<PAGE> 1
Filed pursuant to Rule 424(b)(2)
Registration No. 33-52571
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 18, 1994)
$1,000,000,000
(EAGLE LOGO)
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
------------------------
Bank of Boston Corporation (the "Corporation") may offer from time to time up
to $1,000,000,000 aggregate initial offering price, or the equivalent thereof in
one or more foreign or composite currencies, of its Senior Medium-Term Notes
(the "Senior Notes") and Subordinated Medium-Term Notes (the "Subordinated
Notes") Due Nine Months or More from Date of Issue (collectively, the "Notes").
Such aggregate initial offering price is subject to reduction as a result of the
sale by the Corporation of other Securities described in the accompanying
Prospectus. Each Note will mature on any day nine months or more from the date
of issue, as specified in the applicable pricing supplement hereto (each, a
"Pricing Supplement"), and may be subject to redemption at the option of the
Corporation or repayment at the option of the Holder thereof, in each case, in
whole or in part, prior to its Stated Maturity Date, as set forth therein and
specified in the applicable Pricing Supplement. Each Note may be denominated in
U.S. dollars or in a currency or composite currency other than U.S. dollars, as
specified in the applicable Pricing Supplement. See "Foreign Currency Risks."
The Notes will be issued in denominations of $1,000 and integral multiples
thereof, unless otherwise specified in the applicable Pricing Supplement, and in
such amounts in other currencies or composite currencies as specified in the
applicable Pricing Supplement. The Subordinated Notes will be subordinated to
all existing and future Senior Indebtedness (as defined in the accompanying
Prospectus) of the Corporation. At September 30, 1994, the outstanding Senior
Indebtedness of the Corporation, exclusive of guarantees and other contingent
obligations, was approximately $118,000,000. Payment of principal of
Subordinated Notes may be accelerated only in the case of bankruptcy, insolvency
or reorganization of the Corporation or receivership of The First National Bank
of Boston (the "Bank"). See "DESCRIPTION OF DEBT SECURITIES--SUBORDINATED
SECURITIES" in the accompanying Prospectus.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will bear interest at fixed rates (the "Fixed Rate Notes") or at floating rates
(the "Floating Rate Notes"). The applicable Pricing Supplement will specify
whether a Floating Rate Note is a Regular Floating Rate Note, a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note and whether the rate of
interest thereon is determined by reference to one or more of the CMT Rate, the
Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an "Interest Rate
Basis"), or any other interest rate basis or formula, as adjusted by any Spread
and/or Spread Multiplier. Interest on each Floating Rate Note will accrue from
its date of issue and will be payable in arrears monthly, quarterly,
semiannually or annually, as specified in the applicable Pricing Supplement, and
on the Maturity Date. Unless otherwise specified in the applicable Pricing
Supplement, the rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semiannually or annually, as set forth therein and
specified in the applicable Pricing Supplement. Interest on each Fixed Rate Note
will accrue from its date of issue and, unless otherwise specified in the
applicable Pricing Supplement, will be payable semiannually in arrears on June
15 and December 15 of each year and on the Maturity Date. The Notes may also be
issued with original issue discount, and such Notes may or may not pay any
interest. See "Description of Notes."
The interest rate, or the formula for the determination of any such interest
rate, applicable to each Note and the other variable terms thereof as described
herein will be established by the Corporation on the date of issue of such Note
and will be set forth therein and specified in the applicable Pricing
Supplement. Interest rates, interest rate formulae and such other variable terms
are subject to change by the Corporation, but no change will affect any Note
already issued or as to which an offer to purchase has been accepted by the
Corporation.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note"). Each Book-Entry Note will be represented by one or more fully registered
global securities (the "Global Securities") deposited with or on behalf of The
Depository Trust Company (the "Depositary") and registered in the name of the
Depositary or the Depositary's nominee. Interests in the Global Securities will
be shown on, and transfers thereof will be effected only through, records
maintained by the Depositary (with respect to its participants) and the
Depositary's participants (with respect to beneficial owners). See "Description
of Notes--Book-Entry System."
THE NOTES ARE UNSECURED OBLIGATIONS OF THE CORPORATION AND ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF THE
CORPORATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
(THE "FDIC"), THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY SUPPLEMENT
HERETO. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(1)(2) CORPORATION(1)(3)
- ---------------------------------------------------------------------------------------------------------------------------
Per Note........................................ 100% .125%-.75% 99.875%-99.25%
- ---------------------------------------------------------------------------------------------------------------------------
Total(4)........................................ $1,000,000,000 $1,250,000-$7,500,000 $998,750,000-$992,500,000
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Goldman, Sachs & Co., Lehman Brothers Inc. (including its affiliate Lehman
Government Securities Inc.) and PaineWebber Incorporated (each, an "Agent"
and, collectively, the "Agents"), will purchase the Notes, as principal,
from the Corporation, for resale to investors and other purchasers at
varying prices relating to prevailing market prices at the time of resale as
determined by the applicable Agent, or, if so specified in the applicable
Pricing Supplement, for resale at a fixed public offering price. Unless
otherwise specified in the applicable Pricing Supplement, any Note sold to
an Agent as principal will be purchased by such Agent at a price equal to
100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale (as described
below) of a Note of identical maturity. If agreed to by the Corporation and
the applicable Agent, such Agent, may utilize its reasonable efforts on an
agency basis to solicit offers to purchase the Notes at 100% of the
principal amount thereof, unless otherwise specified in the applicable
Pricing Supplement. The Bank, as an agent of the Corporation, may also
solicit offers to purchase Notes in denominations of $150,000 and integral
multiples of $1,000 in excess thereof, or the equivalent in the applicable
foreign currency or currency unit in the case of Foreign Currency Notes (as
defined herein), from customers of the Bank which it has reason to believe
are sophisticated institutional investors. The Bank will have no obligation
to purchase Notes from the Corporation and will bear no credit risk with
respect to the Notes. The Corporation will pay a commission to each Agent or
the Bank, as the case may be, ranging from .125% to .75% of the principal
amount of a Note, depending upon its stated maturity, sold through such
Agent or the Bank. Commissions with respect to Notes with stated maturities
in excess of 30 years that are sold through an Agent or the Bank will be
negotiated between the Corporation and such Agent or the Bank, as the case
may be, at the time of such sale. See "Plan of Distribution."
(2) The Corporation has agreed to indemnify the Agents and the Bank against, and
to provide contribution with respect to, certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See "Plan of
Distribution."
(3) Before deducting expenses payable by the Corporation estimated at $675,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
------------------------
The Notes are being offered on a continuous basis by the Corporation through
the Agents. Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be listed on any securities exchange and there can be no
assurance that the Notes offered hereby will be sold or that there will be a
secondary market for the Notes. The Corporation reserves the right to cancel or
modify the offer made hereby without notice. The Corporation or the Bank or an
Agent, if the Bank or such Agent solicits the offer on an agency basis, may
reject any offer to purchase Notes in whole or in part. See "Plan of
Distribution."
------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
------------------------
The date of this Prospectus Supplement is December 16, 1994.
<PAGE> 2
IN CONNECTION WITH THE OFFERING OF THE NOTES, THE AGENTS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The Corporation's ratios of earnings to fixed charges are set forth below
for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1994 1993
---- ----
<S> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on Deposits.......................................... 1.81x 2.12x
Including Interest on Deposits.......................................... 1.38 1.30
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
represent net income before extraordinary items and cumulative effect of changes
in accounting principles plus applicable income taxes and fixed charges. Fixed
charges, excluding interest on deposits, include interest expense (other than on
deposits) and the proportion deemed representative of the interest factor of
rent expense, net of income from subleases. Fixed charges, including interest on
deposits, include all interest expense and the proportion deemed representative
of the interest factor of rent expense, net of income from subleases.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of the Debt Securities (as defined in the
accompanying Prospectus) set forth under the heading "DESCRIPTION OF DEBT
SECURITIES" in the accompanying Prospectus, to which description reference is
hereby made. The following description will apply to each Note unless otherwise
specified in the applicable Pricing Supplement. Certain terms not defined in
this Prospectus Supplement are defined in the accompanying Prospectus.
GENERAL
The Notes will be either Senior Notes or Subordinated Notes (referred to in
the accompanying Prospectus as "Senior Securities" and "Subordinated
Securities," respectively). The Senior Notes will be issued as a single series
under an indenture dated as of June 15, 1992 (the "Senior Indenture"), between
the Corporation and Norwest Bank Minnesota, National Association ("Norwest" or
the "Trustee"), as Trustee. The Subordinated Notes will be issued as a single
series under an indenture dated as of June 15, 1992, as amended by the First
Supplemental Indenture dated as of June 24, 1993 (the "Subordinated Indenture"),
between the Corporation and Norwest, as Trustee. The Senior Indenture and the
Subordinated Indenture are collectively referred to herein as the "Indentures."
This Prospectus Supplement, together with the accompanying Prospectus and any
Pricing Supplement, may be used in connection with the offer and sale of the
Notes in an aggregate initial offering price of up to $1,000,000,000 (or its
equivalent in other currencies or composite currencies), subject to reduction as
a result of future sales of the Corporation's Securities described in the
accompanying Prospectus.
The Indentures do not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provide that Debt Securities may be
issued thereunder from time to time in one or more series up to the aggregate
principal amount from time to time authorized by the Corporation for each
series. Prior to the date of this Prospectus Supplement, the Corporation had
issued $850,000,000 aggregate principal amount of Debt Securities under the
Indentures. The Corporation may, from time to time, without the consent of the
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Holders of the Notes, provide for the issuance of Notes or other Debt Securities
under the Indentures in addition to the $1,000,000,000 aggregate initial
offering price of Notes offered hereby and the other Debt Securities previously
issued.
The Notes will not be entitled to the benefit of a sinking fund or to the
defeasance and covenant defeasance provisions contained in the Indentures.
THE NOTES ARE UNSECURED OBLIGATIONS OF THE CORPORATION AND ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF THE
CORPORATION AND ARE NOT INSURED BY THE FDIC, THE BANK INSURANCE FUND OR ANY
OTHER GOVERNMENT AGENCY.
The Notes will be offered on a continuous basis and will mature on any day
nine months or more from their dates of issue, as specified in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, interest-bearing Notes will either be Fixed Rate Notes or Floating
Rate Notes as specified in the applicable Pricing Supplement. The Notes may also
be issued with original issue discount ("Original Issue Discount Notes") and
such Notes may or may not bear any interest.
The Notes will be unsecured obligations of the Corporation. The Senior
Notes will rank on a parity with other unsecured and unsubordinated indebtedness
of the Corporation. The Subordinated Notes will be subordinate in right of
payment to all existing and future Senior Indebtedness of the Corporation as
described under "DESCRIPTION OF DEBT SECURITIES--SUBORDINATED
SECURITIES--Subordination" in the accompanying Prospectus. At September 30,
1994, the outstanding Senior Indebtedness of the Corporation, exclusive of
guarantees and other contingent obligations of the Corporation, was
approximately $118,000,000.
Payment of principal of the Subordinated Notes may be accelerated only in
the case of bankruptcy, insolvency or reorganization of the Corporation or the
receivership of the Bank. There is no right of acceleration of the payment of
principal of the Subordinated Notes upon a default in the payment of principal
or interest on the Subordinated Notes or in the performance of any covenant of
the Corporation contained in the Subordinated Indenture. See "DESCRIPTION OF
DEBT SECURITIES--SUBORDINATED SECURITIES--Events of Default; Defaults" in the
accompanying Prospectus. Except as may be set forth in a supplement to this
Prospectus Supplement, the Subordinated Notes are not convertible into any other
securities and are not Securities for which Capital Securities are exchangeable.
See "DESCRIPTION OF DEBT SECURITIES--SUBORDINATED SECURITIES--Exchangeability"
in the accompanying Prospectus.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, and premium,
if any, and interest on, the Notes will be made in U.S. dollars. The Notes may
also be denominated in currencies or composite currencies other than U.S.
dollars ("Foreign Currency Notes") (the currency or composite currency in which
a Note is denominated, whether U.S. dollars or otherwise, is herein referred to
as the "Specified Currency"). See "Special Provisions and Risks Relating to
Foreign Currency Notes--Payments of Principal and Premium, if any, and
Interest."
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the Specified Currency in
which such Notes are denominated. At the present time, there are limited
facilities in the United States for the conversion of U.S. dollars into foreign
currencies or composite currencies and vice versa, and commercial banks do not
generally offer non-U.S. dollar checking or savings account facilities in the
United States. If requested on or prior to the fifth Business Day (as defined
below) preceding the date of delivery of the Foreign Currency Notes, or by such
other day as determined by the applicable Agent or by the Bank, if acting as
agent for such Notes, the Agents and the Bank are prepared to arrange for the
conversion of U.S. dollars into the Specified Currency to enable the purchasers
to pay for such Notes. Each such conversion will be made by the applicable Agent
or the Bank, as the case may be, on such terms and subject to such conditions,
limitations and charges as such Agent or the Bank may from time to time
establish in accordance with its regular foreign exchange practices. All costs
of exchange will be borne by the purchasers of the Foreign Currency Notes. See
"Special Provisions and Risks Relating to Foreign Currency Notes."
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Interest rates offered by the Corporation with respect to the Notes may
differ depending upon, among other things, the aggregate principal amount of
Notes purchased in any single transaction. Interest rates, interest rate
formulae and other variable terms of the Notes are subject to change by the
Corporation from time to time, but no such change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Corporation.
Each Note will be issued in fully registered form as a Book-Entry Note. The
authorized denominations of each Note other than a Foreign Currency Note will be
$1,000 and integral multiples thereof, unless otherwise specified in the
applicable Pricing Supplement, while the authorized denominations of each
Foreign Currency Note will be specified in the applicable Pricing Supplement.
Book-Entry Notes may be transferred or exchanged only through the Depositary.
See "Book-Entry System."
The Bank through its head office in Boston, Massachusetts and BancBoston
Trust Company of New York through its office in the Borough of Manhattan in The
City of New York (collectively, the "Paying Agents") will act as the
Corporation's paying agents with respect to the Notes. Payments of principal of,
and premium, if any, and interest on, Book-Entry Notes will be made by the
Corporation through the Paying Agents to the Depositary. For special payment
terms applicable to Foreign Currency Notes, see "Special Provisions and Risks
Relating to Foreign Currency Notes--Payments of Principal and Premium, if any,
and Interest."
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law, regulation or executive order to close in The
City of New York or Boston, Massachusetts; provided, however, that, with respect
to Foreign Currency Notes the payment of which is to be made in a Specified
Currency other than U.S. dollars, such day is also not a day on which banking
institutions are authorized or required by law, regulation or executive order to
close in the principal financial center of the country of such Specified
Currency (or, in the case of the European Currency Unit ("ECU"), is not a day
designated as an ECU Non-Settlement Day by the ECU Banking Association or
otherwise generally regarded in the ECU interbank market as a day on which
payments in ECUs shall not be made); provided, further, that, with respect to
Notes as to which LIBOR is an applicable Interest Rate Basis, such day is also a
London Business Day. "London Business Day" means any day (i) if the Index
Currency (as defined below) is other than ECU, on which dealings in such Index
Currency are transacted in the London interbank market or (ii) if the Index
Currency is ECU, that is not designated as an ECU Non-Settlement Day by the ECU
Banking Association or otherwise generally regarded in the ECU interbank market
as a day on which payments in ECUs shall not be made.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest from its date of issue at the rate per annum, in the case of
a Fixed Rate Note, or pursuant to the interest rate formula, in the case of a
Floating Rate Note, specified in the applicable Pricing Supplement, until the
principal thereof is paid or duly made available for payment. Interest will be
payable in arrears on each Interest Payment Date specified in the applicable
Pricing Supplement on which an installment of interest is due and payable and on
the Stated Maturity Date or any prior date on which the principal, or an
installment of principal, of a Note becomes due and payable, whether by the
declaration of acceleration, call for redemption at the option of the
Corporation, repayment at the option of the Holder or otherwise (the Stated
Maturity Date or such prior date, as the case may be, is herein referred to as
the "Maturity Date"). Unless otherwise specified in the applicable Pricing
Supplement, the first payment of interest on any Note originally issued between
a Record Date (as defined below) and the related Interest Payment Date or on an
Interest Payment Date will be made on the Interest Payment Date immediately
following the next succeeding Record Date to the Holder on such next succeeding
Record Date. Unless otherwise specified in the applicable Pricing Supplement, a
"Record Date" shall be the fifteenth calendar day (whether or not a Business
Day) immediately preceding the related Interest Payment Date.
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Interest payments on the Notes will equal the amount of interest accrued
from and including the immediately preceding Interest Payment Date in respect of
which interest has been paid (or from and including the date of issue, if no
interest has been paid with respect to the applicable Note) to but excluding the
related Interest Payment Date or the Maturity Date, as the case may be.
Fixed Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Payment Dates" for the Fixed Rate Notes will be June 15 and December
15 of each year and the Maturity Date. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed on
the basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day as if made on the date such payment was due, and no interest will accrue on
such payment for the period from and after such Interest Payment Date or the
Maturity Date, as the case may be, to the date of such payment on the next
succeeding Business Day.
Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will specify the "Interest Rate Basis" or "Interest Rate Bases" by reference to
which interest will be determined, which may be one or more of (i) the "CMT
Rate," in which case such Note will be a "CMT Rate Note," (ii) the "Commercial
Paper Rate," in which case such Note will be a "Commercial Paper Rate Note,"
(iii) the "Eleventh District Cost of Funds Rate," in which case such Note will
be an "Eleventh District Cost of Funds Rate Note," (iv) the "Federal Funds
Rate," in which case such Note will be a "Federal Funds Rate Note," (v) "LIBOR,"
in which case such Note will be a "LIBOR Note," (vi) the "Prime Rate," in which
case such Note will be a "Prime Rate Note," (vii) the "Treasury Rate," in which
case such Note will be a "Treasury Rate Note," or (viii) such other Interest
Rate Basis or interest rate formula as may be set forth in the applicable
Pricing Supplement. The applicable Pricing Supplement will also specify certain
additional terms with respect to which each Floating Rate Note is being
delivered, including: whether such Floating Rate Note is a "Regular Floating
Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating Rate
Note," the Fixed Rate Commencement Date and Fixed Interest Rate, as applicable,
the Initial Interest Rate, Interest Reset Period and Dates, Record Dates,
Interest Payment Period and Dates, Index Maturity, Maximum Interest Rate and
Minimum Interest Rate, if any, and the Spread and/or Spread Multiplier, if any,
and if one or more of the applicable Interest Rate Bases is LIBOR, the Index
Currency and the Designated LIBOR Page, as described below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
Addendum attached, such Floating Rate Note will be designated as a "Regular
Floating Rate Note" and, except as described below or in the applicable
Pricing Supplement, will bear interest at the rate determined by reference
to the applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the first Interest Reset Date, the rate
at which interest on such Regular Floating Rate Note shall be payable shall
be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the date of issue to the first
Interest Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the applicable
Pricing Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (y) the interest rate in
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effect for the period from the date of issue to the first Interest Reset
Date will be the Initial Interest Rate and (z) the interest rate in effect
for the period commencing on the Fixed Rate Commencement Date to the
Maturity Date shall be the Fixed Interest Rate, if such rate is specified
in the applicable Pricing Supplement or, if no such Fixed Interest Rate is
so specified, the interest rate in effect thereon on the Business Day
immediately preceding the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest equal to the Fixed
Interest Rate specified in the applicable Pricing Supplement minus the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any; provided, however, that, unless
otherwise specified in the applicable Pricing Supplement, the interest rate
thereon will not be less than zero percent. Commencing on the first
Interest Reset Date, the rate at which interest on such Inverse Floating
Rate Note is payable shall be reset as of each Interest Reset Date;
provided, however, that the interest rate in effect for the period from the
date of issue to the first Interest Reset Date will be the Initial Interest
Rate.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating Rate
Note shall bear interest in accordance with the terms described in such Addendum
and the applicable Pricing Supplement.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest Rate
Basis or Bases will be multiplied to determine the applicable interest rate on
such Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually, annually or such other specified period (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Date will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year, (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; provided, however, that,
with respect to Floating Rate/Fixed Rate Notes, the fixed rate of interest in
effect for the period from the Fixed Rate Commencement Date to the Maturity Date
shall be the Fixed Interest Rate or, if no such Fixed Interest Rate is
specified, the interest rate in effect on the day immediately preceding the
Fixed Rate Commencement Date, as specified in the applicable Pricing Supplement.
If any Interest Reset Date for any Floating Rate Note would otherwise be a day
that is not a Business Day, such Interest Reset Date will be postponed to the
next succeeding day that is a Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis, if
such Business Day falls in the next succeeding calendar month, such Interest
Reset Date will be the immediately preceding Business Day.
The interest rate applicable to each day in an Interest Reset Period will
be the rate determined as of the Interest Determination Date immediately
preceding the Interest Reset Date on which such Interest Reset Period commenced.
The "Interest Determination Date" with respect to the CMT Rate, the Commercial
Paper Rate, the Federal Funds Rate and the Prime Rate will be the second
Business Day immediately preceding the applicable Interest Reset Date; the
"Interest Determination Date" with respect to the Eleventh
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<PAGE> 7
District Cost of Funds Rate will be the last working day of the month
immediately preceding the applicable Interest Reset Date on which the Federal
Home Loan Bank of San Francisco (the "FHLB of San Francisco") publishes the
Index (as defined below); and the "Interest Determination Date" with respect to
LIBOR will be the second London Business Day immediately preceding the
applicable Interest Reset Date. With respect to the Treasury Rate, the "Interest
Determination Date" will be the day in the week in which the applicable Interest
Reset Date falls on which day Treasury Bills (as defined below) are normally
auctioned (Treasury Bills are normally sold at an auction held on Monday of each
week, unless that day is a legal holiday, in which case the auction is normally
held on the following Tuesday, except that such auction may be held on the
preceding Friday); provided, however, that if an auction is held on the Friday
of the week preceding the applicable Interest Reset Date, the Interest
Determination Date will be such preceding Friday; and provided, further, that if
an auction falls on the applicable Interest Reset Date, then the Interest Reset
Date will instead be the first Business Day following such auction. The
"Interest Determination Date" pertaining to a Floating Rate Note the interest
rate of which is determined by reference to two or more Interest Rate Bases will
be the most recent Business Day which is at least two Business Days prior to the
applicable Interest Reset Date for such Floating Rate Note on which each
Interest Rate Basis is determinable. Each Interest Rate Basis will be determined
on such date, and the applicable interest rate will take effect on the
applicable Interest Reset Date.
Each Floating Rate Note will bear interest from the date of issue at the
rates specified in the applicable Pricing Supplement until the principal thereof
is paid or otherwise made available for payment. Except as provided below or in
the applicable Pricing Supplement, the "Interest Payment Dates" for the Floating
Rate Notes will be, in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, the third Wednesday of each month or the third Wednesday of
March, June, September and December of each year, as specified in the applicable
Pricing Supplement; (ii) quarterly, the third Wednesday of March, June,
September and December of each year, (iii) semiannually, the third Wednesday of
the two months of each year specified in the applicable Pricing Supplement; and
(iv) annually, the third Wednesday of the month of each year specified in the
applicable Pricing Supplement and, in each case, interest will be payable on the
Maturity Date. If any Interest Payment Date for any Floating Rate Note (other
than the Maturity Date) would otherwise be a day that is not a Business Day,
such Interest Payment Date will be postponed to the next succeeding day that is
a Business Day, except that in the case of a Floating Rate Note as to which
LIBOR is an applicable Interest Rate Basis, if such Business Day falls in the
next succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day. If the Maturity Date of a Floating Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day, and no interest shall accrue on such payment for the period from and after
the Maturity Date to the date of such payment on the next succeeding Business
Day.
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period (a "Maximum Interest Rate") and (ii) a minimum
numerical limitation, or floor, on the rate at which interest may accrue during
any interest period (a "Minimum Interest Rate"). In addition to any Maximum
Interest Rate that may be applicable to any Floating Rate Note pursuant to the
above provisions, the interest rate on Floating Rate Notes will in no event be
higher than the maximum rate permitted by Massachusetts law, as the same may be
modified by United States law of general application.
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
for each such day will be computed by dividing the interest rate applicable to
such day by 360, in the case of Notes for which the Interest Rate Basis is the
Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR or the Prime Rate, or by the actual number of days in the year
in the case of Notes for which the Interest Rate Basis is the CMT Rate or the
Treasury Rate. Unless otherwise specified in the applicable Pricing Supplement,
the interest factor for Notes for which the interest rate is calculated with
reference to two or more Interest Rate
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Bases will be calculated in each period in the same manner as if only one of the
applicable Interest Rate Bases applied as specified in the applicable Pricing
Supplement.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of U.S. dollars, to the nearest cent or, in the case of a Specified
Currency other than U.S. dollars, to the nearest unit (with one-half cent or
unit being rounded upward).
Unless otherwise specified in the applicable Pricing Supplement, the Bank
will be the "Calculation Agent." Upon request of the Holder of any Floating Rate
Note, the Calculation Agent will disclose the interest rate then in effect and,
if determined, the interest rate that will become effective as a result of a
determination made for the next succeeding Interest Reset Date with respect to
such Floating Rate Note. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date," if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date, or, if such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date or the Maturity Date, as the case may be. The
determination of any interest rate by the Calculation Agent will be final and
binding absent manifest error.
CMT Rate. CMT Rate Notes will bear interest at the rates (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in such CMT Rate Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a CMT Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the rate
displayed on the Designated CMT Telerate Page (as defined below) under the
caption ". . . Treasury Constant Maturities . . . Federal Reserve Board Release
H.15 . . . Mondays Approximately 3:45 P.M.," under the column for the Designated
CMT Maturity Index (as defined below) for (i) if the Designated CMT Telerate
Page is 7055, the rate on such CMT Rate Interest Determination Date and (ii) if
the Designated CMT Telerate Page is 7052, the week, or the month, as applicable,
ended immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index as published by the Board of Governors of the Federal Reserve
System in the relevant weekly statistical release entitled "Statistical Release
H.15(519), Selected Interest Rates," or any successor publication of the Board
of Governors of the Federal Reserve System ("H.15(519)"). If such rate is no
longer published, or if not published by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate for such CMT Rate Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date with
respect to such Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate for the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 P.M., New York City time, on
the CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York (which may include the
Agents or their respective affiliates) selected by the Calculation Agent (from
five such Reference Dealers selected by the Calculation Agent and eliminating
the highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for the
most recently issued direct noncallable fixed
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rate obligations of the United States ("Treasury Notes") with an original
maturity of approximately the Designated CMT Maturity Index and a remaining term
to maturity of not less than such Designated CMT Maturity Index minus one year.
If the Calculation Agent cannot obtain three such Treasury Note quotations, the
CMT Rate for such CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offer side prices as of approximately 3:30 P.M., New
York City time, on the CMT Rate Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100 million. If three or four (and not five)
of such Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; provided however, that
if fewer than three Reference Dealers selected by the Calculation Agent are
quoting as described herein, the CMT Rate will be the CMT Rate in effect on such
CMT Rate Interest Determination Date. If two Treasury Notes with an original
maturity of approximately the Designated CMT Maturity Index have remaining terms
to maturity equally close to the Designated CMT Maturity Index, the quotes for
the Treasury Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be 2 years.
Commercial Paper Rate. Commercial Paper Rate Notes will bear interest at
the rates (calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any) specified in such Commercial Paper Rate Notes
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Rate Note or any Floating Rate Note for which the
interest rate is determined with reference to the Commercial Paper Rate (a
"Commercial Paper Rate Interest Determination Date"), the Money Market Yield (as
defined below) on such date of the rate for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "Commercial Paper." In the event that such rate is
not published by 3:00 P.M., New York City time, on the related Calculation Date,
then the Commercial Paper Rate will be the Money Market Yield on such Commercial
Paper Rate Interest Determination Date of the rate for commercial paper having
the Index Maturity specified in the applicable Pricing Supplement as published
by the Federal Reserve Bank of New York in its daily statistical release
"Composite 3:30 P.M. Quotations for U.S. Government Securities" or any successor
publication ("Composite Quotations") under the heading "Commercial Paper" (with
an Index Maturity of one month or three months being deemed to be equivalent to
an Index Maturity of 30 days or 90 days, respectively). If by 3:00 P.M., New
York City time, on the related Calculation Date such rate is not yet published
in either H.15(519) or Composite Quotations, the Commercial Paper Rate on such
Commercial Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The City of New York (which may include the Agents or their
respective affiliates) selected by the Calculation Agent for commercial paper
having the Index Maturity designated in the applicable Pricing Supplement placed
for an industrial issuer whose bond rating is "AA", or the equivalent, from a
nationally recognized statistical rating organization; provided, however, that
if
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any of the dealers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the Commercial Paper Rate determined as
of such Commercial Paper Rate Interest Determination Date will be the Commercial
Paper Rate in effect on such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
<TABLE>
<C> <C> <S>
D X 360
Money Market Yield = 360 - (D X M) X 100
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Eleventh District Cost of Funds Rate. Eleventh District Cost of Funds Rate
Notes will bear interest at the rates (calculated with reference to the Eleventh
District Cost of Funds Rate and the Spread and/or Spread Multiplier, if any)
specified in such Eleventh District Cost of Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Interest Determination
Date relating to an Eleventh District Cost of Funds Rate Note or any Floating
Rate Note for which the interest rate is determined with reference to the
Eleventh District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate
Interest Determination Date"), the rate equal to the monthly weighted average
cost of funds for the calendar month immediately preceding the month in which
such Eleventh District Cost of Funds Rate Interest Determination Date falls, as
set forth under the caption "11th District" on Telerate Page 7058 (as defined
below) as of 11:00 A.M., San Francisco time, on such Eleventh District Cost of
Funds Rate Interest Determination Date. If such rate does not appear on Telerate
Page 7058 on any related Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate for such Eleventh
District Cost of Funds Rate Interest Determination Date shall be the monthly
weighted average cost of funds paid by member institutions of the Eleventh
Federal Home Loan Bank District that was most recently announced (the "Index")
by the FHLB of San Francisco as such cost of funds for the calendar month
immediately preceding the date of such announcement. If the FHLB of San
Francisco fails to announce such rate for the calendar month immediately
preceding such Eleventh District Cost of Funds Rate Interest Determination Date,
then the Eleventh District Cost of Funds Rate determined as of such Eleventh
District Cost of Funds Rate Interest Determination Date will be the Eleventh
District Cost of Funds Rate in effect on such Eleventh District Cost of Funds
Rate Interest Determination Date.
"Telerate Page 7058" means the display designated as page "7058" on the Dow
Jones Telerate Service (or such other page as may replace the 7058 page on that
service for the purpose of displaying the monthly weighted average cost of funds
paid by member institutions of the Eleventh Federal Home Loan Bank District).
Federal Funds Rate. Federal Funds Rate Notes will bear interest at the
rates (calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to a
Federal Funds Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for federal funds as
published in H.15(519) under the heading "Federal Funds (Effective)" or, if not
published by 3:00 P.M., New York City time, on the related Calculation Date, the
rate on such Federal Funds Rate Interest Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 P.M., New York City time, on the related Calculation Date such rate is not
published in either H.15(519) or Composite Quotations, then the Federal Funds
Rate on such Federal Funds Rate Interest Determination Date will be calculated
by
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the Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight U.S. dollar federal funds arranged prior to 9:00 A.M.,
New York City time, on such Federal Funds Rate Interest Determination Date by
three leading brokers of federal funds transactions in The City of New York
(which may include the Agents or their respective affiliates) selected by the
Calculation Agent; provided, however that if the brokers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Federal
Funds Rate determined as of such Federal Funds Rate Interest Determination Date
will be the Federal Funds Rate in effect on such Federal Funds Rate Interest
Determination Date.
LIBOR. LIBOR Notes will bear interest at the rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified in
such LIBOR Notes and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note or any Floating Rate Note for which the interest rate is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be, as specified in the applicable Pricing Supplement, either: (a) if
"LIBOR Telerate" is specified in the applicable Pricing Supplement or if
neither "LIBOR Telerate" nor "LIBOR Reuters" is specified as the method for
calculating LIBOR, the rate for deposits in the Index Currency having the
Index Maturity designated in the applicable Pricing Supplement, commencing
on the second London Business Day immediately following such LIBOR Interest
Determination Date that appears on the Designated LIBOR Page specified in
the applicable Pricing Supplement as of 11:00 A.M., London time, on such
LIBOR Interest Determination Date; or (b) if "LIBOR Reuters" is specified
in the applicable Pricing Supplement, the arithmetic mean of the offered
rates (unless the specified Designated LIBOR Page by its terms provides
only for a single rate, in which case such single rate shall be used) for
deposits in the Index Currency having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date, that appear
on the Designated LIBOR Page specified in the applicable Pricing Supplement
as of 11:00 A.M. London time, on such LIBOR Interest Determination Date, if
at least two such offered rates appear (unless, as aforesaid, only a single
rate is required) on such Designated LIBOR Page. If no such rate appears,
or if fewer than two such offered rates appear, as applicable, LIBOR in
respect of the related LIBOR Interest Determination Date will be determined
in accordance with the provisions described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case may
be, on the applicable Designated LIBOR Page as specified in clause (i)
above, the Calculation Agent will request the principal London offices of
each of four major reference banks in the London interbank market, as
selected by the Calculation Agent, to provide the Calculation Agent with
its offered quotation for deposits in the Index Currency for the period of
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time. If
at least two such quotations are provided, LIBOR determined on such LIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two quotations are provided, LIBOR determined on such LIBOR
Interest Determination Date will be the arithmetic mean of the rates quoted
at approximately 11:00 A.M., in the applicable Principal Financial Center,
on such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center (which may include affiliates of the Agents)
selected by the Calculation Agent for loans in the Index Currency to
leading European banks, having the Index Maturity designated in the
applicable Pricing Supplement and in a principal amount that is
representative for a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined as of such LIBOR Interest Determination Date will be LIBOR in
effect on such LIBOR Interest Determination Date.
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"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Telerate" is specified
in the applicable Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified as the method for calculating LIBOR, the display on the
Dow Jones Telerate Service for the purpose of displaying the London interbank
rates of major banks for the applicable Index Currency, or (b) if "LIBOR
Reuters" is specified in the applicable Pricing Supplement, the display on the
Reuters Monitor Money Rates Service for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency.
"Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to U.S.
dollars, Deutsche Marks, Dutch Guilders, Italian Lire, Swiss Francs and ECUs,
the Principal Financial Center shall be The City of New York, Frankfurt,
Amsterdam, Milan, Zurich and Brussels, respectively.
Prime Rate. Prime Rate Notes will bear interest at the rates (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in such Prime Rate Notes and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a Prime
Rate Note or any Floating Rate Note for which the interest rate is determined
with reference to the Prime Rate (a "Prime Rate Interest Determination Date"),
the rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 3:00 P.M., New York
City time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen NYMF Page (as defined below) as such bank's prime
rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates but more than one such rate
appear on the Reuters Screen NYMF Page for such Prime Rate Interest
Determination Date, the Prime Rate shall be the arithmetic mean of the prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date by three, or two if only two such rates are quoted, major
money center banks in The City of New York selected by the Calculation Agent. If
fewer than two such rates appear on the Reuters Screen NYMF Page, the Prime Rate
will be determined by the Calculation Agent on the basis of the rates furnished
in The City of New York by three, or two if only two such rates are quoted,
substitute banks or trust companies organized and doing business under the laws
of the United States, or any State thereof, having total equity capital of at
least $500 million and being subject to supervision or examination by federal or
state authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if fewer than two such substitute banks or trust
companies selected as aforesaid are quoting as mentioned in this sentence, the
Prime Rate determined as of such Prime Rate Interest Determination Date will be
the Prime Rate in effect on such Prime Rate Interest Determination Date.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
NYMF page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
Treasury Rate. Treasury Rate Notes will bear interest at the rates
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
specified in the applicable Pricing Supplement, as such rate is published in
H.15(519) under the heading "Treasury Bills-auction average (investment)" or, if
not published by
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3:00 P.M., New York City time, on the related Calculation Date, the auction
average rate (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. In the event that the results of
the auction of Treasury Bills having the Index Maturity designated in the
applicable Pricing Supplement are not reported as provided by 3:00 P.M., New
York City time, on such Calculation Date, or if no such auction is held in a
particular week, then the Treasury Rate will be calculated by the Calculation
Agent and will be a yield to maturity (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of approximately
3:30 P.M., New York City time, on such Treasury Rate Interest Determination
Date, of three leading primary United States government securities dealers
(which may include the Agents or their respective affiliates) selected by the
Calculation Agent, for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the Treasury Rate
determined as of such Treasury Rate Interest Determination Date will be the
Treasury Rate in effect on such Treasury Rate Interest Determination Date.
ORIGINAL ISSUE DISCOUNT NOTES
The Corporation may offer Original Issue Discount Notes from time to time.
Such Original Issue Discount Notes may pay no current interest or interest at a
rate which at the time of issuance is below market rates. In the event of
redemption, repayment or acceleration of maturity in respect of an Original
Issue Discount Note, the amount payable to the Holder of such Original Issue
Discount Note will be equal to (i) the Amortized Face Amount (as defined below)
as of the date of such event, plus (ii) with respect to any redemption of an
Original Issue Discount Note, the Initial Redemption Percentage specified in the
applicable Pricing Supplement (as adjusted by the Annual Redemption Percentage
Reduction, if applicable) minus 100% multiplied by the Issue Price specified in
such Pricing Supplement (the "Issue Price"), net of any portion of such Issue
Price which has been paid prior to the date of redemption, or the portion of the
Issue Price (or the net amount) proportionate to the portion of the unpaid
principal amount to be redeemed, plus (iii) any accrued interest to the date of
such event the payment of which would constitute qualified stated interest
payments within the meaning of Treasury Regulation 1.1273-1(c) under the
Internal Revenue Code of 1986, as amended (the "Code"). The "Amortized Face
Amount" of an Original Issue Discount Note means an amount equal to (i) the
Issue Price, plus (ii) the aggregate portions of the original issue discount
(the excess of the amounts considered as part of the "stated redemption price at
maturity" of such Original Issue Discount Note within the meaning of Section
1273(a)(2) of the Code, whether denominated as principal or interest, over the
Issue Price) which shall theretofore have accrued pursuant to Section 1272 of
the Code (without regard to Section 1272(a)(7) of the Code) from the date of
issue of such Original Issue Discount Note to the date of determination, minus
(iii) any amount considered as part of the "stated redemption price at maturity"
of such Original Issue Discount Note which has been paid from the date of issue
to the date of determination. See "Certain United States Federal Income Tax
Considerations." Certain additional considerations relating to the offering of
any Original Issue Discount Notes may be set forth in the applicable Pricing
Supplement.
FOREIGN-CURRENCY NOTES
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, and premium,
if any, and interest on, the Notes will be made in U.S. dollars. Notes may be
denominated in a currency, including a composite currency, other than U.S.
dollars ("Foreign Currency Notes"). Special provisions relating to Foreign
Currency Notes will be described in the applicable Note and the Pricing
Supplement relating thereto.
An investment in Foreign Currency Notes entails significant risks that are
not associated with similar investments in debt securities that are denominated
in U.S. dollars and the payments with respect to which are made in U.S. dollars.
See "Special Provisions and Risks Relating to Foreign Currency Notes."
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INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, the exchange rate of one or more
specified currencies (including a composite currency such as the ECU) relative
to an indexed currency or such other price or exchange rate ("Indexed Notes"),
as set forth in the applicable Pricing Supplement. In certain cases, Holders of
Indexed Notes may receive a principal amount on the Maturity Date that is
greater than or less than the face amount of the Notes depending upon the
relative value on the Maturity Date of the specified indexed item. Information
as to the method for determining the amount of principal, premium and/or
interest payable in respect of Indexed Notes, certain historical information
with respect to the specified indexed item and tax considerations associated
with an investment in such Indexed Notes will be set forth in the applicable
Pricing Supplement.
An investment in Notes indexed, as to principal, premium and/or interest,
to one or more values of currencies (including exchange rates between
currencies), commodities, stocks or interest rate indices entails significant
risks that are not associated with similar investments in a conventional
fixed-rate debt security. If the interest rate of such a Note is so indexed, it
may result in an interest rate that is less than that payable on a conventional
fixed-rate debt security issued at the same time, including the possibility that
no interest will be paid, and, if the principal of and/or premium on such a Note
is so indexed, the amount of principal and/or premium payable in respect thereof
may be less than the original purchase price of such Note if allowed pursuant to
the terms thereof, including the possibility that no such amount will be paid.
The secondary market for such Notes will be affected by a number of factors
independent of the creditworthiness of the Corporation and the value of the
applicable currency, commodity, stock or interest rate index, including the
volatility of the applicable currency, commodity, stock or interest rate index,
the time remaining to the maturity of such Notes, the amount outstanding of such
Notes and market interest rates. The value of the applicable currency,
commodity, stock or interest rate index depends on a number of interrelated
factors, including economic, financial and political events, over which the
Corporation has no control. Additionally, if the formula used to determine the
amount of principal, premium and/or interest payable with respect to such Notes
contains a multiple or leverage factor, the effect of any change in the
applicable currency, commodity, stock or interest rate index will be increased.
The historical experience of the relevant currencies, commodities, stocks or
interest rate indices should not be taken as an indication of future performance
of such currencies, commodities, stocks or interest rate indices during the term
of any Note. Any credit ratings assigned to the Corporation's medium-term note
program are a reflection of the Corporation's credit status and, in no way, are
a reflection of the potential impact of the factors discussed above or any other
factors, on the market value of the Notes. Accordingly, prospective investors
should consult their own financial and legal advisors as to the risks entailed
by an investment in Indexed Notes and the suitability of Indexed Notes in light
of their particular circumstances.
REDEMPTION AT THE OPTION OF THE CORPORATION
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. If so agreed upon by the Corporation
and the purchaser thereof, a Note will be redeemable on and after a date fixed
at the time of sale and specified in the applicable Pricing Supplement (the
"Initial Redemption Date") either in whole or in part, at the option of the
Corporation, on written notice given not more than 60 nor less than 30 calendar
days prior to the date of redemption by the Corporation to the Holder thereof in
accordance with the provisions of the applicable Indenture. On and after the
Initial Redemption Date, if any, such Note will be redeemable in increments of
$1,000 (or the minimum denomination specified in the applicable Pricing
Supplement) at the option of the Corporation at the applicable Redemption Price,
together with unpaid interest accrued thereon at the applicable rate borne by
such Note to the date of redemption. The "Redemption Price" will initially be
the Initial Redemption Percentage (as specified in the applicable Pricing
Supplement) of the principal amount of such Note to be redeemed and will decline
at each anniversary of the Initial Redemption Date by the Annual Redemption
Percentage Reduction (as specified in the applicable Pricing Supplement), if
any, of the principal amount to be redeemed until the Redemption Price is 100%
of such principal amount. Whenever less than all the Notes at any time
outstanding are to be
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redeemed, the terms of the Notes to be so redeemed shall be selected by the
Corporation. If the Corporation elects to redeem any Note in part only, the
remaining principal amount of such Note will be an authorized denomination of
such Note. If no Initial Redemption Date is specified in the applicable Pricing
Supplement, such Note will not be redeemable prior to its Stated Maturity Date.
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be subject to repayment at the option of the Holders thereof
in accordance with the terms of the Notes on their respective Optional Repayment
Dates, if any, as agreed upon by the Corporation and the purchasers at the time
of sale and specified in the applicable Pricing Supplement. If no Optional
Repayment Date is specified with respect to a Note, such Note will not be
repayable at the option of the Holder thereof prior to the Stated Maturity Date.
On any Optional Repayment Date with respect to a Note, such Note will be
repayable in whole or in part in increments of $1,000 (or the minimum
denomination specified in the applicable Pricing Supplement) provided that any
remaining principal amount of such Note will be an authorized denomination of
such Note. Unless otherwise specified in the applicable Pricing Supplement, the
repayment price for any Note to be repaid means an amount equal to the sum of
(i) 100% of the unpaid principal amount thereof or the portion thereof plus (ii)
accrued interest to the date of repayment. Information with respect to the
repayment price for Indexed Notes shall be set forth in the applicable Pricing
Supplement. For any Note to be repaid, such Note must be received, together with
the form thereon entitled "Option to Elect Repayment" duly completed, by one of
the Paying Agents at its office (or such other address of which the Corporation
shall from time to time notify the Holders) not more than 60 nor less than 30
days prior to the date of repayment. Exercise of such repayment option by the
Holder will be irrevocable.
While the Book-Entry Notes are represented by the Global Securities held by
or on behalf of the Depositary, and registered in the name of the Depositary or
the Depositary's nominee, the option for repayment may be exercised by the
applicable participant (as defined below) that has an account with the
Depositary, on behalf of the beneficial owners of the Global Security or
Securities representing such Book-Entry Notes, by delivering a written notice
substantially similar to the above mentioned form to one of the Paying Agents at
its office (or such other address of which the Corporation shall from time to
time notify the Holders), not more than 60 nor less than 30 days prior to the
date of repayment. Notices of elections from participants on behalf of
beneficial owners of the Global Security or Securities representing such
Book-Entry Notes to exercise their option to have such Book-Entry Notes repaid
must be received by one of the Paying Agents, not later than 5:00 P.M., New York
City time, on the last day for giving such notice. In order to ensure that a
notice is received by one of the Paying Agents on a particular day, the
beneficial owner of the Global Security or Securities representing such
Book-Entry Notes must so direct the applicable participant before such
participant's deadline for accepting instructions for that day. Different firms
may have different deadlines for accepting instructions from their customers.
Accordingly, beneficial owners of the Global Security or Securities representing
Book-Entry Notes should consult the participants through which they own their
interest therein for the respective deadlines for such participants. All notices
shall be executed by a duly authorized officer of such participant (with
signature guaranteed) and shall be irrevocable. In addition, beneficial owners
of the Global Security or Securities representing Book-Entry Notes shall effect
delivery at the time such notices of election are given to the Depositary by
causing the applicable participant to transfer such beneficial owner's interest
in the Global Security or Securities representing such Book-Entry Notes, on the
Depositary's records, to the Trustee. See "Book-Entry Notes."
If applicable, the Corporation will comply with the requirements of Rule
14e-1 under the Securities Exchange Act of 1934, as amended, and any other
securities laws or regulations in connection with any such repayment.
The Corporation may at any time purchase Notes at any price or prices in
the open market or otherwise. Notes so purchased by the Corporation may be held
or resold or, at the discretion of the Corporation, may be surrendered to the
Trustee for cancellation.
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OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the determination of an
Interest Rate Basis, the calculation of the interest rate applicable to a
Floating Rate Note, and the specification of one or more Interest Rate Bases,
the Interest Payment Dates, the Maturity Date or any other variable term
relating thereto, may be modified as specified under "Other Provisions" on the
face thereof or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
BOOK-ENTRY SYSTEM
Upon issuance, all Book-Entry Notes of like tenor and having the same
original issue date will be represented by one or more Global Securities. Each
Global Security representing Book-Entry Notes will be deposited with, or on
behalf of, the Depositary, located in the Borough of Manhattan, The City of New
York, and will be registered in the name of the Depositary or its nominee.
Ownership of Book-Entry Notes will be limited to institutions that have
accounts with such Depositary or its nominee (each, a "participant" and
collectively, the "participants") or persons that may hold interests through
participants. In addition, ownership of Book-Entry Notes by participants will
only be evidenced by, and transfers of such ownership interest will be effected
only through, records maintained by the Depositary or its nominee, and its
participants. Ownership of Book-Entry Notes by persons that hold through
participants will only be evidenced by, and transfers of such ownership interest
within such participants will be effected only through, records maintained by
such participants.
The Corporation has been advised by the Depositary that upon the issuance
of a Global Security or Global Securities representing Book-Entry Notes, and the
deposit of such Global Security or Global Securities with or on behalf of the
Depositary, the Depositary will immediately credit, on its book-entry
registration and transfer system, the respective principal amounts of the
Book-Entry Notes represented by such Global Security or Global Securities to the
accounts of participants. The accounts to be credited will be designated by the
soliciting Agent, by the Bank, if the Notes are offered and sold through the
Bank as agent, or by the Corporation if the Notes are offered and sold directly
by the Corporation.
Each owner of a beneficial interest in a Global Security is required to
hold a beneficial interest in $1,000 principal amount or any integral multiple
of $1,000 in excess thereof (or in such amounts in other currencies or composite
currencies as specified in the applicable Pricing Supplement) of such Global
Security at all times.
Payments of principal of, premium, if any, and interest on, Book-Entry
Notes represented by any Global Security or Global Securities registered in the
name of or held by the Depositary or its nominee will be made to the Depositary
or its nominee, as the case may be, as the registered owner and Holder of the
Global Security or Global Securities representing such Book-Entry Notes. Such
payments to the Depositary or its nominee, as the case may be, will be made in
immediately available funds by a Paying Agent; provided that, in the case of
payments of principal, premium, if any, and interest at the Maturity Date, the
Global Security or Global Securities are presented to a Paying Agent in time for
such Paying Agent to make such payments in such funds in accordance with its
normal procedures. Neither the Corporation nor any agent of the Corporation will
have any responsibility or liability for any aspect of the Depositary's records
or any participant's records relating to, or payments made on account of,
Book-Entry Notes or for maintaining, supervising or reviewing any of the
Depositary's records or any participant's records relating to such Book-Entry
Notes.
The Corporation has been advised by the Depositary that upon receipt of any
payment of principal of, premium, if any, or interest on, a Global Security, the
Depositary will immediately credit, on its book-entry registration and transfer
system, accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown on the records of the Depositary. Payments by participants (or by other
persons that hold interests for customers through participants) to owners of
Book-Entry Notes held through such participants (or such other persons) will be
governed by standing instructions and customary practices, as is now the case
with securities held for the
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<PAGE> 17
accounts of customers registered in "street name," and will be the
responsibility of such participants (or such other persons).
No Global Security or Global Securities described above may be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any such nominee to a successor depositary or a nominee
of such successor depositary.
Book-Entry Notes represented by a Global Security are exchangeable for
definitive Notes in registered form, of like tenor and of an equal aggregate
principal amount, only if (x) the Depositary notifies the Corporation in writing
that it is unwilling or unable to continue as Depositary for such Global
Security or if at any time the Depositary ceases to be a clearing agency
registered under the Exchange Act, and a successor depositary is not appointed
by the Corporation within 60 days (y) the Corporation in its sole discretion
determines not to have such Book-Entry Notes represented by one or more Global
Securities or (z) an event shall have happened and be continuing which, after
notice or lapse of time, or both, would constitute an Event of Default with
respect to such Book-Entry Notes. Any Global Security representing Book-Entry
Notes that is exchangeable pursuant to the preceding sentence shall be
exchangeable in whole for definitive Notes in registered form, of like tenor and
of an equal aggregate principal amount, in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof (or in such amounts in other
currencies or composite currencies as specified in the applicable Pricing
Supplement). Such definitive Notes shall be registered in the name or names of
such person or persons as the Depositary shall instruct the Security Registrar.
It is expected that such instructions may be based upon directions received by
the Depositary from its participants with respect to ownership of Book-Entry
Notes.
Except as provided above, owners of Book-Entry Notes will not be entitled
to receive physical delivery of Notes in definitive form and no Global Security
representing Book-Entry Notes shall be exchangeable, except for another Global
Security of like denomination and tenor to be registered in the name of the
Depositary or its nominee. Accordingly, each person owning a Book-Entry Note
must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its beneficial interest, to exercise any rights of a Holder under the Notes. The
Corporation understands that, under existing industry practices, in the event
that (i) the Corporation requests any action of Holders or (ii) an owner of a
Book-Entry Note desires to give or take any action which a Holder is entitled to
give or take under the Notes in accordance with the terms of the Notes, the
Depositary would authorize the participants owning the relevant Book-Entry Notes
to give or take such action, and such participants would authorize beneficial
owners owning through such participants to give or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
The Depositary has advised the Corporation that the Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. The Depositary holds
securities that its participants deposit with the Depositary. The Depositary
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 who
maintain accounts directly with the Depositary include securities brokers and
dealers (including the Agents), banks, trust companies, clearing corporations
and certain organizations ("direct participants"). The Depositary is owned by a
number of its direct participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the Depositary 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 direct participant, either directly
or indirectly. The rules applicable to the Depositary and its participants are
on file with the Commission.
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The information herein concerning the Depositary and the Depositary's
system has been obtained from sources that the Corporation believes to be
reliable, but the Corporation takes no responsibility for the accuracy thereof.
SPECIAL PROVISIONS AND RISKS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in other than U.S. dollars or ECUs will not be sold in, or to
residents of, the country issuing the Specified Currency in which the particular
Notes are denominated. The information set forth in this Prospectus Supplement
is directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. The Corporation
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of and premium,
if any, and interest on the Notes. Such persons should consult their own
financial and legal advisors with regard to such matters.
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN
FOREIGN CURRENCY NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED OR PAYABLE
IN A SPECIFIED CURRENCY OTHER THAN U.S. DOLLARS, EITHER AS SUCH RISKS EXIST AT
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO
TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN FOREIGN CURRENCY NOTES.
FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a debt security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of significant
changes in the rate of exchange between the U.S. dollar and the applicable
Specified Currency and the possibility of the imposition or modification of
foreign exchange controls by either the United States or foreign governments.
Such risks depend on events over which the Corporation has no control, such as
economic and political events and the supply and demand for the relevant
currencies. In recent years, rates of exchange between the U.S. dollar and
certain foreign currencies have been highly volatile and such volatility may be
expected in the future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of fluctuations in
the rate that may occur during the term of any Foreign Currency Note.
Depreciation of the Specified Currency applicable to a Foreign Currency Note
against the U.S. dollar would result in a decrease in the U.S. dollar-equivalent
yield of such Note, in the U.S. dollar-equivalent value of the principal and
premium, if any, payable on the Maturity Date of such Note, and, generally, in
the U.S. dollar-equivalent market value of such Note.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls at or prior to the date on which any
payment of principal of or premium, if any, or interest on a Foreign Currency
Note is due, which could affect exchange rates as well as the availability of
the Specified Currency on such date. Even if there are no exchange controls, it
is possible that the Specified Currency for any particular Foreign Currency Note
would not be available on the applicable payment date due to other circumstances
beyond the control of the Corporation. In that event, the Corporation will make
the required payment in respect of such Foreign Currency Note in U.S. dollars on
the basis of the Market Exchange Rate (as defined below). See "Payment
Currency."
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<PAGE> 19
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts. If an action based on Foreign Currency Notes
were commenced in a court of the United States, it is likely that such court
would grant judgment relating to such Notes only in U.S. dollars. It is not
clear, however, whether, in granting such judgment, the rate of conversion into
U.S. dollars would be determined with reference to the date of default, the date
judgment is rendered or some other date. Under current Massachusetts law, a
state court in The Commonwealth of Massachusetts rendering a judgment on a
Foreign Currency Note would be required to render such judgment in the Specified
Currency in which such Foreign Currency Note is denominated, and such judgment
would be converted into U.S. dollars at the exchange rate prevailing on the date
of entry of the judgment. Accordingly, Holders of Foreign Currency Notes would
bear the risk of exchange rate fluctuations between the time the amount of the
judgment is calculated and the time such amount is converted from U.S. dollars
into the applicable Specified Currency.
PAYMENT OF PRINCIPAL AND PREMIUM, IF ANY, AND INTEREST
The Corporation is obligated to make payments of principal of and premium,
if any, and interest on Foreign Currency Notes in the applicable Specified
Currency (or, if such Specified Currency is not at the time of such payment
legal tender for the payment of public and private debts, in such other coin or
currency of the country which issued such Specified Currency as at the time of
such payment is legal tender for the payment of such debts). Any such amounts
paid by the Corporation will, unless otherwise specified in the applicable
Pricing Supplement, be converted by the Exchange Rate Agent named in the
applicable Pricing Supplement into U.S. dollars for payment to Holders. However,
unless otherwise specified in the applicable Pricing Supplement, the Holder of a
Foreign Currency Note may elect to receive such payments in the applicable
Specified Currency as hereinafter described.
Any U.S. dollar amount to be received by a Holder of a Foreign Currency
Note will be based on the highest bid quotation in The City of New York received
by the Exchange Rate Agent at approximately 11:00 a.m., New York City time, on
the second Business Day preceding the applicable payment date from three
recognized foreign exchange dealers (one of whom may be the Exchange Rate Agent)
selected by the Exchange Rate Agent and approved by the Corporation for the
purchase by the quoting dealer of the Specified Currency for U.S. dollars for
settlement on such payment date in the aggregate amount of the Specified
Currency payable to all Holders of Foreign Currency Notes scheduled to receive
U.S. dollar payments and at which the applicable dealer commits to execute a
contract. All currency exchange costs will be borne by the Holder of such
Foreign Currency Note by deductions from such payments. If three such bid
quotations are not available, payments will be made in the Specified Currency.
Unless otherwise specified in the applicable Pricing Supplement, a Holder
of a Foreign Currency Note may elect to receive payment of the principal of and
premium, if any, and/or interest on such Note in the Specified Currency by
submitting a written request for such payment to the Trustee at its principal
corporate trust office in Minneapolis, Minnesota on or prior to the applicable
Record Date or at least fifteen calendar days prior to the Maturity Date, as the
case may be. Such written request may be mailed or hand delivered or sent by
cable, telex or other form of facsimile transmission. A Holder of a Foreign
Currency Note may elect to receive payment in the applicable Specified Currency
for all such principal, premium, if any, and interest payments and need not file
a separate election for each payment. Such election will remain in effect until
revoked by written notice to the Trustee, but written notice of any such
revocation must be received by the Trustee on or prior to the applicable Record
Date or at least fifteen calendar days prior to the Maturity Date, as the case
may be. Holders of Foreign Currency Notes whose Notes are to be held in the name
of a broker or nominee should contact such broker or nominee to determine
whether and how an election to receive payments in the applicable Specified
Currency may be made.
Payments of the principal of and premium, if any, and interest on Foreign
Currency Notes which are to be made in U.S. dollars will be made in the manner
specified herein with respect to Notes denominated in U.S. dollars. See
"Description of Notes--General." Payments of interest on Foreign Currency Notes
which are to be made in the applicable Specified Currency on an Interest Payment
Date (other than the Maturity
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Date) will be made by check mailed at the address of the Persons entitled
thereto as they appear in the Security Register. Payments of principal of and
premium, if any, and interest on Foreign Currency Notes which are to be made in
the applicable Specified Currency on the Maturity Date will be made by wire
transfer of immediately available funds to an account with a bank designated at
least fifteen calendar days prior to the Maturity Date by the applicable Holder,
provided that such bank has appropriate facilities therefor and that the
applicable Note is presented at the principal corporate trust office of the
Trustee in time for the Trustee to make such payments in such funds in
accordance with its normal procedures.
Unless otherwise specified in the applicable Pricing Supplement, a
beneficial owner of a Global Security or Securities representing Book-Entry
Notes denominated in a Specified Currency other than U.S. dollars which elects
to receive payments of principal, premium, if any, and interest in such
Specified Currency must notify the participant through which its interest is
held on or prior to the applicable Record Date or at least fifteen calendar days
prior to the Maturity Date, as the case may be, of such beneficial owner's
election to receive all or a portion of such payment in such Specified Currency.
Such participant must notify the Depositary of such election on or prior to the
third Business Day after such Record Date or at least ten calendar days prior to
the Maturity Date, as the case may be, and the Depositary will notify the
Trustee of such election on or prior to the fifth Business Day after such Record
Date or at least ten calendar days prior to the Maturity Date, as the case may
be. If complete instructions are received by the participant and forwarded by
the participant to the Depositary, and by the Depositary to the Trustee, on or
prior to such dates, then the beneficial owner will receive payments in such
Specified Currency.
PAYMENT CURRENCY
If the applicable Specified Currency is not available for the payment of
principal, premium, if any, or interest with respect to a Foreign Currency Note
due to the imposition of exchange controls or other circumstances beyond the
control of the Corporation, the Corporation will be entitled to satisfy its
obligations to the Holder of such Foreign Currency Note by making such payment
in U.S. dollars on the basis of the Market Exchange Rate on the second Business
Day prior to such payment or, if such Market Exchange Rate is not then
available, on the basis of the most recently available Market Exchange Rate or
as otherwise specified in the applicable Pricing Supplement. The "Market
Exchange Rate" for a Specified Currency other than U.S. dollars means the noon
dollar buying rate in the City of New York for cable transfer for such Specified
Currency as certified for customs purposes by (or if not so certified, as
otherwise determined by) the Federal Reserve Bank of New York. Any payment made
under such circumstances in U.S. dollars where the required payment is in a
Specified Currency other than U.S. dollars will not constitute an Event of
Default under the applicable Indenture with respect to the Notes.
If payment in respect of a Foreign Currency Note is required to be made in
any currency unit (e.g., ECU), and such currency unit is unavailable due to the
imposition of exchange controls or other circumstances beyond the Corporation's
control, then the Corporation will be entitled, but not required, to make any
payments in respect of such Foreign Currency Note in U.S. dollars until such
currency unit is again available. The amount of each payment in U.S. dollars
shall be computed on the basis of the equivalent of the currency unit in U.S.
dollars, which shall be determined by the Exchange Rate Agent on the following
basis. The component currencies of the currency unit for this purpose
(collectively, the "Component Currencies" and each, a "Component Currency")
shall be the currency amounts that were components of the currency unit as of
the last day on which the currency unit was used. The equivalent of the currency
unit in U.S. dollars shall be calculated by aggregating the U.S. dollar
equivalents of the Component Currencies. The U.S. dollar equivalent of each of
the Component Currencies shall be determined by the Exchange Rate Agent on the
basis of the most recently available Market Exchange Rate for each such
Component Currency, or as otherwise specified in the applicable Pricing
Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any
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Component Currency is divided into two or more currencies, the amount of the
original Component Currency shall be replaced by the amounts of such two or more
currencies, the sum of which shall be equal to the amount of the original
Component Currency.
All determinations referred to above made by the Corporation or its agent
(including the Exchange Rate Agent) shall be at its sole discretion and shall,
in the absence of manifest error, be conclusive for all purposes and binding on
the Holders of the Foreign Currency Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the U.S. dollar. It also does not deal with holders
other than original purchasers (except where otherwise specifically noted).
Persons considering the purchase of the Notes should consult their own tax
advisors concerning the application of United States Federal income tax laws to
their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting).
ORIGINAL ISSUE DISCOUNT. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") released by the Internal Revenue Service
("IRS") on January 27, 1994 under the original issue discount provisions of the
Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest (as
defined below) prior to maturity, multiplied by the weighted average maturity of
such Note). The issue price of each Note in an issue of Notes equals the first
price at which a substantial amount of such Notes has been sold (ignoring sales
to bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents, or wholesalers). The stated
redemption price at maturity of a Note is the sum of all payments provided by
the Note other than "qualified stated interest" payments. The term "qualified
stated interest" generally means stated interest that is unconditionally payable
in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate. In addition, under the OID Regulations, if a
Note bears interest for one or more accrual periods at a rate below the rate
applicable for the remaining term of such Note (e.g., Notes with teaser rates or
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interest holidays), and if the greater of either the resulting foregone interest
on such Note or any "true" discount on such Note (i.e., the excess of the Note's
stated principal amount over its issue price) equals or exceeds a specified de
minimis amount, then the stated interest on the Note would be treated as
original issue discount rather than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is the
sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (i) the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(ii) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder must
include in its gross income with respect to such Discount Note for any taxable
year (or portion thereof in which the U.S. Holder holds the Discount Note) will
be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Variable Note by more than a
specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than zero but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable Note's
issue date) will be
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treated as a single qualified floating rate. Notwithstanding the foregoing, a
variable rate that would otherwise constitute a qualified floating rate but
which is subject to one or more restrictions such as a maximum numerical
limitation (i.e., a cap) or a minimum numerical limitation (i.e., a floor) may,
under certain circumstances, fail to be treated as a qualified floating rate
under the OID Regulations unless such cap or floor is fixed throughout the term
of the Note. An "objective rate" is a rate that is not itself a qualified
floating rate but which is determined using a single fixed formula and which is
based upon (i) one or more qualified floating rates, (ii) one or more rates
where each rate would be a qualified floating rate for a debt instrument
denominated in a currency other than the currency in which the Variable Note is
denominated, (iii) either the yield or changes in the price of one or more items
of actively traded personal property (other than stock or debt of the issuer or
a related party) or (iv) a combination of objective rates. The OID Regulations
also provide that other variable interest rates may be treated as objective
rates if so designated by the IRS in the future. Despite the foregoing, a
variable rate of interest on a Variable Note will not constitute an objective
rate if it is reasonably expected that the average value of such rate during the
first half of the Variable Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Variable Note's term. A "qualified inverse floating rate" is any
objective rate where such rate is equal to a fixed rate minus a qualified
floating rate, as long as variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly borrowed
funds. The OID Regulations also provide that if a Variable Note provides for
stated interest at a fixed rate for an initial period of less than one year
followed by a variable rate that is either a qualified floating rate or an
objective rate and if the variable rate on the Variable Note's issue date is
intended to approximate the fixed rate (e.g., the value of the variable rate on
the issue date does not differ from the value of the fixed rate by more than 25
basis points), then the fixed rate and the variable rate together will
constitute either a single qualified floating rate or objective rate, as the
case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single qualified
floating rate or a single objective rate throughout the term thereof and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (i.e., at a price below
the Note's stated principal amount) in excess of a specified de minimis amount.
Original issue discount on such a Variable Note arising from "true" discount is
allocated to an accrual period using the constant yield method described above
by assuming that the variable rate is a fixed rate equal to (i) in the case of a
qualified floating rate or qualified inverse floating rate, the value as of the
issue date, of the qualified floating rate or qualified inverse floating rate,
or (ii) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably expected
for the Variable Note.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Variable Note as of the Variable Note's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified
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floating rate or qualified inverse floating rate rather than the fixed rate.
Subsequent to converting the fixed rate into either a qualified floating rate or
a qualified inverse floating rate, the Variable Note is then converted into an
"equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
U.S. Holders should be aware that on December 15, 1994, the IRS released
proposed amendments to the OID Regulations which would broaden the definition of
an objective rate and would further clarify certain other provisions contained
in the OID Regulations. If ultimately adopted, these amendments to the OID
Regulations would be effective for debt instruments issued after April 4, 1994.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if such Note were treated as a contingent
payment debt obligation. The proper United States Federal income tax treatment
of Variable Notes that are treated as contingent payment debt obligations will
be more fully described in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable at
the option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
SHORT-TERM NOTES. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects to
do so. If such an election is not made, any gain recognized by the U.S. Holder
on the sale, exchange or maturity of the Short-Term Note will be ordinary income
to the extent of the original issue discount accrued on a straight-line basis,
or upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
MARKET DISCOUNT. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, such U.S. Holder will be treated as having purchased such
Note at a "market discount," unless such difference is less than a specified de
minimis amount.
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Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange, retirement or other disposition of, a Note as ordinary
income to the extent of the lesser of (i) the amount of such payment or realized
gain or (ii) the market discount which has not previously been included in
income and is treated as having accrued on such Note at the time of such payment
or disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless the
U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or semiannual compounding basis), in which case the
rules described above regarding the treatment as ordinary income of gain upon
the disposition of the Note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for United
States Federal income tax purposes. Such an election will apply to all debt
instruments acquired by the U.S. Holder on or after the first day of the taxable
year to which such election applies and may be revoked only with the consent of
the IRS.
PREMIUM. If a U.S. Holder purchases a Note for an amount that is greater
than the sum of all amounts payable on the Note after the purchase date other
than payments of qualified stated interest, such U.S. Holder will be considered
to have purchased the Note with "amortizable bond premium" equal in amount to
such excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the Note and may offset interest
otherwise required to be included in respect of the Note during any taxable year
by the amortized amount of such excess for the taxable year. However, if the
Note may be redeemed at the option of the Corporation after the U.S. Holder
acquires it at a price in excess of its stated redemption price at maturity,
special rules would apply which could result in a deferral of the amortization
of some bond premium until later in the term of the Note. Any election to
amortize bond premium applies to all taxable debt obligations then owned and
thereafter acquired by the U.S. Holder and may be revoked only with the consent
of the IRS.
DISPOSITION OF A NOTE. Except as discussed above, upon the sale, exchange
or retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any original issue discount included in income (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income) and decreased by the amount of any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such Note. Such gain or loss generally will be long-term capital
gain or loss if the Note were held for more than one year.
NOTES DENOMINATED OR ON WHICH INTEREST IS PAYABLE IN A FOREIGN CURRENCY.
As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
PAYMENTS OF INTEREST IN A FOREIGN CURRENCY.
Cash Method. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of interest
on a Note (other than original issue discount or market discount) will be
required to include in income the U.S. dollar value of the Foreign Currency
payment (determined on the date such payment is received) regardless of whether
the payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the U.S. Holder's tax basis in such Foreign Currency.
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Accrual Method. A U.S. Holder who uses the accrual method of accounting
for United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. A U.S. Holder may elect, however, to translate such accrued
interest income using the rate of exchange on the last day of the accrual period
or, with respect to an accrual period that spans two taxable years, using the
rate of exchange on the last day of the taxable year. If the last day of an
accrual period is within five business days of the date of receipt of the
accrued interest, a U.S. Holder may translate such interest using the rate of
exchange on the date of receipt. The above election will apply to other debt
obligations held by the U.S. Holder and may not be changed without the consent
of the IRS. A U.S. Holder should consult a tax advisor before making the above
election. A U.S. Holder will recognize exchange gain or loss (which will be
treated as ordinary income or loss) with respect to accrued interest income on
the date such income is received. The amount of ordinary income or loss
recognized will equal the difference, if any, between the U.S. dollar value of
the Foreign Currency payment received (determined on the date such payment is
received) in respect of such accrual period and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above).
PURCHASE, SALE AND RETIREMENT OF NOTES. A U.S. Holder who purchases a Note
with previously owned Foreign Currency will recognize ordinary income or loss in
an amount equal to the difference, if any, between such U.S. Holder's tax basis
in the Foreign Currency and the U.S. dollar fair market value of the Foreign
Currency used to purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income) and
will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year. To
the extent the amount realized represents accrued but unpaid interest, however,
such amounts must be taken into account as interest income, with exchange gain
or loss computed as described in "Payments of Interest in a Foreign Currency"
above. If a U.S. Holder receives Foreign Currency on such a sale, exchange or
retirement, the amount realized will be based on the U.S. dollar value of the
Foreign Currency on (i) the date of receipt of such Foreign Currency in the case
of a cash basis U.S. Holder and (ii) the date of disposition in the case of an
accrual basis U.S. Holder. In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the U.S.
dollar value of the amount realized by translating the Foreign Currency payment
at the spot rate of exchange on the settlement date of the sale. A U.S. Holder's
adjusted tax basis in a Note will equal the cost of the Note to such holder,
increased by the amounts of any market discount or original issue discount
previously included in income by the holder with respect to such Note and
reduced by any amortized acquisition or other premium and any principal payments
received by the holder. A U.S. Holder's tax basis in a Note, and the amount of
any subsequent adjustments to such holder's tax basis, will be the U.S. dollar
value of the Foreign Currency amount paid for such Note, or of the Foreign
Currency amount of the adjustment, determined on the date of such purchase or
adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be
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recognized only to the extent of the total gain or loss realized by the U.S.
Holder on the sale, exchange or retirement of the Note.
ORIGINAL ISSUE DISCOUNT. In the case of a Discount Note or Short-Term
Note, (i) original issue discount is determined in units of the Foreign
Currency, (ii) accrued original issue discount is translated into U.S. dollars
as described in "Payments of Interest in a Foreign Currency--Accrual Method"
above and (iii) the amount of Foreign Currency gain or loss on the accrued
original issue discount is determined by comparing the amount of income received
attributable to the discount (either upon payment, maturity or an earlier
disposition), as translated into U.S. dollars at the rate of exchange on the
date of such receipt, with the amount of original issue discount accrued, as
translated above.
PREMIUM AND MARKET DISCOUNT. In the case of a Note with market discount,
(i) market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the Note
(other than accrued market discount required to be taken into account currently)
is translated into U.S. dollars at the exchange rate on such disposition date
(and no part of such accrued market discount is treated as exchange gain or
loss) and (iii) accrued market discount currently includible in income by a U.S.
Holder for any accrual period is translated into U.S. dollars on the basis of
the average exchange rate in effect during such accrual period, and the exchange
gain or loss is determined upon the receipt of any partial principal payment or
upon the sale, exchange, retirement or other disposition of the Note in the
manner described in "Payments of Interest in a Foreign Currency--Accrual Method"
above with respect to computation of exchange gain or loss on accrued interest.
With respect to a Note issued with amortizable bond premium, such premium
is determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder should
recognize exchange gain or loss equal to the difference between the U.S. dollar
value of the bond premium amortized with respect to a period, determined on the
date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.
EXCHANGE OF FOREIGN CURRENCIES. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of such Foreign Currency, determined at
the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder of the Company, a controlled foreign corporation
related to the Company or a bank receiving interest described in section
881(c)(3)(A) of the Code. To qualify for the exemption from taxation, the last
United States payor in the chain of payment prior to payment to a non-U.S.
Holder (the "Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (i) is signed by the beneficial owner of the
Note under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
beneficial owner to the organization or institution. The Treasury Department is
considering implementation of further certification requirements aimed at
determining whether the issuer of a debt obligation is related to holders
thereof.
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Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the
Corporation, through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co., Lehman Brothers Inc. (including its
affiliate Lehman Government Securities Inc.) and PaineWebber Incorporated who
will purchase the Notes, as principal, from the Corporation from time to time,
for resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the applicable
Agent, or, if so specified in the applicable Pricing Supplement, for resale at a
fixed public offering price. Unless otherwise specified in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage of the principal amount equal to the commission applicable to an
agency sale (as described below) of a Note of identical maturity. If agreed to
by the Corporation and the applicable Agent, such Agent may utilize its
reasonable efforts on an agency basis to solicit offers to purchase the Notes at
100% of the principal amount thereof, unless otherwise specified in the
applicable Pricing Supplement. The Bank, as an agent of the Corporation, may
also solicit offers to purchase Notes from certain customers of the Bank as
described below. The Corporation will pay a commission to each Agent or the
Bank, as the case may be, ranging from .125% to .75% of the principal amount of
each Note, depending upon its stated maturity, sold through such Agent or the
Bank. Commissions with respect to Notes with stated maturities in excess of 30
years that are sold through an Agent or the Bank will be negotiated between the
Corporation and such Agent or the Bank, as the case may be, at the time of such
sale.
S-28
<PAGE> 29
The Bank, as an agent of the Corporation, will solicit purchases of the
Notes only in denominations of $150,000 and integral multiples of $1,000 in
excess thereof, or the equivalent in the applicable foreign currency or currency
unit in the case of Foreign Currency Notes, and will solicit offers only from
customers of the Bank which it has reason to believe are sophisticated
institutional investors. The Bank will have no obligation to purchase Notes from
the Corporation and will bear no credit risk with respect to the Notes.
An Agent may sell Notes it has purchased from the Corporation as principal
to other dealers for resale to investors and other purchasers, and may allow any
portion of the discount received in connection with such purchase from the
Corporation to such dealers. After the initial public offering of Notes, the
public offering price (in the case of Notes to be resold at a fixed public
offering price), the concession and the discount may be changed.
The Corporation has reserved the right to sell Notes to investors directly
on its own behalf, or through the Bank acting on an agency basis, only in those
jurisdictions where it or the Bank is authorized to do so. No commission will be
payable nor will a discount be allowed on any sales made directly by the
Corporation.
The Corporation reserves the right to withdraw, cancel or modify the offer
made hereby without notice and may reject orders in whole or in part (whether
placed directly by the Corporation, through the Bank, or through one of the
Agents). The Agents and the Bank will have the right, in their discretion
reasonably exercised, to reject in whole or in part any offer to purchase Notes
received by them on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the applicable Specified Currency in The City of New York on
the date of settlement. See "Description of Notes--General."
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. Each of the Agents may from
time to time purchase and sell Notes in the secondary market, but no Agent is
obligated to do so, and there can be no assurance that there will be a secondary
market for the Notes or liquidity in the secondary market if one develops. From
time to time, each of the Agents may make a market in the Notes, but no Agent is
obligated to do so and may discontinue any market-making activity at any time.
Each of the Agents may be deemed to be an "underwriter" within the meaning
of the Securities Act of 1933, as amended (the "Securities Act"). The
Corporation has agreed to indemnify the Agents and the Bank against certain
liabilities (including liabilities under the Securities Act), or to contribute
to payments the Agents and the Bank may be required to make in respect thereof.
The Corporation has agreed to reimburse each of the Agents for certain other
expenses.
Certain of the Agents and their affiliates may be customers of, including
borrowers from, engage in transactions with, and perform services for, the
Corporation and the Bank in the ordinary course of business. The Bank is a
wholly-owned subsidiary of the Corporation and engages in transactions with and
performs services for the Corporation and its other subsidiaries in the ordinary
course of business.
Concurrently with the offering of Notes described herein, the Corporation
may issue other Debt Securities described in the accompanying Prospectus
pursuant to the Indentures.
LEGAL OPINIONS
The validity of the Notes offered hereby will be passed upon for the
Corporation by Gary A. Spiess, General Counsel of the Corporation, and for the
Agents by Brown & Wood, New York, New York. Brown & Wood will rely as to all
matters of Massachusetts law on the opinion of Mr. Spiess. As of December 16,
1994, Mr. Spiess had a direct or indirect interest in 25,248 shares of the
Corporation's Common Stock and had options to purchase an additional 52,551
shares, of which options to purchase 49,586 shares will be exercisable within 60
days after December 16, 1994.
S-29
<PAGE> 30
PROSPECTUS
- ----------
(EAGLE LOGO)
BANK OF BOSTON CORPORATION
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
------------------------
Bank of Boston Corporation (the "Corporation") intends to issue from time to
time in one or more series up to $1,500,000,000 in aggregate initial offering
price of (i) debt securities, which may be either senior (the "Senior
Securities") or subordinated (the "Subordinated Securities"; and collectively
with the Senior Securities, the "Debt Securities") and warrants to purchase the
Debt Securities (the "Debt Warrants"), (ii) shares of preferred stock (the
"Preferred Stock"), which may be issued in the form of depositary shares
evidenced by depositary receipts (the "Depositary Shares"), and warrants to
purchase shares of the Preferred Stock (the "Preferred Stock Warrants"), and
(iii) shares of common stock, par value $2.25 per share (the "Common Stock") and
warrants to purchase shares of the Common Stock (the "Common Stock Warrants").
The Debt Securities, Preferred Stock, Depositary Shares, Common Stock, Debt
Warrants, Preferred Stock Warrants and Common Stock Warrants (such Debt
Warrants, Preferred Stock Warrants and Common Stock Warrants being referred to
collectively as the "Securities Warrants") offered hereby (collectively, the
"Securities") may be offered, separately or together, in separate series in
amounts, at prices and on terms to be determined at the time of sale and to be
set forth in a supplement to this Prospectus (a "Prospectus Supplement").
------------------------
The Debt Securities of any series may be issued with Securities Warrants,
and, in the case of the Subordinated Securities, may be convertible into or
exchangeable for Capital Securities of the Corporation (as defined herein). The
Senior Securities will rank equally with all other unsubordinated and unsecured
indebtedness of the Corporation. The Subordinated Securities will be subordinate
to all existing and future Senior Indebtedness of the Corporation (as defined
herein). The holders of Subordinated Securities of any series may be obligated
at any time or at maturity to exchange such Subordinated Securities for Capital
Securities. Unless otherwise indicated in the applicable Prospectus Supplement,
the maturity of the Subordinated Securities will be subject to acceleration only
in the event of certain events of bankruptcy, insolvency or reorganization of
the Corporation or the receivership of The First National Bank of Boston. The
specific terms of the Securities in respect of which this Prospectus is being
delivered, such as, where applicable, (i) in the case of Debt Securities, the
specific designation, aggregate principal amount, currency, denomination,
maturity, priority, rate of interest (which may be variable or fixed), time of
payment of interest, terms for optional redemption or repayment by the
Corporation or any holder or for sinking fund payments, terms for conversion or
exchange into Capital Securities (in the case of Subordinated Securities), the
initial public offering price, any stock exchange listings, any special
provisions related to Debt Securities denominated in a foreign currency or
issued as medium-term notes, original issue discount securities or other special
terms, and the designation of the Trustee, Security Registrar and Paying Agent,
(ii) in the case of Preferred Stock, the specific title and stated value, number
of shares or fractional interests therein, any dividend, liquidation,
redemption, voting and other rights, the terms for conversion into Capital
Securities or other preferred stock or for exchange for Capital Securities or
other debt securities, any stock exchange listings, and the initial public
offering price, (iii) in the case of the common stock, the aggregate number of
shares offered, and the initial public offering price and (iv) in the case of
Securities Warrants, where applicable, the duration, offering price, exercise
price and detachability, will be as set forth in the accompanying Prospectus
Supplement. The Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to the Securities covered by the Prospectus Supplement.
------------------------
The Securities may be sold to underwriters for public offering pursuant to
terms of offering established at the time of sale. In addition, the Securities
may be sold by the Corporation directly or through dealers or agents designated
from time to time, which agents may be affiliates of the Corporation. The
Prospectus Supplement will also set forth with respect to the sale of the
Securities in respect of which this Prospectus is being delivered the names of
the underwriters, dealers or agents, if any, any applicable commissions or
discounts, the net proceeds to the Corporation from such sale and any other
terms of the offering. Any underwriters, dealers or agents participating in the
offering may be deemed "underwriters" within the meaning of the Securities Act
of 1933, as amended (the "Securities Act").
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------------------
THE SECURITIES WILL BE UNSECURED OBLIGATIONS OF THE CORPORATION AND WILL NOT
BE SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK
SUBSIDIARY OF THE CORPORATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, (THE "FDIC"), BANK INSURANCE FUND OR ANY OTHER GOVERNMENT
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH
CAROLINA (THE "COMMISSIONER") OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION, THE COMMISSIONER, OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is March 18, 1994.
<PAGE> 31
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
CORPORATION OR ANY UNDERWRITER OR AGENT. THE DELIVERY OF THIS PROSPECTUS OR THE
PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
UNLESS OTHERWISE INDICATED, CURRENCY AMOUNTS IN THIS PROSPECTUS AND ANY
PROSPECTUS SUPPLEMENT ARE STATED IN U.S. DOLLARS ("$," "DOLLARS," "U.S.
DOLLARS," OR "U.S. $").
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Corporation can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained by mail from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 at prescribed rates. Certain securities of the Corporation are listed on
the New York Stock Exchange ("NYSE") and the Boston Stock Exchange ("BSE"), and
such reports, proxy statements and other information concerning the Corporation
also may be inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005, and the Boston Stock Exchange
Incorporated, One Boston Place, Boston, Massachusetts 02108.
This Prospectus does not contain all of the information set forth in the
Registration Statement on Form S-3 (and exhibits thereto, as amended) which the
Corporation has filed with the Commission under the Securities Act and to which
reference is hereby made. The Registration Statement (and exhibits thereto) may
be inspected at the Public Reference Section of the Commission, at the address
noted above, and copies thereof may be obtained from the Commission at
prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the following
documents and information heretofore filed with the Commission pursuant to
Sections 12 or 13 of the Exchange Act:
1. The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1993.
2. The description of the Corporation's Common Stock, Preferred Stock
and Preferred Stock Purchase Rights contained in the Corporation's
registration statements filed under Section 12 of the Exchange
Act, including any amendment or report filed for the purpose of
updating such description.
All documents subsequently filed by the Corporation pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the Securities offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in the accompanying Prospectus Supplement, or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
2
<PAGE> 32
THE CORPORATION WILL PROVIDE UPON REQUEST AND WITHOUT CHARGE TO EACH PERSON
TO WHOM THIS PROSPECTUS IS DELIVERED A COPY OF ANY OR ALL OF THE FOREGOING
DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED THEREIN BY REFERENCE). WRITTEN
REQUESTS SHOULD BE DIRECTED TO INVESTOR RELATIONS, THE FIRST NATIONAL BANK OF
BOSTON, P.O. BOX 2016, 01-16-10, BOSTON, MASSACHUSETTS 02106-2016. TELEPHONE
REQUESTS MAY BE DIRECTED TO INVESTOR RELATIONS AT (617) 434-7858.
THE CORPORATION
The Corporation is a registered bank holding company, organized in 1970
under Massachusetts law, which, through its subsidiaries, is engaged in
providing a wide variety of financial services to individuals, corporate and
institutional customers, governments, and other financial institutions. These
services include retail banking, consumer finance, mortgage origination and
servicing, domestic corporate and investment banking, leasing, international
banking, commercial real estate lending, private banking, trust, correspondent
banking, and securities and payments processing. The Corporation's principal
subsidiary is The First National Bank of Boston (the "Bank"), a national banking
association. Other major banking subsidiaries of the Corporation are Casco
Northern Bank, N.A. ("Casco") in Maine, Bank of Boston Connecticut ("BKB
Connecticut"), Rhode Island Hospital Trust National Bank ("Hospital Trust"),
Bank of Vermont and, in Massachusetts, Multibank West, Mechanics Bank and South
Shore Bank. As of December 31, 1993, approximately 78% of the Corporation's
total loan volume consisted of domestic loans and leases, with the balance
overseas. The Corporation's banking subsidiaries maintain approximately 320
branches in Massachusetts, Rhode Island, Connecticut, Maine and Vermont. The
Corporation, through its subsidiaries, has a presence in approximately 33 states
of the United States and in approximately 23 foreign countries. As of December
31, 1993, the Corporation's subsidiaries employed in the aggregate approximately
18,600 full-time equivalent employees in their domestic and foreign operations.
The executive office of the Corporation and the head office of the Bank are
located at 100 Federal Street, Boston, Massachusetts 02110 (Telephone
617-434-2200).
------------------------
The Corporation's business is generally focused in the areas of retail
banking, corporate banking and international banking. In October of 1993, the
Corporation announced certain organizational and management changes, including
the creation of a new Chairman's Office and the establishment of a twenty-nine
member Corporate Working Committee. The Chairman's Office consists of Chairman
and Chief Executive Officer Ira Stepanian, President and Chief Operating Officer
Charles K. Gifford, Vice Chairman, Chief Financial Officer and Treasurer William
J. Shea and Vice Chairman Edward A. O'Neal. The Corporation's businesses were
previously organized into five major groups and a number of other major
centralized functions. This group structure was replaced by fifteen core
business and ten corporate-wide support areas, each led by an executive with
authority to operate and manage his or her respective area. These twenty-five
executives and the members of the Chairman's Office comprise the Corporate
Working Committee. These core business and corporate-wide support executives
work closely with one another and each is linked to one of the members of the
Chairman's Office.
------------------------
COMPETITION AND INDUSTRY CONSOLIDATION
The Corporation's subsidiaries compete with other major financial
institutions, including commercial banks, investment banks, mutual savings
banks, savings and loan associations, credit unions, consumer finance companies,
money market funds and other non-banking institutions, such as insurance
companies, major retailers, brokerage firms, and investment companies in New
England, throughout the United States, and internationally. One of the principal
methods of competing effectively in the financial services industry is to
improve customer service through the quality and range of services available,
easing access to facilities and pricing.
One outgrowth of the competitive environment discussed above has been a
significant number of consolidations in the banking industry both on a national
and regional level. The Corporation engages on an
3
<PAGE> 33
ongoing basis in reviewing and discussing possible acquisitions of financial
institutions, as well as banking and other assets in order to expand its
business incident to the implementation of its business strategy. The
Corporation intends to continue to explore acquisition opportunities as they
arise in order to take advantage of the continuing consolidation in the banking
industry.
Banks and bank holding companies are extensively regulated under both
federal and state law. Activities in which the Corporation and its subsidiaries
are presently engaged or which they may undertake in the future are subject to
certain statutory and regulatory restrictions. There are also various legal
limitations upon the extent to which banking subsidiaries of the Corporation can
finance or otherwise supply funds to the Corporation or certain of its
affiliates. In addition, there are certain regulatory limitations on the payment
of dividends to the Corporation by certain of its banking subsidiaries. See also
"Supervision and Regulation."
------------------------
<TABLE>
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
The Corporation's ratio of earnings to fixed charges and earnings to
combined fixed charges and preferred stock dividend requirements are set forth
below for the periods indicated:
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1993 1992 1991 1990 1989
----- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on Deposits.................. 1.28 x 1.34x .72x .60x 1.11x
Including Interest on Deposits.................. 1.09 1.09 .95 .89 1.04
Earnings to Combined Fixed Charges and Preferred
Stock Dividend Requirements:
Excluding Interest on Deposits.................. 1.24 1.30 .71 .59 1.10
Including Interest on Deposits.................. 1.08 1.08 .94 .88 1.04
</TABLE>
For the years ended December 31, 1991 and 1990, earnings were insufficient
to cover both fixed charges and combined fixed charges and preferred stock
dividend requirements, both excluding and including interest on deposits.
Additional earnings necessary for the years ended December 31, 1991 and 1990 to
bring the ratios of earnings to fixed charges to one-to-one on both an excluding
and including interest on deposits basis are $178.9 million and $509.3 million,
respectively. Additional earnings necessary for the years ended December 31,
1991 and 1990 to bring the ratios of earnings to combined fixed charges and
preferred stock dividend requirements to one-to-one on both an excluding and
including interest on deposits basis are $192.2 million and $523.1 million,
respectively.
For purposes of computing both the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividend requirements,
earnings represent net income (loss) before extraordinary items and cumulative
effect of changes in accounting principles plus applicable income taxes and
fixed charges. Fixed charges, excluding interest on deposits, include interest
expense (other than on deposits) and the proportion deemed representative of the
interest factor of rent expense, net of income from subleases. Fixed charges,
including interest on deposits, include all interest expense and the proportion
deemed representative of the interest factor of rent expense, net of income from
subleases. Pretax earnings required for preferred stock dividends were computed
using tax rates for the applicable year. No tax adjustments were made in loss
years.
SUPERVISION AND REGULATION
The Corporation is subject to the supervision of, and to regular inspection
by, the Federal Reserve Bank of Boston. The Corporation's banking subsidiaries
that are organized as national banking associations, the Bank, Casco and
Hospital Trust are subject to regulation by the Office of the Comptroller of the
Currency (the "OCC") and the FDIC. The Corporation's state chartered banking
subsidiaries, BKB Connecticut, Bank of Vermont, Multibank West, Mechanics Bank
and South Shore Bank, are subject to regulation by the FDIC
4
<PAGE> 34
as well as by their respective state regulators. A summary of certain of these
regulatory provisions is set forth in the Corporation's Annual Report on Form
10-K for the year ended December 31, 1993.
In addition to extensive existing government regulation, federal and state
statutes and regulations can change in unpredictable ways, often with
significant effects on the way in which banks may conduct business. Legislation
which has been enacted in recent years has substantially increased the level of
competition among commercial banks, thrift institutions and non-banking
institutions, including insurance companies, brokerage firms, mutual funds,
investment banks and major retailers. The enactment of banking legislation such
as the Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") and the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") have affected the banking industry by, among other things, broadening
the regulatory powers of the federal banking agencies in a number of areas.
Under FIRREA, an FDIC-insured bank can be held liable for any loss incurred by,
or reasonably expected to be incurred by, the FDIC in connection with (i) the
default of a commonly controlled FDIC-insured bank or (ii) any assistance
provided by the FDIC to a commonly controlled FDIC-insured bank in danger of
default. "Default" is defined generally as the appointment of a conservator or
receiver and "in danger of default" is defined generally as the existence of
certain conditions indicating that a "default" is likely to occur in the absence
of regulatory assistance. In addition, FIRREA broadened the enforcement powers
of the federal banking agencies, including the power to impose fines and
penalties, over all financial institutions. Further, under FIRREA the failure to
meet capital guidelines could subject a financial institution to a variety of
regulatory actions, including the termination of deposit insurance by the FDIC.
FDICIA also provides for expanded regulation of financial institutions.
Among other things, FDICIA establishes five capital categories for insured
depository institutions, which include "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized," and imposes significant restrictions on the
operations of a bank that is not adequately capitalized. Under FDICIA, an
undercapitalized bank must submit a capital restoration plan guaranteed by its
parent company. The liability of the parent company under any such guarantee is
limited to the lesser of 5% of the bank's assets at the time it became
undercapitalized, or the amount needed to comply with the plan. FDICIA imposes
progressively more restrictive constraints on the operations, management and
capital distributions of undercapitalized, significantly undercapitalized and
critically undercapitalized institutions. In addition, a bank's primary federal
banking agency is authorized to downgrade the bank's capital category to the
next lower category upon a determination that the bank is in an unsafe or
unsound condition or is engaged in an unsafe or unsound practice. An unsafe or
unsound practice can include receipt by the institution of a rating on its most
recent examination of three or worse (on a scale of 1 (best) to 5(worst)), with
respect to its asset quality, management, earnings or liquidity.
As required by FDICIA, the federal banking agencies have adopted
regulations that set specific capital ratio levels for FDICIA's five capital
categories. Pursuant to the regulations, an institution is well capitalized if
it has a total risk-based capital ratio of at least 10%, a Tier 1 risk-based
capital ratio of at least 6% and a leverage capital ratio of at least 5%. An
institution is adequately capitalized if it has a total risk-based capital ratio
of at least 8%, a Tier 1 risk-based capital ratio of at least 4% and a leverage
capital ratio of at least 4%. Under the regulations, in order to qualify as well
capitalized an institution also is required to be free from any agreement,
order, capital directive or prompt corrective action directive that requires it
to meet and maintain a higher level of capital. Under these regulations, at
December 31, 1993, the Bank would be deemed to be well capitalized, and the
Corporation's other banking subsidiaries would be deemed to be adequately
capitalized or well capitalized. The capital categories of the Corporation's
banking subsidiaries are determined solely for purposes of applying FDICIA's
prompt corrective action provisions and, accordingly, such capital categories
may not constitute an accurate representation of the overall financial condition
or prospects of any of the Corporation's banking subsidiaries.
FDICIA and the regulations issued thereunder also have (i) limited the use
of brokered deposits to well capitalized banks, and adequately capitalized banks
that have received waivers from the FDIC; (ii) established restrictions on the
permissible investments and activities of FDIC-insured state chartered banks and
their subsidiaries; (iii) implemented uniform real estate lending rules; (iv)
prescribed standards to limit the risks posed by credit exposure between banks;
(v) revised risk-based capital rules to include components
5
<PAGE> 35
for measuring the risk posed by interest rate changes; (vi) amended various
consumer banking laws; (vii) increased restrictions on loans to a bank's
insiders; (viii) established standards in a number of areas to assure bank
safety and soundness; (ix) implemented additional requirements for institutions
that have $500 million or more in total assets with respect to annual
independent audits, audit committees, and management reports related to
financial statements, internal controls and compliance with designated laws and
regulations; and (x) replaced the FDIC's flat-rate deposit insurance assessment
system with a risk-based system under which a bank is placed in one of nine risk
categories, principally on the basis of its capital level and an evaluation of
the bank's risk to the Bank Insurance Fund, and its premiums are based on the
probability of loss to the FDIC.
The Corporation continues to analyze the effect of, and address its ongoing
compliance with, the various regulations issued under FDICIA. It is anticipated
that FDICIA, and the regulations enacted thereunder, will continue to result in
more limitations on banking activities generally, and increased costs for the
Corporation and the banking industry because of higher FDIC assessments and
higher costs of compliance, documentation and record keeping.
USE OF PROCEEDS
The Corporation intends to use the net proceeds from the sale of the
Securities for general corporate purposes which may include one or more of the
following: investments in and advances to the Corporation's subsidiaries;
financing future acquisitions of financial institutions, as well as banking and
other assets; and the redemption of certain of the Corporation's outstanding
debt securities. The precise amounts and timing of the application of proceeds
used for such corporate purposes will depend upon funding requirements and the
availability of other funds to the Corporation and its subsidiaries.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The following sets forth certain general terms and provisions of the Debt
Securities to which any Prospectus Supplement may relate. The particular terms
of any Debt Securities and the extent, if any, to which such general provisions
may apply to such Debt Securities will be described in the Prospectus Supplement
relating to such Debt Securities.
The Senior Securities offered hereby are to be issued under an Indenture,
dated as of June 15, 1992, between the Corporation and Norwest Bank Minnesota,
National Association ("Norwest" or the "Trustee"), as Trustee (the "Senior
Indenture") and the Subordinated Securities offered hereby are to be issued
under an Indenture, dated as of June 15, 1992, between the Corporation and
Norwest, as Trustee, as amended by the First Supplemental Indenture dated as of
June 24, 1993 (the "Subordinated Indenture"; and collectively with the Senior
Indenture, the "Indentures"), copies of which are filed as exhibits to the
Registration Statement. The following summaries of certain provisions of the
Indentures do not purport to be complete and such summaries are qualified in
their entirety by reference to all of the provisions of the Indentures,
including the definitions therein of certain terms. Whenever particular
sections, articles or defined terms of the Indentures are referred to, such
provisions or definitions are incorporated herein by reference.
Because the Corporation is a holding company, its rights and the rights of
its creditors, including the Holders of the Debt Securities, to participate in
the assets of any subsidiary, including the Bank, upon the subsidiary's
liquidation or reorganization or otherwise would be subject to the prior claims
of the subsidiary's creditors, except to the extent that the Corporation may
itself be a creditor with recognized claims against the subsidiary. There is no
restriction in the Debt Securities or either Indenture against the incurring of
indebtedness by the Corporation, the Bank or any other subsidiary of the
Corporation.
The Indentures do not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and Debt Securities may be issued
thereunder in series up to the aggregate principal amount which may be
authorized from time to time by the Corporation. The Debt Securities will be
unsecured obligations of the Corporation. The Senior Securities will rank on a
parity with all other unsecured and unsubordinated indebtedness of the
Corporation. The Subordinated Securities will be subordinate in right of payment
as
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described below under "Subordination." Unless otherwise set forth in the
Prospectus Supplement, neither the Indentures nor the Debt Securities contain
provisions which would afford Holders of Debt Securities protection in the event
of a takeover, recapitalization or similar restructuring of the Corporation,
which could adversely affect the Debt Securities.
The Debt Securities may be issued in one or more separate series of Senior
Securities and/or one or more separate series of Subordinated Securities.
Reference is made to the Prospectus Supplement relating to the particular series
of Debt Securities offered thereby for the terms of such Debt Securities,
including, where applicable:
(1) the title of such Debt Securities (which shall distinguish such
Debt Securities from all other series of Debt Securities), which may
include medium-term notes;
(2) any limit on the aggregate principal amount or aggregate initial
offering price of the Debt Securities;
(3) the date or dates, or the method by which such date or dates will
be determined or extended, on which the principal of such Debt Securities
will be payable;
(4) the rate or rates at which the Debt Securities will bear
interest, if any, which rate may be zero in the case of certain Debt
Securities issued at an issue price representing a discount from the
principal amount payable at maturity, or the method by which such rate or
rates will be determined, and the date or dates from which such interest,
if any, will accrue or the method by which such date or dates will be
determined;
(5) the date or dates on which such interest, if any, on the Debt
Securities will be payable and the regular record date, if any, for such
Interest Payment Dates or the method by which such date or dates will be
determined;
(6) the place or places where (i) the principal of and premium, if
any, and any interest on the Debt Securities will be payable, (ii)
Registered Debt Securities may be surrendered for registration of transfer,
and (iii) Debt Securities may be surrendered for exchange;
(7) any sinking fund or analogous provisions;
(8) the period or periods within which, the price or prices at which
and the Currency in which, the Debt Securities may, pursuant to any
redemption provision, be redeemed, in whole or in part, and the other
detailed terms and provisions of any such redemption provisions;
(9) if other than denominations of $1,000 and any integral multiples
thereof, the denominations in which any Registered Debt Securities will be
issuable and, if other than a denomination of $5,000, the denominations in
which any Bearer Debt Securities will be issuable;
(10) if other than the Trustee, the identity of each Security
Registrar and/or Paying Agent, and the designation of the initial Exchange
Rate Agent, if any;
(11) if other than the principal amount, the portion of the principal
amount (or the method by which such portion will be determined) of Debt
Securities that will be payable upon declaration of acceleration of the
Maturity thereof;
(12) if other than United States dollars, the currency of payment,
including composite currencies, of principal and premium, if any, and
interest, if any, on such Debt Securities, (which may be different for
principal, premium, if any, and interest, if any);
(13) any index, formula or other method used to determine the amount
of payments of principal of and premium, if any, and interest, if any, on
the Debt Securities;
(14) whether the principal of and premium, if any, and interest, if
any, on the Debt Securities are to be payable, at the election of the
Corporation or the Holder, in a Currency other than the Currency in which
the Debt Securities are denominated or stated to be payable and the period
or periods within which
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and the terms, conditions and manner of making such election and
determining the applicable exchange rate;
(15) any terms upon which any Subordinated Securities will be
convertible into or exchangeable for Capital Securities of the Corporation;
(16) whether such Debt Securities are Senior Securities or
Subordinated Securities, or include both;
(17) whether provisions relating to defeasance and covenant defeasance
will be applicable to such series of Debt Securities;
(18) any provisions granting special rights to Holders of Debt
Securities upon the occurrence of specified events;
(19) any modifications, deletions or additions to the Events of
Default, Defaults (in the case of Subordinated Securities) or covenants of
the Corporation with respect to the Debt Securities;
(20) whether the Debt Securities are issuable as Registered Debt
Securities, Bearer Debt Securities (with or without coupons) or both, any
restrictions on the offer, sale or delivery of Bearer Debt Securities, and
whether Bearer or Registered Debt Securities may be exchanged for
Registered or Bearer Debt Securities, respectively, and the circumstances
and place or places where such exchanges may be made;
(21) whether any Debt Securities are issuable initially in temporary
or permanent global form (with or without coupons) and, if so (i) whether
(and the circumstances under which) beneficial owners of interests in
permanent global Debt Securities may exchange their interests for Debt
Securities of like tenor of any authorized form and denomination, and (ii)
the identity of any initial depository for such global Debt Securities;
(22) the date as of which any Bearer Debt Securities and any temporary
global Debt Security will be dated if other than the original issuance date
of the first Debt Security of that series to be issued;
(23) the Person to whom any interest on any Registered Debt Securities
will be payable, if other than the registered Holder, the Person to whom
any interest on any Bearer Debt Securities will be payable if other than
upon presentation and surrender of the coupons appertaining thereto, and
the extent to which and manner that any interest payable on a temporary
global Debt Security will be paid if other than as specified in the
Indentures;
(24) the form and/or terms of certificates, documents or conditions,
if any, for Debt Securities to be issuable in definitive form (whether upon
original issue or upon exchange of a temporary Debt Security of such
Series);
(25) if Debt Securities are to be issued upon the exercise of
warrants, the time, manner and place for such Debt Securities to be
authenticated and delivered;
(26) whether and under what circumstances the Corporation will pay
Additional Amounts regarding any tax, assessment or government charge as
contemplated by the applicable Indenture to any Holder who is not a United
States person and, if so, whether and under what terms the Corporation will
have the option to redeem such Debt Securities in lieu of paying such
Additional Amounts (and the terms of such option); and
(27) any other terms, conditions, rights and preferences (or
limitations on such rights or preferences) relating to the Debt Securities
(which terms shall not be inconsistent with the provisions of the
applicable Indenture and the Trust Indenture Act).
The Debt Securities may be issued as Original Issue Discount Debt
Securities to be sold at a substantial discount below their principal amount.
Special U.S. federal income tax and other considerations applicable thereto will
be described in the Prospectus Supplement relating thereto.
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The Debt Securities may also be issued under the Indentures upon exercise
of Debt Warrants issued by the Corporation. See "Description of Securities
Warrants."
REGISTRATION AND TRANSFER
Unless otherwise provided in the Prospectus Supplement, each series of Debt
Securities will be issued only as Registered Securities. If so provided with
respect to a series of Debt Securities, however, Debt Securities of such series
will be issued only as Bearer Securities, or in a combination of both Registered
Securities and Bearer Securities. Debt Securities issued as Bearer Securities
shall have interest coupons attached unless issued as zero coupon securities.
(Sections 201, 301. All Section references herein are to the applicable
Indenture or Indentures.) If Bearer Securities are issued, the United States
federal income tax consequences and other special considerations, procedures and
limitations applicable to such Bearer Securities will be described in the
Prospectus Supplement.
Unless otherwise provided in the Prospectus Supplement, Registered
Securities may be presented for transfer (duly endorsed or accompanied by a
written instrument of transfer, if so required by the Corporation or the
Security Registrar) or exchanged for other Debt Securities of the same series at
the office of BancBoston Trust Company of New York in New York City or the
principal office of the Bank in Boston. Such transfer or exchange shall be made
without service charge, but the Corporation may require payment of any tax or
other governmental charge as described in the applicable Indenture. Any
provisions relating to the exchange of Bearer Securities for other Debt
Securities of the same series (including, if applicable, Registered Securities)
will be described in the Prospectus Supplement. Unless otherwise specified in
the Prospectus Supplement, Registered Securities will not be exchangeable for
Bearer Securities. (Sections 301, 305, 1002.)
Unless otherwise indicated in the Prospectus Supplement, Registered
Securities, other than Registered Securities issued in global form which may be
of any denomination, will be issued without coupons and in denominations of
$1,000 or integral multiples thereof, and Bearer Securities, other than Bearer
Securities issued in global form which may be of any denomination, will be
issued in a denomination of $5,000. (Sections 301, 302.)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depositary or common depositary (the "Common
Depositary") identified in the Prospectus Supplement. Global Securities may be
issued in either registered or bearer form and in either temporary or permanent
form. Unless and until it is exchanged in whole or in part for the individual
Debt Securities represented thereby, a Global Security may not be transferred
except as a whole by the Common Depositary for such Global Security to its
nominee or another nominee or by a nominee to the Common Depositary or another
nominee or by the Common Depositary or any nominee to a successor Common
Depositary or any nominee of such successor. (Sections 203, 303, 304.)
The specific terms of the depository arrangement with respect to a series
of Debt Securities and certain limitations and restrictions, including special
U.S. federal income tax consequences, relating to a series of Bearer Securities
in the form of one or more Global Securities, will be described in the
Prospectus Supplement.
Principal and interest payments on the Global Securities registered in the
name of the Common Depositary or its nominee will be made to the Common
Depositary or its nominee, as the case may be, as the registered owner of such
Global Securities. Under the terms of the Indentures, the Corporation and the
Paying Agents will treat the persons in whose names the Global Securities are
registered as the owners of such Global Securities for the purpose of receiving
payment of principal and interest on such Global Securities and for all other
purposes whatsoever. Therefore, neither the Corporation nor the Paying Agents
has any direct responsibility or liability for the payment of principal of or
interest on the Global Securities to owners of beneficial interests in the
Global Securities.
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PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the Prospectus Supplement, payment of
principal of and premium, if any, and interest, if any, on Registered Securities
will be made at the office of BancBoston Trust Company of New York in New York
City or at the principal office of the Bank in Boston, except that, at the
option of the Corporation, interest may be paid by mailing a check to the
address of the person entitled thereto as such address appears in the Security
Register. (Sections 301, 307, 1002.)
Unless otherwise indicated in the Prospectus Supplement, payment of
principal of and premium, if any, and interest, if any, on Bearer Securities
will be made, subject to any applicable laws and regulations, at such office
outside the United States as specified in the Prospectus Supplement and as the
Corporation may designate from time to time or by transfer to an account
maintained by the payee with a bank located outside the United States. Unless
otherwise indicated in the Prospectus Supplement, payment of interest on Bearer
Securities will be made only against surrender of the coupon relating to such
Interest Payment Date. No payment with respect to any Bearer Security will be
made at any office or agency of the Corporation in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States. (Sections 301, 307.)
RESTRICTION ON CERTAIN DISTRIBUTIONS
The Corporation has agreed in the Senior Indenture that it will not make
any payment or other distribution in shares of capital stock of the Bank or its
successor, unless the Bank or its successor unconditionally guarantees payment
when due of the principal of and premium, if any, and interest, if any, on the
Senior Securities issued pursuant to the Senior Indenture. (Section 1008.)
RESTRICTIONS ON LIENS
The Senior Indenture also prohibits the Corporation from, directly or
indirectly, creating, assuming, incurring or suffering to exist any Lien upon
any shares of capital stock of the Bank (other than directors' qualifying
shares) or any shares of capital stock of a Subsidiary which owns capital stock
of the Bank, except liens for taxes, assessments, judgments or other
governmental charges or levies that are not yet due or are payable without
penalty or of which the amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which the Corporation shall set
aside on its books adequate reserves with respect thereto. (Section 1009.)
CONSOLIDATION, MERGER AND SALE OF ASSETS
Under each Indenture, the Corporation, without the consent of the Holders
of any of the Outstanding Debt Securities under the applicable Indenture, may
consolidate with or merge into any other corporation or convey, transfer or
lease its properties and assets substantially as an entirety to any Person
provided that: (i) the successor is a corporation organized and existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the successor corporation expressly assumes, by an indenture supplemental
to the applicable Indenture, the Corporation's obligation for the due and
punctual payment of the principal of and premium, if any, and interest, if any,
on all of the Debt Securities under the applicable Indenture and the performance
of every covenant of the applicable Indenture; (iii) after giving effect to the
transaction, no Event of Default under the Senior Indenture and no Default under
the Subordinated Indenture, and no event which, after notice or lapse of time,
or both, would become an Event of Default or a Default, as the case may be,
shall have happened and be continuing; and (iv) certain other conditions are
met. (Section 801.)
MODIFICATION AND WAIVER
Each Indenture provides that modification or amendments of the Indentures
may be made by the Corporation and the Trustee, with the consent of the Holders
of 66 2/3 percent in principal amount of the Outstanding Debt Securities of each
series affected by such modification or amendment; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby: (a) change the Stated Maturity of
the principal of, or any installment of interest on, any Debt Security; (b)
reduce the principal amount of, or rate of interest, if any, on, or any premium
payable
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upon the redemption or (in the case of Subordinated Securities) exchange of any
Debt Security; (c) change any obligation of the Corporation to pay Additional
Amounts; (d) reduce the amount of principal of any Original Issue Discount
Security that would be due and payable upon a declaration of acceleration of the
Maturity thereof or the amount provable in bankruptcy; (e) adversely affect any
right of repayment at the option of any Holder of any Debt Security; (f) change
the place or Currency of, or (in the case of Subordinated Securities) class of
Capital Securities for, payment of principal of, or any premium or interest on,
any Debt Security; (g) impair the right to institute suit for the enforcement of
any payment on or with respect to any Debt Security on or after the Stated
Maturity thereof (or, in the case of redemption, exchange (in the case of
Subordinated Securities) or repayment at the option of the Holder, on or after
the Redemption Date, Exchange Date (in the case of Subordinated Securities) or
Repayment Date); (h) adversely affect the right to convert any Convertible
Security (in the case of Subordinated Securities); (i) reduce the percentage of
principal amount of Outstanding Debt Securities of any series, the consent of
whose Holders is required for modification or amendment of the Indentures, or
for waiver of compliance with certain provisions of the Indentures or for waiver
of certain defaults and their consequences, or reduce the requirements for
quorum or voting by the Holders; or (j) modify certain provisions of the
Indentures except to increase the percentage of Holders required to consent
thereon to amendment or modification thereof or to provide that certain other
Indenture provisions cannot be modified or waived without the consent of the
Holder of each Outstanding Debt Security affected thereby. (Section 902.)
The Holders of 66 2/3 percent in principal amount of the Outstanding Debt
Securities of each series may, on behalf of all Holders of Debt Securities of
that series, waive, insofar as that series is concerned, compliance by the
Corporation with certain terms, conditions, or provisions of the Indentures.
(Section 1011.) The Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series may, on behalf of all Holders of
Debt Securities of that series, waive any past default under the applicable
Indentures with respect to Debt Securities of that series and its consequences,
except a default in the payment of principal (including, in the case of
Subordinated Securities, principal to be paid by delivery of Capital Securities)
or premium, if any, or interest, if any, or in respect of a covenant or
provision which under Article 9 of each Indenture cannot be modified or amended
without the consent of the Holder of each Outstanding Debt Security of such
series affected. (Section 513.)
Each Indenture provides that, in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or are present at a meeting of Holders for quorum purposes, and for making
calculations required under Section 313 of the Trust Indenture Act: (i) the
principal amount of an Original Issue Discount Security that may be counted in
making such determination or calculation and that shall be deemed to be
Outstanding shall be the amount of principal thereof that would be due and
payable as of the time of such determination upon acceleration of the Maturity
thereof; (ii) the principal amount of any Debt Security denominated in a Foreign
Currency that may be counted in making such determination or calculation and
that shall be deemed to be Outstanding for such purpose shall be the Dollar
equivalent, determined as of the date of original issuance of such Debt
Security, of the principal amount of such Debt Security (or, in the case of an
Original Issue Discount Security, the Dollar equivalent, determined as of the
date of original issuance of such Debt Security, of the amount determined as
provided in (i) above); and (iii) the principal amount of any Indexed Debt
Security that may be counted in making such determination or calculation and
that shall be deemed Outstanding for such purpose shall be equal to the
principal face amount of such Indexed Debt Security at original issuance, unless
otherwise provided with respect to such Debt Security. (Section 101.)
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide that the Corporation may elect (1) to defease and be
discharged from its obligations with respect to any Debt Securities of or within
a series and any related coupons (except the obligations to pay any Additional
Amounts; to register the transfer of or exchange such Debt Securities and any
related coupons; to replace temporary or mutilated, destroyed, lost or stolen
Debt Securities and any related coupons; to maintain an office or agency in
respect of such Debt Securities and any related coupons; and to hold moneys for
payment in trust) ("defeasance") or (2) with respect to the Senior Indenture, to
be
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released from its obligations with respect to such Debt Securities and any
related coupons under Section 1009 of the Senior Indenture (the restriction
described above under "Restrictions on Liens") or, if provided pursuant to
Section 301 of the applicable Indenture, its obligations with respect to any
other covenant, and any omission to comply with such obligations shall not
constitute a default or an Event of Default under the Senior Indenture or a
Default under the Subordinated Indenture with respect to such Debt Securities
and any related coupons ("covenant defeasance"), in either case by (a)
depositing irrevocably with the Trustee as trust funds in trust (i) an amount in
such Currency or, with respect to the Subordinated Securities, a sum (including
Capital Securities, if any) in such Currency (or class of Capital Securities),
in which such Debt Securities and any related coupons are payable at Stated
Maturity, or (ii) Government Obligations (as defined below), in each case in an
amount which through the scheduled payment of principal of and premium, if any,
and interest, if any, in respect thereof in accordance with their terms will
provide, not later than one business day before the due date of any payment,
money in an amount or (iii) a combination of such Currency and Government
Obligations, sufficient to pay the principal (including in the case of
Subordinated Securities, principal to be paid by the delivery of Capital
Securities) of and premium, if any, and interest, if any, on the Debt Securities
of such series and any related coupons on the Stated Maturity of such principal
or installment of principal or interest and any mandatory sinking fund or
similar payments applicable to such Debt Securities and (b) satisfying certain
other conditions precedent specified in the Indentures. Such deposit and
termination is conditioned among other things upon the Corporation's delivery of
an Opinion of Counsel that the Holders of the Debt Securities of such series and
any related coupons will have no U.S. federal income tax consequences as a
result of such deposit and termination. (Senior Indenture, Article 14;
Subordinated Indenture, Article 15.)
If the Corporation exercises its covenant defeasance option with respect to
any series of Debt Securities and any related coupons and such Debt Securities
and related coupons are declared due and payable because of the occurrence of
any Event of Default other than with respect to a covenant as to which there has
been covenant defeasance described above, the money and Government Obligations
on deposit with the Trustee will be sufficient to pay amounts due on such Debt
Securities at their Stated Maturity but may not be sufficient to pay amounts due
on such Debt Securities and any related coupons at the time of acceleration
relating to such Event of Default. However, the Corporation would remain liable
to make payment of such amounts due at the time of acceleration.
The Prospectus Supplement may further describe the provisions, if any,
permitting such defeasance or covenant defeasance, including any modifications
to the provisions described above, with respect to the Debt Securities of or
within any particular series and any related coupons.
Unless otherwise specified in the Prospectus Supplement, "Government
Obligations" means securities that are (i) direct obligations of the government
which issued the Currency in which the Debt Securities of a particular series
are payable or (ii) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the government which issued the
Currency in which the Debt Securities of a particular series are payable, the
payment of which is unconditionally guaranteed by such government, which, in
either case, are full faith and credit obligations of such government payable in
such Currency and are not callable or redeemable at the option of the issuer
thereof, and also includes a depositary receipt issued by a bank or trust
company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the holder of a depositary receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest or principal of the Government
Obligation evidenced by such depositary receipt. (Section 101.)
REGARDING THE TRUSTEE
Norwest, the Trustee under the Indentures, has its principal corporate
trust office at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479.
The Corporation and its banking subsidiaries maintain banking relationships with
the Trustee.
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SENIOR SECURITIES
The Senior Securities will be direct unsecured obligations of the
Corporation and will constitute Senior Indebtedness (as defined below under
"Subordinated Securities -- Subordination") ranking on a parity with the other
Senior Indebtedness of the Corporation.
EVENTS OF DEFAULT
The following will be Events of Default under the Senior Indenture with
respect to Senior Securities of any series: (a) failure to pay principal or
premium, if any, on any Senior Security of that series at Maturity; (b) failure
to pay any interest on any Senior Security of that series when due and payable,
continued for 30 days; (c) failure to deposit any sinking fund payment, when
due, in respect of any Senior Security of that series; (d) failure to perform
any covenant or warranty of the Corporation in the Senior Indenture (other than
a covenant or warranty included in the Senior Indenture solely for the benefit
of series of Senior Securities other than that series), continued for 60 days
after written notice as provided in the Senior Indenture; (e) default under any
bond, debenture, note, mortgage, indenture, other instrument or other evidence
of Indebtedness for Money Borrowed in an aggregate principal amount exceeding
$3,000,000 by the Corporation or the Bank or its successors (including a default
with respect to Senior Securities of another series) under the terms of the
instrument or instruments by or under which such indebtedness is evidenced,
issued or secured, which default results in the acceleration of such
indebtedness, if such acceleration is not rescinded or annulled, or such
indebtedness is not discharged, within ten days after written notice as provided
in the Senior Indenture; (f) certain events in bankruptcy, insolvency or
reorganization of the Corporation or the Bank; and (g) any other Event of
Default provided with respect to Senior Securities of that series. (Senior
Indenture, Section 501.)
If an Event of Default with respect to Senior Securities of any series at
the time Outstanding occurs and is continuing, either the Trustee or the Holders
of at least 25 percent in aggregate principal amount of the Outstanding Senior
Securities of that series may declare the principal amount (or, if the
Securities of that series are Original Issue Discount Senior Securities or
Indexed Securities, such portion of the principal amount of such Senior
Securities as may be specified in the terms thereof) of all the Senior
Securities of that series to be due and payable immediately, by a written notice
to the Corporation (and to the Trustee, if given by Holders), and upon any such
declaration such principal amount (or specified amount) shall become immediately
due and payable. At any time after a declaration of acceleration with respect to
Senior Securities of any series has been made, but before a judgment or decree
for payment of the money due has been obtained, the Holders of a majority in
principal amount of Outstanding Senior Securities of that series may, under
certain circumstances, rescind and annul such declaration and its consequences,
if all Events of Default have been cured, or if permitted, waived, and all
payments due (other than those due as a result of acceleration) have been made
or provided for. (Senior Indenture, Section 502.)
The Senior Indenture provides that, subject to the duty of the Trustee
during default to act with the required standard of care, the Trustee will be
under no obligation to exercise any of its rights or powers under the Senior
Indenture at the request or direction of any of the Holders of Senior Debt
Securities of any series or any related coupons, unless such Holders shall have
offered to the Trustee reasonable indemnity or security against the costs,
expenses and liabilities which may be incurred. (Senior Indenture, Section 602.)
Subject to certain provisions, the Holders of a majority in aggregate principal
amount of the Outstanding Senior Securities of any series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Senior Securities of that series. (Senior
Indenture, Section 512.)
The Corporation is required to deliver to the Trustee annually an Officers'
Certificate as to its performance and observance of any of the terms, provisions
and conditions with respect to certain provisions in the Senior Indenture and as
to the absence of default. (Senior Indenture, Section 1010.)
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SUBORDINATED SECURITIES
The Subordinated Securities will be direct, unsecured obligations of the
Corporation. The obligations of the Corporation pursuant to the Subordinated
Securities will be subordinate in right of payment to all Senior Indebtedness as
defined below under "Subordination."
Unless otherwise indicated in the applicable Prospectus Supplement, the
maturity of the Subordinated Securities will be subject to acceleration only in
the event of certain events of bankruptcy, insolvency or reorganization of the
Corporation or the receivership of the Bank. See "Events of Default; Defaults"
below.
SUBORDINATION
The obligation of the Corporation to make any payment on account of the
principal of or premium, if any, and interest, if any, on the Subordinated
Securities will be subordinate and junior in right of payment to the
Corporation's obligations to the Holders of Senior Indebtedness of the
Corporation to the extent described in the next paragraph. (Subordinated
Indenture, Section 1301.) "Senior Indebtedness" of the Corporation is defined in
the Subordinated Indenture to mean Indebtedness for Money Borrowed of the
Corporation and all Additional Senior Obligations, whether outstanding on the
date of execution of the Subordinated Indenture or thereafter created, assumed
or incurred, except "Indebtedness Ranking on a Parity with the Securities" or
"Indebtedness Ranking Junior to the Securities" and any deferrals, renewals or
extensions of such Senior Indebtedness. "Indebtedness for Money Borrowed" of the
Corporation is defined in the Subordinated Indenture as any obligation of, or
any obligation guaranteed by, the Corporation for the repayment of borrowed
money, whether or not evidenced by bonds, debentures, notes or other written
instruments, and any deferred obligations for the payment of the purchase price
of property or assets, except Additional Senior Obligations. "Additional Senior
Obligations" of the Corporation are defined in the Subordinated Indenture to
mean, unless otherwise determined with respect to any series of Subordinated
Securities, all obligations of the Corporation associated with derivative
products such as interest rate and foreign exchange rate contracts, commodity
contracts and similar arrangements, except Indebtedness for Money Borrowed.
"Indebtedness Ranking on a Parity with the Securities" is defined in the
Subordinated Indenture to mean Indebtedness for Money Borrowed of the
Corporation, whether outstanding on the date of execution of the Subordinated
Indenture or thereafter created, assumed or incurred, which specifically by its
terms ranks equally with and not prior to the Subordinated Securities in the
right of payment upon the happening of any event of the kind specified in the
next paragraph. The indentures of the Corporation governing the subordinated
indebtedness issued by the Corporation listed in items (i) through (v) in the
immediately succeeding sentence do not include Additional Senior Obligations in
the definition of Senior Indebtedness of the Corporation. Additional Senior
Obligations was added to the definition of Senior Indebtedness of the
Corporation in the Subordinated Indenture by the First Supplemental Indenture.
Indebtedness Ranking on a parity with the Securities includes the Corporation's
(i) 10.30% Subordinated Notes due September 1, 2000, issued under an indenture,
dated as of July 15, 1988, between the Corporation and Chemical Bank as Trustee;
(ii) Subordinated Floating Rate Notes Due 2001, issued under a Fiscal and Paying
Agency Agreement, dated as of February 10, 1986, between the Corporation and
Bankers Trust Company, as fiscal agent; (iii) 9 1/2% Subordinated Capital Notes
Due 1997, issued under an indenture, dated as of June 15, 1987, between the
Corporation and The Philadelphia National Bank, as Trustee; (iv) Floating Rate
Subordinated Notes Due 1998, issued pursuant to a Fiscal and Paying Agency
Agreement, dated as of August 26, 1986, between the Corporation and Morgan
Guaranty Trust Company of New York, as fiscal agent; (v) 7 3/4% Convertible
Subordinated Debentures Due 2011, issued pursuant to an indenture, dated as of
January 15, 1986, between the Corporation and Manufacturers Hanover Trust
Company, as successor Trustee; (vi) 6 7/8% Subordinated Notes Due 2003, issued
under the Subordinated Indenture on June 30, 1993; (vii) 6 5/8% Subordinated
Notes Due 2005, issued under the Subordinated Indenture on November 22, 1993;
and (viii) 6 5/8% Subordinated Notes Due 2004, issued under the Subordinated
Indenture on January 12, 1994. "Indebtedness Ranking Junior to the Securities"
is defined in the Subordinated Indenture to mean any Indebtedness for Money
Borrowed of the Corporation, whether outstanding on the date of execution of the
Subordinated Indenture or thereafter created, assumed or incurred, which
specifically by its terms ranks junior to and not equally with or prior to the
Subordinated Securities (and any other Indebtedness Ranking on a Parity with the
Subordinated Securities) in right of payment upon the happening of any event of
the kind specified in the next paragraph. (Subordinated Indenture, Section 101.)
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In the case of any bankruptcy, insolvency, receivership, conservatorship,
reorganization, readjustment of debt, marshalling of assets and liabilities or
similar proceedings or any liquidation or winding up of or relating to the
Corporation as a whole, whether voluntary or involuntary, all obligations of the
Corporation to Holders of Senior Indebtedness of the Corporation (other than
Additional Senior Obligations) shall be entitled to be paid in full before any
payment shall be made on account of the principal (including principal to be
paid by delivery of Capital Securities) of, or premium, if any, or interest, if
any, on the Subordinated Securities of any series. In the event of any such
proceeding, after payment in full of all sums owing with respect to Senior
Indebtedness of the Corporation (other than Additional Senior Obligations), the
Holders of the Subordinated Securities of any series, together with the Holders
of any Indebtedness Ranking on a Parity with the Subordinated Securities, shall
be entitled, ratably, to be paid from the remaining assets of the Corporation
the amounts at the time due and owing on account of unpaid principal (including
principal to be paid by delivery of Capital Securities) of, and premium, if any,
and interest, if any, on the Subordinated Securities of such series and on any
indebtedness Ranking on a Parity with the Subordinated Securities before any
payment or other distribution, whether in cash, property or otherwise, shall be
made on account of any capital stock or any Indebtedness Ranking Junior to the
Securities; provided, however, that if after payment in full of all sums owing
with respect to Senior Indebtedness of the Corporation (other than Additional
Senior Obligations) any amount of cash, property or securities remains available
for payment or distribution in respect of the Subordinated Securities ("Excess
Proceeds") and creditors in respect of Additional Senior Obligations have not
received payment in full of amounts due or to become due thereon or payments of
such amounts have not been provided for, then such Excess Proceeds shall be
applied to payment in full of the Additional Senior Obligations before any
payment is made on the Subordinated Securities. (Subordinated Indenture, Section
1301.) In the event and during the continuation of any default in the payment of
principal (including principal to be paid by delivery of Capital Securities) of,
or premium, if any, or interest, if any, on, any Senior Indebtedness (other than
Additional Senior Obligations) beyond any applicable grace period, or in the
event that any event of default with respect to any Senior Indebtedness (other
than Additional Senior Obligations) shall have occurred and be continuing, or
would occur as a result of certain payments, permitting the holders of such
Senior Indebtedness (or a trustee on behalf of the holders thereof) to
accelerate the maturity thereof, then, unless and until such default or event of
default shall have been cured or waived or shall have ceased to exist, no
payment of principal (including principal to be paid by delivery of Capital
Securities) of, or premium, if any, or interest, if any, on the Subordinated
Securities, or in respect of any redemption, exchange, retirement, purchase or
other acquisition of any of the Subordinated Securities, shall be made by the
Corporation. (Subordinated Indenture, Section 1303.)
By reason of such subordination in favor of the Holders of Senior
Indebtedness of the Corporation (including to the extent set forth above,
Additional Senior Obligations), in the event of the insolvency of the
Corporation, Holders of Senior Indebtedness of the Corporation may receive more,
ratably, and Holders of the Subordinated Securities having a claim pursuant to
the Subordinated Securities may receive less, ratably, than the other creditors
of the Corporation.
EVENTS OF DEFAULT; DEFAULTS
The following will be Events of Default under the Subordinated Indenture
with respect to Subordinated Securities of any series: (a) certain events in
bankruptcy, insolvency or reorganization of the Corporation or the receivership
of the Bank; and (b) any other Event of Default provided with respect to
Subordinated Securities of that series. (Subordinated Indenture, Section 501.)
If an Event of Default with respect to Subordinated Securities of any
series at the time Outstanding occurs and is continuing, the Trustee or the
Holders of at least 25 percent in aggregate principal amount of the Outstanding
Subordinated Securities of that series may declare the principal amount (or, if
any of the Subordinated Securities of that series are Original Issue Discount
Subordinated Securities or Indexed Securities, such portion of the principal
amount of such Subordinated Securities as may be specified in the terms thereof)
of all the Subordinated Securities of that series to be due and payable
immediately, by a written notice to the Corporation (and to the Trustee, if
given by Holders), and upon any such declaration such principal amount (or
specified amount) shall become immediately due and payable. (Subordinated
Indenture, Section 502.) The foregoing provision would, in the event of the
bankruptcy or insolvency of the
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Corporation, be subject as to enforcement to the broad equity powers of a
Federal bankruptcy court and to the determination by that court of the nature
and status of the payment claims of the Holders of the Subordinated Securities.
At any time after a declaration of acceleration with respect to the Subordinated
Securities of any series has been made, but before a judgment or decree for
payment of the money due has been obtained, the Holders of a majority in
principal amount of Outstanding Subordinated Securities of that series may,
under certain circumstances, rescind and annul such acceleration but only if all
Defaults have been remedied, or if permitted, waived and if certain other
conditions have been satisfied. (Subordinated Indenture, Section 502.)
The following events will be Defaults under the Subordinated Indenture with
respect to Subordinated Securities of any series: (a) an Event of Default with
respect to such series of Subordinated Securities; (b) failure to pay principal
(including the delivery of any Capital Securities in exchange for or upon the
conversion of Subordinated Securities) or premium, if any, on any Subordinated
Security of that series at Maturity; (c) failure to pay any interest, if any, on
any Subordinated Security of that series when due and payable, continued for 30
days; (d) failure to deposit any sinking fund payment, when due, in respect of
any Subordinated Security of that series; (e) failure to perform any covenant or
warranty of the Corporation in the Subordinated Indenture (other than a covenant
or warranty included in the Subordinated Indenture solely for the benefit of
series of Subordinated Securities other than that series), continued for 60 days
after written notice as provided in the Subordinated Indenture; (f) default
under any bond, debenture, note, mortgage, indenture, other instruments or other
evidence of Indebtedness for Money Borrowed (including a default with respect to
Subordinated Securities of another series) in an aggregate principal amount
exceeding $3,000,000 by the Corporation or the Bank or its successors under the
terms of the instrument or instruments by or under which such indebtedness is
evidenced, issued or secured, which default results in the acceleration of such
indebtedness, if such acceleration is not rescinded or annulled, or such
indebtedness is not discharged, within ten days after written notice as provided
in the Subordinated Indenture; and (g) any other default provided with respect
to Subordinated Securities of that series. (Subordinated Indenture, Section
507.)
Unless otherwise provided in the terms of a series of Subordinated
Securities, there will be no right of acceleration of the payment of principal
of the Subordinated Securities of such series upon a default in the payment
(including any obligation to exchange Capital Securities for Subordinated
Securities of such series) of principal of or premium, if any, or interest, if
any, or a default in the performance of any covenant or agreement in the
Subordinated Securities or the Subordinated Indenture. If a Default with respect
to the Subordinated Securities of any series occurs and is continuing, the
Trustee may, subject to certain limitations and conditions, seek to enforce its
rights and the rights of the Holders of Subordinated Securities of such series
or the performance of any covenant or agreement in the Subordinated Indenture.
(Subordinated Indenture, Section 503.)
The Subordinated Indenture provides that, subject to the duty of the
Trustee upon the occurrence of a Default to act with the required standard of
care, the Trustee will be under no obligation to exercise any of its rights or
powers under the Subordinated Indenture at the request or direction of any of
the Holders of Subordinated Securities of any series or any related coupons
unless such Holders shall have offered to the Trustee reasonable indemnity or
security against the costs, expenses and liabilities which may be incurred.
(Subordinated Indenture, Section 602.) Subject to certain provisions, the
Holders of a majority in aggregate principal amount of the Outstanding
Subordinated Securities of any series will have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee, with respect
to the Subordinated Securities of that series. (Subordinated Indenture, Section
512.)
The Corporation is required to furnish to the Trustee annually an Officer's
Certificate as to the performance and observance by the Corporation of certain
of the terms, provisions and conditions under the Subordinated Indenture and as
to the absence of default. (Subordinated Indenture, Section 1010.)
CONVERSION
The Holders of Subordinated Securities of a specified series that are
convertible into Capital Securities ("Subordinated Convertible Securities") will
be entitled at certain times specified in the Prospectus Supplement relating to
such Subordinated Convertible Securities, subject to prior redemption, exchange,
repayment or repurchase, to convert any Subordinated Convertible Securities of
such series into Capital
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Securities, at the conversion price set forth in such Prospectus Supplement,
subject to adjustment and to such other terms as are set forth in such
Prospectus Supplement.
EXCHANGEABILITY
The Holders of Subordinated Securities of any series may be obligated at
any time or at Maturity to exchange them for Capital Securities of the
Corporation. The terms of any such exchange and any such Capital Securities will
be described in the Prospectus Supplement relating to such series of
Subordinated Securities. The Common Stock, Preferred Stock, and Capital
Securities of the Corporation are described below under "Description of Common
Stock," "Description of Preferred Stock," and "Description of Capital
Securities," respectively.
DESCRIPTION OF PREFERRED STOCK
The following summary contains a description of certain general terms of
the Corporation's Preferred Stock to which any Prospectus Supplement may relate.
Certain terms of any series of the Preferred Stock offered by any Prospectus
Supplement will be described in the Prospectus Supplement relating thereto. If
so indicated in the Prospectus Supplement, the terms of any series may differ
from the terms set forth below. The description of certain provisions of the
Preferred Stock does not purport to be complete and is subject to and qualified
in its entirety by reference to the provisions of the Corporation's Restated
Articles of Organization (the "Articles"), and the Certificate of Vote of
Directors Establishing a Series of a Class of Stock (the "Certificate") relating
to each particular series of the Preferred Stock, which will be filed with the
Commission at or prior to the time of the sale of such Preferred Stock.
GENERAL
Under the Corporation's Articles, the Board of Directors of the Corporation
is authorized, without further stockholder action, to provide for the issuance
of up to 10,000,000 shares of preferred stock, without par value, in one or more
series, with such designations or titles; dividend rates; special or relative
rights in the event of liquidation, distribution or sale of assets or
dissolution or winding up of the Corporation; any sinking fund provisions; any
redemption or purchase account provisions; any conversion provisions; and any
voting rights thereof, as shall be set forth as and when established by the
Board of Directors of the Corporation. The shares of any series of Preferred
Stock will be, when issued, fully paid and non-assessable and holders thereof
shall have no preemptive rights in connection therewith.
The liquidation preference of any series of the Preferred Stock is not
necessarily indicative of the price at which shares of such series of Preferred
Stock will actually trade at or after the time of their issuance. The market
price of any series of Preferred Stock can be expected to fluctuate with changes
in market and economic conditions, the financial condition and prospects of the
Corporation and other factors that generally influence the market prices of
securities.
The shares of outstanding Preferred Stock are fully paid and
non-assessable. Section 45 of Chapter 156B of the Massachusetts General Laws
("MGL") provides that stockholders to whom a corporation makes any distribution,
whether by way of dividend, repurchase or redemption of stock or otherwise
(other than a distribution of stock of the corporation) if the corporation is,
or is thereby rendered, insolvent shall be liable to the corporation for the
amount of such distribution made, or for the amount of such distribution which
exceeds that which could have been made without rendering the corporation
insolvent, but in either event, only to the extent of the amount paid or
distributed to such stockholders, respectively.
RANK
Any series of the Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding up and dissolution, rank (i) senior to all
classes of common stock and the Junior Participating Preferred Stock, Series D,
of the Corporation and with all equity securities issued by the Corporation, the
terms of which specifically provide that such equity securities will rank junior
to the Preferred Stock (collectively referred to as the "Junior Securities");
(ii) on a parity with all equity securities issued by the Corporation, the terms
of
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which specifically provide that such equity securities will rank on a parity
with the Preferred Stock, including the Corporation's five series outstanding:
Adjustable Rate Cumulative Preferred Stock, Series A, B and C, 8.60% Cumulative
Preferred Stock, Series E, and 7 7/8% Cumulative Preferred Stock, Series F
(collectively referred to as the "Parity Securities"); and (iii) junior to all
equity securities issued by the Corporation, the terms of which specifically
provide that such equity securities will rank senior to the Preferred Stock
(collectively referred to as the "Senior Securities"). As used in any
Certificate for these purposes, the term "equity securities" will not include
debt securities convertible into or exchangeable for equity securities.
DIVIDENDS
Holders of each series of Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors of the Corporation, out of
funds legally available therefor, cash dividends at such rates and on such dates
as are set forth in the Prospectus Supplement relating to such series of the
Preferred Stock. Dividends will be payable to holders of record of the Preferred
Stock as they appear on the books of the Corporation (or, if applicable, the
records of the Depositary referred to below under "Depositary Shares") on such
record dates, as shall be fixed by the Board of Directors. Dividends on any
series of Preferred Stock may be cumulative or non-cumulative.
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Securities unless dividends shall have been
paid or set apart for such payment on the Preferred Stock. If full dividends are
not so paid, the Preferred Stock shall share dividends pro rata with the Parity
Securities. If dividends are cumulative, any accumulated unpaid dividends will
not bear interest.
CONVERSION
The Prospectus Supplement for any series of the Preferred Stock will state
the terms, if any, on which shares of that series are convertible into shares of
another series of Preferred Stock or Capital Securities.
For any series of Preferred Stock which is convertible, the Corporation
shall at all times reserve and keep available, free from preemptive rights, out
of the aggregate of its authorized but unissued Preferred Stock or Capital
Securities or shares held in its treasury or both, for the purpose of effecting
the conversion of the shares of such series of Preferred Stock, the full number
of shares of Preferred Stock or Capital Securities then deliverable upon the
conversion of all outstanding shares of such series.
No fractional shares or scrip representing fractional shares of Preferred
Stock or Capital Securities will be issued upon the conversion of shares of any
series of convertible Preferred Stock. Each holder to whom fractional shares
would otherwise be issued will instead be entitled to receive, at the
Corporation's election, either (a) a cash payment equal to the current market
price of such holder's fractional interest or (b) a cash payment equal to such
holder's proportionate interest in the net proceeds (following the deduction of
applicable transaction costs) from the sale promptly by an agent, on behalf of
such holders, of shares of Preferred Stock or Capital Securities representing
the aggregate of such fractional shares.
The holders of any series of shares of Preferred Stock at the close of
business on a dividend payment record date will be entitled to receive the
dividend payable on such shares (except that holders of shares called for
redemption on a redemption date occurring between such record date and the
dividend payment date shall not be entitled to receive such dividend on such
dividend payment date but instead will receive accrued and unpaid dividends to
such redemption date) on the corresponding dividend payment date notwithstanding
the conversion thereof or the Corporation's default in payment of the dividend
due. Except as provided above, the Corporation will make no payment or allowance
for unpaid dividends, whether or not in arrears, on converted shares or for
dividends on the shares of Preferred Stock or Capital Securities issued upon
conversion.
EXCHANGEABILITY
The holders of shares of Preferred Stock of any series may be obligated at
any time or at maturity to exchange such shares for Capital Securities or other
debt securities of the Corporation. The terms of any such exchange and any such
Capital Securities or other debt securities will be described in the Prospectus
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Supplement relating to such series of Preferred Stock. The Capital Securities of
the Corporation are described below under "Description of Capital Securities."
REDEMPTION
A series of Preferred Stock may be redeemable at any time, in whole or in
part, at the option of the Corporation or the holder thereof upon terms and at
the redemption prices set forth in the Prospectus Supplement relating to such
series.
In the event of partial redemptions of Preferred Stock, whether by
mandatory or optional redemption, the shares to be redeemed will be determined
by lot or pro rata, as may be determined by the Board of Directors of the
Corporation or by any other method determined to be equitable by the Board of
Directors.
On and after a redemption date, unless the Corporation defaults in the
payment of the redemption price, dividends will cease to accrue on shares of
Preferred Stock called for redemption and all rights of holders of such shares
will terminate except for the right to receive the redemption price.
Under current regulations, bank holding companies may not exercise any
option to redeem shares of preferred stock without the prior approval of the
Board of Governors. Ordinarily, the Board of Governors would not permit such a
redemption unless (1) the shares are redeemed with the proceeds of a sale by the
bank holding company of common stock or perpetual preferred stock or (2) the
Board of Governors determines that a bank holding company's capital position
after such redemption would clearly be adequate and that its condition and
circumstances warrant the reduction of a source of permanent capital.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, holders of each series of Preferred Stock that ranks senior to
the Junior Securities will be entitled to receive out of assets of the
Corporation available for distribution to stockholders, before any distribution
is made on any Junior Securities, including Common Stock, distributions upon
liquidation in the amount set forth in the Prospectus Supplement relating to
such series of Preferred Stock, plus an amount equal to any accrued and unpaid
dividends. If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the amounts payable with respect to the Preferred
Stock of any series and any other Parity Securities are not paid in full, the
holders of the Preferred Stock of such series and the Parity Securities will
share ratably in any such distribution of assets of the Corporation in
proportion to the full liquidation preferences to which each is entitled. After
payment of the full amount of the liquidation preference to which they are
entitled, the holders of such series of Preferred Stock will not be entitled to
any further participation in any distribution of assets of the Corporation.
However, neither (i) the merger or consolidation of the Corporation with or into
one or more corporations pursuant to any statute which provides in effect that
the stockholders of the Corporation shall continue as stockholders of the
continuing or combined corporation nor (ii) the acquisition by the Corporation
of assets or stock of another corporation shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
VOTING RIGHTS
Except as indicated below or in the Prospectus Supplement relating to a
particular series of Preferred Stock, or except as expressly required by
applicable law, the holders of the Preferred Stock will have no voting rights.
Under Massachusetts law, a corporation may not amend its articles of
organization so as to adversely affect the rights of any class or series of its
stock without the affirmative vote of at least two-thirds (or a lesser
proportion, but not less than a majority, if so provided in the corporation's
articles of organization) of the shares of such class or series, with all series
of a class of stock which are adversely affected in the same manner voting
together as one class and any other series, which is adversely affected in a
manner different from other series of the same class, voting as a separate
class.
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Under regulations adopted by the Board of Governors, if the holders of
shares of any series of Preferred Stock of the Corporation became entitled to
vote for the election of directors, such series may then be deemed a "class of
voting securities" and a holder of 25% or more of such series (or a holder of 5%
if it otherwise exercises a "controlling influence" over the Corporation) may
then be subject to regulation as a bank holding company in accordance with the
Bank Holding Company Act of 1956, as amended. In addition, at such time as such
series is deemed a class of voting securities, (i) any other bank holding
company may be required to obtain the approval of the Board of Governors to
acquire or retain 5% or more of such series, and (ii) any person other than a
bank holding company may be required to obtain the approval of the Board of
Governors under the Change in Bank Control Act to acquire or retain 10% or more
of such series.
PREFERRED STOCK OUTSTANDING
The Corporation has issued and outstanding five series of Preferred Stock:
Adjustable Rate Cumulative Preferred Stock (Series A, Series B and Series C),
8.60% Cumulative Preferred Stock, Series E, and 7 7/8% Cumulative Preferred
Stock, Series F. The Series A, B and C Preferred Stock are issued as whole
shares, and the Series E and Series F Preferred Stock are issued as fractional
shares represented by depositary shares ("Depositary Shares"). Each Depositary
Share represents a one-tenth interest in a share of Series E or Series F
Preferred Stock. The shares of Series E and Series F Preferred Stock underlying
the Depositary Shares are deposited with the Bank, as Depositary (the
"Depositary"), under Deposit Agreements (the "Deposit Agreement"), among the
Corporation, the Depositary and the holders from time to time of the depositary
receipts issued by the Depositary thereunder (the "Depositary Receipts"). The
Depositary Receipts evidence the Depositary Shares. Subject to the terms of the
Deposit Agreement, each owner of a Depositary Share is entitled through the
Depositary, in proportion to the one-tenth interest in a share of Series E or
Series F Preferred Stock underlying such Depositary Share, to all rights and
preferences of a share of Series E or Series F Preferred Stock (including
dividend, voting, redemption and liquidation rights).
As of December 31, 1993, 4,593,941 shares of Preferred Stock were issued
and outstanding with an aggregate liquidation preference of $508.4 million.
Holders of the outstanding Preferred Stock (or, Depositary Shares, in the case
of the Series E and Series F Preferred Stock) have no preemptive rights with
respect to shares of any other series of Preferred Stock or with respect to
shares of the Corporation's Common Stock. The outstanding Preferred Stock, and
in the case of the Series E and Series F Preferred Stock, the Depositary Shares,
are listed on the NYSE and BSE. The Bank is the registrar, transfer agent and
dividend disbursing agent for the outstanding Preferred Stock and the Depositary
Shares.
The shares of outstanding Preferred Stock are fully paid and
non-assessable, subject to the provisions of Section 45 of the MGL. See
"DESCRIPTION OF PREFERRED STOCK -- General."
DIVIDENDS. Holders of shares (or Depositary Shares, in the case of Series
E and Series F Preferred Stock) of each series of outstanding Preferred Stock
are entitled to cumulative dividends, when, as and if declared by the
Corporation's Board of Directors. Dividends on the existing Preferred Stock must
be paid or set apart for payment before any dividends can be paid to holders of
equity securities which by their terms rank junior to the Preferred Stock,
including the Corporation's Common Stock. Dividends on the outstanding Preferred
Stock are payable in arrears on the 15th day of March, June, September and
December in each year in which the Preferred Stock is outstanding.
LIQUIDATION AND REDEMPTION. In the event of any voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or winding up of the
Corporation, the holders of each share of outstanding Preferred Stock shall be
entitled to receive, prior to any payment upon the Corporation's Common Stock,
cash in the amount of $50 in the case of the Series A and Series B Preferred
Stock, cash in the amount of $100 in the case of the Series C Preferred Stock
and cash in the amount of $250 in the case of the Series E and Series F
Preferred Stock (equivalent to $25 per Depositary Share). The outstanding
Preferred Stock is subject to partial or complete redemption at the option of
the Corporation, with the prior approval of the Federal Reserve Board (if such
approval is required at the time of redemption), except that the Series E and
Series F Preferred Stock are not redeemable prior to September 15, 1997 and July
15, 1998, respectively.
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VOTING. Holders of outstanding Preferred Stock have no general voting
rights. However, during any period in which dividends on a series of outstanding
Preferred Stock are cumulatively in arrears in the amount of six or more full
quarterly dividends, the holders of shares of such series, shall be entitled (by
series, voting as a single class) to elect one director who shall serve until
such time as the arrearage in the payment of dividends has been cured.
DEPOSITARY SHARES
GENERAL. The Corporation may, at its option, elect to offer fractional
shares of Preferred Stock, rather than full shares of Preferred Stock. In the
event such option is exercised, the Corporation will issue receipts for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock) of
a share of a particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Corporation and a bank or trust company selected by the Corporation
having its principal office in the United States and having a combined capital
and surplus of at least $50,000,000 (the "Depositary"). Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of the Preferred
Stock represented thereby (including dividend, voting, redemption, conversion
and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. The forms of
Deposit Agreement and Depositary Receipt are filed as exhibits to the
Registration Statement, and the following summary is qualified in its entirety
by reference to such exhibits.
Pending the preparation of definitive Depositary Receipts, the Depositary
may, upon the written order of the Corporation or any holder of Preferred Stock,
execute and deliver temporary Depositary Receipts which are substantially
identical to, and entitle the holders thereof to all the rights pertaining to,
the definitive Depositary Receipts. Definitive Depositary Receipts will be
prepared thereafter without unreasonable delay, and temporary Depositary
Receipts will be exchangeable for definitive Depositary Receipts at the
Corporation's expense.
DIVIDENDS AND OTHER DISTRIBUTIONS. The Depositary will distribute cash
dividends or other cash distributions received in respect of the Preferred Stock
to the record holders of Depositary Shares relating to such Preferred Stock in
proportion to the numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto. If the Depositary determines that it is not feasible to make
such distribution, it may, with the approval of the Corporation, sell such
property and distribute the net proceeds from such sale to such holders.
REDEMPTION OR EXCHANGE OF STOCK. If a series of Preferred Stock
represented by Depositary Shares is to be redeemed or exchanged, the Depositary
Shares will be redeemed from the proceeds received by the Depositary resulting
from the redemption, in whole or in part, of such series of Preferred Stock held
by the Depositary, or exchanged for the Capital Securities or other debt
securities to be issued in exchange for the Preferred Stock (as the case may be,
in accordance with the terms of such series of Preferred Stock). The Depositary
Shares will be redeemed or exchanged by the Depositary at a price per Depositary
Share equal to the applicable fraction of the redemption price per share or
market value of Capital Securities or other debt securities per Depositary Share
paid in respect of the shares of Preferred Stock so redeemed or exchanged.
Whenever the Corporation redeems or exchanges shares of Preferred Stock held by
the Depositary, the Depositary will redeem or exchange as of the same date the
number of Depositary Shares representing shares of Preferred Stock so redeemed
or exchanged. If fewer than all the Depositary Shares are to be redeemed or
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<PAGE> 51
exchanged, the Depositary Shares to be redeemed or exchanged will be selected by
the Depositary by lot or pro rata or by any other equitable method as may be
determined by the Corporation.
WITHDRAWAL OF STOCK. Any holder of Depositary Shares may, upon surrender
of the Depositary Receipts therefor to the Depositary, receive the number of
whole shares of the related series of Preferred Stock and any money or other
property represented by such Depositary Receipts. Holders of Depositary Shares
making such withdrawals will be entitled to receive whole shares of Preferred
Stock on the basis set forth in the related Prospectus Supplement for such
series of Preferred Stock, but holders of such whole shares of Preferred Stock
will not thereafter be entitled to deposit such Preferred Stock under the
Deposit Agreement or to receive Depositary Receipts therefor. If the Depositary
Shares surrendered by the holder in connection with such withdrawal exceed the
number of Depositary Shares that represent the number of whole shares of
Preferred Stock to be withdrawn, the Depositary will deliver to such holder at
the same time a new Depositary Receipt evidencing such excess number of
Depositary Shares.
VOTING THE PREFERRED STOCK. Upon receipt of notice of any meeting at which
the holders of the Preferred Stock are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such Preferred Stock. Each record holder of
such Depositary Shares on the record date (which will be the same date as the
record date of the Preferred Stock) will be entitled to instruct the Depositary
as to the exercise of the voting rights pertaining to the amount of the
Preferred Stock represented by such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the amount of the Preferred Stock
represented by such Depositary Shares in accordance with such instructions, and
the Corporation will agree to take all reasonable actions which may be deemed
necessary by the Depositary in order to enable the Depositary to do so. The
Depositary will abstain from voting shares of the Preferred Stock to the extent
it does not receive specific instructions from the holder of Depositary Shares
representing such Preferred Stock.
CONVERSION RIGHTS. Any holder of Depositary Shares, upon surrender of the
Depositary Receipts therefor and delivery of instructions to the Depositary, may
cause the Corporation to convert any specified number of whole or fractional
shares of Preferred Stock represented by the Depositary Shares into the number
of whole shares of Capital Securities or other preferred stock (as the case may
be, in accordance with the terms of such series of the Preferred Stock) of the
Corporation obtained by dividing the aggregate liquidation preference of such
Depositary Shares by the Conversion Price (as such term is defined in the
Certificate) then in effect, as such Conversion Price may be adjusted by the
Corporation from time to time as provided in the Certificate. In the event that
a holder delivers Depositary Receipts to the Depositary for conversion which in
the aggregate are convertible either into less than one whole share of such
Capital Securities or other preferred stock or into any number of whole shares
of such Capital Securities or other preferred stock plus an excess constituting
less than one whole share of such Capital Securities or other preferred stock,
the holder shall receive payment in lieu of such fractional shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Corporation and
the Depositary. However, any amendment which materially and adversely alters the
rights of the holders of Depositary Shares will not be effective unless such
amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement automatically
terminates if (i) all outstanding Depositary Shares have been redeemed; or (ii)
each share of Preferred Stock has been converted into Capital Securities or
other preferred stock or has been exchanged for Capital Securities or other debt
securities; or (iii) there has been a final distribution in respect of the
Preferred Stock in connection with any liquidation, dissolution or winding up of
the Corporation and such distribution has been distributed to the holders of
Depositary Shares. The Deposit Agreement also may be terminated by the
Corporation at any time upon 60 days prior written notice to the Depositary, in
which case the Depositary will deliver to the record holders, upon surrender of
the Depositary Receipts, such number of whole or fractional shares of Preferred
Stock represented by such Depositary Receipts.
CHARGES OF DEPOSITARY. The Corporation will pay all transfer and other
taxes and governmental charges arising solely from the existence of the
depositary arrangements. The Corporation will pay all charges of the
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<PAGE> 52
Depositary in connection with the initial deposit of the Preferred Stock and the
initial issuance of the Depositary Shares, all withdrawals of shares of
Preferred Stock by owners of Depositary Shares, and any redemption or exchange
of the Preferred Stock. Holders of Depositary Shares will pay other transfer and
other taxes and governmental charges and such other charges or expenses as are
expressly provided in the Deposit Agreement to be for their accounts.
MISCELLANEOUS. The Depositary will forward all reports and communications
from the Corporation which are delivered to the Depositary and which the
Corporation is required to furnish to the holders of the Preferred Stock.
Neither the Depositary nor the Corporation will be liable if it is
prevented or delayed by law or any circumstance beyond its control in performing
its obligations under the Deposit Agreement. The obligations of the Corporation
and the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares of
Preferred Stock unless satisfactory indemnity is furnished. They may rely upon
written advice of counsel or accountants, or upon information provided by
persons presenting Preferred Stock for deposit, holders of Depositary Receipts
or other persons believed to be competent and on documents believed to be
genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY. The Depositary may resign at any
time by delivering to the Corporation notice of its election to do so, and the
Corporation may at any time remove the Depositary, any such resignation or
removal to take effect upon the appointment of a successor Depositary and its
acceptance of such appointment. Such successor Depositary must be appointed
within 60 days after delivery of the notice of resignation or removal and must
be a bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
DESCRIPTION OF COMMON STOCK
GENERAL
The Corporation's Common Stock as of February 25, 1994 consisted of
200,000,000 authorized shares, par value $2.25 per share, of which there were
106,357,915 shares outstanding. The Common Stock is traded on the NYSE and the
BSE. The transfer agent and registrar for the Common Stock is the Bank.
Shares of Common Stock may be issued from time to time, in such amounts and
proportion and for such consideration as may be fixed by the Board of Directors
of the Corporation. No holder of Common Stock has any preemptive or preferential
rights to purchase or to subscribe for any shares of capital stock or other
securities which may be issued by the Corporation. The Common Stock has no
redemption or sinking fund provisions applicable thereto. The Common Stock does
not have any conversion rights.
The Corporation issues authorized but unissued shares of its Common Stock
in connection with several employee benefit and stock option and incentive plans
maintained by the Corporation or its subsidiaries, and the Corporation's
Automatic Dividend Reinvestment and Common Stock Purchase Plan. In addition,
holders of the Corporation's 7 3/4% Convertible Subordinated Debentures Due 2011
(the "Debentures") are entitled to convert their Debentures into Common Stock at
any time on or before June 15, 2011, unless previously redeemed, at a conversion
price of $23.42 per share, subject to adjustment in certain events. As of
February 25, 1994 $94,396,000 in principal amount of the Debentures was
outstanding. The Debentures are redeemable at the option of the Corporation, in
whole or in part, at prices ranging from 101.55% of the principal amount plus
accrued interest in 1994 to 100% of the principal amount plus accrued interest
in 1995.
The shares of the Common Stock are fully paid and non-assessable. Section
45 of Chapter 156B of the MGL provides that stockholders to whom a corporation
makes any distribution, whether by way of dividend, repurchase or redemption of
stock or otherwise (other than a distribution of stock of the corporation) if
the corporation is, or is thereby rendered, insolvent shall be liable to the
corporation for the amount of such distribution made, or for the amount of such
distribution which exceeds that which could have been made without rendering the
corporation insolvent, but in either event, only to the extent of the amount
paid or distributed to such stockholders, respectively.
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<PAGE> 53
LIQUIDATION
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common Stock
are entitled to receive, on a share for share basis, any assets or funds of the
Corporation which are distributable to its holders of Common Stock upon such
events, subject to the prior rights of creditors of the Corporation and holders
of the Corporation's outstanding Preferred Stock.
VOTING
Holders of Common Stock are entitled to one vote for each share on all
matters voted upon by the stockholders. The shares of Common Stock have
non-cumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of directors can elect 100% of the directors
if they choose to do so, and in such event, the holders of the remaining shares
voting for the election of directors will not be able to elect any person or
persons to the Board of Directors of the Corporation.
DIVIDENDS
When, as and if dividends, payable in cash, stock or other property, are
declared by the Board of Directors of the Corporation out of funds legally
available therefor, the holders of Common Stock are entitled to share equally,
share for share, in such dividends. The payment of dividends on the Common Stock
is subject to the prior payment of dividends on the Preferred Stock.
STOCKHOLDER RIGHTS PLAN
On June 28, 1990, the Board of Directors of the Corporation adopted a
stockholder rights plan providing for a dividend of one Preferred Stock Purchase
Right for each outstanding share of Common Stock of the Corporation (the
"Rights"). The dividend was distributed on July 12, 1990 to stockholders of
record on that date. Holders of shares of Common Stock issued subsequent to that
date receive the Rights with their shares. The Rights trade automatically with
shares of Common Stock and become exercisable only under certain circumstances
as described below. The Rights are designed to protect the interests of the
Corporation and its stockholders against coercive takeover tactics. The purpose
of the Rights is to encourage potential acquirors to negotiate with the
Corporation's Board of Directors prior to attempting a takeover and to provide
the Board with leverage in negotiating on behalf of all stockholders the terms
of any proposed takeover. The Rights may have certain anti-takeover effects. The
Rights should not, however, interfere with any merger or other business
combination approved by the Board of Directors.
Until a Right is exercised, the holder of a Right, as such, will have no
rights as a stockholder of the Corporation including, without limitation, the
right to vote or receive dividends. Upon becoming exercisable, each Right will
entitle the holder thereof to purchase from the Corporation a unit equal to one
one-thousandth of a share of Junior Participating Preferred Stock, Series D at a
purchase price of $50 per unit, subject to adjustment. In general, the Rights
will become exercisable upon the earlier of (i) ten days following a public
announcement by the Corporation that a person or group has acquired beneficial
ownership of 15% or more of the Corporation's Common Stock or voting securities
representing 15% or more of the total voting power of the Corporation (the
"Stock Acquisition Date") or (ii) ten business days (or such later date as the
Board of Directors may determine) after the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 15% or
more of the Corporation's outstanding Common Stock or voting securities
representing 15% or more of the total voting power of the Corporation.
Generally, in the event that a person or group becomes the beneficial owner
of 15% or more of the Corporation's outstanding Common Stock or voting
securities representing 15% or more of the total voting power of the Corporation
(other than pursuant to an offer for all outstanding shares of Common Stock and
other voting securities which the Board of Directors determines to be fair to
stockholders and otherwise in the best interests of the Corporation) (a "Flip-In
Event"), each Right, other than Rights owned by the acquiror, will thereafter
entitle the holder to receive, upon exercise of the Right, Common Stock having a
value equal to two times the exercise price of the Right. In addition, at any
time after a Flip-In Event, the Board of Directors may exchange the then
exercisable Rights (other than Rights held by the acquiror) for Common Stock at
an exchange ratio of one share of Common Stock for each Right. In the event
that, at any time after the Stock
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<PAGE> 54
Acquisition Date, the Corporation is acquired in a merger or other business
combination transaction or more than 50% of the Corporation's assets, cash flow
or earning power is sold or transferred (a "Flip-Over Event"), each Right, other
than Rights owned by the acquiror, will thereafter entitle the holder thereof to
receive, upon the exercise of the Right, common stock of the acquiror having a
value equal to two times the exercise price of the Right.
The Rights are redeemable by the Corporation at $.01 per Right at any time
prior to ten days after the Stock Acquisition Date (which period may be extended
at any time while the Rights are still redeemable). The Rights will expire at
the close of business on July 12, 2000, unless earlier redeemed or exchanged.
The foregoing description of the Rights does not purport to be complete and
is qualified in its entirety by the description of the Rights contained in the
Rights Agreement, dated as of June 28, 1990, between the Corporation and the
Bank, as Rights Agent, which is incorporated herein by reference to Exhibit 1 to
the Corporation's Registration Statement on Form 8-A dated July 2, 1990.
DESCRIPTION OF CAPITAL SECURITIES
GENERAL
A Prospectus Supplement may provide that Capital Securities will be
issuable in exchange for or upon conversion of Subordinated Securities or
Preferred Stock of any series. "Capital Securities" may consist of common stock,
perpetual preferred stock or, if permitted by the Corporation's primary federal
banking regulator (currently the Board of Governors), other securities of the
Corporation. The Prospectus Supplement relating to a series of Subordinated Debt
Securities or Preferred Stock which are exchangeable for or convertible into
Capital Securities will contain a description of the Capital Securities.
TENDER OFFER RULES
Rules 13e-4 and 14e-1 of the Commission's rules and regulations relating to
tender offers by issuers, as currently in effect and interpreted, may be
applicable to exchanges or conversions such as that of Capital Securities for
Subordinated Securities or Preferred Stock of any series. If, at the time of any
such exchange or conversion, Rule 13e-4 or Rule 14e-1 (or any successor rule or
rules) applies to such transactions, the Corporation will comply with such rule
(or any successor rule or rules) and will afford holders of such Subordinated
Securities or Preferred Stock all rights and will make all filings required by
such rule (or successor rule or rules).
DESCRIPTION OF SECURITIES WARRANTS
The Corporation may issue, together with any Debt Securities or Preferred
Stock or Common Stock offered by any Prospectus Supplement or separately,
Securities Warrants for the purchase of other Debt Securities or Preferred Stock
or Common Stock. The Securities Warrants are to be issued under warrant
agreements (each a "Securities Warrant Agreement") to be entered into between
the Corporation and a bank or trust company, as warrant agent ("Securities
Warrant Agent"), all as set forth in the Prospectus Supplement relating to the
particular issue of Securities Warrants. The form of Securities Warrant
Agreement, including the form of certificates representing the Securities
Warrants ("Securities Warrant Certificates"), reflecting the alternative
provisions to be included in the Securities Warrant Agreements that will be
entered into with respect to particular offerings of Securities Warrants, is
filed as an exhibit to the Registration Statement. The following summaries of
certain provisions of the Securities Warrant Agreement and the Securities
Warrant Certificates do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Securities Warrant Agreement and the Securities Warrant Certificates,
respectively, including the definitions therein of certain terms. Wherever
defined terms of the Securities Warrant Agreement are referred to, it is
intended that such defined terms shall be incorporated herein by reference.
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<PAGE> 55
GENERAL
The Prospectus Supplement relating to the particular issue of Securities
Warrants offered thereby will describe the terms of the offered Securities
Warrants, the Securities Warrant Agreement relating to the offered Securities
Warrants and the Securities Warrant Certificates representing the offered
Securities Warrants, including the following: (1) if the Securities Warrants are
offered for separate consideration, the offering price and the Currency for
which Securities Warrants may be purchased; (2) the designation, aggregate
principal amount, Currency and terms of the series of Debt Securities
purchasable upon exercise of the offered Securities Warrants; (3) the
designation, number, stated value and terms (including, without limitation,
liquidation, dividend, conversion and voting rights) of the series of Preferred
Stock purchasable upon exercise of Preferred Stock Warrants and the price at
which such number of shares of Preferred Stock of such series may be purchased
upon such exercise; (4) the number of shares of Common Stock purchasable upon
exercise of Common Stock Warrants and the price at which such number of shares
of Common Stock may be purchased upon such exercise; (5) the date, if any, on
and after which the offered Securities Warrants and the related Debt Securities
and/or Preferred Stock and/or Common Stock will be separately transferable; (6)
the date on which the right to exercise the offered Securities Warrants shall
commence and the date ("Expiration Date") on which such right shall expire; (7)
a discussion of the specific U.S. federal income tax, accounting and other
considerations applicable to the Securities Warrants; (8) whether the offered
Securities Warrants represented by the Securities Warrant Certificates will be
issued in registered or bearer form, and if registered, where they may be
transferred and registered; and (9) any other terms of the offered Securities
Warrants.
Securities Warrant Certificates will be exchangeable on the terms specified
in the Prospectus Supplement for new Securities Warrant Certificates of
different denominations and Securities Warrants may be exercised at the
corporate trust office of the Securities Warrant Agent or any other office
indicated in the Prospectus Supplement relating thereto. Prior to the exercise
of their Securities Warrants, holders of Securities Warrants will not have any
of the rights of holders of the Debt Securities or Preferred Stock or Common
Stock purchasable upon such exercise, including the right in the case of Debt
Warrants to payments of principal of or any premium or interest, if any, on the
Debt Securities purchasable upon such exercise, or to enforce covenants in the
Indentures and in the case of Preferred Stock Warrants and Common Stock
Warrants, the right to receive payments of dividends or distributions of any
kind, if any, on the Preferred Stock and Common Stock, respectively, purchasable
upon exercise or to exercise any applicable right to vote.
EXERCISE OF WARRANTS
Each Securities Warrant will entitle the holder to purchase such principal
amount of Debt Securities or such number of shares of Preferred Stock or Common
Stock, as the case may be, at such exercise price as shall in each case be set
forth in, or be determinable from, the Prospectus Supplement relating to the
Securities Warrants, by payment of such exercise price in full in the Currency
and in the manner specified in the Prospectus Supplement. Securities Warrants
may be exercised at any time up to the close of business on the Expiration Date
(or such later date to which such Expiration Date may be extended by the
Corporation); unexercised Securities Warrants will become void.
Upon receipt at the corporate trust office of the Securities Warrant Agent
or any other office indicated in the Prospectus Supplement of (i) payment of the
exercise price and (ii) the Securities Warrant Certificate properly completed
and duly executed, the Corporation will, as soon as practicable, forward the
Debt Securities or Preferred Stock or Common Stock purchasable upon such
exercise. If less than all of the Securities Warrants represented by such
Warrant Certificate are exercised, a new Securities Warrant Certificate will be
issued for the remaining number of Securities Warrants.
PLAN OF DISTRIBUTION
The Corporation may sell Securities to one or more underwriters for public
offering and sale by them or may sell Securities to investors directly or
through agents (which agents may be affiliates of the Corporation) that solicit
or receive offers on behalf of the Corporation or through dealers or through a
combination of any
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such method of sale. Any such underwriter, dealer or agent involved in the offer
and sale of the Securities is named in the Prospectus Supplement.
The Securities may be distributed in one or more transactions from time to
time at a fixed price or prices, which may be changed, from time to time at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Corporation also may, from
time to time, authorize agents of the Corporation acting on a best efforts or
other basis to solicit or receive offers to purchase the Securities upon the
terms and conditions as are set forth in the Prospectus Supplement. In
connection with the sale of Securities, underwriters may be deemed to have
received compensation from the Corporation in the form of underwriting discounts
or commissions and may also receive commissions from purchasers of Securities
for whom they may act as agent. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent.
Any underwriting compensation paid by the Corporation to underwriters or
agents in connection with the offering of the Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Securities (including agents only
soliciting or receiving offers to purchase Securities on behalf of the
Corporation) may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Securities may
be deemed to be underwriting discounts and commissions, under the Securities
Act. Underwriters, dealers and agents may be entitled, under agreements entered
into with the Corporation, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act.
Certain of the underwriters and their associates may be customers of,
engage in transactions with and perform services for the Corporation in the
ordinary course of business.
LEGAL OPINIONS
The validity of the Securities offered hereby will be passed upon for the
Corporation by Gary A. Spiess, General Counsel of the Corporation and for the
Underwriters by Brown & Wood, New York, New York. Brown & Wood will rely as to
all matters of Massachusetts law on the opinion of Mr. Spiess. As of March 7,
1994, Mr. Spiess had a direct or indirect interest in 22,254 shares of the
Corporation's Common Stock and had options to purchase an additional 55,239
shares, of which options to purchase 50,239 shares will be exercisable within 60
days after March 7, 1994.
EXPERTS
The financial statements contained in and incorporated by reference into
the Corporation's Annual Report on Form 10-K for the fiscal year ended December
31, 1993, have been incorporated herein by reference in reliance upon the
report, set forth therein of Coopers & Lybrand, independent accountants, and
upon the authority of said firm as experts in accounting and auditing. The
report, referred to above, includes an explanatory paragraph related to the
Corporation's adoption of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," and change in its method of accounting for purchased mortgage servicing
rights, effective January 1, 1993; and its adoption of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," effective December 31, 1993.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR
THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT,
THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE CORPORATION OR THE AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE
MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE CORPORATION SINCE THE
DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Consolidated Ratios of Earnings to
Fixed Charges....................... S-2
Description of Notes.................. S-2
Special Provisions and Risks Relating
to Foreign Currency Notes........... S-18
Certain United States Federal Income
Tax Considerations.................. S-21
Plan of Distribution.................. S-28
Legal Opinions........................ S-29
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents By
Reference........................... 2
The Corporation....................... 3
Competition and Industry
Consolidation....................... 3
Consolidated Ratios of Earnings to
Fixed Charges and Combined Fixed
Charges and Preferred Stock Dividend
Requirements........................ 4
Supervision and Regulation............ 4
Use of Proceeds....................... 6
Description of Debt Securities........ 6
Description of Preferred Stock........ 17
Description of Common Stock........... 23
Description of Capital Securities..... 25
Description of Securities Warrants.... 25
Plan of Distribution.................. 26
Legal Opinions........................ 27
Experts............................... 27
</TABLE>
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$1,000,000,000
(EAGLE LOGO)
MEDIUM-TERM NOTES
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
DECEMBER 16, 1994
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