PROSPECTUS
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SIGNAL CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.67% CAPITAL SECURITIES, SERIES B
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8.67% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
FIRSTFEDERAL FINANCIAL SERVICES CORP.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JUNE 30, 1998, UNLESS EXTENDED.
Signal Capital Trust I, a trust created under the laws of the state of
Delaware (the "Trust"), hereby offers, upon the terms and subject to the
conditions set forth in this prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange up to and including $50,000,000 aggregate Liquidation Amount of its
8.67% Capital Securities, Series B (the "Exchange Capital Securities"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for a like Liquidation Amount of its
outstanding 8.67% Capital Securities, Series A (the "Original Capital
Securities"), of which $50,000,000 aggregate Liquidation Amount is
outstanding. Pursuant to the Exchange Offer, FirstFederal Financial Services
Corp., a Ohio corporation (the "Corporation" or "First Federal"), is also
offering to exchange (i) its guarantee of payments of cash distributions and
payments on liquidation of the Trust or redemption of the Exchange Capital
Securities (the "Exchange Guarantee") for a like guarantee in respect of the
Original Capital Securities (the "Original Guarantee") and (ii) its 8.67%
Junior Subordinated Deferrable Interest Debentures due February 15, 2028,
Series B (the "Exchange Junior Subordinated Debentures") for
(Continued on next page)
This Prospectus and the Letter of Transmittal are first mailed to all holders
of Original Capital Securities on or about May 29, 1998.
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER ORIGINAL CAPITAL SECURITIES
IN THE EXCHANGE OFFER.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER OBLIGATIONS
OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MAY 27, 1998.
(Continued from the previous page)
Debentures) for its 8.67% Junior Deferrable Interest Debentures due February
15, 2028, Series A (the "Original Junior Subordinated Debentures"), in an
aggregate principal amount corresponding to the aggregate Liquidation Amount
of Original Capital Securities accepted for exchange, which Exchange Guarantee
and Exchange Junior Subordinated Debentures also have been registered under
the Securities Act. The Original Capital Securities, the Original Guarantee
and the Original Junior Subordinated Debentures are collectively referred to
herein as the "Original Securities" and the Exchange Capital Securities, the
Exchange Guarantee and the Exchange Junior Subordinated Debentures are
collectively referred to herein as the "Exchange Securities."
The terms of the Exchange Securities are identical in all material
respects to the respective terms of the Original Securities, except that (i)
the Exchange Securities have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable
to the Original Securities, (ii) the Exchange Capital Securities will not
provide for any increase in the Distribution rate thereon, and (iii) the
Exchange Junior Subordinated Debentures will not provide for any liquidated
damages thereon. See "Description of Exchange Securities" and "Description of
Original Securities." The Exchange Capital Securities are being offered for
exchange in order to satisfy certain obligations of the Corporation and the
Trust under the Registration Rights Agreement, dated as of February 10, 1998
(the "Registration Rights Agreement"), among the Corporation, the Trust and
Sandler O'Neill & Partners, L.P. (the "Initial Purchaser"). In the event that
the Exchange Offer is consummated, any Original Capital Securities that remain
outstanding after consummation of the Exchange Offer and the Exchange Capital
Securities issued in the Exchange Offer will vote together as a single class
for purposes of determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain actions or exercised
certain rights under the Trust Agreement (as defined herein).
The Exchange Capital Securities and the Original Capital Securities
(together, the "Capital Securities") represent undivided beneficial interests
in the assets of the Trust. The Corporation is the owner of all of the
beneficial interests represented by common securities of the Trust (the
"Common Securities," and together with the Capital Securities, the "Trust
Securities"). Firstar Trust Company is the Property Trustee (the "Property
Trustee") of the Trust. The Trust exists for the sole purpose of issuing the
Trust Securities and investing the proceeds thereof in the Junior Subordinated
Debentures (as defined herein). The Exchange Junior Subordinated Debentures
will mature on February 15, 2028 (the "Stated Maturity Date"). The Exchange
Capital Securities will have a preference over the Common Securities under
certain circumstances with respect to cash distributions and amounts payable
on liquidation, redemption or otherwise. See "Description of Exchange
Securities--Description of Exchange Capital Securities--Subordination of
Common Securities".
As used herein, (i) the "Indenture" means the Indenture, dated as of
February 13, 1998, as amended and supplemented from time to time, between the
Corporation and Firstar Trust Company, as Trustee (the "Debenture Trustee"),
relating to the Junior Subordinated Debentures and (ii) the "Trust Agreement"
means the Amended and Restated Declaration of Trust relating to the Trust,
dated as of February 13, 1998, among the Corporation, as Sponsor, Firstar
Trust Company, as Property Trustee, Delaware Trust Capital Management, Inc.,
as Delaware Trustee (the "Delaware Trustee"), and the Administrative Trustees
named therein (collectively, with the Property Trustee and Delaware Trustee,
the "Issuer Trustees") and the holders, from time to time, or undivided
beneficial interests in the assets or the Trust. In addition, as the context
may require, (i)"Junior Subordinated Debentures" includes the Original Junior
Subordinated Debentures and the Exchange Junior Subordinated Debentures and
(ii) "Guarantee" includes the Original Guarantee and the Exchange Guarantee.
Holders of the Exchange Capital Securities as of August 1, 1998 will be
entitled to receive cumulative cash distributions arising from the payment of
interest on the Exchange Junior Subordinated Debentures, accumulating from
February 13, 1998, payable semi-annually in arrears on February 15 and August
15 of each year, commencing August 15, 1998, at the annual rate of 8.67% of
the Liquidation Amount of $1,000 per Exchange Capital Security
("Distributions"). So long as no Debenture Event of Default (as defined
herein) has occurred and is continuing, the Corporation has the right to defer
payments of interest on the Exchange Junior Subordinated Debentures for a
period not exceeding 10 consecutive semi-annual periods to each deferral
period (each, an "Extension Period"), provided that an Extension Period must
end on an Interest Payment Date (as defined herein) and may not extend beyond
the Stated Maturity Date. Upon the termination of any such Extension Period
and the payment of all amounts then due, the Corporation may elect to begin a
new Extension Period, subject to the requirements set forth herein. If and for
so long as interest payments on the Exchange Junior Subordinated Debentures
are so deferred, Distributions on the Exchange Capital Securities also will be
deferred, and the Corporation will not be permitted, subject to certain
exceptions described herein, to declare or pay any cash distributions with
respect to the Corporation's capital stock or to make any payment with respect
to debt securities of the Corporation that rank pari passu with or junior to
the Exchange Junior Subordinated Debentures.
During an Extension Period, interest on the Exchange Junior Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Exchange Capital Securities are entitled will continue to
accumulate) at the rate of 8.67% per annum, compounded semi-annually, and
holders of Trust Securities will be required to include deferred interest
income in their gross income for United States federal income tax purposes
prior to the receipt of the cash attributable to such income. See "Description
of Exchange Securities--Description of Exchange Junior Subordinated
Debentures--Option to Extend Interest Payment Date" and "Certain U.S. Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
Distributions to which holders of the Trust Securities are entitled during any
such Extension Period will accumulate additional Distributions thereon at the
rate per annum of 8.67% thereof, compounded semi-annually from the relevant
Distribution Date, but not exceeding the interest rate then accruing on the
Exchange Junior Subordinated Debentures. The term "Distributions," as used
herein, shall include any such additional Distributions.
Through the Guarantee, the guarantee of the Corporation relating to the
Common Securities (the "Common Guarantee"), the Trust Agreement, the Junior
Subordinated Debentures and the Indenture, taken together, the Corporation has
guaranteed or will guarantee, as the case may be, all of the Trust's
obligations under the Trust Securities. See "Relationship Among the Exchange
Capital Securities, the Exchange Junior Subordinated Debentures and the
Exchange Guarantee--Full and Unconditional Guarantee." The Exchange Guarantee
and the Common Guarantee will guarantee payments of Distributions and payments
upon liquidation of the Trust or redemption of the Exchange Capital Securities
and Common Securities, but in each case only to the extent that the Trust has
funds legally available therefor and has failed to make such payments, as
described herein. See "Description of Exchange Securities--Description of
Exchange Guarantee." If the Corporation fails to make a required payment on
the Exchange Junior Subordinated Debentures, the Trust will not have
sufficient funds to make the related payments, including Distributions, on the
Trust Securities. The Exchange Guarantee will not cover any such payment when
the Trust does not have sufficient funds legally available therefor. In such
event, a holder of Exchange Capital Securities may institute a legal
proceeding directly against the Corporation to enforce its rights in respect
of such payment. See "Description of Exchange Securities--Description of
Exchange Junior Subordinated Debentures--Enforcement of Certain Rights by
Holders of Exchange Capital Securities." The obligations of the Corporation
under the Exchange Guarantee, the Common Guarantee and the Exchange Junior
Subordinated Debentures will be unsecured and will rank subordinate and junior
in right of payment to all Senior Indebtedness (as defined in "Description of
Exchange Securities--Description of Exchange Junior Subordinated
Debentures--Subordination"). See "Risk Factors--Ranking of Subordinated
Obligations under the Exchange Guarantee and the Exchange Junior Subordinated
Debentures: Limitation on Source of Funds."
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated
Maturity Date upon repayment of the Exchange Junior Subordinated Debentures at
a redemption price equal to the principal amount of, plus accrued and unpaid
interest on, the Exchange Junior Subordinated Debentures (the "Maturity
Redemption Price"), (ii) in whole but not in part, at any time prior to
February 15, 2008 (the "Initial Optional Redemption Date"), contemporaneously
with the optional prepayment of the Exchange Junior Subordinated Debentures by
the Corporation, upon the occurrence and continuation of a Special Event (as
defined herein) at a redemption price equal to the Special Event Prepayment
Price (as defined herein) (the "Special Event Redemption Price"), and (iii) in
whole or in part, on or after the Initial Optional Redemption Date,
contemporaneously with the optional prepayment by the Corporation of all or
part of the Exchange Junior Subordinated Debentures, at a redemption price
equal to the Optional Prepayment Price (as defined herein) (the "Optional
Redemption Price"). Any of the Maturity Redemption Price, the Special Event
Redemption Price and the Optional Redemption Price may be referred to herein
as the "Redemption Price." See "Description of Exchange
Securities--Description of Exchange Capital Securities--Redemption."
Subject to the Corporation having received any required regulatory
approvals, the Exchange Junior Subordinated Debentures will be prepayable
prior to the Stated Maturity Date at the option of the Corporation (i) on or
after the Initial Optional Redemption Date, in whole or in part, at a price
(the "Optional Prepayment Price") equal to 104.335% of the principal amount
thereof on the Initial Optional Redemption Date, declining ratably on each May
1 thereafter to 100% on or after February 15, 2018 or (ii) at any time prior
to the Initial Optional Redemption Date, in whole but not in part, upon the
occurrence and continuation of a Special Event, at a prepayment price (the
"Special Event Prepayment Price") equal to the Make-Whole Amount (as defined
herein). The "Make-Whole Amount" shall be equal to the greater of (a) 100% of
the principal amount thereof or (b) the sum, as determined by a Quotation
Agent (as defined herein), of the present values of the remaining scheduled
payments of principal and interest on the Exchange Junior Subordinated
Debentures, discounted to the prepayment date on a semi-annual basis (assuming
a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury
Rate (as defined herein) plus, in the case of each of clauses (a) and (b),
accrued and unpaid interest thereon, including Compounded Interest and
Additional Sums (as defined herein), if any, to the date of prepayment. Either
of the Optional Prepayment Price or the Special Event Prepayment Price may be
referred to herein as the "Prepayment Price." See "Description of Exchange
Securities--Description of Exchange Junior Subordinated Debentures--Optional
Prepayment" and "--Special Event Prepayment."
The Corporation has the right at any time to dissolve the Trust and,
after satisfaction of liabilities of creditors of the Trust as required by
applicable law, to cause a Like Amount of the Junior Subordinated Debentures
to be distributed to the holders of the Trust Securities in liquidation of the
Trust, subject to the Corporation's having received (i) an opinion of counsel
to the effect that such distribution will not be a taxable event to the
holders of Exchange Capital Securities and (ii) any required regulatory
approvals. Unless the Junior Subordinated Debentures are distributed to the
holders of the Trust Securities, in the event of a liquidation of the Trust as
described herein, after satisfaction of liabilities to creditors of the Trust
as required by applicable law, the holders of the Trust Securities generally
will be entitled to receive a Liquidation Amount of $1,000 per Trust Security
plus accumulated and unpaid Distributions thereon to the date of payment. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Liquidation of the Trust and Distribution of Exchange Junior
Subordinated Debentures."
THE CAPITAL SECURITIES, INCLUDING THE EXCHANGE CAPITAL SECURITIES, MAY BE
TRANSFERRED ONLY IN A BLOCK HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN
$100,000 (100 CAPITAL SECURITIES), OR ANY INTEGRAL MULTIPLE OF $1,000
LIQUIDATION AMOUNT (ONE CAPITAL SECURITY) IN EXCESS THEREOF. ANY TRANSFER OF
EXCHANGE CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS
THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH EXCHANGE
CAPITAL SECURITIES FOR ANY PURPOSE INCLUDING, BUT NOT LIMITED TO, THE RECEIPT
OF DISTRIBUTIONS ON SUCH EXCHANGE CAPITAL SECURITIES, AND SUCH TRANSFEREE
SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH EXCHANGE CAPITAL
SECURITIES.
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The Trust is making the Exchange Offer in reliance on the position of the
staff of the Division of Corporation Finance (the "Staff') of the Securities
and Exchange Commission (the "Commission") as set forth in certain
interpretive letters addressed to third parties in other transactions.
However, neither the Corporation nor the Trust has sought its own interpretive
letter and there can be no assurance that the Staff of the Commission would
make a similar determination with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based on these interpretations by
the Staff of the Commission, and subject to the two immediately following
sentences, the Corporation and the Trust believe that Exchange Capital
Securities issued pursuant to this Exchange Offer in exchange for Original
Capital Securities may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a broker-dealer) without
further compliance with the registration and prospectus delivery requirements
of the Securities Act, provided that such Exchange Capital Securities are
acquired in the ordinary course of such holder's business and that such holder
is not participating, and has no arrangement or understanding with any person
to participate, in a distribution (within the meaning of the Securities Act)
of such Exchange Capital Securities. However, any holder of Original Capital
Securities who is an "affiliate" of the Corporation or the Trust or who
intends to participate in the Exchange Offer for the purpose of distributing
Exchange Capital Securities, or any broker-dealer who purchased Original
Capital Securities from the Trust for resale pursuant to Rule 144A under the
Securities Act ("Rule 144A") or any other available exemption under the
Securities Act, (i) will not be able to rely on the interpretations of the
Staff of the Commission set forth in the above-mentioned interpretive letters,
(ii) will not be permitted or entitled to tender such Original Capital
Securities in the Exchange Offer and (iii) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any sale or other transfer of such Original Capital Securities unless such
sale is made pursuant to an exemption from such requirements. In addition, as
described herein, if any broker-dealer holds Original Capital Securities
acquired for its own account as a result of market-making or other trading
activities and exchanges such Original Capital Securities for Exchange Capital
Securities, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such
Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to exchange
Original Capital Securities for Exchange Capital Securities in the Exchange
Offer will be required to represent that (i) it is not an "affiliate" of the
Corporation or the Trust, (ii) any Exchange Capital Securities to be received
by it are being acquired in the ordinary course of its business, (iii) it has
no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of such Exchange
Capital Securities, and (iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such Exchange Capital
Securities. In addition, the Corporation and the Trust may require such
holder, as a condition to such holder's eligibility to participate in the
Exchange Offer, to furnish to the Corporation and the Trust (or an agent
thereof) in writing information as to the number of "beneficial owners"
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), on behalf of whom such holder holds the
Original Capital Securities to be exchanged in the Exchange Offer. Each
broker-dealer that receives Exchange Capital Securities for its own account
pursuant to the Exchange Offer must acknowledge that it acquired the Original
Capital Securities for its own account as the result of market making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such Exchange Capital Securities. The Letter of Transmittal
states that, by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Based on the position taken by the Staff of
the Commission in the interpretive letters referred to above, the Corporation
and the Trust believe that broker-dealers who acquired Original Capital
Securities for their own accounts, as a result of market-making activities or
other trading activities ("Participating Broker-Dealers"), may fulfill their
prospectus delivery requirements with respect to the Exchange Capital
Securities received upon exchange of such Original Capital Securities (other
than Original Capital Securities which represent an unsold allotment from the
initial sale of the Original Capital Securities) with a prospectus meeting the
requirements of the Securities Act, which may be the prospectus prepared for
an exchange offer so long as it contains a description of the plan of
distribution with respect to the resale of such Exchange Capital Securities.
Each broker-dealer that receives Exchange Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
The Letter of Transmittal states that, by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Capital Securities
received in exchange for Original Capital Securities acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Trust and the Corporation have agreed that, ending on the
close of business on the 90th day following the Expiration Date (as defined
herein), it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution." However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of Exchange Capital Securities received in exchange for
Original Capital Securities pursuant to the Exchange Offer must notify the
Corporation or the Trust, or cause the Corporation or the Trust to be
notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to Firstar Trust Company (the
"Exchange Agent") at the address set forth herein under "The Exchange
Offer--Exchange Agent." Any Participating Broker-Dealer who is an "affiliate"
of the Corporation or the Trust may not rely on such interpretive letters and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. See "The Exchange
Offer--Resales of Exchange Capital Securities."
In that regard, each Participating Broker-Dealer who surrenders Original
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal, that upon receipt of notice
from the Corporation or the Trust of the occurrence of any event or the
discovery of any fact that (i) makes any statement contained or incorporated
by reference in this Prospectus untrue in any material respect or (ii) causes
this Prospectus to omit to state a material fact necessary in order to make
the statements contained or incorporated by reference herein, in the light of
the circumstances under which they were made, not misleading, or upon the
occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) pursuant to this Prospectus until the
Corporation or the Trust has amended or supplemented this Prospectus to
correct such misstatement or omission and has furnished copies of the amended
or supplemented Prospectus to such Participating Broker-Dealer, or the
Corporation or the Trust has given notice that the sale of the Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) may be resumed, as the case may be. If
the Corporation or the Trust gives such notice to suspend the sale of the
Exchange Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable), it shall extend the 90-day period
referred to above during which Participating Broker-Dealers are entitled to
use this Prospectus in connection with the resale of Exchange Capital
Securities by the number of days during the period from and including the date
of the giving of such notice to and including the date when Participating
Broker-Dealers shall have received copies of the amended or supplemented
Prospectus necessary to permit resales of the Exchange Capital Securities or
to and including the date on which the Corporation or the Trust has given
notice that the sale of Exchange Capital Securities (or the Exchange Guarantee
or the Exchange Junior Subordinated Debentures, as applicable) may be resumed,
as the case may be.
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Prior to the Exchange Offer, there has been only a limited secondary
market and no public market for the Original Capital Securities. The Exchange
Capital Securities will be a new issue of securities for which there currently
is no market. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Capital Securities. The Corporation
and the Trust do not intend to apply for listing of the Exchange Capital
Securities on any securities exchange or for inclusion in the Nasdaq Stock
Market, the electronic securities market operated by the National Association
of Securities Dealers, Inc. ("Nasdaq").
Any Original Capital Securities not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to all the same rights and
will be subject to the same limitations applicable thereto under the Trust
Agreement (except for those rights which terminate upon consummation of the
Exchange Offer). Following consummation of the Exchange Offer, the holders of
Original Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither the Corporation nor the Trust
will have any further obligation to such holders (other than under certain
limited circumstances) to provide for registration under the Securities Act of
the Original Capital Securities held by them. To the extent that Original
Capital Securities are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered Original Capital Securities could be adversely
affected. See "Risk Factors--Consequences of a Failure to Exchange Original
Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER.
Original Capital Securities may be tendered for exchange on or prior to
5:00 p.m., New York City time, on June 30, 1998 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by the Corporation or the Trust (in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended). Tenders of Original Capital Securities may be withdrawn at any time
prior to the Expiration Date. The Exchange Offer is not conditioned upon any
minimum Liquidation Amount of Original Capital Securities being tendered for
exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by the Corporation or the Trust and to the
terms and provisions of the Registration Rights Agreement. Original Capital
Securities may be tendered in whole or in part having an aggregate Liquidation
Amount of not less than $100,000 (100 Capital Securities) or any integral
multiple of $1,000 Liquidation Amount (one Capital Security) in excess
thereof. The Corporation has agreed to pay all expenses of the Exchange Offer.
See "The Exchange Offer--Fees and Expenses." Holders of the Original Capital
Securities whose Original Capital Securities are accepted for exchange prior
to August 15, 1998 will not receive Distributions on such Original Capital
Securities and will be deemed to have waived the right to receive any
Distributions on such Original Capital Securities accumulated from and
including February 13, 1998. See "The Exchange Offer--Distributions on the
Exchange Capital Securities."
The Original Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed with
the Commission by June 26, 1998 and declared effective by the Commission by
August 5, 1998, the Distribution rate borne by the Original Capital Securities
will increase by 0.25% until the Exchange Offer is consummated. Upon
consummation of the Exchange Offer, holders of Original Capital Securities
will not be entitled to any increase in the Distribution rate thereon or any
further registration rights under the Registration Rights Agreement, except
under limited circumstances. See "Description of Original Securities."
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities offered hereby. No
dealer-manager is being used in connection with this Exchange Offer. See "Use
of Proceeds" and "Plan of Distribution."
AVAILABLE INFORMATION
The Corporation is subject to informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at 7 World Trade Center,
13th Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material may also be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. If available, such information also may be accessed through the
Commission's electronic data gathering, analysis and retrieval system
("EDGAR") via electronic means, including the Commission's home page on the
Internet (http://www.sec.gov). The Corporation's common stock and one series
of cumulative convertible preferred stock are traded on the Nasdaq National
Market under the symbols "FFSW" and "FFSWO," respectively. Such reports, proxy
statements and other information concerning the Corporation also may be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
No separate financial statements of the Trust have been included herein.
The Corporation and the Trust do not consider that such financial statements
would be material to holders of the Exchange Capital Securities because the
Trust is a newly-formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Junior Subordinated
Debentures, issuing the Trust Securities and engaging in activities necessary,
advisable or incidental thereto. See "Signal Capital Trust I," "Description of
Exchange Securities-Description of Exchange Capital Securities," "Description
of Exchange Securities--Description of Exchange Junior Subordinated
Debentures" and "Description of Exchange Securities--Description of Exchange
Guarantee." In addition, the Corporation does not expect that the Trust will
file reports, proxy statements and other information under the Exchange Act
with the Commission.
This Prospectus constitutes a part of a registration statement on Form
S-4 (the "Registration Statement") filed by the Corporation and the Trust with
the Commission under the Securities Act. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission, and reference is hereby made to the Registration Statement and to
the exhibits relating thereto for further information with respect to the
Corporation and the Exchange Securities. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and,
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed by the Corporation pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior
to the termination of the offering of the Exchange Securities offered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be
a part of this Prospectus from the date of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein do not purport to be
complete and, where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THE CORPORATION WILL PROVIDE WITHOUT
CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN OR
ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN (OTHER THAN EXHIBITS, UNLESS SUCH EXHIBITS
ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). REQUESTS FOR
SUCH DOCUMENTS SHOULD BE DIRECTED TO: FIRSTFEDERAL FINANCIAL SERVICES CORP.,
135 EAST LIBERTY STREET, WOOSTER, OHIO 44691, ATTENTION: JON W. PARK
(TELEPHONE (330) 264-8001).
The following documents, which have been filed by the Corporation
pursuant to the Exchange Act, are incorporated herein by reference:
o the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1997;
o the Corporation's Current Report on Form 8-K dated February
3, 1998 with respect to the Corporation's earnings release
for the year ended December 31, 1997;
o the Corporation's Current Report on Form 8-K dated February
9, 1998 with respect to the announcement of the signing of a
definitive merger agreement with First Shenango Bancorp, Inc.
("Shenango");
o the Corporation's Current Report on Form 8-K dated April 21,
1998 with respect to the Corporation's earnings release for
the quarter ended March 31, 1998; and
o the Joint Proxy Statement of the Corporation and Shenango
dated May 4, 1998 with respect to the proposed acquisition by
the Corporation of Shenango.
o the Corporation's Quarterly Report on Form 10-Q dated May 15,
1998 for the quarter ended March 31, 1998.
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. Reference is made to and
this summary is qualified in its entirety by, the more detailed information
and financial statements including the notes thereto contained elsewhere in
this Prospectus and in documents incorporated by reference hereto.
FIRSTFEDERAL FINANCIAL SERVICES CORP.
FirstFederal Financial Services Corp. (the "Corporation"), an Ohio
corporation, is a bank holding company, which has as its primary wholly-owned
subsidiaries Signal Bank, N.A., a national bank ("Signal Bank"), Summit Bank,
N.A., a national bank ("Summit Bank" and, together with Signal Bank, the
"Banks") and Mobile Consultants, Inc., a broker and servicer of manufactured
housing finance contracts ("MCi" and, together with the Banks, the
"Subsidiaries").
Founded in 1905 as an Ohio chartered mutual building and loan
association, Signal Bank converted to a federally chartered thrift in 1935,
converted from mutual to stock form in 1987, and converted from a savings and
loan association to a national bank in 1997. On September 15, 1997, Signal
Bank completed the acquisition of seven branches from Keybank, National
Association, with approximately $151 million in deposits. Such branches are
located in the cities of Bucyrus, Crestline, Cygnet, Galion, Tiffin, Wayne and
Willard in north central and north western Ohio. The purchase price was equal
to 12.15% of average deposits, resulting in approximately $19 million in
goodwill which is being amortized over a period not exceeding fifteen years.
Signal Bank serves north central Ohio ("the Market Area") through its home
office, 25 full service banking offices, and 3 limited service facilities.
Signal Bank offers a wide range of competitive consumer-oriented lending
and deposit products and services in the Market Area. Signal Bank has achieved
significant growth in recent years through the expansion of its asset
origination capabilities and acquiring branches in its Market Area.
The Corporation acquired Summit Bank on July 8, 1997. Summit Bank offers
a full complement of banking products and primarily provides service to small
businesses, individuals and professionals in the Akron, Canton and Cleveland
metropolitan areas. Summit Bank, with assets of $88.6 million when acquired,
was accounted for as a pooling of interests. Summit Bank operates 2 full
service banking offices.
As of March 31, 1998, 52% of the Banks' loan portfolio consisted of loans
secured by one- to four-family residential real estate, while 28% of the loan
portfolio consisted of manufactured housing and other consumer loans and 20%
consisted of commercial mortgage loans, commercial loans and commercial lease
contracts.
Mci, a manufactured housing finance company which brokers manufactured
home loans to and on behalf of financial institutions, was acquired by the
Corporation in April, 1996. MCi facilitates primarily non-mortgage, consumer
loan contracts through 3,500 dealers of manufactured homes located in 44
states, in the continental United States. MCi also services the collection and
recovery of troubled loans on behalf of the financial institutions which
originate the loans.
On February 9, 1998, the Corporation announced that it signed a
definitive agreement on February 6, 1998 to acquire First Shenango Bancorp,
Inc. ("Shenango") located in New Castle, Pennsylvania. Under the terms of the
agreement, the Corporation will exchange 1.142875 shares of its common stock
for each share of the issued and outstanding common stock of Shenango. Based
on the Corporation's closing price of $33.40 on February 6, 1998, the
transaction value is approximately $103.9 million. The merger will be
accounted for as a pooling of interests. Shenango's wholly owned savings bank,
First Federal Savings Bank of New Castle, Pennsylvania has four offices
located in New Castle, Pennsylvania. At December 31, 1997, Shenango had total
assets of $375.0 million, deposits of $275.2 million and shareholders' equity
of $47.9 million. It is anticipated that the acquisition of Shenango will be
completed in either late June or early in the 3rd quarter.
On April 23, 1998, the Corporation announced that its board of directors
approved a five-for-four stock split and declared cash dividends on its common
and Series B preferred shares.
The Corporation engages in discussions concerning potential acquisitions
from time to time, but currently has no commitments, agreements or
understandings to acquire any additional financial institutions. The
Corporation expects to continue to take advantage of the consolidation of the
financial services industry by further developing its community bank franchise
within its own and contiguous market areas.
The Corporation's principal executive offices are located in 135 E.
Liberty Street, Wooster, Ohio 44691.
SIGNAL CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law
pursuant to (i) the Trust Agreement and (ii) the filing of a certificate of
trust with the Delaware Secretary of State on February 4, 1998. The Trust's
business and affairs are conducted by the Issuer Trustees: Firstar Trust
Company, as Property Trustee, Delaware Trust Capital Management, Inc., as
Delaware Trustee and the three individual Administrative Trustees, who are
officers or other employees of the Corporation. The Trust exists for the
exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using
the proceeds from the sale of the Trust Securities to acquire the Junior
Subordinated Debentures issued by the Corporation and (iii) engaging in only
those other activities necessary, advisable or incidental thereto.
Accordingly, the Junior Subordinated Debentures will be the sole assets of the
Trust and payments under the Junior Subordinated Debentures are and will be
the sole revenue of the Trust. All of the Common Securities will be owned by
the Corporation. The principal executive office of the Trust is c/o
FirstFederal Financial Services Corp., 135 East Liberty Street, Wooster, Ohio
44691.
THE EXCHANGE OFFER
The Exchange Offer............Up to and including $50,000,000 aggregate
Liquidation Amount of Exchange Capital
Securities are being offered in exchange for a
like aggregate Liquidation Amount of Original
Capital Securities. Original Capital Securities
may be tendered for exchange in whole or in part
in a Liquidation Amount of $100,000 (100 Capital
Securities) or any integral multiple of $1,000
(one Capital Security) in excess thereof. The
Corporation and the Trust are making the
Exchange Offer in order to satisfy their
obligations under the Registration Rights
Agreement relating to the Original Capital
Securities. For a description of the procedures
for tendering Original Capital Securities, see
"The Exchange Offer--Procedures for Tendering
Original Capital Securities."
Expiration Date...............5:00 p.m., New York City time, on June 30, 1998
unless the Exchange Offer is extended by the
Corporation and the Trust (in which case the
Expiration Date will be the latest date and time
to which the Exchange Offer is extended). See
"The Exchange Offer--Terms of the Exchange
Offer."
Conditions to
the Exchange Offer............The Exchange Offer is subject to certain
conditions, which may be waived by the
Corporation and the Trust in their sole
discretion. The Exchange Offer is not
conditioned upon any minimum Liquidation Amount
of Original Capital Securities being tendered.
See "The Exchange Offer--Conditions to the
Exchange Offer."
Terms of the Exchange Offer...The Corporation and the Trust reserve the right
in their sole and absolute discretion, subject
to applicable law, at any time and from time to
time, (i) to delay the acceptance of the
Original Capital Securities, (ii) to terminate
the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to
extend the Expiration Date of the Exchange Offer
and retain all Original Capital Securities
tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of
Original Capital Securities to withdraw their
tendered Original Capital Securities, (iv) to
waive any condition, or (v) amend the terms of
the Exchange Offer, subject to the Registration
Rights Agreement, in any respect. See "The
Exchange Offer--Terms of the Exchange Offer."
Withdrawal Rights.............Tenders of Original Capital Securities may be
withdrawn at any time prior to the Expiration
Date by delivering a written notice of such
withdrawal to the Exchange Agent in conformity
with certain procedures as set forth herein
under "The Exchange Offer--Withdrawal Rights."
Procedures for Tendering
Original Capital Securities...Certain brokers, dealers, commercial banks,
trust companies and other nominees (each, a
"Custodian") who hold Original Capital
Securities through The Depository Trust Company
("DTC") must effect tenders by book entry
transfer through DTC's Automated Tender Offer
Program ("ATOP'). Beneficial owners of Original
Capital Securities registered in the name of a
Custodian are urged to contact such Custodian
promptly if they wish to tender Original Capital
Securities pursuant to the Exchange Offer.
Tendering holders of Original Capital Securities
that do not use ATOP must complete and sign a
Letter of Transmittal in accordance with the
instructions contained therein and forward the
same by mail, facsimile transmission or hand
delivery, together with any other required
documents, to the Exchange Agent, either with
the certificates of the Original Capital
Securities to be tendered or in compliance with
the specified procedures for guaranteed delivery
of Original Capital Securities. Tendering
holders of Original Capital Securities that use
ATOP will, by so doing, acknowledge that they
are bound by the terms of the Letter of
Transmittal. See "The Exchange Offer--Procedures
for Tendering Original Capital Securities."
Letters of Transmittal and certificates
representing Original Capital Securities should
not be sent to the Corporation or the Trust.
Such documents should only be sent to the
Exchange Agent.
Resales of Exchange
Capital Securities............The Corporation and the Trust are making the
Exchange Offer in reliance on the position of
the Staff of the Commission as set forth in
certain interpretive letters addressed to third
parties in other transactions. However, neither
the Corporation nor the Trust has sought its own
interpretive letter and there can be no
assurance that the Staff of the Commission would
make a similar determination with respect to the
Exchange Offer as it has in such interpretive
letters to third parties. Based on these
interpretations by the Staff of the Commission,
and subject to the two immediately following
sentences, the Corporation and the Trust believe
that Exchange Capital Securities issued pursuant
to this Exchange Offer in exchange for Original
Capital Securities may be offered for resale,
resold and otherwise transferred by a holder
thereof (other than a holder who is a
broker-dealer) without further compliance with
the registration and prospectus delivery
requirements of the Securities Act, provided
that such Exchange Capital Securities are
acquired in the ordinary course of such holder's
business and that such holder is not
participating, and has no arrangement or
understanding with any person to participate, in
a distribution (within the meaning of the
Securities Act) of such Exchange Capital
Securities. However, any holder of Original
Capital Securities who is an "affiliate" of the
Corporation or the Trust or who intends to
participate in the Exchange Offer for the
purpose of distributing the Exchange Capital
Securities, or any broker-dealer who purchased
the Original Capital Securities from the Trust
for resale pursuant to Rule 144A or any other
available exemption under the Securities Act,
(i) will not be able to rely on the
interpretations of the Staff of the Commission
set forth in the above-mentioned interpretive
letters, (ii) will not be permitted or entitled
to tender such Original Capital Securities in
the Exchange Offer and (iii) must comply with
the registration and prospectus delivery
requirements of the Securities Act in connection
with any sale or other transfer of such Original
Capital Securities unless such sale is made
pursuant to an exemption from such requirements.
In addition, as described herein, if any
broker-dealer holds Original Capital Securities
acquired for its own account as a result of
market-making or other trading activities and
exchanges such Original Capital Securities for
Exchange Capital Securities, then such
broker-dealer must deliver a prospectus meeting
the requirements of the Securities Act in
connection with any resales of such Exchange
Capital Securities.
Each holder of Original Capital Securities who
wishes to exchange Original Capital Securities
for Exchange Capital Securities in the Exchange
Offer will be required to represent that (i) it
is not an "affiliate" of the Corporation or the
Trust, (ii) any Exchange Capital Securities to
be received by it are being acquired in the
ordinary course of its business, (iii) it has no
arrangement or understanding with any person to
participate in a distribution (within the
meaning of the Securities Act) of such Exchange
Capital Securities, and (iv) if such holder is
not a broker-dealer, such holder is not engaged
in, and does not intend to engage in, a
distribution (within the meaning of the
Securities Act) of such Exchange Capital
Securities. Each broker-dealer that receives
Exchange Capital Securities for its own account
in exchange for Original Capital Securities,
where such Original Capital Securities were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus meeting the requirements of
the Exchange Act in connection with any resale
of such Exchange Capital Securities. See "Plan
of Distribution." The Letter of Transmittal
states that, by so acknowledging and by
delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. Based on the position taken by
the Staff of the Commission in the interpretive
letters referred to above, the Corporation and
the Trust believe that Participating
Broker-Dealers who acquired Original Capital
Securities for their own accounts as a result of
market-making activities or other trading
activities may fulfill their prospectus delivery
requirements with respect to the Exchange
Capital Securities received upon exchange of
such Original Capital Securities (other than
Original Capital Securities that represent an
unsold allotment from the initial sale of the
Original Capital Securities) with a prospectus
meeting the requirements of the Securities Act,
which may be the prospectus prepared for an
exchange offer so long as it contains a
description of the plan of distribution with
respect to the resale of such Exchange Capital
Securities. Accordingly, this Prospectus, as it
may be amended or supplemented from time to
time, may be used by a Participating
Broker-Dealer in connection with resales of
Exchange Capital Securities received in exchange
for Original Capital Securities where such
Original Capital Securities were acquired by
such Participating Broker-Dealer for its own
account as a result of market-making or other
trading activities. Subject to certain
provisions set forth in the Registration Rights
Agreement and to the limitations described
herein under "The Exchange Offer-Resales of
Exchange Capital Securities," the Corporation
and the Trust have agreed that this Prospectus,
as it may be amended or supplemented from time
to time, may be used by a Participating
Broker-Dealer in connection with resales of such
Exchange Capital Securities for a period ending
90 days after the Expiration Date (subject to
extension under certain limited circumstances)
or, if earlier, when all such Exchange Capital
Securities have been disposed of by such
Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer
who is an "affiliate" of the Corporation or the
Trust may not rely on such interpretive letters
and must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of
Exchange Capital Securities."
Exchange Agent................The Exchange Agent with respect to the Exchange
Offer is Firstar Trust Company. The address, and
telephone and facsimile number of the Exchange
Agent are set forth in "The Exchange
Offer--Exchange Agent" and in the Letter of
Transmittal.
Use of Proceeds...............Neither the Corporation nor the Trust will
receive any cash proceeds from the issuance of
the Exchange Capital Securities offered hereby.
See "Use of Proceeds."
Certain U.S. Federal
Income Tax Considerations.....The exchange of Original Capital Securities for
Exchange Capital Securities should not be a
taxable exchange for U.S. federal income tax
purposes, and holders should not recognize any
taxable gain or loss or any interest income as a
result of such exchange. See "Certain U.S.
Federal Income Tax Consequences--Exchange of
Capital Securities."
ERISA Considerations..........Holders of Original Capital Securities should
review the information set forth under "ERISA
Considerations" prior to tendering Original
Capital Securities in the Exchange Offer.
THE EXCHANGE CAPITAL SECURITIES
Securities Offered............Up to and including $50,000,000 aggregate
Liquidation Amount of Exchange Capital
Securities (Liquidation Amount $1,000 per
Exchange Capital Security) will have been
registered under the Securities Act. The
Exchange Capital Securities will be issued, and
the Original Capital Securities were issued,
under the Trust Agreement. The Exchange Capital
Securities and any Original Capital Securities
that remain outstanding after consummation of
the Exchange Offer will vote together as a
single class for purposes of determining whether
holders of the requisite percentage in
outstanding Liquidation Amount thereof have
taken certain actions or exercised certain
rights under the Trust Agreement. See
"Description of Exchange Securities--Description
of Exchange Capital Securities--Voting Rights;
Amendment of the Trust Agreement." The terms of
the Exchange Capital Securities are identical in
all material respects to the terms of the
Original Capital Securities, except that the
Exchange Capital Securities have been registered
under the Securities Act, will not be subject to
certain restrictions on transfer applicable to
the Original Capital Securities and will not
provide for any increase in the Distribution
rate thereon. See "The Exchange Offer--Purpose
and Effect of the Exchange Offer," "Description
of Exchange Securities" and "Description of
Original Securities."
Distribution Dates............February 15 and August 15 of each year,
commencing August 15, 1998.
Extension Periods.............So long as no Debenture Event of Default has
occurred and is continuing, Distributions on
Exchange Capital Securities will be deferred for
the duration of any Extension Period elected by
the Corporation with respect to the payment of
interest on the Exchange Junior Subordinated
Debentures. No Extension Period will exceed 10
consecutive semi-annual periods, end on a date
other than an Interest Payment Date or extend
beyond the Stated Maturity Date. During an
Extension Period, the holders of Exchange
Capital Securities will be required to include
deferred interest income in their gross income
for United States federal income tax purposes in
advance of any corresponding cash distributions.
See "Description of Exchange
Securities--Description of Exchange Junior
Subordinated Debentures--Option to Extend
Interest Payment Date" and "Certain U.S. Federal
Income Tax Consequences--Interest Income and
Original Issue Discount."
Ranking.......................The Exchange Capital Securities will rank pari
passu, and payments thereon will be made pro
rata, with the Original Capital Securities and
the Common Securities except as described under
"Description of Exchange Securities--Description
of Exchange Capital Securities--Subordination of
Common Securities." The Exchange Junior
Subordinated Debentures will rank pari passu
with the Original Junior Subordinated Debentures
and all other junior subordinated debentures (if
any) issued by the Corporation (the "Other
Debentures"), which are issued and sold (if at
all) to other trusts to be established by the
Corporation (if any), in each case similar to
the Trust ("Other Trusts"), and will constitute
unsecured obligations of the Corporation and
will rank subordinate and junior in right of
payment to all Senior Indebtedness to the extent
and in the manner set forth in the Indenture.
See "Description of Exchange
Securities--Description of Exchange Junior
Subordinated Debentures." The Exchange Guarantee
will rank pari passu with the Original Guarantee
and all other guarantees (if any) issued by the
Corporation with respect to preferred beneficial
interests (if any) issued by Other Trusts
("Other Guarantees") and will constitute an
unsecured obligation of the Corporation and will
rank subordinate and junior in right of payment
to all Senior Indebtedness to the extent and in
the manner set forth in the Exchange Guarantee.
See "Description of Exchange
Securities--Description of Exchange Guarantee."
In addition, because the Corporation is a
holding company, the Exchange Junior
Subordinated Debentures and the Exchange
Guarantee will be effectively subordinated to
all existing and future liabilities of the
Corporation's subsidiaries. See "Description of
Exchange Securities--Description of Exchange
Junior Subordinated Debentures--Subordination."
Redemption....................The Trust Securities will be subject to
mandatory redemption in a Like Amount, (i) in
whole but not in part, on the Stated Maturity
Date upon repayment of the Junior Subordinated
Debentures, (ii) in whole but not in part, at
any time prior to the Initial Optional
Redemption Date, contemporaneously with the
optional prepayment of the Junior Subordinated
Debentures by the Corporation upon the
occurrence and continuation of a Special Event
and (iii) in whole or in part, on or after the
Initial Optional Redemption Date,
contemporaneously with the optional prepayment
by the Corporation of all or part of the Junior
Subordinated Debentures, in each case, at the
applicable Redemption Price. See "Description of
Exchange Securities--Description of Exchange
Capital Securities--Redemption" and
"--Description of Exchange Junior Subordinated
Debentures--Special Event Prepayment."
Transfer Restrictions.........The Exchange Capital Securities will be issued,
and may be transferred, only in blocks having a
Liquidation Amount of not less than $100,000
(100 Capital Securities), or any integral
multiple of $1,000 Liquidation Amount (one
Capital Security) in excess thereof. See
"Description of Exchange Securities--Description
of Exchange Capital Securities--Restrictions on
Transfer." Any such transfer of Exchange Capital
Securities in a block having a Liquidation
Amount of less than $100,000 shall be deemed to
be void and of no legal effect whatsoever.
ERISA Considerations..........Prospective purchasers must carefully consider
the restrictions on purchase set forth under
"ERISA Considerations."
Absence of Market for the
Exchange Capital
Securities.. .................The Exchange Capital Securities will be a new
issue of securities for which there currently is
no market. Accordingly, there can be no
assurance as to the development or liquidity of
any market for the Exchange Capital Securities.
The Trust and the Corporation do not intend to
apply for listing of the Exchange Capital
Securities on any securities exchange or for
quotation through Nasdaq. See "Plan of
Distribution."
RISK FACTORS
Prospective investors should carefully review the information contained
elsewhere in this Prospectus and should particularly consider the following
matters. In addition, information contained in, or incorporated by reference
in, this Prospectus contains "forward-looking statements" which can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "projected," "contemplates" or
"anticipates" or the negative thereof or other variations thereon or
comparable terminology. No assurance can be given that the future results
covered by the forward-looking statements will be achieved. The following
matters constitute cautionary statements identifying important factors with
respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to vary materially from the
future results covered in such forward-looking statements. Other factors, such
as the general state of the economy, could also cause actual results to vary
materially from the future results covered in such forward-looking statements.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE EXCHANGE GUARANTEE AND THE
EXCHANGE JUNIOR SUBORDINATED DEBENTURES; LIMITATIONS ON SOURCE OF FUNDS
The obligations of the Corporation under the Exchange Guarantee issued by
it for the benefit of the holders of Exchange Capital Securities, as well as
under the Exchange Junior Subordinated Debentures, will be unsecured and will
rank subordinate and junior in right of payment to all Senior Indebtedness to
the extent and in the manner set forth in the Exchange Guarantee and the
Indenture, respectively. No payment may be made of the principal of or
premium, if any, or interest on the Junior Subordinated Debentures, or in
respect of any redemption, retirement, purchase or other acquisition of any of
the Junior Subordinated Debentures, (i) when there shall have occurred and be
continuing a default in any payment in respect of any Senior Indebtedness, or
there has been an acceleration of the maturity thereof because of a default
thereunder, or (ii) in the event of the acceleration of the maturity of the
Junior Subordinated Debentures, until payment has been made on all Senior
Indebtedness. At March 31, 1998, the Corporation had approximately $1.4
billion of Senior Indebtedness outstanding.
As a holding company, the Corporation's operations are conducted
primarily by the Subsidiaries. Presently, dividends from the Subsidiaries are
the primary source of funds for the Corporation. There are regulatory
limitations on the amount of dividends that the Banks may pay to the
Corporation. At March 31, 1998, the Banks had approximately $23 million
legally available for payment of dividends to the Corporation. However, the
Banks' payment of dividends may be prohibited under certain circumstances,
including if payment thereof would constitute an unsafe or unsound banking
practice. In addition to restrictions on the payment of dividends, the Banks
are subject to restrictions imposed by federal law on extensions of credit to,
and certain other transactions with, the Corporation and certain other
affiliates, and on investments in stock or other securities. Such restrictions
prevent the Banks from lending to the Corporation and such other affiliates
unless the loans are secured by various types of collateral. Further, such
secured loans, other transactions and investments by a Bank are generally
limited in amount as to the Corporation and each of such other affiliates to
10% of such Bank's capital and surplus and as to the Corporation and all of
such other affiliates to an aggregate of 20% of such Bank's capital and
surplus.
Further, as a holding company, the right of the Corporation to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability
of holders of the Exchange Capital Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of such subsidiary
(including depositors in the case of the Banks), except to the extent that the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Exchange Junior Subordinated Debentures effectively will be
subordinated to all existing and future liabilities of the Corporation's
subsidiaries (including deposit liabilities of the Banks). As a result,
holders of Exchange Junior Subordinated Debentures should look only to the
assets of the Corporation for payments on the Exchange Junior Subordinated
Debentures. At March 31, 1998, the subsidiaries of the Corporation had total
liabilities (excluding liabilities owed to the Corporation) of approximately
$1.3 billion.
The Exchange Guarantee will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in right of payment to all
Senior Indebtedness to the same extent and in the same manner as the Exchange
Junior Subordinated Debentures. None of the Indenture, the Exchange Guarantee
or the Trust Agreement places any limitation on the amount of secured or
unsecured debt, including Senior Indebtedness, that may be incurred by the
Corporation or any of its subsidiaries. See "Description of Exchange Junior
Subordinated Debentures--General," "--Subordination" and "Description of
Exchange Guarantee--Status of the Exchange Guarantee." The Corporation expects
from time to time that it will incur additional indebtedness constituting
Senior Indebtedness and that its subsidiaries will incur additional
liabilities.
The ability of the Trust to pay amounts due on the Exchange Capital
Securities is solely dependent upon the Corporation making payments on the
Exchange Junior Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods
with respect to each Extension Period, provided that an Extension Period must
end on an Interest Payment Date and may not extend beyond the Stated Maturity
Date. As a consequence of any such deferral, semi-annual Distributions on the
Trust Securities will be deferred from the relevant Distribution Date for such
Distributions during any such Extension Period (and the amount of
Distributions to which holders of the Trust Securities are entitled will
accumulate additional Distributions thereon at the rate of 8.67% per annum,
compounded semi-annually, but not exceeding the interest rate then accruing on
the Junior Subordinated Debentures). During an Extension Period, the
Corporation generally will be prohibited from (i) declaring or paying
dividends on the Corporation's capital stock, (ii) making payments of
principal of or interest or premium, if any, on its debt securities other than
debt securities ranking senior to the Junior Subordinated Debentures or (iii)
making any guarantee payments with respect to any guarantee by the Corporation
of debt securities of any subsidiary of the Corporation other than guarantees
ranking senior to the Junior Subordinated Debentures. See "Description of
Exchange Securities--Description of Exchange Capital
Securities--Distributions."
Before the end of an Extension Period, the Corporation may further extend
such Extension Period, provided that such extension does not cause such
Extension Period to exceed 10 consecutive semi-annual periods, end on a date
other than an Interest Payment Date or extend beyond the Stated Maturity Date.
Upon the termination of any Extension Period and the payment of all interest
then accrued and unpaid on the Junior Subordinated Debentures (together with
interest thereon at the annual rate of 8.67%, compounded semi-annually, to the
extent permitted by applicable law), the Corporation may begin a new Extension
Period, subject to the above requirements. There is no limitation on the
number of times that the Corporation may begin an Extension Period. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Distributions" and "--Description of Exchange Junior Subordinated
Debentures--Option to Extend Interest Payment Date."
The Corporation has no plan to exercise its right to defer payments of
interest on the Junior Subordinated Debentures. However, should the
Corporation exercise its right to defer payments of interest on the Junior
Subordinated Debentures, each holder of Trust Securities will be required to
accrue income (as original issue discount ("OID")) in respect of the deferred
stated interest allocable to its Trust Securities for United States federal
income tax purposes, which will be allocated but not distributed to holders of
Trust Securities. As a result, each holder of Capital Securities will
recognize income for United States federal income tax purposes in advance of
the receipt of cash and will not receive the cash related to such income from
the Trust if the holder disposes of the Capital Securities prior to the record
date for the payment of Distributions thereafter. See "Certain U.S. Federal
Income Tax Consequences--Interest Income and Original Issue Discount" and
"--Sales of Capital Securities."
If the Corporation exercises its right to defer payments of interest on
the Junior Subordinated Debentures, the market price of the Capital Securities
is likely to be affected. A holder that disposes of its Capital Securities
during an Extension Period, therefore, might not receive the same return on
its investment as a holder that continues to hold its Capital Securities. In
addition, the mere existence of the Corporation's right to defer payments of
interest on the Junior Subordinated Debentures may cause the market price of
the Capital Securities to be more volatile than the market prices of other
securities on which OID accrues that are not subject to such deferrals.
SPECIAL EVENT REDEMPTION
If a Special Event occurs before February 15, 2008, the Corporation will
have the right to prepay the Junior Subordinated Debentures in whole (but not
in part) at the Special Event Prepayment Price within 90 days following the
occurrence of such Special Event and therefore cause a mandatory redemption of
the Trust Securities at the Special Event Redemption Price. The exercise of
such right is subject to the Corporation having received any required
regulatory approvals. See "Description of Exchange Securities--Description of
Exchange Capital Securities--Redemption."
PROPOSED TAX LEGISLATION
On February 6, 1997, President Clinton proposed legislation (the
"Proposed Legislation") that would have, among other things, denied an issuer
a deduction for United States federal income tax purposes for the payment of
interest on instruments with characteristics similar to the Exchange Junior
Subordinated Debentures. The Proposed Legislation would have been effective on
the date of first committee action. The Proposed Legislation was not included
in the recently enacted Taxpayer Relief Act of 1997. There can be no
assurances, however, that similar legislation enacted after the date hereof
would not adversely affect the tax treatment of the Exchange Junior
Subordinated Debentures, resulting in a Tax Event. The occurrence of a Tax
Event may result in the redemption of the Exchange Junior Subordinated
Debentures for cash, in which event the holders of the Capital Securities
would receive cash in redemption of their Capital Securities. See "Description
of Exchange Securities--Description of Exchange Capital
Securities--Redemption" and "--Description of Exchange Junior Subordinated
Debentures-- Special Event Prepayment." See also "Certain U.S. Federal Income
Tax Consequences - Proposed Tax Legislation."
LIQUIDATION DISTRIBUTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Corporation will have the right to dissolve the Trust and, after
satisfaction of liabilities of creditors of the Trust as required by
applicable law, to cause the Junior Subordinated Debentures to be distributed
to the holders of the Trust Securities. Under current United States federal
income tax law, a distribution of Exchange Junior Subordinated Debentures upon
the liquidation of the Trust would not be a taxable event to holders of the
Exchange Capital Securities. Upon the occurrence of a Special Event, however,
a liquidation of the Trust in which the Exchange Capital Securities are
redeemed for cash would be a taxable event to the holders thereof. See
"Certain U.S. Federal Income Tax Considerations--Receipt of Junior
Subordinated Debentures or Cash Upon Liquidation of the Trust."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for Exchange Capital
Securities or the Exchange Junior Subordinated Debentures that may be
distributed in exchange for Exchange Capital Securities if a dissolution of
the Trust were to occur. Accordingly, the Exchange Capital Securities or the
Exchange Junior Subordinated Debentures may trade at a discount from the price
that the investor paid to purchase such securities. Because holders of
Exchange Capital Securities may receive Exchange Junior Subordinated
Debentures in liquidation of the Trust and because Distributions are otherwise
limited to interest payments on the Exchange Junior Subordinated Debentures,
prospective purchasers of Exchange Capital Securities are also making an
investment decision with regard to the Exchange Junior Subordinated Debentures
and should carefully review all the information regarding the Exchange Junior
Subordinated Debentures contained herein. See "Description of Exchange
Securities--Description of Exchange Capital Securities--Liquidation of the
Trust and Distribution of Exchange Junior Subordinated Debentures" and
"--Description of Exchange Junior Subordinated Debentures."
RIGHTS UNDER THE EXCHANGE GUARANTEE
The Exchange Guarantee will guarantee to the holders of the Exchange
Capital Securities the following payments, to the extent not paid by or on
behalf of the Trust: (i) any accumulated and unpaid Distributions required to
be paid on the Exchange Capital Securities, to the extent that the Trust has
funds legally available therefor at such time; (ii) the applicable Redemption
Price with respect to the Exchange Capital Securities called for redemption,
to the extent that the Trust has funds legally available therefor at such
time; and (iii) upon a voluntary or involuntary dissolution, winding up or
liquidation of the Trust (unless the Exchange Junior Subordinated Debentures
are distributed to holders of the Exchange Capital Securities), the lesser of
(a) the aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions to the date of payment, to the extent that the Trust has funds
legally available therefor at such time and (b) the amount of assets of the
Trust remaining available for distribution to holders of the Exchange Capital
Securities at such time, after the satisfaction of liabilities to creditors of
the Trust as provided by applicable law.
The holders of a majority in Liquidation Amount of the Exchange Capital
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Exchange Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Exchange Guarantee. Any holder
of the Exchange Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Exchange Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity. If the Corporation defaults on its
obligation to pay amounts payable under the Exchange Junior Subordinated
Debentures, the Trust will not have sufficient funds for the payment of
Distributions or amounts payable on redemption of the Exchange Capital
Securities or otherwise, and, in such event, holders of the Exchange Capital
Securities will not be able to rely upon the Exchange Guarantee for payment of
such amounts. Instead, if a Debenture Event of Default has occurred and is
continuing and such event is attributable to the failure of the Corporation to
pay the principal of (or premium, if any) or interest (including Additional
Sums (as defined below) and Compounded Interest (as defined below), if any) or
Liquidated Damages, if any, on the Exchange Junior Subordinated Debentures
when such payment is due and payable, then a holder of Exchange Capital
Securities may institute a legal proceeding directly against the Corporation
for enforcement of payment to such holder of the principal of (or premium, if
any) or interest (including Additional Sums and Compounded Interest, if any)
or Liquidated Damages, if any, on such Exchange Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of the Exchange
Capital Securities of such holder (a "Direct Action"). Notwithstanding any
payments made to a holder of Exchange Capital Securities by the Corporation in
connection with a Direct Action, the Corporation shall remain obligated to pay
the principal of (and premium, if any) and interest (including Additional Sums
and Compounded Interest, if any) or Liquidated Damages, if any, on the
Exchange Junior Subordinated Debentures, and the rights of the Corporation
shall be subrogated to the rights of the holder of such Exchange Capital
Securities with respect to payments on the Exchange Capital Securities to the
extent of any payments made by the Corporation to such holder in any Direct
Action. Except as described herein, holders of Exchange Capital Securities
will not be able to exercise directly any other remedy available to the
holders of the Exchange Junior Subordinated Debentures or to assert directly
any other rights in respect of the Exchange Junior Subordinated Debentures.
See "Description of Exchange Securities--Description of Exchange Junior
Subordinated Debentures--Enforcement of Certain Rights by Holders of Exchange
Capital Securities," "--Debenture Events of Default" and "Description of
Exchange Securities--Description of Exchange Guarantee." The Trust Agreement
provides that each holder of Exchange Capital Securities by acceptance thereof
agrees to the provisions of the Indenture and the Exchange Guarantee. Firstar
Trust Company will act as Guarantee Trustee under the Exchange Guarantee and
will hold the Exchange Guarantee for the benefit of the holders of the
Exchange Capital Securities. Firstar Trust Company also acts as Property
Trustee under the Trust Agreement and as Debenture Trustee under the
Indenture.
LIMITED VOTING RIGHTS
Holders of Exchange Capital Securities generally will have voting rights
relating only to the modification of the Exchange Capital Securities and the
exercise of the Trust's rights as holder of Exchange Junior Subordinated
Debentures. Holders of Exchange Capital Securities will not be entitled to
vote to appoint, remove or replace, or to increase or decrease the number of,
the Issuer Trustees, which voting rights are vested exclusively in the holder
of the Common Securities except upon the occurrence of certain events
described herein. The Property Trustee, the Administrative Trustees and the
Corporation may amend the Trust Agreement without the consent of holders of
Exchange Capital Securities to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust. Holders of
Exchange Capital Securities will have no voting rights with respect to any
matters submitted to a vote of the Corporation's stockholders. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Voting Rights; Amendment of the Trust Agreement" and "--Removal of
Issuer Trustees."
TRADING CHARACTERISTICS OF THE CAPITAL SECURITIES
The Capital Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Exchange Junior Subordinated Debentures. A holder who uses the accrual method
of accounting for tax purposes (and a cash method holder, if the Exchange
Junior Subordinated Debentures are deemed to have been issued with OID) and
who disposes of its Exchange Capital Securities between record dates for
payments of Distributions thereon will be required to include accrued but
unpaid interest on the Exchange Junior Subordinated Debentures through the
date of disposition in income as ordinary income (i.e., interest or, possibly,
OID), and to add such amount to its adjusted tax basis in its share of the
underlying Exchange Junior Subordinated Debentures deemed disposed of. If the
selling price is less than the holder's adjusted tax basis (which will include
all accrued but unpaid interest), a holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes. See
"Certain U.S. Federal Income Tax Considerations--Interest Income and Original
Issue Discount" and "--Sales of Capital Securities."
ABSENCE OF RATINGS AND RESTRICTIONS ON RESALE
The Capital Securities have not been rated by a nationally recognized
statistical rating organization and, accordingly, will be subject to transfer
restrictions (including a limitation on transfer only to blocks having a
Liquidation Amount of not less than $100,000 (100 Capital Securities)). See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Restrictions on Transfer." There is no existing public market for
the Capital Securities, and there can be no assurance as to the liquidity of
any market that may develop for the Capital Securities or the ability of the
holders to sell their Capital Securities or as to what price holders of the
Capital Securities may be able to sell their Capital Securities. Future
trading prices of the Capital Securities will depend on many factors,
including, among other things, prevailing interest rates, the Corporation's
operating results, and the market for similar securities.
CONSEQUENCES OF A FAILURE TO EXCHANGE ORIGINAL CAPITAL SECURITIES
The Original Capital Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws,
or pursuant to an exemption therefrom or in a transaction not subject thereto,
and in each case in compliance with certain other conditions and restrictions.
Original Capital Securities that remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of
Original Capital Securities that remain outstanding will not be entitled to
any rights to have such Original Capital Securities registered under the
Securities Act or to any similar rights under the Registration Rights
Agreement (subject to certain limited exceptions). The Corporation and the
Trust do not intend to register under the Securities Act any Original Capital
Securities that remain outstanding after consummation of the Exchange Offer
(subject to such limited exceptions, if applicable). To the extent that
Original Capital Securities are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Original Capital Securities could be
adversely affected.
The Exchange Capital Securities and any Original Capital Securities that
remain outstanding after consummation of the Exchange Offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain
actions or exercised certain rights under the Trust Agreement. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Voting Rights; Amendment of the Trust Agreement."
The Original Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed with
the Commission by June 26, 1998 and declared effective by the Commission by
August 5, 1998, the Distribution rate borne by the Original Capital Securities
will increase by 0.25% until the Exchange Offer is consummated. Upon
consummation of the Exchange Offer, holders of Original Capital Securities
will not be entitled to any increase in the Distribution rate thereon or any
further registration rights under the Registration Rights Agreement, except
under limited circumstances. See "Description of Original Securities."
ABSENCE OF PUBLIC MARKET AND RESTRICTIONS ON RESALE
The Original Capital Securities were issued to, and the Corporation
believes such securities are currently owned by, a relatively small number of
beneficial owners. The Original Capital Securities have not been registered
under the Securities Act and will be subject to restrictions on
transferability if they are not exchanged for the Exchange Capital Securities.
Although the Exchange Capital Securities may be resold or otherwise
transferred by the holders (who are not affiliates of the Corporation or the
Trust) without compliance with the registration requirements under the
Securities Act, they will constitute a new issue of securities with no
established trading market. Capital Securities may be transferred by the
holders thereof only in blocks having a Liquidation Amount of not less than
$100,000 (100 Capital Securities), or any integral multiple of $1,000
Liquidation Amount (one Capital Security) in excess thereof. In addition, any
market-making activity, should it develop, will be subject to the limits
imposed by the Securities Act and the Exchange Act and may be limited during
the Exchange Offer. Accordingly, no assurance can be given that an active
public or other market will develop for the Capital Securities, or as to the
liquidity of, or the trading market for, the Exchange Capital Securities. If
an active public market does not develop, the market price and liquidity of
the Exchange Capital Securities may be adversely affected.
If a public trading market develops for the Exchange Capital Securities,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the financial condition and results of
operations of the Corporation and the market for similar securities. Depending
on these and other factors, the Exchange Capital Securities may trade at a
discount.
Notwithstanding the registration of the Exchange Capital Securities in
the Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of
the Securities Act) of the Corporation or the Trust may publicly offer for
sale or resell the Exchange Capital Securities only in compliance with the
provisions of Rule 144 under the Securities Act.
Each broker-dealer that receives Exchange Capital Securities for its own
account in exchange for Original Capital Securities, where such Original
Capital Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Capital Securities. See "Plan of Distribution."
EXCHANGE OFFER PROCEDURES
Subject to conditions set forth under "The Exchange Offer--Conditions to
the Exchange Offer," issuance of the Exchange Capital Securities in exchange
for Original Capital Securities pursuant to the Exchange Offer will be made
only after a timely receipt by the Trust of a book-entry confirmation
evidencing the tender of such Original Capital Securities through ATOP or
certificates representing such Original Capital Securities, a properly
completed and duly executed Letter of Transmittal, with any required signature
guarantees, and all other required documents. See "The Exchange
Offer--Acceptance for Exchange and Issuance of Exchange Capital Securities"
and "--Procedures for Tendering Original Capital Securities." Therefore,
holders of the Original Capital Securities desiring to tender such Original
Capital Securities in exchange for Exchange Capital Securities should allow
sufficient time to ensure timely delivery. Neither the Corporation nor the
Trust is under any duty to give notification of defects or irregularities with
respect to the tenders of Original Capital Securities for exchange.
FIRSTFEDERAL FINANCIAL SERVICES CORP.
The Corporation is a bank holding company, which has as its primary
wholly-owned subsidiaries Signal Bank, N.A., a national bank ("Signal Bank"),
Summit Bank, N.A., a national bank ("Summit Bank" and, together with Signal
Bank, the "Banks") and Mobile Consultants, Inc., a broker and servicer of
manufactured housing finance contracts ("MCi" and, together with the Banks,
the "Subsidiaries").
Founded in 1905 as an Ohio chartered mutual building and loan
association, Signal Bank converted to a federally chartered thrift in 1935,
converted from mutual to stock form in 1987, and converted from a savings and
loan association to a national bank in 1997. On September 15, 1997, Signal
Bank completed the acquisition of seven branches from Keybank, National
Association, with approximately $151 million in deposits. Such branches are
located in the cities of Bucyrus, Crestline, Cygnet, Galion, Tiffin, Wayne and
Willard in north central and north western Ohio. The purchase price was equal
to 12.15% of average deposits, resulting in approximately $19 million in
goodwill which is being amortized over a period not exceeding fifteen years.
Signal Bank serves north central Ohio ("the Market Area") through its home
office, 25 full service banking offices, and 3 limited service facilities.
Signal Bank offers a wide range of competitive consumer-oriented lending
and deposit products and services in the Market Area. Signal Bank has achieved
significant growth in recent years through the expansion of its asset
origination capabilities and acquiring branches in its Market Area.
The Corporation acquired Summit Bank on July 8, 1997. Summit Bank offers
a full complement of banking products and primarily provides service to small
businesses, individuals and professionals in the Akron, Canton and Cleveland
metropolitan areas. Summit Bank, with assets of $88.6 million when acquired,
was accounted for as a pooling of interests. Summit Bank operates 2 full
service banking offices.
As of March 31, 1998, 52% of the Banks' loan portfolio consisted of loans
secured by one- to four-family residential real estate, while 28% of the loan
portfolio consisted of manufactured housing and other consumer loans and 20%
consisted of commercial mortgage loans, commercial loans and commercial lease
contracts.
MCi, a manufactured housing finance company which brokers manufactured
home loans to and on behalf of financial institutions, was acquired by the
Corporation in April, 1996. MCi facilitates primarily non-mortgage, consumer
loan contracts through 3,500 dealers of manufactured homes located in 44
states, in the continental United States. MCi also services the collection and
recovery of troubled loans on behalf of the financial institutions which
originate the loans.
On February 9, 1998, the Corporation announced that it signed a
definitive agreement on February 6, 1998 to acquire First Shenango Bancorp,
Inc. ("Shenango") located in New Castle, Pennsylvania. Under the terms of the
agreement, the Corporation will exchange 1.142875 shares of its common stock
for each share of the issued and outstanding common stock of Shenango. Based
on the Corporation's closing price of $33.40 on February 6, 1998, the
transaction value is approximately $103.9 million. The merger will be
accounted for as a pooling of interests. Shenango's wholly owned savings bank,
First Federal Savings Bank of New Castle, Pennsylvania has four offices
located in New Castle, Pennsylvania. At December 31, 1997, Shenango had total
assets of $375.0 million, deposits of $275.2 million and shareholders' equity
of $47.9 million. It is anticipated that the acquisition of Shenango will be
completed in either late June or early in the 3rd quarter.
On April 23, 1998, the Corporation announced that its board of directors
approved a five-for-four stock split and declared cash dividends on its common
and Series B preferred shares.
The Corporation engages in discussions concerning potential acquisitions
from time to time, but currently has no commitments, agreements or
understandings to acquire any additional financial institutions. The
Corporation expects to continue to take advantage of the consolidation of the
financial services industry by further developing its community bank franchise
within its own and contiguous market areas.
SIGNAL CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law upon
the filing of a certificate of trust with the Delaware Secretary of State. The
Trust exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of Trust Securities to
acquire the Junior Subordinated Debentures and (iii) engaging in only those
other activities necessary, advisable or incidental thereto. The Junior
Subordinated Debentures are and will be the sole assets of the Trust, and
payments under the Junior Subordinated Debentures will be the sole revenues of
the Trust. All of the Common Securities are owned by the Corporation. The
Common Securities rank pari passu, and payments will be made thereon pro rata,
with the Capital Securities, except that if there is an event of default under
the Trust Agreement resulting from a Debenture Event of Default, the rights of
the Corporation as holder of the Common Securities to payments in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Capital Securities. See
"Description of Exchange Capital Securities--Subordination of Common
Securities." The Corporation acquired Common Securities in an aggregate
Liquidation Amount equal to at least 3% of the total capital of the Trust. The
Trust has a term of approximately 31 years, but may be dissolved earlier as
provided in the Trust Agreement. The Trust's business and affairs are
conducted by the Issuer Trustees, each appointed by the Corporation as holder
of the Common Securities. The Issuer Trustees for the Trust are Firstar Trust
Company, as the Property Trustee, Delaware Trust Capital Management, Inc., as
the Delaware Trustee and the three Administrative Trustees who are officers or
other employees of the Corporation. Firstar Trust Company also acts as
guarantee trustee under the Guarantee and as debenture trustee under the
Indenture. See "Description of Exchange Securities--Description of Exchange
Guarantee" and "--Description of Exchange Junior Subordinated Debentures." The
holder of the Common Securities or, if an Event of Default under the Trust
Agreement has occurred and is continuing, the holders of a majority in
Liquidation Amount of the Capital Securities are entitled to appoint, remove
or replace the Property Trustee and/or the Delaware Trustee. In no event will
the holders of the Exchange Capital Securities have the right to vote to
appoint, remove or replace the Administrative Trustees; such voting rights
will be vested exclusively in the holder of the Common Securities. The duties
and obligations of each Issuer Trustee are governed by the Trust Agreement.
The Corporation, as issuer of the Junior Subordinated Debentures, has agreed
to pay all fees, expenses, debts and obligations (other than the payments in
respect of the Trust Securities) related to the Trust and the offering of the
Capital Securities and has agreed to pay, directly or indirectly, all ongoing
costs, expenses and liabilities (other than the payments in respect of the
Trust Securities) of the Trust.
USE OF PROCEEDS
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities. In consideration for issuing
the Exchange Capital Securities in exchange for Original Capital Securities as
described in this Prospectus, the Trust will receive Original Capital
Securities in like Liquidation Amount. The Original Capital Securities
surrendered in exchange for the Exchange Capital Securities will be retired
and canceled.
The proceeds to the Trust (without giving effect to expenses of the
offering payable by the Corporation) from the offering of the Original Capital
Securities was $50,000,000. All of the proceeds from the sale of the Original
Capital Securities were invested by the Trust in the Original Junior
Subordinated Debentures. The Corporation intends that the net proceeds from
the sale of the Original Junior Subordinated Debentures will be used for
general corporate purposes.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
The following table sets forth the ratios of earnings to combined fixed
charges of the Corporation on a consolidated basis for the respective periods
indicated.
Three Months
Ended March 31 Year Ended December 31,
-------------------- -----------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
Ratio of Earnings to Combined
Fixed Charges:
Excluding interest on
deposits .................... 1.94x 2.07x 1.88x 1.73x 1.73x 2.07x 2.55x
Including interest on
deposits .................... 1.34 1.44 1.38 1.32 1.33 1.43 1.55
For purposes of computing the ratios of earnings to combined fixed
charges, earnings represent net income (loss) before extraordinary items and
cumulative effect of changes in accounting principles plus applicable income
taxes and fixed charges. Fixed charges, excluding interest on deposits,
include gross interest expense (other than on deposits) and the proportion
deemed representative of the interest factor of rent expense, net of income
from subleases. Fixed charges, including gross interest on deposits, include
all interest expense and the proportion deemed representative of the interest
factor of rent expense, net of income from subleases.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust is treated as a subsidiary of
the Corporation and, accordingly, the accounts of the Trust are included in
the consolidated financial statements of the Corporation. The Capital
Securities are shown in the consolidated balance sheets of the Corporation as
"Corporation-Obligated Mandatorily Redeemable Capital Securities of Subsidiary
Trust Holding Solely Junior Subordinated Debentures of the Corporation."
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization
of the Corporation as of March 31, 1998. The following data should be read in
conjunction with the financial information and discussion thereof included in
documents incorporated by reference in this Prospectus. See "Incorporation of
Certain Documents by Reference."
March 31, 1998
(in thousands)
Long-Term Borrowings:
Long term debt, primarily Federal Home Loan Bank
borrowings and repurchase agreements ................... $ 203,069
9.125% Subordinated Notes due March 15, 2004,
redeemable after March 15, 2002 ........................ 40,500
Total Long-Term Borrowings ........................... 243,569
---------
Corporation-Obligated Mandatorily Redeemable
Securities of Subsidiary Holding Solely Parent
Company Debentures(1) .................................... 50,000
---------
Shareholders' Equity:
Preferred stock, no par value, authorized 1,500,000 shares
6 1/2% Cumulative Convertible, Series B,
428,842 Shares, issued and outstanding ................. 9,917
Common stock, par value $1.00 per share, 25,000,000
authorized, 8,439,963 issued and outstanding ........... 8,440
Additional paid-in capital ............................... 43,313
Retained earnings ........................................ 48,387
Treasury stock, at cost, 396,431 shares .................. (1,555)
Other comprehensive income .................................... (440)
---------
Total Shareholders' Equity ............................ 108,062
---------
Total Capitalization ....... $ 401,631
=========
- ------------------
(1) Reflects the Original Securities. As described herein, the sole assets of
the Trust, which is a subsidiary of the Corporation, are $51,547,000
aggregate principal amount of the Junior Subordinated Debentures
(including the amounts attributable to the issuance of the Common
Securities of the Trust), which will mature on February 15, 2028. The
Corporation owns all of the Common Securities issued by the Trust.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data below should be read in
connection with the financial information included in the Corporation's 1997
Annual Report on Form 10-K for the year ended December 31, 1997. See
"Available Information" and "Incorporation of Certain Documents by Reference."
Three Months
Ended
March 31, Years Ended December 31,
-------------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(Dollars in Thousands, except per share data)
INCOME STATEMENT DATA:
Interest Income $27,224 $18,698 $90,093 $73,559 $64,922 $51,987 $45,510
Interest Expense 17,708 12,304 59,550 48,048 41,046 29,260 25,319
------- ------- ------- ------- ------- ------- -------
Net Interest Income 9,516 6,394 30,543 25,511 23,876 22,727 20,191
Provision for credit losses 462 107 842 360 -- 15 1,025
-------- -------- -------- -------- -------- -------- --------
Net Interest Income After
Provision for Credit Losses 9,054 6,287 29,701 25,151 23,876 22,712 19,166
Non-interest Income 8,727 6,031 29,285 17,929 4,167 2,915 6,001
Non-interest Expense 11,616 6,668 35,643 27,346 13,651 12,116 10,374
------- ------- ------- ------- ------- ------- -------
Income before Income Taxes 6,165 5,650 23,343 15,734 14,392 13,511 14,793
Provision for Income Taxes 2,106 2,085 8,895 5,884 4,946 4,490 5,054
------- ------- ------- ------- ------- ------- -------
Net income $ 4,059 $ 3,565 $14,448 $ 9,850 $ 9,466 $ 9,021 $ 9,739
======= ======= ======= ======= ======= ======= =======
-====== ======= ======= ======= ======= ======= =------
Net income applicable to common
stock $ 3,885 $ 3,158 $12,864 $ 8,154 $ 7,660 $ 7,657 $ 8,733
======== ======= ======= ======== ======== ======= -=------
======== ======= ======= ======== ======== ======= -=------
PER SHARE DATA (1):
Net Income (basic) $ 0.46 $ 0.55 $ 2.07 $ 1.46 $ 1.48 $1.49 $ 1.70
Net Income (diluted) 0.42 0.41 1.57 1.14 1.14 1.14 1.34
Average Basic Shares (in
thousands) 8,428 5,713 6,215 5,588 5,170 5,149 5,120
Average Diluted Shares (in 9,562 8,667 9,223 8,626 8,313 7,866 7,303
thousands)
BALANCE SHEET DATA (AT PERIOD
END):
Total Assets $1,519,719 $1,088,132 $1,457,415 $1,080,383 $947,270 $835,667 $682,639
Loan & leases, net of allowance 1,003,233 753,249 1,001,311 756,768 581,060 478,576 381,241
Total deposits 998,646 662,680 981,675 671,918 574,041 502,527 453,821
Borrowings, including advances 387,431 322,604 347,243 312,413 286,726 258,171 168,379
Total shareholders' equity 108,062 87,906 104,735 85,287 76,533 69,246 53,673
AVERAGE BALANCE SHEET DATA:
Total assets $1,488,567 $1,084,258 $1,269,144 $1,035,289 $885,727 $741,722 $620,939
Interest-earnings assets 1,379,519 986,721 1,163,765 980,884 858,077 715,901 594,018
Loans and leases, net of
allowance 1,002,273 726,420 821,150 718,802 527,885 413,639 339,437
Total deposits 990,161 663,649 747,168 625,517 524,267 484,920 434,059
Borrowings, including advances 367,337 305,625 381,982 317,999 283,828 190,612 132,962
Total shareholders' equity 106,399 86,597 95,409 80,763 73,211 63,585 49,637
PERFORMANCE RATIOS:
Return on Average Assets 1.09% 1.32% 1.14% 0.95% 1.07% 1.21% 1.57%
Return on Average Shareholders'
Equity 15.26 16.47 15.14 12.20 12.90 14.17 19.62
Net Interest Margin(2) 2.76 2.59 2.62 2.60 2.78 3.17 3.40
Efficiency ratio(3) 60.13 50.83 56.57 61.03 50.61 47.85 45.49
Total non-interest expense to
average total assets 3.12 2.46 2.81 2.67 1.54 1.63 1.67
Dividend payout ratio(4) 22.69 23.87 25.65 34.20 33.73 28.84 20.16
ASSET QUALITY RATIOS(5):
Allowance for Loan Losses to
Non-performing Assets 102.82% 72.88% 119.07% 69.91% 158.41% 89.62% 114.69%
Allowance for Loan Losses to
Total Loans 0.50 0.43 0.60 0.43 0.51 0.67 1.17
Total Non-performing Assets to 0.43 0.58
Total Assets 0.29 0.38 0.32 0.39 0.20
Net Charge-Offs to Average Loans 0.15 0.00 0.10 0.07 0.04 0.32 0.13
CAPITAL RATIOS (AT PERIOD END):
Shareholders' equity to total assets 7.11% 8.08% 7.19 7.89% 8.08% 8.29% 7.86%
Tier 1 Risk-Adjusted Capital(6) 12.64 N/A 8.18 N/A N/A N/A N/A
Total Risk-Adjusted Capital 18.35 15.90 12.89 11.53 14.52 17.25 16.67
Tier 1 Leverage (6) 8.32 9.20 5.23 6.42 6.60 7.42 7.11
- ----------
(1) Per share data has been restated to reflect stock dividends and stock
splits effected prior to December 31, 1997.
(2) Net interest income on a fully taxable equivalent basis divided by
average interest-earning assets.
(3) Non-interest expense less amortization of intangible assets divided by
the sum of net interest income (on a fully taxable equivalent basis) and
on-interest income.
(4) Total dividends paid on common and convertible preferred stock divided by
net income.
(5) Non-performing assets include nonaccrual loans, loans past due 90
days or more, restructured loans, other real estate and other repossessed
assets.
(6) The Corporation became a bank holding company through the July 1, 1997
conversion of First Federal Savings and Loan Association of Wooster to a
national bank, now known as Signal Bank, N.A. Prior to July 1, 1997, the
Corporation operated as a thrift and was not required to compute Tier 1
risk-adjusted capital. The thrift capital ratio, leverage (core) capital,
is comparable to the "Tier 1 leverage" ratio reported by national banks
and has been shown for periods prior to July 1, 1997.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Original Capital Securities, the
Corporation and the Trust entered into the Registration Rights Agreement with
the Initial Purchaser, pursuant to which the Corporation and the Trust agreed
to file and use commercially reasonable efforts to cause to become effective
with the Commission a registration statement relating to the exchange of the
New Capital Securities for the Original Capital Securities. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations
of the Corporation and the Trust under the Registration Rights Agreement. The
form and terms of the Exchange Capital Securities are the same as the form and
terms of the Original Capital Securities except that the Exchange Capital
Securities have been registered under the Securities Act, will not be subject
to certain restrictions on transfer applicable to the Original Capital
Securities and will not provide for any increase in the Distribution rate
thereon. In that regard, the Original Capital Securities provide, among other
things, that, if a registration statement relating to the Exchange Offer has
not been filed by June 26, 1998 and declared effective by August 5, 1998, the
Distribution rate borne by the Original Capital Securities will increase by
0.25% per annum until such registration statement is filed or declared
effective, as the case may be. In addition, the Original Capital Securities
provide that, if the Trust has not exchanged Exchange Capital Securities for
all Original Capital Securities validly tendered by the 45th day after the
date on which the registration statement is declared effective, the
Distribution rate borne by the Original Capital Securities will increase by
0.25% per annum for the period from the occurrence of such event until the
Exchange Offer has been consummated. Upon consummation of the Exchange Offer,
holders of Original Capital Securities will not be entitled to any increase in
the Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Original Capital Securities"
and "Description of Original Securities."
The Exchange Offer is not being made to, nor will the Trust accept
tenders for exchange from, holders of Original Capital Securities in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not
be in compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Original Capital
Securities are registered on the books of the Trust or any other person who
has obtained a properly completed bond power from the registered holder, or
any person whose Original Capital Securities are held of record by DTC who
desires to deliver such Original Capital Securities by book-entry transfer at
DTC.
Pursuant to the Exchange Offer, as soon as practicable after the
Expiration Date, the Corporation will exchange the Exchange Junior
Subordinated Debentures for the Original Junior Subordinated Debentures in a
principal amount corresponding to the Liquidation Amount of the Original
Capital Securities accepted for exchange and will execute the Exchange
Guarantee in respect of the Exchange Capital Securities exchanged for such
Original Capital Securities. The Exchange Guarantee and the Exchange Junior
Subordinated Debentures have been registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to and including $50,000,000 aggregate Liquidation Amount of
Exchange Capital Securities for a like aggregate Liquidation Amount of
Original Capital Securities properly tendered on or prior to the Expiration
Date and not properly withdrawn in accordance with the procedures described
herein. The Trust will issue, as soon as practicable after the Expiration
Date, an aggregate Liquidation Amount of up to and including $50,000,000 of
Exchange Capital Securities in exchange for a like Liquidation Amount of
outstanding Original Capital Securities tendered and accepted in connection
with the Exchange Offer. Holders may tender their Original Capital Securities
in whole or in part in a Liquidation Amount of not less than $100,000 (100
Capital Securities) or any integral multiple of $1,000 Liquidation Amount (one
Capital Security) in excess thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount
of Original Capital Securities being tendered. As of the date of this
Prospectus, $50,000,000 aggregate Liquidation Amount of the Original Capital
Securities is outstanding.
Holders of Original Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Original Capital
Securities that are not tendered for or are tendered but not accepted in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Trust Agreement, but will not be entitled to any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors--Consequences of a Failure to
Exchange Original Capital Securities" and "Description of Original
Securities."
If any tendered Original Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Original Capital
Securities will be returned, without expense, to the tendering holder thereof
as soon as practicable after the Expiration Date.
Holders who tender Original Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Original Capital Securities in connection with the
Exchange Offer. The Corporation will pay all charges and expenses, other than
certain applicable taxes described herein, in connection with the Exchange
Offer. See "--Fees and Expenses."
NEITHER THE CORPORATION, THE BOARD OF DIRECTORS OF THE CORPORATION NOR
ANY ISSUER TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF
ORIGINAL CAPITAL SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING
ALL OR ANY PORTION OF THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE
EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. EACH HOLDER OF ORIGINAL CAPITAL SECURITIES MUST DECIDE WHETHER
TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE LIQUIDATION AMOUNT OF
ORIGINAL CAPITAL SECURITIES TO TENDER BASED ON SUCH HOLDER'S OWN FINANCIAL
POSITION AND REQUIREMENTS.
EXPIRATION DATE, EXTENSIONS, AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on June
30, 1998 unless the Exchange Offer is extended by the Corporation or the Trust
(in which case the term "Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended).
The Corporation and the Trust expressly reserve the right in their sole
and absolute discretion, subject to applicable law, at any time and from time
to time, (i) to delay the acceptance of the Original Capital Securities for
exchange, (ii) to terminate the Exchange Offer (whether or not any Original
Capital Securities have theretofore been accepted for exchange) if the Trust
determines, in its sole and absolute discretion that if any of the events or
conditions referred to under "--Conditions to the Exchange Offer" have
occurred or exist or have not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Original Capital Securities tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Original Capital Securities to withdraw their tendered Original Capital
Securities as described under "--Withdrawal Rights," (iv) to waive any
condition or (v) amend the terms of the Exchange Offer, subject to the
Registration Rights Agreement, in any respect. If the Exchange Offer is
amended in a manner determined by the Corporation and the Trust to constitute
a material change, or if the Corporation and the Trust waive a material
condition of the Exchange Offer, the Corporation and the Trust will promptly
disclose such amendment by means of a prospectus supplement that will be
distributed to the holders of the Original Capital Securities, and the
Corporation and the Trust will extend the Exchange Offer to the extent
required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of
an extension will be made no later than 9:00 a.m., New York City time, on the
next Business Day (as defined herein) after the previously scheduled
Expiration Date. Without limiting the manner in which the Corporation and the
Trust may choose to make any public announcement and subject to applicable
laws, the Corporation and the Trust shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue Exchange Capital Securities for Original
Capital Securities validly tendered and not withdrawn promptly after the
Expiration Date.
In all cases, delivery of Exchange Capital Securities in exchange for
Original Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(i) the book-entry confirmation described below under "--Procedures for
Tendering Original Capital Securities--Book-Entry Transfer" or (ii)
certificates representing such Original Capital Securities, and the Letter of
Transmittal (or facsimile thereof) properly completed and duly executed, with
any required signature guarantees, and any other documents required by the
Letter of Transmittal.
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will be deemed to have accepted for exchange, and thereby exchanged,
Original Capital Securities validly tendered and not withdrawn as, if and when
the Trust gives oral or written notice to the Exchange Agent (any such oral
notice to be promptly confirmed in writing) of the Trust's acceptance of such
Original Capital Securities for exchange pursuant to the Exchange Offer. The
Exchange Agent will act as agent for the Trust for the purpose of receiving
tenders of book-entry confirmations or certificates representing Original
Capital Securities, Letters of Transmittal and related documents, and as agent
for tendering holders for the purpose of receiving book-entry confirmations or
certificates representing Original Capital Securities, Letters of Transmittal
and related documents and transmitting Exchange Capital Securities to validly
tendering holders. Such exchange will be made as soon as practicable after the
Expiration Date. If for any reason whatsoever, acceptance for exchange or the
exchange of any Original Capital Securities tendered pursuant to the Exchange
Offer is delayed (whether before or after the Trust's acceptance for exchange
of Original Capital Securities) or the Trust extends the Exchange Offer or is
unable to accept for exchange or exchange Original Capital Securities tendered
pursuant to the Exchange Offer, then, without prejudice to the Trust's rights
set forth herein, the Exchange Agent may, nevertheless, on behalf of the Trust
and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Original
Capital Securities and such Original Capital Securities may not be withdrawn
except to the extent tendering holders are entitled to withdrawal rights as
described under "--Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Original Capital
Securities will represent, warrant and agree that it has full power and
authority to tender, exchange, sell, assign and transfer Original Capital
Securities, that the Trust will acquire good, marketable and unencumbered
title to the tendered Original Capital Securities, free and clear of all
liens, restrictions, charges and encumbrances, and the Original Capital
Securities tendered for exchange are not subject to any adverse claims or
proxies. The holder also will represent, warrant and agree that it will, upon
request, execute and deliver any additional documents deemed by the Trust or
the Exchange Agent to be necessary or desirable to complete the exchange,
sale, assignment, and transfer of the Original Capital Securities tendered
pursuant to the Exchange Offer. Tendering holders of Original Capital
Securities that use ATOP will, by doing so, acknowledge that such holder has
received and agrees to be bound by the terms of the Letter of Transmittal and
the Corporation may enforce the Letter of Transmittal against such holder.
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
Valid Tender. Except as set forth herein, in order for Original Capital
------------
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees and any other required documents, must be
received by the Exchange Agent at its address set forth under "--Exchange
Agent," and (i) tendered Original Capital Securities must be received by the
Exchange Agent, or (ii) such Original Capital Securities must be tendered
pursuant to the procedures for book-entry transfer set forth herein and a
book-entry confirmation must be received by the Exchange Agent, in each case
on or prior to the Expiration Date, or (iii) the guaranteed delivery
procedures set forth herein must be complied with.
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the Liquidation Amount of Original Capital
Securities being tendered in the appropriate box on the Letter of Transmittal
or so indicate in an agent's message in lieu of the Letter of Transmittal. The
entire Liquidation Amount of Original Capital Securities delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
THE METHOD OF DELIVERY OF THE BOOK-ENTRY CONFIRMATIONS OR CERTIFICATES,
THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION
AND SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL,
REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT
DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. For purposes of the Exchange Offer, the Exchange
Agent will establish an account with respect to the Original Capital
Securities at DTC within two Business Days after the date of this Prospectus.
Any tendering financial institution that is a participant in DTC's book-entry
transfer facility system must make a book-entry delivery of the Original
Capital Securities by causing DTC to transfer such Original Capital Securities
into the Exchange Agent's account at DTC in accordance with DTC's ATOP
procedures for transfers. Such holder of Original Capital Securities using
ATOP should transmit its acceptance to DTC on or prior to the Expiration Date
(or comply with the guaranteed delivery procedures set forth below). DTC will
verify such acceptance, execute a book-entry transfer of the tendered Original
Capital Securities into the Exchange Agent's account at DTC and then send to
the Exchange Agent confirmation of such book-entry transfer, including an
agent's message confirming that DTC has received an express acknowledgment
from such holder that such holder has received and agrees to be bound by the
Letter of Transmittal and that the Trust and the Corporation may enforce the
Letter of Transmittal against such holder (a "book-entry confirmation").
A beneficial owner of Original Capital Securities that are held by or
registered in the name of a custodian is urged to contact such Custodian
promptly if such beneficial owner wishes to participate in the Exchange Offer.
Certificates. If the tender is not made through ATOP, certificates
------------
representing Original Capital Securities, as well as the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any
required signature guarantees, and any other required documents required by
the Letter of Transmittal, must be received by the Exchange Agent at its
address set forth under "--Exchange Agent" on or prior to the Expiration Date
in order for such tender to be effective (or the guaranteed delivery procedure
set forth herein must be complied with).
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the Liquidation Amount of Original Capital
Securities being tendered in the appropriate box on the Letter of Transmittal.
The entire Liquidation Amount of Original Capital Securities delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
Signature Guarantees. Certificates for the Original Capital Securities
--------------------
need not be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (i) a certificate for the Original Capital Securities is
registered in a name other than that of the person surrendering the
certificate or (ii) such holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (i) or (ii) above, such certificates for Original Capital
Securities must be duly endorsed or accompanied by a properly executed bond
power, with the endorsement or signature on the bond power and on the Letter
of Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an "eligible guarantor institution," including (as
such terms are defined therein): (a) a bank; (b) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (c) a
credit union; (d) a national securities exchange, registered securities
association or clearing agency; or (e) a savings association that is a
participant in a Securities Transfer Association (each of the foregoing, an
"Eligible Institution"), unless surrendered on behalf of such Eligible
Institution. See Instruction 1 to the Letter of Transmittal.
Delivery. The method of delivery of the book-entry confirmation or
--------
certificates representing tendered Original Capital Securities, the Letter of
Transmittal, and all other required documents is at the option and sole risk
of the tendering holder, and delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail,
return receipt requested, properly insured, or an overnight delivery service
is recommended. In all cases, sufficient time should be allowed to ensure
timely delivery.
Notwithstanding any other provision hereof, the delivery of Exchange
Capital Securities in exchange for Original Capital Securities tendered and
accepted for exchange pursuant to the Exchange Offer will in all cases be made
only after timely receipt by the Exchange Agent of (i) a book-entry
confirmation with respect to such Original Capital Securities or (ii)
certificates representing Original Capital Securities and a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), together with
any required signature guarantees and any other documents required by the
Letter of Transmittal. Accordingly, the delivery of Exchange Capital
Securities might not be made to all tendering holders at the same time and
will depend upon when book-entry confirmations with respect to Original
Capital Securities or certificates representing Original Capital Securities
and other required documents are received by the Exchange Agent.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Guaranteed Delivery. If a holder desires to tender Original Capital
-------------------
Securities pursuant to the Exchange Offer and the certificates for such
Original Capital Securities are not immediately available or time will not
permit all required documents to reach the Exchange Agent on or prior to the
Expiration Date, or the procedure for book-entry transfer cannot be completed
on a timely basis, such Original Capital Securities may nevertheless be
tendered, provided that all of the following guaranteed delivery procedures
are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed notice to the Exchange
Agent guaranteeing delivery to the Exchange Agent of either certificates
representing Original Capital Securities or a book-entry confirmation in
compliance with the requirements set forth herein (a "Notice of Guaranteed
Delivery"), substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided herein, on or prior to the
Expiration Date; and
(iii) a book-entry confirmation or the certificates representing all
tendered Original Capital Securities, in proper form for transfer, together
with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees and any other
documents required by the Letter of Transmittal, are, in any case, received by
the Exchange Agent within three New York Stock Exchange trading days after the
date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
The Trust's acceptance for exchange of Original Capital Securities
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering holder and the Trust upon the terms
and subject to the conditions of the Exchange Offer.
Determination of Validity. All questions as to the form of documents,
-------------------------
validity, eligibility (including time of receipt) and acceptance for exchange
of any tendered Original Capital Securities will be determined by the
Corporation and the Trust, in their sole discretion, whose determination shall
be final and binding on all parties. The Corporation and the Trust reserve the
absolute right, in their sole and absolute discretion, to reject any and all
tenders determined by them not to be in proper form or the acceptance of
which, or exchange for, may, in the opinion of counsel to the Corporation and
the Trust, be unlawful. The Corporation and the Trust also reserve the
absolute right, subject to applicable law, to waive any of the conditions of
the Exchange Offer as set forth under "--Conditions to the Exchange Offer" or
any condition or irregularity in any tender of Original Capital Securities of
any particular holder, whether or not similar conditions or irregularities are
waived in the case of other holders.
The interpretation by the Corporation and the Trust of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Original Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. None of the
Corporation, the Trust, any affiliates or assigns of the Corporation or the
Trust, the Exchange Agent or any other person shall be under any duty to give
any notification of any irregularities in tenders or incur any liability for
failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the
Corporation and the Trust, proper evidence satisfactory to the Corporation and
the Trust, in their sole discretion, of such person's authority to so act must
be submitted.
RESALES OF EXCHANGE CAPITAL SECURITIES
The Trust is making the Exchange Offer for the Exchange Capital
Securities in reliance on the position of the Staff of the Commission as set
forth in certain interpretive letters addressed to third parties in other
transactions. However, neither the Corporation nor the Trust sought its own
interpretive letter and there can be no assurance that the Staff of the
Commission would make a similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third parties. Based on these
interpretations by the Staff of the Commission, and subject to the two
immediately following sentences, the Corporation and the Trust believe that
Exchange Capital Securities issued pursuant to the Exchange Offer in exchange
for Original Capital Securities may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange
Capital Securities are acquired in the ordinary course of such holder's
business and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities. However,
any holder of Original Capital Securities who is an "affiliate" of the
Corporation or the Trust or who intends to participate in the Exchange Offer
for the purpose of distributing Exchange Capital Securities, or any
broker-dealer who purchased Original Capital Securities from the Trust for
resale pursuant to Rule 144A or any other available exemption under the
Securities Act, (i) will not be able to rely on the interpretations of the
Staff of the Commission set forth in the above-mentioned interpretive letters,
(ii) will not be permitted or entitled to tender such Original Capital
Securities in the Exchange Offer and (iii) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any sale or other transfer of such Original Capital Securities unless such
sale is made pursuant to an exemption from such requirements. In addition, as
described herein, if any broker-dealer holds Original Capital Securities
acquired for its own account as a result of market-making or other trading
activities and exchanges such New Capital Securities for Original Capital
Securities, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such
Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to exchange
Original Capital Securities for Exchange Capital Securities in the Exchange
Offer will be required to represent that (i) it is not an "affiliate" of the
Corporation or the Trust, (ii) any Exchange Capital Securities to be received
by it are being acquired in the ordinary course of its business, (iii) it has
no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of such Exchange
Capital Securities, and (iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such Exchange Capital
Securities. In addition, the Corporation and the Trust may require such
holder, as a condition to such holder's eligibility to participate in the
Exchange Offer, to furnish to the Corporation and the Trust (or an agent
thereof) in writing information as to the number of "beneficial owners"
(within the meaning of Rule 13d-3 under the Exchange Act) on behalf of whom
such holder holds the Original Capital Securities to be exchanged in the
Exchange Offer. Each broker-dealer that receives Exchange Capital Securities
for its own account pursuant to the Exchange Offer must acknowledge that it
acquired the Original Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Capital Securities. The Letter of
Transmittal states that, by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Based on the position taken by the Staff of
the Commission in the interpretive letters referred to above, the Corporation
and the Trust believe that Participating Broker-Dealers who acquired Original
Capital Securities for their own accounts as a result of market-making
activities or other trading activities may fulfill their prospectus delivery
requirements with respect to the Exchange Capital Securities received upon
exchange of such Original Capital Securities (other than Original Capital
Securities which represent an unsold allotment from the initial sale of the
Original Capital Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Capital Securities. Accordingly, this Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer during the period referred to below in connection
with resales of Exchange Capital Securities received in exchange for Original
Capital Securities where such Original Capital Securities were acquired by
such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, the Corporation and the Trust have
agreed that this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales
of such Exchange Capital Securities for a period ending 90 days after the
Expiration Date (subject to extension under certain limited circumstances
described herein) or, if earlier, when all such Exchange Capital Securities
have been disposed of by such Participating Broker-Dealer. See "Plan of
Distribution." However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of Exchange Capital Securities
received in exchange for Original Capital Securities pursuant to the Exchange
Offer must notify the Corporation or the Trust, or cause the Corporation or
the Trust to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided
for that purpose in the Letter of Transmittal or may be delivered to the
Exchange Agent at its address set forth herein under "--Exchange Agent." Any
Participating Broker-Dealer who is an "affiliate" of the Corporation or the
Trust may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Original
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal, that, upon receipt of
notice from the Corporation or the Trust of the occurrence of any event or the
discovery of (i) any fact that makes any statement contained or incorporated
by reference in this Prospectus untrue in any material respect or (ii) any
fact that causes this Prospectus to omit to state a material fact necessary in
order to make the statements contained or incorporated by reference herein, in
the light of the circumstances under which they were made, not misleading, or
of the occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) pursuant to this Prospectus until the
Corporation or the Trust has amended or supplemented this Prospectus to
correct such misstatement or omission and has furnished copies of the amended
or supplemented Prospectus to such Participating Broker-Dealer, or the
Corporation or the Trust has given notice that the sale of the Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) may be resumed, as the case may be. If
the Corporation or the Trust gives such notice to suspend the sale of the
Exchange Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable), it shall extend the 90-day period
referred to above during which Participating Broker-Dealers are entitled to
use this Prospectus in connection with the resale of Exchange Capital
Securities by the number of days during the period from and including the date
of the giving of such notice to and including the date when Participating
Broker-Dealers shall have received copies of the amended or supplemented
Prospectus necessary to permit resales of the Exchange Capital Securities or
to and including the date on which the Corporation or the Trust has given
notice that the sale of Exchange Capital Securities (or the Exchange Guarantee
or the Exchange Junior Subordinated Debentures, as applicable) may be resumed,
as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Original Capital
Securities may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective, a written, telegraphic or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under "--Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Original Capital Securities to be
withdrawn, the aggregate Liquidation Amount of Original Capital Securities to
be withdrawn, and (if certificates for such Original Capital Securities have
been tendered) the name of the registered holder of the Original Capital
Securities as set forth on the certificates if different from that of the
person who tendered such Original Capital Securities. If certificates
representing Original Capital Securities have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
certificates, the tendering holder must submit the serial numbers shown on the
particular certificates to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution, except in the case
of Original Capital Securities tendered for the account of an Eligible
Institution. If Original Capital Securities have been tendered pursuant to the
procedures for book-entry transfer set forth in "--Procedures for Tendering
Original Capital Securities--Book-Entry Transfer," the notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawal of Original Capital Securities. Withdrawals of tenders of Original
Capital Securities may not be rescinded. Original Capital Securities properly
withdrawn will not be deemed validly tendered for purposes of the Exchange
Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described above under
"--Procedures for Tendering Original Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its
sole discretion, whose determination shall be final and binding on all
parties. None of the Corporation, the Trust, any affiliates or assigns of the
Corporation or the Trust, the Exchange Agent or any other person shall be
under any duty to give any notification of any irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Original Capital Securities that have been tendered but are withdrawn will
be returned to the holder thereof promptly after withdrawal.
DISTRIBUTIONS ON THE EXCHANGE CAPITAL SECURITIES
Holders of Original Capital Securities whose Original Capital Securities
are accepted for exchange on or prior to August 15, 1998 will not receive
Distributions on such Original Capital Securities and will be deemed to have
waived the right to receive any Distributions on such Original Capital
Securities accumulated from and including February 13, 1998. Accordingly,
holders of Exchange Capital Securities as of the close of business on August
1, 1998 will be entitled to receive Distributions accumulated from and
including February 13, 1998.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Corporation and the Trust will not be
required to accept for exchange, or to exchange, any Original Capital
Securities for any Exchange Capital Securities, and, as described herein, may
terminate the Exchange Offer (whether or not any Original Capital Securities
have theretofore been accepted for exchange) or may waive any conditions to or
amend the Exchange Offer, if any of the following conditions have occurred or
exists or have not been satisfied prior to the Expiration Date:
(i) there shall occur a change in the current interpretation by the Staff
of the Commission that permits the Exchange Capital Securities issued pursuant
to the Exchange Offer in exchange for Original Capital Securities to be
offered for resale, resold and otherwise transferred by holders thereof (other
than broker-dealers and any such holder that is an "affiliate" of the
Corporation or the Trust within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Capital
Securities are acquired in the ordinary course of such holders' business and
such holders have no arrangement or understanding with any person to
participate in the distribution of such Exchange Capital Securities; or
(ii) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Corporation or the Trust, would
reasonably be expected to impair its ability to proceed with the Exchange
Offer; or
(iii) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement, or proceedings shall have been initiated or, to the knowledge of
the Corporation or the Trust, threatened for that purpose, or any governmental
approval has not been obtained, which approval the Corporation or the Trust
shall, in its sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby; or
(iv) the Corporation shall have determined in good faith that there is a
reasonable likelihood that, or a material uncertainty exists as to whether,
consummation of the Exchange Offer would result in an adverse tax consequence
to the Trust or the Corporation.
If the Corporation or the Trust determine in its sole and absolute
discretion that any of the foregoing events or conditions has occurred or
exists or has not been satisfied, it may, subject to applicable law, terminate
the Exchange Offer (whether or not any Original Capital Securities have
theretofore been accepted for exchange) or may waive any such condition or
otherwise amend the terms of the Exchange Offer in any respect. If such waiver
or amendment constitutes a material change to the Exchange Offer, the
Corporation or the Trust will promptly disclose such waiver or amendment by
means of a prospectus supplement that will be distributed to the registered
holders of the Original Capital Securities and will extend the Exchange Offer
to the extent required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
Firstar Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed
to the Exchange Agent as follows:
BY MAIL: FACSIMILE TRANSMITTER:
Registered or Certified (Eligible Institutions Only)
Mail Recommended) (414) 905-5049
Firstar Trust Company
1555 North River Center TO CONFIRM BY TELEPHONE
Drive (414) 905-5013
Suite 301
Milwaukee, Wisconsin BY HAND OR OVERNIGHT
53212 DELIVERY:
Firstar Trust Company
1555 North RiverCenter
Drive
Suite 301
Milwaukee, Wisconsin
53212
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Corporation has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Corporation will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus and related documents to the beneficial owners of Original Capital
Securities, and in handling or tendering for their customers.
Holders who tender their Original Capital Securities for exchange will
not be obligated to pay any transfer taxes in connection therewith. If,
however, Exchange Capital Securities are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the
Original Capital Securities tendered, or if a transfer tax is imposed for any
reason other than the exchange of Original Capital Securities in connection
with the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering
holder.
Neither the Corporation nor the Trust will make any payment to brokers,
dealers or others soliciting acceptances of the Exchange Offer.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a form of which is available upon request to the Corporation. See
"Incorporation of Certain Documents by Reference." In addition, the
information set forth above concerning certain interpretations of and
positions taken by the Staff of the Commission is not intended to constitute
legal advice, and prospective investors should consult their own legal
advisors with respect to such matters.
DESCRIPTION OF EXCHANGE SECURITIES
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement, the Trust will issue the
Exchange Capital Securities. Firstar Trust Company is the Property Trustee
under the Trust Agreement. The Exchange Capital Securities will represent
beneficial interests in the Trust and the holders thereof will be entitled to
a preference over the Common Securities in certain circumstances with respect
to Distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Trust. See "--Subordination of Common Securities." The
Trust Agreement has been qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). This summary of certain provisions of the
Exchange Capital Securities and the Trust Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Trust Agreement, including the definitions
therein of certain terms.
General. The Exchange Capital Securities will be limited to $50,000,000
-------
aggregate Liquidation Amount at any one time outstanding. The Exchange Capital
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Original Capital Securities and the Common Securities except as
described under "--Subordination of Common Securities." Legal title to the
Exchange Junior Subordinated Debentures will be held by the Property Trustee
on behalf of the Trust in trust for the benefit of the holders of the Exchange
Capital Securities and the related Common Securities. The Exchange Guarantee
will not guarantee payment of Distributions or amounts payable on redemption
of the Exchange Capital Securities or liquidation of the Trust when the Trust
does not have funds legally available for such payments. See "--Description of
Exchange Guarantee."
Distributions. Distributions on the Exchange Capital Securities will be
-------------
cumulative, will accumulate from February 13, 1998 and will be payable
semi-annually in arrears on February 15 and August 15 of each year, commencing
August 15, 1998, at the annual rate of 8.67% of the Liquidation Amount to the
holders of the Exchange Capital Securities on the relevant record dates. The
record dates will be the 15th day of the month next preceding that in which
the relevant Distribution Date (as defined herein) falls. The amount of
Distributions payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
Distributions are payable on the Exchange Capital Securities is not a Business
Day (as defined below), payment of the Distributions payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect to any such delay), with the same force
and effect as if made on such date (each date on which Distributions are
payable in accordance with the foregoing, a "Distribution Date"). A "Business
Day" shall mean any day other than a Saturday or a Sunday, or a day on which
banking institutions in The City of New York, Wilmington, Delaware, Milwaukee,
Wisconsin, and Wooster, Ohio are authorized or required by law or executive
order to remain closed.
So long as no Debenture Event of Default has occurred and is continuing,
the Corporation will have the right under the Indenture to elect to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods
with respect to each Extension Period, provided that no Extension Period shall
end on a date other than an Interest Payment Date or extend beyond the Stated
Maturity Date. Upon any such election, semi-annual Distributions on the
Capital Securities will be deferred by the Trust during such Extension Period.
Distributions to which holders of the Capital Securities are entitled during
any such Extension Period will accumulate additional Distributions thereon at
the rate per annum of 8.67% thereof, compounded semi-annually from the
relevant Distribution Date, but not exceeding the interest rate then accruing
on the Junior Subordinated Debentures. The term "Distributions," as used
herein shall include any such additional Distributions.
Prior to the termination of any Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods, to
end on a date other than an Interest Payment Date or to extend beyond the
Stated Maturity Date. Upon the termination of any such Extension Period and
the payment of all amounts then due on the applicable Interest Payment Date,
the Corporation may elect to begin a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Corporation must give the Property
Trustee, the Administrative Trustees and the Debenture Trustee notice of its
election of any Extension Period (or an extension thereof) at least five
Business Days prior to the earlier of (i) the date the Distributions on the
Exchange Capital Securities would have been payable except for the election to
begin such Extension Period and (ii) the date the Trust is required to give
notice to any securities exchange or automated quotation system or to holders
of the Exchange Capital Securities of the record date or the date such
Distributions are payable, but in any event not less than five Business Days
prior to such record date. There is no limitation on the number of times that
the Corporation may elect to begin an Extension Period. See "--Description of
Exchange Junior Subordinated Debentures--Option to Extend Interest Payment
Date" and "Certain U.S. Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
During any Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock,
(ii) make any payment of principal of or premium, if any, or interest on or
repay, repurchase or redeem any debt securities of the Corporation (including
Other Debentures) that rank pari passu with or junior in right of payment to
the Junior Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation (including Other Guarantees) if such guarantee
ranks pari passu with or junior in right of payment to the Junior Subordinated
Debentures (other than (a) dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) as a result of
a reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for
another class or series of the Corporation's capital stock, (e) the purchase
of fractional interests in shares of the Corporation's capital stock pursuant
to the conversion or exchange provisions of such capital stock or the security
being converted or exchanged and (f) purchases of common stock of the
Corporation related to the issuance of common stock or rights under any of the
Corporation's benefit or compensation plans for its directors, officers or
employees or any of the Corporation's dividend reinvestment plans). The
Corporation has no current intention to exercise its option to defer payments
of interest on the Junior Subordinated Debentures thereby triggering a
deferral of Distributions on the Trust Securities.
The revenue of the Trust available for distribution to holders of the
Exchange Capital Securities will be limited to payments under the Exchange
Junior Subordinated Debentures in which the Trust will invest the proceeds
from the issuance and sale of the Trust Securities. See "--Description of
Exchange Junior Subordinated Debentures--General." If the Corporation does not
make interest payments on the Exchange Junior Subordinated Debentures, the
Property Trustee will not have funds available to pay Distributions on the
Exchange Capital Securities. The payment of Distributions on the Exchange
Capital Securities (if and to the extent the Trust has funds legally available
for the payment of such Distributions) will be guaranteed by the Corporation
on a limited basis as set forth herein under "--Description of Exchange
Guarantee."
Redemption. Upon the repayment on the Stated Maturity Date or prepayment
----------
in whole or in part prior to the Stated Maturity Date of the Junior
Subordinated Debentures (other than following the distribution of the Junior
Subordinated Debentures to the holders of the Trust Securities), the proceeds
from such repayment or prepayment shall be applied by the Property Trustee to
redeem a Like Amount (as defined below) of the Trust Securities, upon not less
than 30 nor more than 60 days' prior written notice of a date of redemption
(the "Redemption Date"), at the applicable Redemption Price, which shall be
equal to (i) in the case of the repayment of the Junior Subordinated
Debentures on the Stated Maturity Date, the Maturity Redemption Price (equal
to the principal of, and accrued and unpaid interest on, the Junior
Subordinated Debentures), (ii) in the case of the optional prepayment of the
Junior Subordinated Debentures before the Initial Optional Redemption Date
upon the occurrence and continuation of a Special Event (as defined herein),
the Special Event Redemption Price (equal to the Special Event Prepayment
Price in respect of the Junior Subordinated Debentures) and (iii) in the case
of the optional prepayment of the Junior Subordinated Debentures on or after
the Initial Optional Redemption Date, the Optional Redemption Price (equal to
the Optional Prepayment Price in respect of the Junior Subordinated
Debentures). See "--Description of Exchange Junior Subordinated
Debentures--Optional Prepayment" and "--Special Event Prepayment." If less
than all of the Exchange Junior Subordinated Debentures are to be prepaid
prior to the Stated Maturity Date, then the proceeds of such prepayment shall
be allocated pro rata to the Trust Securities. If less than all of the Capital
Securities held in book-entry form are to be redeemed, such Capital Securities
will be redeemed in accordance with the procedures of DTC as described under
"--Form, Denomination, Book-Entry Procedures and Transfer."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be paid in accordance
with their terms and (ii) with respect to a distribution of Junior
Subordinated Debentures upon the liquidation of the Trust, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed.
The Corporation will have the option to prepay the Exchange Junior
Subordinated Debentures, (i) in whole or in part, on or after the Initial
Optional Redemption Date, at the applicable Optional Prepayment Price and (ii)
in whole but not in part, at any time prior to the Initial Optional Redemption
Date, upon the occurrence of a Special Event, at the Special Event Prepayment
Price, in each case subject to the receipt of any required regulatory
approvals. See "--Description of Exchange Junior Subordinated
Debentures--Optional Prepayment" and "--Special Event Prepayment."
Liquidation of the Trust and Distribution of Exchange Junior Subordinated
-------------------------------------------------------------------------
Debentures. The Corporation, as Sponsor, will have the right at any time to
- ----------
dissolve the Trust and, after satisfaction of liabilities to creditors of the
Trust as required by applicable law, to cause the Junior Subordinated
Debentures to be distributed to the holders of the Trust Securities in
liquidation of the Trust. Such right is subject to the receipt by (i) the
Administrative Trustees of an opinion of counsel to the effect that such
distribution will not cause the holders of Capital Securities to recognize
gain or loss for federal income tax purposes and (ii) the Corporation, as
Sponsor, of any required regulatory approvals.
The Trust shall automatically dissolve upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Junior Subordinated Debentures
to the holders of the Trust Securities, if the Corporation, as Sponsor, has
given written direction to the Property Trustee to dissolve the Trust (which
direction is optional and, except as described above, wholly within the
discretion of the Corporation, as Sponsor); (iii) redemption of all of the
Trust Securities as described under "--Redemption;" (iv) expiration of the
term of the Trust; and (v) the entry of an order for the dissolution of the
Trust by a court of competent jurisdiction.
If a dissolution occurs as described in clause (i), (ii), (iv), or (v)
above, the Trust shall be liquidated by the Administrative Trustees as
expeditiously as the Administrative Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the holders of the Trust Securities a Like
Amount of the Junior Subordinated Debentures, unless such distribution is
determined by the Property Trustee not to be practicable, in which event such
holders will be entitled to receive out of the assets of the Trust legally
available for distribution to holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, an amount equal to the
aggregate of the Liquidation Amount plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets legally available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Trust Securities shall be paid on a pro rata basis, except that
if a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a priority over the Common Securities in respect of such
amounts. See "--Subordination of Common Securities." If an early dissolution
occurs, the Junior Subordinated Debentures will be subject to optional
prepayment, in whole or in part, on or after the Initial Optional Redemption
Date, unless such dissolution relates to the circumstances described in clause
(v) above, in which case the Junior Subordinated Debentures will be subject to
optional prepayment, in whole, but not in part, on or after the Initial
Optional Redemption Date.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee
will receive, in respect of each Global Capital Security held by it, a
registered global certificate representing the Junior Subordinated Debentures
to be delivered upon such distribution and (iii) any certificates representing
Trust Securities not held by DTC or its nominee will be deemed to represent
Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of such Trust Securities, and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid Distributions on
such Trust Securities until such certificates are presented to the
Administrative Trustees or their agent for cancellation, whereupon the
Corporation will issue to such holder, and the Debenture Trustee will
authenticate, a certificate representing such Junior Subordinated Debentures.
There can be no assurance as to the market prices for the Exchange
Capital Securities or the Exchange Junior Subordinated Debentures that may be
distributed in exchange for the Trust Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Exchange Capital
Securities that an investor may purchase, or the Exchange Junior Subordinated
Debentures that the investor may receive on dissolution and liquidation of the
Trust, may trade at a discount to the price that the investor paid to purchase
such securities.
Redemption Procedures. If applicable, Trust Securities shall be redeemed
---------------------
at the applicable Redemption Price with the proceeds from the contemporaneous
repayment or prepayment of the Junior Subordinated Debentures. Any redemption
of Trust Securities shall be made and the applicable Redemption Price shall be
payable on the Redemption Date only to the extent that the Trust has funds
legally available for the payment of such applicable Redemption Price. See
"--Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the Exchange
Capital Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, to the extent funds are legally available, with respect to the Exchange
Capital Securities held by DTC or its nominees, the Property Trustee will
deposit or cause the Paying Agent (as defined herein) to deposit irrevocably
with DTC funds sufficient to pay the applicable Redemption Price. See "--Form,
Denomination, Book-Entry Procedures and Transfer." With respect to the
Exchange Capital Securities held in certificated form, the Property Trustee,
to the extent funds are legally available, will irrevocably deposit with the
Paying Agent for the Exchange Capital Securities funds sufficient to pay the
applicable Redemption Price and will give such Paying Agent irrevocable
instructions and authority to pay the applicable Redemption Price to the
holders thereof upon surrender of their certificates evidencing the Exchange
Capital Securities. See "--Payment and Paying Agency." Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date shall be
payable to the holders of such Exchange Capital Securities on the relevant
record dates for the related Distribution Dates. If notice of redemption shall
have been given and funds deposited as required, then upon the date of such
deposit, all rights of the holders of the Exchange Capital Securities called
for redemption will cease, except the right of the holders of such Exchange
Capital Securities to receive the applicable Redemption Price, but without
interest on such Redemption Price, and such Exchange Capital Securities will
cease to be outstanding. In the event that any Redemption Date of Exchange
Capital Securities is not a Business Day, then the applicable Redemption Price
payable on such date will be paid on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), with the same force and effect as if made on such date, except that,
if such next succeeding Business Day falls in the next calendar year, such
payment shall be made on the immediately preceding Business Day. In the event
that payment of the applicable Redemption Price is improperly withheld or
refused and not paid either by the Trust or by the Corporation pursuant to the
Exchange Guarantee as described under "--Description of Exchange Guarantee"
(i) Distributions on Exchange Capital Securities will continue to accumulate
at the then-applicable rate, from the Redemption Date originally established
by the Trust to the date such applicable Redemption Price is actually paid and
(ii) the actual payment date will be the Redemption Date for purposes of
calculating the applicable Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time
and from time to time purchase outstanding Exchange Capital Securities by
tender, in the open market or by private agreement.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days prior to the Redemption Date to each holder of Trust Securities
at its registered address. Unless the Corporation defaults in payment of the
applicable Prepayment Price on, or in the repayment of, the Junior
Subordinated Debentures, on and after the Redemption Date, distributions will
cease to accrue on the Trust Securities called for redemption.
Subordination of Common Securities. Payment of Distributions on, and the
----------------------------------
Redemption Price of, the Trust Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of the Trust Securities; provided,
however, that if on any Distribution Date or Redemption Date a Debenture Event
of Default shall have occurred and be continuing, no payment of any
Distribution on, or applicable Redemption Price of, any of the Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of the Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid Distributions on all of the
outstanding Capital Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the applicable Redemption Price
the full amount of such Redemption Price, shall have been made or provided
for, and all funds available to the Property Trustee shall first be applied to
the payment in full in cash of all Distributions on, or Redemption Price of,
the Capital Securities then due and payable.
In the case of any Event of Default, the Corporation as holder of the
Common Securities will be deemed to have waived any right to act with respect
to such Event of Default until the effect of such Event of Default shall have
been cured, waived or otherwise eliminated. Until any such Event of Default
has been so cured, waived or otherwise eliminated, the Property Trustee shall
act solely on behalf of the holders of the Capital Securities and not on
behalf of the Corporation as holder of the Common Securities, and only the
holders of the Capital Securities will have the right to direct the Property
Trustee to act on their behalf.
Events of Default; Notice. The occurrence of a Debenture Event of Default
-------------------------
(see "--Description of Exchange Junior Subordinated Debentures--Debenture
Events of Default") constitutes an "Event of Default" under the Trust
Agreement.
Within ten Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Exchange Capital
Securities, the Administrative Trustees and the Corporation, as Sponsor,
unless such Event of Default shall have been cured or waived. The Corporation,
as Sponsor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under the Trust
Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Capital Securities shall have a preference over the Common Securities as
described under "--Liquidation of the Trust and Distribution of Exchange
Junior Subordinated Debentures" and "--Subordination of Common Securities."
Removal of Issuer Trustees. Unless a Debenture Event of Default shall
--------------------------
have occurred and be continuing, any Issuer Trustee may be removed at any time
by the holder of the Common Securities. If a Debenture Event of Default has
occurred and is continuing, the Property Trustee and the Delaware Trustee may
be removed at such time by the holders of a majority in Liquidation Amount of
the outstanding Capital Securities. In no event will the holders of the
Exchange Capital Securities have the right to vote to appoint, remove or
replace the Administrative Trustees, which voting rights are vested
exclusively in the Corporation as the holder of the Common Securities. No
resignation or removal of an Issuer Trustee and no appointment of a successor
trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
Merger or Consolidation of Issuer Trustees. Any Person into which the
------------------------------------------
Property Trustee, the Delaware Trustee or any Administrative Trustee that is
not a natural person may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which such Issuer Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of such
Issuer Trustee, shall be the successor of such Issuer Trustee under the Trust
Agreement, provided such Person shall be otherwise qualified and eligible.
Mergers, Consolidations, Amalgamation or Replacements of the Trust. The
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Trust may not merge with or into, consolidate, amalgamate, or be replaced by,
or convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any corporation or other Person, except as
described below or as otherwise described under "--Liquidation of the Trust
and Distribution of Exchange Junior Subordinated Debentures." The Trust may,
at the request of the Corporation, as Sponsor, with the consent of the
Administrative Trustees but without the consent of the holders of the Exchange
Capital Securities, merge with or into, consolidate, amalgamate, or be
replaced by or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to a trust organized as such under
the laws of any State; provided, that (i) such successor entity either (a)
expressly assumes all of the obligations of the Trust with respect to the
Trust Securities or (b) substitutes for the Trust Securities other securities
having substantially the same terms as the Trust Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Trust
Securities rank in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Corporation expressly appoints
a trustee of such successor entity possessing the same powers and duties as
the Property Trustee with respect to the Junior Subordinated Debentures, (iii)
the Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on each national securities exchange or
other organization on which the Trust Securities are then listed or quoted, if
any, (iv) if the Capital Securities (including any Successor Securities) or
Junior Subordinated Debentures are rated by any nationally recognized
statistical rating organization prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, such transaction
does not cause the Capital Securities (including any Successor Securities) or
Junior Subordinated Debentures to be downgraded by any such nationally
recognized statistical rating organization, (v) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect (other
than any dilution of such holders' interests in the new entity), (vi) such
successor entity has a purpose substantially identical to that of the Trust,
(vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Corporation has received an opinion from
independent counsel to the Trust experienced in such matters to the effect
that (a) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect (other than any dilution of such holders'
interests in the new entity) and (b) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither the Trust
nor such successor entity will be required to register as an investment
company under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and (viii) the Corporation or any permitted successor or
assignee owns all of the common securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee and the Common
Guarantee. Notwithstanding the foregoing, the Trust shall not, except with the
consent of holders of 100% in Liquidation Amount of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to, any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease 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 the Trust Agreement. Except as provided below
-----------------------------------------------
and under "--Mergers, Consolidations, Amalgamation or Replacements of the
Trust" and "--Description of Exchange Guarantee--Amendments and Assignment"
and as otherwise required by law and the Trust Agreement, the holders of the
Exchange Capital Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Corporation,
the Property Trustee and the Administrative Trustees, without the consent of
the holders of the Trust Securities (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters
or questions arising under the Trust Agreement, which shall not be
inconsistent with the other provisions of the Trust Agreement, (ii) to modify,
eliminate or add to any provisions of the Trust Agreement to such extent as
shall be necessary to ensure that the Trust will be classified for United
States federal income tax purposes as a grantor trust at all times that any
Trust Securities are outstanding or to ensure that the Trust will not be
required to register as an "investment company" under the Investment Company
Act or (iii) to modify, eliminate or add any provisions of the Trust Agreement
to such extent as shall be necessary to enable the Trust or the Corporation to
conduct an Exchange Offer in the manner contemplated by the Registration
Rights Agreement; provided, however, that in each case, such action shall not
adversely affect in any material respect the interests of the holders of the
Trust Securities. Any amendments of the Trust Agreement pursuant to the
foregoing shall become effective when notice thereof is given to the holders
of the Trust Securities. The Trust Agreement may be amended by the Issuer
Trustees and the Corporation (i) with the consent of holders representing a
majority in Liquidation Amount of the outstanding Trust Securities and (ii)
upon receipt by the Issuer Trustees of an opinion of counsel experienced in
such matters to the effect that such amendment or the exercise of any power
granted to the Issuer Trustees in accordance with such amendment will not
affect the Trust's status as a grantor trust for United States federal income
tax purposes or the Trust's exemption from status as an "investment company"
under the Investment Company Act, provided that, without the consent of each
holder of Trust Securities, the Trust Agreement may not be amended to (i)
change the amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to be made
in respect of the Trust Securities as of a specified date or (ii) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date. The Exchange Capital Securities and
any Original Capital Securities that remain outstanding after consummation of
the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Trust Agreement.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Debenture
Trustee, or execute any trust or power conferred on the Debenture Trustee with
respect to the Junior Subordinated Debentures, (ii) waive certain past
defaults under the Indenture, (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Junior
Subordinated Debentures or (iv) consent to any amendment, modification or
termination of the Indenture or the Junior Subordinated Debentures, where such
consent shall be required, without, in each case, obtaining the prior approval
of the holders of a majority in Liquidation Amount of all outstanding Capital
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Junior Subordinated Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior approval of each holder of the Capital Securities. The Issuer Trustees
shall not revoke any action previously authorized or approved by a vote of the
holders of the Capital Securities except by subsequent vote of such holders.
The Property Trustee shall notify each holder of Capital Securities of any
notice of default with respect to the Junior Subordinated Debentures. In
addition to obtaining the foregoing approvals of such holders of the Capital
Securities, prior to taking any of the foregoing actions, the Issuer Trustees
shall obtain an opinion of counsel experienced in such matters to the effect
that the Trust will not be classified as an association taxable as a
corporation for United States federal income tax purposes on account of such
action.
Any required approval of holders of Exchange Capital Securities may be
given at a meeting of such holders convened for such purpose or pursuant to
written consent. The Property Trustee will cause a notice of any meeting at
which holders of Exchange Capital Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of Exchange Capital Securities in the manner
set forth in the Trust Agreement.
No vote or consent of the holders of Exchange Capital Securities will be
required for the Trust to redeem and cancel the Exchange Capital Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Exchange Capital Securities are
entitled to vote or consent under any of the circumstances described above,
any of the Exchange Capital Securities that are owned by the Corporation or
any affiliate of the Corporation shall, for purposes of such vote or consent,
be treated as if they were not outstanding.
Form, Denomination, Book-Entry Procedures and Transfer. The Exchange
------------------------------------------------------
Capital Securities initially will be represented by one or more Exchange
Capital Securities in registered, global form (the "Global Capital
Securities"). The Global Capital Securities will be deposited upon issuance
with the Property Trustee as custodian for DTC, in New York, New York, and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below.
In the event that Exchange Capital Securities are issued in certificated
form, the Exchange Capital Securities will be in blocks having a Liquidation
Amount of not less than $100,000 (100 Capital Securities), or any integral
multiple of $1,000 Liquidation Amount (one Capital Security) in excess
thereof, and may be transferred or exchanged on in such blocks in the manner
described herein.
Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Capital
Securities may not be exchanged for Exchange Capital Securities in
certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Capital Securities for Certificated Capital
Securities."
Depositary Procedures. DTC has advised the Trust and the Corporation that
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers (including the Initial Purchaser),
banks, trust companies, clearing corporations and certain other organizations.
Indirect access to DTC's system is also available to other entities such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital
Securities, DTC will credit the accounts of Participants designated by the
Initial Purchaser with portions of the Liquidation Amount of the Global
Capital Securities and (ii) ownership of such interests in the Global Capital
Securities will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Capital
Securities).
Investors in the Global Capital Securities may hold their interests
therein directly through DTC if they are Participants, or indirectly through
organizations that are Participants. All interests in a Global Capital
Security will be subject to the procedures and requirements of DTC. The laws
of some states require that certain persons take physical delivery in
certificated form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Capital Security to such persons
will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Capital
Security to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests. For certain other restrictions on the transferability of the
Exchange Capital Securities, see "--Exchange of Book-Entry Capital Securities
for Certificated Capital Securities" and Exchange of Certificated Capital
Securities for Book-Entry Capital Securities."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL CAPITAL
SECURITIES WILL NOT HAVE EXCHANGE CAPITAL SECURITIES REGISTERED IN THEIR
NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF EXCHANGE CAPITAL SECURITIES IN
CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS
THEREOF UNDER THE TRUST AGREEMENT FOR ANY PURPOSE.
Payments in respect of the Global Capital Security registered in the name
of DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms
of the Trust Agreement, the Property Trustee will treat the persons in whose
names the Exchange Capital Securities, including the Global Capital
Securities, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently,
neither the Property Trustee nor any agent thereof has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made
on account of beneficial ownership interests in the Global Capital Securities,
or for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Capital Securities or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants or
Indirect Participants. DTC has advised the Trust and the Corporation that its
current practice, upon receipt of any payment in respect of securities such as
the Global Capital Securities, is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in Liquidation Amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of the
Global Capital Securities will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Property
Trustee, the Trust or the Corporation. None of the Trust, the Corporation or
the Property Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the Global Capital
Securities, and the Trust or the Corporation and the Property Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
Secondary market trading activity in interests in the Global Capital
Securities will settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its Participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will settle in same-day funds.
DTC has advised the Trust and the Corporation that it will take any
action permitted to be taken by a holder of Exchange Capital Securities
(including, without limitation, the presentation of Exchange Capital
Securities for exchange as described below) only at the direction of one or
more Participants to whose account with DTC interests in the Global Capital
Securities are credited and only in respect of such portion of the Liquidation
Amount of the Exchange Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event
of Default under the Trust Agreement, DTC reserves the right to exchange the
Global Capital Securities for Exchange Capital Securities in certificated form
and to distribute such Exchange Capital Securities to its Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Trust and the Corporation believe to
be reliable, but neither the Trust nor the Corporation takes responsibility
for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interest in the Global Capital Securities among Participants in
DTC, it is under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. None of the
Trust, the Corporation or the Property Trustee will have any responsibility
for the performance by DTC or its Participants or Indirect Participants of
their respective obligations under the rules and procedures governing DTC's
operations.
Exchange of Book-Entry Capital Securities for Certificated Capital
Securities. A Global Capital Security is exchangeable for Exchange Capital
Securities in registered certificated form if (i) DTC (x) notifies the Trust
that it is unwilling or unable to continue as Depositary for the Global
Capital Security and the Trust thereupon fails to appoint a successor
Depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, and the Trust thereupon fails to appoint a successor
Depositary within 90 days, (ii) the Corporation in its sole discretion elects
to cause the issuance of the Exchange Capital Securities in certificated form
or (iii) there shall have occurred and be continuing an Event of Default under
the Trust Agreement or any event which after notice or lapse of time or both
would be an Event of Default under the Trust Agreement. In addition,
beneficial interests in a Global Capital Security may be exchanged by or on
behalf of DTC for certificated Exchange Capital Securities upon request by
DTC, but only upon at least 20 days' prior written notice given to the
Property Trustee in accordance with DTC's customary procedures. In all cases,
certificated Exchange Capital Securities delivered in exchange for any Global
Capital Security or beneficial interests therein will be registered in the
names, and issued in any approved denominations, requested by or on behalf of
DTC (in accordance with its customary procedures), unless the Property Trustee
determines otherwise in compliance with applicable law.
Exchange of Certificated Capital Securities for Book-Entry Capital
Securities. Other Capital Securities, which will be issued in certificated
form, may not be exchanged for beneficial interests in any Global Capital
Security unless such exchange occurs in connection with a transfer of such
Other Capital Securities and the transferor first delivers to the Property
Trustee a written certificate (in the form provided in the Trust Agreement) to
the effect that such transfer will comply with the appropriate transfer
restrictions applicable to such Capital Securities.
Payment and Paying Agency. Payments in respect of the Global Capital
-------------------------
Securities shall be made to DTC which shall credit the relevant accounts at
DTC on the applicable payment dates and payments in respect of the Exchange
Capital Securities that are not held by DTC shall be made by check mailed to
the address of the holder entitled thereto as such address shall appear on the
register. The paying agent (the "Paying Agent") shall initially be the
Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrative Trustees and the Corporation. The Paying
Agent shall be permitted to resign as Paying Agent upon 30 days' prior written
notice to the Property Trustee, the Administrative Trustees and the
Corporation. In the event that the Property Trustee shall no longer be the
Paying Agent, the Administrative Trustees shall appoint a successor (which
shall be a bank or trust company acceptable to the Administrative Trustees and
the Corporation) to act as Paying Agent.
Restrictions on Transfer. The Exchange Capital Securities will be issued,
------------------------
and may be transferred only in blocks having a Liquidation Amount of not less
than $100,000 (100 Capital Securities) and multiples of $1,000 in excess
thereof. Any attempted sale, transfer or other disposition of Exchange Capital
Securities in a block having an aggregate Liquidation Amount of less than
$100,000 shall be deemed to be void and of no legal effect whatsoever. Any
such purported transferee shall be deemed not to be the holder of such
Exchange Capital Securities for any purpose, including but not limited to the
receipt of Distributions on such Exchange Capital Securities, and such
purported transferee shall be deemed to have no interest whatsoever in such
Exchange Capital Securities.
Registrar and Transfer Agent. The Property Trustee will act as registrar
----------------------------
and transfer agent for the Exchange Capital Securities.
Registration of transfers of the Exchange Capital 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 will not be required to register or cause to
be registered the transfer of the Exchange Capital Securities after they have
been called for redemption.
Information Concerning the Property Trustee. The Property Trustee, other
-------------------------------------------
than during the occurrence and continuance of an Event of Default, will
undertake to perform only such duties as are specifically set forth in the
Trust Agreement and, during the existence of an Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision,
the Property Trustee is under no obligation to exercise any of the powers
vested in it by the Trust Agreement at the request of any holder of Trust
Securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of the Exchange
Capital Securities or the Common Securities are entitled under the Trust
Agreement to vote, then the Property Trustee shall take such action as is
directed by the Corporation and, if not so directed, shall take such action as
it deems advisable and in the best interests of the holders of the Trust
Securities and will have no liability except for its own bad faith, negligence
or willful misconduct.
Miscellaneous. The Administrative Trustees are authorized and directed to
-------------
conduct the affairs of and to operate the Trust in such a way that (i) the
Trust will not be deemed to be an "investment company" required to be
registered under the Investment Company Act, (ii) the Trust will be classified
as a grantor trust for United States federal income tax purposes and (iii) the
Junior Subordinated Debentures will be treated as indebtedness of the
Corporation for United States federal income tax purposes. The Corporation and
the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of the Trust or the
Trust Agreement, that the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of
the Trust Securities.
The Trust Agreement provides that (i) holders of the Trust Securities
have no preemptive or similar rights to subscribe for any additional Trust
Securities, and (ii) the issuance of the Trust Securities are not subject to
preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge
any of its assets.
DESCRIPTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Exchange Junior Subordinated Debentures are to be issued under an
Indenture, as amended and supplemented from time to time (as so amended and
supplemented, the "Indenture"), between the Corporation and Firstar Trust
Company, as Debenture Trustee (the "Debenture Trustee"). The Indenture will be
qualified under the Trust Indenture Act and, by its terms, will incorporate
certain provisions of the Trust Indenture Act. The Indenture will be subject
to and governed by the Trust Indenture Act. This summary of certain terms and
provisions of the Exchange Junior Subordinated Debentures and the Indenture
does not purport to be complete, and is subject to, and is qualified in its
entirety by reference to all of the provisions of the Exchange Junior
Subordinated Debentures and the Indenture, including the definitions therein
of certain terms, and those terms made a part of the Indenture by the Trust
Indenture Act.
General. Concurrently with the issuance of the Original Capital
-------
Securities, the Trust invested the proceeds thereof, together with the
consideration paid by the Corporation for the Common Securities, in Original
Junior Subordinated Debentures issued by the Corporation. Pursuant to the
Exchange Offer, the Corporation will exchange the Exchange Junior Subordinated
Debentures for Original Junior Subordinated Debentures accepted for exchange.
The Exchange Junior Subordinated Debentures will bear interest at the
annual rate of 8.67% of the principal amount thereof, payable semi-annually in
arrears on February 15 and August 15 of each year, commencing August 15, 1998
(each, an "Interest Payment Date"), to the person in whose name each Exchange
Junior Subordinated Debenture is registered, subject to certain exceptions, at
the close of business on the 15th day of the month next preceding that in
which the relevant Interest Payment Date falls. It is anticipated that, until
the liquidation, if any, of the Trust, each Junior Subordinated Debenture 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. In
the event that any date on which payment is due on the Exchange Junior
Subordinated Debentures is not a Business Day, then the payment required to be
made on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
with the same force and effect as if made on such date. Accrued interest that
is not paid on the applicable payment date will bear additional interest on
the amount thereof (to the extent permitted by law) at the rate per annum of
8.67% thereof, compounded semi-annually. The term "interest," as used herein,
shall include semi-annual interest payments, interest on semi-annual interest
payments not paid on the applicable Interest Payment Date and Additional Sums
(as defined below), as applicable.
The Exchange Junior Subordinated Debentures will be issued pursuant to
the Indenture. The Exchange Junior Subordinated Debentures will mature on
February 15, 2028 (the "Stated Maturity Date").
The Exchange Junior Subordinated Debentures will be unsecured and will
rank pari passu with the Original Junior Subordinated Debentures and all Other
Debentures and subordinate and junior in right of payment to all Senior
Indebtedness to the extent and in the manner set forth in the Indenture. See
"--Subordination."
Almost all of the operating assets of the Corporation and its
consolidated subsidiaries are owned by such subsidiaries. The Corporation is a
legal entity separate and distinct from the Banks and its other subsidiaries.
Holders of Junior Subordinated Debentures should look only to the Corporation
for payments on the Junior Subordinated Debentures. The principal sources of
the Corporation's income are dividends and interest from the Banks and its
other subsidiaries, and there are various limitations on the Banks to pay such
dividends, as discussed below. The Banks are also subject to certain
restrictions on the transfer of funds by each of such depository institutions
to the Corporation and certain other affiliates, in the form of loans, other
extensions of credit, investments or purchases of assets. Transfers by any
Bank to the Corporation or any single affiliate are generally limited in
amount as to the Corporation and as to each of such other affiliates to 10% of
such Bank's capital and surplus and transfers to all affiliates are limited in
the aggregate to 20% of such Bank's capital and surplus. Furthermore, such
loans and extensions of credit are subject to various collateral requirements.
As a holding company, the Corporation's operations are conducted
primarily by the Subsidiaries. Presently, dividends from the Subsidiaries are
the primary source of funds for the Corporation. There are regulatory
limitations on the amount of dividends that the Banks may pay to the
Corporation. At March 31, 1998, the Banks had approximately $23 million
legally available for payment of dividends to the Corporation. However, the
Banks' payment of dividends may be prohibited under certain circumstances,
including if payment thereof would constitute an unsafe or unsound banking
practice. In addition to restrictions on the payment of dividends, the Banks
are subject to restrictions imposed by federal law on extensions of credit to,
and certain other transactions with, the Corporation and certain other
affiliates, and on investments in stock or other securities. Such restrictions
prevent the Banks from lending to the Corporation and such other affiliates
unless the loans are secured by various types of collateral. Further, such
secured loans, other transactions and investments by a Bank are generally
limited in amount as to the Corporation and each of such other affiliates to
10% of such Bank's capital and surplus and as to the Corporation and all of
such other affiliates to an aggregate of 20% of such Bank's capital and
surplus.
Further, as a holding company the right of the Corporation to participate
in any distribution of assets of any subsidiary upon such subsidiary's
liquidation or reorganization or otherwise (and thus the ability of holders of
the Exchange Capital Securities to benefit indirectly from such distribution)
is subject to the prior claims of creditors of such subsidiary (including
depositors in the case of the Banks), except to the extent that the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Exchange Junior Subordinated Debentures effectively will be
subordinated to all existing and future liabilities of the Corporation's
subsidiaries (including deposit liabilities of the Banks). As a result,
holders of Exchange Junior Subordinated Debentures should look only to the
assets of the Corporation for payments on the Exchange Junior Subordinated
Debentures.
The Indenture does not limit the amount of secured or unsecured debt,
including Senior Indebtedness, that may be incurred by the Corporation or any
of its subsidiaries. At March 31, 1998, the Corporation had 1.4 billion of
Senior Indebtedness outstanding, and the Corporation's subsidiaries had total
liabilities (excluding liabilities owed to the Corporation) of $1.3 billion.
See "--Subordination." The Corporation expects from time to time that it will
incur additional indebtedness constituting Senior Indebtedness and that its
subsidiaries will incur additional liabilities.
Form, Registration and Transfer. If the Exchange Junior Subordinated
-------------------------------
Debentures are distributed to the holders of the Trust Securities, the
Exchange Junior Subordinated Debentures may be represented by a global
certificate registered in the name of Cede & Co. as the nominee of DTC. The
depositary arrangements for such Exchange Junior Subordinated Debentures are
expected to be substantially similar to those in effect for the Exchange
Capital Securities. For a description of DTC and the terms of the depositary
arrangements relating to payments, transfers, voting rights, prepayments,
notices and other matters, see "--Description of Exchange Capital
Securities--Form, Denomination, Book-Entry Procedures and Transfer."
Payment and Paying Agents. Payment of principal of (and premium, if any)
-------------------------
and interest on Exchange Junior Subordinated Debentures will be made at the
office of the Debenture Trustee in Milwaukee, Wisconsin or at the office of
such Paying Agent or Paying Agents as the Corporation may designate from time
to time, except that at the option of the Corporation payment of any interest
may be made, except in the case of Exchange Junior Subordinated Debentures in
global form, (i) by check mailed to the address of the Person entitled thereto
as such address shall appear in the register for Exchange Junior Subordinated
Debentures or (ii) by transfer to an account maintained by the Person entitled
thereto as specified in such register, provided that proper transfer
instructions have been received by the relevant record date. Payment of any
interest on any Exchange Junior Subordinated Debenture will be made to the
Person in whose name such Exchange Junior Subordinated Debenture is registered
at the close of business on the record date for such interest, except in the
case of defaulted interest. The Corporation may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent;
provided, however, the Corporation will at all times be required to maintain a
Paying Agent in each place of payment for the Exchange Junior Subordinated
Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Corporation in trust, for the payment of the principal of
(and premium, if any) or interest on any Exchange Junior Subordinated
Debenture and remaining unclaimed for two years after such principal (and
premium, if any) or interest has become due and payable shall, at the request
of the Corporation, be repaid to the Corporation and the holder of such
Exchange Junior Subordinated Debenture shall thereafter look, as a general
unsecured creditor, only to the Corporation for payment thereof.
Option to Extend Interest Payment Date. So long as no Debenture Event of
--------------------------------------
Default has occurred and is continuing, the Corporation will have the right
under the Indenture to defer the payment of interest on the Junior
Subordinated Debentures at any time and from time to time for a period not
exceeding 10 consecutive semi-annual periods with respect to each Extension
Period, provided that no Extension Period shall end on a date other than an
Interest Payment Date or extend beyond the Stated Maturity Date. At the end of
an Extension Period, the Corporation must pay all interest then accrued and
unpaid (together with interest thereon at the annual rate of 8.67%, compounded
semi-annually, to the extent permitted by applicable law ("Compounded
Interest")). During an Extension Period, interest will continue to accrue and
holders of Junior Subordinated Debentures (or holders of the Trust Securities
while Trust Securities are outstanding) will be required to accrue such
deferred interest income for United States federal income tax purposes prior
to the receipt of cash attributable to such income. See "Certain U.S. Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
During any Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock,
(ii) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Corporation (including
any Other Debentures) that rank pari passu with or junior in right of payment
to the Junior Subordinated Debentures or (iii) make any guarantee payments
with respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation (including any Other Guarantees) if such
guarantee ranks pari passu with or junior in right of payment to the Junior
Subordinated Debentures (other than (a) dividends or distributions in shares
of, or options, warrants or rights to subscribe for or purchase shares of,
common stock of the Corporation, (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, (d) as a result of a reclassification of the Corporation's capital
stock or the exchange or conversion of one class or series of the
Corporation's capital stock for another class or series of the Corporation's
capital stock, (e) the purchase of fractional interests in shares of the
Corporation's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged and (f)
purchases of common stock of the Corporation related to the issuance of common
stock or rights under any of the Corporation's benefit or compensation plans
for its directors, officers or employees or any of the Corporation's dividend
reinvestment plans).
Prior to the termination of any such Extension Period, the Corporation
may further extend such Extension Period, provided that such extension does
not cause such Extension Period to exceed 10 consecutive semi-annual periods,
end on a date other than an Interest Payment Date or extend beyond the Stated
Maturity Date. Upon the termination of any such Extension Period and the
payment of all amounts then due on any Interest Payment Date, the Corporation
may elect to begin a new Extension Period, subject to the above requirements.
No interest shall be due and payable during an Extension Period, except at the
end thereof. The Corporation must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election of
any Extension Period (or an extension thereof) at least five Business Days
prior to the earlier of (i) the date the Distributions on the Trust Securities
would have been payable except for the election to begin or extend such
Extension Period or (ii) the date the Property Trustee is required to give
notice to any securities exchange or to holders of Exchange Capital Securities
of the record date or the date such Distributions are payable, but in any
event not less than five Business Days prior to such record date. The
Debenture Trustee shall give notice of the Corporation's election to begin or
extend a new Extension Period to the holders of the Exchange Capital
Securities. There is no limitation on the number of times that the Corporation
may elect to begin an Extension Period.
Optional Prepayment. The Exchange Junior Subordinated Debentures will be
-------------------
prepayable, in whole or in part, at the option of the Corporation on or after
the Initial Optional Redemption Date, subject to the Corporation having
received any required regulatory approvals, at a prepayment price (the
"Optional Prepayment Price") equal to the percentage of the outstanding
principal amount of the Exchange Junior Subordinated Debentures specified
below, plus, in each case, accrued and unpaid interest thereon, including
Compounded Interest and Additional Sums (as defined herein), if any, to the
date of prepayment if prepaid during the 12-month period beginning May 1 of
the years indicated below:
YEAR PERCENTAGE
2008 104.335%
2009 103.902%
2010 103.468%
2011 103.035%
2012 102.601%
2013 102.168%
2014 101.734%
2015 101.301%
2016 100.867%
2017 100.434%
2018 and thereafter 100.000%
Special Event Prepayment. Prior to the Initial Optional Redemption Date,
------------------------
if a Special Event shall occur and be continuing, the Corporation may, at its
option and subject to receipt of any required regulatory approvals, prepay the
Exchange Junior Subordinated Debentures in whole (but not in part) at any time
within 90 days of the occurrence of such Special Event, at a prepayment price
(the "Special Event Prepayment Price") equal to the Make-Whole Amount. The
"Make-Whole Amount" shall be equal to the greater of (x) 100% of the principal
amount thereof or (y) the sum, as determined by a Quotation Agent (as defined
herein), of the present values of the remaining scheduled payments of
principal and interest on the Exchange Junior Subordinated Debentures,
discounted to the prepayment date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus,
in the case of each of clauses (x) and (y), accrued and unpaid interest
thereon (including Compounded Interest and Additional Sums, if any) to the
date of prepayment.
A "Special Event" means a Tax Event or a Regulatory Capital Event, as the
case may be.
A "Tax Event" means the receipt by the Corporation and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change)
in, the laws or any regulations thereunder of the United States or any
political subdivision or taxing authority thereof or therein, or as a result
of any official administrative pronouncement or judicial decision interpreting
or applying such laws or regulations, which amendment or change is effective
or which pronouncement or decision is announced on or after February 10, 1998,
there is more than an insubstantial risk that (i) the Trust is, or will be
within 90 days of the date of such opinion, subject to United States federal
income tax with respect to income received or accrued on the Junior
Subordinated Debentures, (ii) the interest payable by the Corporation on the
Junior Subordinated Debentures is not, or within 90 days of the date of such
opinion will not be, deductible by the Corporation, in whole or in part, for
United States federal income tax purposes or (iii) the Trust is, or will be
within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
A "Regulatory Capital Event" means the receipt by the Corporation and the
Trust of an opinion of independent bank regulatory counsel experienced in such
matters to the effect that, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any rules, guidelines or policies of an
applicable regulatory authority for the Corporation or (b) any official
administrative pronouncement or judicial decision interpreting or applying
such laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after February 10, 1998, the
Capital Securities do not constitute, or within 90 days of the date of such
opinion, will not constitute, Tier 1 Capital (or its then-equivalent);
provided, however, that the distribution of the Junior Subordinated Debentures
in connection with the liquidation of the Trust by the Corporation shall not
in and of itself constitute a Regulatory Capital Event unless such liquidation
shall have occurred in connection with a Tax Event.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15 (519)" or any successor
publication which is published weekly by the Board of Governors of the Federal
Reserve System and which establishes yields on actively traded United States
Treasury securities adjusted to constant maturity under the caption "Treasury
Constant Maturities," for the maturity corresponding to the Remaining Life (if
no maturity is within three months before or after the maturity corresponding
to the Remaining Life, yields for the two published maturities most closely
corresponding to the Remaining Life shall be determined, and the Adjusted
Treasury Rate shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding to the nearest month) or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such prepayment date, in each case calculated on the third Business Day
preceding the prepayment date, plus in each case (a) 2.65% if such prepayment
date occurs on or prior to February 15, 1999 and (b) 2.10% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the
Remaining Life of the Junior Subordinated Debentures that would be utilized,
at the time of selection and in accordance with customary financial practice,
in pricing new issues of corporate debt securities of comparable maturity to
the Remaining Life of the Junior Subordinated Debentures, provided that if no
United States Treasury security has a maturity which is within a period from
three months before to three months after the Remaining Life, the two most
closely corresponding United States Treasury securities shall be used as the
Comparable Treasury Issue, and the Adjusted Treasury Rate shall be
interpolated or extrapolated on a straight-line basis, rounding to the nearest
month, using such securities.
"Comparable Treasury Price" means, with respect to any prepayment date,
(i) the average of three Reference Treasury Dealer Quotations for such
prepayment date, after excluding the highest and lowest Reference Treasury
Dealer Quotations, or (ii) if the Debenture Trustee obtains fewer than five
such Reference Treasury Dealer Quotations, the average of all such Reference
Treasury Dealer Quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Corporation. "Reference Treasury Dealer" means a nationally-recognized U.S.
Government securities dealer in The City of New York selected by the
Corporation.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined
by the Debenture Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Debenture Trustee by such Reference Treasury
Dealer at 5:00 p.m., New York City time, on the third Business Day preceding
such prepayment date.
"Remaining Life" means the term of the Junior Subordinated Debentures
from the prepayment date to the Stated Maturity Date.
Notice of any prepayment will be mailed at least 30 days but not more
than 60 days before the prepayment date to each holder of Exchange Junior
Subordinated Debentures to be prepaid at its registered address. Unless the
Corporation defaults in payment of the prepayment price, on and after the
prepayment date interest ceases to accrue on such Exchange Junior Subordinated
Debentures called for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Junior Subordinated Debentures such amounts as shall
be necessary in order that the amount of Distributions then due and payable by
the Trust on the outstanding Trust Securities shall not be reduced as a result
of any additional taxes, duties and other governmental charges to which the
Trust has become subject as a result of a Tax Event ("Additional Sums").
Certain Covenants of the Corporation. The Corporation will also covenant
------------------------------------
that it will not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any
of the Corporation's capital stock, (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including Other Debentures) that rank pari
passu with or junior in right of payment to the Junior Subordinated
Debentures; or (iii) make any guarantee payments with respect to any guarantee
by the Corporation of the debt securities of any subsidiary of the Corporation
(including under Other Guarantees) if such guarantee ranks pari passu or
junior in right of payment to the Junior Subordinated Debentures (other than
(a) dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Original Guarantee or the Exchange Guarantee, (d) as a
result of a reclassification of the Corporation's capital stock or the
exchange or conversion of one class or series of the Corporation's capital
stock for another class or series of the Corporation's capital stock, (e) the
purchase of fractional interests in shares of the Corporation's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, and (f) purchases of common stock
related to the issuance of common stock or rights under any of the
Corporation's benefit or compensation plans for its directors, officers or
employees or any of the Corporation's dividend reinvestment plans) if at such
time (1) there shall have occurred any event of which the Corporation has
actual knowledge that (a) is, or with the giving of notice or the lapse of
time, or both, would be, a Debenture Event of Default and (b) in respect of
which the Corporation shall not have taken reasonable steps to cure, (2) if
such Junior Subordinated Debentures are held by the Trust, the Corporation
shall be in default with respect to its payment of any obligations under the
Guarantee or (3) the Corporation shall have given notice of its election to
exercise its right to commence an Extension Period as provided in the
Indenture and shall not have rescinded such notice, and such Extension Period,
or any extension thereof, shall have commenced and be continuing.
So long as the Trust Securities remain outstanding, the Corporation
also will covenant (i) to maintain 100% direct or indirect ownership of the
Common Securities, provided, however, that any permitted successor of the
Corporation under the Indenture may succeed to the Corporation's ownership of
such Common Securities, (ii) to use commercially reasonable efforts to cause
the Trust (a) to remain a business trust, except in connection with the
distribution of Junior Subordinated Debentures to the holders of Trust
Securities in liquidation of the Trust, the prepayment of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Trust Agreement, and (b) to otherwise continue to be
classified as a grantor trust for United States federal income tax purposes
(iii) to use its reasonable efforts to cause each holder of Trust Securities
to be treated as owning an undivided beneficial interest in the Junior
Subordinated Debentures and (iv) not to cause, as sponsor of the Trust, or to
permit, as Holder of the Common Securities, the dissolution, winding-up or
termination of the Trust, except as provided in the Trust Agreement.
Modification of Indenture. From time to time the Corporation and the
-------------------------
Debenture Trustee may, without the consent of the holders of Junior
Subordinated Debentures, amend, waive or supplement the Indenture for
specified purposes, including, among other things, curing ambiguities, defects
or inconsistencies or enabling the Corporation and the Trust to conduct an
Exchange Offer as contemplated by the Registration Rights Agreement, provided
that any such action does not materially adversely affect the interest of the
holders of Junior Subordinated Debentures, and qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting the Corporation and the Debenture Trustee, with
the consent of the holders of a majority in principal amount of Junior
Subordinated Debentures, to modify the Indenture in a manner affecting the
rights of the holders of Junior Subordinated Debentures; provided that no such
modification may, without the consent of the holders of each outstanding
Junior Subordinated Debenture so affected: (i) change the Stated Maturity
Date, or reduce the principal amount of the Junior Subordinated Debentures, or
reduce the amount payable on redemption thereof or reduce the rate or extend
the time of payment of interest thereon, except pursuant to the Corporation's
right under the Indenture to defer the payment of interest as provided therein
(see "--Option to Extend Interest Payment Date") or change any of the
prepayment provisions, or make the principal of, or interest or premium on,
the Junior Subordinated Debentures payable in any coin or currency other than
U.S. dollars, or impair or affect the right of any holder of Junior
Subordinated Debentures to institute suit for the payment thereof, or (ii)
reduce the percentage of principal amount of Junior Subordinated Debentures,
the holders of which are required to consent to any such modification of the
Indenture.
Debenture Events of Default. The Indenture provides that any one or more
---------------------------
of the following described events with respect to the Junior Subordinated
Debentures constitutes a "Debenture Event of Default" (whatever the reason for
such Debenture Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) failure for 30 days to pay any interest (including
Compounded Interest and Additional Sums, if any) or Liquidated
Damages, if any, on the Junior Subordinated Debentures or any Other
Debentures, when due (subject to the deferral of any due date in the
case of an Extension Period in respect of the Junior Subordinated
Debentures or Other Debentures, as the case may be); or
(ii) failure to pay any principal or premium, if any, on
the Junior Subordinated Debentures or any Other Debentures when due
whether at maturity, upon prepayment, by declaration of acceleration
of maturity or otherwise; or
(iii) failure to observe or perform any other agreement or
covenant contained in the Indenture for 90 days after written notice
to the Corporation from the Debenture Trustee or the holders of at
least 25% in aggregate outstanding principal amount of Junior
Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or
reorganization of the Corporation.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures have, subject to certain exceptions, the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Debenture Trustee. The Debenture Trustee or the
holders of not less than 25% in aggregate outstanding principal amount of the
Junior Subordinated Debentures may declare the principal due and payable
immediately upon a Debenture Event of Default. The holders of a majority in
aggregate outstanding principal amount of the Junior Subordinated Debentures
may annul such declaration and waive the default if the default (other than
the non-payment of the principal of the Junior Subordinated Debentures which
has become due solely by such acceleration) has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures affected thereby may, on behalf of the
holders of all the Junior Subordinated Debentures, waive any past default,
except a default in the payment of principal of (or premium, if any) on or
interest (unless such default has been cured and a sum sufficient to pay all
matured installments of interest (and premium, if any) and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee),
or a default in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding Junior Subordinated Debenture.
The Indenture requires the annual filing by the Corporation with the
Debenture Trustee of a certificate as to the absence of certain defaults under
the Indenture.
The Indenture provides that the Debenture Trustee may withhold notice of
a Debenture Event of Default from the holders of the Exchange Junior
Subordinated Debentures if the Debenture Trustee considers it in the interest
of such holders to do so.
Enforcement of Certain Rights by Holders of Exchange Capital Securities.
-----------------------------------------------------------------------
If a Debenture Event of Default shall have occurred and be continuing and
shall be attributable to the failure of the Corporation to pay the principal
of (or premium, if any), or interest (including Compounded Interest and
Additional Sums, if any) or Liquidated Damages, if any, on the Exchange Junior
Subordinated Debentures on the due date, a holder of Exchange Capital
Securities may institute a Direct Action. The Corporation may not amend the
Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Exchange Capital
Securities. Notwithstanding any payments made to a holder of Exchange Capital
Securities by the Corporation in connection with a Direct Action, the
Corporation shall remain obligated to pay the principal of (or premium, if
any) or interest (including Compounded Interest and Additional Sums, if any)
or Liquidated Damages, if any, on the Exchange Junior Subordinated Debentures,
and the Corporation shall be subrogated to the rights of the holder of such
Exchange Capital Securities with respect to payments on the Exchange Capital
Securities to the extent of any payments made by the Corporation to such
holder in any Direct Action.
The holders of the Exchange Capital 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 Exchange Junior Subordinated
Debentures unless there shall have been an Event of Default under the Trust
Agreement. See "--Description of Exchange Capital Securities--Events of
Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions. The
------------------------------------------------------------
Indenture provides that the Corporation shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties as an
entirety or substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Corporation or convey, transfer or lease
its properties as an entirety or substantially as an entirety to the
Corporation, unless: (i) in case the Corporation consolidates with or merges
into another Person or conveys or transfers its properties as an entirety or
substantially as an entirety to any Person, the successor Person is organized
under the laws of the United States or any state or the District of Columbia,
and such successor Person expressly assumes the Corporation's obligations on
the Junior Subordinated Debentures; (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, shall have
occurred and be continuing; and (iii) certain other conditions as prescribed
in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Exchange Junior Subordinated Debentures protection in the event of a highly
leveraged or other transaction involving the Corporation that may adversely
affect holders of the Exchange Junior Subordinated Debentures.
Satisfaction and Discharge. The Indenture provides that when, among other
--------------------------
things, all Exchange Junior Subordinated Debentures not previously delivered
to the Debenture Trustee for cancellation (i) have become due and payable or
(ii) will become due and payable at maturity or upon prepayment within one
year, and the Corporation deposits or causes to be deposited with the
Debenture Trustee funds, in trust, for the purpose and in an amount sufficient
to pay and discharge the entire indebtedness on the Exchange Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation, for the principal (and premium, if any) and interest to the date
of the deposit or to the Stated Maturity Date, as the case may be, then the
Indenture will cease to be of further effect (except as to the Corporation's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and the
Corporation will be deemed to have satisfied and discharged the Indenture.
Subordination. In the Indenture, the Corporation has covenanted and
-------------
agreed that any Junior Subordinated Debentures issued thereunder will rank
subordinate and junior in right of payment to all Senior Indebtedness to the
extent provided in the Indenture. Upon any payment or distribution of assets
to creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any
bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with any insolvency or bankruptcy proceeding of the Corporation,
the holders of all Senior Indebtedness will first be entitled to receive
payment in full of such Senior Indebtedness before the holders of Junior
Subordinated Debentures will be entitled to receive or retain any payment in
respect thereof.
In the event of the acceleration of the maturity of the Junior
Subordinated Debentures, the holders of all Senior Indebtedness outstanding at
the time of such acceleration will first be entitled to receive payment in
full of such Senior Indebtedness before the holders of the Junior Subordinated
Debentures will be entitled to receive or retain any payment in respect of the
Junior Subordinated Debentures.
No payments on account of principal (or premium, if any) or interest in
respect of the Junior Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Indebtedness" shall mean: (i) every obligation of the Corporation for
money borrowed; (ii) every obligation of the Corporation evidenced by bonds,
debentures, notes or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or businesses; (iii)
every reimbursement obligation of the Corporation with respect to letters of
credit, banker's acceptances or similar facilities issued for the account of
the Corporation; (iv) every obligation of the Corporation issued or assumed as
the deferred purchase price of property or services (but excluding trade
accounts payable or accrued liabilities and accrued and unpaid interest to
depositors arising in the ordinary course of business); (v) every capital
lease obligation of the Corporation; (vi) all indebtedness of the Corporation,
whether incurred on or prior to the date of the Indenture or thereafter
incurred, for claims in respect of derivative products, including interest
rate, foreign exchange rate and commodity forward contracts, options and swaps
and similar arrangements; and (vii) every obligation of the type referred to
in clauses (i) through (vi) of another Person and all dividends of another
Person the payment of which, in either case, the Corporation has guaranteed or
is responsible or liable for, directly or indirectly, as obligor or otherwise.
"Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures" shall mean (i) Indebtedness, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred, to the
extent such indebtedness specifically by its terms ranks pari passu with and
not prior to the Junior Subordinated Debentures in the right of payment upon
the happening of the dissolution or winding-up or liquidation or
reorganization of the Corporation and (ii) all other debt securities, and
guarantees in respect of those debt securities, issued to any other trust, or
a trustee of such trust, partnership or other entity affiliated with the
Corporation that is a financing vehicle of the Corporation (a "financing
entity") in connection with the issuance by such financing entity of equity
securities or other securities guaranteed by the Corporation pursuant to an
instrument that ranks pari passu with or junior in right of payment to the
Guarantee. The securing of any Indebtedness otherwise constituting
Indebtedness Ranking on a Parity with the Junior Subordinated Debentures shall
not be deemed to prevent such Indebtedness from constituting Indebtedness
Ranking on a Parity with the Junior Subordinated Debentures.
"Indebtedness Ranking Junior to the Junior Subordinated Debentures" shall
mean any Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, to the extent such
indebtedness by its terms ranks junior to and not pari passu with or prior to
the Junior Subordinated Debentures (and any other Indebtedness Ranking on a
Parity with the Junior Subordinated Debentures) in right of payment upon the
happening of the dissolution or winding up or liquidation or reorganization of
the Corporation other than the 9.125% Subordinated Notes due 2004. The
securing of any Indebtedness otherwise constituting Indebtedness Ranking
Junior to the Junior Subordinated Debentures shall not be deemed to prevent
such Indebtedness from constituting Indebtedness Ranking Junior to the Junior
Subordinated Debentures.
"Senior Indebtedness" shall mean all Indebtedness, whether outstanding on
the date of execution of the Indenture or thereafter created, assumed or
incurred, except Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures or Indebtedness Ranking Junior to the Junior Subordinated
Debentures, and any deferrals, renewals or extensions of such Senior
Indebtedness.
Almost all of the operating assets of the Corporation and its
consolidated subsidiaries are owned by such subsidiaries. The Corporation is a
legal entity separate and distinct from the Banks and its other subsidiaries.
Holders of Exchange Junior Subordinated Debentures should look only to the
Corporation for payments on the Exchange Junior Subordinated Debentures. The
principal sources of the Corporation's income are dividends and interest from
the Banks and its other subsidiaries, and there are various limitations on the
Banks to pay such dividends, as discussed below. The Banks are also subject to
certain restrictions on the transfer of funds by each of such depository
institutions to the Corporation and certain other affiliates, in the form of
loans, other extensions of credit, investments or purchases of assets.
Transfers by any Bank to the Corporation or any single affiliate are generally
limited in amount as to the Corporation and as to each of such other
affiliates to 10% of such Bank's capital and surplus and transfers to all
affiliates are limited to an aggregate of 20% of such Bank's capital and
surplus. Furthermore, such loans and extensions of credit are subject to
various collateral requirements.
As a holding company, the Corporation's operations are conducted
primarily by the Subsidiaries. Presently, dividends from the Subsidiaries are
the primary source of funds for the Corporation. There are regulatory
limitations on the amount of dividends that the Banks may pay to the
Corporation. At December 31, 1997, the Banks had approximately $20.5 million
legally available for payment of dividends to the Corporation. However, the
Banks' payment of dividends may be prohibited under certain circumstances,
including if payment thereof would constitute an unsafe or unsound banking
practice. In addition to restrictions on the payment of dividends, the Banks
are subject to restrictions imposed by federal law on extensions of credit to,
and certain other transactions with, the Corporation and certain other
affiliates, and on investments in stock or other securities. Such restrictions
prevent the Banks from lending to the Corporation and such other affiliates
unless the loans are secured by various types of collateral. Further, such
secured loans, other transactions and investments by a Bank are generally
limited in amount as to the Corporation and each of such other affiliates to
10% of such Bank's capital and surplus and as to the Corporation and all of
such other affiliates to an aggregate of 20% of such Bank's capital and
surplus.
Further, as a holding company, the right of the Corporation to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability
of holders of the Exchange Capital Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of such subsidiary
(including depositors in the case of the Banks), except to the extent that the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Exchange Junior Subordinated Debentures effectively will be
subordinated to all existing and future liabilities of the Corporation's
subsidiaries (including deposit liabilities of the Banks). As a result,
holders of Exchange Junior Subordinated Debentures should look only to the
assets of the Corporation for payments on the Exchange Junior Subordinated
Debentures.
The Indenture does not limit the amount of secured or unsecured debt,
including Senior Indebtedness, that may be incurred by the Corporation or any
of its subsidiaries. At March 31, 1998, the Corporation had $1.4 billion of
Senior Indebtedness outstanding, and the Corporation's subsidiaries had total
liabilities (excluding liabilities owed to the Corporation) of $1.3 billion.
See "--Subordination." The Corporation expects from time to time that it will
incur additional indebtedness constituting Senior Indebtedness and that its
subsidiaries will incur additional liabilities.
Restrictions on Transfer. The Exchange Junior Subordinated Debentures
------------------------
will be issued, and may be transferred, only in blocks having an aggregate
principal amount of not less than $100,000 and multiples of $1,000 in excess
thereof. Any attempted transfer of Exchange Junior Subordinated Debentures in
a block having an aggregate principal amount of less than $100,000 shall be
deemed to be void and of no legal effect whatsoever. Any such purported
transferee shall be deemed not to be the holder of such Exchange Junior
Subordinated Debentures for any purpose, including but not limited to the
receipt of payments on such Exchange Junior Subordinated Debentures, and such
purported transferee shall be deemed to have no interest whatsoever in such
Exchange Junior Subordinated Debentures.
Information Concerning the Debenture Trustee. Following the Exchange
--------------------------------------------
Offer and the qualification of the Indenture under the Trust Indenture Act,
the Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to the foregoing, the Debenture Trustee is under
no obligation to exercise any of the powers vested in it by the Indenture at
the request of any holder of Exchange Junior Subordinated Debentures, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
Governing Law. The Indenture and the Exchange Junior Subordinated
-------------
Debentures will be governed by and construed in accordance with the laws of
the State of New York.
DESCRIPTION OF EXCHANGE GUARANTEE
The Exchange Guarantee will be executed and delivered by the Corporation
concurrently with the issuance by the Trust of the Exchange Capital Securities
for the benefit of the holders from time to time of the Exchange Capital
Securities. The terms of the Exchange Guarantee are identical in all material
respects to the terms of the Original Guarantee. Firstar Trust Company will
act as Guarantee Trustee under the Exchange Guarantee. The Exchange Guarantee
has been qualified under the Trust Indenture Act. This summary of certain
terms and provisions of the Exchange Guarantee does not purport to be complete
and is subject to, and qualified in its entirety by reference to, all of the
provisions of the Exchange Guarantee, including the definitions therein of
certain terms, and those made part of the Guarantee by the Trust Indenture
Act. The Guarantee Trustee will hold the Exchange Guarantee for the benefit of
the holders of the Exchange Capital Securities.
Status of Original Guarantee. If not all the Original Capital Securities
----------------------------
are exchanged for Exchange Capital Securities in the Exchange Offer, the
Original Guarantee will not terminate, but will continue to guarantee the
obligations of the Corporation for the benefit of the holders of the Original
Capital Securities. The Original Guarantee will terminate upon full payment of
the applicable Redemption Price of the Original Capital Securities, upon full
payment of the Liquidation Amount payable upon liquidation of the Trust or
upon distribution of Original Junior Subordinated Debentures to the holders of
the Original Capital Securities. The Original Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the Original Capital Securities must restore payment of any sums paid under
the Original Capital Securities or the Original Guarantee.
General. The Corporation will irrevocably agree to pay in full on a
-------
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined below) to the holders of the Exchange Capital 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. The following
payments with respect to the Exchange Capital Securities, to the extent not
paid by or on behalf of the Trust (the "Guarantee Payments"), will be subject
to the Exchange Guarantee: (i) any accumulated and unpaid Distributions
required to be paid on the Exchange Capital Securities, to the extent that the
Trust has funds legally available therefor at such time; (ii) the applicable
Redemption Price with respect to the Exchange Capital Securities called for
redemption, to the extent that the Trust has funds legally available therefor
at such time; and (iii) upon a voluntary or involuntary dissolution,
winding-up or liquidation of the Trust (other than in connection with the
distribution of the Exchange Junior Subordinated Debentures to holders of the
Exchange Capital Securities or the redemption of all Exchange Capital
Securities), the lesser of (a) the Liquidation Distribution, to the extent
that the Trust has funds legally available therefor at the time, and (b) the
amount of assets of the Trust remaining available for distribution to holders
of Exchange Capital Securities after satisfaction of liabilities to creditors
of the Trust as required by applicable law. The Corporation's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Corporation to the holders of the Exchange Capital Securities
or by causing the Trust to pay such amounts to such holders.
The Corporation will, through the Exchange Guarantee, the Trust
Agreement, the Exchange Junior Subordinated Debentures and the Indenture,
taken together, fully, irrevocably and unconditionally guarantee all of the
Trust's obligations under the Exchange Capital Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Exchange Capital
Securities. See "Relationship Among the Exchange Capital Securities, the
Exchange Junior Subordinated Debentures and the Exchange Guarantee."
Status of the Exchange Guarantee. The Exchange Guarantee will constitute
--------------------------------
an unsecured obligation of the Corporation and will rank subordinate and
junior in right of payment to all Senior Indebtedness in the same manner as
the Exchange Junior Subordinated Debentures. See "Description of Exchange
Junior Subordinated Debentures--Subordination." In addition, because the
Corporation is a holding company, the right of the Corporation to participate
in any distribution of assets of any subsidiary upon such subsidiary's
liquidation or reorganization or otherwise is subject to the prior claims of
creditors of such subsidiary (including depositors in the Banks), except to
the extent the Corporation may itself be recognized as a creditor of such
subsidiary. Accordingly, the Corporation's obligations under the Exchange
Guarantee effectively will be subordinated to all existing and future
liabilities of the Corporation's present and future subsidiaries (including
deposit liabilities of the Banks). As a result, claimants should look only to
the assets of the Corporation for payments under the Exchange Guarantee. See
"Description of Exchange Junior Subordinated Debentures--General."
The Exchange Guarantee will rank pari passu with all Other Guarantees
issued by the Corporation with respect to preferred beneficial interests (if
any) issued by Other Trusts. The Exchange Guarantee does not limit the amount
of secured or unsecured debt, including Senior Indebtedness, that may be
incurred by the Corporation or any of its subsidiaries. The Corporation
expects from time to time that it will incur additional indebtedness
constituting Senior Indebtedness and that its subsidiaries will incur
additional liabilities.
The Exchange Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Corporation to enforce its rights under the Exchange
Guarantee without first instituting a legal proceeding against any other
person or entity). The Exchange Guarantee will be held for the benefit of the
holders of the Exchange Capital Securities. The Exchange 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 to the holders of the Exchange
Capital Securities of the Exchange Junior Subordinated Debentures.
Events of Default. An event of default under the Exchange Guarantee will
-----------------
occur upon the failure of the Corporation to perform any of its payment or
other obligations thereunder, provided, however, that except with respect to a
default in respect of any Guarantee Payment, the Corporation shall have
received notice of default and shall not have cured such default within 60
days after receipt of such notice.
The holders of a majority in Liquidation Amount of the Exchange Capital
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Exchange Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Exchange Guarantee. If
the Guarantee Trustee fails to enforce the Exchange Guarantee, any holder of
the Exchange Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Exchange Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity.
The Corporation, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Exchange Guarantee.
Amendments and Assignment. Except with respect to any changes that do not
-------------------------
materially adversely affect the rights of holders of the Exchange Capital
Securities (in which case no consent will be required), the Exchange Guarantee
may not be amended without the prior approval of the holders of a majority of
the Liquidation Amount of such outstanding Exchange Capital Securities. The
manner of obtaining any such approval will be as set forth under
"--Description of Exchange Capital Securities--Voting Rights; Amendment of the
Trust Agreement." All guarantees and agreements contained in the Exchange
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Corporation and shall inure to the benefit of the
holders of the Exchange Capital Securities then outstanding.
Termination of the Exchange Guarantee. The Exchange Guarantee will
-------------------------------------
terminate and be of no further force and effect upon full payment of the
applicable Redemption Price of the Exchange Capital Securities, upon full
payment of the Liquidation Amount payable upon liquidation of the Trust or
upon distribution of Exchange Junior Subordinated Debentures to the holders of
the Exchange Capital Securities. The Exchange Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the Exchange Capital Securities must restore payment of any sums paid under
the Exchange Capital Securities or the Exchange Guarantee.
Information Concerning the Guarantee Trustee. The Guarantee Trustee,
--------------------------------------------
other than during the occurrence and continuance of a default by the
Corporation in performance of the Exchange Guarantee, will undertake to
perform only such duties as are specifically set forth in the Exchange
Guarantee and, in case a default with respect to the Exchange Guarantee has
occurred, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to
this provision, the Guarantee Trustee will be under no obligation to exercise
any of the powers vested in it by the Exchange Guarantee at the request of any
holder of the Exchange Capital Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
Governing Law. The Exchange Guarantee will be governed by and construed
-------------
in accordance with the laws of the State of New York.
DESCRIPTION OF ORIGINAL SECURITIES
The terms of the Original Securities are identical in all materials
respects to the Exchange Securities, except that (i) the Original Securities
have not been registered under the Securities Act, are subject to certain
restrictions on transfer and are entitled to certain rights under the
applicable Registration Rights Agreement (which rights will terminate upon
consummation of the Exchange Offer, except under limited circumstances), (ii)
the Exchange Capital Securities will not provide for any increase in the
Distribution rate thereon and (iii) the Exchange Junior Subordinated
Debentures will not provide for any liquidated damages thereon. The Original
Securities provide that, if a registration statement relating to the Exchange
Offer has not been filed by June 26, 1998 and been declared effective by
August 5, 1998, then liquidated damages will accrue at the rate of 0.25% per
annum on the principal amount of the Original Junior Subordinated Debentures
and Distributions will accrue at the rate of 0.25% per annum on the
Liquidation Amount of the Original Capital Securities, for the period from the
occurrence of such event until such time as such registration statement has
been filed or declared effective, as the case may be. In addition, the
Original Capital Securities provide that, if the Trust has not exchanged
Exchange Capital Securities for all Original Capital Securities validly
tendered by the 45th day after the date on which the registration statement is
declared effective, the Distribution rate borne by the Original Capital
Securities will increase by 0.25% per annum for the period from the occurrence
of such event until such time as the Exchange Offer has been consummated. The
Exchange Securities are not, and upon consummation of the Exchange Offer the
Original Securities will not be, entitled to any such additional interest or
Distributions. Accordingly, holders of Original Capital Securities should
review the information set forth under "Risk Factors--Consequences of a
Failure to Exchange Original Capital Securities" and "Description of Exchange
Securities."
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE EXCHANGE
JUNIOR SUBORDINATED DEBENTURES AND THE EXCHANGE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Exchange Capital
Securities (to the extent the Trust has funds legally available for the
payment of such Distributions) will be irrevocably guaranteed by the
Corporation as and to the extent set forth under "Description of Exchange
Securities--Description of Exchange Guarantee." Taken together, the
Corporation's obligations under the Exchange Junior Subordinated Debentures,
the Indenture, the Trust Agreement and the Exchange Guarantee provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the Exchange Capital Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Exchange Capital Securities. If and to the extent that the Corporation does
not make the required payments on the Exchange Junior Subordinated Debentures,
the Trust will not have sufficient funds to make the related payments,
including Distributions, on the Exchange Capital Securities. The Exchange
Guarantee will not cover any such payment when the Trust does not have
sufficient funds legally available therefor. In such event, the remedy of a
holder of Exchange Capital Securities is to institute a Direct Action. The
obligations of the Corporation under the Exchange Guarantee will be
subordinate and junior in right of payment to all Senior Indebtedness in the
same manner as the Exchange Junior Subordinated Debentures.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
the Exchange Junior Subordinated Debentures, such payments will be sufficient
to cover Distributions and other payments due on the Exchange Capital
Securities, primarily because: (i) the aggregate principal amount or
Prepayment Price of the Junior Subordinated Debentures will be equal to the
sum of the aggregate Liquidation Amount or Redemption Price, as applicable, of
the Trust Securities; (ii) the interest rate and interest and other payment
dates on the Junior Subordinated Debentures will match the Distribution rate
and Distribution and other payment rates for the Trust Securities; (iii) the
Corporation, as Sponsor, shall pay for all and any costs, expenses and
liabilities of the Trust except the Trust's obligations to holders of Trust
Securities; and (iv) the Trust Agreement further provides that the Trust is
not authorized to engage in any activity that is not consistent with the
limited purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF EXCHANGE CAPITAL SECURITIES
A holder of any Exchange Capital Security may institute a legal
proceeding directly against the Corporation to enforce its rights under the
Exchange Guarantee without first instituting a legal proceeding against the
Guarantee Trustee, the Trust or any other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Trust Agreement. However,
in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Exchange Junior Subordinated Debentures
until such Senior Indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on
Exchange Junior Subordinated Debentures would constitute an Event of Default
under the Trust Agreement except if an Extension Period is elected by the
Corporation.
LIMITED PURPOSE OF THE TRUST
The Exchange Capital Securities will represent beneficial interests in
the Trust, and the Trust exists for the sole purpose of issuing and selling
the Trust Securities, using the proceeds from the sale of the Trust Securities
to acquire the Exchange Junior Subordinated Debentures, exchanging the
Exchange Capital Securities and the Original Junior Subordinated Debentures in
the Exchange Offer, and engaging in only those other activities necessary,
advisable or incidental thereto.
RIGHTS UPON TERMINATION
Unless the Exchange Junior Subordinated Debentures are distributed to
holders of the Exchange Capital Securities, upon any voluntary or involuntary
termination, winding-up or liquidation of the Trust, after satisfaction of the
liabilities of creditors of the Trust as required by applicable law, the
holders of the Exchange Capital Securities will be entitled to receive, out of
assets held by the Trust, the Liquidation Distribution in cash. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Liquidation of the Trust and Distribution of Exchange Junior
Subordinated Debentures." Upon any voluntary or involuntary liquidation or
bankruptcy of the Corporation, the Property Trustee, as holder of the Exchange
Junior Subordinated Debentures, would be a subordinated creditor of the
Corporation, subordinated in right of payment to all Senior Indebtedness as
set forth in the Indenture, but entitled to receive payment in full of
principal (and premium, if any) and interest, before any stockholders of the
Corporation receive payments or distributions.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of certain of the material United States
federal income tax consequences associated with the exchange of Original
Capital Securities for Exchange Capital Securities and with the ownership and
disposition of Capital Securities held as capital assets by a holder who
purchased Original Capital Securities upon initial issuance. It does not
purport to deal with all aspects of U.S. federal income taxation that might be
relevant to particular holders in light of their personal investment
circumstances or status, nor does it discuss the U.S. federal income tax
consequences to certain types of holders subject to special treatment under
the U.S. federal income tax laws, such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, United States Alien
Holders (as defined herein) engaged in a U.S. trade or business or persons
that will hold the Capital 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. This summary
also does not address the tax consequences to persons that have a functional
currency other than the U.S. dollar or the tax consequences to shareholders,
partners or beneficiaries of a holder of Capital Securities. Further, it does
not include any description of any alternative minimum tax consequences or the
tax laws of any state or local government or of any foreign government that
may be applicable to the Capital Securities. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
thereunder and the administrative and judicial interpretations thereof, as of
the date hereof, all of which are subject to change, possibly on a retroactive
basis.
Brown & Wood LLP ("Tax Counsel") has reviewed this summary and is of the
opinion that, to the extent that it constitutes matters of law or purports to
describe certain provisions of the U.S. federal income tax laws, it is a
correct summary in all material respects of the matters discussed herein. In
connection with the issuance of the Exchange Junior Subordinated Debentures
and the Exchange Capital Securities, Tax Counsel also will render the opinion
described below under "--Classification of the Trust." An opinion of Tax
Counsel is not binding on the Internal Revenue Service ("IRS") or the courts.
No rulings have been or are expected to be sought from the IRS with respect to
any of the transactions described herein and no assurance can be given that
the IRS will not take contrary positions. Moreover, no assurance can be given
that the opinions described herein will not be challenged by the IRS or, if
challenged, that such a challenge would not be successful.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Original Capital Securities for Exchange Capital
Securities should not be a taxable event to holders for United States federal
income tax purposes. The exchange of Original Capital Securities for Exchange
Capital Securities pursuant to the Exchange Offer should not be treated as an
"exchange" for United States federal income tax purposes because the Exchange
Capital Securities should not be considered to differ materially in kind or
extent from the Original Capital Securities and because the exchange will
occur by operation of the terms of the Original Capital Securities.
Accordingly, the Exchange Capital Securities should have the same issue price
as the Original Capital Securities, and a holder should have the same adjusted
tax basis and holding period in the Exchange Capital Securities immediately
after the exchange as the holder had in the Original Capital Securities
immediately before the exchange.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Corporation intends to take the position that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Corporation. The Corporation, the Trust and the holders of
the Capital Securities (by acceptance of a beneficial interest in a Capital
Security) will agree to treat the Junior Subordinated Debentures as
indebtedness of the Corporation and the Capital Securities as evidence of a
beneficial ownership interest in the Junior Subordinated Debentures for all
United States federal income tax purposes. No assurance can be given, however,
that such position will not be challenged by the Internal Revenue Service (the
"IRS") or, if challenged, that such a challenge will not be successful. The
remainder of this discussion assumes that the Junior Subordinated Debentures
will be classified as indebtedness of the Corporation for United States
federal income tax purposes.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Capital Securities, Tax Counsel is
of the opinion generally to the effect that, under then-current law and
assuming full compliance with the terms of the Trust Agreement and the
Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Trust will be classified for United
States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Accordingly, for United States federal
income tax purposes, each holder of Capital Securities generally will be
considered the owner of an undivided interest in the Junior Subordinated
Debentures, and each holder will be required to include in its gross income
any interest (or OID accrued) with respect to its allocable share of those
Junior Subordinated Debentures.
An opinion of Tax Counsel is not binding on the IRS or the courts. No
rulings have been or are expected to be sought from the IRS with respect to
any of the transactions described herein and no assurance can be given that
the IRS will not take contrary positions. Moreover, no assurance can be given
that the opinion expressed herein will not be challenged by the IRS or, if
challenged, that such a challenge would not be successful.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under Treasury regulations (the "Treasury Regulations") applicable to
debt instruments issued on or after August 13, 1996, a "remote" contingency
that stated interest will not be timely paid will be ignored in determining
whether a debt instrument is issued with OID. The Corporation believes that
the likelihood of its exercising its option to defer payments of interest is
"remote" since exercising that option would, among other things, prevent the
Corporation from declaring dividends on any class of its equity securities.
Accordingly, the Corporation intends to take the position that the Junior
Subordinated Debentures will not be considered to be issued with OID and,
accordingly, stated interest on the Junior Subordinated Debentures generally
will be taxable to a holder as ordinary income at the time it is paid or
accrued in accordance with such holder's method of tax accounting.
Under the Treasury Regulations, if the Corporation were to exercise its
option to defer payments of interest, the Junior Subordinated Debentures would
at that time be treated as issued with OID, and all stated interest on the
Junior Subordinated Debentures would thereafter be treated as OID as long as
the Junior Subordinated Debentures remain outstanding. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures would thereafter be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income. Consequently, a
holder of Capital Securities would be required to include in gross income OID
even though the Corporation would not make actual cash payments during an
Extension Period. Moreover, under the Treasury Regulations, if the option to
defer the payment of interest was determined not to be "remote," the Junior
Subordinated Debentures would be treated as having been originally issued with
OID. In such event, all of a holder's taxable interest income with respect to
the Junior Subordinated Debentures would be accounted for on an economic
accrual basis regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
The Treasury Regulations have not yet been addressed in any rulings or
other interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation described herein.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with
respect to the Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
The Corporation will have the right at any time to liquidate the Trust
and cause the Junior Subordinated Debentures to be distributed to the holders
of the Trust Securities. Under current law, such a distribution, for United
States federal income tax purposes, would be treated as a nontaxable event to
each holder, and each holder would receive an aggregate tax basis in the
Junior Subordinated Debentures equal to such holder's aggregate tax basis in
its Capital Securities. A holder's holding period in the Junior Subordinated
Debentures so received in liquidation of the Trust would include the period
during which the Capital Securities were held by such holder. If, however, the
Trust were characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of its dissolution, the
distribution of the Junior Subordinated Debentures may constitute a taxable
event to holders of Capital Securities and a holder's holding period in Junior
Subordinated Debentures would begin on the date such Junior Subordinated
Debentures were received.
Under certain circumstances described herein (see "Description of
Exchange Securities--Description of Exchange Capital Securities"), the Junior
Subordinated Debentures may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Capital Securities.
Under current law, such a redemption would, for United States federal income
tax purposes, constitute a taxable disposition of the redeemed Capital
Securities, and a holder could recognize gain or loss as if it sold such
redeemed Capital Securities for cash. See "--Sales of Capital Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities (including a redemption of the
Capital Securities either on the Stated Maturity Date or upon an optional
redemption of the Junior Subordinated Debentures by the Corporation) will
recognize gain or loss equal to the difference between its adjusted tax basis
in Capital Securities and the amount realized on the sale of such Capital
Securities (other than with respect to accrued and unpaid interest which has
not yet been included in income, which will be treated as ordinary income). A
holder's adjusted tax basis in the Capital Securities generally will be its
initial purchase price increased by OID (if any) previously includible in such
holder's gross income to the date of disposition and decreased by payments (if
any) received on the Capital Securities in respect of OID. Such gain or loss
generally will be a capital gain or loss and generally will be a long-term
capital gain or loss if the Capital Securities have been held for more than
the applicable holding period.
The Capital Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the
underlying Junior Subordinated Debentures. A holder who uses the accrual
method of accounting for tax purposes (and a cash method holder, if the Junior
Subordinated Debentures are deemed to have been issued with OID) who disposes
of his Capital Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income (i.e., interest or, if applicable, OID), and to add such amount to his
adjusted tax basis in his pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than
the holder's adjusted tax basis (which will include all accrued but unpaid
interest), a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
PROPOSED TAX LEGISLATION
On February 6, 1997, President Clinton proposed legislation (the
"Proposed Legislation") that would have, among other things, denied an issuer
a deduction for United States federal income tax purposes for the payment of
interest on instruments with characteristics similar to the Exchange Junior
Subordinated Debentures. The Proposed Legislation would have been effective on
the date of first committee action. The Proposed Legislation was not included
in the recently enacted Taxpayer Relief Act of 1997. In addition, the Clinton
Administration's recently released proposed budget for the fiscal year 1999
does not include the Proposed Legislation or any provisions similar to the
Proposed Legislation. There can be no assurances, however, that similar
legislation enacted after the date hereof would not adversely affect the tax
treatment of the Exchange Junior Subordinated Debentures, resulting in a Tax
Event. The occurrence of a Tax Event may result in the redemption of the
Exchange Junior Subordinated Debentures for cash, in which event the holders
of the Capital Securities would receive cash in redemption of their Capital
Securities. See "Description of Exchange Securities--Description of Capital
Securities--Redemption" and "--Description of Exchange Junior Subordinated
Debentures--Special Event Prepayment."
THE TAXPAYER RELIEF ACT OF 1997
On August 5, 1997, the Taxpayer Relief Act of 1997 (the "Tax Act") was
enacted into law. The Tax Act reduces the maximum rates on long-term capital
gains recognized on capital assets held by individual taxpayers for more than
eighteen month as of the date of disposition (and would further reduce the
maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specified conditions). The Tax Act did not
change the capital gains tax rates applicable to corporate taxpayers.
Prospective investors should consult their own tax advisors concerning these
tax law changes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S.
Holder for United States federal income tax purposes.
A "U.S. Holder" is a holder of Capital Securities who or which is (i) a
citizen or individual resident (or is treated as a citizen or individual
resident) of the United States for federal income tax purposes; (ii) a
corporation or a partnership (including an entity treated as a corporation and
partnership for federal income tax purposes) created or organized in or under
the laws of the United States or any State thereof or the District of Columbia
(unless in the case of a partnership Treasury regulation are adopted are that
provided otherwise); (iii) a trust or estate the income of which is includible
in its gross income for federal income tax purposes without regard to its
source or (iv) a trust if, and only if, (x) a court within the United States
is able to exercise primary supervision over the administration of the trust
and (y) one or more United States persons have the authority to control all
substantial decisions of the trust. Notwithstanding the preceding sentence, to
the extent provided in Treasury regulations, certain trusts in existence on
August 20, 1996 and treated as United States persons prior to such date, that
elect to continue to be treated as United States persons, also will be a U.S.
Holder.
Under present United States federal income tax laws: (i) payments by the
Trust or any of its paying agents to any holder of a Capital Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the
Capital Security does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Corporation
entitled to vote, (b) the beneficial owner of the Capital Security is not a
controlled foreign corporation that is related to the Corporation through
stock ownership, and (c) either (1) the beneficial owner of the Capital
Security certifies to the Trust or its agent, under penalties of perjury, that
it is not a United States holder and provides its name and address or (2) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business (a
"Financial Institution"), and holds the Capital Security in such capacity,
certifies to the Trust or its agent, under penalties of perjury, that such
statement has been received from the beneficial owner by it or by a Financial
Institution between it and the beneficial owner and furnishes the Trust or its
agent with a copy thereof; and (ii) a United States Alien Holder of a Capital
Security will not be subject to United States federal withholding tax on any
gain realized upon the sale or other disposition of a Capital Security unless
(i) the gain is effectively connected with the conduct of a trade or business
within the United States or (ii) the holder is an individual who was present
in the United States for at least 183 days during the taxable year of the sale
and certain other conditions are met.
As discussed above, changes in legislation affecting the United States
federal income tax treatment of the Junior Subordinated Debentures are
possible, and could adversely affect the ability of the Corporation to deduct
the interest payable on the Junior Subordinated Debentures. Moreover, any such
legislation could adversely affect United States Alien Holders by
characterizing income derived from the Junior Subordinated Debentures as
dividends, generally subject to a 30% income tax (on a withholding basis) when
paid to a United States Alien Holder, rather than as interest which, as
discussed above, is generally exempt from income tax in the hands of a United
States Alien Holder.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders
on Forms 1099, which forms should be mailed to holders of Capital Securities
by January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States federal income tax, provided
the required information is provided to the IRS.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors concerning the New Regulations.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON
A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF ORIGINAL
CAPITAL SECURITIES FOR EXCHANGE CAPITAL SECURITIES AND OF THE OWNERSHIP AND
DISPOSITION OF THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Each of the Corporation (the obligor with respect to the Exchange Junior
Subordinated Debentures held by the Trust), and its affiliates and the
Property Trustee may 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 Plans. The purchase and/or holding of Exchange
Capital Securities by a Plan with respect to which the Corporation, the
Property Trustee or any affiliate is a service provider (or otherwise is a
party in interest or a disqualified person) may constitute or result in a
prohibited transaction under ERISA or Section 4975 of the Code, unless such
Exchange Capital Securities are acquired pursuant to and in accordance with an
applicable exemption, such as Prohibited Transaction Class Exemption ("PTCE")
84-14 (an exemption for certain transactions determined by an independent
qualified professional asset manager), PTCE 91-38 (an exemption for certain
transactions involving bank collective investment funds), PTCE 90-1 (an
exemption for certain transactions involving insurance company pooled separate
accounts), PTCE 95-60 (an exemption for transactions involving certain
insurance company general accounts) or PTCE 96-23 (an exemption for certain
transactions determined by an in-house asset manager). In addition, a Plan
fiduciary considering the purchase of Exchange Capital Securities should be
aware that the assets of the Trust may be considered "plan assets" for ERISA
purposes. In such event, the Property Trustee, as well as any other persons
exercising discretion with respect to the Exchange Junior Subordinated
Debentures, may become fiduciaries, parties in interest or disqualified
persons with respect to investing Plans. In order to avoid certain prohibited
transactions under ERISA and the Code that could thereby result, each
investing Plan, by purchasing the Exchange Capital Securities, will be deemed
to have directed the Trust to invest in the Exchange Junior Subordinated
Debentures and to have consented to the appointment of the Property Trustee.
In this regard, it should be noted that, in an Event of Default, the
Corporation may not remove the Property Trustee without the approval of a
majority of the holders of the Exchange Capital Securities.
A Plan fiduciary should consider whether the purchase of Exchange Capital
Securities could result in a delegation of fiduciary authority to the Property
Trustee, and, if so, whether such a delegation of authority is permissible
under the Plan's governing instrument or any investment management agreement
with the Plan.
THE SALE OF INVESTMENTS TO PLANS IS IN NO RESPECT A REPRESENTATION BY THE
TRUST, THE CORPORATION, THE PROPERTY TRUSTEE, THE INITIAL PURCHASER OR ANY
OTHER PERSON ASSOCIATED WITH THE SALE OF THE EXCHANGE CAPITAL SECURITIES THAT
SUCH SECURITIES MEET RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS
BY PLANS GENERALLY OR ANY PARTICULAR PLAN, OR THAT SUCH SECURITIES ARE
OTHERWISE APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR PLAN. ANY
PURCHASER PROPOSING TO ACQUIRE EXCHANGE CAPITAL SECURITIES WITH ASSETS OF ANY
PLAN SHOULD CONSULT WITH ITS COUNSEL.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of Exchange Capital
Securities received in exchange for Original Capital Securities where such
Original Capital Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Trust and the
Corporation have agreed that, starting on the Expiration Date and ending on
the close of business on the 90th day following the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, for a
period of 90 days after the Expiration Date, all dealers effecting
transactions in the Exchange Securities may be required to deliver a
prospectus.
The Trust and the Corporation will not receive any proceeds from any
issuance of Exchange Capital Securities. Exchange Capital Securities received
by broker-dealers for their own account pursuant to the Exchange Offer may be
sold from time to time in one or more transactions, in the over-the-counter
market, in negotiated transactions, through the writing of options on the
Exchange Capital Securities or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Capital Securities.
Any broker-dealer that resells Exchange Capital Securities that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Capital Securities
may be deemed to be an "underwriter" within the meaning of the Securities Act,
and any profit of any such resale of Exchange Capital Securities and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
VALIDITY OF EXCHANGE SECURITIES
The validity of the Exchange Junior Subordinated Debentures and the
Exchange Guarantee will be passed upon for the Corporation by Brown & Wood
LLP, New York, New York. Certain matters of Delaware law relating to the
validity of the Exchange Capital Securities will be passed upon on behalf of
the Trust and the Corporation by Richards, Layton & Finger, P.A., Wilmington,
Delaware. Certain matters relating to United States federal income tax
considerations will be passed upon by Brown & Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Corporation as of December
31, 1997 and 1996, and for the years then ended, included in the Corporation's
1997 Form 10-K and incorporated by reference in this Prospectus, have been
incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. Their report refers to the adoption of the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities", in 1997.
The consolidated financial statements of the Corporation as of December
31, 1995, and for the year then ended, and incorporated in this Prospectus by
reference to the Corporation's 1997 10-K, 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.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL SIGNAL CAPITAL TRUST I
HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN OFFER TO EXCHANGE ITS
THOSE CONTAINED OR INCORPORATED BY REFERENCE 8.67% CAPITAL SECURITIES, SERIES B
IN THIS PROSPECTUS IN CONNECTION WITH THIS (LIQUIDATION AMOUNT
EXCHANGE OFFER AND, IF GIVEN OR MADE, SUCH $1,000 PER CAPITAL SECURITY)
INFORMATION OR REPRESENTATIONS MUST NOT BE WHICH HAVE BEEN REGISTERED UNDER THE
RELIED UPON AS HAVING BEEN AUTHORIZED BY SECURITIES ACT OF 1933
THE CORPORATION OR THE TRUST. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE FOR ANY AND ALL OF ITS OUTSTANDING
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE AN IMPLICATION THAT THERE HAS NOT BEEN 8.67% CAPITAL SECURITIES, SERIES A
ANY CHANGE IN THE AFFAIRS OF THE CORPORATION (LIQUIDATION AMOUNT
OR THE TRUST SINCE THE DATE HEREOF. THIS $1,000 PER CAPITAL SECURITY)
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH FULLY AND UNCONDITIONALLY GUARANTEED, AS
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO DESCRIBED HEREIN, BY
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
---------------- FIRSTFEDERAL FINANCIAL
TABLE OF CONTENTS SERVICES CORP.
AVAILABLE INFORMATION........................ 9
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE............................... 10 -------------
SUMMARY...................................... 11
RISK FACTORS................................. 20 PROSPECTUS
FIRSTFEDERAL FINANCIAL SERVICES CORP......... 28
SIGNAL CAPITAL TRUST I....................... 29 -------------
USE OF PROCEEDS.............................. 30
RATIOS OF EARNINGS TO COMBINED
FIXED CHARGES............................... 30
ACCOUNTING TREATMENT......................... 31
CAPITALIZATION............................... 31
SELECTED CONSOLIDATED FINANCIAL DATA......... 32
THE EXCHANGE OFFER........................... 34
DESCRIPTION OF EXCHANGE SECURITIES........... 46 MAY 27, 1998
DESCRIPTION OF ORIGINAL SECURITIES........... 75
RELATIONSHIP AMONG THE EXCHANGE
CAPITAL SECURITIES, THE EXCHANGE
JUNIOR SUBORDINATED DEBENTURES AND THE
EXCHANGE GUARANTEE.......................... 75
CERTAIN U.S. FEDERAL INCOME TAX
CONSEQUENCES................................ 75
ERISA CONSIDERATIONS......................... 83
PLAN OF DISTRIBUTION......................... 84
VALIDITY OF EXCHANGE SECURITIES.............. 84
EXPERTS...................................... 84