<PAGE>
As filed with the Securities and Exchange Commission on November 16, 1999
Registration No. 333-88485
333-88485-01
333-88485-02
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ALLFIRST FINANCIAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 6712 52-0981378
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
25 South Charles Street
Baltimore, Maryland 21201
(410) 244-4000
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
ALLFIRST PREFERRED CAPITAL TRUST
(Exact name of registrant as specified in its charter)
DELAWARE 6719 [Applied for]
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
25 South Charles Street
Baltimore, Maryland 21201
(410) 244-4000
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
ALLFIRST PREFERRED ASSET TRUST
(Exact name of registrant as specified in its charter)
DELAWARE 6719 [Applied for]
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
25 South Charles Street
Baltimore, Maryland 21201
(410) 244-4000
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
Ralph V. Partlow III
Allfirst Financial Inc.
25 South Charles Street, MS101-850
Baltimore, Maryland 21201
(410) 244-3800
(Name, address, including zip code and telephone number, including area code of
agent of service)
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
----------------
The Registrants hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this Registration Statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
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<PAGE>
PROSPECTUS EXCHANGE OFFER
100,000 Floating Rate Non-Cumulative Subordinated Capital Trust Enhanced
Securities "SKATESSM"
Allfirst Preferred Capital Trust
Liquidation Amount $1,000 per SKATES
guaranteed to the extent described in this prospectus by
Allfirst Financial Inc. (formerly First Maryland Bancorp)
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In the exchange offer:
. Allfirst Capital Trust offers to . Neither we nor the trusts will
exchange new SKATES registered receive any cash proceeds in the
under the 1933 Act for the SKATES exchange offer, and no dealer-
initially issued to institutional manager will assist us.
investors in a private offering;
The terms of the new securities being
. Allfirst Asset Trust will issued in the exchange offer are
exchange the Asset Preferred identical in all respects to the
Securities it originally issued terms of the old securities issued in
to Allfirst Capital Trust in the the private offering, except that:
private offering for new Asset
Preferred Securities registered . the new securities have been
under the 1933 Act; registered under the 1933 Act and
will not be subject to restrictions
. We will exchange the junior on transfer applicable to the old
subordinated debenture we securities;
originally issued to Allfirst
Asset Trust in the private . the new SKATES and the new Asset
offering for a new junior Preferred Securities will not
subordinated debenture registered provide for any penalty increase in
under the 1933 Act; their distribution rates; and
. We will exchange the guarantees . the new junior subordinated
we originally issued in the debenture do not provide for any
private offering for new penalty increase in its interest
guarantees registered under the rate.
1933 Act;
The exchange offer and withdrawal
. If you participate in the rights expire at 5:00 p.m., New York
exchange offer, no further City time, on , 1999, unless
distributions will be paid on extended.
your old SKATES and any future
distributions on your new SKATES
will be payable on the scheduled
payment dates; and
Participating in the exchange offer or investing in new SKATES involves risks.
Please see "Risk Factors" on page 8.
The new SKATES will not be listed on a national securities exchange or quoted
on the Nasdaq Stock Market.
Neither the SKATES nor any of the other securities offered in this prospectus
are deposits or other obligations of a bank or savings association or are
insured by the Federal Deposit Insurance Corporation or any other governmental
agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
This prospectus, together with the letter of transmittal, is being sent to
all registered holders of old SKATES as of November 9, 1999.
November , 1999
SMService mark of Lehman Brothers Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary Information--Q&A................................................... 1
Risk Factors............................................................... 8
Allfirst Financial Inc..................................................... 13
Ratio of Earnings to Fixed Charges of Allfirst Financial Inc............... 14
Selected Consolidated Financial Data....................................... 15
Allfirst Preferred Capital Trust........................................... 16
Allfirst Preferred Asset Trust............................................. 18
The Exchange Offer......................................................... 21
Description of the New SKATES.............................................. 31
Description of the New Capital Guarantee................................... 46
Description of the New Asset Preferred Securities.......................... 49
Description of the New Asset Guarantee..................................... 58
Description of Investments................................................. 61
United States Federal Income Taxation...................................... 70
Certain ERISA Considerations............................................... 74
Plan of Distribution....................................................... 77
Where You Can Find More Information........................................ 77
Incorporation of Information We File With the SEC.......................... 77
Legal Matters.............................................................. 78
Experts.................................................................... 78
Financial Statements of the Trusts......................................... 79
</TABLE>
This prospectus incorporates important business and financial information
about Allfirst that is not included in or delivered with this prospectus. The
information so omitted is available without charge to a SKATES holder upon
written or oral request. You may make a request using the following
information: Allfirst Financial Inc., 25 S. Charles St., Mailcode 101-450,
Baltimore, Maryland 21201, Attn: Richard C. Cumbers, telephone (410) 244-4723.
In order to obtain desired materials in a timely fashion, you must make your
request by no later than December 13, 1999.
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SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information elsewhere in this prospectus to help you understand the exchange
offer and the new SKATES. This summary may not contain all the information that
may be important to you. You should carefully read this prospectus to fully
understand the terms of the exchange offer. You should pay special attention to
the "Risk Factors" section beginning on page 8.
In this prospectus:
. references to "Allfirst," "we", "us" and "our" are to Allfirst Financial
Inc.;
. references to "Allfirst Capital Trust" are to Allfirst Preferred Capital
Trust;
. references to "Allfirst Asset Trust" are to Allfirst Preferred Asset
Trust.
. references to "your" SKATES or "old" SKATES means the SKATES that are
currently outstanding
. references to "SKATES" are to the new SKATES and the old SKATES, if any,
that will be outstanding after the exchange offer; and
. use of the word "old" or "new" to describe the Asset Preferred
Securities, our junior subordinated debenture or our guarantees means
that security as currently outstanding or as outstanding after the
exchange offer
What are the SKATES?
Each SKATES is a preferred interest in the assets of Allfirst Capital Trust.
We own all of the common securities of Allfirst Capital Trust. The sole assets
of Allfirst Capital Trust are the Asset Preferred Securities issued by Allfirst
Asset Trust, which represent preferred ownership interests in the assets of
Allfirst Asset Trust, and a limited Allfirst guarantee. Allfirst Asset Trust
used all of the proceeds from the sale of its Asset Preferred Securities to
Allfirst Capital Trust and the sale of its common securities to us to purchase
the junior subordinated debenture from us and to make the other permitted
investments described in this prospectus.
Who is Allfirst?
We are a bank holding company headquartered in Baltimore, Maryland, formerly
known as First Maryland Bancorp. We operate primarily in the Mid-Atlantic
states. At September 30, 1999, we had total assets of $18.0 billion. Through
our various banking subsidiaries, we offer a full range of banking products and
services to consumers, businesses and governmental units.
What is Allfirst Capital Trust?
Allfirst Capital Trust is a Delaware business trust that exists only for the
purposes of issuing the old and new SKATES, investing the proceeds in the Asset
Preferred Securities issued by Allfirst Asset Trust, participating in the
exchange offer and engaging in incidental activities.
What is Allfirst Asset Trust?
Allfirst Asset Trust is a Delaware business trust that exists only for the
purposes of issuing the old and new Asset Preferred Securities, investing the
proceeds in specified assets, participating in the exchange offer and engaging
in incidental activities. Allfirst Asset Trust has elected to be treated as a
partnership for U.S. Federal income tax purposes. The assets of Allfirst Asset
Trust are:
. a junior subordinated debenture issued by us; and
. other permitted investments described in this prospectus.
What is the exchange offer?
Allfirst Capital Trust is offering to exchange new SKATES for your old
SKATES. Allfirst Asset Trust will exchange new Asset Preferred Securities for
the old Asset Preferred Securities now owned by Allfirst Capital Trust. We will
exchange a new junior subordinated debenture for our old junior subordinated
debenture now owned by Allfirst Asset Trust. We will also exchange new
guarantees for our old guarantees with respect to any old SKATES exchanged for
new SKATES. The old SKATES, Asset Preferred Securities, junior subordinated
debenture and guarantees were originally sold to institutional investors in a
private offering on July 13, 1999. We
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and the trusts are engaging in the exchange offer pursuant to the registration
rights agreement. See "The Exchange Offer."
What are the differences between my old SKATES and the new SKATES?
The only differences between old SKATES and new SKATES are:
. new SKATES have been registered under the 1933 Act;
. new SKATES are freely transferable; and
. the penalty distribution rate provisions of the registration rights
agreement do not apply to the new SKATES.
All of other terms and conditions of the old and new SKATES are the same.
See, "Description of the New Skates."
What distributions will I receive on the SKATES?
The SKATES provide for a quarterly cash distribution at the rate of three-
month LIBOR plus 1.50% per year, reset quarterly, for each SKATES you own.
Distributions are payable on each January 15, April 15, July 15 and October 15,
beginning October 15, 1999. Until January 15, 2000, the distribution rate on
the SKATES is 7.68% per year.
The distributions on the SKATES are non-cumulative. This means that, if
Allfirst Capital Trust does not pay a distribution in full on any distribution
payment date, then you will not, and will have no right to, receive that
distribution or, if paid in part, the unpaid portion of that distribution, at
any time, even if Allfirst Capital Trust pays other distributions in the
future.
The sole assets of Allfirst Capital Trust are the Asset Preferred Securities
of Allfirst Asset Trust and our limited guarantee. Because Allfirst Asset Trust
will only pay quarterly distributions on the Asset Preferred Securities if we
make interest payments (other than deferred interest) on the junior
subordinated debenture on the interest payment dates immediately following the
corresponding quarterly periods, Allfirst Capital Trust's ability to pay
distributions on the SKATES in full is ultimately
dependent upon our ability to make interest payments (other than deferred
interest) on the junior subordinated debenture on each interest payment date.
If we defer making interest payments on the junior subordinated debenture,
which we may for up to twenty quarterly periods, Allfirst Asset Trust will not
make payments on its Asset Preferred Securities and Allfirst Capital Trust will
not pay quarterly distributions on the SKATES for any quarterly period
immediately following any interest payment date on which we fail to make
interest payments on the junior subordinated debenture. Because the Asset
Preferred Securities and the SKATES are non-cumulative, if you do not receive a
distribution for any quarterly period, you will never receive or be entitled to
receive a distribution for that quarterly period. In other words, if we resume
making interest payments on the junior subordinated debenture after we have
deferred making interest payments, any payments of deferred interest will not
be distributed to Allfirst Capital Trust, as holder of the Asset Preferred
Securities, and, therefore, will not be paid to you.
Will payments made on the other permitted investments held by Allfirst Asset
Trust be available for distributions or payments in redemption or liquidation
of the SKATES?
The other permitted investments of Allfirst Asset Trust will not be a source
of funds for the payment of quarterly distributions on, or redemption payments
in respect of, the Asset Preferred Securities, and consequently will not be a
source of funds for the payment of quarterly distributions on, or redemption
payments in respect of, the SKATES.
In the event of a liquidation of Allfirst Asset Trust, Allfirst Capital
Trust, as the holder of the Asset Preferred Securities, would be entitled to
receive a liquidation preference equal to the liquidation amount of the Asset
Preferred Securities from all assets of Allfirst Asset Trust, including the
other permitted investments, after payment of its creditors, before any
liquidation payment would be made to Allfirst, as the holder of Allfirst Asset
Trust's common securities. Thus, the other permitted investments would serve as
a source of funds for payments on the SKATES in an event of liquidation of
Allfirst Capital Trust, which will occur if there is a liquidation of Allfirst
Asset Trust.
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Can the SKATES be redeemed?
Yes. If we redeem the junior subordinated debenture, Allfirst Asset Trust
will use the cash it receives on the redemption of the junior subordinated
debenture to redeem for cash Asset Preferred Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the junior
subordinated debenture redeemed. Allfirst Capital Trust, in turn, will use the
cash it receives on the redemption of the Asset Preferred Securities to redeem
for cash a proportionate liquidation amount of SKATES and its common securities
having an aggregate liquidation amount equal to the Asset Preferred Securities
being redeemed. The redemption price of the SKATES will equal $1,000 per SKATES
plus any accrued and unpaid distributions for the then current quarterly period
to the date of redemption.
The trustees of Allfirst Capital Trust can elect to liquidate Allfirst
Capital Trust and distribute the Asset Preferred Securities to you if at any
time any of the changes in U.S. tax law, U.S. investment company law or U.S. or
Irish banking law described elsewhere in this prospectus occur.
Neither the Asset Preferred Securities nor the SKATES can be redeemed at any
time at the option of their holders. Neither the SKATES nor the Asset Preferred
Securities have any scheduled maturity.
When can Allfirst redeem the junior subordinated debenture?
We may redeem the junior subordinated debenture for cash:
. before July 15, 2009 in whole only and only if any of the specified
changes in U.S. tax law, U.S. investment company law or U.S. or Irish
banking law described in this prospectus occur; and
. in whole or in part from time to time at any time on or after July 15,
2009.
To redeem the junior subordinated debenture, we need the prior approval of
the Federal Reserve Board and the Central Bank of Ireland.
In addition, we may not redeem the junior subordinated debenture unless (1)
all amounts then due on any of our senior obligations are paid or duly
provided for and (2) no event permitting acceleration of any of our senior
obligations has occurred and is continuing.
What happens if Allfirst Capital Trust doesn't pay quarterly distributions on
the SKATES in full?
If Allfirst Capital Trust does not pay a full quarterly distribution or
other scheduled payment on the SKATES for any reason, including because:
. we defer interest payments on the junior subordinated debenture in
accordance with its terms;
. we default on our obligation to pay interest not deferred on the junior
subordinated debenture;
. we do not make a scheduled principal payment on the junior subordinated
debenture;
. we are not permitted to make payments of interest after a deferral period
or principal on the junior subordinated debenture because we do not
receive prior approval from the Federal Reserve Board and the Central
Bank of Ireland;
. we, as guarantor of the Asset Preferred Securities, do not make any
payment that our guarantee of the Asset Preferred Securities requires us
to make to Allfirst Capital Trust; or
. we, as guarantor of the SKATES, do not make any payment that our
guarantee of the SKATES requires us to make to you,
then, we may not (1) declare or pay cash dividends on, redeem, acquire, or make
a liquidation payment with respect to, any of our outstanding capital stock, or
(2) make any payment on, repay, repurchase or redeem any of our debt securities
or guarantees that rank equally with or subordinate and junior to the junior
subordinated debenture, other than pro rata interest payments or payments in
lieu of interest on the junior subordinated debenture and our debt that ranks
equally with the junior subordinated
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debenture, unless and until, since the curing or waiver of any default or the
end of the interest deferral period, as the case may be:
. Allfirst Capital Trust has paid distributions on the SKATES in full on
four consecutive distribution payment dates;
. Allfirst Asset Trust has paid distributions on the Asset Preferred
Securities in full on four consecutive distribution payment dates; and
. we have paid all deferred interest on the junior subordinated debenture
for any interest deferral period and paid interest in full on four
consecutive interest payment dates.
This limitation prevents us from paying cash or other dividends to the
holders of our capital stock or making payments on obligations that rank
equally with or subordinate and junior to the junior subordinated debenture,
other than pro rata payments on obligations which rank equally with the junior
subordinated debenture, if payments are not being made on the SKATES, the Asset
Preferred Securities, the junior subordinated debenture or the guarantees.
Do I have voting rights?
Generally, you do not have any voting rights except under the limited
circumstances described below. The holders of a majority of the SKATES,
however, have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the property trustee of Allfirst Capital
Trust, or direct the exercise of any trust or other power conferred upon the
property trustee of Allfirst Capital Trust.
What other rights of action do I have as a holder of the SKATES?
As a holder of the SKATES, you have the right to bring a direct action
against us if we do not:
. pay interest and principal on the junior subordinated debenture in
accordance with its terms; or
. perform our obligations under our guarantees.
You also have the right as a holder of the SKATES to bring a direct action
against Allfirst Asset Trust if it does not fulfill its obligations under the
Asset Preferred Securities in accordance with their terms.
When does the exchange offer expire?
The exchange offer expires on December 20, 1999, at 5:00 p.m., New York City
time, unless we extend the offer. See, "The Exchange Offer--Expiration Date;
Extensions; Amendments."
How do I participate in the exchange offer?
You must send the properly completed letter of transmittal to the exchange
agent. You must also have your SKATES delivered to the exchange agent before
the expiration date or provide for guaranteed delivery. See, "The Exchange
Offer--Procedures for Tendering Old SKATES."
Are all holders of old SKATES eligible to participate in the exchange offer?
No. If:
. you are an affiliate of Allfirst; or
. you intend to participate in the exchange offer for the purpose of
distributing new SKATES; or
. you are a broker-dealer that purchased old SKATES from Allfirst Capital
Trust to resell under Rule 144A or any other available exemption under
the 1933 Act,
then you are not eligible to participate in the exchange offer. You must resell
your old SKATES in accordance with the registration and prospectus delivery
requirements of the 1933 Act or an exemption from those requirements. See, "The
Exchange Offer--Eligibility."
Are there any other reasons why participating in the exchange offer may not be
appropriate for me?
Yes. If:
. you are prohibited by law or policy of the SEC from participating in the
exchange offer; or
. you may not resell new SKATES to the public without delivering a
prospectus and this prospectus is not appropriate or available for your
resales; or
. you are a broker-dealer that acquired old SKATES directly from Allfirst
Capital Trust or its affiliates,
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and if you notify us in a timely fashion, then we are obligated to use our
reasonable best efforts to file a shelf registration statement with the SEC,
cause it to become effective, and keep it effective until July 9, 2001 at the
latest. You would then be able to sell your old SKATES under the shelf
registration statement. See, "The Exchange Offer--Other Registration Rights."
Who is the exchange agent and how do I contact them?
The exchange agent information is as follows:
The Bank of New York
101 Barclay St., Floor 7E
New York, New York 10286
(212) 815-5920
Attn: Gertrude Jean-Pierre
Reorganization Department
Additional information about contacting the exchange agent is contained in
the letter of transmittal.
May I change my mind once I have tendered my SKATES?
You may withdraw your SKATES from the exchange offer at any time before the
expiration date by delivering a written withdrawal notice to the exchange
agent. See "The Exchange Offer--Withdrawal Rights."
What if I don't participate in the exchange offer?
If you don't exchange your old SKATES for new SKATES, then:
. your old SKATES will remain restricted securities and may not be resold
prior to July 9, 2001 except in compliance with Rule 144A or another
exemption under the 1933 Act; and
. the penalty distribution rate provisions of the registration rights
agreement will not apply to your SKATES.
Otherwise, you will have the same rights and duties as a holder who receives
new SKATES in the exchange offer.
May I resell my new SKATES without any restrictions?
You may freely resell your new SKATES unless:
. you are a broker-dealer; and
. you acquired your old SKATES for your own account as a result of market
making or other trading activities,
in which case you must deliver a prospectus when you sell your new SKATES. See,
"The Exchange Offer--Resales of New SKATES."
What about distributions on the old SKATES?
If you exchange your old SKATES for new SKATES, you will not receive any
further distributions with respect to your old SKATES. Instead, your new SKATES
will be treated as being outstanding for the period of time from the last
payment date or the original issue date. See, "The Exchange Offer--
Distributions on New SKATES."
Are there any income tax consequences to participating in the exchange offer?
There will be no U.S. federal income tax consequences to you when you
exchange your old SKATES for new SKATES. See, "United States Federal Income
Taxation."
What is the junior subordinated debenture?
The junior subordinated debenture is a long term loan made by Allfirst Asset
Trust to us. The junior subordinated debenture initially comprised 95% of
Allfirst Asset Trust's assets. It has a principal amount of approximately
$105,310,000, bears interest at a rate per year of three-month LIBOR plus
1.43%, reset quarterly, and pays interest on January 15, April 15, July 15 and
October 15 of each year, commencing October 15, 1999. Until January 15, 2000,
the interest rate on the junior subordinated debenture is 7.61%. The junior
subordinated debenture is scheduled to mature on July 15, 2029.
The junior subordinated debenture is an unsecured obligation of ours and
ranks subordinate and junior in right of payment of principal and interest to
our general creditors.
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We may not make any payment of principal or interest on the junior
subordinated debenture unless:
. all amounts then due on all of our obligations ranking senior to our
obligations under the junior subordinated debenture have been paid in
full or duly provided for; and
. there has not occurred or is continuing an event of default or a default
in payment in respect of any obligation ranking senior to our obligation
under the junior subordinated debenture which would permit acceleration
under the terms of that senior obligation.
We may exercise our right to defer interest payments on the junior
subordinated debenture for a period of not more than twenty quarterly periods.
However, in the event that we exercise our right to defer interest payments on
the junior subordinated debenture, we may not resume making any interest
payments without the prior approval of the Board of Governors of the Federal
Reserve System and the Central Bank of Ireland.
In addition, we may not redeem or repay the junior subordinated debenture at
maturity, or at any other time, without the prior consent of the Federal
Reserve Board and the Central Bank of Ireland. As a result, if either the
Federal Reserve Board or the Central Bank of Ireland does not permit us to
repay the junior subordinated debenture at the stated maturity date, you may
not receive the corresponding redemption payment on your SKATES on the
corresponding redemption date or at all.
If we do not receive these approvals to resume paying interest after
deferring interest payments for any interest deferral period or to repay the
junior subordinated debenture at maturity:
. no event of default will have occurred;
. in the case of resuming interest payments after an interest deferral
period, the interest deferral period may exceed twenty quarterly periods;
and
. in the case of repayment at maturity, the junior subordinated debenture
will remain outstanding.
What are the differences between the old junior subordinated debenture and the
new junior subordinated debenture?
The only differences between the old junior subordinated debenture and the
new junior subordinated debenture are that:
. the new junior subordinated debenture has been registered under the 1933
Act; and
. the penalty interest rate provisions of the registration rights agreement
do not apply to the new junior subordinated debenture.
All of the other terms and conditions of the old and new junior subordinated
debenture are the same. See, "Description of Investments--Junior Subordinated
Debenture."
What are the differences between the old Asset Preferred Securities and the new
Asset Preferred Securities?
The only differences between old Asset Trust Preferred Securities and the
new Asset Trust Preferred Securities are that:
. the new Asset Trust Preferred Securities have been registered under the
1933 Act; and
. the penalty distribution rate provisions of the registration rights
agreement do not apply to the new Asset Trust Preferred Securities.
All of other terms and conditions of the old and new Asset Trust Preferred
Securities are the same. See, "Description of New Asset Preferred Securities."
What are the guarantees?
We will guarantee, to the extent described in this prospectus:
. quarterly distributions on the Asset Preferred Securities by Allfirst
Asset Trust to Allfirst Capital Trust on each distribution date to the
extent Allfirst Asset Trust receives on the corresponding interest
payment date interest payments on the junior subordinated debenture and
has sufficient cash available to pay such distributions on the scheduled
distribution date;
. payment of quarterly distributions on the SKATES by Allfirst Capital
Trust to you on
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each distribution payment date to the extent Allfirst Capital Trust
receives a distribution on the Asset Preferred Securities on that date;
. distribution of the Asset Preferred Securities to you in the event
Allfirst Capital Trust is liquidated as described in this prospectus;
. the redemption amount due to Allfirst Capital Trust if Allfirst Asset
Trust redeems the Asset Preferred Securities to the extent Allfirst Asset
Trust has funds for that redemption;
. the redemption amount due to you if Allfirst Capital Trust redeems the
SKATES for cash to the extent Allfirst Capital Trust has funds for that
redemption;
. the liquidation amount of the Asset Preferred Securities due to Allfirst
Capital Trust if Allfirst Asset Trust is liquidated to the extent
Allfirst Asset Trust has assets after payment to its creditors; and
. the liquidation amount of the SKATES due to you if Allfirst Capital Trust
is liquidated to the extent Allfirst Capital Trust has assets after
payment to its creditors.
As described in this prospectus, our obligations under the guarantees are
subordinate and junior in right of payment to all of our other liabilities.
What are the differences between the old Allfirst guarantees and the new
Allfirst guarantees?
The only differences between our old guarantees of the SKATES and the Asset
Trust Preferred Securities and the new guarantees are that the new guarantees
have been registered under the 1933 Act. See, "Description of the New Capital
Guarantee" and "Description of the New Asset Guarantee".
Are the SKATES rated by any rating agencies?
Yes. Moody's Investors Service has assigned a rating of "a3" to the SKATES,
and Standard & Poor's Ratings Services has assigned them a rating of "BBB+." A
security rating is not a recommendation to buy, sell or hold a security, and
the rating agency may revise or withdraw its rating at any time. See "Allfirst
Financial Inc."
In what form will the new SKATES be issued?
The new SKATES will be issued in the form of a global certificate registered
in the name of Cede & Co., as nominee for The Depository Trust Company, also
known as DTC. Ownership interests in new SKATES will be evidenced by, and
transfers of new SKATES will be effected only through, records maintained by
DTC and its direct and indirect participants, including Euroclear and
Cedelbank.
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RISK FACTORS
Risk Factors Relating to the Exchange Offer
The new SKATES do not represent any different investment risk than the old
SKATES you currently own. See "--Risks of Investing in the SKATES." However,
. if you are eligible to participate in the exchange offer and fail to do
so, or
. if you fail to determine whether you are eligible to participate in the
exchange offer,
then you will be subject to the risks described below.
If you are eligible to participate in the exchange offer and fail to do so,
then your SKATES will continue to be restricted and you will not have any
further registration rights.
The old SKATES have not been registered under the 1933 Act or any state
securities laws, and may not be offered, sold or otherwise transferred except
in compliance with applicable securities laws, including any exemptions. Old
SKATES that remain outstanding after the exchange offer is completed will
continue to bear a restrictive legend. In addition, after the exchange offer is
completed, a holder of old SKATES will not be entitled to any registration
rights, and we do not intend to register any old SKATES which remain
outstanding.
If you fail to determine whether you are eligible to participate in the
exchange offer or to notify us that you are not eligible, then you may lose the
alternative registration rights provided to you in the registration rights
agreement.
Certain brokers and dealers may not be eligible to participate in the
exchange offer. If you are not eligible to participate in the exchange offer,
then you may have alternative registration rights. You must notify us at least
20 days before the expiration date of the exchange offer in order to take
advantage of these rights or you will lose them. See, "The Exchange Offer--
Eligibility" and "--Other Registration Rights."
Exchange Offer Procedures
In order to participate in the exchange offer, you must:
. properly complete and execute the letter of transmittal and all other
required documents;
. deliver the letter of transmittal to the exchange agent in a timely
fashion; and
. arrange for your old SKATES to be delivered to the exchange agent in a
timely fashion.
Neither we nor the exchange agent is obligated to notify you of any defects or
irregularities with respect to your tender of old SKATES for exchange.
Neither the new SKATES nor the new Asset Preferred Securities are insured.
Neither the Federal Deposit Insurance Corporation nor any other governmental
agency has insured the new SKATES, the new Asset Preferred Securities or any of
the other securities offered by this prospectus.
There is no public market for the SKATES.
New SKATES issued in the exchange offer will be a new issue of securities,
with no established trading market. Lehman Brothers Inc., the initial purchaser
of the old SKATES, has informed Allfirst Capital Trust and us that it intends
to make a market in the new SKATES. However, the initial purchaser is not
obligated to do so and it may terminate any market making activity it engages
in at any time without notice to you. Any market making activity it engages in
will be subject to the limits prescribed under the 1933 Act.
8
<PAGE>
Risks of Investing in the SKATES
An investment in SKATES involves risks, and you should carefully consider
the following discussion before investing in SKATES.
You will only receive quarterly distributions and other payments if Allfirst
Asset Trust receives timely interest and principal payments on the junior
subordinated debenture and Allfirst Capital Trust receives corresponding
distributions on the Asset Preferred Securities or payments on our guarantee of
the Asset Preferred Securities.
Allfirst Capital Trust's ability to pay distributions on the SKATES to you
on scheduled payment dates is dependent upon its receipt of payments on the
Asset Preferred Securities from Allfirst Asset Trust. If we fail to pay
interest or principal on the scheduled payment dates for the junior
subordinated debenture, Allfirst Asset Trust will not make payments on the
Asset Preferred Securities and we will not make payments under our guarantee of
our Asset Preferred Securities. If Allfirst Asset Trust does not make a payment
on the Asset Preferred Securities or we fail to make a payment on our
guarantee, Allfirst Capital Trust will not have funds to make the corresponding
quarterly distribution or other payments to you on the SKATES.
Quarterly distributions on the SKATES are non-cumulative.
Quarterly distributions on the SKATES are not cumulative. If Allfirst
Capital Trust does not pay a quarterly distribution or pays only a portion of a
quarterly distribution on the distribution payment date immediately following
the quarterly period, you will not receive that distribution or the unpaid
portion of that distribution and will have no claim to that distribution or the
unpaid portion of that distribution, whether or not Allfirst Capital Trust
subsequently pays quarterly distributions in full or has funds to pay
subsequent quarterly distributions in full. This also means that, if we fail to
make interest payments on the junior subordinated debenture, you will not
receive any distributions on any distribution payment date for that interest
deferral period. Moreover, when we pay any deferred interest on the junior
subordinated debenture after any interest deferral period ends, you will not
receive that deferred interest because Allfirst Asset Trust will not distribute
it on the Asset Preferred Securities.
Our primary regulator and the primary regulator of our parent, Allied Irish
Banks p.l.c., can prevent you from receiving quarterly distributions beyond the
duration of any interest deferral period we may elect, as well as the payment
to you of the redemption or liquidation amount of your SKATES.
In the event that we do not make interest payments on the junior
subordinated debenture, we may not resume making any interest payments,
including interest accrued during the interest deferral period, without the
prior approval of our primary regulator, the Federal Reserve Board, and the
Central Bank of Ireland, the primary regulator of our parent, Allied Irish
Banks p.l.c. In addition, we may not redeem or repay the junior subordinated
debenture on the July 15, 2029 maturity date or at any other time without the
prior consent of both the Federal Reserve Board and the Central Bank of
Ireland. You may not receive any quarterly distributions on or the cash payable
on the redemption or repayment of your SKATES, and a holder of the junior
subordinated debenture will not have any right to enforce the junior
subordinated debenture, if either of these regulators do not permit us to make
any principal or interest payments on the junior subordinated debenture.
Our ability to defer interest payments on the junior subordinated debenture
may affect the trading value of the SKATES.
If no event of default under the junior subordinated debenture has occurred
and is continuing, we can, on one or more occasions, defer interest payments on
the junior subordinated debentures for up to twenty quarterly periods, but not
beyond the scheduled maturity date of the junior subordinated debenture.
Moreover, we may not resume making interest payments on the junior subordinated
debenture until we have obtained the prior
9
<PAGE>
approval of the Federal Reserve Board and the Central Bank of Ireland, which
may result in an interest deferral period exceeding twenty quarterly periods.
If we fail to make interest payments on the junior subordinated
debenture, Allfirst Asset Trust will lack the funds necessary to make payments
on the Asset Preferred Securities. If Allfirst Asset Trust does not pay
distributions on the Asset Preferred Securities, Allfirst Capital Trust will
lack the funds necessary to pay distributions on the SKATES. If any
distribution is not paid on the SKATES in full, you will not receive or have
any right to receive that distribution or the unpaid portion of that
distribution at any time, even if we resume making interest payments on the
junior subordinated debenture in the future. The existence of our right to
defer interest payments on the junior subordinated debenture may mean that the
trading value for the SKATES may be more volatile than other securities that do
not provide issuers these rights.
The guarantees cover payments only if Allfirst Asset Trust or Allfirst
Capital Trust, as the case may be, has the cash available to make the payments.
If we do not make payments on the junior subordinated debenture, Allfirst
Asset Trust will not have sufficient funds to make payments on the Asset
Preferred Securities and, in turn, Allfirst Capital Trust will not have
sufficient funds to make distributions on or pay the liquidation amount of the
SKATES. Because our guarantee of the Asset Preferred Securities does not cover
payments when Allfirst Asset Trust does not have sufficient funds and our
guarantee of the SKATES does not cover payments when Allfirst Capital Trust
does not have sufficient funds, you will not be able to rely on the guarantees
for payments of these amounts. Instead, you or the property trustees may
enforce the rights of Allfirst Asset Trust under the junior subordinated
debenture directly against us. However, as a holder of the SKATES, you are not
entitled to receive deferred or late interest payments.
Our obligations under the guarantees and the junior subordinated debenture
are subordinated.
Our obligations under the guarantees and the junior subordinated debenture
are unsecured and will rank in priority of payment:
. except as described below, subordinate and junior in right of payment to
our obligations for borrowed money and to all of our other liabilities;
. subordinate and junior in right of payment to our obligations under the
$200,000,000 aggregate principal amount of our 7.20% Subordinated Notes
due 2007 and the $100,000,000 aggregate principal amount of our 6.875%
Subordinated Notes due 2009;
. equally with our obligations under guarantees and indebtedness issued by
us in connection with:
. the $150,000,000 aggregate liquidation amount of Floating Rate
Subordinated Capital Income Securities issued by First Maryland
Capital I; and
. the $150,000,000 aggregate liquidation amount of Floating Rate
Subordinated Capital Income Securities issued by First Maryland
Capital II; and
. equally with or senior to our obligations under any other instrument or
agreement of ours which is stated to rank equally with or junior to the
guarantees and the junior subordinated debenture.
Our obligations under the guarantees and the junior subordinated debenture
will not be paid unless:
. all amounts then due on all of our obligations ranking senior to our
obligations under the junior subordinated debenture and the guarantees
have been paid in full or duly provided for; and
. there has not occurred or is continuing an event of default or a default
in payment on any obligations ranking senior to our obligations under the
junior subordinated debenture and the guarantees which would permit
acceleration under the terms of those senior obligations.
At September 30, 1999, we had outstanding indebtedness and other liabilities
aggregating approximately $636.6 million, and our subsidiaries had deposits and
other liabilities of approximately $15.0 billion, to which the guarantees and
the junior subordinated debenture would have been subordinated.
10
<PAGE>
There are no terms in the SKATES, the Asset Preferred Securities, the
guarantees or the junior subordinated debenture that limit our ability to incur
additional indebtedness, including indebtedness that ranks senior, equally with
or junior to the guarantees or the junior subordinated debenture.
Distribution of the Asset Preferred Securities to you may affect your
return.
In the event that the trustees of Allfirst Capital Trust elect to liquidate
Allfirst Capital Trust as a result of certain changes in U.S. tax, U.S.
investment company or U.S. or Irish banking law and Allfirst Asset Trust does
not redeem the Asset Preferred Securities, Allfirst Capital Trust may
distribute the Asset Preferred Securities to you in exchange for your SKATES.
The trading value of the Asset Preferred Securities may be lower than the
trading value of the SKATES. This may result in a lower return to you upon your
sale of the Asset Preferred Securities.
Because you may receive Asset Preferred Securities upon the liquidation of
Allfirst Capital Trust, in connection with your investment decision to purchase
the SKATES, you are also making an investment decision with regard to the Asset
Preferred Securities. You should carefully review all of the information
regarding the Asset Preferred Securities contained in this prospectus.
Your return on the SKATES may be lower than the return on other investments
if the SKATES are redeemed, and you would be required to reinvest the
redemption amount of your SKATES sooner than expected.
If Allfirst Capital Trust redeems your SKATES, there is a risk that the
redemption amount paid to you may be less than the return you could earn on
other investments for the same holding period. If redeemed, your investment in
the SKATES may not reflect the full opportunity cost to you when you take into
account factors that affect the time value of money. Moreover, if your SKATES
are redeemed, you may be required to reinvest your redemption proceeds at a
time when you may not be able to earn a return that is as high as you were
earning on the SKATES.
Allfirst Capital Trust's and Allfirst Asset Trust's investments may not
generate sufficient income to enable payments on the SKATES.
Because the sole asset of Allfirst Asset Trust from which earnings will be
used to pay distributions on the Asset Preferred Securities will be the junior
subordinated debenture and all of the assets of Allfirst Capital Trust are
comprised of the Asset Preferred Securities, you are subject to a greater risk
that their assets will not generate sufficient income to pay quarterly
distributions and redemption and liquidation payments on the SKATES and the
Asset Preferred Securities than you would with a vehicle whose investments were
diversified and less exposed to the risk that non-payment on any particular
investment asset would impair its ability to make payments to holders of its
capital stock.
Enforcement of certain rights by or on your behalf is limited.
The Bank of New York is the property trustee of Allfirst Asset Trust and the
guarantee trustee of our guarantee of the Asset Preferred Securities. Its
ability to take action on your behalf as property trustee or guarantee trustee
is limited. This is because (a) our guarantee of the Asset Preferred Securities
guarantees distributions on the Asset Preferred Securities only to the extent
Allfirst Asset Trust receives payments (other than late payments or payments of
deferred interest) on the junior subordinated debenture and, upon liquidation
of Allfirst Capital Trust, other assets to which holders of the Asset Preferred
Securities are entitled, and (b) holders of the Asset Preferred Securities are
not entitled to receive interest on the junior subordinated debenture if we
defer or otherwise fail to pay interest on time. As a result, although the
property trustee of Allfirst Asset Trust may be able to enforce Allfirst Asset
Trust's creditors' rights to receive payments in respect of the junior
subordinated debenture, Allfirst Asset Trust will not pay, and we will not
guarantee the payment of, deferred or late interest payments to holders of the
Asset Preferred Securities or make other distributions on the Asset Preferred
Securities unless Allfirst Asset Trust receives such payments on the junior
subordinated debenture.
11
<PAGE>
In addition, our guarantee of the SKATES guarantees distributions on the
SKATES only to the extent Allfirst Capital Trust receives distributions on the
Asset Preferred Securities. To the extent Allfirst Capital Trust does not
receive distributions on the Asset Preferred Securities for any quarterly
period, you will not receive distributions on the SKATES for that quarterly
period.
If at any time:
. an event of default occurs and is continuing on the junior subordinated
debenture; or
. we default on our obligations under our guarantees of the SKATES or the
Asset Preferred Securities;
then:
. you would rely on the enforcement by the property trustee of Allfirst
Capital Trust of its rights, as a holder of the Asset Preferred
Securities, against us, including the right to direct the property
trustee of Allfirst Asset Trust to enforce:
. Allfirst Asset Trust's creditors' rights and other rights with
respect to the junior subordinated debenture;
. the rights of the holders of the Asset Preferred Securities under
our guarantee of the Asset Preferred Securities; and
. the rights of the holders of the Asset Preferred Securities to
receive distributions on the Asset Preferred Securities;
. the trustee under our guarantee of the SKATES will have the right to
enforce the terms of the guarantee; and
. you will have the right to act directly against us under the junior
subordinated debenture and our guarantee of the SKATES.
You have limited voting rights.
As a holder of the SKATES, you will have limited voting rights and will not
be entitled to vote to appoint, change, or increase or decrease the number of
trustees of Allfirst Capital Trust except as described in this prospectus. As
holder of all of Allfirst Capital Trust's common securities, those rights are
ours except as described in this prospectus.
Because we are a bank holding company, we have limited sources of funds.
Because we are a bank holding company, our operations are conducted by our
subsidiaries, including Allfirst Bank, which is subject to significant federal
and state regulation. As a result, our ability to receive dividends and loans
from our subsidiaries is restricted. At September 30, 1999, $185 million of the
retained earnings of Allfirst Bank were available to pay dividends to us,
without regulatory approval. Dividend payments by Allfirst Bank to us in the
future will require generation of future earnings by Allfirst Bank and may
require regulatory approval. Further, our right to participate in the assets of
any bank subsidiary upon its liquidation, reorganization or otherwise, and the
resulting ability of the holders of the SKATES to benefit indirectly from any
participation, will be subject to the claims of the bank subsidiary's
creditors, which will take priority except to the extent to which we may be a
creditor with a recognized claim. Accordingly, the junior subordinated
debenture will be subordinated to all existing and future liabilities of our
subsidiaries, including the deposit liabilities of Allfirst Bank, and you
should look only to our assets for payments on the junior subordinated
debenture. As of September 30, 1999, our subsidiaries had deposits and other
liabilities of approximately $15.0 billion.
12
<PAGE>
ALLFIRST FINANCIAL INC.
Allfirst (formerly First Maryland Bancorp) is a bank holding company
headquartered in Baltimore, Maryland. At September 30, 1999, Allfirst had
consolidated total assets of $18.0 billion, total deposits of $12.3 billion,
and total stockholders' equity of $1.8 billion. Its principal subsidiary is
Allfirst Bank, a Maryland commercial bank. Allfirst Bank provides:
. comprehensive corporate, commercial, correspondent and retail banking
services;
. personal trust, corporate trust, other asset management services; and
. related financial products and services
to individuals, businesses, governmental units and financial institutions,
primarily in Maryland and the adjacent states. The assets of Allfirst Bank at
September 30, 1999 accounted for approximately 94% of Allfirst's consolidated
total assets.
Allied Irish Banks, p.l.c. ("AIB") owns 100% of the common stock, and
controls 99% of the voting power of the capital stock, of Allfirst. AIB is an
Irish banking corporation whose securities are traded on the Dublin, London and
New York Stock Exchanges, and is a registered bank holding company under the
Bank Holding Company Act. At June 30, 1999, based upon United States generally
accepted accounting principles, AIB and its subsidiaries had total assets of
approximately $64 billion, making it the largest banking corporation organized
under the laws of Ireland. AIB provides a full range of banking, financial and
related services principally in Ireland, Poland, the United Kingdom and the
United States.
AIB will not guarantee or otherwise be responsible for payments due on the
SKATES or any other security offered by this prospectus. Because Allfirst is
wholly-owned by AIB, AIB's credit ratings are expected to influence the credit
ratings assigned from time to time to obligations of Allfirst. On August 25,
1999, Standard & Poor's Ratings Services, a division of the McGraw-Hill
Companies, Inc. ("S&P") announced that it had affirmed its credit rating
assigned to AIB's long-term debt and had removed the long-term debt ratings of
AIB and related entities from the credit watch list with negative outlook.
However, S&P's outlook on the ratings remains negative. It is likely that any
lowering of the credit ratings assigned to AIB's obligations by S&P would
result in the lowering of S&P's rating of the SKATES.
For financial reporting purposes, Allfirst Capital Trust and Allfirst Asset
Trust will be treated as subsidiaries of Allfirst and, accordingly, the
accounts of the trusts will be included in the consolidated financial
statements of Allfirst. The SKATES will be presented in the consolidated
balance sheet of Allfirst as long term debt, and appropriate disclosures about
the SKATES, the Asset Preferred Securities, the Capital and Asset Guarantees
and the junior subordinated debenture will be included in the notes to the
consolidated financial statements for financial reporting purposes. Allfirst
will record distributions payable on the SKATES as an interest expense in the
consolidated statements of income.
13
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
OF ALLFIRST FINANCIAL INC.
Allfirst's consolidated ratio of earnings to fixed charges for each of the
periods indicated is set forth below:
<TABLE>
<CAPTION>
Nine Months
Ended Years Ended December 31,
September ----------------------------
30, 1999 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits........ 2.57x 3.25x 2.50x 2.78x 2.59x 3.16x
Including Interest on Deposits........ 1.51 1.63 1.52 1.64 1.57 1.69
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
represent net income plus applicable income taxes and fixed charges. Fixed
charges, excluding interest on deposits, represent interest expense on long-
term debt and short-term borrowings and the interest factor included in rents,
which is deemed to be one-third of rental expense. Fixed charges, including
interest on deposits, represent all interest expense and the interest factor
included in rents.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our historical consolidated financial
information as of and for the periods indicated below. The summary consolidated
financial data as of and for the five years ended December 31, 1998 was derived
from our audited financial statements incorporated herein by reference. The
summary data as of and for the nine months ended September 30, 1999 and 1998 is
unaudited and is not necessarily representative of the results to be expected
for the year ended December 31, 1999 or for any future periods, and includes
all adjustments consisting only of normal recurring accruals, which, in the
opinion of our management, are necessary for a fair statement of results for
such periods.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
------------------------ -------------------------------------------------------------
1999 1998 1998 1997 (1) 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Summary of
Operations:
Interest and dividend
income................ $ 792,249 $ 807,293 $ 1,076,406 $ 941,498 $ 719,029 $ 707,541 $ 619,746
Interest expense....... 392,833 401,377 534,178 445,754 315,373 314,548 241,099
----------- ----------- ----------- ----------- ----------- ---------- ----------
Net interest income.... 399,416 405,916 542,228 495,744 403,656 392,993 378,647
Provision for credit
losses................ 27,164 16,930 34,297 32,017 6,500 16,000 22,996
----------- ----------- ----------- ----------- ----------- ---------- ----------
Net interest income
after provision for
credit losses......... 372,252 388,986 507,931 463,727 397,156 376,993 355,651
Noninterest income..... 234,016 343,436 436,538 317,876 212,896 192,217 207,431
Noninterest expenses... 403,004 441,937 601,879 546,114 402,865 385,031 392,654
----------- ----------- ----------- ----------- ----------- ---------- ----------
Income before income
taxes................. 203,264 290,485 342,590 235,489 207,187 184,179 170,428
Income tax expense..... 75,189 107,279 124,467 84,301 74,850 63,992 59,288
----------- ----------- ----------- ----------- ----------- ---------- ----------
Net income............. $ 128,075 $ 183,206 $ 218,123 $ 151,188 $ 132,337 $ 120,187 $ 111,140
=========== =========== =========== =========== =========== ========== ==========
Dividends declared on
preferred stock....... $ 5,356 $ 8,865 $ 11,820 $ 11,820 $ 11,820 $ 11,820 $ 11,820
Dividends declared on
redeemable preferred
stock................. 303 304 405 405 203 -- --
Consolidated Average
Balances:
Total assets........... $17,691,900 $16,943,000 $17,072,800 $14,132,300 $10,477,100 $9,789,500 $9,411,400
Loans, net of unearned
income................ 10,647,100 10,135,000 10,214,100 8,358,500 6,312,300 5,804,700 5,291,200
Deposits............... 11,950,900 12,024,800 11,961,400 9,569,600 7,073,500 6,744,100 6,635,300
Long-term debt......... 934,000 676,000 686,400 594,900 481,800 269,500 198,000
Common stockholder's
equity................ 1,814,500 1,792,500 1,812,100 1,438,300 1,062,300 965,000 856,600
Stockholders' equity... 1,917,400 1,937,300 1,957,000 1,583,200 1,207,200 1,109,800 1,001,500
Consolidated Ratios:
Return on average
assets ............... 0.97% 1.45% 1.28% 1.07% 1.26% 1.23% 1.18%
Return on average
common stockholder's
equity................ 9.02 12.98 11.36 9.66 11.33 11.23 11.59
Return on average
total stockholders'
equity................ 8.93 12.64 11.15 9.55 10.96 10.83 11.10
Average total
stockholders' equity
to average total
assets................ 10.84 11.43 11.46 11.20 11.52 11.34 10.64
Capital to risk-
adjusted assets:
Tier 1............... 9.07 9.26 9.38 8.30 14.12 13.77 14.05
Total................ 12.84 12.58 12.65 11.90 17.20 17.05 17.68
Tier 1 leverage ratio
...................... 8.04 8.42 8.41 7.26 12.18 10.91 11.05
Net interest margin
(FTE)................. 3.59 3.81 3.79 4.07 4.30 4.47 4.51
Net charge-offs to
average loans, net of
unearned income....... 0.34 0.26 0.36 0.48 0.61 0.51 0.56
Allowance for credit
losses to loans, net
of unearned income.... 1.43 1.53 1.49 1.67 2.28 2.89 3.50
Nonperforming assets
to loans, net of
unearned income plus
other foreclosed
assets owned.......... 0.79 0.96 0.95 0.80 0.87 0.73 1.35
Tax-effected net income
and ratios excluding
goodwill and core
deposit intangible
amortization and
balances: (2)
Net income............. $ 162,346 $ 219,888 $ 266,696 $ 179,204 $ 136,322 $ 122,812 $ 113,722
Return on average
assets................ 1.29% 1.84% 1.65% 1.32% 1.31% 1.26% 1.21%
Return on average
common stockholder's
equity................ 21.83 31.80 27.85 18.69 12.34 11.87 12.36
Return on average
total stockholders'
equity................ 20.42 28.52 25.19 17.26 11.83 11.37 11.73
</TABLE>
- ----------
(1) We acquired Dauphin Deposit Corporation ("DDC") on July 8, 1997. Results of
operations for the year ended December 31, 1997 are not comparable to the
results of operations in 1998. DDC's results of operations have been
included in our results since July 1, 1997.
(2) Amortization and balances of core deposit intangibles are net of applicable
income taxes. Goodwill amortization and balances are not tax effected.
15
<PAGE>
ALLFIRST PREFERRED CAPITAL TRUST
Allfirst Preferred Capital Trust is a statutory business trust formed under
the Delaware Business Trust Act, as amended, pursuant to a declaration of
trust, which was amended and restated in connection with the issuance of the
old SKATES (as amended and restated, the "Capital Declaration"), and the filing
of a certificate of trust with the Secretary of State of the State of Delaware
on June 29, 1999.
We acquired Allfirst Capital Trust's common securities in an aggregate
liquidation amount of $3,059,070 at the time of the initial offering. Allfirst
Capital Trust used all the proceeds from the issuance of the old SKATES to
investors and its common securities (collectively, and together with the new
SKATES, the "Capital Securities") to purchase the old Asset Preferred
Securities from Allfirst Asset Trust. Accordingly, the assets of Allfirst
Capital Trust will consist solely of the Asset Preferred Securities.
Allfirst Capital Trust exists for the exclusive purposes of:
. issuing the Capital Securities representing undivided beneficial
ownership interests in the assets of Allfirst Capital Trust;
. investing the gross proceeds of the Capital Securities in the Asset
Preferred Securities;
. issuing new SKATES in the exchange offer and exchanging the old Asset
Preferred Securities for the new ones; and
. engaging in only those other activities necessary or incidental to the
foregoing purposes.
Under the Capital Declaration, there are two administrators (each, a
"Capital Administrator") and two trustees (each, a "Capital Trustee") for
Allfirst Capital Trust, including:
. two Capital Administrators who are employees or officers of or who are
affiliated with Allfirst;
. a property trustee (the "Capital Property Trustee") , which is The Bank
of New York; and
. a Delaware trustee (the "Capital Delaware Trustee"), which is The Bank of
New York (Delaware).
The Bank of New York also acts as trustee under the guarantee of the SKATES,
as Asset Property Trustee under the Asset Declaration and as trustee under the
indenture under which the junior subordinated debenture is issued.
The Capital Property Trustee holds title to the Asset Preferred Securities
for the benefit of the holders of the Capital Securities. As such, the Capital
Property Trustee has the power to exercise all rights, powers and privileges
with respect to the Asset Preferred Securities. In addition, the Capital
Property Trustee maintains exclusive control of the Capital Property Account.
This account is a segregated non-interest bearing bank account to hold all
payments made in respect of the Asset Preferred Securities for the benefit of
the holders of the Capital Securities. The trustee of the guarantee of the
SKATES holds the guarantee for the benefit of the holders of the SKATES.
In accordance with the terms of the Capital Declaration, before a Capital
Enforcement Event occurs, Allfirst, as the holder of all the common securities
of Allfirst Capital Trust, has the right to appoint, remove or replace any of
the Capital Administrators and Capital Trustees and to increase or decrease the
number of Capital Administrators or Capital Trustees, provided that at least
one Capital Trustee must be a Capital Delaware Trustee, at least one Capital
Trustee must be the Capital Property Trustee and there must always be at least
one Capital Administrator. After a Capital Enforcement Event occurs and so long
as it is continuing, holders of the SKATES have the right to appoint, remove or
replace the Capital Property Trustee and the Capital Delaware Trustee in
accordance with the terms of the Capital Declaration.
16
<PAGE>
Allfirst will pay all fees and expenses related to the organization and
operations of Allfirst Capital Trust, including any taxes, duties, assessments
or governmental charges of whatever nature imposed by the United States or any
other domestic taxing authority upon Allfirst Capital Trust (other than
withholding taxes) and on the exchange offer. We also will be responsible for
all debts and obligations of Allfirst Capital Trust, other than those
obligations with respect to the Capital Securities.
For so long as the SKATES remain outstanding, We will be obligated:
. except as described below, to maintain 100% direct ownership of Allfirst
Capital Trust's common securities;
. to cause Allfirst Capital Trust to remain a statutory business trust and
not to voluntarily dissolve, wind-up, liquidate or terminate, except as
permitted by the Capital Declaration; and
. to use commercially reasonable efforts to ensure that Allfirst Capital
Trust will not be:
. an investment company for purposes of the Investment Company Act of
1940, as amended; or
. classified as other than a grantor trust for United States Federal
income tax purposes.
Allfirst or the then holder of Allfirst Capital Trust's common securities
may transfer its interest to a wholly-owned direct or indirect subsidiary of
Allfirst provided that:
. the successor entity expressly accepts the transfer of the obligations as
sole holder of Allfirst Capital Trust's common securities; and
. before any transfer, Allfirst has received an opinion of nationally
recognized independent legal counsel to Allfirst Capital Trust
experienced in these matters to the effect that:
. following any transfer, Allfirst Capital Trust will be classified as a
grantor trust for United States Federal income tax purposes;
. following any transfer, Allfirst and the successor entity will be in
compliance with the Investment Company Act without being subject to
registration as an investment company thereunder; and
. any transfer will not adversely affect the limited liability of the
holders of the SKATES.
The rights of the holders of the SKATES, including economic rights, rights
to information and voting rights, are as set forth in the Capital Declaration
and the Delaware Trust Act. See "Description of the New SKATES." The Capital
Declaration and the guarantee also incorporate by reference the terms of the
Trust Indenture Act.
The location of the principal executive office of Allfirst Capital Trust is
c/o Allfirst Financial Inc., 25 South Charles Street, Baltimore, Maryland
21201. Its telephone number is (410) 244-4000.
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ALLFIRST PREFERRED ASSET TRUST
Allfirst Preferred Asset Trust is a statutory business trust formed under
the Delaware Business Trust Act, pursuant to a declaration of trust, which was
amended and restated in connection with the issuance of the old Asset Preferred
Securities (as amended and restated, the "Asset Declaration"), and the filing
of a certificate of trust with the Secretary of State of the State of Delaware
on June 29, 1999. Allfirst Capital Trust owns all the Asset Preferred
Securities issued by Allfirst Asset Trust. See "Description of the New Asset
Preferred Securities."
We acquired Allfirst Asset Trust's common securities in an aggregate
liquidation amount of $7,674,873 at the time of the initial offering. Allfirst
Asset Trust used all the proceeds from the issuance of the old Asset Preferred
Securities to Allfirst Capital Trust and its common securities (collectively,
together with the new Asset Preferred Securities, the "Asset Securities") to
purchase the old junior subordinated debenture from us and the other permitted
investments described in this prospectus. See "Description of Investments."
Allfirst Asset Trust exists for the exclusive purposes of:
. issuing the Asset Securities representing undivided beneficial ownership
interests in the assets of Allfirst Asset Trust;
. investing the gross proceeds of the Asset Securities in the junior
subordinated debenture and other permitted investments;
. issuing new Asset Preferred Securities in the exchange offer and
exchanging the old junior subordinated debenture for the new one; and
. engaging in only those other activities necessary or incidental to the
foregoing purposes.
Under the Asset Declaration, there are two administrators (each, an "Asset
Administrator") and two trustees for Allfirst Asset Trust (each, an "Asset
Trustee"), including:
. two Asset Administrators who are employees or officers of or who are
affiliated with Allfirst;
. a property trustee (an "Asset Property Trustee" and together with the
Capital Property Trustee, the "property trustees"), which is The Bank of
New York; and
. a Delaware trustee (an "Asset Delaware Trustee" and together with the
Capital Delaware Trustee, the "Delaware trustees"), which is The Bank of
New York (Delaware).
The Bank of New York also acts as trustee under the guarantee of the Asset
Preferred Securities and as Capital Property Trustee under the Capital
Declaration.
The Asset Property Trustee holds title to all the assets of Allfirst Asset
Trust for the benefit of the holders of the Asset Securities. As such, the
Asset Property Trustee has the power to exercise all rights, powers and
privileges with respect to Allfirst Asset Trust's assets. In addition, the
Asset Property Trustee maintains exclusive control of the Asset Property
Account. This account is a segregated non-interest bearing bank account to hold
all payments made in respect of Allfirst Asset Trust's investments for the
benefit of the holders of the Asset Securities. The trustee for the guarantee
of the Asset Preferred Securities holds the guarantee for the benefit of the
holders of the Asset Preferred Securities.
Allfirst Asset Trust has elected to be treated as a partnership (that will
not be treated as a publicly traded partnership) for United States Federal
income tax purposes.
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In accordance with the terms of the Asset Declaration, before an Asset
Enforcement Event occurs, Allfirst, as the holder of all the common securities
of Allfirst Asset Trust, has the right to appoint, remove or replace any of the
Asset Administrators and Asset Trustees and to increase or decrease the number
of Asset Administrators or Asset Trustees, provided that at least one Asset
Trustee must be an Asset Delaware Trustee, at least one Asset Trustee must be
the Asset Property Trustee and there must always be at least one Asset
Administrator. After an Asset Enforcement Event occurs and so long as it is
continuing, holders of the SKATES (or the holders of the Asset Preferred
Securities in the event Asset Preferred Securities are distributed to holders
of the Capital Securities) have the right to appoint, remove or replace the
Asset Property Trustee and the Asset Delaware Trustee in accordance with the
terms of the Asset Declaration.
Holder of Common Securities of Allfirst Asset Trust
We will pay all fees and expenses related to the organization and operations
of Allfirst Asset Trust, including any taxes, duties, assessments or
governmental charges of whatever nature imposed by the United States or any
other domestic taxing authority upon Allfirst Asset Trust, other than
withholding taxes. We also will be responsible for all debts and obligations of
Allfirst Asset Trust, other than those obligations with respect to the Asset
Securities.
For so long as the SKATES remain outstanding, we will be obligated:
. except as described below, to maintain 100% direct ownership of Allfirst
Asset Trust's common securities, which will at all times represent at
least 1% of the total capital of Allfirst Asset Trust;
. to cause Allfirst Asset Trust to remain a statutory business trust and
not to voluntarily dissolve, wind-up, liquidate or terminate, except as
permitted by the Asset Declaration; and
. to use commercially reasonable efforts to ensure that Allfirst Asset
Trust will not be:
. an investment company for purposes of the Investment Company Act of
1940; or
. an association or a publicly traded partnership taxable as a corporation
for United States Federal income tax purposes.
Allfirst or the then holder of Allfirst Asset Trust's common securities may
transfer its interest to a wholly-owned direct or indirect subsidiary of
Allfirst provided that:
. the successor entity expressly accepts the transfer of the obligations as
sole holder of Allfirst Asset Trust's common securities; and
. before any transfer, Allfirst has received an opinion of nationally
recognized independent legal counsel to Allfirst Asset Trust experienced
in these matters to the effect that:
. Allfirst Asset Trust will be treated as a partnership for United States
Federal income tax purposes;
. any transfer would not cause Allfirst Asset Trust to be classified as an
association or a publicly traded partnership taxable as a corporation
for United States Federal income tax purposes;
. following any transfer, Allfirst and the successor entity will be in
compliance with the Investment Company Act without being subject to
registration as an investment company; and
. any transfer will not adversely affect the limited liability of the
holders of the Asset Preferred Securities.
Distributions to Holder of Common Securities
Immediately following completion of the initial placement of the old SKATES,
the junior subordinated debenture constituted 95% of Allfirst Asset Trust's
assets and other investments constituted 5% of its assets. See "Description of
Investments." To the extent that the earnings Allfirst Asset Trust receives on
its
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investments exceed distributions accrued or payable with respect to the Asset
Preferred Securities, Allfirst Asset Trust may at times have excess funds.
Also, the holders of the Asset Preferred Securities are not entitled to
deferred or late interest payments on the junior subordinated debenture or
income on other permitted investments prior to the liquidation of Allfirst
Asset Trust. The Asset Property Trustee will allocate and distribute these
funds in accordance with the distribution instructions set forth in the Asset
Declaration to Allfirst, as holder of the common securities of Allfirst Asset
Trust, as described below.
On December 20 of each year, commencing December 20, 1999, the Asset
Property Trustee will distribute to the holder of the common securities the
maximum amount of undistributed income of Allfirst Asset Trust that may be
distributed on the applicable distribution payment date after taking into
account the following guidelines:
. The Asset Property Trustee shall not make any distribution to the holder
of the common securities if, on the distribution payment date, after
giving effect to that distribution, the distribution would cause the book
value of the junior subordinated debenture to comprise more than 95% of
the book value of all the assets of Allfirst Asset Trust.
. So long as Allfirst has not deferred interest payments on the junior
subordinated debenture, unless the failure to make any distribution on
the applicable distribution payment date to the holder of the common
securities would cause the book value of the junior subordinated
debenture to comprise less than 92% of the book value of all of the
assets of Allfirst Asset Trust, the Asset Property Trustee shall not make
any distribution to such holder on such distribution payment date. If the
failure to make such distribution would cause the junior subordinated
debenture to comprise less than 92% of the book value of all of the
assets of Allfirst Asset Trust, the Asset Property Trustee may make a
distribution of income of Allfirst Asset Trust to the holder of the
common securities only to the extent necessary to ensure that the book
value of the junior subordinated debenture comprises no less than 92% of
the book value of all of the assets of Allfirst Asset Trust.
. After Allfirst defers interest payments on the junior subordinated
debenture, unless the failure to make any distribution on the applicable
distribution payment date to the holder of the common securities would
cause the book value of the junior subordinated debenture to comprise
less than 85% of the book value of all of the assets of Allfirst Asset
Trust, the Asset Property Trust shall not make any distribution to such
holder on such distribution payment date. If the failure to make such
distribution would cause the junior subordinated debenture to comprise
less than 85% of the book value of all of the assets of Allfirst Asset
Trust, the Asset Property Trustee shall make a distribution of income of
Allfirst Asset Trust to the holder of the common securities only to the
extent necessary to ensure that the book value of the junior subordinated
debenture comprises no less than 85% of the book value of all of the
assets of Allfirst Asset Trust.
. Notwithstanding the first and second bullet points above, the Asset
Property Trustee shall distribute to the holder of the common securities
income of Allfirst Asset Trust, in an amount equal to no greater than 37%
of the net income of Allfirst Asset Trust for the calendar year in which
the related distribution payment date falls, that is attributable to
Allfirst Asset Trust's assets other than payments of deferred interest
made on the junior subordinated debentures (a "Tax Amount") to the extent
that such Tax Amount has not already been distributed to such holder for
such calendar year.
Rights of Holders of Asset Preferred Securities
The rights of the holders of the Asset Preferred Securities, including
economic rights, rights to information and voting rights, are set forth in the
Asset Declaration and the Delaware Trust Act. See "Description of the Asset
Preferred Securities."
The location of the principal executive office of Allfirst Asset Trust is
c/o Allfirst Financial Inc., 25 South Charles Street, Baltimore, Maryland
21201. Its telephone number is (410) 244-4000.
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THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
In connection with the sale of the old SKATES to institutional investors,
Allfirst and the trusts agreed:
. to use their reasonable efforts to file a registration statement covering
the exchange of old SKATES for new SKATES with the SEC by October 7,
1999;
. to use their reasonable efforts to cause the registration statement to
become effective by January 5, 2000; and
. to complete the exchange offer by February 4, 2000.
The registration rights agreement has been filed as an exhibit to the
registration statement of which this prospectus is a part.
If Allfirst and the trusts fail to satisfy their obligations under the
registration rights agreement, then the distribution rate on the old SKATES
will increase by 0.50% per year and the interest rate on the old junior
subordinated debenture will also increase by 0.50% per year. Once the exchange
offer is completed, holders of old SKATES will not be entitled to any increase
in the distribution rate or any further registration rights under the
registration rights agreement.
The exchange offer is not being made to, nor will Allfirst or Allfirst
Capital Trust accept tenders for exchange from, holders of old SKATES in any
jurisdiction in which the exchange offer or its acceptance would not be in
compliance with the securities or blue sky laws of that jurisdiction.
Unless the context requires otherwise, the term "holder," with respect to
the exchange offer, means any person in whose name old SKATES are registered
on the books of Allfirst Capital Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
old SKATES are held of record by The Depository Trust Company and who desires
to deliver its old SKATES by book-entry transfer at The Depository Trust
Company.
Terms of the Exchange
Allfirst and the trusts are offering, on the terms and subject to the
conditions set forth in this prospectus and in the accompanying letter of
transmittal, to exchange up to $100,000,000 aggregate liquidation amount of
new SKATES for a like amount of old SKATES properly tendered on or prior to
the expiration date and not properly withdrawn in accordance with the
procedures described below. Holders may tender their old SKATES in whole or in
part in a liquidation amount of not less than $100,000 or any integral
multiple of $1,000 in excess thereof.
The exchange offer is not conditioned on any minimum amount of old SKATES
being tendered. As of the date of this prospectus $100,000,000 aggregate
liquidation amount of the old SKATES are outstanding. Holders of old SKATES do
not have any appraisal or dissenters' rights in connection with the exchange
offer. Old SKATES which are not tendered in the exchange offer or are tendered
but not accepted will remain outstanding and be entitled to the benefits of
the Capital Declaration, but will not be entitled to any further registration
rights.
Holders who tender old SKATES in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
letter of transmittal, transfer taxes with respect to the exchange of old
SKATES. Allfirst will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. See
"--Fees and Expenses."
Neither the board of directors of Allfirst nor the trustees of the trusts
makes any recommendation to holders of old SKATES as to whether to participate
in the exchange offer. In addition, no one has been authorized to make any
such recommendation. Holders of old SKATES must make their own decision
whether to tender pursuant to the exchange offer and, if so, the aggregate
amount of old SKATES to tender, after reading this prospectus and the letter
of transmittal and consulting with their advisers, if any, based on their own
financial position and requirements.
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Expiration Date; Extensions; Amendments
The exchange offer will expire at 5:00 p.m., New York City time, on December
20, 1999, unless extended by Allfirst and the trusts. Allfirst and the trusts
expressly reserve the right in their sole and absolute discretion, subject to
applicable law, at any time and from time to time:
. to delay acceptance of old SKATES for exchange;
. to terminate the exchange offer, whether or not any old SKATES have been
accepted for exchange, if Allfirst and the trusts determine, in their
sole and absolute discretion, that any of the events or conditions
referred to under "--Conditions to the Exchange Offer" have occurred or
exist or have not been satisfied;
. to extend the expiration date of the exchange offer and retain all old
SKATES tendered, subject, however, to the right of holders to withdraw
their tendered old SKATES; and
. to waive any condition or otherwise amend the terms of the exchange offer
in any respect.
If the exchange offer is amended in a material manner, or if Allfirst and
the trusts waive a material condition of the exchange offer, then Allfirst or
either trust will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders of the old
SKATES, and Allfirst and the trusts will extend the exchange offer to the
extent required by Rule 14e-1 under the 1934 Act.
Allfirst will promptly notify the exchange agent of any delay in acceptance,
extension, termination or amendment and will make a public announcement of the
action. In the event of an extension, public announcement will be made no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date. Neither Allfirst nor either trust has any
obligation to publish, advertise or otherwise communicate any public
announcement other than by issuing a release to an appropriate news agency.
Eligibility
If you wish to exchange your old SKATES for new SKATES in the exchange
offer, then you will represent to us in the letter of transmittal that:
. you are not an affiliate of Allfirst or either trust within the meaning
of the 1933 Act;
. you are acquiring new SKATES in the ordinary course of your business; and
. you:
.are not engaged in;
.do not intend to engage in; and
.have no arrangement or understanding with any person to participate in,
a public distribution (within the meaning of the 1933 Act) of the new SKATES.
You may not be eligible to participate in the exchange offer. If:
. you are an affiliate of Allfirst; or
. you intend to participate in the exchange offer for the purpose of
distributing your new SKATES; or
. you are a broker-dealer who purchased your SKATES from Allfirst Capital
Trust to resell pursuant to Rule 144A or any other available exemption
under the Securities Act,
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then you:
. will not be able to rely on the SEC staff interpretation discussed under
"-- Resales of New SKATES";
. may not tender your old SKATES in the exchange offer; and
. must comply with the registration and prospectus delivery requirements of
the 1933 Act (including any exemptions) in connection with any sale or
transfer of your old SKATES.
Other Registration Rights
If you:
. are prohibited by law or policy of the SEC from participating in the
exchange offer; or
. may not resell new SKATES to the public without delivering a prospectus
and this prospectus is not appropriate or available for your resales; or
. are a broker-dealer that acquired your old SKATES directly from Allfirst,
one of the trusts or their affiliates
then you must notify us of your special status at least 20 days prior to the
expiration date of the exchange offer. If you fit within one of the above
categories and you notify us in a timely fashion, then we and the trusts are
obligated to use our reasonable best efforts:
. to file a shelf registration statement covering your old SKATES with the
SEC within 120 days after the date we receive your notice;
. to cause the shelf registration statement to become effective within 180
days after the date we receive your notice; and
. to keep the shelf registration statement effective until July 9, 2001 at
the latest.
Upon effectiveness of the shelf registration statement, you would then be
able to resell your old SKATES free of restrictions. Our and your rights and
responsibilities with respect to the shelf registration statement are set forth
in detail in the registration rights agreement.
Acceptance for Exchange and Issuance of New SKATES
In all cases, the exchange agent will deliver new SKATES in exchange for old
SKATES tendered and accepted for exchange in the exchange offer only after it
has timely received:
. old SKATES or a book-entry confirmation of a book-entry transfer of old
SKATES into the exchange agent's account at The Depositary Trust Company
("DTC");
. the letter of transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees; and
. any other documents required by the letter of transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of old SKATES into the exchange agent's account at DTC.
Subject to the terms and conditions of the exchange offer, Allfirst and the
trusts will be deemed to have accepted for exchange, and thereby exchanged, old
SKATES validly tendered and not withdrawn as, if and when Allfirst or the
trusts give oral or written notice to the exchange agent of their acceptance of
the old SKATES for exchange.
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The exchange agent will act as agent for us and the trusts for the purpose
of receiving tenders of old SKATES, letters of transmittal and related
documents, and as agent for tendering holders for the purpose of receiving old
SKATES, letters of transmittal and related documents and transmitting new
SKATES to validly tendering holders.
The exchange of SKATES will be made on or promptly after the expiration
date of the exchange offer. If:
. for any reason whatsoever, acceptance for exchange or the exchange of any
old SKATES is delayed (whether before or after our and the trusts'
acceptance for exchange of old SKATES); or
. we or the trusts extend the exchange offer; or
. we or the trusts are unable to accept for exchange or exchange old SKATES
tendered in the exchange offer,
then, without prejudice to our or the trusts' rights set forth in this
prospectus, the exchange agent may, nevertheless, on behalf of Allfirst and
the trusts and subject to Rule 14e-1(c) under the 1934 Act, retain tendered
old SKATES and such old SKATES may not be withdrawn except to the extent
tendering holders are entitled to withdrawal rights.
You will warrant and agree in the letter of transmittal:
. that you have full power and authority to tender, exchange, sell, assign
and transfer old SKATES;
. that Allfirst Capital Trust will acquire good, marketable and
unencumbered title to your old SKATES, free and clear of all liens,
restrictions, charges and encumbrances; and
. that your old SKATES are not subject to any adverse claims or proxies.
You will also warrant and agree that you will, upon request, execute and
deliver any additional documents deemed by Allfirst, the trusts or the
exchange agent to be necessary or desirable to complete the exchange, sale,
assignment, and transfer of the old SKATES tendered in the exchange offer.
Procedures for Tendering Old SKATES
Valid Tender. In order for your old SKATES to be validly tendered in the
exchange offer, you must do one of the following:
. complete, sign and date the letter of transmittal (or a facsimile of it),
have the signature guaranteed if the letter of transmittal so requires,
and mail or deliver the executed letter of transmittal to the exchange
agent prior to the expiration date, or
. comply with DTC's Automated Tender Offer Program described below.
In addition, one of the following events must occur:
. the exchange agent must receive certificates for your old SKATES; or
. the exchange agent must receive a book-entry confirmation of the book-
entry transfer of your old SKATES, or
. you must comply with the guaranteed delivery procedures described below.
If you tender less than all of your old SKATES, then you should fill in the
amount of old SKATES being tendered in the appropriate box on the letter of
transmittal. If you do not, then the entire amount of your old SKATES will be
deemed to have been tendered.
The method of delivery of old SKATES, the letter of transmittal and all
other required documents is at the option and sole risk of the tendering
holder, and delivery will be deemed made only when actually received by the
exchange agent. Registered mail, return receipt requested, properly insured,
or an overnight delivery service, is recommended. In all cases, sufficient
time should be allowed to ensure timely delivery.
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Book-entry Transfer. The exchange agent will establish an account at DTC for
purposes of receiving book-entry deliveries of old SKATES within two business
days after the date of this prospectus. Any broker, dealer, bank or other
financial institution that is a participant in DTC's book-entry transfer
facility system may make a book-entry delivery of old SKATES by causing DTC to
transfer the old SKATES into the exchange agent's account at DTC. However, the
exchange agent must still receive an agent's message (as described in the next
paragraph) or your letter of transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees and any
other required documents, on or prior to the expiration date, or the guaranteed
delivery procedure set forth below must be complied with.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's Automated Tender Offer
Program to tender old SKATES. A DTC participant may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit its acceptance of the exchange offer electronically.
The participant may do so by causing DTC to transfer the old SKATES to the
exchange agent in accordance with DTC's procedures for transfer. DTC will then
send an agent's message to the exchange agent. An "agent's message" is a
message received by the exchange agent from DTC that forms a part of the book-
entry confirmation and that has the following effect:
. DTC has received an express acknowledgement from a participant in DTC's
Automated Tender Offer Program that the participant is tendering old
SKATES that are the subject of a book-entry confirmation;
. the participant has received and agrees to be bound by the terms of the
letter of transmittal or, in the case of an agent's message relating to
guaranteed delivery, that the participant has received and agrees to be
bound by the applicable notice of guaranteed delivery; and
.the agreement may be enforced against the participant.
Delivery of documents to DTC does not constitute delivery to the exchange
agent.
Signature Guarantees. You do not need to endorse certificates for the old
SKATES and you do not need to get signature guarantees on the letter of
transmittal unless:
. a certificate for the old SKATES is registered in a name other than that
of the person surrendering the certificate; or
. a registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the letter of
transmittal.
In either case, the certificates for the old SKATES must be duly endorsed or
accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the letter of transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the 1934 Act as an
"eligible guarantor institution," including (as the following terms are defined
in Rule 17Ad-15):
. a bank;
. a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer;
. a credit union;
. a national securities exchange, registered securities association or
clearing agency; or
. a savings association that is a participant in a Securities Transfer
Association (each an "Eligible Institution"). See Instruction 1 to the
letter of transmittal.
Guaranteed Delivery. If you desire to tender old SKATES and:
. your certificates are not immediately available; or
. time will not permit all required documents to reach the exchange agent
on or before the expiration date of the exchange offer; or
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. the procedures for book-entry transfer cannot be completed on a timely
basis,
then you may nevertheless tender your old SKATES, as long as all of the
following guaranteed delivery procedures are complied with:
. your tender is made by or through an Eligible Institution;
. the exchange agent receives your properly completed and duly executed
notice of guaranteed delivery, substantially in the form accompanying the
letter of transmittal, on or prior to the expiration date; and
. the exchange agent receives the certificates or a book-entry confirmation
representing your tendered old SKATES, in proper form for transfer,
together with a properly completed and duly executed letter of
transmittal (or facsimile thereof), with any required signature
guarantees and any other documents required by the letter of transmittal,
within three New York Stock Exchange trading days after the date of
execution of the notice of guaranteed delivery.
The notice of guaranteed delivery may be delivered by hand or transmitted by
facsimile or mail to the exchange agent and must include a signature guarantee
(as described above) in the form set forth in the notice.
The acceptance by Allfirst and the trusts of old SKATES tendered pursuant to
any of the procedures described above will constitute a binding agreement
between the tendering holder, Allfirst and the trusts upon the terms and
subject to the conditions of the exchange offer.
Determination of Validity. Allfirst Capital Trust will determine all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tendered old SKATES, in its sole
discretion. Allfirst and the trusts reserve the absolute right, in their sole
and absolute discretion, to reject any and all tenders determined by them not
to be in proper form or the acceptance of which, or exchange for, may, in the
view of counsel to Allfirst and the trusts, be unlawful. Allfirst and the
trusts also reserve the absolute right, subject to applicable law:
. to waive any of the conditions of the exchange offer as set forth under
"--Conditions to the Exchange Offer;" or
. to waive any condition or irregularity in any tender of old SKATES of any
particular holder, whether or not similar conditions or irregularities
are waived in the case of other holders.
Our and the trusts' interpretation of the terms and conditions of the
exchange offer (including the letter of transmittal) will be final and binding.
No tender of old SKATES will be deemed to have been validly made until all
irregularities with respect to such tender have been cured or waived. Neither
Allfirst, the trusts, any affiliates or assigns of Allfirst, the trusts, the
exchange agent nor any other person shall be under any duty to give any
notification of any irregularities in tenders or incur any liability for
failure to give any such notification.
If you are signing the letter of transmittal, any endorsement, bond power,
power of attorney, or any other document required by the letter of transmittal,
as trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then you must so indicate when signing and must submit proper evidence of your
authority, unless waived by Allfirst or either trust Capital Trust.
In all cases, the exchange agent will deliver new SKATES in exchange for old
SKATES tendered and accepted for exchange in the exchange offer only after
timely receipt by the exchange agent of old SKATES, or of a book-entry
confirmation with respect to old SKATES, and either an agent's message from DTC
or a properly completed and duly executed letter of transmittal (or facsimile
thereof), together with any required signature guarantees and any other
documents required by the letter of transmittal. Accordingly, new SKATES might
not be delivered to all tendering holders at the same time.
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If your old SKATES are held by or registered in the name of a broker,
dealer, commercial bank, trust company or other nominee or custodian, then you
should contact that person promptly if you want to participate in the exchange
offer.
Resales of New SKATES
Based on existing interpretations of the 1933 Act by the staff of the SEC
set forth in several no-action letters to third parties, and subject to the
immediately following sentence, we and the trusts believe that the new SKATES,
the new Asset Preferred Securities, the new junior subordinated debenture and
the new guarantees may be offered for resale, resold and otherwise transferred
by the holders thereof (other than holders who are broker-dealers) without
further compliance with the registration and prospectus delivery provisions of
the 1933 Act. However, if you:
. are an affiliate of Allfirst; or
. intend to participate in the exchange offer for the purpose of
distributing your new SKATES; or
. are a broker-dealer who purchased your SKATES from Allfirst Capital Trust
to resell pursuant to Rule 144A or any other available exemption under
the 1933 Act,
then you:
. will not be able to rely on the interpretation of the SEC staff set forth
in the above-mentioned no-action letters;
. will not be entitled to tender your old SKATES in the exchange offer; and
. must comply with the registration and prospectus delivery requirements of
the 1933 Act in connection with any sale or transfer of your old SKATES
unless an exemption is available.
We and the trusts have not sought our own no-action letter and there can be
no assurance that the SEC staff would make a similar determination with respect
to the exchange offer as it has in prior no-action letters to third parties.
If:
. you are a broker-dealer participating in the exchange offer (a
"Participating Broker-Dealer"); and
. you acquired old SKATES for your own account as a result of market making
or other trading activities,
then you must deliver a prospectus meeting the requirements of the 1933 Act in
connection with any resales of new SKATES. The SEC has taken the position that
you may fulfill your prospectus delivery requirements (other than in connection
with resale of an unsold allotment from the original sale of the old SKATES)
with this prospectus. Under the registration rights agreement, Allfirst Capital
Trust must allow you, and any other persons subject to similar prospectus
delivery requirements, to use this prospectus in connection with the resale of
new SKATES.
In that regard, as a Participating Broker-Dealer, you will be deemed to have
agreed, by execution of the letter of transmittal, that you will suspend the
sale of new SKATES pursuant to this prospectus upon receipt of notice from
Allfirst or either trust of the occurrence of any event or the discovery of any
fact which makes any statement contained or incorporated by reference in this
prospectus untrue in any material respect or which causes this prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain
other events specified in the registration rights agreement. You may not resume
sales of new SKATES until:
. Allfirst or the trusts have amended this prospectus to correct the
misstatement or omission and have furnished you copies of the amended
prospectus; or
. you have been otherwise notified that you may resume the sale of the new
SKATES.
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Withdrawal Rights
Except as otherwise provided in this prospectus, you may withdraw a tender
of your old SKATES at any time on or prior to the expiration date of the
exchange offer. In order for your withdrawal to be effective, the exchange
agent must receive your written withdrawal notice (by telegraph, telex or
facsimile transmission) on or prior to the expiration date. Your notice of
withdrawal must specify:
. the name of the person who tendered the old SKATES to be withdrawn;
. the aggregate principal amount of old SKATES to be withdrawn; and
. if certificates for the old SKATES have been tendered, the name of the
registered holder of the old SKATES if different from that of the person
who tendered such old SKATES.
If a certificate for old SKATES has been delivered or otherwise identified
to the exchange agent, then prior to the physical release of the old SKATES:
. the tendering holder must submit the serial numbers shown on the
certificate; and
. the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution (except in the case of old SKATES tendered for the
account of an Eligible Institution).
If old SKATES have been tendered by book-entry transfer, then the notice of
withdrawal must also specify the name and number of the account at DTC to be
credited with the withdrawal of old SKATES.
You may not change your mind and revoke a withdrawal notice before the
withdrawal process has been completed. You may re-tender old SKATES that have
been withdrawn at any subsequent time on or prior to the expiration date by
following any of the procedures described above under "--Procedures for
Tendering Old SKATES." Any old SKATES which have been tendered but which are
withdrawn will be returned to the holder thereof promptly after withdrawal.
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by Allfirst and the
trusts, in their sole discretion, and their determination shall be final and
binding on all parties. Neither Allfirst, the trusts, any affiliates or assigns
of Allfirst or the trusts, the exchange agent nor any other person:
. is under any duty to give you any notification of any irregularities in a
notice of withdrawal; and
. will incur any liability for failure to give you any notification of any
irregularities.
Distributions on New SKATES
If your old SKATES are accepted for exchange, then you will not receive any
distributions on your old SKATES for any period from the last distribution date
for old SKATES or, if no distributions have been made, from the original issue
date, to the exchange date. Your new SKATES will be treated as having been
outstanding from last distribution date or the original issue date, and the
amount of any distributions you are entitled receive will not be affected by
the exchange.
Conditions to the Exchange Offer
If Allfirst or Allfirst Capital Trust determines, in its sole and absolute
discretion, that any of the following events or conditions has occurred or
exists or has not been satisfied:
. there is a change in the current interpretation by the SEC staff
permitting resales of new SKATES issued in the exchange offer without
compliance with the registration and prospectus delivery provisions of
the 1933 Act, as described under "-- Resales of New SKATES"; or
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. any action or proceeding is instituted or threatened in any court or by
or before any governmental agency or body with respect to the exchange
offer that, in our and Allfirst Capital Trust's judgment, would
reasonably be expected to impair our ability to proceed with the exchange
offer; or
. any law, statute, rule or regulation is adopted or enacted that, in our
and Allfirst Capital Trust's judgment, would reasonably be expected to
impair our ability to proceed with the exchange offer; or
. a banking moratorium is declared by United States federal or Maryland or
New York State authorities that, in our and Allfirst Capital Trust's
judgment, would reasonably be expected to impair our ability proceed with
the exchange offer; or
. trading on the New York Stock Exchange or generally in the United States
over-the-counter market is suspended by order of the SEC or any other
governmental authority, and the suspension, in our and Allfirst Capital
Trust's judgment, would reasonably be expected to impair our ability to
proceed with the exchange offer; or
. a stop order is issued by the SEC or any state securities authority
suspending the effectiveness of the registration statement or proceedings
are initiated or, to the knowledge of Allfirst or Allfirst Capital Trust,
threatened for that purpose; or
. any change, or any development involving a prospective change, in the
business or financial affairs of Allfirst or the trusts or any of their
subsidiaries has occurred which, in the sole judgment of Allfirst and
Allfirst Capital Trust, might materially impair their ability to proceed
with the exchange offer;
then we and Allfirst Capital Trust may determine (subject to applicable law):
. to terminate the exchange offer (whether or not any old SKATES have been
accepted for exchange); or
. to waive any condition or otherwise amend the terms of the exchange offer
in any respect.
If any waiver or amendment constitutes a material change to the exchange
offer, then we and the trusts will promptly disclose the action by means of a
prospectus supplement that will be distributed to the registered holders of the
old SKATES, and we and the trusts will extend the exchange offer to the extent
required by Rule 14e-1 under the 1934 Act.
Exchange Agent
The Bank of New York has been appointed as exchange agent for the exchange
offer. Delivery of the letters of transmittal and any other required documents,
questions, requests for assistance, and requests for additional copies of this
prospectus or of the letter of transmittal should be directed to the exchange
agent as follows:
The Bank of New York
101 Barclay Street
Floor 7E
New York, New York 10286
Attention: Reorganization Department
Telephone: (212) 815-5920
Facsimile: (212 815-6339
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
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Fees and Expenses
We will pay the exchange agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection with the exchange offer. We will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this prospectus and related documents
to the beneficial owners of old SKATES, and in handling or tendering for their
customers.
If you tender your old SKATES for exchange, you will not be obligated to pay
any transfer taxes in connection with the exchange. If, however, your new
SKATES are to be delivered to, or are to be issued in the name of, any person
other than the registered holder of the old SKATES tendered, or if a transfer
tax is imposed for any reason other than the exchange of old SKATES in
connection with the exchange offer, then the tendering holder must pay the
amount of any transfer taxes (whether imposed on the registered holder or any
other persons). If you do not submit satisfactory evidence of payment of any
transfer taxes (or your exemption therefrom) with the letter of transmittal,
then the amount of the transfer taxes will be billed directly to the tendering
holder.
Neither we nor the trusts will make any payment to brokers, dealers or
others soliciting acceptances of the exchange offer.
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DESCRIPTION OF THE NEW SKATES
The new SKATES will be issued under the terms of the Capital Declaration.
The Capital Declaration will be qualified under the Trust Indenture Act, and
upon consummation of the exchange offer, the Capital Declaration will be
subject to and governed by the Trust Indenture Act. The terms of the SKATES
will include those stated in the Capital Declaration and those made part of
the Capital Declaration by the Trust Indenture Act. The following summary of
the material terms and provisions of the new SKATES is not complete and is
subject to, and qualified in its entirety by reference to, the Capital
Declaration, the Delaware Trust Act and the Trust Indenture Act.
The new SKATES will be issued in fully registered form without coupons. See
"--Form of SKATES."
The Capital Declaration authorizes and directs the Capital Administrators
to issue the Capital Securities, which represent undivided beneficial
ownership interests in the assets of Allfirst Capital Trust. The only assets
of Allfirst Capital Trust are the Asset Preferred Securities. Title to the old
Asset Preferred Securities is, and to the new Asset Preferred Securities will
be, held by the Capital Property Trustee for the benefit of the holders of the
Capital Securities, unless Asset Preferred Securities are distributed to
holders of the Capital Securities as described under "--Capital Special Event
Redemption or Distribution."
The payment of distributions out of money held by Allfirst Capital Trust,
and payments out of money held by Allfirst Capital Trust upon redemption of
the SKATES or liquidation of Allfirst Capital Trust, are guaranteed by
Allfirst to the extent described under "Description of the New Capital
Guarantee." Under its guarantee of the old and new SKATES (the "Capital
Guarantee"), First Maryland also guarantees that you will receive the Asset
Preferred Securities if Allfirst Capital Trust decides to liquidate and
distribute the Asset Preferred Securities to you as described under "--Capital
Special Event Redemption or Distribution."
The Capital Guarantee is held by The Bank of New York, as trustee (the
"Capital Guarantee Trustee"), for the benefit of the holders of the SKATES.
The Capital Guarantee does not cover payments when Allfirst Capital Trust does
not have sufficient available funds to make such payments. In any event of
non-payment, holders of the SKATES will have the remedies described below
under "--Capital Enforcement Events."
The new SKATES will not be registered under the 1934 Act unless required by
the rules and regulations thereunder.
Distributions
Allfirst Capital Trust will make distributions to each holder of a SKATES
in an amount equal to that holder's pro rata share of the distributions
Allfirst Capital Trust receives with respect to the Asset Preferred Securities
or from payments made on the Asset Guarantee. Distributions on the Asset
Preferred Securities on each distribution payment date, in turn, will be made
by Allfirst Asset Trust from interest, other than deferred interest, paid on
the junior subordinated debenture on the interest payment date immediately
following the corresponding quarterly period.
The distribution rate on the SKATES will be at a rate per annum of three-
month LIBOR plus 1.50% of the stated liquidation amount of $1,000 per SKATES,
reset quarterly, and will be calculated on the basis of the actual number of
days elapsed during the related Distribution Period (as defined below) and a
360-day year. The distributions will be paid if, as and when Allfirst Capital
Trust has funds available for distribution. Distributions on the SKATES will
be payable quarterly on each January 15, April 15, July 15 and October 15,
commencing October 15, 1999 if, as and when funds are available for payment,
by the Capital Property Trustee, except as otherwise described below. Until
January 15, 2000, the distribution rate on the SKATES is 7.68% per year.
If your old SKATES are accepted for exchange, then you will not receive any
further distributions on your old SKATES for any period from the last
distribution date for old SKATES or, if no distributions have been
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made, from the original issue date, to the exchange date. Your new SKATES will
be treated as having been outstanding from the last distribution date or the
original issue date, and the amount of any distributions you are entitled to
receive will not be affected by the exchange.
The distributions on the SKATES are non-cumulative. This means that if
Allfirst Capital Trust does not declare and pay a distribution on a
distribution payment date, holders of the SKATES will not receive and will have
no right to receive that distribution at any time, even if Allfirst Capital
Trust pays distributions on the SKATES in the future.
Distributions on the SKATES will be payable to their holders as they appear
on the books and records of Allfirst Capital Trust on the relevant record
dates, which will be one Business Day, as defined below, before the relevant
distribution payment dates. These distributions will be paid through the
Capital Property Trustee who will hold payments received in respect of the
Asset Preferred Securities in the Capital Property Account for the benefit of
the holders of the Capital Securities. Subject to any applicable laws and
regulations and the provisions of the Capital Declaration, each payment will be
made as described under "--Form of SKATES" below. In the event that the SKATES
do not remain in book-entry only form, the relevant record dates shall be the
first day of the month of the relevant payment dates. In the event that any
date on which distributions are payable on the SKATES is not a Business Day,
payment of the distribution payable on that date will be made on the next
succeeding day which is a Business Day, without any interest or other payment
in respect of the distribution subject to delay, except that, if that Business
Day falls in the next succeeding calendar year, the relevant payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on the scheduled payment date.
A "Business Day" shall mean any day other than a day on which banking
institutions in The City of New York or The City of Baltimore, Maryland are
authorized or required by law or executive order to close.
Calculations of LIBOR
Three-month LIBOR will be calculated in the following manner with respect to
calculations of the distribution rate on the SKATES and the Asset Preferred
Securities and the interest rate on the junior subordinated debenture. On each
Determination Date, The Bank of New York, as calculation agent for First
Maryland Bancorp, will determine the three-month LIBOR rate. The three-month
LIBOR rate for any Determination Date will be the rate for deposits in U.S.
dollars having a three-month maturity which appears on Telerate Page 3750, as
defined below, as of 11:00 a.m., London time, on that Determination Date.
"Determination Date" means, with respect to any Distribution Period, the
second London Business Day, as defined below, immediately preceding the first
day of the Distribution Period.
"Distribution Period" means with respect to any distribution payment date,
the period from and including the immediately preceding distribution payment
date to but excluding that distribution payment date, or in the case of the
initial Distribution Period, the period from the original issue date of the
SKATES to but excluding the initial distribution payment date.
"Telerate Page 3750" means the display page so designated by Bridge
Telerate, Inc. or such page as may replace that page or any successor service
as may be nominated by the British Bankers' Association for the purpose of
displaying London interbank offered rates for U.S. dollar deposits.
"London Business Day" means any day on which commercial banks and foreign
exchange markets are open for business, including dealings in foreign exchange
and foreign currency deposits, in The City of London.
If three-month LIBOR does not appear on Telerate Page 3750 on a
Determination Date, three-month LIBOR will be the arithmetic mean rounded if
necessary, to the nearest one hundred-thousandth of a
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percentage point, with five one-millionths of a percentage point rounded
upwards, of the rates (expressed as percentages per annum) for Eurodollar
deposits having a three-month maturity that appear on Reuters Monitor Money
Rates Page LIBO ("Reuters Page LIBO") as of 11:00 a.m. (London time) on that
Determination Date.
If the three-month LIBOR rate for Eurodollar deposits does not appear on
Reuters Page LIBO as of 11:00 a.m. (London time) on a Determination Date, the
three-month LIBOR rate will be determined on the basis of the rates at which
deposits in U.S. dollars are offered by four major banks in the London
interbank market selected by the calculation agent (after consultation with
Allfirst) (the "Reference Banks") at approximately 11:00 a.m., London time, on
that Determination Date to prime banks in the London interbank market. The
calculation agent will request the principal London office of each Reference
Bank to provide a quotation of its rate. If at least two quotations are
provided, the three-month LIBOR rate on that Determination Date will be the
arithmetic mean, rounded if necessary, to the nearest one hundred-thousandth of
a percentage point, with five one-millionths of a percentage point rounded
upwards, of those quotations.
If fewer than two quotations are provided, the three-month LIBOR rate on
that Determination Date will be the arithmetic mean, rounded if necessary, to
the nearest one hundred-thousandth of a percentage point, with five one-
millionths of a percentage point rounded upwards, of the rates quoted by four
major banks in New York City selected by the calculation agent (after
consultation with Allfirst) at approximately 11:00 a.m., New York City time, on
that Determination Date for loans in U.S. dollars to leading European banks;
provided, however, that if the banks in New York City selected as previously
described above by the calculation agent are not quoting rates as mentioned in
this sentence, the three-month LIBOR rate for that Distribution Period will be
the three-month LIBOR rate in effect on the day immediately preceding the
related Determination Date.
If the rate for Eurodollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 or Reuters Page LIBO, as the case may
be, as of 11:00 a.m. (London time) on a Determination Date is superseded on
Telerate Page 3750 or Reuters Page LIBO, respectively, by a corrected rate
before 12:00 noon (London time) on that Determination Date, the corrected rate
as so substituted on the applicable page will be the applicable three-month
LIBOR rate for that Determination Date.
The determination of the three-month LIBOR rate on any Determination Date by
the calculation agent shall, in the absence of manifest error, be final and
binding.
Limitations on Payment of Distributions
Distributions on the SKATES will be made to the extent that Allfirst Capital
Trust has funds available for the payment of the distributions in the Capital
Property Account. Amounts available to Allfirst Capital Trust for distribution
to the holders of the SKATES will be limited to payments received by Allfirst
Capital Trust from Allfirst Asset Trust with respect to the Asset Preferred
Securities or from Allfirst on Allfirst's guarantee of the Asset Preferred
Securities (the "Asset Guarantee" and together with the Capital Guarantee, the
"guarantees") as described in this offering memorandum. Distributions on the
Asset Preferred Securities and the SKATES for any quarterly period will be paid
only if Allfirst Asset Trust receives interest payments, other than deferred
interest, under the junior subordinated debenture on the interest payment date
immediately following the corresponding quarterly period. Under the Capital
Guarantee, Allfirst will pay to you, or cause Allfirst Capital Trust to pay to
you, distributions on the SKATES to the extent that Allfirst Capital Trust has
sufficient funds available for this purpose in the Capital Property Account on
scheduled distribution payment dates. In addition, because the distributions
are non-cumulative, the Capital Guarantee does not apply to past distributions
that have not been paid by Allfirst Capital Trust.
The assets of Allfirst Asset Trust consist only of the junior subordinated
debenture and other permitted investments. To the extent that Allfirst does not
make any payment of current interest in respect of the junior subordinated
debenture for the corresponding quarterly period or fails to make a required
payment under the guarantees, Allfirst Asset Trust will not pay distributions
on the Asset Preferred Securities. If Allfirst Asset Trust does not make
payments on the Asset Preferred Securities in full out of funds legally
available for
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distribution (i.e., interest, other than deferred interest, redemption proceeds
and payments due at maturity, paid on the junior subordinated debenture) or, if
required, Allfirst does not make payments on the Asset Guarantee, Allfirst
Capital Trust will not have sufficient funds to make payments on the SKATES in
full, in which event the Capital Guarantee will not apply to those payments or
the unpaid portion of those payments. See "Description of the New Asset
Preferred Securities--Distributions" and "Description of the New Capital
Guarantee."
In the event Allfirst Capital Trust makes a distribution on the SKATES in
part, that distribution will be made on a pro rata basis to all holders of
outstanding SKATES, new and old.
Capital Enforcement Events
The occurrence, at any time, of any of the following events will constitute
an enforcement event under the Capital Declaration with respect to the Capital
Securities (a "Capital Enforcement Event"):
. Allfirst is in default in respect of any of its obligations under the
Capital Guarantee; or
. an Asset Enforcement Event (as defined on page 48 of this prospectus)
under the Asset Declaration.
Under the Capital Declaration, the holder of the common securities waives
any Capital Enforcement Event with respect to the common securities of Allfirst
Capital Trust until all Capital Enforcement Events with respect to the SKATES
have been cured, waived or otherwise eliminated. Until every Capital
Enforcement Event with respect to the SKATES has been so cured, waived or
otherwise eliminated, the Capital Property Trustee will act solely on behalf of
the holders of the SKATES and only the holders of the SKATES will have the
right to direct the Capital Property Trustee on certain matters under the
Capital Declaration and, in the case of an Asset Enforcement Event, the Asset
Property Trustee with respect to certain matters under the Asset Declaration.
See "Description of the New Asset Preferred Securities--Asset Enforcement
Events" for a description of the events that will trigger the occurrence of an
Asset Enforcement Event.
Upon the occurrence and during the continuance of a Capital Enforcement
Event,
. the Capital Property Trustee, as the holder of the Asset Preferred
Securities, shall have the right to enforce the terms of the Asset
Preferred Securities, including the right to direct the Asset Property
Trustee to enforce:
. Allfirst Asset Trust's creditors' rights and other rights with respect
to the junior subordinated debenture;
. the rights of the holders of the Asset Preferred Securities under the
Asset Guarantee; and
. the rights of the holders of the Asset Preferred Securities to receive
distributions on the Asset Preferred Securities; and
. the Capital Guarantee Trustee shall have the right to enforce the terms
of the Capital Guarantee, including the right to enforce the restriction
on payments by Allfirst on its securities as set forth in the Capital
Guarantee.
If the Capital Property Trustee fails to enforce its rights under the Asset
Preferred Securities after a holder of the SKATES has made a written request,
that holder may directly institute a legal proceeding against Allfirst Asset
Trust and the Asset Property Trustee to enforce the Capital Property Trustee's
rights under the Asset Preferred Securities without first instituting any legal
proceeding against the Capital Property Trustee, Allfirst Capital Trust or any
other person or entity. In addition, for so long as Allfirst Capital Trust
holds any Asset Preferred Securities, if the Asset Property Trustee fails to
enforce its rights on behalf of Allfirst Asset Trust under the junior
subordinated debenture after a holder of the SKATES has made a written request,
any holder
may on behalf of Allfirst Asset Trust directly institute a legal proceeding
against Allfirst under the junior subordinated debenture, without first
instituting any legal proceeding against the Capital Property Trustee,
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Allfirst Capital Trust, the Asset Property Trustee or Allfirst Asset Trust. In
any event, for so long as Allfirst Capital Trust is the holder of any Asset
Preferred Securities, if a Capital Enforcement Event has occurred and is
continuing and that event is attributable to the failure of Allfirst to make
any required payment when due on the junior subordinated debenture, then a
holder of the SKATES may on behalf of Allfirst Asset Trust directly institute a
proceeding against Allfirst with respect to the junior subordinated debenture
for enforcement of payment. A holder of SKATES may also bring a direct action
against Allfirst to enforce the holder's right under the Capital Guarantee. See
"Description of the New Capital Guarantee--Events of Default; Enforcement of
Capital Guarantee."
Under no circumstances, however, will the Asset Property Trustee or any
holder of the SKATES have authority to cause Allfirst Asset Trust to make
distributions on the Asset Preferred Securities of deferred interest or
interest for a quarterly period not paid on the interest payment date
immediately following such quarterly period. As a result, although the Asset
Property Trustee may be able to enforce Allfirst Asset Trust's creditors'
rights in respect of the junior subordinated debenture, Allfirst Asset Trust
will not make distributions of deferred or late interest payments on the junior
subordinated debenture to holders of the Asset Preferred Securities. Because
the guarantees do not cover distribution payments on the Asset Preferred
Securities from deferred or late interest payments on the junior subordinated
debenture, holders of the SKATES will not receive any distributions of deferred
or late interest payments.
Until Allfirst has received approval from the Federal Reserve Board and the
Central Bank of Ireland to do so, its failure to resume paying interest after
deferring interest payments for any interest deferral period or to repay the
junior subordinated debenture at maturity will not constitute a Capital
Enforcement Event or an Asset Enforcement Event.
Allfirst and Allfirst Capital Trust are each required to file annually with
the Capital Property Trustee an officer's certificate as to its compliance with
all conditions and obligations under the Capital Declaration.
Redemption
With the prior consent of the Federal Reserve Board and the Central Bank of
Ireland, at the option of Allfirst, Allfirst may redeem the junior subordinated
debenture, in whole or in part, at any time on or after July 15, 2009 or at any
time in certain circumstances upon the occurrence of a Debenture Special Event
(as defined below). Allfirst Asset Trust will use proceeds from any redemption
of the junior subordinated debenture to redeem for cash Asset Preferred
Securities having a total liquidation amount equal to the total principal
amount of the junior subordinated debenture redeemed. Allfirst Capital Trust
will apply the proceeds from the subsequent redemption of the Asset Preferred
Securities to redeem Capital Securities having an aggregate liquidation amount
equal to the Asset Preferred Securities so redeemed at an amount per Capital
Security equal to $1,000 plus accrued and unpaid distributions from the last
distribution payment date. Holders of the Capital Securities will be given not
less than 30 nor more than 60 days' notice of any redemption. See "Description
of the New Asset Preferred Securities--Redemption."
Capital Special Event Redemption or Distribution
If, at any time, a Capital Tax Event, a Capital Regulatory Event or a
Capital Investment Company Event (each as defined below, and each, a "Capital
Special Event") occurs and is continuing, the holder of the common securities
of Allfirst Capital Trust shall, unless the Asset Preferred Securities are
redeemed in the limited circumstances described below, within 90 days following
the occurrence of the Capital Special Event elect to either:
. dissolve Allfirst Capital Trust upon not less than 30 nor more than 60
days notice with the result that, after satisfaction of creditors of
Allfirst Capital Trust, if any, Asset Preferred Securities would be
distributed on a pro rata basis to the holders of the Capital Securities
in liquidation of the holders' interests in Allfirst Capital Trust; except
that if at the time there is available to Allfirst Capital Trust the
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opportunity to eliminate, within the 90-day period, the Capital Special
Event by taking some ministerial action, such as filing a form or making
an election, or pursuing some other similar reasonable measure which in
the sole judgment of Allfirst has or will cause no adverse effect on
Allfirst Capital Trust, Allfirst Asset Trust, Allfirst or the holders of
the Capital Securities and will involve no material cost, Allfirst Capital
Trust will pursue that measure in lieu of dissolution; or
. cause the SKATES to remain outstanding, and in such event Allfirst shall
pay any and all expenses incurred by or payable by Allfirst Capital Trust
attributable to the Capital Special Event.
Furthermore, if, upon the occurrence of a Capital Tax Event, the Capital
Administrators receive an opinion of nationally recognized independent tax
counsel experienced in these matters that there is more than an insubstantial
risk that interest payable by Allfirst on the junior subordinated debenture is
not, or will not be, deductible by Allfirst for United States Federal income
tax purposes, even if the Asset Preferred Securities are distributed to the
holders of the Capital Securities in liquidation of the holders' interests in
Allfirst Capital Trust as described above, then Allfirst will have the right,
within 90 days following the occurrence of the Capital Tax Event, to elect to
redeem the junior subordinated debenture in whole, but not in part, and, in
turn, Allfirst Asset Trust will redeem the Asset Preferred Securities in
whole, but not in part, for cash upon not less than 30 nor more than 60 days'
notice. Promptly following any redemption of the Asset Preferred Securities by
Allfirst Asset Trust, the Capital Securities will be redeemed by Allfirst
Capital Trust at the redemption price.
"Capital Tax Event" means that Allfirst shall have requested and received
and shall have delivered to the Capital Administrators an opinion of
nationally recognized independent tax counsel experienced in these matters to
the effect that after the date of this offering memorandum one or more of the
following events (each, a "Tax Event") has occurred:
. an amendment to, change in or announced proposed change in the laws of
the United States or any political subdivisions or taxing authorities, or
any regulations promulgated thereunder;
. a judicial decision interpreting, applying, or clarifying these laws or
regulations;
. an administrative pronouncement or action that represents an official
position, including a clarification of an official position, of the
governmental authority or regulatory body making the administrative
pronouncement or taking any action; or
. a threatened challenge asserted in connection with an audit of Allfirst
or any of its affiliates included in its consolidated financial
statements, Allfirst Asset Trust, or Allfirst Capital Trust, or a
threatened challenge asserted in writing against any other taxpayer that
has raised capital through the issuance of securities that are
substantially similar to the junior subordinated debenture, the Asset
Preferred Securities or the SKATES;
and that as a result of the occurrence of any Tax Event there is more than an
insubstantial risk that:
. Allfirst Capital Trust is, or will be, subject to United States Federal
income tax with respect to income received on the Asset Preferred
Securities;
. Allfirst Capital Trust is, or will be, subject to more than a minimal
amount of other taxes, duties or other governmental charges; or
. interest payable by Allfirst with respect to the junior subordinated
debenture is not, or will not be, deductible by Allfirst for United
States Federal income tax purposes.
"Capital Regulatory Event" means Allfirst becomes, or under law or
regulation or any rules, guidelines or policies of the Federal Reserve Board
or the Central Bank of Ireland or any official administrative announcement or
decision interpreting these laws, regulations, rules, policies or guidelines,
or will become within 180 days, subject to capital requirements under which,
in the written opinion of independent bank regulatory counsel experienced in
such matters, the SKATES or the Asset Preferred Securities would not
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qualify, disregarding any Tier 1 category limits, for treatment as (1) Tier 1
capital for Allfirst as a bank holding company or its then equivalent or (2)
consolidated Tier 1 capital of AIB.
"Capital Investment Company Event" means that Allfirst has requested,
received and delivered to the Capital Administrators an opinion of nationally
recognized independent legal counsel experienced in these matters to the effect
that, as a result of the occurrence on or after the date of this prospectus of
a change in law or regulation or a change in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in Investment Company Act Law"), Allfirst
Capital Trust is or will be considered an investment company which is required
to be registered under the Investment Company Act.
Redemption Procedures
If Allfirst Capital Trust gives a notice of redemption in respect of the
SKATES, which notice will be irrevocable, and if the Asset Property Trustee has
paid to the Capital Property Trustee a sufficient amount of cash in connection
with the related redemption of the Asset Preferred Securities, then, by 1:00
p.m., New York City time, on the redemption date, Allfirst Capital Trust will:
. if the SKATES are in book-entry form with DTC, deposit irrevocably with
DTC funds sufficient to pay the applicable redemption price; or
. if the SKATES are held in certificated form, deposit with the paying
agent for the SKATES funds sufficient to pay any amount in respect of any
SKATES in certificated form and give the paying agent irrevocable
instructions and authority to pay these amounts to the holders of SKATES
upon surrender of their certificates.
See "--Form of SKATES."
Allfirst Asset Trust will only redeem the Asset Preferred Securities in
connection with the corresponding redemption by Allfirst of the junior
subordinated debenture.
If notice of redemption shall have been given and funds are deposited as
required, then upon the date of deposit, all rights of holders of any SKATES so
called for redemption will cease, except the right of the holders of those
SKATES to receive the redemption price, but without interest. If any date fixed
for redemption of the SKATES is not a Business Day, then payment of the
redemption price payable on that date will be made on the next succeeding day
that is a Business Day, without any interest or other payment in respect of any
delay, except that, if that Business Day falls in the next calendar year, the
payment will be made on the immediately preceding Business Day, in each case,
with the same force and effect as if made on the date fixed for redemption.
If fewer than all of the outstanding SKATES are to be redeemed, the SKATES
will be redeemed in accordance with the procedures of DTC. See "--Form of
SKATES." If the SKATES do not remain in book-entry only form and fewer than all
of the outstanding SKATES are to be redeemed, the SKATES will be redeemed on a
pro rata basis or pursuant to the rules of any securities exchange on which the
SKATES are listed.
Subject to the foregoing and applicable law, including, without limitation,
United States Federal securities laws, Allfirst or its subsidiaries may at any
time and from time to time purchase outstanding SKATES by tender, in the open
market or by private agreement.
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Subordination of the Common Securities of Allfirst Capital Trust
Payment of amounts upon liquidation of the Capital Securities shall be made
pro rata based on the liquidation amount of the Capital Securities. However,
upon:
. the occurrence of an event of default by Allfirst under the junior
subordinated debenture; or
. default by Allfirst on any of its obligations under any of the
guarantees,
then the holders of the SKATES will have a preference over the holders of the
common securities of Allfirst Capital Trust with respect to payments upon
liquidation of Allfirst Capital Trust.
Liquidation Distribution Upon Dissolution
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of Allfirst Capital Trust, other than as described
above under "--Capital Special Event Redemption or Distribution," the holders
of the SKATES will be entitled to receive out of the assets of Allfirst Capital
Trust, after satisfaction of liabilities to creditors, distributions in cash or
other immediately available funds in an amount equal to the aggregate of the
stated liquidation amount of $1,000 per SKATES plus accrued and unpaid
distributions from the last distribution payment date.
If, upon Allfirst Capital Trust's liquidation, the liquidation distribution
can be paid only in part because Allfirst Capital Trust has insufficient assets
available to pay in full the aggregate liquidation distribution, then the
amounts payable directly by Allfirst Capital Trust on the SKATES will be paid
on a pro rata basis. The holders of the common securities of Allfirst Capital
Trust will be entitled to receive distributions upon liquidation pro rata with
the holders of the SKATES, except in the limited circumstances described above
under "--Subordination of the Common Securities of Allfirst Capital Trust."
Under the Capital Declaration, Allfirst Capital Trust will dissolve and
liquidate and thereafter terminate upon:
. the bankruptcy or insolvency of Allfirst;
. the filing of a certificate of dissolution or the equivalent with respect
to Allfirst, the filing of a certificate of cancellation with respect to
Allfirst Capital Trust after having obtained the consent of the holders
of at least a majority in liquidation amount of the Capital Securities,
voting together as a single class, to file such certificate of
cancellation, or the revocation of the charter of Allfirst and the
expiration of 90 days after the date of revocation without reinstatement;
. the distribution of all of the Asset Preferred Securities upon the
occurrence of a Capital Special Event;
. the entry of a decree of a judicial dissolution of Allfirst, Allfirst
Asset Trust or Allfirst Capital Trust; or
. the redemption of all the Capital Securities.
Voting Rights
Except as described in this offering memorandum, including under
"Description of the New Capital Guarantee--Amendments and Assignment," or as
otherwise required by law or the Capital Declaration, the holders of the SKATES
will have no voting rights.
Subject to the requirement that the Capital Property Trustee receive a tax
opinion as set forth in the last sentence of the next paragraph, the holders of
a majority in liquidation amount of the SKATES have the right to direct the
time, method and place for conducting any proceeding for any remedy available
to the Capital Property Trustee, and to direct the exercise of any trust or
other power conferred upon the Capital Property
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Trustee under the Capital Declaration, including the right to direct the
Capital Property Trustee, as holder of the Asset Preferred Securities, to:
. exercise the remedies available to it under the Asset Declaration as a
holder of the Asset Preferred Securities, including the right to direct
the Asset Property Trustee to exercise its rights in the manner described
above under "--Capital Enforcement Events;" and
. consent to any amendment, modification, or termination of the Asset
Declaration or the Asset Preferred Securities where consent is required;
except, that where a consent or action under the Asset Declaration would
require the consent or act of the holders of more than a majority of the
aggregate liquidation preference of Asset Preferred Securities affected,
only the holders of the percentage of the aggregate stated liquidation
amount of the SKATES which is at least equal to the percentage required
under the Asset Declaration may direct the Capital Property Trustee to
give consent or take action on behalf of Allfirst Capital Trust. See
"Description of the New Asset Preferred Securities--Voting Rights."
If the Asset Property Trustee has actual notice of an Asset Enforcement
Event, the Capital Property Trustee will notify all holders of the SKATES of
any notice of such Asset Enforcement Event received from the Asset Property
Trustee with respect to the Asset Preferred Securities. The notice will state
that the Asset Enforcement Event also constitutes a Capital Enforcement Event.
Except with respect to directing the time, method, and place of conducting a
proceeding for a remedy as described above, the Capital Property Trustee will
be under no obligation to take any of the actions described above unless the
Capital Property Trustee has received an opinion of nationally recognized
independent tax counsel to the effect that as a result of that action, Allfirst
Capital Trust will not fail to be classified as a grantor trust for United
States Federal income tax purposes and that after that action each holder of
Capital Securities will continue to be treated as owning an undivided
beneficial ownership interest in the Asset Preferred Securities.
A waiver of an Asset Enforcement Event with respect to the Asset Preferred
Securities held by the Capital Property Trustee will constitute a waiver of the
corresponding Capital Enforcement Event.
Any required approval or direction of holders of the SKATES may be given at
(1) a separate meeting of holders of the SKATES convened for that purpose, (2)
at a meeting of all of the holders of Capital Securities or (3) pursuant to
written consent. The Capital Property Trustee will cause a notice of any
meeting at which holders of the SKATES are entitled to vote, or of any matter
upon which action by written consent of the holders is to be taken, to be
mailed to each holder of record of the SKATES. Each notice will include a
statement setting forth the following information:
. the date of the meeting or the date by which any action is to be taken;
. a description of any resolution proposed for adoption at the meeting on
which the holders are entitled to vote or of the matter upon which
written consent is sought; and
. instructions for the delivery of proxies or consents.
No vote or consent of the holders of the SKATES will be required for
Allfirst Capital Trust to redeem and cancel the SKATES or distribute Asset
Preferred Securities in accordance with the Capital Declaration.
Even when holders of the SKATES are entitled to vote or consent under any of
the circumstances described above, any of the Capital Securities that are
beneficially owned at that time by Allfirst or any entity directly or
indirectly controlled by, or under direct or indirect common control with,
Allfirst, shall not be entitled to vote or consent and shall, for purposes of
any vote or consent, be treated as if such Capital Securities were not
outstanding; except that persons, other than affiliates of Allfirst, to whom
Allfirst or any of its subsidiaries have pledged the SKATES may vote or consent
with respect to the pledged SKATES pursuant to the terms of the pledge.
The procedures by which holders of the SKATES represented by the global
certificates may exercise their voting rights are described below. See "--Form
of SKATES."
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Holders of the SKATES will have no rights to appoint or remove the Capital
Administrators, who may be appointed, removed or replaced solely by Allfirst,
as the holder of all of the common securities of Allfirst Capital Trust.
Merger, Consolidation or Amalgamation of Allfirst Capital Trust
Allfirst Capital Trust may not 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 corporation or other entity, except as
described below. Allfirst Capital Trust may, with the consent of a majority of
the Capital Administrators and without the consent of the holders of the
Capital Securities, the Capital Property Trustee or the Capital Delaware
Trustee consolidate, amalgamate, merge with or into, or be replaced by a trust
organized as such under the laws of any State of the United States if:
. Allfirst Capital Trust is not the surviving entity, the successor entity
either:
. expressly assumes all of the obligations of Allfirst Capital Trust under
the Capital Securities; or
. substitutes for the SKATES other securities having substantially the
same terms as the SKATES, so long as the successor securities rank the
same as the Capital Securities rank with respect to distributions,
assets and payments;
. Allfirst expressly acknowledges a trustee of the successor entity
possessing the same powers and duties as the Capital Property Trustee as
the holder of the Asset Preferred Securities;
. the SKATES or any successor securities are listed or quoted, or any
successor securities will be listed or quoted upon notification of
issuance, on any national securities exchange or quotation system on
which the SKATES are then listed or quoted;
. any merger, consolidation, amalgamation or replacement does not cause the
SKATES, including any successor securities, to be downgraded by any
nationally recognized statistical rating organization;
. any merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the
SKATES, including any successor securities, in any material respect;
. the successor entity has a purpose substantially identical to that of
Allfirst Capital Trust;
. Allfirst guarantees the obligations of the successor entity under the
successor securities to the same extent as provided by the Capital
Guarantee; and
. before any merger, consolidation, amalgamation or replacement, Allfirst
has received an opinion of nationally recognized independent legal
counsel experienced in these matters to the effect that:
. any merger, consolidation, amalgamation or replacement will not
adversely affect the rights, preferences and privileges of the holders
of the SKATES, including any successor securities, in any material
respect, other than with respect to any dilution of the holders'
interest in the new entity;
. following any merger, consolidation, amalgamation or replacement,
neither Allfirst Capital Trust nor the successor entity will be required
to register as an investment company under the Investment Company Act;
. following any merger, consolidation, amalgamation or replacement,
Allfirst Capital Trust, or any successor trust, will not be classified
as an association or a publicly traded partnership taxable as a
corporation for United States Federal income tax purposes; and
. following any merger, consolidation, amalgamation or replacement,
Allfirst Asset Trust will not be classified as an association or a
publicly traded partnership taxable as a corporation for United States
Federal income tax purposes.
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Allfirst Capital Trust may not, except with the consent of holders of 100%
in liquidation amount of the SKATES, consolidate, amalgamate, merge with or
into, or be replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it, if it would cause
Allfirst Capital Trust or the successor entity to be classified as an
association or a publicly traded partnership taxable as a corporation for
United States Federal income tax purposes.
Modification of the Capital Declaration
The Capital Declaration may be modified and amended as described below.
If any proposed amendment to the Capital Declaration provides for, or the
Capital Administrators otherwise propose to effect,
. any action that would adversely affect the powers, preferences or special
rights of the Capital Securities, whether by way of amendment to the
Capital Declaration or otherwise; or
. the dissolution, winding-up or termination of Allfirst Capital Trust
other than under the terms of the Capital Declaration;
then, in each case, the holders of the Capital Securities voting together as a
single class will be entitled to vote on the amendment or proposal and the
amendment or proposal will not be effective except with the approval of the
holders of at least a majority in liquidation amount of the Capital Securities
affected. If any amendment or proposal referred to in the first bullet point
above would adversely affect only the SKATES or Allfirst Capital Trust's
common securities, then only the affected class will be entitled to vote on
the amendment or proposal and the amendment or proposal will not be effective
except with the approval of the holders of a majority in liquidation amount of
that class of Capital Securities.
The Capital Declaration may be amended without the consent of the holders
of the Capital Securities to:
. cure any ambiguity;
. correct or supplement any provision in the Capital Declaration that may
be defective or inconsistent with any other provision of the Capital
Declaration;
. add to the restrictions or obligations of the sponsor;
. conform to any change in the Investment Company Act, the Trust Indenture
Act or the rules or regulations under either law; and
. modify, eliminate and add to any provision of the Capital Declaration to
the extent as may be necessary or desirable;
if any such amendment does not have a material adverse effect on the rights,
preferences or privileges of the holders of the Capital Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Capital Declaration if the amendment or modification would:
. cause Allfirst Capital Trust to fail to be classified as a grantor trust
for United States Federal income tax purposes;
. cause Allfirst Asset Trust to be classified as an association or publicly
traded partnership taxable as a corporation for United States Federal
income tax purposes;
. cause the SKATES or the Asset Preferred Securities to fail to qualify as
Tier 1 capital of Allfirst or consolidated Tier 1 capital of AIB;
. reduce or otherwise adversely affect the powers of the Capital Property
Trustee; or
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. cause Allfirst Capital Trust or Allfirst Asset Trust to be deemed an
investment company which is required to be registered under the
Investment Company Act.
Form of SKATES
New SKATES (and any old SKATES that remain outstanding after the exchange
offer) will be in the form of fully-registered global securities registered in
the name of Cede & Co. (DTC's nominee). DTC will act as securities depositary
for the SKATES being represented by global certificates and, to the extent
distributed to the holders of the SKATES, the Asset Preferred Securities. One
or more fully-registered global certificates, representing the total aggregate
number of new SKATES, will be issued and will be deposited with DTC. Beneficial
interests in global certificates evidencing the SKATES may not be exchanged for
SKATES in certificated form except in the limited circumstances described
below.
DTC Procedures
DTC has advised Allfirst Capital Trust, Allfirst Asset Trust and Allfirst
that it is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. 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.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its participants and by the New York Stock Exchange, 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 a custodial relationship with a participant, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the SEC.
Purchases of the SKATES within the DTC system must be made by or through
participants, who will receive a credit for the SKATES on DTC's records. The
ownership interest of each beneficial owner of the SKATES is in turn to be
recorded on the participants' and indirect participants' records. Beneficial
owners will not receive written confirmation from DTC of their purchases, but
beneficial owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the participants or indirect participants through which the beneficial
owners purchased SKATES. Transfers of ownership interests in the SKATES are to
be accomplished by entries made on the books of participants and indirect
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interests in the SKATES,
except in the event that use of the book-entry system for the SKATES is
discontinued.
DTC has no knowledge of the actual beneficial owners of the SKATES; DTC's
records reflect only the identity of the participants to whose accounts the
SKATES are credited, which may or may not be the beneficial owners. The
participants and indirect participants will remain responsible for keeping
account of their holdings on behalf of their customers.
So long as DTC or its nominee is the registered owner or holder of a global
certificate, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the SKATES being represented for all purposes under the
Capital Declaration and the SKATES. No beneficial owner of an interest in a
global certificate will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Capital Declaration.
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DTC has advised Allfirst that it will take any action permitted to be taken
by a holder of the SKATES, including the presentation of the SKATES for
exchange as described below, only at the direction of one or more participants
to whose account interests in the global certificates are credited and only in
respect of such portion of the aggregate liquidation amount of the SKATES as to
which the participant or participants has or have given the direction. Also, if
there is a Capital Enforcement Event under the SKATES, DTC will exchange the
global certificates for certificated securities, which it will distribute to
its participants in accordance with its customary procedures.
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants, and by participants and indirect
participants to beneficial owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the SKATES held in book-entry form will be
sent to Cede & Co. If less than all of the SKATES are being redeemed, DTC will
determine the amount of the interest of each participant to be redeemed in
accordance with its procedures.
Although voting with respect to the SKATES is limited, in those cases where
a vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to the SKATES. Under its usual procedures, DTC would mail an omnibus
proxy to Allfirst Capital Trust as soon as possible after the record date. The
omnibus proxy assigns Cede & Co.'s consenting or voting rights to those
participants to whose accounts the SKATES are allocated on the record date
identified in a listing attached to the omnibus proxy.
Distributions on the SKATES held in book-entry form will be made to DTC in
immediately available funds. DTC's practice is to credit 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 the payment date. Payments by participants and indirect
participants to beneficial owners will be governed by standing instructions and
customary practices and will be the responsibility of the participants and
indirect participants and not of DTC, Allfirst Capital Trust or Allfirst,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of any distributions to DTC is the responsibility of
Allfirst Capital Trust, disbursement of those payments to participants is the
responsibility of DTC, and in turn, disbursement of those payments to the
beneficial owners is the responsibility of participants and indirect
participants.
Except as described below, a beneficial owner of an interest in a global
certificate will not be entitled to receive physical delivery of the SKATES.
Accordingly, each beneficial owner must rely on the procedures of DTC to
exercise any rights under the SKATES.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global certificates among participants of DTC,
DTC is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither Allfirst nor
Allfirst Capital Trust will have any responsibility for the performance by DTC
or its participants or indirect participants under the rules and procedures
governing DTC. DTC may discontinue providing its services as securities
depository with respect to the SKATES at any time by giving notice to Allfirst
Capital Trust. Under these circumstances, in the event that a successor
securities depository is not obtained, the SKATES certificates are required to
be printed and delivered to the Capital Property Trustee. Additionally,
Allfirst Capital Trust, with the consent of Allfirst, may decide to discontinue
use of the system of book-entry transfers through DTC or any successor
depository. In that event, certificates for the SKATES will be printed and
delivered to the Capital Property Trustee. In each of the above circumstances,
Allfirst will appoint a paying agent with respect to the SKATES.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. These laws may impair
the ability to transfer beneficial interests in the global SKATES as
represented by a global certificate.
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The information in this section concerning DTC and DTC's system has been
obtained from sources that Allfirst, Allfirst Capital Trust and Allfirst Asset
Trust believe to be reliable, but neither Allfirst nor Allfirst Capital Trust
nor Allfirst Asset Trust takes responsibility for the accuracy of the
information.
Exchange of Global Securities for Certificated Securities
A global certificate is exchangeable for SKATES in definitive form if:
. DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by Allfirst within 60 days; or
. Allfirst Capital Trust (or Allfirst Asset Trust in the event Asset
Preferred Securities are delivered to holders of the SKATES) elects to
exchange the global certificates for definitive certificates.
If either of these events occurs, or, in the event a Capital Enforcement Event
has occurred and is continuing, at the request of a holder of the SKATES, the
global certificates will be exchangeable for SKATES in definitive form of like
tenor and of an equal aggregate liquidation amount of the global certificates
or the portion thereof to be exchanged. The definitive certificates will be
registered in the name or names as the depositary, or any holder, will request.
It is expected that instructions may be based upon directions received by the
depositary from participants with respect to ownership of beneficial interests
in the global securities.
Payment
Payments in respect of the SKATES represented by the global certificates
will be made to DTC, which shall credit the relevant accounts at DTC on the
scheduled payment dates or, in the case of certificated securities, if any,
payments shall be made by check mailed to the address of the holder entitled to
receive the payment as the holder's address shall appear on the register. The
paying agent will be permitted to resign as paying agent upon 30 days written
notice to the Capital Administrators. In the event that The Bank of New York is
no longer the paying agent, the Capital Administrators will appoint a successor
to act as paying agent that will be a bank or trust company.
Registrar, Transfer Agent, and Paying Agent
The Capital Property Trustee acts as registrar, transfer agent and paying
agent for the SKATES.
Registration of transfers of the SKATES may be effected without charge by or
on behalf of Allfirst Capital Trust, but upon payment and with the giving of
any indemnity as Allfirst Capital Trust or Allfirst may require, in respect of
any tax or other government charges which may be imposed in relation to it.
Allfirst Capital Trust will not be required to register or cause to be
registered the transfer of the SKATES after the SKATES have been called for
redemption.
Information Concerning the Capital Property Trustee
The Capital Property Trustee, before the occurrence of a default with
respect to the Capital Securities, undertakes to perform only the duties as are
specifically set forth in the Capital Declaration and, after default, must
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to these provisions, the Capital
Property Trustee is under no obligation to exercise any of the powers vested in
it by the Capital Declaration at the request of any holder of the SKATES,
unless offered indemnity reasonably satisfactory to the Capital Property
Trustee by the holder against the costs, expenses and liabilities which might
be incurred in connection with the exercise of any powers.
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Governing Law
The Capital Declaration and the SKATES are governed by, and will be
construed in accordance with, the internal laws of the State of Delaware.
Miscellaneous
The Capital Administrators are authorized and directed to conduct the
affairs of and to operate Allfirst Capital Trust in such a way that Allfirst
Capital Trust will not be deemed to be an investment company required to be
registered under the Investment Company Act or characterized as other than a
grantor trust for United States Federal income tax purposes. In this
connection, the Capital Administrators are authorized to take any action, not
inconsistent with applicable law, the certificate of trust or the Capital
Declaration that the Capital Administrators determine in their discretion to be
necessary or desirable for those purposes as long as such action does not
adversely affect the interests of the holders of the SKATES.
Holders of the SKATES have no preemptive rights.
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DESCRIPTION OF THE NEW CAPITAL GUARANTEE
Set forth below is a summary of material information concerning the new
Capital Guarantee which will be executed and delivered by Allfirst to the
Capital Guarantee Trustee in exchange for the old Capital Guarantee. The
summary is not complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Capital Guarantee. As
previously noted, the old and new Capital Guarantees are identical, except that
the new Capital Guarantee has been registered under the 1933 Act and qualified
under the Trust Indenture Act. References in the following discussion to the
"Capital Guarantee" are to the new and the old Capital Guarantee. The Capital
Guarantee Trustee will hold the Capital Guarantee for the benefit of the
holders of the SKATES and will act as indenture trustee for the purposes of
compliance with the Trust Indenture Act.
Status of Old Capital Guarantee
If not all of the old SKATES are exchanged for new SKATES, then the old
Capital Guarantee will not terminate, but will continue to guarantee the
obligations of Allfirst Capital Trust for the benefit of the holders of old
SKATES. The old Capital Guarantee will terminate upon:
. full payment of the redemption price of all of the old SKATES;
. distribution of the Asset Preferred Securities to holders of SKATES as a
result of a Capital Special Event as described under "Description of the
New SKATES--Capital Special Event Redemption or Distribution"; or
. full payment of the amounts payable in accordance with the Capital
Declaration upon liquidation of Allfirst Capital Trust.
The old Capital Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of old SKATES must
restore payment of any sums paid under the old SKATES or the old Capital
Guarantee.
Terms of the Capital Guarantee
Under the Capital Guarantee, Allfirst irrevocably agrees, on a subordinated
basis and to the extent set forth in the Capital Guarantee, to pay in full or
distribute to the holders of the SKATES, except to the extent paid by Allfirst
Capital Trust, as and when due, regardless of any defense, right of set-off or
counterclaim which Allfirst Capital Trust may have or assert, the following
payments (the "Capital Guarantee Payments"), without duplication:
. any accrued and unpaid distributions on the SKATES to the extent Allfirst
Capital Trust has funds available for distribution;
. the redemption price with respect to any SKATES called for redemption by
Allfirst Capital Trust, to the extent Allfirst Capital Trust has funds
available for payment; and
. upon any other voluntary or involuntary dissolution, winding-up or
termination of Allfirst Capital Trust, the lesser of:
. the aggregate of the liquidation amount and all accrued and unpaid
distributions on the SKATES since the last distribution payment date,
and
. the amount of assets of Allfirst Capital Trust remaining available for
distribution to holders of the SKATES upon the liquidation of Allfirst
Capital Trust.
Allfirst's obligation to make a Capital Guarantee Payment may be satisfied by
direct payment of the required amounts by Allfirst to the holders of the SKATES
or by causing Allfirst Capital Trust to pay these amounts to holders.
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Allfirst also irrevocably agrees to cause Allfirst Capital Trust, upon
liquidation of Allfirst Capital Trust as a result of a Capital Special Event as
described under "Description of the New SKATES--Capital Special Event
Redemption or Distribution," to distribute the outstanding Asset Preferred
Securities to holders of the SKATES.
The Capital Guarantee is a guarantee on a subordinated basis with respect to
the SKATES from the time of issuance of the SKATES but only applies to the
payment of distributions or the redemption price, or to payments upon the
dissolution, winding-up or termination of Allfirst Capital Trust in full, to
the extent Allfirst Capital Trust has funds legally available for payment. If
Allfirst Asset Trust does not receive payment on the junior subordinated
debenture, it will not make payment on the Asset Preferred Securities, and
Allfirst Capital Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the SKATES or otherwise. In
that event, holders of the SKATES would not be able to rely upon the Capital
Guarantee for payment of these amounts. Instead, holders of the SKATES will
have the remedies described under "Description of the New SKATES--Capital
Enforcement Events," including the right to direct the Capital Guarantee
Trustee to enforce the restriction of payments by Allfirst on its securities.
See "--Obligations of Allfirst" below.
The guarantees, when taken together with the junior subordinated debenture
and Allfirst's obligations to pay all fees and expenses of Allfirst Capital
Trust and Allfirst Asset Trust, constitute a limited guarantee to the extent
set forth in this prospectus by Allfirst of the distribution, redemption and
liquidation payments payable to the holders of the SKATES in full. The
guarantees do not apply, however, to current distributions by Allfirst Asset
Trust unless and until these distributions are paid by Allfirst Asset Trust out
of funds legally available for payment or to liquidating distributions unless
there are assets available for payment in Allfirst Asset Trust, each as more
fully described under "Risk Factors--Risks of Investing in the SKATES" above.
In addition, because the quarterly distributions are non-cumulative, the
guarantees do not apply to past quarterly distributions that have not been paid
by Allfirst Asset Trust or Allfirst Capital Trust.
Obligations of Allfirst
Under the Capital Guarantee, Allfirst agrees that if it is in default of its
obligations thereunder, then, unless and until, since the curing or waiver of
any such default, Allfirst Capital Trust has paid distributions on the SKATES
in full on four consecutive distribution payment dates, Allfirst may not:
. declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock; or
. make any payment of principal, interest or premium, if any, on or repay
or repurchase or redeem any of its debt securities that rank equally with
or subordinate and junior in interest and right of payment to the junior
subordinated debenture or make any guarantee payments with respect to any
guarantee that ranks equally with or junior in interest and right of
payment to the junior subordinated debenture.
However, this limitation does not apply to:
. the declaration or payment of dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares of,
Allfirst's capital stock;
. any conversions or exchanges of Allfirst's common stock of one class into
common stock of another class; or
. any declaration or payment of a dividend or distribution on, or any
payment of the principal, premium, if any, or interest on any guarantee,
debt security or other instrument of Allfirst ranking equally with the
junior subordinated debenture that is made on a pro rated basis with all
other equally ranking guarantees, debt securities and instruments,
including the junior subordinated debenture and the Asset Guarantee.
Events of Default; Enforcement of the Capital Guarantee
An event of default under the Capital Guarantee will occur upon the failure
of Allfirst to perform any of its payment or other obligations set forth in the
Capital Guarantee.
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The holders of a majority in liquidation amount of the SKATES have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Capital Guarantee Trustee or to direct the exercise of
any trust or other power conferred upon the Capital Guarantee Trustee under the
Capital Guarantee. If the Capital Guarantee Trustee fails to enforce its rights
under the Capital Guarantee after a holder of the SKATES has made a written
request, the holder may institute a legal proceeding directly against Allfirst
to enforce the Capital Guarantee Trustee's rights under the Capital Guarantee,
without first instituting a legal proceeding against Allfirst Capital Trust,
the Capital Guarantee Trustee or any other person or entity. In any event, if
Allfirst fails to make a guarantee payment under the Capital Guarantee, a
holder of the SKATES may directly institute a proceeding in the holder's own
name against Allfirst for enforcement of the Capital Guarantee for payment.
Status of the Capital Guarantee; Subordination
The Capital Guarantee constitutes an unsecured obligation of Allfirst and
ranks equally with its obligations under the junior subordinated debenture and
the Asset Guarantee. See "Description of Investments--Junior Subordinated
Debenture--Subordination."
In addition, the Capital Guarantee is effectively subordinated to the
deposits and all other liabilities of Allfirst's subsidiaries.
Accordingly, the rights of the holders of the SKATES to receive payments
under the Capital Guarantee are subject to the rights of the holders of any
obligations of Allfirst that are senior in priority to the obligations under
the Capital Guarantee. Furthermore, the holders of obligations of Allfirst that
are senior to the obligations under the Capital Guarantee, including, but not
limited to, obligations constituting senior indebtedness of Allfirst, are
entitled to the same rights upon payment default or dissolution, liquidation
and reorganization in respect of the Capital Guarantee that inure to the
holders of senior indebtedness as against the holders of the junior
subordinated debenture. Under the terms of the SKATES each holder of the
SKATES, by acceptance of the SKATES, agrees to the subordination provisions and
other terms of the Capital Guarantee.
The Capital Guarantee constitutes a guarantee of payment and not of
collection. That is, the guaranteed party may directly institute a legal
proceeding against Allfirst to enforce its rights under the Capital Guarantee
without instituting a legal proceeding against any other person or entity.
Amendments and Assignment
Except with respect to any changes that do not materially adversely affect
the rights of holders of the SKATES, in which case no vote will be required,
the Capital Guarantee may be amended only with the prior approval of the
holders of at least a majority in liquidation amount of all the outstanding
SKATES. The manner of obtaining any approval of holders of the SKATES will be
as set forth under "Description of the New SKATES--Voting Rights." All
guarantees and agreements contained in the Capital Guarantee will bind the
successors, assigns, receivers, trustees and representatives of Allfirst and
will inure to the benefit of the holders of the SKATES then outstanding. Except
in connection with any permitted merger or consolidation of Allfirst with or
into another entity or any permitted sale, transfer or lease of Allfirst's
assets to another entity in which the surviving corporation, if other than
Allfirst, assumes Allfirst's obligations under the Capital Guarantee, Allfirst
may not assign its rights or delegate its obligations under the Capital
Guarantee without the prior approval of the holders of at least a majority of
the aggregate stated liquidation amount of the SKATES then outstanding.
Termination of the New Capital Guarantee
The new Capital Guarantee will terminate as to each holder of new SKATES
upon:
. full payment of the redemption price of all the new SKATES;
. distribution of the new Asset Preferred Securities to holders of the new
SKATES as a result of a Capital Special Event as described under
"Description of the New SKATES--Capital Special Event Redemption or
Distribution"; or
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. full payment of the amounts payable in accordance with the Capital
Declaration upon liquidation of Allfirst Capital Trust.
The new Capital Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of new SKATES must
restore payment of any sum paid under the new SKATES or the new Capital
Guarantee.
Information Concerning the Capital Guarantee Trustee
The Capital Guarantee Trustee, before the occurrence of a default with
respect to the Capital Guarantee, undertakes to perform only those duties that
are specifically set forth in the Capital Guarantee and, after default with
respect to the Capital Guarantee, will exercise the same degree of care as a
prudent individual would exercise in the conduct of his own affairs. Subject
to that provision, the Capital Guarantee Trustee is under no obligation to
exercise any of the powers vested in it by the Capital Guarantee at the
request of any holder of SKATES unless it is offered indemnity reasonably
satisfactory to the Capital Guarantee Trustee against the costs, expenses and
liabilities that might be incurred in connection with the exercise of those
powers.
Governing Law
The Capital Guarantee is governed by, and will be construed in accordance
with, the internal laws of the State of New York.
DESCRIPTION OF THE NEW ASSET PREFERRED SECURITIES
The old Asset Preferred Securities were, and the new Asset Preferred
Securities will be, issued under the terms of the Asset Declaration. The Asset
Declaration has been qualified under the Trust Indenture Act, and upon
consummation of the exchange offer the Asset Declaration will be subject to
and governed by the Trust Indenture Act. As previously noted, the old and new
Asset Preferred Securities are identical except that the new securities have
been registered under the 1933 Act and do not provide for a penalty
distribution rate. References in the following discussion to the "Asset
Preferred Securities" are to the new and the old Asset Preferred Securities.
The Asset Property Trustee acts as trustee for the Asset Preferred
Securities under the Asset Declaration for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Asset Preferred
Securities include those stated in the Asset Declaration and those made part
of the Asset Declaration by the Trust Indenture Act. The following summary of
the material terms and provisions of the Asset Preferred Securities is not
complete and is subject to, and qualified in its entirety by reference to, the
Asset Declaration, the Delaware Trust Act and the Trust Indenture Act.
The Asset Declaration authorizes and directs the Asset Administrators of
Allfirst Asset Trust to issue the old and new Asset Securities, which
represent undivided beneficial ownership interests in the assets of Allfirst
Asset Trust. Title to the assets of Allfirst Asset Trust will be held by the
Asset Property Trustee for the benefit of the holders of the Asset Securities.
The payment of distributions out of money held by Allfirst Asset Trust, and
payments out of money held by Allfirst Asset Trust upon redemption of the
Asset Preferred Securities or liquidation of Allfirst Asset Trust, are
guaranteed by Allfirst to the extent described under "Description of the New
Asset Guarantee."
The Asset Guarantee is held by The Bank of New York, as trustee (the "Asset
Guarantee Trustee"), for the benefit of the holders of the Asset Preferred
Securities. The Asset Guarantee does not cover payment of distributions when
Allfirst Asset Trust has not received payments of current interest on the
junior subordinated debenture on the interest payment date immediately
following the corresponding quarterly period. In any event of non-payment,
holders of the Asset Preferred Securities will have the remedies described
below under "--Asset Enforcement Events."
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The new Asset Preferred Securities will not be registered under the 1934 Act
unless required by the rules and regulations thereunder.
Status of Old Asset Preferred Securities
If not all of the old SKATES are exchanged for new SKATES, then a like
liquidation amount of the old Asset Preferred Securities:
. will not be exchanged for new Asset Preferred Securities;
. will continue to be outstanding and to bear a restrictive legend;
. will not provide for any penalty increase in the distribution rate or for
any registration rights; and
. would be distributed only to holders of old SKATES in the event that
Asset Preferred Securities are distributed to holders of SKATES.
Distributions
The distribution rate on each Asset Preferred Security is a rate per annum
of three-month LIBOR plus 1.50% of the stated liquidation amount of $1,000 per
Asset Preferred Security, reset quarterly, and will be paid if, as and when
Allfirst Asset Trust has funds from corresponding interest payments on the
junior subordinated debenture from Allfirst available for distribution. These
distributions will be paid through the Asset Property Trustee, who will hold
amounts received in respect of the junior subordinated debenture in the Asset
Property Account for the benefit of the holders of the Asset Preferred
Securities. Distributions on the Asset Preferred Securities are non-cumulative,
and will be payable quarterly on January 15, April 15, July 15 and October 15
of each year, commencing October 15, 1999 if, as and when available for
payment. Until January 15, 2000, the distribution rate on the Asset Preferred
Securities is 7.68% per year.
The distributions on the Asset Preferred Securities are non-cumulative. This
means that if Allfirst Asset Trust does not pay a distribution on a
distribution payment date, holders of the Asset Preferred Securities will not
receive and will have no right to receive that distribution at any time, even
if Allfirst Asset Trust declares and pays distributions on the Asset Preferred
Securities in the future.
The distribution calculation and payment provisions for the Asset Preferred
Securities correspond to the distribution calculation and payment provisions
for the SKATES. See "Description of the New SKATES--Distributions."
Limitation on Payment of Distributions
Distributions on the Asset Preferred Securities will be payable to holders
as they appear on the books and records of Allfirst Asset Trust on the relevant
record dates, which, as long as the SKATES remain in book-entry only form or,
if Allfirst Capital Trust is liquidated in connection with a Capital Special
Event and Asset Preferred Securities are distributed to holders of the SKATES
and as long as the Asset Preferred Securities remain in book-entry only form,
will be one Business Day before the relevant payment dates. If Allfirst Capital
Trust is liquidated in connection with a Capital Special Event and Asset
Preferred Securities are distributed to holders of the SKATES, and the Asset
Preferred Securities will not continue to remain in book-entry only form, the
relevant record dates shall be the first day of the month of the relevant
payment dates. If any date on which distributions are payable on the Asset
Preferred Securities is not a Business Day, then payment of the distribution
payable on that 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 delay, except
that, if that Business Day is in the next succeeding calendar year, that
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on that date.
Allfirst Asset Trust's earnings available for payments to the holders of the
Asset Preferred Securities will be limited to payments made on the junior
subordinated debenture (other than payments of deferred interest, redemption
payments and payments due at maturity). See "Description of Investments--Junior
Subordinated
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Debenture." Allfirst Asset Trust will only make a distribution on the Asset
Preferred Securities on any distribution payment date if Allfirst has made a
payment on the junior subordinated debenture on the interest payment date for
the immediately preceding quarterly period and only if Allfirst Asset Trust has
funds available in the Asset Property Account, in which event the Asset
Guarantee will not apply to those distributions. See "Description of the New
Asset Guarantee." Under the Asset Guarantee, Allfirst will pay to Allfirst
Capital Trust, or cause Allfirst Asset Trust to pay to Allfirst Capital Trust,
payments on the Asset Preferred Securities to the extent that Allfirst Asset
Trust has sufficient funds available for this purpose in the Asset Property
Account. If Allfirst Capital Trust does have sufficient funds to make
distributions on the SKATES, the Capital Guarantee will not apply to those
distributions until Allfirst Capital Trust has sufficient funds available.
In the event Allfirst Asset Trust makes a distribution on the Asset
Preferred Securities in part, that distribution will be made on a pro rata
basis to all holders of outstanding Asset Preferred Securities.
Asset Enforcement Events
The occurrence, at any time, of any of the following events will constitute
an enforcement event under the Asset Declaration with respect to the Asset
Securities (an "Asset Enforcement Event"):
. Allfirst is in default on any of its obligations under the Asset
Guarantee; or
. an event of default occurs and is continuing on the junior subordinated
debenture.
Under the Asset Declaration, the holder of the common securities waives any
Asset Enforcement Event with respect to the common securities of Allfirst Asset
Trust until all Asset Enforcement Events with respect to the Asset Preferred
Securities have been cured, waived or otherwise eliminated. Until every Asset
Enforcement Event with respect to the Asset Preferred Securities has been so
cured, waived or otherwise eliminated, the Asset Property Trustee will act
solely on behalf of the holders of the Asset Preferred Securities and only the
holders of the Asset Preferred Securities will have the right to direct the
Asset Property Trustee on certain matters under the Asset Declaration. So long
as the Asset Preferred Securities are held by Allfirst Capital Trust, the
holders of SKATES will have the rights of a holder of Asset Preferred
Securities described in this paragraph.
Upon the occurrence and during the continuance of an Asset Enforcement
Event, the Capital Property Trustee, for so long as the Asset Preferred
Securities are held by the Capital Property Trustee, will have the right, or
holders of the Asset Preferred Securities will be entitled by the vote of a
majority in aggregate liquidation preference of the holders:
. under the Asset Declaration to enforce the terms of the Asset Preferred
Securities, including the right to direct the Asset Property Trustee to
enforce:
. Allfirst Asset Trust's creditors' rights and other rights with
respect to the junior subordinated debenture;
. the rights of the holders of the Asset Preferred Securities under
the Asset Guarantee; and
. the rights of the holders of the Asset Preferred Securities to
receive distributions on the Asset Preferred Securities; and
. under the Asset Guarantee to enforce the terms of the Asset Guarantee,
including the right to enforce the restriction on payments by Allfirst on
its securities as set forth in the Asset Guarantee.
Until Allfirst has received approval from the Federal Reserve Board or the
Central Bank of Ireland to do so, its failure to resume paying interest after
deferring the payment of interest for any deferral period or to repay the
junior subordinated debenture at maturity will not constitute an Asset
Enforcement Event and neither a holder of the junior subordinated debenture nor
a holder of the Asset Preferred Securities will have any creditors' rights
against Allfirst.
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If the Asset Property Trustee fails to enforce its rights under the junior
subordinated debenture after a holder of Asset Preferred Securities has made a
written request, the holder of record of Asset Preferred
Securities may directly institute a legal proceeding against Allfirst to
enforce the rights of the Asset Property Trustee and Allfirst Asset Trust under
the junior subordinated debenture without first instituting any legal
proceeding against the Asset Property Trustee, Allfirst Asset Trust or any
other person or entity. In any event, if an Asset Enforcement Event has
occurred and is continuing and this event is attributable to the failure of
Allfirst to make any required payment when due on the junior subordinated
debenture, then a holder of Asset Preferred Securities may on behalf of
Allfirst Asset Trust directly institute a proceeding against First Maryland
with respect to the junior subordinated debenture for enforcement of payment. A
holder of Asset Preferred Securities may also bring a direct action against
Allfirst to enforce the holder's right under the Asset Guarantee. See
"Description of the New Asset Guarantee--Events of Default; Enforcement of
Asset Guarantee." So long as the Asset Preferred Securities are held by
Allfirst Capital Trust, the holders of SKATES will have the rights of a holder
of Asset Preferred Securities described in this paragraph.
Under no circumstances, however, will the Asset Property Trustee have
authority to cause Allfirst Asset Trust to make distributions on the Asset
Preferred Securities of deferred interest or interest for a quarterly period
not paid on the interest payment date immediately following that quarterly
period. As a result, although the Asset Property Trustee may be able to enforce
Allfirst Asset Trust's creditors' rights in respect of the junior subordinated
debenture, Allfirst Asset Trust will not make distributions of deferred or late
interest payments on the junior subordinated debenture to holders of the Asset
Preferred Securities.
Allfirst and Allfirst Asset Trust are each required to file annually with
the Asset Property Trustee an officer's certificate as to its compliance with
all conditions and obligations under the Asset Declaration.
Mandatory Redemption
With the prior consent of the Federal Reserve Board and the Central Bank of
Ireland, at the option of Allfirst, Allfirst may redeem the junior subordinated
debenture, in whole or in part, at any time on or after July 15, 2009 or at any
time in certain circumstances upon the occurrence of a Debenture Special Event
(as defined below). If the junior subordinated debenture is redeemed, Allfirst
Asset Trust will redeem the Asset Preferred Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the junior
subordinated debenture being redeemed, upon not less than 30 nor more than 60
days' notice, at an amount per Asset Preferred Security equal to $1,000 plus
accrued and unpaid distributions for the then current quarterly period from the
last distribution payment date. If Allfirst Asset Trust redeems Asset Preferred
Securities in accordance with their terms, Allfirst Capital Trust will redeem
an equal liquidation amount of Capital Securities at the redemption price. If
Allfirst Capital Trust is liquidated in connection with a Capital Special Event
which is also a Debenture Special Event, Allfirst Asset Trust may only redeem
the Asset Preferred Securities in whole.
Redemption Procedures
If Allfirst Asset Trust gives a notice of redemption in respect of Asset
Preferred Securities, which notice will be irrevocable, and, if the indenture
trustee has paid to the Asset Property Trustee a sufficient amount of cash in
connection with the related redemption of the junior subordinated debenture,
then, by 1:00 p.m., New York City time, on the redemption date, Allfirst Asset
Trust will:
. if the Asset Preferred Securities are in book-entry form with DTC,
deposit irrevocably with DTC funds sufficient to pay the applicable
redemption price; or
. if the Asset Preferred Securities are held in certificated form, deposit
with the paying agent for the Asset Preferred Securities funds sufficient
to pay any amount in respect of any Asset Preferred Securities in
certificated form and give the paying agent irrevocable instructions and
authority to pay these amounts to the holders of Asset Preferred
Securities upon surrender of their certificates.
If notice of redemption has been given and funds deposited as required, then
upon the date of the deposit, all rights of holders of any Asset Preferred
Securities so called for redemption will cease, except the right of
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the holders of those Asset Preferred Securities to receive the redemption
price, but without interest. If any date fixed for redemption of Asset
Preferred Securities is not a Business Day, then payment of the redemption
price payable on that 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
delay, except that, if that Business Day falls in the next calendar year, the
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the date fixed for redemption.
If the Asset Preferred Securities are in book-entry form and fewer than all
of the outstanding Asset Preferred Securities are to be redeemed, the Asset
Preferred Securities will be redeemed in accordance with the procedures of
DTC. See "Description of the New SKATES--Form of SKATES." If the Asset
Preferred Securities are not in book-entry form and fewer than all of the
outstanding Asset Preferred Securities are to be redeemed, the Asset Preferred
Securities will be redeemed on a pro rata basis or pursuant to the rules of
any securities exchange on which the Asset Preferred Securities are listed.
Subject to the foregoing and applicable law, including, without limitation,
United States Federal securities laws, Allfirst or any of its subsidiaries may
at any time and from time to time purchase outstanding Asset Preferred
Securities by tender, in the open market or by private agreement.
Subordination of the Common Securities of Allfirst Asset Trust
Payment of amounts upon liquidation of the Asset Securities shall be made
pro rata based on the liquidation amount of the Asset Securities. However,
upon:
. the occurrence of an event of default by Allfirst under the junior
subordinated debenture; or
. default by Allfirst on any of its obligations under any of the
guarantees,
the holders of the Asset Preferred Securities will have a preference over the
holders of the common securities of Allfirst Asset Trust with respect to
payments upon liquidation of Allfirst Asset Trust.
Liquidation Distribution Upon Dissolution
In the event of any voluntary or involuntary dissolution, winding-up or
termination of Allfirst Asset Trust, the holders of the Asset Preferred
Securities at the time will be entitled to receive out of the assets of
Allfirst Asset Trust, after satisfaction of liabilities of creditors,
distributions in cash or other immediately available funds in an amount equal
to the aggregate of the stated liquidation amount of $1,000 per Asset
Preferred Security plus accrued and unpaid distributions from the last
distribution payment date.
If, upon Allfirst Asset Trust's liquidation, the liquidation distribution
can be paid only in part because Allfirst Asset Trust has insufficient assets
available to pay in full the aggregate liquidation distribution, then the
amounts payable directly by Allfirst Asset Trust on the Asset Preferred
Securities will be paid on a pro rata basis. The holder of the common
securities of Allfirst Asset Trust will be entitled to receive distributions
upon liquidation only after the holders of Asset Preferred Securities have
been paid, or amounts have been set aside to pay the holders of the Asset
Preferred Securities, their liquidation distribution in full.
Under the Asset Declaration, Allfirst Asset Trust will dissolve and
liquidate and thereafter terminate upon:
. the bankruptcy or insolvency of Allfirst;
. the filing of a certificate of dissolution or the equivalent with respect
to Allfirst, the filing of a certificate of cancellation with respect to
Allfirst Asset Trust after having obtained the consent of the holders of
at least a majority in liquidation amount of the Asset Securities, voting
together as a single class, to file such certificate of cancellation, or
the revocation of the charter of Allfirst and the expiration of 90 days
after the date of revocation without reinstatement;
. the entry of a decree of a judicial dissolution of Allfirst or Allfirst
Asset Trust; or
. the redemption of all the Asset Securities.
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Voting Rights
Except as described in this offering memorandum, including under
"Description of the New Asset Guarantee--Amendments and Assignment," or as
otherwise required by law or the Asset Declaration, the holders of the Asset
Preferred Securities have no voting rights.
If any proposed amendment to the Asset Declaration provides for, or
Allfirst, as holder of the common securities of Allfirst Asset Trust otherwise
proposes to effect:
. any action that would adversely affect the powers, preferences or special
rights of the Asset Preferred Securities, including, without limitation,
the authorization or issuance of any additional preferred securities of
Allfirst Asset Trust ranking senior to the Asset Preferred Securities; or
. the dissolution or liquidation of Allfirst Asset Trust, other than as
described under "--Merger, Consolidation or Amalgamation of Allfirst
Asset Trust" below;
then the holders of outstanding Asset Preferred Securities will be entitled to
vote on any such amendment or proposal of Allfirst as a class, and no such
amendment or proposal will be effective without the approval of the holders of
a majority in liquidation preference of the outstanding Asset Preferred
Securities having a right to vote on the matter. However, if the Capital
Property Trustee on behalf of Allfirst Capital Trust is the holder of the Asset
Preferred Securities, no such amendment or proposal will be effective without
the prior or concurrent approval of the holders of a majority in liquidation
amount of the outstanding SKATES having a right to vote on such matters.
The Asset Administrators may not:
. direct the time, method and place of conducting any proceeding for any
remedy available;
. waive any event of default that is waivable under the junior subordinated
debenture;
. exercise any right to rescind or annul a declaration that the principal
of the junior subordinated debenture shall be due and payable;
. waive the breach of the obligation by Allfirst to restrict certain
payments on its capital stock, debt securities or guarantees; or
. consent to any amendment, modification or termination of the junior
subordinated debenture, where such consent shall be required from the
holder of the junior subordinated debenture;
without, in each case, obtaining the prior approval of the holders of at least
a majority in liquidation amount of the Asset Preferred Securities. However, if
the Capital Property Trustee on behalf of Allfirst Capital Trust is the holder
of the Asset Preferred Securities, any waiver, consent or amendment or other
action will not be effective without the prior or concurrent approval of at
least a majority in liquidation amount of the outstanding SKATES having a right
to vote on these matters. The Asset Administrators will not revoke any action
previously authorized or approved by a vote of the holders of the Asset
Preferred Securities without the approval of the revocation by a majority in
liquidation preference of the outstanding Asset Preferred Securities. The Asset
Administrators must notify all holders of the Asset Preferred Securities of any
notice of an event of default received with respect to the junior subordinated
debenture.
Any required approval of holders of Asset Preferred Securities may be given
(1) at a separate meeting of holders of Asset Preferred Securities convened for
that purpose, (2) at a meeting of all of the holders of Asset Securities or (3)
pursuant to written consent. The Asset Property Trustee must cause a notice of
any meeting at which holders of Asset Preferred Securities are entitled to
vote, or of any matter upon which action by written consent of the holders is
to be taken, to be mailed to each holder of record of Asset Preferred
Securities. Each notice will include a statement setting forth:
. the date of the meeting or the date by which action is to be taken;
. a description of any resolution proposed for adoption at the meeting on
which holders are entitled to vote or of the matters upon which written
consent is sought; and
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. instructions for the delivery of proxies or consents.
No vote or consent of the holders of Asset Preferred Securities will be
required for Allfirst Asset Trust to redeem and cancel Asset Preferred
Securities in accordance with the Asset Declaration.
Even when holders of Asset Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Asset
Preferred Securities that are beneficially owned by Allfirst or by any entity
directly or indirectly controlled by, or under direct or indirect common
control with, Allfirst, will not be entitled to vote or consent and will, for
purposes of any vote or consent, be treated as if they were not outstanding,
except that persons, other than affiliates of Allfirst, to whom Allfirst or any
of its subsidiaries have pledged Asset Preferred Securities may vote or consent
with respect to the pledged Asset Preferred Securities under the terms of the
pledge.
Holders of the Asset Preferred Securities have no rights to appoint or
remove the Asset Administrators, who may be appointed, removed or replaced
solely by Allfirst, as the holder of all the common securities of Allfirst
Asset Trust.
Merger, Consolidation or Amalgamation of Allfirst Asset Trust
Allfirst Asset Trust may not 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 corporation or other body, except as
described below. Allfirst Asset Trust may, with the consent of a majority of
the Asset Administrators and without the consent of the holders of the Asset
Preferred Securities, the Asset Property Trustee or the Asset Delaware Trustee,
consolidate, amalgamate, merge with or into, or be replaced by a trust
organized as such under the laws of any state of the United States if:
. Allfirst Asset Trust is not the surviving entity, the successor entity
either:
. expressly assumes all of the obligations of Allfirst Asset Trust under
the Asset Preferred Securities; or
. substitutes for the Asset Preferred Securities other securities having
substantially the same terms as the Asset Preferred Securities so long
as such successor securities rank the same as the Asset Preferred
Securities rank with respect to distributions, assets and payments;
. Allfirst expressly acknowledges a trustee of the successor entity
possessing the same powers and duties as the Asset Property Trustee as
the holder of the junior subordinated debenture and the other assets of
Allfirst Asset Trust;
. if the Asset Preferred Securities are distributed in liquidation of the
SKATES as described under "Description of the New SKATES--Capital Special
Event Redemption or Distribution," the Asset Preferred Securities or any
successor securities are listed or quoted, or any successor securities
will be listed or quoted upon notification of issuance, on any national
securities exchange or quoted on any quotation system on which the Asset
Preferred Securities are then listed or quoted;
. any merger, consolidation, amalgamation or replacement does not cause the
SKATES or, in the event that Allfirst Capital Trust is liquidated in
connection with a Capital Special Event, the Asset Preferred Securities
or any successor securities, to be downgraded by any nationally
recognized statistical rating organization;
. any merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the
SKATES or Asset Preferred Securities, including any successor securities,
in any material respect;
. the successor entity has a purpose substantially identical to that of
Allfirst Asset Trust;
. Allfirst guarantees the obligations of the successor entity under the
successor securities at least to the extent provided by the Asset
Guarantee; and
. before any merger, consolidation, amalgamation or replacement, Allfirst
has received an opinion of nationally recognized independent legal
counsel experienced in these matters to the effect that:
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. any merger, consolidation, amalgamation or replacement will not
adversely affect the rights, preferences and privileges of the holders
of the SKATES or the Asset Preferred Securities, including any successor
securities, in any material respect, other than with respect to any
dilution of the holders' interest in the new entity;
. following any merger, consolidation, amalgamation or replacement,
neither Allfirst Asset Trust nor the successor entity will be required
to register as an investment company under the Investment Company Act;
. following any merger, consolidation, amalgamation or replacement,
Allfirst Capital Trust, or any successor trust, will not be classified
as an association or a publicly traded partnership taxable as a
corporation for United States Federal income tax purposes; and
. following any merger, consolidation, amalgamation or replacement,
Allfirst Asset Trust will not be classified as an association or
publicly traded partnership taxable as a corporation for United States
Federal income tax purposes.
Modification of the Asset Declaration
The Asset Declaration may be modified and amended as described below.
If any proposed amendment to the Asset Declaration provides for, or the
Asset Administrators otherwise propose to effect,
. any action that would adversely affect the powers, preferences or special
rights of the Asset Securities, whether by way of amendment to the Asset
Declaration or otherwise; or
. the dissolution, winding-up or termination of Allfirst Asset Trust other
than under the terms of the Asset Declaration;
then, in each case, the holders of the Asset Securities voting together as a
single class will be entitled to vote on the amendment or proposal and the
amendment or proposal will not be effective except with the approval of the
holders of at least a majority in liquidation amount of the Asset Securities
affected. However, if the Capital Property trustee on behalf of Allfirst
Capital Trust is the holder of the Asset Preferred Securities, no such
amendment or proposal will be effective without the prior or concurrent
approval of the holders of a majority in liquidation amount of the outstanding
SKATES having a right to vote on such matters. If any amendment or proposal
referred to in the first point above would adversely affect only the Asset
Preferred Securities or the common securities of Allfirst Asset Trust, then
only the affected class will be entitled to vote on the amendment or proposal
and the amendment or proposal will not be effective except with the approval of
a majority of the holders in liquidation amount of that class of Asset
Securities.
The Asset Declaration may be amended without the consent of the holders of
the Asset Securities to:
. cure any ambiguity;
. correct or supplement any provision in the Asset Declaration that may be
defective or inconsistent with any other provision of the Asset
Declaration;
. add to the restrictions or obligations of the sponsor;
. conform to any change in the Investment Company Act, the Trust Indenture
Act or the rules or regulations under either law; and
. modify, eliminate and add to any provision of the Asset Declaration to
the extent as may be necessary or desirable;
if any such amendment does not have a material adverse effect on the rights,
preferences or privileges of the holders of the Asset Securities or the SKATES.
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Notwithstanding the foregoing, no amendment or modification may be made to
the Asset Declaration if the amendment or modification would:
. cause Allfirst Asset Trust to be classified as an association or publicly
traded partnership taxable as a corporation for United States Federal
income tax purposes;
. cause the SKATES or the Asset Preferred Securities to fail to qualify as
Tier 1 capital of Allfirst or consolidated Tier 1 capital of AIB;
. reduce or otherwise adversely affect the powers of the Asset Property
Trustee; or
. cause Allfirst Asset Trust to be deemed an investment company which is
required to be registered under the Investment Company Act.
Form of Asset Preferred Securities and Payment
In the event that the Asset Preferred Securities are distributed in
liquidation of the SKATES as described under "Description of the New SKATES--
Capital Special Event Redemption or Distribution," the form and payment
provisions applicable to the Asset Preferred Securities will be as described
under "Description of the New SKATES--Form of SKATES" and "--Payment."
Registrar, Transfer Agent and Paying Agent
The Asset Property Trustee, acts as registrar, transfer agent and paying
agent for the Asset Preferred Securities.
Registration of transfers of Asset Preferred Securities will be effected
without charge by or on behalf of Allfirst Asset Trust, but upon payment, with
the giving of such indemnity as Allfirst Asset Trust or First Maryland may
require, in respect of any tax or other governmental charges that may be
imposed in relation to it.
Allfirst Asset Trust will not be required to register or cause to be
registered the transfer of Asset Preferred Securities after those Asset
Preferred Securities have been called for redemption.
Information Concerning the Asset Property Trustee
The Asset Property Trustee, before the occurrence of a default with respect
to the Asset Securities, undertakes to perform only the duties as are
specifically set forth in the Asset Declaration and, after default, must
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to these provisions, the Asset
Property Trustee is under no obligation to exercise any of the powers vested in
it by the Asset Declaration at the request of any holder of the Asset Preferred
Securities or SKATES, unless offered indemnity reasonably satisfactory to the
Asset Property Trustee by the holder against the costs, expenses and
liabilities which might be incurred in connection with the exercise of any
powers.
Governing Law
The Asset Declaration and the Asset Preferred Securities are governed by,
and will be construed in accordance with, the internal laws of the State of
Delaware.
Miscellaneous
The Asset Administrators are authorized and directed to conduct the affairs
of and to operate Allfirst Asset Trust in such a way that:
. Allfirst Asset Trust will not be deemed to be an investment company
required to be registered under the Investment Company Act or
characterized as an association taxable as a corporation for United
States Federal income tax purposes;
. the junior subordinated debenture will be treated as indebtedness of
Allfirst for United States Federal income tax purposes; and
. Allfirst Asset Trust will not be treated as an association or as a
publicly traded partnership, within the meaning of Section 7704 of the
Internal Revenue Code of 1986, as amended, taxable as a corporation.
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In this connection, the Asset Administrators are authorized to take any
action, not inconsistent with applicable law, the certificate of trust or the
Asset Declaration that the Asset Administrators determine in their discretion
to be necessary or desirable for those purposes as long as such action does not
adversely affect the interests of the holders of the SKATES or the Asset
Preferred Securities.
Holders of the Asset Preferred Securities have no preemptive rights.
DESCRIPTION OF THE NEW ASSET GUARANTEE
Set forth below is a summary of the material information concerning the new
Asset Guarantee that will be executed and delivered by Allfirst to the Asset
Guarantee Trustee in exchange for the old Asset Guarantee. As previously noted,
the old and new Asset Guarantees are identical except that the new guarantee
has been registered under the 1933 Act and qualified under the Trust Indenture
Act. References in the following discussion to the "Asset Guarantee" are to the
new and the old Asset Guarantee. The summary is not complete and is subject in
all respects to the provisions of, and is qualified in its entirety by
reference to, the Asset Guarantee. The Asset Guarantee Trustee holds the Asset
Guarantee for the benefit of the holders of the Asset Preferred Securities.
Status of Old Asset Guarantee
If not all of the old SKATES are exchanged for new SKATES, and thus not all
of the old Asset Preferred Securities are exchanged for new Asset Trust
Preferred Securities, then the old Asset Guarantee will not terminate, but will
continue to guarantee the obligations of Allfirst Asset Trust for the benefit
of the holders of old Asset Preferred Securities. The old Asset Guarantee will
terminate upon:
. full payment of the redemption price of all of the old Asset Preferred
Securities; or
. full payment of the amounts payable in accordance with the Asset
Declaration upon liquidation of Allfirst Asset Trust.
The old Asset Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of old Asset Preferred Securities
must restore payment of any sums paid under the old Asset Preferred Securities
or the old Asset Guarantee.
Terms of the Asset Guarantee
Under the Asset Guarantee, Allfirst irrevocably agrees, on a subordinated
basis to the extent set forth in this offering memorandum, to pay in full to
the holders of the Asset Preferred Securities, without duplication of amounts
previously paid by Allfirst Asset Trust, as and when due, regardless of any
defense, right of set-off or counterclaim that Allfirst Asset Trust may have or
assert, the following payments (the "Asset Guarantee Payments"):
. any accrued and unpaid distribution with respect to any distribution
payment date on the Asset Preferred Securities to the extent Allfirst has
paid interest on the junior subordinated debenture on such date for the
immediately preceding quarterly period;
. the redemption price with respect to any Asset Preferred Securities
called for redemption by Allfirst Asset Trust, to the extent Allfirst has
paid the redemption price of a like amount of the junior subordinated
debenture called for redemption by Allfirst; and
. upon a liquidation of Allfirst Asset Trust, the lesser of:
. the aggregate of the liquidation amount and all accrued and unpaid
distributions on the Asset Preferred Securities since the last
distribution payment date; and
. the amount of assets of Allfirst Asset Trust, after satisfaction of all
liabilities, remaining available for distribution to holders of Asset
Preferred Securities in liquidation of Allfirst Asset Trust.
Allfirst's obligation to make an Asset Guarantee Payment may be satisfied by
direct payment of the required amounts by Allfirst to the holders of Asset
Preferred Securities or by causing Allfirst Asset Trust to pay these amounts to
holders.
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The Asset Guarantee is a guarantee on a subordinated basis with respect to
the Asset Preferred Securities from the time of issuance of the Asset Preferred
Securities but will not apply to any payment of distributions or the redemption
price, or to payments upon the dissolution, winding-up or termination of
Allfirst Asset Trust, except to the extent Allfirst Asset Trust has assets
available for such payment in accordance with the terms of the Asset
Declaration. For example, if on any interest payment date Allfirst fails to pay
interest or defers the payment of interest otherwise payable on the junior
subordinated debenture, Allfirst Asset Trust will not pay distributions on the
Asset Preferred Securities for the corresponding quarterly period. In such
event, holders of the Asset Preferred Securities would not be able to rely upon
the Asset Guarantee for payment of these amounts. Instead, holders of the Asset
Preferred Securities will have the remedies described in this offering
memorandum under "Description of the New Asset Preferred Securities--Asset
Enforcement Events."
The guarantees, when taken together with the junior subordinated debenture
and Allfirst's obligations to pay all fees and expenses of Allfirst Capital
Trust and Allfirst Asset Trust, constitute a limited guarantee to the extent
set forth in this prospectus by Allfirst of the distribution, redemption and
liquidation payments payable to the holders of the SKATES. The guarantees do
not apply, however, to distributions in full by Allfirst Asset Trust unless and
until Allfirst Asset Trust receives interest payments on the junior
subordinated debenture for the corresponding quarterly periods on the interest
payment date immediately following each quarterly period, to redemption
payments on the junior subordinated debenture received by Allfirst Asset Trust
or to liquidating distributions unless there are assets available for payment
in Allfirst Asset Trust. In addition, because the distributions are non-
cumulative, the guarantees do not apply to past quarterly distributions that
have not been paid by Allfirst Asset Trust or Allfirst Capital Trust.
Obligations of Allfirst
Under the Asset Guarantee, Allfirst agrees that if it is in default of its
obligations thereunder, then, unless and until, since the curing or waiver of
any such default, Allfirst Asset Trust has paid distributions on the Asset
Preferred Securities in full on four consecutive distribution payment dates,
Allfirst may not:
. declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock; or
. make any payment of principal, interest or premium, if any, on or repay
or repurchase or redeem any of its debt securities that rank equally with
or subordinate and junior in interest and right of payment to the junior
subordinated debenture or make any guarantee payments with respect to any
guarantee that ranks equally with or junior in interest and right of
payment to the junior subordinated debenture.
However, this limitation does not apply to:
. the declaration or payment of dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares of,
Allfirst's capital stock;
. any conversions or exchanges of its common stock of one class into common
stock of another class; or
. any declaration or distribution on, or any payment of the principal,
premium, if any, or interest on any guarantee, debt security or other
instrument of Allfirst ranking equally with the junior subordinated
debenture that is made on a pro rated basis with all other equally
ranking guarantees, debt securities and instruments, including the junior
subordinated debenture and the Capital Guarantee.
Events of Default; Enforcement of Asset Guarantee
An event of default under the Asset Guarantee will occur upon the failure of
Allfirst to perform any of its payment or other obligations under the Asset
Guarantee.
The holders of a majority in liquidation amount of the Asset Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Asset Property Trustee in
respect of the Asset Guarantee or to direct the exercise of any trust or power
conferred upon the Asset Property Trustee under the Asset Guarantee. If the
Asset Property Trustee fails to enforce its rights under the Asset Guarantee,
after a holder of Asset Preferred Securities has made a written request, such
holder of Asset Preferred Securities may institute a legal
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proceeding directly against Allfirst to enforce the Asset Property Trustee's
rights under the Asset Guarantee without first instituting a legal proceeding
against Allfirst Asset Trust, the Asset Property Trustee or any other person or
entity. In any event, if Allfirst fails to make an Asset Guarantee Payment, a
holder of Asset Preferred Securities may directly institute a proceeding
against Allfirst for enforcement of the Asset Guarantee for that payment.
Status of the Asset Guarantee; Subordination
The Asset Guarantee constitutes an unsecured obligation of Allfirst and
ranks equally with its obligations under the junior subordinated debenture and
the Capital Guarantee. See "Description of Investments--Junior Subordinated
Debenture--Subordination."
In addition, the Asset Guarantee is effectively subordinated to the deposits
and all other liabilities of Allfirst's subsidiaries.
Accordingly, the rights of the holders of Asset Preferred Securities to
receive payments under the Asset Guarantee are subject to the rights of the
holders of any obligations of Allfirst that are senior in priority to the
obligations under the Asset Guarantee. Furthermore, the holders of obligations
of Allfirst that are senior to the obligations under the Asset Guarantee,
including, but not limited to, obligations constituting senior indebtedness,
will be entitled to the same rights upon payment default or dissolution,
liquidation and reorganization in respect of the Asset Guarantee that inure to
the holders of senior indebtedness as against the holders of the junior
subordinated debenture. The Asset Declaration provides that each holder of
Asset Preferred Securities, by their acceptance of the Asset Preferred
Securities, agrees to the subordination provisions and other terms of the Asset
Guarantee.
The Asset Guarantee constitutes a guarantee of payment and not of
collection. That is, the guaranteed party may directly institute a legal
proceeding against Allfirst to enforce its rights under the Asset Guarantee
without instituting a legal proceeding against any other person or entity.
Amendments and Assignment
Except with respect to any changes that do not adversely affect the rights
of holders of Asset Preferred Securities, in which case no consent will be
required, the Asset Guarantee may be amended only with the prior approval of
the holders of not less than a majority in liquidation preference of the
outstanding Asset Preferred Securities. All guarantees and agreements contained
in the Asset Guarantee will bind the successors, assigns, receivers, trustees
and representatives of Allfirst and will inure to the benefit of the holders of
the Asset Preferred Securities then outstanding. Except in connection with any
permitted merger or consolidation of Allfirst with or into another entity or
any permitted sale, transfer or lease of Allfirst's assets to another entity in
which the surviving corporation, if other than Allfirst, assumes First
Maryland's obligations under the Asset Guarantee, Allfirst may not assign its
rights or delegate its obligations under the Asset Guarantee without the prior
approval of the holders of at least a majority of the aggregate stated
liquidation amount of the Asset Preferred Securities then outstanding.
Termination of the New Asset Guarantee
The new Asset Guarantee will terminate and be of no further force and effect
as to the new Asset Preferred Securities upon:
. full payment of the redemption price of all new Asset Preferred
Securities; or
. full payment of the amounts payable in accordance with the Asset
Declaration upon liquidation of Allfirst Asset Trust.
The new Asset Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of new Asset Preferred Securities
must restore payment of any sum paid under the new Asset Preferred Securities
or the new Asset Guarantee.
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Information Concerning the Asset Guarantee Trustee
The Asset Guarantee Trustee, before the occurrence of a default with respect
to the Asset Guarantee, undertakes to perform only those duties that are
specifically set forth in the Asset Guarantee and, after default with respect
to the Asset Guarantee, will exercise the same degree of care as a prudent
individual would exercise in the conduct of his own affairs. Subject to that
provision, the Asset Guarantee Trustee is under no obligation to exercise any
of the powers vested in it by the Asset Guarantee at the request of any holder
of the Asset Preferred Securities unless it is offered indemnity reasonably
satisfactory to the Asset Guarantee Trustee against the costs, expenses and
liabilities that might be incurred in connection with the exercise of those
powers.
Governing Law
The Asset Guarantee is governed by and will be construed in accordance with
the internal laws of the State of New York.
DESCRIPTION OF INVESTMENTS
Allfirst Asset Trust used approximately 95% of the proceeds from the sale of
the old Asset Preferred Securities and its common securities to purchase the
junior subordinated debenture. It invested the remaining 5% of the initial sale
proceeds in the permitted investments described below. In the exchange offer,
Allfirst Asset Trust will exchange the old junior subordinated debenture for
the new junior subordinated debenture issued by Allfirst, except to the extent
that old SKATES are not exchanged in the exchange offer. See "--Status of Old
Junior Subordinated Debenture." As previously noted, the old and new junior
subordinated debentures are identical, except that the new junior subordinated
debenture has been registered under the 1933 Act and does not provide for a
penalty interest rate. References in the following discussion to the "junior
subordinated debenture" are to the new and the old junior subordinated
debenture.
Junior Subordinated Debenture
Allfirst will issue the new junior subordinated debenture under the terms of
the indenture in a principal amount of approximately $105,310,000, assuming
that all old SKATES are exchanged in the exchange offer. The junior
subordinated debenture is scheduled to mature on July 15, 2029. The indenture
has been qualified under the Trust Indenture Act. The Bank of New York acts as
indenture trustee for the junior subordinated debenture under the indenture.
The terms of the junior subordinated debenture include those stated in the
indenture and those made part of the indenture by the Trust Indenture Act.
The following summary of the material terms and provisions of the junior
subordinated debenture is not complete and is subject to, and qualified in its
entirety by reference to, the indenture and the Trust Indenture Act. A copy of
the indenture is available, at no cost, by contacting Allfirst at the following
address: Allfirst Financial Inc., 25 South Charles Street, Investor Relations
Dept., Baltimore, Maryland 21201.
Subordination
The junior subordinated debenture is an unsecured, subordinated obligation
of Allfirst. The junior subordinated debenture ranks:
. except as described below, subordinate and junior in right of payment of
principal and interest to Allfirst's obligations for borrowed money and
all other liabilities of Allfirst;
. subordinate and junior in right of payment to its obligations under the
$200,000,000 aggregate principal amount of its 7.20% Subordinated Notes
due 2007 and the $100,000,000 aggregate principal amount of its 6.875%
Subordinated Notes due 2009;
. equally with its obligations under guarantees and indebtedness issued by
Allfirst in connection with:
. the $150,000,000 aggregate liquidation amount of Floating Rate
Subordinated Capital Income Securities issued by First Maryland Capital
I; and
. the $150,000,000 aggregate liquidation amount of Floating Rate
Subordinated Capital Income Securities issued by First Maryland Capital
II;
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. equally with its obligations under the guarantees; and
. equally with or senior to any other instrument or agreement of Allfirst
which is stated to rank equally with or junior to the junior subordinated
debenture.
No payment of principal or interest on the junior subordinated debenture may
be made unless:
. all amounts then due on all of Allfirst obligations ranking senior to its
obligations under the junior subordinated debenture have been paid in
full or duly provided for; and
. there has not occurred or is continuing an event of default or a default
in payment in respect of any obligation ranking senior to Allfirst's
obligation under the junior subordinated debenture which would permit a
holder of any senior obligation to accelerate that senior obligation
under its terms.
In addition, the junior subordinated debenture is effectively subordinated
to the deposits and all other liabilities of Allfirst subsidairies.
The junior subordinated debenture does not represent a deposit liability of
Allfirst or any of its bank subsidiaries.
Interest
The junior subordinated debenture bears interest at an annual rate of three-
month LIBOR plus 1.43%, reset quarterly, from and including July 13, 1999.
Interest is payable quarterly on January 15, April 15, July 15 and October 15
of each year, beginning October 15, 1999. The record dates are the 15th
calendar day, whether or not a Business Day, immediately preceding the relevant
interest payment dates. Interest payments not paid when due will accrue
interest, compounded quarterly, at the annual rate of three-month LIBOR plus
1.43%. Until January 15, 2000, the interest rate on the junior subordinated
debenture will be 7.61% per year.
The amount of interest payable for any period will be computed on the basis
of a 360-day year and the actual number of days elapsed during that period.
The interest calculation provisions for payments on the junior subordinated
debenture correspond to the interest calculation provisions for the
distributions on the SKATES. See "Description of the New SKATES--
Distributions--Calculations of LIBOR."
Allfirst Asset Trust will not receive any accumulated interest on the old
junior subordinated debenture for the period from the last interest payment
date or, if no interest payments have been made, from the original issue date,
to the exchange date. The new junior subordinated debenture will be treated as
having been outstanding from last interest payment date or the original issue
date, and the amount of any interest the trust is entitled to receive will not
be affected by the exchange.
Deferral of Interest Payments
Under the terms of the junior subordinated debenture, Allfirst may defer
interest payments on the junior subordinated debenture for a period of not more
than twenty quarterly periods or beyond the stated maturity of the junior
subordinated debenture. Because Allfirst Asset Trust will not make payments on
the Asset Preferred Securities for any quarterly period unless Allfirst makes
payments on the junior subordinated debenture on the interest payment date
immediately following the corresponding quarterly period and Allfirst Capital
Trust will not make distributions on the SKATES for any quarterly period unless
Allfirst Asset Trust makes distributions on the Asset Preferred Securities on
the distribution payment date immediately following the corresponding quarterly
period, holders of the SKATES will not receive distributions from Allfirst
Capital Trust for any quarterly period as to which Allfirst exercises its right
to defer interest payments on the junior subordinated debenture.
In the event that Allfirst defers interest payments on the junior
subordinated debenture, it may not resume making any interest payments without
the prior approval of the Federal Reserve Board and the Central Bank of
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Ireland. As a result, holders of the SKATES will not receive any distributions
following an interest deferral period if the Federal Reserve Board or the
Central Bank of Ireland does not permit Allfirst to resume making interest
payments on the junior subordinated debenture. If Allfirst is permitted to
resume making interest payments on the junior subordinated debenture after an
interest deferral period, holders of the SKATES will not receive any payments
of deferred interest.
If Allfirst defers interest payments on the junior subordinated debenture,
it will use its best efforts to give the Asset Property Trustee and the
indenture trustee notice of its election not less than one Business Day prior
to the related record date. Notwithstanding Allfirst's failure to give such
notice for any quarterly period, the failure to pay any interest payment in
full on any interest payment date will be deemed to be an election by Allfirst
to defer the interest payment due on that interest payment date. The Capital
Property Trustee will give notice of Allfirst's election to defer interest
payments to the holder of the SKATES.
Dividend and Payment Limitations
Under the terms of the indenture, Allfirst agrees that if:
. it defers interest payments on the junior subordinated debenture;
. there shall have occurred any event which it knows that, with the giving
of notice or the lapse of time, or both, would be an event of default in
respect of the junior subordinated debenture, which it has not taken
reasonable steps to cure or which has not been waived; or
. an event of default with respect to the junior subordinated debenture
occurs;
then, Allfirst may not:
. declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock, or
. make any payment of principal, interest or premium, if any, on or repay
or repurchase or redeem any of its debt securities that rank equally with
or subordinate and junior in interest and right of payment to the junior
subordinated debenture or make any guarantee payments with respect to any
guarantee that ranks equally with or junior in interest and right of
payment to the junior subordinated debenture,
unless and until, since the end of any interest deferral period and the curing
or waiving of any such event or event of default, it has paid all deferred
interest for any such deferral period and interest on the junior subordinated
debenture in full on four consecutive interest payment dates.
However, the limitation in the immediately preceding paragraph does not
apply to:
. the declaration or payment of dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares of,
Allfirst's capital stock;
. any conversions or exchanges of its common stock of one class into common
stock of another class; or
. any declaration or distribution on, or any payment of the principal,
premium, if any, or interest on any guarantee, debt security or other
instrument of Allfirst ranking equally with the junior subordinated
debenture that is made on a pro rated basis with all other equally
ranking guarantees, debt securities and instruments, including the
guarantees.
Redemption
The junior subordinated debenture is not redeemable before July 15, 2009
unless a Debenture Special Event has occurred. At any time on or after July 15,
2009, upon prior approval from the Federal Reserve Board and the Central Bank
of Ireland to do so, Allfirst may redeem the junior subordinated debenture, in
whole or in part, from time to time, at a redemption price equal to 100% of the
principal amount of junior subordinated
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debenture to be redeemed plus any accrued but unpaid interest (including any
Additional Interest (as defined below)) to the redemption date.
Allfirst will not redeem the junior subordinated debenture in part unless
all accrued and unpaid interest (including any Additional Interest) has been
paid in full on the outstanding aggregate principal amount of the junior
subordinated debenture for all quarterly interest periods terminating on or
prior to the redemption date.
In addition, Allfirst may not redeem the junior subordinated debenture
unless:
. all amounts then due on all of Allfirst's obligations ranking senior to
its obligations under the junior subordinated debenture have been paid in
full or duly provided for; and
. there has not occurred or is continuing an event of default or a default
in payment in respect of any obligation ranking senior to Allfirst's
obligation under the junior subordinated debenture which would permit a
holder of any senior obligation to accelerate that senior obligation
under its terms.
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 the junior subordinated
debenture to be redeemed at its registered address. Unless Allfirst defaults in
payment of the redemption price, on and after the redemption date, interest
will cease to accrue on the principal amount of the junior subordinated
debenture being called for redemption.
Debenture Special Event Redemption
If, at any time, a Debenture Tax Event, a Debenture Regulatory Event or a
Debenture Investment Company Event (each as defined below, and each a
"Debenture Special Event") occurs and is continuing, Allfirst must, within 90
days following the occurrence of such Debenture Special Event, elect either:
. with prior approval from the Federal Reserve Board and the Central Bank
of Ireland, to redeem the junior subordinated debenture in whole, but not
in part, upon not less than 30 or more than 60 days notice at the
redemption price, provided that, if at the time there is available to
Allfirst the opportunity to eliminate, within the 90-day period, the
Debenture Special Event by taking some ministerial action, such as filing
a form or making an election, or pursuing some other similar reasonable
measure that in the sole judgment of Allfirst has or will cause no
adverse effect on Allfirst Asset Trust, Allfirst Capital Trust or
Allfirst, Allfirst will pursue that measure in lieu of redemption; or
. to cause the junior subordinated debenture to remain outstanding,
provided that in the case of this clause, Allfirst must pay any and all
costs and expenses incurred by or payable by Allfirst Asset Trust
attributable to the Debenture Special Event.
"Debenture Tax Event" means that Allfirst has requested and received an
opinion of nationally recognized independent tax counsel experienced in these
matters to the effect that there has been a Tax Event and that, as a result,
there is more than an insubstantial risk that:
. Allfirst Asset Trust is, or will be, subject to United States Federal
income tax with respect to income accrued or received on the junior
subordinated debenture or its permitted investments;
. Allfirst Asset Trust is, or will be, subject to more than a minimal
amount of other taxes, duties or other governmental charges; or
. interest payable by Allfirst with respect to the junior subordinated
debenture to Allfirst Asset Trust is not, or will not be, deductible by
Allfirst for United States Federal income tax purposes.
"Debenture Regulatory Event" will occur at any time that Allfirst becomes,
or under law or regulation or any rules, guidelines or policies of the Federal
Reserve Board, the Central Bank of Ireland or any official administrative
announcement or decision interpreting these laws, regulations, rules, policies
or guidelines, will become within 180 days, subject to capital requirements
under which, in the written opinion of independent
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bank regulatory counsel experienced in such matters, the SKATES or the Asset
Preferred Securities would not qualify, disregarding any Tier 1 category
limits, for treatment as (1) Tier 1 capital applied for Allfirst as a bank
holding company or its then equivalent, or (2) consolidated Tier 1 capital of
AIB.
"Debenture Investment Company Event" means that Allfirst has requested and
received an opinion of nationally recognized independent legal counsel
experienced in these matters to the effect that as a result of the occurrence
on or after the date of this offering memorandum of a Change in Investment
Company Act Law, Allfirst Asset Trust is or will be considered an investment
company which is required to be registered under the Investment Company Act.
Indenture Events of Default
The indenture provides that any one or more of the following events with
respect to the junior subordinated debenture that has occurred and is
continuing constitutes an "Event of Default" with respect to the junior
subordinated debenture:
. failure for 30 days to pay any interest on the junior subordinated
debenture when due (subject to the deferral of any due date in the case
of a deferral period);
. failure to pay any principal on the junior subordinated debenture when
due whether at maturity, upon redemption, by declaration or otherwise;
. failure to observe or perform in any material respect any other covenant
contained in the indenture for 90 days after written notice to Allfirst
from the indenture trustee or the holders of at least 25% in aggregate
outstanding principal amount of the junior subordinated debenture; or
. certain events in bankruptcy, insolvency or reorganization of Allfirst.
Notwithstanding the foregoing, no default or Event of Default will exist if
the failure to pay interest or principal on the junior subordinated debenture
when due is the result of the failure of Allfirst to receive the prior approval
of the Federal Reserve Board and the Central Bank of Ireland to resume interest
payments after an interest deferral period or to repay the principal of the
junior subordinated debenture.
If an Event of Default, other than as a result of certain events in
bankruptcy, insolvency or reorganization of Allfirst, occurs and is continuing,
then there will be no right of acceleration of the payment of principal of the
junior subordinated debenture. In that event, the indenture trustee, subject to
certain limitations and conditions, may institute judicial proceedings to
enforce the payment of overdue principal or interest, or to obtain the
performance of any covenant or agreement, or to enforce any other proper
remedy. If an Event of Default as a result of certain events in bankruptcy,
insolvency or reorganization of Allfirst occurs and is continuing, then the
indenture trustee of the holders of not less than 25% in aggregate principal
amount of the junior subordinated debenture outstanding may, or the indenture
trustee if so directed by those holders will, declare the principal of the
junior subordinated debenture to be due and payable immediately. The holders of
a majority in aggregate outstanding principal amount of the junior subordinated
debenture may annul such declaration and waive the default if the default
(other than the non-payment of the principal of the junior subordinated
debenture which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the indenture trustee,
and should the holders of the junior subordinated debenture fail to annul such
declaration and waive such default, the holders of a majority in aggregate
liquidation amount of the outstanding SKATES (or, in the event the Asset
Preferred Securities are distributed to holders of the SKATES in connection
with a Capital Special Event, the Asset Preferred Securities) shall have the
right to do so.
The holders of a majority in aggregate outstanding principal amount of the
junior subordinated debenture affected may, on behalf of all holders of the
junior subordinated debenture, waive any past default, except a default in the
payment of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with
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the indenture trustee) or a default in respect of a covenant or provision which
under the indenture cannot be modified or amended without the consent of each
holder of the outstanding junior subordinated debenture, and should the holders
of the junior subordinated debenture fail to waive such default, the holders of
a majority in aggregate liquidation amount of the SKATES (or, in the event the
Asset Preferred Securities are distributed to holders of the SKATES in
connection with a Capital Special Event, the Asset Preferred Securities) shall
have the right to do so.
If an Event of Default has occurred and is continuing, the Asset Property
Trustee will have the right to declare the principal of and the interest on the
junior subordinated debenture and any other amounts payable under the indenture
to be forthwith due and payable and to enforce Allfirst Asset Trust's other
rights as a creditor with respect to the junior subordinated debenture.
Allfirst is required to file annually with the indenture trustee a
certificate as to whether or not First Maryland is in compliance with all the
conditions and covenants applicable to it under the indenture.
Enforcement of Certain Rights by Holders of SKATES
For so long as Allfirst Capital Trust holds any Asset Preferred Securities,
if the Asset Property Trustee fails to enforce its rights on behalf of Allfirst
Asset Trust under the junior subordinated debenture after a holder of the
SKATES has made a written request, any holder may on behalf of Allfirst Asset
Trust directly institute a legal proceeding against Allfirst under the junior
subordinated debenture, without first instituting any legal proceeding against
the Capital Property Trustee, Allfirst Capital Trust, the Asset Property
Trustee or Allfirst Asset Trust. In any event, for so long as Allfirst Capital
Trust is the holder of any Asset Preferred Securities, if a Capital Enforcement
Event has occurred and is continuing and that event is attributable to failure
of Allfirst to make any required payment when due on the junior subordinated
debenture, then a holder of the SKATES may on behalf of Allfirst Asset Trust
directly institute a proceeding against Allfirst with respect to the junior
subordinated debenture for enforcement of payment.
Allfirst may not amend the indenture to remove the foregoing right of a
holder of the SKATES to bring a direct action against Allfirst for the
enforcement of payment without the prior written consent of the holders of all
of the outstanding SKATES. Notwithstanding any payment made to such holders of
the SKATES by Allfirst in connection with a direct action, Allfirst shall
remain obligated to pay the principal of or interest on the junior subordinated
debenture held by Allfirst Asset Trust and Allfirst shall be subrogated to the
rights of the holder of the SKATES with respect to payments on the SKATES to
the extent of any payments made by Allfirst to such holder in any direct
action. The holders of SKATES will not be able to exercise directly any other
remedy available to the holders of the junior subordinated debenture.
Consolidation, Merger, Sale of Assets and Other Transactions
The indenture provides that Allfirst shall not consolidate with or merge
into any other entity or convey, transfer or lease its properties and assets
substantially as an entirety to any other entity, unless:
. in the event Allfirst consolidates with or merges into another entity or
conveys, transfers or leases its properties and assets substantially to
another entity, the successor entity is organized under the laws of the
United States or any state or the District of Columbia, and the successor
entity expressly assumes Allfirst's obligations under the junior
subordinated debenture;
. immediately after giving effect to any consolidation, merger, conveyance,
transfer or lease, no Event of Default, and no event which, after notice
or lapse of time or both, would become an Event of Default, shall have
happened and be continuing;
. if at the time any SKATES (or, in event the Asset Preferred Securities
are distributed to holders of the SKATES in connection with a Capital
Special Event, Asset Preferred Securities) are outstanding, such
transaction is permitted under the Capital Declaration or Capital
Guarantee (or, in the event the Asset
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Preferred Securities are distributed to holders of the SKATES in
connection with a Capital Special Event, the Asset Declaration or Asset
Guarantee);
. any such lease shall provide that it will remain in effect so long as the
junior subordinated debenture is outstanding; and
. certain other conditions prescribed in the indenture are met.
Modification Of Indenture
From time to time, Allfirst and the indenture trustee may, without the
consent of the holders of the junior subordinated debenture, 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 the junior
subordinated debenture. Allfirst and the indenture trustee may also modify the
indenture without consent of the holders of the junior subordinated debenture
for the purpose of qualifying, or maintaining the qualification of, the
indenture under the Trust Indenture Act.
The indenture also contains provisions permitting Allfirst and the indenture
trustee to modify the indenture in a manner affecting the rights of holders of
the junior subordinated debenture with the consent of the holders of not less
than a majority in principal amount of the outstanding junior subordinated
debenture; except that no modification may, without the consent of each holder
of the outstanding junior subordinated debenture so affected:
. change the stated maturity of, the principal amount of, or reduce the
rate or extend the time of payment of interest on the junior subordinated
debenture (except an extension pursuant to an existing interest deferral
right); or
. reduce the percentage of principal amount of the junior subordinated
debenture the holders of which are required to consent to any such
modification of the indenture.
However, so long as any SKATES (or if Asset Preferred Securities have been
distributed to holders of the SKATES in connection with a Capital Special
Event, Asset Preferred Securities) remain outstanding, no such modification may
be made that adversely affects the holders of the SKATES (or if Asset Preferred
Securities have been distributed to holders of the SKATES in connection with a
Capital Special Event, Asset Preferred Securities) in any material respect, and
no termination of the indenture may occur, and no waiver of any Event of
Default under the indenture 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 the outstanding SKATES (or if
Asset Preferred Securities have been distributed to holders of the SKATES in
connection with a Capital Special Event, Asset Preferred Securities) unless and
until the principal of the junior subordinated debenture and all accrued and
unpaid interest (including all Additional Interest) have been paid in full and
certain other conditions are satisfied.
Defeasance And Discharge
The indenture provides that Allfirst, at its option:
. will be discharged from any and all obligations in respect of the junior
subordinated debenture, other than certain obligations to register the
transfer or exchange of the junior subordinated debenture, replace the
stolen, lost or mutilated junior subordinated debenture, maintain paying
agencies and hold moneys for payment in trust; or
. need not comply with certain restrictive covenants of the indenture,
if Allfirst deposits, in trust with the indenture trustee, cash or U.S.
Government obligations which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money, in an
amount sufficient to pay all the principal of, and interest and premium, if
any, on the junior subordinated
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debenture on the dates payments on the junior subordinated debenture are due in
accordance with the terms of such junior subordinated debenture.
To exercise this option, Allfirst is required to deliver to the indenture
trustee an opinion of nationally recognized independent tax counsel to the
effect that the deposit and related defeasance would not cause Allfirst Asset
Trust, as holder of the junior subordinated debenture to recognize income, gain
or loss for United States Federal income tax purposes and, in the case of a
discharge pursuant to the first bullet point above, that opinion shall be
accompanied by a private letter ruling received by Allfirst from the United
States Internal Revenue Service or revenue ruling pertaining to a comparable
form of transaction to such effect published by the United States Internal
Revenue Service.
Payment and Paying Agents
Allfirst initially will act as paying agent with respect to the junior
subordinated debenture. Allfirst may at any time designate additional paying
agents or rescind the designation of any paying agent or approve a change in
the office through which any paying agent acts, except that Allfirst will be
required to maintain a paying agent at the place of payment.
All moneys deposited with the indenture trustee or any paying agent, or then
held by Allfirst in trust, for the payment of the principal of and premium, if
any, or interest that has become due and payable on the junior subordinated
debenture will, at the request of Allfirst, be repaid to Allfirst and the
holders of the junior subordinated debenture shall thereafter look as a general
unsecured creditor, only to Allfirst for payment.
Status of Old Junior Subordinated Debenture
If not all of the old SKATES are exchanged for new SKATES, and thus not all
of the old Asset Preferred Securities are exchanged for new Asset Trust
Preferred Securities, then a like principal amount of the old junior
subordinated debenture:
. will not be exchanged for a new junior subordinated debenture;
. will continue to be outstanding and to bear a restrictive legend; and
. will not provide for any penalty increase in the interest rate or for any
registration rights.
The Indenture Trustee
The Bank of New York, as indenture trustee, has and is subject to all the
duties and responsibilities specified with respect to an indenture trustee
under the Trust Indenture Act. Subject to those provisions, the indenture
trustee is under no obligation to exercise any of the powers vested in it by
the indenture at the request of any holder of the junior subordinated
debenture, unless offered indemnity reasonably satisfactory to it by that
holder against the costs, expenses and liabilities which might be incurred by
exercising those powers. The indenture trustee is not required to expend or
risk its own funds or otherwise incur personal financial liability in the
performance of its duties.
Governing Law
The indenture and the junior subordinated debenture are governed by and will
be construed in accordance with the laws of the State of New York.
Other Permitted Investments
In accordance with the investment directions set forth in the Asset
Declaration, the Asset Property Trustee, on behalf of Allfirst Asset Trust,
invested approximately 5% of the initial sale proceeds of the Asset Securities
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and the income of Allfirst Asset Trust retained in accordance with the
distribution guidelines described under "Allfirst Preferred Asset Trust--
Distributions to Holder of Common Securities," in eligible debt securities.
These eligible debt securities comprises cash or book-entry securities,
negotiable instruments, or other securities of entities not affiliated with
Allfirst which evidence any of the following:
. any security issued or guaranteed as to principal or interest by the
United States, or by a person controlled or supervised by and acting as
an instrumentality of the Government of the United States pursuant to
authority granted by the Congress of the United States, or any
certificate of deposit for any of the foregoing; and
. demand deposits, time deposits and certificates of deposit of an Eligible
Institution (as defined below) which are fully insured by the Federal
Deposit Insurance Corporation, in no case having a maturity greater than
nine months.
"Eligible Institution" means, a depository institution organized under the
laws of the United States or any one of the states thereof or the District of
Columbia, or any domestic branch of a foreign bank, which has either:
. a long-term unsecured debt rating of AA or better by S&P and Aa or better
by Moody's Investors Service, Inc. ("Moody's"); or
. a short-term unsecured debt rating or a certificate of deposit rating of
A-1+ or better by S&P and P-1 or better by Moody's;
and whose deposits are insured by the FDIC or whose parent has a long-term or
short-term unsecured debt rating which signifies investment grade and whose
deposits are insured by the FDIC.
To the extent not distributed to the holder of Allfirst Asset Trust's common
securities, the Asset Property Trustee, on behalf of Allfirst Asset Trust will,
from time to time and subject to the restrictions described in this prospectus
and in the Asset Declaration, reinvest payments received with respect to (1)
earnings received on the eligible debt securities and (2) deferred interest on
the junior subordinated debenture in additional eligible debt securities in
accordance with the investment directions set forth in the Asset Declaration.
Income with respect to these assets will not be available to make payments to
holders of the SKATES (or, in the event the Asset Preferred Securities are
distributed to holders of the SKATES in connection with a Capital Special
Event, Asset Preferred Securities) except upon liquidation of Asset Trust.
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UNITED STATES FEDERAL INCOME TAXATION
General
The SKATES and payments on the SKATES generally are subject to taxation. The
following discussion is equally applicable to old and new SKATES.
We have engaged Arnold & Porter as special tax counsel ("Tax Counsel") to
review the following discussion. Tax Counsel has given us its written legal
opinion that the discussion correctly describes in all material respects the
principal aspects of the U.S. Federal tax treatment of beneficial owners of
SKATES. Unless otherwise stated, this summary deals only with SKATES held as
capital assets by United States Persons who purchase the SKATES upon original
issuance. As used in this prospectus, a "United States Person" means a person
that is a:
. citizen or resident of the United States;
. a corporation or a partnership (including an entity treated as a
corporation or partnership for United States Federal income tax purposes)
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia (unless, in the case of a
partnership, Treasury regulations are adopted that provide otherwise);
. an estate whose income is subject to United States Federal income tax
regardless of its source; or
. a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States Persons have the authority to control all substantial decisions of
the trust.
Notwithstanding the last bullet point above, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996, and
treated as United States Persons prior to such date, that elect to continue to
be treated as United States Persons, will also be United States Persons.
This summary does not address all the tax consequences that may be relevant
to holders who may be subject to special tax treatment, such as banks, real
estate investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, and foreign
investors. This summary does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the SKATES. This summary is
based on the Code, the Treasury regulations promulgated under the Code and
administrative and judicial interpretations of the Code, as of the date of this
offering memorandum, all of which are subject to change, possibly on a
retroactive basis.
Tax Counsel has advised us that there is no authority directly on point
dealing with securities similar to the SKATES or transactions of the type
described in this prospectus (other than the exchange offer) and that the
opinions of Tax Counsel are not binding on the IRS or the courts, either of
which could take a contrary position. No rulings have been or will be sought
from the IRS. Accordingly, there can be no assurance that the IRS will not
challenge the opinions expressed in this tax discussion or that a court would
not sustain a challenge to these opinions.
You should consult with your own tax advisors regarding the tax consequences
of purchasing, owning and disposing of the SKATES, including the tax
consequences under state, local, foreign, and other tax laws and the possible
effects of changes in United States Federal or other tax laws. For a discussion
of the possible redemption of the SKATES or redemption of the Asset Preferred
Securities upon the occurrence of certain tax events see "Description of the
New SKATES--Capital Special Event Redemption or Distribution" and "Description
of Investments--Junior Subordinated Debenture--Debenture Special Event
Redemption," respectively.
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Exchange Offer
The exchange of the old junior subordinated debenture for the new junior
subordinated debenture will not be treated as an "exchange" for United States
federal income tax purposes since the new junior subordinated debenture does
not differ materially in kind or extent from the old junior subordinated
debenture. Rather, the new junior subordinated debenture should be treated as a
continuation of the old junior subordinated debenture in the hands of the
trustee. As a result, there will be no United States federal income tax
consequences to a holder exchanging old SKATES for new SKATES in the exchange
offer. The new SKATES will be treated as having the same issue date and issue
price as the old SKATES for United States federal income tax purposes.
Classification of Allfirst Capital Trust
Tax Counsel has given us their opinion that, under current law, and based on
certain representations made by Allfirst Capital Trust and Allfirst, as well as
certain facts and assumptions with respect to the transaction described in this
offering memorandum, Allfirst Capital Trust will be classified for United
States Federal income tax purposes as a grantor trust and not as an association
taxable as a corporation. Accordingly, for United States Federal income tax
purposes, each holder of the SKATES will be considered the owner of an
undivided interest in the Asset Preferred Securities held by Allfirst Capital
Trust. As a result of this treatment, each holder of the SKATES will be
required to include in its gross income its distributive share of income
attributable to Allfirst Asset Trust. This amount generally will be equal to a
holder's allocable share of amounts paid on the Asset Preferred Securities. No
amount included in income with respect to the SKATES will be eligible for the
corporate dividends-received deduction.
Classification of Allfirst Asset Trust
Tax Counsel has given us their opinion that, under current law, and based on
certain representations made by the Allfirst Asset Trust and Allfirst, as well
as certain facts and assumptions with respect to the transaction described in
this offering memorandum, Allfirst Asset Trust will be classified for United
States Federal income tax purposes as a partnership and not as an association
or publicly traded partnership taxable as a corporation.
Tax Counsel's opinion is based on certain factual assumptions relating to
the organization and operation of Allfirst Asset Trust and is conditioned upon
certain representations made by Allfirst and Allfirst Asset Trust as to factual
matters, including the organization and the operation of Allfirst Asset Trust
and the type and frequency of investments made by Allfirst Asset Trust.
Allfirst Asset Trust and Allfirst have represented that they intend to
operate Allfirst Asset Trust in a manner that will enable Allfirst Asset Trust
to be classified as a partnership as long as any Asset Preferred Securities
remain outstanding. In particular, under the Asset Declaration, the Asset
Administrators and Asset Trustees cannot take any action that would cause
Allfirst Asset Trust to be a "publicly traded partnership" taxable as a
corporation. Accordingly, we expect that Allfirst Asset Trust will continue to
qualify as a partnership and, therefore, will not constitute a publicly traded
partnership taxable as a corporation for all taxable years in which any Asset
Preferred Securities remain outstanding.
Classification of the Junior Subordinated Debenture
Allfirst Asset Trust, Allfirst and the holders of SKATES (by acceptance of a
beneficial interest in a SKATES) have agreed to treat the junior subordinated
debenture as indebtedness of Allfirst for all United States tax purposes. Based
on certain representations made by Allfirst Asset Trust and Allfirst and
certain other facts and assumptions referred to in its opinion, Tax Counsel has
given us its opinion that, although there are no authorities addressing the
proper treatment of instruments substantially similar to the SKATES and the
junior subordinated debenture, the junior subordinated debenture should be
treated as indebtedness of Allfirst for United States Federal income tax
purposes.
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Income and Deductions
Because Allfirst Capital Trust will be classified as a grantor trust for
United States Federal income tax purposes, holders of SKATES will be considered
to own an undivided interest in the Asset Preferred Securities held by Allfirst
Capital Trust. As a result of this treatment, you will be required to take into
income your proportionate share of income attributable to Allfirst Asset Trust.
Your distributive share of income attributable to Allfirst Asset Trust
generally will be equal to the amount of the cash distributions that accumulate
with respect to the SKATES. Actual cash distributions on the SKATES will not,
however, be separately reported as taxable income to the holders at the time
they are received.
The nature and timing of the income that is allocated to holders of the
SKATES will depend on the United States Federal income tax characterization of
the income earned on the investments held by Allfirst Asset Trust during the
relevant period.
Receipt of Asset Preferred Securities Upon Liquidation of Allfirst Capital
Trust
Under certain circumstances, as described under the caption "Description of
the New SKATES--Capital Special Event Redemption or Distribution," Asset
Preferred Securities may be distributed to holders of the SKATES in exchange
for their SKATES and in liquidation of Allfirst Capital Trust. Unless the
liquidation of Allfirst Capital Trust occurs as a result of Allfirst Capital
Trust being treated as an association taxable as a corporation or otherwise
being subject to United States Federal income tax with respect to income
accrued or received on the Asset Preferred Securities, a distribution to
holders under these circumstances would, for United States Federal income tax
purposes, be treated as a nontaxable event. You would receive a tax basis in
the Asset Preferred Securities equal to your tax basis in your SKATES with a
holding period in the Asset Preferred Securities so received in liquidation of
Allfirst Capital Trust that would include the period during which the SKATES
were held. If, however, the liquidation of Allfirst Capital Trust were to occur
because Allfirst Capital Trust is subject to United States Federal income tax
with respect to income accrued or received on the Asset Preferred Securities,
the distribution of Asset Preferred Securities to you by Allfirst Capital Trust
would likely be a taxable event to you, and you would recognize gain or loss as
if you had exchanged your SKATES for the Asset Preferred Securities you
received upon the liquidation of Allfirst Capital Trust. Gain or loss you
recognize on the exchange would be equal to the difference between your tax
basis in your SKATES surrendered in the exchange and the aggregate fair market
value of the Asset Preferred Securities you receive in the exchange.
Redemption of SKATES for Cash
Under certain circumstances, as described under the caption "Description of
the New SKATES--Mandatory Redemption Description of the SKATES--Capital Special
Event Redemption or Distribution" and "Description of Investments--Junior
Subordinated Debenture--Debenture Special Event Redemption," Allfirst Asset
Trust may redeem the Asset Preferred Securities for cash, in which event
Allfirst Capital Trust shall simultaneously apply the cash received to redeem
the SKATES. Under current law, this redemption of the SKATES would constitute,
for United States Federal income tax purposes, a taxable disposition and you
would recognize gain or loss as if you sold your proportionate interest in the
redeemed Asset Preferred Securities for an amount of cash equal to the proceeds
received upon redemption. See "--Disposition of SKATES."
Disposition of SKATES
If you sell SKATES, you will recognize gain or loss equal to the difference
between the amount realized on the sale of the SKATES and your adjusted tax
basis in the SKATES sold. Gain or loss to the seller generally will be a
capital gain or loss and will be a long-term capital gain or loss if you have
held the SKATES for more than one year at the time of the sale.
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Your tax basis in your SKATES generally will equal:
. the amount you paid for your SKATES;
. increased by the amount includible in your income with respect to your
SKATES; and
. reduced by the amount of cash or other property distributed to you with
respect to your SKATES.
If you acquire SKATES at different prices you may be required to maintain a
single aggregate adjusted tax basis in all of your SKATES and, upon sale or
other disposition of some of your SKATES, to allocate a pro rata portion of
such aggregate tax basis to the SKATES sold, rather than maintaining a separate
tax basis in each SKATES for purposes of computing gain or loss on a sale of
those SKATES.
Partnership Provisions
Section 754. Allfirst Asset Trust does not presently intend to make an
election under Code Section 754. Accordingly, a purchaser of SKATES who does
not purchase the SKATES at initial issuance will not be permitted to adjust the
tax basis in his allocable share of Allfirst Asset Trust's assets so as to
reflect any difference between his purchase price for the SKATES and his share
of Allfirst Asset Trust's underlying tax basis in its assets. As a result, you
may be required to report a larger or smaller amount of income from holding the
SKATES than would otherwise be appropriate based on your purchase price for the
SKATES.
Section 708. Under Section 708 of the Code, Allfirst Asset trust will be
deemed to terminate for United States Federal income tax purposes if 50% or
more of the capital and profits interests in Allfirst Capital Trust are sold or
exchanged within a 12-month period. If a deemed termination under Section 708
were to occur, Allfirst Asset Trust would be considered to have contributed its
assets to a new "partnership" in return for "partnership interests" therein and
then to have distributed those new partnership interests to the holders of
Asset Securities in liquidation of Allfirst Asset Trust.
Section 701. The Department of Treasury has promulgated regulations under
Section 701 of the Code that generally permit it to recast a transaction or
disregard a partnership if a partnership is formed or availed of in connection
with a transaction a principal purpose of which is to reduce substantially the
present value of the partners' aggregate federal tax liability in a manner that
is inconsistent with the intent of the partnership provisions of the Code. The
regulations also permit the Department of the Treasury to treat a partnership
as an aggregate of its partners where appropriate to carry out the purpose of
any provision of the Code or the Treasury regulations thereunder. Allfirst
Asset Trust has been formed for, and will engage in, activities typical for
partnerships. Although there is no precedent that applies to the transactions
contemplated herein, Tax Counsel believes that Allfirst Asset Trust is not of
the type intended to fall within the scope of these regulations.
Non-United States Persons
The following discussion applies to you if you are not a United States
Person as described above.
Payments to you, as a non-United States Person, on a SKATES generally will
not be subject to withholding of income tax, provided that:
. you did not (directly or indirectly, actually or constructively) own 10%
or more of the total combined voting power of all classes of our stock
entitled to vote;
. you are not a controlled foreign entity that is related to us through
stock ownership; and
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. either (a) you certify under penalties of perjury, that you are not a
United States Person and provide your name and address, or (b) a
securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business, and holds the capital security in such capacity, certify, under
penalties of perjury, that it requires and has received such a statement
from you or another financial institution between it and you in the chain
of ownership, and furnishes a copy thereof.
It is possible that changes in the law affecting the United States Federal
income tax consequences of the junior subordinated debenture could adversely
affect our ability to deduct interest payable on the junior subordinated
debenture. Such changes could also cause the junior subordinated debenture to
be classified as our equity (rather than our debt) for United States federal
income tax purposes. This might cause the income on the SKATES to be
characterized as dividends, generally subject to a 30% income tax (on a
withholding basis) when paid to you if you are a non-United States Person,
rather than as interest which, as discussed above generally is exempt from
income tax in the hands of a person who is a non-United States Person.
You, as a non-United States Person, will generally not be subject to
withholding of income tax on any gain realized upon the sale or other
disposition of a SKATES.
If you hold the SKATES in connection with the active conduct of a United
States trade or business, you will be subject to United States Federal income
tax on all income and gains recognized with respect to your proportionate share
of the SKATES.
Information Reporting and Backup Withholding
Income on the SKATES will be reported to holders on an IRS Form 1099, which
form should be mailed to holders of SKATES by January 31 following each
calendar year. Payments made on and proceeds from the sale of SKATES may be
subject to a "back-up" withholding tax of 31% unless the holder is an exempt
recipient (generally corporations and certain other entities) or complies with
certain identification requirements (such as supplying their taxpayer
identification number). Any withheld amount generally will be allowed as a
credit against the holder's United States Federal income tax, provided the
required information is timely filed with the IRS.
New Withholding Regulations
In October 1997, the IRS issued final regulations relating to withholding,
backup withholding and information reporting with respect to payments made to
non-U.S. Persons. The regulations generally are effective for payments made
after December 31, 2000. When effective, the new regulations will streamline
and, in some cases, alter the types of statements and information that must be
furnished to claim a reduced rate of withholding. The regulations also clarify
the duties of payors and modify the rules concerning withholding on payments
made to non-United States Persons through foreign intermediaries. With some
exceptions, the new regulations treat a payment to a foreign partnership as a
payment directly to the partner.
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended or
ERISA (a "Plan"), should consider the fiduciary standards and other
requirements of ERISA in the context of the Plan's particular circumstances
before authorizing an investment in the SKATES, both old and new. Accordingly,
among other factors, the fiduciary should consider whether the investment would
satisfy the prudence and diversification requirements of ERISA and would be
permissible under the documents and instruments governing the Plan and ERISA's
prohibited transactions rules.
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Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as
individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or "disqualified
persons" under the Code ("Parties in Interest") with respect to such Plans. A
violation of these "prohibited transaction" rules may result in an excise tax
or other liabilities under ERISA and/or Section 4975 of the Code for such
persons, unless exemptive relief is available under an applicable statutory or
administrative exemption. Employee benefit plans that are governmental plans
(as defined in Section 3(32) of ERISA), certain church plans (as defined in
Section 3(33) of ERISA) and foreign plans (as described in Section 4(b)(5) of
ERISA) are not subject to the requirements of ERISA or Section 4975 of the
Code.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of Allfirst Capital Trust would be
deemed to be "plan assets" of a Plan for purposes of ERISA and Section 4975 of
the Code if "plan assets" of the Plan were used to acquire an equity interest
in Allfirst Capital Trust and no exception were applicable under the Plan
Assets Regulation. An "equity interest" is defined under the Plan Assets
Regulation as any interest in an entity other than an instrument which is
treated as indebtedness under the 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 Allfirst Capital Trust would not be deemed to be "plan assets" of investing
Plans if, immediately after the most recent acquisition of any equity interest
in Allfirst Capital Trust, less than 25% of the value of each class of equity
interests in Allfirst Capital Trust were held by Plans, other employee benefit
plans not subject to ERISA or Section 4975 of the Code (such as governmental,
church and foreign plans), and entities holding assets deemed to be "plan
assets" of any Plan (collectively, "Benefit Plan Investors"). No assurance can
be given that the value of the SKATES held by Benefit Plan Investors was or
will be less than 25% of the total value of the SKATES at the completion of the
initial offering or thereafter, and no monitoring or other measures have been
or will be taken with respect to the satisfaction of the conditions to this
exception. All of the common securities of Allfirst Capital Trust have been
purchased and are held by Allfirst.
Certain transactions involving Allfirst Capital Trust and Allfirst Asset
Trust could be deemed to constitute direct or indirect prohibited transactions
under ERISA and Section 4975 of the Code with respect to a Plan if the SKATES
were acquired with "plan assets" of such Plan and assets of Allfirst Capital
Trust and Allfirst Asset Trust were deemed to be "plan assets" of Plans
investing in SKATES. For example, if Allfirst is a Party in Interest with
respect to an investing Plan (either directly or by reason of its ownership of
Allfirst or other subsidiaries, including Allfirst Asset Trust), extensions of
credit between First Maryland and Allfirst Asset Trust (as represented by the
junior subordinated debenture and the guarantees) would likely be prohibited by
Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code, unless
exemptive relief were available under an applicable administrative exemption
(see below).
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief for direct or indirect prohibited
transactions resulting from the purchase or holding of the SKATES, assuming
that assets of Allfirst Capital Trust were deemed to be "plan assets" of Plans
investing in the Allfirst Capital Trust (see above). Those class exemptions are
PTCE 96-23 (for certain transactions determined by in-house asset managers),
PTCE 95-60 (for certain transactions involving insurance company general
accounts), PTCE 91-38 (for certain transactions involving bank collective
investment funds), PTCE 90-1 (for certain transactions involving insurance
company pooled separate accounts), and PTCE 84-14 (for certain transactions
determined by independent qualified professional asset managers).
Because the SKATES may be deemed to be equity interests in Allfirst Capital
Trust or Allfirst Asset Trust for purposes of applying ERISA and Section 4975
of the Code, the SKATES 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
75
<PAGE>
applicable exemption. If a purchaser or holder of SKATES 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, Allfirst and the Capital Property Trustee may require a
satisfactory opinion of counsel or other evidence with respect to the
availability of such exemption for such purchase and holding. Any purchaser or
holder of the SKATES or any interest therein that is a Plan or a Plan Asset
Entity or that is purchasing such securities on behalf of or with "plan assets"
of any Plan will be deemed to have represented by its purchase and holding
thereof that: (a) the purchase and holding of the SKATES is covered by the
exemptive relief provided by PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another
applicable exemption; (b) Allfirst, the Capital Administrators and the Asset
Administrators are not "fiduciaries," within the meaning of Section 3(21) of
ERISA and the regulations thereunder, with respect to such person's interest in
the Allfirst Capital Trust, the Allfirst Asset Trust or the junior subordinated
debenture; and (c) in purchasing the SKATES, such person approves the purchase
of the Asset Preferred Securities and the junior subordinated debenture and the
appointment of the property trustees and the Delaware trustees.
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 SKATES on
behalf of or with "plan assets" of any Plan consult with their counsel
regarding the potential consequences if the assets of Allfirst Capital Trust
were deemed to be "plan assets" and the availability of exemptive relief under
PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
Governmental plans and certain church plans (as defined in ERISA) are not
subject to ERISA or the prohibited transaction provisions under Section 4975 of
the Code. However, state laws or regulations governing the investment and
management of the assets of such plans may contain fiduciary and prohibited
transaction requirements similar to those under ERISA and the Code discussed
above.
The discussion herein of ERISA is general in nature and is not intended to
be all inclusive. Any fiduciary of a Plan, governmental plan or church plan
owning SKATES should consult with its legal advisors regarding the consequences
of such an investment.
76
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives new SKATES for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of its new SKATES.
A Participating Broker-Dealer may use this prospectus, as it may be amended
or supplemented from time to time, in connection with resales of new SKATES
received in the exchange offer:
. for a period ending 90 days after the expiration date of the exchange
offer (subject to any extension); or
. if earlier, when all such new SKATES have been disposed of by the
Participating Broker-Dealer,
but only if the Participating Broker-Dealer acquired old SKATES for its own
account as a result of market-making activities or other trading activities.
Neither Allfirst nor Allfirst Capital Trust will receive any cash proceeds
from the issuance of the new SKATES offered hereby. New SKATES received by
broker-dealers for their own accounts in connection with the exchange offer may
be sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the new
SKATES or a combination of such methods of resale, at market prices prevailing
at the time of resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such new SKATES. Any broker-dealer that resells new SKATES that were
received by it for its own account in the exchange offer and any broker or
dealer that participates in a distribution of new SKATES may be deemed to be an
"underwriter" within the meaning of the 1933 Act, and any profit on any resale
of new SKATES and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the 1933 Act. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, information statements and other information with the SEC.
Our SEC filings are available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by visiting
the SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms.
This prospectus summarizes material provisions of contracts and other
documents that we refer you to. Because the prospectus may not contain all the
information that you may find important, you should review the full text of
these documents. You may obtain copies of these documents, at no cost, by
contacting us at the following address: Allfirst Financial Inc., 25 South
Charles Street, Baltimore, Maryland 21201, Attention: Investor Relations.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
We incorporate by reference in this prospectus information we file with the
SEC, which means:
. incorporated documents are considered part of the prospectus;
. we can disclose important information to you by referring you to those
documents; and
. information that we file with the SEC will automatically update and
supersede this incorporated information.
77
<PAGE>
We incorporate by reference the documents listed below which were filed with
the SEC under the 1934 Act:
. annual report on Form 10-K for the year ended December 31, 1998;
. quarterly reports on Form 10-Q for the quarters ended March 31, June 30,
and September 30, 1999; and
. current reports on Form 8-K dated May 25, 1999 and September 15, 1999.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of this prospectus until this placement
is completed:
. reports filed under Sections 13(a) and (c) of the 1934 Act;
. definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent stockholders' meeting; and
. any reports filed under Section 15(d) of the 1934 Act.
You should rely only on information contained or incorporated by reference
in this prospectus. We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not making an offer to sell
these securities in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition, results of operations and prospects may have changed since that
date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Allfirst
Financial Inc., 25 South Charles Street, Baltimore, Maryland 21201, Attention:
Investor Relations. Our telephone number is (410) 244-4000.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the new SKATES
and the Asset Preferred Securities are being passed upon by Morris, Nichols,
Arsht & Tunnell, special Delaware counsel to Allfirst Capital Trust, Allfirst
Asset Trust and Allfirst. The legality under state law of the guarantees and
the junior subordinated debenture will be passed upon on behalf of Allfirst
Capital Trust, Allfirst Asset Trust and Allfirst by Gregory K. Thoreson, Senior
Vice President and General Counsel of Allfirst.
EXPERTS
The financial statements incorporated in this Registration Statement by
reference to the Annual Report on Form 10-K of Allfirst Financial Inc.
(successor to First Maryland Bancorp) for the year ended December 31, 1998 have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The financial statements of Allfirst Preferred Capital Trust and Allfirst
Preferred Asset Trust as of July 13, 1999, included in this prospectus have
been so included in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
78
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF THE TRUSTS
<TABLE>
<S> <C>
ALLFIRST PREFERRED CAPITAL TRUST
Report of Independent Accountants......................................... F-2
Balance Sheet............................................................. F-3
Notes to Balance Sheet.................................................... F-4
ALLFIRST PREFERRED ASSET TRUST
Report of Independent Accountants......................................... F-6
Balance Sheet............................................................. F-7
Notes to Balance Sheet.................................................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Allfirst Preferred Capital Trust
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of Allfirst Preferred Capital Trust
(the "Trust") at July 13, 1999, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Trust's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this
financial statement in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free from material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
September 24, 1999
F-2
<PAGE>
ALLFIRST PREFERRED CAPITAL TRUST
BALANCE SHEET
JULY 13, 1999
<TABLE>
<S> <C>
ASSETS
Investment in Asset Preferred Securities--Allfirst Asset Trust.... $101,962,070
------------
Total Assets.................................................... $101,962,070
============
STOCKHOLDERS' EQUITY
Floating Rate Non-Cumulative Subordinated Capital Trust Enhanced
Securities; (aggregate liquidation amount $100,000,000).......... $ 98,903,000
Trust Common Securities (aggregate liquidation amount
$3,059,070)...................................................... 3,059,070
------------
Total Stockholders' Equity...................................... $101,962,070
============
</TABLE>
See Notes to Balance Sheet
F-3
<PAGE>
NOTES TO BALANCE SHEET OF ALLFIRST PREFERRED CAPITAL TRUST
1. ORGANIZATION AND PURPOSE
Allfirst Preferred Capital Trust ("Allfirst Capital Trust") is a statutory
business trust formed on June 29, 1999 under the laws of the State of Delaware
for exclusive purposes of (i) issuing Floating Rate Non-Cumulative Subordinated
Capital Trust Enhanced Securities ("SKATES") and common securities,
(ii) purchasing Asset Preferred Securities issued by Allfirst Asset Trust and
(iii) engaging in only those other activities necessary or incidental thereto.
Allfirst Financial Inc. (the "Company") has paid compensation of $1.5
million to the initial purchaser of the SKATES. The Company has also agreed to
pay all fees and expenses related to the organization and operations of
Allfirst Capital Trust, including any taxes, duties, assessments or
governmental charges of whatever nature imposed by the United States or any
other domestic taxing authority upon Allfirst Capital Trust, other than
withholding taxes. The Company will also be responsible for all debts and
obligations of Allfirst Capital Trust, other than those obligations with
respect to the SKATES. The Company has agreed to indemnify the trustees and
certain other persons.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements are presented in accordance with United States
generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet. Actual results could differ
significantly from those estimates.
Investment
The investment in Asset Preferred Securities represents an undivided
beneficial ownership interest in the assets of Allfirst Preferred Asset Trust
("Allfirst Asset Trust") and is classified as held to maturity and, therefore,
is recorded at cost. Income on the Asset Preferred Securities is accrued when
earned.
Income Taxes
Allfirst Capital Trust is treated as a grantor trust for U.S. federal income
tax purposes and, therefore, no provision for income taxes has been made.
3. INVESTMENT IN ASSET PREFERRED SECURITIES
Allfirst Capital Trust holds 103,093 Asset Preferred Securities with a
stated liquidation amount of $1,000 per Asset Preferred Security. The
distribution rate on each Asset Preferred Security is a rate per annum of
three-month LIBOR plus 1.50% of the stated liquidation amount of $1,000 per
Asset Preferred Security, reset quarterly. Distributions will be paid if, as
and when Allfirst Asset Trust has funds available for distribution from
corresponding interest payments on a junior subordinated debenture from the
Company. Distributions on the Asset Preferred Securities are non-cumulative,
and will be payable quarterly on January 15, April 15, July 15, and October 15
of each year commencing October 15, 1999, if, as and when funds are available
for payment.
The distributions on the Asset Preferred Securities are non-cumulative. The
distribution calculation and payment provisions for the Asset Preferred
Securities correspond to the distribution calculation and payment provisions
for the SKATES.
Allfirst Asset Trust will redeem the Asset Preferred Securities if the
junior subordinated debenture of the Company held by the Allfirst Asset Trust
is redeemed. The Company may redeem the junior subordinated
F-4
<PAGE>
NOTES TO BALANCE SHEET OF ALLFIRST PREFERRED CAPITAL TRUST--(Continued)
debenture, in whole or in part, at any time on or after July 15, 2009 with the
prior consent of the Federal Reserve Board and the Central Bank of Ireland.
Allfirst Asset Trust will redeem the Asset Preferred Securities at an amount
equal to $1,000 plus accrued and unpaid distributions for the current
quarterly period from the last distribution date. An equal amount of the
SKATES will be redeemed upon any redemption of the Asset Preferred Securities
at the redemption price.
The Company has guaranteed, on a subordinated basis, the payment of
distributions by Allfirst Asset Trust if, as and when declared out of funds
legally available and payments upon liquidation of Allfirst Asset Trust or the
redemption of the Asset Preferred Securities to the extent of funds legally
available.
4. SUBORDINATED CAPITAL TRUST ENHANCED SECURITIES ("SKATES")
Allfirst Capital Trust issued 100,000 of its Floating Rate Non-Cumulative
Subordinated Capital Trust Enhanced Securities, Series A, $1,000 liquidation
preference per security ("SKATES"), on July 13, 1999 for an aggregate purchase
price of $98,903,000. The SKATES are redeemable if the Asset Preferred
Securities of Allfirst Asset Trust are redeemed. Allfirst Asset Trust will
redeem the Asset Preferred Securities if the junior subordinated debenture of
the Company held by the Allfirst Asset Trust is redeemed. The Company may
redeem the junior subordinated debenture, in whole or in part, at any time on
or after July 15, 2009 with the prior consent of the Federal Reserve Board and
the Central Bank of Ireland. Allfirst Asset Trust will redeem the Asset
Preferred Securities at an amount equal to $1,000 plus accrued and unpaid
distributions for the current quarterly period from the last distribution
date. An equal amount of the SKATES will be redeemed upon any redemption of
the Asset Preferred Securities at an amount per SKATE equal to $1,000 plus
accrued and unpaid distributions from the last distribution payment date.
Distributions on the SKATES are non-cumulative. The distribution rate on
the SKATES is a rate per annum of three month LIBOR plus 1.50% of the stated
liquidation amount of $1,000 per SKATES, reset quarterly. The distributions
will be paid if, as and when Allfirst Capital Trust has funds available for
distribution. Distributions on the SKATES will be payable quarterly on each
January 15, April 15, July 15 and October 15, commencing October 15, 1999 if,
as and when funds are available for payment.
The Company has guaranteed, on a subordinated basis, the payment in full of
all distributions and other payments on the SKATES to the extent that the
Allfirst Capital Trust has funds legally available. This guarantee is
subordinated to all other liabilities of the Company. Under certain
circumstances, the SKATES have preferential rights to payment relative to the
Trust Common Securities.
5. TRUST COMMON SECURITIES
The Company owns 100% of the common securities of Allfirst Capital Trust.
F-5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Allfirst Preferred Asset Trust
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of Allfirst Preferred Asset Trust
(the "Trust") at July 13, 1999, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Trust's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this
financial statement in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free from material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
September 24, 1999
F-6
<PAGE>
ALLFIRST PREFERRED ASSET TRUST
BALANCE SHEET
JULY 13, 1999
<TABLE>
<S> <C>
ASSETS
Cash............................................................. $ 923
U.S. Treasury bills available for sale........................... 5,481,271
Investment in affiliate junior subordinated debenture............ 104,154,749
------------
Total Assets................................................... $109,636,943
============
STOCKHOLDERS' EQUITY
Asset Preferred Securities (aggregate liquidation amount
$103,093,000)................................................... $101,962,070
Trust Common Securities (aggregate liquidation amount
$7,674,873)..................................................... 7,674,873
------------
Total Stockholders' Equity................................... $109,636,943
============
</TABLE>
See Notes to Balance Sheet
F-7
<PAGE>
NOTES TO BALANCE SHEET OF ALLFIRST PREFERRED ASSET TRUST
1. ORGANIZATION AND PURPOSE
Allfirst Preferred Asset Trust ("Allfirst Asset Trust") is a statutory
business trust formed on June 29, 1999 under the laws of the State of Delaware
for exclusive purposes of (i) issuing Asset Preferred Securities and its common
securities (collectively the "asset securities"), (ii) investing the gross
proceeds of the asset securities in junior subordinated debentures of Allfirst
Financial Inc. and other permitted investments and (iii) engaging in only those
other activities necessary or incidental thereto.
Allfirst Financial Inc. ("the Company") has agreed to pay all fees and
expenses related to the organization and operations of Allfirst Asset Trust,
including any taxes, duties, assessments or governmental charges of whatever
nature imposed by the United States or any other domestic taxing authority upon
the Allfirst Asset Trust, other than withholding taxes. The Company will also
be responsible for all debts and obligations of Allfirst Asset Trust, other
than those obligations with respect to the Asset Securities. The Company has
agreed to indemnify the trustees and certain other persons.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements are presented in accordance with United States
generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet. Actual results could differ
significantly from those estimates.
Investments
Allfirst Asset Trust's investment in the Company's junior subordinated
debenture is recorded at cost. Its investment in U.S. Treasury bills is
classified as available-for-sale and is recorded at accreted cost which
approximates fair value.
Income Taxes
Allfirst Asset Trust is treated as a partnership for U.S. federal income tax
purposes and, therefore, no provision for income taxes has been made.
3. INVESTMENT IN AFFILIATE JUNIOR SUBORDINATED DEBENTURE
Allfirst Asset Trust holds a junior subordinated debenture of the Company in
a principal amount of $105,310,000 with a maturity date of July 15, 2029, which
it acquired for a purchase price of $104,154,749. The junior subordinated
debenture bears interest at a rate of LIBOR plus 1.43%, reset quarterly, from
and including July 13, 1999. Interest is payable quarterly on January 15, April
15, July 15 and October 15 of each year, beginning October 15, 1999. Interest
payments not paid when due will accrue interest, compounded quarterly, at the
annual rate of LIBOR plus 1.43%.
Under the terms of the junior subordinated debenture, the Company may defer
interest payments on the junior subordinated debenture for a period of not more
than twenty quarterly periods or beyond the stated maturity of the junior
subordinated debenture.
4. ASSET PREFERRED SECURITIES
Allfirst Asset Trust issued 103,093 Asset Preferred Securities with a stated
liquidation amount of $1,000 per Asset Preferred Security for an aggregate
purchase price of $101,962,070. The distribution rate on each Asset Preferred
Security is a rate per annum of three-month LIBOR plus 1.50% of the stated
liquidation
F-8
<PAGE>
NOTES TO BALANCE SHEET OF ALLFIRST PREFERRED ASSET TRUST--(Continued)
amount of $1,000 per Asset Preferred Security, reset quarterly. Distributions
will be paid if, as and when Allfirst Asset Trust has funds available for
distribution from corresponding interest payments on a junior subordinated
debenture from the Company. Distributions on the Asset Preferred Securities are
non-cumulative, and will be payable quarterly on January 15, April 15, July 15,
and October 15 of each year commencing October 15, 1999, if, as and when funds
are available for payment.
Allfirst Asset Trust will redeem the Asset Preferred Securities if the
junior subordinated debenture of the Company is redeemed. The Company may
redeem the junior subordinated debenture, in whole or in part, at any time on
or after July 15, 2009 with the prior consent of the Federal Reserve Board and
the Central Bank of Ireland. Allfirst Asset Trust will redeem the Asset
Preferred Securities at an amount equal to $1,000 plus accrued and unpaid
distributions for the current quarterly period from the last distribution date.
The Company has guaranteed, on a subordinated basis, the payment of
distributions by Allfirst Asset Trust if, as and when declared out of funds
legally available and payments upon liquidation of Allfirst Asset Trust or the
redemption of the Asset Preferred Securities to the extent of funds legally
available.
5. TRUST COMMON SECURITIES
The Company owns 100% of the common securities of Allfirst Asset Trust.
F-9
<PAGE>
Until March 19, 2000 all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This requirement is in addition to the dealers'
obligation to deliver a prospectus when acting as an underwriter and with
respect to their unsold allotments or subscriptions.
ALLFIRST PREFERRED CAPITAL TRUST
ALLFIRST FINANCIAL INC.
(formerly First Maryland Bancorp)
SKATESSM Exchange Offer
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
II-1
<PAGE>
Item 21. Exhibits and Financial Schedules.
<TABLE>
<C> <S>
Exhibit Description
------- -----------
4.1 Supplement No. 1 to Indenture, dated as of September 15, 1999, between
Allfirst Finanical Inc., as successor by merger to First Maryland
Bancorp, and The Bank of New York, as Trustee*
4.2 Indenture, dated as of July 13, 1999, between First Maryland Bancorp
and The Bank of New York, as Trustee*
4.3 Amended and Restated Declaration of Trust of Allfirst Preferred
Capital Trust, dated as of July 13, 1999, among First Maryland
Bancorp, The Bank of New York, as Property Trustee, The Bank of New
York (Delaware), as Delaware Trustee, and the Administrators named
therein*
4.4 Amended and Restated Declaration of Trust of Allfirst Preferred Asset
Trust, dated as of July 13, 1999, among First Maryland Bancorp, The
Bank of New York, as Property Trustee, The Bank of New York
(Delaware), as Delaware Trustee, and the Administrators named therein*
4.5 Form of Capital Guarantee to be entered into by Allfirst and The Bank
of New York, as Capital Guarantee Trustee, and registered under the
Securities Act of 1933, as amended*
4.6 Form of Asset Guarantee to be entered into by Allfirst and The Bank of
New York, as Asset Guarantee Trustee, and registered under the
Securities Act of 1933, as amended*
4.7 Registration Rights Agreement, dated July 9, 1999, among Allfirst,
Allfirst Preferred Capital Trust, Allfirst Preferred Asset Trust and
the initial purchaser named therein*
5.1 Opinion and consent of Gregory K. Thoreson, Senior Vice President and
General Counsel of Allfirst, as to legality of the junior subordinated
debenture and the guarantees to be issued by Allfirst*
5.2 Opinion of special Delaware counsel as to the legality of the SKATES
to be issued by Allfirst Preferred Capital Trust and the Asset
Preferred Securities to be issued by Allfirst Preferred Asset Trust*
8.1 Opinion of special tax counsel as to certain federal income tax
matters*
12.1 Computation of ratio of earnings to fixed charges and of earnings to
fixed charges and preferred stock dividends
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Gregory K. Thoreson (included in Exhibit 5.1)*
23.3 Consent of special Delaware counsel (included in Exhibit 5.2)*
23.4 Consent of special tax counsel (included in Exhibit 8.1)*
24.1 Powers of Attorney*
25.1 Form T-1 Statement of Eligibility of The Bank of New York to act as
trustee under the Indenture*
25.2 Form T-1 Statement of Eligibility of The Bank of New York to act as
trustee under the Amended and Restated Declaration of Trust of
Allfirst Preferred Capital Trust.*
25.3 Form T-1 Statement of Eligibility of The Bank of New York to act as
trustee under the Amended and Restated Declaration of Trust of
Allfirst Preferred Asset Trust.*
25.4 Form T-1 Statement of Eligibility of The Bank of New York under the
Capital Guarantee for the benefit of the holders of SKATES*
25.5 Form T-1 Statement of Eligibility of The Bank of New York under the
Asset Guarantee for the benefit of the holders of Asset Preferred
Securities*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- ------------
* previously filed
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Allfirst
Financial Inc. certifies that it has reasonable grounds to believe that it
meets all the requirements for filing this Pre-effective Amendment No. 1 to
Registration Statement on Form S-4 and has duly caused this Pre-effective
Amendment No. 1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, Maryland on November 16, 1999.
ALLFIRST FINANCIAL INC.
Frank P. Bramble
By:_________________________________
Frank P. Bramble
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Pre-
effective Amendment No. 1 has been signed by the following persons in the
capacities indicated below on November 16, 1999.
<TABLE>
<S> <C>
</TABLE>
Signature Title
Frank P. Bramble Chief Executive Officer and
- ------------------------------------ Director (Principal
Frank P. Bramble Executive Officer)
Jerome W. Evans* Vice Chairman, Chief
- ------------------------------------ Financial Officer and
Jerome W. Evans Director (Principal
Financial Officer)
Robert L. Carpenter, Jr.* Senior Vice President and
- ------------------------------------ Controller (Principal
Robert L. Carpenter, Jr. Accounting Officer)
A Majority of the Board of Directors*:
Benjamin L. Brown, Michael D. Buckley, J. Owen Cole, Edward A. Crooke, John F.
Dealy, Mathias J. DeVito, Jerome W. Geckle, Frank A. Gunther, Jr., Margaret M.
Heckler, Lee H. Javitch, Gary Kennedy, William T. Kirchhoff, Henry J. Knott,
Andrew Maier II, Thomas P. Mulcahy, William M. Passano, Jr., R. Champlin
Sheridan
*By: David M. Cronin
------------------------------
David M. Cronin, as
Attorney-in-Fact
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, Allfirst
Preferred Capital Trust certifies that it has reasonable grounds to believe
that it meets all the requirements for filing this Pre-effective Amendment
No. 1 to Registration Statement on Form S-4 and has duly caused this Pre-
effective Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Baltimore, Maryland on November 16,
1999.
ALLFIRST PREFERRED CAPITAL TRUST
By: David M. Cronin
---------------------------------
David M. Cronin
Administrator
Pursuant to the requirements of the Securities Act of 1933, Allfirst
Preferred Asset Trust certifies that it has reasonable grounds to believe that
it meets all the requirements for filing this Pre-effective Amendment No. 1 to
Registration Statement on Form S-4 and has duly caused this Pre-effective
Amendment No. 1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, Maryland on November 16, 1999.
ALLFIRST PREFERRED ASSET TRUST
By: David M. Cronin
---------------------------------
David M. Cronin
Administrator
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
------- ----------- ----
<C> <S> <C>
4.1 Supplement No. 1 to Indenture, dated as of September 15, 1999,
between Allfirst Finanical Inc., as successor by merger to
First Maryland Bancorp, and The Bank of New York, as Trustee*
4.2 Indenture, dated as of July 13, 1999, between First Maryland
Bancorp and The Bank of New York, as Trustee*
4.3 Amended and Restated Declaration of Trust of Allfirst Preferred
Capital Trust, dated as of July 13, 1999, among First Maryland
Bancorp, The Bank of New York, as Property Trustee, The Bank of
New York (Delaware), as Delaware Trustee, and the
Administrators named therein*
4.4 Amended and Restated Declaration of Trust of Allfirst Preferred
Asset Trust, dated as of July 13, 1999, among First Maryland
Bancorp, The Bank of New York, as Property Trustee, The Bank of
New York (Delaware), as Delaware Trustee, and the
Administrators named therein*
4.5 Form of Capital Guarantee to be entered into by Allfirst and
The Bank of New York, as Capital Guarantee Trustee, and
registered under the Securities Act of 1933, as amended*
4.6 Form of Asset Guarantee to be entered into by Allfirst and The
Bank of New York, as Asset Guarantee Trustee, and registered
under the Securities Act of 1933, as amended*
4.7 Registration Rights Agreement, dated July 9, 1999, among
Allfirst, Allfirst Preferred Capital Trust, Allfirst Preferred
Asset Trust and the initial purchaser named therein*
5.1 Opinion and consent of Gregory K. Thoreson, Senior Vice
President and General Counsel of Allfirst, as to legality of
the junior subordinated debenture and the guarantees to be
issued by Allfirst*
5.2 Opinion of special Delaware counsel as to the legality of the
SKATES to be issued by Allfirst Preferred Capital Trust and the
Asset Preferred Securities to be issued by Allfirst Preferred
Asset Trust*
8.1 Opinion of special tax counsel as to certain federal income tax
matters*
12.1 Computation of ratio of earnings to fixed charges and of
earnings to fixed charges and preferred stock dividends
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Gregory K. Thoreson (included in Exhibit 5.1)*
23.3 Consent of special Delaware counsel (included in Exhibit 5.2)*
23.4 Consent of special tax counsel (included in Exhibit 8.1)*
24.1 Powers of Attorney*
25.1 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the Indenture*
25.2 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the Amended and Restated Declaration of
Trust of Allfirst Preferred Capital Trust.*
25.3 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the Amended and Restated Declaration of
Trust of Allfirst Preferred Asset Trust.*
25.4 Form T-1 Statement of Eligibility of The Bank of New York under
the Capital Guarantee for the benefit of the holders of SKATES*
25.5 Form T-1 Statement of Eligibility of The Bank of New York under
the Asset Guarantee for the benefit of the holders of Asset
Preferred Securities*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- ------------
* previously filed
<PAGE>
Exhibit 12.1
First Maryland Bancorp
Computation of the Ratio of Earnings To Fixed Charges
<TABLE>
<CAPTION>
Nine
Months
Ended
September Years Ended December 31,
30, ------------------------------------------------
1999 1998 1997 1996 1995 1994
------------ -------- -------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Excluding interest on deposits
Fixed Charges:
Interest on long-term debt and short-term
borrowings (a)............................ $123,337 $143,898 $148,110 $110,149 $108,982 $ 71,908
Portion of rent deemed representative
of the interest factor (b)................ 5,867 8,219 8,388 6,564 6,873 7,058
-------- -------- -------- -------- -------- --------
Total fixed charges................... $129,204 $152,117 $156,498 $116,713 $115,855 $ 78,966
Earnings:
Net income.................................... $128,075 $218,123 $151,188 $132,337 $120,187 $111,140
Income taxes.................................. 75,189 124,467 84,301 74,850 63,992 59,288
Fixed charges..................................... 129,204 152,117 156,498 116,713 115,855 78,966
-------- -------- -------- -------- -------- --------
Total earnings........................ $332,468 $494,707 $391,987 $323,900 $300,034 $249,394
Ratio of earnings to fixed charges................ 2.57x 3.25x 2.50x 2.78x 2.59x 3.16x
Including interest on deposits
Fixed Charges:
Interest on long-term debt and short-term
borrowings and deposits (a)............... $392,833 $534,178 $445,754 $315,318 $314,548 $241,099
Portion of rent deemed representative
of the interest factor (b)................ 5,867 8,219 8,388 6,564 6,873 7,058
-------- -------- -------- -------- -------- --------
Total fixed charges................... $398,700 $542,397 $454,142 $321,882 $321,421 $248,157
Earnings:
Net income.................................... $128,075 $218,123 $151,188 $132,337 $120,187 $111,140
Income taxes.................................. 75,189 124,467 84,301 74,850 63,992 59,288
Fixed charges..................................... 398,700 542,397 454,142 321,882 321,421 248,157
-------- -------- -------- -------- -------- --------
Total earnings........................ $601,964 $884,987 $689,631 $529,069 $505,600 $418,585
Ratio of earnings to fixed charges................ 1.51x 1.63x 1.52x 1.64x 1.57x 1.69x
</TABLE>
- ----------------
(a) Includes the amortization of deferred note issue expenses.
(b) One third of rents is deemed representative of the interest factor.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Allfirst Financial Inc. (formerly First Maryland
Bancorp), Allfirst Preferred Capital Trust, and Allfirst Preferred Asset Trust,
respectively, of our report dated January 27, 1999 relating to the financial
statements appearing in the Allfirst Financial Inc. Annual Report on Form 10-K
for the year ended December 31, 1998. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 15, 1999
