SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CENTURY BANCORP, INC. CENTURY BANCORP
CAPITAL TRUST
(Exact name of Registrant as (Exact name of Registrant as
specified in its charter) specified in its Trust Agreement)
MASSACHUSETTS DELAWARE
(State or other jurisdiction (State or other jurisdiction
of incorporation or organization) of incorporation or organization)
6712 6719
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
04-2498617 (applied for)
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
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400 MYSTIC AVENUE
MEDFORD, MASSACHUSETTS 02155
(781) 391-4000
(Address, including zip code, and telephone number, including area code of
Registrant's principal executive offices)
MARSHALL M. SLOANE
Chairman, President and Chief Executive Officer
CENTURY BANCORP, INC.
400 Mystic Avenue
Medford, Massachusetts 02155
(781) 391-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
PETER W. COOGAN, ESQ. REGINA M. PISA, P.C.
DAVID W. WALKER, ESQ. Goodwin, Procter & Hoar LLP
Foley, Hoag & Eliot LLP Exchange Place
One Post Office Square Boston, MA 02109
Boston, MA 02109 (617) 570-1000
(617) 832-1000
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.|_|
If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this form, check the following box: |_|
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_|
If 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, please check the following box. |_|
(1) Includes 375,000 Preferred Securities which may be sold by Century
Bancorp Capital Trust to cover over-allotments.
(2) The Junior Subordinated Debentures will be purchased by Century Bancorp
Capital Trust with the proceeds of the sale of the Preferred
Securities. Such securities may later be distributed for no additional
consideration to the holders of the Preferred Securities of Century
Bancorp Capital Trust upon its dissolution and the distribution of its
assets.
(3) This Registration Statement is deemed to cover the Junior Subordinated
Debentures of Century Bancorp, Inc., the rights of holders of Junior
Subordinated Debentures of Century Bancorp, Inc. under the Indenture
covering the Junior Subordinated Debentures, and the rights of holders
of the Preferred Securities under the Trust Agreement, the Guarantee
and the Expense Agreement entered into by Century Bancorp, Inc. No
separate consideration will be received for the Guarantee.
(4) The registration fee is calculated in accordance with Rule 457(n).
Pursuant to Rule 457(n) under the Securities Act, no separate
registration fee is payable for the Guarantee.
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 the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.
PART I. INFORMATION REQUIRED IN PROSPECTUS
Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED , 1998
[LOGO]
2,500,000 PREFERRED SECURITIES
CENTURY BANCORP CAPITAL TRUST
__% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
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CENTURY BANCORP, INC.
$25,000,000 __% JUNIOR SUBORDINATED DEBENTURES OF
CENTURY BANCORP, INC.
The % Cumulative Trust Preferred Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial interests in the assets
of Century Bancorp Capital Trust, a statutory business trust created under the
laws of the State of Delaware (the "Trust"). Century Bancorp, Inc., a
Massachusetts corporation (the "Company"), will own all the common securities
(the "Common Securities" and, together with the Preferred Securities, the "Trust
Securities") representing undivided beneficial interests in the assets of the
Trust.
(Continued on next page)
Application has been made to have the Preferred Securities approved for quotation on The Nasdaq Stock Market's National Market under the Symbol "CNBKP."
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY AND INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
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 PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC COMMISSION(1) TRUST(2)
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Per Preferred Security...................... $10.00 (2) $10.00
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Total(3).................................... $25,000,000 (2) $25,000,000
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(1) The Company and the Trust have agreed to indemnify the Underwriters
against certain liabilities, including certain liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debentures, the
Company, as issuer of the Junior Subordinated Debentures, has agreed to
pay the Underwriters, as compensation, $_____ per Preferred Security or
$_______ in the aggregate ( $_______ if the over-allotment option is
exercised in full). See "Underwriting." The Company has also agreed to
pay the expenses of the offering estimated to be $ .
(3) The Trust has granted the Underwriters a 30-day option to purchase up
to a maximum of 375,000 additional Preferred Securities to cover
over-allotments, if any. If such option is exercised in full the total
Price to Public, Underwriting Commission and Proceeds to Trust will be
$28,750,000, $[ ] and $28,750,000, respectively. See "Underwriting."
The Preferred Securities are being offered by the Underwriters, subject to prior sale when, as and if delivered to and accepted by the Underwriters and subject to their right to reject orders in whole or in part. It is expected that delivery of the Preferred Securities will be made on or about May __, 1998.
TUCKER ANTHONY INCORPORATED
The date of this Prospectus is ___________, 1998.
State Street Bank and Trust Company is the Property Trustee (as defined herein) of the Trust. The Trust exists for the purpose of issuing the Preferred Securities and investing the proceeds thereof in an equivalent amount of % Junior Subordinated Debentures (the "Junior Subordinated Debentures") of the Company. The Junior Subordinated Debentures will mature on June 30, 2029, which date may be shortened to a date not earlier than June 30, 2003, if certain conditions are met (including, in the case of shortening the Stated Maturity (as defined herein), the Company having received prior approval of the Board of Governors of the Federal Reserve System ("Federal Reserve") to do so if then required under applicable capital guidelines or policies of the Federal Reserve). The Preferred Securities will have a preference over the Common Securities under certain circumstances with respect to cash distributions and amounts payable on liquidation, redemption or otherwise. See "Description of the Preferred Securities--Subordination of the Common Securities."
Holders of Preferred Securities are entitled to receive preferential
cumulative cash distributions, at the annual rate of __% of the liquidation
amount of $10 per Preferred Security (the "Liquidation Amount"), accruing from
May __, 1998, the date of original issuance, and payable quarterly in arrears on
the last day of March, June, September and December of each year, commencing
September 30, 1998 (the "Distributions"). The Company has the right, so long as
no Debenture Event of Default (as defined herein) has occurred and is
continuing, to defer payment of interest on the Junior Subordinated Debentures
at any time or from time to time for a period not to exceed 20 consecutive
quarters with respect to each deferral period (each, an "Extension Period");
provided that no Extension Period may extend beyond the Stated Maturity of the
Junior Subordinated Debentures. 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 requirements set forth herein. If interest
payments on the Junior Subordinated Debentures are so deferred, Distributions on
the Preferred Securities will also be deferred, and the Company will not be
permitted, subject to certain exceptions described herein, to declare or pay any
cash distributions with respect to its capital stock or debt securities that
rank pari passu with or junior to the Junior Subordinated Debentures. DURING AN
EXTENSION PERIOD, INTEREST ON THE JUNIOR SUBORDINATED DEBENTURES WILL CONTINUE
TO ACCRUE (AND THE AMOUNT OF DISTRIBUTIONS TO WHICH HOLDERS OF THE PREFERRED
SECURITIES ARE ENTITLED WILL ACCUMULATE) AT THE RATE OF ___% PER ANNUM,
COMPOUNDED QUARTERLY, AND HOLDERS OF THE PREFERRED SECURITIES WILL BE REQUIRED
TO INCLUDE INTEREST INCOME IN THEIR GROSS INCOME FOR UNITED STATES FEDERAL
INCOME TAX PURPOSES IN ADVANCE OF RECEIPT OF THE CASH DISTRIBUTIONS WITH RESPECT
TO SUCH DEFERRED INTEREST PAYMENTS. UPON THE OCCURRENCE OF AN EXTENSION PERIOD,
A HOLDER OF PREFERRED SECURITIES THAT DISPOSES OF ITS PREFERRED SECURITIES
BETWEEN RECORD DATES FOR PAYMENTS OF DISTRIBUTIONS (AND CONSEQUENTLY DOES NOT
RECEIVE A DISTRIBUTION FROM THE TRUST FOR THE PERIOD PRIOR TO SUCH DISPOSITION)
WILL NEVERTHELESS BE REQUIRED TO INCLUDE ACCRUED BUT UNPAID INTEREST ON THE
JUNIOR SUBORDINATED DEBENTURES THROUGH THE DATE OF DISPOSITION IN INCOME AS
ORDINARY INCOME AND TO ADD SUCH AMOUNT TO ITS ADJUSTED TAX BASIS IN ITS PRO RATA
SHARE OF THE UNDERLYING JUNIOR SUBORDINATED DEBENTURES DEEMED DISPOSED OF. See
"Description of the Junior Subordinated Debentures--Option to Extend Interest
Payment Period," "Certain Federal Income Tax Consequences--Potential Extension
of Interest Payment Period and Original Issue Discount" and "--Disposition of
Preferred Securities."
The Company and the Trust believe that, taken together, the obligations of the Company under the Guarantee, the Trust Agreement, the Junior Subordinated Debentures, the Indenture and the Expense Agreement (each as defined herein) provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a subordinated basis, of all of the obligations of the Trust under the Preferred Securities. See "Relationship Among the Preferred Securities, the Junior Subordinated Debentures and the Guarantee--Full and Unconditional Guarantee." The Guarantee of the Company guarantees the payment of Distributions and payments on liquidation or redemption of the Preferred Securities, but only in each case to the extent of funds held by the Trust, as described herein. See "Description of the Guarantee--General." If the Company does not make interest payments on the Junior Subordinated Debentures held by the Trust, the Trust will have insufficient funds to pay Distributions on the Preferred Securities. The Guarantee does not cover payments of Distributions when the Trust does not have sufficient funds to pay such Distributions. In such event, a holder of Preferred Securities may institute a legal proceeding directly against the Company pursuant to the terms of the Indenture to enforce payments of amounts equal to such Distributions to such holder. See "Description of the Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of the Preferred Securities." The obligations of the Company under the Guarantee and the Preferred Securities are subordinate and junior in right of payment to all Senior Debt, Subordinated Debt and Additional Senior Obligations (each as defined herein) of the Company. The Junior Subordinated Debentures are unsecured obligations of the Company and are subordinated to all Senior Debt, Subordinated Debt and Additional Senior Obligations of the Company.
The Preferred Securities are subject to mandatory redemption, in whole or in part, upon repayment of the Junior Subordinated Debentures at maturity or their earlier redemption. Subject to Federal Reserve approval, if then required under applicable capital guidelines or policies of the Federal Reserve, the Junior Subordinated Debentures are redeemable prior to maturity at the option of the Company (i) on or after June 30, 2003, in whole at any time or in part from time to time, or (ii) at any time, in whole (but not in part), within 180 days following the occurrence of a Tax Event, a Capital Treatment Event or an Investment Company Event (each as defined herein), in each case at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof. See "Description of the Preferred Securities--Redemption or Exchange."
The Company intends to take the position that the Junior Subordinated Debentures will be classified under current law as indebtedness of the Company for United States federal income tax purposes and accordingly, the Company intends to treat the interest payable by the Company on the Junior Subordinated Debentures as deductible for United States federal income tax purposes. There is no assurance that such position of the Company will not be challenged by the Internal Revenue Service or, if challenged, that such a challenge will not be successful. See "Risk Factors-Proposed Tax Legislation".
The Company has the right at any time to dissolve the Trust, subject to the Company having received prior approval of the Federal Reserve to do so if then required under applicable capital guidelines or policies of the Federal Reserve. In the event of the voluntary or involuntary dissolution of the Trust, after satisfaction of liabilities to creditors of the Trust as required by applicable law, the holders of Preferred Securities will be entitled to receive a Liquidation Amount of $10 per Preferred Security, plus accumulated and unpaid Distributions thereon to the date of payment, which may be in the form of a Junior Subordinated Debenture having an aggregate principal amount equal to the Liquidation Amount of such Preferred Securities (and carrying with it accrued interest in an amount equal to the accumulated and unpaid Distributions then due on such Preferred Securities), subject to certain exceptions. See "Description of the Preferred Securities--Redemption or Exchange" and "--Liquidation Distribution Upon Dissolution."
The Company will provide to the holders of the Preferred Securities quarterly reports containing unaudited financial statements and annual reports containing financial statements audited by the Company's independent auditors. The Company will also furnish annual reports on Form 10-K and quarterly reports on Form 10-Q free of charge to holders of the Preferred Securities who so request in writing addressed to the Clerk of the Company.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTMENTS, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. SUCH TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE PREFERRED SECURITIES OFFERED HEREBY ON THE NASDAQ STOCK MARKET'S NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
CENTURY BANCORP, INC.
[MAP OF OPERATIONS]
SUMMARY
The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Prospectus or incorporated herein by reference. The discussion in this Prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that involve risks and uncertainties. The Company's actual results and the timing of certain events may differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors." As used herein, (i) the "Indenture" means the Indenture, to be dated as of April __, 1998, as amended and supplemented from time to time, between the Company and State Street Bank and Trust Company, as Debenture Trustee (the "Debenture Trustee"), relating to the Junior Subordinated Debentures, (ii) the "Trust Agreement" means the Amended and Restated Declaration of Trust relating to the Trust among the Company, as Depositor, State Street Bank and Trust Company, as Property Trustee (the "Property Trustee"), Wilmington Trust Company, as Delaware Trustee (the "Delaware Trustee"), and the Administrative Trustees named therein (collectively, with the Property Trustee and Delaware Trustee, the "Issuer Trustees") and (iii) the "Guarantee" means the Guarantee Agreement relating to the Preferred Securities between the Company and State Street Bank and Trust Company, as Guarantee Trustee (the "Guarantee Trustee").
CENTURY BANCORP, INC.
Century Bancorp, Inc., a Massachusetts corporation (together with its subsidiary, unless the context otherwise requires, the "Company"), formed in 1972 and headquartered in Medford, Massachusetts, is a one bank holding company operating primarily through Century Bank and Trust Company, a Massachusetts bank formed in 1969 (the "Bank"). The Company had total assets of $631.1 million and stockholders' equity of $53.9 million on December 31, 1997. The Bank is a community bank, with 15 banking offices in 14 cities and towns in eastern Massachusetts ranging from Braintree to Peabody. The Bank's customers consist primarily of small and medium-sized businesses and retail customers in these communities and surrounding areas, as well as local governments throughout eastern Massachusetts.
The Bank offers a wide range of services to commercial enterprises, state and local governments and agencies, and individuals with an emphasis on service to small and medium-sized businesses and retail Customers in its market area. It makes commercial loans, real estate and construction loans, and consumer loans, and accepts savings, time, and demand deposits. In addition, the Bank offers to its corporate customers automated lock box collection services, cash management services and account reconciliation services, and actively promotes the marketing of these services to the municipal market.
The Bank provides full service securities brokerage through Century Financial Services in conjunction with Commonwealth Equities. In addition, the Bank is a provider of financial services including cash management, transaction processing and short term financing to municipalities in Massachusetts. The Bank has deposit relationships with approximately 30% of the 351 cities and towns in the state.
FINANCIAL SUMMARY
(dollars in thousands, At or for the
except per share data) Year Ended
December 31,
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1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Assets $631,125 $560,857 $531,928 $465,419 $469,823
Deposits 515,449 476,135 458,615 409,542 421,395
Stockholders' equity 53,857 47,489 42,935 37,553 35,505
Pre-tax income 11,028 8,839 6,240 4,072 1,828
Net income 6,823 5,434 4,574 3,304 1,223
Net yield on average earning assets, taxable
equivalent 4.99% 4.79% 4.86% 4.70% 4.16%
Return on average equity 13.56% 12.13% 11.33% 9.11% 3.48%
Return on average assets 1.20% 1.01% 0.92% 0.70% 0.25%
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STRATEGY
The Company has sought to consistently increase earnings per share and to maximize return on equity through a combination of strategies, including:
o Personalized Service. The Company seeks to offer a full range of products and services to its customers while maintaining the high level of personalized service associated with a community bank. Strong, long-term relationships are a cornerstone of this strategy. The Company strives to respond quickly to customer needs and provides customers with direct access to senior lending officers with approval authority. The Company intends to use its community-based position to build its portfolio of commercial loans to small and medium-sized businesses.
o Growth through Strategic Acquisitions. The Company is in the process of completing the acquisition of Haymarket Cooperative Bank. See "Recent Developments" below. The Company continues to seek suitable strategic opportunities for consolidation and expansion of its market position through selective acquisitions.
RECENT DEVELOPMENTS
On December 10, 1997, the Company announced an agreement to acquire Haymarket Cooperative Bank. Haymarket, located in Boston, Massachusetts, has approximately $142 million of assets and will be acquired for approximately $20 million in cash. The Haymarket acquisition will add two branch locations in Boston's financial district, allowing the Company to provide commercial banking services to a greater number of Boston's small and medium-sized businesses. The acquisition will also connect the Bank geographically, giving it a market presence from Beverly on the North Shore of Massachusetts to Quincy and Braintree on the South Shore. The transaction is subject to federal and state regulatory approvals.
On April 14, 1998, the Company announced net income of $1,802,000 or $0.31 per share for the first quarter of 1998, compared to net income of $1,376,000, or $0.24 per share for the first quarter of 1997.
Total stockholders' equity was $55.3 million at March 31, 1998, compared to $48.4 million at March 31, 1997. The Company's leverage ratio at March 31, 1998, stood at 9.05%, compared to a leverage ratio of 8.62% on March 31, 1997. Book value at March 31, 1998 was $9.55 per share.
The Company's allowance for loan losses was $4.7 million, or 1.46% of loans outstanding at the end of the first quarter, compared to $4.3 million, or 1.46% of loans outstanding at March 31, 1997. Non-accruing loans totaled $1.5 million at March 31, 1998, compared to $1.7 million at the end of the previous quarter.
The Company's Board of Directors voted a regular quarterly dividend of 5 cents ($0.05) per share on the Company's Class A common stock, and 0.70 cents ($0.0070) per share on the Company's Class B common stock. The dividends were declared payable May 15, 1998 to stockholders of record on May 1, 1998.
The principal executive office of the Company is located at 400 Mystic Avenue, Medford, Massachusetts 02155 and its telephone number is (781) 391-4000.
CENTURY BANCORP CAPITAL TRUST
The Trust is a statutory business trust formed under Delaware law pursuant to (i) a trust agreement, dated as of April 21, 1998, executed by the Company, as depositor, and the trustees of the Trust (together with the Property Trustee, the "Trustees"), and (ii) a certificate of trust filed with the Secretary of State of the State of Delaware on April 21, 1998. The initial trust agreement will be amended and restated in its entirety (as so amended and restated, the "Trust Agreement") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Trust Agreement will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred Securities, the purchasers thereof will own all of the Preferred Securities. The Company will acquire all of the Common Securities, which will represent an aggregate liquidation amount equal to at least 3% of the total capital of the Trust. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities, except that upon the occurrence and during the continuance of an Event of Default (as defined herein) under the Trust Agreement resulting from a Debenture Event of Default, the rights of the Company as holder 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 Preferred Securities. See "Description of the Preferred Securities--Subordination of Common Securities." The Trust exists for the exclusive purposes of (i) issuing the Trust Securities representing undivided beneficial interests in the assets of the Trust, (ii) investing the gross proceeds of the Trust Securities in the Junior Subordinated Debentures issued by the Company, and (iii) engaging in only those other activities necessary, advisable, or incidental thereto. The Junior Subordinated Debentures will be the only assets of the Trust and payments under the Junior Subordinated Debentures will be the only revenue of the Trust. The Trust has a term of 55 years, but may dissolve earlier as provided in the Trust Agreement. The principal executive office of the Trust is c/o Century Bancorp, Inc., 400 Mystic Avenue, Medford, Massachusetts 02155, and its telephone number is (781) 391-4000.
THE OFFERING
Securities Offered.................. 2,500,000 Preferred Securities having a Liquidation Amount of $10 per
Preferred Security. The Preferred Securities represent preferred
undivided beneficial interests in the assets of the Trust, which will consist
solely of the Junior Subordinated Debentures and payments thereunder.
The Trust has granted the Underwriters an option, exercisable within 30
days after the date of the Offering, to purchase up to an additional
375,000 Preferred Securities at the initial offering price, solely to cover
over-allotments, if any.
Offering Price ..................... $10 per Preferred Security (Liquidation Amount $10).
Distributions ...................... The Distributions payable on each Preferred Security will be fixed at a
rate per annum of ___% of the Liquidation Amount of $10 per Preferred
Security, will be cumulative, will accrue from May __, 1998, the date of
original issuance of the Preferred Securities, and will be payable quarterly
in arrears, on March 31, June 30, September 30 and December 31 of each
year, commencing September 30, 1998. See "Description of the Preferred
Securities-Distributions-Payment of Distributions."
Junior Subordinated Debentures...... The Trust will invest the proceeds from the issuance of the Preferred
Securities and Common Securities in an equivalent amount of __% Junior
Subordinated Debentures of the Company. The Junior Subordinated
Debentures will mature on June 30, 2029. The Junior Subordinated
Debentures will rank subordinate and junior in right of payment to all
Senior Debt and Subordinated Debt of the Company. In addition, the
Company's obligations under the Junior Subordinated Debentures will be
structurally subordinated to all existing and future liabilities and
obligations of its subsidiaries.
Option to Extend Interest
Payment Period...................... The Company has the right, at any time, so long as no Debenture Event
of Default has occurred and is continuing, to defer payments of interest
on the Junior Subordinated Debentures for a period not exceeding 20
consecutive quarters; provided, that no Extension Period may extend
beyond the Stated Maturity of the Junior Subordinated Debentures. As
a consequence of the extension by the Company of the interest payment
period, quarterly Distributions on the Preferred Securities will be deferred
(though such Distributions will continue to accrue with interest thereon
compounded quarterly, since interest will continue to accrue and
compound on the Junior Subordinated Debentures) during any such
Extension Period. During an Extension Period, the Company will be
prohibited, subject to certain exceptions described herein, from declaring
or paying any cash distributions with respect to its capital stock or debt
securities that 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 the foregoing requirements. See
"Description of the Preferred Securities--Distributions--Extension
Period" and "Description of the Junior Subordinated Debentures--Option
to Extend Interest Payment Period." Should an Extension Period occur,
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holders of Preferred Securities will be required to include deferred
interest income in their gross income for United States federal income
tax purposes in advance of receipt of the cash distributions with
respect to such deferred interest payments. See "Certain Federal
Income Tax Consequences--Potential Extension of Interest Payment
Period and Original Issue Discount."
Redemption.......................... The Preferred Securities are subject to mandatory redemption, in whole
or in part, upon repayment of the Junior Subordinated Debentures at
maturity or their earlier redemption. Subject to Federal Reserve approval,
if then required under applicable capital guidelines or policies of the
Federal Reserve, the Junior Subordinated Debentures are redeemable
prior to maturity at the option of the Company (i) on or after June 30,
2003, in whole at any time or in part from time to time, or (ii) at any time,
in whole (but not in part), within 180 days following the occurrence of a
Tax Event, a Capital Treatment Event or an Investment Company Event,
in each case at a redemption price equal to 100% of the principal amount
of the Junior Subordinated Debentures, together with any accrued but
unpaid interest on the Junior Subordinated Debentures to the date fixed
for redemption. See "Description of the Junior Subordinated
Debentures--Redemption or Exchange."
Ranking............................. The Preferred Securities will rank pari passu, and payments thereon will
be made pro rata, with the Common Securities except as described under
"Description of the Preferred Securities--Subordination of Common
Securities." The Junior Subordinated Debentures will rank pari passu
with all other Junior Subordinated Debentures (if any) issued by the
Company (the "Other Debentures"), which are issued and sold (if at all)
to other trusts established by the Company (if any), in each case similar
to the Trust ("Other Trusts"), and will constitute unsecured obligations of
the Company and will rank subordinate and junior in right of payment to
all Senior Indebtedness to the extent and in the manner set forth in the
Indenture. See "Description of Junior Subordinated Debentures." The
Guarantee will rank pari passu with all other guarantees (if any) issued
by the Company with respect to Preferred Securities (if any) issued by
Other Trusts ("Other Guarantees") and will constitute an unsecured
obligation of the Company and will rank subordinate and junior in right
of payment to all Senior Indebtedness to the extent and in the manner set
forth in the Guarantee Agreement. See "Description of Guarantee." In
addition, because the Company is a holding company, the Junior
Subordinated Debentures and the Guarantee will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, including the Bank's deposit liabilities. See "Description of
Junior Subordinated Debentures--Subordination."
Distribution of Junior
Subordinated Debentures............. The Company has the right at any time to dissolve the Trust and cause the
Junior Subordinated Debentures, after satisfaction of liabilities to
creditors of the Trust as required by applicable law, to be distributed to
holders of Preferred Securities in liquidation of the Trust, subject to the
Company having received prior approval of the Federal Reserve to do so
if then required under applicable capital guidelines or policies of the
|
Federal Reserve. See "Description of the Preferred Securities--
Redemption or Exchange" and "Description of the Preferred
Securities--Liquidation Distribution Upon Dissolution."
Guarantee........................... The Company has guaranteed the payment of Distributions and payments
on liquidation or redemption of the Preferred Securities, but only in each
case to the extent of funds held by the Trust, as described herein. The
Company and the Trust believe that, taken together, the obligations of the
Company under the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures, the Indenture and the Expense Agreement
provide, in the aggregate, a full, irrevocable and unconditional guarantee,
on a subordinated basis, of all of the obligations of the Trust under the
Preferred Securities. The obligations of the Company under the
Guarantee and the Preferred Securities are subordinate and junior in right
of payment to all Senior Debt, Subordinated Debt and Additional Senior
Obligations of the Company. If the Company does not make principal or
interest payments on the Junior Subordinated Debentures, the Trust will
not have sufficient funds to make distributions on the Preferred Securities.
In such event, the Guarantee will not apply to such Distributions until the
Trust has sufficient funds available therefor. See "Description of the
Guarantee."
Voting Rights....................... The holders of the Preferred Securities will have no voting rights except
in limited circumstances. See "Description of the Preferred Securities --
Voting Rights; Amendment of Trust Agreement."
Use of Proceeds..................... All of the proceeds from the sale of the Trust Securities will be invested
by the Trust in the Junior Subordinated Debentures. The Company
intends to use the net proceeds from the sale of the Junior Subordinated
Debentures for general corporate purposes, including contributions to the
Bank to fund its operations, the financing of one or more future
acquisitions by the Company if and when suitable opportunities arise, and
the repurchase of outstanding equity securities of the Company. Initially,
the net proceeds may be used to make short-term investment securities.
See "Use of Proceeds."
Nasdaq National Market
Symbol.............................. Application has been made to have the Preferred Securities approved for
quotation on The Nasdaq Stock Market's National Market under the
symbol "CNBKP."
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SELECTED CONSOLIDATED FINANCIAL DATA
OF CENTURY BANCORP, INC.
At or For the Years Ended December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(dollars in thousands, except share data)
OPERATING RESULTS:
Net interest income.............................. $ 25,294 $ 22,972 $ 21,302 $ 19,537 $ 17,449
Provision for loan losses........................ 660 1,020 1,560 1,620 1,800
----------- ----------- ----------- ----------- -----------
Net interest income after provision for
loan losses............................. 24,634 21,952 19,742 17,917 15,649
----------- ----------- ----------- ----------- -----------
Other operating income........................... 4,994 4,761 4,722 5,420 6,833
----------- ----------- ----------- ----------- -----------
Operating expenses............................... 18,600 17,874 18,224 19,265 20,654
----------- ----------- ----------- ----------- -----------
Income before income taxes ...................... 11,028 8,839 6,240 4,072 1,828
Provision for income taxes....................... 4,205 3,405 1,666 768 605
----------- ----------- ----------- ----------- -----------
Net income....................................... $ 6,823 $ 5,434 $ 4,574 $ 3,304 $ 1,223
=========== =========== =========== =========== ===========
Net income per share, basic...................... $ 1.18 $ 0.95 $ 0.80 $ 0.58 $ 0.21
=========== =========== =========== =========== ===========
Net income per share, diluted.................... $ 1.17 $ 0.93 $ 0.78 $ 0.57 $ 0.21
=========== =========== =========== =========== ===========
Book value per common share...................... $ 9.30 $ 8.25 $ 7.50 $ 6.56 $ 6.20
=========== =========== =========== =========== ===========
Tangible book value per share.................... $ 9.12 $ 8.03 $ 7.25 $ 6.55 $ 6.19
=========== =========== =========== =========== ===========
BALANCE SHEET DATA:
Total assets..................................... $631,125 $560,857 $531,928 $465,419 $469,823
Loans, net....................................... 316,390 288,280 285,438 272,721 272,040
Securities available-for-sale.................... 89,190 81,015 100,754 69,698 24,494
Securities held-to-maturity...................... 109,239 107,715 77,987 48,050 93,544
Core deposit intangibles......................... 1,045 1,252 1,458 95 101
Deposits......................................... 515,449 476,135 458,615 409,542 421,395
Total stockholders' equity....................... 53,857 47,489 42,935 37,553 35,505
PERFORMANCE RATIOS:
Net yield on average earning
assets, taxable equivalent.................... 4.99% 4.79% 4.86% 4.70% 4.16%
Average equity to average assets................. 8.88 8.29 8.17 7.67 7.30
Return on average stockholders' equity........... 13.56 12.13 11.33 9.11 3.48
Return on average assets......................... 1.20 1.01 0.92 0.70 0.25
Efficiency Ratio................................. 61.4 64.5 70.0 77.1 85.1
NON-PERFORMING ASSETS AS A PERCENTAGE OF:
Total loans and real estate owned................ 0.86 1.21 2.11 3.36 7.26
Total assets..................................... 0.43 0.62 1.13 1.99 4.36
ALLOWANCES FOR LOAN LOSSES AS A PERCENTAGE OF
NON-PERFORMING ASSETS......................... 162.80 119.88 69.27 45.78 25.03
NET LOAN CHARGE-OFFS AS A PERCENTAGE OF
AVERAGE OUTSTANDING LOANS..................... 0.13 0.37 0.57 0.94 1.32
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RATIO OF EARNINGS TO FIXED CHARGES Including interest on deposits................... 1.69 1.56 1.42 1.37 1.15 Excluding interest on deposits................... 7.84 10.40 9.58 12.94 8.20 |
RISK FACTORS
Prospective investors should carefully consider, together with the other
information contained and incorporated by reference in this Prospectus, the
following risk factors in evaluating the Company and its business and the Trust
before purchasing the Preferred Securities offered hereby. Prospective investors
should note, in particular, that certain statements contained or incorporated by
reference in this Prospectus, including, without limitation, statements
containing the words "believes", "anticipates", "intends", "expects" and words
of similar import, constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions in those areas in which the Company operates; demographic changes;
competition; fluctuations in interest rates; changes in business strategy or
development plans; changes in governmental regulation; credit quality; the
availability of capital to fund the expansion of the Company's business; and
other factors referenced in this Prospectus or incorporated by reference herein.
Given these uncertainties, prospective investors are cautioned not to place
undue reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the results of any
revisions to any of the forward-looking statements contained or incorporated by
reference herein to reflect future events or developments. The considerations
listed below represent certain important factors the Company believes could
cause such results to differ. These considerations are not intended to represent
a complete list of the general or specific risks that may affect the Company and
the Trust. It should be recognized that other risks may be significant,
presently or in the future, and the risks set forth below may affect the Company
and the Trust to a greater extent than indicated.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
ABILITY TO MAKE PAYMENTS ON THE PREFERRED SECURITIES AND JUNIOR SUBORDINATED DEBENTURES
The Company is a legal entity separate and distinct from its subsidiaries, including the Bank. The ability of the Trust to pay amounts due on the Preferred Securities is solely dependent upon the Company making payments on the Junior Subordinated Debentures as and when required. As a holding company without significant assets other than its equity interest in the Bank, the Company's ability to pay interest on the Junior Subordinated Debentures to the Trust (and consequently, the Trust's ability to pay distributions on the Preferred Securities and the Company's ability to pay its obligations under the Guarantee) depends primarily on cash and liquid investments of the Company and upon cash dividends the Company may receive in the future from the Bank. The Bank's ability to pay dividends to the Company is restricted by Massachusetts law, which requires that retained earnings are available to pay such dividends. The Bank had retained earnings of $37.2 million at December 31, 1997, which amount of retained earnings is unrestricted and available for dividend payments to the Company. At December 31, 1997, the Company had cash, cash equivalents and securities available-for-sale of approximately $187.1 million. See "Use of Proceeds."
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued for the benefit of the holders of Preferred Securities and under the Junior Subordinated Debentures are unsecured and rank subordinate and junior in right of payment to all Senior Debt, Subordinated Debt and Additional Senior Obligations of the Company, whether now existing or hereafter incurred. At December 31, 1997, the Company had no outstanding Senior Debt, Subordinated Debt or Additional Senior Obligations. Because the Company is a holding company, the right of
the Company to participate in any distribution of assets of the Bank upon the Bank's liquidation or reorganization or otherwise (and thus the ability of holders of the Preferred Securities to benefit indirectly from such distribution) is subject to the prior claims of creditors of the Bank, except to the extent that the Company may itself be recognized as a creditor of the Bank. The Junior Subordinated Debentures, therefore, will be effectively subordinated to all existing and future liabilities of the Bank and holders of Junior Subordinated Debentures and Preferred Securities should look only to the assets of the Company for payments on the Junior Subordinated Debentures. Neither the Indenture, the Guarantee nor the Trust Agreement places any limitation on the amount of secured or unsecured debt, including Senior Debt, Subordinated Debt and Additional Senior Obligations, that may be incurred by the Company. See "Description of the Guarantee--Status of the Guarantee" and "Description of the Junior Subordinated Debentures-- Subordination."
The ability of the Trust to pay amounts due on the Preferred Securities is solely dependent upon the Company making payments on the Junior Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE CONSEQUENCES
The Company has the right under the Indenture, so long as no Debenture Event of Default has occurred and is continuing, to defer the payment of interest on the Junior Subordinated Debentures at any time or from time to time for a period not exceeding 20 consecutive quarters with respect to each Extension Period; provided that no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. As a consequence of any such deferral, quarterly Distributions on the Preferred Securities by the Trust will be deferred (and the amount of Distributions to which holders of the Preferred Securities are entitled will accumulate additional Distributions thereon at the rate of ____% per annum, compounded quarterly from the relevant payment date for such Distributions) during any such Extension Period. 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, (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the Junior Subordinated Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Junior Subordinated Debentures (other than payments under the Guarantee), or (iii) redeem, purchase or acquire less than all of the Junior Subordinated Debentures or any of the Preferred Securities. 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 20 consecutive quarters or extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the termination of any Extension Period and the payment of all interest then accrued and unpaid (together with interest thereon at the annual rate of ____% compounded quarterly, to the extent permitted by applicable law), the Company may elect to begin a new Extension Period, subject to the above requirements. 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 Preferred Securities--Distributions--Extension Period" and "Description of the Junior Subordinated Debentures--Option to Extend Interest Payment Period."
Should an Extension Period occur, each holder of Preferred Securities will be required to accrue and recognize income (in the form of original issue discount ("OID")) in respect of its pro rata share of the interest accruing on the Junior Subordinated Debentures held by the Trust for United States federal income tax purposes. A holder of Preferred Securities must, as a result, include such income in gross income for United States federal income tax purposes in advance of the receipt of cash, and will not receive the cash related to such income from the Trust if the holder disposes of the Preferred Securities prior to the record date for the payment of the related Distributions. See "Certain Federal Income Tax Consequences--Potential Extension of Interest Payment Period 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. Should the Company elect, however, to exercise such right in the future, the market price of the Preferred Securities is likely to be adversely affected. A holder
that disposes of its Preferred Securities during an Extension Period, therefore, might not receive the same return on its investment as a holder that continues to hold its Preferred Securities. As a result of the existence of the Company's right to defer interest payments, the market price of the Preferred Securities may be more volatile than the market prices of other securities on which original issue discount accrues that are not subject to such optional deferrals.
REDEMPTION DUE TO TAX EVENT, CAPITAL TREATMENT EVENT OR INVESTMENT COMPANY EVENT
The Company has the right to redeem the Junior Subordinated Debentures in whole (but not in part) within 180 days following the occurrence of a Tax Event, a Capital Treatment Event or an Investment Company Event (whether occurring before or after June 30, 2003), and, therefore, cause a mandatory redemption of the Preferred Securities. The exercise of such right is subject to the Company having received prior approval of the Federal Reserve to do so if then required under applicable capital guidelines or policies of the Federal Reserve.
"Tax Event" means the receipt by the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under the Trust Agreement, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Junior Subordinated Debentures, (ii) interest payable by the Company on the Junior Subordinated Debentures is not, or, within 90 days 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 Trust is, or will be within 90 days of the date of the opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. The Company must request and receive an opinion with regard to such matters within a reasonable period of time after it becomes aware of the possible occurrence of any of the events described in clauses (i) through (iii) above. See "--Risk Factors Relating to the Preferred Securities--Proposed Tax Legislation" for a discussion of certain legislative proposals that, if adopted, could give rise to a Tax Event, which may permit the Company to cause a redemption of the Preferred Securities prior to June 30, 2003.
"Capital Treatment Event" means the receipt by the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or any change (including any announced prospective change) in the laws (or any regulations thereunder) of the United States or any political subdivision thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which proposed change, pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under the Trust Agreement, there is more than an insubstantial risk of impairment of the Company's ability to treat the aggregate Liquidation Amount of the Preferred Securities (or any substantial portion thereof) as "Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital adequacy guidelines of the Federal Reserve, as then applicable to the Company; provided, however, that the inability of the Company to treat all or any portion of the Liquidation Amount of the Preferred Securities as Tier 1 Capital shall not constitute the basis for a Capital Treatment Event if such inability results from the Company having cumulative preferred capital in excess of the amount which may qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines of the Federal Reserve.
"Investment Company Event" means the receipt by the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation
or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, the 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 becomes effective on or after the date of original issuance of the Preferred Securities.
SHORTENING OF STATED MATURITY OF JUNIOR SUBORDINATED DEBENTURES
The Company has the right, at any time, to shorten the maturity of the Junior Subordinated Debentures to a date not earlier than June 30, 2003. The exercise of such right is subject to the Company having received prior approval of the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve. See "Description of the Junior Subordinated Debentures-- General."
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities, to the extent not paid by the Trust, (i) any accrued and unpaid Distributions required to be paid on the Preferred Securities, to the extent that the Trust has funds available therefor at such time, (ii) the Redemption Price (as defined herein) with respect to any Preferred Securities called for redemption, to the extent that the Trust has funds available therefor at such time, and (iii) upon a voluntary or involuntary dissolution, winding-up or liquidation of the Trust (other than in connection with the distribution of Junior Subordinated Debentures to the holders of Preferred Securities or a redemption of all of the Preferred Securities), the lesser of (a) the amount of the Liquidation Distribution (as defined herein), to the extent the Trust has funds available therefor at such time, and (b) the amount of assets of the Trust remaining available for distribution to holders of the Preferred Securities in liquidation of the Trust. The holders of not less than a majority in Liquidation Amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of the Guarantee or to direct the exercise of any trust power conferred upon the Guarantee Trustee under the Guarantee. Any holder of the Preferred 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 Trust, the Guarantee Trustee or any other Person (as defined in the Guarantee). If the Company were to default on its obligation to pay amounts payable under the Junior Subordinated Debentures, the Trust would lack funds for the payment of Distributions or amounts payable on redemption of the Preferred Securities or otherwise, and, in such event, holders of Preferred Securities would not be able to rely upon the Guarantee for such amounts. In the event, however, that a Debenture Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest on or principal of the Junior Subordinated Debentures on the payment date on which such payment is due and payable, then a holder of Preferred Securities may institute a legal proceeding directly against the Company for enforcement of payment to such holder of the principal of or interest on such Junior Subordinated Debentures having a principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such holder (a "Direct Action"). The exercise by the Company of its right, as described herein, to defer the payment of interest on the Junior Subordinated Debentures does not constitute a Debenture Event of Default. In connection with such Direct Action, the Company will have a right of set-off under the Indenture to the extent of any payment made by the Company to such holder of Preferred Securities in the Direct Action. Except as described herein, holders of Preferred 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 Junior Subordinated Debentures-- Enforcement of Certain Rights by Holders of Preferred Securities," "Description of the Junior Subordinated Debentures--Debenture Events of Default" and "Description of the Guarantee." The Trust Agreement provides that each holder of Preferred Securities by acceptance thereof agrees to the provisions of the Guarantee and the Indenture.
NO VOTING RIGHTS EXCEPT IN LIMITED CIRCUMSTANCES
Holders of Preferred Securities will have no voting rights except in limited circumstances relating only to the modification of the Preferred Securities and the exercise of the rights of the Trust as holder of the Junior Subordinated Debentures and the Guarantee. Holders of Preferred Securities will not be entitled to vote to appoint, remove or replace the Property Trustee or the Delaware Trustee, as such voting rights are vested exclusively in the holder of the Common Securities (except upon the occurrence of certain events described herein). The Property Trustee, the Administrative Trustees and the Company may amend the Trust Agreement without the consent of holders of Preferred Securities to ensure that the Trust will be classified for United States federal income tax purposes as a grantor trust even if such action adversely affects the interests of such holders. See "Description of the Preferred Securities--Voting Rights; Amendment of Trust Agreement" and "Description of the Preferred Securities--Removal of the Trust Trustees."
PROPOSED TAX LEGISLATION
In both 1996 and 1997 legislation was proposed that would, if enacted, have adversely affected the tax treatment of the Preferred Securities. On March 19, 1996, President Clinton proposed certain tax law changes (the "1996 Proposed Legislation") that would, among other things, generally deny corporate issuers a deduction for interest in respect of certain debt obligations having a maximum term in excess of 20 years and not shown as indebtedness on the issuer's applicable consolidated balance sheet. Neither the 1996 Proposed Legislation or similar legislation was enacted during the 104th Congress. On February 6, 1997, President Clinton proposed in the administration's fiscal year 1998 budget certain tax law changes (the "Administration's 1997 Tax Proposals") that would b among other things, generally deny corporate issuers a deduction for interest or OID in respect of certain debt obligations having a maximum term in excess of 15 years and not shown as indebtedness on the issuer's applicable consolidated balance sheet. Neither the Administration's 1997 Tax Proposals nor similar legislation was enacted by the 105th Congress. There can be no assurance, however, that legislation enacted after the date hereof will not adversely affect the ability of the Company to deduct the interest payable on the Junior Subordinated Debentures or otherwise give rise to a Tax Event.
REDEMPTION; EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES
The Company has the right at any time to dissolve the Trust and cause the Junior Subordinated Debentures, after satisfaction of liabilities to creditors of the Trust, to be distributed to the holders of the Preferred Securities in exchange therefor in liquidation of the Trust. The exercise of such right is subject to the Company having received prior approval of the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve. The Company will have the right, in certain circumstances, to redeem the Junior Subordinated Debentures in whole or in part, in lieu of a distribution of the Junior Subordinated Debentures by the Trust, in which event the Trust will redeem the Trust Securities on a pro rata basis to the same extent as the Junior Subordinated Debentures are redeemed by the Company. Any such distribution or redemption prior to the Stated Maturity will be subject to prior approval of the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve. See "Description of the Preferred Securities--Redemption or Exchange--Tax Event Redemption, Capital Treatment Event Redemption or Investment Company Event Redemption."
Under current United States federal income tax law, a distribution of Junior Subordinated Debentures upon the dissolution of the Trust would not be a taxable event to holders of the Preferred Securities. If, however, the Trust is characterized as an association taxable as a corporation at the time of the dissolution of the Trust, the distribution of the Junior Subordinated Debentures may constitute a taxable event to holders of Preferred Securities. Moreover, upon occurrence of a Tax Event, a dissolution of the Trust in which holders of the Preferred Securities receive cash may be a taxable event to such holders. See "Certain Federal Income Tax Consequences--Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Preferred Securities or the Junior Subordinated Debentures that may be distributed in exchange for Preferred Securities upon a dissolution or liquidation of the Trust. The Preferred Securities or the Junior Subordinated Debentures may trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. Because holders of Preferred Securities may receive Junior Subordinated Debentures, prospective purchasers of Preferred 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.
If the Junior Subordinated Debentures are distributed to the holders of Preferred Securities upon the liquidation of the Trust, the Company will use its best efforts to list the Junior Subordinated Debentures on The Nasdaq Stock Market's National Market or such stock exchanges, if any, on which the Preferred Securities are then listed.
LIMITED COVENANTS
The covenants in the Indenture are limited, and there are no covenants relating to the Company in the Trust Agreement. As a result, neither the Indenture nor the Trust Agreement protects holders of Junior Subordinated Debentures, or Preferred Securities, respectively, in the event of a material adverse change in the Company's financial condition or results of operations or limits the ability of the Company or any subsidiary to incur additional indebtedness. Therefore, the provisions of these governing instruments should not be considered a significant factor in evaluating whether the Company will be able to comply with its obligations under the Junior Subordinated Debentures or the Guarantee.
TRADING PRICE; ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest (or OID if the Junior
Subordinated Debentures are treated as having been issued, or reissued, with
OID) with respect to the underlying Junior Subordinated Debentures. A holder who
disposes of his Preferred Securities will be required to include in ordinary
income (i) any portion of the amount realized that is attributable to such
accrued but unpaid interest to the extent not previously included in income, or
(ii) any amount of OID, in either case, that has accrued on his pro rata share
of the underlying Junior Subordinated Debentures during the taxable year of sale
through the date of disposition. Any such income inclusion will increase the
holder's adjusted tax basis in his Preferred Securities disposed of. To the
extent that the amount realized in the sale is less than the holder's adjusted
tax basis, a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes. See "Certain Federal Income Tax
Consequences - Disposition of Preferred Securities."
There is no current public market for the Preferred Securities. Although application has been made to have the Preferred Securities approved for quotation on The Nasdaq Stock Market's National Market, there can be no assurance that an active public market will develop for the Preferred Securities or that, if such market develops, the market price will equal or exceed the public offering price set forth on the cover page of this Prospectus. The public offering price for the Preferred Securities has been determined through negotiations between the Company and the Underwriters. Prices for the Preferred Securities will be determined in the marketplace and may be influenced by many factors, including prevailing interest rates, the liquidity of the market for the Preferred Securities, investor perceptions of the Company and general industry and economic conditions.
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for the Preferred Securities or the Junior Subordinated Debentures that may be distributed in exchange for Preferred Securities if a termination of the Trust were to occur. Accordingly, the Preferred Securities or the Junior Subordinated Debentures may trade at a discount from the price
that investors paid to purchase the Preferred Securities offered hereby. Because holders of Preferred Securities may receive Junior Subordinated Debentures in liquidation of the Trust and because Distributions are otherwise limited to payments on the Junior Subordinated Debentures, prospective purchasers of the Preferred 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 Junior Subordinated Debentures."
PREFERRED SECURITIES ARE NOT INSURED
The Preferred Securities are not insured by the Bank Insurance Fund (the "BIF") or the Savings Association Insurance Fund (the "SAIF") of the Federal Deposit Insurance Corporation (the "FDIC") or by any other governmental agency.
RISK FACTORS RELATING TO THE COMPANY
LENDING RISKS -- CREDIT QUALITY
A central focus of the Company's and the Bank's strategy is the continued development and growth of a diversified loan portfolio, with emphasis on commercial real estate, residential real estate and commercial and industrial loans. Certain risks are inherent in the lending function, including a borrower's inability to pay, insufficient collateral coverage and changes in interest rates. Repayment risk on commercial loans is significantly affected by changing economic conditions in a particular geographical area, business or industry which could impair future operating performance. Risks associated with real estate loans and general business loans include changes in general economic conditions which may affect the borrower's ability to repay as well as underlying collateral values. Installment and other consumer loans are subject to repayment risk.
Multi-family residential and commercial real estate loans are generally viewed in the banking community as exposing the lender to greater credit risk than 1-4 family residential real estate loans and typically involve higher loan principal amounts. At December 31, 1997, the Bank's multi-family residential and commercial real estate portfolios totaled $ 140.3 million, or 44.3% of total loans and loans held for sale. Of this amount, $29.6 million, or 21.1% consisted of multi-family residential real estate loans and $110.7 million, or 78.9%, consisted of commercial real estate loans.
The Bank currently originates loans secured by commercial real estate properties. The Bank attempts to offset the risks associated with commercial real estate lending by primarily lending to individuals who have proven management experience and who will be actively involved in the management of the property, and by making such loans with lower loan-to-value ratios than 1-4 family residential real estate loans. Economic events and government regulations, which are outside the control of the borrower or lender, could affect the value of the security for such loans or the future cash flow of the affected properties.
At December 31, 1997, the Bank had $1,831,000 in non-performing commercial real estate loans and $19,000 in non-performing multi-family residential real estate loans. For the year ended December 31, 1997, the Bank experienced charge-offs of $48,000 and $0 on commercial real estate loans and multi-family residential real estate loans, respectively.
At December 31, 1997, 24.1% of the Bank's total loans and loans held for sale were secured by 1-4 family residential mortgages, of which 74% were adjustable rate mortgages ("ARMs"). Generally, ARMs pose credit risks different from the risks inherent in fixed-rate loans because when interest rates rise the borrower's payments
rise, thereby increasing the potential for default. However, long-term fixed-rate loans expose the Bank to higher interest-rate risk.
At December 31, 1997, 16.0% of the Bank's total loans were commercial and industrial. Commercial and industrial loans are typically lines of credit against which the borrowers may draw from time to time to meet cash needs. The amount available to any customer may be fixed by agreement or may be determined by a formula based on the borrower's current inventory or accounts receivable or similar criteria. Interest rates typically float with reference to a prime or base rate establish by the Bank from time to time. Therefore, in addition to the risk of the borrower's credit, some commercial or industrial loans may become unprofitable or less profitable if the reference interest rates decline.
COMPETITION
The Bank faces significant competition both in generating loans and in attracting deposits. The eastern Massachusetts area is a highly competitive market. The Bank faces direct competition from a significant number of financial institutions operating in its market area, many with a state-wide or regional presence and, in some cases, a national presence. Many of these financial institutions are significantly larger and have greater financial resources than the Bank. The Bank's competition for loans comes principally from commercial banks, savings banks, mortgage banking companies, credit unions and insurance companies. The Bank faces competition for deposits from savings and commercial banks and credit unions. In addition, the Bank faces increasing competition for deposits from non-bank institutions such as brokerage firms and insurance companies in such instruments as short-term money market funds, corporate and government securities funds, mutual funds and annuities. Competition may also increase as a result of the lifting of restrictions on the interstate operations of financial institutions.
SENSITIVITY TO LOCAL ECONOMY
Prevailing economic conditions, as well as government policies and regulations concerning, among other things, monetary and fiscal affairs, significantly affect the operations of financial institutions such as the Bank. The New England region of the United States, including eastern Massachusetts (the Bank's primary market area), experienced a significant economic decline which began in 1988 and outlasted the national recession. This decline adversely affected employment, the real estate markets and the banking industry in the Bank's market area. Any deterioration of economic conditions or real estate markets in the Bank's market area could adversely affect the financial condition and results of operations of the Bank in the future.
ECONOMIC CONDITIONS AND MONETARY POLICIES
Conditions beyond the Company's control may have a significant impact on changes in net interest income from one period to another. Examples of such conditions could include: (i) the strength of credit demands by customers; (ii) fiscal and debt management policies of the federal government, including changes in tax laws; (iii) the Federal Reserve's monetary policy, including the percentage of deposits that must be held in the form of non-earning cash reserves; (iv) the introduction and growth of new investment instruments and transaction accounts by non-bank financial competitors; and (v) changes in rules and regulations governing the payment of interest on deposit accounts.
SENSITIVITY TO FLUCTUATIONS IN INTEREST RATES
The Company's profitability, like that of most similarly situated financial institutions, is dependent to a large extent upon the Bank's net interest income, which is the difference between its interest income on interest-earning assets, such as loans and investments, and its interest expense on interest-bearing liabilities, such as deposits and borrowings. Accordingly, the Company's results of operations and financial condition are largely dependent on
movements in market interest rates and its ability to manage its assets in response to such movements. The difference between the amount of the total interest-earning assets and interest-bearing liabilities which reprice within a given time period could have a negative effect on the Bank's net interest income depending on whether such difference was positive or negative and the direction of movement of interest rates.
Increases in interest rates may reduce demand for loans and, thus, the amount of loan and commitment fees. In addition, fluctuations in interest rates may also result in disintermediation, which is the flow of funds away from depository institutions into direct investments which pay a higher rate of return, and may affect the value of the Company's investment securities and other interest earning assets. Given that the Bank's assets consist of a substantial number of loans with interest rates which change in accordance with changes in prevailing market rates, if interest rates rise sharply, many of the Bank's borrowers would be required to make higher interest payments on their loans. Thus, increases in interest rates may cause the Bank to experience an increase in delinquent loans and defaults to the extent that borrowers are unable to meet their increased debt servicing obligations.
ALLOWANCE FOR LOAN LOSSES
The Bank has established an allowance for loan losses in accordance with generally accepted accounting principles. The Company believes that the allowance is adequate. Nevertheless, future additions to the allowance in the form of the provision for loan losses may be necessary due to changes in economic conditions and growth of the Bank's loan portfolio. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. An increase in the Bank's provision for loan losses would negatively affect the Company's earnings.
LEGISLATIVE AND REGULATORY DEVELOPMENTS
The financial institutions industry is subject to significant regulation which has materially affected the financial institutions industry in the past and will do so in the future. Such regulations, which affect the Company on a daily basis, may be changed at any time, and the interpretation of the relevant law and regulations are also subject to change by the authorities who examine the Company and the Bank and interpret those laws and regulations. There can be no assurance that any present or future changes in the laws or regulations or in their interpretation will not adversely and materially affect the Company.
POTENTIAL LIABILITY FOR UNDERCAPITALIZED SUBSIDIARY BANK
Under federal law, a bank holding company may be required to guarantee a capital plan filed by an undercapitalized bank or thrift subsidiary with its primary regulator. If the subsidiary defaults under the plan, the holding company may be required to contribute to the capital of the subsidiary bank an amount equal to the lesser of 5% of the bank's assets at the time it became undercapitalized or the amount necessary to bring the bank into compliance with applicable capital standards. It is, therefore, possible that the Company would be required to contribute capital to the Bank or any other bank it may acquire in the event that the Bank or such other bank becomes undercapitalized.
YEAR 2000 COMPLIANCE
During 1997 the Company conducted a comprehensive review of its computer systems to identify the systems that could be affected by the "Year 2000" issue and has developed an implementation plan to resolve the issue. The Year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's programs that have time-sensitive software may recognize a date ending in "00" as the year 1900 rather than the year 2000. The result might be miscalculations or a major system failure. The Company plans to convert to a new core processing software and implement modifications to existing software beginning mid-1998. The Company's audit committee is also the Year 2000 compliance committee and reports to the board of directors of the Company. The Company believes that the Year 2000 problem will not pose
significant operational problems for the Company's computer systems as so modified and converted. The new core processing software is designed to be Year 2000 compliant and the modifications currently planned for the Company's other systems do not involve material cost to the Company. However, if such modifications and conversions are not completed in a timely manner, the Year 2000 problem may have a material adverse impact on the operations of the Company.
CENTURY BANCORP, INC.
Century Bancorp, Inc., a Massachusetts corporation (together with its subsidiary, unless the context otherwise requires, the "Company"), formed in 1972 and headquartered in Medford, Massachusetts, is a one bank holding company operating primarily through Century Bank and Trust Company, a Massachusetts bank formed in 1969 (the "Bank"). The Company had total assets of $631.1 million and stockholders' equity of $53.9 million on December 31, 1997. The Bank is a community bank, with 15 banking offices in 14 cities and towns in eastern Massachusetts ranging from Braintree to Peabody. The Bank's customers consist primarily of small and medium-sized businesses and retail customers in these communities and surrounding areas, as well as local governments throughout eastern Massachusetts.
The Bank offers a wide range of services to commercial enterprises, state and local governments and agencies, and individuals with an emphasis on service to small and medium-size businesses and retail customers in its market area. It makes commercial loans, real estate and construction loans, and consumer loans, and accepts savings, time, and demand deposits. In addition, the Bank offers to its corporate customers automated lock box collection services, cash management services and account reconciliation services, and actively promotes the marketing of these services to the municipal market.
The Bank provides full service securities brokerage through Century Financial Services in conjunction with Commonwealth Equities. In addition, the Bank is a provider of financial services including cash management, transaction processing and short term financing to municipalities in Massachusetts. The Bank has deposit relationships with approximately 30% of the 351 cities and towns in the state.
FINANCIAL SUMMARY
(dollars in thousands, At or for the
except per share data) Year Ended
December 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Assets $631,125 $560,857 $531,928 $465,419 $469,823
Deposits 515,449 476,135 458,615 409,542 421,395
Stockholders' equity 53,857 47,489 42,935 37,553 35,505
Pre-tax income 11,028 8,839 6,240 4,072 1,828
Net income 6,823 5,434 4,574 3,304 1,223
Net yield on average earning assets, taxable
equivalent 4.99% 4.79% 4.86% 4.70% 4.16%
Return on average equity 13.56% 12.13% 11.33% 9.11% 3.48%
Return on average assets 1.20% 1.01% 0.92% 0.70% 0.25%
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STRATEGY
The Company has sought to consistently increase earnings per share and to maximize return on equity through a combination of strategies, including:
o Personalized Service. The Company seeks to offer a full range of products and services to its customers while maintaining the high level of personalized service associated with a community bank. Strong, long-term relationships are a cornerstone of this strategy. The Company strives to respond quickly to customer needs and provides customers with direct access to senior lending officers with approval authority. The Company intends to use its community-based position to build its portfolio of commercial loans to small and medium-sized businesses.
o Growth through Strategic Acquisitions. The Company is in the process of completing the acquisition of Haymarket Cooperative Bank. See "Recent Developments" below. The Company continues to seek suitable strategic opportunities for consolidation and expansion of its market position through selective acquisitions.
RECENT DEVELOPMENTS
On December 10, 1997, the Company announced an agreement to acquire Haymarket Cooperative Bank. Haymarket, located in Boston, Massachusetts, has approximately $142 million of assets and will be acquired for approximately $20 million in cash. The Haymarket acquisition will add two branch locations in Boston's financial district, allowing the Company to provide commercial banking services to a greater number of Boston's small and medium-sized businesses. The acquisition will also connect the Bank geographically, giving it a market presence from Beverly on the North Shore of Massachusetts to Quincy and Braintree on the South Shore. The transaction is subject to federal and state regulatory approvals.
On April 14, 1998, the Company announced net income of $1,802,000 or $0.31 per share for the first quarter of 1998, compared to net income of $1,376,000, or $0.24 per share for the first quarter of 1997.
Total stockholders' equity was $55.3 million at March 31, 1998, compared to $48.4 million at March 31, 1997. The Company's leverage ratio at March 31, 1998, stood at 9.05%, compared to a leverage ratio of 8.62% on March 31, 1997. Book value at March 31, 1998 was $9.55 per share.
The Company's allowance for loan losses was $4.7 million, or 1.46% of loans outstanding at the end of the first quarter, compared to $4.3 million, or 1.46% of loans outstanding at March 31, 1997. Non-accruing loans totaled $1.5 million at March 31, 1998, compared to $1.7 million at the end of the previous quarter.
The Company's Board of Directors voted a regular quarterly dividend of 5 cents ($0.05) per share on the Company's Class A common stock, and 0.70 cents ($0.0070) per share on the Company's Class B common stock. The dividends were declared payable May 15, 1998 to stockholders of record on May 1, 1998.
The principal executive office of the Company is located at 400 Mystic Avenue, Medford, Massachusetts 02155 and its telephone number is (781) 391-4000.
CENTURY BANCORP CAPITAL TRUST
The Trust is a statutory business trust formed under Delaware law pursuant to (i) a trust agreement, dated as of April 21, 1998, executed by the Company, as depositor, and the trustees of the Trust and (ii) a certificate of trust filed with the Secretary of State of the State of Delaware on April 21, 1998. The initial trust agreement will be amended and restated in its entirety (as so amended and restated, the "Trust Agreement") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Trust Agreement will be qualified as an indenture under the Trust Indenture Act. Upon issuance of the Preferred Securities, the purchasers thereof will own all of the Preferred Securities. The Company will acquire all of the Common Securities, which will represent an aggregate liquidation amount equal to at least 3% of the total capital of the Trust. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities, except that upon the occurrence and during the continuance of an Event of Default (as defined herein) under the Trust Agreement resulting from a Debenture Event of Default, the rights of the Company as holder 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 Preferred Securities. See "Description of the Preferred Securities--Subordination of Common Securities." The Trust exists for the exclusive purposes of (i) issuing the Trust Securities representing undivided beneficial interests in the assets of the Trust, (ii) investing the gross proceeds of the Trust Securities in the Junior Subordinated Debentures issued by the Company, and (iii) engaging in only those other activities necessary, advisable, or incidental thereto. The Junior Subordinated Debentures and payments thereunder will be the only assets of the Trust and payments under the Junior Subordinated Debentures will be the only revenue of the Trust. The Trust has a term of 55 years, but may dissolve earlier as provided in the Trust Agreement. The principal executive office of the Trust is c/o Century Bancorp, Inc., 400 Mystic Avenue, Medford, Massachusetts 02155, and its telephone number is (781) 391-4000.
The number of Trustees will, pursuant to the Trust Agreement, initially be five. Three of the Trustees (the "Administrative Trustees") will be persons who are employees or officers of, or who are affiliated with, the Company. The fourth trustee will be a financial institution that is unaffiliated with the Company, which trustee will serve as institutional trustee under the Trust Agreement and as indenture trustee for the purposes of compliance with the provisions of the Trust Indenture Act (the "Property Trustee"). State Street Bank and Trust Company, a state chartered trust company organized under the laws of The Commonwealth of Massachusetts, will be the Property Trustee until removed or replaced by the holder of the Common Securities. For purposes of compliance with the provisions of the Trust Indenture Act, State Street Bank and Trust Company, a state chartered trust company organized under the laws of The Commonwealth of Massachusetts, will also act as trustee (the "Guarantee Trustee") under the Guarantee and as Debenture Trustee (as defined herein) under the Indenture. The fifth trustee will be an entity that maintains its principal place of business in the State of Delaware (the "Delaware Trustee"). Wilmington Trust Company, a Delaware banking corporation, will act as Delaware Trustee.
The Property Trustee will hold title to the Junior Subordinated Debentures for the benefit of the holders of the Trust Securities and in such capacity will have the power to exercise all rights, powers and privileges under the Indenture. The Property Trustee will also maintain exclusive control of a segregated non-interest-bearing bank account (the "Property Account") to hold all payments made in respect of the Junior Subordinated Debentures for the benefit of the holders of the Trust Securities. The Property Trustee will make payments of Distributions and payments on liquidation, redemption and otherwise to the holders of the Trust Securities out of funds from the Property Account. The Guarantee Trustee will hold the Guarantee for the benefit of the holders of the Preferred Securities. The Company, as the holder of all the Common Securities, will have the right to appoint, remove or replace any Trustee and to increase or decrease the number of Trustees. The Company will pay all fees and expenses related to the Trust and the offering of the Trust Securities.
The rights of the holders of the Preferred Securities, including economic rights, rights to information and voting rights, are set forth in the Trust Agreement, the Delaware Business Trust Act (the "Trust Act") and the Trust Indenture Act. See "Description of the Preferred Securities."
USE OF PROCEEDS
The Trust will use the gross proceeds from the sale of the Preferred Securities to purchase Junior Subordinated Debentures of the Company. The Company intends to use the net proceeds of the sale of the Junior Subordinated Debentures for general corporate purposes, including contributions to the Bank to fund its operations, the financing of one or more future acquisitions by the Company if and when suitable opportunities arise and the repurchase of outstanding equity securities of the Company. Initially, the net proceeds may be used to make investments in short-term investment securities pending its use for the purposes described above.
The Federal Reserve has approved, subject to certain limitations as to amount, the use of certain cumulative preferred stock instruments such as the Preferred Securities as Tier 1 capital for bank holding companies such as the Company. The Company has elected to issue the Preferred Securities because the Company expects the Preferred Securities to qualify as Tier 1 capital and the Distributions payable on the Preferred Securities to be a tax deductible expense of the Company. The Company expects that, upon completion of the sale of the Preferred Securities offered hereby, Preferred Securities having an aggregate Liquidation Amount of approximately $17.6 million at December 31, 1997 will be eligible to qualify as Tier 1 capital under the capital guidelines of the Federal Reserve. Preferred Securities representing an aggregate Liquidation Amount in excess of that amount are expected to be treated as Tier 2 capital until all or some of that excess is eligible to qualify as Tier 1 capital under the capital guidelines of the Federal Reserve.
MARKET FOR THE PREFERRED SECURITIES
Application has been made to have the Preferred Securities approved for quotation on The Nasdaq Stock Market's National Market under the symbol "CNBKP." Although the Underwriters have informed the Company that they currently intend to make a market in the Preferred Securities, there can be no assurance that an active and liquid trading market will develop, or, if developed, that such a market will continue. The offering price and distribution rate have been determined by negotiations among representatives of the Company and the Underwriters, and the offering price of the Preferred Securities may not be indicative of the market price following the offering. See "Underwriting."
ACCOUNTING TREATMENT
The Trust will be treated, for financial reporting purposes, as a subsidiary of the Company and, accordingly, the accounts of the Trust will be included in the consolidated financial statements of the Company. The Preferred Securities will be presented as a separate category of long-term debt in the consolidated balance sheet of the Company under the caption "Guaranteed Preferred Beneficial Interests in the Company's Junior Subordinated Debentures," and appropriate disclosures about the Preferred Securities, the Guarantee and the Junior Subordinated Debentures will be included in the notes to consolidated financial statements. The Company will record Distributions payable on the Preferred Securities as interest expense in the consolidated statements of income for financial reporting purposes.
All future reports of the Company filed under the Exchange Act will (a) present the Trust Securities issued by the Trust on the balance sheet as a separate category of long-term debt item entitled "Guaranteed preferred beneficial interests in the Company's junior subordinated debentures," (b) include in a footnote to the financial statements disclosure that the sole assets of the Trust are the Junior Subordinated Debentures (including the outstanding principal amount, interest rate and maturity date of such Junior Subordinated Debentures), and (c) include in an audited footnote to the financial statements disclosure that the Company owns all the Common Securities of the Trust, and that the back-up obligations, in the aggregate, constitute a full and unconditional guarantee by the Company of the obligations of the Trust under the Preferred Securities.
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the Company at December 31, 1997 and (ii) the consolidated capitalization of the Company giving effect to the issuance of the Preferred Securities hereby offered by the Trust and receipt by the Company of the net proceeds from the corresponding sale of the Junior Subordinated Debentures to the Trust, as if the sale of the Preferred Securities had been consummated on December 31, 1997 and assuming the Underwriters' over-allotment option was not exercised.
December 31, 1997
-----------------
Actual As Adjusted
------ -----------
(dollars in thousands)
LONG-TERM DEBT:
Guaranteed preferred beneficial interests in the Company's
junior subordinated debentures....................................... $ 0 $25,000(1)
STOCKHOLDERS' EQUITY:
Class A common stock, par value $1.00 per share; 10,000,000 shares
authorized; 3,541,447 shares issued and outstanding,
actual and as adjusted............................................... 3,541 $ 3,541
Class B common stock, par value $1.00 per share; 5,000,000
shares authorized; 2,326,520 shares issued and outstanding,
actual and as adjusted............................................... 2,327 2,327
Additional paid-in capital.............................................. 10,877 10,877
Retained earnings....................................................... 37,180 37,180
Treasury stock, Class A, 30,000 shares in 1997 at cost.................. (136) (136)
Treasury stock, Class B, 47,550 shares in 1997 at cost ................. (41) (41)
Unrealized gain on securities available for sale, net of taxes....... 109 109
Total stockholders' equity.................................... 53,857 53,857
------- -------
Total capitalization.......................................... 53,857 78,857
======= =======
CAPITAL RATIOS:
Stockholders' equity to total assets.................................... 8.53% 12.02%
Leverage-based capital ratio(2)(3)(4)................................... 9.09% 11.61%
Risk-based capital ratios(3)(4):
Tier 1 capital to risk-weighted assets........................ 15.51% 20.37%
Total risk-based capital to risk-weighted assets.............. 16.76% 21.61%
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(1) In connection with the issuance of the guaranteed preferred beneficial
interests in the Company's Junior Subordinated Debentures, the Company
estimates it will incur expenses of $________ (including Underwriters'
compensation of $________). The Junior Subordinated Debentures will
mature on June 30, 2029, which date may be shortened to a date not
earlier than June 30, 2003 if certain conditions are met.
(2) The leverage ratio is Tier 1 capital divided by average quarterly
assets, after deducting intangible assets and net deferred tax assets
in excess of regulatory maximum limits.
(3) The capital ratios, as adjusted, are computed including the total
estimated net proceeds from the sale of the Preferred Securities, in a
manner consistent with Federal Reserve guidelines.
(4) Federal Reserve guidelines for calculation of Tier 1 capital to
risk-weighted assets limit the amount of cumulative preferred stock and
securities similar to the Preferred Securities which can be included in
Tier 1 capital to 25% of other Tier 1 capital. The risk-based capital
ratio assumes net proceeds are invested in assets that carry a 20%
risk-weighting.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust Agreement. The Trust Agreement will be qualified as an indenture under the Trust Indenture Act. The Property Trustee, State Street Bank and Trust Company, will act as indenture trustee for the Preferred Securities under the Trust Agreement for purposes of complying with the provisions of the Trust Indenture Act. The terms of the Preferred Securities will include those stated in the Trust Agreement and those made part of the Trust Agreement by the Trust Indenture Act. The following summary of the material terms and provisions of the Preferred Securities and the Trust Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Trust Agreement, the Trust Act and the Trust Indenture Act. Wherever particular defined terms of the Trust Agreement are referred to, but not defined herein, such defined terms are incorporated herein by reference. The form of the Trust Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
Pursuant to the terms of the Trust Agreement, the Trustees, on behalf of the Trust, will issue the Trust Securities. All of the Common Securities will be owned by the Company. The Preferred Securities will represent preferred undivided beneficial interests in the assets of the Trust and the holders thereof will be entitled to a preference over the Common Securities in certain circumstances with respect to Distributions and amounts payable on redemption or liquidation, as well as other benefits as described in the Trust Agreement. The Trust Agreement does not permit the issuance by the Trust of any securities other than the Trust Securities or the incurrence of any indebtedness by the Trust.
The Preferred Securities will rank pari passu, and payments will be made thereon pro rata with the Common Securities, except as described under "--Subordination of Common Securities." Legal title to the Junior Subordinated Debentures will be held by the Property Trustee in trust for the benefit of the holders of the Trust Securities. The Guarantee executed by the Company for the benefit of the holders of the Preferred Securities will be a guarantee on a subordinated basis with respect to the Preferred Securities, but will not guarantee payment of Distributions or amounts payable on redemption or liquidation of such Preferred Securities when the Trust does not have funds on hand available to make such payments. State Street Bank and Trust Company, as Guarantee Trustee, will hold the Guarantee for the benefit of the holders of the Preferred Securities. See "Description of the Guarantee."
DISTRIBUTIONS
Payment of Distributions. Distributions on each Preferred Security will be payable at the annual rate of ___% of the stated Liquidation Amount of $10, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, to the holders of the Preferred Securities on the relevant record dates (each date on which Distributions are payable in accordance with the foregoing, a "Distribution Date"). The record date will be the fifteenth day of the month in which the relevant Distribution Date occurs. Distributions will accumulate from May __, 1998, the date of original issuance. The first Distribution Date for the Preferred Securities will be September 30, 1998. The amount of Distributions payable for any period will be computed on the basis of a 360- day year of twelve 30-day months. In the event that any date on which Distributions are payable on the Preferred 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 (and without any additional Distributions, 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 due and payable. "Business Day" means any day other than a Saturday or a Sunday, a day on which banking institutions in the City of Boston are authorized or required by law or executive order to remain closed or a day on which the corporate trust office of the Property Trustee or the Debenture Trustee is closed for business.
Extension Period. The Company has the right under the Indenture, so long as no Debenture Event of Default has occurred and is continuing, to defer the payment of interest on the Junior Subordinated Debentures at any time, or from time to time (each, an "Extension Period"), which, if exercised, would defer quarterly Distributions on the Preferred Securities during any such Extension Period. Distributions to which holders of the Preferred Securities are entitled will accumulate additional Distributions thereon at the rate per annum of _________ % thereof, compounded quarterly from the relevant Distribution Date. "Distributions," as used herein, includes any such additional Distributions. The right to defer the payment of interest on the Junior Subordinated Debentures is limited, however, to a period, in each instance, not exceeding 20 consecutive quarters and no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. 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, (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the Junior Subordinated Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Junior Subordinated Debentures (other than payments under the Guarantee), or (iii) redeem, purchase or acquire less than all of the Junior Subordinated Debentures or any of the Preferred Securities. Prior to the termination of any such Extension Period, the Company may further defer the payment of interest; provided, that such Extension Period may not exceed 20 consecutive quarters or extend beyond the Stated Maturity of the Junior Subordinated Debentures. 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 requirements. Subject to the foregoing, there is no limitation on the number of times that the Company may elect to begin an Extension Period.
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.
Source of Distributions. The funds of the Trust available for distribution to holders of its Preferred Securities will be limited to payments under the Junior Subordinated Debentures in which the Trust will invest the proceeds from the issuance and sale of its Trust Securities. See "Description of the Junior Subordinated Debentures." Distributions will be paid through the Property Trustee who will hold amounts received in respect of the Junior Subordinated Debentures in the Property Account for the benefit of the holders of the Trust Securities. If the Company does not make interest payments on the Junior Subordinated Debentures, the Property Trustee will not have funds available to pay Distributions on the Preferred Securities. The payment of Distributions (if and to the extent the Trust has funds legally available for the payment of such Distributions and cash sufficient to make such payments) is guaranteed by the Company. See "Description of the Guarantee."
REDEMPTION OR EXCHANGE
General. The Junior Subordinated Debentures will mature on June 30, 2029. The Company will have the right to redeem the Junior Subordinated Debentures (i) on or after June 30, 2003, in whole at any time or in part from time to time, or (ii) at any time, in whole (but not in part), within 180 days following the occurrence of a Tax Event, a Capital Treatment Event or an Investment Company Event, in each case subject to receipt of prior approval by the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve. The Company will not have the right to purchase the Junior Subordinated Debentures, in whole or in part, from the Trust until after June 30, 2003. See "Description of the Junior Subordinated Debentures--General."
Mandatory Redemption. Upon the repayment or redemption, in whole or in part, of any Junior Subordinated Debentures, whether at Stated Maturity or upon earlier redemption as provided in the Indenture, the proceeds from such repayment or redemption will be applied by the Property Trustee to redeem a Like Amount (as defined herein) 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 Trust Securities plus
accumulated but unpaid Distributions thereon to the date of redemption (the "Redemption Date"). See "Description of the Junior Subordinated Debentures--Redemption or Exchange." If less than all of the Junior Subordinated Debentures are to be repaid or redeemed on a Redemption Date, then the proceeds from such repayment or redemption will be allocated to the redemption of the Trust Securities pro rata.
Distribution of Junior Subordinated Debentures. Subject to the Company having received prior approval of the Federal Reserve if so required under applicable capital guidelines or policies of the Federal Reserve, the Company will have the right at any time to dissolve the Trust and, after satisfaction of the liabilities of creditors of the Trust as provided by applicable law, cause the Junior Subordinated Debentures to be distributed to the holders of Trust Securities in liquidation of the Trust. See "--Liquidation Distribution Upon Dissolution."
Tax Event Redemption, Capital Treatment Event Redemption or Investment Company Event Redemption. If a Tax Event, a Capital Treatment Event or an Investment Company Event in respect of the Trust Securities occurs and is continuing, the Company has the right to redeem the Junior Subordinated Debentures in whole (but not in part) and thereby cause a mandatory redemption of such Trust Securities in whole (but not in part) at the Redemption Price within 180 days following the occurrence of such Tax Event, Capital Treatment Event or Investment Company Event. In the event a Tax Event, a Capital Treatment Event or an Investment Company Event has occurred with respect to the Trust Securities and the Company does not elect to redeem the Junior Subordinated Debentures and thereby cause a mandatory redemption of such Trust Securities or to liquidate the Trust and cause the Junior Subordinated Debentures to be distributed to holders of such Trust Securities in liquidation of the Trust as described below under "--Liquidation Distribution Upon Dissolution," such Preferred Securities will remain outstanding and Additional Interest (as defined herein) may be payable on the Junior Subordinated Debentures. "Additional Interest" means the additional amounts as may be necessary in order that the amount of Distributions then due and payable by the Trust on the outstanding Trust Securities will not be reduced as a result of any additional taxes, duties and other governmental charges to which the Trust has become subject as a result of a Tax Event.
"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 Indenture, which will be used
to pay the Redemption Price of such Trust Securities, 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 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. Each Junior Subordinated Debenture distributed pursuant to clause
(ii) above will carry with it accumulated interest in an amount equal to the
accumulated and unpaid interest then due on such Junior Subordinated Debenture.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
After the liquidation date fixed for any distribution of Junior Subordinated Debentures for Preferred Securities (i) such Preferred Securities will no longer be deemed to be outstanding, and (ii) any certificates representing Preferred Securities will be deemed to represent the Junior Subordinated Debentures having a principal amount equal to the Liquidation Amount of such Preferred Securities, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on the Preferred Securities until such certificates are presented to the Administrative Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred Securities or the Junior Subordinated Debentures that may be distributed in exchange for Preferred Securities if a dissolution and liquidation of the Trust were to occur. The Preferred Securities that an investor may purchase, or the Junior Subordinated Debentures that an investor may receive on dissolution and liquidation of the Trust, may, therefore, trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date will be redeemed at the Redemption Price with the applicable proceeds from the contemporaneous redemption of the Junior Subordinated Debentures. Redemptions of the Preferred Securities will be made and the Redemption Price will be payable on each Redemption Date only to the extent that the Trust has funds on hand available for the payment of such Redemption Price. See "--Subordination of the Common Securities."
If the Trust gives a notice of redemption in respect of its Preferred Securities, then, by 12:00 noon, New York time, on the Redemption Date, to the extent funds are available, the Property Trustee will irrevocably deposit with the paying agent for the Preferred Securities funds sufficient to pay the aggregate Redemption Price and will give the paying agent for the Preferred Securities irrevocable instructions and authority to pay the Redemption Price to the holders thereof upon surrender of their certificates evidencing such Preferred Securities. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Preferred Securities called for redemption will be payable to the holders of such Preferred Securities on the relevant record dates for the related Distribution Dates. If notice of redemption will have been given and funds deposited as required, then upon the date of such deposit, all rights of the holders of such Preferred Securities so called for redemption will cease, except the right of the holders of such Preferred Securities to receive the Redemption Price and any Distribution payable on or before the Redemption Date, but without interest on such Redemption Price or Distribution, and such Preferred Securities will cease to be outstanding. In the event that any date fixed for redemption of Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any additional Distribution, interest or other payment in respect of any such delay) with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of Preferred Securities called for redemption is improperly withheld or refused and not paid either by the Trust, or by the Company pursuant to the Guarantee, Distributions on such Preferred Securities will continue to accrue at the then applicable rate, from the Redemption Date originally established by the Trust for such Preferred Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. See "Description of the Guarantee."
Subject to applicable law (including, without limitation, United States federal securities law), and further provided that the Company does not and is not continuing to exercise its right to defer interest payments on the Junior Subordinated Debentures, the Company or its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any distribution of Junior Subordinated Debentures to holders of Preferred Securities will be made to the applicable holders thereof as they appear on the register for the Preferred Securities on the relevant record date, which date will be the date 15 days prior to the Redemption Date or liquidation date, as applicable.
If less than all of the Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of such Trust Securities to be redeemed will be allocated pro rata to the Trust Securities based upon the relative Liquidation Amounts of such classes. The particular Preferred Securities to be redeemed will be selected by the Property Trustee from the outstanding Preferred Securities not previously called for redemption, by such method as the Property Trustee deems fair and appropriate and which may provide for the selection for redemption of portions (equal to $10 or an integral multiple of $10 in excess thereof) of the Liquidation Amount of Preferred Securities of a denomination larger than $10. The Property Trustee will promptly notify the registrar for the Preferred Securities in writing of the Preferred Securities selected for redemption and, in the case of any Preferred Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of the Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Preferred Securities will relate to the portion of the aggregate Liquidation Amount of Preferred 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 holder of Trust Securities to be redeemed at its registered address. 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 such Junior Subordinated Debentures or portions thereof (and Distributions will cease to accrue on the related Preferred Securities or portions thereof) called for redemption.
SUBORDINATION OF THE COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Preferred Securities and Common Securities, as applicable, will be made pro rata based on the Liquidation Amount of the Preferred Securities and Common Securities; provided, however, that if on any Distribution Date or Redemption Date a Debenture Event of Default has occurred and is continuing, no payment of any Distribution on, 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, will be made unless payment in full in cash of all accumulated and unpaid Distributions on all of the outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all of the outstanding Preferred Securities then called for redemption, will have been made or provided for, and all funds available to the Property Trustee will first be applied to the payment in full in cash of all Distributions on, or Redemption Price of, the Preferred Securities then due and payable.
In the case of any Event of Default resulting from a Debenture Event of Default, the Company as holder 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 effect of such Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until any such Event of Default under the Trust Agreement with respect to the Preferred Securities has been so cured, waived or otherwise eliminated, the Property Trustee will act solely on behalf of the holders of the Preferred Securities and not on behalf of the Company, as holder of the Common Securities, and only the holders of the Preferred Securities will have the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
The Company will have the right at any time to dissolve the Trust and cause the Junior Subordinated Debentures, after satisfaction of liabilities to creditors of the Trust, to be distributed to the holders of the Preferred Securities. Such right is subject, however, to the Company having received prior approval of the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve.
Pursuant to the Trust Agreement, the Trust will automatically dissolve
upon expiration of its term and will dissolve earlier on the first to occur of
(i) certain events of bankruptcy, dissolution or liquidation of the Company,
(ii) the Company, as depositor, giving written direction to the Property Trustee
to dissolve the Trust (which direction is optional and wholly within the
discretion of the Company, as depositor), (iii) redemption of all of the
Preferred Securities as described under "Redemption or Exchange--Mandatory
Redemption," or (iv) the entry of an order for the dissolution of the Trust by a
court of competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii) or (iv) of the preceding paragraph, the Trust will be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to the holders of such Trust Securities a Like Amount of the Junior Subordinated Debentures, unless such distribution is determined by the
Property Trustee not to be practical, in which event such holders will be entitled to receive out of the assets of the Trust available for distribution to holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to, in the case of holders of Preferred Securities, the aggregate of the Liquidation Amount plus accumulated but unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If such Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Preferred Securities will be paid on a pro rata basis. The Company, as the holder of the Common Securities, will be entitled to receive distributions upon any such liquidation pro rata with the holders of the Preferred Securities, except that, if a Debenture Event of Default has occurred and is continuing, the Preferred Securities will have a priority over the Common Securities. See "--Subordination of Common Securities."
Under current United States federal income tax law and interpretations and assuming, as expected, that the Trust is treated as a grantor trust, a distribution of the Junior Subordinated Debentures should not be a taxable event to holders of the Preferred Securities. Should there be a change in law, a change in legal interpretation, a Tax Event or other circumstances, however, the distribution could be a taxable event to holders of the Preferred Securities. See "Certain Federal Income Tax Consequences--Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of the Trust." If the Company elects neither to redeem the Junior Subordinated Debentures prior to maturity nor to liquidate the Trust and distribute the Junior Subordinated Debentures to holders of the Preferred Securities, the Preferred Securities will remain outstanding until the repayment of the Junior Subordinated Debentures.
If the Company elects to dissolve the Trust and thereby causes the Junior Subordinated Debentures to be distributed to holders of the Preferred Securities in liquidation of the Trust, the Company will continue to have the right to shorten or extend the maturity of such Junior Subordinated Debentures, subject to certain conditions. See "Description of the Junior Subordinated Debentures--General."
LIQUIDATION VALUE
The amount of the Liquidation Distribution payable on the Preferred Securities in the event of any liquidation of the Trust is $10 per Preferred Security plus accrued but unpaid Distributions thereon to the date of payment, which may be in the form of a distribution of such amount in Junior Subordinated Debentures, subject to certain exceptions. See "--Liquidation Distribution Upon Dissolution."
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 Preferred Securities (whatever the reason for such Event of Default and whether voluntary or involuntary or 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 Junior Subordinated Debentures--Debenture Events of Default"); or
(ii) default by the Trust or the Property Trustee 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 Trust or the Property Trustee 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 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 clauses (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 Trustee(s) by the holders of at least 25% in aggregate Liquidation Amount of the outstanding Preferred Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with respect to the Property Trustee and the failure by the Company to appoint a successor Property Trustee within 60 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 the Preferred Securities, the Administrative Trustees and the Company, as depositor, unless such Event of Default has been cured or waived. The Company, as depositor, and the Administrative Trustees are required to file annually with the Property Trustee a certificate as to whether or not they are in compliance with all the conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Preferred Securities will have a preference over the Common Securities upon dissolution of the Trust. See "--Liquidation Distribution Upon Dissolution." The existence of an Event of Default does not entitle the holders of Preferred Securities to accelerate the maturity thereof.
REMOVAL OF THE TRUST TRUSTEES
Unless a Debenture Event of Default has occurred and is continuing, any Trustee may be removed at any time by the holder of the Common Securities. If a Debenture Event of Default has occurred and is continuing, the Property Trustee and the Delaware Trustee may be removed at such time by the holders of a majority in Liquidation Amount of the outstanding Preferred Securities. In no event, however, will the holders of the Preferred Securities have the right to vote to appoint, remove or replace the Administrative Trustees, which voting rights are vested exclusively in the Company as the holder of the Common Securities. No resignation or removal of a Trustee and no appointment of a successor trustee will be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default has occurred and is continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property (as defined in the Trust Agreement) may at the time be located, the Company, as the holder of the Common Securities, will have power to appoint one or more Persons (as defined in the Trust Agreement) either to act as a co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to act as separate trustee of any such Trust Property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in such capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of the Trust Agreement. In case a Debenture Event of Default has occurred and is continuing, the Property Trustee alone will have power to make such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any Administrative Trustee that is not a natural person may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Trustee is a party, or any Person succeeding to all
or substantially all the corporate trust business of such Trustee, will be the successor of such Trustee under the Trust Agreement, provided such Person is otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any Person, except as described below. The Trust may, at the request of the Company, with the consent of the Administrative Trustees and without the consent of the holders of the Preferred Securities, the Property Trustee or the Delaware Trustee, merge with or into, consolidate, amalgamate, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of the Trust with respect to the Preferred Securities, or (b) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank in priority with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) the Company expressly appoints a trustee of such successor entity possessing the same powers and duties as the Property Trustee in its capacity as the holder of the Junior Subordinated Debentures, (iii) the Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed (including, if applicable, The Nasdaq Stock Market's National Market), if any, (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Preferred Securities (including any Successor Securities) in any material respect, (v) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Company has received an opinion from independent counsel 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 Preferred Securities (including any Successor Securities) in any material respect, and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor such successor entity will be required to register as an "investment company" under the Investment Company Act, and (vi) the Company owns all of the common securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee, the Indenture, the Junior Subordinated Debentures, the Trust Agreement and the Expense Agreement. Notwithstanding the foregoing, the Trust will not, except with the consent of holders of 100% in Liquidation Amount of the Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other Person or permit any other Person to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "Description of the Guarantee--Amendments and Assignment" and as otherwise required by the Trust Act and the Trust Agreement, the holders of the Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company, the Property Trustee and the Administrative Trustees, without the consent of the holders of the Preferred Securities (i) with respect to acceptance of appointment by a successor trustee, (ii) to cure any ambiguity, correct or supplement any provisions in such 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 such amendment is not inconsistent with the other provisions of the Trust Agreement), (iii) to modify, eliminate or add to any provisions of the Trust Agreement to such extent as is necessary to ensure that the Trust will be classified for United States federal income tax purposes as a grantor trust at all times that any Trust Securities are outstanding or to ensure that the Trust will
not be required to register as an "investment company" under the Investment Company Act, or (iv) to reduce or increase the Liquidation Amount per Trust Security and simultaneously to increase or reduce the number of Trust Securities issued and outstanding solely for the purpose of maintaining the eligibility of the Preferred Securities for listing or quotation on any national securities exchange or other organization on which the Preferred Securities are then listed or quoted (including, if applicable, The Nasdaq Stock Market's National Market); provided, however, that in the case of clause (ii), such action may not adversely affect in any material respect the interests of any holder of Trust Securities, and that, in the case of clause (iv), the aggregate Liquidation Amount of the Trust Securities outstanding, upon completion of any such reduction or increase must be the same as the aggregate Liquidation Amount of the Trust Securities outstanding immediately prior to any such reduction or increase, and any amendments of such Trust Agreement will become effective when notice thereof is given to the holders of Trust Securities (or, in the case of an amendment pursuant to clause (iv), as of the date specified in the notice). The Trust Agreement may be amended by the Trustees and the Company with (i) the consent of holders representing not less than a majority in the aggregate Liquidation Amount of the outstanding Trust Securities, and (ii) receipt by the Trustees of an opinion of counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not affect the Trust's status as a grantor trust for United States federal income tax purposes or the Trust's exemption from status as an "investment company" under the Investment Company Act. Notwithstanding anything in this paragraph to the contrary, without the consent of each holder of Trust Securities, the Trust Agreement may not be amended to (a) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date, or (b) restrict the right of a holder of Trust Securities to institute suit for the enforcement of any such payment on or after such date.
The Trustees will not, so long as any Junior Subordinated Debentures are held by the Property Trustee, (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or executing any trust or power conferred on the Property Trustee with respect to the Junior Subordinated Debentures, (ii) waive any past default that is waivable under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Junior Subordinated Debentures will be due and payable, or (iv) consent to any amendment, modification or termination of the Indenture or the Junior Subordinated Debentures, where such consent is required, without, in each case, obtaining the prior approval of the holders of a majority in aggregate Liquidation Amount of all outstanding Preferred Securities; provided, however, that where a consent under the Indenture requires the consent of each holder of Junior Subordinated Debentures affected thereby, no such consent will be given by the Property Trustee without the prior consent of each holder of the Preferred Securities. The Trustees may not revoke any action previously authorized or approved by a vote of the holders of the Preferred Securities except by subsequent vote of the holders of the Preferred Securities. The Property Trustee will notify each holder of Preferred Securities of any notice of default with respect to the Junior Subordinated Debentures. In addition to obtaining the foregoing approvals of the holders of the Preferred Securities, prior to taking any of the foregoing actions, the Trustees must obtain an opinion of counsel experienced in such matters to the effect that the Trust will not be classified as an association taxable as a corporation for United States federal income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a meeting of holders of Preferred Securities convened for such purpose or pursuant to written consent. The Property Trustee will cause a notice of any meeting at which holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be given to each holder of record of Preferred Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required for the Trust to redeem and cancel its Preferred Securities in accordance with the Trust Agreement.
Notwithstanding the fact that holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by the Company, the Trustees or
any affiliate of the Company or any Trustee, will, for purposes of such vote or consent, be treated as if they were not outstanding.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities will be made by check mailed to the address of the holder entitled thereto as such address will appear on the register of holders of the Preferred Securities. The paying agent for the Preferred Securities will initially be the Property Trustee and any co-paying agent chosen by the Property Trustee and acceptable to the Administrative Trustees and the Company. The paying agent for the Preferred Securities may resign as paying agent upon 30 days' written notice to the Property Trustee and the Company. In the event that the Property Trustee no longer is the paying agent for the Preferred Securities, the Administrative Trustees will appoint a successor (which must be a bank or trust company acceptable to the Administrative Trustees and the Company) to act as paying agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as the registrar and the transfer agent for the Preferred Securities. Registration of transfers of Preferred Securities will be effected without charge by or on behalf of the Trust, but upon payment of any tax or other governmental charges that may be imposed in connection with any transfer or exchange. The Trust will not be required to register or cause to be registered the transfer of Preferred Securities after such Preferred Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the continuance of an Event of Default, undertakes to perform only such duties as are specifically set forth in the Trust Agreement and, upon the occurrence and during the continuance of an Event of Default, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Trust Agreement at the request of any holder of Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. If no Event of Default has occurred and is continuing and the Property Trustee is required to decide between alternative causes of action, construe ambiguous provisions in the Trust Agreement or is unsure of the application of any provision of the Trust Agreement, and the matter is not one on which holders of Preferred Securities are entitled under the Trust Agreement to vote, then the Property Trustee will take such action as is directed by the Company and if not so directed, will take such action as it deems advisable and in the best interests of the holders of the Trust Securities and will have no liability except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the affairs of and to operate the Trust in such a way that the Trust will not be deemed to be an "investment company" required to be registered under the Investment Company Act or classified as an association taxable as a corporation for United States federal income tax purposes and so that the Junior Subordinated Debentures will be treated as indebtedness of the Company for United States federal income tax purposes. The Company and the Administrative Trustees are authorized, in this connection, to take any action, not inconsistent with applicable law, the certificate of trust of the Trust or the Trust Agreement, that the Company and the Administrative Trustees determine in their discretion to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar rights.
The Trust Agreement and the Preferred Securities will be governed by, and construed in accordance with, the internal laws of the State of Delaware.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Concurrently with the issuance of the Preferred Securities, the Trust will invest the proceeds thereof, together with the consideration paid by the Company for the Common Securities, in the Junior Subordinated Debentures issued by the Company. The Junior Subordinated Debentures will be issued as unsecured debt under the Indenture, to be dated as of April __, 1998 (the "Indenture"), between the Company and State Street Bank and Trust Company, as trustee (the "Debenture Trustee"). The Indenture will be qualified as an indenture under the Trust Indenture Act. The following summary of the material terms and provisions of the Junior Subordinated Debentures and the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Indenture and to the Trust Indenture Act. Wherever particular defined terms of the Indenture are referred to, but not defined herein, such defined terms are incorporated herein by reference. The form of the Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
The Junior Subordinated Debentures will be limited in aggregate principal amount to approximately $25,773,200 (or $29,639,180 if the Underwriters' over-allotment option is exercised) the sum of the aggregate stated Liquidation Amount of the Trust Securities'. The Junior Subordinated Debentures will bear interest at the annual rate of ___% of the principal amount thereof, payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year (each, an "Interest Payment Date") beginning September 30, 1998, to the Person (as defined in the Indenture) in whose name each Subordinated Debenture is registered, subject to certain exceptions, at the close of business on the fifteenth day of the last month of the calendar quarter. It is anticipated that, until the liquidation of the Trust, the Junior Subordinated Debentures will be held in the name of the Property Trustee in trust for the benefit of the holders of the Preferred Securities. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the Junior Subordinated Debentures is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), 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 the rate per annum of __% thereof, compounded quarterly. The term "interest," as used herein, includes quarterly interest payments, interest on quarterly interest payments not paid on the applicable Interest Payment Date and Additional Interest, as applicable.
The Junior Subordinated Debentures will mature on June 30, 2029 (such date, as it may be shortened or extended as hereinafter described, the "Stated Maturity"). Such date may be shortened at any time by the Company to any date not earlier than June 30, 2003, subject to the Company having received prior approval of the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve. In the event that the Company elects to shorten or extend the Stated Maturity of the Junior Subordinated Debentures, it will give notice thereof to the Debenture Trustee, the Trust and to the holders of the Junior Subordinated Debentures no more than 180 days and no less than 90 days prior to the effectiveness thereof. The Company will not have the right to purchase the Junior Subordinated Debentures, in whole or in part, from the Trust until on or after June 30, 2003, except if a Tax Event, a Capital Treatment Event or an Investment Company Event has occurred and is continuing.
The Junior Subordinated Debentures will be unsecured and will rank junior and be subordinate in right of payment to all Senior Debt, Subordinated Debt and Additional Senior Obligations of the Company. Because the
Company is a holding company, the right of the Company to participate in any distribution of assets of the Bank, upon the Bank's liquidation or reorganization or otherwise (and thus the ability of holders of the Junior Subordinated Debentures to benefit indirectly from such distribution), is subject to the prior claim of creditors of the Bank, except to the extent that the Company may itself be recognized as a creditor of the Bank. The Junior Subordinated Debentures will, therefore, be effectively subordinated to all existing and future liabilities of the Bank, and holders of Junior Subordinated Debentures should look only to the assets of the Company for payments on the Junior Subordinated Debentures. The Indenture does not limit the incurrence or issuance of other secured or unsecured debt of the Company, including Senior Debt, Subordinated Debt and Additional Senior Obligations, whether under the Indenture or any existing indenture or other indenture that the Company may enter into in the future or otherwise. See "--Subordination."
The Indenture does not contain provisions that afford holders of the Junior Subordinated Debentures protection in the event of a highly leveraged transaction or other similar transaction involving the Company that may adversely affect such holders.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture at any time during the term of the Junior Subordinated Debentures, so long as no Debenture Event of Default has occurred and is continuing, to defer the payment of interest at any time, or from time to time (each, an "Extension Period"). The right to defer the payment of interest on the Junior Subordinated Debentures is limited, however, to a period, in each instance, not exceeding 20 consecutive quarters and no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. At the end of each Extension Period, the Company must pay all interest then accrued and unpaid (together with interest thereon at the annual rate of __%, compounded quarterly, to the extent permitted by applicable law). During an Extension Period, interest will continue to accrue and holders of Junior Subordinated Debentures (or the holders of Preferred Securities if such securities are then outstanding) will be required to accrue and recognize income for United States federal income tax purposes. See "Certain Federal Income Tax Consequences--Potential Extension of Interest Payment Period 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, (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the Junior Subordinated Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu or junior in interest to the Junior Subordinated Debentures (other than payments under the Guarantee), or (iii) redeem, purchase or acquire less than all of the Junior Subordinated Debentures or any of the Preferred Securities. 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 20 consecutive quarters or extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the termination of any such Extension Period and the payment of all amounts then due on any Interest Payment Date, the Company may elect to begin a new Extension Period subject to the above requirements. No interest will be due and payable during an Extension Period, except at the end thereof. The Company has no present intention of exercising its rights to defer payments of interest on the Junior Subordinated Debentures. The Company must give the Property Trustee, the Administrative Trustees and the Debenture Trustee notice of its election of such Extension Period at least two Business Days prior to the earlier of (i) the next succeeding date on which Distributions on the Trust Securities would have been payable except for the election to begin such Extension Period, or (ii) the date the Trust is required to give notice of the record date, or the date such Distributions are payable, to The Nasdaq Stock Market's National Market (or other applicable self-regulatory organization) or to holders of the Preferred Securities, but in any event at least one Business Day before such record date. Subject to the foregoing, there is no limitation on the number of times that the Company may elect to begin an Extension Period.
ADDITIONAL SUMS
If the Trust or the Property Trustee is required to pay any additional taxes, duties or other governmental charges as a result of the occurrence of a Tax Event, the Company will pay to the holders of the Junior Subordinated Debentures as additional amounts (referred to herein as "Additional Interest") on the Junior Subordinated Debentures such additional amounts as may be required so that the net amounts received and retained by the Trust after paying any such additional taxes, duties or other governmental charges will not be less than the amounts the Trust would have received had such additional taxes, duties or other governmental charges not been imposed.
REDEMPTION OR EXCHANGE
The Company will have the right to redeem the Junior Subordinated Debentures prior to maturity (i) on or after June 30, 2003, in whole at any time or in part from time to time, or (ii) at any time in whole (but not in part), within 180 days following the occurrence of a Tax Event, a Capital Treatment Event or an Investment Company Event, in each case at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof. Any such redemption prior to the Stated Maturity will be subject to prior approval of the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve.
"Tax Event" means the receipt by the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under the Trust Agreement, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days after the date of such opinion of counsel, 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 date 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 Trust is, or will be within 90 days after the date of such opinion of counsel, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges. The Company must request and receive an opinion with regard to such matters within a reasonable period of time after it becomes aware of the possible occurrence of any of the events described in clauses (i) through (iii) above.
"Capital Treatment Event" means the receipt by the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or any change (including any announced prospective change) in the laws (or any regulations thereunder) of the United States or any political subdivision thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which proposed change, pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under the Trust Agreement, there is more than an insubstantial risk of impairment of the Company's ability to treat the aggregate Liquidation Amount of the Preferred Securities (or any substantial portion thereof) as "Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital adequacy guidelines of the Federal Reserve, as then applicable to the Company; provided, however, that the inability of the Company to treat all or any portion of the Liquidation Amount of the Preferred Securities as Tier 1 Capital shall not constitute the basis for a Capital Treatment Event if such inability results from the Company having cumulative preferred capital in excess of the amount which may qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines of the Federal Reserve.
"Investment Company Event" means the receipt by the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation
or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, the Trust is or will be considered an "investment company" that is required to be registered under the Investment Company Act, which change becomes effective on or after the date of original issuance of the Preferred Securities.
Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Junior Subordinated Debentures to be redeemed at its registered address. Unless the Company defaults in payment of the redemption price for the Junior Subordinated Debentures, on and after the redemption date interest ceases to accrue on such Junior Subordinated Debentures or portions thereof called for redemption.
The Junior Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Preferred Securities--Liquidation Distribution Upon Dissolution," under certain circumstances involving the dissolution of the Trust, the Junior Subordinated Debentures may be distributed to the holders of the Preferred Securities in liquidation of the Trust after satisfaction of liabilities to creditors of the Trust as provided by applicable law. Any such distribution will be subject to receipt of prior approval by the Federal Reserve if then required under applicable policies or guidelines of the Federal Reserve. If the Junior Subordinated Debentures are distributed to the holders of Preferred Securities upon the dissolution of the Trust, the Company will use its best efforts to list the Junior Subordinated Debentures on The Nasdaq Stock Market's National Market or such stock exchanges, if any, on which the Preferred Securities are then listed. There can be no assurance as to the market price of any Junior Subordinated Debentures that may be distributed to the holders of Preferred Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there has occurred a Debenture Event of Default,
(ii) the Company is in default with respect to its obligations under the
Guarantee or (iii) the Company has given notice of its election of an Extension
Period as provided in the Indenture with respect to the Junior Subordinated
Debentures and has not rescinded such notice, or such Extension Period, or any
extension thereof, is continuing, the Company will not (1) 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, (2)
make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
or junior in interest to the Junior Subordinated Debentures (other than payments
under the Guarantee), or (3) redeem, purchase or acquire less than all of the
Junior Subordinated Debentures or any of the Preferred Securities.
SUBORDINATION
The Indenture provides that the Junior Subordinated Debentures are subordinated and junior in right of payment to all Senior Debt, Subordinated Debt and Additional Senior Obligations of the Company. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt restructuring or similar proceedings in connection with any insolvency or bankruptcy proceedings of the Company, the holders of Senior Debt, Subordinated Debt and Additional Senior Obligations of the Company will first be entitled to receive payment in full of principal of (and premium on, if any) and interest on, if any, such Senior Debt, Subordinated Debt and Additional Senior Obligations of the Company before the holders of Junior Subordinated Debentures will be entitled to receive or retain any payment in respect of the principal of or interest on the Junior Subordinated Debentures.
In the event of the acceleration of the maturity of any Junior Subordinated Debentures, the holders of all Senior Debt, Subordinated Debt and Additional Senior Obligations of the Company outstanding at the time of such acceleration will first be entitled to receive payment in full of all amounts due thereon (including any amounts due upon acceleration) before the holders of the Junior Subordinated Debentures will be entitled to receive or retain any payment in respect of the principal of or interest on the Junior Subordinated Debentures.
No payments on account of principal or interest in respect of the Junior Subordinated Debentures may be made if there has occurred and is continuing a default in any payment with respect to Senior Debt, Subordinated Debt or Additional Senior Obligations of the Company or an event of default with respect to any Senior Debt, Subordinated Debt or Additional Senior Obligations of the Company resulting in the acceleration of the maturity thereof, or if any judicial proceeding is pending with respect to any such default.
"Debt" means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed, (ii) every obligation of such Person 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 such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), (v) every capital lease obligation of such Person, and (vi) every obligation of the type referred to in clauses (i) through (v) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise.
"Senior Debt" means, with respect to the Company, the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt, whether incurred on or prior to the date of the Indenture or thereafter incurred, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are not superior in right of payment to the Junior Subordinated Debentures or to other Debt which is pari passu with, or subordinated to, the Junior Subordinated Debentures; provided, however, that Senior Debt will not be deemed to include (i) any Debt 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, (ii) any Debt of the Company to any of its subsidiaries, (iii) any Debt to any employee of the Company, (iv) any Debt which by its terms is subordinated to trade accounts payable or accrued liabilities arising in the ordinary course of business to the extent that payments made to the holders of such Debt by the holders of the Junior Subordinated Debentures as a result of the subordination provisions of the Indenture would be greater than they otherwise would have been as a result of any obligation of such holders to pay amounts over to the obligees on such trade accounts payable or accrued liabilities arising in the ordinary course of business as a result of subordination provisions to which such Debt is subject, and (v) Debt which constitutes Subordinated Debt.
"Subordinated Debt" means, with respect to the Company, the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt, whether incurred on or prior to the date of the Indenture or thereafter incurred, which is by its terms expressly provided to be junior and subordinate to other Debt of the Company (other than the Junior Subordinated Debentures).
"Additional Senior Obligations" means, with respect to the Company, all indebtedness, whether incurred on or prior to the date of the Indenture or thereafter incurred, for claims in respect of derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements; provided, however, that Additional Senior Obligations do not include claims in respect of Senior Debt or Subordinated Debt or
obligations which, by their terms, are expressly stated to be not superior in right of payment to the Junior Subordinated Debentures or to rank pari passu in right of payment with the Junior Subordinated Debentures. "Claim," as used herein, has the meaning assigned thereto in Section 101(4) of the United States Bankruptcy Code of 1978, as amended.
The Indenture places no limitation on the amount of additional Senior Debt, Subordinated Debt or Additional Senior Obligations that may be incurred by the Company. The Company expects from time to time to incur additional indebtedness constituting Senior Debt, Subordinated Debt and Additional Senior Obligations. As of December 31, 1997, the Company had no outstanding Senior Debt, Subordinated Debt or Additional Senior Obligations. Because the Company is a holding company, the Junior Subordinated Debentures are effectively subordinated to all existing and future liabilities of the Company's subsidiaries, including obligations to depositors of the Bank.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior Subordinated Debentures will be made at the office of the Debenture Trustee in Boston, Massachusetts, except that, at the option of the Company, payment of any interest may be made (i) by check mailed to the address of the Person entitled thereto as such address appears in the register of holders of the Junior Subordinated Debentures, or (ii) by transfer to an account maintained by the Person entitled thereto as specified in the register of holders of the Junior Subordinated Debentures, provided that proper transfer instructions have been received by the regular record date. Payment of any interest on Junior Subordinated Debentures will be made to the Person in whose name such Subordinated Debenture is registered at the close of business on the regular record date for such interest, except in the case of defaulted interest. The Company may at any time designate additional paying agents for the Junior Subordinated Debentures or rescind the designation of any paying agent for the Junior Subordinated Debentures; however, the Company will at all times be required to maintain a paying agent in Boston, Massachusetts and each place of payment for the Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent for the Junior Subordinated Debentures, or then held by the Company in trust, for the payment of the principal of or interest on the Junior Subordinated Debentures and remaining unclaimed for two years after such principal or interest has become due and payable will be repaid to the Company on May 31 of each year or (if then held in trust by the Company) will be discharged from such trust and the holder of such Junior Subordinated Debenture will thereafter look, as a general unsecured creditor, only to the Company for payment thereof.
REGISTRAR AND TRANSFER AGENT
The Debenture Trustee will act as the registrar and the transfer agent
for the Junior Subordinated Debentures. Junior Subordinated Debentures may be
presented for registration of transfer (with the form of transfer endorsed
thereon, or a satisfactory written instrument of transfer, duly executed), in
Boston, Massachusetts or at the office of the registrar in Boston,
Massachusetts. The Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts. The Company may at any time designate additional transfer
agents with respect to the Junior Subordinated Debentures. In the event of any
redemption, neither the Company nor the Debenture Trustee will be required to
(i) issue, register the transfer of or exchange Junior Subordinated Debentures
during a period beginning at the opening of business 15 days before the day of
selection for redemption of Junior Subordinated Debentures and ending at the
close of business on the day of mailing of the relevant notice of redemption, or
(ii) transfer or exchange any Junior Subordinated Debentures so selected for
redemption, except, in the case of any Junior Subordinated Debentures being
redeemed in part, any portion thereof not to be redeemed.
MODIFICATION OF INDENTURE
The Company and the Debenture Trustee may, from time to time without the consent of the holders of the Junior Subordinated Debentures, amend, waive or supplement the Indenture for specified purposes, including, among other things, curing ambiguities, defects or inconsistencies and qualifying, or maintaining the qualification of, the Indenture under the Trust Indenture Act. The 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 outstanding Junior Subordinated Debentures, to modify the Indenture; provided, that no such modification may, without the consent of the holder of each outstanding Subordinated Debenture affected by such proposed modification, (i) extend the fixed maturity of the Junior Subordinated Debentures, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or (ii) reduce the percentage of principal amount of Junior Subordinated Debentures, the holders of which are required to consent to any such modification of the Indenture; provided that so long as any of the Preferred Securities remain outstanding, no such modification may be made that requires the consent of the holders of the Junior Subordinated Debentures, and no termination of the Indenture may occur, and no waiver of any Debenture Event of Default may be effective, without the prior consent of the holders of at least a majority of the aggregate Liquidation Amount of the Preferred Securities and that if the consent of the holder of each Subordinated Debenture is required, such modification will not be effective until each holder of Trust Securities has consented thereto.
DEBENTURE EVENTS OF DEFAULT
The 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 (each, a "Debenture Event of Default") with respect to the Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior Subordinated Debentures, when due (subject to the deferral of any due date in the case of an Extension Period); or
(ii) failure to pay any principal on the Junior Subordinated Debentures when due whether at maturity, upon redemption by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain other covenants contained in the Indenture for 90 days after written notice to the Company from the Debenture Trustee or the holders of at least 25% in aggregate outstanding principal amount of the Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the Company.
The holders of a majority in aggregate outstanding principal amount of the Junior Subordinated Debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee. The Debenture Trustee, or the holders of not less than 25% in aggregate outstanding principal amount of the Junior Subordinated Debentures, may declare the principal due and payable immediately upon a Debenture Event of Default. The holders of a majority in aggregate outstanding principal amount of the Junior Subordinated Debentures may annul such declaration and waive the default if the default (other than the non-payment of the principal of the Junior Subordinated Debentures which has become due solely by such acceleration) has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee. Should the holders of the Junior Subordinated Debentures fail to annul such declaration and waive such default, the holders of a majority in aggregate Liquidation Amount of the Preferred Securities will have such right.
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 Indenture.
If a Debenture Event of Default has occurred and is continuing, the Property Trustee will have the right to declare the principal of and the interest on such Junior Subordinated Debentures, and any other amounts payable under the Indenture, to be forthwith due and payable and to enforce its other rights as a creditor with respect to such Junior Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED 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 interest on or principal of the Junior Subordinated Debentures on the payment date on which such payment is due and payable, then a holder of Preferred Securities may institute a legal proceeding directly against the Company for enforcement of payment to such holder of the principal of or interest on such Junior Subordinated Debentures having a principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such holder (a "Direct Action"). In connection with such Direct Action, the Company will have a right of set-off under the Indenture to the extent of any payment made by the Company to such holder of Preferred Securities in the Direct Action. The Company may not amend the Indenture to remove the foregoing right to bring a Direct Action without the prior written consent of the holders of all of the Preferred Securities. If the right to bring a Direct Action is removed, the Trust may become subject to the reporting obligations under the Exchange Act. The Company has the right under the Indenture to set-off any payment made to such holder of Preferred Securities by the Company in connection with a Direct Action.
The holders of the Preferred Securities will not be able to exercise directly any remedies, other than those set forth in the preceding paragraph, available to the holders of the Junior Subordinated Debentures unless there has been an Event of Default under the Trust Agreement. See "Description of the Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Company may not consolidate with or merge into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person, and no Person may consolidate with or merge into the Company or sell, convey, transfer or otherwise dispose of its properties and assets substantially as an entirety to the Company, unless (i) in the event the Company consolidates with or merges into another Person or conveys or transfers its properties and assets substantially as an entirety to any Person, the successor Person is organized under the laws of the United States or any State or the District of Columbia, and such successor Person expressly assumes by supplemental indenture the Company obligations on the Junior Subordinated Debentures, (ii) immediately after giving effect thereto, no Debenture Event of Default, and no event which, after notice or lapse of time or both, would become a Debenture Event of Default, has occurred and is continuing, and (iii) certain other conditions prescribed in the Indenture are met.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to the Company's obligations to pay certain sums due pursuant to the Indenture and to provide certain officers' certificates and opinions of counsel described therein) and the Company will be deemed to have satisfied and discharged the Indenture when, among other things, all Junior Subordinated Debentures not previously delivered to the Debenture Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year or are to be called for redemption within one year, and 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 interest to the date of the deposit or to the Stated Maturity or redemption date, as the case may be.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee has and is subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to such provisions, the Debenture Trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of Junior Subordinated Debentures, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The Debenture Trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Debenture Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it.
MISCELLANEOUS
The Company has agreed, pursuant to the Indenture, for so long as Trust Securities remain outstanding, (i) to maintain directly or indirectly 100% ownership of the Common Securities of the Trust (provided that certain successors which are permitted pursuant to the Indenture may succeed to the Company's ownership of the Common Securities), (ii) not to voluntarily dissolve the Trust, except upon prior approval of the Federal Reserve if then so required under applicable capital guidelines or policies of the Federal Reserve, and (a) in connection with a distribution of Junior Subordinated Debentures to the holders of the Preferred Securities in liquidation of the Trust, or (b) in connection with certain mergers, consolidations or amalgamations permitted by the Trust Agreement, and (iii) to use its reasonable efforts, consistent with the terms and provisions of the Trust Agreement, to cause the Trust to remain classified as a grantor trust and not as an association taxable as a corporation for United States federal income tax purposes.
DESCRIPTION OF THE GUARANTEE
The Preferred Securities Guarantee Agreement (the "Guarantee") will be executed and delivered by the Company concurrently with the issuance of the Preferred Securities for the benefit of the holders of the Preferred Securities. The Guarantee will be qualified as an indenture under the Trust Indenture Act. The Guarantee Trustee will act as indenture trustee under the Guarantee for purposes of complying with the provisions of the Trust Indenture Act. The Guarantee Trustee, State Street Bank and Trust Company, will hold the Guarantee for the benefit of the holders of the Preferred Securities. The following summary of the material terms and 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 and the Trust Indenture Act. Wherever particular defined terms of the Guarantee are referred to, but not defined herein, such defined terms are incorporated herein by reference. The form of the Guarantee has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
The Company will, pursuant to the Guarantee, irrevocably agree to pay in full on a subordinated basis, to the extent set forth therein, the Guarantee Payments (as defined below) to the holders of the Preferred Securities, as and when due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert other than the defense of payment. The following payments with respect to the Preferred Securities, to the extent not paid by or on behalf of the Trust (the "Guarantee Payments"), will be subject to the Guarantee: (i) any accrued and unpaid Distributions required to be paid on the Preferred Securities, to the extent that the Trust has funds available therefor at such time, (ii) the Redemption Price with respect to any Preferred Securities called for
redemption, to the extent that the Trust has funds available therefor at such time, and (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of the Trust (other than in connection with the distribution of Junior Subordinated Debentures to the holders of Preferred Securities or a redemption of all of the Preferred Securities), the lesser of (a) the amount of the Liquidation Distribution, to the extent the Trust has funds available therefor at such time, and (b) the amount of assets of the Trust remaining available for distribution to holders of Preferred Securities in liquidation of the Trust. The obligation of the Company to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of the Preferred Securities or by causing the Trust to pay such amounts to such holders.
The Guarantee will not apply to any payment of Distributions except to the extent the Trust has funds available therefor. If the Company does not make interest payments on the Junior Subordinated Debentures held by the Trust, the Trust will not pay Distributions on the Preferred Securities and will not have funds legally available therefor.
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 Debt, Subordinated Debt and Additional Senior Obligations of the Company in the same manner as the Junior Subordinated Debentures. The Guarantee does not place a limitation on the amount of additional Senior Debt, Subordinated Debt or Additional Senior Obligations that may be incurred by the Company. The Company expects from time to time to incur additional indebtedness constituting Senior Debt, Subordinated Debt and Additional Senior Obligations.
The Guarantee will constitute a guarantee of payment and not of collection (that is, the guaranteed party may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against any other Person). The Guarantee will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by the Trust or upon distribution of the Junior Subordinated Debentures to the holders of the Preferred Securities. Because the Company is a holding company, the right of the Company to participate in any distribution of assets of the Bank upon the Bank's liquidation or reorganization or otherwise is subject to the prior claims of creditors of the Bank, except to the extent the Company may itself be recognized as a creditor of the Bank. The Company's obligations under the Guarantee, therefore, will be effectively subordinated to all existing and future liabilities of the Company's subsidiaries, and claimants should look only to the assets of the Company for payments thereunder.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect the rights of holders of the Preferred 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 outstanding Preferred Securities. See "Description of the Preferred Securities--Voting Rights; Amendment of Trust Agreement." All guarantees and agreements contained in the Guarantee will bind the successors, assigns, receivers, trustees and representatives of the Company and will inure to the benefit of the holders of the Preferred 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 or other obligations thereunder. The holders of not less than a majority in aggregate Liquidation Amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of the Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee.
Any holder of Preferred 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 Trust, the Guarantee Trustee or any other Person.
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 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 such provisions, the Guarantee Trustee is under no obligation to exercise any of the powers vested in it by the Guarantee at the request of any holder of any Preferred Securities, unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
(a) full payment of the Redemption Price of the Preferred Securities, (b) full
payment of the amounts payable upon liquidation of the Trust, or (c)
distribution of the Junior Subordinated Debentures to the holders of the
Preferred 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 Preferred
Securities must restore payment of any sums paid under such Preferred Securities
or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts.
EXPENSE AGREEMENT
The Company will, pursuant to the Agreement as to Expenses and Liabilities entered into by it under the Trust Agreement (the "Expense Agreement"), irrevocably and unconditionally guarantee to each person or entity to whom the Trust becomes indebted or liable, the full payment of any costs, expenses or liabilities of the Trust, other than obligations of the Trust to pay to the holders of the Preferred Securities or other similar interests in the Trust of the amounts due such holders pursuant to the terms of the Preferred Securities or such other similar interests, as the case may be. Third party creditors of the Trust may proceed directly against the Company under the Expense Agreement, regardless of whether such creditors had notice of the Expense Agreement.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities (to the extent the Trust has funds available for the payment of such Distributions) are irrevocably guaranteed by the Company as and to the extent set forth under "Description of the Guarantee." The Company and the Trust believe that, taken together,
the obligations of the Company under the Junior Subordinated Debentures, the Indenture, the Trust Agreement, the Expense Agreement, and the Guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a subordinated basis, of payment of Distributions and other amounts due on the Preferred Securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes 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 obligations of the Trust under the Preferred Securities. If and to the extent that the Company does not make payments on the Junior Subordinated Debentures, the Trust will not pay Distributions or other amounts due on the Preferred Securities. The Guarantee does not cover payment of Distributions when the Trust does not have sufficient funds to pay such Distributions. In such event, the remedy of a holder of Preferred Securities is to institute a legal proceeding directly against the Company for enforcement of payment of such Distributions to such holder. The obligations of the Company under the Guarantee are subordinate and junior in right of payment to all Senior Debt, Subordinated Debt and Additional Senior Obligations of the Company.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the Junior Subordinated Debentures, such payments will be sufficient to cover Distributions and other payments due on the Preferred 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 Trust Securities, (ii) the interest rate and interest and other payment dates on the Junior Subordinated Debentures will match the Distribution rate and Distribution and other payment dates for the Preferred Securities, (iii) the Company will pay for all and any costs, expenses and liabilities of the Trust (except the obligations of the Trust to holders of the Preferred Securities), and (iv) the Trust Agreement further provides that the Trust will not engage in any activity that is not consistent with the limited purposes of the Trust.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred 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 Trust or any other Person. A default or event of default under any Senior Debt, Subordinated Debt or Additional Senior Obligations of the Company would not constitute a default or Event of Default. In the event, however, of payment defaults under, or acceleration of, Senior Debt, Subordinated Debt or Additional Senior Obligations of the Company, the subordination provisions of the Indenture provide that no payments may be made in respect of the Junior Subordinated Debentures until such Senior Debt, Subordinated Debt or Additional Senior Obligations has been paid in full or any payment default thereunder has been cured or waived. Failure to make required payments on the Junior Subordinated Debentures would constitute an Event of Default.
LIMITED PURPOSE OF THE TRUST
The Preferred Securities evidence a preferred undivided beneficial
interest in the assets of the Trust. The Trust exists for the exclusive purposes
of (i) issuing the Trust Securities representing undivided beneficial interests
in the assets of the Trust, (ii) investing the gross proceeds of the Trust
Securities in the Junior Subordinated Debentures issued by the Company, and
(iii) engaging in only those other activities necessary, advisable, or
incidental thereto. A principal difference between the rights of a holder of a
Preferred Security and the rights of a holder of a Subordinated Debenture is
that a holder of a Subordinated Debenture is entitled to receive from the
Company the principal amount of and interest accrued on Junior Subordinated
Debentures held, while a holder of Preferred Securities is entitled to receive
Distributions from the Trust (or from the Company under the Guarantee) if and to
the extent the Trust has funds available for the payment of such Distributions.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution of the Trust involving the liquidation of the Junior Subordinated Debentures, the holders of the Preferred Securities will be entitled to receive, out of assets held by the Trust, the Liquidation Distribution in cash. See "Description of the Preferred Securities--Liquidation Distribution Upon Dissolution." Upon any voluntary or involuntary liquidation or bankruptcy of the Company, the Property Trustee, as holder of the Junior Subordinated Debentures, would be a subordinated creditor of the Company, subordinated in right of payment to all Senior Debt, Subordinated Debt and Additional Senior Obligations of the Company (as set forth in the Indenture), but entitled to receive payment in full of principal and interest before any shareholders of the Company receive payments or distributions. Since the Company is the guarantor under the Guarantee and has agreed to pay for all costs, expenses and liabilities of the Trust (other than the obligations of the Trust to the holders of its Preferred Securities), the positions of a holder of the Preferred Securities and a holder of the 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 Preferred
Securities which has been passed upon by Foley, Hoag & Eliot LLP, counsel to the
Company and the Trust insofar as it relates to matters of law and legal
conclusions. The discussion only addresses the tax consequences to a person that
acquires Preferred Securities on their original issue at their original offering
price and that is (i) an individual citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any state thereof or the District of Columbia or (iii) an estate or
trust the income of which is subject to United States federal income tax
regardless of source. This discussion does not attempt to discuss all tax
consequences that may be applicable to a holder of Preferred Securities, nor
does it address the tax consequences to (i) persons who are not United States
Persons, (ii) persons that may be subject to special tax treatment under United
States federal income tax law, such as banks, insurance companies, thrift
institutions, real estate investment trusts, regulated investment companies,
tax-exempt organizations, and dealers in securities or currencies, (iii) persons
that will hold the Preferred Securities as part of a position in a "straddle,"
as part of a "hedge or "synthetic security," as part of a "conversion
transaction" or other integrated investment transaction for federal income tax
purposes, or as other than a capital asset, or (iv) persons whose functional
currency is not the United States dollar. Further, it does not include any
description of any alternative minimum tax consequences or the tax laws of any
state or local government or of any foreign government that may be applicable to
the Preferred Securities.
The summary is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations thereunder and administrative and judicial interpretations thereof, all of which are subject to change, with possible retroactive effect. Subsequent changes may cause tax consequences to vary substantially from the consequences described below. Furthermore, the authorities on which this summary is based are subject to various interpretations, and it is therefore possible that the federal income tax treatment of the purchase, ownership and disposition of Preferred Securities may differ from the treatment described below.
CLASSIFICATION OF THE TRUST
Under current law and assuming full compliance with the terms of the Trust Agreement and Indenture (and certain other documents described herein), the Trust will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. As a result, each holder of Preferred Securities generally will be considered the owner of an undivided beneficial interest in the Junior Subordinated Debentures. Accordingly, for United States federal income tax purposes, each holder of Preferred Securities will
be required to include in its gross income any interest, including original issue discount, paid or accrued with respect to its allocable share of the Junior Subordinated Debentures whether or not cash is actually distributed to such holder.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company intends to take the position that the Junior Subordinated Debentures will be classified for United States federal income tax purposes as indebtedness of the Company under current law and each holder of Preferred Securities will be treated as owning an indirect beneficial interest in the Junior Subordinated Debentures. No ruling is being requested from the Internal Revenue Service and there is no direct authority addressing the characterization of the Junior Subordinated Debentures. No assurance can be given that such position of the Company will not be challenged by the Internal Revenue Service or, if challenged that such a challenge will not be successful. The remainder of this discussion assumes that the Junior Subordinated Debentures will be classified for United States federal income tax purposes as indebtedness of the Company.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations"), a debt instrument will be deemed to be issued with original issue discount ("OID") if there is more than a "remote" contingency that periodic stated interest payments due on the instrument will not be timely paid. Because the exercise by the Company of its option to defer the payment of stated interest on the Junior Subordinated Debentures would prevent the Company from declaring dividends on any class of equity, the Company believes that the likelihood of its exercising the option is "remote" within the meaning of the Regulations. As a result, the Company intends to take the position that the Junior Subordinated Debentures will not be considered to be issued with OID. Accordingly, based on this position, stated interest on the Junior Subordinated Debentures will be includible in the ordinary income of a holder at the time that such payments are paid or accrued in accordance with such holder's regular method of tax accounting. Because the Regulations have not yet been addressed in any published rulings or other published interpretations issued by the Internal Revenue Service, it is possible that the Internal Revenue Service could take a position contrary to the position taken by the Company.
Under the Regulations, if the Company were to exercise its option to defer the payment of stated interest on the Junior Subordinated Debentures, the Junior Subordinated Debentures would at that time be treated as issued with OID and all stated interest on the Junior Subordinated Debentures would thereafter be treated as OID as long as the Junior Subordinated Debentures remain outstanding. In such event, a holder of the Junior Subordinated Debentures would be required to include OID in ordinary income, on a current basis, over the period that the instrument is held even though the Company would not be making any actual cash payments during the extended interest payment period. The amount of interest income includible in the taxable income of a holder of the Junior Subordinated Debentures would be determined on the basis of a constant yield method over the remaining term of the instrument and the actual receipt of future payments of stated interest on the Junior Subordinated Debentures would no longer be separately reported as taxable income. The amount of OID that would accrue, in the aggregate, during the extended interest payment period would be approximately equal to the amount of the cash payment due at the end of such period. Any OID included in income would increase the holder's adjusted tax basis in the Junior Subordinated Debentures and the holder's actual receipt of interest payments would reduce such basis.
Because income on the Preferred Securities will constitute interest or OID, corporate holders of Preferred Securities will not be entitled to a dividends-received deduction with respect to any income recognized with respect to the Preferred Securities.
MARKET DISCOUNT AND ACQUISITION PREMIUM
Holders of Preferred Securities other than a holder who purchased the Preferred Securities upon original issuance may be considered to have acquired their undivided interest in the Junior Subordinated Debentures with "market discount' or acquisition premium" as such phrases are defined for United States federal income tax purposes. Such holders are advised to consult their tax advisors as to the income tax consequences of the acquisition, ownership and disposition of the Preferred Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described herein (see "Description of the Preferred Securities -- Redemption or Exchange" and "Description of the Preferred Securities -- Liquidation Distribution Upon Dissolution"), the Junior Subordinated Debentures may be distributed to holders of Preferred Securities upon a liquidation of the Trust. Under current United States federal income tax law, such a distribution would be treated as a nontaxable event to each such holder and would result in such holder having an adjusted tax basis in the Junior Subordinated Debentures received in the liquidation equal to such holder's adjusted tax basis in the Preferred Securities immediately before the distribution. A holder's holding period in the Junior Subordinated Debentures so received in liquidation of the Trust would include the period for which such holder held the Preferred Securities. If, however, the Trust is characterized for United States federal income tax purposes as an association taxable as a corporation at the time of its dissolution, the distribution of the Junior Subordinated Debentures may constitute a taxable event to holders of Preferred Securities.
Under certain circumstances described herein, the Junior Subordinated Debentures may be redeemed for cash and the proceeds of such redemption distributed to holders in redemption of their Preferred Securities. Under current law, such a redemption would, for United States federal income tax purposes, constitute a taxable disposition of the redeemed Preferred Securities, and a holder would recognize gain or loss as if the holder sold such Preferred Securities for cash. See "Description of the Preferred Securities -- Redemption or Exchange" and "Description of the Preferred Securities -- Liquidation Distribution Upon Dissolution."
DISPOSITION OF PREFERRED SECURITIES
Upon the sale of the Preferred Securities, a holder will recognize gain or loss in an amount equal to the difference between its adjusted tax basis in the Preferred Securities and the amount realized in the sale (except to the extent of any amount received in respect of accrued but unpaid interest not previously included in income). A holder's adjusted tax basis in the Preferred Securities generally will be its initial purchase price increased by the amount of OID accrued and decreased by payments (if any) received on the Preferred Securities in respect of OID (if any) to the date of disposition. Such gain or loss generally will be a capital gain or loss and generally will be long-term capital gain or loss if the Preferred Securities have been held for more than one year at the time of sale. Amounts attributable to accrued interest with respect to a holder's share of the Junior Subordinated Debentures not previously included in income will be taxable as ordinary income.
Should the Corporation exercise its option to defer any payment of interest on the Junior Subordinated Debentures, the Preferred Securities may trade at a price that does not accurately reflect the value of accrued but unpaid interest with respect to the underlying Junior Subordinated Debentures (or OID if the Junior Subordinated Debentures are treated as having been issued with OID). In the event of such a deferral, a holder who disposes of its Preferred Securities will be required to include in ordinary income (i) any portion of the amount realized that is attributable to such accrued but unpaid interest to the extent not previously included in income, or (ii) any amount of OID, in either case, that has accrued on its pro rata share of the underlying Junior Subordinated Debentures during the taxable year of sale through the date of disposition. Any such income inclusion will increase the holder's adjusted tax basis in the Preferred Securities disposed of. To the extent that the amount
realized in the sale is less than the holder's adjusted tax basis, a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The amount of interest paid and any OID accrued on the Preferred Securities held of record by individual citizens or residents of the United States, or certain trusts, estates, and partnerships, will be reported to the Internal Revenue Service on Forms 1099, which forms should be mailed to such holders of Preferred Securities by January 31 following each calendar year. Payments of interest may be subject to a "backup" withholding tax at a rate of 31% unless the holder complies with certain identification and other requirements. Payment of the proceeds from the sale of Preferred Securities may also be subject to information reporting and backup withholding. Any amounts withheld under the backup withholding rules will be allowed as a credit against the holder's United States federal income tax liability, provided the required information is furnished to the Internal Revenue Service.
EFFECT OF PROPOSED CHANGES IN TAX LAWS
In both 1996 and 1997 legislation was proposed that would, if enacted, have adversely affected the tax treatment of the Preferred Securities. On March 19, 1996, President Clinton proposed certain tax law changes (the "1996 Proposed Legislation") that would, among other things, generally deny corporate issuers a deduction for interest in respect of certain debt obligations having a maximum term in excess of 20 years and not shown as indebtedness on the issuer's applicable consolidated balance sheet. Neither the 1996 Proposed Legislation or similar legislation was enacted during the 104th Congress. On February 6, 1997, President Clinton proposed in the administration's fiscal year 1998 budget certain tax law changes (the "Administration's 1997 Tax Proposals") that would, among other things, generally deny corporate issuers a deduction for interest or OID in respect of certain debt obligations having a maximum term in excess of 15 years and not shown as indebtedness on the issuer's applicable consolidated balance sheet. Neither the Administration's 1997 Tax Proposals nor similar legislation was enacted by the 105th Congress. There can be no assurance, however, that legislation enacted after the date hereof will not adversely affect the ability of the Company to deduct the interest payable on the Junior Subordinated Debentures or otherwise give rise to a Tax Event.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN THE UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code ("Plans"), generally may purchase Preferred Securities, subject to the investing fiduciary's determination that the investment in Preferred Securities satisfies ERISA's fiduciary standards and other requirements applicable to investments by the Plan.
In any case, the Company and/or any of its affiliates may be considered a "party in interest" (within the meaning of ERISA) or a "disqualified person" (within the meaning of Section 4975 of the Code) with respect to certain plans (generally, Plans maintained or sponsored by, or contributed to by, any such persons with respect to which the Company or an affiliate is a fiduciary or Plans for which the Company or an affiliate provides services). The acquisition and ownership of Preferred Securities by a Plan (or by an individual retirement arrangement or other Plans described in Section 4975(e)(1) of the Code) with respect to which the Company or
any of its affiliates is considered a party in interest or a disqualified person may constitute or result in a prohibited transaction under ERISA or Section 4975 of the Code, unless such Preferred Securities are acquired pursuant to and in accordance with an applicable exemption.
As a result, Plans with respect to which the Company or any of its affiliates is a party in interest or a disqualified person should not acquire Preferred Securities unless such Preferred Securities are acquired pursuant to and in accordance with an applicable exemption. Any other Plans or other entities whose assets include Plan assets subject to ERISA or Section 4975 of the code proposing to acquire Preferred Securities should consult with their own counsel.
UNDERWRITING
The Underwriters named below, represented by Tucker Anthony Incorporated (the "Representative"), have severally agreed, subject to the terms and conditions set forth in the Underwriting Agreement, the form of which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, to purchase from the Trust the number of Preferred Securities set forth opposite their respective names below. The several Underwriters have agreed in the Underwriting Agreement, subject to the terms and conditions set forth therein, to purchase all the Preferred Securities offered hereby if any of the Preferred Securities are purchased. In the event of default by an Underwriter, the Underwriting Agreement provides that, in certain circumstances, purchase commitments of the nondefaulting Underwriters may be increased or the Underwriting Agreement may be terminated.
Number of Preferred
Underwriters Securities
------------ -------------------
Tucker Anthony Incorporated...................................
Total................................................
|
The Representative has advised the Trust that it proposes initially to offer the Preferred Securities to the public at the public offering price set forth on the cover page of this Prospectus, and to certain dealers at such price less a concession not in excess of $___ per Preferred Security. The Underwriters may allow, and such dealers may reallow, a discount not in excess of $___ per Preferred Security to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed.
In view of the fact that the proceeds of the sale of the Preferred Securities will be used to purchase the Junior Subordinated Debentures of the Company, the Underwriting Agreement provides that the Company will pay as compensation to the Underwriters arranging the investment therein of such proceeds, an amount in immediately available funds of $___ per Preferred Security (or $___ in the aggregate) for the accounts of the several Underwriters.
The Trust has granted the Underwriters an option to purchase up to an additional 375,000 Preferred Securities at the public offering price. Such option, which expires 30 days from the date of this Prospectus, may be exercised solely to cover over-allotments. To the extent that the Underwriters exercise such option, each of the Underwriters will have a firm commitment, subject to certain conditions, to purchase approximately the same percentage of the additional Preferred Securities that the number of Preferred Securities to be purchased initially by the Underwriter is of the 2,500,000 Preferred Securities initially purchased by the Underwriters.
To the extent that the Underwriters exercise their option to purchase additional Preferred Securities, the Trust will issue and sell to the Company additional Common Securities in such aggregate Liquidation Amount as is required for the Company to continue to hold Common Securities in an aggregate Liquidation Amount equal
to at least 3% of the total capital of the Trust and the Company will issue and sell to the Trust Junior Subordinated Debentures in an aggregate principal amount equal to the total aggregate Liquidation Amount of the additional Preferred Securities being purchased pursuant to the option and the additional Common Securities.
In connection with the offering of the Preferred Securities, the Underwriters and any selling group members and their respective affiliates may engage in transactions effected in accordance with Rule 104 of the Securities and Exchange Commission's Regulation M that are intended to stabilize, maintain or otherwise affect the market price of the Preferred Securities. Such transactions may include over-allotment transactions in which the Underwriters create a short position for their own account by selling more Preferred Securities than they are committed to purchase from the Trust. In such case, to cover all or part of the short position, the Underwriters may exercise the over-allotment option described above or may purchase Preferred Securities in the open market following completion of the initial offering of the Preferred Securities. The Underwriters also may engage in stabilizing transactions in which they bid for, and purchase, Preferred Securities at a level above that which might otherwise prevail in the open market for the purpose of preventing or retarding a decline in the market price of the Preferred Securities. The Underwriters also may reclaim any selling concessions allowed to an Underwriter or dealer if the Underwriters repurchase shares distributed by that Underwriter or dealer. Any of the foregoing transactions may result in the maintenance of a price for the Preferred Securities at a level above that which might otherwise prevail in the open market. Neither the Company nor any of the Underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Preferred Securities. The Underwriters are not required to engage in any of the foregoing transactions and, if commenced, such transactions may be discontinued at any time without notice.
During a period of 180 days from the date of this Prospectus, neither the Trust nor the Company will, subject to certain exceptions, without the prior written consent of the Representative, directly or indirectly, sell, offer to sell, grant any option for sale of, or otherwise dispose of, any Preferred Securities, any security convertible into or exchangeable into or exercisable for Preferred Securities or Junior Subordinated Debentures or any debt securities substantially similar to the Junior Subordinated Debentures or equity securities substantially similar to the Preferred Securities (except for Junior Subordinated Debentures and the Preferred Securities offered hereby).
Because the National Association of Securities Dealers, Inc. ("NASD") is expected to view the Preferred Securities as interests in a direct participation program, the offering of the Preferred Securities is being made in compliance with the applicable provisions of Rule 2810 of the NASD's Conduct Rules.
Application has been made to have the Preferred Securities approved for quotation on The Nasdaq Stock Market's National Market. The Representative has advised the Trust that it presently intends to make a market in the Preferred Securities after the commencement of trading on The Nasdaq Stock Market's National Market, but no assurances can be made as to the liquidity of such Preferred Securities or that an active and liquid trading market will develop or, if developed, that it will continue. The offering price and distribution rate have been determined by negotiations among representatives of the Company and the Underwriters, and the offering price of the Preferred Securities may not be indicative of the market price following the Offering. The Representative will have no obligation to make a market in the Preferred Securities, however, and may cease market-making activities, if commenced, at any time.
The Trust and the Company have agreed to indemnify the Underwriters against, or contribute to payments that the Underwriters may be required to make in respect of, certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred Securities, the enforceability of the Trust Agreement and the formation of the Trust will be passed upon by Morris, Nichols, Arsht & Tunnell,
Wilmington, Delaware, special Delaware counsel to the Company and the Trust. Certain legal matters for the Company and the Trust, including matters relating to United States federal income tax considerations and the validity of the Guarantee and the Junior Subordinated Debentures, will be passed upon for the Company and the Trust by Foley, Hoag & Eliot LLP, Boston, Massachusetts, counsel to the Company and the Trust. Certain legal matters will be passed upon for the Underwriters by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Foley, Hoag & Eliot LLP will rely on the opinion of Morris, Nichols, Arsht & Tunnell as to matters of Delaware law.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1997 and 1996, and for each of the years in the three-year period ended December 31, 1997, appearing in the 1997 Annual Report of the Company to its shareholders and incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 1997, have been incorporated by reference in this Prospectus and in the Registration Statement of which this Prospectus forms a part, in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, whose report thereon appears therein, and upon the authority of said firm as experts in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following document filed by the Company with the Commission is incorporated into this Prospectus by reference:
The Company's Annual Report on Form 10-K for the year ended December 31, 1997 (attached hereto as Appendix A).
Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED BY REFERENCE HEREIN (OTHER THAN EXHIBITS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO: CENTURY BANCORP, INC., 400 MYSTIC AVENUE, MEDFORD, MASSACHUSETTS 02155, ATTN: CHIEF FINANCIAL OFFICER (TELEPHONE (781-391-4000).
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.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material may also be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. If available, such information also may be accessed through the Commission's electronic data gathering, analysis and retrieval system ("EDGAR") via electronic means, including the Commission's home page on the Internet (http://www.sec.gov). The Company's Class A common stock is traded on the Nasdaq National Market. Such reports, proxy statements and other information concerning the Company also may be inspected at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form S-2 (the "Registration Statement") pursuant to the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules relating thereto as permitted by the rules and regulations of the Commission. For further information pertaining to the Company and the securities offered hereby, reference is made to the Registration Statement and the exhibits thereto. Items of information omitted from this Prospectus, but contained in the Registration Statement, may be obtained at prescribed rates or inspected without charge at the offices of the Commission set forth above. 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.
No separate financial statements of the Trust have been included herein. The Company does not consider that such financial statements would be material to holders of the Preferred Securities because (i) all of the voting securities of the Trust will be owned by the Company, a reporting company under the Exchange Act, (ii) the Trust has no independent operations but exists for the sole purpose of issuing securities representing undivided beneficial interest in the assets of the Trust and investing the proceeds thereof in the Junior Subordinated Debentures issued by the Company, and (iii) the obligations of the Company described herein to provide certain indemnities in respect of and be responsible for certain costs, expenses, debts and liabilities of the Trust under the Indenture and pursuant to the Trust Agreement, the guarantee issued by the Company with respect to the Preferred Securities, and the Junior Subordinated Debentures purchased by the Trust and the related Indenture, taken together, constitute, in the belief of the Company and the Trust, a full and unconditional guarantee of payments due on the Preferred Securities. See "Description of the Junior Subordinated Debentures" and "Description of the Guarantee."
The Trust is not currently subject to the information reporting requirements of the Exchange Act. The Trust will become subject to such requirements upon the effectiveness of the Registration Statement, although it intends to seek and expects to receive an exemption therefrom.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended DECEMBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission file number 0-15752
CENTURY BANCORP, INC.
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF MASSACHUSETTS 04-2498617 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification number) 400 MYSTIC AVENUE, MEDFORD, MA 02155 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (781)391-4000 |
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, $1.00 PAR VALUE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. [ ]
State the aggregate market value of the voting stock held by nonaffiliates of the registrant as of February 28, 1998:
$7,848,270
Indicate the number of shares outstanding of each of the registrant's classes of common stock as of February 28,1998:
CLASS A COMMON STOCK, $1.00 PAR VALUE 3,523,647 SHARES
CLASS B COMMON STOCK, $1.00 PAR VALUE 2,268,770 SHARES
CENTURY BANCORP INC.
FORM 10-K
TABLE OF CONTENTS
PAGE
----
PART I
ITEM 1 BUSINESS 1-16
ITEM 2 PROPERTIES 17
ITEM 3 LEGAL PROCEEDINGS 17
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY 17
HOLDERS
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED 17-18
STOCKHOLDER MATTERS
ITEM 6 SELECTED FINANCIAL DATA 18
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 18
CONDITION AND RESULTS OF OPERATIONS
ITEM 7a QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET 18
RISK
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 18
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 18
ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 45-47
ITEM 11 EXECUTIVE COMPENSATION AND OTHER INFORMATION 47-51
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 52
AND MANAGEMENT
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 53
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND 53
REPORTS ON FORM 8-K
SIGNATURES 54
|
PART I
ITEM 1. BUSINESS
THE COMPANY
Century Bancorp, Inc. (together with its subsidiary, unless the context otherwise requires, the "Company"), is a Massachusetts state chartered bank holding company headquartered in Medford, Massachusetts. The Company is a Massachusetts corporation formed in 1972 and has one banking subsidiary (the "Bank"): Century Bank and Trust Company formed in 1969. The Company had total assets of $631.1 million on December 31, 1997. The Company presently operates 15 banking offices in 14 cities and towns ranging from Braintree to Peabody. The Banks' customers consist primarily of small and medium-sized businesses and retail customers in these communities and surrounding areas, as well as local governments throughout Massachusetts.
On December 10, 1997, the Company announced an agreement to merge Haymarket Cooperative Bank, based in Boston, Massachusetts, into Century Bank and Trust Company. The agreement called for the Bank to acquire assets of approximately $142 million and two banking offices located in Boston. Century Bank and Trust Company will pay approximately $20 million in cash for Haymarket Cooperative Bank and is subject to federal and state regulatory approval. The transaction will be accounted for using the purchase method of accounting.
The Company offers a wide range of services to commercial enterprises, state and local governments and agencies, and individuals. It makes commercial loans, real estate and construction loans, and consumer loans, and accepts savings, time, and demand deposits. In addition, the Company offers to its corporate customers automated lock box collection services, cash management services and account reconciliation services, and actively promotes the marketing of these services to the municipal market.
The Company emphasizes service to small and medium-sized businesses and retail customers in its market area. It provides business and consumer deposit services and makes commercial loans, real estate and construction loans and consumer loans. The Company provides full service brokerage through Century Financial Services in conjunction with Commonwealth Equities.
The Company is a provider of financial services including cash management, transaction processing, short term financing and intermediate term leasing to municipalities in Massachusetts. The Company has deposit relationships with approximately 30% of the 351 cities and towns in the state.
The following table sets forth the distribution of the Company's average assets, liabilities and stockholders' equity, and average rates earned or paid on a fully taxable equivalent basis for each of the years indicated.
YEAR ENDED DECEMBER 31,
1997 1996
---- ----
Average Interest Rate Average Interest Rate
Balance Income (1) Earned (1) Balance Income (1) Earned (1)
--------- --------- ---------- --------- --------- ----------
(Dollars In Thousands)
Assets
Interest-earning assets:
Loans(2) $ 304,147 $ 28,479 9.36% $ 281,943 $ 26,429 9.37%
Securities available-for-sale:
Taxable 82,163 5,054 6.15% 90,652 5,627 6.21%
Tax-exempt 1,327 80 6.03% 872 52 5.96%
Securities held-to-maturity:
Taxable 109,458 7,047 6.44% 94,335 6,007 6.37%
Tax-exempt 33 3 9.09% 170 13 7.65%
Federal funds sold 12,864 706 5.49% 15,090 807 5.35%
Interest bearing deposits
in other banks 36 1 2.78% 47 2 4.26%
----------------------- ---------------------
Total interest-earning assets 510,028 41,370 8.11% 483,109 38,937 8.06%
--------- ----- --------- -----
Non interest-earning assets 61,211 61,450
Allowance for loan losses (4,412) (4,163)
--------- ---------
Total assets $ 566,827 $ 540,396
========= =========
|
1995
----
Average Interest Rate
Balance Income (1) Earned (1)
----------- --------- ----------
Assets
Interest-earning assets:
Loans(2) $ 279,555 $ 26,490 9.48%
Securities available-for-sale:
Taxable 70,467 4,218 5.99%
Tax-exempt 1,372 91 6.63%
Securities held-to-maturity:
Taxable 62,158 3,650 5.87%
Tax-exempt 180 15 8.33%
Federal funds sold 29,076 1,723 5.93%
Interest bearing deposits
in other banks 29 1 3.45%
--------------------
Total interest-earning assets 442,837 36,188 8.17%
--------- --------
Non interest-earning assets 56,127
Allowance for loan losses (4,479)
-----------
Total assets $ 494,485
===========
|
(2) Nonaccrual loans are included in average amounts outstanding.
YEAR ENDED DECEMBER 31,
1997 1996
Average Interest Income Rate Earned Average Interest Income Rate Earned
Balance /Expense (1) /Paid (1) Balance /Expense (1) /Paid (1)
-------- --------------- ----------- -------- --------------- -----------
(Dollars In Thousands)
Liabilities and Stockholders'
Equity
Interest-bearing deposits:
NOW accounts $ 91,938 $ 2,561 2.79% $ 84,620 $ 2,367 2.80%
Savings accounts 55,911 1,433 2.56% 55,905 1,439 2.57%
Money market accounts 66,936 1,888 2.82% 70,735 2,084 2.95%
Time deposits 155,607 8,474 5.45% 158,037 9,020 5.71%
-------- -------- -------- --------
Total interest-bearing
deposits 370,392 14,356 3.88% 369,297 14,910 4.04%
Securities sold under
agreements to repurchase 24,994 1,075 4.30% 16,654 713 4.28%
Other borrowed funds 7,908 491 6.21% 3,135 182 5.81%
-------- -------- -------- --------
Total interest-bearing
liabilities 403,294 15,922 3.95% 389,086 15,805 4.06%
-------- -------- ---- -------- -------- ----
Non interest-bearing
liabilities
Demand deposits 105,417 99,179
Other liabilities 7,787 7,340
-------- --------
Total liabilities 516,498 495,605
Stockholders' equity 50,329 44,791
-------- --------
Total liabilities &
stockholders' equity $566,827 $540,396
======== ========
Net interest income(1) $ 25,448 $ 23,132
======== ========
Net interest spread 4.16% 4.00%
---- ----
Net yield on earnings assets 4.99% 4.79%
---- ----
|
1995
Average Interest Income Rate Earned
Balance /Expense (1) /Paid (1)
-------- ---------------- -----------
Liabilities and Stockholders'
Equity
Interest-bearing deposits:
NOW accounts $ 82,628 $ 2,568 3.11%
Savings accounts 50,916 1,335 2.62%
Money market accounts 78,029 2,487 3.19%
Time deposits 134,769 7,612 5.65%
-------- --------
Total interest-bearing
deposits 346,342 14,002 4.04%
Securities sold under
agreements to repurchase 14,390 632 4.39%
Other borrowed funds 960 52 5.42%
-------- -------- -----------
Total interest-bearing
liabilities 361,692 14,686 4.06%
-------- ----
Non interest-bearing
liabilities
Demand deposits 86,328
Other liabilities 6,084
-----------
Total liabilities 454,104
Stockholders' equity 40,381
-----------
Total liabilities &
stockholders' equity $ 494,485
===========
Net interest income(1) $21,502
=======
Net interest spread 4.11%
----
Net yield on earnings assets 4.86%
----
|
The following table summarizes the year-to-year changes in the Company's net interest income resulting from fluctuations in interest rates and volume changes in earning assets and interest bearing liabilities. Changes due to rate are the change in rate multiplied by the prior year's volume. Changes due to volume are the change in volume multiplied by the prior year's rate. Changes in volume and rate that cannot be separately identified have been allocated in proportion to the relationship of the absolute dollar amounts of each change.
Net interest income improved in 1997. Interest income was affected positively by higher loan volume and by improvements in the interest earned in most categories of earning assets. Much of the Company's earning assets were repriced to improve their respective returns. Interest expense rose primarily because of a higher level of borrowed funds. Interest income on securities increased primarily because of volume.
Year Ended December 31,
1997 Compared with 1996 1996 Compared with 1995
------------------------------- -------------------------------
Increase/(Decrease) Increase/(Decrease)
Due to Change in Due to Change in
Total Total
Average Average Increase Average Average Increase
Balance Rate (Decrease) Balance Rate (Decrease)
------- ------- ------- ------- -------- -------
(In Thousands)
Interest income:
Loans $ 2,079 $ (29) $ 2,050 $ 225 $ (286) $ (61)
Securities available-for-sale:
Taxable (523) (50) (573) 1,248 161 1,409
Tax-exempt 27 1 28 (31) (8) (39)
Securities held-to-maturity:
Taxable 973 66 1,039 2,027 330 2,357
Tax-exempt (12) 2 (10) (1) (1) (2)
Federal funds sold (122) 21 (101) (762) (154) (916)
Interest-bearing deposits
in other banks (1) 1 0 1 0 1
------- ------- ------- ------- ------- -------
Total interest income 2,422 11 2,433 2,707 42 2,749
------- ------- ------- ------- ------- -------
Interest expense:
Deposits:
NOW accounts 204 (10) 194 61 (262) (201)
Savings accounts 0 (6) (6) 129 (25) 104
Money market accounts (109) (87) (196) (223) 180 403
Time deposits (137) (409) (546) 1,327 81 1,408
------- ------- -------
Total interest-bearing
deposits (42) (512) (554) 1,294 (386) 908
Securities sold under
agreements to repurchase 359 3 362 97 (16) 81
Other borrowed funds 262 13 309 126 4 130
------- ------- ------- ------- ------- -------
Total interest expense 612 (495) 117 1,517 (398) 1,119
------- ------- ------- ------- ------- -------
Change in net interest income $ 1,811 $ 505 $ 2,316 $ 1,190 $ 440 $ 1,630
======= ======= ======= ======= ======= =======
|
ASSET/LIABILITY MANAGEMENT
The Company's asset/liability management objective is to attempt to insulate the balance sheet, and therefore the income statement, from excessive risk due to changes in market interest rates. It is the responsibility of the Company's ALCO committee to establish long-term strategies with respect to interest rate exposure, and to monitor that exposure in relation to present and prospective market interest rates, economic conditions, and balance sheet composition on an on-going basis. Monitoring techniques include gap management and simulation analysis.
The Company attempts to manage its exposure to interest rate risk by closely monitoring the maturities and interest rate sensitivities of its assets and liabilities. The following table measures the extent to which interest-sensitive assets exceed interest-sensitive liabilities (or vice versa) within certain time periods. This "Gap" analysis is one measure of the Company's sensitivity to interest rate fluctuations. A Gap is considered positive when the amount of interest-sensitive assets maturing or repricing within a period exceeds the amount of interest-sensitive liabilities maturing or repricing within that period; a Gap is considered negative when the converse occurs. During a decreasing interest rate environment, a negative Gap would tend to result in an increase in net interest income while a positive Gap would tend to adversely affect net interest income. In a rising interest rate environment, an institution with a positive Gap would generally expect an increase in net interest income, whereas an institution with a negative Gap would generally be expected to experience the opposite result.
The Company's targeted Gap range is +/- 10% within 3 months or less and +/- 10% within 4 to 12 months with a cumulative 1 year Gap at +/- 10%. The table presents categorical balances based on contractual maturities and repricing opportunities. The resulting amounts have been modified to reflect a management adjustment that pertains to NOW and savings accounts. While these core deposit accounts are subject to immediate withdrawal, the management adjustment is based on the fact that interest changes on such accounts have been infrequent and have not coincided with changes in market interest rates. In addition, a management adjustment has been made in the first maturity interval for the uncollected portion of cash and due from banks.
Repricing / Maturity Interval Within
-----------------------------------------------------------------------------------
December 31, 1997 3 months 4 months One year Over Non-
or less to 12 months to 5 years 5 years Maturing(1) Total
-----------------------------------------------------------------------------------
Interest-earning assets: (Dollars in Thousands)
------------------------
Loans $ 118,184 $ 49,270 $ 131,471 $ 15,760 $ 1,705 $ 316,390
Securities available-for-sale:
Taxable 8,926 24,004 54,251 1,259 0 88,440
Tax exempt 0 750 0 0 0 750
Securities held-to-maturity:
Taxable 2,524 9,494 79,217 17,981 0 109,216
Tax exempt 0 12 11 0 0 23
Federal funds sold 51,000 0 0 0 0 51,000
Interest-bearing deposits in other banks: 24 0 0 0 0 24
--------- -------- --------- -------- ------- ---------
Total interest-earning assets 180,658 83,530 264,950 35,000 1,705 565,843
--------- -------- --------- -------- ------- ---------
Interest-bearing liabilities:
Deposits:
NOW accounts 93,825 0 0 0 0 93,825
Savings accounts 55,983 0 0 0 0 55,983
Money market deposits 50,110 20,951 0 0 0 71,061
Time deposits 101,719 55,263 14,297 0 0 171,279
--------- -------- --------- -------- ------- ---------
Total interest-bearing deposits 301,637 76,214 14,297 0 0 392,148
Securities sold under agreements
to repurchase 32,850 0 0 0 0 32,850
Other borrowed funds 10,972 1,048 0 1,454 0 13,474
--------- -------- --------- -------- ------- ---------
Total interest-bearing liabilities 345,459 77,262 14,297 1,454 0 438,472
--------- -------- --------- -------- ------- ---------
Interest-earning assets minus
interest-bearing liabilities(Gap) ($164,801) $ 6,268 $ 250,653 $ 33,546 $ 1,705 $ 127,371
Management adjustment 126,189 (30,489) (60,978) 0 0 34,722
--------- -------- --------- -------- ------- ---------
Management-adjusted Gap ($ 38,612) ($ 24,221) $ 189,675 $ 33,546 $ 1,705 $ 162,093
Management-adjusted Cumulative Gap (62,833) 126,842 160,388 162,093 --
Management-adjusted Gap / Total Assets -6.08% -3.81% 29.84% 5.28% 0.27% 25.50
Management-adjusted Cumulative Gap /
Total Assets -9.89% 19.96% 25.24% 25.50% --
(1) Represents loans placed on nonaccrual status.
|
LENDING ACTIVITIES
The following summary shows the composition of the loan portfolio at the dates indicated.
December 31,
1997 1996 1995
---- ---- ----
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
-------- -------- -------- -------- -------- --------
(Dollars In Thousands)
Construction and land development $ 7,549 2.4% $ 3,576 1.2% $ 1,444 0.5%
Commercial and industrial 50,560 16.0 41,006 14.2 37,811 13.2
Industrial revenue bonds 2,693 0.9 3,030 1.1 3,362 1.2
Commercial real estate 140,270 44.3 133,757 46.4 130,173 45.6
Residential real estate 76,385 24.1 76,638 26.6 82,132 28.8
Consumer 19,254 6.1 12,749 4.4 9,243 3.2
Home equity 19,031 6.0 17,330 6.0 21,130 7.4
Overdrafts 648 0.2 194 0.1 143 0.1
-------- ----- -------- ----- -------- -----
Loans(net of unearned
discount) $316,390 100.0% $288,280 100.0% $285,438 100.0%
======== ===== ======== ===== ======== =====
|
1994 1993
---- ----
Percent Percent
Amount of Total Amount of Total
-------- -------- -------- --------
Construction and land development $ 1,924 0.7% $ 1,228 0.5%
Commercial and industrial 33,283 12.2 29,664 10.9
Industrial revenue bonds 3,873 1.4 4,186 1.5
Commercial real estate 122,538 44.9 120,064 44.2
Residential real estate 82,028 30.1 85,260 31.3
Consumer 12,017 4.4 15,208 5.6
Home equity 16,826 6.2 16,180 5.9
Overdrafts 232 0.1 250 0.1
-------- ----- -------- -----
Loans(net of unearned
discount) $272,721 100.0% $272,040 100.0%
======== ===== ======== =====
|
The following table summarizes the remaining maturity distribution of certain components of the Company's loan portfolio at December 31, 1997. The table excludes loans secured by one-to-four family residential real estate and loans for household family and other personal expenditures. Maturities are presented as if scheduled principal amortization payments are due on the last contractual payment date.
Remaining Maturities of Selected Loans at December 31, 1997
One Year One to Five Over
or Less Years Five Years Total
-------- ----------- ---------- --------
(In Thousands)
Construction and land development $ 4,927 $ 2,622 $ 0 $ 7,549
Commercial and industrial 36,499 13,964 97 50,560
Industrial revenue bonds 50 1,902 741 2,693
Commercial real estate 64,668 72,437 3,165 140,270
-------- -------- -------- --------
Total $106,144 $ 90,925 $ 4,003 $201,072
======== ======== ======== ========
|
The following table indicates the rate variability of the above loans due after one year.
December 31, 1997
One to Five Over
Years Five Years Total
------- ------- -------
(In Thousands)
Predetermined interest rates $75,535 $ 3,919 $79,454
Floating or adjustable interest rates 15,390 83 15,473
------- ------- -------
Total $90,925 $ 4,002 $94,927
======= ======= =======
|
Individual loan officers have designated lending authorities established by the Board of Directors, with larger loans requiring a second approval. The Bank has an Executive Committee of the Board of Directors which meets monthly and ratifies or approves all credits above a specified size. In addition, the Company has an Executive Management Committee which meets monthly and monitors the Company's lending policies and practices. The members of the Executive Management Committee are: Marshall M. Sloane, Chairman, President and CEO; George F. Swansburg, Executive Vice President; Jonathan G. Sloane, Senior Vice President; Paul V. Cusick, Jr., Vice President and Treasurer; all of the Company, and Donald H. Lang and William J. Sloboda, both Executive Vice Presidents of the Bank.
The Company's commercial and industrial (C&I) loan customers represent various small and middle market established businesses involved in manufacturing, distribution, retailing and services. Most clients are privately owned with markets that range from local to national in scope. Many of the loans to this segment are secured by liens on corporate assets and the personal guarantees of the principals. The Bank has placed greater emphasis on building its C&I base over the future. The regional economic strength or weakness impacts on the relative risks in this loan category. There is little concentration to any one business sector and loan risks are generally diversified among many borrowers.
Commercial real estate loans are extended to finance various manufacturing, warehouse, light industrial, office, retail and residential properties in the Banks's market area to generally include Eastern Massachusetts and Southern New Hampshire. Loans are normally extended in amounts up to a maximum of 80% of appraised value and normally for terms up to three to five years. Amortization schedules are long term and thus a balloon payment is due at maturity. Under most circumstances, the Bank will offer to re-write or otherwise extend the loan at prevailing interest rates. During recent years, the Bank has emphasized non-residential type owner-occupied properties. This complements the above C&I emphasis placed on the operating business entities and will be continued. The regional economic environment impacts on the risk to both non-residential and residential mortgages. This environment has improved over the recent period. Together the above factors have stabilized many sections of the regional market.
Residential real estate (1-4 family) includes two categories of loans. Approximately $14 million of loans are classified as "Commercial and Industrial" type loans secured by 1-4 family real estate. Primarily, these are small businesses with modest capital or shorter operating histories wherein the collateral mitigates some risk. The collateral position notwithstanding, this category of loans shares similar risk characteristics as the C&I loans. The balance of loans in this category are mostly 1-4 family residential properties located in the Bank's market area. General underwriting criteria are largely the same as FNMA but normally only one or three year adjustable interest rates are used. The Bank does utilize mortgage insurance in order to provide lower down payment products and has provided a "First Time Homebuyer" product to encourage new home ownership. Residential real estate loan volume has declined but nonetheless remains a core consumer product. The regional environment impacts on the risks to this category. In the recent period, the environment has improved, and the market has generally been stable. Declining interest rates could negatively impact the risk on adjustable interest rate loans as they are repriced in the future.
Home equity loans are extended as both first and second mortgages on owner occupied residential properties in the Bank's market area. Loans are underwritten to a maximum loan to value of 75%.
The Bank does intend to maintain a market for construction loans, principally for smaller local residential projects or an owner occupied commercial project. Independent appraisals of the project and the costs are obtained and funds are advanced over the life of the project as inspections of completed work warrant. Individual consumer residential home construction loans are also extended on a similar basis.
Bank officers evaluate the feasibility of construction projects, based on independent appraisals of the project, architects or engineers evaluations of the cost of construction, and other relevant data. At December 31, 1997, the Company was obligated to advance a total of $321 thousand to complete projects under construction.
At December 31, 1997 approximately 44% of the Company's loan portfolio consisted of commercial real estate loans. Construction loans had increased to 2.4 % of the Company's outstanding loans.
At December 31, 1997, the Company's residential mortgage loans amounted to $76.4 million. The Company's consumer loan portfolio amounted to $38.3 million at December 31, 1997, primarily consisting of home equity loans amounting to $19.0 million and personal lines of credit, motor vehicle loans and other installment loans amounting to $19.3 million.
NONPERFORMING ASSETS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
Loans are placed on nonaccrual status when any payment of principal and/or interest is 90 days or more past due, unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection. The Company monitors closely the performance of its loan portfolio. In addition to internal loan review, the Company has contracted with an independent organization to review the Company's commercial and commercial real estate loan portfolios. This independent review was performed in each of the past five years. The status of delinquent loans, as well as situations identified as potential problems, are reviewed on a regular basis by senior management and monthly by the Board of Directors of the Bank.
The following table summarizes the Company's nonperforming assets at the dates indicated.
December 31,
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(Dollars in Thousands)
Loans on nonaccrual $ 1,705 $ 2,140 $ 3,751 $ 2,954 $ 4,676
Loans not included above
which are nonperforming
troubled debt restructurings 1,026 1,164 1,457 3,113 5,427
Other real estate owned , net -0- 182 845 3,192 10,388
------- ------- ------- ------- -------
Total nonperforming assets $ 2,731 $ 3,486 $ 6,053 $ 9,259 $20,491
======= ======= ======= ======= =======
Percentage of nonperforming
assets to total loans and
other related assets 0.86% 1.21% 2.11% 3.36% 7.26%
======= ======= ======= ======= =======
|
The lower level of nonperforming assets in 1997 resulted from a reduction in new additions to nonperforming assets during the year combined with an improvement in the resolution of nonperforming assets including payments on nonperforming loans and sales of other real estate owned (OREO).
The Company identifies loans renegotiated prior to January 1, 1995 at then below market rates as troubled debt restructurings. Interest income associated with the $3,306,000 of troubled debt restructurings and performing impaired loans at December 31, 1997 amounted to $230,000 for the year then ended. Interest income for the same period would have amounted to $277,000 under the original terms and agreements of the notes. As a result of placing loans on non-accrual status, the Company has foregone $118,000 of interest income during 1997 compared to $172,000 during 1996.
In addition to the above, the Company is monitoring closely $7.7 million of loans on which management is concerned with the ability of the borrowers to perform. The majority of the loans are secured by real estate properties experiencing higher than expected vacancies and lower than expected rental revenue. While the properties are considered to have adequate value to cover the loan balances at December 31, 1997, such values can fluctuate with changes in the economy and the real estate market.
There were no impaired loans with specific reserves at December 31, 1997 and 1996 because, in the opinion of management, none required a specific reserve. All impaired loans have been measured using the fair value of the collateral method.
The following table summarizes the Company's loans past due 90 days or more and still accruing and impaired loans at the dates indicated.
December 31,
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(Dollars in Thousands)
Loans past due 90 days or
more and still accruing $ 7 $ 192 $ 87 $ 114 $ 502
Impaired loans $3,515 $3,055 $3,356 n/a n/a
|
The Company maintains an allowance for loan losses in an amount determined by management on the basis of the character of the loans, loan performance, the financial condition of borrowers, the value of collateral securing loans and other relevant factors. The following table summarizes the changes in the Company's allowance for loan losses for the years indicated.
Year Ended December 31,
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(Dollars in Thousands)
Year end loans outstanding
(net of unearned discount) $316,390 $288,280 $285,438 $272,721 $272,040
======== ======== ======== ======== ========
Average loans outstanding
(net of unearned discount) $304,147 $281,943 $279,555 $267,123 $289,007
======== ======== ======== ======== ========
Balance of allowance for
loan losses at
beginning of year $ 4,179 $ 4,193 $ 4,239 $ 5,129 $ 5,644
-------- -------- -------- -------- --------
Loans charged-off:
Commercial 25 2 2 781 657
Construction and land development 0 0 0 292 23
Commercial real estate 48 380 1,144 433 2,024
Residential real estate 363 801 551 1,016 1,075
Consumer 253 120 131 242 408
-------- -------- -------- -------- --------
Total loans charged-off 689 1303 1,828 2,764 4,187
-------- -------- -------- -------- --------
Recoveries of loans previously charged-off:
Commercial 76 78 39 23 32
Real estate 162 163 134 204 297
Consumer 58 28 49 27 43
-------- -------- -------- -------- --------
Total recoveries of loans
previously charged-off 296 269 222 254 372
-------- -------- -------- -------- --------
Net loans charged-off 393 1,034 1,606 2,510 3,815
-------- -------- -------- -------- --------
Additions to allowance charged to
operating expense 660 1,020 1,560 1,620 1,800
Acquired allowance -- -- -- -- 1,500
-------- -------- -------- -------- --------
Balance at end of year $ 4,446 $ 4,179 $ 4,193 $ 4,239 $ 5,129
======== ======== ======== ======== ========
Ratio of net charge-offs during
the year to average loans
outstanding 0.13% 0.37% .57% .94% 1.32%
======== ======== ======== ======== ========
Ratio of allowance for
loan losses to loans
outstanding 1.41% 1.45% 1.47% 1.55% 1.89%
======== ======== ======== ======== ========
|
The provision for 1997, while below the prior four year average, remains above historical levels and reflects significant improvements in the loan portfolio. At December 31, 1997 nonperforming assets were $2.7 million or .86% of loans and related assets. Such figures are significantly lower than those at the end of the last four years.
While the Company expects a similar level of charge-offs in future periods, the pace of the charge-offs depends on many factors including the national and regional economy. Cyclical lagging factors may result in charge-offs being higher than historical levels.
The allowance for loan losses is an estimate of the amount needed for an adequate reserve to absorb losses in the existing loan portfolio. This amount is determined by an evaluation of the loan portfolio including input from an independent organization engaged to review selected larger loans, a review of loan loss experience and current economic conditions. At December 31, the allowance was comprised of the following components.
1997 1996 1995 1994
---- ---- ---- ----
Percent of Percent of Percent of Percent of
loans in loans in loans in loans in
each category each category each category each category
Balance at end of to total to total to total to total
period applicable to Amount loans Amount loans Amount loans Amount loans
-------------------- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars In Thousands)
Construction and land development $ 104 2.4% $ 48 1.2% $ 21 0.5% $ 49 0.7%
Commercial and industrial 716 16.0 660 14.2 595 13.2 530 12.2
Industrial revenue bonds 17 0.9 17 1.1 23 1.2 26 1.4
Commercial real estate 2,138 44.3 2,201 46.4 2,095 45.6 2,158 44.9
Residential real estate 846 24.1 830 26.6 1,031 28.8 1,025 30.1
Consumer 402 6.1 233 4.4 228 3.2 293 4.4
Home equity 214 6.0 187 6.0 198 7.4 155 6.2
Overdrafts 9 0.2 3 0.1 2 0.1 3 0.1
------- ----- ------ ----- ------ ----- ------ -----
$ 4,446 100.0% $4,179 100.0% $4,193 100.0% $4,239 100.0%
======= ===== ====== ===== ====== ===== ====== =====
|
1993
----
Percent of
loans in
each category
Balance at end of to total
period applicable to Amount loans
-------------------- ------ -----
(Dollars In Thousands)
Construction and land development $ 102 0.5%
Commercial and industrial 958 10.9
Industrial revenue bonds 23 1.5
Commercial real estate 2,422 44.1
Residential real estate 1,023 31.3
Consumer 462 5.6
Home equity 139 5.9
Overdrafts 0 0.1
------ -----
$5,129 100.0%
====== =====
|
Investment Activities
The following table sets forth certain information regarding the Company's investment portfolio. Dollar amounts reflect carrying values. At December 31, 1997, the market value of securities available-for-sale was $89.2 million compared to the amortized cost of $89.0 million for such securities. At December 31, 1997, the market value of securities held-to-maturity was $109.5 million, compared to the amortized cost of $109.2 million of such securities.
Securities available-for-sale Securities held-to-maturity
December 31, December 31,
----------------------------------- -----------------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
(In Thousands) (In Thousands)
Balance at end of
period applicable to
U.S. Government and Agencies $84,763 $ 77,155 $ 97,482 $107,117 $105,582 $74,710
Obligations of states and political
subdivison 750 1,241 1,510 22 34 179
Other 3,677 2,619 1,762 2,100 2,099 3,098
------- -------- -------- -------- -------- -------
$89,190 $ 81,015 $100,754 $109,239 $107,715 $77,987
======= ======== ======== ======== ======== =======
|
The following table sets forth the maturities of the Company's investment securities on the basis of their carrying values at December 31, 1997 and the weighted average yields of securities, which are based on amortized cost, calculated on a fully taxable equivalent basis.
Securities Available-for-Sale
-----------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
-------- ---------- ---------- --------- -----
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars In Thousands)
U.S Government and
Agencies $29,503 5.97% $54,251 6.24% $1,000 6.50% $ 0 0.00% $84,754 6.15%
Obligations of states
and political
subdivisions 750 4.18% 0 0.00% 0 0.00% 0 0.00% 750 4.18%
Other 0 0.00% 0 0.00% 259 7.80% 3,427 6.38% 3,686 6.48%
------- ------- ------ ------ -------
$30,253 5.92% $54,251 6.24% $1,259 6.77% $3,427 6.38% $89,190 6.15%
======= ===== ======= ==== ====== ==== ====== ==== ======= ====
|
Securities Held-To-Maturity
---------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
-------- ---------- ---------- --------- -----
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars In Thousands)
U.S Government and
Agencies $ 9,970 6.12% $79,191 6.37% $16,956 6.57% $1,000 6.65% $107,117 6.38%
Obligations of states
and political
subdivisions 11 8.65% 11 8.65% 0 0.00% 0 0.00% 22 8.65%
Other 2,025 4.91% 50 4.19% 25 5.50% 0 0.00% 2,100 4.90%
----- ------- ------- ------ --------
$12,006 5.91% $79,252 6.37% $16.981 6.57% $1,000 6.65% $109,239 6.35%
======= ==== ======= ==== ======= ==== ====== ==== ======== ====
|
Obligations of states and political subdivisions consist primarily of obligations of the Commonwealth of Massachusetts and entities within it having other relationships with the Company. The Company regularly bids on tax anticipation notes and other short-term instruments of municipalities who have depository relationships with it. The Company also writes equipment leases to finance acquisition of computers, fire trucks, snow plows and other equipment used by municipalities.
Except for obligations of the United States Government, the portfolio at December 31, 1997 did not include securities of any single issuer in an amount in excess of 10% of stockholders' equity.
DEPOSITS
The Company offers savings accounts, NOW accounts, demand deposits, certificates of deposit and money market accounts. The Company offers cash management accounts which provide either automatic transfer of funds above a specified level from the customer's checking account to a money market account or short-term borrowings. Also, an account reconciliation service is offered whereby the Company provides a computerized report balancing the customer's checking account.
Interest rates on deposits are set weekly by the Treasurer, based on factors including loan demand, maturities and a review of competing interest rates offered. Interest rate policies are reviewed periodically by the Executive Management Committee.
The following table shows the average amount of and average interest rate paid on various categories of deposits during the years indicated.
1997 1996 1995
---- ---- ----
Average Average Average
Interest Interest Interest
Average Rate Average Rate Average Rate
Amount Paid Amount Paid Amount Paid
------ ---- ------ ---- ------ ----
Interest-bearing deposits:
NOW accounts $ 91,938 2.79% $ 84,620 2.80% $ 82,628 3.11%
Savings accounts 55,911 2.56% 55,905 2.57% 50,916 2.62%
Money market accounts 66,936 2.82% 70,735 2.95% 78,029 3.19%
Time deposits of $100,000 or more 35,939 5.14% 34,542 5.19% 26,872 5.50%
Other time deposits 119,668 5.54% 123,495 5.85% 107,897 5.69%
-------- -------- --------
Total interest-bearing deposits 370,392 3.88% 369,297 4.04% 346,342 4.04%
Non interest-bearing demand deposits 105,417 99,179 86,328
-------- -------- --------
Total average deposits $475,809 3.02% $468,476 3.18% $432,670 3.24%
======== ==== ======== ==== ======== ====
|
Total deposits at December 31, 1997 amounted to $515 million, including $63 million of time deposits of $100,000 or more. Traditionally, the Company experiences a decline in deposits during the first and third quarters of each year because of the deposit cycles of certain of its customers, notably municipalities.
The Company's time certificates of deposit in amounts of $100,000 or more at December 31, 1997 mature as follows.
(In Thousands)
Three months or less $49,960
Three through six months 6,193
Six through twelve months 6,279
Over twelve months 782
-------
$63,214
=======
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BORROWED FUNDS
The Company sells securities under repurchase agreements and enters into other borrowings to obtain funds to support asset growth. Pertinent data relating to borrowed funds is presented below.
1997 1996 1995
---- ---- ----
(Dollars In Thousands)
Securities sold under agreements to repurchase:
Amount outstanding at year end $32,850 $17,790 $21,580
Weighted average interest rate
at end of year 4.49% 4.34% 4.25%
Maximum amount outstanding at
any month end during year $39,060 $17,790 $21,580
Daily average amount outstanding
during year $24,994 $16,654 $14,390
Weighted average interest rate
during year 4.30% 4.28% 4.39%
Other borrowed funds:
Amount outstanding at year end $13,474 $12,353 $ 1,897
Weighted average interest rate
at end of year 6.96% 7.16% 5.21%
Maximum amount outstanding at
any month end during year $36,609 $17,577 $ 1,897
Daily average amount outstanding
during year $ 7,908 $ 3,135 $ 960
Weighted average interest rate
during year 6.21% 5.81% 5.42%
|
Securities sold under agreements to repurchase are primarily over-night demand obligations and are collateralized by U.S. Government and Agency securities.
OTHER SERVICES
In addition to fees derived from traditional banking activities such as loan origination fees, the Company derives revenues from its automated lock box collection system and full service securities brokerage offered through Commonwealth Equity Services, Inc., a registered securities broker-dealer and investment adviser.
Under the lock-box program, which is not tied to extensions of credit by the Company, the Company's customer arranges for payments of its accounts receivable to be made directly to the Company. The Company records on its computer the amounts paid to its customers, deposits the funds to the customer's account with the Company and provides computerized records of the amounts received to the Company's customers. Typical customers for the lock box service are municipalities who use it to automate tax collections, cable TV companies, and other commercial enterprises.
Through Commonwealth Equity Services, Inc., the Bank provides full service securities brokerage services. Registered representatives employed by the Bank offer investment advice, execute transactions and assist customers in financial and retirement planning. Commonwealth Equity Services, Inc., provides research to and supervises the representatives in exchange for payment by the Bank for a fixed fee and a share in the commission revenues.
EMPLOYEES
As of December 31, 1997, the Company had 201 full-time and 85 part-time employees. The Company's employees are not represented by any collective bargaining unit. The Company believes that its employee relations are good.
HOLDING COMPANY REGULATION
The Company is a bank holding company as defined by the Bank Holding Company Act of 1956, as amended (the "Holding Company Act") and is registered as such with the Federal Reserve Board (the "FRB"), which is responsible for administration of the Holding Company Act. As required by the Holding Company Act, the Company files with the FRB an annual report regarding its financial condition and operations, management and intercompany relationships of the Company and the Bank. It is also subject to examination by the FRB and must obtain FRB approval before (I) acquiring direct or indirect ownership or control of more than 5% of the voting stock of any bank, unless it already owns or controls a majority of the voting stock of that bank, (ii) acquiring all or substantially all of the assets of a bank, except through a subsidiary which is a bank, or (iii) merging or consolidating with any other bank holding company. A bank holding company must also give the FRB prior written notice before purchasing or redeeming its equity securities if the gross consideration for the purchase or redemption, when aggregated with the net consideration paid by the company for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the Company's consolidated net worth.
The Holding Company Act prohibits a bank holding company, with certain
exceptions, from (I) acquiring direct or indirect ownership or control of any
voting shares of any company which is not a bank or a bank holding company, or
(ii) engaging in any activity other than managing or controlling banks, or
furnishing services to or performing services for its subsidiaries. A bank
holding company may own, however, shares of a company engaged in activities
which the FRB has determined are so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Such activities include
leasing real or personal property under certain conditions; operating as a
mortgage finance or factoring company; servicing loans and other extensions of
credit; acting as a fiduciary; acting as investment or financial advisor under
certain conditions; acting as insurance agent or broker principally in
connection with extension of credit by the bank holding company or any
subsidiary; acting as underwriter for credit life insurance and credit accident
and health insurance which is directly related to extension of credit by the
bank holding company or any subsidiary; arranging commercial real estate equity
financing under certain circumstances; providing securities brokerage and
related services as agent for the account of customers; providing bookkeeping or
data processing services for the bank holding company, its affiliates and other
institutions, with certain limitations; making certain equity and debt
investments in community rehabilitation and development corporations; and
providing certain kinds of management consulting advice to unaffiliated banks.
A bank holding company and its subsidiaries are prohibited from acquiring any voting shares of, interest in, or all or substantially all of the assets of, any bank located outside the state in which the operations of the bank holding company's banking subsidiaries are principally conducted, unless the acquisition is specifically authorized by the statutes of the state in which the bank to be acquired is located.
The Company and its subsidiaries are examined by federal and state regulators. The FRB has responsibility for holding company activities and performed a review in 1997.
The regulatory standard for capital adequacy assigns risk factors to asset categories and certain off-balance sheet commitments. The fully-phased in 1992 standard requires a tier-1 capital to risk assets ratio of 4.00% and a total capital to risk assets ratio of 8.00%. At December 31, 1997, the Company's ratios were 15.51% and 16.76%, respectively. The Bank also exceeded these risk-weighted capital measures at December 31, 1997. In addition to these risk based capital requirements, federal banking regulators have leverage guidelines. The minimum leverage requirement is 4% as measured by the ratio of core capital, net of intangible assets, to total assets. At December 31, 1997 the Company's ratio was 9.09%. The Bank also exceeded the leverage requirement at December 31, 1997.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
On December 19, 1991, the FDIC Improvement Act of 1991 (the "1991 Act") was enacted. This legislation seeks to recapitalize the Bank Insurance Fund of the FDIC ("BIF") so that the BIF can continue to resolve its caseload of failed banks. The recapitalization will be funded through, among other things, increased deposit insurance assessments payable by BIF-insured institutions, which will increase the cost of doing business by all BIF-insured institutions, including the Company's subsidiary. The 1991 Act also provides for, among other things: enhanced federal supervision of depository institutions, including greater authority for the appointment of a conservator or receiver for undercapitalized institutions; the establishment of risk-based deposit insurance premiums; a requirement that the federal banking agencies amend their risk-based capital requirements to include components for interest-rate risk, concentration of credit risk, and the risk of nontraditional activities; expanded authority for cross-industry mergers and acquisitions; mandated consumer protection disclosures with respect to deposit accounts; and imposed restrictions on the activities of state-chartered banks, including the Company's subsidiary.
Provisions of the 1991 Act relating to the activities of state-chartered banks may significantly impact the way the Company conducts its business. In this regard, the 1991 Act provides that, effective one year from date of enactment, insured state banks, such as the Company's subsidiary, may not engage as principal in any activity that is not permissible for a national bank, unless the FDIC has determined that the activity would pose no significant risk to the BIF and the state bank is in compliance with applicable capital standards. Activities of subsidiaries of insured state banks are similarly restricted to those activities permissible for subsidiaries of national banks, unless the FDIC has determined that the activity would pose no significant risk to the BIF and the state bank is in compliance with applicable capital standards.
COMPETITION
The Company experiences substantial competition in attracting deposits and making loans from commercial banks, thrift institutions and other enterprises such as insurance companies and mutual funds. These competitors include several major commercial banks whose greater resources may afford them a competitive advantage by enabling them to maintain numerous branch offices and mount extensive advertising campaigns.
ITEM 2. PROPERTIES
The Company owns its main banking office, headquarters, and operations center in Medford, and 11 of the 14 other facilities in which its branch offices are located. The remaining offices are occupied under leases expiring on various dates from 1997 to 2026. The Company has renovated its Medford operations center to provide space for its Executive and Lending staff.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to various claims and lawsuits arising in the course of their normal business activities. Although the ultimate outcome of these suits cannot be ascertained at this time, it is the opinion of management that none of these matters, when resolved, will have a material adverse effect on the Company's consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Security Holders during the fourth quarter of the fiscal year ended December 31, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Class A Common Stock of the Company is traded on the NASDAQ system. The price range of the Company's common stock since January 1, 1996 is shown on page 19.
The shares of Class A Common Stock are not entitled to vote in the election of Company Directors but, in limited circumstances, are entitled to vote as a class on certain extraordinary transactions, including any merger or consolidation (other than one in which the Company is the surviving corporation or one which by law may be approved by the directors without any stockholder vote) or the sale, lease, or exchange of all or substantially all of the property and assets of the Company. Since the vote of a majority of the shares of Class B Common Stock, voting as a class, is required to approve certain extraordinary corporate transactions, the Board of Directors of the Company has power to prevent any takeover of the Company not approved by them in their capacity as Class B stockholders.
(b) Approximate number of equity security holders as of December
31, 1997.
Approximate Number
Title of Class of Record Holders
Class A Common Stock 347
Class B Common Stock 79
|
(C) Under the Company's Articles of Organization, the holders of the Class A Common Stock are entitled to receive dividends per share equal to at least 200% of that paid, if any, from time to time on each share of Class B Common Stock.(cont.)
The following table shows the dividends paid by the Company on the Class A and Class B Common Stock for the periods indicated.
Dividends Per Share
Class A Class B
------- -------
1995
First quarter $ .030 $ .0042
Second quarter .030 .0042
Third quarter .030 .0042
Fourth quarter .030 .0042
1996
First quarter $ .040 $ .0056
Second quarter .040 .0056
Third quarter .040 .0056
Fourth quarter .040 .0056
1997
First quarter $ .050 $ .0070
Second quarter .050 .0070
Third quarter .050 .0070
Fourth quarter .050 .0070
|
As a bank holding company, the Company's ability to pay dividends is dependent in part upon the dividend payments it receives from the Bank, which are subject to certain restrictions on the payment of dividends. A Massachusetts trust company may pay dividends out of net profits from time to time, provided that either (I) the trust company's capital stock and surplus account equal an aggregate of at least 10% of its deposit liability, or (ii) the amount of its surplus account is equal to at least the amount of its capital account.
ITEM 6. SELECTED FINANCIAL DATA
The information required herein is shown on page 19 and 20.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required herein is shown on pages 21 through 24.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required herein is shown on page 23.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required herein is shown on pages 25 through 44.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------
1997 1996 1995
------------------------------------------------------------------------------------
(dollars in thousands except share data)
YEAR-END
Total assets $ 631,125 $ 560,857 $ 531,928
Total loans 316,390 288,280 285,438
Total deposits 515,449 476,135 458,615
Total stockholders' equity 53,857 47,489 42,935
YEARLY AVERAGES
Total assets $ 566,827 $ 540,396 $ 494,485
Total earning assets 510,028 483,109 442,837
Total securities available-for-sale 83,396 91,524 71,839
Total securities held-to-maturity 109,491 94,505 62,338
Total loans 304,147 281,943 279,555
Total deposits 475,809 468,476 432,670
Total borrowed funds 32,902 19,789 15,350
Total stockholders' equity 50,329 44,791 40,381
EARNINGS
Net income $ 6,823 $ 5,434 $ 4,574
Net interest income, taxable equivalent 25,448 23,132 21,502
Other operating income 4,994 4,761 4,722
Operating expenses 18,600 17,874 18,224
PERFORMANCE MEASURES
Earnings per share, basic $ 1.18 $ 0.95 $ 0.80
Earnings per share, diluted $ 1.17 $ 0.93 $ 0.78
Return on average stockholders' equity 13.56% 12.13% 11.33%
Book value per share at December 31 $ 9.30 $ 8.25 $ 7.50
Return on average assets 1.20% 1.01% .92%
COMMON SHARE DATA
Average shares outstanding, basic 5,772,135 5,736,230 5,722,646
Average shares outstanding, diluted 5,830,910 5,818,942 5,831,042
Shares outstanding at year-end 5,790,417 5,758,467 5,724,117
|
PER SHARE DATA
1997, Quarter Ended December 31, September 30, June 30, March 31, ------------------------------------------------------------------------------------------------- Market price range (Class A) High $ 19.00 $ 17.25 $ 13.875 $ 14.125 Low 16.625 13.25 12.625 12.75 Dividends class A 0.05 0.05 0.05 0.05 Dividends class B 0.007 0.007 0.007 0.007 |
1996, Quarter Ended December 31, September 30, June 30, March 31, ------------------------------------------------------------------------------------------------- Market price range (Class A) High $ 14.50 $ 13.00 $ 12.875 $ 11.375 Low 12.25 11.50 11.00 10.00 Dividends class A 0.04 0.04 0.04 0.04 Dividends class B 0.0056 0.0056 0.0056 0.0056 |
SELECTED FINANCIAL DATA
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(dollars in thousands except share data)
FOR THE YEAR
Interest income.............................. $ 41,216 $ 38,777 $ 35,988 $ 30,461 $ 29,262
Interest expense............................. 15,922 15,805 14,686 10,924 11,813
---------- ---------- ---------- ---------- ----------
Net interest income....................... 25,294 22,972 21,302 19,537 17,449
Provision for loan losses.................... 660 1,020 1,560 1,620 1,800
---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses......................... 24,634 21,952 19,742 17,917 15,649
Other operating income....................... 4,994 4,761 4,722 5,420 6,833
Operating expenses........................... 18,600 17,874 18,224 19,265 20,654
---------- ---------- ---------- ---------- ----------
Income before income taxes................ 11,028 8,839 6,240 4,072 1,828
Provision for income taxes................... 4,205 3,405 1,666 768 605
---------- ---------- ---------- ---------- ----------
Net income................................ $ 6,823 $ 5,434 $ 4,574 $ 3,304 $ 1,223
========== ========== ========== ========== ==========
Average shares outstanding, basic............ 5,772,135 5,736,230 5,722,646 5,722,450 5,722,450
Average shares outstanding, diluted.......... 5,830,910 5,818,942 5,831,042 5,832,093 5,722,450
Earnings per share:
Basic..................................... $ 1.18 $ 0.95 $ 0.80 $ 0.58 $ 0.21
Diluted................................... $ 1.17 $ 0.93 $ 0.78 $ 0.57 $ 0.21
Dividend payout ratio........................ 11.1% 10.9% 9.6% 10.9% 28.9%
AT YEAR-END
Assets....................................... $ 631,125 $ 560,857 $ 531,928 $ 465,419 $ 469,823
Loans........................................ 316,390 288,280 285,438 272,721 272,040
Deposits..................................... 515,449 476,135 458,615 409,542 421,395
Stockholders' equity......................... 53,857 47,489 42,935 37,553 35,505
Book value per share......................... $ 9.30 $ 8.25 $ 7.50 $ 6.56 $ 6.20
SELECTED FINANCIAL PERCENTAGES
Return on average assets..................... 1.20% 1.01% 0.92% 0.70% 0.25%
Return on average stockholders' equity....... 13.56% 12.13% 11.33% 9.11% 3.48%
Net yield on average earning assets,
taxable equivalent........................ 4.99% 4.79% 4.86% 4.70% 4.16%
Net charge-offs as a percent of
average loans............................. 0.13% 0.37% 0.57% 0.94% 1.32%
Average stockholders' equity to
average assets............................ 8.88% 8.29% 8.17% 7.67% 7.30%
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
Century Bancorp, Inc. (the "Company") had net income of $6,823,000 for the year ended December 31, 1997, compared with net income of $5,434,000 for year ended December 31, 1996 and net income of $4,574,000 for the year ended December 31, 1995. Basic earnings per share were $1.18 in 1997 compared to $0.95 in 1996 and $0.80 in 1995. Diluted earnings per share were $1.17 in 1997 compared to $0.94 in 1996 and $0.79 in 1995.
Total assets were $631,125,000 at December 31, 1997, an increase of 12.5% from total assets of $560,857,000 on December 31, 1996, which, in turn, were 5.4% higher than total assets of $531,928,000 on December 31, 1995.
On December 31, 1997, stockholders' equity totaled $53,857,000 compared with $47,489,000 on December 31, 1996, and $42,935,000 on December 31, 1995. Book value increased to $9.30 at December 31, 1997 from $8.25 on December 31, 1996, which had increased from $7.50 on December 31, 1995.
On December 10, 1997 the Company announced an agreement to merge Haymarket Cooperative Bank, based in Boston, Massachusetts, into Century Bank and Trust Company. The agreement called for the Bank to acquire assets of approximately $142 million and operate two banking offices located in Boston. Century Bank and Trust Company will pay approximately $20 million in cash for Haymarket Cooperative Bank and is subject to federal and state regulatory approval. The transaction will be accounted for using the purchase method of accounting.
During 1997 the Company conducted a comprehensive review of its computer systems to identify the systems that could be affected by the "Year 2000" issue and has developed an implementation plan to resolve the issue. The Year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather then the year 2000. This could result in a major system failure or miscalculations. The Company presently believes that, with the previously planned conversion to a new core processing software and modifications to existing software, the Year 2000 problem will not pose significant operational problems for the Company's computer systems as so modified and converted. The new core processing software is Year 2000 compliant and the other systems which require modifications are not significant and the cost is not material. However, if such modifications and conversions are not completed timely, the Year 2000 problem may have a material impact on the operations of the Company.
RESULTS OF OPERATIONS
The Company's operating results depend primarily on net interest income and fees received for providing services. Net interest income on a fully taxable equivalent basis increased 10.0% in 1997 to $25,448,000 compared with $23,132,000 in 1996. Interest income was affected positively by improvements in the interest earned in most categories of earning assets. Much of the Company's earning assets were repriced to improve their respective returns. Net interest income is affected by the level of interest rates, the ability of the Company's earning assets and deposits to adjust to changes in interest rates and the mix of the Company's earning assets and deposits. The net yield on earning assets on a fully taxable equivalent basis increased to 4.99% in 1997 from 4.79% in 1996 which, in turn, had decreased from 4.86% in 1995.
Average earning assets were $510,028,000 in 1997, an increase of $26,919,000 or 5.6% from the average in 1996, which was 9.1% higher than the average in 1995. Total average securities, including securities available for sale and securities held to maturity, increased 3.7% to $192,887,000. The increase in securities volume combined with a slight lengthening in the maturity of the portfolios resulted in higher securities income, which increased 4.1% to $12,156,000. Total average loans increased 7.9% to $304,147,000 after increasing $2,388,000 in 1996. The increase in loan volume combined with a slightly higher level of interest rates resulted in higher loan income, which increased by 7.8% or $2,062,000 to $28,353,000. Total loan income was $26,326,000 in 1995.
The Company's sources of funds include deposits and borrowed funds. On average, deposits showed an increase of 1.6% in 1997 after increasing by 8.3% in 1996. Borrowed funds increased by 66.3% in 1997 following an increase of 28.9% in 1996. The majority of the Company's borrowed funds are in repurchase agreements. Interest expense totaled $15,922,000 in 1997, an increase of $117,000 or .7% from 1996 when interest expense increased 7.6% from 1995. This increase in interest expense is due primarily to an increase in deposits and borrowed funds volume.
PROVISION FOR LOAN LOSS
The provision for loan losses was $660,000 in 1997 compared with $1,020,000 in 1996 and $1,560,000 in 1995. These provisions are the result of management's evaluation of the quality of the loan portfolio considering such factors as loan status, collateral values, financial condition of the borrower, the state of the economy and other relevant information.
The allowance for loan losses was $4,446,000 at December 31, 1997 compared with $4,179,000 at December 31, 1996 and $4,193,000 at December 31, 1995. Expressed as a percentage of outstanding loans at year-end, the allowance was 1.41% in 1997, 1.45% in 1996 and 1.47% in 1995.
Management believes that the allowance for loan losses is adequate. Management uses available information to provide for losses but recognizes that changes in economic conditions may result in additional losses and additional loss provisions. Also, the allowance is reviewed in conjunction with regulatory examinations. These reviews may require the Company to make additional provisions to the allowance based on judgements made by the regulators.
The Company experienced a decrease in net charge-offs in 1997 with net charge-offs as a percent of average loans outstanding at 0.13%. The comparable figures for 1996 and 1995 were 0.37% and 0.57% respectively. Non-performing loans, which include all non-accruing loans and certain restructured, accruing loans, totaled $2,731,000 on December 31, 1997, compared with $3,304,000 on December 31, 1996.
OTHER OPERATING INCOME
The Company continued to experience good results in its fee-based services in 1997. These fee-based services include deposit related services, lock-box processing, mortgage origination services and securities brokerage services.
Total other operating income in 1997, was $4,994,000 an increase of $233,000 or 4.9% compared to 1996. This increase followed an increase of $39,000 or 0.8% in 1996, compared to 1995. Service charge income, which continues to be the largest area of other operating income with $1,791,000 in 1997, saw an increase of $164,000 in 1997 as more customers paid demand deposit fees. Lock-box revenues totaled $1,467,000 up $187,000 in 1997, primarily as a result of an increase in the lock-box customer base. Brokerage commissions increased slightly to $1,171,000 in 1997 from $1,072,000 in 1996, which, saw an increase of $45,000 from 1995. Gain on sale of loans decreased to $136,000 in 1997 from $290,000 in 1996 and $217,000 in 1995. There were no security transactions in 1997, 1996 and 1995.
OPERATING EXPENSES
Total operating expenses excluding other real estate owned (OREO) expenses and writedowns were $18,578,000 in 1997 compared to $17,894,000 in 1996 and $18,007,000 in 1995. Total OREO expenses were $22,000 in 1997, $(20,000) in 1996 and $217,000 in 1995. At year-end the Company had $0 of OREO compared with $182,000 at December 31, 1996.
Salaries and employee benefits expenses increased by $379,000 or 3.2% in 1997 after increasing 3.0% in 1996. Nearly all of the increase, for 1997 and 1996, was in the salaries category and was caused by an increase in the wage base.
Occupancy expense decreased by $50,000 or 3.8% in 1997 primarily because of an increase in tenant rents. Occupancy expense decreased by 6.4% in 1996 primarily because of a decrease in building depreciation. Equipment expense increased by $5,000 in 1997 primarily because of increased equipment depreciation. Equipment expense increased by $54,000 in 1996 also because of increased equipment depreciation.
Other operating expenses increased by $350,000 in 1997, which followed a $423,000 decrease in 1996. In 1997 increases were primarily the result of increased marketing, FDIC insurance and other operating expenses. In 1996 decreases in FDIC insurance expense and legal expense were offset by increased marketing and amortization of the core deposit intangible associated with a prior branch acquisition.
PROVISION FOR INCOME TAXES
Income tax expense was $4,205,000 in 1997, $3,405,000 in 1996 and $1,666,000 in 1995. The relatively low tax expense for 1995 is a result of reductions in the valuation reserve for deferred income taxes. The effective tax rate was 38.1% in 1997, 38.5% in 1996 and 26.7% in 1995.
MARKET RISK AND ASSET LIABILITY MANAGEMENT
Market risk is the risk of loss from adverse changes in market prices and rates. The Company's market risk arises primarily from interest rate risk inherent in its lending and deposit taking activities. To that end, management actively monitors and manages its interest rate risk exposure.
The Company's profitability is affected by fluctuations in interest rates. A sudden and substantial increase in interest rates may adversely impact the Company's earnings to the extent that the interest rates borne by assets and liabilities do not change at the same speed, to the same extent, or on the same basis. The Company monitors the impact of changes in interest on its net interest income using several tools. One measure of the Company's exposure to differential changes in interest rates between assets and liabilities is shown in the Company's gap table shown below. Another measure is an interest rate risk management test. This test measures the impact on net interest income of an immediate change in interest rates in 100 basis point increments.
--------------------------------------------------------------------------------------------
Change in Interest Rates (in Basis Points) Percentage Change in Net Interest Income (1)
--------------------------------------------------------------------------------------------
+200 5.1%
+100 2.5%
-100 (2.0%)
-200 (3.8%)
|
(1) The percentage change in this column represents net interest income for 12 months in a stable interest rate environment versus the Net Interest Income in the various rate scenarios.
The Company's primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on the Company's net interest income and capital, while structuring the Company's asset-liability structure to obtain the maximum yield-cost spread on that structure. The Company relies primarily on its asset-liability structure to control interest rate risk.
The Company manages the mix, maturity and pricing of its assets and liabilities so that changes in interest rates will not impact earnings adversely. The interest rate gap is used to measure the Company's exposure. At December 31, 1997 the gap was:
------------------------------------------------------------------------------------ Subject to Interest Rate Changes Within Three Months Three to Twelve Months ------------------------------------------------------------------------------------ (in thousands) Assets $ 215,380 $ 83,530 Liabilities 253,991 107,751 ------------------------------------------------------------------------------------ Gap $ (38,611) $ (24,221) ==================================================================================== |
LIQUIDITY
Liquidity is provided by maintaining an adequate level of liquid assets that include cash and due from banks, federal funds sold and other temporary investments. Liquid assets totaled $97,892,000 on December 31, 1997 compared with $67,681,000 on December 31, 1996, and $51,114,000 on December 31, 1995. In each of the three years deposit activity has generally been adequate to support asset activity.
The source of funds for dividends paid by the Company is dividends received from the Bank. The Company and the Bank are regulated enterprises and their abilities to pay dividends are subject to regulatory review and restriction. Certain regulatory and statutory restrictions exist regarding dividends, loans and advances from the Bank to the Company. Generally, the Bank has the ability to pay dividends to the Company subject to minimum regulatory capital requirements.
CAPITAL ADEQUACY
Total stockholders' equity was $53,857,000 at December 31, 1997, compared with $47,489,000 at December 31, 1996 and $42,935,000 at December 31, 1995. The increases in all years reported were primarily the result of retained earnings less dividends paid, although there was a $123,000 increase in 1997, a $133,000 increase in 1996 and a $6,000 increase in 1995 from the execution of certain stock options.
Federal banking regulators have issued risk-based capital guidelines which assign risk factors to asset categories and off-balance sheet items. The current guidelines require a tier-1 capital-to-risk assets ratio of 4.00% and a total capital-to-risk assets ratio of 8.00%. The Company and the Bank exceeded these requirements with a tier-1 capital-to-risk assets ratio of 15.51% and 13.38% respectively, and total capital-to-risk assets ratio of 16.76% and 14.64%, respectively at December 31, 1997. Additionally, federal banking regulators have issued leverage ratio guidelines which supplement the risk-based capital guidelines. The minimum leverage ratio requirement applicable to the Company is 4.00% and at December 31, 1997, the Company and the Bank exceeded this requirement with leverage ratios of 9.09% and 7.85%, respectively.
RECENT ACCOUNTING DEVELOPMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting and displaying comprehensive income, which is defined as all changes to equity except investments by and distributions to shareholders. Net income is a component of comprehensive income, with all other components referred to in the aggregate as other comprehensive income. This statement is effective for 1998 financial statements.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which establishes standards for reporting information about operating segments. An operating segment is defined as a components of a business for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and evaluate performance.
This statement requires a company to disclose certain income statement and balance sheet information by operating segment, as well as provide a reconciliation of operating segment information to the company's consolidated balances. This statement is effective for 1998 annual financial statements.
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------------------------------------------
December 31, 1997 1996
-----------------------------------------------------------------------------------------------------------------
(dollars in thousands except share data)
ASSETS
Cash and due from banks (note 2) $ 46,868 $ 46,681
Federal funds sold and interest-bearing deposits in other banks 51,024 21,000
-----------------------
Total cash and cash equivalents 97,892 67,681
Securities available-for-sale, amortized cost $89,004,000 in 1997
and $81,140,000 in 1996 (note 3) 89,190 81,015
Securities held-to-maturity, market value $109,454,000 in 1997
and $107,331,000 in 1996 (notes 4 and 10) 109,239 107,715
Loans, net (note 5) 316,390 288,280
Less: allowance for loan losses (note 6) 4,446 4,179
-----------------------
Net loans 311,944 284,101
Bank premises and equipment (note 7) 8,718 8,265
Accrued interest receivable 4,334 4,283
Other real estate owned, net of allowance for losses (note 8) -- 182
Other assets (note 13) 9,808 7,615
-----------------------
Total assets $ 631,125 $ 560,857
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 123,301 $ 111,704
Savings and NOW deposits 149,808 129,792
Money market accounts 71,061 69,772
Time deposits (note 9) 171,279 164,867
-----------------------
Total deposits 515,449 476,135
Securities sold under agreements to repurchase (note 10) 32,850 17,790
Other borrowed funds (note 11) 13,474 12,353
Other liabilities 15,495 7,090
-----------------------
Total liabilities 577,268 513,368
Commitments and contingencies (notes 7, 15 and 16)
Stockholders' equity (note 12):
Class A common stock,
$1.00 par value per share; authorized 10,000,000 shares;
issued 3,541,447 shares in 1997 and 3,488,297 in 1996 3,541 3,488
Class B common stock,
$1.00 par value per share; authorized 5,000,000 shares;
issued 2,326,520 shares in 1997 and 2,347,720 in 1996 2,327 2,348
Additional paid-in-capital 10,877 10,786
Retained earnings 37,180 31,117
Treasury stock, Class A, 30,000 shares in 1997 and 1996, at cost (136) (136)
Treasury stock, Class B, 47,550 shares in 1997 and 1996, at cost (41) (41)
-----------------------
Realized stockholders' equity 53,748 47,562
Unrealized gains (losses) on securities available-for-sale, net of taxes (note 3) 109 (73)
-----------------------
Total stockholders' equity 53,857 47,489
-----------------------
Total liabilities and stockholders' equity $ 631,125 $ 560,857
=======================
|
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
----------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997 1996 1995
----------------------------------------------------------------------------------------------------------------
(dollars in thousands except share data)
INTEREST INCOME
Loans $ 28,353 $ 26,291 $ 26,326
Securities held-to-maturity 7,049 6,016 3,660
Securities available-for-sale 5,107 5,661 4,278
Federal funds sold and interest-bearing deposits in other banks 707 809 1,724
------------------------------------------
Total interest income 41,216 38,777 35,988
INTEREST EXPENSE
Savings and NOW deposits 3,994 3,806 3,903
Money market accounts 1,888 2,084 2,487
Time deposits (note 9) 8,474 9,020 7,612
Securities sold under agreements to repurchase 1,075 713 632
Other borrowed funds 491 182 52
------------------------------------------
Total interest expense 15,922 15,805 14,686
------------------------------------------
Net interest income 25,294 22,972 21,302
Provision for loan losses (note 6) 660 1,020 1,560
------------------------------------------
Net interest income after provision for loan losses 24,634 21,952 19,742
OTHER OPERATING INCOME
Service charges on deposit accounts 1,791 1,627 1,559
Lockbox fees 1,467 1,280 1,421
Brokerage commissions 1,171 1,072 1,027
Gain on sales of loans 136 290 217
Other income 429 492 498
------------------------------------------
Total other operating income 4,994 4,761 4,722
OPERATING EXPENSES
Salaries and employee benefits (note 14) 12,120 11,741 11,394
Occupancy 1,272 1,322 1,413
Equipment 1,140 1,135 1,081
Other real estate owned 22 (20) 217
Other (note 17) 4,046 3,696 4,119
------------------------------------------
Total operating expenses 18,600 17,874 18,224
------------------------------------------
Income before income taxes 11,028 8,839 6,240
Provision for income taxes (note 13) 4,205 3,405 1,666
------------------------------------------
NET INCOME $ 6,823 $ 5,434 $ 4,574
==========================================
SHARE DATA (NOTE 12)
Weighted average number of shares outstanding, basic 5,772,135 5,736,230 5,722,646
Weighted average number of shares outstanding, diluted 5,830,910 5,818,942 5,831,042
Net income per share, basic $ 1.18 $ 0.95 $ 0.80
Net income per share, diluted $ 1.17 $ 0.93 $ 0.78
|
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Unrealized
Gains (losses)
on Securities
Class A Class B Additional Treasury Treasury available-
Common Common Paid-In Retained Stock Stock for-sale,
Stock Stock Capital Earnings Class A Class B net of taxes
--------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands except share data)
BALANCE, DECEMBER 31, 1994 $3,312 $2,488 $10,683 $22,142 $(136) $(41) $ (895)
Conversion of Class B common
stock to Class A common
stock, 91,698 shares 92 (92) -- -- -- -- --
Stock options exercised,
1,667 shares 2 -- 4 -- -- -- --
Net income -- -- -- 4,574 -- -- --
Cash dividends, Class A common
stock $0.12 per share -- -- -- (397) -- -- --
Cash dividends, Class B common
stock $0.0168 per share -- -- -- (41) -- -- --
Change in unrealized gains (losses)
on securities available-for-sale,
net of taxes -- -- -- -- -- -- 1,240
-------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 3,406 2,396 10,687 26,278 (136) (41) 345
Conversion of Class B common
stock to Class A common
stock, 48,200 shares 48 (48) -- -- -- -- --
Stock options exercised,
34,350 shares 34 -- 99 -- -- -- --
Net income -- -- -- 5,434 -- -- --
Cash dividends, Class A common
stock $0.16 per share -- -- -- (543) -- -- --
Cash dividends, Class B common
stock $0.0224 per share -- -- -- (52) -- -- --
Change in unrealized gains (losses)
on securities available-for-sale,
net of taxes -- -- -- -- -- -- (418)
-------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 3,488 2,348 10,786 31,117 (136) (41) (73)
Conversion of Class B common
stock to Class A common
stock, 21,200 shares 21 (21) -- -- -- -- --
Stock options exercised,
31,950 shares 32 -- 91 -- -- -- --
Net income -- -- -- 6,823 -- -- --
Cash dividends, Class A common
stock $0.20 per share -- -- -- (696) -- -- --
Cash dividends, Class B common
stock $0.028 per share -- -- -- (64) -- -- --
Change in unrealized gains (losses)
on securities available-for-sale,
net of taxes -- -- -- -- -- -- 182
-------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 $3,541 $2,327 $10,877 $37,180 $(136) $(41) $ 109
=====================================================================================
|
Total
Stockholders'
Equity
--------------------------------------------------------
(dollars in thousands except share data)
BALANCE, DECEMBER 31, 1994 $37,553
Conversion of Class B common
stock to Class A common
stock, 91,698 shares --
Stock options exercised,
1,667 shares 6
Net income 4,574
Cash dividends, Class A common
stock $0.12 per share (397)
Cash dividends, Class B common
stock $0.0168 per share (41)
Change in unrealized gains (losses)
on securities available-for-sale,
net of taxes 1,240
-------------
BALANCE, DECEMBER 31, 1995 42,935
Conversion of Class B common
stock to Class A common
stock, 48,200 shares --
Stock options exercised,
34,350 shares 133
Net income 5,434
Cash dividends, Class A common
stock $0.16 per share (543)
Cash dividends, Class B common
stock $0.0224 per share (52)
Change in unrealized gains (losses)
on securities available-for-sale,
net of taxes (418)
-------------
BALANCE, DECEMBER 31, 1996 47,489
Conversion of Class B common
stock to Class A common
stock, 21,200 shares --
Stock options exercised,
31,950 shares 123
Net income 6,823
Cash dividends, Class A common
stock $0.20 per share (696)
Cash dividends, Class B common
stock $0.028 per share (64)
Change in unrealized gains (losses)
on securities available-for-sale,
net of taxes 182
-------------
BALANCE, DECEMBER 31, 1997 $53,857
=============
|
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997 1996 1995
---------------------------------------------------------------------------------------------------------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,823 $ 5,434 $ 4,574
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 660 1,020 1,560
Deferred income taxes (710) (616) (82)
Net depreciation and amortization 586 668 548
(Increase) decrease in accrued interest receivable (51) 9 (1,001)
(Increase) decrease in other assets (1,818) 72 1,382
Loans originated for sale (9,442) (18,033) (16,407)
Proceeds from sales of loans 10,507 19,317 16,025
Gain on sales of loans (137) (290) (226)
Loss (gain) on sales of other real estate owned 1 (82) (27)
Provision for losses on other real estate owned -- -- 70
Increase (decrease) in other liabilities 8,405 189 (690)
----------------------------------
Net cash provided by operating activities 14,824 7,688 5,726
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available-for-sale 30,235 49,193 27,860
Purchase of securities available-for-sale (37,934) (29,999) (56,543)
Proceeds from maturities of securities held-to-maturity 39,013 53,946 38,447
Purchase of securities held-to-maturity (40,418) (83,675) (68,575)
Net cash and cash equivalents received from acquisitions -- -- 17,877
Net increase in loans (29,400) (4,823) (13,618)
Proceeds from sales of other real estate owned 566 1,121 2,744
Capital expenditures (1,533) (608) (1,416)
----------------------------------
Net cash used in investing activities (39,471) (14,845) (53,224)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in time deposit accounts 6,412 9,849 17,658
Net increase in demand, savings,
money market and NOW deposits 32,902 7,671 11,499
Net proceeds from the issuance of common stock 123 133 6
Cash Dividends (760) (595) (438)
Net increase (decrease) in securities sold
under agreements to repurchase 15,060 (3,790) 11,780
Net increase in other borrowed funds 1,121 10,456 963
----------------------------------
Net cash provided by financing activities 54,858 23,724 41,468
----------------------------------
Net increase (decrease) in cash and cash equivalents 30,211 16,567 (6,030)
Cash and cash equivalents at beginning of year 67,681 51,114 57,144
----------------------------------
Cash and cash equivalents at end of year $ 97,892 $ 67,681 $ 51,114
==================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 14,800 $ 16,170 $ 13,884
Income taxes 4,784 3,644 1,512
Noncash transactions:
Property acquired through foreclosure $ 385 $ 376 $ 440
Change in unrealized gains (losses)
on securities available-for-sale, net of taxes $ 182 $ (418) $ 1,240
Assets acquired and liabilities assumed through acquisitions:
Assets acquired, net of cash and cash equivalents received -- -- $ 2,040
Cash and cash equivalents received -- -- 17,877
Liabilities assumed -- -- 19,917
|
See accompanying Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Century Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, Century Bank and Trust Company (the "Bank"). The Company provides a full range of banking services to individual, business and municipal customers in Massachusetts. As a bank holding company, the Company is subject to the regulation and supervision of the Federal Reserve Board. The Bank, a state chartered financial institution, is subject to supervision and regulation by applicable state and federal banking agencies, including the Federal Reserve Board, the Office of the Comptroller of the Currency (the "Comptroller"), the Federal Deposit Insurance Corporation (the "FDIC") and the Commonwealth of Massachusetts Commissioner of Banks. The Bank is also subject to various requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of the Bank. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. All aspects of the Company's business are highly competitive. The Company faces aggressive competition from other lending institutions and from numerous other providers of financial services.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial statements have been prepared in conformity with generally accepted accounting principles and to general practices within the banking industry. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates.
Material estimates that are susceptible to change in the near-term relate to the allowance for losses on loans. Management believes that the allowance for losses on loans is adequate based on independent appraisals and review of other factors associated with the assets. While management uses available information to recognize losses on loans, future additions to the allowance for loans may be necessary based on changes in economic conditions. In addition, regulatory agencies periodically review the Company's allowance for losses on loans. Such agencies may require the Company to recognize additions to the allowance for loans based on their judgements about information available to them at the time of their examination.
INVESTMENT SECURITIES
Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity and reported at amortized cost; debt and equity securities that are bought and held principally for the purpose of selling are classified as trading and reported at fair value, with unrealized gains and losses included in earnings; and debt and equity securities not classified as either held-to-maturity or trading are classified as available-for-sale and reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity, net of estimated related income taxes. The Company has no securities held for trading.
Premiums and discounts on investment securities are amortized or accreted into income by use of the level-yield method. If a decline in fair value below the amortized cost basis of an investment is judged to be other than temporary, the cost basis of the investment is written down to fair value. The amount of the writedown is included as a charge to earnings. Gains and losses on the sale of investment securities are recognized at the time of sale on a specific identification basis.
LOANS
Interest on loans is recognized based on the daily principal amount outstanding. Accrual of interest is discontinued when loans become 90 days delinquent unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection. Loans, including impaired loans, on which the accrual of interest has been discontinued are designated non-accrual loans. When a loan is placed on non-accrual, all income which has been accrued but remains unpaid is reversed against current period income and all amortization of deferred loan fees is discontinued. Non-accrual loans may be returned to an accrual status when principal and interest payments are not delinquent and the risk characteristics of the loan have improved to the extent that there no longer exists a concern as to the collectibility of principal and income. Income received on non-accrual loans is either recorded in income or applied to the principal balance of the loan depending on management's evaluation as to the collectibility of principal.
Loans held for sale are carried at the lower of aggregate cost or market value. Gain or loss on sales of loans is recognized at the time of sale when the sales proceeds exceed or are less than the Bank's investment in the loans. Additionally, gains and losses are recognized when the average interest rate on the loans sold, adjusted for normal servicing fee, differs from the agreed yield to the buyer. The resulting excess service fee receivables, if any, are amortized using the interest method over the estimated life of the loans, adjusted for estimated prepayments.
Discounts and premiums on loans purchased from failed financial institutions that represent market yield adjustments are accreted or amortized to interest income over the estimated lives of the loans using the level-yield method.
Loan origination fees and related direct incremental loan origination costs are offset and the resulting net amount is deferred and amortized over the life of the related loans using the level-yield method.
The Bank accounts for impaired loans, except those loans that are accounted for at fair value or at lower of cost or fair value, at the present value of the expected future cash flows discounted at the loan's effective interest rate. This method applies to all loans, uncollateralized as well as collateralized, except large groups of smaller-balance homogeneous loans that are collectively evaluated for impairment, loans that are measured at fair value and leases and debt securities. Management considers the payment status, net worth and earnings potential of the borrower, and the value and cash flow of the collateral as factors to determine if a loan will be paid in accordance with its contractual terms. Management does not set any minimum delay of payments as a factor in reviewing for impaired classification. Impaired loans are charged-off when management believes that the collectibility of the loan's principal is remote. In addition, criteria for classification of a loan as in-substance foreclosure has been modified so that such classification need be made only when a lender is in possession of the collateral. The Bank measures the impairment of troubled debt restructurings using the pre-modification rate of interest.
The Bank recognizes the rights to service mortgage loans for others as an asset, including rights acquired through both purchases and originations. Capitalized mortgage servicing rights are amortized over the period of estimated net servicing income and are periodically evaluated for impairment based on their fair value.
Effective January 1, 1997, the Bank adopted SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." This statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities based on consistent application of a financial-components approach that focuses on control. It distinguishes transfers of financial assets that are sales from transfers that are secured borrowings. Under the financial-components approach, after a transfer of financial assets, an entity recognizes all financial and servicing assets it controls and liabilities it has incurred and derecognizes financial assets it no longer controls and liabilities that have been extinguished. The financial-components approach focuses on the assets and liabilities that exist after the transfer. Many of these assets and liabilities are components of financial assets that existed prior to the transfer. If a transfer does not meet the criteria for a sale, the transfer is accounted for as a secured borrowing with a pledge of collateral. However, SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of SFAS No. 125," requires the deferral of implementation as it relates to repurchase agreements, dollar-rolls, securities lending and similar transactions until after December 31, 1997. Earlier or retroactive applications of this statement is not permitted. The Company has determined that the adoption of SFAS No. 127 will not have a material impact on its consolidated financial statements. The adoption of SFAS No. 125 did not have a significant impact.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is based on management's evaluation of the quality of the loan portfolio and is used to provide for losses resulting from loans which ultimately prove uncollectible. In determining the level of the allowance, periodic evaluations are made of the loan portfolio which take into account such factors as the character of the loans, loan status, financial posture of the borrowers, value of collateral securing the loans and other relevant information sufficient to reach an informed judgement. The allowance is increased by provisions charged to income and reduced by loan charge-offs, net of recoveries.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
While management uses available information in establishing the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations. Loans are charged-off in whole or in part when, in management's opinion, collectibility is not probable.
Management believes that the allowance for loan losses is adequate. In addition, various regulatory agencies, as part of their examination process, periodically review the Company's allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgements about information available to them at the time of their examination.
OTHER REAL ESTATE OWNED
Other real estate owned ("OREO") includes real estate acquired by foreclosure and real estate substantively repossessed. Real estate acquired by foreclosure is comprised of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. Real estate substantively repossessed includes only those loans for which the Company has taken possession of the collateral, but has not completed legal foreclosure proceedings. Both in-substance foreclosures and real estate formally acquired in settlement of loans are recorded at the lower of the carrying value of the loan or the fair value of the property constructively or actually received. Loan losses from the acquisition of such properties are charged against the allowance for loan losses. After foreclosure, if the fair value of an asset minus its estimated cost to sell is less than the carrying value of the asset, such amount is recognized as a valuation allowance. If the fair value of an asset less its estimated cost to sell subsequently increases so that the resulting amount is more than the asset's current carrying value, the valuation allowance is reversed by the amount of the increase. Increases or decreases in the valuation allowance are charged or credited to income. Gains upon disposition of OREO are reflected in the statement of income as realized. Realized losses are charged to the valuation allowance.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the terms of leases, if shorter. It is general practice to charge the cost of maintenance and repairs to operations when incurred; major expenditures for improvements are capitalized and depreciated.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. Under this method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
2. CASH AND DUE FROM BANKS
The Company is required to maintain a portion of its cash and due from banks as a reserve balance under the Federal Reserve Act. Such reserve is calculated based upon deposit levels and amounted to $471,000 at December 31, 1997 and $10,768,000 at December 31, 1996.
3. SECURITIES AVAILABLE-FOR-SALE
December 31,1997 December 31,1996
----------------------------------------------- -----------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
------------------------------------------------------------------------------- -----------------------------------------------
(in thousands)
U.S. Government and Agencies $84,582 $237 $56 $84,763 $77,283 $93 $221 $77,155
Obligations of states
and political subdivisions 750 -- -- 750 1,241 -- -- 1,241
FHLB Stock 3,419 -- -- 3,419 2,364 -- -- 2,364
Other 253 5 -- 258 252 3 -- 255
----------------------------------------------- -----------------------------------------------
$89,004 $242 $56 $89,190 $81,140 $96 $221 $81,015
=============================================== ===============================================
|
The following tables show the maturity distribution of the Company's securities available-for-sale at December 31, 1997 and 1996:
December 31, 1997
-----------------------------------------------------------
Obligations
U.S. of States Estimated
Government and Political Market
and Agencies Subdivisions Other Total Value
---------------------------------------------------------------------------------------------
(in thousands)
Within one year $29,460 $750 $ -- $30,210 $30,253
After one but within five years 54,122 -- -- 54,122 54,251
After five but within ten years 1,000 -- 250 1,250 1,259
Non-maturing -- -- 3,422 3,422 3,427
-----------------------------------------------------------
$84,582 $750 $3,672 $89,004 $89,190
===========================================================
|
December 31, 1996
-----------------------------------------------------------
Obligations
U.S. of States Estimated
Government and Political Market
and Agencies Subdivisions Other Total Value
---------------------------------------------------------------------------------------------
(in thousands)
Within one year $13,988 $1,241 $ -- $15,229 $15,254
After one but within five years 63,295 -- -- 63,295 63,142
After five but within ten years -- -- 250 250 250
Non-maturing -- -- 2,366 2,366 2,369
-----------------------------------------------------------
$77,283 $1,241 $2,616 $81,140 $81,015
===========================================================
|
There were no sales of securities available-for-sale in 1997, 1996 and 1995.
4. SECURITIES HELD-TO-MATURITY
December 31, 1997 December 31, 1996
----------------------------------------------- -----------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
------------------------------------------------------------------------------ -----------------------------------------------
(in thousands)
U.S. Government and Agencies $107,117 $347 $124 $107,340 $105,582 $211 $574 $105,219
Obligations of states
and political subdivisions 22 -- -- 22 34 -- -- 34
Other 2,100 -- 8 2,092 2,099 -- 21 2,078
----------------------------------------------- -----------------------------------------------
$109,239 $347 $132 $109,454 $107,715 $211 $595 $107,331
=============================================== ===============================================
|
Included in U.S. Government and Agency securities are securities pledged to secure public deposits and repurchase agreements amounting to $40,256,000 at December 31, 1997 and $24,746,000 at December 31, 1996.
The following tables show the maturity distribution of the Company's securities held-to-maturity at December 31, 1997 and 1996:
December 31, 1997
------------------------------------------------------------
Obligations
U.S. of States Estimated
Government and Political Market
and Agencies Subdivisions Other Total Value
----------------------------------------------------------------------------------------------
(in thousands)
Within one year $ 9,970 $11 $2,025 $ 12,006 $ 12,009
After one but within five years 79,191 11 50 79,252 79,439
After five but within ten years 16,956 -- 25 16,981 17,007
More than ten years 1,000 -- -- 1,000 999
------------------------------------------------------------
$107,117 $22 $2,100 $109,239 $109,454
============================================================
|
December 31, 1996
------------------------------------------------------------
Obligations
U.S. of States Estimated
Government and Political Market
and Agencies Subdivisions Other Total Value
----------------------------------------------------------------------------------------------
(in thousands)
Within one year $ 2,511 $11 $ 2 $ 2,524 $ 2,516
After one but within five years 83,636 23 2,072 85,731 85,562
After five but within ten years 18,935 -- 25 18,960 18,759
More than ten years 500 -- -- 500 494
------------------------------------------------------------
$105,582 $34 $2,099 $107,715 $107,331
============================================================
|
There were no sales of securities held-to-maturity in 1997, 1996 or 1995.
5. LOANS
The Company's lending activities are conducted principally in Massachusetts. The Company grants single and multi-family residential loans, commercial and commercial real estate loans, and a variety of consumer loans. To a lesser extent, the Company grants loans for the construction of residential homes, multi-family properties, commercial real estate properties, and land development. Most loans granted by the Company are secured by real estate collateral. The ability and willingness of commercial real estate, commercial, construction, residential and consumer loan borrowers to honor their repayment commitments is generally dependent on the health of the real estate market in the borrowers' geographic areas and the general economy.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The composition of the loan portfolio at December 31, 1997 and 1996 is as follows:
1997 1996
--------------------------------------------------------------------------------
(in thousands)
Construction and land development $ 7,549 $ 3,576
Commercial and industrial 50,560 41,006
Industrial revenue bonds 2,693 3,030
Commercial real estate 140,270 133,757
Residential real estate 76,160 76,081
Residential real estate held for sale 225 557
Consumer 19,254 12,749
Home equity 19,031 17,330
Overdrafts 648 194
------------------------
$316,390 $288,280
========================
|
At December 31, 1997 and 1996, loans were carried net of discounts of $2,875,000 and $3,360,000 respectively. Included in these amounts at December 31, 1997 and 1996, residential real estate loans were carried net of discounts of $2,847,000 and $3,319,000 respectively, associated with the acquisition of Wollaston.
The composition of non-accrual loans, impaired loans and troubled debt restructuring agreements is as follows:
1997 1996
--------------------------------------------------------------------------------
(in thousands)
Loans on non-accrual $1,705 $2,140
Impaired loans on non-accrual included above 1,235 1,676
Troubled debt restructuring agreements $3,306 $2,543
Impaired troubled debt restructuring
agreements included above 2,280 1,377
Total recorded investment in impaired loans $3,515 $3,055
Average recorded value of impaired loans $3,157 $2,935
Loans 90 days past due and still accruing $ 7 $ 192
Interest income on non-accrual loans according to
their original terms $ 202 $ 270
Interest income on non-accrual loans
actually recorded $ 84 $ 98
Interest income recognized on impaired loans $ 216 $ 149
|
The composition of impaired loans at December 31, is as follows:
1997 1996
--------------------------------------------------------------------------------
(in thousands)
Residential real estate:
1 to 4 family $ 250 $ 299
Multi-family 771 1,201
Construction and land development -- --
Commercial real estate 2,323 1,248
Commercial and industrial 171 307
----------------------
Total $3,515 $3,055
Specific valuation allowance -- --
----------------------
Total impaired loans $3,515 $3,055
======================
|
There were no impaired loans with specific reserves at December 31, 1997 and 1996 and in the opinion of management, none of the above listed impaired loans required a specific reserve. All of the impaired loans listed above have been measured using the fair value of the collateral method.
The Company was servicing mortgage loans sold to others without recourse of approximately $18,053,000 at December 31, 1997 and $20,359,000 at December 31, 1996. Additionally, the Company was servicing mortgage loans sold to others with limited recourse. The outstanding balance of these loans with limited recourse was approximately $753,000 at December 31, 1997 and $1,092,000 at December 31, 1996.
Directors and officers of the Company and their associates are customers of, and have other transactions with, the Company in the normal course of business. All loans and commitments included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than normal risk of collection or present other unfavorable features.
The following table shows the aggregate amount of loans to directors and officers of the Company and their associates during 1997.
Balance at Repayments Balance at
December 31, 1996 Additions and Deletions December 31, 1997
-----------------------------------------------------------------------------------
(in thousands)
$ 928 $1,055 $ 556 $1,427
-----------------------------------------------------------------
|
6. ALLOWANCE FOR LOAN LOSSES
1997 1996 1995
--------------------------------------------------------------------------------------
(in thousands)
Balance at beginning of year $4,179 $ 4,193 $ 4,239
Provision charged to operating expense 660 1,020 1,560
Loans charged-off (689) (1,303) (1,828)
Loan recoveries 296 269 222
---------------------------------------
Balance at end of year $4,446 $ 4,179 $ 4,193
=======================================
|
7. BANK PREMISES AND EQUIPMENT
December 31, 1997 1996
--------------------------------------------------------------------------------
(in thousands)
Land $ 1,839 $ 1,839
Bank premises 6,533 6,254
Furniture and equipment 9,468 8,261
Leasehold improvements 1,888 1,888
-----------------------
19,728 18,242
Accumulated depreciation and amortization (11,010) (9,977)
-----------------------
$ 8,718 $ 8,265
=======================
|
The Company and its subsidiaries are obligated under a number of noncancelable operating leases for premises and equipment expiring in various years through the year 2026. Total lease expense approximated $85,000, $144,000 and $168,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
Future minimum rental commitments for noncancelable operating leases with initial or remaining terms of one year or more at December 31, 1997 were as follows:
Year Amount
------------------------------------------------------------------------------
(in thousands)
1998 $ 80
1999 64
2000 64
2001 28
2002 21
Thereafter 554
------------------------------
$ 811
==============================
|
8. ALLOWANCE FOR LOSSES ON OTHER REAL ESTATE OWNED
1997 1996 1995
--------------------------------------------------------------------------------
(in thousands)
Balance at beginning of year $ 19 $ 60 $ 238
Valuation writedowns (19) (41) (248)
Provision charged to expense -- -- 70
---------------------------------------
Balance at end of year $ -- $ 19 $ 60
=======================================
|
9. DEPOSITS
Time deposits as of December 31 are as follows:
1997 1996
-----------------------------------------------------------------------------
(in thousands)
Three months or less $101,719 $ 60,569
Three through twelve months 55,263 57,369
Over twelve months 14,297 46,929
-------------------------
$171,279 $164,867
=========================
|
Time deposits in denominations of $100,000 or more totaled $63,214,000 and $45,646,000 at December 31, 1997 and 1996, respectively. Interest expense associated with deposits in denominations of $100,000 or more was $2,251,000, $2,124,000 and $1,749,000 for the years ended 1997, 1996 and 1995, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
1997 1996 1995
--------------------------------------------------------------------------------
(dollars in thousands)
Average rate at December 31, 4.49% 4.34% 4.25%
Average balance outstanding during the year $24,994 $16,654 $14,390
Average rate during the year 4.30% 4.28% 4.39%
Maximum amount outstanding at any month-end $39,060 $17,790 $21,580
Amount outstanding at December 31, $32,850 $17,790 $21,580
|
Amounts outstanding at December 31, 1997, 1996 and 1995 carried maturity dates of the next business day. U.S. Government and Agency securities with a total book value of $32,776,000, $17,762,000 and $21,497,000 were pledged as collateral and held by custodians to secure the agreements at December 31, 1997, 1996 and 1995, respectively. The approximate market value of the collateral at those dates was $32,814,000, $17,605,000 and $21,715,000, respectively.
11. OTHER BORROWED FUNDS
December 31, 1997 1996
------------------------------------------------------------------------------
(in thousands)
Treasury tax and loan note $ 834 $ 726
Federal Home Loan Bank - IDEAL Advance - 10,000
Federal Home Loan Bank - Advance 11,454 1,489
Other 1,186 138
---------------------------
$13,474 $12,353
===========================
|
The Bank serves as a Treasury Tax and Loan depository under a note option with the Federal Reserve Bank of Boston. This open-ended interest bearing borrowing carries an interest rate equal to the daily Federal funds rate less 0.25%. The Bank borrowed $10,000,000 from the Federal Home Loan Bank on December 31, 1997 as an overnight advance. The interest rate on this advance was 7.05%. The Bank also borrowed $1,500,000 during 1996 from Federal Home Loan Bank. The borrowing bears interest at a fixed rate of 7.20%, has a remaining principal balance of $1,454,000 and matures on July 24, 2006.
12. STOCKHOLDERS' EQUITY
DIVIDENDS
Holders of the Class A common stock may not vote in the election of directors, but may vote as a class to approve certain extraordinary corporate transactions. Class A common stockholders are entitled to receive dividends per share equal to at least 200% per share of that paid, if any, on each share of Class B common stock. Class A common stock is publicly traded. Class B common stock is not publicly traded, however, it can be converted on a share for share basis to Class A common stock at any time. Dividend payments by the Company are dependent in part on the dividends it receives from its bank subsidiary, which are subject to certain regulatory restrictions.
EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share," which is effective for financial statements for both interim and annual periods ending December 31, 1997. Primary EPS has been replaced with basic EPS and fully diluted EPS has been replaced with diluted EPS. Diluted EPS includes the dilutive effect of common stock equivalents; basic EPS excludes all common stock equivalents. Diluted EPS is very similar to fully diluted EPS. The statement also requires a reconciliation of basic EPS to diluted EPS. The only common stock equivalents for the Company are the stock options discussed below. The dilutive effect of these stock options for 1997, 1996 and 1995 was an increase of 58,775, 82,712 and 108,396 shares, respectively.
STOCK OPTION PLAN
On March 10, 1987, the common stockholders of the Company approved a stock option plan (the "Option Plan") that provides for granting of options for not more than 150,000 shares of Class A common stock. Under the Option Plan, all officers and other key employees of the Company are eligible to receive non-qualified and incentive stock options to purchase shares of Class A common stock. The Option Plan is administered by the Compensation Committee
whose members are ineligible to participate in the Option Plan. Based on management's recommendations, the Committee submits its recommendations to the Board of Directors as to persons to whom options are to be granted, the number of shares to be granted to each, the option price (which may not be less than 85% of the fair market value for non-qualified stock options, or the fair market value for incentive stock options, of the shares on the date of grant) and the time period over which the options are exercisable (no more than ten years from the date of grant). Options exercisable at December 31, 1997 totaled 78,533 with a weighted average option price of $3.75.
Information with regard to the stock option plan is as follows:
Number of Weighted Average
Option Shares Option Price Per Share
--------------------------------------------------------------------------------
Outstanding at December 31, 1994 146,500 $3.80
Granted -- --
Exercised (1,667) 3.75
Cancelled -- --
--------------------------------------------------------------------------------
Outstanding at December 31, 1995 144,833 3.80
Granted -- --
Exercised (34,350) 3.89
Cancelled -- --
--------------------------------------------------------------------------------
Outstanding at December 31, 1996 110,483 3.78
Granted -- --
Exercised (31,950) 3.84
Cancelled -- --
--------------------------------------------------------------------------------
Outstanding at December 31, 1997 78,533 $3.75
================================================================================
|
A summary of options by maturity is as follows:
Expiring During the Number of Weighted average
Year Ended December 31, Shares Option Price Per Share
--------------------------------------------------------------------------------
1998 -- --
1999 -- --
2000 -- --
2001 78,533 $ 3.75
2002 -- --
--------------------------------------------------------------------------------
78,533 $ 3.75
================================================================================
|
The Company measures compensation cost for stock-based compensation plans using the intrinsic value based method prescribed by Accounting Principles Board Opinion No. 25. The Company granted no stock options during 1997, 1996 or 1995 and, therefore, no disclosures of proforma net income and earnings per share as if the fair value method had been applied are required. The new disclosures will be provided when additional stock options are granted.
CAPITAL AND OTHER REGULATORY REQUIREMENTS
The Bank is subject to various regulatory requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory- and possibly additional discretionary-actions by regulators that, if undertaken, could have a direct material affect on the Company's financial statements. Under capital adequacy guidelines and regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk weighted assets (as defined), and Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 1997 that the Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 1997, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes would cause a change in the Bank's categorization.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Bank's actual capital amounts and ratios are presented in the following
table.
To Be Well Capitalized
Under Prompt Corrective
Actual For Capital Adequacy Purposes Action Provisions
-----------------------------------------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
-----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
As of December 31, 1997:
Total capital (to risk-weighted assets) $49,735 14.64% $27,179 8.0% $33,974 10.0%
Tier I capital (to risk-weighted assets) 45,474 13.38% 13,590 4.0% 20,384 6.0%
Tier I capital (to average assets) 45,474 7.85% 22,670 4.0% 28,338 5.0%
As of December 31, 1996:
Total capital (to risk-weighted assets) $44,004 14.74% $23,882 8.0% $29,852 10.0%
Tier I capital (to risk-weighted assets) 40,267 13.49% 11,941 4.0% 17,911 6.0%
Tier I capital (to average assets) 40,267 7.46% 21,577 4.0% 26,971 5.0%
|
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information about Capital Structure," which is effective for 1997 financial statements. The Company's disclosures currently comply with the provisions of this statement.
13. INCOME TAXES
The current and deferred components of income tax expense for the years ended December 31 are as follows:
1997 1996 1995
--------------------------------------------------------------------------------
(in thousands)
Current expense:
Federal $3,824 $ 2,959 $1,302
State 1,091 1,062 446
---------------------------------------
Total current expense 4,915 4,021 1,748
=======================================
Deferred expense:
Federal (541) (238) 716
State (169) (78) 337
Change in valuation reserve -- (300) (1,135)
---------------------------------------
Total deferred expense (710) (616) (82)
---------------------------------------
Provision for income taxes $4,205 $ 3,405 $1,666
=======================================
|
Income tax accounts included in other assets and other liabilities at December 31 are as follows:
1997 1996
--------------------------------------------------------------------------------
(in thousands)
Currently payable $ (419) $ (287)
Deferred income tax asset, net 2,235 1,655
---------------------------
$1,816 $ 1,368
===========================
|
Income tax expense for the years presented is different from the amounts computed by applying the statutory Federal income tax rate of 34% to income before Federal income taxes. The following tabulation reconciles Federal income tax expense based on statutory rates to the actual income tax expense for the years ended December 31:
1997 1996 1995
--------------------------------------------------------------------------------
(in thousands)
Federal income tax expense
at statutory rates $ 3,750 $ 3,005 $ 2,121
State income taxes, net of Federal
income tax benefit 608 649 517
Effect of tax-exempt interest (102) (105) (132)
Change in valuation reserve -- (300) (1,135)
Other (51) 156 295
---------------------------------------
$ 4,205 $ 3,405 $ 1,666
=======================================
Effective Tax Rate 38.1% 38.5% 26.7%
|
Management believes that it is more likely than not that the net deferred income tax asset of $2,235,000 at December 31, 1997 will be realized. The federal tax portion of $1,622,000 of the deferred tax asset is supported by the availability of federal income taxes paid in prior carryback years.
The valuation reserve was reduced by $300,000 in 1996 in recognition of the operating results achieved and the increase in recoverable federal income taxes paid in prior years.
The following table sets forth the Company's gross deferred income tax assets and gross deferred income tax liabilities at December 31:
1997 1996
--------------------------------------------------------------------------------
(in thousands)
Deferred income tax assets:
Allowance for loan losses $ 1,055 $ 722
Other real estate owned writedowns -- 8
Deferred compensation 1,625 1,340
Unrealized loss on securities available-for-sale -- 52
Acquisition premium 95 50
Other 12 79
----------------------
Gross deferred income tax asset 2,787 2,251
Deferred income tax liabilities:
Unrealized gain on securities available-for-sale (77) --
Purchase accounting (297) (388)
Depreciation (157) (183)
Other (21) (25)
----------------------
Deferred income tax asset, net $ 2,235 $ 1,655
======================
|
14. EMPLOYEE BENEFITS
The Company's noncontributory defined benefit pension plan covers substantially all full-time employees. Benefits are based on employee's years of service and highest five year compensation. The plan is funded on a current basis, in compliance with the requirements of the Employee Retirement Income Security Act.
1997 1996
------------------------------------------------------------------------------
(dollars in thousands)
Projected benefit obligation $6,319 $ 4,859
Plan assets at fair value 4,171 3,341
--------------------------
Projected benefit obligation in
excess of plan assets $2,148 $ 1,518
==========================
|
The assumptions used in determining the projected benefits obligation were as follows:
Discount rate 7.00% 7.00% Rate of increase in compensation levels 5.00% 5.00% |
Certain changes in the items shown are not recognized as they occur, but are amortized over subsequent periods. Unrecognized amounts to be amortized and the amounts included in the Consolidated Balance Sheets are as follows:
December 31, 1997 1996
------------------------------------------------------------------------------
(in thousands)
Unrecognized net loss $ 987 $ 200
Unrecognized past service costs 722 821
Transition obligation 3 4
Accrued pension expense 436 493
--------------------------
Projected benefit obligation in
excess of plan assets $2,148 $ 1,518
==========================
|
The assumptions used and the components of net pension expense for the years ended December 31, 1997, 1996 and 1995 include the following:
Years Ended December 31, 1997 1996 1995
----------------------------------------------------------------------------------
(dollars in thousands)
Assumptions used
Discount rate 7.00% 7.00% 8.00%
Rate of increase in compensation levels 5.00% 5.00% 5.00%
Expected long term rate of return on plan assets 8.00% 8.00% 8.00%
Net pension cost:
Service cost; benefits earned during this period $ 357 $ 318 $ 256
Interest cost on projected benefit obligation 340 308 260
Actual return on plan assets (354) (208) (181)
Net amortization and deferral 174 120 117
---------------------------
Net periodic pension expense $ 517 $ 538 $ 452
===========================
|
In 1996, the Company began offering a 401(k) defined contribution plan for all employees reaching minimum age and service requirements. The plan is voluntary with no matching contributions. Administrative costs associated with the plan are absorbed by the Company.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has a Supplemental Insurance/Retirement Plan which is limited to certain officers and employees of the Company. The plan is voluntary and participants are required to contribute to its cost. Under the plan, each participant will receive a retirement benefit based on compensation and length of service. Individual life insurance policies are purchased covering the life of each participant. The Company is the owner of these policies and each participating employee has received an assignment of a portion of each policy's proceeds. The amount of pension liability recorded on the books of the Company related to the supplemental retirement plan was $3.9 million and $3.2 million on December 31, 1997 and 1996, respectively. The net cost to the Company for this plan for the years ended December 31, 1997, 1996 and 1995 was $558,000, $306,000 and $247,000, respectively.
The Company does not offer any post retirement benefits other than pensions.
15. COMMITMENTS AND CONTINGENCIES
A number of legal claims against the Bank arising in the normal course of business were outstanding at December 31, 1997. Management, after reviewing these claims with legal counsel, is of the opinion that their resolution will not have a material adverse affect on the Company's consolidated financial position.
16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments primarily include commitments to originate and sell loans, standby letters of credit, unused lines of credit and unadvanced portions of construction loans. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in these particular classes of financial instruments.
The Company's exposure to credit loss in the event of non-performance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
Financial instruments with off-balance sheet risk at December 31 are as follows:
Contract or Notional Amount 1997 1996 ------------------------------------------------------------------------------ (in thousands) Financial instruments whose contract amount represents credit risk: Commitments to originate 1-4 family mortgages $ 163 $ 106 Standby letters of credit 1,561 945 Unused lines of credit 85,204 66,696 Unadvanced portions of construction loans 321 2,190 Financial instruments whose contract amount exceeds the amount of credit risk: Commitments to sell 1-4 family mortgages 388 663 |
Commitments to originate loans, unadvanced portions of construction loans and unused lines of credit are generally agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the borrower.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance by a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
In addition to general commitments, the Company originates 1-4 family mortgages for sale in the secondary markets. These loans are sold with and without recourse and no loan is originated without its sale having been pre-arranged. The Company was servicing mortgage loans sold to others with a maximum recourse provision of 10% of the outstanding balance of approximately $753,000 at December 31, 1997 and $1,092,000 at December 31, 1996.
17. OTHER OPERATING EXPENSES
Year Ended December 31, 1997 1996 1995
---------------------------------------------------------------------------------------
(in thousands)
Marketing $1,024 $ 835 $ 650
Supplies 441 471 522
Telephone 227 218 198
Postage and delivery 465 512 514
Legal and audit 330 316 486
Insurance 187 184 192
FDIC assessment 57 2 473
Core deposit intangible amortization 200 200 25
Other 1,115 958 1,059
------------------------------------------
$4,046 $ 3,696 $4,119
==========================================
|
18. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating fair values of its financial instruments. Excluded from this disclosure are certain financial instruments for which it is not practical to estimate their value and all nonfinancial instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.
Cash and cash equivalents: The carrying amounts reported in the balance sheet for cash and cash equivalents approximate the fair values of these assets because of the short-term nature of these financial instruments.
Securities held-to-maturity and securities available-for-sale: The fair value of these securities, excluding certain state and municipal securities whose fair value is estimated at book value because they are not readily marketable, is estimated based on bid prices published in financial newspapers or bid quotations received from securities dealers.
Loans: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying amounts. The fair value of other loans is estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Incremental credit risk for non-performing loans has been considered.
Accrued interest receivable and payable: The carrying amounts for accrued interest receivable and payable approximate fair values because of the short-term nature of these financial instruments.
Deposits: The fair value of deposits with no stated maturity, such as noninterest bearing demand deposits, savings, N.O.W. and money market accounts, is equal to the amount payable on demand as of the balance sheet date. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate used is estimated based on the rates currently offered for deposits of similar remaining maturities.
Repurchase agreements and other borrowed funds: The carrying amounts reported in the balance sheet for repurchase agreements and other borrowed funds approximate the fair values of those liabilities because of the short-term nature of these financial instruments.
Off-balance-sheet instruments: The fair values of the Company's unused lines of credit, commitments to originate and sell loans and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. The fair value of the Company's commitments to sell mortgage loans approximates the estimated cost to terminate or otherwise settle the obligations with the counterparties. Therefore, at December 31, 1997 and 1996, there was no fair value adjustment.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The carrying amounts and fair values of the Company's financial instruments at December 31 are as follows:
1997 1996
----------------------------------------------------------------------------------------------------------------------------
Carrying Carrying
Amounts Fair Value Amounts Fair Value
----------------------------------------------------------------------------------------------------------------------------
(in thousands)
Financial assets:
Cash and cash equivalents $ 97,892 $ 97,892 $ 67,681 $ 67,681
Securities available-for-sale 89,190 89,190 81,015 81,015
Investment securities held-to-maturity 109,239 109,454 107,715 107,331
Net loans 311,944 315,653 284,101 286,494
Accrued interest receivable 4,334 4,334 4,283 4,283
Financial liabilities:
Deposits 515,449 515,904 476,135 476,787
Repurchase agreements
and other borrowed funds 46,324 46,324 30,143 30,143
Accrued interest payable 3,123 3,123 2,000 2,000
|
LIMITATIONS
Fair value estimates are made at a specific point in time, based on relevant market information and information about the type of financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Bank's entire holdings of a particular financial instrument. Because no market exists for some of the Bank's financial instruments, fair value estimates are based on judgements regarding future expected loss experience, cash flows, current economic conditions, risk characteristics and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions and changes in the loan, debt and interest rate markets could significantly affect the estimates. Further, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value estimates and have not been considered.
19. QUARTERLY RESULT OF OPERATIONS
1997 Quarters Fourth Third Second First
--------------------------------------------------------------------------------------------------
(in thousands, except per share data)
Interest income $ 10,593 $ 10,395 $ 10,332 $ 9,896
Interest expense 4,094 3,991 3,992 3,845
---------------------------------------------------------
Net interest income 6,499 6,404 6,340 6,051
Provision for loan losses 135 135 135 255
---------------------------------------------------------
Net-interest income after provisions
for loan losses 6,364 6,269 6,205 5,796
Other operating income 1,347 1,248 1,255 1,144
Operating expenses 4,613 4,693 4,663 4,630
---------------------------------------------------------
Income before income taxes 3,098 2,824 2,797 2,310
Provision for income taxes 1,045 1,093 1,133 934
Net income $ 2,053 $ 1,731 $ 1,664 $ 1,376
=========================================================
Share Data
Average shares outstanding, basic 5,779,946 5,777,767 5,769,282 5,761,278
Average shares outstanding, diluted 5,842,167 5,846,473 5,834,441 5,835,391
Earnings per share, basic $ 0.36 $ 0.30 $ 0.29 $ 0.24
Earnings per share, diluted $ 0.35 $ 0.30 $ 0.29 $ 0.24
=========================================================
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1996 Quarters Fourth Third Second First
--------------------------------------------------------------------------------------------------
(in thousands, except per share data)
Interest income $ 9,789 $ 9,887 $ 9,706 $ 9,395
Interest expense 3,809 4,052 4,041 3,903
---------------------------------------------------------
Net interest income 5,980 5,835 5,665 5,492
Provision for loan losses 255 255 255 255
---------------------------------------------------------
Net-interest income after provisions
for loan losses 5,725 5,580 5,410 5,237
Other operating income 1,143 1,060 1,270 1,288
Operating expenses 4,417 4,337 4,502 4,618
---------------------------------------------------------
Income before income taxes 2,451 2,303 2,178 1,907
Provision for income taxes 903 899 880 723
---------------------------------------------------------
Net income $ 1,548 $ 1,404 $ 1,298 $ 1,184
=========================================================
Share Data
Average shares outstanding, basic 5,743,657 5,738,706 5,736,220 5,726,227
Average shares outstanding, diluted 5,831,192 5,836,271 5,828,748 5,818,968
Earnings per share, basic $ 0.27 $ 0.24 $ 0.23 $ 0.21
Earnings per share, diluted $ 0.27 $ 0.24 $ 0.22 $ 0.20
=========================================================
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20. PARENT COMPANY FINANCIAL STATEMENTS
The balance sheets of Century Bancorp, Inc. ("Parent Company") as of December 31, 1997 and 1996 and the statements of income and cash flows for each of the years in the three-year period ended December 31, 1997 are presented below. The statements of changes in stockholders' equity are identical to the consolidated statements of changes in stockholders' equity and are therefore not presented here.
BALANCE SHEETS
December 31, 1997 1996
------------------------------------------------------------------------------------------------
(in thousands)
Assets:
Cash $ 7,602 $ 6,409
Investment in subsidiary, at equity 46,550 41,363
Other assets 83 87
---------------------------------
Total assets 54,235 $47,859
=================================
Liabilities and Stockholders' Equity:
Liabilities $ 378 $ 370
Stockholders' equity 53,857 47,489
---------------------------------
Total liabilities and stockholders' equity $ 54,235 $47,859
=================================
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STATEMENTS OF INCOME
Year Ended December 31, 1997 1996 1995
-----------------------------------------------------------------------------------------------
(in thousands)
Income:
Dividends from subsidiary $ 1,702 $ 1,544 $ 939
Interest income from deposits in bank 289 253 216
Other income 12 12 12
------------------------------------------
Total income 2,003 1,809 1,167
Operating expenses 73 69 79
------------------------------------------
Income before income taxes and equity in
undistributed income of subsidiary 1,930 1,740 1,088
Income tax expense 112 89 66
------------------------------------------
Income before equity in undistributed
income of subsidiary 1,818 1,651 1,022
Equity in undistributed income of subsidiary 5,005 3,783 3,552
------------------------------------------
Net income $ 6,823 $ 5,434 $ 4,574
==========================================
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STATEMENTS OF CASH FLOWS
Year Ended December 31, 1997 1996 1995
----------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $ 6,823 $ 5,434 $ 4,574
Adjustments to reconcile net income to
net cash provided by operating activities:
Undistributed income of subsidiary (5,005) (3,783) (3,552)
Depreciation and amortization 6 6 6
Increase in other assets (2) (1) (3)
Increase (decrease) in liabilities 8 129 (298)
-----------------------------------------
Net cash provided by operating activities 1,830 1,785 727
-----------------------------------------
Cash flows from investing activities:
None -- -- --
Cash flows from financing activities:
Stock options exercised 123 133 6
Cash dividends paid (760) (595) (438)
-----------------------------------------
Net cash used by financing activities (637) (462) (432)
-----------------------------------------
Net increase in cash 1,193 1,323 295
Cash at beginning of year 6,409 5,086 4,791
-----------------------------------------
Cash at end of year $ 7,602 $ 6,409 $ 5,086
=========================================
Supplemental disclosures of cash flow
information: Cash paid during the year
for:
Income taxes $ 111 $ 93 $ 70
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. SUBSEQUENT EVENT - ACQUISITION
In December 1997, Century Bancorp, Inc. announced an agreement to acquire Haymarket Cooperative Bank ("Haymarket") and merge Haymarket into Century Bank and Trust Company. This acquisition is expected to be completed on or before April 1, 1998. Haymarket is headquartered in Boston, Massachusetts and operates two banking offices located in Boston. Haymarket is engaged principally in the business of attracting deposits from the general public and investing those deposits in residential real estate, consumer and small business loans.
Total assets of Haymarket were approximately $142 million at December 31, 1997. Under the terms of the agreement, Century Bank and Trust Company will pay approximately $20 million in cash for Haymarket and the acquisition is subject to federal and state regulatory approval. The transaction will be accounted for using the purchase method of accounting.
The following pro-forma condensed balance sheet was prepared as if this acquisition had taken place at December 31, 1997.
PRO-FORMA CONDENSED BALANCE SHEETS
DECEMBER 31,1997
(unaudited) Century Pro-Forma Pro-Forma
Bancorp, Inc. Haymarket Adjustments Combined
-----------------------------------------------------------------------------------------------------------
(in thousands)
Assets:
Cash and cash equivalents $ 97,892 $ 5,015 $ (20,395)(a) $ 82,512
Securities 198,429 54,278 (b) 252,707
Loans, net 311,944 79,358 (c) 391,302
Bank premises and equipment 8,718 725 9,443
Other assets 14,142 2,561 3,397 (a) 20,100
--------------------------------------------------------------
Total assets $ 631,125 $ 141,937 $ (16,998) $ 756,064
==============================================================
Liabilities:
Deposits $ 515,449 $ 119,984 (c) $ 635,433
Borrowed funds 46,324 3,000 (c) 49,324
Other liabilities 15,495 1,955 17,450
--------------------------------------------------------------
Total liabilities 577,268 124,939 702,207
Stockholders' equity 53,857 16,998 (16,998)(a) 53,857
--------------------------------------------------------------
Total liabilities & stockholders' equity $ 631,125 $ 141,937 $ (16,998) $ 756,064
==============================================================
|
(a) Purchase of Haymarket funded by sale of federal funds.
(b) All of Haymarket's securities are classified as available-for-sale and carried at fair value.
(c) Haymarket's loans, deposits and borrowed funds are generally short term in nature and approximate fair value.
The following pro-forma condensed results of Century Bancorp, Inc. were prepared as if this acquisition had taken place on January 1, 1997. The pro-forma results are not necessarily indicative of the actual results of operations had the Company's acquisition of Haymarket actually occurred on January 1, 1997.
PRO-FORMA CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31,1997
(unaudited) Century Pro-Forma Pro-Forma
Bancorp, Inc. Haymarket Adjustments Combined
----------------------------------------------------------------------------------------------------------------------------
(in thousands)
Interest income $ 41,216 $ 12,842 $ (1,122)(a) $ 52,936
Interest expense 15,922 6,859 22,781
---------------------------------------------------------------------
Net interest income 25,294 5,983 (1,122) 30,155
Provision for loan losses 660 (841) (181)
---------------------------------------------------------------------
Net interest income after provision for loan losses 24,634 6,824 (1,122) 30,336
Operating income 4,994 200 5,194
Operating expenses 18,600 3,995 340 (b) 22,935
---------------------------------------------------------------------
Income before income taxes 11,028 3,029 (1,462) 12,595
Provision for income taxes 4,205 890 (464)(c) 4,631
---------------------------------------------------------------------
Net income $ 6,823 $ 2,139 $ (998) $ 7,964
=====================================================================
Net income per share, basic $ 1.18 -- -- $ 1.38
Net income per share, diluted $ 1.17 -- -- $ 1.37
|
(a) Foregone interest on federal funds sold to finance purchase of Haymarket.
(b) Amortization of goodwill assuming ten year amortization period.
(c) Tax effect of the interest income adjustments.
INDEPENDENT AUDITORS' REPORT
KPMG PEAT MARWICK LLP
Certified Public Accountants
99 High Street
Boston, Massachusetts 02110
THE BOARD OF DIRECTORS CENTURY BANCORP, INC.:
We have audited the accompanying consolidated balance sheets of Century Bancorp, Inc. and subsidiary (the Company) as of December 31, 1997 and 1996, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Century Bancorp, Inc. and subsidiary as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
January 12, 1998
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors of the Company and their ages as of December 31, 1997 are as follows:
NAME AGE POSITION
George R. Baldwin 54 Director, Century Bancorp, Inc., and Century Bank and Trust Co.,
Roger S. Berkowitz 45 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
Karl E. Case, Ph. D. 51 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
Henry L. Foster, D.V.M. 72 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
Marshall I. Goldman, Ph. D. 67 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
Russell B. Higley, Esquire 58 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
Jonathan B. Kay 38 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
Fraser Lemley 57 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
Joseph P. Mercurio 49 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
Joseph J. Senna, Esquire 58 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
Barry R. Sloane 42 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
Jonathan G. Sloane 39 Director and Senior Vice President, Century Bancorp, Inc.; President
and COO, Century Bank and Trust Company
Marshall M. Sloane 71 Chairman, President and CEO, Century Bancorp, Inc., Chairman and
CEO, Century Bank and Trust Company
Stephanie Sonnabend 44 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
George F. Swansburg 55 Director and Executive Vice President, Century Bancorp, Inc.;
Director, Vice Chairman, Century Bank and Trust Company
Jon Westling 55 Director, Century Bancorp, Inc., and Century Bank and Trust Co.
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Mr. Baldwin became a director of the Company in 1996. He has been a Director of Century Bank and Trust Company since January 1995. Mr. Baldwin is President and CEO of Arthur J. Gallagher & Co. of Massachusetts. Inc.
Mr. Berkowitz became a director of the Company in 1996. He was elected a director of Century Bank/Suffolk in 1986 and has been a director of Century Bank and Trust Company since the banks merged in 1992. Mr. Berkowitz is President of Legal SeaFoods, Inc.
Dr. Case became a director of the Company in 1996. Dr. Case has been a director of Century Bank and Trust Company since March 1995. He is the Marion Butler McLean Professor of Economics at Wellesley College and a Visiting Scholar at the Federal Reserve Bank of Boston.
Dr. Foster has been a director of the Company since its organization in 1972. He was a founding director of Century Bank and Trust Company in 1969. For over 40 years he has been Chairman of the Board of Charles River Laboratories, Inc.
Dr. Goldman has been a director of the Company since its organization in 1972. He was also a founding director of Century Bank and Trust Company in 1969. He has been a Professor of Economics at Wellesley College since 1968 and Associate Director of the Russian Research Center at Harvard University since 1975.
Mr. Higley became a director of the Company in 1996. He has been a director of Century Bank and Trust Company since April 1986. Mr. Higley is an attorney.
Mr. Kay became a director of the Company in January 1997. He was also elected a director of Century Bank and Trust Company in January 1997. Mr. Kay is President of The Kay Companies.
Mr. Lemley became a director of the Company in 1996. He has been a director of Century Bank and Trust Company since March 1988. Mr. Lemley is Chairman of the Board of Sentry Ford, Inc., Sentry Lincoln-Mercury, Inc., and Sentry South Lincoln-Mercury, Inc.
Mr. Mercurio became a director of the Company in 1991. He was formerly a director of Century Bank and Trust Company from 1989 to 1991. He is an Executive Vice President of Boston University.
Mr. Senna became a director of the Company in 1986. He has been a director of Century Bank and Trust Company since 1979. Mr. Senna is an attorney.
Mr. Barry R. Sloane became a director of the Company in January 1997. He was also elected a director of Century Bank and Trust Company in January 1997. Mr. Sloane is Head of Private Banking (North America) at Credit Suisse Private Banking.
Mr. Jonathan G. Sloane became a director of the Company in 1986. He was elected President and director of Century Bank/Suffolk in 1983. In 1992 he was elected Executive Vice President of Century Bank and Trust Company and in 1995 promoted to Senior Executive Vice President. Mr. Sloane is currently President and COO of Century Bank and Trust Company.
Mr. Marshall M. Sloane is the founder of the Company and has been Chairman, President and CEO since its organization in 1972. He founded Century Bank and Trust Company in 1969 and is currently its Chairman and CEO.
Ms. Sonnabend became a director of the Company in July 1997. She has been a director of Century Bank and Trust Company since April 1997. Ms Sonnabend is President of Sonesta International Hotels Corporation.
Mr. Swansburg became a director of the Company in 1986 and was elected Executive Vice President in 1995. He was President of Century North Shore Bank and Trust Company. In 1992 he was elected President and COO of Century Bank and Trust Company. He is currently Vice Chairman of Century Bank and Trust Company.
Mr. Westling became a director of the Company in 1996. He has been a director of Century Bank and Trust Company since April 1995. Mr. Westling is President of Boston University.
All of the Company's directors are elected annually and hold office until their successors are duly elected and qualified. There are no family relationships between any of the directors or executive officers, except that Barry R. Sloane and Jonathan G. Sloane are the sons of Marshall M. Sloane and Jonathan B. Kay is the son-in-law of Marshall M. Sloane.
The Company has a Compensation and Audit Committee. The Compensation Committee is a committee of the Board of Directors composed of Joseph P. Mercurio as Chairman, Fraser Lemley and Roger S. Berkowitz. It reviews the salaries of the Company's officers and administers the Company's Supplemental Executive Insurance/Retirement Income Plan, Incentive Compensation Plan and Stock Option Plan.
The Audit Committee is composed of Joseph Senna, Chairman and George Baldwin, Russell B. Higley and Jon Westling. It meets with KPMG Peat Marwick LLP, independent certified public accountants, in connection with the annual audit of the Company's financial statements and reviews the findings and recommendations of the FRB, FDIC and Massachusetts Bank Commissioner's staff in connection with their examinations and the internal audit reports and procedures for the Company and its subsidiary.
Directors not employed by the Company receive $100 per Board meeting attended and $200 per committee meeting attended.
ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive officers are elected annually by the Board prior to the Annual Meeting of Shareholders to serve for a one year term and until their successors are elected and qualified. The following table sets forth the name of each executive officer of the Company and the principal positions and offices he holds with the Company. Unless otherwise noted, each of these officers has served as an executive officer of the Company or its principal subsidiary for at least five years.
Marshall M. Sloane Chairman, President and CEO; Chairman and CEO, Century Bank
and Trust Company.
George F. Swansburg Director and Executive Vice President; Director and Vice Chairman, Century
Bank and Trust Company.
Jonathan G. Sloane Director and Senior Vice President; Director President and COO, Century
Bank and Trust Company.
Paul V. Cusick, Jr. Vice President and Treasurer;
Executive Vice President, Chief Financial Officer and Treasurer,
Century Bank and Trust Company. Mr. Cusick is 53 years of age.
Donald H. Lang Executive Vice President, Century Bank and Trust
Company with responsibility for lending. Mr. Lang
is 57 years of age.
William J. Sloboda Executive Vice President, Century Bank and Trust Company with
responsibility for operations. Mr. Sloboda is 55 years of age.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives are generally made by the Compensation Committee of the Board of Directors. Each member of the Compensation Committee is a non-employee director. The goal of the Committee is to provide competitive levels of compensation in order to attract and retain qualified executive personnel. The Compensation Committee believes that the actions of each executive officer have the potential to affect the short and long term profitability of the Company. Accordingly, the Compensation Committee places considerable importance on the design and administration of the executive compensation program.
The Company has an executive compensation program that is driven by the overall performance of the Company, the increase in shareholder value, the performance of the business unit directly affected by the executive and by the performance of the individual executive. The three primary components of the executive compensation program are base salary, cash incentive plan and stock based incentive plans.
BASE SALARY
Base salary levels are set so that the Company has the management talent to meet the challenges in the financial services industry. Several factors are included in setting base salaries including the responsibilities of the executive officer, the scope of the executive's position, individual performance and salary levels at peer banks. Historically, the Company's executive compensation practices have been designed to provide total compensation in the middle range of compensation levels at similar banking institutions. Salary increases for the senior management group have averaged 3% to 6% during the last several years.
CASH INCENTIVE PLANS
The Company has a cash incentive compensation plan which provides for the award of bonuses up to a percentage of base salary to officers of the Company or its subsidiaries. Recipients of incentive compensation are selected by the Compensation Committee, upon the recommendation of management, as eligible to participate in the plan. Awards are based upon the attainments of established objectives including profitability, expense control, sales volume and overall job performance. No bonuses are paid unless actual earnings are at least 85% of budgeted net income. Upon recommendation of the Compensation Committee, the Board of Directors determines the amounts, if any, to be awarded. Earned bonuses for 1997, 1996 and 1995 are shown in the Summary Compensation Table.
STOCK INCENTIVE PLANS
One of the Compensation Committee's priorities is for executives to be significant shareholders so that the interest of the executives are aligned with the shareholders and decisions are made as owners of the Company. On March 10, 1987, the stockholders approved a Stock Option Plan (the "Option Plan") that the Board of Directors adopted on February 24, 1987, that provides for grants of options to purchase no more than 150,000 shares of Class A Common Stock. Options may be granted, in the discretion of the Board of Directors, to officers and other key employees of the Company. Options granted under the Option Plan may be either incentive stock options as defined in the Internal Revenue Code or non-qualified stock options. The Option Plan is administrated by the Compensation Committee (whose members are ineligible to participate in the Option Plan) which makes recommendations, based upon management's recommendations, to the Board of Directors as to persons to whom options are to be granted, the number of shares to be optioned to each, the option price (which may not be less than 85% of the fair market value for non-qualified stock options, or the fair market value for incentive stock options, of the shares on the date of grant) and the time periods during which options are exercisable (no more than ten years from the date of grants). In the event of a reorganization, as defined in the Option Plan, the Board of Directors may terminate the exercise period by giving 30 days notice to all participants, during which time all outstanding options may be exercised. Options for 146,500 shares were granted in 1994.
EXECUTIVE BENEFITS
The Company's executive compensation package includes a special benefits component in addition to base salary and cash and stock incentive plans. These special benefits are viewed as less important than the above. Where such benefits are provided, they are intended to support other business purposes including facilitating business development efforts.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Marshall Sloane is eligible to participate in the same executive compensation plans available to other executive officers described above. The 1997 cash compensation for Mr. Sloane was $563,460 of which $438,200 was base salary.
CONCLUSION
The Compensation Committee believes that the executive compensation package will motivate the management team to produce the results the Company has historically achieved.
Comparison of Five-Year Cumulative Total Return*
[LINE GRAPH]
Value of $100 Invested on December 31, 1992 at:
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
Century 115.06 267.51 342.97 450.46 621.64
Nasdaq Banks 114.04 119.27 169.27 223.41 377.44
Nasdaq U.S. 114.80 112.16 158.70 195.19 239.53
|
* Assumes that the value of the investment in the Company's Common Stock and each index was $100 on December 31, 1992 and that all dividends were reinvested.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for fiscal years ending December 31, 1995, 1996 and 1997, the cash compensation paid by the Company and its subsidiaries, as well as certain other compensation paid, accrued or granted for those years to the five most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
-------------------------------------------
Annual Compensation Awards Payouts
------------------------------------------------------------------------------------------------------------------
Restricted Securities
Name Stock Underlying LTIP
and Salary Bonus(1) Other Awards Options/ Payouts All Other
Principal Position Year ($) ($) ($) ($) SARs (#) ($) Compensation
----------------------------------------------------------------------------------------------------------------------------------
Marshall M. Sloane 1997 438,200 139,000 0 0 0 0 0
Chairman 1996 413,400 125,260 0 0 0 0 0
1995 390,000 107,250 0 0 0 0 0
George F. Swansburg 1997 191,100 50,496 0 0 0 0 0
Vice Chairman 1996 183,800 45,582 0 0 0 0 0
1995 173,400 39,015 0 0 0 0 0
Jonathan G. Sloane 1997 154,000 40,905 0 0 0 0 0
President 1996 148,000 36,852 0 0 0 0 0
1995 140,000 31,500 0 0 0 0 0
Donald H. Lang 1997 127,000 30,793 0 0 0 0 0
Executive Vice 1996 123,300 27,742 0 0 0 0 0
President 1995 118,600 23,720 0 0 0 0 0
William J. Sloboda 1997 147,900 36,827 0 0 0 0 0
Executive Vice 1996 145,000 29,000 0 0 0 0 0
President 1995 141,900 28,380 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------------------------
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(1) Bonus amounts are based on performance for the years shown.
STOCK OPTION PLAN
The Company has granted incentive stock options to purchase 126,500 shares of Class A Common Stock, at 100% of the January 19, 1994 closing price of $3.75 per share, to 18 officers and employees. The Company also granted incentive stock options to purchase 20,000 shares of Class A Common Stock at $4.125 to Marshall M. Sloane. Options granted to the aforementioned officers are as follows.
NAME OF INDIVIDUAL NUMBER OF SHARES -------------------------- ---------------- Marshall M. Sloane 20,000 George F. Swansburg 20,000 Donald H. Lang 15,000 Jonathan G. Sloane 16,000 William J. Sloboda 16,000 |
Options for the eighteen participants have six year terms and become exercisable in increments of 33.3% of the shares covered thereby per year, commencing in January of 1995. Mr. Sloane's options have five year terms.
SUPPLEMENTAL EXECUTIVE INSURANCE/RETIREMENT INCOME PLAN
Executive officers of the Company or its subsidiaries who have at least one year of service may participate in the Supplemental Executive Insurance/Retirement Income Plan (the "Supplemental Plan").
The Company maintains split dollar life insurance policies for participants, in addition to the group term life insurance, which provides life insurance equal to twice the individual's salary with a maximum of $200,000, which they receive under a policy the Company maintains for its employees generally. The split dollar insurance provides death benefits if the participant dies while in the employ of the Company, equal to $2,191,000, $955,500, $635,000, $770,000, $739,000 for Messrs. Marshall M. Sloane, Swansburg, Lang, Jonathan G. Sloane and Sloboda.
Premiums paid by the Company in 1997 amounted to $87,800, $31,700, $27,600, $8,300, $28,400, for policies on the lives of Messrs. Marshall M. Sloane, Swansburg, Lang, Jonathan G. Sloane and Sloboda. The policies are on an "insurance bonus" basis, which means that the Company pays the full amount of all premiums on the policies but an amount equal to the one-year term cost of the insurance is treated for tax purposes as a bonus to the insured. The Company is the owner of these policies and each participating employee has received an assignment of a portion of each policy's proceeds. Upon the death of a participant, the Company will receive benefits equal to the difference between the death benefits payable to the named beneficiary under the Supplemental Plan and the face amount of the policy (less any policy loans then in force).
A participant in the Supplemental Plan is also entitled to retirement benefits. Participants, upon retirement at age 65, after a specified number of years of service, are entitled to receive for life, with ten years certain, 75% of their highest 60 months salary for certain executives, or 66% of such salary if the participants are Senior Vice Presidents and equivalents (as determined by the Compensation Committee), less the primary social security benefits and the benefit received from the defined benefit retirement plan. If a participant retires or terminates employment prior to age 65 such person is entitled to a reduced benefit. Five years of service are required for any benefits to become vested. Thereafter benefits vest incrementally.
The following table illustrates representative annual retirement benefits at various compensation levels for executive management employees under the Supplemental Plan who retire at age 65 and with 15 years of service, without reflecting the required offset of benefits from social security and the defined benefit retirement plan.
Five Year
Average Compensation Annual Benefit
-------------------- --------------
$ 50,000 $ 37,500
100,000 75,000
150,000 112,500
200,000 150,000
250,000 187,500
300,000 225,000
|
As of January 1, 1997, Messrs. Marshall M. Sloane, Swansburg, Lang, Jonathan G. Sloane, and Sloboda were 100%, 77.5%, 85.0%, 100%, and 100% vested, respectively, under the Supplemental Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the number and percentage of shares of Class A and Class B Common Stock beneficially owned as of December 31, 1997 (i) by each person known by the Company to own beneficially more than 5% of the Company's outstanding shares of Class A or Class B Common Stock (ii) by each of the Company's directors and certain officers; and (iii) by all directors and officers of the Company as a group.
NUMBER OF BENEFICIAL OWNER & ADDRESS OR NUMBER CLASS A % A CLASS B % B OF PERSONS IN GROUP OWNED OWNED OWNED OWNED ------------------------------------ --------- ----- ----------- ----- Charles J. Moore,(i) 222,000 6.32% The Banc Funds 208 South LaSalle Street Chicago, IL 60604 Marshall M. Sloane,(i),(ii) 15,973(1) 0.45% 1,714,330(2) 75.22% 400 Mystic Ave. Medford, MA 02155 George R. Baldwin,(ii) 5,960 0.17% Roger S. Berkowitz,(ii) 1,934 0.06% Karl E. Case,(ii) 342 0.01% Paul V. Cusick, Jr., (ii) 8,200 0.23% Henry L. Foster, D.V.M.,(ii) 18,471 0.53% 1,000 0.04% Marshall I. Goldman,(ii) 261(3) 0.01% 30,000(4) 1.32% Russell B. Higley, Esquire,(ii) 4,440 0.13% Jonathan B. Kay,(ii) 2,946 0.08% 60,000(6) 2.63% Donald H. Lang,(ii) 6,600 0.19% Fraser Lemley,(ii) 2,219 0.06% Joseph P. Mercurio,(ii) 1,362 0.04% Joseph J. Senna,(ii) 2,818 0.08% 42,000(5) 1.84% Barry R. Sloane,(ii) 251 0.01% Jonathan G. Sloane,(ii) 614 0.02% 60,000 2.63% William J. Sloboda,(ii) 7,009 0.20% 500 0.02% Stephanie Sonnabend,(ii) 126 0.00% George F. Swansburg,(ii) 17,100 0.49% Jon Westling,(ii) 385 0.01% All directors and officers as a group (20 in number),(iii) 101,111 2.87% 1,907,930 83.72% |
(1) Includes 2,500 shares owned by Mrs. Sloane and also includes 13,316 shares held in trust for Mr. Sloane's grandchildren.
(2) Includes 1,500 shares owned by Mrs. Sloane, and does not include 120,000 shares owned by Mr. Sloane's children. Mr. Sloane disclaims beneficial ownership of such 120,000 shares.
(3) Does not include 9,000 shares held of record by Mr. Goldman's children; Mr. Goldman disclaims beneficial ownership of such shares.
(4) Does not include 9,000 shares held of record by Mr. Goldman's children; Mr. Goldman disclaims beneficial ownership of such shares.
(5) Includes 34,800 shares owned by Mrs. Senna.
(6) Entire 60,000 shares are owned by Mrs. Kay, Marshall Sloane's daughter.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's Executive Officers and Directors, and any persons who own more than 10% of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership of securities with the SEC and NASDAQ. Executive Officers, Directors, and greater than 10% stockholders (of which, to the Company's knowledge, there currently are none) are required by SEC regulation to furnish the Company's with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such reports received by it or written representations from certain reporting persons that no other reports were required, the corporation believes that, during 1997, all Section 16(a) filing requirements applicable to its Executive Officers and Directors were complied with, except that reports on initial holdings and subsequent purchases by one director were filed late.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements.
The following financial statements of the company and its subsidiaries are presented in Item 8:
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income -- Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Changes in Stockholders' Equity -Years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows-Years Ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
All schedules are omitted because either the required information is shown in the financial statements or notes incorporated by reference, or they are not applicable, or the data is not significant.
(3) Exhibits
Those exhibits required by Item 601 of Regulation S-K and by paragraph (C) below previously filed.
(b) Reports on Form 8K.
There were no items reported on Form 8K during the last quarter of the period covered by this Form.
(C) Exhibits required by Item 601 of Regulation S-K.
Required exhibits previously filed
(d) Financial Statement required by Regulation S-X.
Schedules to Consolidated Financial Statements required by Regulation S-X are not required under the related instructions or are inapplicable, and therefore have been omitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 10th day of March 1998
Century Bancorp, Inc.
/s/ Marshall M. Sloane ------------------------------------------------ By: Marshall M. Sloane, Chairman, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the date indicated.
/s/ George R. Baldwin /s/ Barry R. Sloane
------------------------------------------ -------------------------------------------------------
George R. Baldwin, Director Barry R. Sloane, Director
/s/ Roger S. Berkowitz /s/ Stephanie Sonnabend
------------------------------------------ -------------------------------------------------------
Roger S. Berkowitz, Director Stephanie Sonnabend, Director
/s/ Karl E. Case /s/ Jon Westling
------------------------------------------ -------------------------------------------------------
Karl E. Case, Ph.D., Director Jon Westling, Director
/s/ Henry L. Foster /s/ Jonathan G. Sloane
------------------------------------------ -------------------------------------------------------
Henry L. Foster, D.V.M., Director Jonathan G. Sloane, Director and Senior Vice President
/s/ Marshall I. Goldman /s/ Marshall M. Sloane
------------------------------------------ -------------------------------------------------------
Marshall I. Goldman, Ph.D., Director Marshall M. Sloane, Chairman, President and Chief
Executive Officer
/s/ Russell B. Higley /s/ George F. Swansburg
------------------------------------------ -------------------------------------------------------
Russell B. Higley, Esquire, Director George F. Swansburg, Director and Executive
Vice President
/s/ Jonathan B. Kay /s/ Paul V. Cusick, Jr.
------------------------------------------ -------------------------------------------------------
Jonathan B. Kay, Director Paul V. Cusick, Jr., Vice President and Treasurer,
Principal Financial Officer
/s/ Fraser Lemley /s/ Kenneth A. Samuelian
------------------------------------------ -------------------------------------------------------
Fraser Lemley, Director Kenneth A. Samuelian, Vice President, Controller and
Compliance Officer, Century Bank and Trust Company,
Principal Accounting Officer
/s/ Joseph P. Mercurio
------------------------------------------
Joseph P. Mercurio, Director
/s/ Joseph J. Senna
------------------------------------------
Joseph J. Senna, Esquire, Director
|
TABLE OF CONTENTS
PAGE
Summary.............................................................. 5 Selected Consolidated Financial Data.................................. 10 Risk Factors ......................................................... 13 Century Bancorp, Inc.................................................. 22 Century Bancorp Capital Trust......................................... 23 Use of Proceeds....................................................... 25 Market for the Preferred Securities................................... 26 Accounting Treatment.................................................. 26 Capitalization........................................................ 27 Description of the Preferred Securities............................... 28 Description of the Junior Subordinated Debentures......................................................... 38 Description of the Guarantee.......................................... 46 Expense Agreement..................................................... 48 Relationship Among the Preferred Securities, the Junior Subordinated Debentures and the Guarantee.................................................. 48 Certain Federal Income Tax Consequences............................... 50 ERISA Considerations.................................................. 53 Underwriting.......................................................... 54 Legal Matters......................................................... 55 Experts............................................................... 56 Incorporation of Certain Documents by Reference.......................................................... 57 Available Information................................................. 57 |
No dealer, salesperson or any other person has been authorized to give any information or to make any representations not contained in this Prospectus in connection with the offering covered by this Prospectus. If given or made, such information or representations must not be relied upon as having been authorized by the Company or the Underwriters. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, the Preferred Securities in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has not been any change in the facts set forth in this Prospectus or the affairs of the Company since the date hereof.
2,500,000 PREFERRED SECURITIES
CENTURY BANCORP
CAPITAL TRUST
___% CUMULATIVE TRUST
PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER
PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
CENTURY BANCORP, INC.
$25,000,000
___% JUNIOR SUBORDINATED DEBENTURES OF
CENTURY BANCORP, INC.
PROSPECTUS
APRIL __, 1998
TUCKER ANTHONY
INCORPORATED
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1).
NATURE OF EXPENSE AMOUNT
SEC filing fee (2)...................................................... $ 9,913
Nasdaq Listing Fee...................................................... 10,000
NASD Filing Fee......................................................... 6,000
Printing, postage and mailing........................................... 40,000
Legal fees and expenses................................................. 125,000
Accounting fees and expenses............................................ 40,000
Trustees' fees and expenses............................................. 11,000
Transfer Agent and Registrar fees....................................... 10,000
Blue Sky fees and expenses.............................................. 10,000
Miscellaneous........................................................... 34,000
--------
TOTAL........................................................... $295,913
========
|
(1) The amounts set forth above, except for the SEC and NASD fees, are in each case estimated.
(2) Based upon the sale of 2,875,000 Preferred Securities at $10 per Preferred Security.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Indemnification. The Company is a Massachusetts corporation. Massachusetts General Laws Chapter 156B, Section 67 provides that a corporation may, subject to certain limitations, indemnify its directors, officers, employees and other agents, and persons who serve at its request as directors, officers, employees or other agents of another organization, or who serve at its request in any capacity with respect to any employee benefit plan, to the extent specified or authorized by the corporation's articles of organization, a by-law adopted by the stockholders, or a vote adopted by the holders of a majority of the shares of stock entitled to vote on the election of directors.
Section 67 also provides that a corporation may purchase and maintain insurance against liability incurred by an officer or director in his capacity as officer or director, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability.
The Company's Articles of Organization provide that directors and officers of the Company and each person who, at the request of or by reason of an election effected in whole or in major part by the Company shall, be indemnified by the Company against liabilities and expenses arising out of service for or on behalf of the Company. The Articles provide that the indemnification provision in the Articles does not limit any other right to indemnification existing independently of the Articles including the discretionary power of the Board of Directors in granting or refusing indemnification to such other personnel.
Under the Articles, indemnification may include payment by the Company of expenses incurred in defending a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding, upon receipt of an undertaking by the person indemnified to repay such payment unless the payment of the indemnification with respect to such expenses is authorized by the Board of Directors in accordance with the Articles. Any such indemnification may be provided even if the person to be indemnified is no longer an officer or director of the Company.
The Articles provide that the Company is authorized to enter into agreements with its directors and officers providing indemnification procedures different from those set forth in the Articles, and to purchase and maintain liability insurance for itself and any director, officer, employee or agent of the Company.
Limitation of Liability. Massachusetts General Laws Chapter 156B,
Section 13 enables a corporation in its original articles of organization or an
amendment thereto to eliminate or limit the personal liability of a director for
monetary damages for violations of the director's fiduciary duty, except (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Sections
61 and 62 of Chapter 156B (providing for liability of directors for authorizing
illegal distributions and for making loans to directors, officers and certain
shareholders) or (iv) for any transaction from which a director derived an
improper personal benefit. The Company's Articles and By-laws currently contain
no limitation of liability provisions.
ITEM 16. EXHIBITS.
The following is a complete list of exhibits filed as part of this Registration Statement.
*1.1 Underwriting Agreement, dated as of April __, 1998, by and between the Company and Tucker Anthony Incorporated as representative of the several Underwriters.
4.1 Form of Indenture of the Company relating to the Junior Subordinated Debentures.
4.2 Form of Junior Subordinated Debenture.
4.3 Certificate of Trust of Century Bancorp Capital Trust (included as an exhibit to Exhibit 4.4).
4.4 Form of Amended and Restated Trust Agreement of Century Bancorp Capital Trust.
4.5 Form of Preferred Security Certificate for Century Bancorp Capital Trust (included as an exhibit to Exhibit 4.4).
4.6 Form of Preferred Securities Guarantee Agreement of the Company relating to the Preferred Securities.
4.7 Form of Agreement as to Expenses and Liabilities (included as an exhibit to Exhibit 4.4).
*5.1 Opinion of Foley, Hoag & Eliot LLP as to legality of the Junior Subordinated Debentures and the Guarantee to be issued by the Company.
*5.2 Opinion of Morris, Nichols, Arsht & Tunnell as to legality of the Preferred Securities to be issued by Century Bancorp Capital Trust.
*8.1 Opinion of Foley, Hoag & Eliot LLP as to certain federal income tax matters.
12.1 Computation of ratio of earnings to fixed charges.
13.1 Annual Report on Form 10-K of Century Bancorp, Inc. for the fiscal year ended December 31, 1997 (the "10-K") (filed with the Commission on March 25, 1998) (included in Prospectus).
23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1).
*23.3 Consent of Morris, Nichols, Arsht & Tunnell (included in Exhibit 5.2).
24.1 Power of Attorney of certain officers and directors of the Company (located on the signature page hereto).
25.1 Form T-1 Statement of Eligibility of State Street Bank and Trust Company to act as trustee under the Indenture.
25.2 Form T-1 Statement of Eligibility of State Street Bank and Trust Company to act as trustee under the Declaration of Trust of Century Bancorp Capital Trust.
25.3 Form T-1 Statement of Eligibility of State Street Bank and Trust Company under the Guarantee for the benefit of the holders of Preferred Securities of Century Bancorp Capital Trust.
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, as amended (the "Act"), each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this Registration Statement 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.
Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of each undersigned Registrant pursuant to the foregoing provisions, or otherwise, each Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by each undersigned Registrant of expenses incurred or paid by a director, officer of controlling person of each Registrant 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, each Registrant will, unless in the opinion of its counsel the matter has been settled by the controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective; and (2) for the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-2 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Medford, Massachusetts, on April 21, 1998.
CENTURY BANCORP, INC.
By:/s/Marshall M. Sloane ----------------------------------------------- Chairman, President and Chief Executive Officer |
Pursuant to the requirements of Securities Act of 1933, Century Bancorp Capital Trust certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-2 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Medford, Massachusetts, on April 21, 1998.
CENTURY BANCORP CAPITAL TRUST
By:/s/Marshall M. Sloane --------------------- Administrative Trustee By:/s/Jonathan G. Sloane --------------------- Administrative Trustee By:/s/Paul V. Cusick, Jr. --------------------- Administrative Trustee |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Century Bancorp, Inc. hereby severally constitute Marshall M. Sloane and Jonathan G. Sloane and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the Registration Statement filed herewith and any and all amendments to said Registration Statement, and generally to do all such things in our names and in our capacities as officers and directors to enable Century Bancorp, Inc. to comply with the provisions of the Securities Act of 1933, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on April 21, 1998.
/s/ George R. Baldwin /s/ Barry R. Sloane
--------------------------- ---------------------------
George R. Baldwin, Director Barry R. Sloane, Director
/s/ Roger S. Berkowitz /s/ Stephanie Sonnabend
--------------------------- ---------------------------
Roger S. Berkowitz, Director Stephanie Sonnabend, Director
/s/ Karl E. Case /s/ Jon Westling
--------------------------- ---------------------------
Karl E. Case, Ph.D., Director Jon Westling, Director
/s/ Henry L. Foster /s/ Jonathan G. Sloane
--------------------------- ---------------------------
Henry L. Foster, D.V.M., Director Jonathan G. Sloane, Director and
Senior Vice President
/s/ Marshall I. Goldman
--------------------------- /s/ Marshall M. Sloane
Marshall I. Goldman, Ph.D., Director ---------------------------
Marshall M. Sloane, Chairman, President
/s/ Russell B. Higley and Chief Executive Officer
---------------------------
Russell B. Higley, Esquire, Director /s/ George F. Swansburg
---------------------------
/s/ Jonathan B. Kay George F. Swansburg, Director
---------------------------
Jonathan B. Kay, Director /s/ Paul V. Cusick, Jr.
---------------------------
/s/ Fraser Lemley Paul V. Cusick, Jr., Vice President and
--------------------------- Treasurer, Principal Financial Officer
Fraser Lemley, Director
/s/ Kenneth A. Samuelian
/s/ Joseph P. Mercurio ---------------------------
--------------------------- Kenneth A. Samuelian, Vice President,
Joseph P. Mercurio, Director Controller and Compliance Officer,
Century Bank and Trust Company
/s/ Joseph J. Senna Principal Accounting Officer
---------------------------
Joseph J. Senna, Esquire, Director
|
EXHIBIT INDEX
*1.1 Underwriting Agreement, dated as of April __, 1998, by and between the Company and Tucker Anthony Incorporated, as representative of the several Underwriters.
4.1 Form of Indenture of the Company relating to the Junior Subordinated Debentures.
4.2 Form of Junior Subordinated Debenture.
4.3 Certificate of Trust of Century Bancorp Capital Trust (included as an exhibit to Exhibit 4.4).
4.4 Form of Amended and Restated Trust Agreement of Century Bancorp Capital Trust.
4.5 Form of Preferred Security Certificate for Century Bancorp Capital Trust (included as an exhibit to Exhibit 4.4).
4.6 Form of Preferred Securities Guarantee Agreement of the Company relating to the Preferred Securities.
4.7 Form of Agreement as to Expenses and Liabilities (included as an exhibit to Exhibit 4.4).
*5.1 Opinion of Foley, Hoag & Eliot LLP as to legality of the Junior Subordinated Debentures and the Guarantee to be issued by the Company.
*5.2 Opinion of Morris, Nichols, Arsht & Tunnell as to legality of the Preferred Securities to be issued by Century Bancorp Capital Trust.
*8.1 Opinion of Foley, Hoag & Eliot LLP as to certain federal income tax matters.
12.1 Computation of ratio of earnings to fixed charges.
13.1 Annual Report on Form 10-K of Century Bancorp, Inc. for the fiscal year ended December 31, 1997 (the "10-K") (filed with the Commission on March 25, 1998) (included in Prospectus).
23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1).
*23.3 Consent of Morris, Nichols, Arsht & Tunnell (included in Exhibit 5.2).
24.1 Power of Attorney of certain officers and directors of the Company (located on the signature page hereto).
25.1 Form T-1 Statement of Eligibility of State Street Bank and Trust Company to act as trustee under the Indenture.
25.2 Form T-1 Statement of Eligibility of State Street Bank and Trust Company to act as trustee under the Declaration of Trust of Century Bancorp Capital Trust.
25.3 Form T-1 Statement of Eligibility of State Street Bank and Trust Company under the Guarantee for the benefit of the holders of Preferred Securities of Century Bancorp Capital Trust.
* To be filed by amendment.
Exhibit 4.1
CENTURY BANCORP, INC.
AND
STATE STREET BANK AND TRUST COMPANY
AS TRUSTEE
INDENTURE
____% JUNIOR SUBORDINATED DEBENTURES DUE 2029
DATED AS OF _______________, 1998.
CROSS-REFERENCE TABLE
Section of Trust Indenture Act Section of of 1939, as amended Indenture 310(a).....................................................................9.10 310(b)................................................................9.9, 9.11 310(c)...........................................................Not Applicable 311(a).....................................................................9.14 311(b).....................................................................9.14 311(c)...........................................................Not Applicable 312(a)............................................................. 6.1, 6.2(a) 312(b).................................................................. 6.2(c) 312(c).................................................................. 6.2(c) 313(a).................................................................. 6.4(a) 313(b).................................................................. 6.4(b) 313(c)...........................................................6.4(a), 6.4(b) 313(d)...................................................................6.4(c) 314(a)...................................................................6.3(a) 314(b)...........................................................Not Applicable 314(c).....................................................................15.7 314(d)...........................................................Not Applicable 314(e).....................................................................15.7 314(f)...........................................................Not Applicable 315(a)..............................................................9.1(a), 9.3 315(b)......................................................................9.2 315(c)...................................................................9.1(a) 315(d)...................................................................9.1(b) 315(e)......................................................................7.7 316(a).................................................................1.1, 7.6 316(b)...................................................................7.4(b) 316(c)..................................................................10.1(b) 317(a)......................................................................7.2 317(b)......................................................................5.3 318(a).....................................................................15.9 |
Note: This Cross-Reference Table does not constitute part of this Indenture and shall not affect the interpretation of any of its terms or provisions.
INDENTURE
INDENTURE, dated as of __________, 1998, between CENTURY BANCORP, INC., a Massachusetts corporation (the "Company") and STATE STREET BANK AND TRUST COMPANY, a trust company duly organized and existing under the laws of The Commonwealth of Massachusetts, as trustee (the "Trustee");
RECITALS
WHEREAS, for its lawful corporate purposes, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of securities to be known as its ____% Junior Subordinated Debentures due 2029 (hereinafter referred to as the "Debentures"), the form and substance of such Debentures and the terms, provisions and conditions thereof to be set forth as provided in this Indenture; and
WHEREAS, Century Bancorp Capital Trust, a Delaware statutory business trust (the "Trust"), has offered to the public up to $28,750,000 aggregate liquidation amount of its Preferred Securities (as defined herein) and proposes to invest the proceeds from such offering, together with the proceeds of the issuance and sale by the Trust to the Company of $889,180 aggregate liquidation amount of its Common Securities (as defined herein), in $29,639,180 aggregate principal amount of the Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver this Indenture; and
WHEREAS, all requirements necessary to make this Indenture a valid instrument in accordance with its terms, and to make the Debentures, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been performed, and the execution and delivery of this Indenture have been duly authorized in all respects; and
WHEREAS, to provide the terms and conditions upon which the Debentures are to be authenticated, issued and delivered, the Company has duly authorized the execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of the Debentures by the holders thereof, it is mutually covenanted and agreed as follows for the equal and ratable benefit of the holders of the Debentures:
ARTICLE I.
DEFINITIONS
SECTION 1.1. DEFINITIONS OF TERMS.
The terms defined in this Section 1.1 (except as in this Indenture otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1 and shall include the plural as well as the singular. All other terms used in this Indenture that are defined in the Trust Indenture Act, or that are by reference in the Trust Indenture Act defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires), shall have the meanings assigned to such terms in the Trust Indenture Act and in the Securities Act as in force at the date of the execution of this instrument. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with Generally Accepted Accounting Principles.
"Accelerated Maturity Date" means if the Company elects to accelerate the Maturity Date in accordance with Section 2.2(c), the date selected by the Company which is prior to the Scheduled Maturity Date, but is on or after June 30, 2003.
"Additional Interest" shall have the meaning set forth in Section 2.5.
"Additional Senior Obligations" means all indebtedness of the Company
whether incurred on or prior to the date of this Indenture or thereafter
incurred, for claims in respect of derivative products such as interest and
foreign exchange rate contracts, commodity contracts and similar arrangements;
provided, however, that Additional Senior Obligations does not include claims in
respect of Senior Debt or Subordinated Debt or obligations which, by their
terms, are expressly stated to be not superior in right of payment to the
Debentures or to rank pari passu in right of payment with the Debentures. For
purposes of this definition, "claim" shall have the meaning assigned thereto in
Section 101(4) of the United States Bankruptcy Code of 1978, as amended.
"Administrative Trustees" shall have the meaning set forth in the Trust Agreement.
"Affiliate" means, with respect to a specified Person, (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities or other ownership interests of the specified Person; (b) any Person 10% or more of whose outstanding voting securities or other ownership interests are directly or indirectly owned, controlled or held with power to vote by the specified Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person; (d) a partnership in which the specified Person is a general partner; (e) any officer or director of the specified Person; and (f) if the specified Person is an individual, any entity of which the specified Person is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to the Debentures appointed by the Trustee pursuant to Section 2.12.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any duly authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification.
"Business Day" means, with respect to the Debentures, any day other than a Saturday or a Sunday or a day on which federal or state banking institutions in Boston, Massachusetts, are authorized or required by law, executive order or regulation to close, or a day on which the Corporate Trust Office of the Trustee or the Property Trustee is closed for business.
"Capital Treatment Event" means the receipt by the Trust of an Opinion of Counsel, rendered by a law firm experienced in such matters to the effect that, as a result of any amendment to or any change (including any announced prospective change) in the laws (or any regulations thereunder) of the United States or any political subdivision thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such proposed change, pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under the Trust Agreement, there is more than an insubstantial risk of impairment of the Company's ability to treat the aggregate Liquidation Amount of the Preferred Securities (or any substantial portion thereof) as "Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital adequacy guidelines of the Federal Reserve, as then applicable to the Company, provided, however, that the inability of the Company to treat all or any portion of the Liquidation Amount of the Preferred Securities as Tier 1 Capital shall not constitute the basis for a Capital Treatment Event if such inability results from the Company having cumulative preferred capital in excess of the amount which may qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines of the Federal Reserve.
"Certificate" means a certificate signed by the principal executive officer, the principal financial officer, the principal accounting officer, the treasurer or any vice president of the Company. The Certificate need not comply with the provisions of Section 15.7.
"Change in 1940 Act Law" shall have the meaning set forth in the definition of "Investment Company Event."
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
"Common Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with the Preferred Securities; provided, however, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect of (i) distributions, and (ii) payments upon liquidation, redemption and otherwise, are subordinated to the rights of holders of Preferred Securities.
"Company" means Century Bancorp, Inc., a Massachusetts corporation , a corporation duly organized and existing under the laws of The Commonwealth of Massachusetts, and, subject to the provisions of Article XII, shall also include its successors and assigns.
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Corporate Trust Office" means the office of the Trustee at which, at any particular time, its corporate trust business shall be principally administered, which office at the date hereof is located at Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department.
"Coupon Rate" shall have the meaning set forth in Section 2.5.
"Custodian" means any receiver, trustee, assignee, liquidator, or similar official under any Bankruptcy Law.
"Debentures" shall have the meaning set forth in the Recitals hereto.
"Debentureholder," "holder of Debentures," "registered holder," or other similar term, means the Person or Persons in whose name or names a particular Debenture shall be registered on the books of the Company or the Trustee kept for that purpose in accordance with the terms of this Indenture.
"Debenture Register" shall have the meaning set forth in Section 2.7(b).
"Debenture Registrar" shall have the meaning set forth in Section 2.7(b).
"Debt" means with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person 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 such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; and (vi) and every obligation of the type referred to in clauses (i) through (v) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise.
"Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
"Dissolution Event" means that as a result of the occurrence and continuation of a Special Event, the Trust is to be dissolved in accordance with the Trust Agreement and the Debentures held by the Property Trustee are to be distributed to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Trust Agreement.
"Distribution" shall have the meaning set forth in the Trust Agreement.
"Event of Default" means, with respect to the Debentures, any event specified in Section 7.1, which has continued for the period of time, if any, and after the giving of the notice, if any, therein designated.
"Exchange Act," means the Securities Exchange Act of 1934, as amended, as in effect at the date of execution of this instrument.
"Extension Period" shall have the meaning set forth in Section 4.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve System.
"Generally Accepted Accounting Principles" means such accounting principles as are generally accepted at the time of any computation required hereunder.
"Governmental Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged; or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America that, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such Governmental Obligation or a specific payment of principal of or interest on any such Governmental Obligation held by such custodian for the account of the holder of such depositary receipt; provided, however, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the Governmental Obligation or the specific payment of principal of or interest on the Governmental Obligation evidenced by such depositary receipt.
"Herein," "hereof," and "hereunder," and other words of similar import, refer to this
Indenture as a whole and not to any particular Article, Section or other subdivision.
"Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into in accordance with the terms hereof.
"Interest Payment Date" shall have the meaning set forth in Section 2.5.
"Investment Company Act," means the Investment Company Act of 1940, as amended, as in effect at the date of execution of this instrument.
"Investment Company Event" means the receipt by the Trust of an Opinion of Counsel, rendered by a law firm experienced in such matters, to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or shall be considered an "investment company" that is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities under the Trust Agreement.
"Maturity Date" means the date on which the Debentures mature and on which the principal shall be due and payable together with all accrued and unpaid interest thereon including Compounded Interest and Additional Interest, if any.
"Ministerial Action" shall have the meaning set forth in Section 3.2.
"Officers' Certificate" means a certificate signed by the President or
a Vice President and by the Treasurer or an Assistant Treasurer or the
Controller or an Assistant Controller or the Secretary or an Assistant Secretary
of the Company that is delivered to the Trustee in accordance with the terms
hereof. Each such certificate shall include the statements provided for in
Section 15.7, if and to the extent required by the provisions thereof.
"Opinion of Counsel" means an opinion in writing of legal counsel, who may be an employee of or counsel for the Company, that is delivered to the Trustee in accordance with the terms hereof. Each such opinion shall include the statements provided for in Section 15.7, if and to the extent required by the provisions thereof.
"Outstanding," when used with respect to the Debentures, means, as of the date of determination, all of the Debentures theretofore executed and delivered by the Trustee under this Indenture, except:
(a) the Debentures theretofore canceled by the Trustee or any Paying Agent, or delivered to the Trustee or any Paying Agent for cancellation;
(b) the Debentures for whose payment or redemption money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent (other than the Company) for the holders of such Debentures;
(c) the Debentures which have been paid or in exchange for or in lieu
of which other Debentures have been executed and delivered pursuant to Section
2.7; provided, however, that in determining whether the holders of a majority or
specified percentage in aggregate principal amount of the Debentures have given
any request, demand, authorization, direction, notice, consent or waiver
hereunder, the Debentures owned by the Company or any other obligor on the
Debentures or any Person directly or indirectly controlling or controlled by or
under common control with the Company or any other obligor on the Debentures
shall be disregarded and deemed not to be Outstanding, except that (a) in
determining whether any Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only the
Debentures that such Trustee knows to be so owned shall be so disregarded; and
(b) for the purposes hereof, the Trust shall be deemed not to be controlled by
the Company. The Debentures so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Debentures and the
pledgee is not a Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company or any such other
obligor.
"Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 5.3.
"Person" means any individual, corporation, partnership, joint-venture, trust, limited liability company, joint-stock company, unincorporated organization or government or any agency or political subdivision thereof.
"Predecessor Debenture" means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for the purposes of this definition, any Debenture authenticated and delivered under Section 2.9 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture.
"Preferred Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Common Securities issued by the Trust; provided, however, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect of (i) distributions, and (ii) payments upon liquidation, redemption and otherwise, are subordinated to the rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means any guarantee that the Company may enter into with the Trustee or other Persons that operates directly or indirectly for the benefit of holders of Preferred Securities.
"Property Trustee" has the meaning set forth in the Trust Agreement.
"Responsible Officer" when used with respect to the Trustee means the Chairman of the
Board of Directors, the President, any Vice President, the Secretary, the Treasurer, any trust officer, any corporate trust officer or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject.
"Scheduled Maturity Date" means June 30, 2029.
"Securities Act," means the Securities Act of 1933, as amended, as in effect at the date of execution of this instrument.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or to other Debt which is pari
passu with, or subordinated to, the Debentures; provided, however, that Senior
Debt shall not be deemed to include (i) any Debt 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;
(ii) any Debt of the Company to any of its subsidiaries; (iii) Debt to any
employee of the Company; (iv) Debt which by its terms is subordinated to trade
accounts payable or accrued liabilities arising in the ordinary course of
business to the extent that payments made to the holders of such Debt by the
holders of the Debentures as a result of the subordination provisions of this
Indenture would be greater than they otherwise would have been as a result of
any obligation of such holders to pay amounts over to the obligees on such trade
accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which such Debt is subject;
and (v) Debt which constitutes Subordinated Debt.
"Senior Indebtedness" shall have the meaning set forth in Section 16.1.
"Special Event" means a Tax Event, a Capital Treatment Event or an Investment Company Event.
"Subordinated Debt" means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt (other than the Debentures), whether incurred on or prior to the date of this Indenture or thereafter incurred, which is by its terms expressly provided to be junior and subordinate to other Debt of the Company (other than the Debentures).
"Subsidiary" means, with respect to any Person, (i) any corporation at least a majority of whose outstanding Voting Stock shall at the time be owned, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries; (ii)
any general partnership, joint venture, trust or similar entity, at least a majority of whose outstanding partnership or similar interests shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel, rendered by a law firm experienced in such matters, to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under the Trust Agreement, there is more than an insubstantial risk that (i) the Trust is, or shall be within 90 days after the date of such Opinion of Counsel, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days after the date of such Opinion of Counsel, shall not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or shall be within 90 days after the date of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges. The Trust or the Company shall request and receive such Opinion of Counsel with regard to such matters within a reasonable period of time after the Trust or the Company shall have become aware of the possible occurrence of any of the events described in clauses (i) through (iii) above.
"Trust" means Century Bancorp Capital Trust, a Delaware statutory business trust.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated ____________, 1998, of the Trust.
"Trustee" means State Street Bank and Trust Company and, subject to the provisions of Article IX, shall also include its successors and assigns, and, if at any time there is more than one Person acting in such capacity hereunder, "Trustee" shall mean each such Person.
"Trust Indenture Act," means the Trust Indenture Act of 1939, as amended, subject to the provisions of Sections 11.1, 11.2, and 12.1, as in effect at the date of execution of this instrument.
"Trust Securities" means the Common Securities and Preferred Securities, collectively.
"Voting Stock," as applied to stock of any Person, means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.
ARTICLE II.
ISSUE, DESCRIPTION, TERMS, CONDITIONS
REGISTRATION AND EXCHANGE OF THE DEBENTURES
SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT.
There is hereby authorized Debentures designated the "___% Subordinated Debentures due 2029," limited in aggregate principal amount up to $29,639,130, which amount shall be as set forth in any written order of the Company for the authentication and delivery of Debentures pursuant to Section 2.6.
SECTION 2.2. MATURITY.
(a) The Maturity Date shall be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to accelerate the Maturity Date to
be a date prior to the Scheduled Maturity Date in accordance with
Section 2.2(b), the Accelerated Maturity Date.
(b) The Company may, on one occasion, at any time before the day which is 90 days before the Scheduled Maturity Date and on or after June 30, 2003, elect to shorten the Maturity Date to the Accelerated Maturity Date provided that the Company has received the prior approval of the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve.
(c) If the Company elects to accelerate the Maturity Date in accordance with Section 2.2(b), the Company shall give notice to the registered holders of the Debentures, the Property Trustee and the Trust of the acceleration of the Maturity Date and the Accelerated Maturity Date at least 90 days and no more than 180 days before the Accelerated Maturity Date.
SECTION 2.3. FORM AND PAYMENT.
The Debentures shall be issued in fully registered certificated form without interest coupons. Principal and interest on the Debentures issued in certificated form shall be payable, the transfer of such Debentures shall be registrable and such Debentures shall be exchangeable for Debentures bearing identical terms and provisions at the office or agency of the Trustee; provided, however, that payment of interest may be made at the option of the Company by check mailed to the holder at such address as shall appear in the Debenture Register or by wire transfer to an account maintained by the holder as specified in the Debenture Register, provided that the holder provides proper transfer instructions by the regular record date. Notwithstanding the foregoing, so long as the holder of any Debentures is the Property Trustee, the payment of the principal of and interest (including Compounded Interest and Additional Interest, if any) on such Debentures held by the Property Trustee shall be made at such place and to such account as may
be designated by the Property Trustee.
SECTION 2.4. [Intentionally Omitted]
SECTION 2.5. INTEREST.
(a) Each Debenture shall bear interest at the rate of ___% per annum (the "Coupon Rate") from the original date of issuance until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the Coupon Rate, compounded quarterly, payable (subject to the provisions of Article IV) quarterly in arrears on March 31, June 30, September 30, and December 31 of each year (each, an "Interest Payment Date," commencing on September 30, 1998), to the Person in whose name such Debenture or any Predecessor Debenture is registered, at the close of business on the regular record date for such interest installment, which shall be the fifteenth day of the last month of the calendar quarter.
(b) The amount of interest payable for any period shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full quarterly period for which interest is computed shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) with the same force and effect as if made on the date such payment was originally payable.
(c) If, at any time while the Property Trustee is the holder of any Debentures, the Trust or the Property Trustee is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any case, the Company shall pay as additional interest ("Additional Interest") on the Debentures held by the Property Trustee, such additional amounts as shall be required so that the net amounts received and retained by the Trust and the Property Trustee after paying such taxes, duties, assessments or other governmental charges shall be equal to the amounts the Trust and the Property Trustee would have received had no such taxes, duties, assessments or other government charges been imposed.
SECTION 2.6. EXECUTION AND AUTHENTICATIONS.
(a) The Debentures shall be signed on behalf of the Company by its Chief Executive Officer, President or one of its Vice Presidents, under its corporate seal attested by its Secretary or one of its Assistant Secretaries. Signatures may be in the form of a manual or facsimile signature. The Company may use the facsimile signature of any Person who shall have been a Chief Executive Officer, President or Vice President thereof, or of any Person who shall have been a Secretary or Assistant Secretary thereof, notwithstanding the fact that at the time the Debentures shall be authenticated and delivered or disposed of such Person shall have ceased to be the Chief Executive Officer, President or a Vice President, or the Secretary or an Assistant
Secretary, of the Company. The seal of the Company may be in the form of a facsimile of such seal and may be impressed, affixed, imprinted or otherwise reproduced on the Debentures. The Debentures may contain such notations, legends or endorsements required by law, stock exchange rule or usage. Each Debenture shall be dated the date of its authentication by the Trustee.
(b) A Debenture shall not be valid until manually authenticated by an authorized signatory of the Trustee, or by an Authenticating Agent. Such signature shall be conclusive evidence that the Debenture so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture.
(c) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Debentures executed by the Company to the Trustee for authentication, together with a written order of the Company for the authentication and delivery of such Debentures signed by its Chief Executive Officer, President or any Vice President and its Treasurer or any Assistant Treasurer, and the Trustee in accordance with such written order shall authenticate and deliver such Debentures.
(d) In authenticating such Debentures and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section 9.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the form and terms thereof have been established in conformity with the provisions of this Indenture.
(e) The Trustee shall not be required to authenticate such Debentures if the issue of such Debentures pursuant to this Indenture shall affect the Trustee's own rights, duties or immunities under the Debentures and this Indenture or otherwise in a manner that is not reasonably acceptable to the Trustee.
SECTION 2.7. REGISTRATION OF TRANSFER AND EXCHANGE.
(a) Debentures may be exchanged upon presentation thereof at the office
or agency of the Company designated for such purpose in Boston, Massachusetts ,
or at the office of the Debenture Registrar, for other Debentures and for a like
aggregate principal amount, upon payment of a sum sufficient to cover any tax or
other governmental charge in relation thereto, all as provided in this Section
2.7. In respect of any Debentures so surrendered for exchange, the Company shall
execute, the Trustee shall authenticate and such office or agency shall deliver
in exchange therefor the Debenture or Debentures that the Debentureholder making
the exchange shall be entitled to receive, bearing numbers not contemporaneously
outstanding.
(b) The Company shall keep, or cause to be kept, at its office or agency designated for such purpose in Boston, Massachusetts, or at the office of the Debenture Registrar, or such other location designated by the Company a register or registers (herein referred to as the "Debenture Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall register the Debentures and the transfers of Debentures as in this Article II provided and which at all reasonable times shall be open for inspection by the Trustee. The registrar for the
purpose of registering Debentures and transfer of Debentures as herein provided shall initially be the Trustee and thereafter as may be appointed by the Company as authorized by Board Resolution (the "Debenture Registrar"). Upon surrender for transfer of any Debenture at the office or agency of the Company designated for such purpose, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in the name of the transferee or transferees a new Debenture or Debentures for a like aggregate principal amount. All Debentures presented or surrendered for exchange or registration of transfer, as provided in this Section 2.7, shall be accompanied (if so required by the Company or the Debenture Registrar) by a written instrument or instruments of transfer, in form satisfactory to the Company or the Debenture Registrar, duly executed by the registered holder or by such holder's duly authorized attorney in writing.
(c) No service charge shall be made for any exchange or registration of transfer of Debentures, or issue of new Debentures in case of partial redemption, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, other than exchanges pursuant to Section 2.8, Section 3.5(b) and Section 11.4 not involving any transfer.
(d) The Company shall not be required (i) to issue, exchange or register the transfer of any Debentures during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of less than all the Outstanding Debentures and ending at the close of business on the day of such mailing; nor (ii) to register the transfer of or exchange any Debentures or portions thereof called for redemption.
SECTION 2.8. TEMPORARY DEBENTURES.
Pending the preparation of definitive Debentures, the Company may execute, and the Trustee shall authenticate and deliver, temporary Debentures (printed, lithographed, or typewritten). Such temporary Debentures shall be substantially in the form of the definitive Debentures in lieu of which they are issued, but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company. Every temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Debentures. Without unnecessary delay the Company shall execute and shall furnish definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor (without charge to the holders), at the office or agency of the Company designated for the purpose in Boston, Massachusetts, and the Trustee shall authenticate and such office or agency shall deliver in exchange for such temporary Debentures an equal aggregate principal amount of definitive Debentures, unless the Company advises the Trustee to the effect that definitive Debentures need not be executed and furnished until further notice from the Company. Until so exchanged, the temporary Debentures shall be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder.
SECTION 2.9. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES.
(a) In case any temporary or definitive Debenture shall become mutilated or be destroyed, lost or stolen, the Company (subject to the next succeeding sentence) shall execute, and upon the Company's request the Trustee (subject as aforesaid) shall authenticate and deliver, a new Debenture bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen. In every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of the applicant's Debenture and of the ownership thereof. The Trustee shall authenticate any such substituted Debenture and deliver the same upon the written request or authorization of the Chairman, President or any Vice President and the Treasurer or any Assistant Treasurer of the Company. Upon the issuance of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. In case any Debenture that has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as they may require to save them harmless, and, in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof.
(b) Every replacement Debenture issued pursuant to the provisions of this Section 2.9 shall constitute an additional contractual obligation of the Company whether or not the mutilated, destroyed, lost or stolen Debenture shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures duly issued hereunder. All Debentures shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures, and shall preclude (to the extent lawful) any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.
SECTION 2.10. CANCELLATION.
All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer shall, if surrendered to the Company or any Paying Agent, be delivered to the Trustee for cancellation, or, if surrendered to the Trustee, shall be canceled by it, and no Debentures shall be issued in lieu thereof except as expressly required or permitted by any of the provisions of this Indenture. On request of the Company at the time of such surrender, the Trustee shall deliver to the Company canceled Debentures held by the Trustee. In the absence of such request the Trustee may dispose of canceled Debentures in accordance with its standard
procedures and deliver a certificate of disposition to the Company. If the Company shall otherwise acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are delivered to the Trustee for cancellation.
SECTION 2.11. BENEFIT OF INDENTURE.
Nothing in this Indenture or in the Debentures, express or implied, shall give or be construed to give to any Person, other than the parties hereto and the holders of the Debentures (and, with respect to the provisions of Article XVI, the holders of Senior Indebtedness) any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained; all such covenants, conditions and provisions being for the sole benefit of the parties hereto and of the holders of the Debentures (and, with respect to the provisions of Article XVI, the holders of Senior Indebtedness).
SECTION 2.12. AUTHENTICATION AGENT.
(a) So long as any of the Debentures remain Outstanding there may be an Authenticating Agent for any or all such Debentures, which the Trustee shall have the right to appoint. Said Authenticating Agent shall be authorized to act on behalf of the Trustee to authenticate Debentures issued upon exchange, transfer or partial redemption thereof, and Debentures so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. All references in this Indenture to the authentication of Debentures by the Trustee shall be deemed to include authentication by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall be a corporation that has a combined capital and surplus, as most recently reported or determined by it, sufficient under the laws of any jurisdiction under which it is organized or in which it is doing business to conduct a trust business, and that is otherwise authorized under such laws to conduct such business and is subject to supervision or examination by federal or state authorities. If at any time any Authenticating Agent shall cease to be eligible in accordance with these provisions, it shall resign immediately.
(b) Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time (and upon request by the Company shall) terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon resignation, termination or cessation of eligibility of any Authenticating Agent, the Trustee may appoint an eligible successor Authenticating Agent acceptable to the Company. Any successor Authenticating Agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder as if originally named as an Authenticating Agent pursuant hereto.
ARTICLE III.
REDEMPTION OF DEBENTURES
SECTION 3.1. REDEMPTION.
Subject to the Company having received prior approval of the Federal Reserve, if then required under the applicable capital guidelines or policies of the Federal Reserve, the Company may redeem the Debentures issued hereunder on and after the dates set forth in and in accordance with the terms of this Article III.
SECTION 3.2. SPECIAL EVENT REDEMPTION.
Subject to the Company having received the prior approval of the Federal Reserve, if then required under the applicable capital guidelines or policies of the Federal Reserve, if a Special Event has occurred and is continuing, then, notwithstanding Section 3.3(a) but subject to Section 3.3(b), the Company shall have the right upon not less than 30 days nor more than 60 days notice to the holders of the Debentures to redeem the Debentures, in whole but not in part, for cash within 180 days following the occurrence of such Special Event (the "180-Day Period") at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption (the "Redemption Price"), provided that if at the time there is available to the Company the opportunity to eliminate, within the 180-Day Period, a Tax Event by taking some ministerial action (a "Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Company, the Trust or the holders of the Trust Securities issued by the Trust, the Company shall pursue such Ministerial Action in lieu of redemption, and, provided further, that the Company shall have no right to redeem the Debentures while the Trust is pursuing any Ministerial Action pursuant to its obligations hereunder. The Redemption Price shall be paid prior to 12:00 noon, Boston time, on the date of such redemption or such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Redemption Price by 10:00 a.m., Boston time, on the date such Redemption Price is to be paid.
SECTION 3.3. OPTIONAL REDEMPTION BY COMPANY.
(a) Subject to the provisions of Section 3.3(b), except as otherwise may be specified in this Indenture, the Company shall have the right to redeem the Debentures, in whole or in part, from time to time, on or after June 30, 2003, at a Redemption Price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption, plus Deferred Interest, if any. Any redemption pursuant to this Section 3.3(a) shall be made upon not less than 30 days nor more than 60 days notice to the holder of the Debentures, at the Redemption Price. If the Debentures are only partially redeemed pursuant to this Section 3.3, the Debentures shall be redeemed pro rata or by lot or in such other manner as the Trustee shall deem appropriate and fair in its discretion. The Redemption Price shall be paid prior to 12:00 noon, Boston time, on the date of such redemption or at such earlier time as the Company determines provided that the Company shall deposit with the Trustee an amount sufficient to pay
the Redemption Price by 10:00 a.m., Boston time, on the date such Redemption Price is to be paid.
(b) If a partial redemption of the Debentures would result in the delisting of the Preferred Securities issued by the Trust from The Nasdaq Stock Market's National Market or any national securities exchange or other organization on which the Preferred Securities are then listed, the Company shall not be permitted to effect such partial redemption and may only redeem the Debentures in whole.
SECTION 3.4. NOTICE OF REDEMPTION.
(a) In case the Company shall desire to exercise such right to redeem all or, as the case may be, a portion of the Debentures in accordance with the right reserved so to do, the Company shall, or shall cause the Trustee to upon receipt of 45 days' written notice from the Company (which notice shall, in the event of a partial redemption, include a representation to the effect that such partial redemption shall not result in the delisting of the Preferred Securities as described in Section 3.3(b) above), give notice of such redemption to holders of the Debentures to be redeemed by mailing, first class postage prepaid, a notice of such redemption not less than 30 days and not more than 60 days before the date fixed for redemption to such holders at their last addresses as they shall appear upon the Debenture Register unless a shorter period is specified in the Debentures to be redeemed. Any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the registered holder receives the notice. In any case, failure duly to give such notice to the holder of any Debenture designated for redemption in whole or in part, or any defect in the notice, shall not affect the validity of the proceedings for the redemption of any other Debentures. In the case of any redemption of Debentures prior to the expiration of any restriction on such redemption provided in the terms of such Debentures or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with any such restriction. Each such notice of redemption shall specify the date fixed for redemption and the Redemption Price and shall state that payment of the Redemption Price shall be made at the office or agency of the Company in Boston, Massachusetts or at the Corporate Trust Office, upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption shall be paid as specified in said notice and that from and after said date interest shall cease to accrue. If less than all the Debentures are to be redeemed, the notice to the holders of the Debentures shall specify the particular Debentures to be redeemed. If the Debentures are to be redeemed in part only, the notice shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the redemption date, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof shall be issued.
(b) If less than all the Debentures are to be redeemed, the Company shall give the Trustee at least 45 days' notice in advance of the date fixed for redemption as to the aggregate principal amount of Debentures to be redeemed, and thereupon the Trustee shall select, by lot or in such other manner as it shall deem appropriate and fair in its discretion, the portion or portions (equal to $10 or any integral multiple thereof) of the Debentures to be redeemed and shall thereafter promptly notify the Company in writing of the numbers of the Debentures to be
redeemed, in whole or in part. The Company may, if and whenever it shall so elect pursuant to the terms hereof, by delivery of instructions signed on its behalf by its President or any Vice President, instruct the Trustee or any Paying Agent to call all or any part of the Debentures for redemption and to give notice of redemption in the manner set forth in this Section 3.4, such notice to be in the name of the Company or its own name as the Trustee or such Paying Agent may deem advisable. In any case in which notice of redemption is to be given by the Trustee or any such Paying Agent, the Company shall deliver or cause to be delivered to, or permit to remain with, the Trustee or such Paying Agent, as the case may be, such Debenture Register, transfer books or other records, or suitable copies or extracts therefrom, sufficient to enable the Trustee or such Paying Agent to give any notice by mail that may be required under the provisions of this Section 3.4.
SECTION 3.5. PAYMENT UPON REDEMPTION.
(a) If the giving of notice of redemption shall have been completed as above provided, the Debentures or portions of Debentures to be redeemed specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable Redemption Price, and interest on such Debentures or portions of Debentures shall cease to accrue on and after the date fixed for redemption, unless the Company shall default in the payment of such Redemption Price with respect to any such Debenture or portion thereof. On presentation and surrender of such Debentures on or after the date fixed for redemption at the place of payment specified in the notice, said Debentures shall be paid and redeemed at the Redemption Price (but if the date fixed for redemption is an Interest Payment Date, the interest installment payable on such date shall be payable to the registered holder at the close of business on the applicable record date pursuant to Section 3.3).
(b) Upon presentation of any Debenture that is to be redeemed in part only, the Company shall execute and the Trustee shall authenticate and the office or agency where the Debenture is presented shall deliver to the holder thereof, at the expense of the Company, a new Debenture of authorized denomination in principal amount equal to the unredeemed portion of the Debenture so presented.
SECTION 3.6. NO SINKING FUND.
The Debentures are not entitled to the benefit of any sinking fund.
ARTICLE IV.
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. EXTENSION OF INTEREST PAYMENT PERIOD.
So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of the Debentures, to defer payments of interest by extending the interest payment period of such Debentures for a period not exceeding 20 consecutive quarters (the "Extension Period"), during which Extension Period no
interest shall be due and payable; provided that no Extension Period may extend beyond the Maturity Date. Interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 4.1, shall bear interest thereon at the Coupon Rate compounded quarterly for each quarter of the Extension Period ("Compounded Interest"). At the end of the Extension Period, the Company shall calculate (and deliver such calculation to the Trustee) and pay all interest accrued and unpaid on the Debentures, including any Additional Interest and Compounded Interest (together, "Deferred Interest") that shall be payable to the holders of the Debentures in whose names the Debentures are registered in the Debenture Register on the first record date after the end of the Extension Period. Before the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such further extensions thereof shall not exceed 20 consecutive quarters, or extend beyond the Maturity Date of the Debentures. Upon the termination of any Extension Period and upon the payment of all Deferred Interest then due, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest shall be due and payable during an Extension Period, except at the end thereof, but the Company may prepay at any time all or any portion of the interest accrued during an Extension Period.
SECTION 4.2. NOTICE OF EXTENSION.
(a) If the Property Trustee is the only registered holder of the Debentures at the time the Company selects an Extension Period, the Company shall give written notice to the Administrative Trustees, the Property Trustee and the Trustee of its selection of such Extension Period two Business Days before the earlier of (i) the next succeeding date on which Distributions on the Trust Securities issued by the Trust are payable; or (ii) the date the Trust is required to give notice of the record date, or the date such Distributions are payable, to The Nasdaq Stock Market's National Market or other applicable self-regulatory organization or to holders of the Preferred Securities issued by the Trust, but in any event at least one Business Day before such record date.
(b) If the Property Trustee is not the only holder of the Debentures at the time the Company selects an Extension Period, the Company shall give the holders of the Debentures and the Trustee written notice of its selection of such Extension Period at least two Business Days before the earlier of (i) the next succeeding Interest Payment Date; or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to The Nasdaq Stock Market's National Market or other applicable self-regulatory organization or to holders of the Debentures.
(c) The quarter in which any notice is given pursuant to paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20 quarters permitted in the maximum Extension Period permitted under Section 4.1.
SECTION 4.3. LIMITATION ON TRANSACTIONS.
If (i) the Company shall exercise its right to defer payment of interest as provided in Section 4.1; or (ii) there shall have occurred any Event of Default, then (a) 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; (b) the Company shall not make any payment of interest, principal or premium, if any, or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Debentures; or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Debentures; provided, however, that notwithstanding the foregoing the Company may make payments pursuant to its obligations under the Preferred Securities Guarantee; and (c) the Company shall not redeem, purchase or acquire less than all of the Outstanding Debentures or any of the Preferred Securities.
ARTICLE V.
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.1. PAYMENT OF PRINCIPAL AND INTEREST.
The Company shall duly and punctually pay or cause to be paid the principal of and interest on the Debentures at the time and place and in the manner provided herein. Each such payment of the principal of and interest on the Debentures shall relate only to the Debentures, shall not be combined with any other payment of the principal of or interest on any other obligation of the Company, and shall be clearly and unmistakably identified as pertaining to the Debentures.
SECTION 5.2. MAINTENANCE OF AGENCY.
So long as any of the Debentures remain Outstanding, the Company shall maintain an office or agency in Boston, Massachusetts, and at such other location or locations as may be designated as provided in this Section 5.2, where (i) Debentures may be presented for payment; (ii) Debentures may be presented as hereinabove authorized for registration of transfer and exchange; and (iii) notices and demands to or upon the Company in respect of the Debentures and this Indenture may be given or served, such designation to continue with respect to such office or agency until the Company shall, by written notice signed by its President or a Vice President and delivered to the Trustee, designate some other office or agency for such purposes or any of them. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, notices and demands. In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside of Boston, Massachusetts, where the Debentures may be presented for registration or transfer and for exchange in the manner provided herein, and the Company may from time to time rescind such designation as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in
Boston, Massachusetts, for the purposes above mentioned. The Company shall give the Trustee prompt written notice of any such designation or rescission thereof.
SECTION 5.3. PAYING AGENTS.
(a) The Property Trustee shall act as the Paying Agent. If the Company shall appoint one or more paying agents for the Debentures, other than the Property Trustee, the Company shall cause each such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 5.3:
(i) that it shall hold all sums held by it as such agent for the payment of the principal of or interest on the Debentures (whether such sums have been paid to it by the Company or by any other obligor of such Debentures) in trust for the benefit of the Persons entitled thereto;
(ii) that it shall give the Trustee notice of any failure by the Company (or by any other obligor of such Debentures) to make any payment of the principal of or interest on the Debentures when the same shall be due and payable;
(iii) that it shall, at any time during the continuance of any failure referred to in the preceding paragraph (a)(ii) above, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and
(iv) that it shall perform all other duties of Paying Agent as set forth in this Indenture.
(b) If the Company shall act as its own Paying Agent with respect to the Debentures, it shall on or before each due date of the principal of or interest on such Debentures, set aside, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay such principal or interest so becoming due on Debentures until such sums shall be paid to such Persons or otherwise disposed of as herein provided and shall promptly notify the Trustee of such action, or any failure (by it or any other obligor on such Debentures) to take such action. Whenever the Company shall have one or more Paying Agents for the Debentures, it shall, prior to each due date of the principal of or interest on any Debentures, deposit with the Paying Agent a sum sufficient to pay the principal or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal or interest, and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of this action or failure so to act.
(c) Notwithstanding anything in this Section 5.3 to the contrary, (i) the agreement to hold sums in trust as provided in this Section 5.3 is subject to the provisions of Section 13.3 and 13.4; and (ii) the Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same terms and conditions as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
SECTION 5.4. APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE.
The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, shall appoint, in the manner provided in Section 9.11, a Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 5.5. COMPLIANCE WITH CONSOLIDATION PROVISIONS.
The Company shall not, while any of the Debentures remain Outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other company unless the provisions of Article XII hereof are complied with.
SECTION 5.6. LIMITATION ON TRANSACTIONS.
If Debentures are issued to the Trust or a trustee of the Trust in connection with the issuance of Trust Securities by the Trust and (i) there shall have occurred any event that would constitute an Event of Default; (ii) the Company shall be in default with respect to its payment of any obligations under the Preferred Securities Guarantee relating to the Trust; or (iii) the Company shall have given notice of its election to defer payments of interest on such Debentures by extending the interest payment period as provided in this Indenture and such Extension Period, or any extension thereof, shall be continuing, then (a) 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; (b) the Company shall not make any payment of principal, interest or premium, if any, or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Debentures; provided, however, that the Company may make payments pursuant to its obligations under the Preferred Securities Guarantee; and (c) the Company shall not redeem, purchase or acquire less than all of the Outstanding Debentures or any of the Preferred Securities.
SECTION 5.7. COVENANTS AS TO THE TRUST.
For so long as the Trust Securities of the Trust remain outstanding, the Company shall (i) maintain 100% direct or indirect ownership of the Common Securities of the Trust; provided, however, that any permitted successor of the Company under this Indenture may succeed to the Company's ownership of the Common Securities; (ii) not voluntarily terminate, wind up or liquidate the Trust, except upon prior approval of the Federal Reserve if then so required under applicable capital guidelines or policies of the Federal Reserve; (iii) use its reasonable efforts to cause the Trust (a) to remain a business trust, except in connection with a distribution of Debentures, the redemption of all of the Trust Securities of the Trust or certain mergers, consolidations or amalgamations, each as permitted by the Trust Agreement; and (b) to otherwise continue not to be treated as an association taxable as a corporation or partnership for United States federal income tax purposes; and (iv) use its reasonable efforts to cause each holder of Trust Securities to be treated as owning an individual beneficial interest in the Debentures. In
connection with the distribution of the Debentures to the holders of the Preferred Securities issued by the Trust upon a Dissolution Event, the Company shall use its best efforts to list such Debentures on The Nasdaq Stock Market's National Market or on such other exchange as the Preferred Securities are then listed.
SECTION 5.8. COVENANTS AS TO PURCHASES.
Except upon the exercise by the Company of its right to redeem the Debentures pursuant to Section 3.2 upon the occurrence and continuation of a Special Event, the Company shall not purchase any Debentures, in whole or in part, from the Trust prior to June 30, 2003.
ARTICLE VI.
DEBENTUREHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 6.1. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF DEBENTUREHOLDERS.
The Company shall furnish or cause to be furnished to the Trustee (a) on a quarterly basis on each regular record date (as described in Section 2.5) a list, in such form as the Trustee may reasonably require, of the names and addresses of the holders of the Debentures as of such regular record date, provided that the Company shall not be obligated to furnish or cause to furnish such list at any time that the list shall not differ in any respect from the most recent list furnished to the Trustee by the Company (in the event the Company fails to provide such list on a monthly basis, the Trustee shall be entitled to rely on the most recent list provided by the Company); and (b) at such other times as the Trustee may request in writing within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that, in either case, no such list need be furnished if the Trustee shall be the Debenture Registrar.
SECTION 6.2. PRESERVATION OF INFORMATION COMMUNICATIONS WITH DEBENTUREHOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debentures contained in the most recent list furnished to it as provided in
Section 6.1 and as to the names and addresses of holders of Debentures received
by the Trustee in its capacity as Debenture Registrar for the Debentures (if
acting in such capacity).
(b) The Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.
(c) Debentureholders may communicate as provided in Section 312(b) of the Trust Indenture Act with other Debentureholders with respect to their rights under this Indenture or under the Debentures.
SECTION 6.3. REPORTS BY THE COMPANY.
(a) The Company covenants and agrees to file with the Trustee, within
15 days after the Company is required to file the same with the Commission,
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) that the Company may be
required to file with the Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act; or, if the Company is not required to file information,
documents or reports pursuant to either of such sections, then to file with the
Trustee and the Commission, in accordance with the rules and regulations
prescribed from time to time by the Commission, such of the supplementary and
periodic information, documents and reports that may be required pursuant to
Section 13 of the Exchange Act in respect of a security listed and registered on
a national securities exchange as may be prescribed from time to time in such
rules and regulations.
(b) The Company covenants and agrees to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations.
(c) The Company covenants and agrees to transmit by mail, first class postage prepaid, or reputable overnight delivery service that provides for evidence of receipt, to the Debentureholders, as their names and addresses appear upon the Debenture Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 6.3 as may be required by rules and regulations prescribed from time to time by the Commission.
SECTION 6.4. REPORTS BY THE TRUSTEE.
(a) On or before July 15 in each year in which any of the Debentures are Outstanding, the Trustee shall transmit by mail, first class postage prepaid, to the Debentureholders, as their names and addresses appear upon the Debenture Register, a brief report dated as of the preceding May 15, if and to the extent required under Section 313(a) of the Trust Indenture Act.
(b) The Trustee shall comply with Section 313(b) and 313(c) of the Trust Indenture Act.
(c) A copy of each such report shall, at the time of such transmission to Debentureholders, be filed by the Trustee with the Company, with each stock exchange upon which any Debentures are listed (if so listed) and also with the Commission. The Company agrees to notify the Trustee when any Debentures become listed on any stock exchange.
ARTICLE VII.
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
SECTION 7.1. EVENTS OF DEFAULT.
(a) Whenever used herein with respect to the Debentures, "Event of Default" means any one or more of the following events that has occurred and is continuing:
(i) the Company defaults in the payment of any installment of interest upon any of the Debentures, as and when the same shall become due and payable, and continuance of such default for a period of 30 days; provided, however, that a valid extension of an interest payment period by the Company in accordance with the terms of this Indenture shall not constitute a default in the payment of interest for this purpose;
(ii) the Company defaults in the payment of the principal on the Debentures as and when the same shall become due and payable whether at maturity, upon redemption, by declaration or otherwise; provided, however, that a valid extension of the maturity of such Debentures in accordance with the terms of this Indenture shall not constitute a default in the payment of principal;
(iii) the Company fails to observe or perform any other of its covenants or agreements with respect to the Debentures for a period of 90 days after the date on which written notice of such failure, requiring the same to be remedied and stating that such notice is a "Notice of Default" hereunder, shall have been given to the Company by the Trustee, by registered or certified mail, or to the Company and the Trustee by the holders of at least 25% in principal amount of the Debentures at the time Outstanding;
(iv) the Company pursuant to or within the meaning of any Bankruptcy Law (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (iv) makes a general assignment for the benefit of its creditors;
(v) a court of competent jurisdiction enters an order under any Bankruptcy Law that (i) is for relief against the Company in an involuntary case; (ii) appoints a Custodian of the Company for all or substantially all of its property; or (iii) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for 90 days; or
(vi) the Trust shall have voluntarily or involuntarily
dissolved, wound-up its business or otherwise terminated its existence
except in connection with (i) the distribution of Debentures to holders
of Trust Securities in liquidation of their interests in the Trust;
(ii) the redemption of all of the outstanding Trust Securities of the
Trust; or (iii) certain mergers, consolidations or amalgamations, each
as permitted by the Trust Agreement.
(b) In each and every such case, unless the principal of all the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then Outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by such Debentureholders) may declare the principal of all the Debentures to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, notwithstanding anything contained in this Indenture or in the Debentures.
(c) At any time after the principal of the Debentures shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the holders of a majority in aggregate principal amount of the Debentures then Outstanding hereunder, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debentures and the principal of any and all Debentures that shall have become due otherwise than by acceleration (with interest upon such principal, and upon overdue installments of interest, at the rate per annum expressed in the Debentures to the date of such payment or deposit) and the amount payable to the Trustee under Section 9.7; and (ii) any and all Events of Default under this Indenture, other than the nonpayment of principal on Debentures that shall not have become due by their terms, shall have been remedied or waived as provided in Section 7.6. No such rescission and annulment shall extend to or shall affect any subsequent default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right with respect to Debentures under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company and the Trustee shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company and the Trustee shall continue as though no such proceedings had been taken.
SECTION 7.2. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
(a) The Company covenants that (1) in case it shall default in the payment of any installment of interest on any of the Debentures, and such default shall have continued for a period of 90 Business Days; or (2) in case it shall default in the payment of the principal of any of the Debentures when the same shall have become due and payable, whether upon maturity of the Debentures or upon redemption or upon declaration or otherwise, then, upon demand of the Trustee, the Company shall pay to the Trustee, for the benefit of the holders of the Debentures, the whole amount that then shall have been become due and payable on all such Debentures for principal or interest, or both, as the case may be, with interest upon the overdue principal and upon overdue installments of interest at the rate per annum expressed in the Debentures; and (if the Debentures are held by the Trust or a trustee of the Trust, without duplication of any other amounts paid by the Trust or trustee in respect thereof) upon overdue installments of interest at
the rate per annum expressed in the Debentures; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, and the amount payable to the Trustee under Section 9.7.
(b) If the Company shall fail to pay such amounts set forth in Section 7.2(a) forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or other obligor upon the Debentures and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or other obligor upon the Debentures, wherever situated.
(c) In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, readjustment, arrangement, composition or judicial proceedings affecting the Company or the creditors or property thereof, the Trustee shall have power to intervene in such proceedings and take any action therein that may be permitted by the court and shall (except as may be otherwise provided by law) be entitled to file such proofs of claim and other papers and documents as may be necessary or advisable in order to have the claims of the Trustee and of the holders of the Debentures allowed for the entire amount due and payable by the Company under this Indenture at the date of institution of such proceedings and for any additional amount that may become due and payable by the Company after such date, and to collect and receive any moneys or other property payable or deliverable on any such claim, and to distribute the same after the deduction of the amount payable to the Trustee under Section 9.7; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the holders of the Debentures to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to such Debentureholders, to pay to the Trustee any amount due it under Section 9.7.
(d) All rights of action and of asserting claims under this Indenture, or under any of the terms established with respect to Debentures, may be enforced by the Trustee without the possession of any of such Debentures, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for payment to the Trustee of any amounts due under Section 9.7, be for the ratable benefit of the holders of the Debentures. In case of an Event of Default hereunder, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Debentureholder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any holder thereof or to authorize the Trustee to vote in respect of
the claim of any Debentureholder in any such proceeding.
SECTION 7.3. APPLICATION OF MONEYS COLLECTED.
Any moneys collected by the Trustee pursuant to this Article VII with respect to the Debentures shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal or interest, upon presentation of the Debentures, and notation thereon of the payment, if only partially paid, and upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses of collection and of all amounts payable to the Trustee under Section 9.7;
SECOND: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XVI; and
THIRD: To the payment of the amounts then due and unpaid upon the Debentures for principal and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Debentures for principal and interest, respectively.
SECTION 7.4. LIMITATION ON SUITS.
(a) Except as provided in Section 15.13 hereof, no holder of any Debenture shall have any right by virtue or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (i) such holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof with respect to the Debentures specifying such Event of Default, as hereinbefore provided; (ii) the holders of not less than 25% in aggregate principal amount of the Debentures then Outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as trustee hereunder; (iii) such holder or holders shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby; and (iv) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have failed to institute any such action, suit or proceeding; and (v) during such 60 day period, the holders of a majority in principal amount of the Debentures do not give the Trustee a direction inconsistent with the request.
(b) Notwithstanding anything contained herein to the contrary or any other provisions of this Indenture, the right of any holder of the Debentures to receive payment of the principal of and interest on the Debentures, as therein provided, on or after the respective due dates expressed in such Debenture (or in the case of redemption, on the redemption date), or to institute suit for the enforcement of any such payment on or after such respective dates or redemption date, shall not be impaired or affected without the consent of such holder and by accepting a Debenture
hereunder it is expressly understood, intended and covenanted by the taker and holder of every Debenture with every other such taker and holder and the Trustee, that no one or more holders of Debentures shall have any right in any manner whatsoever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other of such Debentures, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debentures. For the protection and enforcement of the provisions of this Section 7.4, each and every Debentureholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.
SECTION 7.5. RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER.
(a) Except as otherwise provided in Section 2.9, all powers and remedies given by this Article VII to the Trustee or to the Debentureholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to such Debentures.
(b) No delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 7.4, every power and remedy given by this Article VII or by law to the Trustee or the Debentureholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Debentureholders.
SECTION 7.6. CONTROL BY DEBENTUREHOLDERS.
The holders of a majority in aggregate principal amount of the Debentures at the time Outstanding, determined in accordance with Section 10.4, shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee; provided, however, that such direction shall not be in conflict with any rule of law or with this Indenture. Subject to the provisions of Section 9.1, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding so directed would involve the Trustee in personal liability. The holders of a majority in aggregate principal amount of the Debentures at the time Outstanding affected thereby, determined in accordance with Section 10.4, may on behalf of the holders of all of the Debentures waive any past default in the performance of any of the covenants contained herein and its consequences, except (i) a default in the payment of the principal of or interest on, any of the Debentures as and when the same shall become due by the terms of such Debentures otherwise than by acceleration (unless such default has been cured and a sum sufficient to pay all matured installments of principal and interest has been deposited with the Trustee (in accordance
with Section 7.1(c)); (ii) a default in the covenants contained in Section 5.6; or (iii) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the holder of each Outstanding Debenture affected; provided, however, that if the Debentures are held by the Trust or a trustee of the Trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in liquidation preference of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver; provided further, that if the Debentures are held by the Trust or a trustee of the Trust, and if the consent of the holder of each Outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SECTION 7.7. UNDERTAKING TO PAY COSTS.
All parties to this Indenture agree, and each holder of any Debentures by such holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 7.7 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Debentureholder, or group of Debentureholders holding more than 10% in aggregate principal amount of the Outstanding Debentures, or to any suit instituted by any Debentureholder for the enforcement of the payment of the principal of or interest on the Debentures, on or after the respective due dates expressed in such Debenture or established pursuant to this Indenture.
ARTICLE VIII.
FORM OF DEBENTURE AND ORIGINAL ISSUE
SECTION 8.1. FORM OF DEBENTURE.
The Debenture and the Trustee's Certificate of Authentication to be endorsed thereon are to be substantially in the forms contained as Exhibit A attached hereto and incorporated herein by reference.
SECTION 8.2. ORIGINAL ISSUE OF DEBENTURES.
Debentures in the aggregate principal amount of $25,773,200 may, upon execution of this Indenture, be executed by the Company and delivered to the Trustee for authentication. If the Underwriters exercise their Option and there is an Option Closing Date (as such terms are defined in Underwriting Agreement, dated ______________, 1998, by and among the Company,
the Trust and Tucker Anthony Incorporated, for itself and as representative of the Underwriters named therein) then, on such Option Closing Date, Debentures in the additional aggregate principal amount of $3,865,979 may be executed by the Company and delivered to the Trustee for authentication. In either such event, the Trustee shall thereupon authenticate and deliver said Debentures to or upon the written order of the Company, signed by its Chairman, its Vice Chairman, its President, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company.
ARTICLE IX.
CONCERNING THE TRUSTEE
SECTION 9.1. CERTAIN DUTIES AND RESPONSIBILITIES TRUSTEE.
(a) The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform with respect to the Debentures such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default has occurred that has not been cured or waived, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
(b) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Trustee shall with respect to the Debentures be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable with respect to the Debentures except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(B) in the absence of bad faith on the part of the Trustee, the Trustee may with respect to the Debentures conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;
(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority in principal amount of the Debentures at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture with respect to the Debentures; and
(iv) none of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture or adequate indemnity against such risk is not reasonably assured to it.
SECTION 9.2. NOTICE OF DEFAULTS.
Within 90 days after actual knowledge by a Responsible Officer of the Trustee of the occurrence of any default hereunder with respect to the Debentures, the Trustee shall transmit by mail to all holders of the Debentures, as their names and addresses appear in the Debenture Register, notice of such default, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal or interest (including any Additional Interest) on any Debenture, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of the directors and/or Responsible Officers of the Trustee determines in good faith that the withholding of such notice is in the interests of the holders of such Debentures; and provided, further, that in the case of any default of the character specified in section 7.1(a)(iii), no such notice to holders of Debentures need be sent until at least 30 days after the occurrence thereof. For the purposes of this Section 9.2, the term "default" means any event which is, or after notice or lapse of time or both, would become, an Event of Default with respect to the Debentures.
SECTION 9.3. CERTAIN RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 9.1:
(a) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by a Board Resolution or an instrument signed in the name of the Company by the President or any Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer thereof (unless other evidence in respect thereof is
specifically prescribed herein);
(c) The Trustee shall not be deemed to have knowledge of a default or an Event of Default, other than an Event of Default specified in Section 7.1(a)(i); or (ii), unless and until it receives written notification of such Event of Default from the Company or by holders of at least 25% of the aggregate principal amount of the Debentures at the time Outstanding (determined as provided in Section 10.4);
(d) The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted hereunder in good faith and in reliance thereon;
(e) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Debentureholders, pursuant to the provisions of this Indenture, unless such Debentureholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default (that has not been cured or waived) to exercise with respect to the Debentures such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs;
(f) The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;
(g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security, or other papers or documents, unless requested in writing so to do by the holders of not less than a majority in principal amount of the Outstanding Debentures (determined as provided in Section 10.4); provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such costs, expenses or liabilities as a condition to so proceeding. The reasonable expense of every such examination shall be paid by the Company or, if paid by the Trustee, shall be repaid by the Company upon demand; and
(h) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.
SECTION 9.4. TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC.
(a) The Recitals contained herein and in the Debentures shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Debentures.
(c) The Trustee shall not be accountable for the use or application by the Company of any of the Debentures or of the proceeds of such Debentures, or for the use or application of any moneys paid over by the Trustee in accordance with any provision of this Indenture, or for the use or application of any moneys received by any Paying Agent other than the Trustee.
SECTION 9.5. MAY HOLD DEBENTURES.
The Trustee or any Paying Agent or Debenture Registrar for the Debentures, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, Paying Agent or Debenture Registrar.
SECTION 9.6. MONEYS HELD IN TRUST.
Subject to the provisions of Section 13.5, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any moneys received by it hereunder except such as it may agree with the Company to pay thereon.
SECTION 9.7. COMPENSATION AND REIMBURSEMENT.
(a) The Company covenants and agrees to pay to the Trustee, and the Trustee shall be entitled to, such reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), as the Company and the Trustee may from time to time agree in writing, for all services rendered by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, and, except as otherwise expressly provided herein, the Company shall pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Company also covenants to indemnify the Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability in the premises.
(b) The obligations of the Company under this Section 9.7 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures.
SECTION 9.8. RELIANCE ON OFFICERS' CERTIFICATE.
Except as otherwise provided in Section 9.1, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting to take any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted to be taken by it under the provisions of this Indenture upon the faith thereof.
SECTION 9.9. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the Company shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 9.10. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee with respect to the Debentures issued hereunder which shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or other Person permitted to act as trustee by the Commission, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 9.10, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 9.10, the Trustee shall resign immediately in the manner and with the effect specified in Section 9.11.
SECTION 9.11. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) The Trustee or any successor hereafter appointed, may at any time resign by giving written notice thereof to the Company and by transmitting notice of resignation by mail, first
class postage prepaid, to the Debentureholders, as their names and addresses appear upon the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee with respect to Debentures by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee with respect to Debentures, or any Debentureholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 9.10, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any one of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of
Section 9.9 after written request therefor by the Company or by any
Debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 9.10 and shall fail to resign after written request therefor by the Company or by any such Debentureholder; or
(iii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy proceeding, or a receiver of the Trustee or of its property shall be appointed or consented to, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the Company may remove the Trustee with respect to all Debentures and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 9.10, unless the Trustee's duty to resign is stayed as provided herein, any Debentureholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, on behalf of that holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the Debentures at the time Outstanding may at any time remove the Trustee by so notifying the Trustee and the Company and may appoint a successor Trustee with the consent of the Company.
(d) Any resignation or removal of the Trustee and appointment of a successor trustee with respect to the Debentures pursuant to any of the provisions of this Section 9.11 shall
become effective upon acceptance of appointment by the successor trustee as provided in Section 9.12.
(e) Any successor trustee appointed pursuant to this Section 9.11 may be appointed with respect to the Debentures, and at any time there shall be only one Trustee with respect to the Debentures.
SECTION 9.12. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor trustee with respect to the Debentures, every successor trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor trustee all the rights, powers, and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor trustee all property and money held by such retiring Trustee hereunder.
(b) Upon request of any successor trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor trustee all such rights, powers and trusts referred to in paragraph (a) of this Section 9.12.
(c) No successor trustee shall accept its appointment unless at the time of such acceptance such successor trustee shall be qualified and eligible under this Article IX.
(d) Upon acceptance of appointment by a successor trustee as provided in this Section 9.12, the Company shall transmit notice of the succession of such trustee hereunder by mail, first class postage prepaid, to the Debentureholders, as their names and addresses appear upon the Debenture Register. If the Company fails to transmit such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be transmitted at the expense of the Company.
SECTION 9.13. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be qualified under the provisions of Section 9.9 and eligible under the provisions of Section 9.10, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case any Debentures shall have been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Debentures so authenticated with the same effect as if such successor Trustee had itself authenticated such Debentures.
SECTION 9.14. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship described in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent included therein.
ARTICLE X.
CONCERNING THE DEBENTUREHOLDERS
SECTION 10.1. EVIDENCE OF ACTION BY HOLDERS.
(a) Whenever in this Indenture it is provided that the holders of a majority or specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the holders of such majority or specified percentage have joined therein may be evidenced by any instrument or any number of instruments of similar tenor executed by such holders of Debentures in Person or by agent or proxy appointed in writing.
(b) If the Company shall solicit from the Debentureholders any request, demand, authorization, direction, notice, consent, waiver or other action, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for the determination of Debentureholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action may be given before or after the record date, but only the Debentureholders of record at the close of business on the record date shall be deemed to be Debentureholders for the purposes of determining whether Debentureholders of the requisite proportion of Outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action, and for that purpose the Outstanding Debentures shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Debentureholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date.
SECTION 10.2. PROOF OF EXECUTION BY DEBENTUREHOLDERS.
Subject to the provisions of Section 9.1, proof of the execution of any instrument by a Debentureholder (such proof shall not require notarization) or his agent or proxy and proof of the holding by any Person of any of the Debentures shall be sufficient if made in the following
manner:
(a) The fact and date of the execution by any such Person of any instrument may be proved in any reasonable manner acceptable to the Trustee.
(b) The ownership of Debentures shall be proved by the Debenture Register of such Debentures or by a certificate of the Debenture Registrar thereof.
(c) The Trustee may require such additional proof of any matter referred to in this Section 10.2 as it shall deem necessary.
SECTION 10.3. WHO MAY BE DEEMED OWNERS.
Prior to the due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Paying Agent, any Authenticating Agent and any Debenture Registrar may deem and treat the Person in whose name such Debenture shall be registered upon the books of the Company as the absolute owner of such Debenture (whether or not such Debenture shall be overdue and notwithstanding any notice of ownership or writing thereon made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal of and interest on such Debenture (subject to Section 2.3) and for all other purposes; and neither the Company nor the Trustee nor any Paying Agent nor any Authenticating Agent nor any Debenture Registrar shall be affected by any notice to the contrary.
SECTION 10.4. CERTAIN DEBENTURES OWNED BY COMPANY DISREGARDED.
In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, the Debentures that are owned by the Company or any other obligor on the Debentures or by any Person directly or indirectly controlling or controlled by or under common control with the Company or any other obligor on the Debentures shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that (i) for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures that the Trustee actually knows are so owned shall be so disregarded and (ii) for purposes of this Section 10.4, the Trust shall be deemed not to be controlled by the Company. The Debentures so owned that have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 10.4, if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right so to act with respect to such Debentures and that the pledgee is not a Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.
SECTION 10.5. ACTIONS BINDING ON FUTURE DEBENTUREHOLDERS.
At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 10.1, of the taking of any action by the holders of the majority or percentage in aggregate
principal amount of the Debentures specified in this Indenture in connection with such action, any holder of a Debenture that is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee, and upon proof of holding as provided in Section 10.2, revoke such action so far as concerns such Debenture. Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange therefor, on registration of transfer thereof or in place thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture. Any action taken by the holders of the majority or percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the holders of all the Debentures.
ARTICLE XI.
SUPPLEMENTAL INDENTURES
SECTION 11.1. SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF DEBENTUREHOLDERS.
In addition to any supplemental indenture otherwise authorized by this Indenture, the Company and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect), without the consent of the Debentureholders, for one or more of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, or in the Debentures;
(b) to comply with Article X;
(c) to provide for uncertificated Debentures in addition to or in place of certificated Debentures;
(d) to add to the covenants of the Company for the benefit of the holders of all or any of the Debentures or to surrender any right or power herein conferred upon the Company;
(e) to add to, delete from, or revise the conditions, limitations, and restrictions on the authorized amount, terms, or purposes of issue, authentication, and delivery of Debentures, as herein set forth;
(f) to make any change that does not adversely affect the rights of any Debentureholder in any material respect;
(g) to provide for the issuance of and establish the form and terms and conditions of the Debentures, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or of the Debentures, or to add to the rights of the holders of the
Debentures;
(h) qualify or maintain the qualification of this Indenture under the Trust Indenture Act; or
(i) to evidence a consolidation or merger involving the Company as permitted under Section 12.1.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into any such supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise. Any supplemental indenture authorized by the provisions of this
Section 11.1 may be executed by the Company and the Trustee without the consent
of the holders of any of the Debentures at the time Outstanding, notwithstanding
any of the provisions of Section 11.2.
SECTION 11.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF DEBENTUREHOLDERS.
With the consent (evidenced as provided in Section 10.1) of the holders
of not less than a majority in aggregate principal amount of the Debentures at
the time Outstanding, the Company, when authorized by Board Resolutions, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as then in effect) for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Indenture or of any supplemental indenture or of modifying in any manner not
covered by Section 11.1 the rights of the holders of the Debentures under this
Indenture; provided, however, that no such supplemental indenture shall without
the consent of the holders of each Debenture then Outstanding and affected
thereby, (i) extend the fixed maturity of any Debentures, reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, without the consent of the holder of each Debenture so affected; or
(ii) reduce the aforesaid percentage of Debentures, the holders of which are
required to consent to any such supplemental indenture; provided further, that
if the Debentures are held by the Trust or a trustee of the Trust and if the
Debentures are held by the Trust or a trustee of the Trust, such supplemental
indenture shall not be effective until the holders of a majority in liquidation
preference of Trust Securities of the Trust shall have consented to such
supplemental indenture; provided further, that if the Debentures are held by the
Trust or a trustee of the Trust and if the consent of the holder of each
Outstanding Debenture is required, such supplemental indenture shall not be
effective until each holder of the Trust Securities of the Trust shall have
consented to such supplemental indenture. It shall not be necessary for the
consent of the Debentureholders affected thereby under this Section 11.2 to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such consent shall approve the substance thereof.
SECTION 11.3. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture pursuant to the provisions of this Article XI, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
SECTION 11.4. DEBENTURES AFFECTED BY SUPPLEMENTAL INDENTURES.
Debentures affected by a supplemental indenture, authenticated and delivered after the execution of such supplemental indenture pursuant to the provisions of this Article XI, may bear a notation in form approved by the Company, provided such form meets the requirements of any exchange upon which the Debentures may be listed, as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Debentures so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Company, authenticated by the Trustee and delivered in exchange for the Debentures then Outstanding.
SECTION 11.5. EXECUTION OF SUPPLEMENTAL INDENTURES.
(a) Upon the request of the Company, accompanied by its Board Resolutions authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Debentureholders required to consent thereto as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. The Trustee, subject to the provisions of Sections 9.1, may receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article XI is authorized or permitted by, and conforms to, the terms of this Article XI and that it is proper for the Trustee under the provisions of this Article XI to join in the execution thereof.
(b) Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section 11.5, the Trustee shall transmit by mail, first class postage prepaid, a notice, setting forth in general terms the substance of such supplemental indenture, to the Debentureholders as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
ARTICLE XII.
SUCCESSOR CORPORATION
SECTION 12.1. COMPANY MAY CONSOLIDATE, ETC.
Nothing contained in this Indenture or in any of the Debentures shall prevent any consolidation or merger of the Company with or into any other corporation or corporations (whether or not affiliated with the Company, as the case may be), or successive consolidations or mergers in which the Company, as the case may be, or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property of the Company, as the case may be, or its successor or successors as an entirety, or substantially as an entirety, to any other corporation (whether or not affiliated with the Company, as the case may be, or its successor or successors) authorized to acquire and operate the same; provided, however, that the Company hereby covenants and agrees that, (i) upon any such consolidation, merger, sale, conveyance, transfer or other disposition, the due and punctual payment, in the case of the Company, of the principal of and interest on all of the Debentures, according to their tenor and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company as the case may be, shall be expressly assumed, by supplemental indenture (which shall conform to the provisions of the Trust Indenture Act, as then in effect) satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company, as the case may be, shall have been merged, or by the entity which shall have acquired such property; (ii) in case the Company consolidates with or merges into another Person or conveys or transfers its properties and assets substantially then as an entirety to any Person, the successor Person is organized under the laws of the United States or any state or the District of Columbia; and (iii) immediately after giving effect thereto, an Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing.
SECTION 12.2. SUCCESSOR CORPORATION SUBSTITUTED.
(a) In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and interest on all of the Debentures Outstanding and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Company such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named as the Company herein, and thereupon the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Debentures.
(b) In case of any such consolidation, merger, sale, conveyance, transfer or other disposition such changes in phraseology and form (but not in substance) may be made in the Debentures thereafter to be issued as may be appropriate.
(c) Nothing contained in this Indenture or in any of the Debentures shall prevent the
Company from merging into itself or acquiring by purchase or otherwise all or any part of the property of any other Person (whether or not affiliated with the Company).
SECTION 12.3. EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE.
The Trustee, subject to the provisions of Section 9.1, may receive an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, conveyance, transfer or other disposition, and any such assumption, comply with the provisions of this Article XII.
ARTICLE XIII.
SATISFACTION AND DISCHARGE
SECTION 13.1. SATISFACTION AND DISCHARGE OF INDENTURE.
If at any time: (a) the Company shall have delivered to the Trustee for cancellation all Debentures theretofore authenticated (other than any Debentures that shall have been destroyed, lost or stolen and that shall have been replaced or paid as provided in Section 2.9) and Debentures for whose payment money or Governmental Obligations have theretofore been deposited in trust or segregated and held in trust by the Company (and thereupon repaid to the Company or discharged from such trust, as provided in Section 13.5); or (b) all such Debentures not theretofore delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit or cause to be deposited with the Trustee as trust funds the entire amount in moneys or Governmental Obligations sufficient or a combination thereof, sufficient in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay at maturity or upon redemption all Debentures not theretofore delivered to the Trustee for cancellation, including principal and interest due or to become due to such date of maturity or date fixed for redemption, as the case may be, and if the Company shall also pay or cause to be paid all other sums payable hereunder by the Company; then this Indenture shall thereupon cease to be of further effect except for the provisions of Sections 2.3, 2.7, 2.9, 5.1, 5.2, 5.3, 9.7 and 9.10, which shall survive until the date of maturity or redemption date, as the case may be, and Sections 9.6 and 13.5, which shall survive to such date and thereafter, and the Trustee, on demand of the Company and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture.
SECTION 13.2. DISCHARGE OF OBLIGATIONS.
If at any time all Debentures not heretofore delivered to the Trustee for cancellation or that have not become due and payable as described in Section 13.1 shall have been paid by the Company by depositing irrevocably with the Trustee as trust funds moneys or an amount of Governmental Obligations sufficient in the opinion of a nationally recognized certified public accounting firm to pay at maturity or upon redemption all Debentures not theretofore delivered to
the Trustee for cancellation, including principal and interest due or to become due to such date of maturity or date fixed for redemption, as the case may be, and if the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then after the date such moneys or Governmental Obligations, as the case may be, are deposited with the Trustee, the obligations of the Company under this Indenture shall cease to be of further effect except for the provisions of Sections 2.3, 2.7, 2.9, 5.1, 5.2, 5.3, 9.6, 9.7, 9.10 and 13.5 hereof which shall survive until such Debentures shall mature and be paid. Thereafter, Sections 9.6 and 13.5 shall survive.
SECTION 13.3. DEPOSITED MONEYS TO BE HELD IN TRUST.
All monies or Governmental Obligations deposited with the Trustee pursuant to Sections 13.1 or 13.2 shall be held in trust and shall be available for payment as due, either directly or through any Paying Agent (including the Company acting as its own Paying Agent), to the holders of the Debentures for the payment or redemption of which such moneys or Governmental Obligations have been deposited with the Trustee.
SECTION 13.4. PAYMENT OF MONIES HELD BY PAYING AGENTS.
In connection with the satisfaction and discharge of this Indenture, all moneys or Governmental Obligations then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Company, be paid to the Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys or Governmental Obligations.
SECTION 13.5. REPAYMENT TO COMPANY.
Any monies or Governmental Obligations deposited with any Paying Agent or the Trustee, or then held by the Company in trust, for payment of principal of or interest on the Debentures that are not applied but remain unclaimed by the holders of such Debentures for at least two years after the date upon which the principal of or interest on such Debentures shall have respectively become due and payable, shall be repaid to the Company, as the case may be, on May 31 of each year or (if then held by the Company) shall be discharged from such trust; and thereupon the Paying Agent and the Trustee shall be released from all further liability with respect to such moneys or Governmental Obligations, and the holder of any of the Debentures entitled to receive such payment shall thereafter, as an unsecured general creditor, look only to the Company for the payment thereof.
ARTICLE XIV.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 14.1. NO RECOURSE
No recourse under or upon any obligation, covenant or agreement of this Indenture, or of the Debentures, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, past, present or future as such, of the Company or of any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors as such, of the Company or of any predecessor or successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Debentures or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Debentures or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of such Debentures.
ARTICLE XV.
MISCELLANEOUS PROVISIONS
SECTION 15.1. EFFECT ON SUCCESSORS AND ASSIGNS.
All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Company shall bind its successors and assigns, whether so expressed or not.
SECTION 15.2. ACTIONS BY SUCCESSOR.
Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the corresponding board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Company.
SECTION 15.3. SURRENDER OF COMPANY POWERS.
The Company by instrument in writing executed by appropriate authority of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company,
and thereupon such power so surrendered shall terminate both as to the Company, as the case may be, and as to any successor corporation.
SECTION 15.4. NOTICES.
Except as otherwise expressly provided herein any notice or demand that by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Debentures to or on the Company may be given or served by being deposited first class postage prepaid in a post-office letterbox addressed (until another address is filed in writing by the Company with the Trustee) to Century Bancorp, Inc., 400 Mystic Avenue, Medford, Massachusetts 02155, Attention: Chief Financial Officer. Any notice, election, request or demand by the Company or any Debentureholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the Corporate Trust Office of the Trustee.
SECTION 15.5. GOVERNING LAW.
This Indenture and each Debenture shall be deemed to be a contract made
under the internal laws of The Commonwealth of Massachusetts and for all
purposes shall be construed in accordance with the laws of such Commonwealth. .
SECTION 15.6. TREATMENT OF DEBENTURES AS DEBT.
It is intended that the Debentures shall be treated as indebtedness and not as equity for federal income tax purposes. The provisions of this Indenture shall be interpreted to further this intention.
SECTION 15.7. COMPLIANCE CERTIFICATES AND OPINIONS.
(a) Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished.
(b) Each certificate or opinion of the Company provided for in this
Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant in this Indenture shall include (1) a statement that the
Person making such certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based; (3) a statement that, in the opinion of such
Person, he has made such examination or investigation as, in the opinion of such
Person, is necessary to enable him to express an informed
opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.
SECTION 15.8. PAYMENTS ON BUSINESS DAYS.
In any case where the date of maturity of interest or principal of any Debenture or the date of redemption of any Debenture shall not be a Business Day, then payment of interest or principal may (subject to Section 2.5) be made on the next succeeding Business Day with the same force and effect as if made on the nominal date of maturity or redemption, and no interest shall accrue for the period after such nominal date.
SECTION 15.9. CONFLICT WITH TRUST INDENTURE ACT.
If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 15.10. COUNTERPARTS.
This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
SECTION 15.11. SEPARABILITY.
In case any one or more of the provisions contained in this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of the Debentures, but this Indenture and the Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.
SECTION 15.12. ASSIGNMENT.
The Company shall have the right at all times to assign any of its respective rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company shall remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties thereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties thereto.
SECTION 15.13. ACKNOWLEDGMENT OF RIGHTS; RIGHT OF SETOFF.
(a) The Company acknowledges that, with respect to any Debentures held by the Trust or a trustee of the Trust, if the Property Trustee fails to enforce its rights under this Indenture as the holder of the Debentures held as the assets of the Trust, any holder of Preferred Securities may
institute legal proceedings directly against the Company to enforce such Property Trustee's rights under this Indenture without first instituting any legal proceedings against such Property Trustee or any other person or entity. Notwithstanding the foregoing, and notwithstanding the provisions of Section 7.4(a) hereof, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay principal or interest on the Debentures on the date such principal or interest is otherwise payable (or in the case of redemption, on the redemption date), the Company acknowledges that a holder of Preferred Securities may directly institute a proceeding for enforcement of payment to such holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such holder on or after the respective due date specified in the Debentures.
(b) Notwithstanding anything to the contrary contained in this Indenture, the Company shall have the right to setoff any payment it is otherwise required to make hereunder in respect of any Trust Securities to the extent that the Company has previously made, or is concurrently making, a payment to the holder of such Trust Securities under the Preferred Securities Guarantee or in connection with a proceeding for enforcement of payment of the principal of or interest on the Debentures directly brought by holders of any Trust Securities.
(c) For so long as any of the Preferred Securities remain outstanding, if, upon an Event of Default, the Trust holds the Debentures and the Property Trustee fails or the holders of not less than 25% in principal amount of the Outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the holders of at least 25% in liquidation amount of the Preferred Securities then Outstanding (determined as provided in the Trust Agreement) shall have the right to make such declaration by a notice in writing to the Depositor and the Property Trustee; and upon any such declaration such declaration such principal amount of and the accrued interest on all of the Debentures shall become immediately due and payable, provided that the payment of principal and interest on such Debentures shall remain subordinated to the extent provided in this Indenture.
ARTICLE XVI.
SUBORDINATION OF DEBENTURES
SECTION 16.1. AGREEMENT TO SUBORDINATE.
The Company covenants and agrees, and each holder of Debentures issued hereunder by such holder's acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XVI; and each holder of a Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of and interest on all Debentures issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Debt, Subordinated Debt and Additional Senior Obligations of the Company (collectively, "Senior Indebtedness") to the extent provided herein, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article XVI shall prevent the occurrence of any default or Event of Default hereunder.
SECTION 16.2. DEFAULT ON SENIOR DEBT, SUBORDINATED DEBT OR ADDITIONAL SENIOR OBLIGATIONS.
In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of the Company, or in the event that the maturity of any
Senior Indebtedness of the Company has been accelerated because of a default,
then, in either case, no payment shall be made by the Company with respect to
the principal (including redemption payments) of or interest on the Debentures.
In the event that, notwithstanding the foregoing, any payment shall be received
by the Trustee when such payment is prohibited by the preceding sentence of this
Section 16.2, such payment shall be held in trust for the benefit of, and shall
be paid over or delivered to, the holders of Senior Indebtedness or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, but only to the extent that the holders of the
Senior Indebtedness (or their representative or representatives or a trustee)
notify the Trustee in writing within 90 days of such payment of the amounts then
due and owing on the Senior Indebtedness and only the amounts specified in such
notice to the Trustee shall be paid to the holders of Senior Indebtedness.
SECTION 16.3. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
(a) Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company on account of the principal or interest on the Debentures; and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the holders of the Debentures or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XVI, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the holders of the Debentures or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the holders of Debentures or to the Trustee.
(b) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by
the foregoing, shall be received by the Trustee before all Senior Indebtedness of the Company is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness of the Company, as the case may be, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness.
(c) For purposes of this Article XVI, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XVI with respect
to the Debentures to the payment of all Senior Indebtedness of the Company, as
the case may be, that may at the time be outstanding, provided that (i) such
Senior Indebtedness is assumed by the new corporation, if any, resulting from
any such reorganization or readjustment; and (ii) the rights of the holders of
such Senior Indebtedness are not, without the consent of such holders, altered
by such reorganization or readjustment. The consolidation of the Company with,
or the merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article XII shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 16.3 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
XII. Nothing in Section 16.2 or in this Section 16.3 shall apply to claims of,
or payments to, the Trustee under or pursuant to Section 9.7.
SECTION 16.4. SUBROGATION.
(a) Subject to the payment in full of all Senior Indebtedness of the Company, the rights of the holders of the Debentures shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, as the case may be, applicable to such Senior Indebtedness until the principal of and interest on the Debentures shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the holders of the Debentures or the Trustee would be entitled except for the provisions of this Article XVI, and no payment over pursuant to the provisions of this Article XVI to or for the benefit of the holders of such Senior Indebtedness by holders of the Debentures or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debentures, be deemed to be a payment by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XVI are and are intended solely for the purposes of defining the relative rights of the holders of the Debentures, on the one hand, and the holders of such Senior Indebtedness on the other hand.
(b) Nothing contained in this Article XVI or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors (other than the holders of Senior Indebtedness of the Company), and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company, as the case may be, other than the holders of Senior Indebtedness of the Company, as the case may be, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XVI of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, as the case may be, received upon the exercise of any such remedy.
(c) Upon any payment or distribution of assets of the Company referred to in this Article XVI, the Trustee, subject to the provisions of Article IX, and the holders of the Debentures shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the holders of the Debentures, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XVI.
SECTION 16.5. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each holder of Debentures by such holder's acceptance thereof authorizes and directs the Trustee on such holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XVI and appoints the Trustee such holder's attorney-in-fact for any and all such purposes.
SECTION 16.6. NOTICE BY THE COMPANY.
(a) The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XVI. Notwithstanding the provisions of this Article XVI or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XVI, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 9.1, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 16.6 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date.
(b) The Trustee, subject to the provisions of Section 9.1, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness of the Company (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XVI, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XVI, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.
SECTION 16.7. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS.
(a) The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XVI in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. The Trustee's right to compensation and reimbursement of expenses as set forth in Section 9.7 shall not be subject to the subordination provisions of the Article XVI.
(b) With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XVI, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Section 9.1, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to holders of Debentures, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XVI or otherwise.
SECTION 16.8. SUBORDINATION MAY NOT BE IMPAIRED.
(a) No right of any present or future holder of any Senior Indebtedness of the Company to enforce subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with.
(b) Without in any way limiting the generality of Section 16.8(a), the holders of Senior Indebtedness of the Company may, at any time and from time to time, without the consent of or notice to the Trustee or the holders of the Debentures, without incurring responsibility to the holders of the Debentures and without impairing or releasing the subordination provided in this Article XVI or the obligations hereunder of the holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other Person.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.
CENTURY BANCORP, INC.
By:_____________________________
Name:
Title:
Attest:_______________________
STATE STREET BANK AND TRUST
COMPANY as trustee
By:______________________________
Name:
Title:
Attest:________________________
THE COMMONWEALTH OF MASSACHUSETTS )
) ss
COUNTY OF _______________________ )
On this ______ day of ______________________, 1998, before me appeared ___________________, to me personally known, who, being by me duly sworn, did say that he is the _____________________ of Century Bancorp, Inc. and that the seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its board of directors and said _____________________________, acknowledged said instrument to be the free act and deed of said corporation.
In testimony whereof I have hereunto set my hand and affixed my official seal at my office in said county and state the day and year last above written.
My term expires:
[seal]
THE COMMONWEALTH OF MASSACHUSETTS )
) ss
COUNTY OF SUFFOLK )
On this ______ day of ______________________, 1998, before me appeared ___________________, to me personally known, who, being by me duly sworn, did say that he is the _____________________ of State Street Bank and Trust Company, and that the seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its board of directors and said _____________________________, acknowledged said instrument to be the free act and deed of said corporation.
In testimony whereof I have hereunto set my hand and affixed my official seal at my office in said county and commonwealth the day and year last above written.
My term expires:
Exhibit 4.2
Certificate No. 1 $___________
CUSIP No. ____________
CENTURY BANCORP, INC.
____% JUNIOR SUBORDINATED DEBENTURE
DUE JUNE 30, 2029
Century Bancorp, Inc., a Massachusetts corporation (the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to State Street Bank and Trust Company, as Property Trustee for Century Bancorp Capital Trust, or registered assigns, the principal sum of ______________________________ Thousand Dollars ($__________) on June 30, 2029 (the "Stated Maturity"), and to pay interest on said principal sum from May __, 1998, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30 and December 31 of each year commencing June 30, 1998, at the rate of _____% per annum until the principal hereof shall have become due and payable, and on any overdue principal and (without duplication) on any overdue installment of interest at the same rate per annum compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30- day months. The amount of interest for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Debenture is not a business day, then payment of interest payable on such date shall be made on the next succeeding day that is a Business Day (as defined in the Indenture) (and without any interest or other payment in respect of any such delay) with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the person in whose name this Debenture (or one or more Predecessor Debentures, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, which shall be the close of business on the fifteenth day of the last month of the calendar quarter in which the Interest Payment Date occurs unless otherwise provided in the Indenture. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such regular record date and may be paid to the person in whose name this Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of the Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of and the interest on this Debenture shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the holder of this Debenture is the Property Trustee, the payment of the principal of and interest on this Debenture shall be made at such place and to such account as may be designated by the Trustee.
This Debenture may be redeemed by the Company on any date not earlier than June 30, 2003, subject to the Company having received prior approval of the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve.
The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness (as defined in the Indenture), and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions; (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided; and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee.
The provisions of this Debenture are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
Dated: , 1998
CENTURY BANCORP, INC.
By:______________________________
President and Chief Executive Officer
|
Attest:
By: _____________________________
Vice President and Treasurer
____% SUBORDINATED DEBENTURE
(CONTINUED)
This Debenture is one of the subordinated debentures of the Company (herein sometimes referred to as the "Debentures"), all issued or to be issued under and pursuant to an Indenture dated as of May __, 1998 (the "Indenture") duly executed and delivered between the Company and State Street Bank and Trust Company, as Trustee (the "Trustee"), to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. The Debentures are limited in aggregate principal amount as specified in the Indenture.
The Company shall have the right to redeem this Debenture at the option of the Company, without premium or penalty, in whole or in part at any time on or after June 30, 2003 (an "Optional Redemption"), or at any time in certain circumstances upon the occurrence of a Special Event (as defined in the Indenture), at a redemption price (the "Redemption Price") equal to 100% of the principal amount hereof plus any accrued but unpaid interest hereon, to the date of such redemption, plus Additional Interest, if any. Any redemption pursuant to this paragraph shall be made upon not less than 30 days nor more than 60 days notice, at the Redemption Price. If the Debentures are only partially redeemed by the Company pursuant to an Optional Redemption, the Debentures shall be redeemed pro rata or by lot or by any other method utilized by the Trustee as described in the Indenture.
In the event of redemption of this Debenture in part only, a new Debenture or Debentures for the unredeemed portion hereof shall be issued in the name of the holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of the Debentures except as provided in the Indenture, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, without the consent of the holder of each Debenture so affected; or (ii) reduce the aforesaid percentage of Debentures, the holders of which are required to consent to any such supplemental indenture, without the consent
of the holders of each Debenture then outstanding and affected thereby. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Debentures at the time outstanding, on behalf of all of the holders of the Debentures, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture, and its consequences, except a default in the payment of the principal of or interest on any of the Debentures. Any such consent or waiver by the registered holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Debenture and of any Debenture issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and interest on this Debenture at the time and place and at the rate and in the money herein prescribed.
The Company, as further described in the Indenture, shall have the right at any time during the term of the Debentures and from time to time to extend the interest payment period of such Debentures for up to 20 consecutive quarters (each, an "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid, including any Additional Interest and Compounded Interest (as defined in the Indenture and together, the "Deferred Payments") that shall be payable to the holders of the Debentures in whose names the Debentures are registered in the Debenture Register on the first record date after the end of the Extension Period. Before the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, provided that such Extended Interest Payment Period together with all such further extensions thereof shall not exceed 20 consecutive quarters. At the termination of any such Extended Interest Payment Period and upon the payment of all Deferred Payments then due, the Company may commence a new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the registered holder hereof on the Debenture Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Trustee accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered holder hereof or his attorney duly authorized in writing, and thereupon one or more new Debentures of authorized denominations and for the same aggregate principal amount shall be issued to the designated transferee or transferees. No service charge shall be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Debenture, the Company, the Trustee, any Paying Agent and the Debenture Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Debenture
Registrar) for the purpose of receiving payment of or on account of the principal hereof and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any Paying Agent nor any Debenture Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released.
The Debentures are issuable only in registered form without coupons in denominations of $10 and any integral multiple thereof (or such other denominations and any integral multiple thereof as may be deemed necessary by the Company for the purpose of maintaining the eligibility of the Debentures for quotation on The Nasdaq Stock Market's National Market or any successor thereto).
All terms used in this Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture.
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-mentioned Indenture.
Dated: , 1998
STATE STREET BANK AND TRUST COMPANY
as Trustee
By ___________________________
Authorized Signatory
EXHIBIT 4.4
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINED TERMS........................................................................................... 2
SECTION 101. DEFINITIONS. ............................................................................ 2
ARTICLE II
ESTABLISHMENT OF THE TRUST
....................................................................................................... 10
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE
OF BUSINESS.................................................................. 10
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY;
ORGANIZATIONAL EXPENSES...................................................... 10
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION
AND PURCHASE OF DEBENTURES................................................... 11
SECTION 206. DECLARATION OF TRUST......................................................... 11
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN
TRANSACTIONS................................................................. 12
SECTION 208. ASSETS OF TRUST.............................................................. 15
SECTION 209. TITLE TO TRUST PROPERTY...................................................... 15
ARTICLE III
PAYMENT ACCOUNT......................................................................................... 16
SECTION 301. PAYMENT ACCOUNT.............................................................. 16
ARTICLE IV
DISTRIBUTIONS; REDEMPTION............................................................................... 16
SECTION 401. DISTRIBUTIONS................................................................ 16
SECTION 402. REDEMPTION................................................................... 17
SECTION 403. SUBORDINATION OF COMMON SECURITIES........................................... 19
SECTION 404. PAYMENT PROCEDURES........................................................... 19
SECTION 405. TAX RETURNS AND REPORTS...................................................... 19
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST................................. 20
SECTION 407. PAYMENTS UNDER INDENTURE..................................................... 20
ARTICLE V
TRUST SECURITIES CERTIFICATES........................................................................... 20
SECTION 501. INITIAL OWNERSHIP............................................................ 20
SECTION 502. THE TRUST SECURITIES CERTIFICATES............................................ 20
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SECTION 503. EXECUTION, AUTHENTICATION AND DELIVERY OF TRUST
SECURITIES CERTIFICATES...................................................... 21
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF
PREFERRED SECURITIES CERTIFICATES............................................ 21
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST
SECURITIES CERTIFICATES...................................................... 22
SECTION 506. PERSONS DEEMED SECURITYHOLDERS............................................... 23
SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND
ADDRESSES.................................................................... 23
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY.............................................. 23
SECTION 509. APPOINTMENT OF PAYING AGENT.................................................. 24
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR.
............................................................................ 24
SECTION 511. PREFERRED SECURITIES CERTIFICATES............................................ 24
SECTION 512. [Intentionally Omitted]...................................................... 25
SECTION 513. [Intentionally Omitted]...................................................... 25
SECTION 514. RIGHTS OF SECURITYHOLDERS.................................................... 25
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING............................................................... 26
SECTION 601. LIMITATIONS ON VOTING RIGHTS................................................. 26
SECTION 602. NOTICE OF MEETINGS........................................................... 27
SECTION 603. MEETINGS OF PREFERRED SECURITYHOLDERS........................................ 27
SECTION 604. VOTING RIGHTS................................................................ 27
SECTION 605. PROXIES, ETC................................................................. 27
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT..................................... 28
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES.................................... 28
SECTION 608. ACTS OF SECURITYHOLDERS...................................................... 28
SECTION 609. INSPECTION OF RECORDS........................................................ 29
ARTICLE VII
REPRESENTATIONS AND WARRANTIES.......................................................................... 29
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND
THE PROPERTY TRUSTEE......................................................... 29
SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE
BANK AND THE DELAWARE TRUSTEE................................................ 31
SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR.
............................................................................ 32
ARTICLE VIII
TRUSTEES................................................................................................ 32
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.......................................... 32
SECTION 802. CERTAIN NOTICES.............................................................. 34
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE........................................... 34
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SECTION 804. NOT RESPONSIBLE FOR RECITALS OR USE OF PROCEEDS.
36
SECTION 805. MAY HOLD SECURITIES.......................................................... 36
SECTION 806. COMPENSATION; INDEMNITY; FEES................................................ 36
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY
OF TRUSTEES.................................................................. 37
SECTION 808. CONFLICTING INTERESTS........................................................ 38
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE............................................. 38
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR.................................................................... 39
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR....................................... 41
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS.................................................................. 41
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
DEPOSITOR OR TRUST........................................................... 42
SECTION 814. REPORTS BY PROPERTY TRUSTEE.................................................. 42
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE.............................................. 42
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS
PRECEDENT.................................................................... 42
SECTION 817. NUMBER OF TRUSTEES........................................................... 42
SECTION 818. DELEGATION OF POWER.......................................................... 43
SECTION 819. VOTING....................................................................... 43
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER..................................................................... 43
SECTION 901. DISSOLUTION UPON EXPIRATION DATE............................................. 43
SECTION 902. EARLY TERMINATION............................................................ 43
SECTION 903. TERMINATION.................................................................. 44
SECTION 904. LIQUIDATION.................................................................. 44
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR
REPLACEMENTS OF THE TRUST.................................................... 46
ARTICLE X
MISCELLANEOUS PROVISIONS................................................................................ 47
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS...................................... 47
SECTION 1002. AMENDMENT.................................................................... 47
SECTION 1003. SEPARABILITY................................................................. 49
SECTION 1004. GOVERNING LAW................................................................ 49
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY............................................. 49
SECTION 1006. SUCCESSORS................................................................... 50
SECTION 1007. HEADINGS..................................................................... 50
SECTION 1008. REPORTS, NOTICES AND DEMANDS................................................. 50
SECTION 1009. AGREEMENT NOT TO PETITION.................................................... 51
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SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST
INDENTURE ACT................................................................ 51
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT,
GUARANTEE AND INDENTURE...................................................... 51
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CROSS-REFERENCE TABLE
Section of Section of Amended Trust Indenture Act and Restated of 1939, as amended Trust Agreement ------------------- --------------- 310(a)(1)....................................................................807 310(a)(2)....................................................................807 310(a)(3)....................................................................807 310(a)(4).............................................................207(a)(ii) 310(b).......................................................................808 311(a).......................................................................813 311(b).......................................................................813 312(a).......................................................................507 312(b).......................................................................507 312(c).......................................................................507 313(a)....................................................................814(a) 313(a)(4).................................................................814(b) 313(b)....................................................................814(b) 313(c)......................................................................1008 313(d)....................................................................814(b) 314(a).......................................................................815 314(b)............................................................Not Applicable 314(c)(1)....................................................................816 314(c)(2)....................................................................816 314(c)(3).........................................................Not Applicable 314(d)............................................................Not Applicable 314(e)..................................................................101, 816 315(a)............................................................801(a), 803(a) 315(b).................................................................802, 1008 315(c)....................................................................801(a) 315(d)..................................................................801, 803 316(a)(2).........................................................Not Applicable 316(b)............................................................Not Applicable 316(c).......................................................................607 317(a)(1).........................................................Not Applicable 317(a)(2).........................................................Not Applicable 317(b).......................................................................509 318(a)......................................................................1010 |
Note: This Cross-Reference Table does not constitute part of this Agreement and shall not affect any interpretation of any of its terms or provisions.
AMENDED AND RESTATED TRUST AGREEMENT
AMENDED AND RESTATED TRUST AGREEMENT, dated as of _________, 1998, among (i) CENTURY BANCORP, INC., a Massachusetts corporation (including any successors or assigns, the "Depositor"), (ii) STATE STREET BANK AND TRUST COMPANY, a trust company duly organized and existing under the laws of the Commonwealth of Massachusetts, as property trustee (the "Property Trustee" and, in its separate corporate capacity and not in its capacity as Property Trustee, the "Bank"), (iii) WILMINGTON TRUST COMPANY, a Delaware banking corporation duly organized and existing under the laws of the State of Delaware, as Delaware trustee (the "Delaware Trustee," and, in its separate corporate capacity and not in its capacity as Delaware Trustee, the "Delaware Bank") (iv) Marshall M. Sloane, an individual, Jonathan C. Sloane, an individual, and Paul V. Cusick, Jr., an individual, each of whose address is c/o Century Bancorp, Inc., 400 Mystic Avenue, Medford, Massachusetts 02155 (each an "Administrative Trustee" and collectively the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and the Administrative Trustees referred to collectively as the "Trustees"), and (v) the several Holders (as hereinafter defined).
RECITALS
WHEREAS, the Depositor, the Delaware Trustee, and Marshall M. Sloane, Jonathan A. Sloane and Paul V. Cusick, Jr., each as an Administrative Trustee, have heretofore duly declared and established a business trust pursuant to the Delaware Business Trust Act (as hereinafter defined) by the entering into of that certain Trust Agreement, dated as of April __, 1998 (the "Original Trust Agreement"), and by the execution and filing by the Delaware Trustee, the Depositor and the Administrative Trustees with the Secretary of State of the State of Delaware of the Certificate of Trust, filed on April __, 1998, the form of which is attached as Exhibit A; and
WHEREAS, the Depositor, the Delaware Trustee, the Property Trustee and the Administrative Trustees desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities (as defined herein) by the Trust (as defined herein) to the Depositor; (ii) the issuance and sale of the Preferred Securities (as defined herein) by the Trust pursuant to the Underwriting Agreement (as defined herein); (iii) the acquisition by the Trust from the Depositor of all of the right, title and interest in the Debentures (as defined herein); and (iv) the appointment of the Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each party, for the benefit of the other parties and for the benefit of the Securityholders (as defined herein), hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows:
ARTICLE I
DEFINED TERMS
SECTION 101. DEFINITIONS. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article I have the meanings assigned to them in this Article I and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;
(c) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the amount of additional interest accrued on interest in arrears and paid by the Depositor on a Like Amount of Debentures for such period.
"Additional Interest" has the meaning specified in Section 1.1 of the Indenture.
"Administrative Trustee" means each of Marshall M. Sloane, Jonathan A. Sloane and Paul V. Cusick, Jr., solely in his capacity as Administrative Trustee of the Trust formed and continued hereunder and not in his individual capacity, or such Administrative Trustee's successor in interest in such capacity, or any successor trustee appointed as herein provided.
"Affiliate" means, with respect to a specified Person, (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities or other ownership interests of the specified Person, any Person 10% or more of whose outstanding voting securities or other ownership interests are directly or indirectly owned, controlled or held with power to vote by the specified Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person; (d) a partnership in which the specified Person is a general partner; (e) any officer or director of the specified Person; and (f) if the specified Person is an individual, any entity of which the specified Person is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to the Preferred Securities appointed by the Property Trustee pursuant to Section 503.
"Bank" has the meaning specified in the Preamble to this Trust Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in the premises adjudging such Person a bankrupt or insolvent, or approving as properly filed a petition seeking liquidation or reorganization of or in respect of such Person under the United States Bankruptcy Code of 1978, as amended, or any other similar applicable federal or state law, and the continuance of any such decree or order unvacated and unstayed for a period of 90 days; or the commencement of an involuntary case under the United States Bankruptcy Code of 1978, as amended, in respect of such Person, which shall continue undismissed for a period of 90 days or entry of an order for relief in such case; or the entry of a decree or order of a court having jurisdiction in the premises for the appointment on the ground of insolvency or bankruptcy of a receiver, custodian, liquidator, trustee or assignee in bankruptcy or insolvency of such Person or of its property, or for the winding up or liquidation of its affairs, and such decree or order shall have remained in force unvacated and unstayed for a period of 90 days; or
(b) the institution by such Person of proceedings to be adjudicated a voluntary bankrupt, or the consent by such Person to the filing of a bankruptcy proceeding against it, or the filing by such Person of a petition or answer or consent seeking liquidation or reorganization under the United States Bankruptcy Code of 1978, as amended, or other similar applicable Federal or State law, or the consent by such Person to the filing of any such petition or to the appointment on the ground of insolvency or bankruptcy of a receiver or custodian or liquidator or trustee or assignee in bankruptcy or insolvency of such Person or of its property, or shall make a general assignment for the benefit of creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Depositor to have been duly adopted by the Depositor's Board of Directors, or such committee of the Board of Directors or officers of the Depositor to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the appropriate Trustee.
"Business Day" means a day other than a Saturday or Sunday, a day on which banking institutions in the City of Boston are authorized or required by law, executive order or regulation to remain closed, or a day on which the Property Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture Trustee is closed for business.
"Certificate of Trust" means the certificate of trust filed with the Secretary of State of the State of Delaware with respect to the Trust, as amended or restated from time to time.
"Closing Date" means the date of execution and delivery of this Trust Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $10 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit B.
"Corporate Trust Office" means the office at which, at any particular time, the corporate trust business of the Property Trustee or the Debenture Trustee, as the case may be, shall be principally administered, which office at the date hereof, in each such case, is located at Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department.
"Debenture Event of Default" means an "Event of Default" as defined in
Section 7.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Trustee" means State Street Bank and Trust Company, a trust company organized under the laws of The Commonwealth of Massachusetts and any successor thereto, as trustee under the Indenture.
"Debentures" means the $25,773,200 aggregate principal amount (or up to $29,639,180 aggregate principal amount if the Underwriter exercises its Option and there is an Option Closing Date) of the Depositor's ____% Junior Subordinated Debentures due 2029, issued pursuant to the Indenture.
"Delaware Bank" has the meaning specified in the Preamble to this Trust Agreement.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Delaware Code Sections 3801 et seq. as it may be amended from time to time.
"Delaware Trustee" means the commercial bank or trust company identified as the "Delaware Trustee" in the Preamble to this Trust Agreement solely in its capacity as Delaware
Trustee of the Trust formed and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the Preamble to this Trust Agreement.
"Distribution Date" has the meaning specified in Section 401(a).
"Distributions" means amounts payable in respect of the Trust Securities as provided in Section 401.
"Early Termination Event" has the meaning specified in Section 902.
"Event of Default" means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust or the Property Trustee in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or
(c) default by the Trust or the Property Trustee in the payment of any Redemption Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of any covenant or warranty of the Trustees in this Trust Agreement (other than a covenant or warranty a default in the performance of which or the breach of which is dealt with in clause (b) or (c), above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the defaulting Trustee or Trustees by the Holders of at least 25% in aggregate Liquidation Amount of the Outstanding Preferred Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property Trustee and the failure by the Depositor to appoint a successor Property Trustee within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Agreement" means the Agreement as to Expenses and Liabilities between the Depositor and the Trust, substantially in the form attached as Exhibit C, as amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extension Period" has the meaning specified in Section 4.1 of the Indenture.
"Guarantee" means the Preferred Securities Guarantee Agreement executed and delivered by the Depositor and State Street Bank and Trust Company, as trustee, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the Holders of the Preferred Securities, as amended from time to time.
"Indenture" means the Indenture, dated as of April __, 1998, between the Depositor and the Debenture Trustee, as trustee, as amended or supplemented from time to time pertaining to the Debentures of the Depositor.
"Investment Company Act," means the Investment Company Act of 1940, as amended, as in effect at the date of execution of this instrument.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust Securities, Trust Securities having a Liquidation Amount equal to the principal amount of Debentures to be contemporaneously redeemed in accordance with the Indenture and the proceeds of which shall be used to pay the Redemption Price of such Trust Securities; and (b) with respect to a distribution of Debentures to Holders of Trust Securities in connection with a dissolution or liquidation of the Trust, Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Debentures are distributed. Each Debenture distributed pursuant to clause (b) above shall carry with it accumulated interest in an amount equal to the accumulated and unpaid interest then due on such Debenture.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be distributed to Holders of Trust Securities in connection with a dissolution and liquidation of the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section 904(d).
"Officers' Certificate" means a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Controller or an Assistant Controller or the Secretary or an Assistant Secretary, of the Depositor, and delivered to the appropriate Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 816 shall be the principal executive, financial or accounting officer of the Depositor. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with.
"Opinion of Counsel" means an opinion in writing of legal counsel, who may be counsel for the Trust, the Property Trustee, the Delaware Trustee or the Depositor, but not an employee of any thereof, and who shall be reasonably acceptable to the Property Trustee.
"Option" means the grant by the Trust to the Underwriters of an option to purchase all or any portion of an additional 375,000 Preferred Securities, pursuant to the terms of the Underwriting Agreement.
"Option Closing Date" means the time, date of payment and delivery of the Preferred Securities Certificates purchased pursuant to the Underwriters' exercise of the Option, as more particularly described in the Underwriting Agreement.
"Original Trust Agreement" has the meaning specified in the Recitals to this Trust Agreement.
"Outstanding", when used with respect to Preferred Securities, means, as of the date of determination, all Preferred Securities theretofore executed and delivered under this Trust Agreement, except:
(a) Preferred Securities theretofore canceled by the Property Trustee or delivered to the Property Trustee for cancellation;
(b) Preferred Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent for the Holders of such Preferred Securities; provided that, if such Preferred Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; and
(c) Preferred Securities which have been paid or in exchange for or in lieu of which other Preferred Securities have been executed and delivered pursuant to Sections 504, 505 and 511; provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Preferred Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Preferred Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Preferred Securities that such Trustee knows to be so owned shall be so disregarded; and (b) the foregoing shall not apply at any time when all of the Outstanding Preferred Securities are owned by the Depositor, one or more of the Trustees and/or any such Affiliate. Preferred Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustees the pledgee's right so to act with respect to such Preferred Securities and the pledgee is not the Depositor or any other Obligor upon the Preferred Securities or a Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Depositor or any Affiliate of the Depositor.
"Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee with the Bank in its trust department for the benefit of the Securityholders in which all amounts paid in respect of the Debentures shall be held and from which the Property Trustee shall make payments to the Securityholders in accordance with Sections 401 and 402.
"Person" means any individual, corporation, partnership, joint venture, trust, limited liability company or corporation, unincorporated organization or government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $10 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate", means a certificate evidencing ownership of Preferred Securities, substantially in the form attached as Exhibit D.
"Property Trustee" means the commercial bank or trust company identified as the "Property Trustee," in the Preamble to this Trust Agreement solely in its capacity as Property Trustee of the Trust heretofore formed and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided that each Debenture Redemption Date and the stated maturity of the Debentures shall be a Redemption Date for a Like Amount of Trust Securities.
"Redemption Price" means, with respect to any Trust Security, the Liquidation Amount of such Trust Security, plus accumulated and unpaid Distributions to the Redemption Date, paid by the Depositor upon the concurrent redemption of a Like Amount of Debentures, allocated on a pro rata basis (based on Liquidation Amounts) among the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 810.
"Securities Register" and "Securities Registrar" have the respective meanings specified in Section 504.
"Securityholder" or "Holder" means a Person in whose name a Trust Security or Securities are registered in the Securities Register; any such Person is a beneficial owner within the meaning of the Delaware Business Trust Act.
"Trust" means Century Bancorp Capital Trust, the Delaware business trust created and continued hereby.
"Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including all exhibits hereto, including, for all purposes of this Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939, as amended, is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures; (b) the rights of the Property Trustee under the Guarantee; (c) any cash on deposit in, or owing to, the Payment Account; and (d) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to the provisions of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the Preferred Securities.
"Trust Securities Certificate" means any one of the Common Securities Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware Trustee and the Administrative Trustees.
"Underwriters" means Tucker Anthony Incorporated and the other underwriters named in the Underwriting Agreement.
"Underwriting Agreement" means the Underwriting Agreement, dated as of __________, 1998, among the Trust, the Depositor and the Underwriters named therein.
ARTICLE II
ESTABLISHMENT OF THE TRUST
SECTION 201. NAME.
The Trust created and continued hereby shall be known as "Century Bancorp Capital Trust", as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Trust Securities and the other Trustees, in which name the Trustees may engage in the transactions contemplated hereby, make and execute contracts and other instruments on behalf of the Trust and sue and be sued.
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS.
The address of the Delaware Trustee in the State of Delaware is c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Securityholders and the Depositor. The principal executive office of the Trust is c/o Century Bancorp, Inc., 400 Mystic Avenue, Medford, Massachusetts 02155.
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL EXPENSES.
The Trustees acknowledge receipt in trust from the Depositor in connection with the Original Trust Agreement of the sum of $10, which constituted the initial Trust Property. The Depositor shall pay organizational expenses of the Trust as they arise or shall, upon request of any Trustee, promptly reimburse such Trustee for any such expenses paid by such Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such expenses.
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES.
On __________, 1998, the Depositor and an Administrative Trustee, on behalf of the Trust and pursuant to the Original Trust Agreement, executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 502 and deliver in accordance with the Underwriting Agreement, Preferred Securities Certificates, registered in the name of the Persons entitled thereto, in an aggregate amount of 2,500,000 Preferred Securities having an aggregate Liquidation Amount of $25,000,000 against receipt of the aggregate purchase price of such Preferred Securities of $25,000,000, which amount such Administrative Trustee shall promptly deliver to the Property Trustee. If the Underwriters
exercise their Option and there is an Option Closing Date, then an
Administrative Trustee, on behalf of the Trust, shall execute in accordance with
Section 502 and deliver in accordance with the Underwriting Agreement, Preferred
Securities Certificates, registered in the name of the Persons entitled thereto,
in an aggregate amount of up to 375,000 Preferred Securities having an aggregate
Liquidation Amount of up to $3,750,000 against receipt of the aggregate purchase
price of such Preferred Securities equal to the product of $10 multiplied by the
number of Preferred Securities purchased pursuant to the Option, which amount
such Administrative Trustee shall promptly deliver to the Property Trustee.
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE OF DEBENTURES.
(a) Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 502 and deliver to the Depositor, Common Securities Certificates, registered in the name of the Depositor, in an aggregate amount of 77,320 Common Securities having an aggregate Liquidation Amount of $773,200 against payment by the Depositor of such amount. Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase from the Depositor Debentures, registered in the name of the Property Trustee on behalf of the Trust and having an aggregate principal amount equal to $25,773,200, and, in satisfaction of the purchase price for such Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of $25,773,200.
(b) If the Underwriters exercise the Option and there is an Option Closing Date, then an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 502 and deliver to the Depositor, Common Securities Certificates, registered in the name of the Depositor, in an aggregate amount of up to 11,593 Common Securities having an aggregate Liquidation Amount of up to $115,930 against payment by the Depositor of such amount. Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase from the Depositor, Debentures, registered in the name of the Trust and having an aggregate principal amount of up to $3,865,980, and, in satisfaction of the purchase price of such Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the amount received from one of the Administrative Trustees pursuant to the last sentence of Section 204.
SECTION 206. DECLARATION OF TRUST.
The exclusive purposes and functions of the Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Debentures; and (b) to engage in those activities necessary, convenient or incidental thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to have all the rights, powers and duties to the extent set forth herein, and the Trustees hereby accept such appointment. The Property Trustee hereby declares that it shall hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Securityholders. The Administrative Trustees shall have all rights, powers and duties set
forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Trust. The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Property Trustee or the Administrative Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Business Trust Act.
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section 207 and Article VIII, and in accordance with the following provisions (i) and (ii), the Administrative Trustees shall have the authority to enter into all transactions and agreements determined by the Administrative Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Administrative Trustees under this Trust Agreement, and to perform all acts in furtherance thereof, including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee, acting singly or jointly, shall have the power and authority to act on behalf of the Trust with respect to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Expense Agreement and such other agreements or documents as may be necessary or desirable in connection with the purposes and function of the Trust;
(C) assisting in the registration of the Preferred Securities under the Securities Act of 1933, as amended, and under state securities or blue sky laws, and the qualification of this Trust Agreement as a trust indenture under the Trust Indenture Act;
(D) assisting in the listing of the Preferred Securities upon The Nasdaq Stock Market's National Market or such securities exchange or exchanges as shall be determined by the Depositor and the registration of the Preferred Securities under the Exchange Act, and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing;
(E) the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement;
(F) the appointment of a Paying Agent, Authenticating Agent and Securities Registrar in accordance with this Trust Agreement;
(G) to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware;
(H) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Preferred Securities or to enable the Trust to effect the purposes for which the Trust was created; and
(I) the taking of any action incidental to the foregoing as the Administrative Trustees may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other payments made in respect of the Debentures in the Payment Account;
(D) the distribution of amounts owed to the Securityholders in respect of the Trust Securities in accordance with the terms of this Trust Agreement;
(E) the exercise of all of the rights, powers and privileges of a holder of the Debentures;
(F) the sending of notices of default and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Trust;
(I) after an Event of Default, the taking of any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder);
(J) registering transfers of the Trust Securities in accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section
207(a)(ii), the Property Trustee shall have none of the
duties, liabilities, powers or the authority of the
Administrative Trustees set forth in Section 207(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Trustees shall not (i) acquire any investments or engage in any activities not authorized by this Trust Agreement; (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Securityholders, except as expressly provided herein; (iii) take any action that would cause the Trust to fail or cease to qualify as a "grantor trust" for United States federal income tax purposes; (iv) incur any indebtedness for borrowed money or issue any other debt; or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Administrative Trustees shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Trust or the Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred Securities, the Depositor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the Commission and the execution on behalf of the Trust of a registration statement on the appropriate form in relation to the Preferred Securities and the Debentures, including any amendments thereto;
(ii) the determination of the States in which to take appropriate action to qualify or, register for sale all or part of the Preferred Securities and to do any and all such acts, other than actions which must be taken by or on behalf of the Trust, and advise the Trustees of actions they must take on behalf of the Trust, and prepare for execution and filing any documents to be executed and filed by the Trust or on behalf of the Trust, as the
Depositor deems necessary or advisable in order to comply with the applicable laws of any such States;
(iii) the preparation for filing by the Trust and execution on behalf of the Trust of an application to The Nasdaq Stock Market's National Market or a national stock exchange or other organizations for listing upon notice of issuance of any Preferred Securities and to file or cause an Administrative Trustee to file thereafter with such exchange or organization such notifications and documents as may be necessary from time to time;
(iv) the preparation for filing by the Trust with the Commission and the execution on behalf of the Trust of a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) or 12(g) of the Exchange Act, including any amendments thereto;
(v) the negotiation of the terms of, and the execution and delivery of, the Underwriting Agreement providing for the sale of the Preferred Securities; and
(vi) the taking of any other actions necessary or desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative Trustees are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust shall not be deemed to be an "investment company" required to be registered under the Investment Company Act, shall be classified as a "grantor trust" and not as an association taxable as a corporation for United States federal income tax purposes and so that the Debentures shall be treated as indebtedness of the Depositor for United States federal income tax purposes. In this connection, subject to Section 1002, the Depositor and the Administrative Trustees are authorized to take any action, not inconsistent with applicable law or this Trust Agreement, that each of the Depositor and the Administrative Trustees determines in their discretion to be necessary or desirable for such purposes.
SECTION 208. ASSETS OF TRUST.
The assets of the Trust shall consist of the Trust Property.
SECTION 209. TITLE TO TRUST PROPERTY.
Legal title to all Trust Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee for the benefit of the Securityholders in accordance with this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 301. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and any agent of the Property Trustee shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits and withdrawals from the Payment Account in accordance with this Trust Agreement. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Securityholders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments or proceeds with respect to, the Debentures. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 401. DISTRIBUTIONS.
(a) Distributions on the Trust Securities shall be cumulative, and shall accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accumulate from May __, 1998, and, except during any Extension Period with respect to the Debentures, shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on September 30, 1998. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) with the same force and effect as if made on such date (each date on which distributions are payable in accordance with this Section 401(a), a "Distribution Date").
(b) The Trust Securities represent undivided beneficial interests in the Trust Property. Distributions on the Trust Securities shall be payable at a rate of ___% per annum of the Liquidation Amount of the Trust Securities. The amount of Distributions payable for any full period shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of Distributions for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30 day months. During any Extension Period with respect to the Debentures, Distributions on the Preferred Securities shall be deferred for a period equal to the Extension Period. The amount of Distributions payable for any period shall include the Additional Amounts, if any.
(c) Distributions on the Trust Securities shall be made by the Property Trustee solely from the Payment Account and shall be payable on each Distribution Date only to the extent that the Trust has funds then on hand and immediately available by 12:30 p.m., Boston time, on each Distribution Date in the Payment Account for the payment of such Distributions.
(d) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be 15th day of the month in which the Distribution is payable.
SECTION 402. REDEMPTION.
(a) On each Debenture Redemption Date at maturity of the Debentures, the Trust shall be required to redeem a Like Amount of Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Securities Register. The Property Trustee shall have no responsibility for the accuracy of any CUSIP number contained in such notice. All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the outstanding Trust Securities are to be redeemed, the identification and the aggregate Liquidation Amount of the particular Trust Securities to be redeemed; and
(v) that, on the Redemption Date, the Redemption Price shall become due and payable upon each such Trust Security to be redeemed and that Distributions thereon shall cease to accumulate on and after said date.
(c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has immediately available funds then on hand and available in the Payment Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of any Preferred Securities, then, by 12:00 noon, Boston time, on the Redemption Date, subject to Section 402(c), the Property Trustee shall deposit with the Paying Agent funds sufficient to pay the applicable
Redemption Price and shall give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders thereof upon surrender of their Preferred Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Securities Register for the Trust Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Securityholders holding Trust Securities so called for redemption shall cease, except the right of such Securityholders to receive the Redemption Price and any Distribution payable on or prior to the Redemption Date, but without interest, and such Trust Securities shall cease to be Outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date shall be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Trust or by the Depositor pursuant to the Guarantee, Distributions on such Trust Securities shall continue to accumulate, at the then applicable rate, from the Redemption Date originally established by the Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date shall be the date fixed for redemption for purposes of calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be made to the record holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be the date 15 days prior to the relevant Redemption Date.
(f) Subject to Section 403(a), if less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated on a pro rata basis (based on Liquidation Amounts) among the Common Securities and the Preferred Securities. The particular Preferred Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Property Trustee from the Outstanding Preferred Securities not previously called for redemption, by such method (including, without limitation, by lot) as the Property Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the Liquidation Amount or an integral multiple of the Liquidation Amount in excess thereof) of the Liquidation Amount of Preferred Securities of a denomination larger than the Liquidation Amount. The Property Trustee shall promptly notify the Securities Registrar in writing of the Preferred Securities selected for redemption and, in the case of any Preferred Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Preferred Securities shall relate, in the case of any Preferred Securities redeemed or to be redeemed only in part, to the portion of the Liquidation Amount of Preferred Securities which has been or is to be redeemed.
SECTION 403. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if applicable) on, and the Redemption Price of, the Trust Securities, as applicable, shall be made, subject to Section 402(f), pro rata among the Common Securities and the Preferred Securities based on the Liquidation Amount of the Trust Securities; provided, however, that if on any Distribution Date or Redemption Date any Event of Default resulting from a Debenture Event of Default shall have occurred and be continuing, no payment of any Distribution (including Additional Amounts, if applicable) on, or Redemption Price of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including Additional Amounts, if applicable) on all Outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all Outstanding Preferred Securities then called for redemption, 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, if applicable) on, or the Redemption Price of, Preferred Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting from a Debenture Event of Default, the Holder of Common Securities shall be deemed to have waived any right to act with respect to any such Event of Default under this Trust Agreement until the effect of all such Events of Default with respect to the Preferred Securities shall have been cured, waived or otherwise eliminated. Until any such Event of Default under this Trust Agreement with respect to the Preferred Securities shall have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Preferred Securities and not the Holder of the Common Securities, and only the Holders of the Preferred Securities shall have the right to direct the Property Trustee to act on their behalf.
SECTION 404. PAYMENT PROCEDURES.
Payments of Distributions (including Additional Amounts, if applicable) in respect of the Preferred Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Common Securityholder.
SECTION 405. TAX RETURNS AND REPORTS.
The Administrative Trustees shall prepare (or cause to be prepared), at the Depositor's expense, and file all United States federal, state and local tax and information returns and reports required to be filed by or in respect of the Trust. In this regard, the Administrative Trustees shall (a) prepare and file (or cause to be prepared and filed) the appropriate Internal Revenue Service form required to be filed in respect of the Trust in each taxable year of the Trust; and (b) prepare and furnish (or cause to be prepared and furnished) to each Securityholder the appropriate
Internal Revenue Service form required to be furnished to such Securityholder or the information required to be provided on such form. The Administrative Trustees shall provide the Depositor with a copy of all such returns and reports promptly after such filing or furnishing. The Property Trustee shall comply with United States federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Securityholders under the Trust Securities.
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST.
Upon receipt under the Debentures of Additional Interest, the Property Trustee, at the direction of an Administrative Trustee or the Depositor, shall promptly pay any taxes, duties or governmental charges of whatsoever nature (other than withholding taxes) imposed on the Trust by the United States or any other taxing authority.
SECTION 407. PAYMENTS UNDER INDENTURE.
Any amount payable hereunder to any Holder of Preferred Securities shall be reduced by the amount of any corresponding payment such Holder has directly received under the Indenture pursuant to Section 514(b) or (c) hereof.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 501. INITIAL OWNERSHIP.
Upon the creation of the Trust and the contribution by the Depositor pursuant to Section 203 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Depositor shall be the sole beneficial owner of the Trust.
SECTION 502. THE TRUST SECURITIES CERTIFICATES.
The Preferred Securities Certificates shall be issued in minimum denominations of the Liquidation Amount and integral multiples of the Liquidation Amount in excess thereof, and the Common Securities Certificates shall be issued in denominations of the Liquidation Amount and integral multiples thereof. The Trust Securities Certificates shall be executed on behalf of the Trust by manual or facsimile signature of at least one Administrative Trustee. Trust Securities Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Securityholder, and shall be entitled to the rights and subject to the obligations of a Securityholder hereunder, upon due
registration of such Trust Securities Certificate in such transferee's name pursuant to Sections 504 and 511.
SECTION 503. EXECUTION, AUTHENTICATION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
(a) On the Closing Date and on the Option Closing Date, the Administrative Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 204 and 205, to be executed on behalf of the Trust by at least one of the Administrative Trustees and delivered to or upon the written order of the Depositor, signed by its Chief Executive Officer, President, any Vice President, the Treasurer or any Assistant Treasurer without further corporate action by the Depositor, in authorized denominations.
(b) A Preferred Securities Certificate shall not be valid until authenticated by the manual signature of an authorized signatory of the Property Trustee. The signature shall be conclusive evidence that the Preferred Securities Certificate has been authenticated under this Trust Agreement. Each Preferred Securities Certificate shall be dated the date of its authentication.
(c) Upon the written order of the Trust signed by the Administrative Trustee, the Property Trustee shall authenticate and make available for delivery the Preferred Securities Certificates.
(d) The Property Trustee may appoint an Authenticating Agent acceptable to the Trust to authenticate the Preferred Securities. An Authenticating Agent may authenticate the Preferred Securities whenever the Property Trustee may do so. Each reference in this Trust Agreement to authentication by the Property Trustee includes authentication by such agent. An Authenticating Agent has the same rights as the Property Trustee to deal with the Depositor or the Trust.
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED SECURITIES CERTIFICATES.
(a) The Depositor shall keep or cause to be kept, at the office or agency maintained pursuant to Section 508, a register or registers for the purpose of registering Trust Securities Certificates and transfers and exchanges of Preferred Securities Certificates (herein referred to as the "Securities Register") in which the registrar designated by the Depositor (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Preferred Securities Certificates and Common Securities Certificates (subject to Section 510 in the case of the Common Securities Certificates) and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. The Property Trustee shall be the initial Securities Registrar.
(b) Upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 508, the Administrative Trustees or any one of them shall execute and deliver, in the name of the designated transferee or transferees, one or
more new Preferred Securities Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of execution by such Administrative Trustee or Trustees. The Securities Registrar shall not be required to register the transfer of any Preferred Securities that have been called for redemption. At the option of a Holder, Preferred Securities Certificates may be exchanged for other Preferred Securities Certificates in authorized denominations of the same class and of a like aggregate Liquidation Amount upon surrender of the Preferred Securities Certificates to be exchanged at the office or agency maintained pursuant to Section 508.
(c) Every Preferred Securities Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Property Trustee and the Securities Registrar duly executed by the Holder or his attorney duly authorized in writing. Each Preferred Securities Certificate surrendered for registration of transfer or exchange shall be canceled and subsequently disposed of by the Property Trustee in accordance with its customary practice. The Trust shall not be required to (i) issue, register the transfer of, or exchange any Preferred Securities during a period beginning at the opening of business 15 calendar days before the date of mailing of a notice of redemption of any Preferred Securities called for redemption and ending at the close of business on the day of such mailing; or (ii) register the transfer of or exchange any Preferred Securities so selected for redemption, in whole or in part, except the unredeemed portion of any such Preferred Securities being redeemed in part.
(d) No service charge shall be made for any registration of transfer or exchange of Preferred Securities Certificates, but the Securities Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities Certificates.
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES CERTIFICATES.
If (a) any mutilated Trust Securities Certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate; and (b) there shall be delivered to the Securities Registrar, the Property Trustee and the Administrative Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustees, or any one of them, on behalf of the Trust shall execute and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section 505, the Administrative Trustees or the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Trust Securities Certificate issued pursuant to this Section 505 shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time.
SECTION 506. PERSONS DEEMED SECURITYHOLDERS.
The Trustees, the Paying Agent and the Securities Registrar shall treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and neither the Trustees nor the Securities Registrar shall be bound by any notice to the contrary.
SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.
At any time when the Property Trustee is not also acting as the Securities Registrar, the Administrative Trustees or the Depositor shall furnish or cause to be furnished to the Property Trustee (a) semi-annually on or before January 15 and July 15 in each year, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Securityholders as of the most recent record date; and (b) promptly after receipt by any Administrative Trustee or the Depositor of a request therefor from the Property Trustee in order to enable the Property Trustee to discharge its obligations under this Trust Agreement, in each case to the extent such information is in the possession or control of the Administrative Trustees or the Depositor and is not identical to a previously supplied list or has not otherwise been received by the Property Trustee in its capacity as Securities Registrar. The rights of Securityholders to communicate with other Securityholders with respect to their rights under this Trust Agreement or under the Trust Securities, and the corresponding rights of the Trustee shall be as provided in the Trust Indenture Act. Each Holder, by receiving and holding a Trust Securities Certificate, and each owner shall be deemed to have agreed not to hold the Depositor, the Property Trustee or the Administrative Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived.
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY.
The Administrative Trustees shall maintain in a location or locations designated by the Administrative Trustees, an office or offices or agency or agencies where Preferred Securities Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Trustees in respect of the Trust Securities Certificates may be served. The Administrative Trustees initially designate the Corporate Trust Office of the Property Trustee, Two International Place, 4th Floor, Boston, Massachusetts 02110, as the principal corporate trust office for such purposes. The Administrative Trustees shall give prompt written notice to the Depositor and to the Securityholders of any change in the location of the Securities Register or any such office or agency.
SECTION 509. APPOINTMENT OF PAYING AGENT.
The Paying Agent shall initially be the Property Trustee, and any co-paying agent chosen by the Property Trustee must be acceptable to the Administrative Trustees and the Depositor. The Paying Agent shall make Distributions to Securityholders from the Payment Account and shall report the amounts of such Distributions to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making the Distributions referred to above. The Administrative Trustees may revoke such power and remove the Paying Agent if such Trustees determine in their sole discretion that the Paying Agent shall have failed to perform its obligations under this Trust Agreement in any material respect. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustees, the Property Trustee and the Depositor. In the event that the Property Trustee shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustees shall appoint a successor that is acceptable to the Property Trustee and the Depositor to act as Paying Agent (which shall be a bank or trust company). The Administrative Trustees shall cause such successor Paying Agent or any additional Paying Agent appointed by the Administrative Trustees to execute and deliver to the Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent shall hold all sums, if any, held by it for payment to the Securityholders in trust for the benefit of the Securityholders entitled thereto until such sums shall be paid to such Securityholders. The Paying Agent shall return all unclaimed funds to the Property Trustee and, upon removal of a Paying Agent, such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Sections 801, 803 and 806 shall apply to the Property Trustee also in its role as Paying Agent, for so long as the Property Trustee shall act as Paying Agent and, to the extent applicable, to any other Paying Agent appointed hereunder. Any reference in this Trust Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise.
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR.
On the Closing Date, the Depositor shall acquire and retain beneficial
and record ownership of the Common Securities. To the fullest extent permitted
by law, any attempted transfer of the Common Securities (other than a transfer
in connection with a merger or consolidation of the Depositor into another
corporation pursuant to Section 12.1 of the Indenture) shall be void. The
Administrative Trustees shall cause each Common Securities Certificate issued to
the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT
TRANSFERABLE".
SECTION 511. PREFERRED SECURITIES CERTIFICATES.
(a) Each owner shall receive a Preferred Securities Certificate representing such owner's interest in such Preferred Securities. Upon the issuance of Preferred Securities Certificates, the Trustees shall recognize the record holders of the Preferred Securities Certificates as
Securityholders. The Preferred Securities Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustees, as evidenced by the execution thereof by the Administrative Trustees or any one of them.
(b) A single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a definitive Common Securities Certificate.
SECTION 512. [Intentionally Omitted]
SECTION 513. [Intentionally Omitted]
SECTION 514. RIGHTS OF SECURITYHOLDERS.
(a) The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 209, and the Securityholders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights. When issued and delivered to Holders of the Preferred Securities against payment of the purchase price therefor, the Preferred Securities shall be fully paid and nonassessable interests in the Trust. The Holders of the Preferred Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, upon a Debenture Event of Default, the Debenture Trustee fails or the holders of not less than 25% in principal amount of the outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the Holders of at least 25% in Liquidation Amount of the Preferred Securities then Outstanding shall have such right by a notice in writing to the Depositor and the Debenture Trustee; and upon any such declaration such principal amount of and the accrued interest on all of the Debentures shall become immediately due and payable, provided that the payment of principal and interest on such Debentures shall remain subordinated to the extent provided in the Indenture.
(c) For so long as any Preferred Securities remain Outstanding, upon a Debenture Event of Default arising from the failure to pay interest or principal on the Debentures, the Holders of any Preferred Securities then Outstanding shall, to the fullest extent permitted by law, have the right to directly institute proceedings for enforcement of payment to such Holders of principal of or interest on the Debentures having a principal amount equal to the Liquidation Amount of the Preferred Securities of such Holders.
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 601. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section 601, in Sections 514, 810 and 1002 and in the Indenture and as otherwise required by law, no Holder of Preferred Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Securityholders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee, the Trustees shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or executing any trust or power conferred on the Debenture Trustee with respect to such Debentures; (ii) waive any past default which is waivable under Article VII of the Indenture; (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of at least a majority in Liquidation Amount of all Outstanding Preferred Securities; provided, however, that where a consent under the Indenture would require the consent of each holder of outstanding Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Preferred Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of the Outstanding Preferred Securities, except when authorized by a subsequent vote of the Holders of the Outstanding Preferred Securities. The Property Trustee shall notify each Holder of the Outstanding Preferred Securities of any notice of default received from the Debenture Trustee with respect to the Debentures. In addition to obtaining the foregoing approvals of the Holders of the Preferred Securities, prior to taking any of the foregoing actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that the Trust shall continue to be classified as a grantor trust and not as an association taxable as a corporation for United States federal income tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides for, or the Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment to the Trust Agreement or otherwise; or (ii) the dissolution, winding-up or termination of the Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Preferred Securities as a class shall be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a majority in Liquidation Amount of the Outstanding Preferred Securities. No amendment to this Trust Agreement may be made if, as a result of such amendment, the Trust would cease to be
classified as a grantor trust or would be classified as an association taxable as a corporation for United States federal income tax purposes.
SECTION 602. NOTICE OF MEETINGS.
Notice of all meetings of the Preferred Securityholders, stating the time, place and purpose of the meeting, shall be given by the Property Trustee pursuant to Section 1008 to each Preferred Securityholder of record, at his registered address, at least 15 days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice.
SECTION 603. MEETINGS OF PREFERRED SECURITYHOLDERS.
(a) No annual meeting of Securityholders is required to be held. The Administrative Trustees, however, shall call a meeting of Securityholders to vote on any matter in respect of which Preferred Securityholders are entitled to vote upon the written request of the Preferred Securityholders of 25% of the Outstanding Preferred Securities (based upon their aggregate Liquidation Amount) and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of Preferred Securityholders to vote on any matters as to which the Preferred Securityholders are entitled to vote.
(b) Preferred Securityholders of record of 50% of the Outstanding Preferred Securities (based upon their aggregate Liquidation Amount), present in person or by proxy, shall constitute a quorum at any meeting of Securityholders.
(c) If a quorum is present at a meeting, an affirmative vote by the Preferred Securityholders of record present, in person or by proxy, holding more than a majority of the Preferred Securities (based upon their aggregate Liquidation Amount) held by the Preferred Securityholders of record present, either in person or by proxy, at such meeting shall constitute the action of the Securityholders, unless this Trust Agreement requires a greater number of affirmative votes.
SECTION 604. VOTING RIGHTS.
Securityholders shall be entitled to one vote for each dollar value of Liquidation Amount represented by their Trust Securities in respect of any matter as to which such Securityholders are entitled to vote (and such dollar value shall be $10 per Preferred Security until such time, if any, as the Liquidation Amount is changed as provided herein).
SECTION 605. PROXIES, ETC.
At any meeting of Securityholders, any Securityholder entitled to vote thereat may vote by proxy, provided that no proxy, shall be voted at any meeting unless it shall have been placed on
file with the Administrative Trustees, or with such other officer or agent of the Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. When Trust Securities are held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Securityholder shall be deemed valid unless challenged at or prior to its exercise, and, the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution.
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT.
Any action which may be taken by Securityholders at a meeting may be taken without a meeting if Securityholders holding more than a majority of all Outstanding Trust Securities (based upon their aggregate Liquidation Amount) entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any express provision of this Trust Agreement) shall consent to the action in writing.
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES.
For the purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any Distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Administrative Trustees may from time to time fix a date, not more than 90 days prior to the date of any meeting of Securityholders or the payment of Distribution or other action, as the case may be, as a record date for the determination of the identity of the Securityholders of record for such purposes.
SECTION 608. ACTS OF SECURITYHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Securityholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to an Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and (subject to Section 801) conclusive in favor of the Trustees, if made in the manner provided in this Section 608.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which any Trustee receiving the same deems sufficient.
(c) The ownership of Preferred Securities shall be proved by the Securities Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Securityholder of any Trust Security shall bind every future Securityholder of the same Trust Security and the Securityholder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security.
(e) Without limiting the foregoing, a Securityholder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such Liquidation Amount.
(f) A Securityholder may institute a legal proceeding directly against the Depositor under the Guarantee to enforce its rights under the Guarantee without first instituting a legal proceeding against the Guarantee Trustee (as defined in the Guarantee), the Trust or any Person.
SECTION 609. INSPECTION OF RECORDS.
Upon reasonable notice to the Administrative Trustees and the Property Trustee, the records of the Trust shall be open to inspection and copying by Securityholders and their authorized representatives during normal business hours for any purpose reasonably related to such Securityholder's interest as a Securityholder.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE PROPERTY TRUSTEE.
The Bank and the Property Trustee, each severally on behalf of and as to itself, as of the date hereof, and each successor Property Trustee at the time of the successor Property Trustee's acceptance of its appointment as Property Trustee hereunder (the term "Bank" being used to refer
to such successor Property Trustee in its separate corporate capacity) hereby represents and warrants (as applicable) for the benefit of the Depositor and the Securityholders that:
(a) the Bank is a trust company duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts;
(b) the Bank has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and delivered by the Property Trustee and constitutes the valid and legally binding agreement of the Property Trustee enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors, rights and to general equity principles;
(d) the execution, delivery and performance by the Property Trustee of
this Trust Agreement has been duly authorized by all necessary corporate or
other action on the part of the Property Trustee and does not require any
approval of stockholders of the Bank and such execution, delivery and
performance shall not (i) violate the Bank's charter or by-laws; (ii) violate
any provision of, or constitute, with or without notice or lapse of time, a
default under, or result in the creation or imposition of, any Lien on any
properties included in the Trust Property pursuant to the provisions of, any
indenture, mortgage, credit agreement, license or other agreement or instrument
to which the Property Trustee or the Bank is a party or by which it is bound; or
(iii) violate any law, governmental rule or regulation of the United States or
the Commonwealth of Massachusetts, as the case may be, governing the banking or
trust powers of the Bank or the Property Trustee (as appropriate in context) or
any order, judgment or decree applicable to the Property Trustee or the Bank;
(e) neither the authorization, execution or delivery by the Property Trustee of this Trust Agreement nor the consummation of any of the transactions by the Property Trustee contemplated herein or therein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing federal law governing the banking or trust powers of the Bank or the Property Trustee, as the case may be, under the laws of the United States or the Commonwealth of Massachusetts; and
(f) there are no proceedings pending or, to the best of the Property Trustee's knowledge, threatened against or affecting the Bank or the Property Trustee in any court or before any governmental authority, agency or arbitration board or tribunal which, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Property Trustee to enter into or perform its obligations as one of the Trustees under this Trust Agreement.
SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE BANK AND THE DELAWARE TRUSTEE.
The Delaware Bank and the Delaware Trustee, each severally on behalf of and as to itself, as of the date hereof, and each successor Delaware Trustee at the time of the successor Delaware Trustee's acceptance of appointment as Delaware Trustee hereunder (the term "Delaware Bank" being used to refer to such successor Delaware Trustee in its separate corporate capacity), hereby represents and warrants (as applicable) for the benefit of the Depositor and the Securityholders that:
(a) the Delaware Bank is a Delaware banking corporation duly organized, validly existing and in good standing under the laws of the State of Delaware;
(b) the Delaware Bank has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and delivered by the Delaware Trustee and constitutes the valid and legally binding agreement of the Delaware Trustee enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors, rights and to general equity principles;
(d) the execution, delivery and performance by the Delaware Trustee of this Trust Agreement has been duly authorized by all necessary corporate or other action on the part of the Delaware Trustee and does not require any approval of stockholders of the Delaware Bank and such execution, delivery and performance shall not (i) violate the Delaware Bank's charter or by-laws; (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of, any Lien on any properties included in the Trust Property pursuant to the provisions of, any indenture, mortgage, credit agreement, license or other agreement or instrument to which the Delaware Bank or the Delaware Trustee is a party or by which it is bound; or (iii) violate any law, governmental rule or regulation of the United States or the State of Delaware, as the case may be, governing the banking or trust powers of the Delaware Bank or the Delaware Trustee (as appropriate in context) or any order, judgment or decree applicable to the Delaware Bank or the Delaware Trustee;
(e) neither the authorization, execution or delivery by the Delaware Trustee of this Trust Agreement nor the consummation of any of the transactions by the Delaware Trustee contemplated herein or therein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing federal law governing the banking or trust powers of the Delaware Bank or the Delaware Trustee, as the case may be, under the laws of the United States or the State of Delaware; and
(f) there are no proceedings pending or, to the best of the Delaware Trustee's knowledge, threatened against or affecting the Delaware Bank or the Delaware Trustee in any court or before any governmental authority, agency or arbitration board or tribunal which, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Delaware Trustee to enter into or perform its obligations as one of the Trustees under this Trust Agreement.
SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR.
The Depositor hereby represents and warrants for the benefit of the Securityholders that:
(a) the Trust Securities Certificates issued on the Closing Date or the Option Closing Date, if applicable, on behalf of the Trust have been duly authorized and, shall be, as of such date or dates, if applicable, duly and validly executed, issued and delivered by the Administrative Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Trust Agreement and the Securityholders shall be, as of such date or dates, if applicable, entitled to the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by the Trust (or the Trustees on behalf of the Trust) under the laws of the State of Delaware or any political subdivision thereof in connection with the execution, delivery and performance by the Bank, the Property Trustee or the Delaware Trustee, as the case may be, of this Trust Agreement.
ARTICLE VIII
TRUSTEES
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as provided by this Trust Agreement and, in the case of the Property Trustee, by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Trust Agreement shall require the Trustees to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers, if they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to them. No Administrative Trustee nor the Delaware Trustee shall be liable for its act or omissions hereunder except as a result of its own gross negligence or willful misconduct. The Property Trustee's liability shall be determined under the Trust Indenture Act. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section 801. To the extent that, at law or in equity, the Delaware Trustee or an Administrative Trustee has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to the Securityholders, the Delaware Trustee or such Administrative Trustee shall not be liable to the Trust or to any Securityholder for such Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that
they restrict the duties and liabilities of the Delaware Trustee or the Administrative Trustees otherwise existing at law or in equity, are agreed by the Depositor and the Securityholders to replace such other duties and liabilities of the Delaware Trustee and the Administrative Trustees, as the case may be.
(b) All payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Property Trustee or a Paying Agent to make payments in accordance with the terms hereof. With respect to the relationship of each Securityholder and the Trustee, each Securityholder, by its acceptance of a Trust Security, agrees that it shall look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 801(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in Liquidation Amount of the Trust Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Payment Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Trust Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Depositor and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 301 and except to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the negligence, default or misconduct of the Administrative Trustees or the Depositor.
SECTION 802. CERTAIN NOTICES.
(a) Within 5 Business Days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 1008, notice of such Event of Default to the Securityholders, the Administrative Trustees and the Depositor, unless such Event of Default shall have been cured or waived. For purposes of this Section 802 the term "Event of Default" means any event that is, or after notice or lapse of time or both would become, an Event of Default.
(b) The Administrative Trustees shall transmit, to the Securityholders in the manner and to the extent provided in Section 1008, notice of the Depositor's election to begin or further extend an Extension Period on the Debentures (unless such election shall have been revoked), and of any election by the Depositor to accelerate the Maturity Date of the Debentures within the time specified for transmitting such notice to the holders of the Debentures pursuant to the Indenture as originally executed.
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE.
Subject to the provisions of Section 801:
(a) the Property Trustee may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action; or
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with other provisions contained
herein; or (iii) the Property Trustee is unsure of the application of any
provision of this Trust Agreement, then, except as to any matter as to which the
Preferred Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken and the Property Trustee shall take such action, or refrain from taking
such action, as the Property Trustee shall be instructed in writing to take, or
to refrain from taking, by the Depositor; provided, however, that if the
Property Trustee does not receive such instructions of the Depositor within 10
Business Days after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent practicable shall
not
be less than 2 Business Days), it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Trust Agreement as it shall deem advisable and in the best interests of the Securityholders, in which event the Property Trustee shall have no liability except for its own bad faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the Property Trustee shall deem it desirable that a matter be established before undertaking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officer's Certificate which, upon receipt of such request, shall be promptly delivered by the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement, any filing under tax or securities laws or any filing under tax or securities laws) or any rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with counsel of its choice (which counsel may be counsel to the Depositor or any of its Affiliates) and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and, in accordance with such advice, such counsel may be counsel to the Depositor or any of its Affiliates, and may include any of its employees; the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request, order or direction of any of the Securityholders pursuant to this Trust Agreement, unless such Securityholders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request, order or direction; nothing contained herein shall, however, relieve the Property Trustee of the obligation, upon the occurrence of an Event of Default (that has not been cured or waived) to exercise with respect to the Debentures, such of the rights and powers vested in it by this Trust Agreement, and to use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs;
(h) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Securityholders, but the
Property Trustee may make such further inquiry or investigation into such facts or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, provided that the Property Trustee shall be responsible for its own negligence or recklessness with respect to selection of any agent or attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request instructions from the Holders of the Trust Securities which instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of the Trust Securities in respect of such remedy, right or action; (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received; and (iii) shall be protected in acting in accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Trust Agreement. No provision of this Trust Agreement shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty.
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR USE OF PROCEEDS.
The Recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Trust, and the Trustees do not assume any responsibility for their correctness. The Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Debentures.
SECTION 805. MAY HOLD SECURITIES.
Any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 808 and 813 and except as provided in the definition of the term "Outstanding" in Article I, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent.
SECTION 806. COMPENSATION; INDEMNITY; FEES.
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable compensation for all services rendered by them hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to such Trustee's negligence, bad faith or willful misconduct (or, in the case of the Administrative Trustees or the Delaware Trustee, any such expense, disbursement or advance as may be attributable to its, his or her gross negligence, bad faith or willful misconduct); and
(c) to indemnify each of the Trustees or any predecessor Trustee for, and to hold the Trustees harmless against, any loss, damage, claims, liability, penalty or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Trust Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except any such expense, disbursement or advance as may be attributable to such Trustee's negligence, bad faith or willful misconduct (or, in the case of the Administrative Trustees or the Delaware Trustee, any such expense, disbursement or advance as may be attributable to its, his or her gross negligence, bad faith or willful misconduct).
No Trustee may claim any Lien on any Trust Property as a result of any amount due pursuant to this Section 806.
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this Section
807, the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Property Trustee with respect to the Trust
Securities shall cease to be eligible in accordance with the provisions of this
Section 807, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VIII.
(b) There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity.
(c) There shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware; or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity.
SECTION 808. CONFLICTING INTERESTS.
If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Trust Agreement.
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE.
(a) Unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Depositor shall have power to appoint, and upon the written request of the Property Trustee, the Depositor shall for such purpose join with the Property Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Property Trustee either to act as co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section 809. If the Depositor does not join in such appointment within 15 days after the receipt by it of a request so to do, or in case a Debenture Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make such appointment. Any co-trustee or separate trustee appointed pursuant to this Section 809 shall either be (i) a natural person who is at least 21 years of age and a resident of the United States; or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity.
(b) Should any written instrument from the Depositor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged, and delivered by the Depositor.
(c) Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely:
(i) The Trust Securities shall be executed and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustees
specified hereunder, shall be exercised, solely by such Trustees and not by such co-trustee or separate trustee.
(ii) The rights, powers, duties and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee or by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee.
(iii) The Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section 809, and, in case a Debenture Event of Default has occurred and is continuing, the Property Trustee shall have the power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section 809.
(iv) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee or any other trustee hereunder.
(v) The Property Trustee shall not be liable by reason of any act of a co-trustee or separate trustee.
(vi) Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee.
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) Except as otherwise provided herein, no resignation or removal of any Trustee (the "Relevant Trustee") and no appointment of a successor Trustee pursuant to this Article VIII shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 811.
(b) Subject to the immediately preceding paragraph, the Relevant Trustee may resign at any time with respect to the Trust Securities by giving written notice thereof to the Securityholders. If the instrument of acceptance by the successor Trustee required by Section
811 shall not have been delivered to the Relevant Trustee within 30 days after the giving of such notice of resignation, the Relevant Trustee may petition, at the expense of the Depositor, any court of competent jurisdiction for the appointment of a successor Relevant Trustee with respect to the Trust Securities.
(c) Unless a Debenture Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by Act of the Common Securityholder. If a Debenture Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be removed at such time by Act of the Holders of a majority in Liquidation Amount of the Preferred Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). An Administrative Trustee may be removed by the Common Securityholder at any time.
(d) If any Trustee shall resign, be removed or become incapable of acting as Trustee, or if a vacancy shall occur in the office of any Trustee for any cause, at a time when no Debenture Event of Default shall have occurred and be continuing, the Common Securityholder, by Act of the Common Securityholder delivered to the retiring Trustee, shall promptly appoint a successor Trustee or Trustees with respect to the Trust Securities and the Trust, and the successor Trustee shall comply with the applicable requirements of Section 811. If the Property Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee or the Delaware Trustee, as the case may be, at a time when a Debenture Event of Default shall have occurred and is continuing, the Preferred Securityholders, by Act of the Securityholders of a majority in Liquidation Amount of the Preferred Securities then Outstanding delivered to the retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees with respect to the Trust Securities and the Trust, and such successor Trustee shall comply with the applicable requirements of Section 811. If an Administrative Trustee shall resign, be removed or become incapable of acting as Administrative Trustee, at a time when a Debenture Event of Default shall have occurred and be continuing, the Common Securityholder, by Act of the Common Securityholder delivered to an Administrative Trustee, shall promptly appoint a successor Administrative Trustee or Administrative Trustees with respect to the Trust Securities and the Trust, and such successor Administrative Trustee or Administrative Trustees shall comply with the applicable requirements of Section 811. If no successor Relevant Trustee with respect to the Trust Securities shall have been so appointed by the Common Securityholder or the Preferred Securityholders and accepted appointment in the manner required by Section 811, any Securityholder who has been a Securityholder of Trust Securities for six consecutive months on behalf of himself and all others similarly situated may petition a court of competent jurisdiction for the appointment of a successor Relevant Trustee with respect to the Trust Securities.
(e) The Property Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Securityholders in the manner provided in Section 1008 and shall give notice to the Depositor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the Property Trustee.
(f) Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of remaining Administrative Trustees if there are at least two of them; or (b) otherwise by the Depositor (with the successor in each case being a Person who satisfies the eligibility requirement for Administrative Trustees set forth in Section 807).
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Relevant Trustee with respect to the Trust Securities and the Trust, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Trust Securities shall execute and deliver an instrument hereto wherein each successor Relevant Trustee shall accept such appointment and which shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust and upon the execution and delivery of such instrument the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust; but, on request of the Trust or any successor Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Trust Securities and the Trust.
(b) Upon request of any such successor Relevant Trustee, the Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights, powers and trusts referred to in the immediately preceding paragraph, as the case may be.
(c) No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article VIII.
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any Person into which the Property Trustee, the Delaware Trustee or any Administrative Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article VIII, without the execution or filing of any paper or any further act on the part of any of the parties hereto.
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST.
If and when the Property Trustee or the Delaware Trustee shall be or become a creditor of the Depositor or the Trust (or any other obligor upon the Debentures or the Trust Securities), the Property Trustee or the Delaware Trustee, as the case may be, shall be subject to and shall take all actions necessary in order to comply with the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor or Trust (or any such other obligor).
SECTION 814. REPORTS BY PROPERTY TRUSTEE.
(a) The Property Trustee shall transmit to Securityholders such reports concerning the Property Trustee, its actions under this Trust Agreement and the property and funds in its possession as Property Trustee as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with The Nasdaq Stock Market's National Market, and each national securities exchange or other organization upon which the Trust Securities are listed, and also with the Commission and the Depositor.
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE.
The Depositor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 817. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five, provided that the Holder of all of the Common Securities by written instrument may increase or decrease the number of Administrative Trustees. The Property Trustee and the Delaware Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 817(a), or if the
number of Trustees is increased pursuant to Section 817(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 810.
(c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 810, the Administrative Trustees in office, regardless of their number (and notwithstanding any other provision of this Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement.
SECTION 818. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 207(a); and
(b) The Administrative Trustees shall have power to delegate from time to time to such of their number or to the Depositor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein.
SECTION 819. VOTING.
Except as otherwise provided in this Trust Agreement, the consent or approval of the Administrative Trustees shall require consent or approval by not less than a majority of the Administrative Trustees, unless there are only two, in which case both must consent.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 901. DISSOLUTION UPON EXPIRATION DATE.
Unless earlier dissolved, the Trust shall automatically dissolve on March 31, 2053 (the "Expiration Date") and the Trust Property shall be distributed in accordance with Section 904.
SECTION 902. EARLY TERMINATION.
The first to occur of any of the following events is an "Early Termination Event:"
(a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor;
(b) delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within the
discretion of the Depositor) to dissolve the Trust and distribute the Debentures
to Securityholders in exchange for the Preferred Securities in accordance with
Section 904;
(c) the redemption of all of the Preferred Securities in connection with the redemption of all of the Debentures; and
(d) the entry of an order for dissolution of the Trust by a court of competent jurisdiction.
SECTION 903. TERMINATION.
The respective obligations and responsibilities of the Trustees and the Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 904, or upon the redemption of all of the Trust Securities pursuant to Section 402, of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (b) the payment of any expenses owed by the Trust; (c) the discharge of all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Trust or the Securityholders; and (d) the filing of a Certificate of Cancellation by the Administrative Trustee under the Delaware Business Trust Act.
SECTION 904. LIQUIDATION.
(a) If an Early Termination Event specified in clause (a), (b), or (d) of Section 902 occurs or upon the Expiration Date, the Trust shall be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, (including, without limitation, after paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with Section 3808(e) of the Delaware Business Trust Act), to each Securityholder a Like Amount of Debentures, subject to Section 904(d). Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust Securities shall no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange shall be deemed to represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for Debentures, or, if Section 904(d) applies, receive a Liquidation Distribution, as the Administrative Trustees or the Property Trustee shall deem appropriate.
(b) Except where Section 902(c) or 904(d) applies, in order to effect the liquidation of the Trust and distribution of the Debentures to Securityholders, the Property Trustee shall establish a record date for such distribution (which shall be not more than 45 days prior to the Liquidation Date) and, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem appropriate to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities shall no longer be deemed to be
outstanding; (ii) certificates representing a Like Amount of Debentures shall be
issued to Holders of Trust Securities Certificates upon surrender of such
certificates to the Administrative Trustees or their agent for exchange; (iii)
the Depositor shall use its reasonable efforts to have the Debentures listed on
The Nasdaq Stock Market's National Market or on such other securities exchange
or other organization as the Preferred Securities are then listed or traded;
(iv) any Trust Securities Certificates not so surrendered for exchange shall be
deemed to represent a Like Amount of Debentures, accruing interest at the rate
provided for in the Debentures from the last Distribution Date on which a
Distribution was made on such Trust Securities Certificates until such
certificates are so surrendered (and until such certificates are so surrendered,
no payments of interest or principal shall be made to holders of Trust
Securities Certificates with respect to such Debentures); and (v) all rights of
Securityholders holding Trust Securities shall cease, except the right of such
Securityholders to receive Debentures upon surrender of Trust Securities
Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 904, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustee not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
dissolved by the Property Trustee in such manner as the Property Trustee
determines. In such event, on the date of the dissolution of the Trust,
Securityholders shall be entitled to receive out of the assets of the Trust
available for distribution to Securityholders, after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, (including, without
limitation, after paying or making reasonable provision to pay all claims and
obligations of the Trust in accordance with Section 3808(e) of the Delaware
Business Trust Act), an amount equal to the Liquidation Amount per Trust
Security plus accumulated and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If, upon any such
dissolution the Liquidation Distribution can be paid only in part because the
Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then, subject to the next
succeeding sentence, the amounts payable by the Trust on the Trust Securities
shall be paid on a pro rata basis (based upon Liquidation Amounts, subject to
Section 407). The Holder of the Common Securities shall be entitled to receive
Liquidation Distributions upon any such dissolution pro rata (determined as
aforesaid) with Holders of Preferred Securities, except that, if a Debenture
Event of Default has occurred and is continuing, the Preferred Securities shall
have a priority over the Common Securities.
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST.
The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other Person, except pursuant to this Section 905. At the request of the Depositor, with the consent of the Administrative Trustees and without the consent of the Holders of the Preferred Securities, the Property Trustee or the Delaware Trustee, the Trust may merge with or into, consolidate, amalgamate, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of the Trust with respect to the Preferred Securities; or (b) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank in priority with respect to distributions and payments upon liquidation, redemption and otherwise; (ii) the Depositor expressly appoints a trustee of such successor entity possessing substantially the same powers and duties as the Property Trustee as the holder of the Debentures; (iii) the Successor Securities are listed or traded, or any Successor Securities shall be listed or traded upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed, if any; (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect; (v) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Depositor has received an Opinion of Counsel 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 Preferred Securities (including any Successor Securities) in any material respect; and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor such successor entity shall be required to register as an "investment company" under the Investment Company Act; and (vi) the Depositor owns all of the Common Securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee, the Debentures, the Indenture, this Trust Agreement and the Expense Agreement. Notwithstanding the foregoing, the Trust shall not, except with the consent of Holders of 100% in Liquidation Amount of the Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other Person or permit any other
Person to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS.
The death or incapacity of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust Agreement, nor entitle the legal representatives or heirs of such Person or any Securityholder for such Person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding-up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them.
SECTION 1002. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the Trustees and the Depositor, without the consent of any Securityholders, (i) as provided in Section 811 with respect to acceptance of appointment by a successor Trustee; (ii) to cure any ambiguity, correct or supplement any provision herein or therein which may be inconsistent with any other provision herein or therein, or to make any other provisions with respect to matters or questions arising under this Trust Agreement, that shall not be inconsistent with the other provisions of this Trust Agreement; or (iii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Trust shall be classified for United States federal income tax purposes as a grantor trust at all times that any Trust Securities are outstanding or to ensure that the Trust shall not be required to register as an "investment company" under the Investment Company Act; or (iv) to reduce or increase the Liquidation Amount per Trust Security and simultaneously to increase or reduce the number of Trust Securities issued and outstanding solely for the purpose of maintaining the eligibility of the Preferred Securities for listing or quotation on any national securities exchange or other organization on which the Preferred Securities are then listed or quoted (including, if applicable, The Nasdaq Stock Market's National Market), provided, however, that in the case of clause (ii), such action shall not adversely affect in any material respect the interests of any Securityholder, and that, in the case of clause (iv), the aggregate Liquidation Amount of the Trust Securities outstanding upon completion of any such reduction or increase, must be the same as the aggregate Liquidation Amount of the Trust Securities outstanding immediately prior to such reduction or increase, and any amendments of such Trust Agreement will become effective when notice thereof is given to the Securityholders (or, in the case of an amendment pursuant to clause (iv), as of the date specified in the notice).
(b) Except as provided in Section 601(c) or Section 1002(c) hereof, any provision of this Trust Agreement may be amended by the Trustees and the Depositor (i) with the consent of Trust
Securityholders representing not less than a majority (based upon Liquidation Amounts) of the Trust Securities then Outstanding; and (ii) upon receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment shall not affect the Trust's status as a grantor trust for United States federal income tax purposes or the Trust's exemption from status of an "investment company" under the Investment Company Act.
(c) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Securityholder (such consent being obtained in accordance with Section 603 or 606 hereof), this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date; or (ii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment on or after such date; notwithstanding any other provision herein, without the unanimous consent of the Securityholders (such consent being obtained in accordance with Section 603 or 606 hereof), this paragraph (c) of this Section 1002 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no Trustee shall enter into or consent to any amendment to this Trust Agreement which would cause the Trust to fail or cease to qualify for the exemption from status of an "investment company" under the Investment Company Act or to fail or cease to be classified as a grantor trust for United States federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary, without the consent of the Depositor, this Trust Agreement may not be amended in a manner which imposes any additional obligation on the Depositor.
(f) In the event that any amendment to this Trust Agreement is made, the Administrative Trustees shall promptly provide to the Depositor a copy of such amendment.
(g) Upon the request of the Depositor, accompanied by its board resolutions authorizing the execution of any such amendments to this Trust Agreement, and upon the filing with the Property Trustee and the Delaware Trustee of evidence of the consent of the Securityholders required to consent thereto as aforesaid, the Property Trustee and the Delaware Trustee shall join with the Depositor in the execution of such amendment to this Trust Agreement unless such amendment affects the Property Trustee's or the Delaware Trustee's own rights, duties, or immunities under this Trust Agreement or otherwise, in which case the Property Trustee and Delaware Trustee may in their own discretion but shall not be obligated to enter into such amendment to this Trust Agreement. The Property Trustee and Delaware Trustee, subject to the provisions of Section 801, may receive an Opinion of Counsel as conclusive evidence that any amendment to this Trust Agreement executed pursuant to this Article X is authorized or permitted by, and conforms to, the terms of this Article X and that it is proper for the Property Trustee and Delaware Trustee under the provisions of this Article X to join in the execution thereof.
SECTION 1003. SEPARABILITY.
In case any provision in this Trust Agreement or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1004. GOVERNING LAW.
THIS TRUST AGREEMENT AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION THAT WOULD CALL FOR THE APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE; PROVIDED, HOWEVER, THAT THERE SHALL NOT BE APPLICABLE TO THE PARTIES HEREUNDER OR THIS TRUST AGREEMENT ANY PROVISION OF THE LAWS (STATUTORY OR COMMON) OF THE STATE OF DELAWARE PERTAINING TO TRUSTS THAT RELATE TO OR REGULAR, IN A MANNER INCONSISTENT WITH THE TERMS HEREOF (A) THE FILING WITH ANY COURT OR GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND CHARGES (B) AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND EXPENDITURES TO INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE ESTABLISHMENT OF FIDUCIARY OR OTHER STANDARDS OF RESPONSIBILITY OR LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE LIMITATIONS OR LIABILITIES OR AUTHORITIES AND POWERS OF THE TRUSTEES HEREUNDER AS SET FORTH OR REFERENCED IN THIS TRUST AGREEMENT. SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST.
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY.
If the date fixed for any payment on any Trust Security shall be a day that is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day which is a Business Day, with the same force and effect as though made on the date fixed for such payment, and no distribution shall accumulate thereon for the period after such date.
SECTION 1006. SUCCESSORS.
This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Trust or the Relevant Trustee(s), including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Depositor that is permitted under Article XII of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder.
SECTION 1007. HEADINGS.
The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement.
SECTION 1008. REPORTS, NOTICES AND DEMANDS.
Any report, notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Securityholder or the Depositor may be given or served in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (a) in the case of a Preferred Securityholder, to such Preferred Securityholder as such Securityholder's name and address may appear on the Securities Register; and (b) in the case of the Common Securityholder or the Depositor, to Century Bancorp, Inc., 400 Mystic Avenue, Medford, Massachusetts 02155, Attention: Chief Financial Officer, facsimile no.: 781-393-4071. Any notice to Preferred Securityholders shall also be given to such owners as have, within two years preceding the giving of such notice, filed their names and addresses with the Property Trustee for that purpose. Such notice, demand or other communication to or upon a Securityholder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee or the Administrative Trustees shall be given in
writing addressed (until another address is published by the Trust) as follows:
(a) with respect to the Property Trustee to State Street Bank and Trust Company,
Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention:
Corporate Trust Department; (b) with respect to the Delaware Trustee, to
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration; and
(c) with respect to the Administrative Trustees, to them at the address above
for notices to the Depositor, marked "Attention: Administrative Trustees of
Century Bancorp Capital Trust." Such notice, demand or other communication to or
upon the Trust or the Property Trustee shall be deemed to have been sufficiently
given or made only upon actual receipt of the writing by the Trust or the
Property Trustee.
SECTION 1009. AGREEMENT NOT TO PETITION.
Each of the Trustees and the Depositor agrees for the benefit of the
Securityholders that, until at least one year and 1 day after the Trust has been
terminated in accordance with Article IX, they shall not file, or join in the
filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code of 1978, as amended) (collectively, "Bankruptcy Laws") or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor takes action in violation of this
Section 1009, the Property Trustee agrees, for the benefit of Securityholders,
that at the expense of the Depositor (which expense shall be paid prior to the
filing), it shall file an answer with the bankruptcy court or otherwise properly
contest the filing of such petition by the Depositor against the Trust or the
commencement of such action and raise the defense that the Depositor has agreed
in writing not to take such action and should be stopped and precluded
therefrom. The provisions of this Section 1009 shall survive the termination of
this Trust Agreement.
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT.
(a) This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Trust Agreement and shall, to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Trust Agreement by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Trust Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Trust Agreement as so modified or to be excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Trust Securities as equity securities representing undivided beneficial interests in the assets of the Trust.
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND INDENTURE.
The receipt and acceptance of a Trust Security or any interest therein by or on behalf of a Securityholder or any beneficial owner, without any signature or further manifestation of assent, shall constitute the unconditional acceptance by the Securityholder and all others having a beneficial interest in such Trust Security of all the terms and provisions of this Trust Agreement
and agreement to the subordination provisions and other terms of the Guarantee and the Indenture, and shall constitute the agreement of the Trust, such Securityholder and such others that the terms and provisions of this trust agreement shall be binding, operative and effective as between the Trust and such Securityholder and such others.
CENTURY BANCORP, INC.
By:___________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Property Trustee
By:____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By:_____________________________________
Name:
Title:
______________________, as Administrative Trustee
Marshall M. Sloane
______________________, as Administrative Trustee
Jonathan G. Sloane
______________________, as Administrative Trustee
Paul V. Cusick, Jr.
Exhibit A
CERTIFICATE OF TRUST
OF
CENTURY BANCORP CAPITAL TRUST
THIS CERTIFICATE OF TRUST OF CENTURY BANCORP CAPITAL TRUST (the "Trust"), dated as of April 21, 1998, is being duly executed and filed by WILMINGTON TRUST COMPANY, a Delaware banking corporation, Marshall M. Sloane, Jonathan G. Sloane and Paul V. Cusick, Jr., each an individual, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. Section 3801 et seq.).
1. NAME. The name of the business trust formed hereby is Century Bancorp Capital Trust.
2. DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective on April 21, 1998.
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust, has executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY, as trustee
By:_________________________________
Name:
Title:
/s/Marshall M. Sloane , as Trustee _______________________________ Marshall M. Sloane /s/Jonathan G. Sloane , as Trustee _______________________________ Jonathan G. Sloane /s/Paul V. Cusick, Jr. , as Trustee _______________________________ Paul V. Cusick, Jr. |
Exhibit B
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER ________. NUMBER OF COMMON SECURITIES
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
CENTURY BANCORP CAPITAL TRUST
(LIQUIDATION AMOUNT $10 PER COMMON SECURITY)
COMMON SECURITIES
CENTURY BANCORP CAPITAL TRUST , a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that _________________ (the "Holder") is the registered owner of ________________ (_____) common securities of the Trust representing undivided beneficial interests in the assets of the Trust and designated the ___% Common Securities (liquidation amount $10 per Common Security) (the "Common Securities"). In accordance with Section 510 of the Trust Agreement (as defined below), the Common Securities are not transferable and any attempted transfer hereof shall be void. The designations, rights, privileges, restrictions, preferences, and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of _______________, 1998, as the same may be amended from time to time (the "Trust Agreement"), including the designation of the terms of the Common Securities as set forth therein. The Trust shall furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed this certificate this _____ day of __________, 1998.
CENTURY BANCORP CAPITAL TRUST
By:____________________________________
Administrative Trustee
Exhibit C
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement") dated as of _____________, 1998, between Century Bancorp, Inc., a Massachusetts corporation (the "Company"), and Century Bancorp Capital Trust, a Delaware business trust (the "Trust").
RECITALS
WHEREAS, the Trust intends to issue its common securities (the "Common Securities") to, and receive Debentures from, the Company and to issue and sell 2,500,000 __% Cumulative Trust Preferred Securities (the "Preferred Securities") with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Trust Agreement of the Trust dated as of May ___, 1998, as the same may be amended from time to time (the "Trust Agreement");
WHEREAS, the Company shall directly or indirectly own all of the Common Securities of the Trust and shall issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the Preferred Securities, which purchase the Company hereby agrees shall benefit the Company and which purchase the Company acknowledges shall be made in reliance upon the execution and delivery of this Agreement, the Company, including in its capacity as holder of the Common Securities, and the Trust hereby agree as follows:
ARTICLE I
SECTION 1.1. GUARANTEE BY THE COMPANY.
Subject to the terms and conditions hereof, the Company, including in its capacity as holder of the Common Securities, hereby irrevocably and unconditionally guarantees to each person or entity to whom the Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the full payment when and as due, of any and all Obligations (as hereinafter defined) to such Beneficiaries. As used herein, "Obligations" means any costs, expenses or liabilities of the Trust other than obligations of the Trust to pay to holders of any Preferred Securities or other similar interests in the Trust the amounts due such holders pursuant to the terms of the Preferred Securities or such other similar interests, as the case may be. This Agreement is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof.
SECTION 1.2. TERM OF AGREEMENT.
This Agreement shall terminate and be of no further force and effect upon the later of (a) the date on which full payment has been made of all amounts payable to all holders of all the Preferred Securities (whether upon redemption, liquidation, exchange or otherwise); and (b) the date on which there are no Beneficiaries remaining; provided, however, that this Agreement shall
continue to be effective or shall be reinstated, as the case may be, if at any time any holder of Preferred Securities or any Beneficiary must restore payment of any sums paid under the Preferred Securities, under any obligation, under the Preferred Securities Guarantee Agreement dated the date hereof by the Company and State Street Bank and Trust Company as guarantee trustee, or under this Agreement for any reason whatsoever. This Agreement is continuing, irrevocable, unconditional and absolute.
SECTION 1.3. WAIVER OF NOTICE.
The Company hereby waives notice of acceptance of this Agreement and of any obligation to which it applies or may apply, and the Company hereby waives presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.
SECTION 1.4. NO IMPAIRMENT.
The obligations, covenants, agreements and duties of the Company under this Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any portion of the obligations or for the performance of any other obligation under, arising out of, or in connection with, the obligations;
(b) any failure, omission, delay or lack of diligence on the part of the Beneficiaries to enforce, assert or exercise any right, privilege, power or remedy conferred on the Beneficiaries with respect to the obligations or any action on the part of the Trust granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain the consent of, the Company with respect to the happening of any of the foregoing.
SECTION 1.5. ENFORCEMENT.
A Beneficiary may enforce this Agreement directly against the Company, and the Company waives any right or remedy to require that any action be brought against the Trust or any other person or entity before proceeding against the Company.
ARTICLE II
SECTION 2.1. BINDING EFFECT.
All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the Beneficiaries.
SECTION 2.2. AMENDMENT.
So long as there remains any Beneficiary or any Preferred Securities of any series are outstanding, this Agreement shall not be modified or amended in any manner adverse to such Beneficiary or to the holders of the Preferred Securities.
SECTION 2.3. NOTICES.
Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same by facsimile transmission (confirmed by mail), telex, or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when mailed or upon receipt of an answer back, if sent by telex):
Century Bancorp, Inc., 400 Mystic Avenue, Medford, Massachusetts 02155, facsimile no. (781)393-4071, Attention: Chief Financial Officer.
Century Bancorp Capital Trust, c/o Century Bancorp, Inc., 400 Mystic
Avenue, Medford, Massachusetts 02155, facsimile no. (781) 393-4071, Attention:
Chief Financial Officer.
SECTION 2.4 This agreement shall be governed by and construed and interpreted in accordance with the laws of The Commonwealth of Massachusetts (without regard to conflict of laws principles).
THIS AGREEMENT is executed as of the day and year first above written.
CENTURY BANCORP, INC.
By:____________________________________
Name:
Title:
CENTURY BANCORP CAPITAL TRUST
By:_____________________________________
Name:
Title: Administrative Trustee
Exhibit D
Certificate Number Number of Preferred Securities
P-
Certificate Evidencing Preferred Securities
of
Century Bancorp Capital Trust
|
___% Cumulative Trust Preferred Securities
(liquidation amount $10 per Preferred Security)
Century Bancorp Capital Trust, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that ______________ (the "Holder") is the registered owner of _____ preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust and designated the __________% Cumulative Trust Preferred Securities (liquidation amount $10 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 504 of the Trust Agreement. The designations, rights, privileges, restrictions, preferences, and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of April ___, 1998, as the same may be amended from time to time (the "Trust Agreement"), including the designation of the terms of Preferred Securities as set forth therein. The Holder is entitled to the benefits of the Preferred Securities Guarantee Agreement entered into by Century Bancorp, Inc., a Massachusetts corporation, and State Street Bank and Trust Company, as guarantee trustee, dated as of _______________, 1998 (the "Guarantee"), to the extent provided therein. The Trust shall furnish a copy of the Trust Agreement and the Guarantee to the Holder without charge upon written request to the Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed this certificate this _____day of _______________, 1998.
CENTURY BANCORP CAPITAL TRUST
By:_______________________________
Name:
Title:
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the _____% Cumulative Trust Preferred Securities described in the within-mentioned Amended and Restated Trust Agreement.
Dated:____________________________
STATE STREET BANK AND TRUST COMPANY,
as Authentication Agent and Registrar
By_______________________________
Authorized Signatory
By______________________________
Administrative Trustee
EXHIBIT 4.6
PREFERRED SECURITIES GUARANTEE AGREEMENT
BY AND BETWEEN
CENTURY BANCORP, INC.
AND
STATE STREET BANK AND TRUST COMPANY
_______________, 1998
CROSS-REFERENCE TABLE
Section of Trust Indenture Act Section of of 1939, as amended Indenture ------------------- --------- 310(a)....................................................................4.1(a) 310(b)...............................................................4.1(c), 2.8 310(c)............................................................Not Applicable 311(a)....................................................................2.2(b) 311(b)....................................................................2.2(b) 311(c)............................................................Not Applicable 312(a)................................................................... 2.2(a) 312(b)................................................................... 2.2(b) 313......................................................................... 2.3 314(a).......................................................................2.4 314(b)............................................................Not Applicable 314(c).......................................................................2.5 314(d)............................................................Not Applicable 314(e)..............................................................1.1, 2.5,3.2 314(f)..................................................................2.1, 3.2 315(a)....................................................................3.1(d) 315(b).......................................................................2.7 315(c).......................................................................3.1 315(d)....................................................................3.1(d) 316(a).............................................................1.1, 2.6, 5.4 316(b).......................................................................5.3 317(a).......................................................................3.1 317(b)............................................................Not Applicable 318(a).......................................................................2.1 318(b).......................................................................2.1 318(c)....................................................................2.1(b) |
Note: This Cross-Reference Table does not constitute part of this Agreement and shall not affect the interpretation of any of its terms or provisions.
PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Preferred Securities Guarantee"), dated as of ___________, 1998, is executed and delivered by CENTURY BANCORP, INC., a Massachusetts corporation (the "Guarantor"), and STATE STREET BANK AND TRUST COMPANY, a trust company organized and existing under the laws of The Commonwealth of Massachusetts, as trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of CENTURY BANCORP CAPITAL TRUST, a Delaware statutory business trust (the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust Agreement"), dated as of ___________, 1998, among the trustees of the Trust named therein, the Guarantor, as depositor, and the holders from time to time of undivided beneficial interests in the assets of the Trust, the Trust is issuing on the date hereof 2,875,000 preferred securities, having an aggregate liquidation amount of $28,750,000, designated the ________% Cumulative Trust Preferred Securities (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Preferred Securities Guarantee, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Preferred Securities Guarantee for the benefit of the Holders.
ARTICLE I.
DEFINITIONS AND INTERPRETATION
SECTION 1.1. DEFINITIONS AND INTERPRETATION.
In this Preferred Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Preferred Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;
(b) terms defined in the Trust Agreement as at the date of execution of this Preferred Securities Guarantee have the same meaning when used in this Preferred Securities Guarantee;
(c) a term defined anywhere in this Preferred Securities Guarantee has the same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or "this Preferred Securities Guarantee" are to this Preferred Securities Guarantee as modified, supplemented or amended from time to time;
(e) all references in this Preferred Securities Guarantee to Articles and Sections are to Articles and Sections of this Preferred Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning when used in this Preferred Securities Guarantee, unless otherwise defined in this Preferred Securities Guarantee or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which federal or state banking institutions in New York, New York are authorized or required by law, executive order or regulation to close or a day on which the Corporate Trust Office of the Preferred Guarantee Trustee is closed for business.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Preferred Securities Guarantee is located at Two
International Place, 4th Floor, Boston, Massachusetts 02110, Attention:
Corporate Trust Department.
"Covered Person" means any Holder or beneficial owner of Preferred Securities. "Debentures" means the ____% Junior Subordinated Debentures due June 30, 2029, of the Debenture Issuer held by the Property Trustee of the Trust.
"Debenture Issuer" means the Guarantor.
"Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Preferred Securities Guarantee.
"Guarantor" means Century Bancorp, Inc., a Massachusetts corporation.
"Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Trust: (i) any accrued and unpaid Distributions that are required to be paid on such Preferred Securities,
to the extent the Trust shall have funds available therefor, (ii) the redemption
price, including all accrued and unpaid Distributions to the date of redemption
(the "Redemption Price"), to the extent the Trust has funds available therefor,
with respect to any Preferred Securities called for redemption by the Trust, and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Trust (other than in connection with the distribution of Debentures to the
Holders in exchange for Preferred Securities as provided in the Trust
Agreement), the lesser of (a) the aggregate of the Liquidation Amount and all
accrued and unpaid Distributions on the Preferred Securities to the date of
payment, to the extent the Trust shall have funds available therefor (the
"Liquidation Distribution"), and (b) the amount of assets of the Trust remaining
available for distribution to Holders in liquidation of the Trust.
"Holder" means a Person in whose name a Preferred Security is or Preferred Securities are registered in the Securities Register; any such Person is a beneficial owner within the meaning of the Delaware Business Trust Act; provided, however, that, in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate of the Preferred Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of May__, 1998, among the Debenture Issuer and State Street Bank and Trust Company, as trustee, and any indenture supplemental thereto pursuant to which Subordinated Debentures of the Debenture Issuer are to be issued to the Property Trustee of the Trust.
"Liquidation Distribution" has the meaning provided therefor in the definition of Guarantee Payments.
"Majority in Liquidation Amount of the Preferred Securities" means the holders of more than 50% of the Liquidation Amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all of the Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a certificate signed by two authorized officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means State Street Bank and Trust Company, until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Preferred Securities Guarantee and thereafter means each such Successor Preferred Guarantee Trustee.
"Redemption Price" has the meaning provided therefor in the definition of Guarantee Payments.
"Responsible Officer" means, with respect to the Preferred Guarantee Trustee, any officer within the Corporate Trust Office of the Preferred Guarantee Trustee, including any vice-president, any assistant vice-president, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Preferred Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred Guarantee Trustee possessing the qualifications to act as Preferred Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in force at the date of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939, as amended, is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939, as so amended.
ARTICLE II.
TRUST INDENTURE ACT
SECTION 2.1. TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Preferred Securities Guarantee and shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.2. LIST OF HOLDERS OF SECURITIES.
(a) In the event the Preferred Guarantee Trustee is not also the Securities Registrar, the Guarantor shall provide the Preferred Guarantee Trustee with a list, in such form as the Preferred Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Preferred Securities (the "List of Holders") as of such date, (i) within 1 Business Day after January 1 and June 30 of each year, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 15 days before such List of Holders is given to the Preferred Guarantee Trustee; provided, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Preferred Guarantee Trustee by the Guarantor. The Preferred Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3. REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.
On or before July 15 of each year, the Preferred Guarantee Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4. PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE.
The Guarantor shall provide to the Preferred Guarantee Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Preferred Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Preferred Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6. EVENTS OF DEFAULT; WAIVER.
The Holders of a Majority in Liquidation Amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Preferred Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.
SECTION 2.7. EVENT OF DEFAULT; NOTICE.
(a) The Preferred Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Preferred Securities, notices of all Events of Default actually known to a Responsible Officer of the Preferred Guarantee Trustee, unless such defaults have been cured before the giving of such notice; provided, that the Preferred Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Preferred Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Preferred Guarantee Trustee shall have received written notice, or of which a Responsible Officer of the Preferred Guarantee Trustee charged with the administration of the Trust Agreement shall have obtained actual knowledge of such Event of Default.
SECTION 2.8. CONFLICTING INTERESTS.
The Trust Agreement shall be deemed to be specifically described in this Preferred Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
SECTION 3.1. POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
(a) This Preferred Securities Guarantee shall be held by the Preferred Guarantee Trustee for the benefit of the Holders of the Preferred Securities, and the Preferred Guarantee Trustee shall not transfer this Preferred Securities Guarantee to any Person except a Holder of Preferred Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred Guarantee Trustee of its appointment to act as Successor Preferred Guarantee Trustee. The right, title and interest of the Preferred Guarantee Trustee shall automatically vest in any Successor Preferred Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such Successor Preferred Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the Preferred Guarantee Trustee has occurred and is continuing, the Preferred Guarantee Trustee shall enforce this Preferred Securities Guarantee for the benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Preferred Securities Guarantee, and no implied covenants shall be read into this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such of the rights and powers vested in it by this Preferred Securities Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be construed to relieve the Preferred Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Preferred Guarantee Trustee shall be determined solely by the express provisions of this Preferred Securities Guarantee, and the Preferred Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Preferred Securities Guarantee, and no implied covenants or obligations shall be read into this Preferred Securities Guarantee against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Preferred Guarantee Trustee and conforming to the requirements of this Preferred Securities Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Preferred Guarantee Trustee, unless it shall be proved that the Preferred Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in Liquidation Amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee, or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall require the Preferred Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Preferred Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Preferred Securities Guarantee or indemnity, reasonably satisfactory to the Preferred Guarantee Trustee, against such risk or liability is not reasonably assured to it.
SECTION 3.2. CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) the Preferred Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by this Preferred Securities Guarantee shall be sufficiently evidenced by an Officers' Certificate;
(iii) whenever, in the administration of this Preferred Securities Guarantee, the Preferred Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Preferred Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof);
(v) the Preferred Guarantee Trustee may consult with counsel, and the written advice or opinion of such counsel with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Preferred Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Preferred Securities Guarantee from any court of competent jurisdiction;
(vi) the Preferred Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Preferred Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Preferred Guarantee Trustee such security and indemnity, reasonably satisfactory to the Preferred Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Preferred Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Preferred Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Preferred Securities Guarantee;
(vii) the Preferred Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Preferred Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit;
(viii) the Preferred Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Preferred Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;
(ix) no third party shall be required to inquire as to the authority of the Preferred Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Preferred Securities Guarantee, both of which shall be conclusively evidenced by the Preferred Guarantee Trustee's or its agent's taking such action;
(x) whenever in the administration of this Preferred Securities Guarantee the Preferred Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Preferred Guarantee Trustee (i) may request instructions from the Holders of a Majority in Liquidation Amount of the Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such
instructions.
(b) No provision of this Preferred Securities Guarantee shall be deemed to impose any duty or obligation on the Preferred Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Preferred Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Preferred Guarantee Trustee shall be construed to be a duty.
SECTION 3.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The Recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Preferred Guarantee Trustee does not assume any responsibility for their correctness. The Preferred Guarantee Trustee makes no representation as to the validity or sufficiency of this Preferred Securities Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Preferred Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Preferred Guarantee Trustee
and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2. APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold office until a Successor Preferred Guarantee Trustee shall have been appointed or until its removal or resignation. The Preferred Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Preferred Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Preferred Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or removal or resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1. GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Trust), as and when
due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Trust to pay such amounts to the Holders.
SECTION 5.2. WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of this Preferred Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Trust or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.
SECTION 5.3. OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor under this Preferred Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Trust of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Trust granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred Securities;
(f) any failure or omission to receive any regulatory approval or consent required in connection with the Preferred Securities (or the common equity securities issued by the Trust),
including the failure to receive any approval of the Board of Governors of the Federal Reserve System required for the redemption of the Preferred Securities;
(g) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or
(h) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4. RIGHTS OF HOLDERS.
(a) The Holders of a Majority in Liquidation Amount of the Preferred Securities have the right to direct the time, method and place of conducting of any proceeding for any remedy available to the Preferred Guarantee Trustee in respect of this Preferred Securities Guarantee or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may institute a legal proceeding directly against the Guarantor to enforce its rights under this Preferred Securities Guarantee, without first instituting a legal proceeding against the Trust, the Preferred Guarantee Trustee or any other Person.
SECTION 5.5. GUARANTEE OF PAYMENT.
This Preferred Securities Guarantee creates a guarantee of payment and not of collection.
SECTION 5.6. SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of the Holders of Preferred Securities against the Trust in respect of any amounts paid to such Holders by the Guarantor under this Preferred Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Preferred Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Preferred Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.7. INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Trust with respect to the Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1. LIMITATION ON TRANSACTIONS.
So long as any Preferred Securities remain outstanding, if any of the circumstances described in Section 5.6 of the Indenture shall have occurred, then
(a) the Guarantor 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 and
(b) the Guarantor shall not make any payment of interest or principal on or repay, repurchase or redeem any debt securities issued by the Guarantor which rank pari passu with or junior to the Debentures other than payments under this Preferred Securities Guarantee and
(c) the Guarantor shall not redeem, purchase or acquire less than all of the Outstanding Debentures or any of the Preferred Securities.
SECTION 6.2 RANKING.
This Preferred Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor, (ii) pari passu with the most senior preferred securities or preference stock now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred securities or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1. TERMINATION.
This Preferred Securities Guarantee shall terminate upon (i) full payment of the Redemption Price of all Preferred Securities, (ii) upon full payment of the amounts payable in accordance with the Trust Agreement upon liquidation of the Trust, or (iii) upon distribution of the Debentures to the Holders of the Preferred Securities. Notwithstanding the foregoing, this Preferred Securities Guarantee shall continue to be effective or shall be reinstated, as the case
may be, if at any time any Holder of Preferred Securities must restore payment of any sums paid under the Preferred Securities or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Preferred Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Preferred Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.2. INDEMNIFICATION.
The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Preferred Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding.
SECTION 9.2. AMENDMENTS.
Except with respect to any changes that do not materially adversely affect the rights of Holders (in which case no consent of Holders will be required), this Preferred Securities Guarantee may only be amended with the prior approval of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities. The provisions of Article VI of the Trust Agreement with respect to meetings of Holders of the Preferred Securities apply to the giving of such approval.
SECTION 9.3. NOTICES.
All notices provided for in this Preferred Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred Guarantee Trustee's mailing address set forth below (or such other address as the Preferred Guarantee Trustee may give notice of to the Holders of the Preferred Securities):
State Street Bank and Trust Company Two International Place, 4th Floor Boston, Massachusetts 02110 Attention: Corporate Trust Department
(b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Preferred Securities):
Century Bancorp, Inc. 400 Mystic Avenue Medford, Massachusetts 02155 Attention: Chief Financial Officer
(c) If given to any Holder of Preferred Securities, at the address set forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.
SECTION 9.4. BENEFIT.
This Preferred Securities Guarantee is solely for the benefit of the Holders of the
Preferred Securities and, subject to Section 3.1 (a), is not separately transferable from the Preferred Securities.
SECTION 9.5. GOVERNING LAW.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
This Preferred Securities Guarantee is executed as of the day and year first above written.
CENTURY BANCORP, INC.
as Guarantor
___________________________,
By:__________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
as Preferred Guarantee Trustee
By:___________________________________
Name:
Title:
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AT OR FOR THE
YEAR ENDED
DECEMBER 31,
----------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
INCLUDING INTEREST ON DEPOSITS:
Earnings:
Earnings before income taxes.. 11,028 8,839 6,240 4,072 1,828
Fixed charges from below ..... 15,969 15,850 14,729 10,965 11,852
Earnings...................... 26,997 24,689 20,969 15,037 13,680
Fixed Charges:
Interest expense.............. 15,922 15,805 14,686 10,924 11,813
Rent Expense.................. 47 45 43 41 39
Ratio of Earnings to Fixed
Charges....................... 1.69 1.56 1.42 1.37 1.15
EXCLUDING INTEREST ON DEPOSITS:
Earnings:
Earnings before income taxes.. 11,028 8,839 6,240 4,072 1,828
Fixed charges from below...... 1,613 940 727 341 254
Earnings...................... 12,641 9,779 6,967 4,413 2,082
Fixed Charges:
Interest expense, excluding
interest on deposits......... 1,566 895 684 300 215
Rent Expense.................. 47 45 43 41 39
Ratio of Earnings to Fixed
Charges...................... 7.84 10.40 9.58 12.94 8.20
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Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Century Bancorp, Inc.
We consent to the incorporation by reference in the Registration Statement to be filed on Form S-2 by Century Bancorp, Inc. of our report dated January 12, 1998, relating to the consolidated balance sheets of Century Bancorp, Inc. and subsidiary as of December 31, 1997, and 1996, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the three-year period then ended, and to the reference to our firm under the heading "Experts".
/s/ KPMG Peat Marwick LLP
--------------------------------
Boston, Massachusetts
April 22, 1998
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EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
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Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253
(Name, address and telephone number of agent for service)
CENTURY BANCORP, INC.
(Exact name of obligor as specified in its charter)
Massachusetts 04-2498617
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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400 Mystic Avenue, Medford, Massachusetts (781) 391-4000
(Address of principal executive offices) (Zip Code)
% SUBORDINATED DEBENTURES
(Title of indenture securities)
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State Street Boston Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Boston and The Commonwealth of Massachusetts, on the 20th day of April, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /S/ PAUL D. ALLEN
____________________________________
PAUL D. ALLEN
VICE PRESIDENT
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EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by CENTURY BANCORP, INC. of its % SUBORDINATED DEBENTURES, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /S/ PAUL D. ALLEN
________________________________
PAUL D. ALLEN
VICE PRESIDENT
DATED: APRIL 20, 1998
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EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business December 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................ 2,220,829
Interest-bearing balances ......................................... 10,076,045
Securities ................................................................. 10,373,821
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................... 5,124,310
Loans and lease financing receivables:
Loans and leases, net of unearned income ...... 6,270,348
Allowance for loan and lease losses ........... 82,820
Allocated transfer risk reserve ............... 0
Loans and leases, net of unearned income and allowances ........... 6,187,528
Assets held in trading accounts ............................................ 1, 241,555
Premises and fixed assets .................................................. 410,029
Other real estate owned .................................................... 100
Investments in unconsolidated subsidiaries ................................. 38,831
Customers' liability to this bank on acceptances outstanding ............... 44,962
Intangible assets .......................................................... 224,049
Other assets ............................................................... 1,507,650
----------
Total assets ............................................................... 37,449,709
==========
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LIABILITIES
Deposits:
In domestic offices ............................................... 10,115,205
Noninterest-bearing ................... 7,739,136
Interest-bearing ...................... 2,376,069
In foreign offices and Edge subsidiary ............................ 14,791,134
Noninterest-bearing ................... 71,889
Interest-bearing ...................... 14,719,245
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Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................... 7,603,920
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 194,059
Trading liabilities ........................................................ 1,036,905
Other borrowed money ....................................................... 459,252
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 44,962
Other liabilities .......................................................... 972,782
Total liabilities .......................................................... 35,218,219
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus .............................. 0
Common stock ............................................................... 29,931
Surplus .................................................................... 444,620
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,763,076
Cumulative foreign currency translation adjustments ........................ (6,137)
Total equity capital ....................................................... 2,231,490
-----------
Total liabilities and equity capital ....................................... 37,449,709
-----------
|
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct.
David A. Spina Marshall N. Carter Truman S. Casner
Exhibit 25.2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
|
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253
(Name, address and telephone number of agent for service)
CENTURY BANCORP CAPITAL TRUST
(Exact name of obligor as specified in its charter)
Delaware xx-xxxxxxx
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
|
400 Mystic Avenue, Medford, Massachusetts (781) 391-4000
(Address of principal executive offices) (Zip Code)
PREFERRED SECURITIES
(Title of indenture securities)
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State Street Boston Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Boston and The Commonwealth of Massachusetts, on the 20th day of April, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /S/ PAUL D. ALLEN
--------------------------------
PAUL D. ALLEN
VICE PRESIDENT
|
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by CENTURY BANCORP CAPITAL TRUST of its PREFERRED SECURITIES, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /S/ PAUL D. ALLEN
--------------------------------
PAUL D. ALLEN
VICE PRESIDENT
DATED: APRIL 20, 1998
|
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business December 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................ 2,220,829
Interest-bearing balances ......................................... 10,076,045
Securities ................................................................. 10,373,821
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................... 5,124,310
Loans and lease financing receivables:
Loans and leases, net of unearned income ........... 6,270,348
Allowance for loan and lease losses ................ 82,820
Allocated transfer risk reserve .................... 0
Loans and leases, net of unearned income and allowances ........... 6,187,528
Assets held in trading accounts ............................................ 1,241,555
Premises and fixed assets .................................................. 410,029
Other real estate owned .................................................... 100
Investments in unconsolidated subsidiaries ................................. 38,831
Customers' liability to this bank on acceptances outstanding ............... 44,962
Intangible assets .......................................................... 224,049
Other assets ............................................................... 1,507,650
-----------
Total assets ............................................................... 37,449,709
===========
LIABILITIES
Deposits:
In domestic offices ............................................... 10,115,205
Noninterest-bearing ....................... 7,739,136
Interest-bearing .......................... 2,376,069
In foreign offices and Edge subsidiary ............................ 14,791,134
Noninterest-bearing ....................... 71,889
Interest-bearing .......................... 14,719,245
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................... 7,603,920
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 194,059
Trading liabilities ........................................................ 1,036,905
Other borrowed money ....................................................... 459,252
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 44,962
Other liabilities .......................................................... 972,782
Total liabilities .......................................................... 35,218,219
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus .............................. 0
Common stock ............................................................... 29,931
Surplus .................................................................... 444,620
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,763,076
Cumulative foreign currency translation adjustments ........................ (6,137)
Total equity capital ....................................................... 2,231,490
-----------
Total liabilities and equity capital ....................................... 37,449,709
-----------
|
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct.
David A. Spina Marshall N. Carter Truman S. Casner
EXHIBIT 25.3
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
|
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253
(Name, address and telephone number of agent for service)
CENTURY BANCORP, INC.
(Exact name of obligor as specified in its charter)
Massachusetts 04-2498617
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
|
400 Mystic Avenue, Medford, Massachusetts (781) 391-4000
(Address of principal executive offices) (Zip Code)
GUARANTEE
(Title of indenture securities)
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State Street Boston Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Boston and The Commonwealth of Massachusetts, on the 20th day of April, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /S/ PAUL D. ALLEN
-------------------------------
PAUL D. ALLEN
VICE PRESIDENT
|
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by CENTURY BANCORP, INC. of its GUARANTEE, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /S/ PAUL D. ALLEN
-------------------------------
PAUL D. ALLEN
VICE PRESIDENT
DATED: APRIL 20, 1998
|
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business December 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin .................... 2,220,829
Interest-bearing balances ............................................. 10,076,045
Securities ..................................................................... 10,373,821
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ................................... 5,124,310
Loans and lease financing receivables:
Loans and leases, net of unearned income ........... 6,270,348
Allowance for loan and lease losses ................ 82,820
Allocated transfer risk reserve .................... 0
Loans and leases, net of unearned income and allowances ............... 6,187,528
Assets held in trading accounts ................................................ 1, 241,555
Premises and fixed assets ...................................................... 410,029
Other real estate owned ........................................................ 100
Investments in unconsolidated subsidiaries ..................................... 38,831
Customers' liability to this bank on acceptances outstanding ................... 44,962
Intangible assets .............................................................. 224,049
Other assets ................................................................... 1,507,650
----------
Total assets ................................................................... 37,449,709
==========
LIABILITIES
Deposits:
In domestic offices ................................................... 10,115,205
Noninterest-bearing ....................... 7,739,136
Interest-bearing .......................... 2,376,069
In foreign offices and Edge subsidiary ................................ 14,791,134
Noninterest-bearing ....................... 71,889
Interest-bearing ..........................14,719,245
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ................................... 7,603,920
Demand notes issued to the U.S. Treasury and Trading Liabilities ............... 194,059
Trading liabilities ............................................................ 1,036,905
Other borrowed money ........................................................... 459,252
Subordinated notes and debentures .............................................. 0
Bank's liability on acceptances executed and outstanding ....................... 44,962
Other liabilities .............................................................. 972,782
Total liabilities .............................................................. 35,218,219
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus .................................. 0
Common stock ................................................................... 29,931
Surplus ........................................................................ 444,620
Undivided profits and capital reserves/Net unrealized holding gains (losses) ... 1,763,076
Cumulative foreign currency translation adjustments ............................ (6,137)
Total equity capital ........................................................... 2,231,490
----------
Total liabilities and equity capital ........................................... 37,449,709
----------
|
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct.
David A. Spina Marshall N. Carter Truman S. Casner