<PAGE>
RULE NO. 424(b)(1)
REGISTRATION NO. 333-19019
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JANUARY 15, 1997
$100,000,000
COMPASS TRUST I
8.23% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
COMPASS BANCSHARES, INC.
---------------
The 8.23% Capital Securities, Series A (the "Series A Capital Securities"),
offered hereby represent preferred beneficial interests in Compass Trust I, a
statutory business trust formed under the laws of the State of Delaware (the
"Series A Issuer"). Compass Bancshares, Inc., a Delaware corporation (the
"Corporation"), will be the owner of all of the beneficial interests
represented by common securities of the Series A Issuer
(Continued on next page)
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-5 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE SERIES A CAPITAL SECURITIES.
---------------
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING THE SERIES A
OFFERING PRICE(1) COMMISSION(2) ISSUER(1)(3)(4)
----------------- ------------- ---------------
<S> <C> <C> <C>
Per Series A Capital
Security............... $1,000.00 (3) $1,000.00
Total................... $100,000,000.00 (3) $100,000,000.00
</TABLE>
- -------
(1) Plus accrued Distributions from January 15, 1997.
(2) The Series A Issuer and the Corporation have each agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Series A Capital
Securities will be invested in the Series A Subordinated Debentures, the
Corporation has agreed to pay to the Underwriters as compensation
("Underwriters' Compensation") for their arranging the investment therein
of such proceeds $10.00 per Series A Capital Security (or $1,000,000 in
the aggregate) and to reimburse the Underwriters for $25,000 of expenses.
See "Underwriting."
(4) Expenses of the offering which are payable by the Corporation are
estimated to be $240,000.
---------------
The Series A Capital Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that the Series A Capital Securities will be ready for delivery in
book-entry form only through the facilities of The Depository Trust Company in
New York, New York, on or about January 21, 1997, against payment therefor in
immediately available funds.
GOLDMAN, SACHS & CO. CREDIT SUISSE FIRST BOSTON
---------------
The date of this Prospectus Supplement is January 15, 1997.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
CAPITAL SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
(cover page continued)
("Series A Common Securities" and, collectively with the Series A Capital
Securities, the "Series A Securities"). Wilmington Trust Company is the
Property Trustee of the Series A Issuer. The Series A Issuer exists for the
sole purpose of issuing the Series A Securities and investing the proceeds
thereof in $103,093,000 initial principal amount of 8.23% Junior Subordinated
Deferrable Interest Debentures, Series A (the "Series A Subordinated
Debentures"), to be issued by the Corporation. The Series A Subordinated
Debentures will mature on January 15, 2027 (the "Stated Maturity") (which date
may be shortened to a date not earlier than January 15, 2017 in certain
circumstances as described under "Certain Terms of Series A Subordinated
Debentures--Conditional Right to Shorten Maturity or Redeem upon a Tax Event
or Capital Treatment Event" upon the occurrence of a Tax Event or Capital
Treatment Event (each as defined herein) if certain conditions are met). The
Corporation has committed to the Board of Governors of the Federal Reserve
System (the "Federal Reserve") not to exercise its right to shorten the Stated
Maturity of the Series A Subordinated Debentures without having received the
prior approval of the Federal Reserve to do so, if such approval is then
required under applicable Federal Reserve capital guidelines or policies. The
Series A Capital Securities will have a preference under certain circumstances
with respect to cash distributions and amounts payable on liquidation,
redemption or otherwise over the Series A Common Securities. See "Description
of Capital Securities--Subordination of Common Securities" in the accompanying
Prospectus.
Holders of the Series A Capital Securities will be entitled to receive
preferential cumulative cash distributions accruing from January 15, 1997 and
payable semi-annually in arrears on January 15 and July 15 of each year,
commencing July 15, 1997, at the annual rate of 8.23% of the Liquidation
Amount of $1000 per Series A Capital Security ("Distributions"). Subject to
certain exceptions, as described herein, the Corporation has the right to
defer payment of interest on the Series A Subordinated Debentures at any time
or from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each deferral period (each, an "Extension Period"),
provided that no Extension Period may extend beyond the Stated Maturity of the
Series A Subordinated Debentures. Upon the termination of any such Extension
Period and the payment of all interest then accrued and unpaid (together with
interest thereon at the rate of 8.23% per annum, compounded semi-annually, to
the extent permitted by applicable law), the Corporation may elect to begin a
new Extension Period subject to the requirements set forth herein. If interest
payments on the Series A Subordinated Debentures are so deferred,
Distributions on the Series A Capital Securities will also be deferred and the
Corporation will not be permitted, subject to certain exceptions described
herein, to declare or pay any cash distributions with respect to the
Corporation's capital stock or debt securities that rank pari passu with or
junior to the Series A Subordinated Debentures. During an Extension Period,
interest on the Series A Subordinated Debentures will continue to accrue (and
the amount of Distributions to which holders of the Series A Capital
Securities are entitled will accumulate) at the rate of 8.23% per annum,
compounded semi-annually from the relevant payment date for such interest, and
holders of Series A Capital Securities will be required to accrue interest
income for United States federal income tax purposes. See "Certain Terms of
Series A Subordinated Debentures--Option to Defer Interest Payments" and
"Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount."
S-2
<PAGE>
The Series A Subordinated Debentures are unsecured and subordinated to all
Senior Debt (as defined in the accompanying Prospectus). Substantially all of
the Corporation's existing indebtedness constitutes Senior Debt. Because the
Corporation is a holding company, the right of the Corporation to participate
in any distribution of assets of any subsidiary, including its subsidiary
banks, upon any such subsidiary's liquidation or reorganization or otherwise
is subject to the prior claims of creditors of that subsidiary except to the
extent that the Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Series A Subordinated Debentures (and therefore
the Series A Capital Securities) will be effectively subordinated to all
existing and future liabilities of the Corporation's subsidiaries, and holders
thereof should look only to the assets of the Corporation for payments on the
Series A Subordinated Debentures. See "Description of Subordinated
Debentures--Subordination" in the accompanying Prospectus.
The Corporation has, through the Series A Guarantee, the Trust Agreement,
the Series A Subordinated Debentures, the Indenture and the Expense Agreement
(each as defined herein), taken together, fully, irrevocably and
unconditionally guaranteed all of the Series A Issuer's obligations under the
Series A Capital Securities. See "Relationship Among the Capital Securities,
the Corresponding Junior Subordinated Debentures, the Expense Agreement and
the Guarantees--Full and Unconditional Guarantee" in the accompanying
Prospectus. The Series A Guarantee of the Corporation guarantees the payment
of Distributions and payments on liquidation or redemption of the Series A
Capital Securities, but only in each case to the extent of funds held by the
Series A Issuer, as described herein (the "Series A Guarantee"). See
"Description of Guarantees" in the accompanying Prospectus. If the Corporation
does not make interest payments on the Series A Subordinated Debentures held
by the Series A Issuer, the Series A Issuer will have insufficient funds to
pay Distributions on the Series A Capital Securities. The Series A Guarantee
does not cover payment of Distributions when the Series A Issuer has
insufficient funds to pay such Distributions. In such event, a holder of
Series A Capital Securities may institute a legal proceeding directly against
the Corporation pursuant to the terms of the Indenture to enforce payment of
amounts equal to such Distributions to such holder. See "Description of Junior
Subordinated Debentures--Enforcement of Certain Rights By Holders of Capital
Securities" in the accompanying Prospectus. The obligations of the Corporation
under the Series A Guarantee and the Series A Subordinated Debentures are
subordinate and junior in right of payment to all Senior Debt of the
Corporation.
The Series A Capital Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Series A Subordinated Debentures at
maturity or their earlier redemption. The Series A Subordinated Debentures are
redeemable prior to maturity at the option of the Corporation (i) on or after
January 15, 2007, in whole at any time or in part from time to time, or (ii)
at any time in certain circumstances as described under "Certain Terms of
Series A Subordinated Debentures--Conditional Right to Shorten Maturity or
Redeem upon a Tax Event or Capital Treatment Event", in whole (but not in
part), upon the occurrence of a Tax Event or a Capital Treatment Event. The
Corporation has committed to the Federal Reserve that the Corporation will not
exercise its right to redeem the Series A Subordinated Debentures prior to the
Stated Maturity without having received the prior approval of the Federal
Reserve to do so, if such approval is then required under applicable Federal
Reserve capital guidelines or policies. For a description of the redemption
prices for the Series A Capital Securities pursuant to clause (i) or (ii)
above, see "Certain Terms of Series A Capital Securities--Redemption" and
"Certain Terms of Series A Subordinated Debentures--Redemption."
The Corporation will have the right at any time to terminate the Series A
Issuer and cause the Series A Subordinated Debentures to be distributed to the
holders of the Series A Capital Securities in liquidation of the Series A
Issuer. The Corporation has committed to the Federal Reserve that, so long as
the Corporation (or any affiliate) is a holder of Common Securities, the
Corporation will not so terminate the Series A Issuer without having received
the prior approval of the Federal Reserve to do
S-3
<PAGE>
so, if such approval is then required under applicable Federal Reserve capital
guidelines or policies. See "Certain Terms of Series A Capital Securities--
Liquidation of Series A Issuer and Distribution of Series A Subordinated
Debentures to Holders."
In the event of the termination of the Series A Issuer, after satisfaction
of liabilities to creditors of the Series A Issuer as required by applicable
law, the holders of the Series A Capital Securities will be entitled to
receive a Liquidation Amount of $1000 per Series A Capital Security plus
accumulated and unpaid Distributions thereon to the date of payment, which may
be in the form of a distribution of such amount in Series A Subordinated
Debentures, subject to certain exceptions. See "Description of Capital
Securities--Liquidation Distribution Upon Termination" in the accompanying
Prospectus.
If the Series A Subordinated Debentures are distributed to the holders of
Series A Capital Securities upon the liquidation of the Series A Issuer, the
Corporation will use its best efforts to include the Series A Subordinated
Debentures on such stock exchanges or other automated quotation systems, if
any, on which the Series A Capital Securities are then listed or traded.
The Series A Capital Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Series A Capital Securities will be shown on, and
transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described in the accompanying Prospectus,
Series A Capital Securities in certificated form will not be issued in
exchange for the global certificates. See "Book-Entry Issuance" in the
accompanying Prospectus.
S-4
<PAGE>
The information in this Prospectus Supplement supplements and should be read
in conjunction with the information contained in the accompanying Prospectus.
As used herein, (i) the "Indenture" means the Junior Subordinated Indenture,
as amended and supplemented from time to time, between the Corporation and
Wilmington Trust Company, as trustee (the "Debenture Trustee"), and (ii) the
"Trust Agreement" means the Amended and Restated Trust Agreement relating to
the Series A Issuer among the Corporation, as Depositor, Wilmington Trust
Company, as Property Trustee (the "Property Trustee") and as Delaware Trustee
(the "Delaware Trustee"), and the Administrative Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees"). Each of the other capitalized terms used in this Prospectus
Supplement and not otherwise defined in this Prospectus Supplement has the
meaning set forth in the accompanying Prospectus.
RISK FACTORS
Prospective purchasers of the Series A Capital Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and
in the accompanying Prospectus and should particularly consider the following
matters. In addition, because holders of Series A Capital Securities may
receive Series A Subordinated Debentures in exchange therefor upon liquidation
of the Series A Issuer, prospective purchasers of Series A Capital Securities
are also making an investment decision with regard to the Series A
Subordinated Debentures and should carefully review all the information
regarding the Series A Subordinated Debentures contained herein.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES A GUARANTEE AND THE
SERIES A SUBORDINATED DEBENTURES
The obligations of the Corporation under the Series A Guarantee issued by
the Corporation for the benefit of the holders of Series A Capital Securities
and under the Series A Subordinated Debentures are unsecured and rank
subordinate and junior in right of payment to all Senior Debt of the
Corporation. Substantially all of the Corporation's existing indebtedness
constitutes Senior Debt. Because the Corporation is a holding company, the
right of the Corporation to participate in any distribution of assets of any
subsidiary, including its subsidiary banks, upon any such subsidiary's
liquidation or reorganization or otherwise (and thus the ability of holders of
the Series A Capital Securities to benefit indirectly from such distribution),
is subject to the prior claims of creditors of that subsidiary, except to the
extent that the Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Series A Guarantee and the Series A Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, and holders of Series A
Subordinated Debentures should look only to the assets of the Corporation for
payments on the Series A Subordinated Debentures. See "The Corporation." None
of the Indenture, the Series A Guarantee, the Trust Agreement or the Expense
Agreement places any limitation on the amount of secured or unsecured debt,
including Senior Debt, that may be incurred by the Corporation. See
"Description of Guarantees--Status of the Guarantees" and "Description of
Junior Subordinated Debentures--Subordination" in the accompanying Prospectus.
The ability of the Series A Issuer to pay amounts due on the Series A
Capital Securities is solely dependent upon the Corporation making payments on
the Series A Subordinated Debentures as and when required.
OPTION TO DEFER INTEREST PAYMENTS; TAX CONSEQUENCES
So long as no event of default under the Indenture has occurred or is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Series A Subordinated Debentures at any time or from time
to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond
S-5
<PAGE>
the Stated Maturity of the Series A Subordinated Debentures. As a consequence
of any such deferral, semi-annual Distributions on the Series A Capital
Securities by the Series A Issuer will also be deferred (and the amount of
Distributions to which holders of the Series A Capital Securities are entitled
will accumulate additional Distributions thereon at the rate of 8.23% per
annum, compounded semi-annually from the relevant payment date for such
Distributions) during any such Extension Period. During any such Extension
Period, the Corporation may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Corporation's capital stock or (ii) make any
payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Corporation that rank pari
passu in all respects with or junior in interest to the Series A Subordinated
Debentures subject to certain exceptions described herein. See "Certain Terms
of Series A Subordinated Debentures--Option to Defer Interest Payments." Prior
to the termination of any such Extension Period, the Corporation may further
defer the payment of interest, provided that no Extension Period may exceed 10
consecutive semi-annual periods or extend beyond the Stated Maturity of the
Series A Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all interest then accrued and unpaid (together with
interest thereon at the annual rate of 8.23%, compounded semi-annually from
the interest payment date for such interest, to the extent permitted by
applicable law), the Corporation may elect to begin a new Extension Period
subject to the above requirements. There is no limitation on the number of
times that the Corporation may elect to begin an Extension Period. See
"Certain Terms of Series A Capital Securities--Distributions."
Should an Extension Period occur, a holder of Series A Capital Securities
will be required to recognize income (in the form of original issue discount)
in respect of its pro rata share of the Series A Subordinated Debentures held
by the Series A Issuer for United States federal income tax purposes. As a
result, a holder of Series A Capital Securities will be required to include
such income in gross income for United States federal income tax purposes in
advance of the receipt of cash attributable to such income, and will not
receive the cash related to such income from the Series A Issuer if the holder
disposes of the Series A Capital Securities prior to the record date for the
payment of Distributions. See "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount" and "--Sale or Redemption of
Series A Capital Securities."
The Corporation has no current intention of exercising its right to defer
payments of interest on the Series A Subordinated Debentures. However, should
the Corporation elect to exercise such right in the future, the market price
of the Series A Capital Securities is likely to be affected. A holder that
disposes of its Series A Capital Securities during an Extension Period,
therefore, might not receive the same return on its investment as a holder
that continues to hold its Series A Capital Securities.
TAX EVENT OR CAPITAL TREATMENT EVENT
Upon the occurrence and continuation of a Tax Event or a Capital Treatment
Event (whether occurring before or after January 15, 2007), the Corporation
has the right, if certain conditions are met, (i) to terminate the Series A
Issuer and cause the Series A Subordinated Debentures to be distributed to the
holders of the Series A Capital Securities in exchange therefor upon
liquidation of the Series A Issuer, (ii) to shorten the maturity of the Series
A Subordinated Debentures to a date not earlier than January 15, 2017, or
(iii) to redeem the Series A Subordinated Debentures in whole (but not in
part) within 90 days following the occurrence of such Tax Event or Capital
Treatment Event and thereby cause a mandatory redemption of the Series A
Capital Securities. The Corporation has committed to the Federal Reserve that
it will not exercise such right without having received prior approval of the
Federal Reserve to do so, if such approval is then required under applicable
Federal Reserve capital guidelines or policies. See "Certain Terms of Series A
Subordinated Debentures--Conditional Right to Shorten Maturity or Redeem upon
a Tax Event or Capital Treatment Event."
S-6
<PAGE>
A "Tax Event" means the receipt by the Series A Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement or decision is announced on or after the date of issuance
of the Series A Capital Securities under the Trust Agreement, there is more
than an insubstantial risk that (i) the Series A Issuer is, or will be within
90 days of the date of such opinion, subject to United States Federal income
tax with respect to income received or accrued on the Series A Subordinated
Debentures, (ii) interest payable by the Corporation on the Series A
Subordinated Debentures is not, or within 90 days of such opinion, will not
be, deductible by the Corporation, in whole or in part, for United States
Federal income tax purposes, or (iii) the Series A Issuer is, or will be
within 90 days of the date of the opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
A "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws, rules or regulations, which
amendment or change is effective or which pronouncement, action or decision is
announced on or after the date of issuance of the Series A Capital Securities
under the Trust Agreement, there is more than an insubstantial risk that the
Corporation will not be entitled to treat an amount equal to the aggregate
Liquidation Amount of the Series A Capital Securities as "Tier 1 Capital" (or
the then equivalent thereof) for purposes of the capital adequacy guidelines
of the Federal Reserve, as then in effect and applicable to the Corporation.
See "Risk Factors--Possible Tax Law Changes Affecting the Series A Capital
Securities" for a discussion of certain legislative proposals that, if
adopted, could give rise to a Tax Event, which may permit the Corporation to
cause a redemption of the Series A Capital Securities prior to January 15,
2007.
EXCHANGE OF SERIES A CAPITAL SECURITIES FOR SERIES A SUBORDINATED DEBENTURES
The Corporation will have the right at any time to terminate the Series A
Issuer and after satisfaction of liabilities to creditors of the Series A
Issuer as required by applicable law cause the Series A Subordinated
Debentures to be distributed to the holders of the Series A Capital Securities
in exchange therefor upon liquidation of the Series A Issuer. The Corporation
has committed to the Federal Reserve not to exercise such right without having
received prior approval of the Federal Reserve to do so, if such approval is
then required under applicable Federal Reserve capital guidelines or policies.
See "Certain Terms of Series A Capital Securities--Liquidation of Series A
Issuer and Distribution of Series A Subordinated Debentures to Holders."
Under current United States Federal income tax law and interpretations, a
distribution of the Series A Subordinated Debentures upon liquidation of the
Series A Issuer should not be a taxable event to holders of the Series A
Capital Securities. However, if a Tax Event were to occur which would cause
the Series A Issuer to be subject to United States Federal income tax with
respect to income received or accrued on the Series A Subordinated Debentures,
a distribution of the Series A Subordinated Debentures by the Series A Issuer
could be a taxable event to the Series A Issuer and the holders of the Series
A Capital Securities. See "Certain Federal Income Tax Consequences--
Distribution of the Series A Subordinated Debentures to Holders of Series A
Capital Securities."
S-7
<PAGE>
SHORTENING OF STATED MATURITY OF SERIES A SUBORDINATED DEBENTURES
Upon the occurrence of a Tax Event or a Capital Treatment Event, the
Corporation in certain circumstances will have the right to shorten the
maturity of the Series A Subordinated Debentures to a date not earlier than
January 15, 2017 and thereby cause the Series A Capital Securities to be
redeemed on such earlier date. See "Certain Terms of Series A Subordinated
Debentures--Conditional Right to Shorten Maturity or Redeem upon a Tax Event
or Capital Treatment Event."
MARKET PRICES
There can be no assurance as to the market prices for Series A Capital
Securities or Series A Subordinated Debentures that may be distributed in
exchange for Series A Capital Securities upon liquidation of the Series A
Issuer. Accordingly, the Series A Capital Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary
market, or the Series A Subordinated Debentures that a holder of Series A
Capital Securities may receive on liquidation of the Series A Issuer, may
trade at a discount to the price that the investor paid to purchase the Series
A Capital Securities offered hereby. As a result of the existence of the
Corporation's right to defer interest payments, the market price of the Series
A Capital Securities (which represent preferred beneficial interests in the
Series A Issuer) may be more volatile than the market prices of other
securities on which original issue discount accrues that are not subject to
such deferrals. See "Certain Terms of the Series A Subordinated Debentures"
and "Description of Junior Subordinated Debentures--Corresponding Junior
Subordinated Debentures" in the accompanying Prospectus.
RIGHTS UNDER THE SERIES A GUARANTEE; DIRECT ACTION
The Series A Guarantee guarantees to the holders of the Series A Capital
Securities the following payments, to the extent not paid by the Series A
Issuer: (i) any accumulated and unpaid Distributions required to be paid on
the Series A Capital Securities, to the extent that the Series A Issuer has
funds on hand available therefor at such time, (ii) the redemption price with
respect to any Series A Securities called for redemption, to the extent that
the Series A Issuer has funds on hand available therefor at such time, and
(iii) upon a voluntary or involuntary dissolution, winding-up or liquidation
of the Series A Issuer (unless the Series A Subordinated Debentures are
distributed to holders of the Series A Capital Securities), the lesser of (a)
the aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions to the date of payment, to the extent that the Series A Issuer
has funds on hand available therefor at such time and (b) the amount of assets
of the Series A Issuer remaining available for distribution to holders of the
Series A Capital Securities. The Series A Guarantee will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Wilmington Trust Company will act as the indenture trustee
under the Series A Guarantee (the "Guarantee Trustee") for the purposes of
compliance with the Trust Indenture Act and will hold the Series A Guarantee
for the benefit of the holders of the Series A Capital Securities. Wilmington
Trust Company will also act as Debenture Trustee for the Series A Subordinated
Debentures and as Property Trustee and Delaware Trustee under the Trust
Agreement.
The holders of not less than a majority in aggregate liquidation amount of
the Series A Capital Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Series A Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Series A Guarantee.
Any holder of the Series A Capital Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under the Series A
Guarantee without first instituting a legal proceeding against the Series A
Issuer, the Guarantee Trustee or any other person or entity. If the
Corporation were to default on its obligation to pay amounts payable under the
Series A Subordinated Debentures, the Series A Issuer would lack funds for the
payment of Distributions or amounts payable on redemption of the Series A
Capital Securities or otherwise, and, in such event, holders of the Series A
Capital Securities would not be able to rely upon the Series A Guarantee for
payment of such amounts. Instead, in the event a Debenture Event of Default
shall have occurred and be continuing
S-8
<PAGE>
and such event is attributable to the failure of the Corporation to pay
interest on or principal of the Series A Subordinated Debentures on the
payment date on which such payment is due and payable, then a holder of Series
A Capital Securities may institute a legal proceeding directly against the
Corporation for enforcement of payment to such holder of the principal of or
interest on such Series A Subordinated Debentures having a principal amount
equal to the aggregate Liquidation Amount of the Series A Capital Securities
of such holder (a "Direct Action"). In connection with such Direct Action, the
Corporation will have a right of set-off under the Indenture to the extent of
any payment made by the Corporation to such holder of Series A Securities in
the Direct Action. Except as described herein, holders of Series A Securities
will not be able to exercise directly any other remedy available to the
holders of the Series A Subordinated Debentures or assert directly any other
rights in respect of the Series A Subordinated Debentures. See "Description of
Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of
Capital Securities" and "--Debenture Events of Default" and "Description of
Guarantees" in the accompanying Prospectus. The Trust Agreement provides that
each holder of Series A Capital Securities by acceptance thereof agrees to the
provisions of the Series A Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Series A Capital Securities generally will have limited voting
rights relating only to the modification of the Series A Capital Securities
and the exercise of the Series A Issuer's rights as holder of Series A
Subordinated Debentures and the Series A Guarantee. Holders of Series A
Capital Securities will not be entitled to vote to appoint, remove or replace
the Property Trustee, the Delaware Trustee or any Administrative Trustee, and
such voting rights are vested exclusively in the holder of the Series A Common
Securities except, with respect to the Property Trustee and the Delaware
Trustee, upon the occurrence of certain events described in the accompanying
Prospectus. The Property Trustee, the Administrative Trustees and the
Corporation may amend the Trust Agreement without the consent of holders of
Series A Capital Securities to ensure that the Series A Issuer will be
classified for United States federal income tax purposes as a grantor trust or
as other than as an association taxable as a corporation unless such action
materially adversely affects the interests of such holders. See "Description
of Capital Securities--Voting Rights; Amendment of Each Trust Agreement" and
"--Removal of Issuer Trustees" in the accompanying Prospectus.
TRADING CHARACTERISTICS OF SERIES A CAPITAL SECURITIES
The Series A Capital Securities have not been listed on a national
securities exchange or the NASDAQ Stock Market. The absence of such a listing
for the Series A Capital Securities could adversely affect the liquidity of
the Series A Capital Securities.
The Series A Capital Securities may trade at prices that do not fully
reflect the value of accrued but unpaid interest with respect to the
underlying Series A Subordinated Debentures. A holder of Series A Capital
Securities that disposes of its Series A Capital Securities between record
dates for payments of Distributions (and consequently does not receive a
Distribution from the Series A Issuer for the period prior to such
disposition) will nevertheless be required to include accrued but unpaid
interest on the Series A Subordinated Debentures through the date of
disposition in income as ordinary income and to add such amount to its
adjusted tax basis in the Series A Capital Securities disposed of. Such holder
will recognize a capital loss to the extent the selling price (which may not
fully reflect the value of accrued but unpaid interest) is less than its
adjusted tax basis (which will include accrued but unpaid interest). Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes. See "Certain
Federal Income Tax Consequences--Sale or Redemption of Series A Capital
Securities."
POSSIBLE TAX LAW CHANGES AFFECTING THE SERIES A CAPITAL SECURITIES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Revenue
Reconciliation Bill"), the revenue portion of President Clinton's budget
proposal, was introduced in the 104th Congress. If
S-9
<PAGE>
enacted, the Revenue Reconciliation Bill would have generally denied interest
deductions for interest on an instrument issued by a corporation that has a
maximum term of more than 20 years and that is not shown as indebtedness on
the separate balance sheet of the issuer or, where the instrument is issued to
a related party (other than a corporation), where the holder or some other
related party issues a related instrument that is not shown as indebtedness on
the issuer's consolidated balance sheet. For purposes of determining the
weighted average maturity or the term of an instrument, any right to extend
would be treated as exercised. The above-described provisions of the Revenue
Reconciliation Bill were proposed to be effective generally for instruments
issued on or after December 7, 1995. If the proposed provision were to have
applied to the Series A Subordinated Debentures, the Corporation would have
been unable to deduct interest on the Series A Subordinated Debentures.
However, on March 29, 1996, the Chairmen of the Senate Finance and House Ways
and Means Committees issued a joint statement to the effect that it was their
intention that the effective date of the President's legislative proposals, if
adopted, would be no earlier than the date of appropriate Congressional
action. Under current law, the Corporation will be able to deduct interest on
the Series A Subordinated Debentures. Although the 104th Congress adjourned
without enacting the above-described provisions of the Revenue Reconciliation
Bill, there can be no assurance that current or future legislative proposals
or final legislation will not affect the ability of the Corporation to deduct
interest on the Series A Subordinated Debentures. Such a change could give
rise to a Tax Event, which may permit the Corporation to cause a redemption of
the Series A Capital Securities before January 15, 2007. See "Certain Terms of
Series A Subordinated Debentures--Redemption" in this Prospectus Supplement
and "Description of Capital Securities--Redemption or Exchange--Tax Event
Redemption" in the accompanying Prospectus. See also "Certain Federal Income
Tax Consequences--Possible Tax Law Changes."
COMPASS TRUST I
Compass Trust I is a statutory business trust created under Delaware law
pursuant to (i) the Trust Agreement executed by the Corporation, as Depositor,
Wilmington Trust Company, as Property Trustee and as Delaware Trustee, and the
Administrative Trustees named therein, and (ii) the filing of a certificate of
trust with the Delaware Secretary of State on December 30, 1996. The Series A
Issuer's business and affairs are conducted by the Issuer Trustees: Wilmington
Trust Company, as Property Trustee and as Delaware Trustee, and four
individual Administrative Trustees who are employees or officers of or
affiliated with the Corporation. The Series A Issuer exists for the exclusive
purposes of (i) issuing and selling the Series A Securities, (ii) using the
proceeds from the sale of Series A Securities to acquire Series A Subordinated
Debentures issued by the Corporation and (iii) engaging in only those other
activities necessary or incidental thereto (such as registering the transfer
of the Series A Capital Securities). Accordingly, the Series A Subordinated
Debentures will be the sole assets of the Series A Issuer, and payments under
the Series A Subordinated Debentures will be the sole revenue of the Series A
Issuer. All of the Series A Common Securities will be owned by the
Corporation. The Series A Common Securities will rank pari passu, and payments
will be made thereon pro rata, with the Series A Capital Securities, except
that upon the occurrence and continuance of an event of default under the
Trust Agreement resulting from an Event of Default under the Indenture, the
rights of the Corporation, as holder of the Series A Common Securities, to
payment in respect of Distributions and payments upon liquidation, redemption
or otherwise will be subordinated to the rights of the holders of the Series A
Capital Securities. See "Description of Capital Securities--Subordination of
Common Securities" in the accompanying Prospectus. The Corporation will
acquire Series A Common Securities in an aggregate liquidation amount equal to
3% of the total capital of the Series A Issuer. The Series A Issuer has a term
of 55 years, but may terminate earlier as provided in the Trust Agreement. The
principal executive office of the Series A Issuer is 15 South 20th Street,
Birmingham, Alabama 35233, Attention: Secretary, and its telephone number is
(205) 933-3000. See "The Issuers" in the accompanying Prospectus.
It is anticipated that the Series A Issuer will not be subject to the
reporting requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
S-10
<PAGE>
THE CORPORATION
The Corporation is a bank holding company with its principal place of
business in Birmingham, Alabama. The Corporation was organized in 1970 and
commenced business in late 1971 upon the acquisition of Central Bank & Trust
Co. and State National Bank. The Corporation subsequently acquired
substantially all of the outstanding stock of additional banks located in
Alabama, 11 of which were merged in late 1981 to create Central Bank of the
South, Alabama's first statewide bank. In February, 1987, the Corporation
acquired First National Bank of Crosby near Houston, Texas, and became the
first out-of-state holding company to acquire a bank in Texas. The Corporation
first expanded into Florida in July, 1991, when it acquired Citizens &
Builders Federal Savings, F.S.B., in Pensacola, Florida. In November, 1993,
the Corporation changed its name from Central Bancshares of the South, Inc. to
Compass Bancshares, Inc. and Central Bank of the South, the Company's lead
bank subsidiary, changed its name to Compass Bank ("Compass Bank").
In addition to Compass Bank, the Corporation also owns Compass Bank, a
Florida state member bank headquartered in Jacksonville, Florida, Central Bank
of the South, an Alabama banking corporation headquartered in Anniston,
Alabama, and Compass Banks of Texas, Inc., a Delaware bank holding company
("Compass of Texas"), which owns Compass Bank, a Texas state bank
headquartered in Houston, Texas. Compass of Texas also owns River Oaks Trust
Company with offices in Houston and Dallas, Texas.
The principal role of the Corporation is to supervise and coordinate the
activities of its subsidiaries and to provide them with capital and services
of various kinds. The Corporation derives substantially all of its income from
dividends from its subsidiaries. Such dividends are determined on an
individual basis, generally in relation to each subsidiary's earnings and
capital position.
On September 30, 1996, the Corporation and its subsidiaries had consolidated
assets of approximately $11.6 billion, consolidated deposits of approximately
$9.1 billion, and total shareholders' equity of approximately $777 million. Of
the Corporation's approximately $11.6 billion of consolidated assets,
approximately $5.8 billion are held in Alabama, approximately $4.8 billion are
held in Texas, and approximately $1.0 billion are held in Florida.
The Corporation has its principal executive offices at 15 South 20th Street,
Birmingham, Alabama 35233, telephone number (205) 933-3000.
S-11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF COMPASS BANCSHARES, INC.
The following table presents summary consolidated financial data which has
been derived from, and should be read in conjunction with, the consolidated
financial statements, notes thereto and other information of the Corporation
included in the documents incorporated herein by reference. This summary is
qualified in its entirety by the detailed information included in such
documents. See "Incorporation of Certain Documents by Reference" in the
accompanying Prospectus. The data presented for the nine-month periods ended
September 30, 1996 and September 30, 1995 are not necessarily indicative of
the data for the entire year and have been derived from unaudited consolidated
financial statements of the Corporation. These financial statements include,
in the opinion of management, all adjustments of a normal recurring nature and
disclosures which are necessary to present fairly the data for such interim
periods. The comparability of the data presented is affected by certain
acquisitions that the Corporation has completed in the time periods presented.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD
Interest income........ $ 604,468 $ 557,787 $ 754,910 $ 608,783 $ 554,601 $ 572,318 $ 579,599
Interest expense....... 308,411 282,973 385,956 255,575 206,876 237,733 307,665
Net interest income.... 296,057 274,814 368,954 353,208 347,725 334,585 271,934
Provision for loan
losses................ 12,935 8,478 11,008 3,816 36,089 53,326 39,385
Noninterest income..... 115,225 93,478 127,750 93,151 110,896 102,587 93,437
Noninterest expense.... 250,615 228,576 308,228 283,040 277,206 263,582 230,131
Income before income
taxes................. 147,732 131,238 177,468 159,503 145,326 120,264 95,855
Net income............. 94,480 84,677 114,224 105,439 96,920 80,938 66,130
Net income applicable
to Common Shares...... 94,480 84,677 114,224 105,439 95,389 78,849 64,539
PER COMMON SHARE
Net income............. $ 2.35 $ 2.09 $ 2.82 $ 2.62 $ 2.37 $ 1.97 $ 1.68
Cash dividends......... 0.96 0.84 1.12 0.92 0.76 0.667 0.587
Book value at end of
period................ 19.18 17.42 18.29 15.91 14.63 12.88 11.37
Weighted average Common
Shares................ 40,195 40,474 40,513 40,320 40,310 39,984 38,373
AT PERIOD END
Loans.................. $7,274,900 $6,465,827 $6,461,537 $6,007,821 $5,413,283 $4,852,116 $4,148,371
Earning assets......... 10,670,201 9,621,402 9,705,405 8,838,869 7,260,029 6,888,254 6,478,995
Total assets........... 11,605,379 10,391,108 10,678,369 9,639,541 7,808,063 7,484,662 7,122,202
Deposits............... 9,119,124 7,765,969 8,090,818 7,511,470 6,047,131 5,776,902 5,425,146
Long-term debt......... 602,373 665,352 590,044 494,327 329,718 208,570 22,038
Common shareholders'
equity................ 776,810 702,059 737,463 637,877 585,868 515,107 445,962
Total shareholders' eq-
uity.................. 776,810 702,059 737,463 637,877 585,868 538,217 469,072
PERFORMANCE RATIOS
Return on average total
assets (1)............ 1.18% 1.16% 1.16% 1.24% 1.28% 1.13% 1.02%
Return on average com-
mon
equity (1)............ 17.08 16.92 16.79 17.33 17.20 16.24 15.78
Return on average total
equity (1)............ 17.08 16.92 16.79 17.33 16.96 15.91 15.50
Net interest margin (1)
(TE).................. 4.01 4.11 4.01 4.54 5.09 5.20 4.73
CAPITAL RATIOS AT PERIOD
END
Equity to assets....... 6.69% 6.76% 6.91% 6.62% 7.50% 7.19% 6.59%
Tangible equity to tan-
gible assets.......... 6.05 6.49 6.55 6.37 6.98 6.55 6.01
Tier I risk-adjusted
capital (2)........... 8.61 9.70 10.10 9.75 10.55 9.85 9.70
Total risk-adjusted
capital (3)........... 11.43 12.83 13.17 13.06 13.26 11.59 11.50
Leverage (4)........... 6.21 6.69 6.74 6.62 7.32 6.86 6.43
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- -------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- --------- ---------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSET QUALITY DATA
Nonperforming loans.... $ 24,932 $ 14,033 $ 13,608 $ 13,725 $ 19,843 $ 29,675 $ 38,384
Nonperforming assets... 30,946 23,841 23,158 21,196 41,815 69,030 83,251
Allowance for loan
losses................ 118,273 111,132 111,235 110,958 114,233 87,463 59,608
Net loan chargeoffs.... 12,870 8,304 10,731 8,339 10,924 25,641 32,960
Nonperforming loans to
period-end loans...... 0.34% 0.22% 0.21% 0.23% 0.37% 0.61% 0.93%
Nonperforming assets to
period-end loans plus
OREO and other
nonperforming asset... 0.43% 0.37% 0.35% 0.35% 0.77% 1.41% 1.99%
Allowance for loan
losses to
nonperforming loans... 474.38% 791.93% 817.42% 808.44% 575.68% 294.74% 155.29%
Allowance for loan
losses to
period-end loans...... 1.63% 1.72% 1.69% 1.85% 2.11% 1.80% 1.44%
Net loan chargeoffs to
average
loans (1)............. 0.25% 0.18% 0.17% 0.15% 0.22% 0.58% 0.85%
RATIO OF EARNINGS TO
FIXED CHARGES
Excluding deposit in-
terest................ 3.22x 2.81x 2.78x 3.68x 4.50x 3.64x 2.56x
<CAPTION>
Including deposit in-
terest................ 1.47x 1.46x 1.45x 1.61x 1.69x 1.50x 1.31x
RATIO OF EARNINGS TO
FIXED CHARGES AND
PREFERRED STOCK
DIVIDENDS(5)
Excluding deposit
interest............... 3.22x 2.81x 2.78x 3.68x 4.25x 3.40x 2.46x
Including deposit
interest............... 1.47x 1.46x 1.45x 1.61x 1.67x 1.48x 1.30x
</TABLE>
- --------
(1) Annualized
(2) The Corporation's Tier I risk-adjusted capital consists of common
shareholders' equity (excluding net unrealized gains or losses on
securities, except for net unrealized losses on marketable equity
securities), less certain intangibles.
(3) The Corporation's total risk-adjusted capital consists of Tier I capital
and subordinated debt and a limited amount of the loan loss allowance. At
least half of a bank holding company's total capital is to be comprised of
Tier I capital.
(4) The leverage ratio is defined as the ratio of Tier I capital to average
quarterly assets, less certain intangibles. Federal Reserve guidelines
require a minimum leverage ratio of 3% for bank holding companies that meet
certain specified criteria, including that they have the highest regulatory
rating. All other bank holding companies will be required to maintain a
leverage ratio of 3% plus an additional cushion of at least 100 to 200 basis
points. The guidelines also provide that banking organizations experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels,
without significant reliance on intangible assets.
(5) Earnings represent consolidated income before income taxes and
extraordinary item plus fixed charges. Fixed charges include consolidated
interest expense (excluding or including interest on deposits, as the case
may be) and the proportion deemed representative of the interest factor of
rental expense, net of income from subleases.
TE = Taxable Equivalent
S-13
<PAGE>
USE OF PROCEEDS
All of the proceeds from the sale of Series A Capital Securities will be
invested by the Series A Issuer in Series A Subordinated Debentures. The
Corporation intends that the proceeds from the sale of such Series A
Subordinated Debentures will be added to its general corporate funds and will
be used for general corporate purposes.
The Corporation is required by the Federal Reserve to maintain certain
levels of capital for bank regulatory purposes. On October 21, 1996, the
Federal Reserve announced that cumulative preferred securities having the
characteristics of the Series A Capital Securities which qualify as a minority
interest could be included as Tier 1 capital for bank holding companies. Such
Tier 1 capital treatment, together with the Corporation's ability to deduct,
for income tax purposes, interest payable on the Series A Subordinated
Debentures, will provide the Corporation with a more cost-effective means of
obtaining capital for regulatory purposes than other Tier 1 capital
alternatives currently available to it.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation and its subsidiaries as of September 30, 1996 and as adjusted to
give effect to the consummation of the offering of the Series A Capital
Securities. The following data should be read in conjunction with the
consolidated financial statements and notes thereto of the Corporation and its
subsidiaries incorporated herein by reference.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Total Long-term debt................................... $ 602,373 $ 602,373
---------- ----------
Guaranteed Preferred Beneficial Interests in Corpora-
tion's Junior
Subordinated Deferrable Interest Debentures(a) ....... -- 100,000
Shareholders' equity:
Common stock of $2 par value:
Authorized--100,000,000 shares;
Issued--40,509,654 shares in 1996 and 40,325,281
shares in 1995...................................... 81,019 81,019
Surplus.............................................. 57,768 57,768
Loans to finance stock purchases..................... (5,006) (5,006)
Unearned restricted stock............................ (1,145) (1,145)
Net unrealized holding gain (loss) on available-for-
sale securities..................................... (8,117) (8,117)
Retained earnings.................................... 652,291 652,291
---------- ----------
Total shareholders' equity......................... 776,810 776,810
---------- ----------
Total capitalization............................. $1,379,183 $1,479,183
========== ==========
</TABLE>
(a) As described herein, the sole assets of the Series A Issuer will be
$103,093,000 of 8.23% Series A Subordinated Debentures, issued by the
Corporation to the Series A Issuer. The Series A Subordinated Debentures will
mature on January 15, 2027 (which date may be shortened to a date not earlier
than January 15, 2017 in certain circumstances as described under "Certain
Terms of Series A Subordinated Debentures--Conditional Right to Shorten
Maturity or Redeem upon a Tax Event or Capital Treatment Event" upon the
occurrence of a Tax Event or Capital Treatment Event if certain conditions are
met. The Corporation owns all of the Series A Common Securities of the Series
A Issuer, which accrue distributions at the rate of 8.23% per annum.
S-14
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Series A Issuer will be treated as a
subsidiary of the Corporation and, accordingly, the accounts of the Series A
Issuer will be included in the consolidated financial statements of the
Corporation. The Series A Capital Securities will be presented as a separate
line item in the consolidated balance sheets of the Corporation, entitled
"Guaranteed Preferred Beneficial Interests in Corporation's Junior
Subordinated Deferrable Interest Debentures" and appropriate disclosures about
the Series A Capital Securities, the Series A Guarantee and the Series A
Subordinated Debentures will be included in the notes to the consolidated
financial statements. For financial reporting purposes, the Corporation will
record Distributions payable on the Series A Capital Securities as an expense
in the consolidated statements of income.
The Corporation has agreed that future financial reports of the Corporation
will: (i) present the Capital Securities issued by other Issuer Trusts on the
Corporation's balance sheet as a separate line item entitled "Guaranteed
Preferred Beneficial Interests in Corporation's Junior Subordinated Deferrable
Interest Debentures"; (ii) include in a footnote to the financial statements
disclosure that the sole assets of the trusts are the Junior Subordinated
Debentures (specifying as to each trust the principal amount, interest rate
and maturity date of the Junior Subordinated Debentures held); and (iii) if
Staff Accounting Bulletin 53 treatment is sought, include, in an audited
footnote to the financial statements, disclosure that (a) the trusts are
wholly owned, (b) the sole assets of the trusts are the Junior Subordinated
Debentures (specifying as to each trust the principal amount, interest rate
and maturity date of the Junior Subordinated Debentures held), and (c) the
obligations of the Corporation under the Junior Subordinated Debentures, the
Indenture, Trust Agreement, Guarantee and Expense Agreement, in the aggregate,
constitute a full and unconditional guarantee by the Corporation of such
trust's obligations under the Capital Securities issued by such trust.
CERTAIN TERMS OF SERIES A CAPITAL SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series A
Capital Securities supplements the description of the terms and provisions of
the Capital Securities set forth in the accompanying Prospectus under the
heading "Description of Capital Securities," to which description reference is
hereby made. This summary of certain terms and provisions of the Series A
Capital Securities, which describes the material provisions thereof, does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Trust Agreement to which reference is hereby made. The form
of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and accompanying Prospectus form
a part.
DISTRIBUTIONS
The Series A Capital Securities represent beneficial interests in the Series
A Issuer, and Distributions on the Series A Capital Securities will be payable
at the annual rate of 8.23% of the stated Liquidation Amount of $1000, payable
semi-annually in arrears on January 15 and July 15 of each year (each a
"Distribution Date"), to the holders of the Series A Capital Securities at the
close of business on the fifteenth day (whether or not a Business Day (as
defined below)) next preceding the relevant Distribution Date. Distributions
will accumulate from January 15, 1997. The first Distribution payment date for
the Series A Capital Securities will be July 15, 1997. The amount of
Distributions payable for any period will be computed on the basis of a 360-
day year of twelve 30-day months. In the event that any date on which
Distributions are payable on the Series A Capital Securities is not a Business
Day, then payment of the Distributions payable on such date will be made on
the next succeeding day that is a Business Day (and without any additional
Distributions or other payment in respect of any such
S-15
<PAGE>
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment
was originally payable. The Paying Agent for the Capital Securities shall be
Wilmington Trust Company. See "Description of Capital Securities--
Distributions" in the accompanying Prospectus.
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Series A Subordinated Debentures at any time or from time
to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity of the Series A Subordinated Debentures. As a
consequence of any such deferral of interest payments by the Corporation,
semi-annual Distributions on the Series A Capital Securities will also be
deferred by the Series A Issuer during any such Extension Period.
Distributions to which holders of the Series A Capital Securities are entitled
will accumulate additional Distributions thereon at the rate per annum of
8.23% thereof, compounded semi-annually from the relevant payment date for
such Distributions. The term "Distributions" as used herein shall include any
such additional Distributions. During any such Extension Period, the
Corporation may not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Corporation's capital stock or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank pari passu in all respects with or
junior in interest to the Series A Subordinated Debentures subject to certain
exceptions described herein. See "Certain Terms of Series A Subordinated
Debentures--Option to Defer Interest Payments". Prior to the termination of
any such Extension Period, the Corporation may further defer the payment of
interest on the Series A Subordinated Debentures, provided that no Extension
Period may exceed 10 consecutive semi-annual periods or extend beyond the
Stated Maturity of the Series A Subordinated Debentures. Upon the termination
of any such Extension Period and the payment of all interest then accrued and
unpaid (together with interest thereon at the rate of 8.23% per annum,
compounded semi-annually, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period. There is no limitation
on the number of times that the Corporation may elect to begin an Extension
Period. See "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series A
Subordinated Debentures.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series A
Subordinated Debentures, whether at Stated Maturity or upon earlier redemption
as provided in the Indenture, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount (as defined
in the accompanying Prospectus) of the Series A Securities, upon not less than
30 nor more than 60 days notice prior to the date fixed for repayment or
redemption, at a redemption price, with respect to the Series A Capital
Securities (the "Redemption Price"), equal to the aggregate Liquidation Amount
of such Series A Capital Securities plus accumulated and unpaid Distributions
thereon to the date of redemption (the "Redemption Date") and the related
amount of the premium, if any, paid by the Corporation upon the concurrent
redemption of such Series A Subordinated Debentures. If less than all of the
Series A Subordinated Debentures are to be repaid or redeemed on a Redemption
Date, then the proceeds from such repayment or redemption, including any
premium paid by the Corporation, shall be allocated to the redemption pro rata
of the Series A Capital Securities and the Series A Common Securities.
The Corporation has the right to redeem the Series A Subordinated Debentures
(i) on or after January 15, 2007, in whole at any time or in part from time to
time or (ii) at any time, in certain circumstances as described under "Certain
Terms of Series A Subordinated Debentures--Conditional
S-16
<PAGE>
Right to Shorten Maturity or Redeem upon a Tax Event or Capital Treatment
Event", in whole (but not in part), within 90 days following the occurrence of
a Tax Event or Capital Treatment Event. A redemption of the Series A
Subordinated Debentures would cause a mandatory redemption of Series A Capital
Securities and Series A Common Securities.
The Redemption Price, in the case of a redemption under (i) above, shall
equal the following prices expressed in percentages of the Liquidation Amount
together with accrued Distributions to but excluding the Redemption Date. If
redeemed during the 12-month period beginning January 15:
<TABLE>
<S> <C>
REDEMPTION
YEAR PRICE
---- ----------
2007......................................................... 104.1150%
2008......................................................... 103.7035
2009......................................................... 103.2920
2010......................................................... 102.8805
2011......................................................... 102.4690
2012......................................................... 102.0575
2013......................................................... 101.6460
2014......................................................... 101.2345
2015......................................................... 100.8230
2016......................................................... 100.4115
</TABLE>
and at 100% on or after January 15, 2017.
The Redemption Price, in the case of a redemption following a Tax Event or
Capital Treatment Event as described under (ii) above, shall be equal to the
aggregate Liquidation Amount of such Series A Capital Securities plus
accumulated and unpaid Distributions thereon to the Redemption Date.
LIQUIDATION OF SERIES A ISSUER AND DISTRIBUTION OF SERIES A SUBORDINATED
DEBENTURES TO HOLDERS
The Corporation will have the right at any time to liquidate the Series A
Issuer and cause Series A Subordinated Debentures to be distributed to the
holders of the Series A Capital Securities in exchange therefor upon
liquidation of the Series A Issuer. The Corporation has committed to the
Federal Reserve that, so long as the Corporation (or any affiliate) is a
holder of Series A Common Securities, the Corporation will not exercise such
right without having received the prior approval of the Federal Reserve to do
so, if such approval is then required under applicable Federal Reserve capital
guidelines or policies.
Under current United States Federal income tax law, a distribution of Series
A Subordinated Debentures in exchange for Series A Capital Securities should
not be a taxable event to holders of the Series A Capital Securities. Should
there be a change in law, a change in legal interpretation, a Tax Event or
other circumstances, however, the distribution of the Series A Subordinated
Debentures could be a taxable event to holders of the Series A Capital
Securities. See "Certain Federal Income Tax Consequences--Distribution of
Series A Subordinated Debentures to Holders of Series A Capital Securities."
If the Corporation elects neither to redeem the Series A Subordinated
Debentures prior to maturity nor to liquidate the Series A Issuer and
distribute the Series A Subordinated Debentures to holders of the Series A
Capital Securities in exchange therefor, the Series A Capital Securities will
remain outstanding until the Stated Maturity of the Series A Subordinated
Debentures.
If the Corporation elects to liquidate the Series A Issuer and thereby
causes the Series A Subordinated Debentures to be distributed to holders of
the Series A Capital Securities in exchange therefor upon liquidation of the
Series A Issuer, the Corporation shall continue to have the right to shorten
or extend the maturity of the Series A Subordinated Debentures, subject to
certain conditions as described under "Certain Terms of Series A Subordinated
Debentures--General."
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<PAGE>
LIQUIDATION VALUE
The amount payable on the Series A Capital Securities in the event of any
liquidation of the Series A Issuer is $1,000 per Series A Capital Security
plus accumulated and unpaid Distributions, which may be in the form of a
distribution of a Like Amount in Series A Subordinated Debentures, subject to
certain exceptions. See "Description of Capital Securities--Liquidation
Distribution Upon Termination" in the accompanying Prospectus.
REGISTRATION OF SERIES A CAPITAL SECURITIES
The Series A Capital Securities will be represented by global certificates
registered in the name of DTC or its nominee. Beneficial interests in the
Series A Capital Securities will be shown on, and transfers thereof will be
effected only through, records maintained by Participants in DTC (as defined
in the accompanying Prospectus). Except as described below and in the
accompanying Prospectus, Series A Capital Securities in certificated form will
not be issued in exchange for the global certificates. See "Book-Entry
Issuance" in the accompanying Prospectus.
A global security shall be exchangeable for Series A Capital Securities
registered in the names of persons other than DTC or its nominee only if (i)
DTC notifies the Series A Issuer that it is unwilling or unable to continue as
a depository for such global security and no successor depository shall have
been appointed, or if at any time DTC ceases to be a clearing agency
registered under the Exchange Act, at a time when DTC is required to be so
registered to act as such depository, (ii) the Series A Issuer in its sole
discretion determines that such global security shall be so exchangeable, or
(iii) there shall have occurred and be continuing an event of default under
the Indenture with respect to the Series A Subordinated Debentures. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants with respect to ownership of beneficial
interests in such global security. In the event that Series A Capital
Securities are issued in definitive form, such Series A Capital Securities
will be in denominations of $1000 and integral multiples thereof and may be
transferred or exchanged at the offices described below.
Payments on Series A Capital Securities represented by a global security
will be made to DTC, as the depositary for the Series A Capital Securities. In
the event Series A Capital Securities are issued in certificated form, the
Liquidation Amount and Distributions will be payable, the transfer of the
Series A Capital Securities will be registrable, and Series A Capital
Securities will be exchangeable for Series A Capital Securities of other
denominations of a like aggregate Liquidation Amount, at the corporate trust
office of the Property Trustee in New York, New York, or at the offices of any
paying agent or transfer agent appointed by the Administrative Trustees,
provided that payment of any Distribution may be made at the option of the
Administrative Trustees by check mailed to the address of the persons entitled
thereto or by wire transfer. In addition, if the Series A Capital Securities
are issued in certificated form, the record dates for payment of Distributions
will be the 15th day of the month in which the relevant Distribution payment
is scheduled to be made. For a description of DTC and the terms of the
depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance" in
the accompanying Prospectus.
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<PAGE>
CERTAIN TERMS OF SERIES A SUBORDINATED DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Series A
Subordinated Debentures supplements the description of the terms and
provisions of the Junior Subordinated Debentures set forth in the accompanying
Prospectus under the headings "Description of Junior Subordinated Debentures",
to which description reference is hereby made. The summary of certain terms
and provisions of the Series A Subordinated Debentures set forth below, which
describes the material provisions thereof, does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, the Indenture
to which reference is hereby made. The form of Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus Supplement and
accompanying Prospectus form a part.
Concurrently with the issuance of the Series A Capital Securities, the
Series A Issuer will invest the proceeds thereof, together with the
consideration paid by the Corporation for the Series A Common Securities, in
the Series A Subordinated Debentures issued by the Corporation. The Series A
Subordinated Debentures will bear interest at the annual rate of 8.23% of the
principal amount thereof, payable semi-annually in arrears on January 15 and
July 15 of each year (each, an "Interest Payment Date"), commencing July 15,
1997, to the person in whose name each Series A Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. It is anticipated
that, until the liquidation, if any, of the Series A Issuer, the Series A
Subordinated Debentures will be held in the name of the Property Trustee in
trust for the benefit of the holders of the Series A Securities. The amount of
interest payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which interest is
payable on the Series A Subordinated Debentures is not a Business Day, then
payment of the interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on the date such payment was originally payable. Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
the rate per annum of 8.23% thereof, compounded semi-annually from the
relevant Interest Payment Date. The term "interest" as used herein shall
include semi-annual interest payments, interest on semi-annual interest
payments not paid on the applicable Interest Payment Date and Additional Sums
(as defined below), as applicable.
The Series A Subordinated Debentures will be issued as a series of junior
subordinated deferrable interest debentures under the Indenture. The Series A
Subordinated Debentures will mature on January 15, 2027. Such date may be
shortened by the Corporation in certain circumstances upon the occurrence of a
Tax Event or a Capital Treatment Event as described under "--Conditional Right
to Shorten Maturity or Redeem upon a Tax Event or Capital Treatment Event" to
any date not earlier than January 15, 2017. The Corporation has committed to
the Federal Reserve that it will not shorten the Stated Maturity without
having received the prior approval of the Federal Reserve to do so, if such
approval is then required under applicable Federal Reserve capital guidelines
or policies. In the event that the Corporation elects to shorten the maturity
of the Series A Subordinated Debentures, it shall give notice to the Debenture
Trustee, and the Debenture Trustee shall give notice of such shortening to the
holders of the Series A Subordinated Debentures no more than 30 and no less
than 60 days prior to the effectiveness thereof.
The Series A Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt of the Corporation.
See "Description of Junior Subordinated Debentures--Subordination" in the
accompanying Prospectus. Substantially all of the Corporation's existing
indebtedness constitutes Senior Debt. Because the Corporation is a holding
company, the
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right of the Corporation to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the Series A Capital Securities to benefit
indirectly from such distribution), is subject to the prior claims of
creditors of that subsidiary, except to the extent that the Corporation may
itself be recognized as a creditor of that subsidiary. Accordingly, the Series
A Subordinated Debentures will be effectively subordinated to all existing and
future liabilities of the Corporation's subsidiaries, and holders of Series A
Subordinated Debentures should look only to the assets of the Corporation for
payments on the Series A Subordinated Debentures. The Indenture does not limit
the incurrence or issuance of other secured or unsecured debt of the
Corporation, including Senior Debt, whether under the Indenture or any
existing or other indenture that the Corporation may enter into in the future
or otherwise. See "Description of Junior Subordinated Debentures--
Subordination" in the accompanying Prospectus.
OPTION TO DEFER INTEREST PAYMENTS
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture at any time or
from time to time during the term of the Series A Subordinated Debentures to
defer payment of interest on the Series A Subordinated Debentures for a period
not exceeding 10 consecutive semi-annual periods with respect to each
Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Series A Subordinated Debentures. At the end of such
Extension Period, the Corporation must pay all interest then accrued and
unpaid on the Subordinated Debentures (together with interest on such unpaid
interest at the annual rate of 8.23%, compounded semi-annually from the
relevant Interest Payment Date, to the extent permitted by applicable law).
During an Extension Period, interest will continue to accrue and holders of
Series A Subordinated Debentures (or holders of Series A Capital Securities
while such series is outstanding) will be required to accrue interest income
for United States federal income tax purposes. See "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
During any such Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock or
(ii) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Corporation (including
other Junior Subordinated Debentures) that rank pari passu in all respects
with or junior in interest to the Series A Subordinated Debentures (other than
(a) repurchases, redemptions or other acquisitions of shares of capital stock
of the Corporation in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of one or more employees,
officers, directors or consultants, in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of
capital stock of the Corporation (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series
of the Corporation's capital stock, (c) the purchase of fractional interests
in shares of the Corporation's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise
of such warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks pari passu with or junior to such stock).
Prior to the termination of any such Extension Period, the Corporation may
further defer the payment of interest on the Series A Subordinated Debentures,
provided that no Extension Period may exceed 10 consecutive semi-annual
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<PAGE>
periods or extend beyond the Stated Maturity of the Series A Subordinated
Debentures. Upon the termination of any such Extension Period and the payment
of all interest then accrued and unpaid (together with interest thereon at the
rate of 8.23% per annum compounded semi-annually, to the extent permitted by
applicable law), the Corporation may elect to begin a new Extension Period
subject to the above requirements. No interest shall be due and payable during
an Extension Period, except at the end thereof. The Corporation must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election to begin such Extension Period at least one Business Day prior
to the earlier of (i) the date interest on the Series A Subordinated
Debentures would have been payable except for the election to begin such
Extension Period or (ii) the date the Administrative Trustees are required to
give notice to any applicable stock exchange or automated quotation system on
which the Series A Capital Securities are then listed or quoted or to holders
of Series A Subordinated Debentures of the record date or (iii) the date such
interest is payable, but in any event not less than one Business Day prior to
such record date. The Debenture Trustee shall give notice of the Corporation's
election to begin a new Extension Period to the holders of the Series A
Subordinated Debentures. There is no limitation on the number of times that
the Corporation may elect to begin an Extension Period. See "Description of
Junior Subordinated Debentures--Option to Defer Interest Payments" in the
accompanying Prospectus.
ADDITIONAL SUMS
If the Series A Issuer is required to pay any additional taxes, duties or
other governmental charges as a result of a Tax Event, the Corporation will
pay as additional amounts on the Series A Subordinated Debentures such amounts
as shall be required so that the Distributions payable by the Series A Issuer
shall not be reduced as a result of any such additional taxes, duties or other
governmental charges.
REDEMPTION
The Series A Subordinated Debentures are redeemable prior to maturity at the
option of the Corporation (i) on or after January 15, 2007, in whole at any
time or in part from time to time or (ii) at any time, in certain
circumstances as described under "Certain Terms of Series A Subordinated
Debentures--Conditional Right to Shorten Maturity or Redeem upon a Tax Event
or Capital Treatment Event", in whole (but not in part) within 90 days
following the occurrence of a Tax Event or Capital Treatment Event. The
proceeds of any such redemption will be used by the Series A Issuer to redeem
the Series A Securities.
The Redemption Price, in the case of a redemption under (i) above, shall
equal the following prices, expressed in percentages of the principal amount,
together with accrued interest to but excluding the Redemption Date. If
redeemed during the 12-month period beginning January 15:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2007........................................................... 104.1150%
2008........................................................... 103.7035
2009........................................................... 103.2920
2010........................................................... 102.8805
2011........................................................... 102.4690
2012........................................................... 102.0575
2013........................................................... 101.6460
2014........................................................... 101.2345
2015........................................................... 100.8230
2016........................................................... 100.4115
</TABLE>
and at 100% on or after January 15, 2017.
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<PAGE>
The Redemption Price, in the case of a redemption following a Tax Event or
Capital Treatment Event as described under (ii) above, shall be equal to 100%
of the principal amount plus accrued and unpaid interest thereon to the
Redemption Date.
DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES
As described under "Certain Terms of Series A Capital Securities--
Liquidation of Series A Issuer and Distribution of Series A Subordinated
Debentures to Holders", under certain circumstances involving the termination
of the Series A Issuer, Series A Subordinated Debentures may be distributed to
the holders of the Series A Capital Securities in exchange therefor upon
liquidation of the Series A Issuer after satisfaction of liabilities to
creditors of the Series A Issuer as provided by applicable law. If distributed
to holders of Series A Capital Securities, the Series A Subordinated
Debentures will initially be issued in the form of one or more global
securities and DTC, or any successor depositary for the Series A Capital
Securities, will act as depositary for the Series A Subordinated Debentures.
It is anticipated that the depositary arrangements for the Series A
Subordinated Debentures would be substantially identical to those in effect
for the Series A Capital Securities. If Series A Subordinated Debentures are
distributed to the holders of Series A Capital Securities in exchange therefor
upon liquidation of the Series A Issuer, the Corporation will use its best
efforts to include the Series A Subordinated Debentures on such stock
exchanges or automated quotation system, if any, on which the Series A Capital
Securities are then listed or quoted. There can be no assurance as to the
market price of any Series A Subordinated Debentures that may be distributed
to the holders of Series A Capital Securities.
CONDITIONAL RIGHT TO SHORTEN MATURITY OR REDEEM UPON A TAX EVENT OR CAPITAL
TREATMENT EVENT
If a Tax Event or a Capital Treatment Event occurs and either (i) in the
opinion of counsel to the Corporation experienced in such matters, there would
in all cases, after effecting the termination of the Series A Issuer and the
distribution of the Series A Subordinated Debentures to the holders of the
Series A Capital Securities in exchange therefor upon liquidation of the
Series A Issuer, be more than an insubstantial risk that an Adverse Tax
Consequence (as defined in "Risk Factors--Tax Event or Capital Treatment
Event--Exchange of Series A Capital Securities for Series A Subordinated
Debentures, Shortening of Maturity of Series A Debentures or Redemption")
would continue to exist, (ii) in the reasonable determination of the
Corporation, there would in all cases, after effecting the termination of the
Series A Issuer and the distribution of the Series A Subordinated Debentures
to the holders of the Series A Capital Securities in exchange therefor upon
liquidation of the Series A Issuer, be more than an insubstantial risk that
the Corporation will not be entitled to treat an amount equal to the
Liquidation Amount of the Series A Capital Securities as "Tier 1 Capital" (or
the equivalent thereof) or (iii) the Series A Subordinated Debentures are not
held by the Series A Issuer, then the Corporation shall have the right (a) to
shorten the Stated Maturity of the Series A Subordinated Debentures to the
minimum extent required, but in any event to a date not earlier than January
15, 2017 (the action referred to in this clause (a) being referred to herein
as a "Maturity Advancement"), such that, in the opinion of counsel to the
Corporation experienced in such matters, after advancing the Stated Maturity,
interest paid on the Series A Subordinated Debentures will be deductible for
federal income tax purposes, or (b) if either (x) in the opinion of counsel to
the Corporation experienced in such matters, there would in all cases, after
affecting a Maturity Advancement, be more than an insubstantial risk that an
Adverse Tax Consequence would continue to exist or (y) in the reasonable
determination of the Corporation, there would in all cases, after effecting a
Maturity Advancement, be more than an insubstantial risk that the Corporation
will not be entitled to treat an amount equal to the Liquidation Amount of the
Series A Capital Securities as "Tier 1 Capital" (or the then equivalent
thereof) for purposes of the capital adequacy guidelines of the Federal
Reserve, as then in effect and applicable to the Corporation, to redeem the
Series A Subordinated Debentures, in whole but not in part, at any time within
90 days following the occurrence of the Tax Event or Capital Treatment Event
at a Redemption Price equal to 100% of the principal amount thereof plus
accrued and unpaid interest
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<PAGE>
thereon to the Redemption Date. See "Certain Terms of Series A Capital
Securities--Liquidation of Series A Issuer and Distribution of Series A
Subordinated Debentures to Holders" and "--Redemption" and "Certain Terms of
Series A Subordinated Debentures--General" and "--Redemption".
Holders of Series A Capital Securities should consult their own tax advisors
regarding the tax consequences to them of a Maturity Advancement.
See "Certain Federal Tax Law Consequences--Possible Tax Law Changes" for a
discussion of certain legislative proposals that, if adopted, could give risk
to a Tax Event, which may permit the Corporation to shorten the Stated
Maturity of the Series A Subordinated Debentures or cause a redemption of the
Series A Capital Securities prior to January 15, 2007.
REGISTRATION OF SERIES A SUBORDINATED DEBENTURES
The Series A Subordinated Debentures will be represented by global
certificates registered in the name of DTC or its nominee. Beneficial
interests in the Series A Subordinated Debentures will be shown on, and
transfers thereof will be effected only through, records maintained by
Participants in DTC. Except as described below and in the accompanying
Prospectus, Series A Subordinated Debentures in certificated form will not be
issued in exchange for the global certificates. See "Book-Entry Issuance" in
the accompanying Prospectus.
A global security shall be exchangeable for Series A Subordinated Debentures
registered in the names of persons other than DTC or its nominee only if (i)
DTC notifies the Corporation that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have
been appointed, or if at any time DTC ceases to be a clearing agency
registered under the Exchange Act, at a time when DTC is required to be so
registered to act as such depositary, (ii) the Corporation in its sole
discretion determines that such global security shall be so exchangeable, or
(iii) there shall have occurred and be continuing an event of default under
the Indenture with respect to the Series A Subordinated Debentures. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants with respect to ownership of beneficial
interests in such global security. In the event that Series A Subordinated
Debentures are issued in definitive form, such Series A Subordinated
Debentures will be in denominations of $1000 integral multiples thereof and
may be transferred or exchanged at the offices described below.
Payments on Series A Subordinated Debentures represented by a global
security will be made to DTC, as the depositary for the Series A Subordinated
Debentures. In the event Series A Subordinated Debentures are issued in
certificated form, principal and interest will be payable, the transfer of the
Series A Subordinated Debentures will be registrable, and Series A
Subordinated Debentures will be exchangeable for Series A Subordinated
Debentures of other denominations of a like aggregate principal amount, at the
corporate office of the Debenture Trustee in New York, New York, or at the
offices of any paying agent or transfer agent appointed by the Corporation,
provided that payment of interest may be made at the option of the Corporation
by check mailed to the address of the persons entitled thereto or by wire
transfer. In addition, if the Series A Subordinated Debentures are issued in
certificated form, the record dates for payment of interest will be the 15th
day of the last month of each semi-annual period. For a description of DTC and
the terms of the depositary arrangements relating to payments, transfers,
voting rights, redemptions and other notices and other matters, see "Book-
Entry Issuance" in the accompanying Prospectus.
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<PAGE>
CERTAIN TERMS OF SERIES A GUARANTEE
The Series A Guarantee guarantees to the holders of the Series A Capital
Securities the following payments, to the extent not paid by the Series A
Issuer: (i) any accumulated and unpaid Distributions required to be paid on
the Series A Capital Securities, to the extent that the Series A Issuer has
funds on hand available therefor at such time, (ii) the Redemption Price with
respect to any Series A Capital Securities called for redemption, to the
extent that the Series A Issuer has funds on hand available therefor at such
time, and (iii) upon a voluntary or involuntary dissolution, winding-up or
liquidation of the Series A Issuer (unless the Series A Subordinated
Debentures are distributed to holders of the Series A Capital Securities), the
lesser of (a) the aggregate of the Liquidation Amount and all accumulated and
unpaid Distributions to the date of payment, to the extent that the Series A
Issuer has funds on hand available therefor at such time, and (b) the amount
of assets of the Series A Issuer remaining available for distribution to
holders of the Series A Capital Securities after payment of creditors of the
Series A Issuer as required by applicable law. The Series A Guarantee will be
qualified as an indenture under the Trust Indenture Act. Wilmington Trust
Company will act as the Guarantee Trustee for the purposes of compliance with
the Trust Indenture Act and will hold the Series A Guarantee for the benefit
of the holders of the Series A Capital Securities. Wilmington Trust Company
will also act as Debenture Trustee for the Series A Subordinated Debentures
and as Property Trustee and Delaware Trustee.
The holders of not less than a majority in aggregate Liquidation Amount of
the Series A Capital Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect to the Series A Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Series A Guarantee.
Any holder of the Series A Capital Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under the Series A
Guarantee without first instituting a legal proceeding against the Series A
Issuer, the Guarantee Trustee or any other person or entity. If the
Corporation were to default on its obligation to pay amounts payable under the
Series A Subordinated Debentures, the Series A Issuer would lack funds for the
payment of Distributions or amounts payable on redemption of the Series A
Capital Securities or otherwise, and, in such event, holders of the Series A
Capital Securities would not be able to rely upon the Series A Guarantee for
payment of such amounts. Instead, if any event of default under the Indenture
shall have occurred and be continuing and such event is attributable to the
failure of the Corporation to pay interest or premium, if any, on or principal
of the Series A Subordinated Debentures on the applicable Interest Payment
Date, then a holder of Series A Capital Securities may institute a Direct
Action against the Corporation pursuant to the terms of the Indenture for
enforcement of payment to such holder of the principal of or interest or
premium, if any, on such Series A Subordinated Debentures having a principal
amount equal to the aggregate Liquidation Amount of the Series A Capital
Securities of such holder. In connection with such Direct Action, the
Corporation will have a right to set-off under the Indenture to the extent of
any payment made by the Corporation to such holder of Series A Securities in
the Direct Action. Except as described herein, holders of Series A Capital
Securities will not be able to exercise directly any other remedy available to
the holders of the Series A Subordinated Debentures or assert directly any
other rights in respect of the Series A Subordinated Debentures. See
"Description of Guarantees" in the accompanying Prospectus. The Trust
Agreement provides that each holder of Series A Capital Securities by
acceptance thereof agrees to the provisions of the Series A Guarantee, the
Expense Agreement and the Indenture.
ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA")(a "Plan"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an
investment in the Series A Capital Securities. Accordingly, among other
factors, the fiduciary should
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consider whether the investment would satisfy the prudence and diversification
requirements of ERISA and would be consistent with the documents and
instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code") prohibit Plans, as well as individual retirement
accounts and Keogh plans subject to Section 4975 of the Code (also "Plans"),
from engaging in certain transactions involving "plan assets" with persons who
are "parties in interest" under ERISA or "disqualified persons" under the Code
("Parties in Interest") with respect to such Plan. A violation of these
"prohibited transaction" rules may result in an excise tax or other
liabilities under ERISA and/or Section 4975 of the Code for such persons,
unless exemptive relief is available under an applicable statutory or
administrative exemption. Employee benefit plans that are governmental plans
(as defined in Section 3(32) of ERISA), certain church plans (as defined in
Section 3(33) of ERISA) and foreign plans (as described in Section 4(b)(5) of
ERISA) are not subject to the requirements of ERISA of Section 4975 of the
Code.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Series A Issuer would be
deemed to be "plan assets" of a Plan for purposes of ERISA and Section 4975 of
the Code if "plan assets" of the Plan were used to acquire an equity interest
in the Series A Issuer and no exception were applicable under the Plan Assets
Regulation. An "equity interest" is defined under the Plan Assets Regulation
as any interest in an entity other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features and specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the assets
of the Series A Issuer would not be deemed to be "plan assets" of investing
Plans if, immediately after the most recent acquisition of any equity interest
in the Series A Issuer, less than 25% of the value of each class of equity
interests in the Series A Issuer were held by Plans, other employee benefit
plans not subject to ERISA or Section 4975 of the Code (such as governmental,
church and foreign plans), and entities holding assets deemed to be "plan
assets" of any Plan (collectively, "Benefit Plan Investors"), or if the Series
A Capital Securities were "publicly-offered securities" for purposes of the
Plan Assets Regulation. No assurance can be given that the value of the Series
A Capital Securities held by Benefit Plan Investors will be less than 25% of
the total value of such Series A Capital Securities at the completion of the
initial offering or thereafter, and no monitoring or other measures will be
taken with respect to the satisfaction of the conditions to this exception. In
addition, the Series A Capital Securities will be deemed "publicly offered
securities" for the purposes of the Plan Asset Regulations only if owned by
100 or more investors independent of the Series A Issuer and each other. No
assurance can be given that the Series A Capital Securities would be
considered to be "publicly-offered securities" under the Plan Assets
Regulation. All of the Series A Common Securities will be purchased and
initially held by the Corporation.
Certain transactions involving the Series A Issuer could be deemed to
constitute direct or indirect prohibited transactions under ERISA and Section
4975 of the Code with respect to a Plan if the Series A Capital Securities
were acquired with "plan assets" of such Plan and the assets of the Series A
Issuer were deemed to be "plan assets" of Plans investing in the Series A
Issuer. For example, if the Corporation is a Party in Interest with respect to
an investing Plan (either directly or by reason of its ownership of the Bank
or other subsidiaries), extensions of credit between the Corporation and the
Series A Issuer (as represented by the Series A Subordinated Debentures and
the Guarantee) would likely be prohibited by Section 406(a)(1)(B) of ERISA and
Section 4975(c)(1)(B) of the Code, unless exemptive relief were available
under an applicable administrative exemption (see below). In addition, if the
Corporation were considered to be a fiduciary with respect to the Series A
Issuer as a result of certain powers it holds (such as the powers to remove
and replace the Property Trustee and the Administrative Trustees), certain
operations of the Series A Issuer, including the optional redemption or
acceleration of the Series A Subordinated Debentures, could be considered to
be prohibited transactions under Section 406(b) of ERISA and Section
4975(c)(1)(E) of the Code. IN ORDER TO AVOID
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SUCH PROHIBITED TRANSACTIONS, EACH INVESTING PLAN, BY PURCHASING THE SERIES A
CAPITAL SECURITIES, WILL BE DEEMED TO HAVE DIRECTED THE SERIES A ISSUER TO
INVEST IN THE SERIES A SUBORDINATED DEBENTURES AND TO HAVE APPOINTED THE
PROPERTY TRUSTEE.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief if required for direct or indirect
prohibited transactions that may arise from the purchase or holding of the
Series A Capital Securities if assets of the Series A Issuer were deemed to be
"plan assets" of Plans investing in the Series A Issuer as described above.
Those class exemptions are PTCE 96-23 (for certain transactions determined by
in-house asset managers), PTCE 95-60 (for certain transactions involving
insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain
transactions involving insurance company separate accounts), and PTCE 84-14
(for certain transactions determined by independent qualified asset managers).
Because the Series A Capital Securities may be deemed to be equity interests
in the Series A Issuer for purposes of applying ERISA and Section 4975 of the
Code, the Series A Capital Securities may not be purchased or held by any
Plan, any entity whose underlying assets include "plan assets" by reason of
any Plan's investment in the entity (a "Plan Asset Entity") or any person
investing "plan assets" of any Plan, unless such purchaser or holder is
eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38,
90-1 or 84-14 or another applicable exemption. Any purchaser or holder of the
Series A Capital Securities or any interest therein will be deemed to have
represented by its purchase and holding thereof that it either (a) is not a
Plan or (b) is eligible for the exemptive relief available under PTCE 96-23,
95-60, 91-38, 90-1 or 84-14 or another applicable exemption with respect to
such purchase or holding. If a purchaser or holder of the Series A Capital
Securities that is a Plan or a Plan Asset Entity elects to rely on an
exemption other than PTCE 96-23, 95-60, 91-38, 90-1, or 84-14, the Corporation
and the Series A Issuer may require a satisfactory opinion of counsel or other
evidence with respect to the availability of such exemption for such purchase
and holding.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries or other persons considering
purchasing the Series A Capital Securities on behalf of or with "plan assets"
of any Plan consult with their counsel regarding the potential consequences if
the assets of the Series A Issuer were deemed to be "plan assets" and the
availability of exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14
or any other applicable exemption.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income tax
consequences of the purchase, ownership and disposition of Series A Capital
Securities. This summary only addresses the tax consequences to a person that
acquires Series A Capital Securities on their original issue at their original
offering price and that is (i) an individual citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any state thereof or the District of Columbia or (iii) an
estate or trust the income of which is subject to United States federal income
tax regardless of source (a "United States Person"). This summary does not
address all tax consequences that may be applicable to a United States Person
that is a beneficial owner of Series A Capital Securities, nor does it address
the tax consequences to (i) persons that are not United States Persons, (ii)
persons that may be subject to special treatment under United States federal
income tax law, such as banks, insurance companies, thrift institutions,
regulated investment companies, real estate investment trusts, tax-exempt
organizations and dealers in securities or currencies, (iii) persons that will
hold Series A Capital Securities as part of a position in a "straddle" or as
part of a "hedging," "conversion" or other integrated investment transaction
for federal income tax purposes, (iv) persons whose functional currency is not
the United States dollar or (v) persons that do not hold Series A Capital
Securities as capital assets.
S-26
<PAGE>
The statements of law or legal conclusion set forth in this summary
constitute the opinion of Balch & Bingham LLP, counsel to the Corporation and
the Series A Issuer. This summary is based upon the Code, Treasury
Regulations, Internal Revenue Service rulings and pronouncements and judicial
decisions now in effect, all of which are subject to change at any time. Such
changes may be applied retroactively in a manner that could cause the tax
consequences to vary substantially from the consequences described below,
possibly adversely affecting a beneficial owner of Series A Capital
Securities. In particular, legislation has been proposed that could adversely
affect the Corporation's ability to deduct interest on the Series A
Subordinated Debentures, which may in turn permit the Corporation to cause a
redemption of the Series A Capital Securities. See "--Possible Tax Law
Changes." The authorities on which this summary is based are subject to
various interpretations, and it is therefore possible that the federal income
tax treatment of the purchase, ownership and disposition of Series A Capital
Securities may differ from the treatment described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SERIES A CAPITAL SECURITIES, AS
WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE SERIES A ISSUER
Under current law and assuming compliance with the terms of the Trust
Agreement, the Series A Issuer will not be classified as an association
taxable as a corporation for United States federal income tax purposes. As a
result, each beneficial owner of Series A Capital Securities (a
"Securityholder") will be required to include in its gross income its pro rata
share of the interest income, including original issue discount, paid or
accrued with respect to the Series A Subordinated Debentures whether or not
cash is actually distributed to the Securityholders. See "--Interest Income
and Original Issue Discount." No amount included in income with respect to the
Series A Capital Securities will be eligible for the dividends-received
deduction.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations applicable to debt instruments
issued on or after August 13, 1996 (the "Regulations"), a contingency that
stated interest will not be timely paid that is "remote" because of the terms
of the relevant debt instrument will be ignored in determining whether such
debt instrument is issued with original issue discount ("OID"). As a result of
terms and conditions of the Series A Subordinated Debentures that prohibit
certain payments with respect to the Corporation's capital stock and
indebtedness if the Corporation elects to extend interest payment periods, the
Corporation believes that the likelihood of its exercising its option to defer
payments is remote. See "Certain Terms of Series A Subordinated Debentures--
Option to Defer Interest Payments." Based on the foregoing, the Corporation
believes that the Series A Subordinated Debentures will not be considered to
be issued with OID at the time of their original issuance and, accordingly, a
Securityholder should include in gross income such holder's allocable share of
interest actually paid on the Series A Subordinated Debentures.
Under the Regulations, if the Corporation exercises its option to defer any
payment of interest, the Series A Subordinated Debentures would at that time
be treated as issued with OID, and all stated interest on the Series A
Subordinated Debentures would thereafter be treated as OID as long as the
Series A Subordinated Debentures remained outstanding. In such event, all of a
Securityholder's taxable interest income with respect to the Series A
Subordinated Debentures would be accounted for as OID on an economic-accrual
basis regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
Consequently, a
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<PAGE>
Securityholder would be required to include in gross income OID even though
the Corporation would not make any actual cash payments during an Extension
Period.
The Regulations have not been addressed in any rulings or other
interpretations by the Internal Revenue Service (the "IRS"), and it is
possible that the IRS could take a position contrary to the interpretation
herein.
Because income on the Series A Capital Securities will constitute interest
or OID, corporate Securityholders will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Series A
Capital Securities.
DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES TO HOLDERS OF SERIES A
CAPITAL SECURITIES
Under current law, a distribution by the Series A Issuer of the Series A
Subordinated Debentures as described under the caption "Certain Terms of
Series A Capital Securities--Liquidation of Series A Issuer and Distribution
of Series A Subordinated Debentures to Holders" will be non-taxable and will
result in the Securityholder receiving directly its pro rata share of the
Series A Subordinated Debentures previously held indirectly through the Series
A Issuer, with a holding period and aggregate-tax basis equal to the holding
period and aggregate-tax basis such Securityholder had in its Series A Capital
Securities before such distribution. If, however, the liquidation of the
Series A Issuer were to occur because the Series A Issuer is subject to United
States Federal income tax with respect to income accrued or received on the
Series A Subordinated Debentures, the distribution of Series A Subordinated
Debentures to Securityholders by the Series A Issuer would be a taxable event
to the Series A Issuer and each Securityholder, and each Securityholder would
recognize gain or loss as if the Securityholder had exchanged its Series A
Capital Securities for the Series A Subordinated Debentures it received upon
the liquidation of the Series A Issuer. A Securityholder will include interest
in income in respect of Series A Subordinated Debentures received from the
Series A Issuer in the manner described above under "--Interest Income and
Original Issue Discount."
SALE OR REDEMPTION OF SERIES A CAPITAL SECURITIES
A Securityholder that sells (including a redemption for cash) Series A
Capital Securities will recognize gain or loss equal to the difference between
its adjusted-tax basis in the Series A Capital Securities and the amount
realized on the sale of such Series A Capital Securities. Assuming that the
Corporation does not exercise its option to defer payment of interest on the
Series A Subordinated Debentures and the Series A Subordinated Debentures are
not considered issued with OID, a Securityholder's adjusted tax basis in the
Series A Capital Securities generally will be its initial purchase price. If
the Series A Subordinated Debentures are deemed to be issued with OID, as a
result of the Corporation's deferral of interest payments, a Securityholder's
adjusted tax basis in the Series A Capital Securities generally will be its
initial purchase price, increased by OID previously includible in such
Securityholder's gross income to the date of disposition and decreased by
Distributions or other payments received on the Series A Capital Securities
since and including the date of the first Extension Period. Such gain or loss
generally will be a capital gain or loss (except to the extent any amount
realized is treated as a payment of accrued interest with respect to such
Securityholder's pro rata share of the Series A Subordinated Debentures
required to be included in income) and generally will be a long-term capital
gain or loss if the Series A Capital Securities have been held for more than
one year.
Should the Corporation exercise its option to defer any payment of interest
on the Series A Subordinated Debentures, the Series A Capital Securities may
trade at a price that does not accurately reflect the value of accrued but
unpaid interest with respect to the underlying Series A Subordinated
Debentures. In the event of such a deferral, a Securityholder who disposes of
its Series A Capital Securities between record dates for payments of
distributions thereon will be required to include in
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<PAGE>
income as ordinary income accrued but unpaid interest on the Series A
Subordinated Debentures to the date of disposition and to add such amount to
its adjusted-tax basis in its Series A Capital Securities. To the extent the
selling price is less than the Securityholder's adjusted-tax basis, such
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest income paid and OID accrued on the Series A Capital
Securities held of record by United States Persons (other than corporations
and other exempt Securityholders) will be reported to the IRS. "Backup"
withholding at a rate of 31% will apply to payments of interest to nonexempt
United States Persons unless the Securityholder furnishes its taxpayer
identification number in the manner prescribed in applicable Treasury
Regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions.
Payment of the proceeds from the disposition of Series A Capital Securities
to or through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information
is furnished to the IRS.
It is anticipated that income on the Series A Capital Securities will be
reported to holders on Form 1099 and mailed to holders of the Series A Capital
Securities by January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill, the revenue portion of
President Clinton's budget proposal, was introduced in the 104th Congress. If
enacted, the Revenue Reconciliation Bill would have generally denied interest
deductions for interest on an instrument issued by a corporation that has a
maximum term of more than 20 years and that is not shown as indebtedness on
the separate balance sheet of the issuer or, where the instrument is issued to
a related party (other than a corporation), where the holder or some other
related party issues a related instrument that is not shown as indebtedness on
the issuer's consolidated balance sheet. For purposes of determining the
weighted average maturity or the term of an instrument, any right to extend
would be treated as exercised. The above-described provisions of the Revenue
Reconciliation Bill were proposed to be effective generally for instruments
issued on or after December 7, 1995. If the proposed provision were to have
applied to the Series A Subordinated Debentures, the Corporation would have
been unable to deduct interest on the Series A Subordinated Debentures.
However, on March 29, 1996, the Chairmen of the Senate Finance and House Ways
and Means Committees issued a joint statement to the effect that it was their
intention that the effective date of the President's legislative proposals, if
adopted, will be no earlier than the date of appropriate Congressional action.
Under current law, the Corporation will be able to deduct interest on the
Series A Subordinated Debentures. Although the 104th Congress adjourned
without enacting the above-described provisions of the Revenue Reconciliation
Bill, there can be no assurance that current or future legislative proposals
or final legislation will not affect the ability of the Corporation to deduct
interest on the Series A Subordinated Debentures. Such a change could give
rise to a Tax Event, which may permit the Corporation to cause a redemption of
the Series A Capital Securities, as described more fully under "Description of
Capital Securities--Redemption or Exchange."
S-29
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Corporation and the Series A Issuer have agreed that the Series A Issuer will
sell to each of the Underwriters named below, and each of such Underwriters
has severally agreed to purchase from the Series A Issuer, the respective
number of Series A Capital Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SERIES A
CAPITAL
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Goldman, Sachs & Co. ......................................... 50,000
Credit Suisse First Boston Corporation........................ 50,000
-------
Total....................................................... 100,000
=======
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the Series A Capital
Securities offered hereby, if any are taken.
The Underwriters propose to offer the Series A Capital Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement and in part to certain securities
dealers at such price less a concession of $6.00 per Series A Capital
Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $2.50 per Series A Capital Security to certain
brokers and dealers. After the Series A Capital Securities are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the Underwriters.
In view of the fact that the proceeds from the sale of the Series A Capital
Securities will be used to purchase the Series A Subordinated Debentures
issued by the Corporation, the Underwriting Agreement provides that the
Corporation will pay as Underwriters' compensation for the Underwriters'
arranging the investment therein of such proceeds an amount of $10.00 per
Series A Capital Security for the accounts of the several Underwriters and
will reimburse the Underwriters for $25,000 of expenses.
Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the Series A Capital Securities offered hereby as interests
in a direct participation program, the offering is being made in compliance
with Rule 2810 of the NASD's Conduct Rules. Offers and sales of Series A
Capital Securities will be made only to (i) "qualified institutional buyers",
as defined in Rule 144A under the Securities Act of 1933, as amended (the
"Act"); (ii) institutional "accredited investors", as defined in Rule 501 (a)
(1)-(3) of Regulation D under the Act or (iii) individual investors for whom
an investment in non-convertible investment grade preferred securities is
appropriate. The underwriters may not confirm sales to any accounts over which
they exercise discretionary authority without prior written approval of the
transaction by the customer.
The Corporation and the Series A Issuer have agreed that, during the period
beginning from the date of the Underwriting Agreement and continuing to and
including the later of (i) the termination of trading restrictions on the
Series A Capital Securities, as determined by the Underwriters, and (ii) 30
days after the closing date, they will not offer, sell, contract to sell or
otherwise dispose of any Series A Capital Securities, any other beneficial
interests in the assets of any Issuer, or any preferred securities or any
other securities of any Issuer or the Corporation which are substantially
similar to the Series A Capital Securities, including any guarantee of such
securities, or any securities convertible into or exchangeable for or
representing the right to receive preferred securities or any such
substantially similar securities of either any Issuer or the Corporation,
without the prior written consent of the Underwriters, except for the Series A
Capital Securities offered in connection with this offering.
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<PAGE>
The Series A Capital Securities are a new issue of securities with no
established trading market. The Underwriters have advised the Corporation that
they intend to make a market in the Series A Capital Securities, but are not
obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for the Series A Capital Securities.
The Corporation and the Series A Issuer have agreed to indemnify the several
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities
under the Securities Act of 1933.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to the Corporation and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series A
Capital Securities, the enforceability of the Trust Agreement and the
formation of the Series A Issuer will be passed upon by Richards, Layton &
Finger, One Rodney Square, Wilmington, Delaware 19801, special Delaware
counsel to the Corporation and the Series A Issuer. The validity of the Series
A Guarantee and the Series A Subordinated Debentures will be passed upon for
the Corporation by Balch & Bingham LLP, 1901 Sixth Avenue North, Birmingham,
Alabama 35203, and for the Underwriters by Sullivan & Cromwell, 125 Broad
Street, New York, New York 10004. Certain matters relating to United States
federal income tax considerations will be passed upon for the Corporation by
Balch & Bingham LLP.
S-31
<PAGE>
$100,000,000
COMPASS BANCSHARES, INC.
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
COMPASS TRUST I
COMPASS TRUST II
CAPITAL SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN,
BY
COMPASS BANCSHARES, INC.
Compass Bancshares, Inc., a Delaware corporation (the "Corporation"), may
from time to time offer in one or more series or issuances its junior
subordinated deferrable interest debentures (the "Junior Subordinated
Debentures"). The Junior Subordinated Debentures will be unsecured and
subordinate and junior in right of payment to all Senior Debt (as defined in
"Description of Junior Subordinated Debentures--Subordination") of the
Corporation. If provided in an accompanying Prospectus Supplement, the
Corporation will have the right to defer payments of interest on any series of
Junior Subordinated Debentures by extending the interest payment period
thereon at any time or from time to time for up to such number of consecutive
interest payment periods (which shall not extend beyond the Stated Maturity
(as defined herein) of the Junior Subordinated Debentures) with respect to
each deferral period as may be specified in such Prospectus Supplement (each,
an "Extension Period"). In such circumstances, however, the Corporation would
not be permitted, subject to certain exceptions set forth herein, to declare
or pay any dividends, distributions or other payments with respect to, or
repay, repurchase, redeem or otherwise acquire, the Corporation's capital
stock or debt securities that rank pari passu in all respects with or junior
to such series of Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures--Option to Defer Interest Payments" and "--
Restrictions on Certain Payments".
Compass Trust I and Compass Trust II, each a statutory business trust
created under the laws of the State of Delaware (each, an "Issuer," and
collectively, the "Issuers"), may severally offer, from time to time,
preferred securities (the "Capital Securities") representing preferred
beneficial interests in such Issuer. The Corporation will be the owner of the
common securities representing common ownership interests in such Issuer (the
"Common Securities" and, together with the Capital Securities, the "Trust
Securities"). Holders of the Capital Securities will be entitled to receive
preferential cumulative cash distributions ("Distributions") accumulating from
the date of original issuance and payable periodically as provided in an
accompanying Prospectus Supplement. Concurrently with the
(continued on next page)
----------------
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is January 15, 1997.
<PAGE>
(cover page continued)
issuance by an Issuer of its Capital Securities, such Issuer will invest the
proceeds thereof and of any contributions received in respect of the Common
Securities in a corresponding series of the Corporation's Junior Subordinated
Debentures (the "Corresponding Junior Subordinated Debentures") with terms
corresponding to the terms of that Issuer's Capital Securities (the "Related
Capital Securities"). The Corresponding Junior Subordinated Debentures will be
the sole assets of each Issuer, and payments under the Corresponding Junior
Subordinated Debentures will be the only revenue of each Issuer. If provided
in an accompanying Prospectus Supplement, the Corporation may, upon receipt of
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve") (if such approval is then required), redeem the Corresponding Junior
Subordinated Debentures (and cause the redemption of the related Capital
Securities) or may terminate each Issuer and cause the Corresponding Junior
Subordinated Debentures to be distributed to the holders of the Related
Capital Securities in liquidation of their interests in such Issuer. See
"Description of Capital Securities--Liquidation Distribution Upon
Termination".
If provided in an accompanying Prospectus Supplement, the Corporation will
have the right to defer payments of interest on any series of Corresponding
Junior Subordinated Debentures. If interest payments are so deferred,
Distributions on the Related Capital Securities will also be deferred and the
Corporation will not be permitted, subject to certain exceptions set forth
herein, to declare or pay any cash distributions with respect to the
Corporation's capital stock or debt securities that rank pari passu in all
respects with or junior to the Corresponding Junior Subordinated Debentures.
During an Extension Period, Distributions will continue to accumulate (and the
Related Capital Securities will accumulate additional Distributions thereon at
the rate per annum set forth in the Prospectus Supplement). See "Description
of Capital Securities--Distributions".
Taken together, the Corporation's obligations under each series of Junior
Subordinated Debentures, the Indenture, the related Trust Agreement, the
related Expense Agreement and the related Guarantee (each, as defined herein),
in the aggregate, provide a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the Related Capital
Securities. See "Relationship Among the Capital Securities, the Corresponding
Junior Subordinated Debentures, the Expense Agreements and the Guarantees--
Full and Unconditional Guarantee". The payment of Distributions with respect
to the Capital Securities of each Issuer and payments on liquidation or
redemption with respect to such Capital Securities, in each case out of funds
held by such Issuer, are each irrevocably guaranteed by the Corporation to the
extent described herein (each, a "Guarantee"). See "Description of
Guarantees". The obligations of the Corporation under each Guarantee will be
subordinate and junior in right of payment to all Senior Debt of the
Corporation.
The Junior Subordinated Debentures and Capital Securities may be offered in
amounts, at prices and on terms to be determined at the time of offering;
provided, however, the aggregate initial public offering price of all Junior
Subordinated Debentures (other than Corresponding Junior Subordinated
Debentures) and Capital Securities (including the Corresponding Junior
Subordinated Debentures) issued pursuant to the Registration Statement of
which this Prospectus forms a part shall not exceed $100,000,000. Certain
specific terms of the Junior Subordinated Debentures or Capital Securities in
respect of which this Prospectus is being delivered will be described in an
accompanying Prospectus Supplement, including without limitation and where
applicable and to the extent not set forth herein, (a) in the case of Junior
Subordinated Debentures, the specific designation, aggregate principal amount,
denominations, Stated Maturity (including any provisions for the shortening or
extension thereof), interest payment dates, interest rate (which may be fixed
or variable) or method of calculating interest, if any, applicable Extension
Period or interest deferral terms, if any, place or places where principal,
premium, if any, and interest, if any, will be payable, any terms of
redemption, any sinking fund provisions, terms for any conversion or exchange
into other securities, initial offering or
2
<PAGE>
(cover page continued)
purchase price, methods of distribution and any other special terms, and (b)
in the case of Capital Securities, the identity of the Issuer, specific title,
aggregate amount, stated liquidation amount, number of securities,
Distribution rate or method of calculating such rate, Distribution payment
dates, applicable Distribution deferral terms, if any, place or places where
Distributions will be payable, any terms of redemption, exchange, initial
offering or purchase price, methods of distribution and any other special
terms.
The Prospectus Supplement also will contain information, as applicable,
about certain United States Federal income tax consequences relating to the
Junior Subordinated Debentures or Capital Securities.
The Junior Subordinated Debentures and Capital Securities may be sold to or
through underwriters, through dealers, remarketing firms or agents or directly
to purchasers. See "Plan of Distribution". The names of any underwriters,
dealers, remarketing firms or agents involved in the sale of Junior
Subordinated Debentures or Capital Securities in respect of which this
Prospectus is being delivered and any applicable fee, commission or discount
arrangements with them will be set forth in a Prospectus Supplement. The
Prospectus Supplement will state whether the Junior Subordinated Debentures or
Capital Securities will be listed on any national securities exchange or
automated quotation system. If the Junior Subordinated Debentures or Capital
Securities are not listed on any national securities exchange or automated
quotation system, there can be no assurance that there will be a secondary
market for the Junior Subordinated Debentures or Capital Securities.
This Prospectus may not be used to consummate sales of Junior Subordinated
Debentures or Capital Securities unless accompanied by a Prospectus
Supplement.
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AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York
10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be
accessed electronically by means of the Commission's home page on the Internet
at http://www.sec.gov.
The Corporation and the Issuers have filed with the Commission a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Corporation and the securities offered hereby,
reference is made to the Registration Statement and the exhibits and the
financial statements, notes and schedules filed as a part thereof or
incorporated by reference therein, which may be inspected at the public
reference facilities of the Commission at the addresses set forth above or
through the Commission's home page on the Internet. Statements made in this
Prospectus concerning the contents of any documents referred to herein are not
necessarily complete, and in each instance are qualified in all respects by
reference to the copy of such document filed as an exhibit to the Registration
Statement.
No separate financial statements of any Issuer have been included herein.
The Corporation and the Issuers do not consider that such financial statements
would be material to holders of the Capital Securities because each Issuer is
a newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any
activity other than holding as trust assets the Corresponding Junior
Subordinated Debentures of the Corporation and issuing the Trust Securities.
Furthermore, taken together, the Corporation's obligations under each series
of Corresponding Junior Subordinated Debentures, the Indenture, the related
Trust Agreement, the related Expense Agreement and the related Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of Distributions and other amounts due on the Related Capital
Securities of an Issuer. See "The Issuers", "Description of Capital
Securities", "Description of Junior Subordinated Debentures--Corresponding
Junior Subordinated Debentures" and "Description of Guarantees". In addition,
the Corporation does not expect that any of the Issuers will be filing reports
under the Exchange Act with the Commission.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated into this Prospectus by reference:
1. the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1995; and
2. the Corporation's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996.
Each document or report filed by the Corporation pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of any offering of securities made by this Prospectus shall be
deemed to be incorporated by reference into this Prospectus and to be a part
of this Prospectus from the date of filing of such document. Any statement
contained herein, or in a document all or a portion of which is incorporated
or deemed to be incorporated by reference herein, shall be deemed to be
modified or superseded for purposes of the Registration Statement and this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Corporation will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein
(other than exhibits not specifically incorporated by reference into the texts
of such documents). Requests for such documents should be directed to Compass
Bancshares, Inc., 15 South 20th Street, Birmingham, Alabama 35233, Attention
Michael A. Bean, Controller, telephone number (205) 558-5740.
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<PAGE>
THE CORPORATION
The Corporation is a bank holding company with its principal place of
business in Birmingham, Alabama. The Corporation was organized in 1970 and
commenced business in late 1971 upon the acquisition of Central Bank & Trust
Co. and State National Bank. The Corporation subsequently acquired
substantially all of the outstanding stock of additional banks located in
Alabama, 11 of which were merged in late 1981 to create Central Bank of the
South, Alabama's first statewide bank. In February, 1987, the Corporation
acquired First National Bank of Crosby near Houston, Texas, and became the
first out-of-state holding company to acquire a bank in Texas. The Corporation
first expanded into Florida in July, 1991, when it acquired Citizens &
Builders Federal Savings, F.S.B., in Pensacola, Florida. In November, 1993,
the Company changed its name from Central Bancshares of the South, Inc. to
Compass Bancshares, Inc. and Central Bank of the South, the Corporation's lead
bank subsidiary, changed its name to Compass Bank ("Compass Bank").
In addition to Compass Bank, the Corporation also owns Compass Bank, a
Florida state member bank headquartered in Jacksonville, Florida ("Compass
Bank-Florida"), Central Bank of the South, an Alabama banking corporation
headquartered in Anniston, Alabama, and Compass Banks of Texas, Inc., a
Delaware bank holding company ("Compass of Texas"), which owns Compass Bank, a
Texas state bank headquartered in Houston, Texas. The bank subsidiaries of the
Corporation and Compass of Texas are referred to collectively herein as the
"Subsidiary Banks". Compass of Texas also owns River Oaks Trust Company with
offices in Houston and Dallas, Texas.
The principal role of the Corporation is to supervise and coordinate the
activities of its subsidiaries and to provide them with capital and services
of various kinds. The Corporation derives substantially all of its income from
dividends from its subsidiaries. Such dividends are determined on an
individual basis, generally in relation to each subsidiary's earnings and
capital position.
The Corporation has its principal executive offices at 15 South 20th Street,
Birmingham, Alabama 35233, telephone number (205) 933-3000.
SUBSIDIARY BANKS
Compass Bank conducts a general commercial banking and trust business at 88
locations in 47 communities in Alabama. Compass Bank-Houston conducts a
general commercial banking business from 42 locations in Houston, Texas, 24
banking offices in the Dallas-Ft. Worth area, 16 banking offices in San
Antonio, Texas and 6 banking offices in Central and East Texas. River Oaks
Trust Company offers a full range of trust services to customers in Texas
through its offices in Houston and Dallas. Compass Bank, Jacksonville, Florida
conducts a general commercial banking business from 33 locations in Florida.
Central Bank of the South primarily provides cash management depository
services to commercial customers of the Subsidiary Banks.
The Subsidiary Banks perform banking services customary for full service
banks of similar size and character for their customers in Alabama and
Northeastern and Northwestern Florida and the three largest metropolitan
markets in Texas. Such services include receiving demand and time deposit
accounts, making personal and commercial loans and furnishing personal and
commercial checking accounts. The Trust Division of Compass Bank and River
Oaks Trust Company offer customers in Alabama, Texas, North Carolina, Georgia
and Florida a variety of fiduciary services, including the administration and
investment of funds of estates, trusts and employee benefit plans. Other trust
services include custodial and portfolio management services, and acting as
fiscal and paying agent and trustee under corporate and government trust
indentures. Through Compass Bancshares Insurance, Inc., a wholly-owned
subsidiary of Compass Bank, the Subsidiary Banks make available to their
customers and others, as agent for a variety of insurance companies, term life
insurance, fixed-rate annuities and other insurance products.
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The Subsidiary Banks provide correspondent services including loan
participations, investment services, and audit services to approximately 1,000
financial institutions located throughout the Southeast and Southwest. Through
the Correspondent and Investment Services Division of Compass Bank, the
Subsidiary Banks distribute or make available a variety of investment services
and products to institutional and individual investors including sales of
municipal bonds, U.S. Government securities and asset/liability services.
Through Compass Brokerage, Inc., a wholly-owned subsidiary of Compass Bank,
the Subsidiary Banks also provide discount brokerage services, mutual funds,
and variable annuities to individuals and businesses. Through Compass Bank's
wholly-owned subsidiary, Compass Financial Corporation, the Subsidiary Banks
provide lease financing services to individuals and businesses.
NONBANKING SUBSIDIARIES
Through wholly-owned subsidiaries, the Corporation is engaged in providing
credit-related insurance products to customers of the Subsidiary Banks and
owning real estate for bank premises. Revenues from operation of these
subsidiaries do not presently constitute a significant portion of the
Company's total operating revenues. The Corporation may subsequently engage in
other activities permissible for registered bank holding companies when
suitable opportunities develop. Any proposal for such further activities is
subject to approval by appropriate regulatory authorities. (See "Supervision
and Regulation".)
ACQUISITIONS
The Corporation may seek to acquire other banks and banking offices when
suitable opportunities develop. Discussions are held from time to time with
institutions primarily in Texas and Florida about their possible affiliation
with the Corporation. It is impossible to predict accurately whether any
discussions will lead to agreement. Any bid or proposal for the acquisition of
additional banks is subject to approval by appropriate regulatory authorities.
(See "Supervision and Regulation".)
Since the Corporation first expanded to Texas in 1987 and to Florida in
1991, the Corporation has acquired approximately 35 financial institutions and
numerous branch offices in Texas and Florida. Acquisitions have been made on a
competitive bid basis from the Federal Deposit Insurance Corporation ("FDIC")
and the Resolution Trust Corporation ("RTC") and as the result of negotiations
with boards of directors and shareholders of the institutions. A list of the
acquisitions completed during the past three years with their asset size
(dollars in thousands) and closing dates follows:
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<PAGE>
<TABLE>
<CAPTION>
ASSETS METHOD OF
ACQUISITION DATE ACQUIRED ACCOUNTING
- ----------- -------- -------- ----------
<S> <C> <C> <C>
1st Performance National Bank 1-27-94 $278,000 Purchase
Jacksonville, Florida
Security Bank, N.A. 5-1-94 $ 76,000 Pooling
Houston, Texas
Anchor Federal Savings Bank 5-12-94 $ 31,000 Purchase
Branches in Callahan, Jacksonville,
St. Augustine, Florida
First Heights Bank, F.S.B. 10-1-94 $885,000 Purchase
Houston, Texas
Southwest Bankers, Inc. 3-7-95 $142,000 Pooling
San Antonio, Texas
Flower Mound Bancshares, Inc. 2-1-96 $ 46,000 Pooling
Flower Mound, Texas
Equitable BankShares, Inc. 4-11-96 $184,000 Pooling
Dallas, Texas
Post Oak Bank 4-22-96 $323,000 Purchase
Houston, Texas
Peoples Bancshares, Inc. 5-21-96 $136,000 Purchase
Belton, Texas
Royall Financial Corporation 7-16-96 $109,000 Pooling
Palestine, Texas
CFB Bancorp, Inc. 8-23-96 $302,000 Purchase
Jacksonville, Florida
Texas American Bank 9-27-96 $ 65,000 Pooling
San Antonio, Texas
ProBank 10-24-96 $ 61,000 Purchase
Houston, Texas
Enterprise National Bank of Jacksonville 1-14-97 $162,000 Pooling
Jacksonville, Florida
</TABLE>
PENDING ACQUISITIONS
On October 2, 1996, the Corporation signed a definitive agreement to acquire
Greater Brazos Valley Bancorp, Inc. ("Greater Brazos"), and its subsidiary,
Commerce National Bank, in College Station, Texas. At September 30, 1996,
Greater Brazos had consolidated assets of $61 million and equity of $3
million. On December 4, 1996, the Corporation signed a definitive agreement to
acquire Horizon Bancorp, Inc. ("Horizon"), and its subsidiary, Horizon Bank &
Trust, in Austin, Texas. At September 30, 1996, Horizon had consolidated
assets of $143 million and equity of $12 million. The Corporation anticipates
that these acquisitions will be consummated in the first quarter of 1997 and
will be accounted for under the pooling-of-interests method of accounting.
8
<PAGE>
SUPERVISION AND REGULATION
THE CORPORATION
The Corporation and Compass of Texas are multi-bank holding companies within
the meaning of the Bank Holding Company Act ("BHC Act") and are registered as
such with the Federal Reserve. As bank holding companies, the Corporation and
Compass of Texas are required to file with the Federal Reserve an annual
report and such additional information as the Federal Reserve may require
pursuant to the BHC Act. The Federal Reserve may also make examinations of the
Corporation and each of its subsidiaries. Under the BHC Act, bank holding
companies are prohibited, with certain exceptions, from acquiring direct or
indirect ownership or control of more than five percent of the voting shares
of any company engaging in activities other than banking or managing or
controlling banks or furnishing services to or performing services for their
banking subsidiaries. However, the BHC Act authorizes the Federal Reserve to
permit bank holding companies to engage in, and to acquire or retain shares of
companies that engage in, activities which the Federal Reserve determines to
be so closely related to banking or managing or controlling banks as to be a
proper incident thereto.
The BHC Act requires a bank holding company to obtain the prior approval of
the Federal Reserve before it may acquire substantially all the assets of any
bank or ownership or control of any voting shares of any bank if, after such
acquisition, it would own or control, directly or indirectly, more than five
percent of the voting shares of any such bank. The Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 ("Interstate Act") facilitates
branching and the establishment of agency relationships across state lines and
permits bank holding companies to acquire banks located in any state without
regard to whether the transaction is prohibited under any state law, subject
to certain state provisions, including the establishment by states of a
minimum age of their local banks subject to interstate acquisition of out-of-
state bank holding companies. The minimum age of local banks subject to
interstate acquisition is limited to a maximum of five years.
The States of Alabama, Florida, and Texas, where the Corporation currently
operates banking subsidiaries, each have laws relating specifically to
acquisitions of banks, bank holding companies, and other types of financial
institutions in those states by financial institutions that are based in, and
not based in, those states. In 1995, the State of Alabama enacted an
interstate banking act. In general, the Alabama statute implements the
Interstate Act, specifying five years as the minimum age of banks which may be
acquired and "opting into" interstate branching on May 31, 1997. Texas and
Florida law currently permits out-of-state bank holding companies to acquire
banks in Texas and Florida regardless of where the acquiror is based, subject
to the satisfaction of various provisions of state law, including the
requirement that the bank to be acquired has been in existence at least five
years in Texas and two years in Florida.
The Federal Reserve Act generally imposes certain limitations on extensions
of credit and other transactions by and between banks which are members of the
Federal Reserve System and other affiliates (which includes any holding
company of which such bank is a subsidiary and any other non-bank subsidiary
of such holding company). Banks which are not members of the Federal Reserve
System are also subject to these limitations. Further, federal law prohibits a
bank holding company and its subsidiaries from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property, or the furnishing of services.
In December, 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") was enacted. This act recapitalized the Bank Insurance Fund
("BIF"), of which the Subsidiary Banks are members, and the Savings
Association Insurance Fund ("SAIF"), which insures certain of the Subsidiary
Banks' deposits, substantially revised statutory provisions, including capital
standards, restricted certain powers of state banks, gave regulators the
authority to limit officer and director compensation and required holding
companies to guarantee the capital compliance of their
9
<PAGE>
banks in certain instances. Among other things, FDICIA requires the federal
banking agencies to take "prompt corrective action" with respect to banks that
do not meet minimum capital requirements. FDICIA established five capital
tiers: "well capitalized", "adequately capitalized", "undercapitalized",
"significantly undercapitalized" and "critically undercapitalized", as defined
by regulations adopted by the Federal Reserve, the FDIC and the other federal
depository institution regulatory agencies. A depository institution is well
capitalized if it significantly exceeds the minimum level required by
regulation for each relevant capital measure, adequately capitalized if it
meets each such measure, undercapitalized if it fails to meet any such
measure, significantly undercapitalized if it is significantly below such
measures and critically undercapitalized if it fails to meet any critical
capital level set forth in the regulations. The critical capital level must be
a level of tangible equity capital equal to the greater of 2 percent of total
tangible assets or 65 percent of the minimum leverage ratio to be prescribed
by regulation. An institution may be deemed to be in a capitalization category
that is lower than is indicated by its actual capital position if it receives
an unsatisfactory examination rating.
If a depository institution fails to meet regulatory capital requirements,
the regulatory agencies can require submission and funding of a capital
restoration plan by the institution, place limits on its activities, require
the raising of additional capital and, ultimately, require the appointment of
a conservator or receiver for the institution. The obligation of a controlling
bank holding company under FDICIA to fund a capital restoration plan is
limited to the lesser of five percent of an undercapitalized subsidiary's
assets or the amount required to meet regulatory capital requirements. If the
controlling bank holding company fails to fulfill its obligations under FDICIA
and files (or has filed against it) a petition under the Federal Bankruptcy
Code, the FDIC's claim may be entitled to a priority in such bankruptcy
proceeding over third party creditors of the bank holding company.
An insured depository institution may not pay management fees to any person
having control of the institution nor may an institution, except under certain
circumstances and with prior regulatory approval, make any capital
distribution (including the payment of dividends) if, after making such
payment or distribution, the institution would be undercapitalized. FDICIA
also restricts the acceptance of brokered deposits by insured depository
institutions and contains a number of consumer banking provisions, including
disclosure requirements and substantive contractual limitations with respect
to deposit accounts.
At June 30, 1996, the Subsidiary Banks were "well capitalized", and were not
subject to any of the foregoing restrictions, including, without limitation,
those relating to brokered deposits. The Subsidiary Banks do not rely upon
brokered deposits as a primary source of deposit funding, although such
deposits are sold through the Correspondent and Investment Services Division
of Compass Bank.
FDICIA contains numerous other provisions, including new reporting
requirements, termination of the "too big to fail" doctrine except in special
cases, limitations on the FDIC's payment of deposits at foreign branches and
revised regulatory standards for, among other things, real estate lending and
capital adequacy. In addition, FDICIA requires the FDIC to establish a system
of risk-based assessments for federal deposit insurance, by which banks that
pose a greater risk of loss to the FDIC (based on their capital levels and the
FDIC's level of supervisory concern) will pay a higher insurance assesment.
The FDIC significantly reduced the insurance premiums it charges on bank
deposits insured by the BIF to the statutory minimum of $2,000.00 annually for
"well capitalized" banks, effective January 1, 1996. Premiums related to
savings association deposits acquired by banks continued to be assessed at the
rate of 23 cents to 31 cents per $100.00 of deposits. On September 30, 1996,
the Deposit Insurance Funds Act of 1996 ("DIFA") was enacted and signed into
law. DIFA is expected to reduce the amount of semi-annual FDIC insurance
premiums for savings association deposits acquired by banks to the same levels
assessed for deposits insured by BIF.
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<PAGE>
DIFA also provides for a special one-time assessment imposed on deposits
insured by the SAIF, including such deposits held by banks, to recapitalize
the SAIF to bring the SAIF up to statutory required levels. The one time
assessment for the Corporation's Subsidiary Banks was in an aggregate amount
of $7.6 million.
DIFA further provides for assessments to be imposed on insured depository
institutions with respect to deposits insured by the BIF (in addition to
assessments currently imposed on depository institutions with respect to SAIF-
insured deposits) to pay for the cost of Financing Corporation funding. Based
on September 30, 1996 deposit levels, the Corporation currently estimates
assessments will amount to approximately $1.9 million pre-tax in 1997.
THE SUBSIDIARY BANKS
In general, federal and state banking laws and regulations govern all areas
of the operations of the Subsidiary Banks, including reserves, loans,
mortgages, capital, issuances of securities, payment of dividends and
establishment of branches. Federal and state banking regulatory agencies also
have the general authority to limit the dividends paid by insured banks and
bank holding companies if such payments may be deemed to constitute an unsafe
and unsound practice. Federal and state banking agencies also have authority
to impose penalties, initiate civil and administrative actions and take other
steps intended to prevent banks from engaging in unsafe or unsound practices.
Compass Bank, organized under the laws of the State of Alabama, is a member
of the federal Reserve System. As such, it is supervised, regulated and
regularly examined by the Alabama State Banking Department and the Federal
Reserve. Compass Bank, Jacksonville, Florida is a Florida-chartered bank which
is also a member of the Federal Reserve System. It is supervised, regulated
and regularly examined by the Florida Department of Banking and Finance and
the Federal Reserve. Compass Bank, Houston, Texas, is organized under the laws
of the State of Texas and is a state bank that is not a member of the Federal
Reserve System. The Texas bank is supervised, regulated and regularly examined
by the Department of Banking of the State of Texas and the FDIC. The
Subsidiary Banks, as participants in the BIF and the SAIF of the FDIC, are
subject to the provisions of the Federal Deposit Insurance Act and to
examination by and regulations of the FDIC.
Compass Bank is governed by Alabama laws restricting the declaration and
payment of dividends to 90 percent of annual net income until its surplus
funds equal at least 20 percent of capital stock. Compass Bank has surplus in
excess of this amount. Compass Bank, Houston, Texas, governed by the laws of
the State of Texas, is, under certain circumstances, restricted in the
declaration and payment of dividends to the extent that before declaring any
dividends, it must transfer to its "certified surplus" accounts an amount not
less than 10 percent of net profits earned since the last dividend was
declared, except that there is no requirement for a transfer to certified
surplus of a sum which would increase the certified surplus to more than the
capital stock of the bank. Compass Bank, Jacksonville, Florida, governed by
the laws of the State of Florida, may declare and pay dividends not to exceed
the current period's net profits combined with the net retained profits of the
previous two years--after charging off bad debts, depreciation, and other
worthless assets and after making provision for reasonably anticipated future
losses on loans and other assets--and may, with the approval of the Department
of Banking and Finance of the State of Florida, declare quarterly, semiannual,
or annual dividends, in any amounts deemed expedient by the board of
directors, from retained net profits which accrued during the preceding two
years; provided that, prior to declaring any dividend, the bank must carry 20
percent of its net profits for such preceding period as is covered by the
dividend to its surplus fund until such surplus fund at least equals the
amount of the bank's common stock and any preferred stock then issued and
outstanding. Compass Bank, Jacksonville, Florida, may not declare any dividend
at any time at which its net income from the current year combined with
retained net income for the preceding two years is a loss or which would cause
the capital accounts of the bank to fall below any written agreement with the
Florida Department of Banking and Finance or any federal
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<PAGE>
regulatory agency. Compass Bank, Jacksonville, Florida, has no such written
agreements with the Florida Department of Banking and Finance or any federal
regulatory agency concerning its dividends. As members of the Federal Reserve
System, Compass Bank and Compass Bank, Jacksonville, Florida, are subject to
dividend limitations imposed by the Federal Reserve that are similar to those
applicable to national banks. The approval of the OCC is required if the total
of all dividends declared by a national bank in any calendar year exceeds the
total of net profits for that year, plus its retained net profits for the
preceding two years, less any required transfers to surplus.
Federal law further provides that no insured depository institution may make
any capital distribution, including a cash dividend, if, after making the
distribution, the institution would not satisfy one or more of its minimum
capital requirements. Moreover, the federal bank regulatory agencies also have
the general authority to limit the dividends paid by insured banks if such
payments may be deemed to constitute an unsafe and unsound practice. Insured
banks are prohibited from paying dividends on their capital stock while in
default in the payment of any assessment due to the FDIC except in those cases
where the amount of the assessment is in dispute and the insured bank has
deposited satisfactory security for the payment thereof.
The Community Reinvestment Act of 1977 ("CRA") and the regulations of the
Federal Reserve and the FDIC implementing that act are intended to encourage
regulated financial institutions to help meet the credit needs of their local
community or communities, including low and moderate income neighborhoods,
consistent with the safe and sound operation of such financial institutions.
The CRA and such regulations provide that the appropriate regulatory authority
will assess the records of regulated financial institutions in satisfying
their continuing and affirmative obligations to help meet the credit needs of
their local communities as part of their regulatory examination of the
institution. The results of such examinations are made public and are taken
into account upon the filing of any application to establish a domestic branch
or to merge or to acquire the assets or assume the liabilities of a bank. In
the case of a bank holding company, the CRA performance record of the bands
involved in the transaction are reviewed in connection with the filing of an
application to acquire ownership or control of shares or assets of a bank or
to merge with any other bank holding company. An unsatisfactory record can
substantially delay or block the transaction.
OTHER
Other legislative and regulator proposals regarding changes in banking, and
the regulation of banks, thrifts and other financial institutions, are being
considered by the executive branch of the federal government, Congress and
various state governments, including Alabama, Texas and Florida. Certain of
these proposals, if adopted, could significantly change the regulation of
banks and the financial services industry. It cannot be predicted accurately
whether any of these proposals will be adopted or, if adopted, how these
proposals will affect the Corporation or the Subsidiary Banks.
The Correspondent and Investment Services Division of Compass Bank is
treated as a municipal securities dealer and a government securities dealer
for purposes of the federal securities laws and, therefore, is subject to
certain reporting requirements and/or regulatory controls by the Commission,
the United States Department of the Treasury and the Federal Reserve. Compass
Brokerage, Inc. is a discount brokerage service registered with the Commission
and the National Association of Securities Dealers, Inc. and is subject to
certain reporting requirements and regulatory control by these agencies.
Compass Bancshares Insurance, Inc. is a licensed insurance agent or broker for
various insurance companies and is subject to reporting and licensing
regulations of the Alabama Insurance Commission and various other states in
which it conducts its business.
References herein to applicable statutes are brief summaries of portions
thereof, do not purport to be complete and are qualified in their entirety by
reference to such statutes.
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THE ISSUERS
Each Issuer is a statutory business trust formed under Delaware law pursuant
to (i) a trust agreement executed by the Corporation, as Depositor of the
Issuer, and the Delaware Trustee (as defined herein) of such Issuer and (ii)
the filing of a certificate of trust with the Delaware Secretary of State.
Each trust agreement will be amended and restated in its entirety (each, as so
amended and restated, a "Trust Agreement") substantially in the form filed as
an exhibit to the Registration Statement of which this Prospectus forms a
part. Each Trust Agreement will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Each Issuer
exists for the exclusive purposes of (i) issuing and selling its Trust
Securities, (ii) using the proceeds from the sale of such Trust Securities to
acquire a series of Corresponding Junior Subordinated Debentures issued by the
Corporation, and (iii) engaging in only those other activities necessary or
incidental thereto (such as registering the transfer of the Trust Securities).
Accordingly, the Corresponding Junior Subordinated Debentures and the right to
reimbursement of expenses under the related Expense Agreement will be the sole
assets of each Issuer, and payments under the Corresponding Junior
Subordinated Debentures and the related Expense Agreement will be the sole
revenue of each Issuer.
All of the Common Securities of each Issuer will be owned by the
Corporation. The Common Securities of an Issuer will rank pari passu, and
payments will be made thereon pro rata, with the Capital Securities of such
Issuer, except that upon the occurrence and continuance of an event of default
under a Trust Agreement resulting from an event of default under the
Indenture, the rights of the Corporation, as holder of the Common Securities,
to payment in respect of Distributions and payments upon liquidation or
redemption will be subordinated to the rights of the holders of the Capital
Securities of such Issuer. See "Description of Capital Securities--
Subordination of Common Securities". The Corporation will acquire Common
Securities in an aggregate Liquidation Amount equal to not less than 3% of the
total capital of each Issuer.
Unless otherwise specified in the applicable Prospectus Supplement, each
Issuer has a term of approximately 55 years, but may terminate earlier as
provided in the applicable Trust Agreement. Each Issuer's business and affairs
are conducted by its trustees, each appointed by the Corporation as holder of
the Common Securities. The trustees for each Issuer will be Wilmington Trust
Company, as Property Trustee (the "Property Trustee") and as Delaware Trustee
(the "Delaware Trustee"), and two individual trustees (the "Administrative
Trustees") who are employees or officers of or affiliated with the Corporation
(collectively, the "Issuer Trustees"). Wilmington Trust Company, as Property
Trustee, will act as sole indenture trustee under each Trust Agreement for
purposes of compliance with the Trust Indenture Act. Wilmington Trust Company
will also act as trustee under the Guarantees and the Indenture (each as
defined herein). See "Description of Guarantees" and "Description of Junior
Subordinated Debentures". The holder of the Common Securities of an Issuer, or
the holders of a majority in Liquidation Amount of the Related Capital
Securities if an event of default under the Trust Agreement for such Issuer
has occurred and is continuing, will be entitled to appoint, remove or replace
the Property Trustee and/or the Delaware Trustee for such Issuer. In no event
will the holders of the Capital Securities have the right to vote to appoint,
remove or replace the Administrative Trustees; such voting rights are vested
exclusively in the holder of the Common Securities. The duties and obligations
of each Issuer Trustee are governed by the applicable Trust Agreement. The
Corporation will pay all fees and expenses related to each Issuer and the
offering of the Capital Securities and will pay, directly or indirectly, all
ongoing costs, expenses and liabilities of each Issuer.
The principal executive office of each Issuer is 15 South 20th Street,
Birmingham, Alabama 35233 and its telephone number is (205) 933-3000.
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USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Corporation intends to use the proceeds from the sale of its Junior
Subordinated Debentures (including Corresponding Junior Subordinated
Debentures issued to the Issuers in connection with the investment by the
Issuers of all of the proceeds from the sale of Capital Securities) for
general corporate purposes, including working capital, capital expenditures,
investments in or loans to subsidiaries, refinancing of debt, including
outstanding commercial paper and other short-term indebtedness, redemption or
repurchase of shares of its outstanding common stock, the satisfaction of
other obligations or for such other purposes as may be specified in the
applicable Prospectus Supplement.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more series
under a Junior Subordinated Indenture, as supplemented from time to time (as
so supplemented, the "Indenture"), between the Corporation and Wilmington
Trust Company, as trustee (the "Debenture Trustee"). This summary of certain
terms and provisions of the Junior Subordinated Debentures, Corresponding
Junior Subordinated Debentures and the Indenture, which summarizes the
material provisions thereof, does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the Indenture, the form
of which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, and to the Trust Indenture Act, to each of which
reference is hereby made. The Indenture is qualified under the Trust Indenture
Act. Whenever particular defined terms of the Indenture (as supplemented or
amended from time to time) are referred to herein or in a Prospectus
Supplement, such defined terms are incorporated herein or therein by
reference.
GENERAL
Each series of Junior Subordinated Debentures will rank pari passu with all
other series of Junior Subordinated Debentures and will be unsecured and
subordinate and junior in right of payment to the extent and in the manner set
forth in the Indenture to all Senior Debt (as defined below) of the
Corporation. See "--Subordination". The Corporation is a non-operating holding
company and almost all of the operating assets of the Corporation and its
consolidated subsidiaries are owned by such subsidiaries. The Corporation
relies primarily on dividends from such subsidiaries to meet its obligations.
See "Certain Regulatory Considerations--Dividends". Because the Corporation is
a holding company, the right of the Corporation to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of
the subsidiary, except to the extent the Corporation may itself be recognized
as a creditor of that subsidiary. Accordingly, the Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, and holders of Junior
Subordinated Debentures should look only to the assets of the Corporation for
payments on the Junior Subordinated Debentures. Except as otherwise provided
in the applicable Prospectus Supplement, the Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the Corporation,
including Senior Debt, whether under the Indenture, any other existing
indenture or any other indenture that the Corporation may enter into in the
future or otherwise. See "--Subordination" and the Prospectus Supplement
relating to any offering of Capital Securities or Junior Subordinated
Debentures.
The Junior Subordinated Debentures will be issuable in one or more series
pursuant to an indenture supplemental to the Indenture or a resolution of the
Corporation's Board of Directors or a committee thereof.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the Junior Subordinated Debentures: (1) the title of
the Junior Subordinated Debentures; (2) any limit upon the aggregate principal
amount of the Junior Subordinated Debentures; (3) the date or
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dates on which the principal of the Junior Subordinated Debentures is payable
(the "Stated Maturity") or the method of determination thereof; (4) the rate
or rates, if any, at which the Junior Subordinated Debentures shall bear
interest, the dates on which any such interest shall be payable (the "Interest
Payment Dates"), the right, if any, of the Corporation to defer or extend an
Interest Payment Date, and the record dates for any interest payable on any
Interest Payment Date or the method by which any of the foregoing shall be
determined; (5) the place or places where, subject to the terms of the
Indenture as described below under "--Payment and Paying Agents", the
principal of and premium, if any, and interest on the Junior Subordinated
Debentures will be payable and where, subject to the terms of the Indenture as
described below under "--Denominations, Registration and Transfer," the Junior
Subordinated Debentures may be presented for registration of transfer or
exchange and the place or places where notices and demands to or upon the
Corporation in respect of the Junior Subordinated Debentures and the
Indentures may be made ("Place of Payment"); (6) any period or periods within
which or date or dates on which, the price or prices at which and the terms
and conditions upon which Junior Subordinated Debentures may be redeemed, in
whole or in part, at the option of the Corporation or a holder thereof; (7)
the obligation or the right, if any, of the Corporation or a holder thereof to
redeem, purchase or repay the Junior Subordinated Debentures and the period or
periods within which, the price or prices at which, the currency or currencies
(including currency unit or units) in which and the other terms and conditions
upon which the Junior Subordinated Debentures shall be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation; (8) the
denominations in which any Junior Subordinated Debentures shall be issuable if
other than denominations of $1,000 and any integral multiple thereof; (9) if
other than in U.S. Dollars, the currency or currencies (including currency
unit or units) in which the principal of (and premium, if any) and interest
and Additional Interest, if any, on the Junior Subordinated Debentures shall
be payable, or in which the Junior Subordinated Debentures shall be
denominated; (10) any additions, modifications or deletions in the events of
default under the Indenture or covenants of the Corporation specified in the
Indenture with respect to the Junior Subordinated Debentures; (11) if other
than the principal amount thereof, the portion of the principal amount of
Junior Subordinated Debentures that shall be payable upon declaration of
acceleration of the maturity thereof; (12) any additions or changes to the
Indenture with respect to a series of Junior Subordinated Debentures as shall
be necessary to permit or facilitate the issuance of such series in bearer
form, registrable or not registrable as to principal, and with or without
interest coupons; (13) any index or indices used to determine the amount of
payments of principal of and premium, if any, on the Junior Subordinated
Debentures and the manner in which such amounts will be determined; (14) the
terms and conditions relating to the issuance of a temporary Global Security
representing all of the Junior Subordinated Debentures of such series and the
exchange of such temporary Global Security for definitive Junior Subordinated
Debentures of such series; (15) subject to the terms described herein under
"--Global Junior Subordinated Debentures", whether the Junior Subordinated
Debentures of the series shall be issued in whole or in part in the form of
one or more Global Securities and, in such case, the Depositary for such
Global Securities, which Depositary shall be a clearing agency registered
under the Exchange Act; (16) the appointment of any paying agent or agents;
(17) the terms and conditions of any obligation or right of the Corporation or
a holder to convert or exchange the Junior Subordinated Debentures into
Capital Securities; (18) the form of Trust Agreement, Guarantee Agreement and
Expense Agreement, if applicable; (19) the relative degree, if any, to which
such Junior Subordinated Debentures of the series shall be senior to or be
subordinated to other series of such Junior Subordinated Debentures or other
indebtedness of the Corporation in right of payment, whether such other series
of Junior Subordinated Debentures or other indebtedness are outstanding or
not; and (20) any other terms of the Junior Subordinated Debentures not
inconsistent with the provisions of the Indenture.
Junior Subordinated Debentures may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. Certain United States Federal
income tax consequences and special considerations applicable to any such
Junior Subordinated Debentures will be described in the applicable Prospectus
Supplement.
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If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest, if any,
on any Junior Subordinated Debentures is payable in one or more foreign
currencies or currency units, the restrictions, elections, certain United
States Federal income tax consequences, specific terms and other information
with respect to such series of Junior Subordinated Debentures and such foreign
currency or currency units will be set forth in the applicable Prospectus
Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of Junior Subordinated Debentures,
special United States Federal income tax, accounting and other considerations
applicable thereto will be described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issuable only in registered form
without coupons in denominations of $1000 and any integral multiple thereof.
Junior Subordinated Debentures of any series will be exchangeable for other
Junior Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same original
issue date and Stated Maturity and bearing the same interest rate.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate securities registrar or at
the office of any transfer agent designated by the Corporation for such
purpose with respect to any series of Junior Subordinated Debentures and
referred to in the applicable Prospectus Supplement, without service charge
and upon payment of any taxes and other governmental charges as described in
the Indenture. The Corporation will appoint the Trustee as securities
registrar under the Indenture. If the applicable Prospectus Supplement refers
to any transfer agents (in addition to the securities registrar) initially
designated by the Corporation with respect to any series of Junior
Subordinated Debentures, the Corporation may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, provided that the Corporation
maintains a transfer agent in each place of payment for such series. The
Corporation may at any time designate additional transfer agents with respect
to any series of Junior Subordinated Debentures.
In the event of any redemption, neither the Corporation nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during the period beginning at
the opening of business 15 days before the day of selection for redemption of
Junior Subordinated Debentures of that series and ending at the close of
business on the day of mailing of the relevant notice of redemption or (ii)
transfer or exchange any Junior Subordinated Debentures so selected for
redemption, except, in the case of any Junior Subordinated Debentures being
redeemed in part, any portion thereof not to be redeemed.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole or in
part in the form of one or more Global Junior Subordinated Debentures that
will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the Prospectus Supplement relating to such series. Global Junior
Subordinated Debentures may be issued only in fully registered form and in
either temporary or permanent form. Unless and until it is exchanged in whole
or in part for the individual Junior Subordinated Debentures represented
thereby, a Global Junior Subordinated Debenture may not be
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transferred except as a whole by the Depositary for such Global Junior
Subordinated Debenture to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor.
The specific terms of the depositary arrangement with respect to a series of
Junior Subordinated Debentures will be described in the Prospectus Supplement
relating to such series. The Corporation anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the deposit
of such Global Junior Subordinated Debenture with or on behalf of the
Depositary, the Depositary for such Global Junior Subordinated Debenture or
its nominee will credit, on its book-entry registration and transfer system,
the respective principal amounts of the individual Junior Subordinated
Debentures represented by such Global Junior Subordinated Debenture to the
accounts of persons that have accounts with such Depositary ("Participants").
Such accounts shall be designated by the dealers, underwriters or agents with
respect to such Junior Subordinated Debentures or by the Corporation if such
Junior Subordinated Debentures are offered and sold directly by the
Corporation. Ownership of beneficial interests in a Global Junior Subordinated
Debenture will be limited to Participants or persons that may hold interests
through Participants. Ownership of beneficial interests in such Global Junior
Subordinated Debenture will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the applicable Depositary
or its nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests
in a Global Junior Subordinated Debenture.
So long as the Depositary for a Global Junior Subordinated Debenture, or its
nominee, is the registered owner of such Global Junior Subordinated Debenture,
such Depositary or such nominee, as the case may be, will be considered the
sole owner or holder of the Junior Subordinated Debentures represented by such
Global Junior Subordinated Debenture for all purposes under the Indenture
governing such Junior Subordinated Debentures. Except as provided below,
owners of beneficial interests in a Global Junior Subordinated Debenture will
not be entitled to have any of the individual Junior Subordinated Debentures
of the series represented by such Global Junior Subordinated Debenture
registered in their names, will not receive or be entitled to receive physical
delivery of any such Junior Subordinated Debentures of such series in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Junior Subordinated Debentures represented by a Global Junior Subordinated
Debenture registered in the name of a Depositary or its nominee will be made
to the Depositary or its nominee, as the case may be, as the registered owner
of the Global Junior Subordinated Debenture representing such Junior
Subordinated Debentures. None of the Corporation, the Debenture Trustee, any
Paying Agent, or the Securities Registrar for such Junior Subordinated
Debentures will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Junior Subordinated Debenture representing such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Corporation expects that the Depositary for a series of Junior
Subordinated Debentures or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of a permanent Global
Junior Subordinated Debenture representing any of such Junior Subordinated
Debentures, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of such Global Junior Subordinated Debenture for such Junior
Subordinated Debentures as shown on the records of such Depositary or
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its nominee. The Corporation also expects that payments by Participants to
owners of beneficial interests in such Global Junior Subordinated Debenture
held through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name." Such payments will
be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depositary and the Corporation
is unable to locate a qualified successor, the Corporation will issue
individual Junior Subordinated Debentures of such series in exchange for the
Global Junior Subordinated Debenture representing such series of Junior
Subordinated Debentures. In addition, the Corporation may at any time and in
its sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Junior Subordinated Debentures, determine not to
have any Junior Subordinated Debentures of such series represented by one or
more Global Junior Subordinated Debentures and, in such event, will issue
certificated Junior Subordinated Debentures of such series in exchange for the
Global Junior Subordinated Debenture or Securities representing such series of
Junior Subordinated Debentures. Further, if the Corporation so specifies with
respect to the Junior Subordinated Debentures of a series, an owner of a
beneficial interest in a Global Junior Subordinated Debenture representing
Junior Subordinated Debentures of such series may, on terms acceptable to the
Corporation, the Debenture Trustee and the Depositary for such Global Junior
Subordinated Debenture, receive certificated Junior Subordinated Debentures of
such series in exchange for such beneficial interests, subject to any
limitations described in the Prospectus Supplement relating to such Junior
Subordinated Debentures. In any such instance, an owner of a beneficial
interest in a Global Junior Subordinated Debenture will be entitled to
physical delivery of certificated Junior Subordinated Debentures of the series
represented by such Global Junior Subordinated Debenture equal in principal
amount to such beneficial interest and to have such Junior Subordinated
Debentures registered in its name. Individual Junior Subordinated Debentures
of such series so issued will be issued in denominations, unless otherwise
specified by the Corporation, of $1000 and integral multiples thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in the City of
New York or at the office of such paying agent or paying agents as the
Corporation may designate from time to time, except that at the option of the
Corporation payment of any interest may be made (i) except in the case of
Global Junior Subordinated Debentures, by check mailed to the address of the
Person entitled thereto as such address shall appear in the securities
register or (ii) by transfer to an account maintained by the person entitled
thereto as specified in the securities register, provided that proper transfer
instructions have been received by the Regular Record Date. Unless otherwise
indicated in the applicable Prospectus Supplement, payment of any interest on
Junior Subordinated Debentures will be made to the person in whose name such
Junior Subordinated Debenture is registered at the close of business on the
Regular Record Date for such interest, except in the case of Defaulted
Interest. The Corporation may at any time designate additional Paying Agents
or rescind the designation of any paying agent; however the Corporation will
at all times be required to maintain a paying agent in each place of payment
for each series of Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent, or then
held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any)
or interest has become due and payable shall, at the request of the
Corporation, be repaid to the Corporation and the holder of such Junior
Subordinated Debenture shall thereafter look, as a general unsecured creditor,
only to the Corporation for payment thereof.
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OPTION TO DEFER INTEREST PAYMENTS
If provided in the applicable Prospectus Supplement, the Corporation will
have the right at any time and from time to time during the term of any series
of Junior Subordinated Debentures to defer payment of interest for up to such
number of consecutive interest payment periods as may be specified in the
applicable Prospectus Supplement (each, an "Extension Period"), subject to the
terms, conditions and covenants, if any, specified in such Prospectus
Supplement, provided that such Extension Period may not extend beyond the
Stated Maturity of such series of Junior Subordinated Debentures. Certain
United States Federal income tax consequences and special considerations
applicable to any such Junior Subordinated Debentures will be described in the
applicable Prospectus Supplement.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, Junior
Subordinated Debentures will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation may, at its option, redeem the Junior Subordinated Debentures of
any series in whole at any time or in part from time to time. If the Junior
Subordinated Debentures of any series are so redeemable only on or after a
specified date or upon the satisfaction of additional conditions, the
applicable Prospectus Supplement will specify such date or describe such
conditions. Junior Subordinated Debentures in denominations larger than $1000
may be redeemed in part but only in integral multiples of $1000. Except as
otherwise specified in the applicable Prospectus Supplement, the redemption
price for any Junior Subordinated Debenture so redeemed shall equal any
accrued and unpaid interest (including Additional Interest) thereon to the
redemption date, plus 100% of the principal amount thereof. The Corporation
has committed to the Federal Reserve that the Corporation will not exercise
its right to redeem the Junior Subordinated Debentures prior to the Stated
Maturity without having received the prior approval of the Federal Reserve to
do so, if such approval is then required under the applicable Federal Reserve
capital guidelines or policies.
Except as otherwise specified in the applicable Prospectus Supplement, if a
Tax Event (as defined below) in respect of a series of Junior Subordinated
Debentures or a Capital Treatment Event (as defined below) shall occur and be
continuing, the Corporation may, at its option, redeem such series of Junior
Subordinated Debentures in whole (but not in part) at any time within 90 days
following the occurrence of such Tax Event or Capital Treatment Event, at a
redemption price equal to 100% of the principal amount of such Junior
Subordinated Debentures then outstanding plus accrued and unpaid interest to
the date fixed for redemption, except as otherwise specified in the applicable
Prospectus Supplement. The Corporation has committed to the Federal Reserve
that the Corporation will not exercise its right to redeem the Junior
Subordinated Debentures prior to the Stated Maturity without having received
the prior approval of the Federal Reserve to do so, if such approval is then
required under the applicable Federal Reserve capital guidelines or policies.
"Tax Event" means the receipt by an Issuer of a series of Capital Securities
of an opinion of counsel experienced in such matters to the effect that, as a
result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or
any political subdivision or taxing authority thereof or therein, or as a
result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change
is effective or which pronouncement or decision is announced on or after the
date of issuance of such Capital Securities under the Trust Agreement, there
is more than an insubstantial risk that (i) such Issuer is, or will be within
90 days of the date of such opinion, subject to United States Federal income
tax with respect to income received or accrued on the corresponding series of
Corresponding Junior Subordinated Debentures, (ii) interest payable by the
Corporation on such series of Corresponding Junior Subordinated Debentures is
not, or within 90 days of the date of such opinion, will not be, deductible by
the Corporation, in whole or in part, for United States Federal income tax
purposes, or (iii) such Issuer is, or will be within 90 days of the date
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of such opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
A "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such
laws, rules or regulations, which amendment or change is effective or which
pronouncement, action or decision is announced on or after the date of
issuance of the Capital Securities, there is more than an insubstantial risk
that the Corporation will not be entitled to treat an amount equal to the
aggregate Liquidation Amount of the Capital Securities as "Tier 1 Capital" (or
the then equivalent thereof) for purposes of the capital adequacy guidelines
of the Federal Reserve, as then in effect and applicable to the Corporation.
Notice of any redemption will be mailed at least 45 days but not more than
75 days before the redemption date to each Holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Corporation
defaults in payment of the redemption price, on and after the redemption date
interest shall cease to accrue on such Junior Subordinated Debentures or
portions thereof called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
The Corporation will also covenant, as to each series of Junior Subordinated
Debentures, that it will not, and will not permit any subsidiary of the
Corporation to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Corporation's capital stock or (ii) make any payment of principal of or
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Corporation (including other Junior Subordinated Debentures)
that rank pari passu in all respects with or junior in interest to the Junior
Subordinated Debentures (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Corporation in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or
in connection with the issuance of capital stock of the Corporation (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the
applicable Extension Period, (b) as a result of any exchange or conversion of
any class or series of the Corporation's capital stock (or any capital stock
of a subsidiary of the Corporation) for any class or series of the
Corporation's capital stock or of any class or series of the Corporation's
indebtedness for any class or series of the Corporation's capital stock, (c)
the purchase of fractional interests in shares of the Corporation's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in
the form of stock, warrants, options or other rights where the dividend stock
or the stock issuable upon exercise of such warrants, options or other rights
is the same stock as that on which the dividend is being paid or ranks pari
passu with or junior to such stock), if at such time (i) there shall have
occurred any event of which the Corporation has actual knowledge that (a) with
the giving of notice or the lapse of time, or both, would constitute an "Event
of Default" under the Indenture with respect to the Junior Subordinated
Debentures of such series and (b) in respect of which the Corporation shall
not have taken reasonable steps to cure, (ii) if such Junior Subordinated
Debentures are held by an Issuer of a series of Related Capital Securities,
the Corporation shall be in default with respect to its payment of any
obligations under the Guarantee relating to such Related Capital Securities or
(iii) the Corporation shall have given notice of its selection of an Extension
Period as provided in the Indenture with respect to the Junior Subordinated
Debentures of such series and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
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MODIFICATION OF INDENTURE
From time to time the Corporation and the Debenture Trustee may, without the
consent of the holders of any series of Junior Subordinated Debentures, amend,
waive or supplement the Indenture for specified purposes, including, among
other things, curing ambiguities, defects or inconsistencies (provided that
any such action does not materially adversely affect the interest of the
holders of any series of Junior Subordinated Debentures or, in the case of
Corresponding Junior Subordinated Debentures, the holders of the Related
Capital Securities so long as they remain outstanding) and qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act.
The Indenture contains provisions permitting the Corporation and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of each outstanding series of Junior Subordinated Debentures
affected, to modify the Indenture in a manner affecting adversely the rights
of the holders of such series of the Junior Subordinated Debentures in any
material respect; provided, that no such modification may, without the consent
of the holder of each outstanding Junior Subordinated Debenture so affected,
(i) change the Stated Maturity of any series of Junior Subordinated Debentures
(except as otherwise specified in the applicable Prospectus Supplement), or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon or (ii) reduce the percentage of principal amount
of Junior Subordinated Debentures of any series, the holders of which are
required to consent to any such modification of the Indenture, provided that,
in the case of Corresponding Junior Subordinated Debentures, so long as any of
the Related Capital Securities remain outstanding, (a) no such modification
may be made that adversely affects the holders of such Capital Securities in
any material respect, and no termination of the Indenture may occur, and no
waiver of any event of default or compliance with any covenant under the
Indenture may be effective, without the prior consent of the holders of at
least a majority of the aggregate Liquidation Amount of all outstanding
Related Capital Securities affected unless and until the principal of the
Corresponding Junior Subordinated Debentures and all accrued and unpaid
interest thereon have been paid in full and certain other conditions have been
satisfied and (b) where a consent under the Indenture would require the
consent of each holder of Corresponding Junior Subordinated Debentures, no
such consent will be given by the Property Trustee without the prior consent
of each holder of Related Capital Securities.
In addition, the Corporation and the Debenture Trustee may execute, without
the consent of any holder of Junior Subordinated Debentures, any supplemental
Indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default" with
respect to such series of Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on such series of Junior
Subordinated Debentures, including any Additional Interest in respect
thereof, when due (subject to the deferral of any interest payment in the
case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series of
Junior Subordinated Debentures when due whether at maturity or upon
redemption; or
(iii) failure to observe or perform any other covenants contained in the
indenture for 90 days after written notice to the Corporation from the
Debenture Trustee or the holders of at least 25% in aggregate outstanding
principal amount of such affected series of outstanding Junior Subordinated
Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Corporation.
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The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures of each series affected have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Debenture Trustee. The Debenture Trustee or the holders of
not less than 25% in aggregate outstanding principal amount of Junior
Subordinated Debentures of each series affected may declare the principal due
and payable immediately upon a Debenture Event of Default. In case a Debenture
Event of Default shall occur and be continuing as to a series of Corresponding
Junior Subordinated Debentures, the Property Trustee will have the right to
declare the principal of and the interest on such Corresponding Junior
Subordinated Debentures, and any other amounts payable under the Indenture, to
be forthwith due and payable and to enforce its other rights as a creditor
with respect to such Corresponding Junior Subordinated Debentures. In the case
of Corresponding Junior Subordinated Debentures, should the Debenture Trustee
or the Property Trustee fail to make such declaration, the holders of at least
25% in aggregate Liquidation Amount of the Related Capital Securities shall
have such right. The Property Trustee may annul such declaration and waive
such default, provided all defaults have been cured and all payment
obligations have been made current. Should the Property Trustee fail to annul
such declaration and waive such default, the holders of a majority in
aggregate Liquidation Amount of the Related Capital Securities shall have such
right.
The holders of a majority in aggregate outstanding principal amount of each
series of Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures of such series, waive
any default, except a default in the payment of principal or interest
(including any Additional Interest) (unless such default has been cured and a
sum sufficient to pay all matured installments of interest (including any
Additional Interest) and principal due otherwise than by acceleration has been
deposited with the Debenture Trustee) or a default in respect of a covenant or
provision which under the Indenture cannot be modified or amended without the
consent of the holder of each outstanding Junior Subordinated Debenture of
such series. In the case of Corresponding Junior Subordinated Debentures, the
holders of a majority in aggregate Liquidation Amount of the Related Capital
Securities shall have such right. The Corporation is required to file annually
with the Debenture Trustee a certificate as to whether or not the Corporation
is in compliance with all the conditions and covenants applicable to it under
the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Debenture Event of Default with respect to a series of Corresponding
Junior Subordinated Debentures has occurred and is continuing and such event
is attributable to the failure of the Corporation to pay interest or principal
on such Corresponding Junior Subordinated Debentures on the date such interest
or principal is due and payable, a holder of Related Capital Securities may
institute a legal proceeding directly against the Corporation for enforcement
of payment to such holder of the principal of or interest (including any
Additional Interest) on such Corresponding Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Related Capital Securities of such holder (a "Direct Action"). The Corporation
may not amend the Indenture to remove the foregoing right to bring a Direct
Action without the prior written consent of the holders of all of the Capital
Securities outstanding. If the right to bring a Direct Action is removed, the
applicable Issuer may become subject to the reporting obligations under the
Exchange Act. The Corporation shall have the right under the Indenture to set-
off any payment made to such holder of Capital Securities by the Corporation
in connection with a Direct Action.
The holders of the Capital Securities will not be able to exercise directly
any remedies other than those set forth in the preceding paragraph available
to the holders of the Corresponding Junior Subordinated Debentures unless
there shall have been an event of default under the Trust Agreement. See
"Description of Capital Securities--Events of Default; Notice".
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CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Corporation shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Corporation or convey, transfer or lease
its properties and assets substantially as an entirety to the Corporation,
unless (i) in case the Corporation consolidates with or merges into another
Person or conveys or transfers its properties and assets substantially as an
entirety to any Person, the successor Person is organized under the laws of
the United States or any state or the District of Columbia, and such successor
Person expressly assumes the Corporation's obligations on the Junior
Subordinated Debentures issued under the Indenture; (ii) immediately after
giving effect thereto, no Debenture Event of Default, and no event which,
after notice or lapse of time or both, would become a Debenture Event of
Default, shall have occurred and be continuing, and (iii) certain other
conditions as prescribed by the Indenture are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Corporation that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at their Stated Maturity within one year, and the Corporation deposits
or causes to be deposited with the Debenture Trustee funds, in trust, for the
purpose and in an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal (and premium, if
any) and interest (including any Additional Interest) to the date of the
deposit or to the Stated Maturity, as the case may be, then the Indenture will
cease to be of further effect (except as to the Corporation's obligations to
pay all other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Corporation
will be deemed to have satisfied and discharged the Indenture.
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures of any series may be convertible or
exchangeable into Junior Subordinated Debentures of another series or into
Capital Securities of another series. The specific terms on which Junior
Subordinated Debentures of any series may be so converted or exchanged will be
set forth in the applicable Prospectus Supplement. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at the option of the Corporation, in which case the number of
shares of Capital Securities or other securities to be received by the holders
of Junior Subordinated Debentures would be calculated as of a time and in the
manner stated in the applicable Prospectus Supplement.
SUBORDINATION
The Junior Subordinated Debentures will be subordinate in right of payment,
to the extent set forth in the Indenture, to all Senior Debt (as defined
below) of the Corporation. If the Corporation defaults in the payment of any
principal, premium, if any, or interest, if any, or any other amount payable
on any Senior Debt when the same becomes due and payable, whether at maturity
or at a date fixed for redemption or by declaration of acceleration or
otherwise, then, unless and until such default has been cured or waived or has
ceased to exist or all Senior Debt has been paid, no direct or indirect
payment (in cash, property, securities, by set-off or otherwise) may be made
or agreed to be made on the Junior
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Subordinated Debentures, or in respect of any redemption, repayment,
retirement, purchase or other acquisition of any of the Junior Subordinated
Debentures.
As used herein, "Senior Debt" means any obligation of the Corporation to its
creditors, whether now outstanding or subsequently incurred, other than any
obligation as to which, in the instrument creating or evidencing the
obligation or pursuant to which the obligation is outstanding, it is provided
that such obligation is not Senior Debt, but does not include trade accounts
payable and accrued liabilities arising in the ordinary course of business.
Senior Debt includes the Corporation's outstanding subordinated debt
securities and any subordinated debt securities issued in the future with
substantially similar subordination terms, but does not include the Junior
Subordinated Debentures of any Series or any junior subordinated debt
securities issued in the future with subordination terms substantially similar
to those of the Junior Subordinated Debentures. Substantially all of the
existing indebtedness of the Corporation constitutes Senior Debt.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Corporation, its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding up of the Corporation, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by the Corporation for the benefit of creditors or (iv)
any other marshalling of the assets of the Corporation, all Senior Debt
(including any interest thereon accruing after the commencement of any such
proceedings) shall first be paid in full before any payment or distribution,
whether in cash, securities or other property, shall be made on account of the
Junior Subordinated Debentures. In such event, any payment or distribution on
account of the Junior Subordinated Debentures, whether in cash, securities or
other property, that would otherwise (but for the subordination provisions) be
payable or deliverable in respect of the Junior Subordinated Debentures will
be paid or delivered directly to the holders of Senior Debt in accordance with
the priorities then existing among such holders until all Senior Debt
(including any interest thereon accruing after the commencement of any such
proceedings) has been paid in full.
In the event of any such proceeding, after payment in full of all sums owing
with respect to Senior Debt, the holders of Junior Subordinated Debentures,
together with the holders of any obligations of the Corporation ranking on a
parity with the Junior Subordinated Debentures, will be entitled to be paid
from the remaining assets of the Corporation the amounts at the time due and
owing on the Junior Subordinated Debentures and such other obligations before
any payment or other distribution, whether in cash, property or otherwise,
will be made on account of any capital stock or obligations of the Corporation
ranking junior to the Junior Subordinated Debentures. If any payment or
distribution on account of the Junior Subordinated Debentures of any character
or any security, whether in cash, securities or other property is received by
any holder of any Junior Subordinated Debentures in contravention of any of
the terms hereof and before all the Senior Debt has been paid in full, such
payment or distribution or security will be received in trust for the benefit
of, and must be paid over or delivered and transferred to, the holders of the
Senior Debt at the time outstanding in accordance with the priorities then
existing among such holders for application to the payment of all Senior Debt
remaining unpaid to the extent necessary to pay all such Senior Debt in full.
By reason of such subordination, in the event of the insolvency of the
Corporation, holders of Senior Debt may receive more, ratably, and holders of
the Junior Subordinated Debentures may receive less, ratably, than the other
creditors of the Corporation. Such subordination will not prevent the
occurrence of any Event of Default under the Indenture.
The Junior Subordinated Indenture places no limitation on the amount of
additional Senior Debt that may be incurred by the Corporation. The
Corporation expects from time to time to incur additional indebtedness
constituting Senior Debt.
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TRUST EXPENSES
Pursuant to the Expense Agreement for each series of Corresponding Junior
Subordinated Debentures, the Corporation will irrevocably and unconditionally
agree with each Issuer that holds Junior Subordinated Debentures that the
Corporation will pay to such Issuer, and reimburse such Issuer for, the full
amounts of any costs, expenses or liabilities of the Issuer, other than
obligations of the Issuer to pay to the holders of any Capital Securities or
other similar interests in the Issuer the amounts due such holders pursuant to
the terms of the Capital Securities or such other similar interests, as the
case may be. Such payment obligation will include any such costs, expenses or
liabilities of the Issuer that are required by applicable law to be satisfied
in connection with a termination of such Issuer.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Debenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Junior Subordinated Debentures,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
The Corresponding Junior Subordinated Debentures may be issued in one or
more series of Junior Subordinated Debentures under the Indenture with terms
corresponding to the terms of a series of Related Capital Securities. In that
event, concurrently with the issuance of each Issuer's Capital Securities,
such Issuer will invest the proceeds thereof and the consideration paid by the
Corporation for the Common Securities of such Issuer in such series of
Corresponding Junior Subordinated Debentures issued by the Corporation to such
Issuer. Each series of Corresponding Junior Subordinated Debentures will be in
the principal amount equal to the aggregate stated Liquidation Amount of the
Related Capital Securities and the Common Securities of such Issuer and will
rank pari passu with all other series of Junior Subordinated Debentures.
Holders of the Related Capital Securities will have the rights in connection
with modifications to the Indenture or upon occurrence of Debenture Events of
Default, as described under "--Modification of Indenture" and "--Debenture
Events of Default", unless provided otherwise in the Prospectus Supplement for
such Related Capital Securities.
Unless otherwise specified in the applicable Prospectus Supplement, if a Tax
Event in respect of an Issuer shall occur and be continuing, the Corporation
may, at its option, redeem the Corresponding Junior Subordinated Debentures at
any time within 90 days of the occurrence of such Tax Event, in whole but not
in part, subject to the provisions of the Indenture and whether or not such
Corresponding Junior Subordinated Debentures are then otherwise redeemable at
the option of the Corporation. The redemption price for any Corresponding
Junior Subordinated Debentures shall be equal to 100% of the principal amount
of such Corresponding Junior Subordinated Debentures then outstanding plus
accrued and unpaid interest to the date fixed for redemption. For so long as
the applicable Issuer is the holder of all the outstanding Corresponding
Junior Subordinated Debentures, the proceeds of any
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such redemption will be used by the Issuer to redeem the corresponding Trust
Securities in accordance with their terms. The Corporation may not redeem a
series of Corresponding Junior Subordinated Debentures in part unless all
accrued and unpaid interest has been paid in full on all outstanding
Corresponding Junior Subordinated Debentures of such series for all interest
periods terminating on or prior to the Redemption Date. The Corporation has
committed to the Federal Reserve that the Corporation will not exercise its
right to redeem the Junior Subordinated Debentures prior to the Stated
Maturity without having received the prior approval of the Federal Reserve to
do so, if such approval is then required under the applicable Federal Reserve
capital guidelines or policies.
The Corporation will covenant in the Indenture, as to each series of
Corresponding Junior Subordinated Debentures, that if and so long as (i) the
Issuer of the related series of Trust Securities is the holder of all such
Corresponding Junior Subordinated Debentures, (ii) a Tax Event in respect of
such Issuer has occurred and is continuing and (iii) the Corporation has
elected, and has not revoked such election, to pay Additional Sums (as defined
under "Description of Capital Securities--Redemption or Exchange") in respect
of such Trust Securities, the Corporation will pay to such Issuer such
Additional Sums. The Corporation will also covenant, as to each series of
Corresponding Junior Subordinated Debentures, (i) to maintain directly or
indirectly 100% ownership of the Common Securities of the Issuer to which such
Corresponding Junior Subordinated Debentures have been issued, provided that
certain successors which are permitted pursuant to the Indenture may succeed
to the Corporation's ownership of the Common Securities, (ii) not to
voluntarily terminate, wind-up or liquidate any Issuer, except (a) in
connection with a distribution of Corresponding Junior Subordinated Debentures
to the holders of the Capital Securities in exchange therefor upon liquidation
of such Issuer or (b) in connection with certain mergers, consolidations or
amalgamations permitted by the related Trust Agreement, and (iii) to use its
reasonable efforts, consistent with the terms and provisions of the related
Trust Agreement, to cause such Issuer to remain classified as a grantor trust
and not as an association taxable as a corporation for United States Federal
income tax purposes. The Corporation has committed to the Federal Reserve that
the Corporation will not exercise its right to redeem the Junior Subordinated
Debentures prior to the Stated Maturity without having received the prior
approval of the Federal Reserve to do so, if such approval is then required
under the applicable Federal Reserve capital guidelines or policies.
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DESCRIPTION OF CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement for each Issuer, the Issuer
Trustees on behalf of such Issuer will issue the Capital Securities and the
Common Securities. The Capital Securities of a particular Issuer will
represent preferred beneficial interests in the Issuer and the holders thereof
will be entitled to a preference in certain circumstances with respect to
Distributions and amounts payable on redemption or liquidation over the Common
Securities of such Issuer, as well as other benefits as described in the
corresponding Trust Agreement. This summary of certain provisions of the
Capital Securities and each Trust Agreement, which summarizes the material
terms thereof, does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of each Trust
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act, to which reference is hereby made. Wherever particular defined
terms of a Trust Agreement (as amended or supplemented from time to time) are
referred to herein or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference. The form of the Trust Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each of the Issuers is a legally separate entity and
the assets of one are not available to satisfy the obligations of any of the
others.
GENERAL
The Capital Securities of an Issuer will rank pari passu, and payments will
be made thereon pro rata, with the Common Securities of that Issuer except as
described under "--Subordination of Common Securities". Legal title to the
Corresponding Junior Subordinated Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the related Capital
Securities and Common Securities. Each Guarantee Agreement executed by the
Corporation for the benefit of the holders of an Issuer's Capital Securities
(the "Guarantee" for such Capital Securities) will be a guarantee on a
subordinated basis with respect to the related Capital Securities but will not
guarantee payment of Distributions or amounts payable on redemption or
liquidation of such Capital Securities when the related Issuer does not have
funds on hand available to make such payments. See "Description of
Guarantees."
DISTRIBUTIONS
Distributions on the Capital Securities will be cumulative, will accumulate
from the date of original issuance and will be payable on such dates as
specified in the applicable Prospectus Supplement. In the event that any date
on which Distributions are payable on the Capital Securities is not a Business
Day (as defined below), payment of the Distribution payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect to any such delay) except that, if such
Business Day is in the next succeeding calendar year, payment of such
Distribution shall be made on the immediately preceding Business Day, in
either case with the same force and effect as if made on such date (each date
on which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). A "Business Day" shall mean any day other than a
Saturday or a Sunday, or a day on which banking institutions in The City of
New York are authorized or required by law or executive order to remain closed
or a day on which the corporate trust office of the Property Trustee or the
Debenture Trustee is closed for business.
Each Issuer's Capital Securities represent preferred beneficial interests in
the applicable Issuer, and the Distributions on each Preferred Security will
be payable at a rate specified in the applicable Prospectus Supplement for
such Capital Securities. The amount of Distributions payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months unless
otherwise specified in the applicable Prospectus Supplement. Distributions to
which holders of Capital Securities
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are entitled will accumulate additional Distributions at the rate per annum if
and as specified in the applicable Prospectus Supplement. The term
"Distributions" as used herein includes any such additional Distributions
unless otherwise stated.
If provided in the applicable Prospectus Supplement, the Corporation has the
right under the Indenture, pursuant to which it will issue the Corresponding
Junior Subordinated Debentures, to defer the payment of interest at any time
or from time to time on any series of the Corresponding Junior Subordinated
Debentures for up to such number of consecutive interest payment periods which
will be specified in such Prospectus Supplement relating to such series (each,
an "Extension Period"), provided that no Extension Period may extend beyond
the Stated Maturity of the Corresponding Junior Subordinated Debentures. As a
consequence of any such deferral, Distributions on the Related Capital
Securities would be deferred (but would continue to accumulate additional
Distributions thereon at the rate per annum set forth in the Prospectus
Supplement for such Capital Securities) by the Issuer of such Related Capital
Securities during any such Extension Period. During any such Extension Period,
the Corporation may not (i) declare or pay any dividends or distributions on,
or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Corporation's capital stock or (ii) make any payment of principal
of or interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank pari passu in all respects with or
junior in interest to the Corresponding Junior Subordinated Debentures (other
than (a) repurchases, redemptions or other acquisitions of shares of capital
stock of the Corporation in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Corporation (or securities convertible into
or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series
of the Corporation's capital stock, (c) the purchase of fractional interests
in shares of the Corporation's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise
of such warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks pari passu with or junior to such stock).
The revenue of each Issuer available for distribution to holders of its
Related Capital Securities will be limited to payments under the Corresponding
Junior Subordinated Debentures in which the Issuer will invest the proceeds
from the issuance and sale of its Trust Securities. See "Description of Junior
Subordinated Debentures--Corresponding Junior Subordinated Debentures." If the
Corporation does not make interest payments on such Corresponding Junior
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Related Capital Securities. The payment of
Distributions (if and to the extent the Issuer has funds legally available for
the payment of such Distributions and cash sufficient to make such payments)
is guaranteed by the Corporation on a limited basis as set forth herein under
"Description of Guarantees".
Distributions on the Capital Securities will be payable to the holders
thereof as they appear on the register of such Issuer on the relevant record
dates, which, as long as the Capital Securities remain in book-entry form,
will be one Business Day prior to the relevant Distribution Date. Subject to
any applicable laws and regulations and the provisions of the applicable Trust
Agreement, each such payment will be made as described under "Book-Entry
Issuance." In the event any Capital Securities
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are not in book-entry form, the relevant record date for such Capital
Securities shall be the date at least 15 days prior to the relevant
Distribution Date, as specified in the applicable Prospectus Supplement.
REDEMPTION OR EXCHANGE
Mandatory Redemption. Upon the repayment or redemption, in whole or in part,
of any Corresponding Junior Subordinated Debentures, whether at maturity or
upon earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days notice, at a redemption price (the "Redemption Price")
equal to the aggregate Liquidation Amount of such Trust Securities plus
accumulated but unpaid Distributions thereon to the date of redemption (the
"Redemption Date") and the related amount of the premium, if any, paid by the
Corporation upon the concurrent redemption of such Corresponding Junior
Subordinated Debentures. See "Description of Junior Subordinated Debentures--
Redemption". If less than all of any series of Corresponding Junior
Subordinated Debentures are to be repaid or redeemed on a Redemption Date,
then the proceeds from such repayment or redemption shall be allocated to the
redemption pro rata of the Related Capital Securities and the Common
Securities. The amount of premium, if any, paid by the Corporation upon the
redemption of all or any part of any series of any Corresponding Junior
Subordinated Debentures to be repaid or redeemed on a Redemption Date shall be
allocated to the redemption pro rata of the Related Capital Securities and the
Common Securities.
The Corporation will have the right to redeem any series of Corresponding
Junior Subordinated Debentures (i) on or after such date as may be specified
in the applicable Prospectus Supplement, in whole at any time or in part from
time to time, (ii) at any time, in whole (but not in part), upon the
occurrence of a Tax Event or Capital Treatment Event or (iii) as may be
otherwise specified in the applicable Prospectus Supplement. The Corporation
has committed to the Federal Reserve that the Corporation will not exercise
its right to redeem the Junior Subordinated Debentures prior to the Stated
Maturity without having received the prior approval of the Federal Reserve to
do so, if such approval is then required under the applicable Federal Reserve
capital guidelines or policies.
Distribution of Corresponding Junior Subordinated Debentures. The
Corporation has the right at any time to terminate any Issuer and, after
satisfaction of the liabilities of creditors of such Issuer as provided by
applicable law, cause such Corresponding Junior Subordinated Debentures in
respect of the Related Capital Securities and Common Securities issued by such
Issuer to be distributed to the holders of such Related Capital Securities and
Common Securities in liquidation of the Issuer. The Corporation has committed
to the Federal Reserve that, so long as the Corporation (or any affiliate) is
a holder of Common Securities of an Issuer, the Corporation will not so
terminate such Issuer without having received the prior approval of the
Federal Reserve to do so, if such approval is then required under applicable
Federal Reserve capital guidelines or policies.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debentures for any series of Capital Securities (i) such
series of Capital Securities will no longer be deemed to be outstanding, (ii)
the depositary or its nominee, as the record holder of such series of Capital
Securities, will receive a registered global certificate or certificates
representing the Corresponding Junior Subordinated Debentures to be delivered
upon such distribution and (iii) any certificates representing such series of
Capital Securities not held by DTC or its nominee will be deemed to represent
the Corresponding Junior Subordinated Debentures having a principal amount
equal to the stated Liquidation Amount of such series of Capital Securities,
and bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid Distributions on such series of Capital Securities until such
certificates are presented to the Issuer Trustee or its agent for transfer or
reissuance.
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There can be no assurance as to the market prices for the Capital Securities
or the Corresponding Junior Subordinated Debentures that may be distributed in
exchange for Capital Securities if a dissolution and liquidation of an Issuer
were to occur. Accordingly, the Capital Securities that an investor may
purchase, or the Corresponding Junior Subordinated Debentures that the
investor may receive on dissolution and liquidation of an Issuer, may trade at
a discount to the price that the investor paid to purchase the Capital
Securities offered hereby.
Tax Event or Capital Treatment Event Redemption. If a Tax Event or Capital
Treatment Event in respect of a series of Capital Securities and Common
Securities shall occur and be continuing, the Corporation has the right to
redeem the Corresponding Junior Subordinated Debentures in whole (but not in
part) and thereby cause a mandatory redemption of such Related Capital
Securities and Common Securities in whole (but not in part) at the Redemption
Price within 90 days following the occurrence of such Tax Event or Capital
Treatment Event. In the event a Tax Event or Capital Treatment Event in
respect of a series of Capital Securities and Common Securities has occurred
and is continuing and the Corporation does not elect to redeem the
Corresponding Junior Subordinated Debentures and thereby cause a mandatory
redemption of such Capital Securities or to liquidate the related Issuer and
cause the Corresponding Junior Subordinated Debentures to be distributed to
holders of such Capital Securities and Common Securities in exchange therefor
upon liquidation of the Issuer as described above, such Capital Securities
will remain outstanding and Additional Sums (as defined below) may be payable
on the Corresponding Junior Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by an Issuer on the
outstanding Capital Securities and Common Securities of the Issuer shall not
be reduced as a result of any additional taxes, duties and other governmental
charges to which such Issuer has become subject as a result of a Tax Event.
"Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such
laws, rules or regulations, which amendment or change is effective or such
pronouncement, action or decision is announced on or after the date of
issuance of the Capital Securities of an Issuer, there is more than an
insubstantial risk that the Corporation will not be entitled to treat an
amount equal to the aggregate Liquidation Amount of such Capital Securities as
"Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital
adequacy guidelines of the Federal Reserve, as then in effect and applicable
to the Corporation.
"Like Amount" means (i) with respect to a redemption of any series of Trust
Securities, Trust Securities of such series having a Liquidation Amount (as
defined below) equal to the principal amount of Corresponding Junior
Subordinated Debentures to be contemporaneously redeemed in accordance with
the Indenture, the proceeds of which will be used to pay the Redemption Price
of such Trust Securities, and (ii) with respect to a distribution of
Corresponding Junior Subordinated Debentures to holders of any series of Trust
Securities in connection with a dissolution or liquidation of the related
Issuer, Corresponding Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of the Trust Securities in respect of which
such distribution is made.
"Liquidation Amount" means the stated amount per Trust Security of $1000 (or
such other stated amount as is set forth in the applicable Prospectus
Supplement).
"Tax Event" with respect to an Issuer means the receipt by the Issuer of a
series of Capital Securities of an opinion of counsel experienced in such
matters to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or
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applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance
of such Capital Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) such Issuer is, or will be within 90 days of the
date of such opinion, subject to United States Federal income tax with respect
to income received or accrued on the corresponding series of Corresponding
Junior Subordinated Debentures, (ii) interest payable by the Corporation on
such series of Corresponding Junior Subordinated Debentures is not, or within
90 days of the date of such opinion, will not be, deductible by the
Corporation, in whole or in part, for United States Federal income tax
purposes, or (iii) such Issuer is, or will be within 90 days of the date of
such opinion, subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
Possible Tax Law Changes. On March 19, 1996, the Revenue Reconciliation
Bill, the revenue portion of President Clinton's budget proposal, was
introduced in the 104th Congress. If enacted, the Revenue Reconciliation Bill
would have generally denied interest deductions for interest on an instrument
issued by a corporation that has a maximum term of more than 20 years and that
is not shown as indebtedness on the separate balance sheet of the issuer or,
where the instrument is issued to a related party (other than a corporation),
where the holder or some other related party issues a related instrument that
is not shown as indebtedness on the issuer's consolidated balance sheet. For
purposes of determining the weighted average maturity or the term of an
instrument, any right to extend would be treated as exercised. The above-
described provisions of the Revenue Reconciliation Bill were proposed to be
effective generally for instruments issued on or after December 7, 1995. If
the proposed provision were to have applied to the Capital Securities of any
Series, the Corporation would have been unable to deduct interest on the
Capital Securities of such Series. However, on March 29, 1996, the Chairmen of
the Senate Finance and House Ways and Means Committees issued a joint
statement to the effect that it was their intention that the effective date of
the President's legislative proposals, if adopted, will be no earlier than the
date of appropriate Congressional action. Under current law, the Corporation
will be able to deduct interest on the Capital Securities. Although the 104th
Congress adjourned without enacting the above-described provisions of the
Revenue Reconciliation Bill, there can be no assurance that current or future
legislative proposals or final legislation will not affect the ability of the
Corporation to deduct interest on the Capital Securities. Such a change could
give rise to a Tax Event, which may permit the Corporation to cause a
redemption of the Capital Securities, as described more fully herein.
REDEMPTION PROCEDURES
Capital Securities redeemed on each Redemption Date shall be redeemed at the
Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated Debentures. Redemptions of
the Capital Securities shall be made and the Redemption Price shall be payable
on each Redemption Date only to the extent that the related Issuer has funds
on hand available for the payment of such Redemption Price. See also "--
Subordination of Common Securities".
If the Property Trustee gives a notice of redemption in respect of Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
to the extent funds are available, the Property Trustee will deposit
irrevocably with DTC funds sufficient to pay the applicable Redemption Price
and will give DTC irrevocable instructions and authority to pay the Redemption
Price to the holders of such Capital Securities. See "Book-Entry Issuance". If
such Capital Securities are no longer in book-entry form, the Property
Trustee, to the extent funds are available, will irrevocably deposit with the
paying agent for such Capital Securities funds sufficient to pay the
applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing such Capital Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Capital Securities called for redemption shall be
payable to the holders of such Capital Securities on the relevant record dates
for the related Distribution Dates. If notice of redemption shall have been
given and funds deposited
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as required, then upon the date of such deposit, all rights of the holders of
such Capital Securities so called for redemption will cease, except the right
of the holders of such Capital Securities to receive the Redemption Price and
any Distribution payable in respect of the Capital Securities on or prior to
the Redemption Date, but without interest on such Redemption Price, and such
Capital Securities will cease to be outstanding. In the event that any date
fixed for redemption of Capital Securities is not a Business Day, then payment
of the Redemption Price payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case, with the same force and effect as if
made on such date. In the event that payment of the Redemption Price in
respect of Capital Securities called for redemption is improperly withheld or
refused and not paid either by the Issuer or by the Corporation pursuant to
the Guarantee as described under "Description of Guarantees", Distributions on
such Capital Securities will continue to accrue at the then applicable rate
from the Redemption Date originally established by the Issuer for such Capital
Securities to the date such Redemption Price is actually paid, in which case
the actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
Federal securities law), the Corporation or its subsidiaries may at any time
and from time to time purchase outstanding Capital Securities by tender, in
the open market or by private agreement.
Payment of the Redemption Price on the Capital Securities and any
distribution of Corresponding Junior Subordinated Debentures to holders of
Capital Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Capital Securities on the relevant record
date, which shall be one Business Day prior to the relevant Redemption Date or
liquidation date, as applicable; provided, however, that in the event that any
Capital Securities are not in book-entry form, the relevant record date for
such Capital Securities shall be a date at least 15 days prior to the
Redemption Date or liquidation date, as applicable, as specified in the
applicable Prospectus Supplement.
If less than all of the Capital Securities and Common Securities issued by
an Issuer are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Capital Securities and Common Securities to be
redeemed shall be allocated pro rata to the Capital Securities and the Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Capital Securities to be redeemed shall be selected on a pro rata
basis not more than 60 days prior to the Redemption Date by the Property
Trustee from the outstanding Capital Securities not previously called for
redemption, by such method as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $1000 or an integral multiple of $1000 in excess thereof, unless a
different amount is specified in the applicable Prospectus Supplement) of the
Liquidation Amount of Capital Securities of a denomination larger than $1000
(or such other denomination as is specified in the applicable Prospectus
Supplement). The Property Trustee shall promptly notify the Securities
registrar in writing of the Capital Securities selected for redemption and, in
the case of any Capital Securities selected for partial redemption, the
Liquidation Amount thereof to be redeemed. For all purposes of each Trust
Agreement, unless the context otherwise requires, all provisions relating to
the redemption of Capital Securities shall relate, in the case of any Capital
Securities redeemed or to be redeemed only in part, to the portion of the
aggregate Liquidation Amount of Capital Securities which has been or is to be
redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless the Corporation defaults in payment
of the Redemption Price on the Corresponding Junior
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Subordinated Debentures, on and after the Redemption Date interest will cease
to accrue on such Junior Subordinated Debentures or portions thereof (and
Distributions will cease to accrue on the Related Capital Securities or
portions thereof) called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Issuer's
Capital Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of such Capital Securities and Common
Securities; provided, however, that if on any Distribution Date, Redemption
Date or Liquidation Date a Debenture Event of Default shall have occurred and
be continuing, no payment of any Distribution on, or Redemption Price of, or
Liquidation Distribution in respect of, any of the Issuer's Common Securities,
and no other payment on account of the redemption, liquidation or other
acquisition of such Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all of the Issuer's
outstanding Capital Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price the full
amount of such Redemption Price on all of the Issuer's outstanding Capital
Securities then called for redemption, or in the case of payment of the
Liquidation Distribution the full amount of such Liquidation Distribution on
all Outstanding Capital Securities, shall have been made or provided for, and
all funds available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions on, or Redemption Price of, the
Issuer's Capital Securities then due and payable.
In the case of any event of default under the applicable Trust Agreement
resulting from a Debenture Event of Default, the Corporation as holder of such
Issuer's Common Securities will be deemed to have waived any right to act with
respect to any such Event of Default under the applicable Trust Agreement
until the effect of all such Events of Default with respect to such Capital
Securities have been cured, waived or otherwise eliminated. Until any such
Events of Default under the applicable Trust Agreement with respect to the
Capital Securities have been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the holders of such Capital
Securities and not on behalf of the Corporation as holder of the Issuer's
Common Securities, and only the holders of such Capital Securities will have
the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Issuer shall automatically terminate
upon expiration of its term and shall terminate on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Corresponding Junior
Subordinated Debentures to the holders of its Trust Securities, if the
Corporation, as Depositor, has given written direction to the Property Trustee
to terminate such Issuer; (iii) redemption of all of the Issuer's Capital
Securities as described under "Description of Capital Securities--Redemption
or Exchange--Mandatory Redemption"; and (iv) the entry of an order for the
dissolution of the Issuer by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv)
above, the Issuer shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of such Issuer as provided by
applicable law, to the holders of such Trust Securities in exchange therefor a
Like Amount of the Corresponding Junior Subordinated Debentures, unless such
distribution is determined by the Property Trustee not to be practical, in
which event such holders will be entitled to receive out of the assets of the
Issuer available for distribution to holders, after satisfaction of
liabilities to creditors of such Issuer as provided by
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applicable law, an amount equal to, in the case of holders of Capital
Securities, the aggregate of the Liquidation Amount plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because such Issuer has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by
such Issuer on its Capital Securities shall be paid on a pro rata basis. The
holder(s) of such Issuer's Common Securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of its
Capital Securities, except that if a Debenture Event of Default has occurred
and is continuing, the Capital Securities shall have a priority over the
Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under each
Trust Agreement with respect to the Capital Securities issued thereunder
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the Indenture
(see "Description of Junior Subordinated Debentures--Debenture Events of
Default"); or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Trustees by the holders of at least 25% in aggregate Liquidation
Amount of the outstanding Capital Securities of the applicable Issuer, 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 such
Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Corporation to
appoint a successor Property Trustee within 90 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer's Capital
Securities, the Administrative Trustees and the Corporation, as Depositor,
unless such Event of Default shall have been cured or waived. The Corporation,
as Depositor, and the Administrative Trustees are required to file annually
with the Property Trustee a certificate as to whether or not they are in
compliance with all the conditions and covenants applicable to them under each
Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described
above. See "--Liquidation Distribution Upon Termination." The existence of an
Event of Default does not entitle the holders of Capital Securities to
accelerate the maturity thereof.
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default
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has occurred and is continuing, the Property Trustee and the Delaware Trustee
may be removed at such time by the holders of a majority in Liquidation Amount
of the outstanding Capital Securities. In no event will the holders of the
Capital Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Corporation as the holder of the Common Securities. No resignation or removal
of an Issuer Trustee and no appointment of a successor trustee shall be
effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the applicable Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or from time to time, for the purpose of meeting the legal requirements
of the Trust Indenture Act or of any jurisdiction in which any part of the
Trust Property may at the time be located, the Corporation, as the holder of
the Common Securities, and the Administrative Trustees shall have power to
appoint one or more persons either to act as a co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to act as
separate trustee of any such property, in either case with such powers as may
be provided in the instrument of appointment, and to vest in such person or
persons in such capacity any property, title, right or power deemed necessary
or desirable, subject to the provisions of the applicable Trust Agreement. In
case a Debenture Event of Default has occurred and is continuing, the Property
Trustee alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under each Trust
Agreement, provided such Person shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUERS
An Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. An Issuer may, at the request of the Corporation, with the
consent of the Administrative Trustees and without the consent of the holders
of the Capital Securities, merge with or into, consolidate, amalgamate, or be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to a trust organized as such under the laws of
any State; provided, that (i) such successor entity either (a) expressly
assumes all of the obligations of such Issuer with respect to the Capital
Securities or (b) substitutes for the Capital Securities other securities
having substantially the same terms as the Capital Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Capital
Securities in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Corporation expressly appoints
a trustee of such successor entity possessing the same powers and duties as
the Property Trustee as the holder of the Corresponding Junior Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Capital Securities are
then listed, if any, (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital
Securities to be downgraded by any nationally recognized statistical rating
organization which assigns ratings to the Capital Securities, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Capital Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose identical to that of the
Issuer, (vii) prior to such
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merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Corporation has received an opinion from independent counsel to the
Issuer experienced in such matters to the effect that (a) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Capital Securities (including any Successor Securities) in any material
respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Issuer nor such
successor entity will be required to register as an investment company under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
and (viii) the Corporation or any permitted successor or assignee owns all of
the Common Securities of such successor entity and guarantees the obligations
of such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, an Issuer shall not,
except with the consent of holders of 100% in Liquidation Amount of the
Capital Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or
lease would cause the Issuer or the successor entity to be classified as an
association taxable as a corporation or as other than a grantor trust for
United States Federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
Except as provided below and under "Description of Guarantees--Amendments
and Assignment" and as otherwise required by law and the applicable Trust
Agreement, the holders of the Capital Securities will have no voting rights.
Each Trust Agreement may be amended from time to time by the Corporation,
the Property Trustee and the Administrative Trustees, without the consent of
the holders of the Capital Securities (i) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent
with any other provision, or to make any other provisions with respect to
matters or questions arising under such Trust Agreement, which shall not be
inconsistent with the other provisions of such Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of such Trust Agreement to such
extent as shall be necessary to ensure that the Issuer will be classified for
United States Federal income tax purposes as a grantor trust or as other than
an association taxable as a corporation at all times that any Trust Securities
are outstanding or to ensure that the Issuer will not be required to register
as an "investment company" under the Investment Company Act; provided,
however, that in the case of either clause (i) or clause (ii), such action
shall not adversely affect in any material respect the interests of any holder
of Capital Securities, and any amendments of such Trust Agreement shall become
effective when notice thereof is given to the holders of Trust Securities.
Each Trust Agreement may be amended by the Issuer Trustees and the Corporation
with (i) the consent of holders representing not less than a majority (based
upon Liquidation Amounts) of the outstanding Trust Securities, and (ii)
receipt by the Issuer Trustees of an opinion of counsel to the effect that
such amendment or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not cause the Issuer to be taxable as a
corporation or affect the Issuer's status as a grantor trust for United States
Federal income tax purposes or the Issuer's exemption from status as an
"investment company" under the Investment Company Act, provided that without
the consent of each holder of Trust Securities, such Trust Agreement may not
be amended to (i) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Trust Securities as of a specified date
or (ii) restrict the right of a holder of Trust Securities to institute suit
for the enforcement of any such payment on or after such date.
So long as any Corresponding Junior Subordinated Debentures are held by the
Property Trustee, the Issuer Trustees shall not (i) direct the time, method
and place of conducting any proceeding for
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any remedy available to the Debenture Trustee, or executing any trust or power
conferred on the Property Trustee with respect to such Corresponding Junior
Subordinated Debentures, (ii) waive any past default that is waivable under
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Junior Subordinated Debentures shall be due and
payable or (iv) consent to any amendment, modification or termination of the
Indenture or such Corresponding Junior Subordinated Debentures, where such
consent shall be required, without, in each case, obtaining the prior approval
of the holders of a majority in aggregate Liquidation Amount of all
outstanding Capital Securities; provided, however, that where a consent under
the Indenture would require the consent of each holder of Corresponding Junior
Subordinated Debentures affected thereby, no such consent shall be given by
the Property Trustee without the prior consent of each holder of the
corresponding Capital Securities. The Issuer Trustees shall not revoke any
action previously authorized or approved by a vote of the holders of the
Capital Securities except by subsequent vote of the holders of the Capital
Securities. The Property Trustee shall notify each holder of Capital
Securities of any notice of default with respect to the Corresponding Junior
Subordinated Debentures. In addition to obtaining the foregoing approvals of
the holders of the Capital Securities, prior to taking any of the foregoing
actions, the Issuer Trustees shall obtain an opinion of counsel experienced in
such matters to the effect that the Issuer will not be classified as an
association taxable as a corporation for United States Federal income tax
purposes on account of such action and such action would not cause the Issuer
to be classified as other than a grantor trust for United States Federal
income tax purposes.
Any required approval of holders of Capital Securities may be given at a
meeting of holders of Capital Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
given to each holder of record of Capital Securities in the manner set forth
in each Trust Agreement.
No vote or consent of the holders of Capital Securities will be required for
an Issuer to redeem and cancel its Capital Securities in accordance with the
applicable Trust Agreement.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Corporation, the Issuer Trustees or any
affiliate of the Corporation or any Issuer Trustees, shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
GLOBAL CAPITAL SECURITIES
The Capital Securities of a series may be issued in whole or in part in the
form of one or more Global Capital Securities that will be deposited with, or
on behalf of, the Depositary identified in the Prospectus Supplement relating
to such series. Unless otherwise indicated in the applicable Prospectus
Supplement for such series, the Depositary will be DTC. Global Capital
Securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for
the individual Capital Securities represented thereby, a Global Capital
Security may not be transferred except as a whole by the Depositary for such
Global Capital Security to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
the Depositary or any nominee to a successor Depositary or any nominee of such
successor.
The specific terms of the depositary arrangement with respect to a series of
Capital Securities will be described in the Prospectus Supplement relating to
such series. The Corporation anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Capital Security, and the deposit of such
Global Capital Security with or on behalf of the Depositary, the Depositary
for such Global Capital Security or its nominee will
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credit, on its book-entry registration and transfer system, the respective
aggregate Liquidation Amounts of the individual Capital Securities represented
by such Global Capital Securities to the accounts of Participants. Such
accounts shall be designated by the dealers, underwriters or agents with
respect to such Capital Securities or by the Corporation if such Capital
Securities are offered and sold directly by the Corporation. Ownership of
beneficial interests in a Global Capital Security will be limited to
Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Capital Security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the applicable Depositary or its nominee (with respect
to interests of Participants) and the records of Participants (with respect to
interests of persons who hold through Participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Capital Security.
So long as the Depositary for a Global Capital Security, or its nominee, is
the registered owner of such Global Capital Security, such Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of
the Capital Securities represented by such Global Capital Security for all
purposes under the Indenture governing such Capital Securities. Except as
provided below, owners of beneficial interests in a Global Capital Security
will not be entitled to have any of the individual Capital Securities of the
series represented by such Global Capital Security registered in their names,
will not receive or be entitled to receive physical delivery of any such
Capital Securities of such series in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Capital Securities represented by a Global Capital Security registered in the
name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Capital
Security representing such Capital Securities. None of the Corporation, the
Property Trustee, any Paying Agent, or the Securities Registrar for such
Capital Securities will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the Global Capital Security representing such Capital Securities
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Corporation expects that the Depositary for a series of Capital
Securities or its nominee, upon receipt of any payment of Liquidation Amount,
premium or Distributions, including any payment of Redemption Price, in
respect of a permanent Global Capital Security representing any of such
Capital Securities immediately will credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interest in
the aggregate Liquidation Amount of such Global Capital Security for such
Capital Securities as shown on the records of such Depositary or its nominee.
The Corporation also expects that payments by Participants to owners of
beneficial interests in such Global Capital Security held through such
Participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Capital Securities is at any time unwilling, unable
or ineligible to continue as depositary and a successor depositary is not
appointed by the Issuer within 90 days, or if there shall have occurred and be
continuing an event of default under the Indenture with respect to the
Subordinated Debentures of such series, the Issuer will issue individual
Capital Securities of such series in exchange for the Global Capital Security
representing such series of Capital Securities. In addition, the Issuer may at
any time and in its sole discretion, subject to any limitations described in
the Prospectus Supplement relating to such Capital Securities, determine not
to have any Capital Securities of such series represented by one or more
Global Capital Securities and, in such event, will issue individual Capital
Securities of such
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series in exchange for the Global Capital Security or Securities representing
such series of Capital Securities. Further, if the Issuer so specifies with
respect to the Capital Securities of a series, an owner of a beneficial
interest in a Global Capital Security representing Capital Securities of such
series may, on terms acceptable to the Issuer, the Property Trustee and the
Depositary for such Global Capital Security, receive individual Capital
Securities of such series in exchange for such beneficial interests, subject
to any limitations described in the Prospectus Supplement relating to such
Capital Securities. In any such instance, an owner of a beneficial interest in
a Global Capital Security will be entitled to physical delivery of individual
Capital Securities of the series represented by such Global Capital Security
equal in principal amount to such beneficial interest and to have such Capital
Securities registered in its name. Individual Capital Securities of such
series so issued will be issued in denominations, unless otherwise specified
by the Issuer, and integral multiples thereof that are the same as the
denominations and multiples in which the Capital Securities are issued.
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any Issuer's Capital Securities are not
held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. Unless otherwise specified in the applicable Prospectus Supplement,
the paying agent (the "Paying Agent") shall initially be the Property Trustee
and any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Corporation. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee and the Corporation. In the event that the Property Trustee
shall no longer be the Paying Agent, the Administrative Trustees shall appoint
a successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and the Corporation) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Capital
Securities.
Registration of transfers of Capital Securities will be effected without
charge by or on behalf of each Issuer, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Issuers will not be required to register or cause to be
registered the transfer of their Capital Securities after such Capital
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically
set forth in each Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision,
the Property Trustee is under no obligation to exercise any of the powers
vested in it by the applicable Trust Agreement at the request of any holder of
Capital Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the applicable Trust Agreement or is unsure of the application of any
provision of the applicable Trust Agreement, and the matter is not one on
which holders of Capital Securities are entitled under such Trust Agreement to
vote, then the Property Trustee shall take such action as is directed by the
Corporation and if not so directed, shall take such action as it deems
advisable and in the best interests of the holders of the Trust Securities and
will have no liability except for its own bad faith, negligence or willful
misconduct.
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MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuers in such a way that no Issuer will be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a
corporation or as other than a grantor trust for United States Federal income
tax purposes and so that the Corresponding Junior Subordinated Debentures will
be treated as indebtedness of the Corporation for United States Federal income
tax purposes. In this connection, the Corporation and the Administrative
Trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust of each Issuer or each Trust Agreement, that the
Corporation and the Administrative Trustees determine in their discretion to
be necessary or desirable for such purposes, as long as such action does not
materially adversely affect the interests of the holders of the related
Capital Securities.
Holders of the Capital Securities have no preemptive or similar rights.
No Issuer may borrow money or issue debt or mortgage or pledge any of its
assets.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Capital Securities and
the Junior Subordinated Debentures, unless otherwise referred to in the
Prospectus Supplement relating to an offering of Capital Securities or Junior
Subordinated Debentures. The Capital Securities and the Junior Subordinated
Debentures will be issued only as fully-registered securities registered in
the name of Cede & Co. (DTC's nominee). One or more fully-registered global
certificates will be issued for the Capital Securities of each Issuer and the
Junior Subordinated Debentures, representing in the aggregate the total number
of such Issuer's Capital Securities or aggregate principal balance of Junior
Subordinated Debentures, respectively, and will be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. "Direct Participants" include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants
are on file with the Commission.
Purchases of Capital Securities or Junior Subordinated Debentures within the
DTC system must be made by or through Direct Participants, which will receive
a credit for the Capital Securities or Junior Subordinated Debentures on DTC's
records. The ownership interest of each actual purchaser of each Preferred
Security and each Junior Subordinated Debenture ("Beneficial Owner") is in
turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the
Beneficial Owners purchased Capital Securities or Junior Subordinated
Debentures. Transfers of ownership interests in the Capital
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Securities or Junior Subordinated Debentures are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Capital Securities or Junior Subordinated Debentures, except in
the event that use of the book-entry system for the Capital Securities of such
Issuer or Junior Subordinated Debentures is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Capital
Securities or Junior Subordinated Debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Capital Securities
or Junior Subordinated Debentures are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Capital Securities or Junior Subordinated Debentures. If less than all of
an Issuer's Capital Securities or the Junior Subordinated Debentures are being
redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Capital Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Capital
Securities or Junior Subordinated Debentures, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Capital Securities or Junior Subordinated Debentures. Under its
usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
relevant Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts such Capital Securities or Junior Subordinated Debentures
are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Distribution payments on the Capital Securities or the Junior Subordinated
Debentures will be made by the relevant Trustee to DTC. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the relevant Trustee, the Issuer thereof or the
Corporation, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of Distributions to DTC is the
responsibility of the relevant Trustee, disbursement of such payments to
Direct Participants is the responsibility of DTC, and disbursements of such
payments to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Capital Securities or the Junior Subordinated Debentures
at any time by giving reasonable notice to the relevant Trustee and the
Corporation. In the event that a successor securities depositary is not
obtained, definitive Capital Security or Junior Subordinated Debenture
certificates representing such Capital Securities or Junior Subordinated
Debentures are required to be printed and delivered. The Corporation, at its
option, may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary). After a Debenture Event of Default,
the holders of a majority in liquidation preference of Capital Securities or
aggregate principal amount of Junior Subordinated Debentures may determine to
discontinue the system of book-entry transfers through DTC. In any such event,
definitive certificates for such Capital Securities or Junior Subordinated
Debentures will be printed and delivered.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and the Corporation believe to
be accurate, but the Issuers and the Corporation assume no responsibility for
the accuracy thereof. Neither the Issuers nor the Corporation has any
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Corporation concurrently
with the issuance by each Issuer of its Capital Securities for the benefit of
the holders from time to time of such Capital Securities. Wilmington Trust
Company will act as indenture trustee ("Guarantee Trustee") under each
Guarantee for the purposes of compliance with the Trust Indenture Act and each
Guarantee will be qualified as an indenture under the Trust Indenture Act.
This summary of certain provisions of the Guarantees, which summarizes the
material terms thereof, does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of each
Guarantee, including the definitions therein of certain terms, and the Trust
Indenture Act, to each of which reference is hereby made. The form of the
Guarantee has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Reference in this summary to Capital Securities
means that Issuer's Capital Securities to which a Guarantee relates. The
Guarantee Trustee will hold each Guarantee for the benefit of the holders of
the related Issuer's Capital Securities.
GENERAL
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
below) to the holders of the Capital Securities, as and when due, regardless
of any defense, right of set-off or counterclaim that such Issuer may have or
assert other than the defense of payment. The following payments with respect
to the Capital Securities, to the extent not paid by or on behalf of the
related Issuer (the "Guarantee Payments"), will be subject to the Guarantee:
(i) any accumulated and unpaid Distributions required to be paid on such
Capital Securities, to the extent that such Issuer has funds on hand available
therefor at such time, (ii) the Redemption Price with respect to any Capital
Securities called for redemption, to the extent that such Issuer has funds on
hand available therefor at such time, or (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of such Issuer (unless the
Corresponding Junior Subordinated Debentures are distributed to holders of
such Capital Securities in exchange therefor), the lesser of (a) the
Liquidation Distribution and (b) the amount of assets of such Issuer remaining
available for distribution to holders of Capital Securities after satisfaction
of liabilities to creditors of such Issuer as required by applicable law. The
Corporation's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Corporation to the holders of
the applicable Capital Securities or by causing the Issuer to pay such amounts
to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Issuer's obligations under the Capital Securities, but will apply
only to the extent that such related Issuer has funds sufficient to make such
payments, and is not a guarantee of collection.
If the Corporation does not make interest payments on the Corresponding
Junior Subordinated Debentures held by the Issuer, the Issuer will not be able
to pay Distributions on the Related Capital Securities and will not have funds
legally available therefor. Each Guarantee will rank subordinate and junior in
right of payment to all Senior Debt of the Corporation. See "--Status of the
Guarantees". Because the Corporation is a holding company, the right of the
Corporation to participate in any distribution of assets of any subsidiary
upon such subsidiary's liquidation or reorganization or otherwise, is subject
to the prior claims of creditors of that subsidiary, except to the extent the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Corporation's obligations under the Guarantees will be
effectively subordinated to all existing and future liabilities of
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the Corporation's subsidiaries, and claimants should look only to the assets
of the Corporation for payments thereunder. See "The Corporation." Except as
otherwise provided in the applicable Prospectus Supplement, the Guarantees do
not limit the incurrence or issuance of other secured or unsecured debt of the
Corporation, including Senior Debt, whether under the Indenture, any other
existing indenture or any other indenture that the Corporation may enter into
in the future or otherwise. See the applicable Prospectus Supplement relating
to any offering of Capital Securities.
The Corporation has, through the applicable Guarantee, the applicable Trust
Agreement, the applicable series of Corresponding Junior Subordinated
Debentures, the Indenture and the applicable Expense Agreement, taken
together, fully, irrevocably and unconditionally guaranteed all of the
Issuer's obligations under the Capital Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer's obligations under the Capital
Securities. See "Relationship Among the Capital Securities, the Corresponding
Junior Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Corporation
and will rank subordinate and junior in right of payment to all Senior Debt of
the Corporation in the same manner as Junior Subordinated Debentures.
Each Guarantee will rank pari passu with all other Guarantees issued by the
Corporation. Each Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Corporation to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). Each Guarantee will be held for the benefit of the holders of the
related Capital Securities. Each Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Issuer
or upon distribution to the holders of the Capital Securities of the
Corresponding Junior Subordinated Debentures. None of the Guarantees places a
limitation on the amount of additional Senior Debt that may be incurred by the
Corporation. The Corporation expects from time to time to incur additional
indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related Capital Securities (in which case no vote
will be required), no Guarantee may be amended without the prior approval of
the holders of not less than a majority of the aggregate Liquidation Amount of
such outstanding Capital Securities. The manner of obtaining any such approval
will be as set forth under "Description of Capital Securities--Voting Rights;
Amendment of Each Trust Agreement." All guarantees and agreements contained in
each Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Corporation and shall inure to the benefit of the
holders of the related Capital Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of the
Corporation to perform any of its payment obligations thereunder or to perform
any non-payment obligations if such non-payment default remains unremedied for
30 days. The holders of not less than a majority in aggregate Liquidation
Amount of the related Capital Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of such Guarantee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under such Guarantee.
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Any holder of the Capital Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under such Guarantee
without first instituting a legal proceeding against the Issuer, the Guarantee
Trustee or any other person or entity.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Corporation in performance of any Guarantee, undertakes to
perform only such duties as are specifically set forth in each Guarantee and,
after default with respect to any Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by any Guarantee at
the request of any holder of any Capital Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Capital Securities, upon
full payment of the amounts payable upon liquidation of the related Issuer or
upon distribution of Corresponding Junior Subordinated Debentures to the
holders of the Related Capital Securities in exchange therefor. Each Guarantee
will continue to be effective or will be reinstated, as the case may be, if at
any time any holder of the related Capital Securities must restore payment of
any sums paid under such Capital Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by the Corporation under each
Trust Agreement (the "Expense Agreement"), the Corporation will irrevocably
and unconditionally guarantee to each Person or entity to whom the Issuer
becomes indebted or liable, the full payment of any costs, expenses or
liabilities of the Issuer, other than obligations of the Issuer to pay to the
holders of any Capital Securities or other similar interests in the Issuer of
the amounts due such holders pursuant to the terms of the Capital Securities
or such other similar interests, as the case may be. The Expense Agreement
will be enforceable by third parties.
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RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE CORRESPONDING JUNIOR
SUBORDINATED DEBENTURES, THE EXPENSE AGREEMENT AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Capital Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Corporation as and to the
extent set forth under "Description of Guarantees." Taken together, the
Corporation's obligations under each series of Corresponding Junior
Subordinated Debentures, the Indenture, the related Trust Agreement, the
related Expense Agreement, and the related Guarantee provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the Related Capital Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under the
Related Capital Securities. If and to the extent that the Corporation does not
make payments on any series of Corresponding Junior Subordinated Debentures,
such Issuer will not pay Distributions or other amounts due on its Related
Capital Securities. The Guarantees do not cover payment of Distributions when
the related Issuer does not have sufficient funds to pay such Distributions.
In such event, the remedy of a holder of a series of Capital Securities is to
institute a legal proceeding directly against the Corporation pursuant to the
terms of the Indenture for enforcement of payment of amounts of such
Distributions to such holder. The obligations of the Corporation under each
Guarantee are subordinate and junior in right of payment to all Senior Debt of
the Corporation.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on each
series of Corresponding Junior Subordinated Debentures, such payments will be
sufficient to cover Distributions and other payments due on the Related
Capital Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to
the sum of the aggregate stated Liquidation Amount of the Related Capital
Securities and related Common Securities; (ii) the interest rate and interest
and other payment dates on each series of Corresponding Junior Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Related Capital Securities; (iii) the Corporation shall pay for
all and any costs, expenses and liabilities of such Issuer except the Issuer's
obligations to holders of its Capital Securities under such Capital
Securities; and (iv) each Trust Agreement provides that the Issuer will not
engage in any activity that is not consistent with the limited purposes of
such Issuer.
Notwithstanding anything to the contrary in the Indenture, the Corporation
has the right to set-off any payment it is otherwise required to make
thereunder with and to the extent the Corporation has theretofore made, or is
concurrently on the date of such payment making, a payment under the related
Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of any Capital Security may institute a legal proceeding directly
against the Corporation to enforce its rights under the related Guarantee
without first instituting a legal proceeding against the Guarantee Trustee,
the related Issuer or any other person or entity.
A default or event of default under any Senior Debt of the Corporation would
not constitute a default or Event of Default under the Indenture. However, in
the event of payment defaults under, or acceleration of, Senior Debt of the
Corporation, the subordination provisions of the Indenture provide
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that no payments may be made in respect of the Junior Subordinated Debentures
until such Senior Debt has been paid in full or any payment default thereunder
has been cured or waived. Failure to make required payments on any series of
Junior Subordinated Debentures would constitute an Event of Default under the
Indenture.
LIMITED PURPOSE OF ISSUERS
Each Issuer's Capital Securities evidence a beneficial interest in such
Issuer, and each Issuer exists for the sole purpose of issuing its Capital
Securities and Common Securities and investing the proceeds thereof in Junior
Subordinated Debentures. A principal difference between the rights of a holder
of a Capital Security and a holder of a Junior Subordinated Debenture is that
a holder of a Junior Subordinated Debenture is entitled to receive from the
Corporation the principal amount of and interest accrued on Junior
Subordinated Debentures held, while a holder of Capital Securities is entitled
to receive Distributions from such Issuer (or from the Corporation under the
applicable Guarantee) if and to the extent such Issuer has funds available for
the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Issuer involving the liquidation of the Corresponding Junior Subordinated
Debentures, the holders of the Related Capital Securities will be entitled to
receive, out of the assets held by such Issuer, the Liquidation Distribution
in cash. See "Description of Capital Securities--Liquidation Distribution Upon
Termination." Upon any voluntary or involuntary liquidation or bankruptcy of
the Corporation, the Property Trustee, as holder of the Corresponding Junior
Subordinated Debentures, would be a subordinated creditor of the Corporation,
subordinated in right of payment to all Senior Debt as set forth in the
Indenture, but entitled to receive payment in full of principal and interest,
before any stockholders of the Corporation receive payments or distributions.
Since the Corporation is the guarantor under each Guarantee and has agreed to
pay for all costs, expenses and liabilities of each Issuer (other than the
Issuer's obligations to the holders of its Capital Securities), the positions
of a holder of such Capital Securities and a holder of such Corresponding
Junior Subordinated Debentures relative to other creditors and to stockholders
of the Corporation in the event of liquidation or bankruptcy of the
Corporation are expected to be substantially the same.
PLAN OF DISTRIBUTION
The Junior Subordinated Debentures or the Capital Securities may be sold in
a public offering to or through underwriters or dealers designated from time
to time. The Corporation and each Issuer may sell its Junior Subordinated
Debentures or Capital Securities as soon as practicable after effectiveness of
the Registration Statement of which this Prospectus forms a part. The names of
any underwriters or dealers involved in the sale of the Junior Subordinated
Debentures or Capital Securities in respect of which this Prospectus is
delivered, the amount or number of Junior Subordinated Debentures and Capital
Securities to be purchased by any such underwriters and any applicable
commissions or discounts will be set forth in the applicable Prospectus
Supplement.
Underwriters may offer and sell Junior Subordinated Debentures or Capital
Securities at a fixed price or prices, which may be changed, or from time to
time at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. In connection with the
sale of Capital Securities, underwriters may be deemed to have received
compensation from the Corporation and/or the applicable Issuer in the form of
underwriting discounts or commissions and may also receive commissions.
Underwriters may sell Junior Subordinated Debentures or Capital Securities to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters.
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Any underwriting compensation paid by the Corporation and/or the applicable
Issuer to underwriters in connection with the offering of Junior Subordinated
Debentures or Capital Securities, and any discounts, concessions or
commissions allowed by such underwriters to participating dealers, will be
described in an accompanying Prospectus Supplement. Underwriters and dealers
participating in the distribution of Junior Subordinated Debentures or Capital
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of such Junior
Subordinated Debentures or Capital Securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters and dealers
may be entitled, under agreement with the Corporation and the applicable
Issuer, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act, and to
reimbursement by the Corporation for certain expenses.
In connection with the offering of the Capital Securities of any Issuer,
such Issuer may grant to the underwriters an option to purchase additional
Capital Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set
forth in the accompanying Prospectus Supplement. If such Issuer grants any
over-allotment option, the terms of such over-allotment option will be set
forth in the Prospectus Supplement for such Capital Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, the Corporation and/or the applicable Issuer and/or any of their
affiliates in the ordinary course of business.
The Junior Subordinated Debentures and the Capital Securities will be new
issues of securities and will have no established trading market. Any
underwriters to whom Junior Subordinated Debentures or Capital Securities are
sold for public offering and sale may make a market in such Junior
Subordinated Debentures and Capital Securities, but such underwriters will not
be obligated to do so and may discontinue any market making at any time
without notice. Such Junior Subordinated Debentures or Capital Securities may
or may not be listed on a national securities exchange or the Nasdaq National
Market. No assurance can be given as to the liquidity of or the existence of
trading markets for any Junior Subordinated Debentures or Capital Securities.
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, certain
matters of Delaware law relating to the validity of the Capital Securities,
the enforceability of the Trust Agreements and the formation of the Issuers
will be passed upon by Richards, Layton & Finger, One Rodney Square,
Wilmington, Delaware 19801, special Delaware counsel to the Corporation and
the Issuers. Unless otherwise indicated in the applicable Prospectus
Supplement, the validity of the Guarantees and the Junior Subordinated
Debentures will be passed upon for the Corporation by Balch & Bingham LLP,
1901 Sixth Avenue North, Birmingham, Alabama 35203, and for the Underwriters
by Sullivan & Cromwell, 125 Broad Street, New York, New York 10004. Certain
matters relating to United States Federal income tax considerations will be
passed upon for the Corporation by Balch & Bingham LLP.
EXPERTS
The consolidated financial statements of the Corporation and subsidiaries as
of December 31, 1995 and 1994, and for each of the years in the three-year
period ended December 31, 1995 have been incorporated by reference herein and
in the registration statement in reliance upon the report of KPMG Peat
Marwick, LLP Independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. Such report refers to changes in the method of accounting for
income taxes and in the method of accounting for certain investments in debt
and equity securities.
47
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PRO-
SPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PRO-
SPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUP-
PLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURI-
TIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEI-
THER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE
MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLI-
CATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors.............................................................. S-5
Compass Trust I........................................................... S-10
The Corporation........................................................... S-11
Selected Consolidated Financial Data of Compass Bancshares, Inc. ......... S-12
Use of Proceeds........................................................... S-14
Capitalization............................................................ S-14
Accounting Treatment...................................................... S-15
Certain Terms of Series A Capital Securities.............................. S-15
Certain Terms of Series A Subordinated Debentures......................... S-19
Certain Terms of Series A Guarantee....................................... S-24
ERISA Considerations...................................................... S-24
Certain Federal Income Tax Consequences................................... S-26
Underwriting.............................................................. S-30
Validity of Securities.................................................... S-31
PROSPECTUS
Available Information..................................................... 4
Incorporation of Certain Documents by Reference........................... 5
The Corporation........................................................... 6
Supervision and Regulation................................................ 9
The Issuers............................................................... 13
Use of Proceeds........................................................... 14
Description of Junior Subordinated Debentures............................. 14
Description of Capital Securities......................................... 27
Book-Entry Issuance....................................................... 40
Description of Guarantees................................................. 42
Relationship Among the Capital Securities, the Corresponding Junior
Subordinated Debentures, the Expense Agreement and the Guarantees........ 45
Plan of Distribution...................................................... 46
Validity of Securities.................................................... 47
Experts................................................................... 47
</TABLE>
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$100,000,000
COMPASS TRUST I
8.23%
CAPITAL SECURITIES,
SERIES A
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
COMPASS BANCSHARES, INC.
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
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