As filed with the Securities and Exchange Commission on August 20, 1998
Registration No. 333-59039, 333-59039-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
FIRST CITIZENS BANCSHARES, INC. FCB/NC CAPITAL TRUST I
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
Delaware Delaware
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
56-1528994 51-6507188
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
3128 Smoketree Court 3128 Smoketree Court
Raleigh, North Carolina 27604 Raleigh, North Carolina 27604
(919) 716-7000 (919) 716-7000
(Address, including zip code, and telephone number, (Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices) including area code, of registrant's principal
executive offices)
---------------
KENNETH A. BLACK
Vice President and Chief Financial Officer
First Citizens BancShares, Inc.
3128 Smoketree Court
Raleigh, North Carolina 27604
(919) 716-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
WILLIAM R. LATHAN, JR., Esq.
Ward and Smith, P.A.
1001 College Court
New Bern, North Carolina 28560
(252) 633-1000
---------------
Approximate date of commencement of the proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
PROSPECTUS
FCB/NC Capital Trust I
Offer to Exchange 8.05% Capital Securities
(Liquidation Amount $1,000 per Capital Security)
which have been registered under the Securities Act of 1933
for any and all
Outstanding 8.05% Capital Securities
(Liquidation Amount $1,000 per Capital Security)
all as fully and unconditionally guaranteed, to the extent described herein, by
First Citizens BancShares, Inc.
---------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 PM,
NEW YORK CITY TIME, ON SEPTEMBER 23, 1998, UNLESS EXTENDED.
---------------
FCB/NC Capital Trust I (the "Issuer Trust"), a statutory business trust
created under the laws of the State of Delaware, together with First Citizens
BancShares, Inc., a Delaware corporation (the "Company"), as depositor of the
Issuer Trust, hereby offer 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 $150,000,000
aggregate Liquidation Amount (as defined herein) of newly issued 8.05% Capital
Securities of the Issuer Trust (the "New 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 the Issuer
Trust's outstanding 8.05% Capital Securities (the "Old Capital Securities"), of
which $150,000,000 aggregate liquidation amount is outstanding. Pursuant to the
Exchange Offer, the Company is also exchanging (i) its guarantee of the New
Capital Securities, to the extent provided therein (the "Guarantee") for its
guarantee of the Old Capital Securities (the "Old Guarantee"), and (ii) up to
$150,000,000 aggregate principal amount of newly issued Junior Subordinated
Deferrable Interest Debentures (the "New Junior Subordinated Debentures") for a
like amount of its outstanding Junior Subordinated Deferrable Interest
Debentures (the "Old Junior Subordinated Debentures"). The Guarantee and the
New Junior Subordinated Debentures also have been registered under the
Securities Act. See "Certain Defined Terms," "Summary," "The Exchange Offer,"
"Description of the New Capital Securities," "Description of the New Junior
Subordinated Debentures," "Description of the Guarantee," and "Relationship
Among the Capital Securities, the Junior Subordinated Debentures and the
Guarantee."
The terms of the New Capital Securities are identical in all material
respects to the respective terms of the Old Capital Securities, except that (i)
the New Capital Securities have been registered under the Securities Act and,
therefore, will not be subject to certain restrictions on transfer applicable
to the Old Capital Securities, and (ii) the New Capital Securities will not
provide for any increase in the Distribution rate thereon, subject to certain
limited exceptions specified in the Registration Rights Agreement described
below. See "Description of the New Capital Securities." The New Capital
Securities are being offered for exchange in order to satisfy certain
obligations of the Company and the Issuer Trust under the Registration Rights
Agreement dated March 5, 1998, between the Company, the Issuer Trust and the
Initial Purchaser (as defined herein) (the "Registration Rights Agreement").
(Continued on next page.)
SEE "CERTAIN DEFINED TERMS" ON PAGE 6 OF THIS PROSPECTUS FOR A GLOSSARY OF
CERTAIN CAPITALIZED TERMS USED IN THIS PROSPECTUS WITHOUT DEFINITION.
SEE "RISK FACTORS" BEGINNING ON PAGE 16 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO HOLDERS WHO TENDER OLD CAPITAL SECURITIES IN THE
EXCHANGE OFFER.
---------------
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------
The New 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). Any transfer, sale or other disposition of 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 Capital Securities for any purpose, including but not
limited to the receipt of Distributions on such Capital Securities, and such
transferee shall be deemed to have no interest whatsoever in such Capital
Securities.
The date of this Prospectus is August 24, 1998.
(cover page continued)
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission"), as set forth in no-action letters issued to
third parties, the Company and the Issuer Trust believe that the New Capital
Securities issued pursuant to the Exchange Offer may be offered for resale,
resold or otherwise transferred by holders thereof (other than any holder that
is an "affiliate" of the Company or the Issuer Trust as defined under Rule 405
of the Securities Act), provided that such New Capital Securities are acquired
in the ordinary course of such holders' business and such holders are not
engaged in, and do not intend to engage in, a distribution of such New Capital
Securities and have no arrangement or understanding with any person to
participate in the distribution of such New Capital Securities. However, the
staff of the Commission has not considered the Exchange Offer in the context of
a no-action letter, and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. By tendering the Old Capital Securities
in exchange for New Capital Securities, each holder, other than a broker-dealer,
will represent to the Company and the Issuer Trust that: (i) it is not an
affiliate of the Company or the Issuer Trust (as defined under Rule 405 of the
Securities Act); (ii) any New Capital Securities to be received by it were
acquired in the course of its ordinary business; and (iii) it is not engaged
in, and does not intend to engage in, a distribution of the New Capital
Securities and has no arrangement or understanding to participate in a
distribution of the New Capital Securities. See "Risk Factors -- Consequences
of a Failure to Exchange Old Capital Securities" and "The Exchange Offer --
Resales of New Capital Securities."
Each broker-dealer that receives New 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 New 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 New Capital Securities received in
exchange for Old Capital Securities where such Old Capital Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company and the Issuer Trust have agreed that, starting
on the date on which the Exchange Offer is consummated and ending on the close
of business ninety (90) days after such date, they will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
In that regard, each Participating Broker-Dealer (as defined herein) who
surrenders Old 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 Company or the Issuer 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 Rights
Agreement, such Participating Broker-Dealer will suspend the sale of New
Capital Securities (or the Guarantee or the New Junior Subordinated Debentures,
as applicable) pursuant to this Prospectus until the Company or the Issuer
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 until the Company or the Issuer Trust
has given notice that the sale of the New Capital Securities (or the Guarantee
or the New 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 Old Capital Securities. The New Capital
Securities will be a new issue of securities for which there currently is no
market. Although the Initial Purchaser (as defined herein) has informed the
Company and the Issuer Trust that it currently intends to make a market in the
New Capital Securities, it is 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 New
Capital Securities. Neither the Company nor the Issuer Trust currently intends
to apply for listing of the New Capital Securities on any securities exchange
or for quotation through the National Association of Securities Dealers
Automated Quotation System.
Any Old 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). Any Old Capital Securities which remain outstanding after consummation
of the Exchange Offer and the New 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. Following consummation of the Exchange Offer, the holders of Old
Capital Securities will continue to be subject to all of the existing
restrictions
2
upon transfer thereof, and neither the Company nor the Issuer 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 Old
Capital Securities held by them. To the extent that Old Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Capital Securities could be adversely affected. See "Risk
Factors -- Consequences of a Failure to Exchange Old Capital Securities."
The New Capital Securities offered hereby represent undivided beneficial
interests in the assets of the Issuer Trust. The Company has acquired all the
Common Securities of the Issuer Trust. The Issuer Trust exists for the sole
purpose of issuing the Trust Securities, investing the proceeds thereof in the
Junior Subordinated Debentures of the Company, effecting the Exchange Offer,
and certain other limited activities described herein.
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on September 23, 1998 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by the Company and the Issuer Trust (in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended). Tenders of Old 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 Old Capital Securities being tendered
for exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by the Company or the Issuer Trust and to the
terms and provisions of the Registration Rights Agreement. The Company has
agreed to pay all expenses of the Exchange Offer. See "The Exchange Offer --
Fees and Expenses." Each New Capital Security will pay cumulative Distributions
from the most recent Distribution Date of the Old Capital Securities
surrendered in exchange for such New Capital Securities or, if no Distributions
have been paid on such Old Capital Securities, from March 5, 1998. Holders of
the Old Capital Securities whose Old Capital Securities are accepted for
exchange will not receive accumulated Distributions on such Old Capital
Securities for any period from and after the last Distribution Date on such Old
Capital Securities prior to the original issue date of the New Capital
Securities or, if no such Distributions have been paid, will not receive any
accumulated Distributions on such Old Capital Securities, and will be deemed to
have waived the right to receive any Distributions on such Old Capital
Securities accumulated from and after such Distribution Date or, if no such
Distributions have been paid or duly provided for, from and after March 5,
1998. However, because Distributions on the New Capital Securities will
accumulate from such date, the amount of the Distributions received by holders
whose Old Capital Securities are accepted for exchange will not be affected by
the exchange. This Prospectus, together with the Letter of Transmittal, is
being sent to all registered holders of Old Capital Securities as of August 17,
1998.
Neither the Company nor the Issuer Trust will receive any cash proceeds
from the issuance of the New Capital Securities offered hereby. No
dealer-manager is being used in connection with this Exchange Offer.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of Sections 13
and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and in accordance therewith files reports and other information with the
Commission. The Company intends to seek an order from the commission
conditionally exempting the Issuer Trust from the reporting requirements of the
Exchange Act pursuant to Section 12(h) thereof, and, therefore, it is not
expected that the Issuer Trust will be filing separate reports under the
Exchange Act. Any reports, proxy and information statements and other
information filed by the Company with the Commission may be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's regional offices in Chicago, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and in New York, Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material may also be obtained
by mail from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
who file electronically with the Commission. In addition, such reports, proxy
statements and other information can be inspected at Nasdaq, 1735 K Street,
N.W., Washington, D.C. 20006, on whose National Market System the Company's
Class A common stock is traded.
No separate financial statements of the Issuer Trust have been included or
incorporated by reference herein. The Company and the Issuer Trust do not
consider that such financial statements would be material to holders of the
Capital Securities because the Issuer Trust has no 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, effecting the Exchange Offer and engaging in activities necessary
or incidental thereto. All of the Common Securities of the Issuer Trust are
owned by the Company and the Company's obligations described herein under the
Junior Subordinated Indenture, the Trust Agreement (including its obligations
to pay costs, expenses, debts and other obligations of the Issuer Trust, other
than with respect to the Trust Securities), the Junior Subordinated Debentures
and the Guarantee, taken together, constitute a full and unconditional
guarantee on a subordinated basis by the Company of amounts due on the Capital
Securities. See "FCB/NC Capital Trust I," "Description of the New Capital
Securities," "Description of the New Junior Subordinated Debentures,"
"Description of the Guarantee," and "Relationship Among the Capital Securities,
the Junior Subordinated Debentures and the Guarantee." In addition, the Company
does not expect that the Issuer Trust will file reports under the Exchange Act
with the Commission.
This Prospectus constitutes a part of a Registration Statement on Form S-4
(together with all exhibits thereto, the "Registration Statement") filed by the
Company and the Issuer 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 for further information with respect to the Company, the Issuer Trust
and the New Capital 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.
This Prospectus may contain or incorporate by reference statements which
may constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees for future performance and involve risks and uncertainties, and that
actual results may differ materially from those contemplated by such
forward-looking statements. Important factors currently known to management
that could cause actual results to differ materially from those in
forward-looking statements include significant fluctuations in interest rates,
inflation, economic recession, significant changes in the federal and state
legal and regulatory environment and tax laws, significant underperformance in
the Company's portfolio of outstanding loans, and competition in the Company's
markets. Neither the Company nor the Issuer Trust undertakes any obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated by reference in this Prospectus: (i) the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, and (ii) the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of any offering of securities hereunder shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for all purposes of the
Registration Statement and this Prospectus to the extent that a statement
contained herein or in any subsequently filed document that is also
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Prospectus. As used herein, the terms
"Prospectus" and "herein" mean this Prospectus, including the documents
incorporated or deemed to be incorporated herein by reference, as the same may
be amended, supplemented or otherwise modified from time to time. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to herein do not purport to be complete, and where reference
is made to the particular provisions of such contract or other document, such
provisions are qualified in all respects by reference to all of the provisions
of such contract or other document.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM THE COMPANY AT 3128 SMOKETREE COURT, RALEIGH, NORTH CAROLINA 27604
(TELEPHONE NUMBER 919-716-7000), ATTENTION: KENNETH A. BLACK, CHIEF FINANCIAL
OFFICER. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY SEPTEMBER 16, 1998, WHICH IS THE DATE FIVE BUSINESS DAYS
PRIOR TO THE EXPIRATION DATE.
TABLE OF CONTENTS
Page No.
---------
Available Information .................................................................... 4
Incorporation of Certain Documents by Reference .......................................... 5
Certain Defined Terms .................................................................... 6
Summary .................................................................................. 7
Risk Factors ............................................................................. 16
First Citizens BancShares, Inc. .......................................................... 22
Consolidated Ratios of Earnings to Fixed Charges ......................................... 23
Selected Consolidated Financial Data and Other Information ............................... 23
FCB/NC Capital Trust I ................................................................... 24
Accounting Treatment ..................................................................... 24
The Exchange Offer ....................................................................... 24
Description of the New Capital Securities ................................................ 32
Description of the New Junior Subordinated Debentures .................................... 44
Description of the Guarantee ............................................................. 53
Relationship among the Capital Securities, the Junior Subordinated Debentures and the 54
Guarantee
Certain Federal Income Tax Consequences .................................................. 56
Plan of Distribution ..................................................................... 59
Certain ERISA Considerations ............................................................. 60
Supervision, Regulation and Other Matters ................................................ 61
Legal Matters ............................................................................ 66
Experts .................................................................................. 66
5
CERTAIN DEFINED TERMS
As used in this Prospectus, the following terms have the meanings
indicated:
"Capital Securities" means the New Capital Securities and the Old Capital
Securities of the Issuer Trust, each representing undivided beneficial
interests in the assets of the Issuer Trust.
"Common Securities" means the common securities of the Issuer Trust
representing undivided beneficial interests in the assets of the Issuer Trust.
"Company" means First Citizens BancShares, Inc., a Delaware corporation.
"Distribution Date" means the 1st day of March and September in each year.
"Exchange Agent" means Bankers Trust Company, which also acts as the
Property Trustee under the Trust Agreement, the Debenture Trustee under the
Junior Subordinated Indenture, and the Guarantee Trustee under the Guarantee.
"Exchange Offer" means the offer made herein and in the accompanying
Letter of Transmittal by the Company and the Issuer Trust to exchange up to
$150,000,000 aggregate Liquidation Amount of New Capital Securities for a like
amount of Old Capital Securities.
"Guarantee" means the Guarantee Agreement from the Company in favor of
Bankers Trust Company, as Guarantee Trustee for the benefit of the holders of
Capital Securities, to be issued in exchange for the Old Guarantee.
"Indenture" means the Junior Subordinated Indenture, dated as of March 5,
1998, between the Company and Bankers Trust Company, as Trustee for the benefit
of the holders of the Junior Subordinated Debentures, and any indenture
supplemental thereto pursuant to which the Junior Subordinated Debentures are
to be issued.
"Interest Payment Date" means the 1st day of March and September in each
year.
"Issuer Trust" means FCB/NC Capital Trust I, a Delaware business trust.
"Junior Subordinated Debentures" means the New Junior Subordinated
Debentures and the Old Junior Subordinated Debentures.
"Liquidation Amount" means the stated amount of $1,000 per Trust Security.
"New Capital Securities" means up to $150,000,000 aggregate Liquidation
Amount of newly issued 8.05% Capital Securities to be issued by the Issuer
Trust in exchange for a like amount of Old Capital Securities.
"New Junior Subordinated Debentures" means up to $150,000,000 aggregate
principal amount of newly issued 8.05% Junior Subordinated Deferrable Interest
Debentures due March 1, 2028, to be issued by the Company to the Issuer Trust
in exchange for a like amount of Old Junior Subordinated Debentures.
"Old Capital Securities" means the $150,000,000 aggregate Liquidation
Amount of 8.05% Capital Securities issued by the Issuer Trust on March 5, 1998.
"Old Guarantee" means the Guarantee Agreement, dated as of March 5, 1998,
from the Company in favor of Bankers Trust Company, as Guarantee Trustee for
the benefit of the holders of Old Capital Securities.
"Old Junior Subordinated Debentures" means the $150,000,000 aggregate
principal amount of Junior Subordinated Deferrable Interest Debentures issued
by the Company to the Issuer Trust on March 5, 1998.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of March 5, 1998, among the Issuer Trust, the Company, and Wheat First
Securities, Inc. as Initial Purchaser (the "Initial Purchaser").
"Trust Agreement" means the Amended and Restated Trust Agreement, dated as
of March 5, 1998, among the Company as Depositor, Bankers Trust Company as
property trustee (the "Property Trustee"), Bankers Trust (Delaware) as Delaware
trustee (the "Delaware Trustee"), the Administrators appointed pursuant to
Section 8.20 thereof, and the holders, from time to time, of undivided
beneficial interests in the assets of the Issuer Trust, pursuant to which
Capital Securities were, and will be, issued.
"Trust Securities" means the Common Securities and the Capital Securities.
6
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial
statements, including the notes thereto, appearing elsewhere or incorporated by
reference herein. Holders of Old Capital Securities should consider carefully
the factors set forth herein under "Risk Factors."
First Citizens BancShares, Inc.
The Company is a registered bank holding company, chartered under the laws
of Delaware, and headquartered in Raleigh, North Carolina. The Company operates
through, and its principal assets are its investments in, its three wholly-owned
banking subsidiaries, the largest of which is First-Citizens Bank & Trust
Company, Raleigh, North Carolina ("FCB/ NC"). The Company's other two banking
subsidiaries are First-Citizens Bank & Trust Company, White Sulphur Springs,
West Virginia ("FCB/WV"), and Atlantic States Bank, Raleigh, North Carolina
("ASB"). FCB/NC, FCB/WV, and ASB (collectively referred to herein as the
"Banks") provide a wide variety of retail and commercial banking products and
services to individuals and small- to medium-sized businesses located in the
communities they serve. At June 30, 1998, the Company had total consolidated
assets of approximately $9.2 billion, total consolidated deposits of
approximately $7.8 billion, and total consolidated shareholders' equity of
approximately $628.7 million.
FCB/NC is a North Carolina-chartered bank that currently maintains 349
banking offices in 209 communities in North Carolina and Virginia. FCB/WV is a
West Virginia-chartered bank that currently maintains four banking offices in
four communities in West Virginia. ASB is a federally-chartered savings bank
based in Raleigh, North Carolina, that currently maintains 13 branch offices
located in the vicinity of Atlanta, Georgia.
Management of the Company is led by members of the Holding family, which
collectively controls 43.0% of the Class A, and 68.8% of the Class B (with a
16-to-1 voting preference over the shares of Class A), common stock of the
Company. As a result, the Company has been managed from a long-term perspective
with primary emphasis being placed on balance sheet liquidity, loan quality,
and earnings stability. Consistent with its management philosophy, the Company
has emphasized a low-risk loan portfolio derived from its local markets. At
June 30, 1998, the Company's loan-to-deposit ratio was 75.48%, and its
non-performing assets were $13.5 million, or 0.23% of gross loans and other
real estate. Net charge-offs for the six months ended June 30, 1998, were 0.14%
of average loans. The allowance for loan losses at June 30, 1998, was 1.53% of
gross loans and 731.58 % of non-performing loans.
The Company's strategy includes continuing to: (i) provide
community-oriented banking services with a focus on offering a complete array
of financial services for small- and medium-sized businesses and to individuals
within the communities in which it operates; (ii) increase its loan to deposit
ratio while maintaining above-average credit quality measurements; and (iii)
make the necessary investments in technology to remain competitive with the
larger banking organizations in its markets from a product delivery and
customer service standpoint. Management believes that as its largest
super-regional competitors continue to focus on larger dollar transactions and
less personal forms of customer service, and as smaller banking organizations
become less capable of providing the advanced levels of customer service
required in today's banking market, the Company will have significant
opportunities to continue to expand its franchise and further penetrate its
targeted markets.
The Company's principal executive offices are located at 3128 Smoketree
Court, Raleigh, North Carolina 27604, and its telephone number is (919)
716-7000.
For additional information regarding the Company and its financial
condition and results of operations, see "Available Information,"
"Incorporation of Certain Documents by Reference," "First Citizens BancShares,
Inc." and "Selected Consolidated Financial Data and Other Information."
FCB/NC Capital Trust I
The Issuer Trust is a statutory business trust created under Delaware law
on February 27, 1998 and which is governed by the Trust Agreement. The Issuer
Trust exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures, (iii) effecting the Exchange Offer
by exchanging up to $150,000,000 aggregate Liquidation Amount of the New
Capital Securities for a like amount of the Old Capital Securities, and (iv)
engaging in only those other activities necessary, convenient or incidental
7
thereto (such as registering the transfer of the Trust Securities).
Accordingly, the Junior Subordinated Debentures will be the sole assets of the
Issuer Trust, and payments under the Junior Subordinated Debentures will be the
sole source of revenue of the Issuer Trust.
The Exchange Offer
The Exchange Offer ............. Up to $150,000,000 aggregate Liquidation
Amount of New Capital Securities are being
offered in exchange for a like aggregate
Liquidation Amount of Old Capital Securities.
Old 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 in excess
thereof. The Company and the Issuer Trust are
making the Exchange Offer in order to satisfy
their obligations under the Registration
Rights Agreement relating to the Old Capital
Securities. For a description of the
procedures for tendering Old Capital
Securities, see "The Exchange Offer --
Procedure for Tendering Old Capital
Securities."
Expiration Date................. 5:00 p.m., New York City time, on September
23, 1998 (such time on such date being
hereinafter called the "Expiration Date")
unless the Exchange Offer is extended by the
Company and the Issuer Trust (in which case
the term "Expiration Date" shall mean the
latest date and time to which the Exchange
Offer is extended). See "The Exchange Offer
-- Expiration Date; Extensions; Amendments."
Conditions to the
Exchange Offer.................. The Exchange Offer is subject to certain
conditions, which may be waived by the
Company and the Issuer Trust in their sole
discretion. The Exchange Offer is not
conditioned upon any minimum Liquidation
Amount of Old Capital Securities being
tendered. See "The Exchange Offer --
Conditions to the Exchange Offer." The
Company and the Issuer 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 Old 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 Old Capital Securities tendered
pursuant to the Exchange Offer, subject,
however, to the right of holders of Old
Capital Securities to withdraw their tendered
Old Capital Securities, or (iv) to waive any
condition or otherwise amend the terms of the
Exchange Offer in any respect. See "The
Exchange Offer -- Expiration Date;
Withdrawal Rights............... Tenders of Old 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
Old Capital Securities.......... Tendering holders of Old Capital Securities
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 Old
Capital Securities to be tendered or in
compliance with the specified procedures for
guaranteed delivery of Old Capital
Securities. Certain brokers, dealers,
commercial banks, trust companies and other
nominees may also effect tenders by
book-entry transfer including an Agent's
Message (as defined herein) in lieu of a
Letter of Transmittal. Holders of Old Capital
Securities registered in the name of a
broker, dealer, commercial bank, trust
company or other
8
nominee are urged to contact such person
promptly if they wish to tender Old Capital
Securities pursuant to the Exchange Offer.
See "The Exchange Offer -- Procedure for
Tendering Old Capital Securities." Letters
of Transmittal and certificates representing
Old Capital Securities should not be sent to
the Company or the Issuer Trust. Such
documents should only be sent to the
Exchange Agent. Questions regarding how to
tender and requests for information should
be directed to the Exchange Agent. See "The
Exchange Offer -- Exchange Agent."
Resales of New
Capital Securities.............. Based on interpretations by the staff of the
Commission (the "Staff") as set forth in
no-action letters issued to third parties,
the Company and the Issuer Trust believe that
holders of Old Capital Securities (other than
any holder that is an "affiliate" of the
Company or the Issuer Trust as defined under
Rule 405 of the Securities Act) who exchange
their Old Capital Securities for New Capital
Securities pursuant to the Exchange Offer may
offer such New Capital Securities for resale,
resell such New Capital Securities and
otherwise transfer such New Capital
Securities without compliance with the
registration and prospectus delivery
provisions of the Securities Act, provided
that such New Capital Securities are acquired
in the ordinary course of such holders'
business and such holders are not engaged in,
and do not intend to engage in, a
distribution of such New Capital Securities
and have no arrangement or understanding with
any person to participate in the distribution
of such New Capital Securities. However, the
Staff has not considered the Exchange Offer
in the context of a no-action letter, and
there can be no assurance that the Staff
would make a similar determination with
respect to the Exchange Offer.
Any holder of Old Capital Securities who is
an "affiliate" of the Company or the Issuer
Trust or who intends to participate in the
Exchange Offer for the purpose of
distributing the New Capital Securities, or
any broker-dealer who purchased the Old
Capital Securities from the Issuer Trust to
resell pursuant to Rule 144A or any other
available exemption under the Securities
Act, (i) will not be able to rely on the
interpretations of the Staff set forth in
the above-mentioned interpretive letters,
(ii) will not be permitted or entitled to
tender such Old 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 Old Capital Securities unless such
sale is made pursuant to an exemption from
such requirements. In addition, as described
below, if any broker-dealer holds Old
Capital Securities acquired for its own
account as a result of market-making or
other trading activities and exchanges such
Old Capital Securities for New Capital
Securities, then such broker-dealer must
deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resales of such New
Capital Securities.
Each holder of Old Capital Securities (other
than certain specified holders) who wishes
to exchange Old Capital Securities for New
Capital Securities in the Exchange Offer
will be required to represent that (i) it is
not an "affiliate" of the Company or the
Issuer Trust, (ii) any New Capital
Securities to be received by it are being
acquired in the ordinary course of its
business, and (iii) it is not engaged in,
and does not intend to engage in, a
distribution (within the meaning of the
Securities Act) of such New Capital
Securities and has no arrangement or
understanding to participate in a
distribution of New Capital Securities. Each
broker-dealer that receives New Capital
Securities
9
for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver
a prospectus meeting the requirements of the
Securities Act in connection with any resale
of such New 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 in
the interpretive letters referred to above,
the Company and the Issuer Trust believe
that broker-dealers who acquired Old 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 New Capital Securities
received upon exchange of such Old Capital
Securities (other than Old Capital
Securities which represent an unsold
allotment from the original sale of the Old
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 New
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 New Capital
Securities received in exchange for Old
Capital Securities where such Old Capital
Securities were acquired by such
Participating Broker-Dealer for its own
account as a result of market-making or
other trading activities. Subject to certain
provisions set forth in the Registration
Rights Agreement and to the limitations
described below under "The Exchange Offer --
Resales of New Capital Securities," the
Company and the Issuer Trust have agreed to
allow the Participating Broker-Dealers to
use this Prospectus in connection with
resales of such New Capital Securities for a
period of ninety (90) days after the
Expiration Date, exclusive of any period
when a stop order is in effect. See "Plan of
Distribution." Any Participating
Broker-Dealer who is an "affiliate" of the
Company or the Issuer 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 New
Capital Securities."
Exchange Agent.................. The Exchange Agent with respect to the
Exchange Offer is Bankers Trust Company. 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 Company nor the Issuer Trust
will receive any cash proceeds from the
issuance of the New Capital Securities
offered hereby.
Certain Federal Income Tax Consequences;
Certain ERISA Considerations.... Holders of Old Capital Securities should
review the information set forth under
"Certain Federal Income Tax Consequences" and
"Certain ERISA Considerations" prior to
tendering Old Capital Securities in the
Exchange Offer.
The New Capital Securities
Securities Offered.............. Up to $150,000,000 aggregate Liquidation
Amount of the Issuer Trust's 8.05% Capital
Securities which have been registered under
the Securities Act (Liquidation Amount $1,000
per Capital Security). The New Capital
Securities will be issued, and the Old
Capital Securities were
10
issued, under the Trust Agreement. The New
Capital Securities and any Old Capital
Securities which remain outstanding after
consummation of the Exchange Offer will
constitute a single series of Capital
Securities under the Trust Agreement and,
accordingly, 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 the New Capital Securities
-- General." The terms of the New Capital
Securities are identical in all material
respects to the terms of the Old Capital
Securities, except that the New Capital
Securities have been registered under the
Securities Act and, therefore, are not
subject to certain restrictions on transfer
applicable to the Old Capital Securities
and, subject to certain limited exceptions
specified in the Registration Rights
Agreement, will not provide for any increase
in the Distribution rate thereon. See "The
Exchange Offer -- Purpose and Effect of the
Exchange Offer" and "Description of the New
Capital Securities."
Distributions................... Holders of the New Capital Securities are
entitled to receive cumulative cash
Distributions at an annual rate of 8.05% on
the Liquidation Amount of $1,000 per New
Capital Security, accruing from the last
Distribution Date on the Old Capital
Securities preceding the original issue date
of the New Capital Securities or, if no
Distributions have been made on the Old
Capital Securities, from the original date of
issuance of the Old Capital Securities (March
5, 1998), and (subject to the possible
extension of Distribution payment periods
described below) will be payable
semi-annually, in arrears, on the first day
of March and September of each year. See
"Description of the New Capital Securities --
Distributions."
Option to Extend Interest
Payment Period.................. The Company has the right, at any time,
subject to certain conditions, to defer
payments of interest on the Junior
Subordinated Debentures, for Extension
Periods, each not exceeding 10 consecutive
semi-annual periods; provided that no
Extension Period may extend beyond the
maturity date of the Junior Subordinated
Debentures or end on a date other than a
Distribution Date. As a consequence of the
Company's extension of the interest payment
period on the Junior Subordinated Debentures,
Distributions on the Capital Securities also
would be deferred, but would continue to
accrue during any such Extension Period to
the extent permitted by law. In the event the
Company exercises its right to extend an
interest payment period, then during any
Extension Period, subject to certain
exceptions, (i) the Company shall not declare
or pay any dividend on, make any
distributions with respect to, or redeem,
purchase, acquire or make a liquidation
payment with respect to, any of its capital
stock or rights to acquire such capital stock
or make any guarantee payments (other than
payments on the Guarantee) with respect to
the foregoing and (ii) the Company shall not
make any payment of interest on or principal
of (or premium, if any, on), or repay,
repurchase or redeem, any debt securities
issued by the Company which rank pari passu
with or junior to the Junior Subordinated
Debentures. Upon the termination of any
Extension Period and the payment of all
amounts then due, the Company may commence a
new Extension Period, subject to certain
requirements. See "Description of the New
Junior Subordinated Debentures -- Option to
Extend Interest Payment Period." Should an
Extension Period occur with respect to the
11
Capital Securities, holders of the Capital
Securities will accrue interest income (in
the form of original issue discount
("OID")), for United States federal income
tax purposes in respect of their pro rata
share of the Junior Subordinated Debentures
held by the Issuer Trust. As a result, such
holders will be required to include such
amounts in gross income for United States
federal income tax purposes in advance of
the receipt of cash, and such holders will
not receive the cash from the Issuer Trust
related to such income if such holders
dispose of the Capital Securities prior to
the record date for payment of
Distributions. See "Certain Federal Income
Tax Consequences -- Interest Income and
Original Issue Discount."
Liquidation..................... The Company, as the holder of all of the
Common Securities, has the right at any time
to dissolve the Issuer Trust (including,
without limitation, upon the occurrence of a
Tax Event, a Capital Treatment Event or an
Investment Company Event (each as defined
herein)), subject to certain conditions
(including the receipt of prior approval by
the Federal Reserve if then required under
applicable capital guidelines or policies of
the Federal Reserve), with the result that,
after satisfaction of liabilities to
creditors of the Issuer Trust (to the extent
not satisfied by the Company), the Company
must cause the Junior Subordinated Debentures
to be distributed to the holders of the Trust
Securities on a pro rata basis in accordance
with the respective Liquidation Amounts
thereof. In addition, the Issuer Trust will
be dissolved and liquidated under certain
other circumstances. See "Description of the
New Capital Securities -- Liquidation
Distribution on Dissolution."
Liquidation Distribution........ In the event of the voluntary or
involuntary liquidation, dissolution or
winding-up of the Issuer Trust, after
satisfaction of liabilities to creditors of
the Issuer Trust (to the extent not satisfied
by the Company), holders of the Capital
Securities will be entitled to receive a
Liquidation Distribution (as defined herein)
equal to $1,000 per Capital Security plus an
amount equal to accrued and unpaid
Distributions thereon to the date of payment,
unless the Junior Subordinated Debentures are
distributed to holders of the Trust
Securities in exchange therefor. If such
Liquidation Distribution can be paid only in
part because the Issuer Trust has
insufficient assets available to pay in full
the aggregate Liquidation Distribution, then
the amounts payable directly by the Issuer
Trust on the Capital Securities shall be paid
on a pro rata basis. The holders of the
Common Securities will be entitled to receive
distributions upon any such liquidation pro
rata with the holders of the Capital
Securities, except that if a Debenture Event
of Default (as defined herein) has occurred
and is continuing by reason of the failure to
pay amounts due with respect to the Junior
Subordinated Debentures, the Capital
Securities shall have a priority over the
Common Securities. See "Description of the
New Capital Securities -- Liquidation
Distribution on Dissolution."
Maturity........................ Upon the repayment of the Junior
Subordinated Debentures, whether at maturity
or upon early redemption as provided in the
Junior Subordinated Indenture, the proceeds
from such repayment will be applied by the
Property Trustee to redeem a like amount of
the Trust Securities, upon the terms and
conditions described herein. See "Description
of the New Capital Securities -- Redemption."
Redemption...................... The Trust Securities are subject to
mandatory redemption (i) in whole, but not in
part, at the Stated Maturity upon repayment
of the Junior
12
Subordinated Debentures, (ii) in whole, but
not in part, contemporaneously with the
optional redemption at any time by the
Company of the Junior Subordinated
Debentures at any time within 90 days
following the occurrence and during the
continuation of a Tax Event, Investment
Company Event or Capital Treatment Event, in
each case subject to possible regulatory
approval, and (iii) in whole or in part, at
any time on or after March 1, 2008,
contemporaneously with the optional
redemption by the Company of the Junior
Subordinated Debentures in whole or in part,
in each case at the applicable Redemption
Price (as defined herein). See "Description
of the New Capital Securities --
Redemption."
Tax Event, Capital Treatment Event and
Investment Company
Event Redemption................ If at any time a Tax Event, a Capital
Treatment Event or an Investment Company
Event should occur and be continuing, the
Company may, within 90 days of the occurrence
of such Tax Event, Capital Treatment Event or
Investment Company Event, as applicable,
redeem the Junior Subordinated Debentures in
whole or in part in certain limited
circumstances described herein at a
Redemption Price (as defined herein) equal to
par plus accrued and unpaid interest to the
redemption date, subject to the Company
having received prior approval from the
Federal Reserve if then required under
applicable capital guidelines or policies of
the Federal Reserve. Upon the redemption of
the Junior Subordinated Debentures, the
proceeds of such redemption will be applied
by the Property Trustee to redeem a like
amount of the Trust Securities on a pro rata
basis, upon the terms and conditions
described herein. See "Description of the New
Capital Securities -- Redemption."
The Guarantee................... The payment of Distributions out of moneys
held by the Issuer Trust, payments on
liquidation of the Issuer Trust, and payment
upon the redemption of the Capital Securities
are guaranteed by the Company to the extent
described herein under "Description of the
Guarantee." The Guarantee covers payments of
Distributions and other payments on the
Capital Securities only if and to the extent
that the Issuer Trust has funds available
therefor, which funds will not be available
except to the extent the Company has made
payments of interest or principal or other
payments on the Junior Subordinated
Debentures. The Guarantee, when taken
together with the Company's obligations under
the Junior Subordinated Debentures, the Trust
Agreement and the Junior Subordinated
Indenture (including its obligations to pay
costs, expenses, debts and other liabilities
of the Issuer Trust (other than with respect
to the Trust Securities)), provides a full
and unconditional guarantee on a subordinated
basis by the Company of amounts due on the
Capital Securities.
Ranking......................... The Common Securities rank pari passu with,
and payments thereon will be made pro rata
with, the Capital Securities, except that
upon the occurrence and continuation of a
Debenture Event of Default by reason of the
failure to pay amounts due with respect to
the Junior Subordinated Debentures, the
rights of the holders of the Common
Securities to receive payment 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 the New
Capital Securities -- General." The Junior
Subordinated Debentures are unsecured and
subordinate and junior in right of payment to
the
13
extent and in the manner set forth in the
Junior Subordinated Indenture to all Senior
Indebtedness (as defined herein) of the
Company. See "Description of the New Junior
Subordinated Debentures -- General." The
Guarantee will constitute an unsecured
obligation of the Company and will rank
subordinate and junior in right of payment
to the extent and in the manner set forth in
the Guarantee to all Senior Indebtedness of
the Company. The Company's obligations under
the Guarantee and the Junior Subordinated
Debentures are also effectively subordinate
to claims of creditors of the Company's
subsidiaries. See "Description of the
Guarantee -- Status of the Guarantee."
Voting Rights................... Holders of the Capital Securities have
limited voting rights relating generally to
the modification of the Capital Securities
and the Guarantee and the exercise of the
Issuer Trust's rights as the holder of the
Junior Subordinated Debentures. Holders of
the Capital Securities are not entitled to
appoint, remove or replace the Property
Trustee or the Delaware Trustee except upon
the occurrence of a Debenture Event of
Default (as defined herein) described herein.
See "Description of the New Capital
Securities -- Voting Rights, Amendment of
Trust Agreement" and " -- Removal of Issuer
Trustees; Appointment of Successors."
Rating.......................... The Old Capital Securities are, and the New
Capital Securities are expected to be, rated
"baa3" 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 Old Capital Securities were, and the
New Capital Securities will be, issued and
may be transferred only in blocks having a
Liquidation Amount of not less than $100,000
(100 Old Capital Securities or New Capital
Securities, as the case may be). Any such
transfer of the Old Capital Securities or the
New 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. See "Description of the
New Capital Securities -- Restrictions on
Transfer."
Junior Subordinated Debentures... The Issuer Trust invested the proceeds from
the issuance of the Old Capital Securities
and Common Securities in an equivalent amount
of Old Junior Subordinated Debentures of the
Company, up to $150,000,000 aggregate
principal amount of which will be exchanged
for New Junior Subordinated Debentures. The
Junior Subordinated Debentures mature on
March 1, 2028, and rank subordinate and
junior in right of payment to all Senior
Indebtedness of the Company. In addition, the
Company's obligations under the Junior
Subordinated Debentures are effectively
subordinated to all existing and future
liabilities and obligations of its
subsidiaries. See "Risk Factors -- Ranking of
Subordinated Obligations Under the Guarantee
and the Junior Subordinated Debentures", and
"Description of the New Junior Subordinated
Debentures -- Subordination."
Form of Capital Securities...... The Old Capital Securities initially sold
to "qualified institutional buyers" (as
defined in Rule 144A under the Securities
Act) in reliance on Rule 144A under the
Securities Act are represented by a global
certificate or certificates registered in the
name of Cede & Co., as nominee for DTC. The
Old Capital Securities initially sold to
institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7)
14
under the Securities Act) were issued only
in fully registered, certificated form.
Beneficial interests in the New Capital
Securities represented by a global
certificate or certificates will be
evidenced by, and transfers thereof will be
effected only through, records maintained by
the participants in DTC. Except in the
limited circumstances described herein, the
New Capital Securities in certificated form
will not be issued in exchange for the
global certificate or certificates. See
"Description of the New Capital Securities
-- Book-Entry Only Issuance -- The
Depository Trust Company."
For additional information with respect to the New Capital Securities, see
"Description of the New Capital Securities," "Description of the New Junior
Subordinated Debentures," "Description of the Guarantee," "Relationship Among
the Capital Securities, the Junior Subordinated Debentures, and the Guarantee,"
and "Certain Federal Income Tax Consequences."
RISK FACTORS
Holders of the Old Capital Securities should carefully consider the matters
set forth under "Risk Factors."
15
RISK FACTORS
Prior to deciding whether to participate in the Exchange Offer, holders of
Old Capital Securities should carefully review the information contained
elsewhere, or incorporated by reference, in this Prospectus and should
particularly consider the following matters:
Consequences of a Failure to Exchange Old Capital Securities
The Old 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. Old 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 Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to limited
exceptions, if applicable). The Company and the Issuer Trust do not intend to
register under the Securities Act any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer (subject to limited
exceptions, if applicable).
To the extent that Old Capital Securities are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Capital Securities
could be adversely affected. In addition, although the Old Capital Securities
have been designated for trading in the Private Offerings, Resale and Trading
through Automatic Linkages ("PORTAL") market, to the extent that Old Capital
Securities are tendered and accepted in connection with the Exchange Offer, any
trading market for Old Capital Securities which remain outstanding after the
Exchange Offer could be adversely affected.
The New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will constitute a single
series of Capital Securities under the Trust Agreement and, accordingly, 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 the New Capital Securities -- General."
Exchange Offer Procedures
Issuance of the New Capital Securities in exchange for Old Capital
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Exchange Agent of such Old Capital Securities, a properly
completed and duly executed Letter of Transmittal (or an Agent's Message in
lieu thereof) and all other required documents. Therefore, holders of the Old
Capital Securities desiring to tender such Old Capital Securities in exchange
for New Capital Securities should carefully follow the exchange procedures
described in this Prospectus and allow sufficient time to ensure timely
delivery to the Exchange Agent. The Issuer Trust is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Capital Securities for exchange. See "Procedure for Tendering Old Capital
Securities."
Ranking of Subordinated Obligations Under the Guarantee and the Junior
Subordinated Debentures
The obligations of the Company under the Guarantee issued by the Company
for the benefit of the holders of Capital Securities and under the Junior
Subordinated Debentures are subordinate and junior in right of payment to all
present and future Senior Indebtedness of the Company. No payment of principal
of (including redemption payments, if any) or interest on the Junior
Subordinated Debentures may be made if (i) any Senior Indebtedness of the
Company is not paid when due and any applicable grace period with respect to
such default has ended with such default not having been cured or waived or
ceasing to exist or (ii) the maturity of any Senior Indebtedness of the Company
has been accelerated because of a default. At June 30, 1998, the Senior
Indebtedness of the Company aggregated approximately $368.3 million. None of
the Junior Subordinated Indenture, the Guarantee or the Trust Agreement places
any limitation on the amount of secured or unsecured debt, including Senior
Indebtedness, that may be incurred by the Company. See "Description of the
Guarantee -- Status of the Guarantee" and "Description of the New Junior
Subordinated Debentures -- Subordination."
The ability of the Issuer Trust to pay amounts due on the Capital
Securities is solely dependent upon the Company's making payments on the Junior
Subordinated Debentures as and when required.
16
Status of the Company as a Bank Holding Company
Because the Company is a bank holding company, its right to participate in
any distribution of assets of any of the Banks upon such Bank's liquidation or
reorganization or otherwise (and thus the ability of holders of the Capital
Securities to benefit indirectly from such a distribution) is subject to the
prior claims of creditors of that Bank (including its depositors), except to
the extent that the Company may itself be recognized as a creditor of the Bank.
At June 30, 1998, the Banks had total liabilities (excluding liabilities owed
to the Company) of approximately $8.20 billion, including deposits.
Accordingly, the Capital Securities effectively will be subordinated to all
existing and future liabilities of the Banks, and holders of Capital Securities
should look only to the assets of the Company for payments on the Capital
Securities. Neither the Guarantee nor the Junior Subordinated Indenture places
any limitation on the amount of secured or unsecured debt that may be incurred
by the Banks in the future. See "Description of the New Junior Subordinated
Debentures" and "Description of the Guarantee."
In addition, almost all of the operating assets of the Company are owned
by the Banks. The Company relies primarily on dividends from the Banks to meet
its obligations for the payment of principal and interest on its separate debt
obligations and corporate expenses and for payment of dividends on its
outstanding common stock. The payment of dividends by the Banks to the Company
is subject to certain legal and regulatory limitations, is subject to ongoing
review by banking regulators and, under certain circumstances, may require
prior approval by banking regulatory authorities. At June 30, 1998,
approximately $398.4 million was available for payment of dividends to the
Company from the Banks without prior regulatory approval. The Banks also are
subject to certain restrictions under federal law on extensions of credit to,
and certain other transactions with, the Company and certain of its other
affiliates, and on investments in the stock or other securities thereof. Such
restrictions prevent the Company and such other affiliates from borrowing from
the Banks unless the loans are secured by various types of collateral. Further,
such secured loans or other transactions and investments by each Bank are
generally limited in amount as to the Company and as to each such other
affiliate to 10% of such Bank's capital and surplus and as to the Company and
all such other affiliates to an aggregate of 20% of such Bank's capital and
surplus.
Option to Extend Interest Payment Period; Tax Consequences
So long as no Event of Default (as defined in the Junior Subordinated
Indenture) has occurred and is continuing with respect to the Junior
Subordinated Debentures (a "Debenture Event of Default"), the Company has the
right under the Junior Subordinated Indenture to defer the payment of interest
on the Junior Subordinated Debentures at any time or from time to time for a
period not exceeding 10 consecutive semi-annual periods with respect to each
Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures or end on a date other
than a Distribution Date. See "Description of the New Junior Subordinated
Debentures -- Debenture Events of Default." As a consequence of any such
deferral, semi-annual Distributions on the Capital Securities by the Issuer
Trust will be deferred during any such Extension Period. Distributions to which
holders of the Capital Securities are entitled will accumulate additional
Distributions thereon during any Extension Period at a rate equal to 8.05% per
annum, compounded semi-annually from the relevant payment date for such
Distributions, computed on the basis of a 360-day year of twelve 30-day months
and the actual days elapsed in a partial month in such period. Additional
Distributions payable for each full Distribution period will be computed by
dividing the rate per annum by two. The term "Distributions" as used herein
shall include any such additional Distributions. During any such Extension
Period, the Company may not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank pari passu in all respects with or junior
in interest to the Junior Subordinated Debentures (other than (a) repurchases,
redemptions or other acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of any one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
shareholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into
prior to the applicable Extension Period, (b) as a result of an exchange or
conversion of any class or series of the Company's capital stock (or any
capital stock of a subsidiary of the Company) for any class or series of the
Company's capital stock or of any class or series of the Company's indebtedness
for any class or series of the Company's capital stock, (c) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (d) any declaration of a dividend in connection with
any shareholder's rights plan, or the issuance of rights, stock or other
property under any shareholder's rights plan, or the redemption or repurchase
of rights pursuant thereto, or (e) any dividend in the form of stock, warrants,
options or other rights where the dividend stock or the stock issuable upon
exercise of such warrants, options or other rights is the same stock as that on
which the dividend is being paid or ranks pari
17
passu with or junior to such stock). Prior to the termination of any such
Extension Period, the Company may further defer the payment of interest,
provided that no Extension Period may exceed 10 consecutive semi-annual
periods, extend beyond the Stated Maturity of the Junior Subordinated
Debentures, or end on a date other than a Distribution Date. Upon the
termination of any Extension Period and the payment of all interest then
accrued and unpaid (together with interest thereon at a rate equal to 8.05% per
annum, compounded semi-annually), the Company may elect to begin a new
Extension Period subject to the above conditions. No interest shall be due and
payable during an Extension Period, except at the end thereof. The Company must
give the Issuer Trustees notice of its election of such Extension Period at
least one Business Day prior to the earlier of (i) the date the Distributions
on the Capital Securities would have been payable but for the election to begin
such Extension Period and (ii) the date the Property Trustee is required to
give notice to holders of the Capital Securities of the record date or the date
such Distributions are payable, but in any event not less than one Business Day
prior to such record date. The Property Trustee will give notice of the
Company's election to begin a new Extension Period to the holders of the
Capital Securities. Subject to the foregoing, there is no limitation on the
number of times that the Company may elect to begin an Extension Period. See
"Description of the New Capital Securities -- Distributions" and "Description
of the New Junior Subordinated Debentures -- Option to Extend Interest Payment
Period."
Should an Extension Period occur, a holder of Capital Securities will
accrue interest income (in the form of OID) for United States federal income
tax purposes in respect of its pro rata share of the Junior Subordinated
Debentures held by the Issuer Trust. As a result, a holder of Capital
Securities will include such interest income in gross income for United States
federal income tax purposes in advance of the receipt of cash attributable to
such income, and will not receive the cash related to such income from the
Issuer Trust if the holder disposes of the Capital Securities prior to the
record date for the payment of Distributions with respect to such Extension
Period. See "Certain Federal Income Tax Consequences -- Interest Income and
Original Issue Discount" and " -- Sale or Redemption of Capital Securities."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. However, should the Company elect to exercise such
right in the future, the market price of the 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, as a result
of the existence of the Company's right to defer interest payments, the market
price of the Capital Securities (which represent preferred undivided beneficial
interests in the assets of the Issuer Trust) may be more volatile than the
market prices of other securities on which original issue discount accrues that
are not subject to such deferrals.
Tax Event, Investment Company Event or Capital Treatment Event Redemption;
Proposed Tax Law Changes
Upon the occurrence and during the continuation of a Tax Event, Investment
Company Event or Capital Treatment Event, the Company has the right to redeem
the Junior Subordinated Debentures in whole, but not in part, at any time
within 90 days following the occurrence of such Tax Event, Investment Company
Event or Capital Treatment Event and thereby cause a mandatory redemption of
the Capital Securities and Common Securities. Any such redemption shall be at a
price equal to the aggregate Liquidation Amount of the Capital Securities and
Common Securities, respectively, together with accumulated Distributions to but
excluding the date fixed for redemption and the related amount of the premium,
if any, paid by the Company upon the concurrent redemption of such Junior
Subordinated Debentures. The ability of the Company to exercise its rights to
redeem the Junior Subordinated Debentures prior to the stated maturity may be
subject to prior regulatory approval by the Federal Reserve, if then required
under applicable Federal Reserve capital guidelines or policies. See
"Description of the New Junior Subordinated Debentures -- Redemption" and
"Description of the New Capital Securities -- Liquidation Distribution Upon
Dissolution."
A "Tax Event" means the receipt by the Issuer Trust of an opinion of
counsel to the Company experienced in such matters to the effect that, as a
result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or
any political subdivision or taxing authority thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or which pronouncement or decision is announced on or after
the date of issuance of the Capital Securities, there is more than an
insubstantial risk that (i) the Issuer Trust is, or will be within 90 days of
the delivery of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Old Junior Subordinated Debentures
or New Junior Subordinated Debentures, (ii) interest payable by the Company on
the Old Junior Subordinated Debentures or New Junior Subordinated Debentures is
not, or within 90 days of the delivery of such opinion will not be, deductible
by the Company, in whole or in part, for United States federal income tax
purposes or (iii) the Issuer Trust is, or will be within 90 days of the
delivery of the opinion, subject to more than a de
18
minimis amount of other taxes, duties or other governmental charges. According
to a petition recently filed in the United States Tax court by a corporation
unrelated to the Company and the Issuer Trust, the Internal Revenue Service has
challenged the deductibility for United States federal income tax purposes of
interest payments on certain purported debt instruments held by entities
intended to be taxable as partnerships for United States federal income tax
purposes, where those entities, in turn, issued preferred securities to
investors. Although the overall structure of the financing arrangement involved
in that case is somewhat similar to the financing structure for the Junior
Subordinated Debentures and the Issuer Trust, the relevant facts in that case
appear to differ significantly from those relating to the Junior Subordinated
Debentures and the Issuer Trust. Whether the Internal Revenue Service would
attempt to challenge the deductibility of interest on the Junior Subordinated
Debentures cannot be predicted. The Company, based on the advice of counsel,
intends to take the position that interest payments on the Junior Subordinated
Debentures will be deductible by the Company for United States federal income
tax purposes. See "Certain Federal Income Tax Consequences -- Classification of
the Junior Subordinated Debentures." Adverse developments relating to the
deductibility of interest, whether arising in connection with the case
currently pending in the United States Tax Court or not, could give rise to a
Tax Event.
"Investment Company Event" means the receipt by the Issuer Trust of an
opinion of counsel to the Company experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change (including any announced prospective change) in interpretation
or application of law or regulation by any legislative body, court,
governmental agency or regulatory authority, there is more than an
insubstantial risk that the Issuer Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which change or
prospective change becomes effective or would become effective, as the case may
be, on or after the date of the issuance of the Capital Securities.
A "Capital Treatment Event" means the reasonable determination by the
Company that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such laws
or regulations, which amendment or change is effective or such pronouncement,
action or decision is announced on or after the date of issuance of the Capital
Securities, there is more than an insubstantial risk that the Company will not
be entitled to treat an amount equal to the Liquidation Amount of the Capital
Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes of
the risk-based capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company.
Possible Tax Law Changes
In both 1996 and 1997, the Clinton Administration proposed to amend the
Internal Revenue Code of 1986, as amended (the "Code"), to deny deductions of
interest on instruments with features similar to those of the Junior
Subordinated Debentures when issued under arrangements similar to the Issuer
Trust. That proposal was not passed by, and is not currently pending before,
Congress. There can be no assurance, however, that future legislative
proposals, future regulations or official administrative pronouncements or
future judicial decisions will not affect the ability of the Company to deduct
interest on the Junior Subordinated Debentures. Such a change could give rise
to a Tax Event, which may permit the Company, upon approval of the Federal
Reserve if then required under applicable capital guidelines or policies of the
Federal Reserve, to cause a redemption of the Capital Securities, as described
more fully under "Description of the New Capital Securities -- Redemption."
Exchange of Capital Securities for Junior Subordinated Debentures
The holders of all the outstanding Common Securities have the right at any
time to dissolve the Issuer Trust and, after satisfaction of liabilities to
creditors of the Issuer Trust as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of the Capital
Securities and Common Securities in liquidation of the Issuer Trust. The
ability of the Company to dissolve the Issuer Trust may be subject to prior
regulatory approval of the Federal Reserve, if then required under applicable
Federal Reserve capital guidelines or policies. See "Description of the New
Capital Securities -- Liquidation Distribution Upon Dissolution."
Under current United States federal income tax law and interpretations and
assuming, as expected, that the Issuer Trust will be taxable as a grantor
trust, a distribution of the Junior Subordinated Debentures upon a liquidation
of the Issuer Trust will not be a taxable event to holders of the Capital
Securities. However, if a Tax Event were to occur that would cause the Issuer
Trust to be subject to United States federal income tax with respect to income
received or accrued on the Junior Subordinated Debentures, a distribution of
the Junior Subordinated Debentures by the Issuer Trust would be a taxable event
to
19
the Issuer Trust and the holders of the Capital Securities. See "Certain
Federal Income Tax Consequences -- Distribution of Junior Subordinated
Debentures to Holders of Capital Securities."
Rights Under the Guarantee
The terms of the Guarantee will be those set forth in the Guarantee and
those made part of the Guarantee by the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). Bankers Trust Company will act as the trustee under the
Guarantee (the "Guarantee Trustee") and will hold the Guarantee for the benefit
of the holders of the Capital Securities. Bankers Trust Company will also act
as Debenture Trustee for the Junior Subordinated Debentures and as Property
Trustee under the Trust Agreement. Bankers Trust (Delaware) will act as
Delaware Trustee under the Trust Agreement. The Guarantee guarantees to the
holders of the Capital Securities the following payments, to the extent not
paid by or on behalf of the Issuer Trust: (i) any accumulated and unpaid
Distributions required to be paid on the Capital Securities, to the extent that
the Issuer Trust has funds on hand available therefor at such time; (ii) the
Redemption Price (as defined in "Description of the New Capital Securities --
Redemption") with respect to any Capital Securities called for redemption, to
the extent that the Issuer Trust has funds on hand available therefor at such
time; and (iii) upon a voluntary or involuntary dissolution of the Issuer 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 Issuer Trust has funds on hand available therefor at such time,
and (b) the amount of assets of the Issuer Trust remaining available for
distribution to holders of the Capital Securities on liquidation of the Issuer
Trust. The Guarantee is subordinated as described under " -- Ranking of
Subordinated Obligations Under the Guarantee and the Junior Subordinated
Debentures" and "Description of the Guarantee -- Status of the Guarantee." The
holders of not less than a majority in aggregate Liquidation Amount of the
outstanding Capital Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust
power conferred upon the Guarantee Trustee under the Guarantee. Any holder of
the Capital Securities may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Issuer Trust, the Guarantee Trustee or any other
person or entity.
If the Company were to default on its obligation to pay amounts payable
under the Junior Subordinated Debentures, the Issuer Trust may lack funds for
the payment of Distributions or amounts payable on redemption of the Capital
Securities or otherwise, and, in such event, holders of the Capital Securities
would not be able to rely upon the Guarantee for payment of such amounts.
Instead, if a Debenture Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay any amounts
payable in respect of the Junior Subordinated Debentures on the payment date on
which such payment is due and payable, then a holder of Capital Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of any amounts payable in respect of such Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Capital Securities of such holder (a "Direct
Action"). In connection with such Direct Action, the Company will have a right
of set-off under the Junior Subordinated Indenture to the extent of any payment
made by the Company to such holder of Capital Securities in the 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 assert directly any other rights in respect of the
Junior Subordinated Debentures. See "Description of the New Junior Subordinated
Debentures -- Enforcement of Certain Rights by Holders of Capital Securities,"
" -- Debenture Events of Default" and "Description of the Guarantee." The Trust
Agreement provides that each holder of Capital Securities by acceptance thereof
agrees to the provisions of the Guarantee and the Junior Subordinated
Indenture.
Limited Voting Rights
Holders of Capital Securities will have limited voting rights relating
generally to the modification of the Capital Securities and the Guarantee and
the exercise of the Issuer Trust's rights as holder of Junior Subordinated
Debentures. Holders of Capital Securities will not be entitled to appoint,
remove or replace the Property Trustee or the Delaware Trustee except upon the
occurrence of certain events specified in the Trust Agreement and described
herein. The Property Trustee and the holders of all the Common Securities may,
subject to certain conditions, amend the Trust Agreement without the consent of
holders of Capital Securities to cure any ambiguity or make other provisions
not inconsistent with the Trust Agreement or to ensure that the Issuer Trust
(i) will not be taxable other than as a grantor trust for United States federal
income tax purposes, or (ii) will not be required to register as an "investment
company" under the Investment Company Act. See "Description of the New Capital
Securities -- Voting Rights; Amendment of Trust Agreement" and " -- Removal of
Issuer Trustees; Appointment of Successors."
20
Market Prices
There can be no assurance as to the market prices for Capital Securities,
or the market prices for Junior Subordinated Debentures that may be distributed
in exchange for Capital Securities if a liquidation of the Issuer Trust occurs.
Accordingly, the Capital Securities or the Junior Subordinated Debentures that
a holder of Capital Securities may receive on liquidation of the Issuer Trust
may trade at a discount to the price that the investor paid to purchase the Old
Capital Securities in exchange for which the New Capital Securities are being
offered. Because holders of Capital Securities may receive Junior Subordinated
Debentures on termination of the Issuer Trust, holders who elect to exchange
their Old Capital Securities for New Capital Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and
should carefully review all the information regarding the Junior Subordinated
Debentures contained herein. See "Description of the New Junior Subordinated
Debentures."
Absence of Public Market
The Old Capital Securities were issued to, and the Company believes they
are currently owned by, a relatively small number of beneficial owners. The Old
Capital Securities have not been registered under the Securities Act and will
be subject to restrictions on transferability to the extent that they are not
exchanged for the New Capital Securities. Although the New Capital Securities
will generally be permitted to be resold or otherwise transferred by the
holders thereof (who are not affiliates of the Company or the Issuer Trust)
without compliance with the registration requirements under the Securities Act,
they will constitute a new issue of securities with no established trading
market. Also, 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 Company and the Issuer Trust have been advised by the Initial
Purchaser that the Initial Purchaser presently intends to make a market in the
New Capital Securities. However, the Initial Purchaser is not obligated to do
so and any market-making activity with respect to the New Capital Securities
may be discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer. Accordingly, no
assurance can be given that an active public or other market will develop for
the New Capital Securities or the Old Capital Securities or as to the liquidity
of the trading market for the New Capital Securities or the Old Capital
Securities. If an active public market does not develop, the market price and
liquidity of the New Capital Securities may be adversely affected.
If a public trading market for the New Capital Securities develops, future
trading prices of such securities will depend on many factors, including, among
other things, prevailing interest rates, the Company's results of operations
and the market for similar securities. Depending on prevailing interest rates,
the market for similar securities and other factors, including the financial
condition of the Company, the New Capital Securities may trade at a discount.
Notwithstanding the registration of the New Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Company or the Issuer Trust may publicly offer for sale
or resell the New Capital Securities only in compliance with the provisions of
Rule 144 under the Securities Act.
Each broker-dealer that receives New Capital Securities for its own
account in exchange for Old Capital Securities, where such Old 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 New Capital Securities. See
"Plan of Distribution."
Growth
The Company has grown and may seek to grow by acquiring other financial
institutions and branches. However, competition for acquisitions in the
Company's market area is highly competitive. Moreover, any acquisitions will be
subject to regulatory approval and there can be no assurance that the Company
will obtain such approvals. The Company may not be as successful in the future
as it has been in the past in identifying further acquisition candidates,
integrating acquired institutions or preventing deposit erosion at acquired
institutions or branches. Furthermore, the Company's ability to grow through
acquisitions will depend on its maintaining sufficient regulatory capital
levels and on economic conditions.
Competition
The banking business is highly competitive. In their primary market areas,
the Banks compete with other commercial banks, savings and loan associations,
credit unions, finance companies, mutual funds, insurance companies, and
brokerage and investment banking firms operating locally and elsewhere. Certain
of the Banks' primary competitors have substantially
21
greater resources and lending limits than the Banks and may offer certain
services the Banks do not provide at this time. The profitability of the
Company depends upon the Banks' ability to continue to compete in their primary
market areas.
Developments in Technology
The market for financial services, including banking services, is
increasingly affected by advances in technology, including developments in
telecommunications, data processing, computers, automation, Internet-based
banking, telebanking, debit cards and so-called "smart" cards. The ability of
the Company to compete successfully in its markets may depend on the extent to
which it is able to exploit such technological changes. However, there can be
no assurance that the development of these or any other new technologies, or
the Company's success or failure in anticipating or responding to such
developments, will materially affect the Company's business, financial
condition and operating results.
FIRST CITIZENS BANCSHARES, INC.
The Company is a registered bank holding company, chartered under the laws
of Delaware, and headquartered in Raleigh, North Carolina. The Company operates
through, and its principal assets are its investments in, its three wholly-owned
banking subsidiaries, the largest of which is First-Citizens Bank & Trust
Company, Raleigh, North Carolina ("FCB/
NC"). The Company's other two banking subsidiaries are First-Citizens Bank &
Trust Company, White Sulphur Springs, West Virginia ("FCB/WV"), and Atlantic
States Bank, Raleigh, North Carolina ("ASB"). FCB/NC, FCB/WV, and ASB
(collectively referred to herein as the "Banks") provide a wide variety of
retail and commercial banking products and services to individuals and small-
to medium-sized businesses located in the communities they serve. At June 30,
1998, the Company had total consolidated assets of approximately $9.2 billion,
total consolidated deposits of approximately $7.8 billion, and total
consolidated shareholders' equity of approximately $628.7 million.
FCB/NC is a North Carolina-chartered bank that currently maintains 349
banking offices in 209 communities in North Carolina and Virginia. FCB/WV is a
West Virginia-chartered bank that currently maintains four banking offices in
four communities in West Virginia. ASB is a federally-chartered savings bank
based in Raleigh, North Carolina, that currently maintains 13 branch offices
located in the vicinity of Atlanta, Georgia.
Management of the Company is led by members of the Holding family, which
collectively controls 43.0% of the Class A, and 68.8% of the Class B (with a
16-to-1 voting preference over the shares of Class A), common stock of the
Company. As a result, the Company has been managed from a long-term perspective
with primary emphasis being placed on balance sheet liquidity, loan quality,
and earnings stability. Consistent with its management philosophy, the Company
has emphasized a low-risk loan portfolio derived from its local markets. At
June 30, 1998, the Company's loan-to-deposit ratio was 75.48%, and its
non-performing assets were $13.5 million, or 0.23% of gross loans and other
real estate. Net charge-offs for the six months ended June 30, 1998, were 0.14%
of average loans. The allowance for loan losses at June 30, 1998, was 1.53% of
gross loans and 731.58% of non-performing loans.
The Company's strategy includes continuing to: (i) provide
community-oriented banking services with a focus on offering a complete array
of financial services for small- and medium-sized businesses and to individuals
within the communities in which it operates; (ii) increase its loan to deposit
ratio while maintaining above-average credit quality measurements; and (iii)
make the necessary investments in technology to remain competitive with the
larger banking organizations in its markets from a product delivery and
customer service standpoint. Management believes that as its largest
super-regional competitors continue to focus on larger dollar transactions and
less personal forms of customer service, and as smaller banking organizations
become less capable of providing the advanced levels of customer service
required in today's banking market, the Company will have significant
opportunities to continue to expand its franchise and further penetrate its
targeted markets.
The Company's principal executive offices are located at 3128 Smoketree
Court, Raleigh, North Carolina 27604, and its telephone number is (919)
716-7000.
For additional information regarding the Company and its financial
condition and results of operations, see "Available Information,"
"Incorporation of Certain Documents by Reference" and "Selected Consolidated
Financial Data and Other Information."
NEITHER THE CAPITAL SECURITIES NOR THE JUNIOR SUBORDINATED DEBENTURES ARE
OBLIGATIONS OF OR GUARANTEED BY THE BANKS.
22
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following unaudited table presents the consolidated ratios of earnings
to fixed charges of the Company. The consolidated ratios of earnings to fixed
charges have been computed by dividing income before income taxes and fixed
charges by fixed charges. Fixed charges represent all interest expense (ratios
are presented both excluding and including interest on deposits). Interest
expense (other than on deposits) includes interest on borrowed funds, federal
funds purchased and securities sold under agreements to repurchase, and other
funds borrowed.
Six months ended
June 30, For the year ended December 31,
----------------------- ---------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- -----------
Earnings to fixed charges:
Excluding interest on deposits 4.04 x 6.62x 5.54x 6.86x 6.01x 8.18x 12.11x
Including interest on deposits 1.35 1.42 1.41 1.41 1.39 1.53 1.61
SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER INFORMATION
Presented below is selected consolidated financial information for the
Company for the periods specified. The consolidated financial information is
not necessarily indicative of the results for any future period and is
qualified in its entirety by, and should be read in conjunction with, the
detailed information contained in the Company's consolidated financial
statements, including footnotes thereto, incorporated herein by reference and
the other information contained in its reports filed with the Commission under
the Exchange Act. See "Available Information" and "Incorporation of Certain
Documents by Reference."
As of and for the
six months ended
June 30,
-------------------------------
1998 1997
--------------- ---------------
(Unaudited)
(Dollars in thousands, except
for per share data)
Selected balance sheet data:
Loans ............................... $ 5,886,315 $ 4,996,770
Securities held to maturity ......... 2,322,673 2,271,282
Securities available for sale ....... 26,098 26,092
Total assets ........................ 9,224,848 8,351,978
Deposits ............................ 7,798,918 7,127,282
Long term obligations ............... 159,456 12,150
Shareholders' equity ................ 628,702 644,210
Selected results of operations:
Net interest income ................. $ 158,915 $ 150,309
Provision for loan losses ........... 9,662 3,664
Noninterest income .................. 67,285 52,308
Noninterest expense ................. 165,180 145,401
Income taxes ........................ 18,153 19,376
Net income .......................... 33,205 34,176
Per share:
Net income (1) ..................... 3.07 3.00
Book value ......................... 59.17 56.55
Cash dividends ..................... 0.500 0.500
Selected ratios:
Return on average
assets (2) ......................... 0.74% 0.86%
Return on average
equity (2) ......................... 10.90 10.92
Shareholders' equity to total
assets ............................. 6.82 7.71
Asset quality ratios:
Nonperforming assets to total
gross loans and other real
estate owned ....................... 0.23% 0.33%
Net charge-offs to average loans
(2) ................................ 0.14 0.11
Total allowance for
loan losses to total
nonperforming assets ............... 668.20 520.31
As of and for the year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993
--------------- --------------- --------------- --------------- ---------------
(Dollars in thousands, except for per share data)
Selected balance sheet data:
Loans ............................... $ 5,445,772 $ 4,930,508 $ 4,580,719 $ 4,148,133 $ 3,584,991
Securities held to maturity ......... 2,456,722 2,138,831 1,983,148 1,458,969 1,814,787
Securities available for sale ....... 26,572 22,405 -- -- --
Total assets ........................ 8,951,109 8,055,572 7,383,950 6,333,324 6,101,016
Deposits ............................ 7,579,567 6,954,028 6,388,082 5,517,589 5,358,187
Long term obligations ............... 10,856 6,922 22,957 34,542 60,326
Shareholders' equity ................ 601,640 615,507 520,837 449,411 389,050
Selected results of operations:
Net interest income ................. $ 304,263 $ 285,945 $ 246,445 $ 227,879 $ 226,947
Provision for loan losses ........... 8,726 8,907 5,364 2,786 15,245
Noninterest income .................. 115,307 103,304 92,128 83,325 85,737
Noninterest expense ................. 300,794 278,668 245,880 230,582 213,213
Income taxes ........................ 39,492 36,207 30,423 26,867 28,641
Net income .......................... 70,558 65,467 56,906 50,969 55,585
Per share:
Net income (1) ..................... 6.22 5.77 5.37 5.13 5.73
Book value ......................... 56.61 53.94 48.60 44.11 39.84
Cash dividends ..................... 1.000 0.925 0.825 0.725 0.625
Selected ratios:
Return on average
assets (2) ......................... 0.85% 0.85% 0.83% 0.84% 1.00%
Return on average
equity (2) ......................... 11.04 11.35 11.66 12.22 15.32
Shareholders' equity to total
assets ............................. 6.72 7.64 7.05 7.10 6.38
Asset quality ratios:
Nonperforming assets to total
gross loans and other real
estate owned ....................... 0.26% 0.28% 0.34% 0.65% 1.39%
Net charge-offs to average loans
(2) ................................ 0.12 0.15 0.05 0.05 0.35
Total allowance for
loan losses to total
nonperforming assets ............... 596.48 582.96 510.97 266.78 139.61
- ---------
(1) In December 1997, the Company adopted SFAS No. 128, "Earnings Per Share".
Adoption of this new accounting standard had no impact on the Company's
net income per share computations because the Company has no dilutive
securities.
(2) Annualized for the six months ended June 30, 1998 and 1997.
23
FCB/NC CAPITAL TRUST I
The Issuer Trust is a statutory business trust created under the Delaware
Business Trust Act (the "Trust Act") on February 27, 1998, pursuant to the
filing of a certificate of trust with the Delaware Secretary of State. The
Issuer Trust is governed by the Trust Agreement among the Company as Depositor,
Bankers Trust (Delaware) as Delaware Trustee, Bankers Trust Company as Property
Trustee, the Administrators named therein, and the holders, from time to time,
of undivided beneficial interests in the assets of the Issuer Trust. The
Company, as holder of the Common Securities, has appointed two individuals who
are officers of the Company to serve as the Administrators of the Issuer Trust.
See "Description of the New Capital Securities -- Miscellaneous." The Issuer
Trust exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures, (iii) effecting the Exchange Offer
by exchanging up to $150,000,000 aggregate Liquidation Amount of the New
Capital Securities for a like amount of the Old Capital Securities, and (iv)
engaging in only those other activities necessary, convenient or incidental
thereto (such as registering the transfer of the Trust Securities).
Accordingly, the Junior Subordinated Debentures will be the sole assets of the
Issuer Trust, and payments under the Junior Subordinated Debentures will be the
sole source of revenue of the Issuer Trust.
All the Common Securities of the Issuer Trust are owned by the Company.
The Common Securities rank pari passu, and payments will be made thereon pro
rata, with the Capital Securities, except that upon the occurrence and during
the continuation of a Debenture Event of Default arising as a result of any
failure by the Company to pay any amounts in respect of the Junior Subordinated
Debentures when due, the rights of the holders of the Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption
or otherwise will be subordinated to the rights of the holders of the Capital
Securities. See "Description of the New Capital Securities -- Subordination of
Common Securities." The Company acquired Common Securities in an aggregate
Liquidation Amount equal to 3% of the total capital of the Issuer Trust. The
Issuer Trust has a term of 31 years, but may dissolve earlier as provided in
the Trust Agreement. The address of the Delaware Trustee is Bankers Trust
(Delaware), E.A. Delle Donne Corporate Center, Montgomery Building, 1011 Centre
Road, Suite 200, Wilmington, Delaware 19805-1266, telephone number (302)
636-3301. The address of the Property Trustee, the Guarantee Trustee and the
Debenture Trustee is Bankers Trust Company, Four Albany Street, 4th Floor, New
York, New York 10006, telephone number (212) 250-2500.
ACCOUNTING TREATMENT
For financial reporting purposes, the Issuer Trust will be treated as a
subsidiary of the Company and, accordingly, the accounts of the Issuer Trust
will be included in the consolidated financial statements of the Company. The
Capital Securities will be included in the consolidated balance sheets of the
Company as long-term obligations, and appropriate disclosures about the Capital
Securities, the Guarantee and the New Junior Subordinated Debentures will be
included in the notes to the consolidated financial statements of the Company.
For financial reporting purposes, Distributions on the Capital Securities will
be recorded as interest expense in the consolidated statements of income of the
Company.
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
In connection with the sale of the Old Capital Securities, the Company and
the Issuer Trust entered into the Registration Rights Agreement with the
Initial Purchaser pursuant to which the Company and the Issuer Trust agreed,
among other things, to file and to use their best efforts to cause to become
effective with the Commission a registration statement (the "Exchange
Registration Statement") with respect to the exchange of the Old Capital
Securities for Capital Securities which have been registered under the
Securities Act and which have terms identical in all material respects to the
terms of the Old Capital Securities. A copy of the Registration Rights
Agreement has been filed as an Exhibit to the Registration Statement of which
this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Company and the Issuer Trust under the Registration Rights Agreement. The
form and terms of the New Capital Securities are the same as the form and terms
of the Old Capital Securities, except that the New Capital Securities have been
registered under the Securities Act and, therefore, will not be subject to
certain restrictions on transfer applicable to the Old Capital Securities and,
subject to certain limited exceptions specified in the Registration Rights
Agreement, will not provide for any increase in the Distribution rate thereon.
In this regard, under certain circumstances set forth in the Registration
Rights Agreement, additional interest will accrue on the Capital Securities in
addition to the stated interest thereon. The Registration Rights Agreement
provides that (i) the
24
Company and the Issuer Trust shall use their respective best efforts to cause
the Exchange Registration Statement to be declared effective by the Commission
on or prior to 180 days after the date of original issuance of the Trust
Securities, and to keep the Exchange Registration Statement effective for not
less than 30 business days (or longer if required by applicable law) after the
date notice of the Exchange Offer is made to the holders, (ii) unless the
Exchange Offer will not be permitted by applicable law or Commission policy,
the Issuer Trust will commence the Exchange Offer and use its best efforts to
consummate the Exchange Offer within 30 business days after the effective date
of the Exchange Registration Statement, and (iii) if obligated to file the
"Shelf Registration Statement" (as defined in the Registration Rights
Agreement), the Company and Issuer Trust will use their best efforts to file
the Shelf Registration Statement with the Commission as promptly as
practicable, but, in any event, within 45 days after such filing obligation
arises, and to cause the Shelf Registration Statement to be declared effective
by the Commission on or prior to 180 days after such obligation arises.
If (i) the Company and the Issuer Trust fail to file, if appropriate, the
Shelf Registration Statement on or before the dates specified for such filing,
(ii) the Exchange Registration Statement or the Shelf Registration Statement,
if applicable, is not declared effective by the Commission on or prior to the
date specified for such effectiveness (the "Effectiveness Target Date"), (iii)
the Company and Issuer Trust fail to consummate the Exchange Offer within 30
business days of the Effectiveness Target Date with respect to the Exchange
Registration Statement, or (iv) the Exchange Registration Statement or the
Shelf Registration Statement, if applicable, is declared effective but
thereafter ceases to be effective or usable in connection with resales of
"Transfer Restricted Securities" (as defined below) during the period specified
in the Registration Rights Agreement (each such event referred to in clauses
(i) through (iv) above, a "Registration Default"), then liquidated damages
shall accrue on the principal amount ("Additional Interest") of the Old Junior
Subordinated Debentures and, if the Exchange Offer has been consummated, the
New Junior Subordinated Debentures, and additional Distributions shall
accumulate on the Liquidation Amount ("Additional Distributions") of the Old
Capital Securities and, if the Exchange Offer has been consummated, the New
Capital Securities, immediately following the occurrence of such Registration
Default, each at a rate of 0.25% per annum. Notwithstanding the foregoing,
neither the Additional Interest on the Junior Subordinated Debentures nor the
Additional Distribution rate on the Liquidation Amount of the Capital
Securities may exceed in the aggregate 0.25% per annum. Such Additional
Interest and Additional Distributions shall cease to accrue and accumulate upon
the curing of the respective Registration Default.
For purposes of the preceding paragraph, "Transfer Restricted Security"
means each Old Capital Security, the Old Guarantee or Old Junior Subordinated
Debenture until (i) the date on which such Old Capital Security, the Old
Guarantee or Old Junior Subordinated Debenture has been exchanged for a New
Capital Security, the Guarantee or New Junior Subordinated Debenture in the
Exchange Offer and are thereafter freely tradable by the holder thereof (other
than an affiliate of the Company), (ii) such Old Capital Security, Old
Guarantee or Old Junior Subordinated Debenture, as the case may be, shall have
ceased to be outstanding, (iii) the date on which such Old Capital Security,
Old Guarantee or Old Junior Subordinated Debenture has been effectively
registered under the Securities Act and disposed of in accordance with the
Exchange Registration Statement or the Shelf Registration Statement, if
applicable, or (iv) the date on which such Old Capital Security, Old Guarantee
or Old Junior Subordinated Debenture is distributed to the public pursuant to
Rule 144 (or any similar provision then in force, but not Rule 144A) under the
Securities Act.
The Exchange Offer is not being made to, nor will the Company or the
Issuer Trust accept tenders for exchange from, holders of Old 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 Old Capital Securities
are registered on the books of the Issuer Trust or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose Old Capital Securities are held of record by The Depository Trust
Company ("DTC") who desires to deliver such Old Capital Securities by
book-entry transfer at DTC. Pursuant to the Exchange Offer, the Company will
exchange, as soon as practicable after the date hereof, the Old Guarantee for
the Guarantee and up to $150,000,000 aggregate principal amount of the Old
Junior Subordinated Debentures for a like aggregate principal amount of the New
Junior Subordinated Debentures. The Guarantee and the New Junior Subordinated
Debentures have also been registered under the Securities Act.
Terms of the Exchange
The Company and the Issuer Trust hereby offer, upon the terms and subject
to the conditions set forth in this Prospectus and in the accompanying Letter
of Transmittal, to exchange up to $150,000,000 aggregate Liquidation Amount of
New Capital Securities for a like aggregate Liquidation Amount of Old Capital
Securities properly tendered on or prior to the Expiration Date and not
properly withdrawn in accordance with the procedures described below. The
Issuer Trust will issue,
25
promptly after the Expiration Date, an aggregate Liquidation Amount of up to
$150,000,000 of New Capital Securities in exchange for a like Liquidation
Amount of outstanding Old Capital Securities tendered and accepted in
connection with the Exchange Offer. Holders may tender their Old Capital
Securities in whole or in part in a Liquidation Amount of not less than
$100,000 or any integral multiple of $1,000 in excess thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount
of Old Capital Securities being tendered. As of the date of this Prospectus,
$150,000,000 aggregate Liquidation Amount of the Old Capital Securities is
outstanding. Holders of Old Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Old Capital
Securities which are not tendered, or are tendered but not accepted, in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Trust Agreement, but will not be entitled to any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors -- Consequences of a Failure to
Exchange Old Capital Securities."
If any tendered Old 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 Old Capital
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Old 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 Old Capital Securities in connection with the Exchange Offer.
The Company 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 BOARD OF DIRECTORS OF THE COMPANY, THE ADMINISTRATORS OR
TRUSTEES OF THE ISSUER TRUST, NOR THE EXCHANGE AGENT, MAKE ANY RECOMMENDATION
TO HOLDERS OF OLD CAPITAL SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD CAPITAL SECURITIES PURSUANT TO THE
EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OLD CAPITAL SECURITIES MUST MAKE THEIR OWN DECISION
WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE
AMOUNT OF OLD CAPITAL SECURITIES TO TENDER, AFTER READING THIS PROSPECTUS AND
THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON
THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
Expiration Date; Extensions; Amendments
The Expiration Date will be 5:00 p.m., New York City time, on September
23, 1998, unless the Exchange Offer is extended by the Company and the Issuer
Trust (in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended). The Company and the Issuer 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 Old Capital Securities for exchange, (ii) to terminate the Exchange
Offer (whether or not any Old Capital Securities have theretofore been accepted
for exchange) if the Company and the Issuer Trust determine, in their 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 Old Capital Securities tendered pursuant to the Exchange Offer, subject,
however, to the right of holders of Old Capital Securities to withdraw their
tendered Old 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
Company and the Issuer Trust to constitute a material change, or if the Company
and the Issuer Trust waive a material condition of the Exchange Offer, the
Company or the Issuer Trust will promptly disclose such amendment or waiver by
means of a supplement to this Prospectus that will be distributed to the
registered holders of the Old Capital Securities, and the Company and the
Issuer 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 Company or the Issuer Trust may choose to make
any public announcement and subject to applicable law, neither the Company nor
the Issuer Trust shall have any obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to an
appropriate news agency.
26
Acceptance for Exchange and Issuance of New Capital Securities
Upon the terms and subject to the conditions of the Exchange Offer, the
Company and the Issuer Trust will exchange, and will issue to the Exchange
Agent, New Capital Securities for Old Capital Securities validly tendered and
not withdrawn (pursuant to the withdrawal rights described below under " --
Withdrawal Rights") promptly after the Expiration Date.
In all cases, delivery of New Capital Securities in exchange for Old
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) Old
Capital Securities or a Book-Entry Confirmation (as defined below) of a
book-entry transfer of Old Capital Securities into the Exchange Agent's account
at DTC, (ii) the Letter of Transmittal (or facsimile thereof), or an Agent's
Message (as defined below), properly completed and duly executed, with any
required signature guarantees, and (iii) any other documents required by the
Letter of Transmittal.
The term "Book-Entry Confirmation" means a timely confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's account
at DTC.
The term "Agent's Message" means a message, transmitted by DTC and
received by the Exchange Agent and forming part of a Book-Entry Confirmation,
which states that DTC has received an express acknowledgment from a participant
tendering Old Capital Securities which are the subject of such Book-Entry
Confirmation and that such participant has received and agrees to be bound by
the terms of the Letter of Transmittal and that the Company may enforce such
agreement against such participant.
Subject to the terms and conditions of the Exchange Offer, the Company and
the Issuer Trust will be deemed to have accepted for exchange, and thereby
exchanged, Old Capital Securities validly tendered and not withdrawn as, if and
when the Company or the Issuer Trust gives oral or written notice to the
Exchange Agent of the Company's and the Issuer Trust's acceptance of such Old
Capital Securities for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Company and the Issuer Trust for the purpose of
receiving tenders of Old Capital Securities, Letters of Transmittal, Agent's
Messages, and related documents, and as agent for tendering holders for the
purpose of receiving Old Capital Securities, Letters of Transmittal, Agent's
Messages, and related documents and transmitting New 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 Old Capital Securities tendered pursuant to the Exchange Offer
is delayed (whether before or after the Company's and the Issuer Trust's
acceptance for exchange of Old Capital Securities) or the Company or the Issuer
Trust extends the Exchange Offer or is unable to accept for exchange or
exchange Old Capital Securities tendered pursuant to the Exchange Offer, then,
without prejudice to the Company's or the Issuer Trust's rights set forth
herein, the Exchange Agent may, nevertheless, on behalf of the Company and the
Issuer Trust and subject to Rule 14e-1(c) under the Exchange Act, retain
tendered Old Capital Securities and such Old Capital Securities may not be
withdrawn except to the extent tendering holders are entitled to withdrawal
rights as described below under " -- Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Old Capital Securities
will warrant and agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Old Capital
Securities, that the Issuer Trust will acquire good, marketable and
unencumbered title to the tendered Old Capital Securities, free and clear of
all liens, restrictions, charges and encumbrances, and that the Old Capital
Securities tendered for exchange are not subject to any adverse claims or
proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Company, the Issuer
Trust or the Exchange Agent to be necessary or desirable to complete the
exchange, sale, assignment, and transfer of the Old Capital Securities tendered
pursuant to the Exchange Offer.
Procedure for Tendering Old Capital Securities
Valid Tender. Except as set forth below, in order for Old Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), or an
Agent's Message, with any required signature guarantees and any other required
documents, must be received by the Exchange Agent, on or prior to the
Expiration Date, at its address set forth below under " -- Exchange Agent," and
either (i) tendered Old Capital Securities must be received by the Exchange
Agent on or prior to the Expiration Date, or (ii) such Old Capital Securities
must be tendered pursuant to the procedures for book-entry transfer set forth
below and a Book-Entry Confirmation must be received by the Exchange Agent, in
each case on or prior to the Expiration Date, or (iii) the guaranteed delivery
procedures set forth below must be complied with.
27
If less than all of a tendering holder's Old Capital Securities are
tendered, the tendering holder should fill in the amount of Old Capital
Securities being tendered in the appropriate box on the Letter of Transmittal.
The entire amount of Old Capital Securities delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF THE OLD CAPITAL SECURITIES, INCLUDING THE
CERTIFICATES EVIDENCING THE SAME, 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 TO BE MADE 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 ON OR PRIOR
TO THE EXPIRATION DATE.
Book-Entry Transfer. The Company understands that the Exchange Agent has
confirmed with DTC that any financial institution that is a participant in
DTC's system may utilize DTC's Automated Tender Offer Program ("ATOP") to
tender Old Capital Securities. The Exchange Agent will establish an account
with respect to the Old Capital Securities at DTC for purposes of the Exchange
Offer within two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Old Capital Securities by causing DTC to
transfer such Old Capital Securities into the Exchange Agent's account at DTC
in accordance with DTC's procedures for transfers. However, although delivery
of Old Capital Securities may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Book-Entry Confirmation and a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), or an
Agent's Message, with any required signature guarantees and any other required
documents, must in any case be delivered to and received by the Exchange Agent
at its address set forth below under " -- Exchange Agent" on or prior to the
Expiration Date, or the guaranteed delivery procedure set forth below must be
complied with, and the exchange of Old Capital Securities will only be made
after timely receipt thereof by the Exchange Agent.
DELIVERY OF THE LETTER OF TRANSMITTAL AND OTHER REQUIRED DOCUMENTS TO DTC
IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
Signature Guarantees. Certificates for the Old Capital Securities need not
be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (i) a certificate for the Old Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (ii) such registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (i) or (ii) above, such certificates for Old 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,
certificates representing tendered Old 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 to be made by mail, registered
mail, return receipt requested, properly insured, or an overnight delivery
service, is recommended. In all such cases, sufficient time should be allowed
to ensure timely delivery on or before the Expiration Date.
Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old 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 certificates representing Old Capital
Securities, or a Book-Entry Confirmation with respect to such Old Capital
Securities, and a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), or an Agent's Message, together with any required
signature guarantees and any other documents required by the Letter of
Transmittal. Accordingly, the delivery of New 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 Old Capital Securities or certificates
representing Old Capital Securities and other required documents are received
by the Exchange Agent.
Guaranteed Delivery. If a holder desires to tender Old Capital Securities
pursuant to the Exchange Offer and the certificates for such Old Capital
Securities are not immediately available or time will not permit all required
documents to reach
28
the Exchange Agent on or before the Expiration Date, or the procedures for
book-entry transfer cannot be completed on a timely basis, such Old Capital
Securities may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with: (i) such tenders are made by
or through an Eligible Institution; (ii) a properly completed and duly executed
Notice 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; and (iii) the certificates (or a Book-Entry
Confirmation) representing all tendered Old Capital Securities, in proper form
for transfer, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), or an Agent's Message (as defined below),
with any required signature guarantees and any other documents required by the
Letter of Transmittal, are received by the Exchange Agent within five New York
Stock Exchange trading days after the date of execution of such Notice of
Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by
hand, or transmitted by facsimile or mail, to the Exchange Agent and must
include a guarantee by an Eligible Institution in the form set forth in such
notice.
The acceptance by the Company and the Issuer Trust for exchange of Old
Capital Securities tendered pursuant to any of the procedures described above
will constitute a binding agreement among the tendering holder, the Company and
the Issuer 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 Old Capital Securities will be determined by the Company and
the Issuer Trust, in their sole discretion, whose determination shall be final
and binding on all parties. The Company and the Issuer 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 view of counsel to the Company and the Issuer
Trust, be unlawful. The Company and the Issuer Trust also reserve the absolute
right, subject to applicable law, to waive any of the conditions of the
Exchange Offer as set forth below under " -- Conditions to the Exchange Offer"
or any condition or irregularity in any tender of Old Capital Securities of any
particular holder whether or not similar conditions or irregularities are
waived in the case of other holders.
The Company's and the Issuer Trust's interpretation 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 Old Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the Company, the
Issuer Trust, any affiliates or assigns of the Company or the Issuer 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 Company
or the Issuer Trust, proper evidence satisfactory to the Company or the Issuer
Trust, in their sole discretion, of such person's authority to so act must be
submitted.
A beneficial owner of Old 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 New Capital Securities
Based on interpretations by the Staff as set forth in no-action letters
issued to third parties, the Company and the Issuer Trust believe that holders
of Old Capital Securities (other than any holder that is an "affiliate" of the
Company or the Issuer Trust as defined under Rule 405 of the Securities Act)
who exchange their Old Capital Securities for New Capital Securities pursuant
to the Exchange Offer may offer such New Capital Securities for resale, resell
such New Capital Securities, and otherwise transfer such New Capital
Securities, without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Capital Securities are
acquired in the ordinary course of such holders' business and such holders are
not engaged in, and do not intend to engage in, a distribution of such New
Capital Securities and have no arrangement or understanding with any person to
participate in the distribution of such New Capital Securities. However, the
Staff has not considered the Exchange Offer in the context of a no-action
letter, and there can be no assurance that the Staff would make a similar
determination with respect to the Exchange Offer.
Any holder of Old Capital Securities who is an "affiliate" of the Company
or the Issuer Trust or who intends to participate in the Exchange Offer for the
purpose of distributing New Capital Securities, or any broker-dealer who
purchased Old Capital Securities from the Issuer Trust to resell pursuant to
Rule 144A or any other available exemption under the
29
Securities Act, (i) will not be able to rely on the interpretations of the
Staff set forth in the above-mentioned interpretive letters, (ii) will not be
permitted or entitled to tender such Old 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 Old Capital Securities unless such sale is made pursuant to an
exemption from such requirements. In addition, as described below, if any
broker-dealer holds Old Capital Securities acquired for its own account as a
result of market-making or other trading activities and exchanges such Old
Capital Securities for New Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such New Capital Securities.
Each holder of Old Capital Securities (other than certain specified
holders) who wishes to exchange them for New Capital Securities in the Exchange
Offer will be required to represent that: (i) it is not an "affiliate" of the
Company or the Issuer Trust; (ii) any New Capital Securities to be received by
it are being acquired in the ordinary course of its business; and (iii) it is
not engaged in, and does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such New Capital Securities and has no
arrangement or understanding to participate in a distribution of New Capital
Securities. In addition, the Company and the Issuer Trust may require such
holder, as a condition to such holder's eligibility to participate in the
Exchange Offer, to furnish to the Company and the Issuer 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 Old Capital Securities to be exchanged in the Exchange Offer. Each
broker-dealer that receives New Capital Securities for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New 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 in the interpretive
letters referred to above, the Company and the Issuer Trust believe that
broker-dealers who acquired Old 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 New Capital
Securities received upon exchange of such Old Capital Securities (other than
Old Capital Securities which represent an unsold allotment from the original
sale of the Old 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 New 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 New Capital Securities received in exchange for Old
Capital Securities where such Old Capital Securities were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Company and the Issuer Trust have agreed to
allow the Participating Broker-Dealers to use this Prospectus, as it may be
amended or supplemented from time to time, in connection with resales of such
New Capital Securities for a period of ninety (90) days after the Expiration
Date. See "Plan of Distribution." Any Participating Broker-Dealer who is an
"affiliate" of the Company or the Issuer 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 Old
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 Company or the Issuer 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, such Participating
Broker-Dealer will suspend the sale of New Capital Securities (or the Guarantee
or the New Junior Subordinated Debentures, as applicable) pursuant to this
Prospectus until the Company or the Issuer 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 Company or the Issuer Trust has given notice that the sale
of the New Capital Securities (or the Guarantee or the New Junior Subordinated
Debentures, as applicable) may be resumed, as the case may be.
Withdrawal Rights
Except as otherwise provided herein, tenders of Old 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 its address set
forth below 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
Old Capital Securities to be withdrawn, the aggregate Liquidation Amount of Old
Capital Securities to be withdrawn, and (if certificates for such
30
Old Capital Securities have been tendered) the name of the registered holder of
the Old Capital Securities as set forth on the certificates evidencing the Old
Capital Securities, if different from that of the person who tendered such Old
Capital Securities. If Old Capital Securities have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
Old Capital Securities, the tendering holder must submit the serial numbers
shown on the particular Old Capital Securities to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Old Capital Securities tendered for the
account of an Eligible Institution. If Old Capital Securities have been
tendered pursuant to the procedures for book-entry transfer set forth above
under " -- Procedure for Tendering Old Capital Securities," then the notice of
withdrawal must specify the name and number of the account at DTC to be
credited with the withdrawal of Old Capital Securities. Withdrawals of tenders
of Old Capital Securities may not be rescinded. Old Capital Securities properly
withdrawn will not be deemed validly tendered for purposes of the Exchange
Offer, but may be re-tendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described above under " --
Procedure for Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company and the
Issuer Trust, in their sole discretion, whose determination shall be final and
binding on all parties. Neither the Company, the Issuer Trust, any affiliates
or assigns of the Company or the Issuer 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 Old Capital Securities which have been tendered but which are
properly withdrawn in accordance with the above procedures will be returned to
the holder thereof promptly after withdrawal.
Distributions on the New Capital Securities
Holders of Old Capital Securities whose Old Capital Securities are
accepted for exchange will not receive accumulated Distributions on such Old
Capital Securities for any period from and after the last Distribution Date
with respect to such Old Capital Securities prior to the original issue date of
the New Capital Securities or, if no such Distributions have been made, will
not receive any accumulated Distributions on such Old Capital Securities, and
will be deemed to have waived the right to receive any Distributions on such
Old Capital Securities accumulated from and after such Distribution Date or, if
no such Distributions have been made, from and after March 5, 1998. However,
because Distributions on the New Capital Securities will accumulate from such
date, the amount of the Distributions received by holders whose Old Capital
Securities are accepted for exchange will not be affected by the exchange.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company and the Issuer Trust will not be
required to accept for exchange, or to exchange, any Old Capital Securities for
any New Capital Securities, and, as described below, may terminate the Exchange
Offer (whether or not any Old Capital Securities have theretofore been accepted
for exchange) or may waive any conditions to or amend the Exchange Offer, if
there shall occur a change in the current interpretation by the Staff that
permits the New Capital Securities issued pursuant to the Exchange Offer in
exchange for Old 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 Company or the Issuer 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 New 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 New Capital Securities.
If the Company and the Issuer Trust determine in their sole and absolute
discretion that the foregoing event has occurred, the Company and the Issuer
Trust may, subject to applicable law, terminate the Exchange Offer (whether or
not any Old 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 Company and the Issuer Trust will promptly disclose
such amendment or waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Old Capital Securities, and the
Company and the Issuer Trust will extend the Exchange Offer to the extent
required by Rule 14e-1 under the Exchange Act.
31
Exchange Agent
Bankers Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Requests for additional copies of this Prospectus or the Letter
of Transmittal and any other required documents, questions or requests for
assistance should be directed to the Exchange Agent as follows:
Bankers Trust Company
Four Albany Street, 4th Floor
New York, New York 10006
Attn: Corporate Trust and Agency Group
Telephone: (212) 250-6161
Facsimile: (212) 250-6392/6961
Delivery of the Letter of Transmittal and any other required documents
should be directed to:
By Mail: By Hand: By Overnight Mail:
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Corporate Trust and Agency Group Corporate Trust and Agency Group Corporate Trust and Agency Group
Reorganization Unit Receipt and Delivery Window Reorganization Unit
P.O. Box 292737 123 Washington Street, 1st Floor 648 Grassmere Park Road
Nashville, TN 37229-2737 New York, NY 10006 Nashville, TN 37211
For information call: (800) 735-7777
Confirm: (615) 835-3572
Facsimile: (615) 835-3701
Delivery to other than one of the above address or facsimile number will
not constitute a valid delivery to the Exchange Agent.
Fees and Expenses
The Company 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 Company 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 Old Capital Securities, and in handling
or tendering for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
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 Old Capital Securities
tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old 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 Company nor the Issuer Trust will make any payment to brokers,
dealers or others soliciting acceptances of the Exchange Offer.
DESCRIPTION OF THE NEW CAPITAL SECURITIES
The Old Capital Securities have been issued and the New Capital Securities
will be issued pursuant to the terms of the Trust Agreement. The Property
Trustee, Bankers Trust Company, acts as trustee for the Capital Securities
under the Trust Agreement. The terms of the Capital Securities include those
stated in the Trust Agreement and those made part of the Trust Agreement by the
Trust Indenture Act and the Trust Act. The Trust Agreement will be qualified
under the Trust Indenture Act upon effectiveness of the Registration Statement
with respect to the New Capital Securities. See "The Exchange Offer." Wherever
particular defined terms of the Trust Agreement are referred to herein, such
defined terms are incorporated herein by reference. The following summary of
the material terms and provisions of the Capital Securities does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the Trust Agreement (a copy of which may be obtained from the Company or the
Issuer Trust), the Trust Act and the Trust Indenture Act.
32
General
The New Capital Securities will be limited to $150,000,000 aggregate
Liquidation Amount outstanding. The New 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." The New
Junior Subordinated Debentures will be registered in the name of the Issuer
Trust and held by the Property Trustee in trust for the benefit of the holders
of the Capital Securities and Common Securities. The Guarantee will be a
guarantee on a subordinated basis with respect to the New Capital Securities
but will not guarantee payment of Distributions or amounts payable on
redemption or liquidation of such New Capital Securities when the Issuer Trust
does not have funds on hand available to make such payments. See "Description
of the Guarantee."
Distributions
The New Capital Securities represent preferred undivided beneficial
interests in the assets of the Issuer Trust, and Distributions on each New
Capital Security will be payable at an annual rate equal to 8.05% on the stated
Liquidation Amount of $1,000, payable semi-annually in arrears on the 1st day
of March and September of each year (each a "Distribution Date") to the holders
of the New Capital Securities at the close of business on the February 15 or
August 15 (whether or not a Business Day (as defined below)) next preceding the
relevant Distribution Date. Distributions on the New Capital Securities will be
cumulative. Distributions on the New Capital Securities will accumulate from
the last Distribution Date on the Old Capital Securities preceding the original
issue date of the New Capital Securities or, if no Distributions have been made
on the Old Capital Securities, from March 5, 1998. The amount of Distributions
payable for any period less than a full Distribution period will be computed on
the basis of a 360-day year of twelve 30-day months and the actual days elapsed
in a partial month in such period. Distributions payable for each full
Distribution period will be computed by dividing the rate per annum by two. If
any date on which Distributions are payable on the New Capital Securities is
not a Business Day, then payment of the Distributions payable on such date will
be made on the next succeeding day that is a Business Day (without any
additional Distributions or other payment in respect of any such delay), with
the same force and effect as if made on the date such payment was originally
payable.
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Junior Subordinated Indenture to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity of the Junior Subordinated Debentures or end on a
date other than a Distribution Date. As a consequence of any such deferral,
semi-annual Distributions on the New Capital Securities by the Issuer Trust
will be deferred during any such Extension Period. Distributions to which
holders of the New Capital Securities are entitled will accumulate additional
Distributions thereon at a rate equal to 8.05% per annum, compounded semi-
annually from the relevant payment date for such Distributions, computed on the
basis of a 360-day year of twelve 30-day months and the actual days elapsed in
a partial month in such period. Additional Distributions payable for each full
Distribution period will be computed by dividing the rate per annum by two. The
term "Distributions" as used herein shall include any such additional
Distributions. During any such Extension Period, the Company may not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock, or (ii) make any payment of principal of or interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Company that rank
pari passu in all respects with or junior in interest to the Junior
Subordinated Debentures (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan or other similar arrangement with or for the
benefit of any one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or shareholder stock purchase plan or
in connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of an exchange or conversion of any class or series of the
Company's capital stock (or any capital stock of a subsidiary of the Company)
for any class or series of the Company's capital stock or of any class or
series of the Company's indebtedness for any class or series of the Company's
capital stock, (c) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any shareholder's rights plan, or
the issuance of rights, stock or other property under any shareholder's rights
plan, or the redemption or repurchase of rights pursuant thereto, or (e) any
dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock). Prior to the termination of any
such Extension Period, the Company may further defer the payment of interest,
provided that no Extension Period may exceed 10 consecutive semi-annual
periods, extend
33
beyond the Stated Maturity of the Junior Subordinated Debentures, or end on a
date other than a Distribution Date. Upon the termination of any such Extension
Period and the payment of all amounts then due, the Company may elect to begin
a new Extension Period. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give the Issuer
Trustees and the Property Trustee notice of its election of such Extension
Period at least one Business Day prior to the earlier of (i) the date the
Distributions on the New Capital Securities would have been payable but for the
election to begin such Extension Period and (ii) the date the Property Trustee
is required to give notice to holders of the New Capital Securities of the
record date or the date such Distributions are payable, but in any event not
less than one Business Day prior to such record date. The Property Trustee will
give notice of the Company's election to begin a new Extension Period to the
holders of the New Capital Securities. Subject to the foregoing, there is no
limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of the New Junior Subordinated Debentures --
Option To Extend Interest Payment Period" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
The revenue of the Issuer Trust available for distribution to holders of
the New Capital Securities will be limited to payments under the Junior
Subordinated Debentures. See "Description of the New Junior Subordinated
Debentures." If the Company does not make payments on the Junior Subordinated
Debentures, the Issuer Trust may not have funds available to pay Distributions
or other amounts payable on the New Capital Securities. The payment of
Distributions and other amounts payable on the New Capital Securities (if and
to the extent the Issuer Trust has funds legally available for and cash
sufficient to make such payments) is guaranteed by the Company on a limited
basis as set forth herein under "Description of the Guarantee."
Redemption
Upon the repayment or redemption, in whole or in part, of the Junior
Subordinated Debentures, whether at maturity or upon earlier redemption as
provided in the Junior Subordinated Indenture, the proceeds from such repayment
or redemption shall be applied by the Property Trustee to redeem a Like Amount
(as defined below) of the Trust Securities, upon not less than 30 nor more than
60 days' notice, at a redemption price (the "Redemption Price") equal to the
aggregate Liquidation Amount of such Capital Securities plus accumulated but
unpaid Distributions thereon to but excluding the date of redemption (the
"Redemption Date") and the related amount of the premium, if any, paid by the
Company upon the concurrent redemption of such Junior Subordinated Debentures.
See "Description of the New Junior Subordinated Debentures -- Redemption." If
less than all the Junior Subordinated Debentures are to be repaid or redeemed
on a Redemption Date, then the proceeds from such repayment or redemption shall
be allocated to the redemption pro rata of the Capital Securities and the
Common Securities. The amount of premium, if any, paid by the Company upon the
redemption of all or any part of the Junior Subordinated Debentures to be
repaid or redeemed on a Redemption Date shall be allocated to the redemption
pro rata of the Capital Securities and the Common Securities.
The Company has the right to redeem the Junior Subordinated Debentures (i)
on or after March 1, 2008, in whole at any time or in part from time to time,
or (ii) in whole, but not in part, at any time within 90 days following the
occurrence and during the continuation of a Tax Event, Investment Company Event
or Capital Treatment Event (each as defined below), in each case subject to
possible regulatory approval. See " -- Liquidation Distribution Upon
Dissolution." A redemption of the Junior Subordinated Debentures would cause a
mandatory redemption of a Like Amount of the Capital Securities and Common
Securities at the Redemption Price.
The Redemption Price, in the case of a redemption under (i) above, shall
equal the following prices, expressed in percentages of their Liquidation
Amount, together with accumulated Distributions to but excluding the date fixed
for redemption, if redeemed during the 12-month period beginning March 1:
34
Year Redemption Price
- ------------------ ------------------
2008 ........... 104.03 %
2009 ........... 103.62
2010 ........... 103.22
2011 ........... 102.82
2012 ........... 102.42
2013 ........... 102.01
2014 ........... 101.61
2015 ........... 101.21
2016 ........... 100.81
2017 ........... 100.40
and at 100% on or after March 1, 2018.
The Redemption Price, in the case of a redemption on or after March 1,
2008 following a Tax Event, Investment Company Event or Capital Treatment Event
shall equal the Redemption Price then applicable to a redemption under (i)
above. The Redemption Price, in the case of a redemption prior to March 1, 2008
following a Tax Event, Investment Company Event or Capital Treatment Event as
described under (ii) above, will equal for each Capital Security the Make-Whole
Amount (as defined below) for a corresponding $1,000 principal amount of Junior
Subordinated Debentures together with accumulated Distributions to but
excluding the date fixed for redemption. The "Make-Whole Amount" will be equal
to the greater of (i) 100% of the principal amount of such Junior Subordinated
Debentures and, (ii) as determined by a Quotation Agent (as defined below), the
sum of the present values of the principal amount and premium payable as part
of the Redemption Price with respect to an optional redemption of such Junior
Subordinated Debentures on March 1, 2008, together with the present values of
scheduled payments of interest (not including the portion of any such payments
of interest accrued as of the Redemption Date) from the Redemption Date to
March 1, 2008 (the "Remaining Life"), in each case discounted to the Redemption
Date on a semi-annual basis (assuming a 360-day year consisting of 30-day
months) at the Adjusted Treasury Rate.
"Adjusted Treasury Rate" means, with respect to any Redemption Date, the
Treasury Rate plus (i) 150 basis points if such Redemption Date occurs on or
before March 1, 1999 or (ii) 100 basis points if such Redemption Date occurs
after March 1, 1999.
"Treasury Rate" means (i) the yield, under the heading which represents
the average for the week immediately prior to the calculation date, appearing
in the most recently published statistical release designated "H.15 (519)" or
any successor publication which is published weekly by the Federal Reserve and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Remaining Life (if no maturity is within
three months before or after the Remaining Life, yields for the two published
maturities most closely corresponding to the Remaining Life shall be determined
and the Treasury Rate shall be interpolated or extrapolated from such yields on
a straight-line basis, rounding to the nearest month) or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date. The Treasury Rate shall be calculated on the third
Business Day preceding the Redemption Date.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a day
on which banking institutions in the City of New York or the City of Raleigh,
North Carolina are authorized or required by law or executive order to remain
closed, or (c) a day on which the Property Trustee's Corporate Trust Office or
the Corporate Trust Office of the Debenture Trustee is closed for business.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to that portion of the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed in accordance with the Junior Subordinated Indenture, allocated to the
Common Securities and to the Capital Securities pro rata based upon the
relative Liquidation Amounts of such classes and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of Trust Securities
in connection with a dissolution or liquidation of the Issuer Trust, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Junior Subordinated
Debentures are distributed.
35
"Liquidation Amount" means the stated amount of $1,000 per Trust Security.
"Tax Event" means the receipt by the Issuer Trust of an opinion of counsel
to the Company experienced in such matters to the effect that, as a result of
any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of issuance of the Capital Securities, there is more than an insubstantial risk
that (i) the Issuer Trust is, or will be within 90 days of the delivery of such
opinion, subject to United States federal income tax with respect to income
received or accrued on the Junior Subordinated Debentures, (ii) interest
payable by the Company on the Junior Subordinated Debentures is not, or within
90 days of the delivery of such opinion, will not be, deductible by the
Company, in whole or in part, for United States federal income tax purposes or
(iii) the Issuer Trust is, or will be within 90 days of the delivery of such
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Investment Company Event" means the receipt by the Issuer Trust of an
opinion of counsel to the Company experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change (including any announced prospective change) in interpretation
or application of law or regulation by any legislative body, court,
governmental agency or regulatory authority, there is more than an
insubstantial risk that the Issuer Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act, which change or prospective change becomes effective or would
become effective, as the case may be, on or after the date of the issuance of
the Capital Securities.
"Capital Treatment Event" means, in respect of the Issuer Trust, the
reasonable determination by the Company that, as a result of the occurrence of
any amendment to, or change (including any announced prospective change) in,
the laws (or any rules or regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement, action or decision is announced on or after the date of
issuance of the Capital Securities, there is more than an insubstantial risk
that the Company will not be entitled to treat an amount equal to the
Liquidation Amount of the Capital Securities as "Tier 1 Capital" (or the then
equivalent thereof) for purposes of the risk-based capital adequacy guidelines
of the Federal Reserve, as then in effect and applicable to the Company.
Payment of Additional Sums. If a Tax Event described in clause (i) or
(iii) of the definition of Tax Event above has occurred and is continuing and
the Issuer Trust is the holder of all the Junior Subordinated Debentures, the
Company will pay Additional Sums (as defined below), if any, on the Junior
Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Issuer Trust
on the outstanding Capital Securities and Common Securities of the Issuer Trust
will not be reduced as a result of any additional taxes, duties and other
governmental charges to which the Issuer Trust has become subject as a result
of a Tax Event.
Redemption Procedures
Capital Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Junior Subordinated Debentures. Redemptions of the Capital
Securities shall be made and the Redemption Price shall be payable on each
Redemption Date only to the extent that the Issuer Trust has funds on hand
available for the payment of such Redemption Price. See also " -- Subordination
of Common Securities."
If the Issuer Trust gives a notice of redemption in respect of any Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are available, in the case of Capital Securities held in
book-entry form, the Property Trustee will deposit irrevocably with DTC funds
sufficient to pay the applicable Redemption Price and will give DTC irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Capital Securities. With respect to Capital Securities not held in book-entry
form, the Property Trustee, to the extent funds are available, will irrevocably
deposit with the paying agent for the Capital Securities funds sufficient to
pay the applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing the Capital Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Capital Securities called for redemption 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
36
been given and funds deposited as required, then upon the date of such deposit
all rights of the holders of such Capital Securities so called for redemption
will cease, except the right of the holders of such Capital Securities to
receive the Redemption Price, and any Distribution payable in respect of the
Capital Securities, but without interest on such Redemption Price, and such
Capital Securities will cease to be outstanding. If any date fixed for
redemption of Capital Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
which is a Business Day (without any interest or other payment in respect of
any such delay), except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day. In
the event that payment of the Redemption Price in respect of Capital Securities
called for redemption is improperly withheld or refused and not paid either by
the Issuer Trust or by the Company pursuant to the Guarantee as described under
"Description of the Guarantee," Distributions on such Capital Securities will
continue to accumulate at the then applicable rate, from the Redemption Date
originally established by the Issuer Trust for such Capital Securities to the
date such Redemption Price is actually paid, in which case the actual payment
date will be the date fixed for redemption for purposes of calculating the
Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities laws), the Company or its affiliates may at any time and
from time to time purchase outstanding Capital Securities by tender, in the
open market or by private agreement, and may resell such securities.
If less than all the Capital Securities and Common Securities are to be
redeemed on a Redemption Date, then the aggregate Liquidation Amount of such
Capital Securities and Common Securities to be redeemed shall be allocated pro
rata to the Capital Securities and the Common Securities based upon the
relative Liquidation Amounts of such classes. The particular Capital Securities
to be redeemed shall be selected on a pro rata basis not more than 60 days
prior to the Redemption Date by the Property Trustee from the outstanding
Capital Securities not previously called for redemption, or if the Capital
Securities are then held in the form of a Global Capital Security (as defined
below), in accordance with DTC's customary procedures. The Property Trustee
shall promptly notify the securities registrar for the Trust Securities in
writing of the Capital Securities selected for redemption and, in the case of
any Capital Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of the Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of
Capital Securities shall relate, in the case of any Capital Securities redeemed
or to be redeemed only in part, to the portion of the aggregate Liquidation
Amount of Capital Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each registered holder of Capital
Securities to be redeemed at its address appearing on the securities register
for the Trust Securities. Unless the Company defaults in payment of the
Redemption Price on the Junior Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on the Junior Subordinated
Debentures or portions thereof (and, unless payment of the Redemption Price in
respect of the Capital Securities is withheld or refused and not paid either by
the Issuer Trust or the Company pursuant to the Guarantee, Distributions will
cease to accumulate on the Capital Securities or portions thereof) called for
redemption.
Subordination of Common Securities
Payment of Distributions (including Additional Amounts (as defined below),
if any) on, the Liquidation Distribution (as defined below) in respect of, and
the Redemption Price of, the Capital Securities and Common Securities, as
applicable, shall be made pro rata based on the Liquidation Amount of such
Capital Securities and Common Securities. However, if on any Distribution Date
or Redemption Date a Debenture Event of Default has occurred and is continuing
as a result of any failure by the Company to pay any amounts in respect of the
Junior Subordinated Debentures when due, no payment of any Distribution
(including Additional Amounts) on, or Liquidation Distribution in respect of,
or Redemption Price of, any of the Common Securities, and no other payment on
account of the redemption, liquidation or other acquisition of such Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions (including Additional Amounts) on all the outstanding
Capital Securities for all Distribution periods terminating on or prior
thereto, or, in the case of payment of the Redemption Price, the full amount of
such Redemption Price on all the outstanding Capital Securities then called for
redemption, or, in the case of payment of the Liquidation Distribution, the
full amount of such Liquidation Distribution on all outstanding Capital
Securities, shall have been made or provided for, and all funds immediately
available to the Property Trustee shall first be applied to the payment in full
in cash of all Distributions (including Additional Amounts) on, or Redemption
Price of, or Liquidation Distributions in respect of, the Capital Securities
then due and payable. The existence of an Event of Default (as defined below)
does not entitle the holders of Capital Securities to accelerate the maturity
thereof. "Additional Amounts" means, with respect to Trust Securities of a
given Liquidation Amount
37
and/or a given period, the amount of Additional Interest (as defined in the
Junior Subordinated Indenture) paid by the Company on a Like Amount of the
Junior Subordinated Debentures for such period.
In the case of any Event of Default (as defined below) resulting from a
Debenture Event of Default, the holders of the Common Securities will be deemed
to have waived any right to act with respect to any such Event of Default under
the Trust Agreement until the effects of all such Events of Default with
respect to such Capital Securities have been cured, waived or otherwise
eliminated. See " -- Events of Default; Notice" and "Description of the New
Junior Subordinated Debentures -- Debenture Events of Default." Until all such
Events of Default under the Trust Agreement with respect to the Capital
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee will act solely on behalf of the holders of the Capital Securities and
not on behalf of the holders 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.
Liquidation Distribution on Dissolution
The amount payable on the Capital Securities in the event of any
liquidation of the Issuer Trust is $1,000 per Capital Security plus accumulated
and unpaid Distributions to the date of payment, subject to certain exceptions,
which may be in the form of a distribution of such amount in Junior
Subordinated Debentures.
The holders of all the outstanding Common Securities have the right at any
time to dissolve the Issuer Trust and, after satisfaction of liabilities to
creditors of the Issuer Trust as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of the Capital
Securities and Common Securities in liquidation of the Issuer Trust.
The Federal Reserve's risk-based capital guidelines currently provide that
redemptions of permanent equity or other capital instruments before stated
maturity could have a significant impact on a bank holding company's overall
capital structure and that any organization considering such a redemption
should consult with the Federal Reserve before redeeming any equity or capital
instrument prior to maturity if such redemption could have a material effect on
the level or composition of the organization's capital base (unless the equity
or capital instrument were redeemed with the proceeds of, or replaced by, a
like amount of a similar or higher quality capital instrument and the Federal
Reserve considers the organization's capital position to be fully adequate
after the redemption).
In the event the Company, while a holder of Common Securities, dissolves
the Issuer Trust prior to the Stated Maturity of the Capital Securities and the
dissolution of the Issuer Trust is deemed to constitute the redemption of
capital instruments by the Federal Reserve under its risk-based capital
guidelines or policies, the dissolution of the Issuer Trust by the Company may
be subject to the prior approval of the Federal Reserve. Moreover, any changes
in applicable law or changes in the Federal Reserve's risk-based capital
guidelines or policies could impose a requirement on the Company that it obtain
the prior approval of the Federal Reserve to dissolve the Issuer Trust.
Pursuant to the Trust Agreement, the Issuer Trust will automatically
dissolve upon expiration of its term or, if earlier, will dissolve on the first
to occur of: (i) certain events of bankruptcy, dissolution or liquidation of
the Company or the holder of the Common Securities, (ii) if the holders of
Common Securities have given written direction to the Property Trustee to
dissolve the Issuer Trust (which direction, subject to the foregoing
restrictions, is optional and wholly within the discretion of the holders of
Common Securities), (iii) the repayment of all the Capital Securities in
connection with the redemption of all the Trust Securities as described under "
- -- Redemption," and (iv) the entry of an order for the dissolution of the
Issuer Trust by a court of competent jurisdiction.
If dissolution of the Issuer Trust occurs as described in clause (i), (ii)
or (iv) above, the Issuer Trust will be liquidated by the Property Trustee as
expeditiously as the Property Trustee determines to be possible by
distributing, after satisfaction of liabilities to creditors of the Issuer
Trust as provided by applicable law, to the holders of such Trust Securities a
Like Amount of the Junior Subordinated Debentures, unless such distribution is
not practical, in which event such holders will be entitled to receive out of
the assets of the Issuer Trust available for distribution to holders, after
satisfaction of liabilities to creditors of the Issuer Trust as provided by
applicable law, an amount equal to, in the case of holders of Capital
Securities, the aggregate of the Liquidation Amount plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because the Issuer Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Issuer Trust on its Capital Securities shall be paid on a pro rata
basis. The holders of the Common Securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of the
Capital Securities, except that if a Debenture Event of Default has occurred
and is continuing as a result of any failure by the Company to pay any amounts
in respect of the Junior Subordinated Debentures when due, the Capital
Securities shall have a priority over the Common Securities. See " --
Subordination of Common Securities."
38
After the liquidation date fixed for any distribution of Junior
Subordinated Debentures (i) the Capital Securities will no longer be deemed to
be outstanding, (ii) DTC or its nominee, as the registered holder of Capital
Securities represented by Global Capital Securities (as defined herein), will
receive a registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution with respect to
such Global Capital Securities and (iii) each certificate representing the
Capital Securities other than the Global Capital Securities will be deemed to
represent the Junior Subordinated Debentures having a principal amount equal to
the stated Liquidation Amount of the Capital Securities and bearing accrued and
unpaid interest in an amount equal to the accumulated and unpaid Distributions
on the Capital Securities until such certificates are presented to the security
registrar for the Trust Securities for transfer or reissuance.
If the Company does not redeem the Junior Subordinated Debentures prior to
the Stated Maturity and the Issuer Trust is not liquidated and the Junior
Subordinated Debentures are not distributed to holders of the Capital
Securities, the Capital Securities will remain outstanding until the repayment
of the Junior Subordinated Debentures and the distribution of the Liquidation
Distribution to the holders of the Capital Securities.
There can be no assurance as to the market prices for the Capital
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Capital Securities if a dissolution and liquidation of the Issuer
Trust were to occur. Accordingly, the Capital Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Junior Subordinated Debentures that the investor may receive on
dissolution and liquidation of the Issuer Trust, may trade at a discount to the
price that the investor paid to purchase the Capital Securities offered hereby.
Events of Default; Notice
Any one of the following events constitutes an "Event of Default" under
the Trust Agreement (an "Event of Default") with respect to the Capital
Securities (whatever the reason for such Event of Default and whether it is
voluntary or involuntary or is effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description of
the New Junior Subordinated Debentures -- Debenture Events of Default"); or
(ii) default by the Issuer Trust in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a period of 30
days; or
(iii) default by the Issuer Trust in the payment of any Redemption Price
of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in the Trust Agreement (other
than a covenant or warranty a default in the performance of which or the breach
of which is dealt with in clause (ii) or (iii) above), and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Issuer Trustees and the Company by the
holders of at least 25% in aggregate Liquidation Amount of the outstanding
Capital Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee if a successor Property Trustee has not been
appointed within 90 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of Trust Securities and the
Administrators, unless such Event of Default has been cured or waived. The
Company, as Depositor, and the Administrators are required to file annually
with the Property Trustee a certificate as to whether or not they are in
compliance with all the conditions and covenants applicable to them under the
Trust Agreement.
If a Debenture Event of Default has occurred and is continuing as a result
of any failure by the Company to pay any amounts in respect of the Junior
Subordinated Debentures when due, the Capital Securities will have a preference
over the Common Securities with respect to payments of any amounts in respect
of the Capital Securities as described above. See " -- Subordination of Common
Securities," " -- Liquidation Distribution Upon Dissolution" and "Description
of the New Junior Subordinated Debentures -- Debenture Events of Default."
39
Removal of Issuer Trustees; Appointment of Successors
The holders of at least a majority in aggregate Liquidation Amount of the
outstanding Capital Securities may remove an Issuer Trustee for cause or, if a
Debenture Event of Default has occurred and is continuing, with or without
cause. If an Issuer Trustee is removed by the holders of the outstanding
Capital Securities, the successor may be appointed by the holders of at least
25% in Liquidation Amount of Capital Securities then outstanding. If an Issuer
Trustee resigns, such Issuer Trustee will appoint its successor. If an Issuer
Trustee fails to appoint a successor, the holders of at least 25% in
Liquidation Amount of the outstanding Capital Securities may appoint a
successor. If a successor has not been appointed by the holders, any holder of
Capital Securities or Common Securities or the other Issuer Trustee may
petition a court in the State of Delaware to appoint a successor. Any Delaware
Trustee must meet the applicable requirements of Delaware law. Any Property
Trustee must be a national or state-chartered bank and, at the time of
appointment, have securities rated in one of the three highest rating
categories by a nationally recognized statistical rating organization and have
combined capital and surplus of at least $50,000,000. No resignation or removal
of an Issuer Trustee and no appointment of a successor trustee shall be
effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the Trust Agreement.
Merger or Consolidation of Issuer Trustees
Any entity into which the Property Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any entity
resulting from any merger, conversion or consolidation to which such Issuer
Trustee is a party, or any entity succeeding to all or substantially all of the
corporate trust business of such Issuer Trustee, will be the successor of such
Issuer Trustee under the Trust Agreement, provided such entity is otherwise
qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Issuer Trust
The Issuer Trust may not merge with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any entity, except as described below or as
otherwise set forth in the Trust Agreement. The Issuer Trust may, at the
request of the holders of the Common Securities and with the consent of the
holders of at least a majority in aggregate Liquidation Amount of the
outstanding Capital Securities, merge with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, a trust organized as such under the laws of
any State, so long as (i) such successor entity either (a) expressly assumes
all the obligations of the Issuer Trust with respect to the 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 have the same priority as the
Capital Securities with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) a trustee of such successor entity, possessing
the same powers and duties as the Property Trustee, is appointed to hold the
Junior Subordinated Debentures, (iii) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (iv) 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, (v) such successor entity has a purpose substantially identical to
that of the Issuer Trust, (vi) prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, the Issuer Trust has
received an opinion from independent counsel experienced in such matters to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Capital Securities (including any
Successor Securities) in any material respect and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Issuer Trust nor such successor entity will be required to register
as an investment company under the Investment Company Act, and (vii) the
Company or any permitted successor or assignee owns all the common securities
of such successor entity and guarantees the obligations of such successor
entity under the Successor Securities at least to the extent provided by the
Guarantee. Notwithstanding the foregoing, the Issuer Trust may not, except with
the consent of holders of 100% in aggregate Liquidation Amount of the Capital
Securities, consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets substantially as an
entirety to, any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause
the Issuer Trust or the successor entity to be taxable other than as a grantor
trust for United States federal income tax purposes.
40
Voting Rights; Amendment of Trust Agreement
Except as provided below and under " -- Removal of Issuer Trustees;
Appointment of Successors" and "Description of the 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 holders of a
majority in Liquidation Amount of the Common Securities and the Property
Trustee, without the consent of the holders of the Capital Securities, (i) to
cure any ambiguity, correct or supplement any provisions in the Trust Agreement
that may be inconsistent with any other provision, or to make any other
provisions with respect to matters or questions arising under the Trust
Agreement, provided that any such amendment does not adversely affect in any
material respect the interests of any holder of Trust Securities, or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such
extent as may be necessary to ensure that the Issuer Trust will not be taxable
other than as a grantor trust for United States federal income tax purposes at
any time that any Trust Securities are outstanding or to ensure that the Issuer
Trust will not be required to register as an "investment company" under the
Investment Company Act, and any amendments of the Trust Agreement will become
effective when notice of such amendment is given to the holders of Trust
Securities. The Trust Agreement may be amended by the holders of a majority in
Liquidation Amount of the Common Securities and the Property Trustee with (i)
the consent of holders representing not less than a majority in aggregate
Liquidation Amount of the outstanding Capital Securities and (ii) receipt by
the Issuer Trustees of an opinion of counsel to the effect that such amendment
or the exercise of any power granted to the Issuer Trustees in accordance with
such amendment will not affect the Issuer Trust's being taxable as a grantor
trust for United States federal income tax purposes or the Issuer Trust's
exemption from status as an "investment company" under the Investment Company
Act, except that, without the consent of each holder of Trust Securities
affected thereby, the Trust Agreement may not be amended to (x) change the
amount or timing of any Distribution on the Trust Securities or otherwise
adversely affect the amount of any Distribution required to be made in respect
of the Trust Securities as of a specified date or (y) restrict the right of a
holder of Trust Securities to institute suit for the enforcement of any such
payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Issuer
Trust, the Property Trustee will not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
execute any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default that is
waivable under Section 5.13 of the Junior Subordinated Indenture, (iii)
exercise any right to rescind or annul a declaration that the Junior
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Junior Subordinated Indenture or
the Junior Subordinated Debentures, where such consent shall be required,
without, in each case, obtaining the prior approval of the holders of at least
a majority in aggregate Liquidation Amount of the outstanding Capital
Securities, except that, if a consent under the Junior Subordinated Indenture
would require the consent of each holder of Junior Subordinated Debentures
affected thereby, no such consent will be given by the Property Trustee without
the prior consent of each holder of the Capital Securities. The Property
Trustee may not revoke any action previously authorized or approved by a vote
of the holders of the Capital Securities except by subsequent vote of the
holders of the Capital Securities. The Property Trustee will 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
the holders of the Capital Securities, before taking any of the foregoing
actions, the Property Trustee will obtain an opinion of counsel experienced in
such matters to the effect that the Issuer Trust will not be taxable other than
as a grantor trust for United States federal income tax purposes on account of
such action.
Any required approval of holders of Capital Securities may be given at a
meeting of holders of Capital Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of 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 registered holder of Capital Securities in the manner set forth in the
Trust Agreement.
No vote or consent of the holders of Capital Securities will be required
to redeem and cancel Capital Securities in accordance with the Trust Agreement.
Notwithstanding that holders of 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 Company, the Issuer Trustees or any affiliate
of the Company or any Issuer Trustees, will, for purposes of such vote or
consent, be treated as if they were not outstanding.
41
Book-Entry Only Issuance -- The Depository Trust Company
The New Capital Securities initially will be represented by one or more
Capital Securities in registered, global form (collectively, the "Global
Capital Securities"). The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of securities in definitive
form. Such laws may impair the ability to transfer beneficial interests in the
Global Capital Securities as represented by a Global Certificate.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC holds securities that its participants ("Participants") deposit with
DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations ("Direct
Participants"). DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others, such as securities brokers and dealers, banks and
trust companies that clear transactions through or maintain a direct or
indirect custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of the Capital Securities within the DTC system must be made by
or through Direct Participants, which will receive a credit for the Capital
Securities on DTC's records. The ownership interest of each actual purchaser of
each Capital Security ("Beneficial Owner") is in turn to be recorded on the
Direct Participants' and Indirect Participants' records. Beneficial Owners will
not receive written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participants through which the Beneficial Owners purchased the
Capital Securities. Transfers of ownership interests in the Capital Securities
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Capital Securities, except in the
event that use of the book-entry system for the Capital Securities is
discontinued.
To facilitate subsequent transfers, all the Capital Securities deposited
by Participants with DTC will be registered in the name of DTC's nominee, Cede
& Co. The deposit of the Capital Securities with DTC and their registration in
the name of Cede & Co. will effect no change in beneficial ownership. DTC will
have no knowledge of the actual Beneficial Owners of the Capital Securities.
DTC's records will reflect only the identity of the Direct Participants to
whose accounts such Capital Securities are credited, which may or may not be
the Beneficial Owners. The Direct Participants and Indirect Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate in respect of the Capital Securities, DTC or such nominee,
as the case may be, will be considered the sole owner or holder of the Capital
Securities represented thereby for all purposes under the Trust Agreement and
such Capital Securities. No Beneficial Owner of an interest in a Global
Certificate will be able to transfer that interest except in accordance with
DTC's applicable procedures.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of the Capital Securities (including the presentation of the
Capital Securities for exchange as described below) only at the direction of
one or more Participants to whose accounts the DTC interest in the Global
Certificates is credited and only in respect of such portion of the aggregate
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 with respect to the Capital Securities, DTC will, upon notice, exchange
the Global Certificates in respect of such Capital Securities for Certificated
Securities, which it will distribute to its Participants.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices in respect of the Capital Securities held in book-entry
form will be sent to Cede & Co. If less than all of the Capital Securities are
being redeemed, the Capital Securities will be redeemed on a pro rata basis.
Although voting with respect to the Capital Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to the Capital Securities. Under its usual
procedures, DTC would
42
mail an omnibus proxy to the Issuer Trust as soon as possible after the record
date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the Capital Securities are credited
on the record date (identified in a listing attached to the omnibus proxy).
Payments in respect of the Capital Securities held in book-entry form will
be made to DTC in immediately available funds. DTC's practice is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of such Direct Participants and Indirect Participants and not of
DTC, the Issuer Trust or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payments in respect of the
Capital Securities held in book-entry form to DTC are the responsibility of the
Issuer Trust, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of the Capital
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC, the Direct Participants and the Indirect Participants to exercise any
rights under the Capital Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC,
DTC is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. None of the Company, the
Issuer Trust, the Property Trustee, or the Delaware Trustee will have any
responsibility for the performance by DTC or its Direct Participants or
Indirect Participants under the rules and procedures governing DTC. DTC may
discontinue providing its services as a securities depositary with respect to
the Capital Securities at any time by giving notice to the Company and the
Issuer Trust. Under such circumstances, in the event that a successor
securities depositary is not obtained, the Capital Security certificates will
be required to be printed and delivered. Additionally, the Issuer Trust (with
the consent of the Company) may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary) with respect to
the Capital Securities of the Issuer Trust. In that event, certificates for
such Capital Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company and the Issuer Trust believe to
be reliable, but neither the Company nor the Issuer Trust takes responsibility
for the accuracy thereof.
Expenses and Taxes
In the Trust Agreement, the Company has agreed to pay all debts and other
obligations (other than with respect to the Capital Securities) and all costs
and expenses of the Issuer Trust (including costs and expenses relating to the
organization of the Issuer Trust, the fees and expenses of the Issuer Trustees
and the costs and expenses relating to the operation of the Issuer Trust) and
to pay any and all taxes and all costs and expenses with respect thereto (other
than withholding taxes) to which the Issuer Trust might become subject. The
foregoing obligations of the Company under the Trust Agreement are for the
benefit of, and shall be enforceable by, any person to whom any such debts,
obligations, costs, expenses and taxes are owed (a "Creditor") whether or not
such Creditor has received notice thereof. Any such Creditor may enforce such
obligations of the Company directly against the Company, and the Company has
irrevocably waived any right or remedy to require that any such Creditor take
any action against the Issuer Trust or any other person before proceeding
against the Company. The Company has also agreed in the Trust Agreement to
execute such additional agreements as may be necessary or desirable to give
full effect to the foregoing.
Restrictions on Transfer
The Old Capital Securities were, and the New Capital Securities will be,
issued and may be transferred only in blocks having a Liquidation Amount of not
less than $100,000 (100 Old Capital Securities or New Capital Securities, as
the case may be). Any such transfer of the Old Capital Securities or the New
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 Old Capital Securities
or New Capital Securities for any purpose, including but not limited to, the
receipt of distributions on such Old Capital Securities or New Capital
Securities, and such transferee shall be deemed to have no interest whatsoever
in such Old Capital Securities or New Capital Securities.
43
Payment and Paying Agency
Payments in respect of the Capital Securities will be made to DTC, which
will credit the relevant accounts at DTC on the applicable Distribution Dates
or, if the Capital Securities are not held by DTC, such payments shall be made
by check mailed to the address of the holder entitled thereto as such address
appears on the securities register for the Trust Securities. The paying agent
for the Trust Securities (the "Paying Agent") initially will be the Property
Trustee and any co-paying agent chosen by the Property Trustee and acceptable
to the Administrators. The Paying Agent will be permitted to resign as Paying
Agent upon 30 days' written notice to the Property Trustee and the
Administrators. If the Property Trustee is no longer the Paying Agent, the
Property Trustee will appoint a successor (which must be a bank or trust
company reasonably acceptable to the Administrators) to act as Paying Agent.
Registrar and Transfer Agent
The Property Trustee is acting as registrar and transfer agent for the
Capital Securities.
Registration of transfers or exchanges of the Capital Securities will be
effected without charge by or on behalf of the Issuer Trust, but upon payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. The Issuer Trust will not be required to register or
cause to be registered the transfer or exchange of the Capital Securities after
such Capital Securities have been called for redemption.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision, the
Property Trustee is under no obligation to exercise any of the powers vested in
it by the Trust Agreement at the request of any holder of Capital Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
For information concerning the relationships between Bankers Trust
Company, the Property Trustee, and the Company, see "Description of the New
Junior Subordinated Debentures -- Information Concerning the Debenture
Trustee."
Miscellaneous
The Administrators and the Property Trustee are authorized and directed to
conduct the affairs of and to operate the Issuer Trust in such a way that the
Issuer Trust will not be deemed to be an "investment company" required to be
registered under the Investment Company Act or taxable other than as a grantor
trust for United States federal income tax purposes and so that the
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. In this connection, the Property
Trustee and the holders of Common Securities are authorized to take any action,
not inconsistent with applicable law, the certificate of trust of the Issuer
Trust or the Trust Agreement, that the Property Trustee and the holders of
Common Securities determine in their discretion to be necessary or desirable
for such purposes, as long as such action does not materially adversely affect
the interests of the holders of the Capital Securities.
Holders of the Capital Securities have no preemptive or similar rights.
The Issuer Trust may not borrow money or issue debt or mortgage or pledge
any of its assets.
Governing Law
The Trust Agreement will be governed by and construed in accordance with
the laws of the State of Delaware.
DESCRIPTION OF THE NEW JUNIOR SUBORDINATED DEBENTURES
The New Junior Subordinated Debentures are to be issued under the Junior
Subordinated Indenture, under which Bankers Trust Company is acting as
Debenture Trustee. This summary of certain terms and provisions of the New
Junior Subordinated Debentures and the Junior Subordinated Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Junior Subordinated Indenture,
including the definitions therein of certain terms. Whenever particular defined
terms of the Junior Subordinated Indenture (as amended or supplemented from
time to time) are referred to herein, such defined terms are incorporated
herein by reference. A copy of the form of Junior Subordinated Indenture is
available from the Debenture Trustee upon request.
44
General
Concurrently with the issuance of the Old Capital Securities, the Issuer
Trust invested the proceeds thereof, together with the consideration paid by
the Company for the Common Securities, in the Old Junior Subordinated
Debentures issued by the Company. Pursuant to the Exchange Offer, the Company
will Exchange up to $150 million aggregate principal amount of New Junior
Subordinated Debentures for a like amount of Old Junior Subordinated Debentures
as soon as practicable after the date of this Prospectus. The New Junior
Subordinated Debentures will bear interest, accruing from the date of original
issuance, at a rate equal to 8.05% per annum on the principal amount thereof,
payable semi-annually in arrears on the 1st day of March and September of each
year (each, an "Interest Payment Date"), to the person in whose name each New
Junior Subordinated Debenture is registered at the close of business on the
February 15 or August 15 (whether or not a Business Day) next preceding such
Interest Payment Date. It is anticipated that, until the liquidation, if any,
of the Issuer Trust, each New Junior Subordinated Debenture will be registered
in the name of the Issuer Trust and held by the Property Trustee in trust for
the benefit of the holders of the Trust Securities. The amount of interest
payable for any period less than a full interest period will be computed on the
basis of a 360-day year of twelve 30-day months and the actual days elapsed in
a partial month in such period. The amount of interest payable for any full
interest period will be computed by dividing the rate per annum by two. If any
date on which interest is payable on the New Junior Subordinated Debentures is
not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day that is a Business Day (without any interest or
other payment in respect of any such delay), with the same force and effect as
if made on the date such payment was originally payable. Accrued interest that
is not paid on the applicable Interest Payment Date will bear additional
interest on the amount thereof (to the extent permitted by law) at a rate equal
to 8.05% per annum, compounded semi-annually and computed on the basis of a
360-day year of twelve 30-day months and the actual days elapsed in a partial
month in such period. The amount of additional interest payable for any full
interest period will be computed by dividing the rate per annum by two. The
term "interest" as used herein includes semi-annual interest payments, interest
on semi-annual interest payments not paid on the applicable Interest Payment
Date and Additional Sums (as defined under "Description of the New Capital
Securities -- Redemption"), as applicable.
The New Junior Subordinated Debentures will mature on March 1, 2028.
The New Junior Subordinated Debentures will be unsecured and will rank
junior and be subordinate in right of payment to all Senior Indebtedness of the
Company. The New Junior Subordinated Debentures will not be subject to a
sinking fund and will not be eligible as collateral for any loan made by the
Company. The Junior Subordinated Indenture does not limit the incurrence or
issuance of other secured or unsecured debt by the Company, including Senior
Indebtedness, whether under the Junior Subordinated Indenture or any existing
or other indenture or agreement that the Company may enter into in the future
or otherwise. See " -- Subordination."
Option to Extend Interest Payment Period
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right at any time during the term of the New Junior
Subordinated Debentures to defer the payment of interest 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 may extend
beyond the Stated Maturity of the New Junior Subordinated Debentures or end on
a date other than an Interest Payment Date. At the end of such Extension
Period, the Company must pay all interest then accrued and unpaid (together
with interest thereon at a rate equal to 8.05% per annum, compounded
semi-annually and computed on the basis of a 360-day year of twelve 30-day
months and the actual days elapsed in a partial month in such period, to the
extent permitted by applicable law). The amount of additional interest payable
for any full interest period will be computed by dividing the rate per annum by
two. During an Extension Period, interest will continue to accrue and holders
of New Junior Subordinated Debentures (or holders of Capital Securities while
outstanding) will be required to accrue interest income (in the form of OID)
for United States federal income tax purposes. See "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu in
all respects with or junior in interest to the New Junior Subordinated
Debentures (other than (a) repurchases, redemptions or other acquisitions of
shares of capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
any one or more employees, officers, directors or consultants, in connection
with a dividend reinvestment or shareholder stock purchase plan or in
connection with the
45
issuance of capital stock of the Company (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of an exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
class or series of the Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's capital stock,
(c) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, (d) any declaration of a dividend
in connection with any shareholder's rights plan, or the issuance of rights,
stock or other property under any shareholders rights plan, or the redemption
or repurchase of rights pursuant thereto, or (e) any dividend in the form of
stock, warrants, options or other rights where the dividend stock or the stock
issuable upon exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks pari passu with or
junior to such stock). Prior to the termination of any such Extension Period,
the Company may further defer the payment of interest, provided that no
Extension Period may exceed 10 consecutive semi-annual periods, extend beyond
the Stated Maturity of the New Junior Subordinated Debentures, or end on a date
other than an Interest Payment Date. Upon the termination of any such Extension
Period and the payment of all amounts then due, the Company may elect to begin
a new Extension Period subject to the above conditions. No interest shall be
due and payable during an Extension Period, except at the end thereof. The
Company must give the Issuer Trustees notice of its election of such Extension
Period at least one Business Day prior to the earlier of (i) the date the
Distributions on the Capital Securities would have been payable but for the
election to begin such Extension Period and (ii) the date the Property Trustee
is required to give notice to holders of the Capital Securities of the record
date or the date such Distributions are payable, but in any event not less than
one Business Day prior to such record date. The Property Trustee will give
notice of the Company's election to begin a new Extension Period to the holders
of the Capital Securities. There is no limitation on the number of times that
the Company may elect to begin an Extension Period.
Redemption
The New Junior Subordinated Debentures are redeemable prior to maturity at
the option of the Company (i) on or after March 1, 2008, in whole at any time
or in part from time to time, or (ii) in whole, but not in part, at any time
within 90 days following the occurrence and during the continuation of a Tax
Event, Investment Company Event or Capital Treatment Event (each as defined
under "Description of the New Capital Securities -- Redemption"), in each case
at the redemption price described below. The proceeds of any such redemption
will be used by the Issuer Trust to redeem the Capital Securities.
The Federal Reserve's risk-based capital guidelines, which are subject to
change, currently provide that redemptions of permanent equity or other capital
instruments before stated maturity could have a significant impact on a bank
holding company's overall capital structure and that any organization
considering such a redemption should consult with the Federal Reserve before
redeeming any equity or capital instrument prior to maturity if such redemption
could have a material effect on the level or composition of the organization's
capital base (unless the equity or capital instrument were redeemed with the
proceeds of, or replaced by, a like amount of a similar or higher quality
capital instrument and the Federal Reserve considers the organization's capital
position to be fully adequate after the redemption).
The redemption of the New Junior Subordinated Debentures by the Company
prior to their Stated Maturity would constitute the redemption of capital
instruments under the Federal Reserve's current risk-based capital guidelines
and may be subject to the prior approval of the Federal Reserve.
46
The Redemption Price for New Junior Subordinated Debentures in the case of
a redemption under (i) above shall equal the following prices, expressed in
percentages of their principal amount, together with accrued interest to but
excluding the date fixed for redemption, if redeemed during the 12-month period
beginning March 1:
Year Redemption Price
- ----------------- -----------------
2008 .......... 104.03 %
2009 .......... 103.62
2010 .......... 103.22
2011 .......... 102.82
2012 .......... 102.42
2013 .......... 102.01
2014 .......... 101.61
2015 .......... 101.21
2016 .......... 100.81
2017 .......... 100.40
and at 100% on or after March 1, 2018.
The Redemption Price in the case of a redemption on or after March 1, 2008
following a Tax Event, Investment Company Event or Capital Treatment Event
shall equal the Redemption Price then applicable to a redemption under (i)
above. The Redemption Price for New Junior Subordinated Debentures, in the case
of a redemption prior to March 1, 2008 following a Tax Event, Investment
Company Event or Capital Treatment Event as described under (ii) above, will
equal the Make-Whole Amount (as defined under "Description of the New Capital
Securities -- Redemption"), together with accrued interest to but excluding the
date fixed for redemption.
Additional Sums
The Company has covenanted in the Junior Subordinated Indenture that, if
and for so long as (i) the Issuer Trust is the holder of all New Junior
Subordinated Debentures and (ii) the Issuer Trust is required to pay any
additional taxes, duties or other governmental charges as a result of a Tax
Event, the Company will pay as Additional Sums on the New Junior Subordinated
Debentures such amounts as may be required so that the Distributions payable by
the Issuer Trust will not be reduced as a result of any such additional taxes,
duties or other governmental charges. See "Description of the New Capital
Securities -- Redemption."
Registration, Denomination and Transfer
The New Junior Subordinated Debentures will initially be registered in the
name of the Issuer Trust. If the New Junior Subordinated Debentures are
distributed to holders of Capital Securities, it is anticipated that the
depositary arrangements for the New Junior Subordinated Debentures will be
substantially identical to those in effect for the Capital Securities. See
"Description of the New Capital Securities -- Book-Entry Only Issuance -- The
Depository Trust Company."
Payments on New Junior Subordinated Debentures represented by a global
security will be made to Cede & Co., the nominee for DTC, as the registered
holder of the New Junior Subordinated Debentures, as described under
"Description of the New Capital Securities -- Book-Entry Only Issuance -- The
Depository Trust Company." If New Junior Subordinated Debentures are issued in
certificated form, principal and interest will be payable, the transfer of the
New Junior Subordinated Debentures will be registrable, and New Junior
Subordinated Debentures will be exchangeable for New Junior Subordinated
Debentures of other authorized denominations of a like aggregate principal
amount, at the corporate trust office of the Debenture Trustee in New York, New
York or at the offices of any Paying Agent or transfer agent appointed by the
Company, provided that payment of interest may be made at the option of the
Company by check mailed to the address of the persons entitled thereto.
However, a holder of $1 million or more in aggregate principal amount of New
Junior Subordinated Debentures may receive payments of interest (other than
interest payable at the Stated Maturity) by wire transfer of immediately
available funds upon written request to the Debenture Trustee not later than 15
calendar days prior to the date on which the interest is payable.
The New Junior Subordinated Debentures will be issuable only in registered
form without coupons in integral multiples of $1,000. The minimum purchase
requirement will be $100,000 (100 Junior Subordinated Debentures). New Junior
Subordinated Debentures will be exchangeable for other New Junior Subordinated
Debentures of like tenor, of any authorized denominations, and of a like
aggregate principal amount.
47
New Junior Subordinated Debentures may be presented for exchange as
provided above, and may be presented for registration of transfer (with the
form of transfer endorsed thereon, or a satisfactory written instrument of
transfer, duly executed), at the office of the securities registrar appointed
under the Junior Subordinated Indenture or at the office of any transfer agent
designated by the Company for such purpose without service charge and upon
payment of any taxes and other governmental charges as described in the Junior
Subordinated Indenture. The Company has appointed the Property Trustee as
securities registrar under the Junior Subordinated Indenture. The Company may
at any time designate additional transfer agents with respect to the New Junior
Subordinated Debentures.
In the event of any redemption, neither the Company nor the Property
Trustee shall be required to (i) issue, register the transfer of or exchange
New Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of the New Junior
Subordinated Debentures to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption or (ii) transfer or
exchange any New Junior Subordinated Debentures so selected for redemption,
except, in the case of any New Junior Subordinated Debentures being redeemed in
part, any portion thereof not to be redeemed.
Any monies deposited with the Property Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of (and
premium, if any) or interest on any New Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any) or
interest has become due and payable shall, at the request of the Company, be
repaid to the Company and the holder of such New Junior Subordinated Debenture
shall thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
Restrictions on Certain Payments; Certain Covenants of the Company
The Company has covenanted in the Junior Subordinated Indenture that it
will not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock or (ii) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu in all respects with or junior in interest to the
New Junior Subordinated Debentures (other than (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Company in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of any one or more employees, officers, directors or consultants,
in connection with a dividend reinvestment or shareholder stock purchase plan
or in connection with the issuance of capital stock of the Company (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the
applicable Extension Period or other event referred to below, (b) as a result
of an exchange or conversion of any class or series of the Company's capital
stock (or any capital stock of a subsidiary of the Company) for any class or
series of the Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's capital stock,
(c) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, (d) any declaration of a dividend
in connection with any shareholder's rights plan, or the issuance of rights,
stock or other property under any shareholder's rights plan, or the redemption
or repurchase of rights pursuant thereto, or (e) any dividend in the form of
stock, warrants, options or other rights where the dividend stock or the stock
issuable upon exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks pari passu with or
junior to such stock), if at such time (x) there has occurred any event (1) of
which the Company has actual knowledge that with the giving of notice or the
lapse of time, or both, would constitute a Debenture Event of Default and (2)
that the Company has not taken reasonable steps to cure, (y) if the New Junior
Subordinated Debentures are held by the Issuer Trust, the Company is in default
with respect to its payment of any obligations under the Guarantee or (z) the
Company has given notice of its election of an Extension Period as provided in
the Junior Subordinated Indenture and has not rescinded such notice, or such
Extension Period, or any extension thereof, is continuing.
The Company has covenanted in the Junior Subordinated Indenture (i) to
continue to hold, directly or indirectly, 100% of the Common Securities,
provided that certain successors that are permitted pursuant to the Junior
Subordinated Indenture may succeed to the Company's ownership of the Common
Securities, (ii) as holder of the Common Securities, not to voluntarily
terminate, windup or liquidate the Issuer Trust, other than (a) in connection
with a distribution of New Junior Subordinated Debentures to the holders of the
Capital Securities in liquidation of the Issuer Trust or (b) in connection with
certain mergers, consolidations or amalgamations permitted by the Trust
Agreement and (iii) to use its reasonable efforts, consistent with the terms
and provisions of the Trust Agreement, to cause the Issuer Trust to continue to
be taxable as a grantor trust for United States federal income tax purposes.
48
Modification of Junior Subordinated Indenture
From time to time, the Company and the Debenture Trustee may, without the
consent of any of the holders of the outstanding Junior Subordinated
Debentures, amend, waive or supplement the provisions of the Junior
Subordinated Indenture to: (i) evidence succession of another corporation or
association to the Company and the assumption by such person of the obligations
of the Company under the Junior Subordinated Indenture and the Junior
Subordinated Debentures; (ii) add further covenants, restrictions or conditions
for the protection of holders of the Junior Subordinated Debentures, or
surrender any right or power conferred upon the Company by the Junior
Subordinated Indenture; (iii) cure ambiguities or correct or supplement any
provision in the Junior Subordinated Debentures in the case of defects or
inconsistencies in the provisions thereof, so long as any such cure or
correction does not adversely affect the interest of the holders of the Junior
Subordinated Debentures or the Capital Securities in any material respect; (iv)
change the terms of the Junior Subordinated Indenture to facilitate the
issuance of the Junior Subordinated Debentures in certificated or other
definitive form; (v) evidence or provide for the appointment under the Junior
Subordinated Indenture of a successor Debenture Trustee; (vi) comply with the
requirements of the Commission to qualify, or maintain the qualification of,
the Junior Subordinated Indenture under the Trust Indenture Act; (vii) convey,
transfer, assign, mortgage or pledge any property to or with the Debenture
Trustee or to surrender any right or power conferred on the Company in the
Junior Subordinated Indenture; (viii) establish the form or terms of any series
of the Junior Subordinated Debentures as permitted by the Junior Subordinated
Indenture; (ix) change or eliminate any provision of the Junior Subordinated
Indenture, so long as at the time of such change there are no outstanding
Junior Subordinated Debentures entitled to the benefit of such provision or
such change does not apply to then outstanding Junior Subordinated Debentures,
or (x) add any additional Debenture Events of Default for the holders of the
Junior Subordinated Debentures. The Junior Subordinated Indenture contains
provisions permitting the Company and the Debenture Trustee, with the consent
of the holders of not less than a majority in principal amount of the Junior
Subordinated Debentures, to modify the Junior Subordinated Indenture in a
manner affecting the rights of the holders of the Junior Subordinated
Debentures, except that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Debenture so affected, (i)
change the Stated Maturity of the principal of, or any installment of interest
on, the Junior Subordinated Debentures, or reduce the principal amount thereof,
the rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the currency in which, any
such amount is payable or impair the right to institute suit for the
enforcement of any Junior Subordinated Debenture or (ii) reduce the percentage
of principal amount of Junior Subordinated Debentures, the holders of which are
required to consent to any such modification of, or to waive certain matters
provided for in, the Junior Subordinated Indenture. Furthermore, so long as any
of the Capital Securities remain outstanding, no such modification may be made
that adversely affects the holders of such Capital Securities in any material
respect, and no termination of the Junior Subordinated Indenture may occur, and
no waiver of any Debenture Event of Default or compliance with any covenant
under the Junior Subordinated Indenture may be effective, without the prior
consent of the holders of at least a majority of the aggregate Liquidation
Amount of the outstanding Capital Securities unless and until the principal of
(and premium, if any, on) the Junior Subordinated Debentures and all accrued
and unpaid interest thereon have been paid in full and certain other conditions
are satisfied.
Debenture Events of Default
The Junior Subordinated Indenture provides that any one or more of the
following described events with respect to the Junior Subordinated Debentures
that has occurred and is continuing constitutes an "Event of Default" with
respect to the Junior Subordinated Debentures:
(i) failure to pay any interest on the Junior Subordinated Debentures
when due and payable, and continuance of such default for a period of 30
days (subject to the deferral of any due date in the case of an Extension
Period); or
(ii) failure to pay any principal of or premium, if any, on the Junior
Subordinated Debentures when due whether at maturity, upon redemption, by
declaration of acceleration or otherwise; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Junior Subordinated Indenture for 90
days after written notice to the Company from the Debenture Trustee or
the holders of at least 25% in aggregate outstanding principal amount of
the outstanding Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
For purposes of the Trust Agreement and this Prospectus, each such Event
of Default under the Junior Subordinated Indenture is referred to as a
"Debenture Event of Default." As described in "Description of the New Capital
Securities --
49
Events of Default; Notice," the occurrence of a Debenture Event of Default will
also constitute an Event of Default in respect of the Trust Securities.
The holders of at least a majority in aggregate principal amount of
outstanding Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate principal amount of outstanding Junior Subordinated Debentures may
declare the principal due and payable upon a Debenture Event of Default, and,
should the Debenture Trustee or such holders of Junior Subordinated Debentures
fail to make such declaration, the holders of at least 25% in aggregate
Liquidation Amount of the outstanding Capital Securities shall have such right.
The holders of a majority in aggregate principal amount of outstanding Junior
Subordinated Debentures may annul such declaration and waive the default if all
defaults (other than the non-payment of the principal of Junior Subordinated
Debentures which has become due solely by such acceleration) have been cured or
waived and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
Debenture Trustee. Should the holders of New Junior Subordinated Debentures
fail to annul such declaration and waive such default, the holders of a
majority in aggregate Liquidation Amount of the outstanding Capital Securities
shall have such right.
The holders of at least a majority in aggregate principal amount of the
outstanding Junior Subordinated Debentures affected thereby, and the holders of
a majority in aggregate Liquidation Amount of the Capital Securities issued by
the Issuer Trust, may, on behalf of the holders of all the Junior Subordinated
Debentures, waive any past default, except a default in the payment of
principal (or premium, if any) or interest (unless such default has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration has been deposited with the Debenture
Trustee) or a default in respect of a covenant or provision which under the
Junior Subordinated Indenture cannot be modified or amended without the consent
of the holder of each outstanding Junior Subordinated Debenture affected
thereby. See " -- Modification of Junior Subordinated Indenture." The Company
is required to file annually with the Debenture Trustee a certificate as to
whether or not the Company is in compliance with all the conditions and
covenants applicable to it under the Junior Subordinated Indenture.
If a Debenture Event of Default occurs and is continuing, the Property
Trustee will have the right to declare the principal of and the interest on the
Junior Subordinated Debentures, and any other amounts payable under the Junior
Subordinated Indenture, to be forthwith due and payable and to enforce its
other rights as a creditor with respect to the Junior Subordinated Debentures.
Enforcement of Certain Rights by Holders of Capital Securities
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay any amounts payable
in respect of the Junior Subordinated Debentures on the date such amounts are
otherwise payable, a registered holder of Capital Securities may institute a
legal proceeding directly against the Company for enforcement of payment to
such holder of an amount equal to the amount payable in respect of Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Capital Securities held by such holder (a "Direct
Action"). The Company may not amend the Junior Subordinated Indenture to remove
the foregoing right to bring a Direct Action without the prior written consent
of the holders of all the Capital Securities. The Company will have the right
under the Junior Subordinated Indenture to set-off any payment made to such
holder of Capital Securities by the Company in connection with a Direct Action.
With certain exceptions, the holders of the Capital Securities would not
be able to exercise directly any remedies available to the holders of the
Junior Subordinated Debentures except under the circumstances described in the
preceding paragraph. See "Description of the New Capital Securities -- Events
of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Junior Subordinated Indenture provides that the Company may not
consolidate with or merge into any other Person or convey, transfer or lease
its properties and assets substantially as an entirety to any Person, and no
Person may consolidate with or merge into the Company or convey, transfer or
lease its properties and assets substantially as an entirety to the Company,
unless (i) if the Company consolidates with or merges into another Person or
conveys, transfers or leases 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 thereof or the District of Columbia, and such
successor Person expressly assumes the Company's obligations in respect of the
New Junior Subordinated Debentures; (ii) immediately after giving effect
thereto, no Debenture
50
Event of Default, and no event which, after notice or lapse of time or both,
would constitute a Debenture Event of Default, has occurred and is continuing;
and (iii) certain other conditions as prescribed in the Junior Subordinated
Indenture are satisfied.
The provisions of the Junior Subordinated Indenture do not afford holders
of the Junior Subordinated Debentures protection in the event of a highly
leveraged or other transaction involving the Company that may adversely affect
holders of the New Junior Subordinated Debentures.
Satisfaction and Discharge
The Junior Subordinated Indenture provides that when, among other things,
all Junior Subordinated Debentures not previously delivered to the Debenture
Trustee for cancellation (i)(a) have become due and payable or (b) will become
due and payable at the Stated Maturity within one year, or (c) are to be called
for redemption within one year under arrangements satisfactory to the Debenture
Trustee, and (ii) the Company deposits or causes to be deposited with the
Debenture Trustee funds, in trust, for the purpose and in an amount sufficient
to pay and discharge the entire indebtedness on the Junior Subordinated
Debentures not previously delivered to the Debenture Trustee for cancellation,
for the principal (and premium, if any) and interest (including any additional
interest) to the date of the deposit or to the Stated Maturity, as the case may
be, then the Junior Subordinated Indenture will, upon the Company's request, be
satisfied and discharged and cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange, certain obligations
of the Company to the Debenture Trustee and the obligations of the Debenture
Trustee to apply money deposited by the Company in payment of the Junior
Subordinated Debentures).
Subordination
The New Junior Subordinated Debentures will be subordinate and junior in
right of payment, to the extent set forth in the Junior Subordinated Indenture,
to all Senior Indebtedness (as defined below) of the Company. If the Company
defaults in the payment of any principal, premium, if any, or interest, if any,
or any other amount payable on any Senior Indebtedness when the same becomes
due and payable, whether at maturity or at a date fixed for redemption or by
declaration of acceleration or otherwise, then, unless and until such default
has been cured or waived or has ceased to exist or all Senior Indebtedness has
been paid, no direct or indirect payment (in cash, property, securities, by
setoff or otherwise) may be made or agreed to be made on the Junior
Subordinated Debentures, or in respect of any redemption, repayment,
retirement, purchase or other acquisition of any of the Junior Subordinated
Debentures.
As used herein, "Senior Indebtedness" means, whether recourse is to all or
a portion of the assets of the Company and whether or not contingent, (i) every
obligation of the Company for money borrowed; (ii) every obligation of the
Company evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of the Company with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of the Company; (iv) every obligation of the Company issued or
assumed as the deferred purchase price of property services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of the Company; (vi) every
obligation of the Company for claims (as defined in Section 101(4) of the
United States Bankruptcy Code of 1978, as amended) in respect of derivative
products such as interest and foreign exchange rate contracts, commodity
contracts and similar arrangements; and (vii) every obligation of the type
referred to in clauses (i) through (vi) of another person the payment of which
the Company has guaranteed or is responsible or liable, directly or indirectly,
as obligor or otherwise. Without limiting the generality of the foregoing,
Senior Indebtedness shall include indebtedness incurred pursuant to the
Company's existing $75 million revolving credit facility and its master note
program. At June 30, 1998, the Company's Senior Indebtedness aggregated
approximately $368.3 million. See "Risk Factors -- Ranking of Subordinated
Obligations Under the Guarantee and the Junior Subordinated Debentures" and "
- -- Status of the Company as a Bank Holding Company." "Senior Indebtedness"
shall not include (i) any obligations which, by their terms, are expressly
stated to rank pari passu in right of payment with, or to not be superior in
right of payment to, the Junior Subordinated Debentures, (ii) any indebtedness
of the Company which when incurred and without respect to any election under
Section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was
without recourse to the Company, (iii) any indebtedness of the Company to any
of its subsidiaries, (iv) indebtedness to any executive officer or director of
the Company, or (v) any indebtedness in respect of debt securities issued to
any trust, or a trustee of such trust, partnership or other entity affiliated
with the Company that is a financing entity of the Company in connection with
the issuance of such financing entity of securities that are similar to the
Capital Securities.
51
In the event of (i) certain events of bankruptcy, dissolution or
liquidation of the Company, (ii) any proceeding for the liquidation,
dissolution or other winding up of the Company, voluntary or involuntary,
whether or not involving insolvency or bankruptcy proceedings, (iii) any
assignment by the Company for the benefit of creditors, or (iv) any other
marshalling of the assets of the Company, all Senior Indebtedness (including
any interest thereon accruing after the commencement of any such proceedings)
shall first be paid in full before any payment or distribution, whether in
cash, securities or other property, shall be made on account of the Junior
Subordinated Debentures. In such event, any payment or distribution on account
of the Junior Subordinated Debentures, whether in cash, securities or other
property, that would otherwise (but for the subordination provisions) be
payable or deliverable in respect of the Junior Subordinated Debentures will be
paid or delivered directly to the holders of Senior Indebtedness in accordance
with the priorities then existing among such holders until all Senior
Indebtedness (including any interest thereon accruing after the commencement of
any such proceedings) has been paid in full.
In the event of any such proceeding, after payment in full of all sums
owing with respect to Senior Indebtedness, the holders of Junior Subordinated
Debentures, together with the holders of any obligations of the Company ranking
on a parity with the Junior Subordinated Debentures, will be entitled to be
paid from the remaining assets of the Company the amounts at the time due and
owing on the Junior Subordinated Debentures and such other obligations before
any payment or other distribution, whether in cash, property or otherwise, will
be made on account of any capital stock or obligations of the Company ranking
junior to the Junior Subordinated Debentures and such other obligations. If any
payment or distribution on account of the Junior Subordinated Debentures of any
character or any security, whether in cash, securities or other property is
received by any holder of any Junior Subordinated Debentures in contravention
of any of the terms hereof and before all the Senior Indebtedness has been paid
in full, such payment or distribution or security will be received in trust for
the benefit of, and must be paid over or delivered and transferred to, the
holders of the Senior Indebtedness at the time outstanding in accordance with
the priorities then existing among such holders for application to the payment
of all Senior Indebtedness remaining unpaid to the extent necessary to pay all
such Senior Indebtedness in full. By reason of such subordination, in the event
of the insolvency of the Company, holders of Senior Indebtedness may receive
more, ratably, and holders of the Junior Subordinated Debentures may receive
less, ratably, than the other creditors of the Company. Such subordination will
not prevent the occurrence of any Event of Default in respect of the Junior
Subordinated Debentures.
The Junior Subordinated Indenture places no limitation on the amount of
additional Senior Indebtedness that may be incurred by the Company. The Company
expects from time to time to incur additional indebtedness that will constitute
Senior Indebtedness.
Information Concerning the Debenture Trustee
The Debenture Trustee, other than during the occurrence and continuance of
a Debenture Event of Default, undertakes to perform only such duties as are
specifically set forth in the Junior Subordinated Indenture, is under no
obligation to exercise any of the powers vested in it by the Junior
Subordinated Indenture and, after such Debenture Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
in the conduct of his or her own affairs. The Debenture Trustee is not required
to expend or risk its own funds or otherwise incur personal financial liability
in the performance of its duties if the Debenture Trustee reasonably believes
that repayment or adequate indemnity is not reasonably assured to it.
Bankers Trust Company, the Debenture Trustee, may serve from time to time
as trustee under other indentures or trust agreements with the Company or its
subsidiaries relating to other issues of their securities. In addition, the
Company and certain of its affiliates may have other banking relationships with
Bankers Trust Company and its affiliates.
Restrictions on Transfer
The New 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 New Junior Subordinated Debentures). Any such transfer of
New 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
New Junior Subordinated Debentures for any purpose, including but not limited
to the receipt of payments on such New Junior Subordinated Debentures, and such
transferee shall be deemed to have no interest whatsoever in such New Junior
Subordinated Debentures.
Governing Law
The Junior Subordinated Indenture and the New Junior Subordinated
Debentures will be governed by and construed in accordance with the laws of the
State of New York.
52
DESCRIPTION OF THE GUARANTEE
Concurrent with the issuance by the Issuer Trust of the Old Capital
Securities, the Old Guarantee was executed and delivered by the Company for the
benefit of the holders from time to time of the Capital Securities. As soon as
is practicable after the date hereof, the Company will exchange the Guarantee
for the Old Guarantee. This summary of the material provisions of the 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 Guarantee, including the
definitions therein of certain terms. A copy of the Guarantee is available upon
request from the Guarantee Trustee. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Capital Securities.
General
Pursuant to the Guarantee, the Company 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 Capital Securities, as and
when due, regardless of any defense, right of set-off or counterclaim that the
Issuer Trust may have or assert other than the defense of payment. The
following payments with respect to the Capital Securities, to the extent not
paid by or on behalf of the Issuer Trust (the "Guarantee Payments"), will be
subject to the Guarantee: (i) any accumulated and unpaid Distributions which
are required to be paid on the Capital Securities, to the extent the Issuer
Trust has funds on hand available therefor at such time; (ii) the Redemption
Price with respect to any Capital Securities called for redemption, to the
extent that the Issuer Trust has funds on hand available therefor at such time;
and (iii) upon a voluntary or involuntary dissolution, winding up or
liquidation of the Issuer Trust (unless the Junior Subordinated Debentures are
distributed to holders of the 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 the Issuer Trust has funds
on hand available therefor at such time, and (b) the amount of assets of the
Issuer Trust remaining available for distribution to holders of such Capital
Securities in liquidation of the Issuer Trust. The Company's obligation to make
a Guarantee Payment may be satisfied by direct payment of the required amounts
by the Company to the holders of the Capital Securities or by causing the
Issuer Trust to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Issuer Trust's obligations under the Capital Securities, but will apply
only to the extent that the Issuer Trust has funds sufficient to make such
payments, and is not a guarantee of collection.
If the Company does not make payments on the Junior Subordinated
Debentures held by the Issuer Trust, the Issuer Trust will not be able to pay
any amounts payable in respect of the Capital Securities and will not have
funds legally available therefor. The Guarantee will rank subordinate and
junior in right of payment to all Senior Indebtedness of the Company. See " --
Status of the Guarantee." The Guarantee does not limit the incurrence or
issuance of other secured or unsecured debt of the Company, including Senior
Indebtedness, whether under the Junior Subordinated Indenture, any other
indenture that the Company may enter into in the future or otherwise.
The Company has, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures and the Junior Subordinated Indenture, taken together,
fully, irrevocably and unconditionally guaranteed all the Issuer Trust's
obligations under the Capital Securities. No single document standing alone or
operating in conjunction with fewer than all the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
Issuer Trust's obligations in respect of the Capital Securities. See
"Relationship Among the Capital Securities, the Junior Subordinated Debentures
and the Guarantee."
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Indebtedness
of the Company in the same manner as the Junior Subordinated Debentures.
The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held by the Guarantee Trustee for the benefit of the holders
of the Capital Securities. The Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Issuer
Trust or distribution to the holders of the Capital Securities of the Junior
Subordinated Debentures.
53
Amendments and Assignment
Except with respect to any changes which do not materially adversely
affect the rights of holders of the Capital Securities (in which case no vote
will be required), the Guarantee may not be amended without the prior approval
of the holders of not less than a majority of the aggregate Liquidation Amount
of the Capital Securities. The manner of obtaining any such approval will be as
set forth under "Description of the Capital Securities -- Voting Rights;
Amendment of Trust Agreement." All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Capital Securities then outstanding.
Events of Default
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment obligations thereunder, or to perform any
non-payment obligation if such non-payment default remains unremedied for 30
days. The holders of not less than a majority in aggregate Liquidation Amount
of the Capital Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
Any registered holder of Capital Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Issuer
Trust, the Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants applicable to it under the Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after the
occurrence of an event of default with respect to the Guarantee, must exercise
the same degree of care and skill as a prudent person would exercise or use in
the conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by
the Guarantee at the request of any holder of the Capital Securities unless it
is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby.
For information concerning the relationship between Bankers Trust Company,
the Guarantee Trustee, and the Company, see "Description of the Junior
Subordinated Debentures -- Information Concerning the Debenture Trustee."
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the Capital Securities, upon full
payment of the amounts payable with respect to the Capital Securities upon
liquidation of the Issuer Trust or upon distribution of Junior Subordinated
Debentures to the holders of the Capital Securities. The Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of the Capital Securities must restore payment of any sums paid
under the Capital Securities or the Guarantee.
Governing Law
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Capital Securities
(to the extent the Issuer Trust has funds available for such payment) are
irrevocably guaranteed by the Company as and to the extent set forth under
"Description of the Guarantee." Taken together, the Company's obligations under
the Junior Subordinated Debentures, the Junior Subordinated Indenture, the
Trust Agreement and the Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of Distributions and other
amounts due on the Capital Securities. No single document standing alone or
operating in conjunction with fewer than all the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
Issuer
54
Trust's obligations in respect of the Capital Securities. If and to the extent
that the Company does not make payments on the Junior Subordinated Debentures,
the Issuer Trust will not have sufficient funds to pay Distributions or other
amounts due on the Capital Securities. The Guarantee does not cover payment of
amounts payable with respect to the Capital Securities when the Issuer Trust
does not have sufficient funds to pay such amounts. In such event, the remedy
of a holder of the Capital Securities is to institute a legal proceeding
directly against the Company for enforcement of payment of the Company's
obligations under Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of the Capital Securities held by such holder.
The obligations of the Company under the Junior Subordinated Debentures
and the Guarantee are subordinate and junior in right of payment to all Senior
Indebtedness.
Sufficiency of Payments
As long as payments are made when due on the Junior Subordinated
Debentures, such payments will be sufficient to cover Distributions and other
payments distributable on the Capital Securities, primarily because: (i) the
aggregate principal amount of the Junior Subordinated Debentures will be equal
to the sum of the aggregate stated Liquidation Amount of the Capital Securities
and Common Securities; (ii) the interest rate and interest and other payment
dates on the Junior Subordinated Debentures will match the Distribution rate,
Distribution Dates and other payment dates for the Capital Securities; (iii)
the Company will pay for all and any costs, expenses and liabilities of the
Issuer Trust except the Issuer Trust's obligations to holders of the Trust
Securities; and (iv) the Trust Agreement further provides that the Issuer Trust
will not engage in any activity that is not consistent with the limited
purposes of the Issuer Trust.
Notwithstanding anything to the contrary in the Junior Subordinated
Indenture, the Company has the right to set-off any payment it is otherwise
required to make thereunder against and to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee.
Enforcement Rights of Holders of Capital Securities
A holder of any Capital Security may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer Trust
or any other person or entity. See "Description of the Guarantee."
A default or event of default under any Senior Indebtedness of the Company
would not constitute a default or Event of Default in respect of the Capital
Securities. However, in the event of payment defaults under, or acceleration
of, Senior Indebtedness of the Company, the subordination provisions of the
Junior Subordinated Indenture provide that no payments may be made in respect
of the Junior Subordinated Debentures until such Senior Indebtedness has been
paid in full or any payment default thereunder has been cured or waived. See
"Description of the New Subordinated Debentures -- Subordination."
Limited Purpose of Issuer Trust
The Capital Securities represent preferred undivided beneficial interests
in the assets of the Issuer Trust, and the Issuer Trust exists for the sole
purpose of issuing its Capital Securities and Common Securities and investing
the proceeds thereof in Junior Subordinated Debentures. A principal difference
between the rights of a holder of a Capital Security and a holder of a Junior
Subordinated Debenture is that a holder of a Junior Subordinated Debenture is
entitled to receive from the Company payments on Junior Subordinated Debentures
held, while a holder of Capital Securities is entitled to receive Distributions
or other amounts distributable with respect to the Capital Securities from the
Issuer Trust (or from the Company under the Guarantee) only if and to the
extent the Issuer Trust has funds available for the payment of such
Distributions.
Rights Upon Dissolution
Upon any voluntary or involuntary dissolution of the Issuer Trust, other
than any such dissolution involving the distribution of the Junior Subordinated
Debentures, after satisfaction of liabilities to creditors of the Issuer Trust
as required by applicable law, the holders of the Capital Securities will be
entitled to receive, out of assets held by the Issuer Trust, the Liquidation
Distribution in cash. See "Description of the New Capital Securities --
Liquidation Distribution Upon Dissolution." Upon any voluntary or involuntary
liquidation or bankruptcy of the Company, the Issuer Trust, as registered
holder of the Junior Subordinated Debentures, would be a subordinated creditor
of the Company, subordinated and junior in right of payment to all Senior
Indebtedness as set forth in the Junior Subordinated Indenture, but entitled to
receive payment in full of all amounts payable with respect to the Junior
Subordinated Debentures before any shareholders of the Company
55
receive payments or distributions. Since the Company is the guarantor under the
Guarantee and has agreed under the Junior Subordinated Indenture to pay for all
costs, expenses and liabilities of the Issuer Trust (other than the Issuer
Trust's obligations to the holders of the Trust Securities), the positions of a
holder of the Capital Securities and a holder of such Junior Subordinated
Debentures relative to other creditors and to shareholders of the Company in
the event of liquidation or bankruptcy of the Company are expected to be
substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of the principal United States federal income
tax consequences of the purchase, ownership and disposition of Capital
Securities. The statements of law and legal conclusions set forth in this
summary regarding the tax consequences to the beneficial owners of Capital
Securities (the "Securityholders") represent the opinion of Hunton & Williams,
Richmond, Virginia, special tax counsel to the Company. This summary does not
address all tax consequences that may be applicable to a Securityholder, nor
does it address the tax consequences to (i) persons that may be subject to
special treatment under United States federal income tax law, such as banks,
insurance companies, thrift institutions, regulated investment companies, real
estate investment trusts, tax-exempt organizations and dealers in securities or
currencies, (ii) persons that will hold Capital Securities as part of a
position in a "straddle" or as part of a "hedging," "conversion" or other
integrated investment transaction for federal income tax purposes, (iii) except
with respect to the discussion under the caption "United States Alien
Securityholders," persons whose functional currency is not the United States
dollar or (iv) persons that do not hold Capital Securities as capital assets.
This summary is based on the Code, Treasury Regulations, Internal Revenue
Service (the "IRS") rulings and pronouncements and judicial decisions now in
effect, all of which are subject to change at any time. Such changes may be
applied retroactively in a manner that could cause the tax consequences to vary
substantially from the consequences described below, possibly adversely
affecting a beneficial owner of Capital Securities. In addition, the
authorities on which this summary is based (including authorities
distinguishing debt from equity) are subject to various interpretations, and it
is therefore possible that the federal income tax treatment of the Capital
Securities may differ from the treatment described below. No ruling has been
received from the IRS regarding the tax consequences of the Capital Securities.
Counsel's opinion regarding such tax consequences represents only counsel's
best legal judgment based on current authorities and is not binding on the IRS
or the courts.
HOLDERS OF CAPITAL SECURITIES ARE ADVISED TO CONSULT WITH THEIR OWN TAX
ADVISORS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX
CONSEQUENCES OF THE EXCHANGE OFFER, AND THE PURCHASE, OWNERSHIP AND DISPOSITION
OF CAPITAL SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX
LAWS.
Classification of the Junior Subordinated Debentures
The Junior Subordinated Debentures are intended to be, in the opinion of
Hunton & Williams should be, and the Company intends to take the position that
the Junior Subordinated Debentures will be, classified for United States
federal income tax purposes as indebtedness under current law. No assurance can
be given, however, the IRS will not challenge that position. According to a
petition recently filed in the United States Tax Court by a corporation
unrelated to the Company and the Issuer Trust, the IRS has challenged the
status as indebtedness, for United States federal income tax purposes, of
certain purported debt instruments held by entities intended to be taxable as
partnerships for United States federal income tax purposes, where those
entities, in turn, issued preferred securities to investors. Although the
overall structure of the financing arrangement involved in that case is
somewhat similar to the financing structure for the Junior Subordinated
Debentures and the Issuer Trust, the relevant facts involved in that case
appear to differ significantly from those relating to the Junior Subordinated
Debentures and the Issuer Trust. The remainder of this summary assumes that the
Junior Subordinated Debentures will be classified as indebtedness for United
States federal income tax purposes.
Exchange of Capital Securities
The exchange of Old Capital Securities for New Capital Securities will not
be a taxable event to Securityholders for United States federal income tax
purposes. Accordingly, the New Capital Securities will have the same issue
price as the Old Capital Securities, and a Securityholder will have the same
adjusted tax basis and holding period for New Capital Securities as the holder
had for Old Capital Securities immediately before the exchange.
56
Classification of the Issuer Trust
In the opinion of Hunton & Williams, under current law and assuming
compliance with the terms of the Trust Agreement, the Issuer Trust will be
classified as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes. As a result, each
Securityholder will be treated as owning an undivided beneficial interest in
the Junior Subordinated Debentures. Accordingly, each Securityholder will be
required to include in its gross income its pro rata share of the interest,
including any original issue discount ("OID"), and any other income received or
accrued with respect to the Junior Subordinated Debentures whether or not cash
is actually distributed to the Securityholders. See " -- Interest Income and
Original Issue Discount." No amount included in income with respect to the
Capital Securities will be eligible for the dividends received deduction.
Interest Income and Original Issue Discount
Under Treasury Regulations applicable to debt instruments issued after
August 12, 1996 (the "Regulations"), 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 Company believes that the likelihood of its
exercising its option to defer payments of interest on the Junior Subordinated
Debentures is remote. Based on the foregoing, in the opinion of Hunton &
Williams, the Junior Subordinated Debentures will not be considered to be
issued with OID at the time of their original issuance and, accordingly, a
Securityholder should include in gross income such Securityholder's allocable
share of interest on the Junior Subordinated Debentures (other than an amount
of the first interest payment attributable to pre-issuance accrued interest,
which a Securityholder may treat as a reduction of the issue price of the
Junior Subordinated Debentures rather than as gross income) in accordance with
such Securityholder's method of tax accounting.
Under the Regulations, if the Company should actually exercise its option
to defer any payment of interest, the Junior Subordinated Debentures would at
that time be treated as issued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID so long as the
Junior Subordinated Debentures remained outstanding. In such event, all of a
Securityholder's taxable interest income with respect to the Junior
Subordinated Debentures would be accounted for as OID on an economic accrual
basis regardless of such Securityholder's method of tax accounting, and actual
payments of stated interest would not be reported as taxable income.
Consequently, a Securityholder would be required to include in gross income OID
even though the Company would not make any cash payments during an Extension
Period.
The Regulations have not been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation herein.
Market Discount and Amortizable Premium
A secondary market purchaser of Capital Securities at a discount from the
principal amount (or, if the Junior Subordinated Debentures are deemed to be
issued with OID, the issue price plus accrued but unpaid OID) of the pro rata
share of Junior Subordinated Debentures represented by the Capital Securities
acquires such Capital Securities with "market discount" if the discount is not
less than the product of (i) 0.25% of the principal amount (or, if the Junior
Subordinated Debentures are deemed to be issued with OID, the issue price plus
accrued but unpaid OID) multiplied by (ii) the number of complete years to
maturity of the Junior Subordinated Debentures after the date of purchase. A
purchaser of Capital Securities with market discount generally will be required
to treat any gain on the sale, redemption or other disposition of all or part
of such Capital Securities as ordinary income to the extent of accrued (but not
previously taxable) market discount. Market discount generally will accrue
ratably during the period from the date of purchase to the maturity date,
unless the Securityholder elects to accrue such market discount on the basis of
a constant interest rate. A Securityholder who acquires Capital Securities at a
market discount may be required to defer some interest deductions attributable
to any indebtedness incurred or continued to purchase or carry the Capital
Securities.
A secondary market purchaser of Capital Securities at a premium over the
stated principal amount of the pro rata share of Junior Subordinated Debentures
(plus accrued interest) generally may elect to amortize such premium ("Section
171 premium"), under a constant yield method, as an offset to interest income
on the Junior Subordinated Debentures. If the Junior Subordinated Debentures
are deemed to be issued with OID and Capital Securities are acquired at a
premium, the premium will not be Section 171 premium but will be amortized as a
reduction in the amount of OID includable in the Securityholder's income.
57
Distribution of Junior Subordinated Debentures to Holders of Capital Securities
Except as noted below, under current law a distribution by the Issuer
Trust of the Junior Subordinated Debentures as described under the caption
"Description of the New Capital Securities -- Liquidation Distribution Upon
Dissolution," would not be a taxable event to Securityholders for United States
federal income tax purposes; such a distribution would result in a
Securityholder receiving directly its pro rata share of the Junior Subordinated
Debentures previously held indirectly through the Issuer Trust, with a holding
period and aggregate tax basis equal to the holding period and aggregate tax
basis such Securityholder had in its Capital Securities before such
distribution; and a Securityholder would account for interest, market discount
and amortizable premium in respect of Junior Subordinated Debentures received
from the Issuer Trust in the manner described above under " -- Interest Income
and Original Issue Discount" and " -- Market Discount and Amortizable Premium."
If, however, the Junior Subordinated Debentures were distributed in connection
with a Tax Event that would cause the Issuer Trust to be subject to United
States federal income tax with respect to income received or accrued on the
Junior Subordinated Debentures, the distribution likely would be a taxable
event to Securityholders. In that case, Securityholders would recognize gain or
loss equal to the difference between their adjusted bases in their Capital
Securities and the fair market value of the Junior Subordinated Debentures
distributed to the Securityholders, and they would obtain new holding periods
and fair market value bases for such Junior Subordinated Debentures.
Sale or Redemption of Capital Securities
Upon a sale (including redemption) of Capital Securities, a Securityholder
will recognize gain or loss equal to the difference between its adjusted tax
basis in the Capital Securities and the amount realized on the sale of such
Capital Securities (excluding any amount attributable to any accrued interest
with respect to such Securityholder's pro rata share of the Junior Subordinated
Debentures not previously included in income, which will be taxable as ordinary
income). Provided that the Company does not exercise its option to defer
payment of interest on the Junior Subordinated Debentures and the Capital
Securities are not considered to be issued with OID, a Securityholder's
adjusted tax basis in the Capital Securities generally will be its initial
purchase price, increased by any market discount included in income and reduced
by any amortized Section 171 premium for such Capital Securities. If the Junior
Subordinated Debentures are deemed to be issued with OID as a result of the
Company's deferral of any interest payment, a Securityholder's tax basis in the
Capital Securities generally will be increased by OID previously includable in
such Securityholder's gross income to the date of disposition and decreased by
distributions or other payments received on the Capital Securities since and
including the commencement date of the first Extension Period. Such gain or
loss, except to the extent of any accrued market discount, generally will be a
long-term capital gain or loss if the Capital Securities have been held for
more than one year.
Should the Company exercise its option to defer any payment of interest on
the Junior Subordinated Debentures, the Capital Securities may trade at a price
that does not accurately reflect the value of accrued but unpaid interest with
respect to the underlying Junior Subordinated Debentures. As a result, and
because a Securityholder will be required to include in income accrued but
unpaid interest on Junior Subordinated Debentures and to add such amount to its
adjusted tax basis, such Securityholder may recognize a capital loss on a sale
of Capital Securities during an Extension Period. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
Backup Withholding Tax and Information Reporting
The amount of interest paid and any OID accrued with respect to the
Capital Securities to Securityholders (other than corporations and other exempt
Securityholders) will be reported to the IRS. It is expected that such income
on the Capital Securities will be reported to Securityholders on Form 1099 and
mailed to Securityholders by January 31 following each calendar year. "Backup"
withholding at a rate of 31% will apply to payments of interest and payments of
disposition (including redemption) proceeds to a non-exempt Securityholder
unless the Securityholder furnishes to the payor its taxpayer identification
number, certifies that such number is correct, and meets certain other
conditions. Any amounts withheld from a Securityholder under the backup
withholding rules will be allowable as a refund or a credit against such
Securityholder's United States federal income tax liability.
United States Alien Securityholders
For purposes of this discussion, a United States Alien Securityholder is
any corporation, individual, partnership, estate or trust that for United
States federal income tax purposes is a foreign corporation, non-resident alien
individual, foreign
58
partnership, foreign estate or foreign trust. This discussion assumes that
income with respect to the Capital Securities is not effectively connected with
a trade or business in the United States in which the United States Alien
Securityholder is engaged.
Under current United States federal income tax law:
(i) payments by the Issuer Trust or any of its paying agents to any
holder of Capital Securities that is a United States Alien
Securityholder generally will not be subject to withholding or other
United States federal income tax, provided that, in the case of
payments with respect to interest (including OID), (a) the beneficial
owner of the Capital Securities does not actually or constructively
own 10% or more of the total combined voting power of all classes of
stock of the Company entitled to vote, (b) the beneficial owner of the
Capital Securities is not a controlled foreign corporation that is
related to the Company through stock ownership, and (c) either (A) the
beneficial owner of the Capital Securities certifies to the Issuer
Trust or its agent, under penalties of perjury, that it is a United
States Alien Securityholder 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 Capital
Securities in such capacity certifies to the Issuer 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 Issuer Trust or its agent
with a copy thereof; and
(ii) a United States Alien Securityholder of Capital Securities
generally will not be subject to withholding or other United States
federal income tax on any gain realized upon the sale or other
disposition of Capital Securities.
Possible Tax Law Changes
In both 1996 and 1997, the Clinton Administration proposed to amend the
Code to deny deductions of interest and OID on instruments with features
similar to those of the Junior Subordinated Debentures when issued under
arrangements similar to the Issuer Trust. That proposal was not passed by, and
is not currently pending before, Congress. There can be no assurance, however,
that future legislative proposals, future regulations or official
administrative pronouncements, or future judicial decisions will not affect the
ability of the Company to deduct interest on the Junior Subordinated
Debentures. Such a change could give rise to a Tax Event, which may permit the
Company, upon approval of the Federal Reserve if then required under applicable
capital guidelines or policies of the Federal Reserve, to cause a redemption of
the Capital Securities, as described more fully under "Description of the New
Capital Securities -- Redemption."
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Capital Securities for its own
account in connection with the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Capital
Securities. The Company and the Issuer Trust have agreed that this Prospectus,
as it may be amended or supplemented from time to time, may be used by
Participating Broker-Dealers for a period of ninety (90) days after the
Expiration Date (subject to extension under certain limited circumstances
described herein) in connection with resales of New Capital Securities received
in exchange for Old Capital Securities if such Old Capital Securities were
acquired by such Participating Broker-Dealers for their own accounts as a
result of market-making activities or other trading activities. See "The
Exchange Offer -- Resales of New Capital Securities." Neither the Company nor
the Issuer Trust will receive any cash proceeds from the issuance of the New
Capital Securities offered hereby. New Capital Securities received by
broker-dealers for their own accounts in connection with 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 New
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 New Capital Securities. Any broker-dealer that resells
New Capital Securities that were received by it for its own account in
connection with the Exchange Offer and any broker or dealer that participates
in a distribution of such New Capital Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New 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.
59
For a period of ninety (90) days after the date on which the Exchange
Offer is consummated, the Company and the Issuer Trust 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 Company and the Issuer Trust have agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Old Capital Securities) other than commissions or concessions of
any brokers or dealers and will indemnify the holders of the Old Capital
Securities (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan"), should consider, among other matters, (a) ERISA's
fiduciary standards (including its prudence and diversification requirements),
(b) whether such fiduciaries have authority to make an investment in the
Capital Securities under the applicable Plan investment policies and governing
instruments, and (c) rules under ERISA and the Code that prohibit Plan
fiduciaries from causing a Plan to engage in a "prohibited transaction."
Section 406 of ERISA and Section 4975 of 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)(4) of
ERISA) are not subject to the requirements of ERISA or Section 4975 of the
Code.
The U.S. Department of Labor (the "DOL") has issued a regulation (29
C.F.R. [00a7]2510.3-101) (the "Plan Assets Regulation") concerning the
definition of what constitutes the assets of a Plan. The Plan Assets Regulation
provides that, as a general rule, the underlying assets and properties of
corporations, partnerships, trusts and certain other entities in which a Plan
makes an "equity" investment will be deemed, for purposes of ERISA, to be
assets of the investing Plan unless certain exceptions apply.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of the Issuer 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 Issuer Trust, less than 25% of the value of each class of equity
interests in the Issuer 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
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, 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 by the Company.
Under another exception contained in the Plan Assets Regulation, if New
Capital Securities received as a result of the Exchange Offer were to qualify
as "publicly offered securities" under the Plan Assets Regulation, the assets
of the Issuer Trust would not be deemed to be "plan assets" by reason of a
Plan's acquisition or holding of such securities. The New Capital Securities
would qualify as "publicly offered securities" if, among other things, they are
offered pursuant to an effective registration statement, are owned by 100 or
more investors independent of the issuer and each other at the time of the
offering, and are subsequently registered under the Exchange Act. It is
expected that the 100 investor requirement will not be satisfied and that the
New Capital Securities will not be registered under the Exchange Act. However,
the New Capital Securities are being offered pursuant to an effective
Registration Statement.
In the event that assets of the Issuer Trust are considered assets of an
investing Plan, the Trustees, the Company, and/or other persons, in providing
services with respect to the Junior Subordinated Debentures, could be
considered fiduciaries to such Plan and subject to the fiduciary responsibility
provisions of Title I of ERISA. In addition, certain transactions involving the
Issuer Trust and/or the Capital Securities 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 Issuer Trust were deemed to be "plan
assets" of Plans investing in the Issuer Trust. For example, if the Company is
a Party in Interest with respect to an investing Plan (either directly or by
reason of its ownership of the Banks), extensions of credit between the Company
and the Issuer Trust (as represented by the Subordinated Debentures and the
Guarantees) 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 exemption (see below).
60
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 Issuer Trust were deemed to be "plan assets" of
Plans investing in the Issuer 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
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 asset managers).
Because of ERISA's prohibitions and those of 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 purchase or holding is covered by the exemptive relief
provided by PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable
exemption. If a purchaser or holder of the Capital Securities that is a Plan or
a Plan Asset Entity elects to rely on an exemption other than PTCE 96-23,
95-60, 91-38, 90-1 or 84-14, the Company and the Issuer Trust may require a
satisfactory opinion of counsel or other evidence with respect to the
availability of such exemption for such purchase and holding. Any purchaser or
holder of the Capital Securities or any interest therein that is a Plan or a
Plan Asset Entity or is purchasing such securities on behalf of or with "plan
assets" will be deemed to have represented by its purchase and holding thereof
that either (a) the purchase and holding of the Capital Securities is covered
by the exemptive relief provided by PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or
another applicable exemption, (b) the Company and the Administrators are not
"fiduciaries," within the meaning of Section 3(21) of ERISA and the regulations
thereunder, with respect to its interest in the Capital Securities or the
Junior Subordinated Debentures, and (c) in purchasing the Capital Securities,
it approves the purchase and holding of the Junior Subordinated Debentures and
the appointment and retention of the Issuer Trustees.
Insurance companies should note that the Small Business Job Protection Act
of 1986 added new Section 401(c) of ERISA relating to the status of the assets
of insurance company general accounts under ERISA and Section 4975 of the Code.
Pursuant to Section 401(cx), the Department of Labor issued proposed
regulations (the "Proposed General Accounting Regulations") in December 1997
with respect to insurance policies that are supported by an insurer's general
account. The Proposed General Accounting Regulations are intended to provide
guidance on which assets held by the insurer constitute "plan assets" of an
ERISA Plan for purposes of the fiduciary responsibility provisions of ERISA and
Section 4975 of the Code.
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, or any plans or
other entities whose assets include Plan assets subject to ERISA or Section
4975 of the Code, consult with their counsel regarding the potential
consequences if the assets of the Issuer 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.
Governmental plans and certain church plans are not subject to ERISA and
are also not subject to the prohibited transaction provisions of Section 4975
of the Code. However, state laws or regulations governing the investment and
management of the assets of such plans may contain fiduciary and prohibited
transaction provisions similar to those under ERISA and the Code discussed
above. Accordingly, fiduciaries of governmental plans and church plans, in
consultation with their advisers, should consider the impact of their
respective state laws on investments in the Capital Securities, and the
considerations discussed above, to the extent applicable.
SUPERVISION, REGULATION AND OTHER MATTERS
The following information is not intended to be an exhaustive description
of the statutes and regulations applicable to the Company or the Banks. The
discussion is qualified in its entirety by reference to all particular
statutory or regulatory provisions. Additional information regarding
supervision and regulation is included in the documents filed by the Company
with the Commission or incorporated herein by reference. See "Available
Information" and "Incorporation of Certain Documents by Reference."
The business and operations of the Company and the Banks are subject to
extensive federal and state governmental regulation and supervision.
61
Regulation of the Company
The Company is a bank holding company registered with the Federal Reserve
under the Bank Holding Company Act of 1956, as amended (the "BHCA"), and is
subject to supervision and examination by, and the regulations and reporting
requirements of, the Federal Reserve. Under the BHCA, the activities of the
Company are limited to banking, managing or controlling banks or engaging in
any other activity which the Federal Reserve determines to be so closely
related to banking or managing or controlling banks as to be a proper incident
thereto.
The BHCA prohibits the Company from acquiring direct or indirect control
of more than 5.0% of the outstanding voting stock or substantially all of the
assets of any financial institution, or merging or consolidating with another
bank holding company or savings bank holding company, without prior approval of
the Federal Reserve. Additionally, the BHCA prohibits the Company from engaging
in, or acquiring ownership or control of more than 5.0% of the outstanding
voting stock of any company engaged in, a nonbanking activity unless such
activity is determined by the Federal Reserve to be so closely related to
banking as to be a proper incident thereto. In approving an application by the
Company to engage in a nonbanking activity, the Federal Reserve must consider
whether that activity can reasonably be expected to produce benefits to the
public, such as greater convenience, increased competition or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest or unsound
banking practices.
There are a number of obligations and restrictions imposed by law on a
bank holding company and its insured depository institution subsidiaries that
are designed to minimize potential loss to depositors and the FDIC insurance
funds. For example, if a bank holding company's insured depository institution
subsidiary becomes "undercapitalized," the bank holding company is required to
guarantee (subject to certain limits) the subsidiary's compliance with the
terms of any capital restoration plan filed with its appropriate federal
banking agency. Also, a bank holding company is required to serve as a source
of financial strength to its depository institution subsidiaries and to commit
resources to support such institutions in circumstances where it might not do
so, absent such policy. Under the BHCA, the Federal Reserve has the authority
to require a bank holding company to terminate any activity or to relinquish
control of a nonbank subsidiary upon the Federal Reserve's determination that
such activity or control constitutes a serious risk to the financial soundness
and stability of a depository institution subsidiary of the bank holding
company.
Regulation of the Banks
As a North Carolina-chartered bank that is not a member of the Federal
Reserve System, FCB/NC's primary federal bank regulator is the Federal Deposit
Insurance Corporation (the "FDIC"). FCB/WV also is a state-chartered bank but
is a member of the Federal Reserve System, so its primary federal bank
regulator is the Federal Reserve. As a federally-chartered savings bank, ASB's
primary federal bank regulator is the Office of Thrift Supervision ("OTS"). The
deposits of each of the Banks are insured by the FDIC. Each of the Banks is
subject to supervision and examination by, and the regulations and reporting
requirements of, its primary federal bank regulator and, in the case of FCB/NC
and FCB/WV, by the respective Commissioner of Banks in North Carolina and West
Virginia (collectively, the "Commissioners").
As insured institutions, the Banks are prohibited from engaging as a
principal in activities that are not permitted for national banks unless (i)
the FDIC determines that the activity would pose no significant risk to the
appropriate deposit insurance fund and (ii) the institution is, and continues
to be, in compliance with all applicable capital standards. Insured
institutions also are prohibited from directly acquiring or retaining any
equity investment of a type or in an amount not permitted for national banks.
The Federal Reserve, the FDIC, the OTS and the Commissioners all have
broad powers to enforce laws and regulations applicable to the Company and the
Banks and to require corrective action of conditions affecting the safety and
soundness of the Banks. Among others, these powers include cease and desist
orders, the imposition of civil penalties and the removal of officers and
directors.
Payment of Dividends
The Company is a legal entity separate and distinct from the Banks. The
principal sources of cash flow of the Company, including cash flow to pay
dividends to its shareholders, are dividends it receives from the Banks. There
are statutory and regulatory limitations on the payment of dividends by the
Banks to the Company, as well as by the Company to its shareholders. As insured
depository institutions, each of the Banks also is prohibited from making
capital distributions, including the payment of dividends, if, after making
such distribution, it would become "undercapitalized" (as such term is defined
in the Federal Deposit Insurance Act).
62
If, in the opinion of the federal bank regulatory agencies, a depository
institution under their jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), they may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under current federal
law, a depository institution may not pay any dividend if payment would cause
it to become undercapitalized or if it already is undercapitalized. See " --
Prompt Corrective Action." Moreover, the federal agencies have issued policy
statements which provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
At June 30, 1998, approximately $398.4 million was available for payment
of dividends to the Company from the Banks without regulatory approval.
The payment of dividends by the Company and the Banks may also be affected
or limited by other factors, such as the requirement to maintain adequate
capital above regulatory guidelines.
Capital Adequacy
The Company and the Banks are required to comply with the capital adequacy
standards established by the Federal Reserve in the case of the Company, and
the FDIC, the Federal Reserve and the OTS, respectively, in the case of the
Banks. There are two basic measures of capital adequacy for bank holding
companies that have been promulgated by the Federal Reserve and each of the
federal bank regulatory agencies: a risk-based measure and a leverage measure.
All applicable capital standards must be satisfied for a bank holding company
to be considered in compliance.
The minimum guideline for the ratio ("Total Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must be composed of common equity, undivided profits,
minority interests in the equity accounts of consolidated subsidiaries,
qualifying noncumulative perpetual preferred stock, and a limited amount of
cumulative perpetual preferred stock, less goodwill and certain other
intangible assets ("Tier 1 Capital"). The remainder may consist of certain
subordinated debt, certain hybrid capital instruments and other qualifying
preferred stock, and a limited amount of loan loss reserves ("Tier 2 Capital").
At June 30, 1998, the Company's consolidated Total Capital Ratio and its ratio
of Tier 1 Capital to risk-weighted assets ("Tier 1 Capital Ratio") were 11.20%
and 9.95%, respectively, and FCB/NC's, FCB/WV's and ASB's consolidated Total
Capital and Tier 1 Capital Ratios were 11.16% and 9.90%, 20.40% and 19.40%, and
56.34% and 55.45%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Capital Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3.0% for bank holding
companies that meet certain specified criteria, including having the highest
regulatory rating. All other bank holding companies generally are required to
maintain an additional cushion of 100 to 200 basis points above the stated
minimums. The guidelines also provide that bank holding companies experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, the Federal Reserve has
indicated that it will consider a "Tangible Leverage Ratio" (deducting all
intangibles) and other indicia of capital strength in evaluating proposals for
expansion or new activities. At June 30, 1998, the Company's Leverage Capital
Ratio was 7.10%, and FCB/NC's, FCB/WV's and ASB's Leverage Capital Ratios were
7.26%, 10.80% and 29.71%, respectively.
The Banks are subject to risk-based and leverage capital requirements
adopted by the FDIC, the Federal Reserve and the OTS which are substantially
similar to those adopted by the Federal Reserve for bank holding companies.
Each of the Banks was in compliance with applicable minimum capital
requirements as of June 30, 1998. Neither the Company nor either of the Banks
has been advised by any federal banking agency of any specific minimum capital
ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
" -- Prompt Corrective Action."
The Federal Reserve, the FDIC and the OTS also consider interest rate risk
(when the interest rate sensitivity of an institution's assets does not match
the sensitivity of its liabilities or its off-balance-sheet position) in the
evaluation of a
63
bank's capital adequacy. The bank regulatory agencies' methodology for
evaluating interest rate risk requires banks with excessive interest rate risk
exposure to hold additional amounts of capital against such exposures.
Prompt Corrective Action
Current federal law establishes a system of prompt corrective action to
resolve the problems of undercapitalized institutions. Under this system, which
became effective in December 1992, the federal banking regulators are required
to establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories The severity of such actions taken will
depend upon the capital category in which the institution is placed. Generally,
subject to a narrow exception, current federal law requires the banking
regulators to appoint a receiver or conservator for an institution that is
critically undercapitalized.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital Ratio of 10% or
greater, a Tier 1 Capital Ratio of 6.0% or greater, and a Leverage Ratio of
5.0% or greater, and (ii) is not subject to any written agreement, order,
capital directive, or prompt corrective action directive issued by the
appropriate federal banking agency, is deemed to be well capitalized. An
institution with a Total Capital Ratio of 8.0% or greater, a Tier 1 Capital
Ratio of 4.0% or greater, and a Leverage Ratio of 4.0% or greater, is
considered to be adequately capitalized. A depository institution that has a
Total Capital Ratio of less than 8.0%, a Tier 1 Capital Ratio of less than
4.0%, or a Leverage Ratio of less than 4.0%, is considered to be
undercapitalized. A depository institution that has a Total Capital Ratio of
less than 6.0%, a Tier 1 Capital Ratio of less than 3.0%, or a Leverage Ratio
of less than 3.0%, is considered to be significantly undercapitalized, and an
institution that has a tangible equity capital to assets ratio equal to or less
than 2.0% is deemed to be critically undercapitalized. For purposes of the
regulation, the term "tangible equity" includes core capital elements counted
as Tier 1 Capital for purposes of the risk-based capital standards, plus the
amount of outstanding cumulative perpetual preferred stock (including related
surplus), minus all intangible assets with certain exceptions. A depository
institution may be deemed to be in a capitalization category that is lower than
is indicated by its actual capital position if it receives an unsatisfactory
examination rating.
An institution that is categorized as undercapitalized, significantly
under-capitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
A bank holding company must guarantee that a subsidiary depository institution
meets its capital restoration plan, subject to certain limitations. The
obligation of a controlling bank holding company to fund a capital restoration
plan is limited to the lesser of 5.0% of an undercapitalized subsidiary's
assets or the amount required to meet regulatory capital requirements. An
undercapitalized institution is also generally prohibited from increasing its
average total assets, making acquisitions, establishing any branches, or
engaging in any new line of business, except in accordance with an accepted
capital restoration plan or with the approval of the FDIC. In addition, the
appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described above if it determines "that those actions are
necessary to carry out the purpose" of the law.
At June 30, 1998, each of the Banks had the requisite capital levels to
qualify as well capitalized.
Reserve Requirements
Pursuant to regulations of the Federal Reserve, all FDIC-insured
depository institutions must maintain average daily reserves against their
transaction accounts. No reserves are required to be maintained on the first
$4.7 million of transaction accounts, but reserves equal to 3.0% must be
maintained on the aggregate amount of the balances of such accounts between
that amount and $47.8 million, and reserves of 10% must be maintained on
aggregate balances in excess of $47.8 million. These percentages are subject to
adjustment by the Federal Reserve. Because required reserves must be maintained
in the form of vault cash or in a non-interest-bearing account at a Federal
Reserve Bank, the effect of the reserve requirement is to reduce the amount of
the institution's interest-earning assets. As of June 30, 1998, each of the
Banks met its reserve requirements.
FDIC Insurance Assessments
The FDIC currently uses a risk-based assessment system that takes into
account the risks attributable to different categories and concentrations of
assets and liabilities for purposes of calculating deposit insurance
assessments to be paid by insured depository institutions. The risk-based
assessment system, which went into effect on January 1, 1994, assigns an
institution to one of three capital categories: (i) well capitalized; (ii)
adequately capitalized; and (iii) undercapitalized. These
64
three categories are substantially similar to the prompt corrective action
categories described above, with the "undercapitalized" category including
institutions that are undercapitalized, significantly undercapitalized, and
critically undercapitalized for prompt corrective action purposes. An
institution is also assigned by the FDIC to one of three supervisory subgroups
within each capital group. The supervisory subgroup to which an institution is
assigned is based on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and information which the FDIC
determines to be relevant to the institution's financial condition and the risk
posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor). An institution's
insurance assessment rate is then determined based on the capital category and
supervisory category to which it is assigned. Under the final risk-based
assessment system, there are nine assessment risk classifications (i.e.,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied.
In 1996, the FDIC imposed a special one-time assessment of approximately
65.7 basis points (0.657%) on a depository institution's assessable deposits
insured by the Savings Association Insurance Fund ("SAIF") held as of March 31,
1995 (or approximately 52.6 basis points on SAIF deposits acquired by banks in
certain qualifying transactions), and adopted revisions to the assessment rate
schedules that would generally eliminate the disparity between assessment rates
applicable to the deposits insured by the Bank Insurance Fund ("BIF") and the
SAIF. The Company anticipates that the net effect of the decrease in the
premium assessment rate on SAIF deposits will result in a reduction in the
Banks' total deposit insurance premium assessments through 1999 as compared to
years prior to 1997, assuming no further changes in announced premium
assessment rates. The Company recorded a charge against earnings for the
special assessment in 1996 in the pre-tax amount of approximately $10.0
million.
Under the Federal Deposit Insurance Act, insurance of deposits may be
terminated by the FDIC upon a finding that the institution has engaged in
unsafe and unsound practices, is in an unsafe or unsound condition to continue
operations, or has violated any applicable law, regulation, rule, order, or
condition imposed by the FDIC.
Community Reinvestment
Under the Community Reinvestment Act ("CRA"), as implemented by
regulations of the federal bank regulatory agencies, an insured institution has
a continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire community, including low
and moderate income neighborhoods. The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit an
institution's discretion to develop the types of products and services that it
believes are best suited to its particular community, consistent with the CRA.
The CRA requires the federal bank regulatory agencies, in connection with their
examination of insured institutions, to assess the institutions' records of
meeting the credit needs of their communities, using the ratings of
"outstanding," "satisfactory," "needs to improve," or "substantial
noncompliance," and to take that record into account in its evaluation of
certain applications by those institutions. All institutions are required to
make public disclosure of their CRA performance ratings. FCB/NC received an
"outstanding" rating in its last CRA examination.
On May 4, 1995, the federal bank regulatory agencies adopted new uniform
CRA regulations that provide guidance to financial institutions on their CRA
obligations and the methods by which those obligations will be assessed and
enforced. The regulations establish three tests applicable to the Banks: (i) a
lending test to evaluate direct lending in low-income areas and indirect
lending to groups that specialize in community lending; (ii) a service test to
evaluate their delivery of services to such areas, and (iii) an investment test
to evaluate their investment in programs beneficial to such areas. The new CRA
regulations became effective on July 1, 1995, but reporting requirements were
not effective until January 1, 1997. Evaluation under the regulations was not
mandatory until July 1, 1997. Each of he Banks believes its current operations
and policies substantially comply with the regulations and therefore no
material changes to operations or policies are expected.
Transactions With Affiliates
Each of the Banks is subject to restrictions imposed by federal law on
extensions of credit to, and certain other transactions with, the Company and
other affiliates and on investments in the stock or other securities thereof.
These restrictions prevent the Company and other affiliates from borrowing from
the Banks unless the loans are secured by specified collateral, and require
such transactions to have terms comparable to terms of arms-length transactions
with third persons. Further, such secured loans and other transactions and
investments by either of the Banks are generally limited in amount as to the
Company and as to any other affiliate to 10.0% of that Bank's capital and
surplus and as to the Company and all other affiliates to an aggregate of 20.0%
of that Bank's capital and surplus. These regulations and restrictions may
limit the Company's ability to obtain funds from the Banks for its cash needs,
including funds for acquisitions and for payment of
65
dividends, interest and operating expenses. The Banks' ability to extend credit
to their and the Company's directors, executive officers, and 10.0%
stockholders, as well as to entities controlled by such persons, is governed by
the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and
Regulation O of the Federal Reserve thereunder.
Interstate Banking and Branching
The BHCA, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Law"), permits adequately capitalized and managed bank
holding companies to acquire control of the assets of banks in any state.
Acquisitions are subject to antitrust provisions that cap at 10.0% the portion
of the total deposits of insured depository institutions in the United States
that a single bank holding company may control and generally cap at 30.0% the
portion of the total deposits of insured depository institutions in a state
that a single bank holding company may control. Under certain circumstances,
states have the authority to increase or decrease the 30.0% cap, and states may
set minimum age requirements of up to five years on target banks within their
borders.
Beginning June 1, 1997, and subject to certain conditions, the Interstate
Banking Law also permitted interstate branching by allowing a bank to merge
with a bank located in a different state. A state was allowed to accelerate the
effective date for interstate mergers by adopting a law authorizing such
transactions prior to June 1, 1997, or it could "opt out" and thereby prohibit
interstate branching by enacting legislation to that effect prior to that date.
The Interstate Banking Law also permits banks to establish branches in other
states by opening new branches or acquiring existing branches of other banks,
provided the laws of those other states specifically permit that form of
interstate branching. North Carolina and West Virginia each has adopted
statutes which, subject to conditions contained therein, specifically authorize
out-of-state bank holding companies and banks to acquire or merge with banks in
those states and to establish or acquire branches in those states.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Capital
Securities, the enforceability of the Trust Agreement and the creation of the
Issuer Trust will be passed upon by Richards, Layton & Finger, P.A., special
Delaware counsel to the Company and the Issuer Trust. Certain matters of law
relating to the validity of the Guarantee and the Junior Subordinated
Debentures will be passed upon for the Company by Ward and Smith, P.A.,
Raleigh, North Carolina, General Counsel of the Company. Certain United States
federal income tax matters relating to the Capital Securities and the Issuer
Trust will be passed upon for the Company by Hunton & Williams, Richmond,
Virginia, special tax counsel to the Company. David L. Ward, Jr., who is the
senior member of Ward and Smith, P.A., serves as a director of the Company,
and, as of June 30, 1998, certain members of Ward and Smith, P.A., beneficially
owned an aggregate of 26,163 shares of the Company's Class A common stock and
8,349 shares of the Company's Class B common stock.
EXPERTS
The consolidated financial statements of First Citizens BancShares, Inc.
and subsidiaries as of December 31, 1997 and 1996, and for each of the years in
the three-year period ended December 31, 1997, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
66
================================================================================
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by BancShares, the Issuer Trust or the Exchange Agent. Neither
the delivery of this Prospectus nor any sale made hereunder and thereunder
shall, under any circumstances, create an implication that there has been no
change in the affairs of BancShares or the Issuer 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.
--------------------------------
TABLE OF CONTENTS
Page
-----
Available Information .............................. 4
Incorporation of Certain
Documents by Reference .......................... 5
Certain Defined Terms .............................. 6
Summary ............................................ 7
Risk Factors ....................................... 16
First Citizens BancShares, Inc. .................... 22
Consolidated Ratios of Earnings
to Fixed Charges ................................ 23
Selected Consolidated Financial Data and Other
Information ..................................... 23
FCB/NC Capital Trust I ............................. 24
Accounting Treatment ............................... 24
The Exchange Offer ................................. 24
Description of the New Capital Securities .......... 32
Description of the New Junior Subordinated
Debentures ...................................... 44
Description of the Guarantee ....................... 53
Relationship Among the Capital Securities, the
Junior Subordinated Debentures and the
Guarantee ....................................... 54
Certain Federal Income Tax Consequences ............ 56
Plan of Distribution ............................... 59
Certain ERISA Considerations ....................... 60
Supervision, Regulation and Other Matters .......... 61
Legal Matters ...................................... 66
Experts ............................................ 66
================================================================================
================================================================================
150,000 Capital Securities
FCB/NC Capital Trust I
Offer to Exchange its newly issued
8.05% Capital Securities
(Liquidation Amount $1,000 Per Capital Security)
which have been registered under
the Securities Act of 1933
for any and all of its outstanding
8.05% Capital Securities
(Liquidation Amount $1,000 Per Capital Security)
all as fully and unconditionally guaranteed,
as described herein, by
First Citizens
BancShares, Inc.
----------------------
PROSPECTUS
----------------------
August 24, 1998
================================================================================
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Permissible Indemnification. Under the General Corporation Law of the
State of Delaware, Registrant generally may indemnify any person who was or is
a party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding (other than an action by or in the right
of Registrant), whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director or officer of Registrant,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of Registrant
and, with respect to any criminal action or proceeding, had no reasonably cause
to believe his conduct was unlawful.
In the case of an action or suit by or in the right of Registrant to
procure a judgment in its favor, Registrant generally may indemnify any person
who was or is a party, or is threatened to be made a party, to any such
threatened, pending or completed action or suit by reason of the fact that he
is or was a director or officer of Registrant, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
Registrant and, if he shall have been adjudged to be liable to Registrant, only
to the extent the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case such person if fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper).
Mandatory Indemnification. To the extent that a director or officer of
Registrant is successful on the merits or otherwise in defense of any action,
suit or proceeding, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Advance for Expenses. Expenses incurred by a director or officer of
Registrant in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by Registrant in advance of the final
disposition of the action, suit or proceeding upon receipt of an undertaking by
or on behalf of such person to repay amounts advanced if it ultimately is
determined that such person is not entitled to be indemnified by Registrant
against such expenses.
Indemnification by Registrant. Registrant's Bylaws provide for
indemnification of its directors and officers to the fullest extent permitted
by Delaware law and require its Board of Directors to take all actions
necessary and appropriate to authorize such indemnification.
Under Delaware law, Registrant may purchase insurance on behalf of any
person who is or was a director or officer against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not Registrant would have the power to indemnify him
against such liability. Registrant maintains a liability insurance policy
covering its directors and officers.
Item 21. Exhibits and Financial Statement Schedules.
An index of exhibits appears at page II-6 and is incorporated herein by
reference.
Item 22. Undertakings.
(A) Each of the undersigned registrants hereby undertakes:
1. to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in "Calculation of Registration Fee"
table in the effective Registration Statement; and
II-1
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
2. that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
3. to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of this offering.
(B) Each of the undersigned Registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report to Section 13(a) or Section 15(b) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(C) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrants of expenses incurred or paid by a
director, officer or controlling person of the Registrants in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction, the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will each be
governed by the final adjudication of such issue.
(D) The undersigned Registrants hereby undertake to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(E) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
undersigned Registrant has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Raleigh, State of North Carolina, on August 20,
1998.
FIRST CITIZENS BANCSHARES, INC.
BY: /s/ JAMES B. HYLER, JR.
-----------------------------------------
James B. Hyler, Jr.
Vice Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacity and on the dates indicated.
Name Title Date
- --------------------------------------- --------------------------------------- ----------------
/s/ LEWIS R. HOLDING * Chairman and Chief Executive August 20, 1998
---------------------------------- Officer (principal executive officer)
Lewis R. Holding
/s/ FRANK B. HOLDING * Executive Vice Chairman August 20, 1998
----------------------------------
Frank B. Holding
/s/ JAMES B. HYLER, JR. Vice Chairman August 20, 1998
----------------------------------
James B. Hyler, Jr.
/s/ FRANK B. HOLDING, JR. * President and Director August 20, 1998
----------------------------------
Frank B. Holding, Jr.
/s/ KENNETH A. BLACK Vice President, Treasurer and August 20, 1998
---------------------------------- Chief Financial Officer (principal
Kenneth A. Black financial and accounting officer)
/s/ JOHN M. ALEXANDER, JR. * Director August 20, 1998
----------------------------------
John W. Alexander, Jr.
/s/ TED L. BISSETT * Director August 20, 1998
----------------------------------
Ted L. Bissett
/s/ B. IRVIN BOYLE * Director August 20, 1998
----------------------------------
B. Irvin Boyle
/s/ GEORGE H. BROADRICK * Director August 20, 1998
----------------------------------
George H. Broadrick
/s/ HUBERT M. CRAIG, III * Director August 20, 1998
----------------------------------
Hubert M. Craig, III
/s/ BETTY M. FARNSWORTH * Director August 20, 1998
----------------------------------
Betty M. Farnsworth
/s/ LEWIS M. FETTERMAN * Director August 20, 1998
----------------------------------
Lewis M. Fetterman
II-3
Name Title Date
- --------------------------------------- ---------- ----------------
/s/ CARMEN P. HOLDING * Director August 20, 1998
----------------------------------
Carmen P. Holding
/s/ CHARLES B. C. HOLT* Director August 20, 1998
----------------------------------
Charles B. C. Holt
/s/ EDWIN A. HUBBARD * Director August 20, 1998
----------------------------------
Edwin A. Hubbard
/s/ GALE D. JOHNSON* Director August 20, 1998
----------------------------------
Gale D. Johnson
/s/ FREEMAN R. JONES * Director August 20, 1998
----------------------------------
Freeman R. Jones
/s/ LUCIUS S. JONES * Director August 20, 1998
----------------------------------
Lucius S. Jones
/s/ JOSEPH T. MALONEY, JR. * Director August 20, 1998
----------------------------------
Joseph T. Malone, Jr.
/s/ J. CLAUDE MAYO, JR.* Director August 20, 1998
----------------------------------
J. Claude Mayo, Jr.
/s/ WILLIAM MCKAY* Director August 20, 1998
----------------------------------
William McKay
/s/ BRENT D. NASH* Director August 20, 1998
----------------------------------
Brent D. Nash
/s/ LEWIS T. NUNNELEE, III* Director August 20, 1998
----------------------------------
Lewis T. Nunnelee, III
/s/ TALBERT O. SHAW* Director August 20, 1998
----------------------------------
Talbert O. Shaw
/s/ R. C. SOLES, JR.* Director August 20, 1998
----------------------------------
R. C. Soles, Jr.
/s/ DAVID L. WARD, JR.* Director August 20, 1998
----------------------------------
David L. Ward, Jr.
* Kenneth A. Black hereby signs this Amendment No. 1 to Registration Statement
on Form S-4 on August 20, 1998, on behalf of each of the indicated persons for
whom he is attorney-in-fact pursuant to a Power of Attorney filed herewith.
By: /s/ KENNETH A. BLACK
- ----------------------------------
Attorney-In-Fact
II-4
Pursuant to the requirements of the Securities Act of 1933, the
undersigned Registrant has duly caused this Amendment No. 1 to Registration
Statement on form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Raleigh, State of North Carolina, on August 20,
1998.
FCB/NC CAPITAL TRUST I
By: /s/ KENNETH A. BLACK
-----------------------------------------
Kenneth A. Black
Administrator
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on form S-4 has been signed by the following
persons in the capacity and on the dates indicated.
Name Title Date
- ------------------------------------ --------------- ----------------
/s/ KENNETH A. BLACK Administrator August 20, 1998
----------------------------------
Kenneth A. Black
/s/ JOHN H. GRAY Administrator August 20, 1998
----------------------------------
John H. Gray
II-5
EXHIBIT INDEX
Exhibit No. Page No.
- ------------- Description ---------
------
3.1* Initial Trust Agreement of FCB/NC Capital Trust I
3.2* Certificate of Trust of FCB/NC Capital Trust I
4.1* Amended and Restated Trust Agreement of FCB/NC Capital Trust I
4.2* Form of Guarantee Agreement
4.3* Junior Subordinated Indenture between Registrant and Bankers
Trust Company, as Debenture Trustee
4.4* Registration Right Agreement
4.5* Form of certificate evidencing New Capital Securities
4.6* Form of New Junior Subordinated Debenture
5.1* Opinion of Ward and Smith, P.A., as to the legality of the Junior
Subordinated Debentures and the Guarantee
5.2* Opinion of Richards, Layton & Finger, P.A., as to the legality of the
Capital Securities
8.1* Opinion of Hunton & Williams as to certain federal income tax matters
12.1 Statement re computation of ratios of earnings to fixed charges
23.1 Consent of KPMG Peat Marwick LLP
23.2* Consent of Ward and Smith, P.A. (included in Exhibit 5.1 hereto)
23.2* Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2 hereto)
23.3* Consent of Hunton & Williams (included in Exhibit 8.1 hereto)
24.1* Powers of Attorney
25.1* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Bankers Trust Company, as Indenture Trustee under
the Junior Subordinated Indenture
25.2* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Bankers Trust Company, as Property Trustee under
the Amended and Restated Trust Agreement of FCB/NC Capital
Trust I (included in Exhibit 25.1)
25.3* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Bankers Trust Company, as Guarantee Trustee under
the Guarantee (included in Exhibit 25.1)
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agency Agreement
99.4 Brokers' Letter (included as exhibit to Exhibit 99.3)
99.5 Customers Letter (included as exhibit to Exhibit 99.3)
- ---------
* Previously filed.
II-6