SUMMARY HISTORICAL FINANCIAL DATA
The following tables set forth selected consolidated historical financial and operating data for the periods ended and as of the dates
indicated. The selected consolidated financial data presented for the fiscal years ended December 31, 2015, 2014, and 2013 is derived from our audited consolidated financial statements, which
are incorporated by reference into this prospectus supplement and accompanying prospectus. The historical financial information for the years ended December 31, 2012, and 2011 is derived from
our audited financial statements not included in this prospectus. The selected consolidated financial data presented for the six months ended June 30, 2016 and 2015 is derived from our
unaudited interim consolidated financial statements, which are also incorporated by reference into this prospectus supplement and accompanying prospectus. See "Where You Can Find More Information" for
more information on accessing the sources of the data set forth below.
The
summary historical financial data should be read in conjunction with the section titled "Capitalization," set forth in this prospectus supplement, as well as our consolidated
financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2015 and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016. The selected consolidated financial data presented for the six months
ended June 30, 2016 was prepared on the same basis as our audited financial statements and includes, in the opinion of management, all adjustments necessary to fairly present the data for such
periods. The results included here and elsewhere in this prospectus supplement are not necessarily indicative of performance for the full fiscal year or any future period. Average balances have been
computed using daily averages.
We
have presented certain information in the table below on a non-GAAP (as defined below) basis. We believe that these non-GAAP ratios, when taken together with the corresponding ratios
calculated in
S-2
Table of Contents
accordance
with GAAP, provide meaningful supplemental information regarding our performance for the periods presented. Reconciliations for the non-GAAP measures included in the table are provided
below.
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Six Months Ended
June 30,
|
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Fiscal Year Ended December 31,
|
|
Amounts in thousands, except share and per share data and ratios
|
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2016
|
|
2015
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
Income Statement Summary:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
26,664
|
|
$
|
19,317
|
|
$
|
41,447
|
|
$
|
31,215
|
|
$
|
25,536
|
|
$
|
24,374
|
|
$
|
23,944
|
|
Interest expense
|
|
|
8,217
|
|
|
4,971
|
|
|
10,694
|
|
|
8,928
|
|
|
8,088
|
|
|
8,532
|
|
|
9,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
18,447
|
|
|
14,346
|
|
|
30,753
|
|
|
22,287
|
|
|
17,448
|
|
|
15,842
|
|
|
14,323
|
|
Provision for loan losses
|
|
|
1,870
|
|
|
746
|
|
|
1,946
|
|
|
349
|
|
|
324
|
|
|
2,852
|
|
|
2,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Net interest income after provision for loan losses
|
|
|
16,577
|
|
|
13,600
|
|
|
28,807
|
|
|
21,938
|
|
|
17,124
|
|
|
12,990
|
|
|
11,883
|
|
Noninterest income
|
|
|
6,288
|
|
|
5,624
|
|
|
10,141
|
|
|
7,174
|
|
|
9,517
|
|
|
11,423
|
|
|
3,559
|
|
Noninterest expense
|
|
|
14,880
|
|
|
12,584
|
|
|
25,283
|
|
|
22,662
|
|
|
20,482
|
|
|
16,613
|
|
|
11,483
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
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Income before income taxes
|
|
|
7,985
|
|
|
6,640
|
|
|
13,665
|
|
|
6,450
|
|
|
6,159
|
|
|
7,800
|
|
|
3,959
|
|
Income tax provision
|
|
|
2,719
|
|
|
2,312
|
|
|
4,736
|
|
|
2,126
|
|
|
1,566
|
|
|
2,194
|
|
|
773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Net income
|
|
$
|
5,266
|
|
$
|
4,328
|
|
$
|
8,929
|
|
$
|
4,324
|
|
$
|
4,593
|
|
$
|
5,606
|
|
$
|
3,186
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
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Per Share and Share Information:
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|
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Net income:
|
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|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
Basic
|
|
$
|
1.11
|
|
$
|
0.96
|
|
$
|
1.97
|
|
$
|
0.96
|
|
$
|
1.51
|
|
$
|
1.95
|
|
$
|
1.11
|
|
Diluted
|
|
$
|
1.10
|
|
$
|
0.95
|
|
$
|
1.96
|
|
$
|
0.96
|
|
$
|
1.51
|
|
$
|
1.95
|
|
$
|
1.11
|
|
Tangible book value per common share(1)
|
|
$
|
23.67
|
|
$
|
21.23
|
|
$
|
22.24
|
|
$
|
20.74
|
|
$
|
19.38
|
|
$
|
20.13
|
|
$
|
18.07
|
|
Weighted average common shares outstanding:
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Basic
|
|
|
4,757,243
|
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|
4,523,336
|
|
|
4,528,528
|
|
|
4,497,007
|
|
|
3,041,666
|
|
|
2,869,365
|
|
|
2,859,434
|
|
Diluted
|
|
|
4,782,700
|
|
|
4,536,736
|
|
|
4,554,219
|
|
|
4,507,995
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|
|
3,050,001
|
|
|
2,869,365
|
|
|
2,859,434
|
|
Common shares outstanding at end of period
|
|
|
5,533,050
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|
|
4,484,513
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|
|
4,481,347
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|
|
4,439,575
|
|
|
4,448,326
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|
|
2,815,094
|
|
|
2,807,385
|
|
Balance Sheet Data:
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|
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|
Total assets
|
|
$
|
1,702,468
|
|
$
|
1,104,645
|
|
$
|
1,269,870
|
|
$
|
970,503
|
|
$
|
802,342
|
|
$
|
636,367
|
|
$
|
585,440
|
|
Cash and cash equivalents
|
|
$
|
70,008
|
|
$
|
30,602
|
|
$
|
25,152
|
|
$
|
28,289
|
|
$
|
53,690
|
|
$
|
32,513
|
|
$
|
34,778
|
|
Net loans
|
|
$
|
1,101,606
|
|
$
|
807,170
|
|
$
|
945,508
|
|
$
|
726,626
|
|
$
|
495,727
|
|
$
|
352,328
|
|
$
|
329,570
|
|
Loans held-for-sale
|
|
$
|
44,503
|
|
$
|
29,872
|
|
$
|
36,518
|
|
$
|
34,671
|
|
$
|
28,610
|
|
$
|
63,234
|
|
$
|
45,091
|
|
Securities available for sale
|
|
$
|
433,806
|
|
$
|
190,767
|
|
$
|
213,698
|
|
$
|
137,518
|
|
$
|
181,409
|
|
$
|
156,693
|
|
$
|
149,270
|
|
Deposits
|
|
$
|
1,388,933
|
|
$
|
856,503
|
|
$
|
956,054
|
|
$
|
758,598
|
|
$
|
673,095
|
|
$
|
530,691
|
|
$
|
486,665
|
|
Tangible common equity(1)
|
|
$
|
130,992
|
|
$
|
95,221
|
|
$
|
99,643
|
|
$
|
92,098
|
|
$
|
86,221
|
|
$
|
56,663
|
|
$
|
50,736
|
|
Total shareholders' equity
|
|
$
|
135,679
|
|
$
|
99,908
|
|
$
|
104,330
|
|
$
|
96,785
|
|
$
|
90,908
|
|
$
|
61,350
|
|
$
|
55,423
|
|
Performance Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.72
|
%
|
|
0.84
|
%
|
|
0.81
|
%
|
|
0.50
|
%
|
|
0.67
|
%
|
|
0.91
|
%
|
|
0.59
|
%
|
Return on average shareholders' equity
|
|
|
9.45
|
%
|
|
8.85
|
%
|
|
8.89
|
%
|
|
4.61
|
%
|
|
7.10
|
%
|
|
9.51
|
%
|
|
6.09
|
%
|
Net interest margin(2)
|
|
|
2.57
|
%
|
|
2.86
|
%
|
|
2.85
|
%
|
|
2.65
|
%
|
|
2.67
|
%
|
|
2.67
|
%
|
|
2.75
|
%
|
Noninterest expense to average assets
|
|
|
2.03
|
%
|
|
2.44
|
%
|
|
2.28
|
%
|
|
2.60
|
%
|
|
2.99
|
%
|
|
2.70
|
%
|
|
2.12
|
%
|
Asset Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans
|
|
|
0.51
|
%
|
|
0.02
|
%
|
|
0.02
|
%
|
|
0.04
|
%
|
|
0.37
|
%
|
|
1.23
|
%
|
|
2.64
|
%
|
Nonperforming assets to total assets
|
|
|
0.60
|
%
|
|
0.43
|
%
|
|
0.37
|
%
|
|
0.50
|
%
|
|
0.90
|
%
|
|
1.62
|
%
|
|
2.29
|
%
|
Nonperforming assets (including troubled debt restructurings) to total assets
|
|
|
0.66
|
%
|
|
0.54
|
%
|
|
0.46
|
%
|
|
0.62
|
%
|
|
1.05
|
%
|
|
1.84
|
%
|
|
2.47
|
%
|
Allowance for loan losses to total loans
|
|
|
0.90
|
%
|
|
0.87
|
%
|
|
0.88
|
%
|
|
0.79
|
%
|
|
1.09
|
%
|
|
1.65
|
%
|
|
1.70
|
%
|
Net charge-offs (recoveries) to average loans
|
|
|
0.04
|
%
|
|
(0.14
|
)%
|
|
(0.07
|
)%
|
|
0.00
|
%
|
|
0.17
|
%
|
|
0.69
|
%
|
|
1.05
|
%
|
Capital Ratios:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity to tangible assets(1)
|
|
|
7.72
|
%
|
|
8.66
|
%
|
|
7.88
|
%
|
|
9.54
|
%
|
|
10.81
|
%
|
|
8.97
|
%
|
|
8.74
|
%
|
Tier 1 leverage ratio
|
|
|
8.08
|
%
|
|
8.93
|
%
|
|
8.28
|
%
|
|
9.87
|
%
|
|
11.66
|
%
|
|
8.89
|
%
|
|
8.74
|
%
|
Common equity tier 1 capital ratio(4)
|
|
|
10.66
|
%
|
|
11.12
|
%
|
|
10.11
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Tier 1 capital ratio
|
|
|
10.66
|
%
|
|
11.12
|
%
|
|
10.11
|
%
|
|
12.55
|
%
|
|
15.61
|
%
|
|
12.20
|
%
|
|
11.15
|
%
|
Total risk-based capital ratio
|
|
|
12.54
|
%
|
|
12.28
|
%
|
|
12.25
|
%
|
|
13.75
|
%
|
|
17.09
|
%
|
|
13.46
|
%
|
|
12.40
|
%
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full-time equivalent employees
|
|
|
177
|
|
|
155
|
|
|
152
|
|
|
143
|
|
|
130
|
|
|
97
|
|
|
74
|
|
-
(1)
-
Tangible
common equity, tangible assets and tangible book value per share are financial measures not recognized by generally accepted accounting principles
("GAAP"). Our management, banking regulators, many financial analysts and other investors use these non-GAAP financial measures to compare the capital adequacy of banking organizations with
significant amounts of preferred equity and/or goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of
S-3
Table of Contents
accounting
for mergers and acquisitions. Tangible common equity, tangible assets, tangible book value per share or related measures should not be considered as a substitute for total shareholders'
equity, total assets, book value per share or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate these measures may differ from those of other
companies reporting measures with similar names. The following table reconciles these non-GAAP performance measures and a capital ratio using such measures to the most directly comparable GAAP measure
or ratio.
-
(2)
-
Net
interest margin is net interest income divided by average earnings assets.
-
(3)
-
Capital
ratios are calculated in accordance with regulatory guidelines specified by our primary federal banking regulatory authority.
-
(4)
-
Introduced
as part of the final implementation of the "Basel III" regulatory capital reforms as of January 1, 2015. Not applicable to periods prior
to 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended June 30,
|
|
Fiscal Year Ended December 31,
|
|
Amounts in thousands, except share and per share data and ratios
|
|
2016
|
|
2015
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
Total equityGAAP
|
|
$
|
135,679
|
|
$
|
99,908
|
|
$
|
104,330
|
|
$
|
96,785
|
|
$
|
90,908
|
|
$
|
61,350
|
|
$
|
55,423
|
|
Less: goodwill
|
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity
|
|
$
|
130,992
|
|
$
|
95,221
|
|
$
|
99,643
|
|
$
|
92,098
|
|
$
|
86,221
|
|
$
|
56,663
|
|
$
|
50,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assetsGAAP
|
|
$
|
1,702,468
|
|
$
|
1,104,645
|
|
$
|
1,269,870
|
|
$
|
970,503
|
|
$
|
802,342
|
|
$
|
636,367
|
|
$
|
585,440
|
|
Less: goodwill
|
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
(4,687
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible assets
|
|
$
|
1,697,781
|
|
$
|
1,099,958
|
|
$
|
1,265,183
|
|
$
|
965,816
|
|
$
|
797,655
|
|
$
|
631,680
|
|
$
|
580,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common shares outstanding
|
|
|
5,533,050
|
|
|
4,484,513
|
|
|
4,481,347
|
|
|
4,439,575
|
|
|
4,448,326
|
|
|
2,815,094
|
|
|
2,807,385
|
|
Book value per share
|
|
$
|
24.52
|
|
$
|
22.28
|
|
$
|
23.28
|
|
$
|
21.80
|
|
$
|
20.44
|
|
$
|
21.79
|
|
$
|
19.74
|
|
Effect of goodwill
|
|
|
(0.85
|
)
|
|
(1.05
|
)
|
|
(1.04
|
)
|
|
(1.06
|
)
|
|
(1.06
|
)
|
|
(1.66
|
)
|
|
(1.67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value per share
|
|
$
|
23.67
|
|
$
|
21.23
|
|
$
|
22.24
|
|
$
|
20.74
|
|
$
|
19.38
|
|
$
|
20.13
|
|
$
|
18.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity to assets ratio
|
|
|
7.97
|
%
|
|
9.04
|
%
|
|
8.22
|
%
|
|
9.97
|
%
|
|
11.33
|
%
|
|
9.64
|
%
|
|
9.47
|
%
|
Effect of goodwill
|
|
|
(0.25
|
)%
|
|
(0.38
|
%)
|
|
(0.34
|
)%
|
|
(0.43
|
)%
|
|
(0.52
|
)%
|
|
(0.67
|
)%
|
|
(0.73
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity to tangible assets ratio
|
|
|
7.72
|
%
|
|
8.66
|
%
|
|
7.88
|
%
|
|
9.54
|
%
|
|
10.81
|
%
|
|
8.97
|
%
|
|
8.74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-4
Table of Contents
The Offering
|
|
|
Issuer
|
|
First Internet Bancorp
|
Securities offered
|
|
6.0% Fixed-to-Floating Rate Subordinated Notes due 2026
|
Aggregate principal amount
|
|
$25,000,000 (or up to $28,750,000 if the underwriters exercise their purchase option in full)
|
Issue price
|
|
100%
|
Maturity date
|
|
The Notes will mature on September 30, 2026.
|
Interest Rate
|
|
From and including the issue date to but excluding September 30, 2021, a fixed per annum rate of 6.0%.
|
|
|
From and including September 30, 2021 to but excluding the maturity date or the date of earlier redemption, a floating
per annum rate equal to the then-current three-month LIBOR rate, determined on the determination date of the applicable interest period, plus 4.85%; however, if three-month LIBOR is less than zero, three-month LIBOR will be deemed to be zero. For any
determination date, "LIBOR" means the rate as published by Reuters (or any successor service) at approximately 11:00 a.m., London time, two business days prior to the commencement of the relevant quarterly interest period, as the London
interbank rate for U.S. dollars. If such rate is not available at such time for any reason, then the rate for that interest period will be determined by such alternate method as provided in the Indenture (as defined in "Description of the Notes" in
this prospectus supplement). The Company has appointed U.S. Bank National Association as the calculation agent for purposes of determining three-month LIBOR for each floating rate interest period.
|
Interest Payment Dates
|
|
We will pay interest on the Notes on March 30, June 30, September 30 and December 30 of each
year.
|
Record Dates
|
|
The 15th day of the month immediately before the month of the applicable interest payment date.
|
Day Count Convention
|
|
Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months to but excluding
September 30, 2021 and, thereafter, on the basis of the actual number of days in the relevant interest period divided by 360.
|
No Guarantees
|
|
The Notes are not guaranteed by any of our subsidiaries. As a result, the Notes will be structurally subordinated to the
liabilities of our subsidiaries as discussed below under "Ranking."
|
S-5
Table of Contents
|
|
|
Ranking
|
|
The Notes offered by this prospectus supplement will be issued by First Internet Bancorp under a Subordinated Indenture dated as of
September 30, 2016 between First Internet Bancorp and U.S. Bank National Association, as trustee (the "Trustee"), as amended and supplemented by a First Supplemental Indenture dated as of September 30, 2016 between First Internet Bancorp
and the Trustee. We refer to the Subordinated Indenture, as amended and supplemented by the First Supplemental Indenture, as the "Indenture."
|
|
|
The Notes will be our unsecured, subordinated obligations and:
|
|
|
will rank junior in right of payment and upon
our liquidation to any of our existing and all future Senior Indebtedness (as defined in the Indenture), all as described under "Description of the Notes" in this prospectus supplement;
|
|
|
will rank junior in right of payment and upon
our liquidation to any of our existing and all of our future general creditors other than our outstanding subordinated indebtedness, which ranks equal in right;
|
|
|
will rank equal in right of payment and upon
our liquidation with any of our existing and all of our future indebtedness the terms of which provide that such indebtedness ranks equally with the Notes;
|
|
|
will rank senior in right of payment and upon
our liquidation to any of our indebtedness the terms of which provide that such indebtedness ranks junior in right of payment to note indebtedness such as the Notes; and
|
|
|
will be effectively subordinated to our
future secured indebtedness to the extent of the value of the collateral securing such indebtedness, and structurally subordinated to the existing and future indebtedness of our subsidiaries, including without limitation the Bank's depositors,
liabilities to general creditors and liabilities arising in the ordinary course of business or otherwise.
|
|
|
As of June 30, 2016, on a consolidated basis, the Company's total liabilities were approximately $1.57 billion,
which included approximately $1.39 billion of deposit liabilities. As of June 30, 2016, we also had $13.0 million principal amount of outstanding subordinated indebtedness that ranks equal in right to the Notes.
|
|
|
The Indenture does not limit the amount of additional indebtedness we or our subsidiaries may incur.
|
Optional Redemption
|
|
We may, beginning with the interest payment date of September 30, 2021, and on any interest payment date thereafter,
redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption.
|
S-6
Table of Contents
|
|
|
Special Event Redemption
|
|
We may also redeem the Notes at any time, including prior to September 30, 2021, at our option, in whole but not in part, if:
(a) a change or prospective change in law occurs that could prevent us from deducting interest payable on the Notes for U.S. federal income tax purposes; (b) a subsequent event occurs that could preclude the Notes from being recognized as
Tier 2 capital for regulatory capital purposes; or (c) we are required to register as an investment company under the Investment Company Act of 1940, as amended; in each case, at a redemption price equal to 100% of the principal amount of
the Notes plus any accrued and unpaid interest to but excluding the redemption date. For more information, see "Description of the NotesRedemption" in this prospectus supplement.
|
Sinking Fund
|
|
There is no sinking fund for the Notes.
|
Further Issuances
|
|
The Notes will initially be limited to an aggregate principal amount of $25,000,000. We may from time to time, without
notice to or consent of the holders, increase the aggregate principal amount of the Notes outstanding by issuing additional notes in the future with the same terms as the Notes, except for the issue date, the offering price and the first interest
payment date, and such additional notes may be consolidated with the Notes issued in this offering and form a single series.
|
Use of Proceeds
|
|
We estimate that the net proceeds from this offering, after deducting underwriting discounts and estimated expenses, will be
approximately $23,737,500 (or up to $27,369,375 if the underwriters exercise their purchase option in full). We intend to use these proceeds for general corporate purposes, which may include providing capital to support our growth organically or
through strategic acquisitions, repaying indebtedness and financing investments and capital expenditures, and for investments in the Bank as regulatory capital. See "Use of Proceeds" in this prospectus supplement.
|
Form and Denomination
|
|
The Notes will be offered in book-entry form through the facilities of DTC in minimum denominations of $25 and integral
multiples of $25 in excess thereof.
|
Listing
|
|
We have applied to list the Notes on the NASDAQ Global Market. Trading on the NASDAQ Global Market is expected to commence
within a 30-day period after the initial delivery of the Notes. Currently, there is no market for the Notes, and there can be no assurances that an active market for the Notes will develop.
|
Governing Law
|
|
The Notes and the Indenture will be governed by the laws of the State of New York.
|
Trustee
|
|
U.S. Bank National Association.
|
S-7
Table of Contents
|
|
|
Risk Factors
|
|
An investment in the Notes involves risks. You should carefully consider the information contained under "Risk Factors" beginning on
page S-9 in this prospectus supplement and Item 1A., Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as well as other information included or incorporated by reference into this
prospectus supplement and the accompanying prospectus, including our financial statements and the notes thereto, before making an investment decision.
|
Ratios of Earnings to Fixed Charges
|
|
Please refer to the information contained under "Ratios of Earnings to Fixed Charges" in this prospectus supplement for a
presentation of such ratios as of June 30, 2016 and 2015 and for each of the last five years.
|
S-8
Table of Contents
RISK FACTORS
An investment in the Notes involves a number of risks. This prospectus supplement does not describe all of
those risks. Before you decide whether an investment in the Notes is suitable for you, you should carefully consider the risks described below relating to the offering as well as the risk factors
concerning our business included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, in addition to the other information in this prospectus supplement and the
accompanying prospectus, including our other filings which are incorporated by reference into this prospectus supplement and the accompanying prospectus. See "Where You Can Find More Information" in
this prospectus supplement and the accompanying prospectus for discussions of these other filings. The prospectus is qualified in its entirety by those risk factors.
Our obligations under the Notes will be unsecured and subordinated to any Senior Indebtedness.
The Notes will be unsecured subordinated obligations of First Internet Bancorp. Accordingly, they will be junior in right of payment to
any of our existing and future Senior Indebtedness (as defined in the Indenture). The Notes will rank equally with all of our other unsecured subordinated indebtedness issued in the future under the
Indenture. In addition, the Notes will be structurally subordinated to all existing and future indebtedness, liabilities and other obligations, including deposits, of our current and future
subsidiaries, including the Bank. As of June 30, 2016, on a consolidated basis, we had outstanding liabilities totaling approximately $1.57 billion, which included approximately
$1.39 billion of deposit liabilities. As adjusted to give effect to the offering of the Notes, as if the offerings had been completed as of June 30, 2016, First Internet Bancorp, the
Bank and our other subsidiaries had, on a consolidated basis, $38.0 million principal amount of indebtedness. As of June 30, 2016, we also had approximately $13.0 million
principal amount of outstanding subordinated indebtedness that ranks equal in right to the Notes.
In
addition, the Notes will not be secured by any of our assets. As a result, the Notes will be effectively subordinated to all of our secured indebtedness, if any, to the extent of the
value of the assets securing such indebtedness. The Indenture does not limit the amount of Senior Indebtedness and other financial obligations or secured obligations that we or our subsidiaries may
incur.
As
a result of the subordination provisions described above and in the following paragraph, holders of Notes may not be fully repaid in the event of our bankruptcy, liquidation, or
reorganization.
The Notes are not obligations of, or guaranteed by, our subsidiaries and are structurally
subordinated to all liabilities of our subsidiaries.
The Notes will be obligations of First Internet Bancorp only and will not be guaranteed by any of our subsidiaries, including the Bank.
The Notes will be structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries, which means that creditors of our subsidiaries (including, in the case of
the Bank, its depositors) generally will be paid from those subsidiaries' assets before holders of the Notes would have any claims to those assets. Even if we become a creditor of any of our
subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of that subsidiary and any debt of that subsidiary senior to that held by us, and our rights could
otherwise be subordinated to the rights of other creditors and depositors of that subsidiary. Furthermore, none of our subsidiaries is under any obligation to make payments to us, and any payments to
us would depend on the earnings or financial condition of our subsidiaries and various business considerations. Statutory, contractual, or other restrictions also limit our subsidiaries' ability to
pay dividends or make distributions, loans or advances to us. For these reasons, we may not have access to any assets or cash flows of our subsidiaries to make interest and principal payments on the
Notes.
S-9
Table of Contents
We may incur a substantial level of debt that could materially adversely affect our ability to
generate sufficient cash to fulfill our obligations under the Notes.
Neither we, nor any of our subsidiaries, are subject to any limitations under the terms of the Indenture from issuing, accepting or
incurring any amount of additional debt, deposits or other liabilities, including Senior Indebtedness or other obligations ranking senior to or equally with the Notes. We and our subsidiaries are
expected to incur additional debt and other liabilities from time to time, and our level of debt and the risks related thereto could increase.
A
substantial level of debt could have important consequences to holders of the Notes, including the following:
-
-
making it more difficult for us to satisfy our obligations with respect to our debt, including the Notes;
-
-
requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds
available for other purposes;
-
-
increasing our vulnerability to adverse economic and industry conditions, which could place us at a disadvantage compared to our
competitors that have relatively less debt;
-
-
limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; and
-
-
limiting our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital
expenditures, acquisitions and other corporate purposes.
In
addition, a breach of any of the restrictions or covenants in our debt agreements could cause a cross-default under other debt agreements. A significant portion of our debt then may
become immediately due and payable. We are not certain whether we would then have, or be able to obtain, sufficient funds to make these accelerated payments. If any of our debt is accelerated, our
assets may not be sufficient to repay such debt in full.
The Indenture has limited covenants and does not contain any limitations on our ability to grant or
incur a lien on our assets, sell or otherwise dispose of assets, pay dividends, or repurchase our capital stock, which may not protect your investment.
In addition to the absence of any restrictions on us or our subsidiaries on incurring any additional debt or other liabilities, we are
not restricted under the Indenture from granting security interests over our assets, or from paying dividends or issuing or repurchasing our securities. Also, there are no covenants in the Indenture
requiring us to achieve or maintain any minimum financial results relating to our financial position or results of operations. You are not protected under the Indenture in the event of a highly
leveraged transaction, reorganization, a default under our existing indebtedness, restructuring, merger or similar transaction that may adversely affect our ability to make payments on the Notes when
due.
Our access to funds from First Internet Bank may become limited, thereby restricting our ability to
make payments on our obligations.
First Internet Bancorp is a separate and distinct legal entity from the Bank and our other subsidiaries. Our principal source of funds
to make payments on the Notes and our other obligations is dividends, distributions and other payments from the Bank. The Bank is subject to laws that authorize regulatory bodies to block or reduce
the flow of funds from the Bank to us, which could impede access to funds we need to make payments on our obligations, including interest and principal payments on the Notes. For example, under
Indiana law an Indiana bank such as First Internet Bank is generally limited to
paying dividends equal to its profits for that year, plus its retained net profits for the two preceding years, less any required transfers to surplus or to fund the retirement of preferred stock or
debt, absent approval of the Indiana Department of Financial Institutions.
S-10
Table of Contents
In
addition, effective January 1, 2016, banks and bank holding companies are required to maintain a capital conservation buffer on top of minimum risk-weighted asset ratios. This
buffer is designed to absorb losses during periods of economic stress. When fully phased-in on January 1, 2019, the capital conservation buffer will be 2.5%. Banking institutions that do not
maintain capital in excess of the capital conservation buffer will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. Accordingly, if the Bank
does not maintain capital in excess of the buffer, distributions to the Company may be prohibited or limited and we may not have funds to make principal and interest payments on the Notes.
For
more information about these restrictions, see the information under the heading "Supervision and Regulation" in Item 1., Business, and the information under the headings
"We are subject to extensive government regulation,
and such regulation could limit or restrict our activities and adversely affect our earnings." and "Financial reform
legislation enacted by Congress will, among other things, tighten capital standards and result in new laws and regulations that likely will increase our costs of operations."
in Item 1A., Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
We may not be able to generate sufficient cash to service all of our debt, including the Notes.
Our ability to make scheduled payments of principal and interest, or to satisfy our obligations in respect of our debt or to refinance
our debt, will depend on our future performance of our operating subsidiaries. Prevailing economic conditions (including interest rates), regulatory constraints, including, among other things,
limiting distributions to us from the Bank and required capital levels with respect to the Bank and certain of our nonbank subsidiaries, and financial, business and other factors, many of which are
beyond our control, will also affect our ability to meet these needs. Our subsidiaries may not be able to generate sufficient cash flows from operations, or we may be unable to obtain future
borrowings in an amount sufficient to enable us to pay our debt, or to fund our other liquidity needs. We may need to refinance all or a portion of our debt on or before maturity. We may not be able
to refinance any of our debt when needed on commercially reasonable terms or at all.
Regulatory guidelines may restrict our ability to pay the principal of, and accrued and unpaid
interest on, the Notes, regardless of whether we are the subject of an insolvency proceeding.
As a bank holding company, our ability to pay the principal of, and interest on, the Notes is subject to the rules and guidelines of
the Federal Reserve regarding capital adequacy. We intend to treat the Notes as "Tier 2 capital" under these rules and guidelines. The Federal Reserve guidelines generally require us to review
the effects of the cash payment of Tier 2 capital instruments, such as the Notes, on our overall financial condition. The guidelines also require that we review our net income for the current
and past four quarters, and the amounts we have paid on Tier 2 capital instruments for those periods, as well as our projected rate of earnings retention. Moreover, pursuant to federal law and
the Federal Reserve regulations, as a bank holding company, we are required to act as a source of financial and managerial strength to the Bank and commit resources to its support, including the
guarantee of capital plans of an undercapitalized bank subsidiary. Such support may be required at times when we may not otherwise be inclined or able to provide it. As a result of the foregoing, we
may be unable to pay accrued interest on the Notes on one or more of the scheduled interest payment dates, or at any other time, or the principal of the Notes at the maturity of the Notes.
If
we were to be the subject of a bankruptcy proceeding under Chapter 11 of the U.S. Bankruptcy Code, the bankruptcy trustee would be deemed to have assumed, and would be required
to cure, immediately any deficit under any commitment we have to any of the federal banking agencies to maintain the capital of the Bank, and any other insured depository institution for which we have
such a responsibility, and any claim for breach of such obligation would generally have priority over most other unsecured claims.
S-11
Table of Contents
Holders of the Notes will have limited rights, including limited rights of acceleration, if there is
an event of default.
Payment of principal on the Notes may be accelerated only in the case of certain events of bankruptcy or insolvency involving us or
First Internet Bank. There is no automatic acceleration, or right of acceleration, in the case of default in the payment of principal of or interest on the Notes, or in the performance of any of our
other obligations under the Notes or the Indenture. Our regulators can, in the event we become subject to an enforcement action, require our subsidiary bank to not pay dividends to us, and to prevent
payment of interest or principal on the Notes and any dividends on our capital stock, but such limits will not permit acceleration of the Notes.
There may be no active trading market for the Notes.
The Notes will be a new issue of securities with no established trading market. Although we intend to apply to have the notes listed on
the NASDAQ Global Market, there can be no assurance the Notes will be approved for listing or, if listed, that an active trading market for the Notes will develop, or, if one does develop, that it
will be maintained. Although representatives of the underwriters have advised us that, following completion of the offering of Notes, one or more of the underwriters currently intend to make secondary
markets in the Notes, they are not obligated to do so and may discontinue any market-making activities at any time without notice. If an active trading market for the Notes does not develop or is not
maintained, the market or trading price and liquidity of the Notes may be adversely affected. If the Notes are traded after their initial issuance, they may trade at a discount to their initial
offering price, depending upon prevailing interest rates, the market for similar securities, general economic conditions and our financial condition and results of operations.
The market value of the Notes may be less than the principal amount of the Notes.
If a market develops for the Notes, the prices at which holders may be able to sell their Notes may be affected, potentially adversely,
by a number of factors. These factors include: the method of calculating the principal, premium, if any, interest or other amounts payable, if any, on the Notes; the time remaining to maturity of the
Notes; the aggregate amount outstanding of the Notes; any redemption or repayment features of the Notes; the level, direction, and volatility of market interest rates generally; general economic
conditions of the capital markets in the United States; geopolitical conditions and other financial, political, regulatory, and judicial events that affect the capital markets generally; the extent of
any market-making activities with respect to the Notes; and the operating performance of the Bank. Often, the only way to liquidate your investment in the Notes prior to maturity will be to sell the
Notes. At that time, there may be a very illiquid market for the Notes or no market at all.
Because the Notes may be redeemed at our option under certain circumstances prior to their maturity,
you may be subject to reinvestment risk.
Subject to the prior approval of the Federal Reserve, to the extent that such approval is then required, we may redeem all or a portion
of the Notes on September 30, 2021 and on any interest payment date thereafter prior to their stated maturity date. In addition, at any time at which any Notes remain outstanding, subject to
the prior approval of the Federal Reserve, to the extent that such approval is then required, we may redeem the Notes in whole but not in part upon the occurrence of (i) a "Tax Event,"
(ii) a "Tier 2 Capital Event" or (iii) a "1940 Act Event." In the event that we redeem the Notes, holders of the Notes will receive only the principal amount of the Notes plus any
accrued and unpaid
interest to but excluding such earlier redemption date. If any redemption occurs, holders of the Notes will not have the opportunity to continue to accrue and be paid interest to the stated maturity
date. Any such redemption may have the effect of reducing the income or return that you may receive on an investment in the Notes by reducing the term of the investment. If this occurs, you may not be
able to reinvest the proceeds at an interest rate
S-12
Table of Contents
comparable
to the rate paid on the Notes. See "Description of the NotesRedemption" in this prospectus supplement.
Investors
should not expect us to redeem the Notes on or after the date on which they become redeemable at our option. Under Federal Reserve regulations, unless the Federal Reserve
authorizes us in writing to do otherwise, we may not redeem the Notes unless they are replaced with other Tier 2 capital instruments or unless we can demonstrate to the satisfaction of the
Federal Reserve that, following redemption, we will continue to hold capital commensurate with our risk.
The amount of interest payable on the Notes will vary on and after September 30, 2021.
As the interest rate of the Notes will be calculated based on LIBOR from September 30, 2021 to but excluding the maturity date
or earlier redemption date and LIBOR is a floating rate, the interest rate on the Notes will vary on and after September 30, 2021. During this period, the Notes will bear a floating interest
rate set each quarterly interest period at a per annum rate equal to the then-current three-month LIBOR rate plus 4.85%; provided, that in the event three-month LIBOR is less than zero, three-month
LIBOR shall be deemed to be zero. The per annum interest rate that is determined on the relevant determination date will apply to the entire quarterly interest period following such determination date
even if LIBOR increases during that period.
Floating
rate notes bear additional significant risks not associated with fixed rate debt securities. These risks include fluctuation of the interest rates and the possibility that you
will receive an amount of interest that is lower than expected. We have no control over a number of matters, including economic, financial, and political events, that are important in determining the
existence, magnitude, and longevity of market volatility and other risks and their impact on the value of, or payments made on, the floating rate Notes. In recent years, interest rates have been
volatile, and that volatility may be expected in the future.
The level of LIBOR may affect our decision to redeem the Notes.
We are more likely to redeem the Notes on or after September 30, 2021 if the interest rate on them is higher than that which
would be payable on one or more other forms of borrowing. If we redeem the Notes prior to their maturity date, holders may not be able to invest in other securities that yield as much interest as the
Notes.
Holders of the Notes will have no rights against the publishers of LIBOR.
Holders of the Notes will have no rights against the publishers of LIBOR, even though the amount they receive on each interest payment
date on and after September 30, 2021 will depend upon the level of LIBOR. The publishers of LIBOR are not in any way involved in this offering and have no obligations relating to the Notes or
the holders of the Notes.
The Notes are not insured or guaranteed by the Federal Deposit Insurance Corporation.
The Notes are not savings accounts, deposits or other obligations of our bank subsidiary or any of our nonbank subsidiaries. The Notes
are not insured by the FDIC or any other governmental agency or public or private insurer. The Notes are ineligible and may not be used as collateral for a loan by us or our bank subsidiary.
Our credit ratings may not reflect all risks of an investment in the Notes, and changes in our
credit ratings may adversely affect your investment in the Notes.
The credit ratings of our indebtedness are an assessment by rating agencies of our ability to pay our debts when due. These ratings are
not recommendations to purchase, hold or sell the Notes, inasmuch as the ratings do not comment as to market price or suitability for a particular investor, are limited in scope,
S-13
Table of Contents
and
do not address all material risks relating to an investment in the Notes, but rather reflect only the view of each rating agency at the time the rating is issued. The ratings are based on current
and historical information furnished to the ratings agencies by us and information obtained by the ratings agencies from other sources. An explanation of the significance of such rating may be
obtained from such rating agency. There can be no assurance that such credit ratings will remain in effect for any given period of time, or that such ratings will not be lowered, suspended or
withdrawn entirely by the rating agencies, if, in each rating agency's judgment, circumstances so warrant.
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Table of Contents
USE OF PROCEEDS
We estimate that the net proceeds to us from this offering, after underwriting discounts and estimated expenses, will be approximately
$23,737,500 (or up to $27,369,375 if the underwriters exercise their purchase option in full). We intend to use the net proceeds to support the Bank's organic growth, the pursuit of strategic
acquisition opportunities and other general corporate purposes, which may include, among other things, contributing capital to the Bank, reducing or redeeming existing debt, funding loans and
purchasing investment securities through the Bank. We do not have any immediate plans, arrangements or understandings relating to any material acquisition.
As
of the date of this prospectus supplement, we cannot specify with certainty all of the particular uses for the net proceeds we will have upon completion of this offering. Accordingly,
our management will have broad discretion in the application of net proceeds.
Pending
the uses described above, we plan to invest the net proceeds from this offering in cash or cash equivalents. Investing the offering proceeds in securities until we are able to
deploy the proceeds will provide lower yields than we generally earn on loans, potentially adversely affecting our net interest yield and our net interest margin.
S-15
Table of Contents
CAPITALIZATION
The following table sets forth our capitalization, including regulatory capital ratios, on a consolidated basis, as of June 30,
2016:
-
-
on an actual basis, and
-
-
on an as adjusted basis to give effect to the sale of the Notes offered hereby without giving effect to any Notes that may be issued
pursuant to the underwriters' purchase option.
This
information should be read together with the financial and other data in this prospectus supplement as well as the unaudited consolidated financial statements and related notes and
Management's Discussion and Analysis of Financial Conditions and Results of Operations in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, which is incorporated by
reference into this prospectus supplement.
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016
|
|
|
|
Actual
|
|
As Adjusted
|
|
|
|
(dollars in thousands)
|
|
Liabilities:
|
|
|
|
|
|
|
|
Total Deposits
|
|
$
|
1,388,933
|
|
$
|
1,388,933
|
|
Advances from Federal Home Loan Bank
|
|
|
147,974
|
|
|
147,974
|
|
Outstanding subordinated debt
|
|
|
12,778
|
|
|
12,778
|
|
Notes offered hereby
|
|
|
|
|
|
23,738
|
(1)
|
Accrued interest payable
|
|
|
138
|
|
|
138
|
|
Accrued expenses and other liabilities
|
|
|
16,966
|
|
|
16,966
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,566,789
|
|
|
1,590,527
|
|
Shareholders' equity:
|
|
|
|
|
|
|
|
Preferred stock, no par value; 4,913,779 shares authorized; issued and outstandingnone
|
|
$
|
|
|
$
|
|
|
Voting common stock, no par value; 45,000,000 shares authorized; 5,533,050 shares issued and outstanding
|
|
|
95,642
|
|
|
95,642
|
|
Nonvoting common stock, no par value; 86,221 shares authorized; issued and outstandingnone
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
37,630
|
|
|
37,630
|
|
Accumulated other comprehensive income (loss)
|
|
|
2,407
|
|
|
2,407
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
$
|
135,679
|
|
$
|
135,679
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
1,702,468
|
|
$
|
1,726,206
|
|
|
|
|
|
|
|
|
|
Capital Ratios(2):
|
|
|
|
|
|
|
|
Common equity tier 1 to risk-weighted assets
|
|
|
10.66
|
%
|
|
10.66
|
%
|
Tier 1 capital to risk-weighted assets
|
|
|
10.66
|
%
|
|
10.66
|
%
|
Total capital to risk-weighted assets
|
|
|
12.54
|
%
|
|
14.51
|
%
|
Tier 1 leverage to average assets(3)
|
|
|
8.08
|
%
|
|
8.08
|
%
|
-
(1)
-
Represents
the aggregate principal amount of the Notes, reduced by the underwriting discount ($787,500) and our estimated offering expenses ($475,000).
-
(2)
-
The
as adjusted calculations for the risk-based capital ratios assume that the net proceeds from the sale of the Notes are invested in assets that carry a
0% risk weighting as of June 30, 2016.
-
(3)
-
Tier 1
leverage ratio is defined as Tier 1 capital (pursuant to risk-based capital guidelines) as a percentage of adjusted average assets for
the quarter ended June 30, 2016. The as adjusted calculations assume that the proceeds from the sale of the Notes would have been received on June 30, 2016.
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Table of Contents
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratio of earnings to fixed charges and our consolidated ratio of earnings to combined
fixed charges and preferred stock dividends on a historical basis for the periods indicated. For purposes of computing these ratios, earnings represent income before taxes and fixed charges. Fixed
charges, excluding interest on deposits, consist of interest expense, excluding interest on deposits, and one-third of rental expense for all operating leases, which we believe to be representative of
the interest portion of rent expense. Fixed charges, including interest on deposits, consist of interest expense, one-third of rental expense and interest on deposits. The term "preferred stock
dividends" is the amount of pre-tax earnings that is required to pay dividends on First Internet Bancorp's issued and outstanding preferred stock. As of the date of this prospectus supplement, we had
no preferred stock outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months
ended June 30,
|
|
Year ended December 31,
|
|
|
|
2016
|
|
2015
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
Consolidated ratio of earnings to fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding interest on deposits
|
|
|
6.17x
|
|
|
7.82x
|
|
|
7.45x
|
|
|
5.43x
|
|
|
5.42x
|
|
|
6.32x
|
|
|
3.66x
|
|
Including interest on deposits
|
|
|
1.96x
|
|
|
2.31x
|
|
|
2.26x
|
|
|
1.71x
|
|
|
1.75x
|
|
|
1.90x
|
|
|
1.41x
|
|
Consolidated ratio of earnings to combined fixed charges and preferred stock dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding interest on deposits
|
|
|
6.17x
|
|
|
7.82x
|
|
|
7.45x
|
|
|
5.43x
|
|
|
5.42x
|
|
|
6.32x
|
|
|
3.66x
|
|
Including interest on deposits
|
|
|
1.96x
|
|
|
2.31x
|
|
|
2.26x
|
|
|
1.71x
|
|
|
1.75x
|
|
|
1.90x
|
|
|
1.41x
|
|
S-17
Table of Contents
DESCRIPTION OF THE NOTES
The Notes offered by this prospectus supplement will be issued by First Internet Bancorp pursuant to a Subordinated Indenture dated as
of September 30, 2016 between First Internet Bancorp and the Trustee, as amended and supplemented by a First Supplemental Indenture dated as of September 30, 2016 between First Internet
Bancorp and the Trustee. We refer to the Subordinated Indenture, as amended and supplemented by the First Supplemental Indenture, as the "Indenture." You may request a copy of the Indenture from us as
described under "Where You Can Find More Information." We have summarized the material terms of the Indenture and the Notes below, but the summary does not purport to be complete and is subject to and
qualified in its entirety by reference to all of the provisions of the Indenture and the Notes. The following description of the particular terms of the Indenture and the Notes supplements, and to the
extent inconsistent therewith replaces, the description of the general terms and provisions of subordinated debt in the accompanying prospectus, to which description we refer you.
You
should read the Indenture and the Notes because they, and not this description, define your rights as holders of the Notes.
General
The Notes issued in this offering will initially be limited to $25,000,000 aggregate principal amount. Under the Indenture, the
aggregate principal amount of Notes which may be sold and delivered in other offerings is unlimited. The Notes may be sold in one or more series with the same or various maturities, at par, at a
premium, or at a discount.
The
maturity of the Notes may not be accelerated in the absence of certain events of default (as such term is defined in the Indenture). There is no right to accelerate the maturity of
the Notes if we fail to pay interest or principal on the Notes or any Additional Amounts (as defined below) with respect thereto or default in the performance or breach any covenant or warranty under
any Note or in the Indenture "Events of Default; Acceleration of Payment; Limitation on Suits."
The
Notes will mature on September 30, 2026 (the "maturity date"). The Notes are not convertible into, or exchangeable for, equity securities, other securities or assets of First
Internet Bancorp or First Internet Bank. There is no sinking fund for the Notes.
As
a bank holding company, our ability to make payments on the Notes will depend primarily on the receipt of dividends and other distributions from our subsidiary First Internet Bank.
There are various regulatory restrictions on the ability of First Internet Bank to pay dividends or make other distributions to us. See "Risk FactorsPayments on the Notes will depend on
receipt of dividends and distributions from our subsidiaries" and "Regulatory guidelines may restrict our ability to pay the principal of, and accrued and unpaid interest on, the Notes, regardless of
whether we are the subject of an insolvency proceeding" in this prospectus supplement.
Delivery
of reports, information and documents (including, without limitation, reports contemplated in this section) to the Trustee is for information purposes only, and the Trustee's
receipt thereof shall not constitute actual or constructive notice of any information contained therein or determinable from information contained therein, including First Internet Bancorp's
compliance with covenants under the Indenture, Notes, and guarantees (if any), as to which the Trustee is entitled to rely exclusively on officers' certificates.
The
Notes are not savings accounts, deposits or other obligations of First Internet Bank or any of our non-bank subsidiaries and are not insured or guaranteed by the FDIC or any other
governmental agency or public or private insurer. The Notes are solely obligations of First Internet Bancorp and are neither obligations of, nor guaranteed by, any of our subsidiaries.
S-18
Table of Contents
The
Notes will be issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.
Interest
The Notes will bear interest (a) at an initial rate of 6.0% per annum, commencing on September 30, 2016, from and
including the date of issuance to but excluding September 30, 2021, and (b) thereafter at a floating per annum rate equal to the then-current three-month LIBOR plus 4.85%. Interest is
payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year (the "interest payment dates").
"Three-month
LIBOR" means, for any interest period, the offered rate for deposits in U.S. dollars having a maturity of three months that appears on the Designated LIBOR Page as of
11:00 a.m., London time, on the Reset Rate Determination Date related to such interest period. If such rate does not appear on such page at such time, then the Calculation Agent will request
the principal London office of each of four major reference banks in the London interbank market, selected by First Internet Bancorp for this purpose and whose names and contact information will be
provided by First Internet Bancorp to the Calculation Agent, to provide such bank's offered quotation to prime banks in the London interbank market for deposits in U.S. dollars with a term of three
months as of 11:00 a m., London time, on such Reset Rate Determination Date and in a principal amount equal to an amount for a single transaction in U.S. dollars in the relevant market at the relevant
time as determined by First Internet Bancorp and provided to the Calculation Agent (a "Representative Amount"). If at least two such quotations are so provided, three-month LIBOR for the interest
period related to such Reset Rate Determination Date will be the arithmetic mean of such quotations. If fewer than two such quotations are provided, the Calculation Agent will request each of three
major banks in the City of New York selected by First Internet Bancorp for this purpose and whose names and contact information will be provided by First Internet Bancorp to the Calculation Agent, to
provide such bank's rate for loans in U.S. dollars to leading European banks with a term of three months as of approximately 11:00 a m., New York City time, on such Reset Rate Determination Date and
in a Representative Amount. If at least two such rates are so provided, three-month LIBOR for the interest period related to such Reset Rate Determination Date will be the arithmetic mean of such
quotations. If fewer than two such rates are so provided, then three-month LIBOR for the interest period related to such Reset Rate Determination Date will be set to equal the three-month LIBOR for
the immediately preceding interest period or, in the case of the interest period commencing on the first floating rate interest payment date, the coupon rate will be 6.0%. All percentages used in or
resulting from any calculation of three-month LIBOR will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with 0.000005% rounded up to 0.00001%. Notwithstanding
the foregoing, in the event that three-month LIBOR as determined in accordance with this definition is less than zero, three-month LIBOR for such interest period shall be deemed to be zero.
"Calculation
Agent" means U.S. Bank National Association, or any other successor appointed by us, acting as calculation agent.
"Designated
LIBOR Page" means the display on Bloomberg Page BBAM1 (or any successor or substitute page of such service, or any successor to such service selected by First Internet
Bancorp), for the purpose of displaying the London interbank rates for U.S. dollars.
"London
Banking Day" means any day on which commercial banks are open for business (including dealings in U.S. dollars) in London.
"Reset
Rate Determination Date" means the second London Banking Day immediately preceding the first day of each applicable interest period commencing on the first floating rate interest
payment date.
"Additional
Amounts" means any additional amounts that are required by the Indenture or the Notes, under circumstances specified by the Indenture or the Notes, to be paid by First
Internet Bancorp in respect
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Table of Contents
of
certain taxes imposed on holders of the Notes specified by the Indenture or the Notes and which are owing to such holders.
The
determination of three-month LIBOR for each applicable interest period by the Calculation Agent will (in the absence of manifest error) be final and binding. The Calculation Agent's
calculation of the amount of any interest payable after the first Reset Rate Determination Date will be maintained on file at the Calculation Agent's principal offices.
Interest
shall be calculated on the basis of a 360-day year consisting of twelve 30-day months to, but excluding, September 30, 2021 and thereafter on the basis of a 360-day year
and on the basis of the actual number of days elapsed. Dollar amounts resulting from that calculation will be rounded to the nearest cent, with one-half cent being rounded upward.
Interest
on the Notes, subject to certain exceptions, will accrue during the applicable interest period, which is from and including the immediately preceding interest payment date in
respect of which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from and including the date of issuance of the Notes to but excluding the applicable
interest payment date or the stated maturity date or date of earlier redemption, if applicable. If an interest payment date or the maturity date for the Notes falls on a day that is not a business
day, the interest payment or the payment of principal and interest at maturity will be paid on the next succeeding business day, but the payments made on such dates will be treated as being made on
the date that the payment was first due and the holders of the Notes will not be entitled to any further interest or other payments. In the event that a floating rate interest payment date falls on a
day that is not a business day, then such floating rate interest payment date will be postponed to the next succeeding business day unless such day falls in the next succeeding calendar month, in
which case such floating rate interest payment date will be accelerated to the immediately preceding business day, and, in each such case, the amounts payable on such business day will include
interest accrued to but excluding such business day.
Interest
on each Note will be payable to the person in whose name such Note is registered for such interest at the close of business on the 15th day of the month immediately preceding
the applicable interest payment date, whether or not such day is a business day. Any such interest which is payable, but is not punctually paid or duly provided for, on any interest payment date shall
cease to be payable to the holder on such relevant record date by virtue of having been a holder on such date, and such defaulted interest may be paid by us to the person in whose name the Note is
registered at the close of business on a special record date for the payment of defaulted interest. However, interest that is paid on the maturity date will be paid to the person to whom the principal
will be payable. Interest will be payable by wire transfer in immediately available funds in U.S. dollars at the office of the principal paying agent or, at our option in the event the Notes are not
represented by Global Notes (as defined below), by check mailed to the address of the person specified for payment in the preceding sentences.
No
recourse will be available for the payment of principal of, or interest or any Additional Amounts on, any Note, for any claim based thereon, or otherwise in respect thereof, against
any stockholder, employee, officer or director, as such, past, present or future, of First Internet Bancorp or of any successor entity. Neither the Indenture nor the Notes contain any covenants or
restrictions restricting the incurrence of debt, deposits or other liability by us or by our subsidiaries. The Indenture and the Notes contain no financial covenants and do not restrict us from paying
dividends or issuing or repurchasing other securities, and do not contain any provision that would provide protection to the holders of the Notes against a sudden and dramatic decline in credit
quality resulting from a merger, takeover, recapitalization or similar restructuring or any other event involving us or our subsidiaries that may adversely affect our credit quality.
When
we use the term "business day," we mean any day except a Saturday, Sunday, a legal holiday or any other day on which banking institutions in the City of New York, New York or any
place of payment are authorized or obligated by law, regulation or executive order to close.
S-20
Table of Contents
Ranking
The Notes will rank equally with all other unsecured subordinated indebtedness First Internet Bancorp may issue in the future under the
Indenture. The Notes will rank equal to the $13.0 million of First Internet Bancorp's subordinated indebtedness outstanding as of June 30, 2016. As of June 30, 2016, we had no
other outstanding subordinated indebtedness.
The
Notes will rank junior to and will be subordinated to all of our senior indebtedness, whether now outstanding, or created, assumed or incurred in the future, including all
indebtedness relating to money owed to general creditors and trade creditors. The Notes will be obligations of First Internet Bancorp only and will not be guaranteed by any of our subsidiaries,
including First Internet Bank, which is our principal subsidiary. The Notes will be structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries, which
means that creditors of our subsidiaries (including, in the case of First Internet Bank, its depositors) generally will be paid from those subsidiaries' assets before holders of the Notes would have
any claims to those assets. The Indenture and the Notes do not limit the amount of senior indebtedness, secured indebtedness, or other liabilities having priority over the Notes that we or our
subsidiaries may incur. As of June 30, 2016, on a consolidated basis, our outstanding indebtedness (including deposits) totaled approximately $1.57 billion, which includes
$13.0 million principal amount of outstanding unsecured subordinated indebtedness. As of June 30, 2016, we had no other outstanding subordinated indebtedness. As adjusted to give effect
to the offering, as if the offering had been completed as of June 30, 2016, First Internet Bancorp, First Internet Bank and our other subsidiaries had, on a consolidated basis,
$38.0 million principal amount of indebtedness.
"Senior
indebtedness" means:
-
-
the principal and any premium or interest for money borrowed or purchased by First Internet Bancorp;
-
-
the principal and any premium or interest for money borrowed or purchased by another person and guaranteed by First Internet Bancorp;
-
-
any deferred obligation for the payment of the purchase price of property or assets evidenced by a note or similar instrument or
agreement;
-
-
obligations to general and trade creditors;
-
-
any obligation arising from direct credit substitutes;
-
-
any obligation associated with derivative products such as interest rate and currency exchange contracts, foreign exchange contracts,
commodity contracts or any similar arrangements, unless the instrument by which First Internet Bancorp incurred, assumed or guaranteed the obligation expressly provides that it is subordinate or
junior in right of payment to any other indebtedness or obligations of First Internet Bancorp; and
-
-
all obligations of the type referred to in the first six bullet points above of other persons or entities for the payment of which
First Internet Bancorp is responsible or liable as obligor, guarantor or otherwise, whether or not classified as a liability on a balance sheet prepared in accordance with accounting principles
generally accepted in the United States;
in
each case, whether now outstanding, or created, assumed or incurred in the future. With respect to the Notes, senior indebtedness excludes any indebtedness
that:
-
-
expressly states that it is junior to, or ranks equally in right of payment with, the Notes; or
-
-
is identified as junior to, or equal in right of payment with, the Notes in any board resolution establishing such series of
subordinated indebtedness or in any supplemental indenture.
S-21
Table of Contents
Notwithstanding
the foregoing, and for the avoidance of doubt, if the Federal Reserve (or other competent regulatory agency or authority) promulgates any rule or issues any
interpretation that defines general creditor(s), the main purpose of which is to establish criteria for determining whether the subordinated debt of a financial or bank holding company is to be
included in its capital, then the term "general creditors" as used in the definition of "senior indebtedness" in the Indenture will have the meaning as described in that rule or interpretation.
Upon
the liquidation, dissolution, winding up, or reorganization of First Internet Bancorp, First Internet Bancorp must pay to the holders of all senior indebtedness the full amounts of
principal of, premium, interest and any additional amounts owing on, that senior indebtedness before any payment is made on the Notes. If, after we have made those payments on our senior indebtedness
there are amounts available for payment on the Notes, then we may make any payment on the Notes. Because of the subordination provisions and the obligation to pay senior indebtedness described above,
in the event of insolvency of First Internet Bancorp, holders of the Notes may recover less ratably than holders of senior indebtedness and other creditors of First Internet Bancorp. With respect to
the assets of a subsidiary of ours, our creditors (including holders of the Notes) are structurally subordinated to the prior claims of creditors of such subsidiary, except to the extent that we may
be a creditor with recognized claims against such subsidiary.
Subject
to the terms of the Indenture, if the Trustee or any holder of any of the Notes receives any payment or distribution of our assets in contravention of the subordination
provisions applicable to the Notes before all senior indebtedness is paid in full in cash, property or securities, including by way of set-off or any such payment or distribution that may be payable
or deliverable by reason of the payment of any other indebtedness of First Internet Bancorp being subordinated to the payment of the Notes, then such payment or distribution will be held in trust for
the benefit of holders of senior indebtedness or their representatives to the extent necessary to make payment in full in cash or payment satisfactory to the holders of senior indebtedness of all
unpaid senior indebtedness.
Events of Default; Acceleration of Payment; Limitation on Suits
The Notes and Indenture provide for only limited events upon which the principal of the Notes, together with accrued and unpaid
interest and premium, if any, shall be accelerated. These events are:
-
-
A court having jurisdiction shall enter a decree or order for the appointment of a receiver, trustee, assignee, liquidator or similar
official in any receivership, insolvency, liquidation, or similar proceeding relating to First Internet Bancorp, and such decree or order shall remain unstayed and in effect for a period of 60
consecutive days;
-
-
First Internet Bancorp shall consent to the appointment of a receiver, liquidator, trustee, assignee or other similar official in any
receivership, insolvency, liquidation or similar proceeding with respect to First Internet Bancorp; or
-
-
In the event of an appointment of a receiver, trustee, assignee, liquidator or similar official for our principal banking subsidiary,
First Internet Bank, and such appointment shall not have been rescinded for a period of 60 consecutive days from the date thereof.
The
Notes and Indenture provide for a limited number of other events of default, which do not permit acceleration of the payment of principal of, and interest on, the Notes,
including:
-
-
Default in the payment of any interest on the Notes when it becomes due and payable, and continuance of such default for a period of
30 days (unless the entire amount of such payment is deposited by First Internet Bancorp with the Trustee or with a paying agent prior to the expiration of such period of 30 days);
S-22
Table of Contents
-
-
Default in the payment of the principal on the Notes or any Additional Amounts with respect thereto when it becomes due and payable
(whether at the stated maturity or by declaration of acceleration, call for redemption or otherwise); or
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Default in the performance or breach of any covenant or warranty of First Internet Bancorp in the Indenture (other than a covenant or
warranty for which the consequences of nonperformance or breach are addressed in the five bullet points above and other than a covenant or warranty that has been included in the Indenture solely for
the benefit of notes issued thereunder other than the Notes), and the continuance of such default or breach (without such default or breach having been waived in accordance with the provisions of the
Indenture) for a period of 90 days after there has been given, by registered or certified mail, to First Internet Bancorp by the Trustee or to First Internet Bancorp and the Trustee by the
holders of not less than 25.0% in principal amount of the outstanding Notes 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 Indenture.
There is no right of acceleration in the case of a default in the payment of principal of or interest or Additional Amounts on the Notes or in our nonperformance
or breach of any other covenant or warranty under the Notes or the Indenture.
If we default in our obligation to pay any interest on the Notes when due and payable and such
default continues for a period of 30 days, or if we default in our obligation to pay the principal amount of the Notes or any Additional Amounts with respect thereto when it becomes due and
payable (whether at the stated maturity or by declaration of acceleration, call for redemption or otherwise), then the Trustee may demand First Internet Bancorp pay to the Trustee, for the benefit of
the holders of the Notes, the whole amount then due and payable on the Notes for principal and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any
overdue principal and any overdue interest at the rate or rates prescribed therefor in the Notes and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
No
holder of Notes will have any right to institute any proceeding, judicial or otherwise, with respect to the Indenture, or for the appointment of a receiver or trustee, or for any
other remedy under the Indenture, unless:
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such holder has previously given written notice to the Trustee of a continuing event of default with respect to the Notes;
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the holders of not less than 25.0% in principal amount of the outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such event of default in its own name as Trustee under the Indenture;
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-
such holder or holders have offered to the Trustee indemnity satisfactory to it against the costs, expenses, and liabilities to be
incurred in complying with such request;
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-
the Trustee for 60 days after its receipt of such notice, request, and offer of indemnity has failed to institute any such
proceeding; and
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no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the holders of a
majority in principal amount of the outstanding Notes.
In
any event, the Indenture provides that no one or more of such holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of the Indenture to
affect, disturb or prejudice the rights of any other of such holders of the Notes, or to obtain or to seek to obtain priority or preference over any other of such holders or to enforce any right under
the Indenture, except in the manner provided in the Indenture and for the equal and ratable benefit of all such holders of Notes.
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Redemption
We may, at our option, beginning with the interest payment date of September 30, 2021, and on any interest payment date
thereafter, redeem the Notes, in whole or in part, from time to time, subject to obtaining the prior approval of the Federal Reserve to the extent such approval is then required under the rules of the
Federal Reserve, at a price equal to 100% of the principal amount of the Notes being redeemed plus accrued but unpaid interest to, but excluding, such date of redemption. The Notes may not otherwise
be redeemed prior to maturity, except that we may also, at our option, redeem the Notes at any time, including before September 30, 2021, in whole, but not in part, from time to time, at a
price equal to 100% of the principal amount of the Notes being redeemed plus accrued but unpaid interest to, but excluding, such date of redemption upon the occurrence
of:
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a "Tax Event," defined in the Indenture to mean the receipt by us of an opinion of independent tax counsel to the effect that as a
result of (a) an 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 (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change becomes
effective or which pronouncement or decision is announced on or after the date of original issuance of the Notes, there is more than an insubstantial risk that the interest payable by us on the Notes
is not, or within 90 days of the date of such opinion will not be, deductible by us, in whole or in part, for U.S. federal income tax purposes;
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a "Tier 2 Capital Event," defined in the Indenture to mean First Internet Bancorp's good faith determination that, as a result
of (a) any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any rules, guidelines or policies of an
applicable regulatory authority for First Internet Bancorp or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Notes, in each case, that there is more than an insubstantial risk
that First Internet Bancorp will not be entitled to treat the Notes then outstanding as Tier 2 capital (or its then equivalent if we were subject to such capital requirement) for purposes of
capital adequacy guidelines of the Federal Reserve (or any successor regulatory authority with jurisdiction over bank holding companies), as then in effect and applicable, for so long as any Note is
outstanding; or
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First Internet Bancorp becoming required to register as an investment company pursuant to the Investment Company Act of 1940, as
amended.
Any
such redemption will be at a redemption price equal to the principal amount of the Notes plus accrued and unpaid interest to, but excluding, such date of redemption.
In
the event of any redemption of the Notes, we will deliver or cause to be delivered a notice of redemption (which notice may be conditional in our discretion on one or more conditions
precedent, and the redemption date may be delayed until such time as any or all of such conditions have been satisfied or revoked by us if we determine that such conditions will not be satisfied) by
first-class mail, or in the event the Notes are represented by Global Notes, electronically in accordance with DTC's procedures, to each holder of Notes not less than 30 nor more than 60 days
prior to the redemption date.
Any
partial redemption will be made in accordance with DTC's applicable procedures among all of the holders of the Notes. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state it is a partial redemption and the portion of the principal amount thereof to be redeemed. A replacement Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon cancellation of the original Note. The Notes are not subject to redemption or prepayment at the option of the holders of the
Notes.
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Modification and Waiver
The Indenture provides that we and the Trustee may amend or supplement the Indenture or the Notes with, or, in certain cases, without
the consent of the holders of a majority in principal amount of the outstanding Notes; provided, that any amendment or waiver may not, without the consent of the holder of each outstanding Note
affected thereby:
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reduce the amount of Notes whose holders must consent to an amendment, supplement or waiver;
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reduce the rate of or extend the time for payment of interest (including default interest) on any Note;
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reduce the principal or change the stated maturity of any Note;
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waive a default or event of default in the payment of the principal of or interest, if any, on any Note (except a rescission of
acceleration of the Notes by the holders of at least a majority in principal amount of the outstanding Notes and a waiver of the payment default that resulted from such acceleration;
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make any change to the percentage in principal amount of the outstanding Notes, held by holders whose consent is required to waive
certain defaults and the consequences thereof under the Indenture or any change to such defaults which require such consent;
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make any change to certain provisions of the Indenture relating to, among other things, holders' rights to receive payment of the
principal of and interest on the Notes and to institute suit for the enforcement of any such payment and waivers of past defaults;
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-
make the principal of or interest, if any, on any Note or any Additional Amount with respect thereto payable in any currency other
than that stated in the Note; or
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-
waive any redemption payment with respect to any Notes.
In
addition, the holders of at least a majority in principal amount of the outstanding Notes may, on behalf of all holders of Notes, waive compliance by us with certain terms, conditions
and provisions of the Indenture, as well as any past default and/or the consequences of default, other than any default in the payment of principal of or interest on any Note (provided that the
holders of a majority in principal amount of the outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration) or any
breach in respect of a covenant or provision that cannot be modified or amended without the consent of the holder of each outstanding Note.
In
addition, we and the Trustee may modify and amend the Indenture without the consent of any holders of Notes for any of the following
purposes:
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to evidence the succession of another person to First Internet Bancorp as obligor under the Indenture and the assumption by any such
successor of the covenants and obligations of First Internet Bancorp in the Indenture and in the Notes;
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to add to the covenants of First Internet Bancorp such further covenants, restrictions, conditions or provisions shall be for the
protection of the holders of the Notes and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions, conditions or provisions an event
of default permitting the enforcement of all or any of the several remedies provided in the Indenture, with such period of grace, if any, and subject to such conditions as such supplemental indenture
may provide;
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to add or change any of the provisions of the Indenture to such extent as shall be necessary to permit or facilitate the issuance of
notes in uncertificated or global form;
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to provide for the acceptance of appointment by a successor Trustee or facilitate the administration of the trust under the Indenture
by more than one Trustee;
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to cure any ambiguity, defect or inconsistency in the Indenture;
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-
to add any additional events of default (and if such events of default are to be for less than all series of notes, stating that such
are expressly being included solely for the benefit of such series);
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to modify, eliminate or add to the provisions of the Indenture, if the change or elimination (i) becomes effective only when
there are no debt securities outstanding of any series created prior to the change or elimination that are entitled to the benefit of the changed or eliminated provision or (ii) shall not apply
to the any debt securities outstanding at the time of such change or elimination;
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to establish the form of the Notes and to provide for the issuance of any other series of notes under the Indenture;
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-
to comply with any requirements of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act of
1939, as amended;
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to modify, eliminate or add to the provisions of the Indenture to such extent as shall be necessary to effect the qualification of the
Indenture under the Trust Indenture Act, or under any similar federal statute hereafter enacted, and to add to the Indenture such other provisions as may be expressly permitted by the Trust Indenture
Act, excluding certain provisions thereof; or
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to make any change that does not adversely affect the rights of any holder of notes of any series issued under the Indenture in any
material respect.
The
Trustee shall be entitled to receive an officer's certificate and opinion of counsel confirming that all conditions precedent are satisfied with respect to any supplemental
indenture, that such supplemental indenture is authorized and permitted and that such supplemental indenture is the legal, valid and binding obligation of First Internet Bancorp, enforceable against
it in accordance with its terms.
Legal Defeasance and Covenant Defeasance
We may choose to either discharge our obligations under the Indenture and the Notes in a legal defeasance or to release ourselves from
certain of our covenant restrictions under the Indenture and the Notes in a covenant defeasance (in each case, except for certain surviving rights of the Trustee and our obligations in connection
therewith). We may do so after we irrevocably deposit with the Trustee, in trust, cash and/or U.S. government securities in an amount that, which through the payment of
interest and principal in accordance with their terms, will provide, not later than one day before the due date of any payment of money, an amount in cash, which is sufficient in the opinion of our
independent public accountants to make all payments of principal of and interest, if any, on the Notes on the dates such installments of interest or principal are due. If we choose the legal
defeasance option, the holders of the Notes will not be entitled to the benefits of the Indenture except for certain limited rights, including registration of transfer and exchange of Notes,
replacement of lost, stolen or mutilated Notes and the right to receive payments of the principal of (and premium, if any) and interest on such Notes when such payments are due.
We
may discharge our obligations under the Indenture or release ourselves from covenant restrictions only if we meet certain requirements. Among other things, we must deliver to the
Trustee an opinion of our legal counsel to the effect that holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not
occurred. In the case of legal defeasance only, this opinion must be based on either a ruling received from or published by the Internal Revenue Service (the "IRS") or a change in the applicable
federal income tax law. We may not have a default or event of default under the
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Indenture
or the Notes on the date of deposit or during the period ending 120 days after such deposit. The deposit may not result in a breach or violation of, or constitute a default under, the
Indenture or any of our agreements to which we are a party or by which we are bound.
Any
defeasance of the Notes pursuant to the Indenture shall be subject to our obtaining the prior approval of the Federal Reserve and any additional requirements that the Federal Reserve
may impose with respect to defeasance of the Notes. Notwithstanding the foregoing, if, due to a change in law, regulation or policy subsequent to the issue date of the Notes the Federal Reserve does
not require that defeasance of instruments be subject to Federal Reserve approval in order for the instrument to be accorded Tier 2 capital treatment, then no such approval of the Federal
Reserve will be required for such defeasance.
Satisfaction and Discharge
We may discharge our obligations under the Indenture (except for certain surviving rights of the Trustee and our obligations in
connection therewith) if: (a) all outstanding Notes and all other outstanding notes issued under the Indenture (i) have been delivered for cancellation, or (ii) (1) have
become due and payable, (2) will become due and payable at their stated maturity within one year (3) are to
be called for redemption within one year under arrangements satisfactory to the Trustee for the filing of notice and redemption by the Trustee or (4) are deemed paid and discharged in a legal
defeasance described above, (and in the case of clauses (1), (2) and (3), we have irrevocably deposited with the Trustee an amount sufficient to pay and discharge the principal of and interest
on all outstanding Notes on the stated maturity date or redemption date, as the case may be); (b) we have paid all other sums payable by us under the Indenture; and (c) we have delivered
an officer's certificate and opinion of counsel confirming that all conditions precedent with respect to the satisfaction and discharge of the Indenture have been satisfied.
Consolidation, Merger and Sale of Assets
The Indenture provides that we may not consolidate with or merge with or into, or convey, transfer or lease all or substantially all of
our properties and assets to any person, and we may not permit any other person to consolidate with or merge into us or to convey, transfer or lease all or substantially all of its properties and
assets to us, unless:
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we are the surviving person or the successor person (if not us), is a corporation organized and validly existing under the laws of any
U.S. domestic jurisdiction and expressly assumes, by a supplemental indenture, our obligations on the Notes and under the Indenture;
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immediately after giving effect to such transaction, and treating any indebtedness that becomes an obligation of us or our
subsidiaries as a result of such transaction as having been incurred by us or such subsidiary at the effective date of such transaction, no default or event of default shall have occurred and be
continuing; and
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we have complied with our obligations to deliver certain documentation to the Trustee, including an officers' certificate and opinion
of counsel each stating that such proposed transaction and any supplemental indenture comply with the Indenture.
Further Issues
We may, from time to time, without notice to or the consent of the holders of the Notes, create and issue further notes ranking equally
with the Notes and with identical terms in all respects (or in all respects except for the date of offering, the offering price and the first interest payment date); provided that such further notes
either shall be fungible with the original Notes for federal income tax purposes or shall be issued under a different CUSIP number. Such further notes will be consolidated and form a single
series with the Notes.
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The
Trustee may conclusively rely upon certificates, opinions or other documents furnished to it under the Indenture and shall have no responsibility to confirm or investigate the
accuracy of mathematical calculations or other facts stated therein. The Trustee shall have no responsibility for monitoring First Internet Bancorp's compliance with any of its covenants under the
Indenture.
Paying Agent
We may appoint one or more financial institutions to act as our paying agents, at whose designated offices the Notes in non-Global form
may be surrendered for payment at their maturity. We call each of those offices a paying agent. We may add, replace or terminate paying agents from time to time. We may also choose to act as our own
paying agent. Initially, we have appointed the Trustee, at its office at 60 Livingston Avenue, St. Paul, Minnesota 55107, as the paying agent for the Notes. We must notify you of changes in the
paying agents.
Governing Law
The Indenture provides that the Notes and the Indenture governing the Notes will be governed by, and construed in accordance with, the
laws of the State of New York.
Tier 2 Capital
The Notes are intended to qualify as Tier 2 capital under the capital rules established by the Federal Reserve for bank holding
companies. The rules set forth specific criteria for instruments to qualify as Tier 2 capital. Among other things, the Notes must:
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be unsecured;
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have a minimum original maturity of at least five years;
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be subordinated to depositors and general creditors;
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not contain provisions permitting the holders of the Notes to accelerate payment of principal prior to maturity except in the event of
receivership, insolvency, liquidation or similar proceedings of First Internet Bancorp; and
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not contain provisions permitting First Internet Bancorp to redeem or repurchase the Notes prior to the maturity date without prior
approval of the Federal Reserve.
Clearance and Settlement
The Notes will be represented by one or more permanent global certificates, which we refer to individually as a Global Note and
collectively as the Global Notes, deposited with, or on behalf of DTC and registered in the name of Cede & Co. (DTC's partnership nominee). The Notes will be available for purchase in
minimum denominations of $25 and integral multiples of $25 in excess thereof in book-entry form only. So long as DTC or any successor depositary, which we refer to collectively as the Depositary or
its nominee is the registered owner of the Global Notes, the Depositary, or such nominee, as the case may be, will be considered to be the sole owner or holder of the Notes for all purposes of the
Indenture. Beneficial interests in the Global Notes will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants
in DTC. Investors may not elect to receive a certificate representing their Notes while the Notes are held by a Depositary. Investors may elect to hold interests in the Global Notes through DTC either
directly if they are participants in DTC or indirectly through organizations that are participants in DTC.
The
laws of some jurisdictions may require that some purchasers of securities take physical delivery of securities in definitive form. These laws may impair the ability to transfer
beneficial interests in the Notes, so long as the corresponding securities are represented by Global Notes.
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DTC
has advised us that it is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act. DTC holds securities that its direct participants deposit with DTC. DTC also facilitates the post-trade settlement among participants of sales and other securities transactions in
deposited securities, through electronic computerized book-entry transfers and pledges between participants' accounts. This eliminates the need for physical movement of securities certificates. Direct
participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly owned subsidiary of The
Depository Trust & Clearing Corporation, which, in turn, is owned by a number of direct participants of DTC and members of the National Securities Clearing Corporation, Fixed Income Clearing
Corporation and Emerging Markets Clearing Corporation, as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC and the Financial Industry Regulatory Authority.
Access to the DTC system is also available to others, referred to as indirect participants, such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing
corporations that clear through or maintain a direct or indirect custodial relationship with a direct participant. The rules applicable to DTC and its participants are on file with the SEC.
Purchases
of securities under the DTC system must be made by or through direct participants, which will receive a credit for the securities on DTC's records. The ownership interest of
each beneficial owner of securities will be recorded on the direct or indirect participants' records. Beneficial owners will not receive written confirmation from DTC of their purchase. Beneficial
owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings,
from the direct or indirect participant through which the beneficial owner entered into the transaction. Under a book-entry format, holders may experience some delay in their receipt of payments, as
such payments will be forwarded by the depositary to Cede & Co., as nominee for DTC. DTC will forward the payments to its participants, who will then forward them to indirect
participants or holders. Beneficial owners of securities other than DTC or its nominees will not be recognized by the relevant registrar, transfer agent, paying agent or trustee as registered holders
of the securities entitled to the benefits of the Indenture. Beneficial owners that are not participants will be permitted to exercise their rights only indirectly through and according to the
procedures of participants and, if applicable, indirect participants.
To
facilitate subsequent transfers, all securities deposited by direct participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such
other name as may be requested by an authorized representative of DTC. The deposit of securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do
not affect any change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the securities; DTC's records reflect only the identity of the direct participants to whose
accounts the securities are credited, which may or may not be the beneficial owners. The direct and indirect participants will remain responsible for keeping account of their holdings on behalf of
their customers.
Conveyance
of redemption notices and other communications by DTC to direct participants, by direct participants to indirect participants, and by direct and indirect participants to
beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. If less than all of the securities of any
class are being redeemed, DTC will determine the amount of the interest of each direct participant to be redeemed in accordance with its then current procedures.
DTC
may discontinue providing its services as securities depositary with respect to the Notes at any time by giving reasonable notice to the issuer or its agent. Under these
circumstances, in the event that a successor securities depositary is not obtained, certificates for the Notes are required to be printed and delivered. We may decide to discontinue the use of the
system of book-entry-only transfers through DTC
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(or
a successor securities depositary). In that event, certificates for the Notes will be printed and delivered to DTC.
As
long as DTC or its nominee is the registered owner of the Global Notes, DTC or its nominee, as the case may be, will be considered the sole owner and holder of the Global Notes and
all securities represented by these certificates for all purposes under the instruments governing the rights and obligations
of holders of such securities. Except in the limited circumstances referred to above, owners of beneficial interests in Global Notes:
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will not be entitled to have such global security certificates or the securities represented by these certificates registered in their
names;
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will not receive or be entitled to receive physical delivery of securities certificates in exchange for beneficial interests in global
security certificates; and
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will not be considered to be owners or holders of the global security certificates or any securities represented by these certificates
for any purpose under the instruments governing the rights and obligations of holders of such securities.
All
redemption proceeds, distributions and dividend payments on the securities represented by the Global Notes and all transfers and deliveries of such securities will be made to DTC or
its nominee, as the case may be, as the registered holder of the securities. DTC's practice is to credit direct participants' accounts upon DTC's receipt of funds and corresponding detail information
from the issuer or its agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of that
participant and not of DTC, the depositary, the issuer, the Trustee or any of their agents, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the
issuer or its agent, disbursement of such payments to direct participants will be the responsibility of DTC, and disbursement of such payments to the beneficial owners will be the responsibility of
direct and indirect participants.
Ownership
of beneficial interests in the Global Notes will be limited to participants or persons that may hold beneficial interests through institutions that have accounts with DTC or
its nominee. Ownership of beneficial interests in Global Notes will be shown only on, and the transfer of those ownership interests will be effected only through, records maintained by DTC or its
nominee, with respect to participants' interests, or any participant, with respect to interests of persons held by the participant on their behalf. Payments, transfers, deliveries, exchanges,
redemptions and other matters relating to beneficial interests in Global Notes may be subject to various policies and procedures adopted by DTC from time to time. None of First Internet Bancorp, the
Trustee or any agent for any of them will have any responsibility or liability for any aspect of DTC's or any direct or indirect participant's records relating to, or for payments made on account
of, beneficial interests in Global Notes, or for maintaining, supervising or reviewing any of DTC's records or any direct or indirect participant's records relating to these beneficial ownership
interests.
Although
DTC has agreed to the foregoing procedures in order to facilitate transfer of interests in the Global Notes among participants, DTC is under no obligation to perform or continue
to perform these procedures, and these procedures may be discontinued at any time. Neither First Internet Bancorp nor the Trustee will have any responsibility for the performance by DTC or its direct
participants or indirect participants under the rules and procedures governing DTC.
Because
DTC can act only on behalf of direct participants, who in turn act only on behalf of direct or indirect participants, and certain banks, trust companies and other persons
approved by it, the ability of a
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beneficial
owner of securities to pledge them to persons or entities that do not participate in the DTC system may be limited due to the unavailability of physical certificates for the securities.
DTC
has advised us that it will take any action permitted to be taken by a registered holder of any securities under the Indenture, only at the direction of one or more participants to
whose accounts with DTC the relevant securities are credited.
The
information in this section concerning DTC and its book-entry system has been obtained from sources that we believe to be accurate, but we assume no responsibility for the accuracy
thereof.
Trustee
U.S. Bank National Association will act as Trustee under the Indenture. The Trustee has all of the duties and responsibilities
specified under the Trust Indenture Act. Other than its duties in a case of an event of default, the Trustee is not obligated to exercise any of its rights or powers under the Indenture at the request
or direction of the holders of the Notes, unless the holders have offered to the Trustee security or indemnity satisfactory to the Trustee. From time to time, we, and one or more of our subsidiaries,
may maintain deposit accounts and conduct other banking transactions, including lending transactions, with the Trustee in the ordinary course of business. Additionally, we maintain banking
relationships with the Trustee and its affiliates in the ordinary course of business. These banking relationships include the Trustee serving as trustee under indentures involving certain of our trust
preferred securities.
Notices
Any notices required to be given to the holders of the Notes will be given to the Trustee. Notwithstanding any other provision of the
Indenture or any Note, where the Indenture or any Note provides for notice of any event or any other communication (including any notice of redemption or repurchase) to a holder of a Note (whether by
mail or otherwise), such notice shall be sufficiently given if given to DTC (or its designee) pursuant to the applicable procedures from DTC or its designee, including by electronic mail in accordance
with accepted practices at DTC.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of material U.S. federal income tax consequences of the ownership and disposition of the Notes
offered hereby. Except where noted, this discussion addresses only those beneficial owners of the Notes that are purchased by an initial holder at their original issue price for cash and that are held
as capital assets for U.S. federal income tax purposes (generally, property held for investment). This summary does not address the tax consequences to subsequent purchasers of the Notes or any
persons who hold the Notes for any reason other than as capital assets. In addition, this summary does not address the tax laws of any state, local or non-U.S. jurisdiction or other U.S. federal
taxes, such as the estate and gift taxes. We intend, and by acquiring any Notes each beneficial owner of a Note will agree, to treat the Notes as indebtedness for U.S. federal income tax purposes, and
this discussion assumes such treatment.
This
discussion does not address all aspects of U.S. federal income taxation that may be applicable to beneficial owners of the Notes in light of their particular circumstances, or to a
class of beneficial owners subject to special treatment under U.S. federal income tax laws, such as:
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entities treated as partnerships or S corporations for U.S. federal income tax purposes or persons who hold the Notes through entities
treated as partnerships or S corporations for U.S. federal income tax purposes,
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financial institutions, banks, and pension plans,
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insurance companies,
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qualified insurance plans,
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tax-exempt organizations,
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qualified retirement plans and individual retirement accounts,
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governmental entities,
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brokers, dealers or traders in securities or currencies,
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regulated investment companies,
-
-
real estate investment trusts or grantor trusts,
-
-
a U.S. Holder (as defined below)whose functional currency is not the U.S. dollar,
-
-
persons subject to the alternative minimum tax provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
-
-
persons who purchase or sell the Notes as part of a wash sale,
-
-
persons who hold the Notes as part of a "hedge," "straddle" or other risk reduction mechanism, "constructive sale," or "conversion
transaction," as these terms are used in the Code,
-
-
certain U.S. expatriates, and
-
-
controlled foreign corporations, passive foreign investment companies and regulated investment companies and shareholders of such
corporations.
This
summary is for general information only and is based on the Code, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, as well
as existing interpretations relating thereto, all as of the date hereof, and changes to any of which subsequent to the date of this prospectus supplement may affect the tax consequences described
herein (possibly with retroactive effect). We have not sought, and will not seek, any ruling from the IRS with respect to the statements made and the conclusions reached in this summary, and we cannot
assure you that the IRS will agree with such statements
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and
conclusions. You are urged to consult your tax advisor with regard to the application of the U.S. federal income tax laws to your particular situation as well as any tax consequences arising under
other U.S. federal tax laws or the laws of any state, local or non-U.S. taxing jurisdiction.
This section applies to you if you are a "U.S. Holder." As used herein, the term "U.S. Holder" means a beneficial owner of a Note that
is, for U.S. federal income tax purposes:
-
-
an individual citizen or resident of the United States,
-
-
a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the
laws of the United States, any state therein or the District of Columbia,
-
-
an estate, the income of which is subject to U.S. federal income taxation regardless of its source, or
-
-
a trust: (a) if a court within the United States is able to exercise primary supervision over its administration and one or
more U.S. persons have authority to control all substantial decisions of the trust; or (b) that was in existence on August 20, 1996 and has a valid election in effect under applicable
Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes.
An
individual may be treated as a resident instead of a nonresident of the United States in any calendar year for U.S. federal income tax purposes if the individual was present in the
United States for at least 31 days in that calendar year and for an aggregate of at least 183 days during the three-year period ending with the current calendar year. For purposes of
this calculation, all of the days present in the current year, one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year are
counted.
Payments of Interest.
Based on the interest rate characteristics of the Notes, we intend to treat the Notes as "variable rate debt
instruments"
("VRDIs") for U.S. federal income tax purposes and this discussion assumes such characterization to be correct. It is expected, and this discussion assumes, that either the issue price of the Notes
will equal the stated redemption price at maturity of the Notes or the Notes will otherwise be issued with no more than a
de minimis
amount of original
issue discount. Accordingly, stated interest paid on a Note should constitute "qualified stated interest" under the Treasury Regulations applicable to VRDIs, and as such will be taxable to you as
ordinary interest income at the time it accrues or is received in accordance with your method of accounting for U.S. federal income tax purposes.
Sale, Exchange, Redemption, Retirement or Other Taxable Disposition.
Upon the sale, exchange, redemption, retirement or other taxable
disposition
(including early redemption) of a Note, you generally will recognize taxable gain or loss equal to the difference between the amount you realize and your adjusted tax basis in the Note. For these
purposes, the amount realized does not include any amount attributable to accrued and unpaid qualified stated interest, which will be treated as described under
"
Payments of Interest
" above. Your adjusted tax basis in the Note generally will equal the cost of the Note to you. Such gain or loss
generally will be capital gain or loss, and will be long-term capital gain or loss if, at the time of the disposition, you have held the Note for more than one year. Long term capital gains recognized
by certain non-corporate U.S. Holders (including certain individuals) are generally subject to preferential tax rates. The deductibility of capital losses may be subject to limitations. You are urged
to consult your tax advisor regarding such limitations.
Backup Withholding and Information Reporting.
Information returns generally will be filed with the IRS in connection with interest
payments on the
Notes and the proceeds from a sale or other disposition (including a retirement or redemption) of the Notes. Backup withholding (currently at a rate of 28%) may be imposed on these payments if you
fail to provide your correct taxpayer identification number to the paying agent, a certification of exempt status, or have been notified by the IRS that you are subject to backup withholding (and such
notification has not been withdrawn). The amount of any backup withholding from a payment to
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you
generally will be allowable as a credit or refund against your U.S. federal income tax liability, provided that the required information is furnished to the IRS. You are urged to consult your tax
advisor regarding your qualification for an exemption from backup withholding and the procedures for establishing such exemption, if applicable.
Net Investment Income Tax.
Certain U.S. Holders who are individuals, estates and certain trusts are subject to a 3.8% tax on the lesser
of:
(a) the U.S. Holder's "net investment income" (or "undistributed net investment income" in the case of an estate or trust) for the relevant taxable year (for these purposes, net investment
income generally includes interest and gains from sales of Notes); and (b) the excess of the U.S. Holder's modified adjusted gross income for the relevant taxable year over a certain threshold
(which, in the case of individuals, is between $125,000 and $250,000, depending on the individual's circumstances). U.S. Holders that are individuals, estates or trusts are urged to consult their tax
advisors regarding the effect, if any, of the net investment income tax on their purchase, ownership and disposition of Notes.
This section applies to you if you are a "Non-U.S. Holder." As used herein, the term "Non-U.S. Holder" means a beneficial owner of a
Note that is, for U.S. federal income tax purposes, neither a U.S. Holder nor a partnership.
Payments on the Notes.
A 30% U.S. federal withholding tax will not apply to any payment to you of principal or interest on the Notes,
provided that
you meet the following requirements of the portfolio interest exemption:
-
-
you do not actually (or constructively) own 10% or more of the total combined voting power of all of our voting stock within the
meaning of the Code and the Treasury regulations;
-
-
you are not a controlled foreign corporation that is related to us through stock ownership;
-
-
you are not a bank whose receipt of interest on the Notes is described in section 881(c)(3)(A) of the Code; and
-
-
(a) you provide your name and address on an IRS Form W-8BEN or W-8BEN-E (or other applicable form), and certify, under
penalties of perjury, that you are not a United States person, or (b) if you hold the Notes through certain foreign intermediaries, you satisfy the certification requirements of applicable U.S.
Treasury regulations. Special certification requirements apply to certain non-U.S. holders that are pass-through entities rather than individuals.
If
you cannot satisfy the requirements described above, payments of interest made to you will be subject to the 30% U.S. federal withholding tax, unless you provide a properly
executed:
-
-
IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable form) claiming an exemption from, or reduction in the rate of,
withholding under the benefit of an applicable tax treaty; or
-
-
IRS Form W-8ECI (or other applicable form) stating that interest paid on the Notes is not subject to withholding tax because it
is effectively connected with your conduct of a trade or business in the United States.
If
interest on the Notes is effectively connected with the conduct by you of a trade or business in the United States (and, if an applicable treaty requires it, is attributable to a
permanent establishment in the United States of the Non-U.S. Holder), you generally will be taxed in the same manner as if you were a U.S. Holder (see "
Tax
Consequences to U.S. Holders
" above), although you will be exempt from the withholding tax discussed in the preceding paragraphs so long as you provide a properly executed IRS
Form W-8 (generally an IRS Form W-8ECI). You should consult your tax advisor with respect to other tax consequences of the ownership and disposition of Notes including the possible
imposition of a branch profits tax.
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Sale, Exchange, Redemption, Retirement or other Disposition.
Subject to the discussion below concerning backup withholding, any gain
realized on the
sale, exchange, redemption, retirement or other disposition of the Notes generally will not be subject to U.S. federal income tax unless:
-
-
that gain or income is effectively connected with the conduct of a trade or business by you in the United States (and, where a tax
treaty requires, is attributable to a U.S. permanent establishment of the non-U.S. holder); or
-
-
you are an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and
certain other conditions are met.
A
non-U.S. holder described in the first bullet above will be subject to tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates (see
"
Tax Consequences to U.S. Holders
" above). An individual non-U.S. holder described in the second bullet point above will be subject to a
flat 30% tax on the gain derived from the sale, which may be offset by certain U.S. source capital losses (even though the individual is not considered a resident of the United States). If a non-U.S.
holder that is a foreign
corporation falls under the first bullet above, it may also be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be
specified by an applicable tax treaty.
Backup Withholding and Information Reporting.
The amount of the interest paid to you and any tax withheld with respect to such interest,
regardless
of whether withholding was required, must be reported annually to the IRS and to you. Copies of the information returns reporting the amount of such interest and the amount of withholding may also be
made available to the tax authority in the country in which you reside under the provisions of an applicable tax treaty.
In
general, no backup withholding will be required regarding payments on the Notes that we make to you, provided that the applicable withholding agent does not have actual knowledge or
reason to know that you are a United States person and you have delivered the statement described above under "U.S. Federal Withholding Tax."
In
addition, no information reporting or backup withholding will be required regarding the proceeds of the sale of the Notes made within the United States or conducted through certain
U.S. financial intermediaries if:
-
-
the payor (1) receives an applicable Form W-8 and (2) does not have actual knowledge or reason to know that you
are a United States person; or
-
-
you otherwise establish an exemption.
Generally,
information reporting and backup withholding will not apply to a payment of disposition proceeds to a non-U.S. holder where the transaction is effected outside the United
States through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a broker with substantial U.S. ownership or operations
generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. Non-U.S. holders should consult their own tax advisors regarding the application of the
information reporting and backup withholding rules to them.
Backup
withholding may apply if you fail to comply with applicable U.S. information reporting or certification requirements.
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax
liability provided the required information is furnished to the IRS.
Foreign Account Tax Compliance Act.
Under Sections 1471 through 1474 of the Code and the Treasury Regulations and administrative
guidance
promulgated thereunder (collectively, "FATCA"), the relevant withholding agent may be required to withhold 30% of interest paid on the Notes and any gross proceeds of
S-35
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either
a sale or disposition of the Notes paid after December 31, 2018 to (i) a foreign financial institution (whether such institution is the beneficial owner or an intermediary) unless
such foreign financial institution agrees to verify, report and disclose its U.S. accountholders and meets certain other specified requirements or (ii) a non-financial foreign entity (whether
such entity is the beneficial owner or an intermediary) unless such entity certifies that it does not have any substantial U.S. owners or provides the name, address and taxpayer identification number
of each substantial U.S. owner and such entity meets certain other specified requirements. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the
United States governing FATCA may be subject to different rules. Under certain circumstances, a non-U.S. holder may be eligible for refunds or credits of the withholding tax. You should consult your
own tax advisor regarding this legislation and whether it may be relevant to your purchase, ownership and disposition of the Notes.
THE
FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS NOT A SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS OF THE TAX CONSEQUENCES RELATED TO THE NOTES TO YOU. WE URGE YOU TO CONSULT A
TAX ADVISOR REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES RELATED TO THE NOTES TO YOU.
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BENEFIT PLAN INVESTOR CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Code, impose certain
requirements on:
-
-
employee benefit plans that are subject to Part 4 of Subtitle B of Title I of ERISA;
-
-
individual retirement accounts ("IRAs"), Keogh plans or other plans and arrangements subject to Section 4975 of the Code;
-
-
entities (including certain insurance company general accounts) with underlying assets that are deemed "plan assets" (as defined in
U.S. Department of Labor regulation 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA (the "plan asset regulations")) by reason of any such plan's or
arrangement's investment therein (we refer to all of the foregoing collectively as "Plans"); and
-
-
persons who are fiduciaries with respect to Plans.
Governmental,
not for profit, church and non-U.S. plans ("Non-ERISA Arrangements") are not subject to Part 4 of Subtitle B of Title I of ERISA or Section 4975 of the Code
but may be subject to laws that are substantially similar (each, a "Similar Law").
The
following discussion summarizes certain aspects of ERISA, the Code and Similar Laws that may affect the decision by a Plan or Non-ERISA Arrangement to invest in the Notes. The
following discussion is general in nature and is not intended to be a complete discussion of applicable laws and regulations pertaining to an investment in the Notes by a Plan or Non-ERISA
Arrangement. The following discussion is not intended to be legal advice. The following discussion is based on applicable law and regulations in effect as of the date of this prospectus supplement; we
do not undertake any obligation to update this summary as a result of changes in applicable law or regulations. Fiduciaries of Plans and Non-ERISA Arrangements should consult their own legal counsel
before purchasing the Notes. References herein to the purchase, holding or disposition of Notes also refer to the purchase, holding or disposition of any beneficial interest in the Notes.
Before investing in the Notes, the fiduciary of a Plan should consider whether an investment will satisfy the applicable requirements
set forth in Part 4 of Title I of ERISA, including whether the investment:
-
-
will satisfy the prudence and diversification standards of ERISA;
-
-
will be made solely in the interests of the participants and beneficiaries of the Plan;
-
-
is permissible under the terms of the Plan and its investment policies and other governing instruments; and
-
-
is for the exclusive purpose of providing benefits to the participants and beneficiaries of the Plan and for defraying the reasonable
expenses of administering the Plan.
The
fiduciary of a Plan should consider all relevant facts and circumstances, including the limitations imposed on transferability, whether the Notes will provide sufficient liquidity in
light of the foreseeable needs of the Plan, that the Notes are unsecured and subordinated, and the tax consequences of the investment. The fiduciary of a Non-ERISA Arrangement should consider whether
an investment in the Notes satisfies its obligations imposed under Similar Laws and whether an investment is consistent with the terms of the governing instruments of the Non-ERISA Arrangement.
Section 406 of ERISA and Section 4975 of the Code may prohibit certain transactions involving the assets of a Plan and
those persons who have specified relationships with the Plan, called "parties in interest" under ERISA and "disqualified persons" under Section 4975 of the Code (collectively, "parties in
interest").
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Parties
in interest who engage in a non-exempt prohibited transaction may be subject to excise taxes, and the transaction may be subject to rescission. Similar Law may include prohibitions applicable
to Non-ERISA Arrangements that are similar to the prohibited transaction rules contained in ERISA and the Code. A fiduciary considering an investment in the Notes should consider whether the
investment, including the holding or disposition of the Notes, may constitute or give rise to such a prohibited transaction for which an exemption is not available.
With
respect to Plans subject to ERISA, we believe that the Notes will be treated as indebtedness with no substantial equity features for purposes of the plan asset regulations (although
we make no assurances to that effect). Although not free from doubt, our assessment is based upon the traditional debt features of the Notes. If the Notes are treated as indebtedness, rather than
equity, our assets will not be treated as plan assets as result of investment in the Notes.
Without
regard to whether the Notes may cause our assets to be treated as plan assets under the plan asset regulations, we, the underwriter and our or the underwriter's respective
current and future affiliates may be parties in interest with respect to many Plans, and the purchase, holding or disposition of the Notes by, on behalf of, or with the assets of, any such Plan could
give rise to a prohibited transaction under ERISA or the Code. For example, a purchase of the Notes may be deemed to represent a direct or indirect sale of property, extension of credit or furnishing
of services between us and an investing Plan, which would be prohibited if we are a party in interest with respect to the Plan unless exemptive relief is available.
A
prospective purchaser that is, or is acting on behalf of, or with the assets of, a Plan may wish to consider the exemptive relief available under the following prohibited transaction
class exemptions, or PTCEs: (a) the in- house asset manager exemption (PTCE 96-23); (b) the insurance company general account exemption (PTCE 95-60); (c) the bank collective
investment fund exemption (PTCE 91-38); (d) the insurance company pooled separate account exemption (PTCE 90-1); and (e) the qualified professional asset manager exemption (PTCE 84-14).
In addition, ERISA Section 408(b)(17) and Section 4975(d)(20) of the Code may provide limited exemptive relief for the purchase and sale of the Notes, provided that neither we nor
certain of our affiliates have or exercise any discretionary authority or control over, or render any investment advice with respect to, the assets of the Plan involved in the transaction, and
provided further that the Plan pays no more, and receives no less than, adequate consideration (as defined in the exemption) in connection with the transaction (the so-called "service provider
exemption"). There can be no assurance, however, that any of these administrative or statutory exemptions will be available with respect to a transaction involving the Notes or with respect to any
particular Plan. Purchasers should consult their own legal counsel to determine whether any purchase will constitute a prohibited transaction and whether exemptive relief is available.
Each
purchaser or holder of a Note, including each fiduciary who causes an entity to purchase or hold a Note, shall be deemed to have represented and warranted on each day such purchaser
or holder holds such Note that either:
-
-
it is neither a Plan nor a Non-ERISA Arrangement, and it is not purchasing or holding the Note on behalf of, or with the assets of,
any Plan or Non-ERISA Arrangement; or
-
-
its purchase, holding and subsequent disposition of the Note will not constitute or result in (a) a non- exempt prohibited
transaction under Section 406 of ERISA, Section 4975 of the Code or any provision of Similar Law, or (b) a breach of fiduciary or other duty or applicable law.
Each
purchaser or holder of a Note will have exclusive responsibility for ensuring that its purchase, holding and subsequent disposition of the Note does not violate ERISA, the Code or
any Similar Law. Nothing contained herein shall be construed as a representation that an investment in the Notes would meet any or all of the relevant legal requirements with respect to investments
by, or that an investment in the Notes is appropriate for, Plans or Non-ERISA Arrangements, whether generally or as to any particular Plan or Non-ERISA Arrangement.
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UNDERWRITING
We have entered into an underwriting agreement with Sandler O'Neill & Partners, L.P., as the representative of the
underwriters named below, with respect to the Notes being offered pursuant to this prospectus supplement. Subject to certain conditions, each underwriter named below has severally agreed to purchase
from us, and we have agreed to sell to that underwriter, the principal amount of notes set forth opposite that underwriter's name:
|
|
|
|
|
Underwriter
|
|
Principal Amount
|
|
Sandler O'Neill & Partners, L.P.
|
|
$
|
13,000,000
|
|
American Capital Partners, LLC
|
|
|
4,000,000
|
|
Boenning & Scattergood, Inc.
|
|
|
4,000,000
|
|
R. Seelaus & Co., Inc.
|
|
|
4,000,000
|
|
|
|
|
|
|
Total
|
|
$
|
25,000,000
|
|
The
underwriting agreement provides that the obligation of the underwriters to purchase the Notes offered hereby is subject to certain conditions precedent and that the underwriters will
purchase an aggregate of $25,000,000 in principal amount of Notes, which represents all of the Notes offered by this prospectus supplement, if any of these Notes are purchased.
The
Company has granted the underwriters the right to purchase an additional $3,750,000 aggregate principal amount of Notes at the public offering price, less the underwriting discount,
within 30 days from the date hereof.
Notes
sold by the underwriters to the public will be offered at the public offering price set forth on the cover of this prospectus supplement. If all the Notes are not sold at the
public offering price, the underwriters may change the offering price and the other selling terms. The offering of the Notes by the underwriters is subject to receipt and acceptance and subject to the
underwriters' right to reject any order in whole or in part.
Each
underwriter advised us that such underwriter does not intend to confirm sales to any account over which it exercises discretionary authority.
Discounts, Commissions and Expenses
The following table shows the per Note and total underwriting discounts and commissions we will pay the underwriters. The amounts shown
in the table assume both no exercise and full exercise of the underwriters' option to purchase the additional $3,750,000 principal amount of Notes.
|
|
|
|
|
|
|
|
|
|
|
Paid by the Company
|
|
Per Note
|
|
Without Option
|
|
With Option
|
|
Public Offering Price
|
|
$
|
25.000
|
|
$
|
25,000,000
|
|
$
|
28,750,000
|
|
Discount
|
|
|
0.788
|
|
|
787,500
|
|
|
905,625
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds (Before Expenses)
|
|
$
|
24.213
|
|
$
|
24,212,500
|
|
$
|
27,844,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We
estimate that our total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $475,000, which expenses are payable by us.
Indemnification
We have agreed to indemnify the underwriters, and persons who control the underwriters, against certain liabilities, including
liabilities under the Securities Act and to contribute to payments the underwriters may be required to make in respect of these liabilities.
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Public Trading Market
The Notes consist of a new issue of securities with no established trading market. We have applied to have the Notes listed on the
NASDAQ Global Market. If the listing is approved, we expect trading of the Notes to begin within the 30-day period after the initial delivery of the Notes. Even if the Notes are listed, there may be
little or no secondary market for the Notes. The representatives of the underwriters have advised us that, following completion of the offering of the Notes, one or more underwriters intend to make a
market in the Notes after the initial offering, although they are under no obligation to do so. The underwriters may discontinue any market making activities at any time without notice. We can give no
assurance as to development, maintenance or liquidity of any trading market for the Notes.
Stabilization
In connection with this offering of the Notes, the underwriters may engage in overallotment, stabilizing transactions and syndicate
covering transactions. Overallotment involves sales in excess of the offering size, which create a short position for the underwriter. Syndicate covering transactions involve purchases of the Notes in
the open market after the distribution has been completed in order to cover short positions. Stabilizing transactions involve bids to purchase the Notes in the open market for the purpose of pegging,
fixing, or maintaining the price of the Notes. Stabilizing transactions may cause the price of the Notes to be higher than it would otherwise be in the absence of those transactions. These activities,
if commenced, may be discontinued at any time.
Neither
we nor the underwriters make 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
Notes. In addition, neither we nor the underwriters make any representation that the underwriters will engage in these transactions or that these transactions, once commenced, will not be discontinued
without notice.
Electronic Distribution
This prospectus supplement and the accompanying prospectus may be made available in electronic format on one or more websites or
through other online services maintained by the underwriters or by their respective affiliates. Other than the prospectus supplement and the accompanying prospectus in electronic format, information
on such websites and any information contained in any other website maintained by the underwriters or any of their respective affiliates is not part of this prospectus supplement or our registration
statement of which the related prospectus forms a part, has not been approved or endorsed by us or the underwriters in their capacity as underwriter and should not be relied on by investors.
Other Relationships with the Underwriters
The underwriters and their respective affiliates have engaged in, and may in the future engage in, investment banking and other
commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.
In
addition, in the ordinary course of their business activities, the underwriters and their respective affiliates may make or hold a broad array of investments, including serving as
counterparties to certain derivative and hedging arrangements and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for
their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their
respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to
clients that they acquire, long and/or short positions in such securities and instruments.
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Other Matters
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the Notes
offered by this prospectus supplement in any jurisdiction where action for that purpose is required. The Notes offered by this prospectus supplement may not be offered or sold, directly or indirectly,
nor may this prospectus supplement, the accompanying prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or
published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. We and the underwriters require that the
persons into whose possession this prospectus supplement comes inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus supplement. This
prospectus supplement does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus supplement in any jurisdiction in which such an offer or a
solicitation is unlawful.
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LEGAL MATTERS
The validity of the securities and certain other matters will be passed upon for us by Faegre Baker Daniels LLP, Indianapolis,
Indiana. Holland & Knight LLP, Washington, DC, will pass upon certain legal matters for the underwriters. John Taylor, counsel at Faegre Baker Daniels LLP, beneficially owns
10,000 shares of our common stock.
EXPERTS
The consolidated financial statements of the Company appearing in its Annual Report on Form 10-K for the year ended
December 31, 2015, and the effectiveness of the Company's internal control over financial reporting as of December 31, 2015 included therein, have been audited by BKD LLP,
independent registered public accounting firm, as stated in their reports thereon dated March 10, 2016, are incorporated herein by reference, and are included in reliance upon such reports
given on the authority of such firm as experts in accounting and auditing.
S-42
PROSPECTUS
$100,000,000
Common Stock
Preferred Stock
Depositary Shares
Debt Securities
Warrants
Purchase Contracts
Units
We may issue securities from time to time in one or more offerings. This prospectus describes the general terms of these securities and the
general manner in which these securities will be offered. Each time we sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering.
Such prospectus supplement may also add, update or change information contained in this prospectus. You should carefully read this prospectus and the applicable prospectus supplement together with the
additional information described under the heading "Where You Can Find More Information" before you invest.
We
may offer and sell these securities in amounts, at prices and on terms determined at the time of offering. The securities may be sold directly to purchasers or through underwriters,
dealers and agents. If underwriters, dealers or agents are used to sell the securities, we will name them and describe their compensation in a prospectus supplement.
Our
common stock is listed on The NASDAQ Capital Market under the symbol "INBK."
Investing in our securities involves a high degree of risk. You should review carefully the risks and uncertainties described under the heading
"Risk Factors" on page 5 of this prospectus and in the applicable prospectus supplement or free writing prospectuses we have authorized for use in connection with a specific offering, and under
similar headings in the other documents that are incorporated by reference into this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
These securities are not savings accounts, deposits or other obligations of any bank and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Deposit Insurance Fund or any other governmental agency or instrumentality.
The date of this prospectus is January 4, 2016.
TABLE OF CONTENTS
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ABOUT THIS PROSPECTUS
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1
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WHERE YOU CAN FIND MORE INFORMATION
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2
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
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2
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OUR COMPANY
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3
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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4
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RISK FACTORS
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5
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USE OF PROCEEDS
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5
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RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
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5
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DESCRIPTION OF CAPITAL STOCK
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6
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DESCRIPTION OF DEBT SECURITIES
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11
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DESCRIPTION OF WARRANTS
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26
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DESCRIPTION OF PURCHASE CONTRACTS
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28
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DESCRIPTION OF UNITS
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28
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PLAN OF DISTRIBUTION
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29
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LEGAL MATTERS
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31
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EXPERTS
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31
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The
distribution of this prospectus and the applicable prospectus supplement and the offering of the securities in certain jurisdictions may be restricted by law. Persons into whose
possession this prospectus and the applicable prospectus supplement come should inform themselves about and observe any such restrictions. This prospectus and the applicable prospectus supplement do
not constitute, and may not be used in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
i
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or "SEC," utilizing a
"shelf" registration process. Under this process, we may sell common stock, preferred stock, depositary shares, debt securities, warrants, purchase contracts or units in one or more offerings up to an
aggregate initial offering price of $100,000,000. We may sell these securities either separately or in units.
This
prospectus provides you with a general description of the securities we may offer. Each time we offer securities under this prospectus, we will provide a prospectus supplement that
will contain more specific information about the terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information
relating to these offerings. The prospectus supplement and any related free writing prospectus that we may authorize to be provided to you may also add, update or change any of the information
contained in this prospectus or in the documents that we have incorporated by reference into this prospectus. We urge you to read carefully this prospectus, any applicable prospectus supplement and
any free writing prospectuses we have authorized for use in connection with a specific offering, together with the information incorporated herein or therein by reference as described under the
heading "Incorporation of Certain Information by Reference," before buying any of the securities being offered.
This prospectus may not be used to consummate a sale of securities unless it is accompanied by a prospectus supplement.
You
should rely only on the information contained in, or incorporated by reference into, this prospectus and any applicable prospectus supplement, along with the information contained in
any free writing prospectuses we have authorized for use in connection with a specific offering. We have not authorized anyone to provide you with different or additional information. This prospectus
is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so.
The
information appearing in this prospectus, any applicable prospectus supplement or any related free writing prospectus is accurate only as of the date on the front of the document,
and any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus, any applicable
prospectus supplement or any related free writing prospectus, or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.
This
prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All
of the summaries are qualified by the actual text of the documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits
to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under the section titled "Where You Can Find More Information."
This
prospectus may contain and incorporates by reference, and any prospectus supplement or free writing prospectus may contain and incorporate by reference, market data and industry
statistics and forecasts that are based on independent industry publications and other publicly available information. Although we believe these sources are reliable, we do not guarantee the accuracy
or completeness of this information and we have not independently verified this information. Although we are not aware of any misstatements regarding the market and industry data that may be presented
in this prospectus and the documents incorporated herein by reference, these estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed
under the heading "Risk Factors" contained in the applicable prospectus supplement and any related free writing prospectus,
1
and
under similar headings in the other documents that are incorporated by reference into this prospectus. Accordingly, investors should not place undue reliance on this information.
When
we refer to "First Internet Bancorp," the "Company," "we," "us" and "our" in this prospectus, we mean First Internet Bancorp, an Indiana corporation, and its consolidated
subsidiaries, unless the
context indicates otherwise. References to "First Internet Bank" or the "Bank" refer to First Internet Bank of Indiana, an Indiana chartered bank and wholly owned subsidiary of the Company.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 we have filed with the SEC under the Securities Act of 1933, as
amended, which we refer to as the "Securities Act," and does not contain all the information set forth in the registration statement. Whenever a reference is made in this prospectus to any of our
contracts, agreements or other documents, the reference may not be complete and you should refer to the exhibits that are a part of the registration statement or the exhibits to the reports or other
documents incorporated by reference into this prospectus for a copy of such contract, agreement or other document. Because we are subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended, which we refer to as the "Exchange Act," we file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC
filings are available to the public over the Internet at the SEC's website at http://www.sec.gov. You may also read and copy any document we file at the SEC's Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room.
We
also make available, free of charge, on or through our website (http://firstinternetbancorp.com) our annual, quarterly and current reports, proxy statements and other information we
file or furnish pursuant the Exchange Act. Please note, however, that we have not incorporated any other information by reference from our website, other than the documents listed under the heading
"Incorporation of Certain Information by Reference." In addition, you may request copies of these filings at no cost, by writing or telephoning us at the following address or telephone number:
Chief
Financial Officer
First Internet Bancorp
11201 USA Parkway
Fishers, Indiana 46037
(317) 532-7900
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" information from other documents that we file with it, which means that we can disclose
important information to you by
referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. Information in this prospectus supersedes information incorporated by reference
that we filed with the SEC prior to the date of this prospectus, while information that we file later with the SEC will automatically update and supersede the information in this prospectus. We
incorporate by reference into this prospectus and the registration statement of which this prospectus is a part the information or documents listed below that we have filed with the SEC (Commission
File No. 001-35750):
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Our Annual Report on Form 10-K for the year ended December 31, 2014, filed on March 13, 2015;
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Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30,
2015, filed on May 7, 2015, August 5, 2015 and November 3, 2015, respectively;
2
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Our Current Reports on Form 8-K filed on January 21, 2015, March 31, 2015, May 20, 2015, October 8,
2015 and October 23, 2015; and
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The description of our capital stock contained in our registration statement on Form 10 filed on November 30, 2012,
including any subsequently filed amendment or report updating such description.
We
also incorporate by reference any future filings (other than any filings or portions of such reports that are not deemed "filed" under the Exchange Act in accordance with the Exchange
Act and applicable SEC rules, including current reports furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits filed on such form that are related to such items unless
such Form 8-K expressly provides to the
contrary) made with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, including those made after the date of the initial filing of the registration statement of which
this prospectus is a part, until we file a post-effective amendment that indicates the termination of the offering of the securities made by this prospectus and will become a part of this
prospectus from the date that such documents are filed with the SEC. Information in such future filings updates and supplements the information provided in this prospectus. Any statements in any such
future filings will automatically be deemed to modify and supersede any information in any document we previously filed with the SEC that is incorporated or deemed to be incorporated herein by
reference to the extent that statements in the later filed document modify or replace such earlier statements. To obtain copies of these filings, see "Where You Can Find More Information."
OUR COMPANY
First Internet Bancorp is a bank holding company that conducts its business activities through its wholly-owned subsidiary, First
Internet Bank. The Bank was the first state-chartered, Federal Deposit Insurance Corporation ("FDIC") insured Internet bank. We offer a full complement of products and services on a nationwide basis.
We conduct our deposit operations primarily over the Internet and have no traditional branch offices. In recent years, we have added commercial real estate ("CRE") lending, including nationwide single
tenant lease financing, and commercial and industrial ("C&I") lending, including business banking/treasury management services to meet the needs of high-quality commercial borrowers and depositors.
Our
business model differs from that of a typical community bank. We do not have a conventional brick and mortar branch system, but instead operate through our scalable Internet banking
platform. The market area for our residential real estate lending, consumer lending, and deposit gathering activities is the entire United States. We also offer single tenant lease financing on a
nationwide basis. Our other commercial banking activities, including CRE and C&I loans, corporate credit cards, and corporate treasury management services, are offered by our commercial banking team
to businesses primarily within Central Indiana, Phoenix, Arizona, and adjacent markets.
The
Bank commenced banking operations in 1999 and grew organically in the consumer market in its early years by adding new customers, products and capabilities through its Internet-based
platform. The Company was incorporated under the laws of the State of Indiana in 2005. In 2006, we acquired all of the outstanding shares of the Bank. In 2007, we acquired Indianapolis-based Landmark
Financial Corporation. The acquisition merged Landmark Savings Bank, FSB, into the Bank. The Landmark acquisition added a turnkey retail mortgage lending operation that we then expanded on a
nationwide basis through our Internet platform.
As
of September 30, 2015, there were 4,484,513 shares of our common stock, no par value, issued and outstanding, and we had total assets of $1.2 billion, total liabilities
of $1.1 billion, and shareholders' equity of $103 million.
3
Our
principal executive offices are located at 11201 USA Parkway, Fishers, Indiana 46037, and our telephone number is (317) 532-7900. Our website is www.firstinternetbancorp.com.
The information on our website is not part of this prospectus and the reference to our website address does not constitute incorporation by reference of any information on our website into this
prospectus.
If
you want to find more information about us, please see the section entitled "Where You Can Find More Information" in this prospectus.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We are including the following discussion to inform our existing and potential security holders generally of some of the risks and
uncertainties that can affect the Company and to take advantage of the "safe harbor" protection for forward-looking statements afforded by applicable federal securities laws.
All
statements other than statements of historical fact included or incorporated by reference in this prospectus, any prospectus supplement or any free writing prospectus authorized for
use in connection with a particular offering, including any regarding our financial condition, results of operations, plans, objectives, future operations or performance, business strategy, and
industry trends, are forward-looking statements. Forward-looking statements are generally accompanied by terms or phrases such as "estimate," "project," "predict," "believe," "expect," "anticipate,"
"target," "plan," "intend," "seek," "goal," "will," "should," "contemplate," "continue," "may" or other words and similar expressions that convey the uncertainty of future events or outcomes. Items
contemplating or making assumptions about actual or potential future income, market size, collaborations, and trends or operating results also constitute such forward-looking statements.
Forward-looking
statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially
from those set forth in the forward-looking statements, include the following: failures of or interruptions in the communications and information systems on which we rely to conduct our business; our
plans to grow our commercial real estate and commercial and industrial loan portfolios; competition with national, regional, and community financial institutions; the loss of any key members of senior
management; fluctuations in interest rates; general economic conditions; and risks relating to the regulation of financial institutions.
We
have based any forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of
which are beyond our control. Accordingly, our actual results, performance or achievements may differ materially from those expressed in or implied by these statements. Forward-looking statements
speak only as of the date they are made. You should consider carefully the statements under the heading "Risk Factors" in this prospectus, the applicable prospectus supplement and any free writing
prospectus that we authorize for use in connection with a specific offering, in our most recent Annual Report on Form 10-K and in other reports, filings or documents filed with the SEC and
incorporated by reference into this prospectus, which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements. We do not undertake, and
specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements other than as may be required by
applicable law or regulation.
4
RISK FACTORS
Investing in our securities involves a high degree of risk. Before deciding whether to invest in our securities, you should consider
carefully the risks and uncertainties described under the heading "Risk Factors" contained in the applicable prospectus supplement and any related free writing prospectus, and discussed under the
section entitled "Risk Factors" contained in our most recent Annual Report on Form 10-K and in our most recent Quarterly Reports on Form 10-Q, as well as any amendments thereto reflected
in subsequent filings with the SEC, which are incorporated by reference into this prospectus in their entirety, together with other information in this prospectus, the applicable prospectus
supplement, the documents incorporated by reference and any free writing prospectus that we authorize for use in connection with a specific offering. The risks described in these documents are not the
only ones we face, but those that we consider to be material. There may be other unknown or unpredictable economic, business, competitive, regulatory or other factors that could have material adverse
effects on our future results, If any of these risks actually occurs, our business, financial condition, results of operations or cash flow could be materially adversely affected. This could cause the
trading price of our common stock to decline, resulting in a loss of all or part of your investment. See the section titled "Where You Can Find More Information" in this prospectus.
USE OF PROCEEDS
Unless we otherwise specify in the applicable prospectus supplement, the net proceeds we receive from the sale of the securities
offered by this prospectus and the accompanying prospectus supplement will be used for general corporate purposes. General corporate purposes may include but are not limited to the repayment of debt,
investments in or extensions of credit to our subsidiaries, the financing of possible acquisitions or business expansion or the repurchase of shares of our common stock. The net proceeds may be
invested temporarily or applied to repay short-term debt until they are used for their stated purpose.
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth our consolidated ratio of earnings to fixed charges and our consolidated ratio of earnings to combined
fixed charges and preferred stock dividends on a historical basis for the periods indicated. For purposes of computing these ratios, earnings represent income before taxes and fixed charges. Fixed
charges, excluding interest on deposits, consist of interest expense, excluding interest on deposits, and one-third of rental expense for all operating leases, which we believe to be representative of
the interest portion of rent expense. Fixed charges, including interest on deposits, consist of interest expense, one-third of rental expense and interest on deposits. The term "preferred stock
dividends" is the amount of pre-tax earnings that is required to pay dividends on First Internet Bancorp's issued and outstanding preferred stock. As of the date of this prospectus, we had no
preferred stock outstanding.
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Nine Months
Ended
September 30,
2015
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Year Ended December 31,
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2014
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2013
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2012
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2011
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2010
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Consolidated ratio of earnings to fixed charges:
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Excluding interest on deposits
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8.00x
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5.43x
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5.42x
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6.32x
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3.66x
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5.11x
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Including interest on deposits
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2.31x
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1.71x
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1.75x
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1.90x
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1.41x
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1.61x
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Consolidated ratio of earnings to combined fixed charges and preferred stock dividends:
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Excluding interest on deposits
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8.00x
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5.43x
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5.42x
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6.32x
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3.66x
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5.11x
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Including interest on deposits
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2.31x
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1.71x
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1.75x
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1.90x
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1.41x
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1.61x
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5
DESCRIPTION OF CAPITAL STOCK
Our voting common stock, no par value per share, is traded on the NASDAQ Capital Market under the symbol "INBK." We are authorized to
issue up to 45,000,000 shares of common stock and, as of September 30, 2015, we had 4,484,513 shares of common stock issued and outstanding. Our Board of Directors also has the authority to
issue up to 5,000,000 shares of preferred stock, no par value per share (described below), none of which shares were issued or outstanding on September 30, 2015.
A
description of material terms and provisions of our articles of incorporation and amended and restated bylaws affecting the rights of holders of our capital stock is set forth below.
The description is intended as a summary and is qualified in its entirety by reference to our articles of incorporation and bylaws which are filed as exhibits to the registration statement of which
this prospectus forms a part.
Common Stock
Voting Rights.
Except as described below under "Important Provisions of Indiana Law
Control Share
Acquisitions
," each holder of common stock is entitled to one vote for each share on all matters to be voted upon by the common shareholders. There are no cumulative voting
rights.
Dividend Rights.
Subject to preferences to which holders of any shares of preferred stock may be entitled, holders of common
stock will be entitled
to receive ratably any dividends that may be declared from time to time by the Board of Directors out of funds legally available for that purpose.
Rights Upon Liquidation.
In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to
share in our assets
remaining after the payment or provision for payment of our debts and other liabilities, and the satisfaction of any liquidation preferences granted to the holders of any shares of preferred stock
that may be outstanding.
Other Provisions.
Holders of common stock have no preemptive or conversion rights or other subscription rights. There are no
redemption or sinking
fund provisions that apply to the common stock. All shares of common stock currently issued and outstanding are fully paid and nonassessable. The rights, preferences and privileges of the holders of
common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate in the future.
Because
we are a bank holding company, any purchaser of certain specified amounts of our common stock may be required to file a notice with or obtain the approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve") under the Bank Holding Company Act of 1956, as amended, and the Change in Bank Control Act of 1978, as amended. Specifically, under
regulations adopted by the Federal Reserve, (1) any other bank holding company may be required to obtain the approval of the Federal Reserve before acquiring 5% or more of our common stock and
(2) any person may be required to file a notice with and not be disapproved by the Federal Reserve to acquire 10% or more of our common stock and will be required to file a notice
with and not be disapproved by the Federal Reserve to acquire 25% or more of our common stock.
Transfer Agent and Registrar.
The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.
Preferred Stock
General.
We are authorized to issue up to 5,000,000 shares of preferred stock (86,221 shares of which are designated as
"Non-Voting Common Stock") in
one or more series with respect to which our Board of Directors may, without shareholder approval, determine the designations, preferences, limitations and relative rights for each series of preferred
stock. Accordingly, our Board of Directors,
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without
shareholder approval, could authorize preferred stock to be issued with voting, conversion and other rights which could adversely affect the voting power and other rights of the holders of
common stock or other outstanding series of preferred stock.
Terms.
Certain specific terms of the preferred stock that we offer in the future will be described in the applicable prospectus
supplement relating
to that preferred stock. Investors are urged to carefully review the terms contained in such prospectus supplement, as well as the articles of amendment to our articles of incorporation establishing
such terms that we file with the Secretary of State of the State of Indiana and the SEC. Those terms may include, among others:
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the designation of the series, which may be by distinguishing number, letter or title;
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the number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the
articles of amendment) increase or decrease (but not below the number of shares thereof then outstanding);
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the amounts payable on, and the preferences, if any, of shares of the series in respect of dividends, and whether such dividends, if
any, shall be cumulative or noncumulative;
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dates at which dividends, if any, shall be payable;
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the redemption rights and price or prices, if any, for shares of the series;
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the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series;
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the amounts payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company;
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whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series, or any other
securities, of ours, and, if so, the specification of such other class or series or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date
or dates at which such shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made;
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any restriction on the repurchase or redemption of shares by us while there is any arrearage in the payment of dividends or sinking
fund installments, if applicable;
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restrictions on the issuance of shares of the same series or of any other class or series; and
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the voting rights, if any, of the holders of shares of the series.
Furthermore,
our Board of Directors could direct us to issue, in one or more transactions, shares of preferred stock, additional shares of common stock or rights to purchase such shares
(subject to the limits imposed by applicable laws and the rules of The Nasdaq Stock Market) in amounts which could make more difficult and, therefore, less likely, a takeover, proxy contest, change in
our management or any other extraordinary corporate transaction, which might be opposed by the incumbent Board of Directors. Any issuance of preferred stock or of common stock could have the effect of
diluting the earnings per share, book value per share and voting power of common stock held by our shareholders.
Under
regulations adopted by the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the Change in Bank Control Act of 1978, as amended, if the holders of any
series of the preferred stock are or become entitled to vote for the election of directors, such series may then be deemed a "class of voting securities" and a holder of 10% or more of such series
that is a company may then be subject to regulation as a bank holding company. In addition, at such time as such series is deemed a class of voting securities, (1) any holder that is a bank
holding company may be required to obtain the approval of the Federal Reserve to acquire or retain more than 5% of that series and (2) any person may be required to obtain the approval of the
Federal Reserve to acquire or retain 10%
7
or
more of that series and will be required to obtain the approval of the Federal Reserve to acquire or retain 25% or more of that series.
Depositary Shares
We may issue fractional shares of preferred stock rather than full shares of preferred stock. If we exercise this option, we will issue
receipts for depositary shares, and each of these depositary shares will represent a fraction (to be set forth in the prospectus supplement relating to such depositary shares) of a share of a
particular series of preferred stock.
The
shares of any series of preferred stock underlying the depositary shares will be deposited under a deposit agreement between us and a bank or trust company selected by us. The
depositary will have its principal office in the United States and a combined capital and surplus of at least $50,000,000. Subject to the terms of the deposit agreement, each owner of a depositary
share will be entitled, in proportion to the applicable fraction of a share of preferred stock underlying the depositary share, to all of the rights and preferences of the preferred stock underlying
that depositary share. Those rights may include dividend, voting, redemption, conversion and liquidation rights.
The
depositary shares will be evidenced by depositary receipts issued under a deposit agreement. Depositary receipts will be distributed to those persons purchasing the fractional shares
of preferred stock underlying the depositary shares, in accordance with the terms of the offering. We will describe the material terms of the deposit agreement, the depositary shares and the
depositary receipts in a prospectus supplement relating to the depositary shares. You should also refer to the forms of the deposit agreement and depositary receipts that will be filed with the SEC in
connection with the offering of the specific depositary shares.
Outstanding Warrant
In 2013, we issued a warrant to purchase up to 48,750 shares of our common stock, no par value, as consideration in connection with a
subordinated debenture purchase agreement entered into with a third-party lender. The warrant had an initial per share exercise price of $19.33. The warrant became exercisable on June 28, 2014,
and, unless previously exercised, will expire on June 28, 2021. The Company has the right to force an exercise of the warrant after the debenture has been repaid in full if the 20-day
volume-weighted average price of a share of its common stock exceeds $30.00. The warrant remained outstanding as of September 30, 2015.
Number of Directors; Removal; Vacancies
Our articles of incorporation provide that we may have between 3 and 25 directors and our bylaws further provide that our Board of
Directors may establish an actual number of directors between 3 and 11 from time to time by resolution. Our articles of incorporation provide that any director may be removed for a specific cause
found and determined by the vote of a majority of the entire Board of Directors. In addition, any or all directors may be removed with or without cause at a meeting of shareholders called for such
purpose by the affirmative vote of the holders of a majority of the outstanding shares entitled to be cast generally in the election of directors. If any vacancy occurs on the Board of Directors,
including a vacancy which occurs by reason of an increase in the number of directors, such vacancy shall be filled by a majority vote of the directors then in office.
Special Meetings of Shareholders; Limitations on Shareholder Action by Written Consent
Our bylaws provide that special meetings of our shareholders may be called only by the Board of Directors, the Chairman of the Board of
Directors, the Chief Executive Officer or the President. A special meeting of our shareholders may not be called by any other person or persons, including
8
holders
of our common stock. The only matters that may be considered at any special meeting of the shareholders are the matters specified in the notice of the meeting.
Because
our common stock is registered under the Exchange Act, the Indiana Business Corporation Law, as amended, or IBCL, provides that any actions required or permitted to be taken by
our shareholders may not be effected by written consent unless the written consent describing the action taken is signed by all shareholders entitled to vote on the action.
Amendments; Vote Requirements
Except where authority is granted to the Board of Directors under the IBCL, our articles of incorporation may be amended if the
amendment is recommended by the Board of Directors and approved by a majority of the votes entitled to be cast if the amendment would create dissenters' rights or otherwise if the votes cast favoring
the proposal exceed the votes cast opposing the proposal at a meeting at which a quorum is present. Our bylaws may only be amended by the affirmative vote of a majority of the entire Board of
Directors, except as otherwise required by our articles of incorporation or the IBCL.
Advance Notice Requirements for Shareholder Proposals and Nomination of Directors
Our bylaws establish an advance notice procedure with regard to business to be brought before an annual meeting of shareholders and
with regard to the nomination of candidates for election as directors, other than by or at the direction of the Board of Directors. In general, notice of intent to raise business or nominate a
director at annual meetings must be received by us not later than the 45th day nor earlier than the 75th day before the one-year anniversary of the date on which we first mailed our
proxy materials or a notice of availability of proxy materials (whichever is earlier) to our shareholders for the preceding year's annual meeting and must contain certain specified information
concerning the matters to be brought before the meeting or the person to be nominated and concerning the shareholder submitting the proposal.
Important Provisions of Indiana Law
Control Share Acquisitions.
Under Chapter 42 of the IBCL, an acquiring person or group who makes a "control share
acquisition" in an "issuing
public corporation" may not exercise voting rights on any "control shares" unless these voting rights are conferred by a majority vote of the disinterested shareholders of the issuing public
corporation at a special meeting of those shareholders held upon the request and at the expense of the acquiring person. If control shares acquired in a control share acquisition are accorded full
voting rights and the acquiring person has acquired control shares with a
majority or more of all voting power, all shareholders of the issuing public corporation have dissenters' rights to receive the fair value of their shares pursuant to Chapter 44 of the IBCL.
Under
the IBCL, "control shares" are shares acquired by a person that, when added to all other shares of the issuing public corporation owned by that person or in respect to which that
person may exercise or direct the exercise of voting power, would otherwise entitle that person to exercise voting power of the issuing public corporation in the election of directors within any of
the following ranges:
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one-fifth or more but less than one-third;
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one-third or more but less than a majority; or
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a majority or more.
A
"control share acquisition" means, subject to specified exceptions, the acquisition, directly or indirectly, by any person of ownership of, or the power to direct the exercise of
voting power with respect to, issued and outstanding control shares. For the purposes of determining whether an
9
acquisition
constitutes a control share acquisition, shares acquired within 90 days or under a plan to make a control share acquisition are considered to have been acquired in the same
acquisition.
An
"issuing public corporation" means a corporation which has (1) 100 or more shareholders; (2) its principal place of business or its principal office in Indiana, or that
owns or controls assets within Indiana having a fair market value of greater than $1,000,000; and (3) (a) more than 10% of its shareholders resident in Indiana, (b) more than 10% of its
shares owned of record or owned beneficially by Indiana residents or (c) 1,000 shareholders resident in Indiana.
The
overall effect of these provisions may be to render more difficult or to discourage a merger, a tender offer, a proxy contest or the assumption of control by a holder of a large
block of our common stock or other person, or the removal of incumbent management, even if those actions may be beneficial to our shareholders generally.
The
provisions described above do not apply if, before a control share acquisition is made, the corporation's articles of incorporation or by-laws, including a by-law adopted by the
corporation's board of directors, provide that the provisions do not apply to the corporation. Our articles of incorporation and bylaws do not currently exclude us from Chapter 42.
Certain Business Combinations.
Chapter 43 of the IBCL restricts the ability of a "resident domestic corporation" to engage
in any combinations
with an "interested shareholder" for five years after the date the interested shareholder became such, unless the combination or the purchase of shares by the interested shareholder on the interested
shareholder's date of acquiring shares is approved by the board of directors of the resident domestic corporation before that date. If the combination was not previously approved, then the interested
shareholder may effect a combination after the five-year period only if that shareholder receives approval from a majority of the disinterested shareholders or the offer meets specified "fair price"
criteria.
For
purposes of the above provisions, "resident domestic corporation" means an Indiana corporation that has 100 or more shareholders. "Interested shareholder" means any person, other
than the resident domestic corporation or its subsidiaries, who is (1) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the
resident domestic corporation or (2) an affiliate or associate of the resident domestic corporation, which at any time within the five-year period immediately before the date in question, was
the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding shares of the resident domestic corporation.
The
definition of "beneficial owner" for purposes of Chapter 43 means a person who, directly or indirectly, owns the shares, has the right to acquire or vote the subject shares
(excluding voting rights under revocable proxies made in accordance with federal law), has any agreement, arrangement or understanding for the purpose of acquiring, holding or voting or disposing of
the subject shares or holds any "derivative instrument" that includes the opportunity, directly or indirectly, to profit or share in any profit derived from any increase in the value of the subject
shares.
The
above provisions do not apply to corporations that elect not to be subject to Chapter 43 in an amendment to their articles of incorporation approved by a majority of the
disinterested shareholders. That amendment, however, cannot become effective until 18 months after its passage and would apply only to share acquisitions occurring after its effective date. Our
articles of incorporation do not exclude us from Chapter 43.
Mandatory Classified Board of Directors.
Under Chapter 33 of the IBCL, a corporation with a class of voting shares
registered with the SEC
under Section 12 of the Exchange Act must have a classified board of directors unless the corporation adopts a by-law expressly electing not to be governed by this provision by the later of
July 31, 2009 or 30 days after the corporation's voting shares are first registered under Section 12 of the Exchange Act. Our Board of Directors adopted a bylaw provision electing
not to be subject to the mandatory classified board requirement within 30 days after our voting common stock was registered under Section 12 of the Exchange Act.
10
DESCRIPTION OF DEBT SECURITIES
This section describes the general terms and provisions of our debt securities, which could be senior debt securities or subordinated
debt securities. A prospectus supplement will describe the specific terms of the debt securities offered through that prospectus supplement and any general terms outlined in this section that will not
apply to those debt securities.
The
senior debt securities will be issued under an indenture, referred to herein as the "senior indenture," between us and the trustee named in the applicable prospectus supplement. The
subordinated debt securities will be issued under an indenture, referred to herein as the "subordinated indenture," between us and the trustee named in the applicable prospectus supplement.
We
have summarized the anticipated material terms and provisions of the senior and subordinated indentures in this section. We have also filed the form of the indentures summarized in
this section as exhibits to the registration statement of which this prospectus is a part. You should read the applicable indenture for additional information before you buy any debt securities. The
summary that follows includes references to section numbers of the indentures so that you can more easily locate these provisions.
General
The debt securities will be our direct unsecured obligations. Neither of the indentures limits the amount of debt securities that we
may issue. Both indentures permit us to issue debt securities from time to time and debt securities issued under an indenture will be issued as part of a series that has been established by us under
such indenture. (Section 301)
The
senior debt securities will be unsecured and will rank equally with all of our other unsecured unsubordinated debt. The subordinated debt securities will be unsecured and will rank
equally with all of our other subordinated debt securities and, together with such other subordinated debt securities, will be subordinated to all of our existing and future Senior Debt (as defined
below). See "Subordination" below.
The
debt securities are our unsecured senior or subordinated debt securities, as the case may be, but our assets include equity in our subsidiaries. As a result, our ability to make
payments on our debt securities may depend in part on our receipt of dividends, loan payments and other funds from our subsidiaries. In addition, if any of our subsidiaries becomes insolvent, the
direct creditors of that subsidiary will have a prior claim on its assets. Our rights and the rights of our creditors, including your rights as an owner of our debt securities, will be subject to that
prior claim, unless we are also a direct creditor of that subsidiary. This subordination of creditors of a parent company to prior claims of creditors of its subsidiaries is commonly referred to as
structural subordination.
Unless
otherwise specified in the applicable prospectus supplement, we may, without the consent of the holders of a series of debt securities, issue additional debt securities of that
series having the same ranking and the same interest rate, maturity date and other terms (except for the price to public and issue date) as such debt securities. Any such additional debt securities,
together with the initial debt securities, will constitute a single series of debt securities under the applicable indenture. No additional debt securities of a series may be issued if an event of
default under the applicable indenture has occurred and is continuing with respect to that series of debt securities.
A
prospectus supplement relating to a series of debt securities being offered will include specific terms relating to the offering. (Section 301) These terms will include some or
all of the following:
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the title and type of the debt securities;
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any limit on the total principal amount of the debt securities of that series;
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the price at which the debt securities will be issued;
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the date or dates on which the principal of and premium, if any, on the debt securities will be payable;
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the maturity date or dates of the debt securities or the method by which those dates can be determined;
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if the debt securities will bear interest:
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the interest rate on the debt securities or the method by which the interest rate may be determined;
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the date from which interest will accrue;
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the record and interest payment dates for the debt securities; and
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the first interest payment date;
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the place or places where:
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we can make payments on the debt securities;
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the debt securities can be surrendered for registration of transfer or exchange; and
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notices and demands can be given to us relating to the debt securities and under the applicable indenture;
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any optional redemption provisions that would permit us to elect redemption of the debt securities, or the holders of the debt
securities to elect repayment of the debt securities, before their final maturity;
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any sinking fund provisions that would obligate us to redeem the debt securities before their final maturity;
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whether the debt securities will be convertible into shares of capital stock and, if so, the terms and conditions of any such
conversion;
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if the debt securities will be issued in bearer form, the terms and provisions contained in the bearer securities and in the
applicable indenture specifically relating to the bearer securities;
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the currency or currencies in which the debt securities will be denominated and payable, if other than U.S. dollars and, if a
composite currency, any special provisions relating thereto;
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any circumstances under which the debt securities may be paid in a currency other than the currency in which the debt securities are
denominated and any provisions relating thereto;
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whether the provisions described below under the heading "Defeasance" will not apply to the debt securities;
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any events of default that will apply to the debt securities in addition to those contained in the applicable indenture;
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any additions or changes to the covenants contained in the applicable indenture and the ability, if any, of the holders to waive our
compliance with those additional or changed covenants;
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whether all or part of the debt securities will not be issued as permanent global securities and the extent to which the description
of the book-entry procedures described below under "Book-Entry, Delivery and Form" will not apply to such global securitiesa "global security" is a debt security that we
issue in accordance with the applicable indenture to represent all or part of a series of debt securities;
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whether all or part of the debt securities will be issued in whole or in part as temporary global securities and, if so, the
depositary for those temporary global securities and any special provisions dealing with the payment of interest and any terms relating to the ability to exchange interests in a temporary global
security for interests in a permanent global security or for definitive debt securities;
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the identity of the trustee, security registrar and paying agent for the debt securities;
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any material tax implications of the debt securities;
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any special provisions relating to the payment of any additional amounts on the debt securities; and
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any other terms of the debt securities.
When
we use the term "holder" in this prospectus with respect to a registered debt security, we mean the person in whose name such debt security is registered in the security register.
(Section 101)
Exchange and Transfer
Any debt securities of a series can be exchanged for other debt securities of that series so long as the other debt securities are
denominated in authorized denominations and have the same aggregate principal amount and same terms as the debt securities that were surrendered for exchange. The debt securities may be presented for
registration of transfer, duly endorsed or accompanied by a satisfactory written instrument of transfer, at the office or agency maintained by us for that purpose in any place of payment that we may
designate. However, holders of global securities may transfer and exchange global securities only in the manner and to the extent set forth under "Book-Entry, Delivery and Form" below.
There will be no service charge for any registration of transfer or exchange of the debt securities, but we may require holders to pay any tax or other governmental charge payable in connection with a
transfer or exchange of the debt securities. (Sections 305, 1002) If the applicable prospectus supplement refers to any office or agency, in addition to the security registrar, initially
designated by us where holders can surrender the debt securities for registration of transfer or exchange, we may at any time rescind the designation of any such office or agency or approve a change
in the location. However, we will be required to maintain an office or agency in each place of payment for that series. (Section 1002)
We
will not be required to:
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register the transfer of or exchange debt securities to be redeemed for a period of 15 calendar days preceding the mailing of
the relevant notice of redemption; or
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register the transfer of or exchange any registered debt security selected for redemption, in whole or in part, except the unredeemed
or unpaid portion of that registered debt security being redeemed in part. (Section 305)
Interest and Principal Payments
Payments.
Holders may present debt securities for payment of principal, premium, if any, and interest, if any, register the
transfer of the debt
securities and exchange the debt securities at the agency maintained by us for such purpose and identified in the applicable prospectus supplement. We refer to the applicable trustee acting in the
capacity of a paying agent for the debt securities as the "paying agent."
Any
money that we pay to the paying agent for the purpose of making payments on the debt securities and that remains unclaimed two years after the payments were due will, at our request,
be
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returned
to us and after that time any holder of a debt security can only look to us for the payments on the debt security. (Section 1003)
Recipients of Payments.
The paying agent will pay interest to the person in whose name the debt security is registered at the
close of business on
the applicable record date. Unless otherwise specified in the applicable prospectus supplement, the "record date" for any interest payment date is the date 15 calendar days prior to that
interest payment date, whether or not that day is a business day. A "business day" means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions are authorized or required by law or regulation to close in New York, New York. However, upon maturity, redemption or repayment, the paying agent will pay any interest due to the person
to whom it pays the principal of the debt security. The paying agent will make the payment on the date of maturity, redemption or repayment, whether or not that date is an interest payment date. The
paying agent will make the initial interest payment on a debt security on the first interest payment date falling after the date of issuance, unless the date of issuance is less than
15 calendar days before an interest payment date. In that case, the paying agent will pay interest on the next succeeding interest payment date to the holder of record on the record date
corresponding to the succeeding interest payment date. An "interest payment date" for any debt security means a date on which, under the terms of that debt security, regularly scheduled interest is
payable.
Book-Entry Debt Securities.
The paying agent will make payments of principal, premium, if any, and interest, if any, to the
account of The Depository
Trust Company, referred to herein as "DTC," or other depositary specified in the applicable prospectus supplement, as holder of book-entry debt securities, by wire transfer of immediately available
funds. The "depositary" means the depositary for global securities issued under the applicable indenture and, unless provided otherwise in the applicable prospectus supplement, means DTC. We expect
that the depositary, upon receipt of any payment, will immediately credit its participants' accounts in amounts proportionate to their respective beneficial interests in the book-entry debt securities
as shown on the records of the depositary. We also expect that payments by the depositary's participants to owners of beneficial interests in the book-entry debt securities will be governed by
standing customer instructions and customary practices and will be the responsibility of those participants.
Certificated Debt Securities.
Except as indicated below for payments of interest at maturity, redemption or repayment, the
paying agent will make
payments of interest either:
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by check mailed to the address of the person entitled to payment as shown on the security register; or
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by wire transfer to an account designated by a holder, if the holder has given written notice not later than 10 calendar days prior to
the applicable interest payment date. (Section 307)
Payments
of principal, premium, if any, and interest, if any, upon maturity, redemption or repayment on a debt security will be made in immediately available funds against presentation
and surrender of the debt security at the office of the paying agent.
Redemption and Repayment of Debt Securities
Optional Redemption by Us.
If applicable, the prospectus supplement will indicate the terms of our option to redeem the debt
securities. We will mail
a notice of redemption to each holder which, in the case of global securities, will be the depositary, as holder of the global securities, by first-class mail, postage prepaid, at least 30 days
and not more than 60 days prior to the date fixed for redemption, or within the redemption notice period designated in the applicable prospectus supplement, to the address of each holder as
that address appears upon the books maintained by the security registrar. The debt securities will not be subject to any sinking fund.
14
A
partial redemption of the debt securities may be effected by such method as the applicable trustee shall deem fair and appropriate and may provide for the selection for redemption of a
portion of the principal amount of debt securities held by a holder equal to an authorized denomination. If we redeem less than all of the debt securities and the debt securities are then held in
book-entry form, the redemption will be made in accordance with the depositary's customary procedures. We have been advised that it is DTC's practice to determine by the lot the amount of each
participant in the debt securities to be redeemed.
Unless
we default in the payment of the redemption price, on and after the redemption date interest will cease to accrue on the debt securities called for redemption.
Repayment at Option of Holder.
If applicable, the prospectus supplement relating to a series of debt securities will indicate
that the holder has the
option to have us repay a debt security of that series on a date or dates specified prior to its stated maturity date. Unless otherwise specified in the applicable prospectus supplement, the repayment
price will be equal to 100% of the principal amount of the debt security, together with accrued interest to the date of repayment.
For
us to repay a debt security, the paying agent must receive at least 30 days but not more than 45 days prior to the repayment
date:
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the debt security with the form entitled "Option to Elect Repayment" on the reverse of the debt security duly completed; or
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a telegram, telex, facsimile transmission or a letter from a member of a national securities exchange, or the Financial Industry
Regulatory Authority, Inc. or a commercial bank or trust company in the United States setting forth the name of the holder of the debt security, the principal amount of the debt security, the
principal amount of the debt security to be repaid, the certificate number or a description of the tenor and terms of the debt security, a statement that the option to elect repayment is being
exercised and a guarantee that the debt security to be repaid, together with the duly completed form entitled "Option to Elect Repayment" on the reverse of the debt security, will be received by the
paying agent not later than the fifth business day after the date of the telegram, telex, facsimile transmission or letter. However, the telegram, telex, facsimile transmission or letter will only be
effective if that debt security and form duly completed are received by the paying agent by the fifth business day after the date of that telegram, telex, facsimile transmission or letter.
Exercise
of the repayment option by the holder of a debt security will be irrevocable. The holder may exercise the repayment option for less than the entire principal amount of the debt
security but, in that event, the principal amount of the debt security remaining outstanding after repayment must be an authorized denomination.
If
a debt security is represented by a global security, the depositary or the depositary's nominee will be the holder of the debt security and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the depositary's nominee will timely exercise a right to repayment of a particular debt security, the beneficial owner of the debt security must
instruct the broker or other direct or indirect participant through which it holds an interest in the debt security to notify the depositary of its desire to exercise a right to repayment. Different
firms have different cut-off times for accepting instructions from their customers and, accordingly, each beneficial owner should consult the broker or other direct or indirect participant through
which it holds an interest in a debt security in order to ascertain the cut-off time by which an instruction must be given in order for timely notice to be delivered to the depositary.
We
may purchase debt securities at any price in the open market or otherwise. Debt securities so purchased by us may, at our discretion, be held or resold or surrendered to the
applicable trustee for cancellation.
15
Denominations
Unless we state otherwise in the applicable prospectus supplement, the debt securities will be issued only in registered form, without
coupons, in denominations of $1,000 each and integral multiples of $1,000 in excess thereof.
Consolidation, Merger or Sale
Each of the indentures generally permits a consolidation or merger between us and another entity. They also permit the sale or transfer
by us of all or substantially all of our property and assets. These transactions are permitted if:
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the resulting or acquiring entity, if other than us, is organized and existing under the laws of a domestic jurisdiction and assumes
all of our responsibilities and liabilities under the applicable indenture, including the payment of all amounts due on the debt securities and performance of the covenants in the applicable
indenture; and
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immediately after giving effect to the transaction, no event of default under the applicable indenture exists. (Section 801)
If
we consolidate or merge with or into any other entity or sell or lease all or substantially all of our assets according to the terms and conditions of the indentures, the resulting or
acquiring entity will be substituted for us in the indentures with the same effect as if it had been an original party to the indentures. As a result, such successor entity may exercise our rights and
powers under the indentures, in our name and, except in the case of a lease of all or substantially all of our properties, we will be released from all our liabilities and obligations under the
indentures and under the debt securities. (Section 802)
Modification and Waiver
Under each of the indentures, certain of our rights and obligations and certain of the rights of holders of the debt securities may be
modified or amended with the consent of the holders of at least a majority of the aggregate principal amount of the outstanding debt securities of all series of debt securities affected by the
modification or amendment, acting as one class. However, the following modifications and amendments will not be effective against any holder without its
consent:
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a change in the stated maturity date of any payment of principal or interest;
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a reduction in payments due on the debt securities;
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a change in the place of payment or currency in which any payment on the debt securities is payable;
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a limitation of a holder's right to sue us for the enforcement of payments due on the debt securities;
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a reduction in the percentage of outstanding debt securities required to consent to a modification or amendment of the applicable
indenture or required to consent to a waiver of compliance with certain provisions of the applicable indenture or certain defaults under the applicable indenture;
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a reduction in the requirements contained in the applicable indenture for quorum or voting;
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a limitation of a holder's right, if any, to repayment of debt securities at the holder's option; and
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a modification of any of the foregoing requirements contained in the applicable indenture. (Section 902)
16
Under
each of the indentures, the holders of at least a majority of the aggregate principal amount of the outstanding debt securities of all series of debt securities affected by a
particular covenant or condition, acting as one class, may, on behalf of all holders of such series of debt securities, waive compliance by us with any covenant or condition contained in the
applicable indenture unless we specify that such covenant or condition cannot be so waived at the time we establish the series.
In
addition, under each of the indentures, the holders of a majority in aggregate principal amount of the outstanding debt securities of any series of debt securities may, on behalf of
all holders of that series, waive any past default under the applicable indenture, except:
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a default in the payment of the principal of or any premium or interest on any debt securities of that series; or
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a default under any provision of the applicable indenture which itself cannot be modified or amended without the consent of the
holders of each outstanding debt security of that series. (Section 513)
Events of Default
Unless otherwise specified in the applicable prospectus supplement, an "event of default," when used in the senior indenture or the
subordinated indenture with respect to any series of debt securities issued thereunder, means any of the following:
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failure to pay interest on any debt security of that series for 30 days after the payment is due;
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failure to pay the principal of or any premium on any debt security of that series when due;
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failure to deposit any sinking fund payment on debt securities of that series when due;
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failure to perform any other covenant in the applicable indenture that applies to debt securities of that series for 90 days
after we have received written notice of the failure to perform in the manner specified in the applicable indenture;
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certain events in bankruptcy, insolvency or reorganization; or
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any other event of default that may be specified for the debt securities of that series when that series is created.
(Section 501)
If
an event of default for any series of debt securities occurs and continues, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding debt securities
of the series may declare the entire principal of all the debt securities of that series to be due and payable immediately. If such a declaration occurs, the holders of a majority of the aggregate
principal amount of the outstanding debt securities of that series can, subject to conditions, rescind the declaration. (Sections 502, 513)
Each
of the indentures requires us to file an officers' certificate with the applicable trustee each year that states, to the knowledge of the certifying officers, whether or not any
defaults exist under the terms of the applicable indenture. (Section 1005) The applicable trustee may withhold notice to the holders of debt securities of any default, except defaults in the
payment of principal, premium, interest or any sinking fund installment, if it considers the withholding of notice to be in the interest of the holders. For purposes of this paragraph, "default" means
any event which is, or after notice or lapse of time or both would become, an event of default under the applicable indenture with respect to the debt securities of the applicable series.
(Section 602)
Other
than its duties in the case of a default, a trustee is not obligated to exercise any of its rights or powers under the applicable indenture at the request, order or direction of
any holders, unless the holders offer that trustee reasonable indemnification. (Sections 601, 603) If reasonable indemnification
17
is
provided, then, subject to other rights of the trustee, the holders of a majority in principal amount of the outstanding debt securities of any series may, with respect to the debt securities of
that series, direct the time, method and place of:
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conducting any proceeding for any remedy available to the trustee; or
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exercising any trust or power conferred upon the trustee. (Sections 512, 603)
The
holder of a debt security of any series will have the right to begin any proceeding with respect to the applicable indenture or for any remedy only
if:
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the holder has previously given the trustee written notice of a continuing event of default with respect to that series;
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the holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series have made a written
request of, and offered reasonable indemnification to, the trustee to begin such proceeding;
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the trustee has not started such proceeding within 60 days after receiving the request; and
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the trustee has not received directions inconsistent with such request from the holders of a majority in aggregate principal amount of
the outstanding debt securities of that series during those 60 days. (Section 507)
However,
the holder of any debt security will have an absolute right to receive payment of principal of and any premium and interest on the debt security when due and to institute suit
to enforce this payment.
Defeasance
Defeasance and Discharge.
At the time that we establish a series of debt securities under the applicable indenture, we can
provide that the debt
securities of that series are subject to the defeasance and discharge provisions of that indenture. Unless we specify otherwise in the applicable prospectus supplement, the debt securities offered
thereby will be subject to the defeasance and discharge provisions of the applicable indenture, and we will be discharged from our obligations on the debt securities of that series
if:
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we deposit with the applicable trustee, in trust, sufficient money or, if the debt securities of that series are denominated and
payable in U.S. dollars only, Eligible Instruments, to pay the principal, any interest, any premium and any other sums due on the debt securities of that series, such as sinking fund payments, on the
dates the payments are due under the applicable indenture and the terms of the debt securities;
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we deliver to the applicable trustee an opinion of counsel that states that the holders of the debt securities of that series will not
recognize income, gain or loss for federal income tax purposes as a result of the deposit and will be subject to federal income tax on the same amounts and in the same manner and at the same times as
would have been the case if no deposit had been made; and
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if the debt securities of that series are listed on any domestic or foreign securities exchange, the debt securities will not be
delisted as a result of the deposit. (Section 403)
When
we use the term "Eligible Instruments" in this section, we mean monetary assets, money market instruments and securities that are payable in U.S. dollars only and essentially risk
free as to collection of principal and interest, including:
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direct obligations of the United States backed by the full faith and credit of the United States; or
18
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any obligation of a person controlled or supervised by and acting as an agency or instrumentality of the United States if the timely
payment of the obligation is unconditionally guaranteed as a full faith and credit obligation by the United States. (Section 101)
In
the event that we deposit money and/or Eligible Instruments in trust and discharge our obligations under a series of debt securities as described above,
then:
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the applicable indenture, including, in the case of subordinated debt securities, the subordination provisions contained in the
subordinated indenture, will no longer apply to the debt securities of that series; however, certain obligations to compensate, reimburse and indemnify the trustee, to register the transfer and
exchange of debt securities, to replace lost, stolen or mutilated debt securities, to maintain paying agencies and the trust funds and to pay additional amounts, if any, required as a result of U.S.
withholding taxes imposed on payments to non-U.S. persons will continue to apply; and
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holders of debt securities of that series can only look to the trust fund for payment of principal, any premium and any interest on
the debt securities of that series. (Section 403)
Defeasance of Certain Covenants and Certain Events of Default.
At the time that we establish a series of debt securities under
the applicable
indenture, we can provide that the debt securities of that series are subject to the covenant defeasance provisions of that indenture. Unless we specify otherwise in the applicable prospectus
supplement, the debt securities offered thereby will be subject to the covenant defeasance provisions of the applicable indenture, and if we make the deposit and deliver the opinion of counsel
described above in this section under the heading "Defeasance and Discharge," we will not have to comply with any covenant we designate when we establish the series of debt securities. In
the event of a covenant defeasance, our obligations under the applicable indenture
and the debt securities, other than with respect to the covenants specifically designated upon establishing the debt securities, will remain in effect. (Section 1501)
If
we exercise our option not to comply with certain covenants as described above and the debt securities of the series become immediately due and payable because an event of default has
occurred, other than as a result of an event of default specifically relating to any of such covenants, the amount of money and/or Eligible Instruments on deposit with the applicable trustee will be
sufficient to pay the principal, any interest, any premium and any other sums, due on the debt securities of that series, such as sinking fund payments, on the date the payments are due under the
applicable indenture and the terms of the debt securities, but may not be sufficient to pay amounts due at the time of acceleration. However, we would remain liable for the balance of the payments.
(Section 1501)
Subordination
The subordinated debt securities will be subordinate to all of our existing and future Senior Debt, as defined below. Our "Senior Debt"
includes the senior debt securities and means the principal of, premium, if any, and interest on, rent under, and any other amounts payable on or in respect of any of our indebtedness (including,
without limitation, any obligations in respect of such indebtedness and any interest accruing after the filing of a petition by or against us under any bankruptcy law, whether or not allowed as a
claim after such filing in any proceeding under such bankruptcy law), whether outstanding on the date of the senior indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by us (including all deferrals, renewals, extensions, refinancings or refundings of, or amendments, modifications or supplements to the foregoing). However, Senior Debt does not
include:
-
-
any liability for federal, state, local or other taxes owed or owing by us;
-
-
our indebtedness to any of our subsidiaries;
19
-
-
our trade payables and accrued expenses (including, without limitation, accrued compensation) for goods, services or materials
purchased or provided in the ordinary course of business; and
-
-
any particular indebtedness in which the instrument creating or evidencing the same expressly provides that such indebtedness shall
not be senior in right of payment to, or is pari passu with, or is subordinated or junior to, the subordinated debt securities. (Section 101 of the subordinated indenture)
If
certain events in bankruptcy, insolvency or reorganization occur, we will first pay all Senior Debt, including any interest accrued after the events occur, in full before we make any
payment or distribution, whether in cash, securities or other property, on account of the principal of or interest on the subordinated debt securities. In such an event, we will pay or deliver
directly to the holders of Senior Debt any payment or distribution otherwise payable or deliverable to holders of the subordinated debt securities. We will make the payments to the holders of Senior
Debt according to priorities existing among those holders until we have paid all Senior Debt, including accrued interest, in full. Notwithstanding the subordination provisions discussed in this
paragraph, we may make payments or distributions on the subordinated debt securities so long as:
-
-
the payments or distributions consist of securities issued by us or another company in connection with a plan of reorganization or
readjustment; and
-
-
payment on those securities is subordinate to outstanding Senior Debt and any securities issued with respect to Senior Debt under such
plan of reorganization or readjustment at least to the same extent provided in the subordination provisions of the subordinated debt securities. (Section 1601 of the subordinated indenture)
If
such events in bankruptcy, insolvency or reorganization occur, after we have paid in full all amounts owed on Senior Debt:
-
-
the holders of subordinated debt securities,
-
-
together with the holders of any of our other obligations ranking equal with those subordinated debt securities,
will
be entitled to receive from our remaining assets any principal, premium or interest due at that time on the subordinated debt securities and such other obligations before we make any payment or
other distribution on account of any of our capital stock or obligations ranking junior to those subordinated debt securities.
If
we violate the subordinated indenture by making a payment or distribution to holders of the subordinated debt securities before we have paid all of the Senior Debt in full, then such
holders of the subordinated debt securities will be deemed to have received the payments or distributions in trust for the benefit of, and will have to pay or transfer the payments or distributions
to, the holders of the Senior Debt outstanding at the time. The payment or transfer to the holders of the Senior Debt will be made according to the priorities existing among those holders.
Notwithstanding the subordination provisions discussed in this paragraph, holders of subordinated debt securities will not be required to pay, or transfer payments or distributions to, holders of
Senior Debt so long as:
-
-
the payments or distributions consist of securities issued by us or another company in connection with a plan of reorganization or
readjustment; and
-
-
payment on those securities is subordinated to outstanding Senior Debt and any securities issued with respect to Senior Debt under
such plan of reorganization or readjustment at least to the same extent provided in the subordination provisions of those subordinated debt securities. (Section 1601 of the subordinated
indenture)
20
Because
of the subordination, if we become insolvent, holders of Senior Debt may receive more, ratably, and holders of the subordinated debt securities having a claim pursuant to those
securities may receive less, ratably, than our other creditors.
We
may modify or amend the subordinated indenture as provided under "Modification and Waiver" above. However, the modification or amendment may not, without the consent of
the holders of all Senior Debt outstanding, modify any of the provisions of the subordinated indenture relating to the subordination of the subordinated debt securities in a manner that would
adversely affect the holders of Senior Debt. (Section 902 of the subordinated indenture)
Payment of Additional Amounts
Unless we specify otherwise in the applicable prospectus supplement, we will not pay any additional amounts on the debt securities
offered thereby to compensate any beneficial owner for any United States tax withheld from payments on such debt securities.
Book-Entry, Delivery and Form
We have obtained the information in this section concerning DTC, Clearstream Banking S.A., or "Clearstream," and Euroclear
Bank S.A./N.V., as operator of the Euroclear System, or "Euroclear," and the book-entry system and procedures from sources that we believe to be reliable, but we take no responsibility for the
accuracy of this information.
Unless
otherwise specified in the applicable prospectus supplement, the debt securities will be issued as fully registered global securities that will be deposited with, or on behalf of,
DTC and registered, at the request of DTC, in the name of Cede & Co. Beneficial interests in the global securities will be represented through book-entry accounts of financial
institutions acting on behalf of beneficial owners as direct or indirect participants in DTC. The direct and indirect participants will remain responsible
for keeping account of their holdings on behalf of their customers. Investors may elect to hold their interests in the global securities through either DTC (in the United States) or (in Europe)
through Clearstream or through Euroclear. Investors may hold their interests in the global securities directly if they are participants of such systems, or indirectly through organizations that are
participants in these systems. Interests held through Clearstream and Euroclear will be recorded on DTC's books as being held by the U.S. Depositary for each of Clearstream and Euroclear (the "U.S.
Depositaries"), which U.S. Depositaries will, in turn, hold interests on behalf of their participants' customers' securities accounts. Unless otherwise specified in the applicable prospectus
supplement, beneficial interests in the global securities will be held in denominations of $1,000 and multiples of $1,000 in excess thereof. Except as set forth below, the global securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee.
Debt
securities represented by a global security can be exchanged for definitive securities in registered form only if:
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-
DTC notifies us that it is unwilling or unable to continue as depositary for that global security and we do not appoint a qualified
successor depositary within 90 days after receiving that notice;
-
-
at any time DTC ceases to be a clearing agency registered under the Exchange Act and we do not appoint a successor depositary within
90 days after becoming aware that DTC has ceased to be registered as a clearing agency;
-
-
we in our sole discretion determine that such global security will be exchangeable for definitive securities in registered form or
elect to terminate the book-entry system through DTC and notify the applicable trustee of our decision; or
21
-
-
an event of default with respect to the debt securities represented by that global security has occurred and is continuing.
A
global security that can be exchanged as described in the preceding sentence will be exchanged for definitive securities issued in authorized denominations in registered form for the
same aggregate amount. The definitive securities will be registered in the names of the owners of the beneficial interests in the global security as directed by DTC.
We
will make principal and interest payments on all debt securities represented by a global security to the paying agent which in turn will make payment to DTC or its nominee, as the
case may be, as the sole registered owner and the sole holder of the debt securities represented by a global security for all purposes under the applicable indenture. Accordingly, we, the applicable
trustee and any paying agent will have no responsibility or liability for:
-
-
any aspect of DTC's records relating to, or payments made on account of, beneficial ownership interests in a debt security represented
by a global security;
-
-
any other aspect of the relationship between DTC and its participants or the relationship between those participants and the owners of
beneficial interests in a global security held through those participants; or
-
-
the maintenance, supervision or review of any of DTC's records relating to those beneficial ownership interests.
We
understand that DTC's current practice is to credit direct participants' accounts on each payment date with payments in amounts proportionate to their respective beneficial interests
in the principal amount of such global security as shown on DTC's records, upon DTC's receipt of funds and corresponding detail information. The underwriters or agents for the debt securities
represented by a global security will initially designate the accounts to be credited. Payments by participants to owners of beneficial interests in a global security will be governed by standing
instructions and customary practices, as is the case with securities held for customer accounts registered in "street name," and will be the sole responsibility of those participants, and not of DTC
or its nominee, the trustee, any agent
of ours, or us, subject to any statutory or regulatory requirements. Book-entry notes may be more difficult to pledge because of the lack of a physical note.
DTC
So long as DTC or its nominee is the registered owner of a global security, DTC or its nominee, as the case may be, will be considered
the sole owner and holder of the debt securities represented by that global security for all purposes of the debt securities. Owners of beneficial interests in the debt securities will not be entitled
to have debt securities registered in their names, will not receive or be entitled to receive physical delivery of the debt securities in definitive form and will not be considered owners or holders
of debt securities under the applicable indenture. Accordingly, each person owning a beneficial interest in a global security must rely on the procedures of DTC and, if that person is not a DTC
participant, on the procedures of the participant through which that person owns its interest, to exercise any rights of a holder of debt securities. The laws of some jurisdictions may require that
certain purchasers of securities take physical delivery of the securities in certificated form. These laws may impair the ability to transfer beneficial interests in a global security. Beneficial
owners may experience delays in receiving distributions on their debt securities since distributions will initially be made to DTC and must then be transferred through the chain of intermediaries to
the beneficial owner's account.
We
understand that, under existing industry practices, if we request holders to take any action, or if an owner of a beneficial interest in a global security desires to take any action
which a holder is entitled to take under the applicable indenture, then DTC would authorize the participants holding the
22
relevant
beneficial interests to take that action and those participants would authorize the beneficial owners owning through such participants to take that action or would otherwise act upon the
instructions of beneficial owners owning through them.
Beneficial
interests in a global security will be shown on, and transfers of those ownership interests will be effected only through, records maintained by DTC and its participants for
that global security. The conveyance of notices and other communications by DTC to its participants and by its participants to owners of beneficial interests in the debt securities will be governed by
arrangements among them, subject to any statutory or regulatory requirements in effect.
We
understand that DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered under the Exchange Act. DTC is a wholly owned
subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of
which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries.
DTC
holds the securities of its participants and facilitates the clearance and settlement of securities transactions among its participants in such securities through electronic
book-entry changes in accounts of its participants. The electronic book-entry system eliminates the need for physical certificates. DTC's participants include securities brokers and dealers, including
underwriters, banks, trust companies, clearing corporations and certain other organizations, some of which, and/or their representatives, own DTCC. Banks, brokers, dealers, trust companies and others
that clear through or maintain a custodial relationship with a participant, either directly or indirectly, also have access to DTC's book-entry system. The rules applicable to DTC and its participants
are on file with the SEC.
The
above information with respect to DTC has been provided for informational purposes only and is not intended to serve as a representation, warranty or contract modification of any
kind.
Clearstream
We understand that Clearstream was incorporated under the laws of Luxembourg as an international clearing system. Clearstream holds
securities for its participating organizations, or "Clearstream Participants," and facilitates the clearance and settlement of securities transactions between Clearstream Participants through
electronic book-entry changes in accounts of Clearstream Participants, thereby eliminating the need for physical movement of certificates. Clearstream provides to Clearstream Participants, among other
things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic securities
markets in several countries. As a professional depositary, Clearstream is subject to regulation by the Luxembourg Commission for the Supervision of the Financial Sector
(
Commission de Surveillance du Secteur Financier
). Clearstream Participants are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Clearstream's U.S. Participants are limited to securities brokers and
dealers and banks. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a
Clearstream Participant either directly or indirectly.
Distributions
with respect to debt securities held beneficially through Clearstream will be credited to cash accounts of Clearstream Participants in accordance with its rules and
procedures, to the extent received by the U.S. Depositary for Clearstream.
23
Euroclear
We understand that Euroclear was created in 1968 to hold securities for participants of Euroclear, or "Euroclear Participants," and to
clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash. Euroclear performs various other services, including securities lending and borrowing and interacts with domestic markets in
several countries. Euroclear is operated by Euroclear Bank S.A./N.V., or the "Euroclear Operator," under contract with Euroclear plc, a U.K. corporation. All operations are conducted by
the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not Euroclear plc. Euroclear plc establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants include banks, including central banks, securities brokers and dealers and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. Euroclear is an
indirect participant in DTC.
The
Euroclear Operator is a Belgian bank. As such it is regulated by the Belgian Banking and Finance Commission and the National Bank of Belgium.
Securities
clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of
the Euroclear System, and applicable Belgian law, which we will refer to herein as the "Terms and Conditions." The Terms and Conditions govern transfers of securities and cash within Euroclear,
withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or
relationship with persons holding through Euroclear Participants.
Distributions
with respect to debt securities held beneficially through Euroclear will be credited to the cash accounts of Euroclear Participants in accordance with the Terms and
Conditions, to the extent received by the Euroclear Operator.
We
further understand that investors that acquire, hold and transfer interests in the debt securities by book-entry through accounts with the Euroclear Operator or any other securities
intermediary are subject to the laws and contractual provisions governing their relationship with their intermediary, as well as the laws and contractual provisions governing the relationship between
such an intermediary and each other intermediary, if any, standing between themselves and the global securities.
Global Clearance and Settlement Procedures
Unless otherwise specified in the applicable prospectus supplement, initial settlement for the debt securities will be made in
immediately available funds. Secondary market trading between DTC participants will occur in the ordinary way in accordance with DTC rules and will be settled in immediately available funds using
DTC's Same-Day Funds Settlement System. Secondary market trading between Clearstream Participants and/or Euroclear Participants will occur in the ordinary way in accordance with the applicable rules
and operating procedures of Clearstream and Euroclear and will be settled using the procedures applicable to conventional eurobonds in immediately available funds.
Cross-market
transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream Participants or Euroclear Participants,
on the other, will be effected through DTC in accordance with DTC rules on behalf of the relevant European
24
international
clearing system by its U.S. Depositary; however, such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its U.S. Depositary to take action to effect final settlement on its behalf by delivering or receiving debt securities through
DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream Participants and Euroclear Participants may not deliver
instructions directly to their respective U.S. Depositaries.
Because
of time-zone differences, credits of debt securities received through Clearstream or Euroclear as a result of a transaction with a DTC participant will be made during subsequent
securities settlement processing and dated the business day following the DTC settlement date. Such credits or any transactions in such debt securities settled during such processing will be reported
to the relevant
Euroclear Participants or Clearstream Participants on such business day. Cash received in Clearstream or Euroclear as a result of sales of debt securities by or through a Clearstream Participant or a
Euroclear Participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business
day following settlement in DTC.
If
the debt securities are cleared only through Euroclear and Clearstream (and not DTC), you will be able to make and receive through Euroclear and Clearstream payments, deliveries,
transfers, exchanges, notices, and other transactions involving any securities held through those systems only on days when those systems are open for business. Those systems may not be open for
business on days when banks, brokers, and other institutions are open for business in the United States. In addition, because of time-zone differences, U.S. investors who hold their interests in the
securities through these systems and wish to transfer their interests, or to receive or make a payment or delivery or exercise any other right with respect to their interests, on a particular day may
find that the transaction will not be effected until the next business day in Luxembourg or Brussels, as applicable. Thus, U.S. investors who wish to exercise rights that expire on a particular day
may need to act before the expiration date.
Although
DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of debt securities among participants of DTC, Clearstream and Euroclear,
they are under no obligation to perform or continue to perform such procedures and such procedures may be modified or discontinued at any time. Neither we nor any paying agent will have any
responsibility for the performance by DTC, Euroclear or Clearstream or their respective direct or indirect participants of their obligations under the rules and procedures governing their operations.
Conversion and Exchange
If any offered debt securities are convertible into shares of any of our capital stock at the option of the holders or exchangeable for
shares of any of our capital stock at our option, the prospectus supplement relating to those debt securities will include the terms and conditions governing any conversions and exchanges.
Notices
Unless otherwise specified in the applicable prospectus supplement, any notices required to be given to the holders of the debt
securities in global form will be given to the depositary.
Governing Law
The indentures are, and the debt securities will be, governed by and will be construed in accordance with New York law.
25
DESCRIPTION OF WARRANTS
The following description, together with the additional information that we include in any applicable prospectus supplements and in any
related free writing prospectuses that we may authorize to be distributed to purchasers summarizes the material terms and provisions of the warrants that we may offer under this prospectus. While the
terms we have summarized below will apply generally to any warrants that we may offer under this prospectus, we will describe the particular terms of any series of warrants in more detail in the
applicable prospectus supplement. The terms of any warrants offered under a prospectus supplement may differ from the terms described below.
We
will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from reports that we file with the SEC, the form of warrant
agreement that describes the terms of the series of warrants we are offering, and any supplemental agreements, before the issuance of the related series of warrants. The following summaries of
material terms and provisions of the warrants are subject to, and qualified in their entirety by reference to, all the provisions of the warrant agreement and any supplemental agreements applicable to
a particular series of warrants. We urge purchasers to read the applicable prospectus supplements related to the particular series of warrants that we may offer under this prospectus, as well as any
related free writing prospectuses and the complete warrant agreement and any supplemental agreements that contain the terms of the warrants.
General
We may issue warrants to purchase common stock, preferred stock, depositary shares or one or more debt securities. We may offer
warrants separately or together with one or more additional warrants, common stock, preferred stock, depositary shares or one or more debt securities, or any combination of those securities in the
form of units, as described in the applicable prospectus supplement. If we issue warrants as part of a unit, the accompanying prospectus supplement will specify whether those warrants may be separated
from the other securities in the unit prior to the expiration date of the warrants.
We
will specify in a prospectus supplement the terms of the series of warrants, including, if applicable, the following:
-
-
the specific designation and aggregate number of, and the offering price at which we will issue, the warrants;
-
-
the currency or currency units in which the offering price, if any, and the exercise price are payable;
-
-
the date on which the right to exercise the warrants will begin and the date on which that right will expire or, if a holder may not
continuously exercise the warrants throughout that period, the specific date or dates on which such holder may exercise the warrants;
-
-
whether the warrants are to be sold separately or with other securities as parts of units;
-
-
whether the warrants will be issued in definitive or global form or in any combination of these forms, although, in any case, the form
of a warrant included in a unit will correspond to the form of the unit and of any security included in that unit;
-
-
any applicable material U.S. federal income tax consequences;
-
-
the identity of the warrant agent for the warrants and of any other depositaries, execution or paying agents, transfer agents,
registrars or other agents;
-
-
the proposed listing, if any, of the warrants or any securities purchasable upon exercise of the warrants on any securities exchange;
26
-
-
the designation and terms of any equity securities purchasable upon exercise of the warrants;
-
-
the designation, aggregate principal amount, currency and terms of any debt securities that may be purchased upon exercise of the
warrants;
-
-
if applicable, the designation and terms of the debt securities, depositary shares, preferred stock or common stock with which the
warrants are issued and, the number of warrants issued with each security;
-
-
if applicable, the date from and after which any warrants issued as part of a unit and the related debt securities, depositary shares,
preferred stock or common stock will be separately transferable;
-
-
the number of depositary shares, shares of preferred stock or shares of common stock purchasable upon exercise of a warrant and the
price at which those shares may be purchased;
-
-
if applicable, the minimum or maximum amount of the warrants that may be exercised at any one time;
-
-
information with respect to book-entry procedures, if any;
-
-
the antidilution provisions of, and other provisions for changes to or adjustment in the exercise price of, the warrants, if any;
-
-
any redemption or call provisions; and
-
-
any additional terms of the warrants, including terms, procedures and limitations relating to the exchange or exercise of the
warrants.
Before
exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise,
including:
-
-
in the case of warrants to purchase debt securities, the right to receive payments of principal of, or premium, if any, on or interest
on, the debt securities purchasable upon exercise of the warrants or to enforce covenants in the applicable indenture; or
-
-
in the case of warrants to purchase depositary shares, common stock or preferred stock, the right to receive dividends, if any, or
payments upon our liquidation, dissolution or winding up or to exercise voting rights, if any.
The
provisions described in this section, as well as those described under "Description of Capital Stock" and "Description of Debt Securities" will apply to each warrant, as applicable,
and to any common stock, preferred stock, depositary shares or debt security included in each warrant, as applicable.
Warrant Agent
We may enter into a warrant agreement with a warrant agent. We will indicate the name, address and other information regarding the
warrant agent in the applicable prospectus supplement relating to a particular series of warrants.
Enforceability of Rights by Holders of Warrants
Each warrant agent will act solely as our agent under the applicable warrant agreement and will not assume any obligation or
relationship of agency or trust with any holder of any warrant. A single bank or trust company may act as a warrant agent for more than one series of warrants. A warrant agent will have no duty or
responsibility in case of any default by us under the applicable warrant agreement or warrant, including any duty or responsibility to initiate any proceedings at law or
27
otherwise,
or to make any demand upon us. Any holder of a warrant may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action its
right to exercise, and receive the securities purchasable upon exercise of, its warrants.
DESCRIPTION OF PURCHASE CONTRACTS
The following is a general description of the terms of the purchase contracts we may issue from time to time. The applicable prospectus
supplement will describe the terms of any purchase contracts and, if applicable, prepaid purchase contracts. The description in the prospectus supplement will be qualified in its entirety by reference
to (1) the purchase contracts, (2) the collateral arrangements and depositary arrangements, if applicable, relating to such purchase contracts and (3) if applicable, the prepaid
purchase contracts and the document pursuant to which such prepaid purchase contracts will be issued.
We
may issue purchase contracts, including contracts obligating holders to purchase from us, and obligating us to sell to holders, a fixed or varying number of shares of common stock,
preferred stock, depositary shares or debt securities at a future date or dates. The consideration may be fixed at the time that the purchase contracts are issued or may be determined by reference to
a specific formula set forth in the purchase contracts. Any purchase contract may include anti-dilution provisions to adjust the number of shares issuable pursuant to such purchase contract, as
applicable, upon the occurrence of certain events.
DESCRIPTION OF UNITS
The following description, together with the additional information that we include in any applicable prospectus supplements and in any
related free writing prospectuses that we may authorize to be distributed to purchasers summarizes the material terms and provisions of the units that we may offer under this prospectus. While the
terms we have summarized below will apply generally to any units that we may offer under this prospectus, we will describe the particular terms of any series of units in more detail in the applicable
prospectus supplement. The terms of any units offered under a prospectus supplement may differ from the terms described below.
We
will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from reports that we file with the SEC, the form of unit
agreement that describes the terms of the series of units we are offering, and any supplemental agreements, before the issuance of the related series of units. The following summaries of material
terms and provisions of the units are subject to, and qualified in their entirety by reference to, all the provisions of the unit agreement and any supplemental agreements applicable to a particular
series of units. We urge purchasers to read the applicable prospectus supplements related to the particular series of units that we may offer under this prospectus, as well as any related free writing
prospectuses and the complete unit agreement and any supplemental agreements that contain the terms of the units.
General
We may issue units consisting of common stock, preferred stock, depositary shares, one or more debt securities, warrants or purchase
contracts, in one or more series, in any combination. Each unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will
have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or
transferred separately, at any time or at any time before a specified date.
28
We
will describe in the applicable prospectus supplement the terms of the series of units being offered, including:
-
-
the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances
those securities may be held or transferred separately;
-
-
any provisions of the governing unit agreement that differ from those described below; and
-
-
any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units.
We
may issue units in such amounts and in such numbers of distinct series as we determine.
The
provisions described in this section, as well as those described under "Description of Capital Stock," "Description of Debt Securities," "Description of Warrants" and "Description of
Purchase Contracts" will apply to each unit, as applicable, and to any common stock, preferred stock, depositary share, debt security, warrant or purchase contract included in each unit, as
applicable.
Unit Agent
The name and address of the unit agent for any units we offer will be set forth in the applicable prospectus supplement.
Enforceability of Rights by Holders of Units
Each unit agent will act solely as our agent under the applicable unit agreement and will not assume any obligation or relationship of
agency or trust with any holder of any unit. A single bank or trust company may act as unit agent for more than one series of units. A unit agent will have no duty or responsibility in case of any
default by us under the applicable unit agreement or unit, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a unit
may, without the consent of the related unit agent or the holder of any other unit, enforce by appropriate legal action its rights as holder under any security included in the unit.
PLAN OF DISTRIBUTION
We may sell the securities from time to time pursuant to underwritten public offerings, direct sales to the public, negotiated
transactions, block trades or a combination of these methods. We may sell the securities to or through underwriters, dealers or agents, or directly to one or more purchasers. We may distribute
securities from time to time in one or more transactions:
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at a fixed price or prices, which may be changed;
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at market prices prevailing at the time of sale;
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at prices related to such prevailing market prices; or
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at negotiated prices.
A
prospectus supplement or supplements (and any related free writing prospectus that we may authorize to be provided to you) will describe the terms of the offering of the securities,
including, to the extent applicable:
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the name or names of the underwriters, if any;
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the purchase price of the securities or other consideration therefor, and the proceeds, if any, we will receive from the sale;
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any over-allotment options under which underwriters may purchase additional securities from us;
29
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any agency fees or underwriting discounts and other items constituting agents' or underwriters' compensation;
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any public offering price;
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any discounts or concessions allowed or reallowed or paid to dealers; and
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any securities exchange or market on which the securities may be listed.
Only
underwriters named in the prospectus supplement will be underwriters of the securities offered by the prospectus supplement.
If
underwriters are used in the sale, they will acquire the securities for their own account and may resell the securities from time to time in one or more transactions at a fixed public
offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase the securities will be subject to the conditions set forth in the applicable
underwriting agreement. We may offer the securities to the public through underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Subject to certain
conditions, the underwriters will be obligated to purchase all of the securities offered by the prospectus supplement, other than securities covered by any over-allotment option. Any public offering
price and any discounts or concessions allowed or reallowed or paid to dealers may change from time to time. We may use underwriters with whom we have a material relationship. We will describe in the
prospectus supplement, naming the underwriter, the nature of any such relationship.
We
may sell securities directly or through agents we designate from time to time. We will name any agent involved in the offering and sale of securities and we will describe any
commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our agent will act on a best-efforts basis for the period of its appointment.
We
may authorize agents or underwriters to solicit offers by certain types of institutional investors to purchase securities from us at the public offering price set forth in the
prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. We will describe the conditions to these contracts and the
commissions we must pay for solicitation of these contracts in the prospectus supplement.
We
may offer securities in a subscription rights offering to our existing security holders and enter into a standby underwriting agreement with dealers, acting as standby underwriters.
We may pay the standby underwriters a commitment fee for the securities they commit to purchase on a standby basis. If we do not enter into a standby underwriting arrangement, we may retain a
dealer-manager to manage a subscription rights offering for us.
We
may provide agents and underwriters with indemnification against civil liabilities, including liabilities under the Securities Act, or contribution with respect to payments that the
agents or underwriters may make with respect to these liabilities. Agents and underwriters may engage in transactions with, or perform services for, us in the ordinary course of business.
All
securities we may offer, other than common stock, will be new issues of securities with no established trading market. Any underwriters may make a market in these securities, but
will not be obligated to do so and may discontinue any market making at any time without notice. We cannot guarantee the liquidity of the trading markets for any securities.
Any
underwriter may engage in over-allotment, stabilizing transactions, short-covering transactions and penalty bids in accordance with Regulation M under the Exchange Act.
Over-allotment involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do
not exceed a specified maximum price. Syndicate-covering or other short-covering transactions involve purchases of the securities, either
30
through
exercise of the over-allotment option or in the open market after the distribution is completed, to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession
from a dealer when the securities originally sold by the dealer are purchased in a stabilizing or covering transaction to cover short positions. Those activities may cause the price of the securities
to be higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time.
Any
underwriters or agents that are qualified market makers on the NASDAQ Capital Market may engage in passive market making transactions in the common stock on the NASDAQ Capital Market
in accordance with Regulation M under the Exchange Act, during the business day prior to the pricing of the offering, before the commencement of offers or sales of the common stock. Passive
market makers must comply with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess
of the highest independent bid for such security; if all independent bids are lowered below the passive market maker's bid, however, the passive market maker's bid must then be lowered when certain
purchase limits are exceeded. Passive market making may stabilize the market price of the securities at a level above that which might otherwise prevail in the open market and, if commenced, may be
discontinued at any time.
LEGAL MATTERS
The validity of the securities and certain other matters will be passed upon for us by Faegre Baker Daniels LLP, Indianapolis,
Indiana.
EXPERTS
The consolidated financial statements of the Company appearing in its Annual Report on Form 10-K for the year ended
December 31, 2014, and the effectiveness of the Company's internal control over financial reporting as of December 31, 2014 included therein, have been audited by BKD LLP,
independent registered public accounting firm, as stated in their reports thereon dated March 13, 2015, are incorporated herein by reference, and are included in reliance upon such reports
given on the authority of such firm as experts in accounting and auditing.
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Table of Contents
$25,000,000
6.0% Fixed-to-Floating Rate Subordinated Notes due 2026
PROSPECTUS SUPPLEMENT
(to the Prospectus dated January 4, 2016)
Sole Book-Running Manager
Co-Managers
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American Capital Partners, LLC
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Boenning & Scattergood
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R. Seelaus & Co., Inc.
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September 30, 2016
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