As a result of our significant growth through
acquisitions, in 1995 we began implementing a program to reorganize,
consolidate and standardize our trust and investment services operations. This
program was successfully completed in 1997. At September 30, 2001, assets under
management were $822$820 million. This subsidiary focuses primarily on investment
management through personal trust and retirement accounts, placing an emphasis
on internal investment expertise and high levels of customer contact. Much of
our business development opportunities are the result of branch referrals.
During the second quarter of 2001, we completed the transition of our joint
venture brokerage operations to an in-house line of business.
Our Growth Strategy:
We believe that we will continue to have opportunities to grow profitably.
Our growth strategy is to maximize the profitability of our existing branches
through the employment of our "community bank" operating philosophy and our
centralized operational support and management. We also feel that it is
important to grow and expand our financial products, services and delivery
channels to meet changing customer needs. In addition, we have developed, and
expect to continue developing, a sales culture within Community Trust Bank
designed to reward our employees for referring business through various
incentive programs. As a result of the consolidation of our banks into our lead
bank, Community Trust Bank, and our existing ample operational capacity for
growth, we believe we are well-positioned to further improve our operating
efficiencies.
We believe that Kentucky's recent legislation permitting statewide branching
increases our opportunities for geographic expansion and growth. Our plan is to
expand our footprint by adding banking locations within contiguous markets to
increase in-market synergies and operational efficiencies. Opportunities to
enter new markets within and contiguous to our geographical footprint include:
. de novo branching;
. branch acquisitions; and
. bank acquisitions.
We believe that we are well-positioned within our markets to offer acquisition
targets the opportunity to partner with a bank that shares their community bank
philosophy and has an operational platform that includes:
. a more diverse selection of financial products and services; and
. more efficient and sophisticated back office operational support.
We believe that these qualities have contributed to our prior growth and
will be instrumental to the successful implementation of our business and
growth strategies in the future.
In January 2001, we acquired deposits, loans and fixed assets from The Bank
of Mt. Vernon, Inc., adding offices in Mt. Vernon, Richmond, Somerset and
Berea, Kentucky. In January 2002, we completed our acquisition of Citizens
National Bank & Trust of Hazard, adding offices in Perry County, Kentucky.
During the first quarter of 2002, we plan to merge Citizens' operations into
Community Trust Bank, subject to regulatory approval.
3
CTBI Preferred Capital Trust II
CTBI Preferred Capital Trust II is a newly created Delaware business trust.
We created the trust to offer the preferred securities and to purchase the
debentures. The trust has a term of 30 years but may be dissolved earlier as
provided in the trust agreement. Upon issuance of the preferred securities
offered by this prospectus, the purchasers in this offering will own all of the
issued and outstanding preferred securities of the trust. We will own all of
the common securities of the trust.
Our principal executive offices, as well as those of the trust, are located
at 346 North Mayo Trail, Pikeville, Kentucky 41501. The main telephone number
for us and the trust is (606) 432-1414.
The Offering
The issuer.................. CTBI Preferred Capital Trust II
Securities being offered.... 1,000,0002,500,000 preferred securities, which represent
preferred undivided interests in the assets of
the trust. Those assets will consist solely of
the debentures and payments received on the
debentures. The trust will sell the preferred
securities to the public for cash. The trust will
use that cash to buy the debentures from us.
Offering price.............. $25.00$10.00 per preferred security.
When the trust will pay
distributions to you...... Your purchase of the preferred securities
entitles you to receive cumulative cash
distributions at a %an 8.25% annual rate.
Distributions will accumulate from the date the
trust issues the preferred securities and are to
be paid quarterly on March 31, June 30, September
30 and December 31 of each year, beginning June
30, 2002. As long as the preferred securities are
represented by a global security, the record date
for distributions on the preferred securities
will be the business day prior to the
distribution date. We may defer the payment of
cash distributions, as described below.
When the trust must redeem
the preferred securities.. The debentures will mature and we must redeem the
preferred securities on March 31, 2032. We have
the option, however, to shorten the maturity date
to a date not earlier than March 31, 2007. We
will not shorten the maturity date unless we have
received the prior approval of the Board of
Governors of the Federal Reserve System, if
required by law or regulation.
Redemption of the preferred
securities before March
31, 2032 is possible...... The trust must redeem the preferred securities
when the debentures are paid at maturity or upon
any earlier redemption of the debentures to the
extent the debentures are redeemed. We may redeem
all or part of the debentures at any time on or
after March 31, 2007. In addition, we may redeem,
at any time, all of the debentures if:
. existing laws or regulations, or the
interpretation or application of these laws or
regulations, change, causing the interest we
pay on the debentures to no longer be
deductible by us for federal income tax
purposes; or causing the trust to become
subject to federal income tax or to certain
other taxes or governmental charges;
4
. existing laws or regulations change, requiring
the trust to register as an investment
company; or
. the capital adequacy guidelines of the Federal
Reserve change so that the preferred
securities no longer qualify as Tier 1 capital.
If your preferred securities are redeemed by the
trust, you will receive the liquidation amount of
$25.00$10.00 per preferred security, plus any accrued
and unpaid distributions to the date of
redemption.
Upon prior approval of the Federal Reserve, if
required, we may also redeem the debentures at
any time, and from time to time, in an amount
equal to the liquidation amount of any preferred
securities we repurchase, plus a proportionate
amount of common securities, but only by
surrendering to the property trustee a like
amount of the preferred securities and common
securities that we then own. In exchange for the
trust securities surrendered by us, the property
trustee will cause to be released to us for
cancellation debentures with a principal amount
equal to the liquidation amount of trust
securities, plus accumulated but unpaid
distributions, if any, then held by the property
trustee allocable to those trust securities.
After the date of redemption involving an
exchange by us, the trust securities we surrender
will no longer be deemed outstanding and the
debentures redeemed in exchange for the trust
securities will be cancelled.
We have the option to extend
the interest payment period The trust will rely solely on payments made by us
under the debentures to pay distributions on the
preferred securities. As long as we are not in
default under the indenture relating to the
debentures, we may, at one or more times, defer
interest payments on the debentures for up to 20
consecutive quarters, but not beyond March 31,
2032. If we defer interest payments on the
debentures:
. the trust will also defer distributions on the
preferred securities;
. the distributions to which you are entitled
will accumulate; and
. these accumulated distributions will earn
interest at an annual rate of %,8.25%,
compounded quarterly, until paid. At the end
of any deferral period, we will pay to the
trust all accrued and unpaid interest under
the debentures. The trust will then pay all
accumulated and unpaid distributions to you.
You will still be taxed if
distributions on the
preferred securities are
deferred.................. If a deferral of payment occurs, you must
recognize the amount of the deferred
distributions as income for United States federal
income tax purposes in advance of receiving the
actual cash distributions, even if you are a cash
basis taxpayer.
Our full and unconditional
guarantee of payment...... Our obligations described in this prospectus, in
the aggregate, constitute a full, irrevocable and
unconditional guarantee on a subordinated basis
by us of the obligations of the trust under the
preferred securities. Under the guarantee
agreement, we guarantee on
5
a subordinated basis by us of the obligations of
the trust under the preferred securities. Under
the guarantee agreement, we guarantee that the
trust will use its assets to pay the
distributions on the preferred securities and the
liquidation amount upon dissolution of the trust.
However, the guarantee does not apply when the
trust does not have sufficient funds to make the
payments. If we do not make payments on the
debentures, the trust will not have suficient
funds to make payments on the preferred
securities. In this event, your remedy is to
institute a legal proceeding directly against us
for enforcement of payments under the debentures.
We may distribute the
debentures directly to you We may, at any time, dissolve the trust and
distribute the debentures to you, subject to the
prior approval of the Federal Reserve, if
required by law or regulation. If we distribute
the debentures, we will use our reasonable
efforts to list the debentures on the American
Stock Exchange or such other securities exchange
or other organization as the preferred securities
are then listed or traded.
How the securities will rank
in right of payment....... Our obligations under the preferred securities,
debentures and guarantee are unsecured and will
rank as follows with regard to right of payment:
. the preferred securities will rank equally
with the common securities of the trust. The
trust will pay distributions on the preferred
securities and the common securities pro rata.
However, if we default with respect to the
debentures, then no distributions on or
redemptions of the common securities of the
trust or our common stock will be paid until
all accumulated and unpaid distributions on
the preferred securities have been paid;
. our obligations under the debentures and the
guarantee are unsecured and generally will
rank junior in priority to our existing and
future senior and subordinated indebtedness;
and
. because we are a holding company, the
debentures and the guarantee will effectively
be subordinated to all depositors' claims, as
well as existing and future liabilities of our
subsidiaries.
Voting rights of the
preferred securities...... Except in limited circumstances, holders of the
preferred securities will have no voting rights.
Proposed American Stock
Exchange symbol........... BPF
You will not receive
certificates.............. The preferred securities will be represented by a
global preferred security certificate that will
be deposited with and registered in the name of
The Depository Trust Company, New York, New York,
or its nominee. As a result, you will not receive
a certificate for the preferred securities, and
your beneficial ownership interests will be
recorded through the DTC book-entry system.
6
How the proceeds of this
offering will be used... The trust will invest the proceeds from the sale
of the preferred securities in the debentures. We
estimate the net proceeds before expenses, to us from the sale of
the debentures to the trust, after deducting underwritingoffering
expenses and underwriting commissions, will be
approximately $ million.$23,750,000. We expect to use
approximately $12.3 million of the net proceeds
from the sale of the debentures to redeem our
8.25% senior notes due January 1, 2003, and $8
million to pay down our line of credit,
approximately $2.5 million of which was used for
the acquisition of Citizens National Bank & Trust
of Hazard. The remaining net proceeds will be
used for general corporate purposes.
Before purchasing the preferred securities being offered, you should
carefully consider the "Risk Factors" beginning on page 10.
7
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below is our selected consolidated financial information and other
financial data. The selected balance sheet and statement of income data,
insofar as they relate to the year ended December 31, 2000 are derived from our
consolidated financial statements which have been audited by Deloitte & Touche
LLP. The selected balance sheet and statement of net income data for the years
ended December 31, 1999, 1998, 1997 and 1996 are derived from our consolidated
financial statements, which have been audited by Ernst & Young LLP. The
selected consolidated financial data as of and for the nine-month periods ended
September 30, 2001 and 2000 are derived from unaudited consolidated financial
statements. In our opinion, all adjustments, consisting solely of normal
recurring adjustments, necessary for a fair presentation of results as of and
for the nine month periods ended September 30, 2001 and 2000 have been
included. This information should be read together with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and the related notes incorporated by
reference into this prospectus from our Annual Report on Form 10-K for the year
ended December 31, 2000 and our Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001. Results for past periods are not necessarily
indicative of results that may be expected for any future period, and results
for the nine-month period ended September 30, 2001 are not necessarily
indicative of results that may be expected for the entire year ended December
31, 2001.
As of or For the Nine
Months Ended
September 30, As of or For the Year Ended December 31,
--------------------- ------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands except per share data)
Summary of income:
Interest income.......................income................... $ 135,474 $ 129,787 $ 175,749 $ 163,516 $ 160,570 $ 150,588 $ 144,447
Interest expense......................expense.................. 74,307 66,403 91,515 79,740 83,986 74,076 69,092
Net interest income...................income............... 61,167 63,384 84,234 83,776 76,584 76,512 75,355
Provision for loan losses.............losses......... 6,345 6,637 9,217 9,105 16,008 11,154 7,285
Noninterest income....................income................ 17,614 14,081 19,526 21,026 19,466 18,442 14,439
Noninterest expense...................expense............... 48,273 46,697 61,927 64,388 62,166 59,892 55,243
Income before income taxes and
extraordinary gains..................gains.............. 24,163 24,131 32,616 31,309 17,876 23,908 27,266
Extraordinary gain, net of tax........tax.... -- -- -- -- -- 3,085 --
Income before income taxes............taxes........ 24,163 24,131 32,616 31,309 17,876 26,993 27,266
Income taxes..........................taxes...................... 7,734 7,539 10,270 9,464 3,907 7,924 8,471
Net income............................income........................ $ 16,429 $ 16,592 $ 22,346 $ 21,845 $ 13,969 $ 19,069 $ 18,795
Common share data:
Diluted earnings per share............share........ $ 1.42 $ 1.38 $ 1.87 $ 1.79 $ 1.14 $ 1.56 $ 1.55
Diluted earnings per share before
extraordinary gain...................gain............... 1.42 1.38 1.87 1.79 1.14 1.31 1.55
Book value per share..................share.............. 16.72 15.10 15.55 14.19 13.54 12.98 11.91
Tangible book value per share.........share..... 11.18 10.23 10.73 9.30 8.40 11.52 10.28
Cash dividends declared...............declared........... 0.60 0.56 0.75 0.72 0.66 0.61 0.55
Weighted average common and
common equivalent shares, diluted....diluted 11,594 12,032 11,955 12,198 12,257 12,246 12,168
Balance sheet data at period end:
Total assets..........................assets...................... $2,422,405 $2,221,994 $2,261,975 $2,176,090 $2,248,039 $1,852,667 $1,840,025
Loans.................................Loans............................. 1,724,389 1,688,541 1,694,525 1,619,480 1,502,386 1,428,429 1,309,623
Allowance for loan losses.............losses......... 24,059 25,759 25,886 25,102 26,089 20,465 18,825
Securities............................Securities........................ 403,053 289,317 285,596 330,588 384,411 281,542 367,685
Deposits..............................Deposits.......................... 2,069,585 1,909,998 1,943,916 1,877,334 1,921,141 1,465,003 1,480,822
Long-term debt........................debt.................... 47,944 48,060 48,060 48,174 48,323 53,463 19,136
Shareholders' equity..................equity.............. 190,799 177,172 181,904 172,419 164,795 158,019 144,754
8
As of or For the Nine
Months Ended
September 30, As of or For the Year Ended December 31,
---------------------- ----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands except per share data)
Balance sheet data, averages:
Assets............................... $2,412,124 $2,178,810 $2,195,380 $2,182,721 $2,038,680 $1,837,874 $1,762,009
Loans................................ 1,751,856 1,655,434 1,666,062 1,557,703 1,468,776 1,406,041 1,215,243
Earning assets....................... 2,227,007 1,985,000 2,004,686 1,976,679 1,871,898 1,702,290 1,632,532
Deposits............................. 2,065,315 1,872,175 1,886,198 1,882,365 1,650,801 1,459,551 1,467,794
Shareholders' equity................. 186,541 175,933 176,911 169,467 162,689 159,036 138,925
Asset quality ratios:
Nonperforming loans to total loans... 1.70% 1.32%1.31% 1.54% 1.16% 1.40% 1.49% 1.31%1.14% 1.38% 1.51% 1.27%
Nonperforming assets to total assets. 1.30 1.20 1.34 0.95 1.00 1.27 0.96
Allowance to nonperforming loans,
end of period....................... 81.94 116.90 99.30 135.77 125.63 94.97 113.50
Allowance to net loans, end of period 1.40 1.53 1.53 1.55 1.74 1.43 1.44
Net chargeoffs to average loans...... 0.22 0.280.62 0.48 0.51 0.65 0.78 0.66 0.37
Profitability and performance
ratios:
Return on average assets............. 0.91% 1.02% 1.02% 1.00% 0.69% 1.05% 1.07%
Return on average common equity...... 11.78 12.60 12.63 12.89 8.59 12.31 13.53
Dividend payout ratio................ 42.25 40.58 40.11 40.10 57.77 46.54 35.29
Net interest margin (1).............. 3.76 4.37 4.33 4.37 4.21 4.66 4.76
Efficiency ratio (2)................. 60.61 59.13 58.53 60.14 63.44 61.79 60.03
Liquidity and capital ratios:
Average loans to average deposits.... 84.8% 88.4% 88.3% 82.8% 89.0% 96.3% 82.8%
Average equity to average assets..... 7.73 8.07 8.06 7.76 7.98 8.65 7.88
Tier 1 risk-based capital............ 9.06 9.06 9.26 8.92 8.50 9.97 9.71
Total risk-based capital............. 10.30 10.32 10.51 10.17 9.75 11.23 10.96
Leverage ratio....................... 6.66 7.29 7.29 7.09 6.09 7.75 7.05
Ratio of earnings to fixed
charges(3):
Including interest expenses on
deposits............................ 1.33 1.36 1.36 1.39 1.21 1.32 1.39
Excluding interest expense on
deposits............................ 4.82 4.94 4.95 5.02 2.33 3.01 4.20
- --------
(1) Net interest income divided by average interest-earning assets.
(2) Non-interest expense divided by the sum of net interest income, on a tax
equivalent basis, plus non-interest income.
(3) For purposes of computing ratios of earnings to combined fixed charges,
earnings represent net income plus applicable income taxes and fixed
charges. Fixed charges include gross interest expense, other than interest
on deposits in one case and inclusive of such interest in the other, and
the proportion deemed representative of the interest factor or rent
expense, net of income from subleases.
9
RISK FACTORS
An investment in the preferred securities involves a number of risks. Some
of these risks relate to the preferred securities and others relate to us and
the financial services industry, generally. We urge you to read all of the
information contained in this prospectus. In addition, we urge you to consider
carefully the following factors in evaluating an investment in the trust before
you purchase the preferred securities offered by this prospectus.
Because the trust will rely on the payments it receives on the debentures
from us to fund all payments on the preferred securities, and because the trust
may distribute the debentures in exchange for the preferred securities,
purchasers of the preferred securities are making an investment decision that
relates to the debentures being issued by us as well as the preferred
securities. Purchasers should carefully review the information in this
prospectus about the preferred securities, the debentures and the guarantee.
Risks Related to an Investment in Community Trust Bancorp, Inc.
Our profitability depends significantly on local economic conditions.
Our success is dependent on the general economic conditions of the
communities we serve. Unlike larger banks that are more geographically
diversified, we provide financial and banking services primarily to eastern,
central and south central Kentucky and southern West Virginia. The economies of
a majority of these markets are dependent to a significant extent on the coal
industry and coal related industries. The economic conditions in these areas
have a significant impact on loan demand, the ability of borrowers to repay
these loans and the value of the collateral securing these loans. A significant
decline in general economic conditions, and in particular the coal industry,
will affect these local economic conditions and will negatively affect the
financial results of our banking operations. Factors influencing general
economic conditions include inflation, recession, unemployment and other
factors beyond our control.
Although local economic conditions have not been greatly effected by the
events of September 11, 2001 or the more recent terrorist activities and
threats, these events may eventually effect economic conditions in general and
in our primary market areas. If those events and other related events cause a
decline in the economy in general and in our primary market areas in
particular, then for the reasons described in the previous paragraph, our
results of operations and financial condition could be adversely effected.
See
"-- Fluctuations in interest rates could reduce our profitability."
Fluctuations in interest rates could reduce our profitability.
We realize income primarily from the difference between interest earned on
loans and investments and the interest paid on deposits and borrowings. We
expect that we will periodically experience "gaps" in the interest rate
sensitivities of our assets and liabilities, meaning that either our
interest-bearing liabilities will be more sensitive to changes in market
interest rates than our interest-earning assets, or vice versa. In either
event, if market interest rates should move contrary to our position, this
"gap" will work against us, and our earnings may be negatively affected.
We are unable to predict fluctuations of market interest rates, which are
affected by, among other factors, changes in the following:
. inflation rates;
. levels of business activity;
. unemployment levels;
10
. money supply; and
. domestic and foreign financial markets.
Our asset-liability management strategy, which is designed to mitigate our
risk from changes in market interest rates, may not be able to prevent changes
in interest rates from having a material adverse effect on our results of
operations and financial condition. This is especially true when fluctuations
in interest rates exceed general expectations such as the recent decreases in
interest rates since September 11,January 1, 2001.
If our allowance for loan losses is not sufficient to cover actual loan losses,
our earnings could decrease.
Our loan customers may not repay their loans according to the terms of these
loans, and the collateral securing the payment of these loans may be
insufficient to assure repayment. We may experience significant credit losses
which could have a material adverse effect on our operating results. We make
various assumptions and judgments about the collectibility of our loan
portfolio, including the creditworthiness of our borrowers and the value of the
real estate and other assets serving as collateral for the repayment of many of
our loans. In determining the size of the allowance for loan losses, we rely on
our experience and our evaluation of economic conditions. If our assumptions
prove to be incorrect, our current allowance for loan losses may not be
sufficient to cover loan losses inherent in our loan portfolio and adjustments
may be necessary due to unfavorable economic conditions or adverse developments
in our loan portfolio. Material additions to our allowance would materially
decrease our net income.
In addition, federal and state regulators periodically review our allowance
for loan losses and may require us to increase our provision for loan losses or
recognize further loan charge-offs. Any increase in our loan allowance or loan
charge-offs as required by these regulatory agencies could have a material
adverse effect on our results of operations and financial condition.
We rely on local businesses which may have less diverse customer bases than
their national competitors, which may make them more susceptible to changes in
the local economy.
We target our business development and marketing strategy primarily to serve
the banking and financial needs of small and medium sized, locally owned and
operated businesses. These businesses may not have as diverse customer bases as
businesses serving regional or national markets. If general economic conditions
such as inflation, recession, unemployment and other factors beyond our control
negatively impact our market area, our results of operations and financial
condition could be significantly affected.
Competition with other financial institutions could adversely affect our
profitability.
We face vigorous competition from banks and other financial institutions,
including savings and loan associations, savings banks, finance companies and
credit unions. A number of these banks and other financial institutions have
substantially greater resources and lending limits, larger branch systems and a
wider array of banking services. To a limited extent, we also compete with
other providers of financial services, such as money market mutual funds,
brokerage firms, consumer finance companies and insurance companies. This
competition may reduce or limit our margins on banking, investment management
and trust services, reduce our market share and adversely affect our results of
operations and financial condition.
The Gramm-Leach-Bliley Act of 1999 (the "Gramm Act") has expanded the
permissible activities of a bank holding company. The Gramm Act allows
qualifying bank holding companies to elect to be treated as financial holding
companies. A financial holding company may engage in activities that are
financial in nature or are incidental or complementary to financial activities.
The Gramm Act also eliminated restrictions imposed by the Glass-Steagall
Financial Services Law, adopted in the 1930s, which prevented banking,
insurance and securities firms from fully entering each other's business. While
it is uncertain what the full impact of this legislation will
11
be, it is likely to result in further consolidation in the financial services
industry. In addition, removal of these restrictions will likely increase the
number of entities providing banking services and thereby create additional
competition.
In the 2000 session, the Kentucky legislature enacted legislation that
permits statewide branching, thereby increasing the geographic expansion and
growth opportunities for banks.
We may be unable to make acquisitions or to integrate our acquisitions
successfully.
Our growth strategy is impacted by our ability to acquire other financial
institutions. We may not be able to make future acquisitions and, if completed,
we may not be able to successfully integrate the operations, management,
products and services of the entities we acquire. Following each acquisition,
we must expend managerial, operational, financial and other resources to
integrate these entities. In particular, we may be required to install and
standardize adequate operational and control systems, deploy or modify
equipment, implement marketing efforts in new as well as existing locations and
employ and maintain qualified personnel. Our failure to successfully integrate
the entities we acquire into our existing operations may adversely affect our
financial condition and results of operations.
We rely heavily on our management team, and the unexpected loss of key managers
may adversely affect our operations.
Our success to date has been strongly influenced by our ability to attract
and to retain senior management experienced in banking and financial services.
Our ability to retain executive officers and the current management teams of
each of our lines of business will continue to be important to successful
implementation of our strategies. We do not have employment or non-compete
agreements with any of these key employees. The unexpected loss of services of
any key management personnel, or the inability to recruit and retain qualified
personnel in the future, could have an adverse effect on our business and
financial results.
We operate in a highly regulated environment and may be adversely affected by
changes in federal and state laws and regulations.
We are subject to extensive regulation, supervision and examination by
federal and state banking authorities. Any change in applicable regulations or
federal or state legislation could have a substantial impact on us and our
results of operations. Additional legislation and regulations may be enacted or
adopted in the future that could significantly affect our powers, authority and
operations, which could have a material adverse effect on our financial
condition and results of operations. Further, regulators have significant
discretion and power to prevent or remedy unsafe or unsound practices or
violations of laws by banks and bank holding companies in the performance of
their supervisory and enforcement duties. The exercise of regulatory power may
have a negative impact on our results of operations and financial condition.
Risks Related to an Investment in the Preferred Securities
If we do not make interest payments under the debentures, the trust will be
unable to pay distributions and liquidation amounts. Our guarantee will not
apply because the guarantee covers payments only if the trust has funds
available.
The trust will depend solely on our payments on the debentures to pay
amounts due to you on the preferred securities. If we default on our obligation
to pay the principal or interest on the debentures, the trust will not have
sufficient funds to pay distributions or the liquidation amount on the
preferred securities. In that case, you will not be able to rely on the
guarantee for payment of these amounts because the guarantee only applies if
the trust has sufficient funds to make distributions on or to pay the
liquidation amount of the preferred securities. Instead, you or the property
trustee will have to institute a direct action against us to enforce the
property trustee's rights under the indenture relating to the debentures.
12
To the extent we must rely on dividends from our subsidiaries to make interest
payments on the debentures to the trust, our available cash flow may be
restricted and distributions may be deferred.
We are a holding company and substantially all of our assets are held by our
subsidiaries. Our ability to make payments on the debentures when due will
depend primarily on available cash resources at the bank holding company and
dividends from our subsidiaries. Dividend payments or extensions of credit from
our subsidiaries are subject to regulatory limitations, generally based on
capital levels and current and retained earnings, imposed by the various
regulatory agencies with authority over such subsidiaries. The ability of our
subsidiaries to pay dividends is also subject to its profitability, financial
condition, capital expenditures and other cash flow requirements. We cannot
assure you that our subsidiaries will be able to pay dividends in the future.
The debentures and the guarantee rank lower than most of our other
indebtedness, and our holding company structure effectively subordinates any
claims against us to those of our subsidiaries' creditors.
Our obligations under the debentures and the guarantee are unsecured and
will rank junior in priority of payment to our existing and future senior and
subordinated indebtedness. As of September 30, 2001, we had approximately $57$56
million outstanding principal amount of short- and long-term senior and
subordinated debt. The issuance of the debentures and the preferred securities
does not limit our ability or the ability of our subsidiaries to incur
additional indebtedness, guarantees or other liabilities. Because we are a
holding company, the creditors of our subsidiaries, including depositors, also
will have priority over you in any distribution of our subsidiaries' assets in
liquidation, reorganization or otherwise. Accordingly, the debentures and the
guarantee will be effectively subordinated to all existing and future
liabilities of our direct and indirect subsidiaries, and you should look only
to our assets for payments on the preferred securities and the debentures.
We may defer interest payments on the debentures for substantial periods, which
could have adverse consequences for you.
We may, at one or more times, defer interest payments on the debentures for
up to 20 consecutive quarters. If we defer interest payments on the debentures,
the trust will defer distributions on the preferred securities during any
deferral period. During a deferral period, you will be required to recognize as
income for federal income tax purposes an amount approximately equal to the
interest that accrues on your proportionate share of the debentures held by the
trust in the tax year in which that interest accrues, even though you will not
receive these amounts until a later date. Although we do not believe this to be
the case, the mere existence of the right to defer interest could result in
your being required to recognize interest income as it accrues even though we
have not exercised our deferral right.
You will also not receive the cash related to any accrued and unpaid
interest from the trust if you sell the preferred securities before the end of
any deferral period. During a deferral period, accrued but unpaid distributions
will increase your tax basis in the preferred securities. If you sell the
preferred securities during a deferral period, your increased tax basis will
decrease the amount of any capital gain or increase the amount of any capital
loss that you may have otherwise realized on the sale. A capital loss, except
in certain limited circumstances, cannot be applied to offset ordinary income.
As a result, deferral of distributions could result in ordinary income, and a
related tax liability for the holder, and a capital loss that may only be used
to offset a capital gain.
We do not currently intend to exercise our right to defer interest payments
on the debentures. However, in the event of a deferral period, the market price
of the preferred securities would likely be adversely affected. The preferred
securities may trade at a price that does not fully reflect the value of
accrued but unpaid interest on the debentures. If you sell the preferred
securities during a deferral period, you may not receive the same return on
investment as someone who continues to hold the preferred securities. Due to
our right to defer interest payments, the market price of the preferred
securities may be more volatile than the market prices of other securities
without the deferral feature.
13
Regulators may preclude us from making distributions on the debentures in the
event our regulatory capital, liquidity or financial performance deteriorates.
We and our subsidiaries are subject to extensive federal and state law,
regulation and supervision. Our regulators monitor our financial condition on a
periodic basis and may impose limitations on our operations and business
activities under various circumstances. In response to any perceived
deficiencies in liquidity or regulatory capital levels, our regulators may
require us to obtain their consent prior to paying dividends on our capital
stock or interest on the debentures. In the event our regulators withheld their
consent to our payment of interest on the debentures, we would exercise our
right to defer interest payments on the debentures, and the trust would not
have funds available to make distributions on the preferred securities during
the deferral period. This action by our regulators may or may not be taken in
conjunction with similar restrictions on the ability of our subsidiaries to pay
dividends to us. See "-- To the extent we must rely on dividends from our
subsidiaries to make interest payments on the debentures to the trust, our
available cash flow may be restricted and distributions may be deferred." The
commencement of a deferral period with respect to interest on the debentures
and, accordingly, distributions on the preferred securities, would likely cause
the market price of the preferred securities to decline. See "-- We may defer
interest payments on the debentures for substantial periods, which could have
adverse consequences for you."
We have made only limited covenants in the indenture and the trust agreement,
which may not protect your investment in the event we experience significant
adverse changes in our financial condition or results of operations.
The indenture governing the debentures and the trust agreement governing the
trust do not require us to maintain any financial ratios or specified levels of
net worth, revenues, income, cash flow or liquidity, and therefore do not
protect holders of the debentures or the preferred securities in the event we
experience significant adverse changes in our financial condition or results of
operations. The indenture prevents us and any subsidiary from incurring, in
connection with the issuance of any trust preferred securities or any similar
securities, indebtedness that is senior in right of payment to the debentures.
The indenture also limits our ability and the ability of any subsidiary to
incur, in connection with the issuance of any trust preferred securities or any
similar securities, indebtedness that is equal in right of payment with the
debentures. Except as described above, neither the indenture or the trust
agreement limits our ability or the ability of any subsidiary to incur
additional indebtedness that is senior in right of payment to the debentures.
Therefore, you should not consider the provisions of these governing
instruments as a significant factor in evaluating whether we will be able to
comply with our obligations under the debentures or the guarantee.
In the event we redeem the debentures before March 31, 2032, you may not be
able to reinvest your principal at the same or a higher rate of return.
Under the following circumstances, we may redeem the debentures before their
stated maturity:
. We may redeem the debentures, in whole or in part, at any time on or after
March 31, 2007.
. We may redeem the debentures in whole, but not in part, within 180 days
after certain occurrences at any time during the life of the trust. These
occurrences may include adverse tax, investment company or bank regulatory
developments. See "Description of the Debentures -- Redemption."
You should assume that we will exercise our redemption option if we are able
to obtain capital at a lower cost than we must pay on the debentures or if it
is otherwise in our interest to redeem the debentures. If the debentures are
redeemed, the trust must redeem preferred securities having an aggregate
liquidation amount equal to the aggregate principal amount of debentures
redeemed, and you may be required to reinvest your principal at a time when you
may not be able to earn a return that is as high as you were earning on the
preferred securities.
14
We can distribute the debentures to you, which may have adverse tax
consequences for you and which may adversely affect the market price of the
preferred securities prior to such distribution.
The trust may be dissolved at any time before maturity of the debentures on
March 31, 2032. As a result, and subject to the terms of the trust agreement,
the trustees may distribute the debentures to you.
We cannot predict the market prices for the debentures that may be
distributed in exchange for preferred securities upon dissolution of the trust.
The preferred securities, or the debentures that you may receive if the trust
is liquidated, may trade at a discount to the price that you paid to purchase
the preferred securities. Because you may receive debentures, your investment
decision with regard to the preferred securities will also be an investment
decision with regard to the debentures. You should carefully review all of the
information contained in this prospectus regarding the debentures.
Under federal income tax laws supporting classification of the trust as a
grantor trust for tax purposes, a distribution of the debentures to you upon
the dissolution of the trust would not be a taxable event to you. If there is a
change in law, a distribution of debentures upon the dissolution of the trust
could be a taxable event to you.
You are subject to repayment risk because possible tax law changes could result
in a redemption of the preferred securities.
Future legislation may be enacted that could adversely affect our ability to
deduct our interest payments on the debentures for federal income tax purposes,
making redemption of the debentures likely and resulting in a redemption of the
preferred securities.
From time to time, Congress has proposed federal income tax law changes that
would, among other things, generally deny interest deductions to a corporate
issuer if the debt instrument has a term exceeding 15 years and if the debt
instrument is not reflected as indebtedness on the issuer's consolidated
balance sheet. Other proposed federal income tax law changes would have denied
interest deductions if the debt instrument had a term exceeding 20 years. These
proposals were not enacted into law. Although it is impossible to predict
whether future proposals of this nature will be introduced and enacted with
application to already issued and outstanding securities, in the future we
could be precluded from deducting interest on the debentures in this event.
Enactment of this type of proposal might in turn give rise to a Tax Event as
described under "Description of the Preferred Securities -- Redemption or
Exchange -- Redemption upon a Tax Event, Investment Company Event or Capital
Treatment Event."
Trading characteristics of the preferred securities may create adverse tax
consequences for you.
The preferred securities may trade at a price that does not reflect the
value of accrued but unpaid interest on the underlying debentures. If you
dispose of your preferred securities between record dates for payments on the
preferred securities, you may have adverse tax consequences. Under these
circumstances, you will be required to include accrued but unpaid interest on
the debentures allocable to the preferred securities through the date of
disposition in your income as ordinary income if you use the accrual method of
accounting or if this interest represents original issue discount. See "Federal
Income Tax Consequences."
If interest on the debentures is included in income under the original issue
discount provisions, you would add this amount to your adjusted tax basis in
your share of the underlying debentures deemed disposed. If your selling price
is less than your adjusted tax basis, which will include all accrued but unpaid
original issue discount interest included in your income, you could recognize a
capital loss which, subject to limited exceptions, cannot be applied to offset
ordinary income for federal income tax purposes. See "Federal Income Tax
Consequences" for more information on possible adverse tax consequences to you.
15
There is no current public market for the preferred securities, and their
market price may decline after you invest.
There is currently no public market for the preferred securities. Although
we have applied to have the preferred securities listed on the American Stock
Exchange, there is no guarantee that an active or liquid trading market will
develop for the preferred securities or that the quotation of the preferred
securities will continue to be listed on the American Stock Exchange. If an
active trading market does not develop, the market price and liquidity of the
preferred securities will be adversely affected. 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 pay for the preferred
securities.
Future trading prices of the preferred securities may be subject to
significant fluctuations in response to prevailing interest rates, our future
operating results and financial condition, the market for similar securities
and general economic and market conditions. The initial public offering price
of the preferred securities has been set at the liquidation amount of the
preferred securities and may be greater than the market price following the
offering.
The market price for the preferred securities, or the debentures that you
may receive in a distribution, is also likely to decline during any period that
we are deferring interest payments on the debentures.
You must rely on the property trustee to enforce your rights if there is an
event of default under the indenture.
You may not be able to directly enforce your rights against us if an event
of default under the indenture occurs. If an event of default under the
indenture occurs and is continuing, this event will also be an event of default
under the trust agreement. In that case, you must rely on the enforcement by
the property trustee of its rights as holder of the debentures against us. The
holders of a majority in liquidation amount of the preferred securities will
have the right to direct the property trustee to enforce its rights. If the
property trustee does not enforce its rights following an event of default
after receipt of a request by the record holders to do so, any record holder
may, to the extent permitted by applicable law, take action directly against us
to enforce the property trustee's rights. If an event of default occurs under
the trust agreement that is attributable to our failure to pay interest or
principal on the debentures, or if we default under the guarantee, you may
proceed directly against us. You will not be able to exercise directly any
other remedies available to the holders of the debentures unless the property
trustee fails to do so.
As a holder of preferred securities you have limited voting rights, and we can
amend the trust agreement to change the terms and conditions of the
administration, operation and management of the trust without your consent.
Holders of preferred securities have limited voting rights. We can, without
your consent, make certain amendments to the trust agreement. Your voting
rights pertain primarily to certain amendments to the trust agreement and not
to the administration, operation or management of the trust. In general, only
we can replace or remove any of the trustees. 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
replace the property trustee and the Delaware trustee. In certain
circumstances, with the consent of the holders of a majority in the aggregate
liquidation amount of the preferred securities, we may amend the trust
agreement to ensure that the trust remains classified for federal income tax
purposes as a grantor trust and to ensure that the trust retains its exemption
from status as an "investment company" under the Investment Company Act, even
if such amendment adversely affects your rights as a holder of preferred
securities. For more information regarding limitation on your ability to
control amendments to the trust agreement, see "Description of the Preferred
Securities -- Voting Rights; Amendment of Trust Agreement."
16
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this prospectus that are not
historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act. Our actual results may differ
materially from those included in the forward-looking statements.
Forward-looking statements are typically identified by words or phrases such as
"believe," "expect," "anticipate," "intend," "estimate," "may increase," "may
fluctuate," and similar expressions or future or conditional verbs such as
"will," "should," "would," and "could." These forward-looking statements
involve risks and uncertainties including, but not limited to the following:
. portfolio growth and the credit performance of the portfolios, including
bankruptcies and seasonal factors;
. changes in general economic conditions, including the performance of
financial markets, the performance of coal and coal related industries,
prevailing inflation and interest rates;
. realized gains from sales of investments, gains from asset sales, and
losses on commercial lending activities;
. results of various investment activities;
. competitors' pricing policies;
. changes in laws and regulations on competition;
. demographic changes on target market populations' savings and financial
planning needs;
. industry changes in information technology systems on which we are highly
dependent;
. failure of acquisitions to produce revenue enhancements or cost savings at
levels or within time frames originally anticipated or unforeseen
integration difficulties;
. adoption of a FFIEC policy that provides guidance on the reporting of
delinquent consumer loans and the timing of associated credit charge-offs
for financial institution subsidiaries; and
. legal proceedings and related matters.
In addition, the banking industry in general is subject to various monetary
and fiscal policies and regulations, which include those determined by the
Federal Reserve Board, the Office of the Comptroller of Currency, the Federal
Deposit Insurance Corporation, and state regulators, whose policies and
regulations could affect our results. These statements are representative only
on the date hereof, we undertake no obligation to update any forward-looking
statements made. We discuss these uncertainties and others in the sections of
this prospectus named "Risk Factors."
17
USE OF PROCEEDS
The trust will invest all of the proceeds from the sale of the trust
securities in the debentures. We anticipate that the net proceeds from the sale
of the debentures will be approximately $ million$23,750,000 after deduction of offering
expenses estimated to be $$250,000 and underwriting commissions. We expect to
use approximately $12.3 million of the net proceeds from the sale of the
debentures to redeem our 8.25% senior notes due January 1, 2003, and $8 million
to pay down our line of credit, approximately $2.5 million of which was used
for the acquisition of Citizens National Bank & Trust of Hazard. The remaining
net proceeds will be used for general corporate purposes.
CAPITALIZATION
The following table sets forth our indebtedness and capitalization at
September 30, 2001 on an actual basis and on a pro forma as adjusted basis to
give effect to the offering and the application of the estimated net proceeds
from the corresponding sale of the debentures as described under "Use of
Proceeds," as if such sale had been consummated on September 30, 2001.
You should read this table in conjunction with our consolidated financial
statements and the related notes incorporated by reference into this prospectus
from our Annual Report on Form 10-K for the year ended December 31, 2000.
As of September 30, 2001 (Unaudited)
------------------------------------
Pro Forma Pro Forma
Actual Adjustments As Adjusted
-------- ----------- -----------
(Dollars in thousands)
Short-Term Indebtedness:
Parent company:
Revolving line of credit, expires January 31, 2002................ $ 8,000 $ (8,000) $ --
Subsidiaries:
Federal funds purchased........................................... 20,230 -- 20,230
Securities sold under agreements to repurchase.................... 50,411 -- 50,411
-------- -------- --------
Total short-term indebtedness................................. 78,461 (8,000) 70,641
Long-Term Indebtedness:
Parent company:
Senior notes, 8.25% interest, due January 1, 2003................. 12,230 (12,230) --
Subsidiaries:
Capital lease obligations......................................... 1,212 -- 1,212
Other............................................................. 2 -- 2
-------- -------- --------
Total long-term indebtedness.................................. 13,444 (12,230) 1,214
Company Obligated Trust Preferred Securities:
Trust preferred securities, 9.0% interest, due March 31, 2027........ 34,500 -- 34,500
Trust preferred securities (1)....................................... -- 25,000 25,000
Shareholders' Equity:
Preferred stock, 300,000 shares authorized and unissued Common stock,
$5 par value, shares authorized 25,000,000 shares outstanding
11,413,704......................................................... 57,068 -- 57,068
Capital surplus...................................................... 51,026 -- 51,026
Retained earnings.................................................... 77,927 -- 77,927
Accumulated other comprehensive income, net of tax................... 4,778 -- 4,778
-------- -------- --------
Total shareholders' equity.................................... $190,799 $ -- $190,799
======== ======== ========
Total capitalization (2)...................................... $238,743 $ 12,770 $251,513
======== ======== ========
18
As of September 30, 2001 (Unaudited)
-----------------------------------
Pro Forma Pro Forma
Actual Adjustments As Adjusted
------ ----------- -----------
(Dollars in thousands)
Capital Ratios (3):
Total shareholders' equity to total assets 7.88% 7.87%
Tier 1 risk-based capital ratio (4)....... 9.06 10.38
Total risk-based capital ratio (4)........ 10.30 11.61
Leverage ratio (4)(5)..................... 6.66 7.63
- --------
(1) Reflects the preferred securities at their issue price. As described
herein, the only assets of the trust, which is our subsidiary, will be
approximately $25.8 million in aggregate principal amount of subordinated
debentures, including the amount attributable to the issuance of the common
securities of the trust, which will mature on March 31, 2032. We will own
all of the common securities issued by the trust.
(2) Includes shareholders' equity and long-term indebtedness.
(3) The capital ratios, as adjusted, are computed including the estimated
proceeds from the sale of the preferred securities in a manner consistent
with Federal Reserve regulations.
(4) The preferred securities have been structured to qualify as Tier 1 capital.
However, in calculating the amount of Tier 1 qualifying capital, the
preferred securities can only be included up to the amount constituting 25%
of total Tier 1 core capital elements (including preferred securities). As
adjusted for this offering, our Tier 1 capital as of September 30, 2001
would have been approximately $182 million, of which $25.0 million would
have been attributable to the preferred securities offered by this
prospectus.
(5) The leverage ratio is Tier 1 capital divided by average quarterly assets
after deducting intangible assets and net deferred tax assets in excess of
regulatory maximum limits.
ACCOUNTING TREATMENT
The trust will be treated, for financial reporting purposes, as our finance
subsidiary and, accordingly, the accounts of the trust will be included in our
consolidated financial statements. The preferred securities will be presented
as a separate line item in our consolidated balance sheet under the caption
"Trust preferred securities," or other similar caption. In addition,
appropriate disclosures about the preferred securities, the guarantee and the
debentures will be included in the notes to our consolidated financial
statements. For financial reporting purposes, we will record distributions
payable on the preferred securities in our consolidated statements of income.
Our future reports filed under the Securities Exchange Act of 1934 will
include a footnote to the audited consolidated financial statements stating
that:
. the trust is wholly owned;
. the sole assets of the trust are the debentures, specifying the
debentures' outstanding principal amount, interest rate and maturity date;
and
. our obligations described in this prospectus, in the aggregate, constitute
a full, irrevocable and unconditional guarantee on a subordinated basis by
us of the obligations of the trust under the preferred securities.
Under accounting rules of the SEC, we are not required to include separate
financial statements of the trust in this prospectus because we will own all of
the trust's voting securities, the trust has no independent operations and we
guarantee the payments on the preferred securities to the extent described in
the prospectus.
19
REGULATORY TREATMENT
We are required by the Federal Reserve to maintain current levels of capital
for bank regulatory purposes. We expect that the preferred securities will be
treated as Tier 1 capital of Community Trust Bancorp, Inc. for these purposes.
MANAGEMENT
Our directors and executive officers and their principal position(s) with
Community Trust Bancorp, Inc. are shown in the following table.
Name Position(s)
---- -----------
Burlin Coleman........ Chairman of the Board
Jean R. Hale.......... Vice Chairman, President and Chief Executive Officer
Mark A. Gooch......... Executive Vice President and Treasurer
Ronald M. Holt........ Executive Vice President
William Hickman III... Executive Vice President and Secretary
James B. Draughn...... Executive Vice President
Michael S. Wasson..... Executive Vice President
Charles J. Baird...... Director
Nick A. Cooley........ Director
William A. Graham, Jr. Director
M. Lynn Parrish....... Director
Ernest M. Rogers...... Director
Burlin Coleman, age 72, has served Community Trust Bank and its predecessor
bank since 1949 until his retirement in 1994. He came out of retirement in 1996
to serve as President and Chief Executive Officer of Community Trust Bancorp,
Inc. until June 1999. He continues to serve as Chairman of Community Trust
Bancorp, Inc. and Community Trust Bank.
Jean R. Hale, age 54, has served as President and CEO of Community Trust
Bancorp, Inc. since July 1, 1999. Ms. Hale has served in various positions
within Community Trust Bank since 1969. Since April 2001, she has also served
as Vice Chairman of Community Trust Bancorp and Community Trust Bank. She has
been a director of Community Trust Bancorp, Inc. and Community Trust Bank since
1993. She currently serves on the board of directors of many organizations
including: Kentucky Economic Development Finance Authority of the State of
Kentucky (Chairman), Kentucky Coal and Export Council, Prestonburg Community
College (Chairman), KCTCS Foundation, East Kentucky Exposition Center and
Commonwealth Small Business Development Corporation. Ms. Hale served as a
director of the Federal Reserve Bank of Cleveland, Cincinnati branch from 1995
to 2001.
Mark A. Gooch, age 42, has been in the banking industry since 1975. He has
been with Community Trust Bank since 1987 serving in many positions. He became
President and CEO of Community Trust Bank and Executive Vice President and
Treasurer of Community Trust Bancorp, Inc. in July 1999 after holding many
positions with Community Trust Bank. He is a director of Pike County Chamber of
Commerce, Kentucky Bankers Association and P-16 Education Council.
Ronald M. Holt, age 54, joined Community Trust Bancorp, Inc. in April 1995
to supervise trust and investment activities. With 30 years of investment and
financial services sales experience, he has earned a number of professional
designations including Certified Financial Planner and Certified Trust and
Financial Advisor. Mr. Holt is a former director and regional manager of a $130
billion trust department.
20
William Hickman III, age 51, joined us in 1980 to form Community Trust
Bank's legal department. He left in 1994 to practice law and returned in 1997
to serve as Executive Vice President and Secretary of Community Trust Bancorp,
Inc. and Executive Vice President and Staff Attorney of Community Trust Bank.
James B. Draughn, age 42, has been with Community Trust Bank since May 1993
during which time he has held several positions. He became an Executive Vice
President of Community Trust Bancorp, Inc. and Executive Vice
President/Operations in July 2001. Mr. Draughn serves on the Morehead State
University Advisory Board.
Michael S. Wasson, age 50, joined Community Trust Bank on June 1, 2000 as
market president for the Lexington market. In October 2000 he was promoted to
Executive Vice President of Community Trust Bancorp, Inc. and regional
president to the central Kentucky market. Mr. Wasson has been involved in the
financial service industry since 1970. Prior to joining Community Trust, he was
senior manager for Mercantile Bancorporation. He serves as a director of
Downtown Lexington Corporation and Resources Education and for Community
Housing, Inc. He is currently serving on the access loan committee for the
Lexington, Kentucky Chamber of Commerce.
Charles J. Baird, age 51, has served as a director since 1987. Mr. Baird is
an attorney with Baird & Baird, P.S.C.
Nick A. Cooley, age 68, has served as a director since 1980. Mr. Cooley is
the President of Unit Coal Corporation.
William A. Graham, Jr., age 64, has served as a director since 1990. Mr.
Graham is the Chairman of the Advisory Board--Flemingsburg Market, Community
Trust Bank, National Association.
M. Lynn Parrish, age 52, has served as a director since 1993. Ms. Parrish is
President of Knott Floyd Land Co., Inc.
Ernest M. Rogers, age 74, has served as a director since 1980. Mr. Rogers is
President and General Manager of Rogers Petroleum Services, Inc.
- --------
Ages as of December 31, 2001.
21
DESCRIPTION OF THE TRUST
The trust is a statutory business trust formed pursuant to the Delaware
Business Trust Act under a trust agreement executed by us, as depositor, and
the trustees named in the trust agreement. A certificate of trust has been
filed with the Delaware Secretary of State. The trust agreement will be amended
and restated in its entirety in the form filed as an exhibit to the
registration statement of which this prospectus is a part, as of the date the
preferred securities are initially issued. The trust agreement will be
qualified under the Trust Indenture Act of 1939.
The following discussion contains a description of the material terms of the
trust agreement of the trust and is subject to, and is qualified in its
entirety by reference to, the amended and restated trust agreement and the
Trust Indenture Act. We urge prospective investors to read the form of amended
and restated trust agreement, which is filed as an exhibit to the registration
statement of which this prospectus forms a part.
The holders of the preferred securities issued pursuant to the offering
described in this prospectus will own all of the issued and outstanding
preferred securities of the trust which have certain prior rights over the
common securities of the trust. We will not initially own any of the preferred
securities. We will acquire common securities in an amount equal to at least 3%
of the total capital of the trust and will initially own, directly or
indirectly, all of the issued and outstanding common securities. The common
securities, together with the preferred securities, are called the trust
securities.
The trust exists exclusively for the purposes of:
. issuing and selling the preferred securities to the public for cash;
. issuing and selling its common securities to us;
. investing the proceeds from the sale of the trust securities in an
equivalent amount of debentures; and
. engaging in other activities that are incidental to those listed above,
such as receiving payments on the debentures and making distributions to
securities holders, furnishing notices and other administrative tasks.
The trust will not have any independent business operations or any assets,
revenues or cash flows other than those related to the issuance and
administration of the trust securities.
The rights of the holders of the trust securities are as set forth in the
trust agreement, the Delaware Business Trust Act and the Trust Indenture Act.
The trust agreement does not permit the trust to borrow money or make any
investment other than in the debentures. Other than with respect to the trust
securities, we have agreed to pay for all debts and obligations and all costs
and expenses of the trust, including the fees and expenses of the trustees and
any income taxes, duties and other governmental charges, and all costs and
expenses related to these charges, to which the trust may become subject,
except for United States withholding taxes that are properly withheld.
The number of trustees of the trust, pursuant to the amended and restated
trust agreement, initially will be five. Three of the trustees will be persons
who are employees or officers of or who are affiliated with us. These three are
the administrative trustees. The fourth trustee will be an entity that
maintains its principal place of business in the State of Delaware. It is the
Delaware trustee. Initially, First Union Trust Company, National Association, a
national banking association, will act as the Delaware trustee. The fifth
trustee, called the property trustee, will initially be First Union Trust
Company, National Association. The property trustee is the institutional
trustee under the trust agreement and acts as the indenture trustee called for
under the applicable provisions of the Trust Indenture Act. Also for purposes
of compliance with the Trust Indenture Act, First Union Trust Company, National
Association will act as guarantee trustee and indenture trustee under the
guarantee agreement and the indenture. See "Description of the Debentures" and
"Description of the Guarantee." We, as
22
holder of all of the common securities, will have the right to appoint or
remove any trustee unless an event of default under the indenture has occurred
and is continuing, in which case only the holders of the preferred securities
may remove the Delaware trustee or the property trustee. The trust has a term
of approximately 30 years but may terminate earlier as provided in the trust
agreement.
The property trustee will hold the debentures for the benefit of the holders
of the trust securities and will have the power to exercise all rights, powers
and privileges under the indenture as the holder of the debentures. In
addition, the property trustee will maintain exclusive control of a segregated
non-interest-bearing "payment account" established with First Union Trust
Company, National Association to hold all payments made on the debentures for
the benefit of the holders of the trust securities. The property trustee will
make payments of distributions and payments on liquidation, redemption and
otherwise to the holders of the trust securities out of funds from the payment
account. The guarantee trustee will hold the guarantee for the benefit of the
holders of the preferred securities. We will pay all fees and expenses related
to the trust and the offering of the preferred securities, including the fees
and expenses of the trustees.
DESCRIPTION OF THE PREFERRED SECURITIES
The preferred securities will be issued pursuant to the trust agreement. For
more information about the trust agreement, see "Description of the Trust."
First Union Trust Company, National Association will act as property trustee
for the preferred securities under the trust agreement for purposes of
complying with the provisions of the Trust Indenture Act. The terms of the
preferred securities will include those stated in the trust agreement and those
made part of the trust agreement by the Trust Indenture Act.
The following discussion contains a description of the material provisions
of the preferred securities and is subject to, and is qualified in its entirety
by reference to, the trust agreement and the Trust Indenture Act. We urge
prospective investors to read the form of amended and restated trust agreement,
which is filed as an exhibit to the registration statement of which this
prospectus forms a part.
General
The trust agreement authorizes the administrative trustees, on behalf of the
trust, to issue the trust securities, which are comprised of 1,000,0002,500,000
preferred securities to be sold to the public and 30,92877,320 common securities
which we will acquire. We will own all of the common securities issued by the
trust. The trust is not permitted to issue any securities other than the trust
securities or to incur any indebtedness.
The preferred securities will represent preferred undivided beneficial
interests in the assets of the trust, and the holders of the preferred
securities will be entitled to a preference over the common securities upon an
event of default under the indenture with respect to distributions and amounts
payable on redemption or liquidation. The preferred securities will rank
equally, and payments on the preferred securities will be made proportionally,
with the common securities, except as described under "-- Subordination of
Common Securities."
The property trustee will hold legal title to the debentures in trust for
the benefit of the holders of the trust securities. We will guarantee the
payment of distributions out of money held by the trust, and payments upon
redemption of the preferred securities or liquidation of the trust, to the
extent described under "Description of the Guarantee." The guarantee agreement
does not cover the payment of any distribution or the liquidation amount when
the trust does not have sufficient funds available to make these payments.
Distributions
Source of Distributions. The funds of the trust available for distribution
to holders of the preferred securities will be limited to payments made under
the debentures, which the trust will purchase with the proceeds
23
from the sale of the trust securities. Distributions will be paid through the
property trustee, which will hold the amounts received from our interest
payments on the debentures in the payment account for the benefit of the
holders of the trust securities. If we do not make interest payments on the
debentures, the property trustee will not have funds available to pay
distributions on the preferred securities.
Payment of Distributions. Distributions on the preferred securities will be
payable at the annual rate of %8.25% of the $25$10 stated liquidation amount,
payable quarterly on March 31, June 30, September 30 and December 31 of each
year, to the holders of the preferred securities on the relevant record dates.
So long as the preferred securities are represented by a global security, as
described below, the record date will be the business day immediately preceding
the relevant distribution date. The first distribution date for the preferred
securities will be June 30, 2002.
Distributions will accumulate from the date of issuance, will be cumulative
and will be computed on the basis of a 360-day year of twelve 30-day months. If
the distribution date is not a business day, then payment of the distributions
will be made on the next day that is a business day, without any additional
interest or other payment for the delay. However, if the next business day is
in the next calendar year, payment of the distribution will be made on the
business day immediately preceding the scheduled distribution date. When we use
the term "business day," we mean any day other than a Saturday, a Sunday, a day
on which banking institutions in Pikeville, Kentucky, Wilmington, Delaware or
the Borough of Manhattan, New York City, New York are authorized or required by
law, regulation or executive order to remain closed or a day on which the
corporate trust office of the property trustee or the indenture trustee is
closed for business.
Extension Period. As long as no event of default under the indenture has
occurred and is continuing, we have the right to defer the payment of interest
on the debentures at any time for a period not exceeding 20 consecutive
quarters. We refer to this period of deferral as an "extension period." No
extension period may extend beyond March 31, 2032 or end on a date other than
an interest payment date, which dates are the same as the distribution dates.
If we defer the payment of interest, quarterly distributions on the preferred
securities will also be deferred during any such extension period. Any deferred
distributions under the preferred securities will accumulate additional amounts
at the annual rate of %,8.25%, compounded quarterly from the relevant
distribution date. The term "distributions" as used in this prospectus includes
those accumulated amounts.
During an extension period, we may not:
. 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, other than stock dividends, non-cash dividends in connection with
the implementation of a shareholder rights plan, purchases of common stock
in connection with employee benefit plans or in connection with the
reclassification of any class of our capital stock into another class of
capital stock, or allow any of our direct or indirect subsidiaries to do
the same with respect to their capital stock, other than the payment of
dividends or distributions to us or to any of our direct or indirect
subsidiaries;
. make, or allow any of our direct or indirect subsidiaries to make, any
payment of principal, interest or premium on or repay, repurchase or
redeem any debt securities that rank equally, or junior to, the debentures;
. make, or allow any of our direct or indirect subsidiaries to make, any
guarantee payments with respect to any guarantee by us of any debt
securities if the guarantee ranks equally with or junior to the
debentures, other than payments under the guarantee; or
. redeem, purchase or acquire less than all of the debentures or any of the
preferred securities.
After the termination of any extension period and the payment of all amounts
due, we may elect to begin a new extension period, subject to the above
requirements.
24
We do not currently intend to exercise our right to defer distributions on
the preferred securities by deferring the payment of interest on the debentures.
Redemption or Exchange
General. Subject to the prior approval of the Federal Reserve, if required,
we will have the right to redeem the debentures:
. in whole at any time, or in part from time to time, on or after March 31,
2007;
. at any time, in whole, within 180 days following the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment Event, which
terms we define below; or
. at any time, to the extent of any preferred securities we repurchase, plus
a proportionate amount of the common securities we hold.
Mandatory Redemption. Upon our repayment or redemption, in whole or in
part, of any debentures, whether on March 31, 2032 or earlier, the property
trustee will apply the proceeds to redeem the same amount of the trust
securities, upon not less than 30 days nor more than 60 days notice, at the
redemption price. The redemption price will equal 100% of the aggregate
liquidation amount of the trust securities plus accumulated but unpaid
distributions to the date of redemption. If less than all of the debentures are
to be repaid or redeemed on a date of redemption, then the proceeds from such
repayment or redemption will be allocated to redemption of preferred securities
and common securities proportionately.
Distribution of Debentures in Exchange for Preferred Securities. Upon prior
approval of the Federal Reserve, if required by law or regulation, we will have
the right at any time to dissolve the trust and, after satisfaction of the
liabilities of creditors of the trust as provided by applicable law, including,
without limitation, amounts due and owing the trustees of the trust, cause the
debentures to be distributed directly to the holders of trust securities in
liquidation of the trust. See "-- Liquidation Distribution Upon Dissolution."
After the liquidation date fixed for any distribution of debentures in
exchange for preferred securities:
. those trust securities will no longer be deemed to be outstanding;
. certificates representing debentures in a principal amount equal to the
liquidation amount of those preferred securities will be issued in
exchange for the preferred securities certificates;
. we will use our reasonable efforts to list the debentures on the American
Stock Exchange or such other securities exchange or other organization as
the preferred securities are then listed or traded;
. any certificates representing trust securities that are not surrendered
for exchange will be deemed to represent debentures with a principal
amount equal to the liquidation amount of those preferred securities,
accruing interest at the rate provided for in the debentures from the last
distribution date on the preferred securities; and
. all rights of the trust security holders other than the right to receive
debentures upon surrender of a certificate representing trust securities
will terminate.
We cannot assure you that the market prices for the preferred securities or
the debentures that may be distributed if a dissolution and liquidation of the
trust were to occur would be favorable. The preferred securities that an
investor may purchase, or the debentures that an investor may receive on
dissolution and liquidation of the trust, may trade at a discount to the price
that the investor paid to purchase the preferred securities.
Redemption upon a Tax Event, Investment Company Event or Capital Treatment
Event. If a Tax Event, an Investment Company Event or a Capital Treatment
Event occurs, we will have the right to redeem the debentures in whole, but not
in part, and thereby cause a mandatory redemption of all of the trust
securities at the redemption
25
price. If one of these events occurs and we do not elect to redeem the
debentures, or to dissolve the trust and cause the debentures to be distributed
to holders of the trust securities, then the preferred securities will remain
outstanding and additional interest may be payable on the debentures. See
"Description of the Debentures --Redemption."
"Tax Event" means the receipt by the trust and us of an opinion of counsel
experienced in such matters stating that, as a result of any change or
prospective change in the laws or regulations of the United States or any
political subdivision or taxing authority of the United States, or as a result
of any official administrative pronouncement or judicial decision interpreting
or applying the tax laws or regulations, there is more than an insubstantial
risk that:
. interest payable by us on the debentures is not, or within 90 days of the
date of the opinion will not be, deductible by us, in whole or in part,
for federal income tax purposes;
. the trust is, or will be within 90 days after the date of the opinion,
subject to federal income tax with respect to income received or accrued
on the debentures; or
. the trust is, or will be within 90 days after the date of the opinion,
subject to more than an immaterial amount of other taxes, duties,
assessments or other governmental charges.
"Investment Company Event" means the receipt by the trust and us of an
opinion of counsel experienced in such matters to the effect that the trust is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act, as a result of a change in law or regulation
or a change in interpretation or application of law or regulation.
"Capital Treatment Event" means the receipt by the trust and us of an
opinion of counsel experienced in such matters to the effect that there is more
than an insubstantial risk of impairment of our ability to treat the preferred
securities as Tier 1 capital for purposes of the current capital adequacy
guidelines of the Federal Reserve, as a result of any amendment to any laws or
any regulations.
For all of the events described above, we or the trust must request and
receive an opinion with regard to the event within a reasonable period of time
after we become aware of the possible occurrence of an event of this kind.
Redemption of Debentures in Exchange for Preferred Securities We
Repurchase. Upon prior approval of the Federal Reserve, if required, we will
also have the right at any time, and from time to time, to redeem debentures in
exchange for any preferred securities we may have repurchased in the market. If
we elect to surrender any preferred securities beneficially owned by us in
exchange for redemption of a like amount of debentures, we will also surrender
a proportionate amount of common securities in exchange for debentures.
The common securities we surrender will be in the same proportion to the
preferred securities we surrender as is the ratio of common securities
purchased by us to the preferred securities issued by the trust. In exchange
for the trust securities surrendered by us, the property trustee will cause to
be released to us for cancellation debentures with a principal amount equal to
the liquidation amount of the trust securities, plus any accumulated but unpaid
distributions, if any, then held by the property trustee allocable to those
trust securities. After the date of redemption involving an exchange by us, the
trust securities we surrender will no longer be deemed outstanding and the
debentures redeemed in exchange for the trust securities will be canceled.
Redemption Procedures
Preferred securities will be redeemed at the redemption price with the
applicable proceeds from our contemporaneous redemption of the debentures.
Redemptions of the preferred securities will be made, and the redemption price
will be payable, on each redemption date only to the extent that the trust has
funds available for the payment of the redemption price.
26
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the date of redemption to each holder of trust securities to be
redeemed at its registered address. Unless we default in payment of the
redemption price on the debentures, interest will cease to accumulate on the
debentures called for redemption on and after the date of redemption.
If the trust gives notice of redemption of its trust securities, then the
property trustee, to the extent funds are available, will irrevocably deposit
with the depositary for the trust securities funds sufficient to pay the
aggregate redemption price and will give the depositary for the trust
securities irrevocable instructions and authority to pay the redemption price
to the holders of the trust securities. See "Book-Entry Issuance." If the
preferred securities are no longer in book-entry only form, the property
trustee, to the extent funds are available, will deposit with the designated
paying agent for such preferred securities funds sufficient to pay the
aggregate redemption price and will give the paying agent irrevocable
instructions and authority to pay the redemption price to the holders upon
surrender of their certificates evidencing the preferred securities.
Notwithstanding the foregoing, distributions payable on or prior to the date of
redemption for any trust securities called for redemption will be payable to
the holders of the trust securities on the relevant record dates for the
related distribution dates.
If notice of redemption has been given and we have deposited funds as
required, then on the date of the deposit all rights of the holders of the
trust securities called for redemption will cease, except the right to receive
the redemption price, but without interest on such redemption price after the
date of redemption. The trust securities will also cease to be outstanding on
the date of the deposit. If any date fixed for redemption of trust securities
is not a business day, then payment of the redemption price payable on that
date will be made on the next day that is a business day without any additional
interest or other payment in respect of the delay. However, if the next
business day is in the next succeeding calendar year, payment of the interest
will be made on the immediately preceding business day.
If payment of the redemption price in respect of trust securities called for
redemption is improperly withheld or refused and not paid by the trust, or by
us pursuant to the guarantee, distributions on the trust securities will
continue to accumulate at the applicable rate from the date of redemption
originally established by the trust for the trust securities to the date the
redemption price is actually paid. In this case, the actual payment date will
be considered the date fixed for redemption for purposes of calculating the
redemption price. See "Description of the Guarantee."
Payment of the redemption price on the preferred securities and any
distribution of debentures to holders of preferred securities will be made to
the applicable recordholders as they appear on the register for the preferred
securities on the relevant record date. As long as the preferred securities are
represented by a global security, the record date will be the business day
immediately preceding the date of redemption or liquidation date, as applicable.
If less than all of the trust securities are to be redeemed, then the
aggregate liquidation amount of the trust securities to be redeemed will be
allocated proportionately to those trust securities based upon the relative
liquidation amounts. The particular preferred securities to be redeemed will be
selected by the property trustee from the outstanding preferred securities not
previously called for redemption by a method the property trustee deems fair
and appropriate. This method may provide for the redemption of portions equal
to $25$10 or an integral multiple of $25$10 of the liquidation amount of the
preferred securities. The property trustee will promptly notify the registrar
for the preferred securities in writing of the preferred securities selected
for redemption and, in the case of any preferred securities selected for
partial redemption, the liquidation amount to be redeemed.
Subject to applicable law, and if we are not exercising our right to defer
interest payments on the debentures, we may, at any time, purchase outstanding
preferred securities.
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Subordination of Common Securities
Payment of distributions on, and the redemption price of, the preferred
securities and common securities of the trust will be made based on the
liquidation amount of these securities. However, if an event of default under
the indenture has occurred and is continuing, no distributions on or redemption
of the common securities may be made unless payment in full in cash of all
accumulated and unpaid distributions on all of the outstanding preferred
securities for all distribution periods terminating on or before that time, or
in the case of payment of the redemption price, payment of the full amount of
the redemption price on all of the outstanding preferred securities then called
for redemption, has been made or provided for. All funds available to the
property trustee will first be applied to the payment in full in cash of all
distributions on, or the redemption price of, the preferred securities then due
and payable.
In the case of the occurrence and continuance of any event of default under
the trust agreement resulting from an event of default under the indenture, we,
as holder of the common securities, will be deemed to have waived any right to
act with respect to that event of default under the trust agreement until the
effect of the event of default has been cured, waived or otherwise eliminated.
Until the event of default under the trust agreement has been so cured, waived
or otherwise eliminated, the property trustee will act solely on behalf of the
holders of the preferred securities and not on our behalf, and only the holders
of the preferred securities will have the right to direct the property trustee
to act on their behalf.
Liquidation Distribution Upon Dissolution
We will have the right at any time to dissolve the trust and cause the
debentures to be distributed to the holders of the trust securities. This right
is subject, however, to us receiving approval of the Federal Reserve, if
required.
In addition, the trust will automatically terminate upon expiration of its
term and will terminate earlier on the first to occur of:
. our bankruptcy, dissolution or liquidation;
. the distribution of a like amount of the debentures to the holders of
trust securities, if we have given written direction to the property
trustee to dissolve the trust;
. redemption of all of the preferred securities as described under "--
Redemption or Exchange -- Mandatory Redemption;" or
. the entry of a court order for the dissolution of the trust.
With the exception of a redemption as described under "-- Redemption or
Exchange -- Mandatory Redemption," if an early dissolution of the trust occurs,
the trust will be wound up by the administrative trustees as expeditiously as
they determine to be possible. After satisfaction of liabilities to creditors
of the trust as provided by applicable law, the trustees will distribute to the
holders of trust securities, debentures:
. in an aggregate stated principal amount equal to the aggregate stated
liquidation amount of the trust securities;
. with an interest rate identical to the distribution rate on the trust
securities; and
. with accrued and unpaid interest equal to accumulated and unpaid
distributions on the trust securities.
If the property trustee determines that the distribution of debentures is
not practical, then the holders of trust securities will be entitled to
receive, instead of debentures, a proportionate amount of the liquidation
distribution. The liquidation distribution will be the amount equal to the
aggregate of the liquidation amount plus accumulated and unpaid distributions
to the date of payment. If the liquidation distribution can be paid only in
part because the trust has insufficient assets available to pay in full the
aggregate liquidation distribution, then the amounts
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payable directly by the trust on the trust securities will be paid on a
proportional basis, based on liquidation amounts, to us, as the holder of the
common securities, and to the holders of the preferred securities. However, if
an event of default under the indenture has occurred and is continuing, the
preferred securities will have a priority over the common securities. See "--
Subordination of Common Securities."
Under current United States federal income tax law and interpretations and
assuming that the trust is treated as a grantor trust, as is expected, a
distribution of the debentures should not be a taxable event to holders of the
preferred securities. Should there be a change in law, a change in legal
interpretation, a Tax Event or another circumstance, however, the distribution
could be a taxable event to holders of the preferred securities. See "Federal
Income Tax Consequences -- Receipt of Debentures or Cash Upon Liquidation of
the Trust" for more information regarding a taxable distribution. If we do not
elect to redeem the debentures prior to maturity or to dissolve the trust and
distribute the debentures to holders of the preferred securities, the preferred
securities will remain outstanding until the repayment of the debentures.
If we elect to dissolve the trust and thus cause the debentures to be
distributed to holders of the preferred securities in liquidation of the trust,
we will continue to have the right to shorten the maturity of the debentures.
See "Description of the Debentures -- General."
Liquidation Value
The amount of the liquidation distribution payable on the preferred
securities in the event of any liquidation of the trust is $25$10 per preferred
security plus accumulated and unpaid distributions to the date of payment,
which may be in the form of a distribution of debentures having a liquidation
value and accrued interest of an equal amount. See "-- Liquidation Distribution
upon Dissolution."
Events of Default; Notice
Any one of the following events constitutes an event of default under the
trust agreement with respect to the preferred securities:
. the occurrence of an event of default under the indenture, see
"Description of the Debentures -- Debenture Events of Default;"
. a default by the trust in the payment of any distribution when it becomes
due and payable, and continuation of the default for a period of 30 days;
. a default by the trust in the payment of any redemption price of any of
the trust securities when it becomes due and payable;
. a default in the performance, or breach, in any material respect, of any
covenant or warranty of the trustees in the trust agreement, other than
those defaults covered in the previous two points, and continuation of the
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the trustees by the holders of at least
25% in aggregate liquidation amount of the outstanding preferred
securities, a written notice specifying the default or breach and
requiring it to be remedied and stating that the notice is a "Notice of
Default" under the trust agreement; or
. the occurrence of events of bankruptcy or insolvency with respect to the
property trustee and our failure to appoint a successor property trustee
within 60 days.
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 the holders of the preferred securities, the
administrative trustees and to us, unless the event of default has been cured
or waived. The administrative trustees and we are required to file annually
with the property trustee a certificate as to whether or not they or we are in
compliance with all the conditions and covenants applicable to them under the
trust agreement.
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If an event of default under the indenture has occurred and is continuing,
the preferred securities will have preference over the common securities upon
dissolution of the trust. See " -- Subordination of Common Securities" and
" -- Liquidation Distribution Upon Dissolution." The existence of an event of
default under the trust agreement does not entitle the holders of preferred
securities to accelerate the maturity thereof, unless the event of default is
caused by the occurrence of an event of default under the indenture and both
the indenture trustee and holders of at least 25% in principal amount of the
debentures fail to accelerate the maturity thereof.
Removal of the Trustees
Unless an event of default under the indenture has occurred and is
continuing, we may remove any trustee at any time. If an event of default under
the indenture has occurred and is continuing, only the holders of a majority in
liquidation amount of the outstanding preferred securities may remove the
property trustee or the Delaware trustee. The holders of the preferred
securities generally have no right to vote to appoint, remove or replace the
administrative trustees. These rights are vested exclusively with us as the
holder of the common securities. No resignation or removal of a trustee and no
appointment of a successor trustee will be effective until the successor
trustee accepts the appointment in accordance with the trust agreement.
Co-Trustees and Separate Property Trustee
Unless an event of default under the indenture has occurred and is
continuing, 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, we will have the power to appoint at any time or
times, and upon written request of the property trustee will appoint, one or
more persons or entities either (a) to act as a co-trustee, jointly with the
property trustee, of all or any part of the trust property, or (b) to act as
separate trustee of any trust property. In either case, these persons or
entities will have the powers that may be provided in the instrument of
appointment, and will have vested in them any property, title, right or power
deemed necessary or desirable, subject to the provisions of the trust
agreement. In case an event of default under the indenture has occurred and is
continuing, the property trustee alone will have power to make the appointment.
Merger or Consolidation of Trustees
Generally, any person or successor to any of the trustees may be a successor
trustee to any of the trustees, including a successor resulting from a merger
or consolidation. However, any successor trustee must meet all of the
qualifications and eligibility standards to act as a trustee.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below. For these purposes, if we consolidate or merge with another
entity, or transfer or sell substantially all of our assets to another entity,
in some cases that transaction may be deemed to involve a replacement of the
trust, and the conditions set forth below would apply to such transaction. The
trust may, at our request, with the consent of the administrative trustees and
without the consent of the holders of the preferred securities, the property
trustee or the Delaware trustee, merge with or into, consolidate, amalgamate or
be replaced by another trust if the following conditions are met:
. the successor entity either (a) expressly assumes all of the obligations
of the trust with respect to the preferred securities, or (b) substitutes
for the preferred securities other securities having substantially the
same terms as the preferred securities, referred to as "successor
securities," so long as the successor securities rank the same in priority
as the preferred securities with respect to distributions and payments
upon liquidation, redemption and otherwise;
. we appoint a trustee of the successor entity possessing substantially the
same powers and duties as the property trustee in its capacity as the
holder of the debentures;
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. the successor securities are listed or traded or shall be listed or traded
on any national securities exchange or other organization in or on which
the preferred securities are then listed, if any;
. 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 successor
securities, in any material respect;
. the successor entity has a purpose substantially identical to that of the
trust;
. prior to the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, we have received an opinion from independent counsel
that (a) any transaction of this kind does not adversely affect the
rights, preferences and privileges of the holders of the preferred
securities, including any successor securities, in any material respect,
and (b) following the transaction, neither the trust nor the successor
entity will be required to register as an "investment company" under the
Investment Company Act; and
. we own all of 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, the debentures, the trust
agreement and the expense agreement. Notwithstanding the foregoing, the
trust may not, except with the consent of every holder of the preferred
securities, enter into any transaction of this kind if the transaction
would cause the trust or the successor entity not to be classified as a
grantor trust for United States federal income tax purposes.
Voting Rights; Amendment of Trust Agreement
Except as described below and under "Description of the
Guarantee -- Amendments" and as otherwise required by the Trust Indenture Act
and the trust agreement, the holders of the preferred securities will have no
voting rights.
The trust agreement may be amended from time to time by us, as holders of
the common securities, and the trustees, without the consent of the holders of
the preferred securities, in the following circumstances:
. with respect to acceptance of appointment by a successor trustee;
. to cure any ambiguity, correct or supplement any provisions in the trust
agreement that may be inconsistent with any other provision, or to make
any other provisions with respect to matters or questions arising under
the trust agreement, as long as the amendment is not inconsistent with the
other provisions of the trust agreement and does not have a material
adverse effect on the interests of any holder of preferred securities; or
. to modify, eliminate or add to any provisions of the trust agreement if
necessary to ensure that the trust will be classified for federal income
tax purposes as a grantor trust at all times that any trust securities are
outstanding or to ensure that the trust will not be required to register
as an "investment company" under the Investment Company Act.
With the consent of the holders of a majority of the aggregate liquidation
amount of the outstanding trust securities, we and the trustees may amend the
trust agreement if the trustees receive an opinion of counsel to the effect
that the amendment or the exercise of any power granted to the trustees in
accordance with the amendment will not affect the trust's status as a grantor
trust for federal income tax purposes or the trust's exemption from status as
an "investment company" under the Investment Company Act. However, without the
consent of each holder of trust securities, the trust agreement may not be
amended to (a) 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 (b) restrict the right of a holder of trust securities to institute suit for
the enforcement of the payment on or after that date.
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As long as the property trustee holds any debentures, the trustees will not,
without obtaining the prior approval of the holders of a majority in aggregate
liquidation amount of all outstanding preferred securities:
. direct the time, method and place of conducting any proceeding for any
remedy available to the indenture trustee, or executing any trust or power
conferred on the property trustee with respect to the debentures;
. waive any past default that is waivable under the indenture;
. exercise any right to rescind or annul a declaration that the principal of
all the debentures will be due and payable; or
. consent to any amendment or termination of the indenture or the
debentures, where the property trustee's consent is required. However,
where a consent under the indenture requires the consent of each holder of
the affected debentures, no consent will be given by the property trustee
without the prior consent of each holder of the preferred securities.
The trustees may not revoke any action previously authorized or approved by
a vote of the holders of the preferred securities, except by subsequent vote of
the holders of the preferred securities. The property trustee will notify each
holder of preferred securities of any notice of default with respect to the
debentures. In addition to obtaining the foregoing approvals of the holders of
the preferred securities, prior to taking any of the foregoing actions, the
trustees must obtain an opinion of counsel experienced in these matters to the
effect that the trust will continue to be classified as a grantor trust and
will not be classified as an association taxable as a corporation for federal
income tax purposes on account of the action.
Any required approval of holders of trust securities may be given at a
meeting or by written consent. The property trustee will cause a notice of any
meeting at which holders of the trust securities are entitled to vote to be
given to each holder of record of trust securities.
No vote or consent of the holders of preferred securities will be required
for the trust to redeem and cancel its preferred securities in accordance with
the trust agreement.
Notwithstanding the fact that holders of preferred securities are entitled
to vote or consent under any of the circumstances described above, any of the
preferred securities that are owned by us, the trustees or any affiliate of
ours or of any trustee, will, for purposes of the vote or consent, be treated
as if they were not outstanding.
Global Preferred Securities
The preferred securities will be represented by one or more global preferred
securities certificates registered in the name of The Depository Trust Company,
New York, New York, referred to below as DTC, or its nominee. A global
preferred security certificate is a certificate representing preferred
securities of more than one beneficial owner. Ownership of beneficial interests
in the preferred securities represented by a global preferred securities
certificate will be reflected in DTC participant account records through DTC's
book-entry transfer and registration system. Participants are brokers, dealers,
or others having accounts with DTC. Indirect beneficial interests of other
persons investing in the preferred securities will be shown on, and transfers
will be effected only through, records maintained by DTC participants. Except
as described below, preferred securities in definitive form will not be issued
in exchange for the global preferred securities certificate. See "Book-Entry
Issuance."
No global preferred security certificate may be exchanged for a certificate
representing preferred securities registered in the names of persons other than
DTC or its nominee unless:
. DTC notifies the indenture trustee that it is unwilling or unable to
continue as a depositary for the global preferred securities and we are
unable to locate a qualified successor depositary;
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. we execute and deliver to the indenture trustee a written order stating
that we elect to terminate the book-entry system through DTC; or
. there shall have occurred and be continuing an event of default under the
indenture.
Any global preferred security certificate that is exchangeable pursuant to
the preceding sentence shall be exchangeable for definitive certificates
registered in the names as DTC shall direct. It is expected that the
instructions will be based upon directions received by DTC with respect to
ownership of beneficial interests in the preferred securities represented by a
global preferred security certificate. If preferred securities certificates are
issued in definitive form, the preferred securities certificates will be in
denominations of $25$10 and integral multiples of $25$10 and may be transferred or
exchanged at the offices described below.
Unless and until it is exchanged in whole or in part for definitive
preferred securities certificates, a global preferred security certificate may
not be transferred, except as a whole, by DTC to a nominee of DTC, by a nominee
of DTC to DTC or another nominee of DTC or by DTC or any nominee to a successor
depositary or any nominee of the successor.
Payments on preferred securities represented by a global preferred
securities certificate will be made to DTC, as the depositary for the global
preferred securities. If the preferred securities are issued in definitive
form, distributions will be payable by check mailed to the address of record of
the persons entitled to the distribution, and the transfer of the preferred
securities will be registrable, and certificates representing preferred
securities will be exchangeable for certificates representing preferred
securities of other denominations of a like aggregate liquidation amount, at
the corporate office of the property trustee, or at the offices of any paying
agent or transfer agent appointed by the administrative trustees. In addition,
if the preferred securities are issued in definitive form, the record dates for
payment of distributions will be the 15th day of the month in which the
relevant distribution date occurs. For a description of the terms of DTC
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other matters, see "Book-Entry Issuance."
Upon the issuance of one or more global preferred securities certificates,
and the deposit of the global preferred security certificate with or on behalf
of DTC or its nominee, DTC or its nominee will credit, on its book-entry
registration and transfer system, the respective aggregate liquidation amounts
of the individual preferred securities represented by the global preferred
security certificate to the designated accounts of persons that participate in
the DTC system. These participant accounts will be designated by the dealers,
underwriters or agents selling the preferred securities. Ownership of
beneficial interests in preferred securities represented by a global preferred
security certificate will be limited to persons or entities having an account
with DTC or who may hold interests through participants. With respect to
interests of any person or entity that is a DTC participant, ownership of
beneficial interests in preferred securities represented by a global preferred
security certificate will be shown on, and the transfer of that ownership will
be effected only through, records maintained by DTC or its nominee. With
respect to persons or entities who hold interests in preferred securities
represented by a global preferred security certificate through a participant,
the interest and any transfer of the interest will be shown only on the
participant's records. The laws of some states require that certain purchasers
of securities take physical delivery of securities in definitive form. These
laws may impair the ability to transfer beneficial interests in preferred
securities represented by a global preferred security certificate.
So long as DTC or another depositary, or its nominee, is the registered
owner of the global preferred security certificate, the depositary or the
nominee, as the case may be, will be considered the sole owner or holder of the
preferred securities represented by the global preferred security certificate
for all purposes under the trust agreement. Except as described in this
prospectus, owners of beneficial interests in preferred securities represented
by a global preferred security certificate will not be entitled to have any of
the individual preferred securities represented by the global preferred
security certificate registered in their names, will not receive or be entitled
to receive physical delivery of any preferred securities in definitive form and
will not be considered the owners or holders of the preferred securities under
the trust agreement.
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None of us, the property trustee, any paying agent or the securities
registrar for the preferred securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the global preferred security certificate
representing the preferred securities or for maintaining, supervising or
reviewing any records relating to the beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of the
liquidation amount or distributions in respect of preferred securities
represented by a global preferred security certificate, immediately will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the aggregate liquidation amount of the
preferred securities represented by global preferred security certificate as
shown on the records of DTC or its nominee. We also expect that payments by
participants to owners of beneficial interests in the preferred securities
represented by a global preferred security certificate held through the
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." The payments will be the responsibility of
the participants. See "Book-Entry Issuance."
Payment and Paying Agency
Payments in respect of the preferred securities shall be made to DTC, which
shall credit the relevant accounts of participants on the applicable
distribution dates, or, if any of the preferred securities are not held by DTC,
the payments shall be made by check mailed to the address of the holder as
listed on the register of holders of the preferred securities. The paying agent
for the preferred securities will initially be the property trustee and any
co-paying agent chosen by the property trustee and acceptable to us and the
administrative trustees. The paying agent for the preferred securities may
resign as paying agent upon 30 days written notice to the administrative
trustees, the property trustee and us. If the property trustee no longer is the
paying agent for the preferred securities, the administrative trustees will
appoint a successor to act as paying agent. The successor must be a bank or
trust company acceptable to us and the property trustee.
Registrar and Transfer Agent
The property trustee will act as the registrar and the 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 upon payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. The trust and its registrar and transfer agent will
not be required to register or cause to be registered the transfer of preferred
securities after they have been called for redemption.
Information Concerning the Property Trustee
The property trustee undertakes to perform only the duties set forth in the
trust agreement. After the occurrence of an event of default that is
continuing, the property trustee must exercise the same degree of care and
skill as a prudent person exercises or uses in the conduct of its own affairs.
The property trustee is under no obligation to exercise any of the powers
vested in it by the trust agreement at the request of any holder of preferred
securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred. If no event of default under
the trust agreement has occurred and is continuing and the property trustee is
required to decide between alternative courses of action, construe ambiguous or
inconsistent provisions in the trust agreement or is unsure of the application
of any provision of the trust agreement, and the matter is not one on which
holders of preferred securities are entitled to vote upon, then the property
trustee will take the action directed in writing by us. If the property trustee
is not so directed, then it will take the action it deems advisable and in the
best interests of the holders of the trust securities and will have no
liability except for its own bad faith, negligence or willful misconduct.
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Miscellaneous
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the trust in such a way that:
. the trust will not be deemed to be an "investment company" required to be
registered under the Investment Company Act;
. the trust will be classified as a grantor trust and not as an association
taxable as a corporation for federal income tax purposes; and
. the debentures will be treated as our indebtedness for federal income tax
purposes.
In this regard, we and the administrative trustees are authorized to take
any action not inconsistent with applicable law, the certificate of trust or
the trust agreement, that we and the administrative trustees determine to be
necessary or desirable for these purposes.
We are required to use our reasonable efforts to maintain the eligibility of
the preferred securities for listing, quotation or inclusion on or in any
national securities exchange or other self-regulatory organization on or in
which the preferred securities are then listed, quoted or included (including,
if applicable, the Nasdaq Stock Market) and to keep the preferred securities so
listed, quoted or included for so long as the preferred securities remain
outstanding, but this requirement will not prevent us from redeeming all or a
portion of the preferred securities in accordance with the trust agreement and
the indenture.
Holders of the preferred securities have no preemptive or similar rights.
The trust agreement and the trust securities will be governed by Delaware law.
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DESCRIPTION OF THE DEBENTURES
Concurrently with the issuance of the preferred securities, the trust will
invest the proceeds from the sale of the trust securities in the debentures
issued by us. The debentures will be issued as unsecured debt under the
indenture between us and First Union Trust Company, National Association, as
indenture trustee. The indenture will be qualified under the Trust Indenture
Act. The following discussion is subject to, and is qualified in its entirety
by reference to, the indenture and to the Trust Indenture Act. We urge
prospective investors to read the form of the indenture, which is filed as an
exhibit to the registration statement of which this prospectus forms a part.
General
The debentures will be limited in aggregate principal amount to $25,773,200.
This amount represents the sum of the aggregate stated liquidation amounts of
the trust securities. The debentures will bear interest at the annual rate of
%8.25% of the principal amount. The interest will be payable quarterly on March
31, June 30, September 30 and December 31 of each year, beginning June 30,
2002, to the person in whose name each debenture is registered at the close of
business on the 15th day of the last month of the calendar quarter. It is
anticipated that, until the liquidation, if any, of the trust, the debentures
will be held in the name of the property trustee in trust for the benefit of
the holders of the trust securities.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. If any date on which interest is
payable on the debentures is not a business day, then payment of interest will
be made on the next day that is a business day without any additional interest
or other payment in respect of the delay. However, if the next business day is
in the next calendar year, payment of interest 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 due at the
annual rate of %,8.25%, compounded quarterly.
The debentures will mature on March 31, 2032 the stated maturity date. We
may shorten this date once at any time to any date on or after March 31, 2007,
subject to the prior approval of the Federal Reserve, if required by law or
regulation.
We will give notice to the indenture trustee and the holders of the
debentures, no more than 180 days and no less than 30 days prior to the
effectiveness of any change in the stated maturity date. We will not have the
right to redeem the debentures from the trust until on or after March 31, 2007,
except if (a) a Tax Event, an Investment Company Event or a Capital Treatment
Event, which terms are defined under redemption of "Preferred Securities --
Redemption or Exchange" has occurred, or (b) we repurchase preferred securities
in the market, in which case we can elect to redeem debentures specifically in
exchange for a like amount of preferred securities owned by us plus a
proportionate amount of common securities.
The debentures will be unsecured and will rank junior to all of our senior
and subordinated debt, including indebtedness we may incur in the future.
Because we are a holding company, our right to participate in any distribution
of assets of any of our subsidiaries, upon any subsidiary's liquidation or
reorganization or otherwise, and thus the ability of holders of the debentures
to benefit indirectly from any distribution by a subsidiary, is subject to the
prior claim of creditors of the subsidiary, except to the extent that we may be
recognized as a creditor of the subsidiary. The debentures will, therefore, be
effectively subordinated to all existing and future liabilities of our
subsidiaries, and holders of debentures should look only to our assets for
payment. The indenture does not limit our ability to incur or issue secured or
unsecured senior and junior debt, except in limited circumstances. See
"Description of the Preferred Securities -- Subordination of Common Securities"
and "Description of the Preferred Securities -- Miscellaneous."
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The indenture does not contain provisions that afford holders of the
debentures protection in the event of a highly leveraged transaction or other
similar transaction involving us, nor does it require us to maintain or achieve
any financial performance levels or to obtain or maintain any credit rating on
the debentures.
Option to Extend Interest Payment Period
As long as no event of default under the indenture has occurred and is
continuing, we have the right under the indenture to defer the payment of
interest on the debentures at any time for a period not exceeding
20 consecutive quarters. However, no extension period may extend beyond the
stated maturity of the debentures or end on a date other than a date interest
is normally due. At the end of an extension period, we must pay all interest
then accrued and unpaid, together with interest thereon at the annual rate of
%,8.25%, compounded quarterly. During an extension period, interest will continue
to accrue and holders of debentures, or the holders of preferred securities if
they are then outstanding, will be required to accrue and recognize as income
for federal income tax purposes the accrued but unpaid interest amounts in the
year in which such amounts accrued. See "Federal Income Tax Consequences."
During an extension period, we are restricted from making certain payments.
See " -- Restrictions on Payments."
Prior to the termination of any extension period, so long as no event of
default under the indenture is continuing, we may further defer the payment of
interest subject to the above stated requirements. Upon the termination of any
extension period and the payment of all amounts then due, we may elect to begin
a new extension period at any time. We do not currently intend to exercise our
right to defer payments of interest on the debentures.
We must give the property trustee, the administrative trustees and the
indenture trustee notice of our election of an extension period at least two
business days prior to the earlier of (a) the next date on which distributions
on the trust securities would have been payable except for the election to
begin an extension period, or (b) the date we are required to give notice of
the record date, or the date the distributions are payable, to the American
Stock Exchange, or other exchange or self-regulatory organization, or to
holders of the preferred securities, but in any event at least one business day
prior to the record date.
Other than as described above, there is no limitation on the number of times
that we may elect to begin an extension period.
Restrictions on Payments
We are restricted from making certain payments, as described below, if we
have chosen to defer payment of interest on the debentures, if an event of
default has occurred and is continuing under the indenture, or if we are in
default with respect to our obligations under the guarantee.
If any of these events occur, we will not:
. 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, other than stock dividends, non-cash dividends in connection with
the implementation of a shareholder rights plan, purchases of common stock
in connection with employee benefit plans or in connection with the
reclassification of any class of our capital stock into another class of
capital stock, or allow any of our direct or indirect subsidiaries to do
the same with respect to their capital stock, other than payment of
dividends or distributions to us or to any of our direct or indirect
subsidiaries;
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. make, or allow any of our subsidiaries to make, any payment of principal,
interest or premium on, or repay or repurchase or redeem any of our debt
securities that rank equally with or junior to the debentures;
. make, or allow any of our subsidiaries to make, any guarantee payments
with respect to any guarantee by us of any debt securities if the
guarantee ranks equally with or junior to the debentures, other than
payments under the guarantee relating to the preferred securities; or
. redeem, purchase or acquire less than all of the debentures or any of the
preferred securities.
Additional Sums to be Paid as a Result of Additional Taxes
If the trust is required to pay any additional taxes, duties, assessments or
other governmental charges as a result of the occurrence of a Tax Event, we
will pay as additional interest on the debentures any amounts which may be
required so that the net amounts received and retained by the trust after
paying any additional taxes, duties, assessments or other governmental charges
will not be less than the amounts the trust would have received had the
additional taxes, duties, assessments or other governmental charges not been
imposed.
Redemption
Subject to prior approval of the Federal Reserve, if required by law or
regulation, we may redeem the debentures prior to maturity:
. on or after March 31, 2007 in whole at any time or in part from time to
time;
. in whole at any time within 180 days following the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment Event; or
. at any time, to the extent of any preferred securities we purchase, plus a
proportionate amount of the common securities we hold.
In each case we will pay a redemption price equal to the accrued and unpaid
interest on the debentures so redeemed to the date fixed for redemption, plus
100% of the principal amount of the redeemed debentures.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of debentures to be redeemed
at its registered address. Redemption of less than all outstanding debentures
must be effected proportionately, by lot or in any other manner deemed to be
fair and appropriate by the indenture trustee. Unless we default in payment of
the redemption price for the debentures, on and after the redemption date
interest will no longer accrue on the debentures or the portions of the
debentures called for redemption.
The debentures will not be subject to any sinking fund.
Distribution Upon Liquidation
As described under "Description of the Preferred Securities -- Liquidation
Distribution Upon Dissolution," under certain circumstances and with the
Federal Reserve's approval, debentures may be distributed to the holders of the
preferred securities in liquidation of the trust after satisfaction of
liabilities to creditors of the trust. If this distribution occurs, we will use
our reasonable efforts to list the debentures on the American Stock Exchange or
such other securities exchange or other organization as the preferred
securities are then listed or traded. There can be no assurance as to the
market price of any debentures that may be distributed to the holders of
preferred securities.
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Subordination
The debentures are subordinated and junior in right of payment to all of our
senior and subordinated debt, as defined below. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up or reorganization of our company, whether voluntary or involuntary in
bankruptcy, insolvency, receivership or other proceedings in connection with
any insolvency or bankruptcy proceedings, the holders of our senior and
subordinated debt will first be entitled to receive payment in full of
principal and interest before the holders of debentures will be entitled to
receive or retain any payment in respect of the debentures.
If the maturity of any debentures is accelerated, the holders of all of our
senior and subordinated debt outstanding at the time of the acceleration will
also be entitled to first receive payment in full of all amounts due to them,
including any amounts due upon acceleration, before the holders of the
debentures will be entitled to receive or retain any principal or interest
payments on the debentures.
No payments of principal or interest on the debentures may be made if there
has occurred and is continuing a default in any payment with respect to any of
our senior or subordinated debt or an event of default with respect to any of
our senior or subordinated debt resulting in the acceleration of the maturity
of the senior or subordinated debt, or if any judicial proceeding is pending
with respect to any default.
The term "debt" means, with respect to any person, whether recourse is to
all or a portion of the assets of the person and whether or not contingent:
. every obligation of the person for money borrowed;
. every obligation of the person evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses;
. every reimbursement obligation of the person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account
of the person;
. every obligation of the person issued or assumed as the deferred purchase
price of property or services, excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business;
. every capital lease obligation of the person; and
. every obligation of the type referred to in the first five points of
another person and all dividends of another person the payment of which,
in either case, the first person has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise.
The term "senior debt" means the principal of, and premium and interest,
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to us), on, debt, whether incurred on
or prior to the date of the indenture or incurred after the date. However,
senior debt will not be deemed to include:
. any debt where it is provided in the instrument creating the debt that the
obligations are not superior in right of payment to the debentures or to
other debt which is equal with, or subordinated to, the debentures;
. any of our debt that when incurred and without regard to any election
under the federal bankruptcy laws, was without recourse to us;
. any debt to any of our employees;
. any debt that by its terms is subordinated to trade accounts payable or
accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of the debt by the holders of the
debentures as a result of the subordination provisions of the indenture
would be greater than they otherwise would have been as a result of any
obligation of the holders to pay amounts over to the obligees on the trade
accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which the debt is
subject; and
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. debt which constitutes subordinated debt.
The term "subordinated debt" means the principal of, and premium and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to us) on debt. Subordinated debt
includes debt incurred on or prior to the date of the indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other debt of ours, other than the debentures. However, subordinated debt
will not be deemed to include:
. any of our debt which when incurred and without regard to any election
under the federal bankruptcy laws was without recourse to us;
. any debt to any of our employees;
. any debt which by its terms is subordinated to trade accounts payable or
accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of the debt by the holders of the
debentures as a result of the subordination provisions of the indenture
would be greater than they otherwise would have been as a result of any
obligation of the holders to pay amounts over to the obligees on the trade
accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which the debt is
subject;
. debt which constitutes senior debt; and
. any debt of ours under debt securities, and guarantees in respect of these
debt securities, initially issued to any trust, or a trustee of a trust,
partnership or other entity affiliated with us that is, directly or
indirectly, our financing subsidiary in connection with the issuance by
that entity of preferred securities or other securities which are intended
to qualify for "Tier 1" capital treatment.
We expect from time to time to incur additional indebtedness (although we
have no specific plans in this regard presently) and there is no limitation
under the indenture on the amount we may incur. We had short- and long-term
senior and subordinated debt of $57$56 million outstanding principal amount at
September 30, 2001.
Payment and Paying Agents
Generally, payment of principal of and interest on the debentures will be
made at the office of the indenture trustee in Wilmington, Delaware. However,
we have the option to make payment of any interest by (a) check mailed to the
address of the person entitled to payment at the address listed in the register
of holders of the debentures or (b) wire transfer to an account maintained by
the person entitled thereto as specified in the register of holders of the
debentures, provided that proper transfer instructions have been received by
the applicable record date. Payment of any interest on debentures will be made
to the person in whose name the debenture is registered at the close of
business on the regular record date for the interest payment, except in the
case of defaulted interest.
Any moneys deposited with the indenture trustee or any paying agent for the
debentures, or then held by us in trust, for the payment of the principal of or
interest on the debentures and remaining unclaimed for two years after the
principal or interest has become due and payable, will be repaid to us on June
30 of each year. If we hold any of this money in trust, then it will be
discharged from the trust to us and the holder of the debenture will thereafter
look, as a general unsecured creditor, only to us for payment.
Registrar and Transfer Agent
The indenture trustee will act as the registrar and the transfer agent for
the debentures. Debentures may be presented for registration of transfer, with
the form of transfer endorsed thereon, or a satisfactory written instrument of
transfer, duly executed, at the office of the registrar. Provided that we
maintain a transfer agent in Wilmington, Delaware, we may rescind the
designation of any transfer agent or approve a change in the location through
which any transfer agent acts. We may at any time designate additional transfer
agents with respect to the debentures.
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If we redeem any of the debentures, neither we nor the indenture trustee
will be required to (a) issue, register the transfer of or exchange any
debentures during a period beginning at the opening of business 15 days before
the day of the mailing of and ending at the close of business on the day of the
mailing of the relevant notice of redemption, or (b) transfer or exchange any
debentures so selected for redemption, except, in the case of any debentures
being redeemed in part, any portion not to be redeemed.
Modification of Indenture
We and the indenture trustee may, from time to time without the consent of
the holders of the debentures, amend, waive our rights under or supplement the
indenture for purposes which do not materially adversely affect the rights of
the holders of the debentures. Other changes may be made by us and the
indenture trustee with the consent of the holders of a majority in principal
amount of the outstanding debentures. However, without the consent of the
holder of each outstanding debenture affected by the proposed modification, no
modification may:
. extend the maturity date of the debentures;
. reduce the principal amount or the rate or extend the time of payment of
interest; or
. reduce the percentage of principal amount of debentures required to amend
the indenture.
As long as any of the preferred securities remain outstanding, no
modification of the indenture may be made that requires the consent of the
holders of the debentures, no termination of the indenture may occur, and no
waiver of any event of default under the indenture may be effective, without
the prior consent of the holders of a majority of the aggregate liquidation
amount of the preferred securities.
Debenture Events of Default
The indenture provides that any one or more of the following events with
respect to the debentures that has occurred and is continuing constitutes an
event of default under the indenture:
. our failure to pay any interest on the debentures for 30 days after the
due date, except where we have properly deferred the interest payment;
. our failure to pay any principal on the debentures when due whether at
maturity, upon redemption or otherwise;
. our failure to observe or perform any other covenants or agreements
contained in the indenture for 90 days after written notice to us from the
indenture trustee or the holders of at least 25% in aggregate outstanding
principal amount of the debentures; or
. our bankruptcy, insolvency or reorganization or dissolution of the trust,
except for certain transactions specifically permitted by the trust
agreement.
The holders of a majority of the aggregate outstanding principal amount of
the debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the indenture trustee.
The indenture trustee, or the holders of at least 25% in aggregate outstanding
principal amount of the debentures, may declare the principal due and payable
immediately upon an event of default under the indenture. The holders of a
majority of the outstanding principal amount of the debentures may rescind and
annul the declaration and waive the default if the default has been cured and a
sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the indenture trustee.
In the event the debentures are held by the trust, this waiver will not be
effective without the consent of a majority in liquidation preference of the
trust securities. Should the holders of the debentures fail to annul the
declaration and waive the default, the holders of at least a majority in
aggregate liquidation amount of the preferred securities will have this right.
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If an event of default under the indenture has occurred and is continuing,
the property trustee will have the right to declare the principal of and the
interest on the debentures, and any other amounts payable under the indenture,
to be immediately due and payable and to enforce its other rights as a creditor
with respect to the debentures.
We are required to file annually with the indenture trustee a certificate as
to whether or not we are in compliance with all of the conditions and covenants
applicable to us under the indenture.
Enforcement of Certain Rights by Holders of the Preferred Securities
If an event of default under the indenture has occurred and is continuing
and the event is attributable to the failure by us to pay interest on or
principal of the debentures on the date on which the payment is due and
payable, then a holder of preferred securities may institute a direct action
against us to compel us to make the payment. We may not amend the indenture to
remove the foregoing right to bring a direct action without the prior written
consent of all of the holders of the preferred securities. If the right to
bring a direct action is removed, the trust may become subject to the reporting
obligations under the Securities Exchange Act of 1934.
The holders of the preferred securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the debentures unless there has been an event of
default under the trust agreement. "Description of the 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 or
transfer our properties and assets substantially as an entirety to any entity,
and no entity may be consolidated with or merged into us or sell, convey,
transfer or otherwise dispose of its properties and assets substantially as an
entirety to us, unless:
. if we consolidate with or merge into another person or convey or transfer
our properties and assets substantially as an entirety to any person, the
successor person is organized under the laws of the United States or any
state or the District of Columbia, and the successor person expressly
assumes by supplemental indenture our obligations on the debentures, and
the ultimate parent entity of the successor entity expressly assumes our
obligations under the guarantee, to the extent the preferred securities
are then outstanding;
. immediately after the transaction, no event of default under the
indenture, and no event which, after notice or lapse of time, or both,
would become an event of default under the indenture, has occurred and is
continuing; and
. other conditions as prescribed in the indenture are met.
Under certain circumstances, if we consolidate or merge with another entity,
or transfer or sell substantially all of our assets to another entity, such
transaction may be considered to involve a replacement of the trust, and the
provisions of the trust agreement relating to a replacement of the trust would
apply to such transaction. See "Description of the Preferred Securities --
Mergers, Consolidations, Amalgamations or Replacements of the Trust."
Satisfaction and Discharge
The indenture will cease to be of further effect and we will be deemed to
have satisfied and discharged our obligations under the indenture when all
debentures not previously delivered to the indenture trustee for cancellation:
. have become due and payable; or
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. will become due and payable at their stated maturity within one year or
are to be called for redemption within one year, and we deposit or cause
to be deposited with the indenture trustee funds, in trust, in an amount
sufficient to pay and discharge the entire indebtedness on the debentures
not previously delivered to the indenture trustee for cancellation, for
the principal and interest due on the stated maturity or redemption date,
as the case may be.
We may still be required to provide officers' certificates, opinions of
counsel and pay fees and expenses due after these events occur.
Governing Law
The indenture and the debentures will be governed by and construed in
accordance with Kentucky law.
Information Concerning the Indenture Trustee
The indenture trustee is subject to all the duties and responsibilities
specified with respect to an indenture trustee under the Trust Indenture Act.
Subject to these provisions, the indenture trustee is under no obligation to
exercise any of the powers vested in it by the indenture at the request of any
holder of debentures, unless offered reasonable security or indemnity by the
holder against the costs, expenses and liabilities which might be incurred. The
indenture trustee is not required to expend or risk its own funds or otherwise
incur personal financial liability in the performance of its duties if the
indenture trustee reasonably believes that repayment or adequate indemnity is
not reasonably assured to it.
Miscellaneous
We have agreed, pursuant to the indenture, for so long as preferred
securities remain outstanding:
. to maintain directly or indirectly 100% ownership of the common securities
of the trust, except that certain successors that are permitted pursuant
to the indenture may succeed to our ownership of the common securities;
. not to voluntarily dissolve, wind up or liquidate the trust without prior
approval of the Federal Reserve, if required by law or regulation;
. to use our reasonable efforts to cause the trust (a) to remain a business
trust and to avoid involuntary dissolution, winding up or liquidation,
except in connection with a distribution of debentures, the redemption of
all of the trust securities of the trust or mergers, consolidations or
amalgamations, each as permitted by the trust agreement; and (b) to
otherwise continue not to be treated as an association taxable as a
corporation or partnership for federal income tax purposes;
. to use our reasonable efforts to cause each holder of trust securities to
be treated as owning an individual beneficial interest in the debentures;
. to use our reasonable efforts to maintain the eligibility of the preferred
securities for listing, quotation or inclusion on or in any national
securities exchange or other self-regulatory organization on or in which
the preferred securities are then listed, quoted or included and to keep
the preferred securities so listed, quoted or included for so long as the
preferred securities remain outstanding; and
. not to issue or incur, directly or indirectly, additional trust preferred
securities that are senior in right of payment to the preferred securities.
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BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for the preferred securities and may
act as securities depositary for all of the debentures in the event of the
distribution of the debentures to the holders of preferred securities. Except
as described below, the preferred securities will be issued only as registered
securities in the name of Cede & Co., as DTC's nominee. One or more global
preferred securities certificates will be issued for the preferred securities
and will be deposited with DTC.
DTC is a limited purpose trust company organized under New York banking law,
a "banking organization" within the meaning of the New York banking law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to Section 17A of the Securities Exchange Act of 1934. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its direct participants and by
the New York Stock Exchange, the American Stock Exchange and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to indirect participants, such as securities brokers and dealers,
banks and trust companies that clear through or maintain custodial
relationships with direct participants, either directly or indirectly. The
rules applicable to DTC and its participants are on file with the SEC.
Purchases of preferred securities within the DTC system must be made by or
through direct participants, which will receive a credit for the preferred
securities on DTC's records. The ownership interest of each actual purchaser of
each preferred security is in turn to be recorded on the direct and indirect
participants' records. These beneficial owners will not receive written
confirmation from DTC of their purchases, but beneficial owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the direct or indirect participants
through which the beneficial owners purchased preferred securities. Transfers
of ownership interests in the preferred securities are to be accomplished by
entries made on the books of participants acting on behalf of beneficial
owners. Beneficial owners will not receive certificates representing their
ownership interest in preferred securities, except if use of the
book-entry-only system for the preferred securities is discontinued.
DTC will have no knowledge of the actual beneficial owners of the preferred
securities; DTC's records reflect only the identity of the direct participants
to whose accounts the preferred securities are credited, which may or may not
be the beneficial owners. The participants will remain responsible for keeping
account of their holdings on behalf of their customers.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be accurate, but we and the
trust assume no responsibility for the accuracy thereof. Neither we nor the
trust have any responsibility for the performance by DTC or its participants of
their respective obligations as described in this prospectus or under the rules
and procedures governing their respective operations.
Notices and Voting
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
and indirect participants to beneficial owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
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Redemption notices will be sent to Cede & Co. as the registered holder of
the preferred securities. If less than all of the preferred securities are
being redeemed, the amount to be redeemed will be determined in accordance with
the trust agreement.
Although voting with respect to the preferred securities is limited to the
holders of record of the preferred securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to preferred securities. Under its usual procedures, DTC would mail an
omnibus proxy to the property trustee as soon as possible after the record
date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights to
those direct participants to whose accounts the preferred securities are
credited on the record date.
Distribution of Funds
The property trustee will make distribution payments on the preferred
securities to DTC. DTC's practice is to credit direct participants' accounts on
the relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payments on the payment date. Payments by participants to beneficial owners
will be governed by standing instructions and customary practices and will be
the responsibility of the participant and not of DTC, the property trustee, the
trust or us, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of distributions to DTC is the responsibility
of the property trustee, disbursement of the payments to direct participants is
the responsibility of DTC, and disbursements of the payments to the beneficial
owners is the responsibility of direct and indirect participants.
Successor Depositaries and Termination of Book-Entry System
DTC may discontinue providing its services with respect to any of the
preferred securities at any time by giving reasonable notice to the property
trustee or us. If no successor securities depositary is obtained, definitive
certificates representing the preferred securities are required to be printed
and delivered. We also have the option to discontinue use of the system of
book-entry transfers through DTC or a successor depositary. After an event of
default under the indenture, the holders of a majority in liquidation amount of
preferred securities may determine to discontinue the system of book-entry
transfers through DTC. In these events, definitive certificates for the
preferred securities will be printed and delivered.
DESCRIPTION OF THE GUARANTEE
The preferred securities guarantee agreement will be executed and delivered
by us concurrently with the issuance of the preferred securities for the
benefit of the holders of the preferred securities. The guarantee agreement
will be qualified as an indenture under the Trust Indenture Act. First Union
Trust Company, National Association, the guarantee trustee, will act as trustee
for purposes of complying with the provisions of the Trust Indenture Act, and
will also hold the guarantee for the benefit of the holders of the preferred
securities.
The following discussion contains a description of the material provisions
of the guarantee and is subject to, and is qualified in its entirety by
reference to, the guarantee agreement and the Trust Indenture Act. We urge
prospective investors to read the form of the guarantee agreement, which has
been filed as an exhibit to the registration statement of which this prospectus
forms a part.
General
We agree to pay in full on a subordinated basis, to the extent described in
the guarantee agreement, the guarantee payments, as defined below, to the
holders of the preferred securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the trust may have or assert
other than the defense of payment.
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The following payments with respect to the preferred securities are called
the "guarantee payments" and, to the extent not paid or made by the trust and
to the extent that the trust has funds available for those distributions, will
be subject to the guarantee:
. any accumulated and unpaid distributions required to be paid on the
preferred securities;
. with respect to any preferred securities called for redemption, the
redemption price; and
. upon a voluntary or involuntary dissolution, winding up or termination of
the trust, other than in connection with the distribution of debentures to
the holders of preferred securities in exchange for preferred securities,
the lesser of:
(a) the amount of the liquidation distribution; and
(b) the amount of assets of the trust remaining available for
distribution to holders of preferred securities in liquidation of the
trust.
We may satisfy our obligations to make a guarantee payment by making a
direct payment of the required amounts to the holders of the preferred
securities or by causing the trust to pay the amounts to the holders.
The guarantee agreement is a guarantee, on a subordinated basis, of the
guarantee payments, but the guarantee only applies to the extent the trust has
funds available for those distributions. If we do not make interest payments on
the debentures purchased by the trust, the trust will not have funds available
to make the distributions and will not pay distributions on the preferred
securities.
Status of the Guarantee
The guarantee constitutes our unsecured obligation that ranks subordinate
and junior in right of payment to all of our senior and subordinated debt in
the same manner as the debentures. We expect to incur additional indebtedness
in the future, although we have no specific plans in this regard presently and,
except in certain circumstances, neither the indenture nor the trust agreement
limits the amounts of senior and subordinated debt that we may incur.
The guarantee constitutes a guarantee of payment and not of collection. If
we fail to make guarantee payments when required, holders of preferred
securities may institute a legal proceeding directly against us to enforce
their rights under the guarantee without first instituting a legal proceeding
against the trust, the guarantee trustee or any other person or entity.
The guarantee will not be discharged except by payment of the guarantee
payments in full to the extent not paid by the trust or upon distribution of
the debentures to the holders of the preferred securities. Because we are a
bank holding company, our right to participate in any distribution of assets of
any subsidiary upon the subsidiary's liquidation or reorganization or otherwise
is subject to the prior claims of creditors of that subsidiary, except to the
extent we may be recognized as a creditor of that subsidiary. Our obligations
under the guarantee, therefore, will be effectively subordinated to all
existing and future liabilities of our subsidiaries, and claimants should look
only to our assets for payments under the guarantee.
Amendments
Except with respect to any changes that do not materially adversely affect
the rights of holders of the preferred securities, in which case no vote will
be required, the guarantee may be amended only with the prior approval of the
holders of a majority of the aggregate liquidation amount of the outstanding
preferred securities. See "Description of the Preferred Securities -- Voting
Rights; Amendment of Trust Agreement."
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Events of Default; Remedies
An event of default under the guarantee agreement will occur upon our
failure to make any required guarantee payments or to perform any other
obligations under the guarantee. The holders of a majority in aggregate
liquidation amount of the preferred securities will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the guarantee trustee in respect of the guarantee and may direct
the exercise of any power conferred upon the guarantee trustee under the
guarantee.
Any holder of preferred securities may institute and prosecute a legal
proceeding directly against us to enforce its 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 to provide to the guarantee trustee annually a certificate
as to whether or not we are in compliance with all of the conditions and
covenants applicable to us under the guarantee agreement.
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;
. full payment of the amounts payable upon dissolution of the trust; or
. distribution of the debentures to the holders of the preferred securities.
If at any time any holder of the preferred securities must restore payment
of any sums paid under the preferred securities or the guarantee, the guarantee
will continue to be effective or will be reinstated with respect to such
amounts.
Information Concerning the Guarantee Trustee
The guarantee trustee, other than during the occurrence and continuance of
our default in performance of the guarantee, undertakes to perform only those
duties as are specifically set forth in the guarantee. When an event of default
has occurred and is continuing, the guarantee trustee must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to those provisions, the guarantee
trustee is under no obligation to exercise any of the powers vested in it by
the guarantee at the request of any holder of any preferred securities unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby.
Expense Agreement
We will, pursuant to the Agreement as to Expenses and Liabilities entered
into by us and the trust, irrevocably and unconditionally guarantee to each
person or entity to whom the trust becomes indebted or liable, the full payment
of any costs, expenses or liabilities of the trust, other than obligations of
the trust to pay to the holders of the trust securities the amounts due to the
holders pursuant to the terms of the trust securities. Third party creditors of
the trust may proceed directly against us under the expense agreement,
regardless of whether they had notice of the expense agreement.
Governing Law
The guarantee will be governed by Kentucky law.
47
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee
We irrevocably guarantee, as and to the extent described in this prospectus,
payments of distributions and other amounts due on the preferred securities, to
the extent the trust has funds available for the payment of these amounts. We
and the trust believe that, taken together, our obligations under the
debentures, the indenture, the trust agreement, the expense agreement and the
guarantee agreement provide, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of payment of distributions
and other amounts due on the preferred securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes a guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional
guarantee of the obligations of the trust under the preferred securities.
If and to the extent that we do not make payments on the debentures, the
trust will not pay distributions or other amounts due on the preferred
securities. The guarantee does not cover payment of distributions when the
trust does not have sufficient funds to pay the distributions. In this event,
the remedy of a holder of preferred securities is to institute a legal
proceeding directly against us for enforcement of payment of the distributions
to the holder. Our obligations under the guarantee are subordinated and junior
in right of payment to all of our other indebtedness.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on the
debentures, these payments will be sufficient to cover distributions and other
payments due on the preferred securities, primarily because:
. the aggregate principal amount of the debentures will be equal to the sum
of the stated liquidation amount of the trust securities;
. the interest rate and interest and other payment dates on the debentures
will match the distribution rate and distribution and other payment dates
for the preferred securities;
. we will pay for any and all costs, expenses and liabilities of the trust,
except the obligations of the trust to pay to holders of the trust
securities the amounts due to the holders pursuant to the terms of the
trust securities; and
. the trust will not engage in any activity that is not consistent with the
limited purposes of the trust.
Enforcement Rights of Holders of Preferred Securities
A holder of any preferred security may institute a legal proceeding directly
against us to enforce its rights under the guarantee without first instituting
a legal proceeding against the guarantee trustee, the trust or any other
person. A default or event of default under any of our senior or subordinated
debt would not constitute a default or event of default under the trust
agreement. In the event, however, of payment defaults under, or acceleration
of, our senior or subordinated debt, the subordination provisions of the
indenture provide that no payments may be made in respect of the debentures
until the obligations have been paid in full or any payment default has been
cured or waived. Failure to make required payments on the debentures would
constitute an event of default under the trust agreement.
Limited Purpose of the Trust
The preferred securities evidence preferred undivided beneficial interests
in the assets of the trust. The trust exists for the exclusive purposes of
issuing the trust securities, investing the proceeds thereof in debentures and
48
engaging in only those other activities necessary, advisable or incidental
thereto. A principal difference between the rights of a holder of a preferred
security and the rights of a holder of a debenture is that a holder of a
debenture is entitled to receive from us the principal amount of and interest
accrued on debentures held, while a holder of preferred securities is entitled
to receive distributions from the trust, or from us under the guarantee
agreement, if and to the extent the trust has funds available for the payment
of the distributions.
Rights Upon Termination
Upon any voluntary or involuntary dissolution, winding-up or liquidation of
the trust involving the liquidation of the debentures, the holders of the
preferred securities will be entitled to receive, out of assets held by the
trust, the liquidation distribution in cash. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Dissolution."
Upon our voluntary or involuntary liquidation or bankruptcy, the property
trustee, as holder of the debentures, would be a subordinated creditor of ours.
Therefore, the property trustee would be subordinated in right of payment to
all of our senior and subordinated debt, but is entitled to receive payment in
full of principal and interest before any of our shareholders receive payments
or distributions. Since we are the guarantor under the guarantee and have
agreed to pay for all costs, expenses and liabilities of the trust other than
the obligations of the trust to pay to holders of the trust securities the
amounts due to the holders pursuant to the terms of the trust securities, the
positions of a holder of the preferred securities and a holder of the
debentures relative to our other creditors and to our shareholders in the event
of liquidation or bankruptcy are expected to be substantially the same.
FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion of the material federal income tax considerations
that may be relevant to the purchasers of preferred securities, insofar as the
discussion relates to matters of law and legal conclusions, represents the
opinion of Greenebaum Doll & McDonald PLLC, counsel to Community Trust Bancorp,
Inc. and the trust.
The conclusions expressed herein are based upon current provisions of the
Internal Revenue Code of 1986, as amended ("Code"), Treasury regulations issued
thereunder and current administrative rulings and court decisions, all of which
are subject to change at any time, with possible retroactive effect. Subsequent
changes may cause tax consequences to vary substantially from the consequences
described below. Furthermore, the authorities on which the following summary is
based are subject to various interpretations, and it is therefore possible that
the federal income tax treatment of the purchase, ownership and disposition of
preferred securities may differ from the treatment described below.
No attempt has been made in the following discussion to comment on all
federal income tax matters affecting purchasers of preferred securities.
Moreover, the discussion addresses only holders of preferred securities who are
individual citizens or residents of the United States and trusts and estates
whose federal taxable income is taxed in the same manner as individual citizens
or residents of the United States, and who acquire preferred securities on
their original issue at their initial offering price and hold such preferred
securities as capital assets. The discussion does not address the tax
consequences that may be relevant to holders who may be subject to special tax
treatment, such as, for example, banks, thrifts, real estate investment trusts,
regulated investment companies, insurance companies, dealers in securities or
currencies, tax-exempt investors or persons that will hold the preferred
securities as a position in a "straddle," as part of a "synthetic security" or
"hedge," as part of a "conversion transaction" or other integrated investment,
or as other than a capital asset. The following discussion also does not
address the tax consequences to persons that have a functional currency other
than the
49
U.S. dollar or the tax consequences to shareholders, partners or beneficiaries
of a holder of preferred securities. Further, it does not include any
description of any alternative minimum tax consequences or discuss the tax laws
of any state or local government or of any foreign government that may be
applicable to the preferred securities. Accordingly, each prospective investor
should consult, and should rely exclusively on, the investor's own tax advisors
in analyzing the federal, state, local and foreign tax consequences of the
purchase, ownership or disposition of preferred securities with regard to the
particular tax consequences specific to that investor, which may vary for
investors in different tax situations.
Classification of the Debentures
Based on advice of counsel, we intend to take the position that the
debentures will be classified for federal income tax purposes as our
indebtedness. Under current law, and, by acceptance of a preferred security,
you, as a holder, covenant to treat the debentures as indebtedness and the
preferred securities as evidence of an indirect beneficial ownership interest
in the debentures. No assurance can be given, however, that this position will
not be challenged by the Internal Revenue Service ("IRS") or, if challenged,
that the challenge will not be successful. The remainder of this discussion
assumes that the debentures will be classified for federal income tax purposes
as our indebtedness.
Classification of the Trust
Greenebaum Doll & McDonald PLLC, counsel for us and the trust, has rendered
its opinion that, under current law and assuming full compliance with the terms
of the trust agreement and indenture, the trust will be classified for federal
income tax purposes as a grantor trust. Accordingly, the trust will not be
subject to federal income tax, and you, as a holder of preferred securities,
will be treated for federal income tax purposes as owning an undivided
beneficial interest in the debentures. You will be required to include in your
gross income any interest with respect to the debentures at the time such
interest is accrued or is received by the trust, in accordance with your
regular method of accounting. If the debentures were determined to be subject
to the original issue discount ("OID") rules (as discussed below), you, as a
holder, would instead be required to include in your gross income any OID
accrued with respect to your allocable share of the debentures, whether or not
cash was actually distributed to you.
Interest Payment Period and Original Issue Discount
Under the indenture, we have the right to defer the payment of interest on
the debentures at any time or from time to time for one or more deferral
periods not exceeding 20 consecutive quarterly periods each, provided that no
deferral period shall end on a date other than an interest payment date or
extend beyond March 31, 2032. Under applicable Treasury regulations, debt
instruments, such as the debentures, that are issued at face value will not be
considered issued with OID, even if their issuer can defer payments of
interest, if the likelihood of any deferral is remote. A debt instrument will
generally be treated as issued with OID if the stated interest on the
instrument does not constitute "qualified stated interest." Qualified stated
interest is generally any one of a series of stated interest payments on an
instrument that are unconditionally payable at least annually at a single fixed
rate. In determining whether stated interest on an instrument is
unconditionally payable and thus constitutes qualified stated interest, remote
contingencies as to the timely payment of stated interest are ignored.
We have concluded that the likelihood of exercising our option to defer
payments of interest on the debentures is remote. This is in part because we
pay dividends on our common stock and intend to continue to do so, and we would
be unable to continue paying these dividends, which could adversely affect the
market for our common stock, if we deferred our payments under the debentures.
Accordingly, we intend to take the position that the debentures will not be
considered to be issued with OID by reason of the deferral option alone, and
accordingly, stated interest on the debentures generally will be included in
your income as ordinary income at the time it is paid or accrued in accordance
with your regular method of accounting.
50
If the likelihood that we would exercise the option to defer any payment of
interest was determined not to be "remote," or if we actually exercise our
option to defer the payment of interest, the debentures would be treated as
issued with OID at the time of issuance or at the time of such exercise, as the
case may be, and all stated interest on the debentures would thereafter be
treated as OID as long as the debentures remained outstanding. In such event,
all of your taxable interest income in respect of the debentures would
constitute OID that would have to be included in income on an economic accrual
basis before the receipt of the cash attributable to such income, regardless of
your method of tax accounting, and actual cash distributions of stated interest
would not be reported as taxable income. The amount of such includible OID
could be significant. Consequently, you, as a holder of preferred securities,
would be required to include such OID in gross income even though we would not
make any actual cash payments during an extension period.
The meanings of the term "remote" as used in the Treasury regulations is not
clear, and it is possible that the IRS could take a position contrary to the
interpretation described in this section. There can be no assurance that the
IRS would not be successful if it took such a position.
Because income on the preferred securities will constitute interest,
corporate holders of preferred securities will not be entitled to a dividends
received deduction with respect to any income recognized with respect to the
preferred securities.
Receipt of Debentures or Cash Upon Liquidation of the Trust
We will have the right at any time to liquidate the trust and cause the
debentures to be distributed to holders of the preferred securities. Under
current federal income tax law, such a distribution would be treated as a
nontaxable event to the holder and would result in the holder having an
aggregate tax basis in the debentures received in the liquidation equal to the
holder's aggregate tax basis in the preferred securities immediately before the
distribution. A holder's holding period in debentures received in liquidation
of the trust would include the period for which the holder held the preferred
securities. If, however, as a result of a change of law or regulation, the
trust is treated as an association taxable as a corporation, the distribution
would likely constitute a taxable event to holders of the preferred securities
and to the trust.
The debentures may be redeemed for cash, and the proceeds of that prepayment
would be distributed to holders in redemption of their preferred securities.
Under current law, such a redemption should constitute a taxable disposition of
the redeemed preferred securities, and, for federal income tax purposes, a
holder should therefore recognize gain or loss as if the holder sold the
preferred securities for cash.
Disposition of Preferred Securities
A holder that sells preferred securities will recognize gain or loss equal
to the difference between the amount realized on the sale of the preferred
securities and the holder's adjusted tax basis in the preferred securities. A
holder's adjusted tax basis in the preferred securities generally will be its
initial purchase price increased by OID, if any, previously included in the
holder's gross income to the date of disposition, and decreased by payments, if
any, received on the preferred securities in respect of OID to the date of
disposition. A gain or loss of this kind will generally be a capital gain or
loss except to the extent any amount realized is treated as payment of accrued
interest with respect to such holder's pro rata share of the debentures and
will be a long-term capital gain or loss if the preferred securities have been
held for more than one year at the time of sale.
The preferred securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
debentures. A holder that disposes of its preferred securities between record
dates for payments of distributions thereon will be required to include as
ordinary income accrued but unpaid interest on the debentures through the date
of disposition. Any OID included in income will increase a holder's adjusted
tax basis as discussed above. To the extent the amount realized on the sale of
the preferred securities is less than the holder's adjusted tax basis in the
preferred securities sold, the holder will recognize a
51
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for federal income tax purposes.
Effect of Possible Changes in Tax Laws
Congress has considered certain proposed tax law changes in the past that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations if the debt obligations have a
maximum term in excess of 15 years and are not shown as indebtedness on the
issuer's applicable consolidated balance sheet. Other proposed tax law changes
would have denied interest deductions if the term was in excess of 20 years.
Although these proposed tax law changes have not been enacted into law, there
can be no assurance that tax law changes will not be reintroduced into future
legislation which, if enacted after the date hereof, may adversely affect our
ability to deduct interest paid on the debentures. The IRS may also challenge
the deductibility of interest paid on the debentures which, if such challenge
were litigated and the IRS's position sustained, would trigger a Tax Event and
possibly a redemption of the preferred securities. Accordingly, there can be no
assurance that a Tax Event will not occur.
Backup Withholding and Information Reporting
Interest paid, or, if applicable, OID accrued, on the preferred securities
held of record by individual citizens or residents of the United States, or
certain trusts, estates and partnerships, will be reported to the IRS on
Forms 1099-INT, or, where applicable, Forms 1099-OID, which forms should be
mailed to the holders by January 31 following each calendar year. Payments made
on, and proceeds from the sale of, the preferred securities may be subject to a
"backup" withholding tax (currently at 30%) unless the holder complies with
certain identification and other requirements. Any amounts withheld under the
backup withholding rules will be allowed as a refund or credit against the
holder's federal income tax liability, provided the required information is
provided to the IRS.
The federal income tax discussion set forth above is included for general
information only and may not be applicable depending upon the particular
situation of a holder of preferred securities. Holders of preferred securities
should consult their tax advisors with respect to the tax consequences to them
of the purchase, ownership and disposition of the preferred securities,
including the tax consequences under state, local, foreign and other tax laws
and the possible effects of changes in federal or other tax laws and
particularly with regard to the tax consequences which vary for investors in
different tax situations.
52
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974 ("ERISA"), or Section 4975 of the Code, generally may
purchase preferred securities, subject to the investing fiduciary's
determination that the investment in preferred securities satisfies ERISA's
fiduciary standards and other requirements applicable to investments by the
plan. We and certain of our affiliates may each be considered a "party in
interest" within the meaning of ERISA or a "disqualified person" within the
meaning of Section 4975 of the Code with respect to many employee benefit plans
that are subject to ERISA. The purchase of the preferred securities by a plan
that is subject to the fiduciary responsibility provisions of ERISA or the
prohibited transaction provisions of ERISA and the Code and with respect to
which either 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 the Code, unless the preferred securities
are acquired pursuant to and in accordance with an applicable exemption.
Any plan fiduciary considering whether to purchase or hold any preferred
securities on behalf of a plan should consult with its counsel regarding the
applicability of the fiduciary responsibility and prohibited transaction
provisions of ERISA and the prohibited transaction provisions of the Code to
such investment. Among other things, before purchasing any preferred
securities, a fiduciary of a plan that is subject to the fiduciary
responsibility and prohibited transaction provisions of ERISA or to the
prohibited transaction provisions of the Code should make its own determination
as to its compliance with such applicable provisions, together with the
availability, if needed, of the exemptive relief provided in an exemption.
In addition, a plan fiduciary considering the purchase of preferred
securities should be aware that the assets of the trust may be considered "plan
assets" for ERISA purposes. In such event, any persons exercising discretion
with respect to the debentures may become fiduciaries, parties in interest or
disqualified persons with respect to an investing plan. Accordingly, each
investing plan, by purchasing the preferred securities, will be deemed to have
directed the trust to invest in the debentures, consented to the appointment of
the property trustee, and made its own determination as to the plan's
compliance with the applicable provisions of ERISA and the Code, insofar as
they relate to persons exercising discretion with respect to the preferred
securities.
53
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement among us,
the trust, J.J.B. Hilliard, W.L. Lyons, Inc. and Ferris, Baker Watts,
Incorporated, the underwriters have severally agreed to purchase from the
trust, and the trust has agreed to sell to them, an aggregate of 1,000,0002,500,000
preferred securities in the amounts set forth below opposite their names.
Number of
Underwriters Preferred Securities
------------ --------------------
J.J.B. Hilliard, W.L. Lyons, Inc......... 1,750,000
Ferris, Baker Watts, Incorporated........ 750,000
---------
Total................................. 1,000,0002,500,000
=========
Under the terms and conditions of the underwriting agreement, the
underwriters are committed to accept and pay for all of the preferred
securities, if any are taken. If an underwriter defaults, the underwriting
agreement provides that the purchase commitments of the non-defaulting
underwriter may be increased or, in certain cases, the underwriting agreement
may be terminated. In the underwriting agreement, the obligations of the
underwriters are subject to approval of certain legal matters by their counsel,
including the authorization and the validity of the preferred securities, and
to other conditions contained in the underwriting agreement, such as receipt by
the underwriters of officers' certificates and legal opinions.
The underwriters propose to offer the preferred securities directly to the
public at the public offering price set forth on the cover page of this
prospectus, and to certain securities dealers (who may include the
underwriters) at this price, less a concession not in excess of $$0.20 per
preferred security. The underwriters may allow, and the selected dealers may
reallow, a concession not in excess of $$0.20 per preferred security to certain
brokers and dealers. After the preferred securities are released for sale to
the public, the offering price and other selling terms may, from time to time,
be changed by the underwriters.
The table below shows the price and proceeds on a per preferred security and
aggregate basis. The proceeds to be received by the trust, as shown in the
table below, do not reflect estimated expenses payable by us. See "Use of
Proceeds."
Per Preferred
Security Total
------------- -----------
Public offering price............................ $25.00price.............................................. $10.00 $25,000,000
Proceeds before expenses, to the trust..........trust.............................................. 10.00 25,000,000
Underwriting commission..........................commission............................................ 0.40 1,000,000
------ -----------
Net proceeds, before expenses, to Community Trust Bancorp, Inc.. $ $9.60 $24,000,000
====== ===========
The offering of the preferred securities is made for delivery when, as and
if accepted by the underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offering without notice. The underwriters
reserve the right to reject any order for the purchase of the preferred
securities.
We and the trust have agreed to indemnify the underwriters against several
liabilities, including liabilities under the Securities Act of 1933.
We have applied to have the preferred securities listed for trading on the
American Stock Exchange under the symbol "BPF", and trading is expected to
commence on or prior to deliverywithin 15 days of the issuance of the preferred securities. The
underwriters have advised the trust that they presently intend to make a market
in the preferred securities after the commencement of trading on the American
Stock Exchange, but are not obligated to do so, and may discontinue market
making at any time without notice. We cannot assure you as to the liquidity of
the preferred securities or that an active and liquid market will develop or,
if developed, that the
54
market will continue. The offering price and distribution rate have been
determined by negotiations between the underwriters and us, and the offering
price of the preferred securities may not be indicative of the market price
following the offering. The underwriters will have no obligation to make a
market in the preferred securities, however, and may cease market-making
activities, if commenced, at any time.
In connection with the offering, the underwriters may engage in transactions
that are intended to stabilize, maintain or otherwise affect the price of the
preferred securities during and after the offering, such as the following:
. the underwriters may over-allot or otherwise create a short position in
the preferred securities for their own account by selling more preferred
securities than have been sold to them;
. the underwriters may elect to cover any short position by purchasing
preferred securities in the open market;
. the underwriters may stabilize or maintain the price of the preferred
securities by bidding;
. the underwriters may engage in passive market making transactions; and
. the underwriters may impose penalty bids, under which selling concessions
allowed to other broker-dealers participating in this offering are
reclaimed if preferred securities previously distributed in the offering
are repurchased in connection with stabilization transactions or otherwise.
The effect of these transactions may be to stabilize or maintain the market
price at a level above that which might otherwise prevail in the open market.
The imposition of a penalty bid may also affect the price of the preferred
securities to the extent that it discourages resales. No representation is made
as to the magnitude or effect of any such stabilization or other transactions.
Such transactions may be effected on the American Stock Exchange or otherwise
and, if commenced, may be discontinued at any time.
Because the National Association of Securities Dealers, Inc. may view the
preferred securities as interests in a direct participation program, the offer
and sale of the preferred securities is being made in compliance with the
provisions of Rule 2810 under the NASD Conduct Rules.
Certain of the underwriters and their affiliates have, from time to time,
performed investment banking and other services for us in the ordinary course
of business and have received fees from us for their services.
55
LEGAL MATTERS
Certain matters of Delaware law relating to CTBI Preferred Capital Trust II
will be passed upon for CTBI Preferred Capital Trust II and Community Trust
Bancorp by Richards, Layton & Finger, P.A., Wilmington, Delaware. The due
authorization, execution and delivery of the junior subordinated debentures and
the validity of the junior subordinated debentures and the guarantees will be
passed upon for Community Trust Bancorp and CTBI Preferred Capital Trust II by
Greenebaum Doll & McDonald PLLC, Louisville, Kentucky. The validity of the
junior subordinated debentures and the guarantees will be passed upon for the
underwriters by Squire, Sanders & Dempsey L.L.P., Columbus, Ohio. Certain
United States federal income taxation matters also will be passed upon for
Community Trust Bancorp and CTBI Preferred Capital Trust II by Greenebaum Doll
& McDonald PLLC. A member of Greenebaum Doll & McDonald PLLC who participated
in the preparation of this prospectus beneficially owns 2,827 shares of
Community Trust Bancorp, Inc. and plans to purchase 5,000 preferred securities
in this offering.
EXPERTS
The financial statements incorporated in this prospectus by reference from
Community Trust Bancorp, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 2000 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements for the years ended December 31, 1999
and 1998, incorporated in this prospectus by reference from Community Trust
Bancorp, Inc.'s Annual Report on Form 10-K for the year ended December 31,
2000, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Community Trust Bancorp, Inc. and the trust have also filed a registration
statement with the SEC relating to the securities offered by this prospectus.
This prospectus is part of the registration statement. You may obtain from the
SEC a copy of the registration statement and exhibits that we filed with the
SEC. The registration statement may contain additional information that is
important to you.
We file periodic reports, proxy statements and other information with the
SEC. Our filings are available to the public over the Internet at the SEC's web
site at http://www.sec.gov. You may also inspect and copy these materials at
the public reference facilities of the SEC at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information.
The trust is not currently subject to the information reporting requirements
of the Securities Exchange Act of 1934 and, although the trust will become
subject to such requirements upon the effectiveness of the registration
statement, it is not expected that the trust will file separate reports under
the Exchange Act.
Each holder of the trust securities will receive a copy of our annual report
at the same time as we furnish the annual report to the holders of our common
stock.
56
DOCUMENTS INCORPORATED BY REFERENCE
We "incorporate by reference" into this prospectus the information in
documents we file with the SEC, which means that we can disclose important
information to you through those documents. The information incorporated by
reference is an important part of this prospectus. Some information contained
in this prospectus updates the information incorporated by reference and some
information that we file subsequently with the SEC will automatically update
this prospectus. We incorporate by reference:
. our Annual Report on Form 10-K for the year ended December 31, 2000;
. our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001,
June 30, 2001 and September 30, 2001; and
. our Current Report on Form 8-K filed on January ,16, 2002.
We also incorporate by reference any filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the initial filing of the registration statement that contains this prospectus
and before the time that all of the securities offered in this prospectus are
sold.
You may request, and we will provide, a copy of these filings at no cost by
contacting Jean R. Hale, our Vice Chairman, President and Chief Executive
Officer, at the following mailing address and phone number:
Community Trust Bancorp, Inc.
P.O. Box 2947
Pikeville, KY 41502-2947
Attention: Jean R. Hale
(606) 432-1414
57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,000,0002,500,000 Preferred Securities
CTBI Preferred Capital Trust II
%8.25% Cumulative Trust
Preferred Securities
(Liquidation Amount $25$10 per Preferred Security)
Fully, irrevocably and unconditionally guaranteed on a
subordinated basis, as described in the prospectus, by
[LOGO] Community Trust(R)Trust Bancorp, Inc.
-----------------
$25,000,000
%8.25% Subordinated Debentures of
Community Trust Bancorp, Inc.
-----------------
Prospectus
-----------------
J.J.B. Hilliard, W.L. Lyons, Inc.
Ferris, Baker Watts
Incorporated
,January 28, 2002
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses payable by Community
Trust Bancorp, Inc. in connection with this offering (excluding underwriting
discounts and commissions). All amounts except the SEC registration fee, the
NASD filing fee and the AMEX listing fee are estimates.
SEC registration fee........ $ 5,975
NASD filing fee............. 3,000
AMEX listing fee............ 16,000
Legal fees and expenses..... 90,000
Accounting fees and expenses 15,000
Printing expenses........... 60,000
Blue sky fees and expenses.. 3,500
Trustee fees and expenses... 13,500
Miscellaneous............... 43,025
--------
Total.................... $250,000
========
Item 15. Indemnification of Directors and Officers.
Section 271B.8-510 of the Kentucky Revised Statutes empowers a Kentucky
corporation to indemnify an individual (including his estate or personal
representative) who was, is or is threatened to be made a party to a
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal,
because he is or was a director against liability incurred in the proceeding
if: (i) he conducted himself in good faith; (ii) he reasonably believed, in the
case of conduct in his official capacity with the corporation, that his conduct
was in the corporation's best interests and, in all other cases, that his
conduct was at least not opposed to its best interests; and (iii) in the case
of any criminal proceeding, he had no reasonable cause to believe his conduct
was unlawful. Indemnification may be made against the obligation to pay a
judgment, settlement, penalty, fine or reasonable expenses (including counsel
fees) incurred with respect to a proceeding, except that if the proceeding was
by or in the right of the corporation, indemnification may be made only against
reasonable expenses incurred in connection with the proceeding. A corporation
may not indemnify a director under KRS 271B.8-510 in connection with a
proceeding by or in the right of the corporation in which the director was
adjudged liable to the corporation or in connection with any other proceeding
charging improper personal benefit to him, whether or not involving action in
his official capacity, in which he was adjudged liable on the basis that
personal benefit was improperly received by him. Pursuant to KRS 271B.8-530, a
corporation may pay for or reimburse the reasonable expenses incurred by a
director in advance of final disposition of the proceeding if (i) the director
affirms to the corporation in writing his good faith belief that he has met the
standard of conduct required for indemnification; (ii) the director undertakes
the personal obligation to repay such advance upon an ultimate determination
that he failed to meet such standard of conduct; and (iii) the corporation
determines that the facts then known to those making the determination would
not preclude indemnification.
Unless limited by the articles of incorporation, a director who has been
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which he was a party because he is or was a director of the corporation is
entitled to indemnification against reasonable expenses incurred by him in
connection with the proceeding. Unless limited by its articles of
incorporation, a Kentucky corporation may indemnify and advance expenses to an
officer, employee or agent of the corporation to the same extent that it may
indemnify and advance expenses to directors. The indemnification provided by or
granted pursuant to Section 271B.8-510 is not exclusive of any rights to which
those seeking indemnification may otherwise be entitled. Section 271B.8-570
II-1
empowers a Kentucky corporation to purchase and maintain insurance on behalf of
its directors, officers, employees or agents of the corporation, whether or not
the corporation would have the power under Sections 271B.8-510 or 271B.8-520 to
indemnify them against such liability.
Article VI of Community Trust Bancorp, Inc.'s Articles of Incorporation, as
amended, provides that any person who was or is a party or threatened party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director or officer of Community Trust Bancorp, Inc.: (a) shall be
indemnified (and may be indemnified if made a party to such proceeding by
reason of the fact that he is or was serving as a Company employee or agent, or
is or was serving at the request of Community Trust Bancorp, Inc. as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise) by Community Trust Bancorp, Inc. against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding (other than a derivative suit), even if he is not
successful on the merits, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of Community
Trust Bancorp, Inc. (and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful); (b) shall be
indemnified (and may be indemnified if made a party to such proceeding by
reason of the fact that he is or was serving as a Company employee or agent, or
is or was serving at the request of Community Trust Bancorp, Inc. as a
director, officer, employee or agent of another enterprise) for expenses of a
derivative suit (a suit by a shareholder alleging a breach by a director or
officer of a duty owed to Community Trust Bancorp, Inc.), even if he is not
successful on the merits, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of Community
Trust Bancorp, Inc. provided that no such indemnification may be made in
accordance with this clause (b) if he is adjudged liable to Community Trust
Bancorp, Inc., unless a court determines that, despite such adjudication, but
in view of all the circumstances, he is entitled to indemnification; and (c)
shall be indemnified by Community Trust Bancorp, Inc. for all expenses of such
litigation when he is successful on the merits. The indemnification described
in clauses (a) and (b) above shall be made only upon a determination, by (i) a
majority vote of the disinterested directors, or (ii) the shareholders, that
indemnification is proper because the applicable standard of conduct has been
met. The Board of Directors or the shareholders may authorize the advancement
of litigation expenses to a director or officer upon receipt of an undertaking
by such director or officer to repay such expenses if it is ultimately
determined that he is not entitled to be indemnified for them. The
indemnification and the advancement of expenses provided for by Article VI are
not deemed exclusive of any rights the indemnitee may have under any by-law,
agreement, vote of shareholders or disinterested directors, or otherwise.
Article X of Community Trust Bancorp, Inc.'s Articles of Incorporation, as
amended, provides that a director of Community Trust Bancorp, Inc. shall not be
personally liable to Community Trust Bancorp, Inc. or its shareholders for
monetary damages for breach of his duties as a director, provided that this
provision will not eliminate or limit the liability of a director for the
following: (a) for any transaction in which the director's personal financial
interest is in conflict with the financial interests of Community Trust
Bancorp, Inc. or its shareholders; (b) for acts or omissions not in good faith
or which involve intentional misconduct or are known to the director to be a
violation of law; (c) for any vote for or assent to an unlawful distribution to
shareholders as prohibited under Section 271B.8-330 of the Kentucky Revised
Statutes; or (d) for any transaction from which the director derived an
improper personal benefit. Article X is applicable with respect to any such
breach of duties by a director of Community Trust Bancorp, Inc. as a director
notwithstanding that such director thereafter ceases to be a director. Article
X inures to the personal benefit of such director's heirs, executors and
administrators.
Community Trust Bancorp, Inc. has purchased and maintains directors' and
officers' liability insurance which insures the directors and officers against
certain liabilities, including liabilities under the Securities Act of 1933.
Under the form of Underwriting Agreement filed as Exhibit 1.1 hereto, the
underwriters have agreed to indemnify, under certain circumstances, the
Registrants, their officers, directors and persons who control the Registrants
against certain liabilities which may be incurred in connection with the
offering, including certain liabilities under the Securities Act of 1933.
II-2
Item 16. Exhibits.
The following exhibits are filed as part of this registration statement.
Exhibit
Number Description of Exhibits
- ------ -----------------------
1.1 -- Form of Underwriting Agreement.
3.1 -- Articles of Incorporation, as amended, of Community Trust Bancorp, Inc. (incorporated by
reference to registration statement no. 33-35138).
3.2 -- Amended Bylaws of Community Trust Bancorp, Inc. (incorporated by reference to registration
statement no. 33-61891).
4.1 -- Form of Indenture for Subordinated Debentures.
4.2 -- Form of Subordinated Debenture (included as Exhibit A to Exhibit 4.1).
4.3 -- Certificate of Trust of CTBI Preferred Capital Trust II.*
4.4 -- Trust Agreement of CTBI Preferred Capital Trust II.*
4.5 -- Form of Amended and Restated Trust Agreement of CTBI Preferred Capital Trust II.
4.6 -- Form of Preferred Securities Certificate of CTBI Preferred Capital Trust II (included as Exhibit D
to Exhibit 4.5).
4.7 -- Form of Preferred Securities Guarantee Agreement of CTBI Preferred Capital Trust II.
4.8 -- Form of Agreement as to Expenses and Liabilities of CTBI Preferred Capital Trust II (included as
Exhibit C to Exhibit 4.5).
5.1 -- Opinion of Greenebaum Doll & McDonald PLLC.
5.2 -- Opinion of Richards, Layton & Finger, P.A.
8.1 -- Opinion of Greenebaum Doll & McDonald PLLC, as to certain tax matters.*
12.1 -- Calculation of ratios of earnings to fixed charges.*
23.1 -- Consent of Ernst & Young LLP.*
23.2 -- Consent of Deloitte & Touche LLP.
23.3 -- Consent of Greenebaum Doll & McDonald PLLC (included in Exhibits 5.1 and 8.1).
23.4 -- Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2).
24.1 -- Powers of Attorney (reference is made to page II-5 of this registration statement).Attorney.*
25.1 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of
First Union Trust Company, National Association, as trustee under the Indenture for Junior
Subordinated Debentures.*
25.2 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of
First Union Trust Company, National Association, as property trustee under the Amended and
Restated Trust Agreement for CTBI Preferred Capital Trust II.*
25.3 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of
First Union Trust Company, National Association, as trustee under the Guarantee Agreement
relating to CTBI Preferred Capital Trust II.*
- --------
* Previously filed.
II-3
Item 17. Undertakings.
Each of the undersigned registrants hereby undertakes:
(1) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of Community Trust Bancorp, Inc.'s annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(2) That, for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrants hereby undertake to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers, and controlling persons of the
registrants under Item 15 above, or otherwise, the registrants have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer, or controlling person of the
registrants in the successful defense of any action, suit, or proceeding) is
asserted against the registrants by such director, officer, or controlling
person in connection with the securities being registered, the registrants
will, unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Community Trust
Bancorp, Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pikeville, Commonwealth
of Kentucky, on the 1125th day of January, 2002.
COMMUNITY TRUST BANCORP, INC.
(Co-Registrant)
/s/ JEAN R. HALE
By: _______________________________________________________________
Jean R. Hale
Vice Chairman, President and Chief
Executive Officer
/s/ KEVIN STUMBO
By: _______________________________________________________________
Kevin Stumbo
Senior Vice President and
Controller
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Each person whose signature appears
below hereby authorizes Jean R. Hale and Mark A. Gooch, or either one of them,
to execute in the name of each such person and to file, any amendments to this
Registration Statement as the registrant deems appropriate, and appoints each
such agent as attorney-in-fact to sign in his or her behalf individually and in
each capacity stated below and to file any and all amendments and
post-effective amendments to this Registration Statement.
Signature Title Date
--------- ----- ----
/s/ BURLIN COLEMAN Chairman of the Board of Directors January 11, 2002
- --------------------------
Burlin Coleman
/s/ JEAN R. HALE Vice Chairman of the Board, January 11, 2002
- -------------------------- President and Chief Executive
Jean R. Hale Officer
/s/ CHARLES J. BAIRD Director January 11, 2002
- --------------------------
Charles J. Baird
/s/ NICK A. COOLEY Director January 11, 2002
- --------------------------
Nick A. Cooley
/s/ WILLIAM A. GRAHAM, JR. Director January 11, 2002
- --------------------------
William A. Graham, Jr.
/s/ M. LYNN PARRISH Director January 11, 2002
- --------------------------
M. Lynn Parrish
/s/ E.M. ROGERS Director January 11, 2002
- --------------------------
Signature Title Date
--------- ----- ----
/s/ BURLIN COLEMAN* Chairman of the Board of Directors January 25, 2002
- -----------------------------
Burlin Coleman
/s/ JEAN R. HALE Vice Chairman of the Board, January 25, 2002
- ----------------------------- President and Chief Executive
Jean R. Hale Officer
/s/ CHARLES J. BAIRD* Director January 25, 2002
- -----------------------------
Charles J. Baird
/s/ NICK A. COOLEY* Director January 25, 2002
- -----------------------------
Nick A. Cooley
/s/ WILLIAM A. GRAHAM, JR.* Director January 25, 2002
- -----------------------------
William A. Graham, Jr.
/s/ M. LYNN PARRISH* Director January 25, 2002
- -----------------------------
M. Lynn Parrish
/s/ E.M. ROGERS* Director January 25, 2002
- -----------------------------
E.M. Rogers
* By
/S/ JEAN R. HALE
- -----------------------------
Jean R. Hale
Attorney-in-fact
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, CTBI Preferred
Capital Trust II certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pikeville, Commonwealth
of Kentucky, on the 1125th day of January, 2002.
CTBI PREFERRED CAPITAL TRUST II
(Co-Registrant)
COMMUNITY TRUST BANCORP, INC.,
By:
as Depositor
/s/ JEAN R. HALE
By: _____________________________________________________________
Jean R. Hale
Vice Chairman, President and Chief
Executive Officer
II-6
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibits
- ------ -----------------------
1.1 -- Form of Underwriting Agreement.
3.1 -- Articles of Incorporation, as amended, of Community Trust Bancorp, Inc. (incorporated by reference
to registration statement no. 33-35138).
3.2 -- Amended Bylaws of Community Trust Bancorp, Inc. (incorporated by reference to registration
statement no. 33-61891).
4.1 -- Form of Indenture for Subordinated Debentures.
4.2 -- Form of Subordinated Debenture (included as Exhibit A to Exhibit 4.1).
4.3 -- Certificate of Trust of CTBI Preferred Capital Trust II.*
4.4 -- Trust Agreement of CTBI Preferred Capital Trust II.*
4.5 -- Form of Amended and Restated Trust Agreement of CTBI Preferred Capital Trust II.
4.6 -- Form of Preferred Securities Certificate of CTBI Preferred Capital Trust II (included as Exhibit D to
Exhibit 4.5).
4.7 -- Form of Preferred Securities Guarantee Agreement of CTBI Preferred Capital Trust II.
4.8 -- Form of Agreement as to Expenses and Liabilities of CTBI Preferred Capital Trust II (included as
Exhibit C to Exhibit 4.5).
5.1 -- Opinion of Greenebaum Doll & McDonald PLLC.
5.2 -- Opinion of Richards, Layton & Finger, P.A.
8.1 -- Opinion of Greenebaum Doll & McDonald PLLC, as to certain tax matters.*
12.1 -- Calculation of ratios of earnings to fixed charges.*
23.1 -- Consent of Ernst & Young LLP.*
23.2 -- Consent of Deloitte & Touche LLP.
23.3 -- Consent of Greenebaum Doll & McDonald PLLC (included in Exhibits 5.1 and 8.1).
23.4 -- Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2).
24.1 -- Powers of Attorney (reference is made to page II-5 of this registration statement).Attorney.*
25.1 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First
Union Trust Company, National Association, as trustee under the Indenture for Junior Subordinated
Debentures.*
25.2 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First
Union Trust Company, National Association, as property trustee under the Amended and Restated
Trust Agreement for CTBI Preferred Capital Trust II.*
25.3 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First
Union Trust Company, National Association, as trustee under the Guarantee Agreement relating to
CTBI Preferred Capital Trust II.*
- --------
* Previously filed.
II-7