Filed Pursuant to Rule 424(b)(3)
Reg. No. 333-29839
ONBANK CAPITAL TRUST I
OFFER TO EXCHANGE ITS
9.25% EXCHANGE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
9.25% ORIGINAL CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
ONBANCORP, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON AUGUST 21, 1997, UNLESS EXTENDED
OnBank Capital Trust I, a trust formed 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 $60,000,000 aggregate liquidation amount of its 9.25% Series B Capital
Securities (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 9.25% Series A Capital
Securities (the "Original Capital Securities"), of which $60,000,000 aggregate
liquidation amount is outstanding. Pursuant to the Exchange Offer, ONBANCorp,
Inc., a Delaware corporation (the "Corporation" or "ONBANCorp"), is also
offering to exchange (i) its guarantee of payments of cash distributions and
payments on liquidation of the Trust or redemption of the Original Capital
Securities (the "Original Guarantee") for a like guarantee in respect of the
Exchange Capital Securities (the "Exchange Guarantee") and (ii) $60,000,000
aggregate principal amount of its 9.25% Series A Junior Subordinated Deferrable
Interest Debentures due February 1, 2027 (the "Original Junior Subordinated
Debentures") for a like aggregate principal amount of its 9.25% Series B Junior
Subordinated Deferrable Interest Debentures due February 1, 2027 (The "Exchange
Junior Subordinated Debentures"), 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 (1) 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, (2) the Exchange Capital Securities will not provide for any
increase in the distribution rate thereon and (3) 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 4, 1997 (the "Registration
Agreement") among the Corporation, the Trust and the Initial Purchasers (as
defined herein). In the event that the Exchange Offer is consummated, any
Original Capital Securities which 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).
(CONTINUED ON THE FOLLOWING PAGE)
------------------------
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of Original Capital Securities on or about July 22, 1997.
See "Risk Factors" commencing on page 19 for certain information that should
be considered by holders in deciding whether to tender Original Capital
Securities in the Exchange Offer.
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 July 22, 1997.
The Exchange Capital Securities and the Original Capital Securities
(collectively, the "Capital Securities") represent 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").
The Bank of New York is 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 Junior
Subordinated Debentures will mature on February 1, 2027 (the "Stated Maturity
Date"). The 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 4, 1997, AS AMENDED AND SUPPLEMENTED FROM TIME TO TIME, BETWEEN THE
CORPORATION AND THE BANK OF NEW YORK, AS TRUSTEE (THE "DEBENTURE TRUSTEE"),
RELATING TO THE JUNIOR SUBORDINATED DEBENTURES, (II) THE "TRUST AGREEMENT" MEANS
THE AMENDED AND RESTATED DECLARATION OF TRUST RELATING TO THE TRUST, DATED AS OF
FEBRUARY 4, 1997 AMONG THE CORPORATION, AS SPONSOR, THE BANK OF NEW YORK AS
PROPERTY TRUSTEE (THE "PROPERTY TRUSTEE"), THE BANK OF NEW YORK (DELAWARE) AS
DELAWARE TRUSTEE (THE "DELAWARE TRUSTEE"), AND THE ADMINISTRATIVE TRUSTEES NAMED
THEREIN (COLLECTIVELY, WITH THE PROPERTY TRUSTEE AND DELAWARE TRUSTEE, THE
"ISSUER TRUSTEES"). IN ADDITION, AS THE CONTEXT MAY REQUIRE, (I) THE TERM
"JUNIOR SUBORDINATED DEBENTURES" INCLUDES THE ORIGINAL JUNIOR SUBORDINATED
DEBENTURES AND THE EXCHANGE JUNIOR SUBORDINATED DEBENTURES, (II) THE TERM
"COMMON GUARANTEE" MEANS THE GUARANTEE AGREEMENT RELATING TO THE COMMON
SECURITIES BETWEEN THE CORPORATION AND THE BANK OF NEW YORK, AS TRUSTEE, AND
(III) THE TERM "GUARANTEE" INCLUDES THE ORIGINAL GUARANTEE AND THE EXCHANGE
GUARANTEE.
Holders of the Trust Securities are entitled to receive cumulative cash
distributions arising from the payment of interest on the Junior Subordinated
Debentures accruing from February 4, 1997 and payable semi-annually in arrears
on the 1st day of February and August of each year (each, an "Interest Payment
Date"), commencing August 1, 1997, at the annual rate of 9.25% of the
Liquidation Amount of $1,000 per Trust Security ("Distributions"). So long as no
Debenture Event of Default (as herein defined) has occurred and is continuing,
the Corporation has the right 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 deferral
period (each, an "Extension Period"); provided, however, that no Extension
Period shall 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, 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 Junior Subordinated Debentures are so deferred,
Distributions on the Trust Securities will also be deferred and the Corporation
will not be permitted, subject to certain exceptions described herein, to (i)
declare or pay any cash distributions with respect to the Corporation's capital
stock (which includes common and preferred stock) or (ii) to make any payment
with respect to debt securities of the Corporation that rank PARI PASSU with or
junior to the Junior Subordinated Debentures. During an Extension Period,
interest on the Junior Subordinated Debentures will continue to accrue (and the
amount of Distributions to which holders of the Trust Securities are entitled
will accumulate) at the rate of 9.25% per annum, compounded semi-annually, and
holders of Trust Securities will be required to accrue such deferred interest
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 United States Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
The Corporation has, through the Guarantee, the Common Guarantee, the Trust
Agreement, the Junior Subordinated Debentures and the Indenture (each as defined
herein), taken together, fully, irrevocably and unconditionally guaranteed all
of the Trust's obligations under the Trust Securities. See "Relationship Among
the Exchange Capital Securities, the Exchange Junior Subordinated Debentures and
2
the Exchange Guarantee--Full and Unconditional Guarantee." The Exchange
Guarantee will guarantee payments of Distributions and payments on liquidation
or redemption of the Exchange Capital Securities, but only to the extent that
the Trust holds funds on hand legally available therefor and has filed 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 Junior Subordinated Debentures, the Trust will not
have sufficient funds to make the related payments, including Distributions, on
the Trust Securities. The Guarantee does not cover any such payment when the
Trust does not have sufficient funds on hand legally available therefor. In such
event, a holder of 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 Guarantee, the Common
Guarantee and the Junior Subordinated Debentures are 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").
The Trust Securities are 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 Junior Subordinated Debentures at a redemption price equal
to the principal amount of, plus accrued interest on, the Junior Subordinated
Debentures (the "Maturity Redemption Price"), (ii) in whole, but not in part, at
any time prior to February 1, 2007, contemporaneously with the optional
prepayment of the 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 February 1, 2007, contemporaneously with the optional prepayment by the
Corporation of the 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 or 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 prior approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve") to do so if then
required under applicable capital guidelines or policies of the Federal Reserve,
the Junior Subordinated Debentures are prepayable prior to the Stated Maturity
Date at the option of the Corporation (i) on or after February 1, 2007 (the
"Initial Optional Prepayment Date"), in whole or in part, at a prepayment price
(the "Optional Prepayment Price") equal to 104.625% of the principal amount
thereof on February 1, 2007, declining ratably on each February 1 thereafter to
100% on or after February 1, 2017, or (ii) at any time prior to the Initial
Optional Prepayment 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 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 principal amount and premium payable with respect
to an optional redemption of such Junior Subordinated Debentures on the Initial
Optional Prepayment Date, together with scheduled payments of interest on the
Junior Subordinated Debentures from the prepayment date to and including the
Initial Optional Prepayment Date, 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 (i) and (ii), accumulated but unpaid interest thereon 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 terminate the Trust and cause
a Like Amount of the Junior Subordinated Debentures to be distributed to the
holders of the Trust Securities upon liquidation of the Trust, subject to (i)
the Corporation having received an opinion of counsel to the effect that such
3
distribution will not be a taxable event to holders of Capital Securities and
(ii) the prior approval of the Federal Reserve to do so, if then required under
applicable capital guidelines or policies of the Federal Reserve. 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 Junior Subordinated Debentures."
The Capital Securities, including the Exchange Capital Securities when
issued, may be transferred only in a block having a Liquidation Value of not
less than $100,000 (100 Capital Securities).
The Trust is making the Exchange Offer of the Exchange Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance 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 Division of
Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Capital Securities, Exchange Guarantee and Exchange
Debentures as it has in such interpretive letters to third parties. Based on
these interpretations by the staff of the Division of Corporation Finance of the
Commission, and subject to the two immediately following sentences, the
Corporation and the Trust believe that the Exchange Capital Securities, Exchange
Guarantee and Exchange Junior Subordinated Debentures 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 to resell 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 Division of Corporation Finance 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 below, 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
4
under the Securities Exchange Act of 1934, as amended) on behalf of whom such
holder holds the 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 Division of Corporation Finance
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 securities 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 180th day following the Expiration Date (as
described herein), they 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 the Exchange Agent at one of the addresses 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 which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration 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
5
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 180-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.
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. Although the Initial Purchasers have informed the Corporation and the
Trust that they each currently intend to make a market in the Exchange Capital
Securities, they are not obligated to do so, and any such market making may be
discontinued at any time without notice. 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 currently do not intend to apply for
listing of the Exchange Capital Securities on any securities exchange or for
quotation through the National Association of Securities Dealers Automated
Quotation System.
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 August 21, 1997 (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 on or 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 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, as Issuer of the Junior
Subordinated Debentures, has agreed to pay all expenses of the Exchange Offer.
See "The Exchange Offer--Fees and Expenses." Holders of Original Capital
Securities as of July 15, 1997 (the record date for the initial Distribution on
August 1, 1997), including such holders who tender their Original Capital
Securities pursuant to the Exchange Offer, will be entitled to receive such
Distribution. See "The Exchange Offer--Distributions on Exchange Capital
Securities."
6
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."
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus in connection with this Exchange
Offer and, if given or made, such information or representations must not be
relied upon as having been authorized by the Corporation or the Trust. Neither
the delivery of this Prospectus nor any sale made hereunder shall under any
circumstance create an implication that there has been no change in the affairs
of the Corporation or the Trust since the date hereof. This Prospectus does not
constitute an offer or a solicitation by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or anyone to whom it is unlawful
to make such offer or solicitation.
7
TABLE OF CONTENTS
PAGE
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AVAILABLE INFORMATION...................................................................................... 9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 9
SUMMARY.................................................................................................... 11
RISK FACTORS............................................................................................... 19
ONBANK CAPITAL TRUST I..................................................................................... 25
ONBANCORP, INC............................................................................................. 25
ACCOUNTING TREATMENT....................................................................................... 26
USE OF PROCEEDS............................................................................................ 27
RATIOS OF EARNINGS TO FIXED CHARGES........................................................................ 28
CAPITALIZATION............................................................................................. 29
SUMMARY FINANCIAL DATA..................................................................................... 30
THE EXCHANGE OFFER......................................................................................... 31
DESCRIPTION OF EXCHANGE SECURITIES......................................................................... 41
DESCRIPTION OF ORIGINAL SECURITIES......................................................................... 64
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE EXCHANGE JUNIOR SUBORDINATED DEBENTURES AND THE
EXCHANGE GUARANTEE....................................................................................... 65
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................................................... 67
ERISA CONSIDERATIONS....................................................................................... 72
PLAN OF DISTRIBUTION....................................................................................... 74
VALIDITY OF EXCHANGE SECURITIES............................................................................ 74
EXPERTS.................................................................................................... 74
8
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
information may also be accessed electronically by means of the Commission's
home page on the Internet (http://www.sec.gov.). In addition, such reports,
proxy statements and other information concerning the Corporation can be
inspected at the offices of the National Association of Securities Dealers
Automated Quotation System, 33 Whitehall Street, New York, New York 10004, on
which exchange certain securities of the Corporation are listed.
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 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 incidental activities. See "OnBank Capital
Trust I" and "Description of Exchange Securities." In addition, the Corporation
does not expect that the Trust will file reports 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, the
Trust 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
The following documents filed by the Corporation with the Commission are
incorporated into this Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The Corporation's Proxy Statement dated March 18, 1997; and
3. The Corporation's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997.
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 document. 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.
9
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 which are not presented
herein or delivered herewith. These documents (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents) are available upon request from Investor Relations, ONBANCORP.
INC., 101 South Salina Street, P.O. Box 4983, Syracuse, New York, 13221-4983.
Telephone requests may be directed to Investor Relations at (315) 424-5995.
10
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED 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.
ONBANK CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Trust Agreement executed by the Corporation, as Sponsor, the Bank of
New York, as Property Trustee, and The Bank of New York (Delaware), as Delaware
Trustee and the three individual Administrative Trustees named therein, and (ii)
the filing of a certificate of trust with the Delaware Secretary of State on
January 24, 1997. The Trust's business and affairs are conducted by the Issuer
Trustees: the Property Trustee, the Delaware Trustee, and the three individual
Administrative Trustees who are employees or officers of or affiliated with 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 will be the sole revenue of the Trust. All of the Common Securities
are owned by the Corporation.
ONBANCORP, INC.
The Corporation is a Delaware chartered bank holding company headquartered
in Syracuse, New York, which operates two wholly owned subsidiaries, OnBank &
Trust Co., a New York-chartered trust company ("OnBank"), and Franklin First
Savings Bank, a Pennsylvania-chartered thrift ("Franklin," and together with
OnBank, the "Banks"). Effective January 1, 1997, the Corporation's New
York-chartered thrift subsidiary (the "Thrift") with $476 million in assets was
merged into OnBank. The Banks offer diversified financial services through 120
locations in upstate New York and Scranton/Wilkes-Barre, Pennsylvania.
At March 31, 1997, the Corporation had total consolidated assets of $5.5
billion, deposits of $3.9 billion and stockholders' equity of $332 million. For
the year ended December 31, 1996, the Corporation reported net income of $43.0
million, or $2.86 per fully diluted common share. At March 31, 1997, OnBank
(including the Thrift) had total assets of $4.0 billion, deposits of $3.0
billion and stockholder's equity of $271 million, and Franklin had total assets
of $1.4 billion, deposits of $0.9 billion and stockholder's equity of $91
million. See "ONBANCorp, Inc.--Recent Developments."
The principal business of the Banks is to accept deposits from the general
public and to invest those deposits, together with funds from borrowings and
ongoing operations, in business, consumer and residential mortgage loans. The
Corporation has concentrated its efforts in the retail, municipal and commercial
banking business, expanding the types of financial products and services,
including trust services, offered to its customers. The Banks offer a variety of
deposit and loan products to residents and businesses in their respective market
areas.
11
THE EXCHANGE OFFER
The Exchange Offer.................. Up to $60,000,000 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 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 August 21, 1997,
unless the Exchange Offer is extended by the
Corporation or 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 for exchange, (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, or (iv) to
waive any condition or otherwise amend the terms of
the Exchange Offer 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 on or prior to the Expiration
Date by delivering a written notice of such
withdrawal to the Exchange Agent in conformity with
certain procedures set forth below under "The
Exchange Offer--Withdrawal Rights."
Procedures for Tendering Original
Capital Securities................ Certain brokers, dealers, commercial banks, trust
companies and other nominees who hold Original
Capital Securities through The Depository Trust
Company ("DTC") must effect
12
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 broker, dealer, commercial bank, trust
company or other nominee are urged to contact such
person 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 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
Division of Corporation Finance 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 Division of Corporation Finance
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
Division of Corporation Finance 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
13
Exchange Offer for the purpose of distributing the
Exchange Capital Securities, or any broker-dealer who
purchased the Original Capital Securities from the
Trust to resell pursuant to Rule 144A or any other
available exemption under the Securities Act, (a)
will not be able to rely on the interpretations of
the staff of the Division of Corporation Finance of
the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted or
entitled to tender such Original Capital Securities
in the Exchange Offer and (c) 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
below, 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 Securities Act in connection with any resale of
such Exchange Capital Securities. The Letter of
Transmittal states that, by so acknowledging and by
delivering such 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 Division of
Corporation Finance 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
14
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 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
Agreement and to the limitations described below
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 180 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 The Bank of New York (the "Exchange Agent"). The
addresses, and telephone and facsimile numbers, 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.
Certain United States Federal Income
Tax Consequences; ERISA
Considerations.................... Holders of Original Capital Securities should review
the information set forth under "Certain United
States Federal Income Tax Consequences" and "ERISA
Considerations" prior to tendering Original Capital
Securities in the Exchange Offer.
15
THE EXCHANGE CAPITAL SECURITIES
Securities Offered.................. Up to $60,000,000 aggregate Liquidation Amount of the
Trust's Exchange Capital Securities which have been
registered under the Securities Act (Liquidation
Amount $1,000 per Exchange Capital Security). 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 which 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 the 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 of the
Exchange Offer," "Description of Exchange Securities"
and "Description of Original Securities."
Distribution Dates.................. February 1 and August 1 of each year.
Extension Periods................... Distributions on the 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. See "Description of
Exchange Securities--Description of Exchange Junior
Subordinated Debentures--Option to Extend Interest
Payment Date" and "Certain United States Federal
Income Tax Consequences--Interest Income and Original
Issue Discount."
16
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 to be issued by the Corporation ("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) to be issued by the Corporation
with respect to capital securities (if any) to be
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 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,
including the Banks' deposit liabilities. See
"Description of Exchange Securities-- Description of
Exchange Junior Subordinated Debentures."
Redemption.......................... The Trust Securities are 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 February 1,
2007, 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 at any
time on or after February 1, 2007, contemporaneously
with the optional prepayment by the Corporation of
Junior Subordinated Debentures, in each case at the
applicable Redemption Price. See "Description of
Exchange Securities--Description of Exchange Capital
Securities--Mandatory Redemption."
17
Rating.............................. The Exchange Capital Securities are expected to be
rated "ba1" by Moody's Investors Service, Inc. and
"BB" by Standard & Poor's Ratings Services. A
security rating is not a recommendation to buy, sell
or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating
organization.
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). 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.
Although Keefe, Bruyette & Woods, Inc., Sandler
O'Neill & Partners, L.P., and Blaylock & Partners,
L.P., the initial purchasers of the Original Capital
Securities (the "Initial Purchasers"), have informed
the Corporation and the Trust that they each
currently intend to make a market in the Exchange
Capital Securities, they are not obligated to do so,
and any such market making may be discontinued at any
time without notice. 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 the
National Association of Securities Dealers Automated
Quotation System ("NASDAQ"). See "Plan of
Distribution."
RISK FACTORS
Prospective investors should carefully consider the matters
set forth under "Risk Factors."
18
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS IN CONNECTION
WITH THE EXCHANGE OFFER AND THE EXCHANGE CAPITAL SECURITIES OFFERED HEREBY. THIS
PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING
TO THE CORPORATION THAT ARE BASED ON THE BELIEFS OF MANAGEMENT AS WELL AS
ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO MANAGEMENT. THE WORDS
"ANTICIPATE," "BELIEVE," "ESTIMATE," "EXPECT," "INTENDS" AND SIMILAR
EXPRESSIONS, AS THEY RELATE TO THE CORPORATION OR THE CORPORATION'S MANAGEMENT,
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT THE
CURRENT VIEWS OF THE CORPORATION WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT
TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS, INCLUDING THE RISK FACTORS
DESCRIBED IN THIS PROSPECTUS. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES
MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS
MAY VARY MATERIALLY FROM THOSE DESCRIBED HEREIN AS ANTICIPATED, BELIEVED,
ESTIMATED OR EXPECTED. THE CORPORATION DOES NOT INTEND TO UPDATE THESE
FORWARD-LOOKING STATEMENTS.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE
GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES
The obligations of the Corporation under the Guarantee issued by it for the
benefit of the holders of Capital Securities as well as under the Junior
Subordinated Debentures are unsecured and rank subordinate and junior in right
of payment to all Senior Indebtedness of the Corporation. At March 31, 1997, the
Corporation had no Senior Indebtedness outstanding. Because the Corporation is a
bank 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 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 such subsidiary. At March 31, 1997, the subsidiaries of the
Corporation had total liabilities (excluding liabilities to the Corporation) of
approximately $5.1 billion. Accordingly, the Junior Subordinated Debentures will
be effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Junior Subordinated Debentures should
look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. None of the Indenture, the Guarantee or the Trust
Agreement places any limitation on the amount of secured or unsecured debt,
including Senior Indebtedness, that may be incurred by the Corporation or any
subsidiary. See "Description of Exchange Securities--Description of Exchange
Junior Subordinated Debentures--Subordination" and "--Description of Exchange
Guarantee--Status of the Guarantee."
The ability of the Trust to pay amounts due on the Capital Securities is
solely dependent upon the Corporation making payments on the Junior Subordinated
Debentures as and when required.
In addition, there are regulatory limitations on the payment of dividends
directly or indirectly to the Corporation from the Banks. At March 31, 1997,
OnBank could have paid $9.9 million in dividends to the Corporation without
prior regulatory approval. Federal and state regulatory agencies also have the
authority to limit further the Banks' payment of dividends based on other
factors, such as the maintenance of adequate capital for the Banks, which could
reduce the amount of dividends otherwise payable.
OPTION TO EXTEND INTEREST PAYMENT DATE;
TAX CONSEQUENCES; MARKET PRICE CONSEQUENCES
So long as no Debenture Event of Default (as defined herein) 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, however, that no
Extension Period shall end on a date other than an Interest Payment Date or
extend beyond the Stated Maturity Date. As a consequence of any such deferral,
semi-annual Distributions on the Trust Securities by the Trust will be
19
deferred (and the amount of Distributions to which holders of the Trust
Securities are entitled will accumulate additional Distributions thereon at the
rate of 9.25% per annum, compounded semi-annually, but not exceeding the
interest rate then accruing on the Junior Subordinated Debentures) from the
relevant payment date for such Distributions during any such Extension Period.
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
(which includes common and preferred stock), (ii) make any payment of principal,
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 interest 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 interest to the
Junior Subordinated Debentures (other than (a) dividends or distributions in
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) purchases or
acquisitions of shares of the Corporation's common stock in connection with the
satisfaction by the Corporation of its obligations under any employee benefit
plan or any other contractual obligation of the Corporation (other than a
contractual obligation ranking PARI PASSU with or junior to the Junior
Subordinated Debentures), (e) 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 or (f) 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).
Prior to the termination of any Extension Period, the Corporation may
further extend such Extension Period; provided, however, 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 to 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 9.25%,
compounded semi-annually, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period, subject to the above
requirements. There is no limitation on the number of times that the Corporation
may elect to 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 present intention 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") 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
payment of Distributions thereafter. See "Certain United States Federal Income
Tax Consequences--Interest Income and Original Issue Discount" and "--Sales of
Capital Securities."
Should the Corporation elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures in the future, 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
20
mere existence of the Corporation's right to defer interest payments 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 and that are not subject to such deferrals.
SPECIAL EVENT REDEMPTION
Upon the occurrence and continuation of a Special Event (as defined under
"Description of Exchange Securities--Description of Exchange Junior Subordinated
Debentures--Special Event Prepayment") prior to February 1, 2007, 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 prior
approval of the Federal Reserve to do so if then required under applicable
capital guidelines or policies of the Federal Reserve. See "Description of
Exchange Securities--Description of Exchange Capital Securities--Redemption
Procedures."
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the fiscal 1998 budget proposal submitted to
Congress, the Clinton Administration proposed certain changes to Federal income
tax law which would, among other things, generally treat as equity, for Federal
income tax purposes, certain debt obligations, such as the Exchange Junior
Subordinated Debentures, that are "issued on or after the date of first
Congressional Committee action" (the "Clinton Proposal"). On June 9, 1997, House
Ways and Means Committee Chairman Bill Archer released the Chairman's Mark
Relating to Revenue Reconciliation Provisions that are proposed to be included
in 1997 tax legislation (the "Chairman's Mark"). The Chairman's Mark constitutes
"first Congressional Committee action" with respect to the provisions contained
therein. The Chairman's Mark does not include the Clinton Proposal that would
require instruments with terms similar to the Exchange Junior Subordinated
Debentures to be treated as equity for Federal income tax purposes.
In light of the Chairman's Mark, it appears that "first Congressional
Committee action" has not yet occurred with respect to the Clinton Proposal.
Furthermore, given the issue date of the Junior Subordinated Debentures and the
effective date transitional rules relating to certain capital markets provisions
included in the Chairman's Mark (as well as transitional rules provided for in
1996 proposed legislation similar to the Clinton Proposal), it is anticipated
that the Clinton Proposal, even if acted upon by Congress in the future, would
not apply to the Exchange Junior Subordinated Debentures.
There can be no assurance, however, that the Clinton Proposal or similar
legislation will not ultimately be enacted into law, that the effective date and
transitional rules relating thereto would be enacted as anticipated, or that
other developments will not occur after the date hereof that would adversely
affect the tax treatment of the Exchange Junior Subordinated Debentures and
could result, in certain circumstances, in the redemption of the Trust
Securities by the Corporation. See "Description of Exchange--Description of
Exchange Securities--Mandatory Redemption" and "Description of Exchange
Securities--Description of Exchange Junior Subordinated Debentures."
LIQUIDATION DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
The Corporation has the right at any time to terminate the Trust and cause
the Junior Subordinated Debentures to be distributed to holders of the Trust
Securities in liquidation of the Trust. Under current United States federal
income tax law, a distribution of Junior Subordinated Debentures upon the
dissolution of the Trust would not be a taxable event to holders of the Capital
Securities. If, however, the Trust is characterized for United States federal
income tax purposes as an association taxable as a corporation at the time of
dissolution of the Trust, the distribution of the Junior Subordinated Debentures
may constitute a taxable event to holders of Capital Securities. Moreover, upon
occurrence of a Special
21
Event, a dissolution of the Trust in which holders of the Capital Securities
receive cash would be a taxable event to such holders. See "Certain United
States Federal Income Taxation Consequences--Distribution 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 Capital Securities or
Junior Subordinated Debentures distributed to the holders of Capital Securities
if a termination of the Trust were to occur. Accordingly, the Capital Securities
or the Junior Subordinated Debentures may trade at a discount from the price
that the investor paid to purchase the Exchange Capital Securities offered
hereby. Because holders of Capital Securities may receive Junior Subordinated
Debentures in liquidation of the Trust and because Distributions are otherwise
limited to payments on the Junior Subordinated Debentures, prospective
purchasers of 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--Description of Liquidation of the Trust and
Distribution of Junior Subordinated Debentures" and "--Description of Exchange
Junior Subordinated Debentures-- General."
RIGHTS UNDER THE GUARANTEE
The Bank of New York will act as the Guarantee Trustee and will hold the
Guarantee for the benefit of the holders of the Capital Securities. The Bank of
New York will also act as Property Trustee and as Debenture Trustee under the
Indenture. The Bank of New York (Delaware) will act as Delaware Trustee under
the Trust Agreement. The Guarantee will guarantee to the holders of the 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
Capital Securities, to the extent that the Trust has funds on hand legally
available therefor at such time, (ii) the applicable Redemption Price with
respect to any Capital Securities called for redemption, to the extent that the
Trust has funds on hand legally available therefor at such time, and (iii) upon
a voluntary or involuntary termination and liquidation of the Trust (unless the
Junior Subordinated Debentures are distributed to holders of the 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 on hand available therefor at such time, and (b) the amount
of assets of the Trust remaining available for distribution to holders of the
Capital Securities upon termination and liquidation of the Trust. The holders of
a majority in Liquidation Amount of the Capital Securities will have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust power conferred upon the Guarantee Trustee. Any holder of
the Capital Securities may institute a legal proceeding directly against the
Corporation to enforce its rights under the Guarantee without first instituting
a legal proceeding against the Trust, the Guarantee Trustee or any other person
or entity. If the Corporation defaults on its obligation to pay amounts payable
under the Junior Subordinated Debentures, the Trust will not have sufficient
funds for the payment of Distributions or amounts payable on redemption of the
Capital Securities or otherwise, and, in such event, holders of the Capital
Securities will not be able to rely upon the Guarantee for payment of such
amounts. Instead, in the event a Debenture Event of Default shall have occurred
and be continuing and such event is attributable to the failure of the
Corporation to pay principal of (or premium, if any) or interest on the Junior
Subordinated Debentures on the payment date on which such payment is due and
payable, then a holder of Capital Securities may institute a legal proceeding
directly against the Corporation for enforcement of payment to such holder of
the principal (or premium, if any) or interest on such Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Capital Securities of such Holder (a "Direct Action"). Notwithstanding any
payments made to a holder of 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)
22
and interest on the Junior Subordinated Debentures, and the Corporation shall be
subrogated to the rights of the holder of such Capital Securities with respect
to payments on the 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 Capital Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Debentures or to
assert directly any other rights in respect of the Junior Subordinated
Debentures. See "Description of Exchange Securities--Description of Exchange
Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of
Exchange Capital Securities," "--Description of Exchange Junior Subordinated
Debentures--Debenture Events of Default" and "-- Description of Exchange
Guarantee." The Trust Agreement will provide that each holder of Capital
Securities by acceptance thereof agrees to the provisions of the Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities and the exercise of
the Trust's rights as holder of Junior Subordinated Debentures. Holders of
Capital Securities will not be entitled to vote to appoint, remove or replace
the Property Trustee or the Delaware Trustee and such 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 Capital Securities to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust, even if such
action adversely affects the interests of such holders. See "Description of
Exchange Securities--Description of Exchange Capital Securities--Voting Rights;
Amendment of the Trust Agreement" and "--Removal of Issuer Trustees."
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 which 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 which 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 Agreement (subject to
certain limited exceptions). The Corporation and the Trust do not intend to
register under the Securities Act any Original Capital Securities which 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 which
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 by July
6, 1997 and declared effective by August 5, 1997, the Distribution rate borne by
the Original Capital Securities commencing on August 6, 1997 will increase by
0.25% per annum until the Exchange Offer is consummated. Upon consummation of
the Exchange Offer, holders of Original Capital Securities will not be entitled
to any increase in the Distribution rate thereon or
23
any further registration rights under the Registration Agreement, except under
limited circumstances. See "Description of Original Securities."
ABSENCE OF PUBLIC MARKET
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). The Corporation and the
Trust have been informed by Keefe, Bruyette & Woods, Inc., Sandler O'Neill &
Partners, L.P., and Blaylock & Partners, L.P. (the "Initial Purchasers") that
the Initial Purchasers intend to make a market in the Exchange Capital
Securities. However, the Initial Purchasers are not obligated to do so and any
such market-making activity may be terminated at any time without notice to the
holders of the Exchange Capital Securities. In addition, such market-making
activity will be subject to the limits of the Securities Act and may be limited
during the pendency of the Exchange Offer. Accordingly, no assurance can be
given that an active public or other market will develop for the Exchange
Capital Securities or the Original Capital Securities, or as to the liquidity of
or the trading market for the Exchange Capital Securities or the Original
Capital Securities. If an active public market does not develop, the market
price and liquidity of the Exchange Capital Securities may be adversely
affected.
If a public trading market develops for the Exchange Capital Securities,
future trading prices 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. 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 the 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 (i) a book-entry confirmation (as defined
below) evidencing the tender of such Original Capital Securities through ATOP or
(ii) 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 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.
24
ONBANK CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Trust Agreement executed by the Corporation, as Sponsor, The Bank of
New York, as Property Trustee, The Bank of New York (Delaware), as Delaware
Trustee, and the Administrative Trustees named therein (the "Trust Agreement"),
and (ii) the filing of a certificate of trust with the Delaware Secretary of
State on January 24, 1997. 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 and (iii)
engaging in only those other activities necessary, advisable or incidental
thereto (such as registering the transfer of the Capital Securities).
Accordingly, the Junior Subordinated Debentures are the sole assets of the
Trust, and payments under the Junior Subordinated Debentures are the sole
revenues of the Trust. All of the Common Securities are owned by the
Corporation. The Common Securities will rank PARI PASSU, and payments are and
will be made thereon pro rata, with the Capital Securities, except that upon the
occurrence and continuance of 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
Securities--Description of Exchange Capital Securities--Subordination of Common
Securities." The Corporation has acquired Common Securities in a Liquidation
Amount equal to approximately, but not less than, 3% of the total capital of the
Trust. The Trust has a term of 31 years, but may terminate earlier as provided
in the Trust Agreement. The Trust's business and affairs are conducted by its
trustees, each appointed by the Corporation as holder of the Common Securities.
The trustees for the Trust are The Bank of New York, as the Property Trustee,
The Bank of New York (Delaware), as the Delaware Trustee, and three individual
trustees who are employees or officers of or affiliated with the Corporation
(collectively, the "Issuer Trustees"). The Bank of New York, as Property
Trustee, currently acts as sole indenture trustee under the Trust Agreement. The
Bank of New York will also act as indenture trustee under the Exchange Guarantee
and the Indenture. See "Description of Exchange Securities--Description of
Exchange Junior Subordinated Debentures" and "--Description of Exchange
Guarantee." The holder of the Common Securities of the Trust, 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 will be entitled to
appoint, remove or replace the Property Trustee and/or Delaware Trustee. In no
event will the holders of the 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 will pay all fees, expenses, debts and obligations (other than the
Trust Securities) related to the Trust and the offering of the Exchange Capital
Securities and will pay, directly or indirectly, all ongoing costs, expenses and
liabilities of the Trust. See "Description of Exchange Securities--Description
of Exchange Capital Securities-- Expenses and Taxes." The principal executive
office of the Trust is ONBANCorp, Inc., 101 South Salina Street, P.O. Box 4983,
Syracuse, New York, 13221-4983.
ONBANCORP, INC.
GENERAL
The Corporation is a Delaware chartered bank holding company headquartered
in Syracuse, New York, which operates two wholly owned subsidiaries, OnBank &
Trust Co., a New York-chartered trust company ("OnBank"), and Franklin First
Savings Bank, a Pennsylvania-chartered thrift ("Franklin" and, together with
OnBank, the "Banks"). Effective January 1, 1997, the Corporation's New
York-chartered thrift subsidiary (the "Thrift") with $476 million in assets was
merged into OnBank. The Banks offer diversified financial services through 120
locations in upstate New York and Scranton/Wilkes-Barre, Pennsylvania. At March
31, 1997 the Corporation had total consolidated assets of $5.5 billion, deposits
of
25
$3.9 billion and stockholders' equity of $332 million. For the year ended
December 31, 1996, the Corporation reported net income of $43.0 million, or
$2.86 per fully diluted common share.
The principal business of the Banks is to accept deposits from the general
public and to invest those deposits, together with funds from borrowings and
ongoing operations, in business, consumer and residential mortgage loans. The
Corporation has concentrated its efforts in the retail, municipal and commercial
banking business, expanding the types of financial products and services,
including trust services, offered to its customers. The Banks offer a variety of
deposit and loan products to residents and businesses in their respective market
areas. At March 31, 1997, OnBank (including the Thrift) had total assets of $4.0
billion, deposits of $3.0 billion and stockholder's equity of $271 million, and
Franklin had total assets of $1.4 billion, deposits of $0.9 billion and
stockholder's equity of $91 million.
The Corporation is a legal entity separate and distinct from its
subsidiaries. The ability of holders of debt and equity securities of the
Corporation to benefit from the distribution of assets of any subsidiary upon
the liquidation or reorganization of such subsidiary is subordinate to prior
claims of creditors of the subsidiary (including depositors in the case of the
Banks) except to the extent that a claim of the Corporation as a creditor may be
recognized.
There are various statutory and regulatory limitations on the extent to
which present and future banking subsidiaries of the Corporation can finance or
otherwise transfer funds in the Corporation or its nonbanking subsidiaries,
whether in the form of loans, extensions of credit investments or asset
purchases. See "Description of Exchange Securities--Description of Exchange
Junior Subordinated Debentures-- General."
In addition, there are regulatory limitations on the payment of dividends
directly or indirectly to the Corporation from the Banks. At March 31, 1997,
OnBank could have paid $9.9 million in dividends to the Corporation without
prior regulatory approval. Federal and state regulatory agencies also have the
authority to limit further the Banks' payment of dividends based on other
factors, such as the maintenance of adequate capital for the Banks, which could
reduce the amount of dividends otherwise payable.
Under current Federal Reserve policy, the Corporation is expected to act as
a source of financial strength to the Banks and to commit resources to support
the Banks in circumstances where the Corporation might not do so absent such
policy. In addition, any subordinated loans by the Corporation to either of the
Banks would also be subordinate in right of payment to deposits and obligations
to general creditors of such Bank. See "Risk Factors."
The principal executive offices of the Corporation are located at 101 South
Salina Street, P.O. Box 4983, Syracuse, New York, 13221-4983, and its telephone
number at such address is (315) 424-4400.
RECENT DEVELOPMENTS
The Corporation reported net income of $12.1 million for the first quarter
of 1997, or $.87 per fully diluted common share, representing a 7.60% increase
in per share earnings when compared to first-quarter 1996 net income of $11.6
million, or $.74 per fully diluted common share. For the year ended December 31,
1996, the Corporation reported net income of $43.0 million, or $2.86 per fully
diluted common share. The Corporation's return on assets and return on equity
figures for the first quarter of 1997 were .93% and 13.7% compared to .85% and
12.0% for the respective prior quarter period. The Corporation declared a first
quarter dividend of $.34 per common share which was paid on April 1, 1997.
ACCOUNTING TREATMENT
The financial statements of the Trust are consolidated into the
Corporation's consolidated financial statements, with the Capital Securities
treated as minority interest and shown in the Corporation's consolidated balance
sheet as "Corporation-Obligated Mandatorily Redeemable Capital Securities of
Subsidiary Trust Holding Solely Junior Subordinated Debentures of the
Corporation." The sole asset of
26
the Trust is $61,856,000 principal amount of the Junior Subordinated Debentures,
bearing interest at 9.25% and maturing on February 1, 2027.
USE OF PROCEEDS
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities and the Exchange Guarantee
offered hereby. In consideration for issuing the Exchange Capital Securities as
contemplated in this Prospectus, the Trust will receive in exchange Original
Capital Securities in like Liquidation Amount, the terms of which are identical
in all material respects to the Exchange Capital Securities except for certain
transfer restrictions and registration rights. The Original Capital Securities
surrendered in exchange for the Exchange Capital Securities will be retired and
canceled and cannot be reissued.
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 $61,856,000. All of the proceeds from the sale of the Original Capital
Securities were invested by the Trust in the Original Junior Subordinated
Debentures.
27
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to combined fixed
charges of the Corporation for the respective periods indicated.
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
THREE MONTHS ENDED
MARCH 31, 1997 1996 1995 1994 1993 1992
----------------------- --------- --------- --------- --------- ---------
Ratio of Earnings to
Fixed changes:
Excluding interest on deposits.................. 2.28x 2.03x 1.58x 1.03x 2.26x 2.59x
Including interest on deposits.................. 1.35x 1.32x 1.26x 1.02x 1.54x 1.50x
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends:
Excluding interest on deposits.................. 2.28x 1.84x 1.49x .98x 2.05x 2.31x
Including interest on deposits.................. 1.35x 1.28x 1.21x .99x 1.48x 1.44x
For purposes of computing these ratios, 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. Preferred stock dividends consist of dividends on the Corporation's
Series B 6.75% Cumulative Convertible Preferred Stock, par value $1.00 per
share. All of such shares of preferred stock had been converted into common
stock or were redeemed as of January 8, 1997. For the year ended December 31,
1994, earnings were insufficient to cover fixed charges and preferred stock
dividends by $2.6 million.
28
CAPITALIZATION
The following table sets forth the consolidated capitalization of ONBANCorp
at March 31, 1997 and as adjusted to give pro forma effect to the Exchange Offer
as if it had occurred on March 31, 1997. The issuance of the Exchange Capital
Securities in the Exchange Offer will have no effect on the capitalization of
the Corporation. This table is based on, and is qualified in its entirety by,
the historical consolidated financial statements of ONBANCorp, including the
related notes thereto, which are included in documents incorporated by reference
herein, and should be read in conjunction therewith. See "Incorporation of
Certain Documents by Reference."
AT MARCH 31, 1997
------------------------------------
PRO FORMA PRO FORMA
ACTUAL ADJUSTMENT AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS)
Long-term debt.............................................................. $ 276,950 -- $ 276,950
Corporation-obligated mandatorily redeemable original capital securities of
subsidiary trust holding solely Series A junior subordinated debentures of
the Corporation(1)........................................................ 60,000 (60,000) 0
Corporation-obligated mandatorily redeemable exchange capital securities of
subsidiary trust holding Series B junior subordinated debentures of the
Corporation(2)............................................................ 60,000 60,000
Stockholders' equity:....................................................... --
Common stock, par value $1.00 per share; 56,000,000 shares authorized;
14,292,924 shares issued.................................................. 14,293 -- 14,293
Additional paid-in capital.................................................. 98,596 -- 98,596
Retained earnings........................................................... 284,228 -- 284,228
Net unrealized holding loss on securities, net of deferred taxes............ (22,828) -- (22,828)
Treasury stock, at cost, 1,994,143 shares................................... (42,462) -- (42,462)
Guarantee of ESOP indebtedness.............................................. (150) (150)
---------- ----------- -----------
Total stockholders' equity.................................................. 331,577 -- 331,677
---------- ----------- -----------
Total capitalization........................................................ $ 668,267 -- $ 668,267
---------- ----------- -----------
---------- ----------- -----------
- ------------------------
(1) Reflects the Original Capital Securities. The Trust is a subsidiary of the
Corporation and holds the Series A Junior Subordinated Debentures as its
sole asset.
(2) Reflects the Exchange Capital Securities. The Trust is a subsidiary of the
Corporation and will hold the Series B Junior Subordinated Debentures as its
sole asset.
29
SUMMARY FINANCIAL DATA
The summary below should be read in connection with the financial
information included in the Corporation's 1996 Annual Report on Form 10-K and
its Quarterly Report on Form 10-Q for the quarter ended March 31, 1997. See
"Available Information," "Incorporation of Certain Documents by Reference" and
"ONBANCorp, Inc.--Recent Developments." Interim unaudited data for the three
months ended March 31, 1997 and 1996 reflect, in the opinion of management of
the Corporation, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such data. Results for the
three months ended March 31, 1997 are not necessarily indicative of results
which may be expected for any other interim period or for the year as a whole.
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Consolidated summary of operations:
Interest income.................................. $ 92,628 $ 94,827 $ 374,845 $ 431,459 $ 388,275 $ 327,622 $ 253,649
Interest expense................................. 54,341 56,945 222,098 278,944 224,646 171,055 141,353
--------- --------- --------- --------- --------- --------- ---------
Net interest income.............................. 38,287 37,882 152,747 152,515 163,629 156,567 112,296
--------- --------- --------- --------- --------- --------- ---------
Provision for loan losses........................ 1,796 1,950 7,813 6,790 7,638 10,297 5,900
Other operating income........................... 7,714 6,621 30,244 23,844 26,807 31,541 19,691
Net gains/(losses) on securities transactions.... 2,085 1,893 6,018 5,457 (79,496) 14,525 3,382
Other operating expense.......................... 26,955 26,213 103,332 103,462 99,890 98,666 58,783
SAIF recapitalization charge..................... -- -- 7,282 -- -- -- --
Income before income taxes and cumulative effect
of accounting change........................... 19,335 18,233 70,582 71,564 3,412 93,670 70,686
Provision for income taxes....................... 7,187 6,667 27,618 26,887 708 35,707 29,432
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of accounting
change......................................... 12,148 11,566 42,964 44,677 2,704 57,963 41,154
Cumulative effect of accounting change........... -- -- -- -- -- 3,400 --
--------- --------- --------- --------- --------- --------- ---------
Net income....................................... $ 12,148 $ 11,566 $ 42,964 $ 44,677 $ 2,704 $ 61,363 $ 41,154
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Per common share data:
Net income (loss):
Primary........................................ $ .88 $ .77 $ 2.98 $ 2.84 $ (.15) $ 4.22 $ 2.92
Fully diluted.................................. .87 .74 2.86 2.75 (.15) 3.93 2.86
Book value at period end......................... 24.96 24.29 24.83 24.11 20.82 25.77 20.87
Cash dividends declared.......................... $ .34 $ .30 $ 1.24 $ 1.14 $ 1.03 $ .69 $ .45
Average number of common shares (in thousands):
Primary.......................................... 13,846 13,707 13,037 14,124 14,017 13,405 12,976
Fully diluted.................................... 14,028 15,680 15,013 16,269 14,017 15,606 14,403
Consolidated balance sheet data at period end:
Securities available-for-sale.................... $1,023,283 $ 879,797 $ 925,340 $ 978,361 $ 710,767 $3,251,521 $ 139,050
Securities held to maturity...................... 1,613,242 1,775,035 1,683,908 1,761,692 3,153,896 329,705 2,144,008
Loans, net of unearned income and fees........... 2,481,262 2,307,775 2,448,474 2,288,990 1,982,972 1,713,438 1,941,586
Allowance for loan losses........................ (38,491) (35,743) (37,840) (34,583) (33,775) (32,717) (31,722)
Total assets..................................... 5,480,161 5,420,051 5,417,877 5,567,059 6,723,305 5,772,280 4,724,021
Deposits......................................... 3,871,794 3,765,628 5,321,300 3,808,273 3,793,343 3,005,999 3,023,901
Borrowings....................................... 1,032,641 1,158,535 1,129,888 1,264,987 2,217,088 2,273,997 1,283,505
Stockholders' equity............................. $ 331,677 $ 391,390 $ 360,051 $ 388,766 $ 362,936 $ 430,638 $ 334,466
30
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Original Capital Securities, the
Corporation and the Trust entered into the Registration Agreement with the
Initial Purchasers, pursuant to which the Corporation and the Trust agreed to
file and to use their reasonable efforts to cause to become effective with the
Commission a registration statement with respect to the exchange of the Original
Capital Securities for capital securities with terms identical in all material
respects to the terms of the Original Capital Securities. A copy of the
Registration 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 Agreement. The form and
terms of the Exchange Capital Securities are the same as the form and terms of
the Original Capital Securities except that the Exchange Capital Securities have
been registered under the Securities Act and will not be subject to the $100,000
minimum Liquidation Amount transfer restriction and certain other 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 July 6, 1997 and
declared effective by August 5, 1997, the Distribution rate borne by the
Original Capital Securities commencing on August 6, 1997 will increase by 0.25%
per annum until the Exchange Offer is consummated. Upon consummation of the
Exchange Offer, holders of Original Capital Securities will not be entitled to
any increase in the Distribution rate thereon or any further registration rights
under the Registration 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 The Depository Trust Company
("DTC") who desires to deliver such Original Capital Securities by book-entry
transfer at DTC.
Pursuant to the Exchange Offer, the Corporation will exchange as soon as
practicable after the date hereof, the Original Guarantee for the Exchange
Guarantee and the Original Junior Subordinated Debentures, in an amount
corresponding to the Original Capital Securities accepted for exchange, for a
like aggregate principal amount of the Exchange Junior Subordinated Debentures.
The Exchange Guarantee and 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 $60,000,000 aggregate Liquidation Amount of Exchange Capital
Securities for a like aggregate Liquidation Amount of Original Capital
Securities properly tendered on or prior to the Expiration Date and not properly
withdrawn in accordance with the procedures described below. The Trust will
issue, promptly after the Expiration Date, an aggregate Liquidation Amount of up
to $60,000,000 of Exchange Capital Securities in exchange for a like principal
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
31
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,
$60,000,000 aggregate Liquidation Amount of the Original Capital Securities is
outstanding.
Holders of Original Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Original Capital
Securities which are not tendered for or are tendered but not accepted in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Trust Agreement, but will not be entitled to any further
registration rights under the Registration 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
promptly after the Expiration Date.
Holders who tender Original Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Original Capital Securities in connection with the
Exchange Offer. The Corporation will pay all charges and expenses, other than
certain applicable taxes described below, 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. HOLDERS OF
ORIGINAL CAPITAL SECURITIES MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER
PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF ORIGINAL
CAPITAL SECURITIES TO TENDER BASED ON SUCH HOLDERS' OWN FINANCIAL POSITIONS AND
REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on August
21, 1997 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 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," and (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in any respect. If the Exchange
Offer is amended in a manner determined by 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
32
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 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 law, 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 to the Exchange Agent, 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, 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.
Subject to the terms and 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 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 promptly after the Expiration
Date. If for any reason whatsoever, acceptance for exchange or the exchange of
any Original Capital Securities tendered pursuant to the Exchange Offer is
delayed (whether before or after the Trust's acceptance for exchange of Original
Capital Securities) or 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 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. Such holder also will 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 so doing, acknowledge that
they are bound by the terms of the Letter of Transmittal.
33
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
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 acknowledgement from such
holder that such holder has received and agrees to be bound by this Letter of
Transmittal and that the Trust and the Corporation may enforce this 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 broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity 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 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 procedures set forth below
must be complied with).
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the amount of Original Capital Securities being
tendered in the appropriate box on the Letter of Transmittal. The entire 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 (a) a certificate for the Original Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (b) such holder completes the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" in the Letter of Transmittal. In the case of (a)
or (b) 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):
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association (an "Eligible Institution"), unless surrendered on behalf of such
Eligible Institution. See Instruction 1 to the Letter of Transmittal.
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.
34
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.
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:
(1) such tenders are made by or through an Eligible Institution;
(2) a properly completed and duly executed notice to the Exchange Agent
guaranteeing delivery to the Exchange Agent of either certificates
representing the Original Capital Securities or a book-entry confirmation in
compliance with the requirements set forth herein (the "Notice of Guaranteed
Delivery"), substantially in the form accompanying the Letter of
Transmittal, is received by the Exchange Agent, as provided below, on or
prior to the Expiration Date;
(3) (a) a book-entry confirmation or (b) 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 the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
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
35
to such tender have been cured or waived. Neither the Corporation, the Trust,
any affiliates or assigns of the Corporation or the Trust, the Exchange Agent
nor 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.
A beneficial owner of Original Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
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 Division of Corporation Finance
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 Division of Corporation Finance 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 Division of Corporation Finance 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 to resell pursuant to Rule 144A or
any other available exemption under the Securities Act, (a) will not be able to
rely on the interpretations of the staff of the Division of Corporation Finance
of the Commission set forth in the above-mentioned interpretive letters, (b)
will not be permitted or entitled to tender such Original Capital Securities in
the Exchange Offer and (c) 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 below, 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
36
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 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
Division of Corporation Finance 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 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 180 days after the Expiration
Date (subject to extension under certain limited circumstances described below)
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 one of the addresses 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 which makes any statement contained or incorporated by reference in
this Prospectus untrue in any material respect or (ii) any fact which causes
this Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference herein, in light of the
circumstances under which they were made, not misleading, or (iii) of the
occurrence of certain other events specified in the Registration 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
37
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 180-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 or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses 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 principal 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 such 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.
Neither the Corporation, the Trust, any affiliates or assigns of the Corporation
or the Trust, the Exchange Agent nor any other person shall be under any duty to
give any notification of any irregularities in any notice of withdrawal or incur
any liability for failure to give any such notification. Any Original Capital
Securities which have been tendered but which are withdrawn will be returned to
the holder thereof promptly after withdrawal.
DISTRIBUTIONS ON EXCHANGE CAPITAL SECURITIES
Holders of Original Capital Securities as of July 15, 1997 (the record date
for the initial Distribution on August 1, 1997), including such holders who
tender their Original Capital Securities pursuant to the Exchange Offer, will be
entitled to receive such Distribution.
38
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 below, may terminate the Exchange
Offer (whether or not any Original Capital Securities have theretofore been
accepted for exchange) or may waive any conditions to or amend the Exchange
Offer, if any of the following conditions have occurred or exists or have not
been satisfied:
(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Capital Securities issued
pursuant to the Exchange Offer in exchange for Original Capital Securities
to be offered for resale, resold and otherwise transferred by holders
thereof (other than broker-dealers and any such holder which is an
"affiliate" of 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;
(b) 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;
(c) 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
(d) the Corporation determines 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 determines 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
The Bank of New York 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
39
requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent as follows:
By Mail: The Bank of New York
101 Barclay Street, 7E
New York, New York 10286
Attention: Reorganization Section
Odell Romeo
By Overnight Mail or Courier:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
New York, New York 10286
Attention: Reorganization Section
Odell Romeo
By Hand: The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
New York, New York 10286
Attention: Reorganization Section
Odell Romeo
Facsimile Transmission Number: (212) 815-6339
Confirm by Telephone: (212) 815-6337
Information: (212) 815-6337
Delivery to other than the above addresses 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 other nominees soliciting acceptances of the Exchange Offer.
40
DESCRIPTION OF EXCHANGE SECURITIES
The terms of the Original Securities are identical in all material 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
Agreement (which rights will terminate upon consummation of the Exchange Offer,
except under limited circumstances), (ii) the Exchange Capital Securities will
not contain certain restrictions on transfer applicable to Original Capital
Securities, (iii) the Exchange Capital Securities will not provide for any
increase in the Distribution rate thereon and (iv) the Exchange Junior
Subordinated Debentures will not provide for any increase in the interest rate
thereon. The Original Securities provide that, in the event that a registration
statement relating to the Exchange Offer has not been filed by July 6, 1997 and
been declared effective by August 5, 1997, or, in certain limited circumstances,
in the event a shelf registration statement (the "Shelf Registration Statement")
with respect to the resale of the Original Capital Securities is not declared
effective by the time required by the Registration Agreement, 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. 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."
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement, the Issuer Trustees on behalf
of the Trust will issue the Exchange Capital Securities. The Exchange Capital
Securities will represent beneficial ownership interests in the Trust and the
holders thereof will be entitled to a preference in certain circumstances with
respect to Distributions and amounts payable on redemption of the Trust
Securities or liquidation of the Trust over the Common Securities, as well as
other benefits as described in the Trust Agreement. 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, the Common 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 the provisions of the Trust
Agreement, including the definitions therein of certain terms. The form of the
Trust Agreement is available upon request from the Issuer Trustees.
GENERAL. The Exchange Capital Securities will be limited to $60,000,000
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 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 Trust Securities. The Exchange Guarantee executed by the
Corporation for the benefit of the holders of the Exchange Capital Securities
(the "Exchange Guarantee") will not guarantee payment of Distributions or
amounts payable on redemption of the Exchange Capital Securities or on
liquidation of the Trust when the Trust does not have funds on hand legally
available for such payments. See "--Description of Exchange Guarantee."
DISTRIBUTIONS. The Exchange Capital Securities represent beneficial
ownership interests in the Trust, and Distributions on each Capital Security
will be payable at the annual rate of 9.25% of the stated Liquidation Amount of
$1,000 and will be payable semi-annually in arrears on February 1 and August 1
of each year, commencing February 1, 1998, to the holders of the Exchange
Capital Securities on the relevant record dates. The record dates will be the
fifteenth day of the month prior to the month in which the relevant Distribution
Date (as defined below) falls. Distributions on the Exchange Capital Securities
will
41
be cumulative. Distributions will accumulate from August 1, 1997. 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 Distribution payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payments in respect to any such delay), except that if such next succeeding
Business Day falls in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on the 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 or Syracuse, New York are authorized or
required by law or executive order to remain closed.
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 the
payment of interest on the Exchange 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. At the end of such Extension Period, the Corporation must
pay all interest then accrued and unpaid (together with interest thereon at the
annual rate of 9.25% compounded semi-annually, to the extent permitted by
applicable law). During an Extension Period, interest will continue to accrue
and holders of Exchange Junior Subordinated Debentures (and holders of the
Securities while 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. The term "Distributions" as
used herein shall include any such additional Distributions.
During any such 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
(which includes common and preferred 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 interest 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 Exchange 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 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 or,
(e) the purchase of fractional interests in shares of the Corporation's 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
plans for its directors, officers or employees or any of the Corporation's
divided 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 the 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 any Extension Period, except at the end thereof.
The Corporation must give the Property Trustee, the Administrative Trustees
42
and the Debenture Trustee notice of its election of any such Extension Period
(or an extension thereof) at least five Business Days prior to the earlier of
(i) the date the Distributions on the Capital Securities would have been payable
except for the election to begin or extend such Extension Period, or (ii) the
date the Administrative Trustees are required to give notice to any automated
quotation system or to holders of such 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 Capital Securities. 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 Federal Income Tax Consequences--Interest Income and Original Issue
Discount."
The revenue of the Trust available for distribution to holders of the
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 Capital Securities.
The payment of Distributions (if and to the extent the Trust has funds on hand
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
prior to the Stated Maturity Date of the Exchange Junior Subordinated
Debentures, the proceeds from such repayment or prepayment shall be applied by
the Property Trustee to redeem a Like Amount (as defined below) of the Exchange
Capital Securities, upon not less than 30 nor more than 60 days' 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 Exchange Junior
Subordinated Debentures on the Stated Maturity Date, the Maturity Redemption
Price (equal to the principal of, and accrued and unpaid interest on, the
Exchange Junior Subordinated Debentures), (ii) in the case of the optional
prepayment of the Exchange Junior Subordinated Debentures prior to February 1,
2007 upon the occurrence and continuation of a Special Event, the Special Event
Redemption Price (equal to the Special Event Prepayment Price in respect of the
Exchange Junior Subordinated Debentures) and (iii) in the case of the optional
prepayment of the Exchange Junior Subordinated Debentures on or after February
1, 2007, the Optional Redemption Price (equal to the Optional Prepayment Price
in respect of the Exchange Junior Subordinated Debentures). See "Description of
Exchange Junior Subordinated Debentures--Optional Prepayment" and "--Special
Event Prepayment."
"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 Exchange Junior Subordinated Debentures to be paid in accordance with
their terms and (ii) with respect to a distribution of Exchange Junior
Subordinated Debentures upon the liquidation of the Trust, Exchange Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Exchange 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 February 1, 2007,
at the applicable Optional Prepayment Price and (ii) in whole but not in part,
at any time prior to February 1, 2007, upon the occurrence of a Special Event,
at the Special Event Prepayment Price, in each case subject to prior approval of
the Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve. See "Description of Exchange Junior
Subordinated Debentures--Optional Prepayment" and "--Special Event Prepayment."
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES.
The Corporation will have the right at any time to terminate the Trust and cause
the Junior Subordinated Debentures to be
43
distributed to the holders of the Trust Securities in liquidation of the Trust.
Such right is subject to (i) the Corporation having received an opinion of
counsel to the effect that such distribution will not be a taxable event to the
holders of Capital Securities and (ii) the prior approval of the Federal Reserve
if then required under applicable capital guidelines or policies of the Federal
Reserve.
The Trust shall automatically terminate 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 terminate 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" above; (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 an early termination occurs as described in clause (i), (ii), (iv) or (v)
above, the Trust shall be liquidated by the Issuer Trustees as expeditiously as
the Issuer 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 available to pay in full the
aggregate Liquidation Distribution or if a Debenture Event of Default has
occurred and is continuing, the Capital Securities shall have a priority over
the Common Securities. See "--Subordination of Common Securities."
If the Corporation elects not to prepay the Junior Subordinated Debentures
prior to maturity in accordance with their terms and either elects not to or is
unable to liquidate the Trust and distribute the Junior Subordinated Debentures
to holders of the Trust Securities, the Trust Securities will remain outstanding
until the repayment of the Junior Subordinated Debentures on the Stated Maturity
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 registered global certificate, if any,
representing Trust Securities held by it, a registered global certificate or
certificates 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
the Exchange Capital Securities offered hereby.
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 Exchange 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
44
available for the payment of such applicable Redemption Price. See also
"--Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the 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 Capital Securities
held by DTC or its nominees, the Property Trustee will 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 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 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
the 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
Capital Securities will cease, except the right of the holders of the Capital
Securities to receive the applicable Redemption Price, but without interest on
such Redemption Price, and the Capital Securities will cease to be outstanding.
In the event that any Redemption Date of 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), except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the 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," 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, in which case 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 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 or
an Event of Default under the Trust Agreement shall have occurred and be
continuing, no payment of any Distribution on, or applicable Redemption Price
of, any of such 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.
45
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 any
such Event of Default until the effect of such Events of Default have been
cured, waived or otherwise eliminated. Until all such Event of Default shall
have been 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 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
above. See "--Liquidation of the Trust and Distribution of 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 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 corporation 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 corporation resulting from any merger, conversion or consolidation to
which such Issuer Trustee shall be a party, or any corporation 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
corporation shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST. The
Trust may not merge with or into, consolidate, amalgamate or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any corporation or other Person, except as
described below. 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 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 Capital
Securities or (b) substitutes for the Capital Securities other securities having
substantially the same terms as the Capital Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Capital
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
46
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Capital Securities are
then listed, if any, (iv) if the Capital Securities (including any Successor
Securities) are rated by any nationally recognized statistical rating
organization prior to such transaction, such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Capital Securities (including any Successor Securities) to be downgraded by any
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
Capital Securities (including any Successor Securities) in any material respect,
(vi) such successor entity has a purpose 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 Capital Securities (including any Successor Securities) in any material
respect, 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. 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, Consolidation, Amalgamations or Replacements of the Trust,"
"--Description of Exchange Guarantee-- Amendments and Assignment" and as
otherwise required by law and the Trust Agreement, the holders of the Capital
Securities will have no voting rights.
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 provision 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, or (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; provided, however,
that in the case of clause (i), such action shall not adversely affect in any
material respect the interests of the holders of the Trust Securities, and any
amendments of the Trust Agreement 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 (based upon Liquidation Amount) of the outstanding Trust
Securities, and (ii) upon receipt by the Issuer Trustees of an opinion of
counsel to the effect that such amendment or the exercise of any power granted
to the Issuer Trustees in accordance with such amendment will not affect the
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
47
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 which 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
executing any trust or power conferred on the Property 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 Capital Securities will be required for
the Trust to redeem and cancel the Capital Securities in accordance with the
Trust Agreement.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Corporation, the Issuer Trustees or any
affiliate of the Corporation or any Issuer Trustees, 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 Capital
Securities in registered, global form (collectively, 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.
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 Capital Securities in certificated form except in the
limited circumstances described below. See "--Exchange of Book-Entry Capital
Securities for Certificated Capital Securities."
48
DEPOSITARY PROCEDURES. DTC has advised the Trust and the Corporation that
DTC is a limited purpose trust company 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 to accounts of its
Participants. The Participants include securities brokers and dealers (including
the Initial Purchasers), banks, trust companies, clearing corporations and
certain other organizations. 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
Purchasers with portions of the principal 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 in such system, or indirectly
through organizations which are Participants in such system. 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 Capital Securities, see
"--Exchange of Book-Entry Capital Securities for Certificated Capital
Securities."
Except as described below, owners of beneficial interests in the Global
Capital Securities will not have Capital Securities registered in their name,
will not receive physical delivery of 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 or its nominee
as the registered holder under the Trust Agreement. Under the terms of the Trust
Agreement, the Property Trustee will treat the persons in whose names the
Capital Securities, including the Global Capital Securities, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. 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 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
49
not receive payment on such payment date. Payments by the Participants and the
Indirect Participants to the beneficial owners of 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.
Neither the Trust nor the Corporation nor Property Trustee will be liable for
any delay by DTC or any of its Participants in identifying the beneficial owners
of the 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 therefore 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 be settled 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 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 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 legended Exchange Capital Securities in certificated form
and to distribute such Exchange Capital Securities to its Participants.
The information in this section concerning DTC and their book-entry systems
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. Neither the Trust nor the
Corporation nor 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 their
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, (ii) the Corporation in its sole discretion elects to cause the issuance of
the Capital Securities in certificated form, or (iii) there shall have occurred
and be continuing an Event of Default 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 for
certificated Exchange Capital Securities upon request, but only upon at least 20
days prior written notice given to the Property Trustee by or on behalf of DTC
in accordance with customary procedures. In all cases, certificated 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 the Depositary (in accordance with
its customary procedures) and will bear the legend referred to in "Notice to
Investors," unless the Property Trustee determines otherwise in compliance with
applicable law.
EXCHANGE OF CERTIFIED CAPITAL SECURITIES FOR BOOK-ENTRY CAPITAL
SECURITIES. Other Capital Securities, which may be issued in certified 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
50
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 Exchange Capital
Securities held in global form shall be made to the Depositary, which shall
credit the relevant accounts at the Depositary on the applicable Distribution
Dates or in respect of the Capital Securities that are not held by the
Depositary, such payments 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' written notice to the Property Trustee
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 Exchange Capital Securities). 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. 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.
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, undertakes to
perform only such duties as are specifically set forth in the Trust Agreement
and, after such Event of Default, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the Property Trustee is under no obligation
to exercise any of the powers vested in it by the Trust Agreement at the request
of any holder of 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 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 the Trust
will not be deemed to be an "investment company" required to be registered under
the Investment Company Act or classified as an association taxable as a
corporation for United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness of the Corporation for
United States federal income tax purposes. In this connection, 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 Corporation and the Administrative Trustees determine
in their discretion to be necessary or desirable for
51
such purposes, as long as such action does not materially adversely affect the
interests of the holders of the Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money or issue debt, execute mortgages or pledge
any of its assets.
DESCRIPTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Original Junior Subordinated Debentures were issued and the Exchange
Junior Subordinated Debentures will be issued under an Indenture, as
supplemented from time to time (as so supplemented, the "Indenture"), between
the Corporation and The Bank of New York, as trustee (the "Debenture Trustee").
The Indenture has been qualified under the Trust Indenture Act of 1939, as
amended (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 where reference is made to particular provisions
of the Indenture, such provisions, including the definitions of certain terms,
some of which are not otherwise defined herein, are qualified in their entirety
by reference to all of the provisions of the Indenture and those terms made a
part of the Indenture by the Trust Indenture Act.
GENERAL. Concurrently with the issuance of the Trust Securities, the Trust
invested the proceeds thereof in the Original Junior Subordinated Debentures
issued by the Corporation. The Exchange Junior Subordinated Debentures,
similarly to the Original Junior Subordinated Debentures, will bear interest at
the annual rate of 9.25% of the principal amount thereof, payable semi-annually
in arrears on February 1 and August 1 of each year (each, an "Interest Payment
Date"), commencing February 1, 1998, to the persons in whose names the Exchange
Junior Subordinated Debentures are registered, subject to certain exceptions, at
the close of business on the fifteenth day of the month prior to the month in
which the relevant payment date falls. It is anticipated that, until the
liquidation, if any, of the Trust, each Exchange 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 interest is payable on the Exchange Junior
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that if such next succeeding Business Day falls in the next succeeding
calendar year, then such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date. Accrued interest that is not paid on the applicable Interest Payment Date
will bear additional interest on the amount thereof (to the extent permitted by
law) at the rate per annum of 9.25% 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 in denominations
of $1,000 and integral multiples thereof. The Junior Subordinated Debentures
will mature on February 1, 2027 (the "Stated Maturity Date").
The Exchange Junior Subordinated Debentures will rank PARI PASSU with the
Original Junior Subordinated Debentures and all Other Debentures and will be
unsecured 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."
The Corporation is a non-operating holding company and almost all of the
operating assets of the Corporation are owned by such subsidiaries. The
Corporation relies primarily on dividends from such subsidiaries to meet its
obligations for payment of principal and interest on its outstanding debt
obligations and corporate expenses. The Corporation is a legal entity separate
and distinct from its banking and non-
52
banking affiliates. The principal sources of the Corporation's income are
dividends, interest and fees from its banking and non-banking affiliates. The
Banks are subject to certain restrictions imposed by federal law on any
extensions of credit to, and certain other transactions with, the Corporation
and certain other affiliates, and on investments in stock or other securities
thereof. Such restrictions prevent the Corporation and such other affiliates
from borrowing from the Banks unless the loans are secured by various types of
collateral. Further, such secured loans, other transactions and investments by
any of the Banks 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 as
to the Corporation and all of such other affiliates to an aggregate of 20% of
such Bank's capital and surplus. In addition, payment of dividends to the
Corporation by the subsidiary banks is subject to ongoing review by banking
regulators and is subject to various statutory limitations and in certain
circumstances requires approval by banking regulatory authorities. At March 31,
1997, OnBank could have paid $9.9 million in dividends to the Corporation
without prior regulatory approval. Federal and State regulatory agencies also
have the authority to limit further the Banks' payment of dividends based on
other factors, such as the maintenance of adequate capital for the Banks, which
could reduce the amount of dividends otherwise payable.
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 the subsidiary (including depositors in the case of the
Banks) except to the extent the Corporation may itself be recognized as a
creditor of that subsidiary. Accordingly, the Junior Subordinated Debentures
will be effectively subordinated to the all existing and future liabilities of
the Corporation's subsidiaries, and holders of Junior Subordinated Debentures
should look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. The Indenture does not limit the occurrence or issuance
of other secured or unsecured debt of the Corporation or any subsidiary,
including Senior Indebtedness. See "--Subordination."
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 one or more global
certificates 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 Capital
Securities.
PAYMENT AND PAYING AGENTS. Payment of principal of (and premium, if any)
and any interest on Exchange Junior Subordinated Debentures will be made at the
office of the Debenture Trustee in the City of New York 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; 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.
53
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 at any time or from time to time during the term of the
Exchange Junior Subordinated Debentures to defer the payment of interest 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 Dates. At the
end of such Extension Period, the Corporation must pay all interest then accrued
and unpaid (together with interest thereon at the annual rate of 9.25%,
compounded semi-annually, to the extent permitted by applicable law). During an
Extension Period, interest will continue to accrue and holders of Exchange
Junior Subordinated Debentures (and holders of the Exchange Capital Securities
while Exchange Capital Securities are outstanding) will be required to accrue
interest income for United States federal income tax purposes prior to the
receipt of cash attributable to such income. See "Certain United States Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
During any such 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
(which includes common and preferred stock) or (ii) make any payment of
principal, 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 Exchange 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 Exchange 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 related to the
issuance of common stock or rights under any of the Corporation's benefit plans
for its directors, officers or employees or any of the Corporation's dividend
reinvestment plans).
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, 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
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
Administrative Trustees are 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 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
February 1, 2007 (the "Initial Optional Prepayment
54
Date"), subject to the Corporation having received prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies of the
Federal Reserve, at a prepayment price (the "Optional Prepayment Price") equal
to the percentage of the outstanding principal amount of the Junior Subordinated
Debentures specified below, plus, in each case, accrued interest to the date of
prepayment if prepaid during the 12-month period beginning February 1 of the
years indicated below:
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
2007.............................................................................. 104.625%
2008.............................................................................. 104.163%
2009.............................................................................. 103.700%
2010.............................................................................. 103.238%
2011.............................................................................. 102.775%
2012.............................................................................. 102.313%
2013.............................................................................. 101.850%
2014.............................................................................. 101.388%
2015.............................................................................. 100.925%
2016.............................................................................. 100.463%
2017 and thereafter............................................................... 100.000%
SPECIAL EVENT PREPAYMENT. If prior to February 1, 2007, a Special Event
shall occur and be continuing, the Corporation may, at its option and subject to
receipt of prior approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve, 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 greater of (i) 100% of the
principal amount of such Exchange Junior Subordinated Debentures or (ii) the
sum, as determined by a Quotation Agent, of the present values of the principal
amount and premium payable with respect to an optional redemption of the
Exchange Junior Subordinated Debentures on the Initial Optional Prepayment Date,
together with scheduled payments of interest on the Junior Subordinated
Debentures from the prepayment date to and including the Initial Optional
Prepayment Date 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 (i) and (ii) accumulated but
unpaid interest thereon to the date of prepayment.
A "Special Event" means a Tax Event or a Regulatory Capital Event (as
defined below), as the case may be.
"Tax Event" means the receipt by the Corporation and the Trust of an opinion
of independent counsel experienced in such matters to the effect that, as a
result of any amendment to, or change (including any announced proposed 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
such pronouncement or decision is announced on or after the Issue Date, 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 Exchange Junior Subordinated
Debentures, (ii) interest payable by the Corporation on the Exchange 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 that the Corporation shall have received
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
55
thereunder) of the United States or any rules, guidelines or policies of the
Federal Reserve or (b) any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such pronouncement or decision is announced on or after
the Issue Date, the Exchange Capital Securities do not constitute, or within 90
days of the date thereof, will not constitute, Tier 1 Capital (or its then
equivalent); provided, however, that the distribution of the Exchange Junior
Subordinated Debt Securities 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 the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming 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 plus (a) 1.85% if such prepayment date
occurs on or prior to January 31, 1998 and (b) 1.25% 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
term of the Exchange Junior Subordinated Debentures to be prepaid 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 term of the Junior Subordinated Debentures.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Corporation. "Reference Treasury Dealer" means a nationally recognized U.S.
Government securities dealer in New York City appointed by the Corporation.
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (a) the average
of five Reference Treasury Dealer Quotations for such prepayment date, after
excluding the highest and lowest of such Reference Treasury Dealer Quotations,
or (b) if the Debenture Trustee obtains fewer than three such Reference Treasury
Dealer Quotations, the average of all such quotations.
"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.
"Additional Sums" means the additional amounts as may be required in order
that the amount of Distributions then due and payable by the Trust on the
outstanding Capital Securities and Common 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.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption 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 the 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 Exchange Junior Subordinated Debentures the Additional
Sums.
56
RESTRICTIONS ON CERTAIN PAYMENTS. 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 (which includes common and preferred stock) or (ii)
make any payment of principal, interest or premium, if any, on or repay or
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
Exchange 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 with or junior in right of payment to the Exchange
Junior Subordinated Debentures (other than (a) dividends or distributions in
shares of, or options or 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 or
(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 plans for its directors, officers or employees or any of the
Corporation's dividend reinvestment plans), if at such time (i) 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, (ii) if such Exchange Junior Subordinated
Debentures are held by the Trust, the Corporation shall be in default with
respect to its payment of any obligations under the Exchange Guarantee or (iii)
the Corporation shall have given notice of its election of 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.
For so long as the Trust Securities remain outstanding, the Corporation will
covenant (i) to directly or indirectly maintain 100% direct or indirect
ownership of the Common Securities of the Trust; provided, however, that any
permitted successor of the Corporation under the Indenture may succeed to the
Corporation's ownership of such Common Securities, (ii) 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 in connection with a distribution
of the Junior Subordinated Debentures as provided in the Trust Agreement and in
connection with certain mergers, consolidations or amalgamations and (iii) to
use its 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 redemption 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.
MODIFICATION OF INDENTURE. From time to time the Corporation and the
Debenture Trustee may, without the consent of the holders of Exchange Junior
Subordinated Debentures, amend, waive or supplement the Indenture for specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies (provided that any such action does not materially adversely
affect the interest of the holders of Exchange 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 Exchange Junior Subordinated Debentures, to
modify the Indenture in a manner affecting the rights of the holders of Exchange
Junior Subordinated Debentures; provided, however, that no such modification
may, without the consent of the holders of each outstanding Exchange Junior
Subordinated Debenture so affected, (i) change the Stated Maturity, or reduce
the principal amount of the Exchange Junior Subordinated Debentures, or reduce
the rate or extend the time of payment of interest thereon except
57
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
(ii) reduce the percentage of principal amount of Exchange 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 Exchange 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 on the Exchange Junior
Subordinated Debentures or any Other Debentures when due (subject to the
deferral of any due date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on the Exchange
Junior Subordinated Debentures or any Other Debentures when due, whether at
maturity, upon redemption, by declaration of acceleration of maturity or
otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants 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 Exchange 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
Exchange Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Exchange 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 Exchange Junior Subordinated Debentures may annul such
declaration and waive the default if the default (other than the non-payment of
the principal of the Exchange 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
Exchange Junior Subordinated Debentures affected thereby may, on behalf of the
holders of all the Exchange 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
Exchange Junior Subordinated Debenture.
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 interest (or premium, if
any) on principal of 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 on the Exchange Junior Subordinated Debentures, and
the Corporation shall be subrogated to the rights of the holder of
58
such 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 and assets 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 and
assets 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 and assets substantially as an entirety to
any Person, the successor Person is organized under the laws of the United
States or any state or the District of Columbia, and such successor Person
expressly assumes the Corporation's obligations on the Exchange 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 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 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 Junior Subordinate 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. The Indenture provides that any Exchange Junior Subordinated
Debentures issued thereunder shall be subordinate and junior in right of payment
to all Senior Indebtedness. 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, all Senior Indebtedness
of the Corporation must be paid in full before the holders of Exchange 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 Exchange 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 Exchange Junior
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the Exchange Junior Subordinated Debentures.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Exchange 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
59
Senior Indebtedness resulting in the acceleration of the maturity thereof, or if
any judicial proceeding shall be pending with respect to any such default.
"Senior Indebtedness" shall mean all Indebtedness for Money Borrowed,
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.
"Indebtedness for Money Borrowed" shall mean any obligation of, or any
obligation guaranteed by, the Corporation for the repayment of borrowed money,
whether or not evidenced by bonds, debentures, notes or other written
instruments.
"Indebtedness Ranking on a Parity with the Junior Subordinated Debentures"
shall mean (i) Indebtedness for Money Borrowed, whether outstanding on the date
of execution of the Indenture or thereafter created, assumed or incurred, which
specifically by its terms ranks equally 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.
"Indebtedness Ranking Junior to the Junior Subordinated Debentures" shall
mean any Indebtedness for Money Borrowed, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred, which
specifically by its terms ranks junior to and not equally 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. The securing of any Indebtedness for Money Borrowed, otherwise
constituting Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures or Indebtedness Ranking Junior to the Junior Subordinated Debentures,
as the case may be, shall not be deemed to prevent such Indebtedness for Money
Borrowed from constituting Indebtedness Ranking on a Parity with the Junior
Subordinated Debentures or Indebtedness Ranking Junior to the Junior
Subordinated Debentures, as the case may be.
The Corporation is a non-operating holding company and almost all of the
operating assets of the Corporation are owned by the Corporation's subsidiaries.
The Corporation relies primarily on dividends from such subsidiaries to meet its
obligations for payment of principal and interest on its outstanding debt
obligations and corporate expenses. The Corporation is a legal entity separate
and distinct from its banking and non-banking affiliates. The principal sources
of the Corporation's income are dividends, interest and fees from its banking
and non-banking affiliates. The Banks are subject to certain restrictions
imposed by federal law on any extensions of credit to, and certain other
transactions with, the Corporation and certain federal law on any extensions of
credit to, and certain other transactions with, the Corporation and certain
other affiliates, and on investments in stock or other securities thereof. Such
restrictions prevent the Corporation and such other affiliates from borrowing
from the Banks unless the loans are secured by various types of collateral.
Further, such secured loans, other transactions and investments by any of the
Banks 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 as to the
Corporation and all of such other affiliates to an aggregate of 20% of such
Bank's capital and surplus. In addition, payment of dividends to the Corporation
by the subsidiary banks is subject to ongoing review by banking regulators and
is subject to various statutory limitations and in certain circumstances
requires approval by banking regulatory authorities. Accordingly, the Junior
Subordinated Debentures will be effectively subordinated to all existing and
future liabilities of
60
the Corporation's subsidiaries. Holders of Junior Subordinated Debentures should
look only to the assets of the Corporation for payments of interest and
principal and premium, if any.
The Indenture places no limitation on the amount of Senior Indebtedness that
may be incurred by the Corporation.
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 (100 Exchange Junior Subordinated Debentures).
Any such 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 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 transferee shall be deemed to have no interest
whatsoever in such Exchange Junior Subordinated Debentures.
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.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE. 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 such
provisions, 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.
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 such Exchange Capital
Securities. The Bank of New York will act as Guarantee Trustee (the "Guarantee
Trustee") under the Exchange Guarantee. The Exchange Guarantee has been
qualified under the Trust Indenture Act. This summary of certain 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 the Trust
Indenture Act. The Guarantee Trustee will hold the Exchange Guarantee for the
benefit of the holders of the Exchange Capital Securities.
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 accrued and unpaid Distributions required to be paid on the
Exchange Capital Securities, to the extent that the Trust has funds on hand
legally available therefor at such time, (ii) the applicable Redemption Price
with respect to Exchange Capital Securities called for redemption, to the extent
that the Trust has funds on hand legally available therefor at such time, and
(iii) upon a voluntary or involuntary termination and liquidation of the Trust,
the lesser of (a) the Liquidation Distribution, and (b) the amount of assets of
the Trust remaining available for distribution to holders of Exchange Capital
Securities. 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.
61
The Exchange Guarantee will rank subordinate and junior in right of payment
to all Senior Indebtedness. See "--Status of the Exchange Guarantee." 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 that subsidiary, except to the extent the Corporation may
itself be recognized as a creditor of that subsidiary. Accordingly, the
Corporation's obligations under the Exchange Guarantee will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and claimants should look only to the assets of the Corporation
for payments thereunder. See "Description of Exchange Junior Subordinated
Debentures-- General." The Guarantee does not limit the incurrence or issuance
of other secured or unsecured debt of the Corporation, including Senior
Indebtedness, whether under the Indenture, any other indenture that the
Corporation may enter into in the future or otherwise.
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 Exchange
Junior Subordinated Debentures.
The Exchange Guarantee will rank PARI PASSU with all Other Guarantees issued
by the Corporation. 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. The Exchange
Guarantee does not place a limitation on the amount of additional Senior
Indebtedness that may be incurred by the Corporation. The Corporation expects
from time to time to incur additional indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT. Except with respect to any changes which do not
materially adversely affect the rights of holders of the Exchange Capital
Securities (in which case no vote 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.
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. 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.
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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, is 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.
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 Guarantee, will undertake to perform only such duties as are
specifically set forth in the Exchange Guarantee and, after default with respect
to the Exchange Guarantee, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the Guarantee Trustee will be under no obligation to
exercise any of the powers vested in it by the Guarantee at the request of any
holder of the Capital Securities unless it is offered reasonable indemnity
against costs, expenses and liabilities that might be incurred thereby.
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.
GOVERNING LAW. The Exchange Guarantee will be governed by and construed in
accordance with the laws of the State of New York.
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DESCRIPTION OF ORIGINAL SECURITIES
The terms of the Original Securities are identical in all material 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
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, in the event that a
registration statement relating to the Exchange Offer has not been filed by July
6, 1997 and been declared effective by August 5, 1997, or, in certain limited
circumstances, in the event a shelf registration statement (the "Shelf
Registration Statement") with respect to the resale of the Original Capital
Securities is not declared effective by August 5, 1997, 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 required Exchange Offer is consummated or any required Shelf Registration
Statement is effective. 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."
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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 on hand 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 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 and unconditional guarantee of the Trust's
obligations under the Exchange Capital Securities. If and to the extent that the
Corporation does not make 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
Guarantee will not cover any such payment when the Trust does not have
sufficient funds on hand 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.
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
Exchange Junior Subordinated Debt Securities 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
Exchange Junior Subordinated Debentures will match the Distribution rate and
Distribution and other payment dates for the Trust Securities; (iii) the
Corporation, as Sponsor, shall pay for all costs, expenses and liabilities of
the Trust except the Trust's obligations to holders of Trust Securities under
such Trust Securities; and (iv) the Trust Agreement will provide 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 Debt 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.
LIMITED PURPOSE OF THE TRUST
The Capital Securities will represent beneficial interest in the Trust, and
the Trust exists for the sole purpose of issuing the Trust Securities, using the
proceeds from the sale of the Trust Securities to acquire
65
the Junior Subordinated Debentures, exchanging the Original Junior Subordinated
Debentures and Trust Securities in the Exchange Offer pursuant to the Indenture
and engaging in other activities necessary or incidental thereto. A principal
difference between the rights of a holder of an Exchange Capital Security and a
holder of an Exchange Junior Subordinated Debenture is that a holder of an
Exchange Junior Subordinated Debenture will be entitled to receive from the
Corporation the principal amount of (and premium, if any) and interest on
Exchange Junior Subordinated Debentures held, while a holder of Exchange Capital
Securities is entitled to receive Distributions from the Trust (or, in certain
circumstances, from the Corporation under the Guarantee) if and to the extent
the Trust has funds on hand legally available for the payment of such
Distributions.
RIGHTS UPON TERMINATION
Unless the Junior Subordinated Debentures are distributed to holders of the
Trust Securities, upon any voluntary or involuntary termination and liquidation
of the Trust the holders of the Trust 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 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. Since the Corporation is the guarantor under the Exchange
Guarantee and has agreed to pay for all costs, expenses and liabilities of the
Trust (other than the Trust's obligations to the holders of its Trust
Securities), the positions of a holder of Exchange Capital Securities and a
holder of Exchange Junior Subordinated Debentures relative to other creditors
and to stockholders of the Corporation in the event of liquidation or bankruptcy
of the Corporation are expected to be substantially the same.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of Exchange
Capital Securities held as capital assets. It does not deal with special classes
of holders 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 Exchange 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 Exchange 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 Exchange 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.
CLASSIFICATION OF THE EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Corporation intends to take the position that the Exchange Junior
Subordinated Debentures will be classified for United States federal income tax
purposes as indebtedness of the Corporation under current law. No assurance can
be given, however, that the IRS will not challenge such position or, if
challenged, that such a challenge will not be successful. The remainder of this
discussion assumes that the Exchange Junior Subordinated Debentures will be
treated 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, Skadden, Arps,
Slate, Meagher & Flom LLP ("Tax Counsel") rendered its 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 upon 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 Exchange Capital
Securities generally will be considered the owner of an undivided interest in
the Exchange 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 Exchange Junior Subordinated Debentures.
An opinion of Tax Counsel, however, is not binding on the IRS or the courts.
Prospective investors should note that no rulings have been or are expected to
be sought from the IRS with respect to any of these issues 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.
EXCHANGE OF ORIGINAL CAPITAL SECURITIES FOR EXCHANGE CAPITAL SECURITIES
There will be no Federal income tax consequences to holders exchanging
Original Capital Securities for Exchange Capital Securities pursuant to the
Exchange Offer and such a holder will have the same adjusted basis and holding
period in the Exchange Capital Securities as it had in the Original Capital
Securities immediately before the exchange.
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INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "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 prevent the Corporation from declaring dividends on
any class of equity securities. Accordingly, the Corporation intends to take the
position that the Exchange Junior Subordinated Debentures will not be considered
to be issued with OID and, accordingly, stated interest on the Exchange 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
accounting.
Under the Regulations, if the Corporation were to exercise its option to
defer payments of interest, the Exchange Junior Subordinated Debentures would at
that time be treated as issued with OID, and all stated interest on the Exchange
Junior Subordinated Debentures would thereafter be treated as OID as long as the
Exchange Junior Subordinated Debentures remain outstanding. In such event, all
of a holder's taxable interest income with respect to the Exchange 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 Exchange 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 Regulations, if
the option to defer the payment of interest was determined not to be "remote,"
the Exchange 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 Exchange 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 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 Tax Counsel's interpretation herein.
Because income on the Exchange Capital Securities will constitute interest
or OID, corporate holders of the Exchange Capital Securities will not be
entitled to a dividends-received deduction with respect to any income recognized
with respect to the Exchange Capital Securities.
RECEIPT OF EXCHANGE 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 Exchange 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 Exchange Junior Subordinated Debentures equal to such holder's aggregate tax
basis in its Exchange Capital Securities. A holder's holding period in the
Exchange Junior Subordinated Debentures so received in liquidation of the Trust
would include the period during which the Exchange Capital Securities were held
by such holder. If, however, the Trust is 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 Exchange Junior Subordinated
Debentures would constitute a taxable event to holders of Capital Securities and
a holder's holding period in Exchange Junior Subordinated Debentures would begin
on the date such Exchange Junior Subordinated Debentures were received.
Under certain circumstances described herein (see "--Description of Exchange
Capital Securities"), the Exchange Junior Subordinated Debentures may be
redeemed for cash and the proceeds of such redemption distributed to holders in
redemption of their Exchange Capital Securities. Under current law, such a
redemption would, for United States federal income tax purposes, constitute a
taxable disposition of
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the redeemed Exchange Capital Securities, and a holder could recognize gain or
loss as if it sold such redeemed Exchange Capital Securities for cash. See
"--Sales of Exchange Capital Securities."
SALES OF EXCHANGE CAPITAL SECURITIES
A holder that sells Exchange Capital Securities (including a redemption of
Exchange Capital Securities either on the Stated Maturity Date or upon an
optional redemption of the Exchange Junior Subordinated Debentures by the
Corporation) will recognize gain or loss equal to the difference between its
adjusted tax basis in the Exchange Capital Securities and the amount realized on
the sale of such Exchange 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 Exchange
Capital Securities will generally be its initial purchase price increased by OID
(if any) previously includable in such holder's gross income to the date of
disposition and decreased by payments (if any) received on the Exchange Capital
Securities in respect of OID. Subject to the market discount rules described
below, 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 Exchange Capital Securities have
been held for more than one year.
The Exchange Capital Securities may trade at a price that does not
accurately 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 Debenture are deemed to have been issued with OID)
who disposes of his 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, if applicable,
OID), and to add such amount to his adjusted tax basis in his pro rata share of
the underlying Exchange 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.
MARKET DISCOUNT AND BOND PREMIUM
To the extent a holder acquires Exchange Capital Securities at a price that
is greater or less than the adjusted issue price (which should generally
approximate the face amount plus accrued but unpaid interest on the Exchange
Junior Subordinated Debentures) of such holder's proportionate share of the
Exchange Junior Subordinated Debentures, the holder may be deemed to have
acquired its undivided interest in the Exchange Junior Subordinated Debentures
with acquisition premium or market discount.
A holder who acquires an undivided beneficial interest in the Exchange
Junior Subordinated Debentures at a market discount will generally be required
to recognize ordinary income to the extent of accrued market discount on the
Exchange Junior Subordinated Debentures upon their retirement or, to the extent
of any gain, upon the disposition of the Exchange Capital Securities. Such
market discount will accrue ratably or, at the election of the holder, under a
constant yield method over the remaining term of the Exchange Junior
Subordinated Debentures. A holder will also be required to defer the deduction
of a portion of the interest paid or accrued on indebtedness incurred to
purchase or carry Exchange Capital Securities that represent an undivided
interest in Exchange Junior Subordinated Debentures acquired with market
discount. In lieu of the foregoing, a holder may elect to include market
discount in income currently as it accrues on all market discount instruments
acquired by such holder in the taxable year of the election or thereafter, in
which case the interest deferral rule will not apply.
A holder who acquires an undivided beneficial interest in the Exchange
Junior Subordinated Debentures at a premium will be able to offset the amount of
such holder's amortizable bond premium
69
attributable to that taxable year against such holder's allocable share of
interest (or OID, if any) paid or accrued on the Exchange Junior Subordinated
Debentures.
Holders are advised to consult their tax advisors regarding the market
discount and acquisition premium rules.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the fiscal 1998 budget proposal submitted to
Congress, the Clinton Administration proposed certain changes to Federal income
tax law which would, among other things, generally treat as equity, for Federal
income tax purposes, certain debt obligations, such as the Exchange Junior
Subordinated Debentures, that are "issued on or after the date of first
Congressional Committee action" (the "Clinton Proposal"). On June 9, 1997, House
Ways and Means Committee Chairman Bill Archer released the Chairman's Mark
Relating to Revenue Reconciliation Provisions that are proposed to be included
in 1997 tax legislation (the "Chairman's Mark"). The Chairman's Mark constitutes
"first Congressional Committee action" with respect to the provisions contained
therein. The Chairman's Mark does not include the Clinton Proposal that would
require instruments with terms similar to the Exchange Junior Subordinated
Debentures to be treated as equity for Federal income tax purposes.
In light of the Chairman's Mark, it appears that "first Congressional
Committee action" has not yet occurred with respect to the Clinton Proposal.
Furthermore, given the issue date of the Junior Subordinated Debentures and the
effective date transitional rules relating to certain capital markets provisions
included in the Chairman's Mark (as well as transitional rules provided for in
1996 proposed legislation similar to the Clinton Proposal), it is anticipated
that the Clinton Proposal, even if acted upon by Congress in the future, would
not apply to the Exchange Junior Subordinated Debentures.
There can be no assurance, however, that the Clinton Proposal or similar
legislation will not ultimately be enacted into law, that the effective date and
transitional rules relating thereto would be enacted as anticipated, or that
other developments will not occur after the date hereof that would adversely
affect the tax treatment of the Exchange Junior Subordinated Debentures and
could result, in certain circumstances, in the redemption of the Trust
Securities by the Corporation. See "Description of Exchange--Description of
Exchange Securities--Mandatory Redemption" and "Description of Exchange
Securities--Description of Exchange Junior Subordinated Debentures."
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 Exchange Capital Securities who or which is a
citizen or individual resident (or is treated as a citizen or individual
resident) of the United States for federal income tax purposes, a corporation or
partnership created or organized (or treated as created or organized for federal
income tax purposes)in or under the laws of the United States or any political
subdivision thereof, or a trust or estate the income of which is includible in
its gross income for federal income tax purposes without regard to its source.
For taxable years beginning after December 31, 1996 (or for the immediately
preceding year, if the trustee of a trust so elects), a trust is a U.S. Holder
for federal income tax purposes if, and only if, (i) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (ii) one or more United States trustees have the authority to control
all substantial decisions of the trust.
Under present United States federal income tax laws: (i) payments by the
Trust or any of its paying agents to any holder of an Exchange 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
Exchange Capital Security does not actually or constructively own 10 percent or
more of the total combined voting
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power of all classes of stock of the Corporation entitled to vote, (b) the
beneficial owner of the Exchange Capital Security is not a controlled foreign
corporation that is related to the Corporation through stock ownership, and (c)
either (A) the beneficial owner of the Exchange 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 (B) 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 Exchange 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 an Exchange
Capital Security will not be subject to United States federal withholding tax on
any gain realized upon the sale or other disposition of an Exchange Capital
Security.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Exchange Capital Securities will be reported to
holders on Forms 1099, which forms should be mailed to holders of Exchange
Capital Securities by January 31 following each calendar year.
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 PURCHASE, OWNERSHIP AND DISPOSITION OF THE
EXCHANGE 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.
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ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
(a "Plan") subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an investment
in the Capital Securities. Accordingly, among other factors, the fiduciary
should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with the documents
and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code") prohibit Plans, as well as individual retirement
accounts and Keogh plans subject to Section 4975 of the Code (also "Plans"),
from engaging in certain transactions involving "plan assets" with persons who
are "parties in interest" under ERISA or "disqualified persons" under the Code
("Parties in Interest") with respect to such Plan. A violation of these
"prohibited transaction" rules may result in an excise tax or other liabilities
under ERISA and/or Section 4975 of the Code for such persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
Employee benefit plans that are governmental plans (as defined in Section 3(32)
of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and
foreign plans (as described in Section 4(b)(5) of ERISA) are not subject to the
requirements of ERISA or Section 4975 of the Code.
Under a regulation (the "Plan Asset Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Trust would be deemed to be
"plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire an equity interest in the Trust
and no exception were applicable under the Plan Assets Regulation. An "equity
interest" is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the assets
of the Trust would not be deemed to be "plan assets" of investing Plans if,
immediately after the most recent acquisition of any equity interest in the
Trust, less than 25% of the value of each class of equity interest in the Trust
were held by Plans, other employee benefit plans not subject to ERISA or Section
4975 of the Code (such as governmental, church and foreign plans) and entities
holding assets deemed to be "plan assets" of any Plan (collectively, "Benefit
Plan Investors"). No assurance can be given by the Initial Purchaser that the
value of the Capital Securities held by Benefit Plan Investors will be less than
25% of the total value of such Capital Securities at the completion of the
initial offering or thereafter, and no monitoring or other measures will be
taken with respect to the satisfaction of the conditions to this exception. All
of the Common Securities will be purchased and held directly or indirectly by
the Corporation.
Certain transactions involving the Trust could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the Capital Securities were acquired with "plan
assets" of such Plan and assets of the Trust were deemed to be "plan assets" of
Plans investing in the Trust. For example, if the Corporation is a Party in
Interest with respect to an Investing Plan (either directly or by reason of its
ownership of the Trust or of any of the Corporation's other subsidiaries),
extensions of credit between the Corporation and the Trust (as represented by
the Junior Subordinated Debentures and the Guarantee) would likely be prohibited
by Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code, unless
exemptive relief were available under an applicable administrative exemption
(see below).
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the Capital Securities, assuming that
assets of the Trust were deemed to be "plan assets" of Plans investing in the
Trust (see above). Those class exemptions are PTCE 96-23 (for certain
transactions determined by in-house asset managers), PTCE 95-60 (for certain
transactions involving insurance company general
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accounts), PTCE 91-38 (for certain transactions involving bank collective
investment funds), PTCE 90-1 (for certain transactions involving insurance
company pooled separate accounts) and PTCE 84-14 (for certain transactions
determined by independent qualified professional asset managers).
Because the Capital Securities may be deemed to be equity interests in the
Trust for purposes of applying ERISA and Section 4975 of the Code, the Capital
Securities may not be purchased or held by any Plan, any entity whose underlying
assets include "plan assets" by reason of any Plan's investment in the entity (a
"Plan Asset Entity") or any person investing "plan assets" of any Plan, unless
such purchaser or holder is eligible for the exemptive relief available under
PTCE 96-23, 95-60, 91-38, 90-1 or 84-14. Any purchaser or holder of the Capital
Securities or any interest therein will be deemed to have represented by its
purchase and holding thereof that it either (a) is not a Plan or a Plan Asset
Entity and is not purchasing such securities on behalf of or with "plan assets"
of any Plan or (b) is eligible for the exemptive relief available under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14 with respect to such purchase or holding. See
"Notice to Investors." Furthermore, to avoid certain prohibited transactions
under ERISA and the Code that could result under certain circumstances if the
Capital Securities are deemed to be such equity interests, each investing Plan,
by purchasing the Capital Securities, will be deemed to have directed the Trust
to invest in the Junior Subordinated Debentures and to have appointed the
Property Trustee.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the Capital
Securities on behalf of or with "plan assets" of any Plan consult with their
counsel regarding the potential consequences if the assets of the Trust were
deemed to be "plan assets" and the availability of exemptive relief under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14.
73
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 Capital Securities where such 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 180th 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 ending 180 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 sale of
Exchange Capital Securities by broker-dealers. 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.
For a period of 180 days after the Expiration Date, the Trust and the
Corporation will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Trust and the Corporation have
agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holders of the Capital Securities) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Capital Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
VALIDITY OF EXCHANGE SECURITIES
The validity of the Exchange Guarantee and the Exchange Junior Subordinated
Debentures will be passed upon for the Corporation and certain matters of
Delaware law relating to the validity of the Exchange Capital Securities will be
passed upon on behalf of the Trust by Skadden, Arps, Slate, Meagher & Flom LLP.
Certain matters relating to United States federal income tax consequences will
be passed upon for the Corporation by Skadden, Arps, Slate, Meagher & Flom LLP,
New York, New York.
EXPERTS
The consolidated financial statements of ONBANCorp, Inc. and subsidiaries as
of December 31, 1996 and 1995 and for each of the years in the three year period
ended December 31, 1996, included in ONBANCorp, Inc.'s 1996 Form 10-K
incorporated by reference into this Prospectus, have been incorporated herein in
reliance upon the report of KPMG Peat Marwick LLP, independent auditors,
included in the 1996 Form 10-K and incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing.
74
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NO DEALER, SALESMAN OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE TRUST. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE CORPORATION OR THE TRUST SINCE THE DATE HEREOF. THIS 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 OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PAGE
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Available Information........................... 9
Incorporation of Certain Documents by
Reference..................................... 9
Summary......................................... 11
Risk Factors.................................... 19
OnBank Capital Trust I.......................... 25
ONBANCorp Inc................................... 25
Accounting Treatment............................ 26
Use of Proceeds................................. 27
Ratios of Earnings to Fixed Charges............. 28
Capitalization.................................. 29
Summary Financial Data.......................... 30
The Exchange Offer.............................. 31
Description of Exchange Securities.............. 41
Description of Original Securities.............. 64
Relationship Among the Exchange Capital
Securities, the Exchange Junior Subordinated
Debentures and the Exchange Guarantee......... 65
Certain United States Federal Income Tax
Consequences.................................. 67
ERISA Considerations............................ 72
Plan of Distribution............................ 74
Validity of Exchange Securities................. 74
Experts......................................... 74
60,000 CAPITAL SECURITIES
ONBANK
CAPITAL TRUST I
OFFER TO EXCHANGE ITS
9.25% EXCHANGE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000
PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933
FOR ANY AND
ALL OF ITS OUTSTANDING
9.25% ORIGINAL CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000
PER ORIGINAL CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
ONBANCORP, INC.
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PROSPECTUS
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JULY 22, 1997
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