<PAGE>
RULE NO. 424(b)(1)
REGISTRATION NO. 333-27229
PROSPECTUS
$250,000,000
BankBoston Capital Trust III
FLOATING RATE CAPITAL SECURITIES
(Liquidation Amount $1,000 per Capital Security)
fully and unconditionally guaranteed, as described herein, by
BankBoston Corporation
[LOGO]
BankBoston
---------------
The Floating Rate Capital Securities (the "Capital Securities") offered
hereby will represent beneficial interests in BankBoston Capital Trust III, a
statutory business trust formed under the laws of the State of Delaware (the
"Trust"). BankBoston Corporation, a Massachusetts corporation (the
"Corporation"), will be the owner of all of the beneficial interests
represented by common securities of the Trust (the "Common Securities", and
together with the Capital Securities, the "Trust Securities"). The Bank of New
York is the Property Trustee of the Trust. The Trust exists for the sole
purpose of issuing the Trust Securities and investing the proceeds thereof in
the Floating Rate Junior Subordinated Deferrable Interest Debentures (the
"Junior Subordinated Debentures") of the Corporation, which are scheduled to
mature on June 15, 2027 (the "Stated Maturity Date"). The Capital Securities
will have a preference over the Common Securities under certain circumstances
with respect to cash distributions and amounts payable on liquidation,
redemption or otherwise. See "Description of Capital Securities--Subordination
of Common Securities."
The Capital Securities will be represented by global Capital Securities in
fully registered form, deposited with a custodian for and registered in the
name of a nominee of The Depository Trust Company ("DTC"). Beneficial
interests in such global Capital Securities will be shown on, and transfers
thereof will be effected through, records maintained by DTC and its
participants. Beneficial interests in such Capital Securities will trade in
DTC's Same-Day Funds Settlement System and secondary market trading activity
in such interests will therefore settle in immediately available funds. See
"Description of Capital Securities--Form, Denomination, Book-Entry Procedures
and Transfer."
(Continued on next page)
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT
IN THE CAPITAL SECURITIES.
---------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER
GOVERNMENTAL
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) COMMISSION(2) TRUST(3)(4)
--------- ------------- -----------
<S> <C> <C> <C>
Per Capital Security............. $988.75 (4) $988.75
Total................................... $247,187,500 (4) $247,187,500
</TABLE>
- -------
(1) Plus accumulated Distributions, if any, from June 4, 1997.
(2) The Corporation and the Trust have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) Without giving effect to estimated expenses of $365,000 incurred by the
Corporation. See "Underwriting."
(4) In view of the fact that the proceeds of the sale of the Capital
Securities will be invested in the Junior Subordinated Debentures, the
Corporation has agreed to pay to the Underwriters, as compensation, $10.00
per Capital Security (or $2,500,000 in the aggregate). See "Underwriting."
---------------
The Capital Securities are offered by the several Underwriters, subject to
prior sale, when, as and if issued to and accepted by the Underwriters and
subject to approval of certain legal matters by counsel for the Underwriters
and to certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in
part. It is expected that delivery of the Capital Securities will be made
through the facilities of DTC, on or about June 4, 1997, against payment
therefor in immediately available funds.
---------------
MORGAN STANLEY & CO.
Incorporated
CREDIT SUISSE FIRST BOSTON
LEHMAN BROTHERS
SALOMON BROTHERS INC
May 30, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING OF THE CAPITAL SECURITIES MAY
ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE
OF THE CAPITAL SECURITIES. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN
CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE CAPITAL
SECURITIES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
----------------
(Continued from the previous page)
Holders of the Trust Securities will be entitled to receive cumulative cash
distributions arising from the payment of interest on the Junior Subordinated
Debentures, accumulating from the date of original issuance and payable
quarterly in arrears on March 15, June 15, September 15 and December 15 of
each year, commencing September 15, 1997, at a rate per annum reset quarterly
equal to LIBOR (as defined herein) plus 0.75% (the "Distribution Rate") on the
Liquidation Amount of $1,000 per Trust Security ("Distributions"). The
Corporation will have the right to defer payments of interest on the Junior
Subordinated Debentures at any time and from time to time for a period not
exceeding 20 consecutive quarterly periods with respect to each deferral
period (each, an "Extension Period"), provided that no Extension Period may
extend beyond the Stated Maturity Date. Upon termination of any such Extension
Period and the payment of all amounts then due, the Corporation may elect to
begin a new Extension Period, subject to the requirements set forth herein. If
and for so long as interest payments on the Junior Subordinated Debentures are
so deferred, Distributions on the Trust Securities will also be deferred and
the Corporation will not be permitted, subject to certain exceptions described
herein, to declare or pay any cash distributions with respect to the
Corporation's capital stock (which includes common and preferred stock) or to
make any payment with respect to debt securities of the Corporation that rank
pari passu with or junior to the Junior Subordinated Debentures. During an
Extension Period, interest on the Junior Subordinated Debentures will continue
to accrue (and the amount of Distributions to which holders of the Trust
Securities are entitled will continue to accumulate) at the applicable
periodic Distribution Rate, compounded quarterly from the relevant payment
date for such interest, and holders of Trust Securities will be required to
accrue interest income for United States federal income tax purposes. See
"Description of Junior Subordinated Debentures--Option to Extend Interest
Payment Date" and "Certain Federal Income Tax Consequences--Interest Income
and Original Issue Discount."
The Corporation will, through the Guarantee, the Common Guarantee, the Trust
Agreement, the Junior Subordinated Debentures and the Indenture (each as
defined herein), taken together, fully, irrevocably and unconditionally
guarantee all of the Trust's obligations under the Trust Securities. See
"Relationship Among the Capital Securities, the Junior Subordinated Debentures
and the Guarantee--Full and Unconditional Guarantee." The Guarantee and the
Common Guarantee will guarantee payments of Distributions and payments on
liquidation of the Trust or redemption of the Trust Securities, but in each
case only to the extent that the Trust holds funds on hand legally available
therefor and has failed to make such payments, as described herein. See
"Description of Guarantee." If the Corporation fails to make a required
payment on the Junior Subordinated Debentures, the Trust will not have
sufficient funds to make the related payments, including Distributions, on the
Trust Securities. The Guarantee and the Common Guarantee will not cover any
such payment when the Trust does not have sufficient funds on hand legally
available therefor. In such event, a holder of Capital Securities may
institute a legal proceeding directly against the Corporation to enforce its
rights in respect of such payment. See "Description of Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of Capital Securities."
The obligations of the Corporation under the Guarantee, the Common Guarantee
and the Junior Subordinated Debentures will rank subordinate and junior in
right of payment to all Senior Indebtedness (as defined in "Description of
Junior Subordinated Debentures--Subordination").
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated
Maturity Date upon repayment of the Junior Subordinated Debentures at a
redemption price equal to the principal amount of, plus accrued interest on,
the Junior Subordinated Debentures (the "Maturity Redemption Price"), (ii) in
whole but not in part, at any time, contemporaneously with the
2
<PAGE>
(Continued from the previous page)
optional prepayment of the Junior Subordinated Debentures, upon the occurrence
and continuation of a Special Event (as defined herein) at a redemption price
(the "Early Redemption Price") equal to the Prepayment Price (as defined
below), and (iii) in whole or in part, on or after June 15, 2007,
contemporaneously with the optional prepayment by the Corporation of the
Junior Subordinated Debentures, at the Early Redemption Price. Any of the
Maturity Redemption Price and the Early Redemption Price may be referred to
herein as the "Redemption Price." See "Description of Capital Securities--
Redemption." Subject to the Corporation having received prior approval of the
Board of Governors of the Federal Reserve System (the "Federal Reserve") to do
so if then required under applicable capital guidelines or policies of the
Federal Reserve, the Junior Subordinated Debentures will be prepayable prior
to the Stated Maturity Date at the option of the Corporation (i) on or after
June 15, 2007, in whole or in part, or (ii) at any time, in whole but not in
part, upon the occurrence and continuation of a Special Event, in each case at
a prepayment price (the "Prepayment Price") equal to 100% of the principal
amount of the Junior Subordinated Debentures so redeemed plus accrued interest
thereon to the date of prepayment. See "Description of Junior Subordinated
Debentures--Optional Prepayment" and "--Special Event Prepayment."
The Corporation will have the right at any time to terminate the Trust and
cause a Like Amount of the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust, subject to
(i) the Corporation having received an opinion of counsel to the effect that
such distribution will not be a taxable event to holders of the Capital
Securities and (ii) the prior approval of the Federal Reserve to do so if then
required under applicable capital guidelines or policies of the Federal
Reserve. Unless the Junior Subordinated Debentures are distributed to the
holders of the Trust Securities, in the event of a liquidation of the Trust as
described herein, after satisfaction of liabilities to creditors of the Trust
as required by applicable law, the holders of the Capital Securities generally
will be entitled to receive a Liquidation Amount of $1,000 per Capital
Security plus accumulated Distributions thereon to the date of payment. See
"Description of Capital Securities--Liquidation of the Trust and Distribution
of Junior Subordinated Debentures."
----------------
As used herein, (i) the "Indenture" means the Indenture, to be dated as of
June 4, 1997, as amended and supplemented from time to time, between the
Corporation and The Bank of New York, as trustee (the "Debenture Trustee"),
relating to the Junior Subordinated Debentures, (ii) the "Trust Agreement"
means the Amended and Restated Declaration of Trust relating to the Trust
among the Corporation, as Sponsor, The Bank of New York, as Property Trustee
(the "Property Trustee"), The Bank of New York (Delaware), as Delaware Trustee
(the "Delaware Trustee"), and the Administrative Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees"), (iii) the "Guarantee" means the Capital Securities Guarantee
Agreement between the Corporation and The Bank of New York, as trustee (the
"Guarantee Trustee") and (iv) the "Common Guarantee" means the Common
Securities Guarantee Agreement of the Corporation.
NO DEALER, SALESMAN OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION, THE
TRUST OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION OR THE TRUST SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.............. 4
Incorporation of Certain Documents
by Reference...................... 5
Prospectus Summary................. 6
Risk Factors....................... 9
BankBoston Corporation............. 13
Use of Proceeds.................... 13
Ratios of Earnings to Fixed
Charges........................... 13
Capitalization..................... 14
Summary Financial Data............. 15
BankBoston Capital Trust III....... 16
Description of Capital Securities.. 17
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Junior Subordinated Debentures.................................................... 27
Description of Guarantee......................................................................... 36
Relationship Among the Capital Securities, the Junior Subordinated Debentures and the Guarantee.. 38
Certain Federal Income Tax Consequences.......................................................... 40
ERISA Considerations............................................................................. 44
Underwriting..................................................................................... 45
Validity of Securities........................................................................... 46
Experts.......................................................................................... 46
</TABLE>
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 may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York
10048 and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material may also be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such information may also be
accessed electronically by means of the Commission's home page on the Internet
(http://www.sec.gov.). In addition, such reports, proxy statements and other
information concerning the Corporation 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, on which exchanges certain securities of the Corporation
are listed.
No separate financial statements of the Trust have been included herein. The
Corporation and the Trust do not consider that such financial statements would
be material to holders of the Capital Securities because the Trust is a newly
formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any
activity other than holding as trust assets the Junior Subordinated
Debentures, issuing the Trust Securities and engaging in necessary, advisable
or incidental activities. See "BankBoston Capital Trust III", "Description of
Capital Securities", "Description of Junior Subordinated Debentures" and
"Description of Guarantee". In addition, the Corporation does not expect that
the Trust will file reports, proxy statements and other information under the
Exchange Act with the Commission.
This Prospectus constitutes a part of a registration statement on Form S-3
(the "Registration Statement") filed by the Corporation and the Trust with the
Commission under the Securities Act of 1933, as amended (the "Securities
Act"). This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission, and reference is hereby made to
the Registration Statement and to the exhibits relating thereto for further
information with respect to the Corporation, the Trust and the Trust
Securities. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
4
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated into this Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The Corporation's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997; and
3. The Corporation's Current Reports on Form 8-K dated January 16, 1997
and April 17, 1997.
All documents subsequently filed by the Corporation pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior
to the termination of the offering of the Capital Securities offered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be
a part of this Prospectus from the date of filing of such document. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein do not purport to be
complete, and where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document. The
Corporation will provide without charge to any person to whom this Prospectus
is delivered, on the written or oral request of such person, a copy of any or
all of the foregoing documents incorporated by reference herein (other than
exhibits not specifically incorporated by reference into the texts of such
documents). Requests for such documents should be directed to: Investor
Relations, BankBoston, P.O. Box 2016, MA BOS 01-20-02, Boston, Massachusetts
02106-2016. Telephone requests may be directed to Investor Relations at (617)
434-7858.
5
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus or incorporated herein by
reference.
BANKBOSTON CORPORATION
The Corporation is a registered bank holding company organized in 1970 under
Massachusetts law with both national and international operations. The
Corporation, through its subsidiaries and, in certain cases, joint ventures, is
engaged in providing a wide variety of personal, corporate and global banking
services to individuals, corporate and institutional customers, governments and
other financial institutions. The Corporation, together with its subsidiaries,
operates a network of 650 offices across the United States and more than 100
offices in 24 countries in Latin America, Europe, Asia and Africa. The major
banking subsidiaries of the Corporation include BankBoston, N.A., Bank of
Boston Connecticut and Rhode Island Hospital Trust National Bank.
BANKBOSTON CAPITAL TRUST III
The Trust is a statutory business trust formed under Delaware law pursuant to
(i) the Trust Agreement executed by the Corporation, as Sponsor, The Bank of
New York, as Property Trustee, and The Bank of New York (Delaware), as Delaware
Trustee and the three individual Administrative Trustees named therein, and
(ii) the filing of a certificate of trust with the Delaware Secretary of State
on May 14, 1997. The Trust's business and affairs are conducted by the Issuer
Trustees: the Property Trustee, the Delaware Trustee, and the three individual
Administrative Trustees who are employees or officers of or affiliated with the
Corporation. The Trust exists for the exclusive purposes of (i) issuing and
selling the Trust Securities, (ii) using the proceeds from the sale of the
Trust Securities to acquire the Junior Subordinated Debentures issued by the
Corporation and (iii) engaging in only those other activities necessary,
advisable or incidental thereto. Accordingly, the Junior Subordinated
Debentures will be the sole assets of the Trust, and payments under the Junior
Subordinated Debentures will be the sole revenues of the Trust. All of the
Common Securities will be owned by the Corporation.
THE OFFERING
Securities Offered............ 250,000 Floating Rate Capital Securities
(Liquidation Amount $1,000 per Capital
Security).
Offering Price................ $988.75 per Capital Security plus accumulated
Distributions, if any, from June 4, 1997.
Distribution Dates............ March 15, June 15, September 15 and December 15
of each year, commencing September 15, 1997.
Extension Periods............. Distributions on Capital Securities will be
deferred for the duration of any Extension
Period elected by the Corporation with respect
to the payment of interest on the Junior
Subordinated Debentures. No Extension Period
will exceed 20 consecutive quarterly periods or
extend beyond the Stated Maturity Date. See
"Description of Junior Subordinated
Debentures--Option to Extend Interest Payment
Date" and "Certain Federal Income Tax
Consequences--Interest Income and Original
Issue Discount."
6
<PAGE>
Ranking....................... The Capital Securities will rank pari passu,
and payments thereon will be made pro rata,
with the Common Securities except as described
under "Description of Capital Securities--
Subordination of Common Securities." The Junior
Subordinated Debentures will rank pari passu
with the $257,732,000 aggregate principal
amount of 8.25% Junior Subordinated Deferrable
Interest Debentures due December 15, 2026, the
$257,732,000 aggregate principal amount of 7
3/4% Junior Subordinated Deferrable Interest
Debentures due December 15, 2026 and all other
junior subordinated debentures to be issued by
the Corporation (collectively, "Other
Debentures"), which will be issued and sold to
other trusts to be established by the
Corporation, in each case similar to the Trust
("Other Trusts"), and will be unsecured and
will rank subordinate and junior in right of
payment to all Senior Indebtedness to the
extent and in the manner set forth in the
Indenture. See "Description of Junior
Subordinated Debentures." The Guarantee will
rank pari passu with the guarantees issued by
the Corporation with respect to the 250,000
8.25% Capital Securities (Liquidation Amount
$1,000 per security) of BankBoston Capital
Trust I, the 250,000 7 3/4% Capital Securities
(Liquidation Amount $1,000 per security) of
BankBoston Capital Trust II and all other
guarantees to be issued by the Corporation with
respect to capital securities issued or to be
issued by Other Trusts (collectively, "Other
Guarantees") and will constitute an unsecured
obligation of the Corporation and will rank
subordinate and junior in right of payment to
all Senior Indebtedness to the extent and in
the manner set forth in the Guarantee
Agreement. See "Description of Guarantee."
Redemption.................... The Trust Securities will be subject to
mandatory redemption in a Like Amount, (i) in
whole but not in part, on the Stated Maturity
Date upon repayment of the Junior Subordinated
Debentures, (ii) in whole but not in part, at
any time contemporaneously with the optional
prepayment of the Junior Subordinated
Debentures by the Corporation upon the
occurrence and continuation of a Special Event
and (iii) in whole or in part, on or after June
15, 2007 contemporaneously with the optional
prepayment by the Corporation of the Junior
Subordinated Debentures, in each case at the
applicable Redemption Price. See "Description
of Capital Securities--Redemption."
Ratings....................... The Capital Securities are expected to be rated
"baa1" by Moody's Investors Service, Inc. and
"BBB" by Standard & Poor's Ratings Services.
Absence of Market for the
Capital Securities...........
The Capital Securities will be a new issue of
securities for which there currently is no
market. Although the Underwriters have informed
the Trust and the Corporation that they each
currently intend to make a market in the
Capital Securities, the Underwriters are not
obligated to do so, and any such market
7
<PAGE>
making may be discontinued at any time without
notice. Accordingly, there can be no assurance
as to the development or liquidity of any
market for the Capital Securities. The Trust
and the Corporation do not intend to apply for
listing of the Capital Securities on any
securities exchange or for quotation through
the NASD Automated Quotation System. See
"Underwriting."
Form of Capital Securities.... The Capital Securities will be represented by a
global certificate or certificates registered
in the name of Cede & Co., as nominee for DTC.
Beneficial interests in the Capital Securities
will be evidenced by, and transfers thereof
will be effected through, records maintained by
the participants in DTC. Except as described
herein, Capital Securities in certificated form
will not be issued in exchange for the global
certificate or certificates. See "Description
of Capital Securities--Form, Denomination,
Book-Entry Procedures and Transfer."
Use of Proceeds............... The proceeds to the Trust from the sale of the
Capital Securities will be invested by the
Trust in the Junior Subordinated Debentures.
The Corporation intends to use the net proceeds
from the sale of the Junior Subordinated
Debentures for general corporate purposes. The
Capital Securities will be eligible to qualify
as Tier 1 capital under the capital guidelines
of the Federal Reserve. See "Use of Proceeds."
8
<PAGE>
RISK FACTORS
Prospective purchasers of the Capital Securities should carefully review the
information contained elsewhere in this Prospectus and should particularly
consider the following matters.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Corporation under the Guarantee issued by it for the
benefit of the holders of Capital Securities, as well as under the Junior
Subordinated Debentures, will be unsecured and rank subordinate and junior in
right of payment to all Senior Indebtedness. In addition, in the case of a
bankruptcy or insolvency proceeding, the Corporation's obligations under the
Guarantee will also rank subordinate and junior in right of payment to all
liabilities (other than Other Guarantees) of the Corporation. At March 31,
1997, the aggregate principal amount of outstanding Senior Indebtedness was
approximately $275 million. Because the Corporation is a bank holding company,
the right of the Corporation to participate in any distribution of assets of
any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise (and thus the ability of holders of the Capital Securities to
benefit indirectly from such distribution) is subject to the prior claims of
creditors of that subsidiary, except to the extent that the Corporation may
itself be recognized as a creditor of that subsidiary. At March 31, 1997, the
subsidiaries of the Corporation had total liabilities (excluding liabilities
owed to the Corporation) of approximately $59.9 billion. Accordingly, the
Junior Subordinated Debentures will be effectively subordinated to all
existing and future liabilities of the Corporation's subsidiaries, and holders
of Junior Subordinated Debentures should look only to the assets of the
Corporation for payments on the Junior Subordinated Debentures. None of the
Indenture, the Guarantee or the Trust Agreement places any limitation on the
amount of secured or unsecured debt, including Senior Indebtedness, that may
be incurred by the Corporation or its subsidiaries. See "Description of
Guarantee--Status of the Guarantee" and "Description of Junior Subordinated
Debentures--Subordination."
The ability of the Trust to pay amounts due on the Capital Securities is
solely dependent upon the Corporation making payments on the Junior
Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSIDERATIONS
So long as no Debenture Event of Default (as defined herein) shall have
occurred and be continuing, the Corporation will have the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures
at any time or from time to time for a period not exceeding 20 consecutive
quarterly periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity Date. As a consequence
of any such deferral, quarterly Distributions on the Capital Securities by the
Trust will be deferred (and the amount of Distributions to which holders of
the Capital Securities are entitled will accumulate additional Distributions
thereon at the applicable Interest Rate (as defined herein), compounded
quarterly, but not exceeding the interest rate then accruing on the Junior
Subordinated Debentures) from the relevant payment date for such Distributions
during any such Extension Period.
Prior to the termination of any Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 20 consecutive quarterly periods or to
extend beyond the Stated Maturity Date. Upon the termination of any Extension
Period and the payment of all interest then accrued and unpaid on the Junior
Subordinated Debentures (together with interest thereon at the applicable
Interest Rate, compounded quarterly, to the extent permitted by applicable
law), the Corporation may elect to begin a new Extension Period, subject to
the above requirements. There is no limitation on the number of times that the
Corporation may elect to begin an Extension Period. See "Description of
Capital Securities--Distributions" and "Description of Junior Subordinated
Debentures--Option to Extend Interest Payment Date."
Should the Corporation exercise its right to defer payments of interest on
the Junior Subordinated Debentures, each holder of Trust Securities will be
required to accrue income (as original issue discount ("OID")) in respect of
the deferred stated interest allocable to its Trust Securities for United
States federal
9
<PAGE>
income tax purposes, which will be allocated but not distributed to holders of
Trust Securities. As a result, each such holder of Capital Securities will
recognize income for United States federal income tax purposes in advance of
the receipt of cash and will not receive the cash related to such income from
the Trust if the holder disposes of the Capital Securities prior to the record
date for the payment of Distributions thereafter. See "Certain Federal Income
Tax Consequences--Interest Income and Original Issue Discount" and "--Sales of
Capital Securities."
Should the Corporation elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures in the future, the market price
of the Capital Securities is likely to be affected. A holder that disposes of
its Capital Securities during an Extension Period, therefore, might not
receive the same return on its investment as a holder that continues to hold
its Capital Securities. In addition, merely as a result of the existence of
the Corporation's right to defer payments of interest on the Junior
Subordinated Debentures, the market price of the Capital Securities may be
more volatile than the market prices of other securities on which OID accrues
and that are not subject to such deferrals.
SPECIAL EVENT REDEMPTION
Upon the occurrence and continuation of a Special Event (as defined under
"Description of Junior Subordinated Debentures--Special Event Prepayment"),
the Corporation will have the right to prepay the Junior Subordinated
Debentures in whole (but not in part) at the Prepayment Price within 90 days
following the occurrence of such Special Event and therefore cause a mandatory
redemption of the Trust Securities at the Early Redemption Price. The exercise
of such right is subject to the Corporation having received prior approval of
the Federal Reserve to do so if then required under applicable guidelines or
policies of the Federal Reserve. See "Description of Capital Securities--
Redemption."
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the Clinton Administration's Fiscal 1998
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate
issuers a deduction for interest in respect of certain debt obligations, such
as the Junior Subordinated Debentures, issued on or after the date of "first
committee action," if such debt obligations have a maximum term in excess of
15 years and are not shown as indebtedness on the issuer's applicable
consolidated balance sheet. Since the Proposed Legislation has not yet been
introduced by any member of the 105th Congress, the Proposed Legislation
should not apply to the Junior Subordinated Debentures. It is possible,
however, that the Proposed Legislation or any other legislation enacted by
Congress may give rise to a Tax Event, in which event the Corporation would be
permitted, upon approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve, to cause a
redemption of the Trust Securities at the Early Redemption Price by electing
to prepay the Junior Subordinated Debentures at the Prepayment Price. See
"Description of Capital Securities--Redemption" and "Description of Junior
Subordinated Debentures--Special Event Prepayment." See also "Certain Federal
Income Tax Consequences--Proposed Tax Legislation."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures distributed to the holders of Capital
Securities if a termination of the Trust were to occur. Accordingly, the
Capital Securities or the Junior Subordinated Debentures may trade at a
discount from the price that the investor paid to purchase the Capital
Securities offered hereby. Because holders of Capital Securities may receive
Junior Subordinated Debentures in liquidation of the Trust and because
Distributions are otherwise limited to payments on the Junior Subordinated
Debentures, prospective purchasers of Capital Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and
should carefully review all the information regarding the Junior Subordinated
Debentures contained herein. See "Description of Junior Subordinated
Debentures."
10
<PAGE>
RIGHTS UNDER THE GUARANTEE
The Guarantee is qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Bank of New York will act as
Guarantee Trustee for the purpose of compliance with the Trust Indenture Act
and will hold the Guarantee for the benefit of the holders of the Capital
Securities. The Bank of New York will also act as Property Trustee and as
Debenture Trustee under the Indenture. The Bank of New York (Delaware) will
act as Delaware Trustee under the Trust Agreement. The Guarantee will
guarantee to the holders of the Capital Securities the following payments, to
the extent not paid by the Trust: (i) any accumulated and unpaid Distributions
required to be paid on the Capital Securities, to the extent that the Trust
has funds on hand legally available therefor at such time, (ii) the applicable
Redemption Price with respect to any Capital Securities called for redemption,
to the extent that the Trust has funds on hand legally available therefor at
such time, and (iii) upon a voluntary or involuntary termination and
liquidation of the Trust (unless the Junior Subordinated Debentures are
distributed to holders of the Capital Securities), the lesser of (a) the
aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions to the date of payment, to the extent that the Trust has funds
on hand legally available therefor at such time and (b) the amount of assets
of the Trust remaining available for distribution to holders of the Capital
Securities upon a termination and liquidation of the Trust. The holders of a
majority in Liquidation Amount of the Capital Securities will have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust power conferred upon the Guarantee Trustee.
Any holder of the Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee
or any other person or entity. If the Corporation defaults on its obligation
to pay amounts payable under the Junior Subordinated Debentures, the Trust
will not have sufficient funds for the payment of Distributions or amounts
payable on redemption of the Capital Securities or otherwise, and, in such
event, holders of the Capital Securities will not be able to rely upon the
Guarantee for payment of such amounts. Instead, in the event a Debenture Event
of Default shall have occurred and be continuing and such event is
attributable to the failure of the Corporation to pay principal of (or
premium, if any) or interest on the Junior Subordinated Debentures on the
payment date on which such payment is due and payable, then a holder of
Capital Securities may institute a legal proceeding directly against the
Corporation for enforcement of payment to such holder of the principal of (or
premium, if any) or interest on such Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Capital Securities of
such holder (a "Direct Action"). Notwithstanding any payments made to a holder
of Capital Securities by the Corporation in connection with a Direct Action,
the Corporation shall remain obligated to pay the principal of (and premium,
if any) and interest on the Junior Subordinated Debentures, and the
Corporation shall be subrogated to the rights of the holder of such Capital
Securities with respect to payments on the Capital Securities to the extent of
any payments made by the Corporation to such holder in any Direct Action.
Except as described herein, holders of Capital Securities will not be able to
exercise directly any other remedy available to the holders of the Junior
Subordinated Debentures or to assert directly any other rights in respect of
the Junior Subordinated Debentures. See "Description of Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of Capital Securities,"
"Description of Junior Subordinated Debentures--Debenture Events of Default"
and "Description of Guarantee." The Trust Agreement will provide that each
holder of Capital Securities by acceptance thereof agrees to the provisions of
the Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities, the termination
or liquidation of the Trust, and the exercise of the Trust's rights as holder
of Junior Subordinated Debentures. Holders of Capital Securities will not be
entitled to vote to appoint, remove or replace the Property Trustee or the
Delaware Trustee, and such voting rights are vested exclusively in the holder
of the Common Securities except upon the occurrence of certain events
described herein. The Property Trustee, the Administrative Trustees and the
Corporation may amend the Trust Agreement without the consent of holders of
Capital Securities to ensure that the Trust will be classified for United
States federal income tax purposes as a grantor trust even if such action
adversely affects the interests of such holders. See "Description of Capital
Securities--Voting Rights; Amendment of the Trust Agreement" and "--Removal of
Issuer Trustees."
11
<PAGE>
ABSENCE OF PUBLIC MARKET
The Corporation does not intend to have the Capital Securities listed on the
New York Stock Exchange or any other securities exchange or for quotation
through the NASD Automated Quotation System. There is no existing market for
the Capital Securities and there can be no assurance as to the liquidity of
any market that may develop for the Capital Securities, the ability of the
holders to sell their Capital Securities or at what price holders of the
Capital Securities may be able to sell their Capital Securities, as the case
may be. Future trading prices of the Capital Securities will depend on many
factors including, among other things, prevailing interest rates, the
Corporation's operating results, and the market for similar securities. The
Underwriters have informed the Trust and the Corporation that the Underwriters
intend to make a market in the Capital Securities. However, the Underwriters
are not obligated to do so and any such market making activity may be
terminated at any time without notice to the holders of the Capital
Securities. In addition, such market making activity will be subject to the
limits of the Securities Act.
TRADING PRICE
The Capital Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who uses the accrual method of accounting
for tax purposes (and a cash method holder, if the Junior Subordinated
Debentures are deemed to have been issued with OID) and who disposes of its
Capital Securities between record dates for payments of distributions thereon
will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income (i.e., interest or, possibly, OID), and to add such amount to its
adjusted tax basis in its share of the underlying Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than
the holder's adjusted tax basis (which will include all accrued but unpaid
interest), a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes. See "Certain Federal Income Tax
Considerations--Interest Income and Original Issue Discount" and "--Sales of
Capital Securities."
12
<PAGE>
BANKBOSTON CORPORATION
The Corporation is a registered bank holding company organized in 1970 under
Massachusetts law with both national and international operations. The
Corporation, through its subsidiaries and, in certain cases, joint ventures,
is engaged in providing a wide variety of personal, corporate and global
banking services to individuals, corporate and institutional customers,
governments and other financial institutions. The Corporation, together with
its subsidiaries, operates a network of 650 offices across the United States
and more than 100 offices in 24 countries in Latin America, Europe, Asia and
Africa. The major banking subsidiaries of the Corporation include BankBoston,
N.A., Bank of Boston Connecticut and Rhode Island Hospital Trust National
Bank.
As of March 31, 1997, on a consolidated basis, the Corporation had total
assets of $64.8 billion, total deposits of $42.3 billion and total
stockholders' equity of $4.9 billion. The Corporation's banking subsidiaries
maintained 537 branches in Massachusetts, Rhode Island, Connecticut and New
Hampshire as of March 31, 1997. The Corporation's loans were diversified
geographically, with approximately 76 percent of its total loan volume
consisting of loans and leases made to domestic borrowers and the balance made
overseas. As of March 31, 1997, the Corporation's subsidiaries employed, in
the aggregate, approximately 22,000 full-time equivalent employees in their
domestic and foreign operations.
USE OF PROCEEDS
The proceeds to the Trust from the offering of the Capital Securities will
be $247,187,500. All of the proceeds from the sale of Capital Securities will
be invested by the Trust in the Junior Subordinated Debentures. The
Corporation intends that the net proceeds from the sale of the Junior
Subordinated Debentures will be used for general corporate purposes, which may
include, but not be limited to, 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
repurchase or redemption of certain of the Corporation's outstanding
securities. The precise amount and timing of the application of such net
proceeds used for such corporate purposes will depend on the funding
requirements and the availability of other funds to the Corporation and its
subsidiaries. Pending such application by the Corporation, such net proceeds
may be temporarily invested in short-term interest bearing securities.
The Capital Securities will be eligible to qualify as Tier 1 capital under
the capital guidelines of the Federal Reserve.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of
the Corporation for the respective periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, ----------------------------
1997 1996 1995 1994 1993 1992
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding interest on deposits.... 2.31x 2.24x 2.08x 1.90x 2.44x 2.17x
Including interest on deposits.... 1.52 1.44 1.42 1.41 1.38 1.22
</TABLE>
For purposes of computing the ratios 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 gross 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 gross interest on deposits, include all interest expense
and the proportion deemed representative of the interest factor of rent
expense, net of income from subleases.
13
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Corporation as of March 31, 1997 and as adjusted to give effect to the
consummation of the offering of the Capital Securities offered hereby. The
following data should be read in conjunction with the financial information
included in the Corporation's 1996 Annual Report on Form 10-K and its
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, which are
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------
AS
ACTUAL ADJUSTED(1)
------ -----------
(IN MILLIONS)
<S> <C> <C>
Total long-term debt....................................... $2,516 $2,516
------ ------
Obligated mandatory redeemable preferred securities of
subsidiary trusts holding solely parent debentures(2) .... 500 747
------ ------
Stockholders' equity:
Preferred stock.......................................... 508 508
Common stock-$1.50 par value-300,000,000 shares autho-
rized,
154,265,361 shares issued .............................. 231 231
Surplus.................................................. 1,259 1,259
Retained earnings........................................ 3,038 3,038
Net unrealized gains on securities available for sale,
net of tax ............................................. 21 21
Treasury stock, at cost.................................. (187) (187)
Cumulative translation adjustments, net of tax........... (9) (9)
------ ------
Total stockholders' equity............................. 4,861 4,861
------ ------
Total capitalization................................. $7,877 $8,124
====== ======
</TABLE>
- --------
(1) Reflects the issuance of the Capital Securities offered hereby.
(2) Obligated mandatory redeemable preferred securities of subsidiary trusts
holding solely parent debentures reflects the Capital Securities offered
hereby, the BankBoston Capital Trust I Capital Securities and the
BankBoston Capital Trust II Capital Securities. The Trust, BankBoston
Capital Trust I and BankBoston Capital Trust II are each subsidiaries of
the Corporation and holds the Floating Rate Junior Subordinated Deferrable
Interest Debentures due June 15, 2027, the 8.25% Junior Subordinated
Deferrable Interest Debentures due December 15, 2026 and the 7 3/4% Junior
Subordinated Deferrable Interest Debentures due December 15, 2026,
respectively, as its sole assets.
14
<PAGE>
SUMMARY FINANCIAL DATA
The summary below should be read in connection with the financial
information included in the Corporation's 1996 Annual Report on Form 10-K and
its Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
Interim unaudited data for the three months ended March 31, 1997 and 1996
reflect, in the opinion of management of the Corporation, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such data. Results for the three months ended March 31, 1997
are not necessarily indicative of results which may be expected for any other
interim period or for the year as a whole.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,(1) YEARS ENDED DECEMBER 31,
--------------- ----------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
(UNAUDITED) DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest revenue.... $ 620 $ 566 $ 2,340 $ 2,249 $ 2,037 $ 1,769 $ 1,672
Provision for credit
losses................. 60 57 231 275 154 107 288
------- ------- ------- ------- ------- ------- -------
Net interest revenue
after provision for
credit losses.......... 560 509 2,109 1,974 1,883 1,662 1,384
Noninterest income...... 330 285 1,344 1,309 1,035 945 1,020
Noninterest expense..... 544 527 2,320 2,076 1,947 2,002 1,949
------- ------- ------- ------- ------- ------- -------
Income before income
taxes, extraordinary
items and cumulative
effect of changes in
accounting principles.. 346 267 1,133 1,207 971 605 455
Provision for income
taxes.................. 139 112 483 529 422 262 190
------- ------- ------- ------- ------- ------- -------
Income before
extraordinary items and
cumulative effect of
changes in accounting
principles............. 207 155 650 678 549 343 265
Extraordinary items, net
of tax................. (7) 73
Cumulative effect of
changes in accounting
principles, net........ 24
------- ------- ------- ------- ------- ------- -------
Net income............ $ 207 $ 155 $ 650 $ 678 $ 542 $ 367 $ 338
======= ======= ======= ======= ======= ======= =======
Per common share:
Income before
extraordinary items
and cumulative effect
of changes in
accounting principles:
Primary............... $ 1.29 $ .94 $ 3.99 $ 4.17 $ 3.44 $ 2.09 $ 1.77
Fully diluted......... 1.27 .93 3.93 4.09 3.36 2.05 1.73
Net income:
Primary............... 1.29 .94 3.99 4.17 3.39 2.26 2.30
Fully diluted......... 1.27 .93 3.93 4.09 3.31 2.21 2.24
Book value............. 28.67 27.14 28.89 27.01 23.07 21.13 18.98
Cash dividends
declared(2)........... .44 .37 1.69 1.28 .93 .40 .10
Average number of common
shares (in thousands):
Primary................ 153,421 154,988 153,529 153,856 148,913 147,033 138,444
Fully diluted.......... 155,592 156,844 156,112 156,768 153,616 152,067 144,044
AVERAGE BALANCE SHEET
DATA:
Loans and lease financ-
ing.................... $41,732 $39,179 $40,589 $38,283 $36,017 $32,565 $31,568
Total earning assets.... 56,641 52,172 53,410 49,567 47,517 42,880 41,658
Total assets............ 63,224 58,587 59,523 55,744 53,389 47,937 46,290
Deposits................ 41,899 40,632 41,603 38,406 37,919 37,163 37,643
Notes payable........... 3,316 2,421 2,666 2,142 2,123 1,797 1,252
Stockholders' equity.... 4,952 4,706 4,744 4,304 3,766 3,390 2,762
</TABLE>
- --------
(1) Financial data for 1996 has been restated to give retroactive effect to
the acquisition of BayBanks, Inc., which was completed in July 1996 and
accounted for as a pooling of interests.
(2)Amounts represent the historical cash dividends of the Corporation.
15
<PAGE>
BANKBOSTON CAPITAL TRUST III
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Trust Agreement executed by the Corporation, as Sponsor, The Bank
of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware
Trustee, and the Administrative Trustees named therein, and (ii) the filing of
a certificate of trust with the Delaware Secretary of State on May 14, 1997.
The Trust exists for the exclusive purposes of (i) issuing and selling the
Trust Securities, (ii) using the proceeds from the sale of Trust Securities to
acquire the Junior Subordinated Debentures and, (iii) engaging in only those
other activities necessary, advisable or incidental thereto (such as
registering the transfer of the Trust Securities). The Junior Subordinated
Debentures will be the sole assets of the Trust and, accordingly, payments
under the Junior Subordinated Debentures will be the sole revenues of the
Trust. All of the Common Securities will be owned by the Corporation. The
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Capital Securities, except that upon the occurrence and
continuance of an event of default under the Trust Agreement resulting from a
Debenture Event of Default, the rights of the Corporation as holder of the
Common Securities to payments in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Capital Securities. See "Description of Capital Securities--
Subordination of Common Securities." The Corporation will acquire Common
Securities in a Liquidation Amount equal to at least 3% of the total capital
of the Trust. The Trust has a term of 31 years, but may terminate earlier as
provided in the Trust Agreement. The Trust's business and affairs are
conducted by its trustees, each appointed by the Corporation as holder of the
Common Securities. The trustees for the Trust will be The Bank of New York, as
the Property Trustee (the "Property Trustee"), The Bank of New York
(Delaware), as the Delaware Trustee (the "Delaware Trustee"), and three
individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with the Corporation (collectively, the "Issuer
Trustees"). The Bank of New York, as Property Trustee, will act as sole
indenture trustee under the Trust Agreement. The Bank of New York will also
act as indenture trustee under the Guarantee and the Indenture. See
"Description of Guarantee" and "Description of Junior Subordinated
Debentures." The holder of the Common Securities of the Trust or, if an Event
of Default under the Trust Agreement has occurred and is continuing, the
holders of a majority in Liquidation Amount of the Capital Securities will be
entitled to appoint, remove or replace the Property Trustee and/or the
Delaware Trustee. In no event will the holders of the Capital Securities have
the right to vote to appoint, remove or replace the Administrative Trustees;
such voting rights will be vested exclusively in the holder of the Common
Securities. The duties and obligations of each Issuer Trustee are governed by
the Trust Agreement. The Corporation will pay all fees, expenses, debts and
obligations (other than with respect to the payment of principal, interest and
premium, if any, on the Trust Securities) related to the Trust and the
offering of the Capital Securities and will pay, directly or indirectly, all
ongoing costs, expenses and liabilities of the Trust (other than payment of
principal, interest and premium, if any, on the Trust Securities). The
principal executive office of the Trust is c/o BankBoston, P.O. Box 2016,
Boston, Massachusetts 02106-2016.
16
<PAGE>
DESCRIPTION OF CAPITAL SECURITIES
The Capital Securities will represent preferred beneficial interests in the
Trust and the holders thereof will be entitled to a preference over the Common
Securities in certain circumstances with respect to Distributions and amounts
payable on redemption of the Trust Securities or liquidation of the Trust. See
"--Subordination of Common Securities." The Trust Agreement is qualified under
the Trust Indenture Act and is subject to and governed by the Trust Indenture
Act. This summary of certain terms and provisions of the Capital Securities,
the Common Securities and the Trust Agreement does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Trust Agreement, including the definitions therein of
certain terms, and those made a part of the Trust Agreement by the Trust
Indenture Act.
GENERAL
The Capital Securities will be limited to $250,000,000 aggregate Liquidation
Amount at any one time outstanding. The Capital Securities will rank pari
passu, and payments will be made thereon pro rata, with the Common Securities
except as described under "--Subordination of Common Securities." Legal title
to the Junior Subordinated Debentures will be held by the Property Trustee in
trust for the benefit of the holders of the Capital Securities and Common
Securities. The Guarantee will not guarantee payment of Distributions or
amounts payable on redemption of the Capital Securities or liquidation of the
Trust when the Trust does not have funds on hand legally available for such
payments. See "Description of Guarantee."
DISTRIBUTIONS
Distributions on the Capital Securities will be cumulative, will accumulate
from June 4, 1997 and will be payable quarterly in arrears on March 15, June
15, September 15 and December 15 of each year, commencing September 15, 1997
(each, a "Distribution Date"), at a rate per annum reset quarterly equal to
LIBOR plus 0.75% (the "Distribution Rate") on the Liquidation Amount of
$1,000, to the holders of the Capital Securities on the relevant record dates.
The record dates will be the first day of the month in which the relevant
Distribution Date falls. The amount of Distributions payable for any period
will be computed on the basis of the actual number of days in such period and
a year of 360 days. In the event that any Distribution Date is not a Business
Day (as defined below), then such Distribution Date shall be postponed to the
next succeeding Business Day (and without any interest or other payment in
respect of any such delay), except that if such Business Day falls in the next
succeeding calendar month then such Distribution Date shall be the immediately
preceding Business Day. If the Stated Maturity Date or earlier prepayment date
for the Junior Subordinated Debentures falls on a day that is not a Business
Day, payment of any Distributions payable on such date will be made on the
next succeeding Business Day, and no interest or other payment will accumulate
for the period from and after the Stated Maturity Date or such prepayment
date, as the case may be. A "Business Day" shall mean any day other than a
Saturday or a Sunday, or a day on which banking institutions in The City of
New York or Boston, Massachusetts are authorized or required by law or
executive order to remain closed.
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer
the payment of interest on the Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 20 consecutive quarterly periods
with respect to each Extension Period, provided that no Extension Period may
extend beyond the Stated Maturity Date. Upon any such election, quarterly
Distributions on the Capital Securities will be deferred by the Trust during
any such Extension Period. Distributions to which holders of the Capital
Securities are entitled during any such Extension Period will accumulate
additional Distributions thereon at the applicable periodic Distribution Rate
compounded quarterly from the relevant Distribution Date, but not exceeding
the interest rate then accruing on the Junior Subordinated Debentures. The
term "Distributions," as used herein, shall include any such additional
Distributions.
Prior to the termination of any Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 20 consecutive quarterly periods or
17
<PAGE>
to extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due, and subject to the
foregoing limitations, the Corporation may elect to begin a new Extension
Period. The Corporation must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of any such
Extension Period at least five Business Days prior to the earlier of (i) the
date the Distributions on the Capital Securities would have been payable
except for the election to begin such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to any securities exchange
or to holders of such Capital Securities of the record date or the date such
Distributions are payable but in any event not less than five Business Days
prior to such record date. There is no limitation on the number of times that
the Corporation may elect to begin an Extension Period. See "Description of
Junior Subordinated Debentures--Option to Extend Interest Payment Period" and
"Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount."
During any Extension Period, the Corporation may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock) or (ii) make any payment of
principal of or premium, if any, or interest on or repay, repurchase or redeem
any debt securities of the Corporation (including Other Debentures) that rank
pari passu with or junior in right of payment to the Junior Subordinated
Debentures or (iii) make any guarantee payments with respect to any guarantee
by the Corporation of the debt securities of any subsidiary of the Corporation
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in right of payment to the Junior Subordinated Debentures (other than (a)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee, (d) as a result of a reclassification of the
Corporation's capital stock or the exchange or conversion of one class, or
series of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (e) the purchase of fractional interests in
shares of the Corporation's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, and (f) purchases of common stock related to the issuance of common
stock or rights under any of the Corporation's benefit plans for its
directors, officers or employees or any of the Corporation's dividend
reinvestment plans).
Although the Corporation may in the future exercise its option to defer
payments of interest on the Junior Subordinated Debentures, the Corporation
has no such current intention.
The revenue of the Trust available for distribution to holders of the
Capital Securities will be limited to payments under the Junior Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities. See "Description of Junior Subordinated
Debentures--General." If the Corporation does not make interest payments on
the Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Capital Securities. The payment of
Distributions on the Capital Securities (if and to the extent the Trust has
funds on hand legally available for the payment of such Distributions) will be
guaranteed by the Corporation on a limited basis as set forth herein under
"Description of Guarantee."
DISTRIBUTION RATE
LIBOR, the Distribution period and the amount of Distributions payable in
respect of each Distribution period will be calculated by The Bank of New
York, as Calculation Agent, in the same manner as LIBOR, the interest period
and the interest payable in respect of each interest period for the Junior
Subordinated Debentures, as described under "Description of Junior
Subordinated Debentures--Interest Rate."
REDEMPTION
Upon the repayment on the Stated Maturity Date or prepayment prior to the
Stated Maturity Date of the Junior Subordinated Debentures, the proceeds from
such repayment or prepayment shall be applied by the
18
<PAGE>
Property Trustee to redeem a Like Amount (as defined below) of the Trust
Securities, upon not less than 30 nor more than 60 days' notice of a date of
redemption (the "Redemption Date"), at the applicable Redemption Price, which
shall be equal to (i) in the case of the repayment of the Junior Subordinated
Debentures on the Stated Maturity Date, the Maturity Redemption Price (equal
to the principal of, and accrued interest on, the Junior Subordinated
Debentures), (ii) in the case of the optional prepayment of the Junior
Subordinated Debentures upon the occurrence and continuation of a Special
Event, the Early Redemption Price (equal to the Prepayment Price in respect of
the Junior Subordinated Debentures) and (iii) in the case of the optional
prepayment of the Junior Subordinated Debentures other than as contemplated in
clause (ii) above, the Early Redemption Price (equal to the Prepayment Price
in respect of the Junior Subordinated Debentures). See "Description of Junior
Subordinated Debentures--Optional Prepayment" and "--Special Event
Prepayment."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be paid in accordance
with their terms and (ii) with respect to a distribution of Junior
Subordinated Debentures upon the liquidation of the Trust, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed.
The Corporation will have the option to prepay the Junior Subordinated
Debentures, (i) in whole or in part, on or after June 15, 2007, and (ii) in
whole but not in part, at any time, upon the occurrence of a Special Event, in
each case at the Prepayment Price and subject to receipt of prior approval by
the Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
The Corporation will have the right at any time to terminate the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of
the Trust Securities in liquidation of the Trust. Such right is subject to (i)
the Corporation having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Capital Securities and
(ii) the prior approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve.
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Junior Subordinated Debentures
to the holders of the Trust Securities, if the Corporation, as Sponsor, has
given written direction to the Property Trustee to terminate the Trust (which
direction is optional and, except as described above, wholly within the
discretion of the Corporation, as Depositor); (iii) redemption of all of the
Trust Securities as described under "--Redemption"; (iv) expiration of the
term of the Trust; and (v) the entry of an order for the dissolution of the
Trust by a court of competent jurisdiction.
If a termination occurs as described in clause (i), (ii), (iv), or (v)
above, the Trust shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Trust as provided by
applicable law, to the holders of the Trust Securities a Like Amount of the
Junior Subordinated Debentures, unless such distribution is determined by the
Property Trustee not to be practicable, in which event such holders will be
entitled to receive out of the assets of the Trust legally available for
distribution to holders, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, an amount equal to the aggregate of the
Liquidation Amount of $1,000 per Trust Security plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because the Trust has insufficient assets on hand legally available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Capital Securities and the Common Securities
shall be paid on a pro rata basis, except that if a Debenture Event of Default
has occurred and is continuing, the Capital Securities shall have a priority
over the Common Securities. See "--Subordination of Common Securities." If an
early termination occurs as described in clause (v) above, the Junior
Subordinated Debentures will be subject to optional prepayment, in whole but
not in part, on or after June 15, 2007.
19
<PAGE>
If the Corporation elects not to prepay the Junior Subordinated Debentures
prior to maturity in accordance with their terms and either elects not to or
is unable to liquidate the Trust and distribute the Junior Subordinated
Debentures to holders of the Trust Securities, the Trust Securities will
remain outstanding until the repayment of the Junior Subordinated Debentures
on the Stated Maturity Date.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) each registered
global certificate, if any, representing Trust Securities and held by The
Depository Trust Company ("DTC" or the "Depositary") or its nominee will be
exchanged for a registered global certificate or certificates representing the
Junior Subordinated Debentures to be delivered upon such distribution and
(iii) any certificates representing Trust Securities not held by DTC or its
nominee will be deemed to represent Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of such Trust Securities, and
bearing accrued and unpaid interest in an amount equal to the accumulated and
unpaid Distributions on such Trust Securities until such certificates are
presented to the Administrative Trustees or their agent for cancellation,
whereupon the Corporation will issue to such holder, and the Debenture Trustee
will authenticate, a certificate representing such Junior Subordinated
Debentures.
There can be no assurance as to the market prices for the Capital Securities
or the Junior Subordinated Debentures that may be distributed in exchange for
the Trust Securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the Capital Securities that an investor may purchase, or
the Junior Subordinated Debentures that the investor may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Capital Securities offered hereby.
REDEMPTION PROCEDURES
If applicable, Trust Securities shall be redeemed at the applicable
Redemption Price with the proceeds from the contemporaneous repayment or
prepayment of the Junior Subordinated Debentures. Any redemption of Trust
Securities shall be made and the applicable Redemption Price shall be payable
on the Redemption Date only to the extent that the Trust has funds legally
available for the payment of such applicable Redemption Price. See also "--
Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
to the extent funds are legally available, with respect to the Capital
Securities held by DTC or its nominees, the Property Trustee will deposit
irrevocably with DTC funds sufficient to pay the applicable Redemption Price.
See "--Form, Denomination, Book-Entry Procedures and Transfer." With respect
to the Capital Securities held in certificated form, the Property Trustee, to
the extent funds are legally available, will irrevocably deposit with the
paying agent for the Capital Securities funds sufficient to pay the applicable
Redemption Price and will give such paying agent irrevocable instructions and
authority to pay the applicable Redemption Price to the holders thereof upon
surrender of their certificates evidencing the Capital Securities. See "--
Payment and Paying Agency." Notwithstanding the foregoing, Distributions
payable on or prior to the Redemption Date shall be payable to the holders of
such Capital Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of the Capital Securities will cease, except the right of the holders
of the Capital Securities to receive the applicable Redemption Price, but
without interest on such Redemption Price, and the Capital Securities will
cease to be outstanding. In the event that payment of the applicable
Redemption Price is improperly withheld or refused and not paid either by the
Trust or by the Corporation pursuant to the Guarantee as described under
"Description of Guarantee," Distributions on Capital Securities will continue
to accumulate at the then applicable rate, from the Redemption Date originally
established by the Trust to the date such applicable Redemption Price is
actually paid, in which case the actual payment date will be the Redemption
Date for purposes of calculating the applicable Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time
and from time to time purchase outstanding Capital Securities by tender, in
the open market or by private agreement.
20
<PAGE>
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Corporation defaults in payment of the
applicable Prepayment Price on, or in the repayment of, the Junior
Subordinated Debentures, on and after the Redemption Date Distributions will
cease to accrue on the Trust Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and Common Securities, as applicable, shall be made pro rata based
on the Liquidation Amount of the Capital Securities and Common Securities;
provided, however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default shall have occurred and be continuing, no payment
of any Distribution on, or applicable Redemption Price of, any of the Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of the Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid Distributions on all of the
outstanding Capital Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the applicable Redemption Price
the full amount of such Redemption Price, shall have been made or provided
for, and all funds available to the Property Trustee shall first be applied to
the payment in full in cash of all Distributions on, or Redemption Price of,
the Capital Securities then due and payable.
In the case of any Event of Default, the Corporation as holder of the Common
Securities will be deemed to have waived any right to act with respect to such
Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of the Capital Securities and not on behalf of
the Corporation as holder of the Common Securities, and only the holders of
the Capital Securities will have the right to direct the Property Trustee to
act on their behalf.
EVENTS OF DEFAULT; NOTICE
The occurrence of a Debenture Event of Default (see "Description of Junior
Subordinated Debentures--Debenture Events of Default") constitutes an "Event
of Default" under the Trust Agreement.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Corporation, as Sponsor, unless such Event of
Default shall have been cured or waived. The Corporation, as Sponsor, and the
Administrative Trustees are required to file annually with the Property
Trustee a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described
under "--Liquidation of the Trust and Distribution of Junior Subordinated
Debentures" and "--Subordination of Common Securities."
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing,
the Property Trustee and the Delaware Trustee may be removed at such time by
the holders of a majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Corporation as the holder of the
Common Securities. No resignation or removal of an Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
21
<PAGE>
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Issuer Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of such Issuer Trustee, shall be the successor of such Issuer
Trustee under the Trust Agreement, provided such corporation shall be
otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other Person,
except as described below. The Trust may, at the request of the Corporation,
as Sponsor, with the consent of the Administrative Trustees but without the
consent of the holders of the Capital Securities, merge with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to a
trust organized as such under the laws of any State; provided, that (i) such
successor entity either (a) expressly assumes all of the obligations of the
Trust with respect to the Capital Securities or (b) substitutes for the
Capital Securities other securities having substantially the same terms as the
Capital Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Capital Securities rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Corporation expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee with
respect to the Junior Subordinated Debentures, (iii) the Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or other organization on which
the Capital Securities are then listed, if any, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not cause the Capital Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Capital Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose identical to that
of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Corporation has received an
opinion from independent counsel to the Trust experienced in such matters to
the effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Capital Securities (including
any Successor Securities) in any material respect, and (b) following such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, neither the Trust nor such successor entity will be required to
register as an investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and (viii) the Corporation or any
permitted successor or assignee owns all of the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in Liquidation Amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets as an entirety or substantially as an entirety to
any other entity or permit any other entity to consolidate, amalgamate, merge
with or into, or replace it if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Trust or the
successor entity not to be classified as a grantor trust for United States
federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "--Mergers, Consolidations, Amalgamations
or Replacements of the Trust" and "Description of Guarantee--Amendments and
Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Capital Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Corporation, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities (i) to cure any ambiguity,
22
<PAGE>
correct or supplement any provisions in the Trust Agreement that may be
inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under the Trust Agreement, which shall
not be inconsistent with the other provisions of the Trust Agreement, or (ii)
to modify, eliminate or add to any provisions of the Trust Agreement to such
extent as shall be necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust at all times that
any Trust Securities are outstanding or to ensure that the Trust will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of the holders of the
Trust Securities, and any amendments of the Trust Agreement shall become
effective when notice thereof is given to the holders of the Trust Securities.
The Trust Agreement may be amended by the Issuer Trustees and the Corporation
(i) with the consent of holders of a majority in Liquidation Amount of the
outstanding Trust Securities, and (ii) upon receipt by the Issuer Trustees of
an opinion of counsel to the effect that such amendment or the exercise of any
power granted to the Issuer Trustees in accordance with such amendment will
not affect the Trust's status as a grantor trust for United States federal
income tax purposes or the Trust's exemption from status as an "investment
company" under the Investment Company Act, provided that, without the consent
of each holder of Trust Securities, the Trust Agreement may not be amended to
(i) change the amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to be made
in respect of the Trust Securities as of a specified date or (ii) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing any trust or power conferred on such Property Trustee
with respect to the Junior Subordinated Debentures, (ii) waive certain past
defaults under the Indenture, (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Junior
Subordinated Debentures or (iv) consent to any amendment, modification or
termination of the Indenture or the Junior Subordinated Debentures, where such
consent shall be required, without, in each case, obtaining the prior approval
of the holders of a majority in Liquidation Amount of all outstanding Capital
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Junior Subordinated Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior approval of each holder of the Capital Securities. The Issuer Trustees
shall not revoke any action previously authorized or approved by a vote of the
holders of the Capital Securities except by subsequent vote of such holders.
The Property Trustee shall notify each holder of Capital Securities of any
notice of default with respect to the Junior Subordinated Debentures. In
addition to obtaining the foregoing approvals of such holders of the Capital
Securities, prior to taking any of the foregoing actions, the Issuer Trustees
shall obtain an opinion of counsel experienced in such matters to the effect
that the Trust will not be classified as an association taxable as a
corporation for United States federal income tax purposes on account of such
action.
Any required approval of holders of Capital Securities may be given at a
meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Capital Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be given to
each holder of record of Capital Securities in the manner set forth in the
Trust Agreement.
No vote or consent of the holders of Capital Securities will be required for
the Trust to redeem and cancel the Capital Securities in accordance with the
Trust Agreement.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Corporation, the Issuer Trustees or any
affiliate of the Corporation or any Issuer Trustees, shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
23
<PAGE>
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The Capital Securities initially will be represented by one or more Capital
Securities in registered, global form (collectively, the "Global Capital
Securities"). The Global Capital Securities will be deposited upon issuance
with the Property Trustee as custodian for DTC, in The City of New York, and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below. Except
as set forth below, the Global Capital Securities may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or
its nominee. Beneficial interests in the Global Capital Securities may not be
exchanged for Capital Securities in certificated form except in the limited
circumstances described below. See "--Exchange of Book-Entry Capital
Securities for Certificated Capital Securities".
Transfer of beneficial interests in the Global Capital Securities will be
subject to the applicable rules and procedures of DTC and its direct or
indirect participants, which may change from time to time.
Depositary Procedures
DTC has advised the Trust and the Corporation that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The
Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital
Securities, DTC will credit the accounts of Participants designated by the
Underwriters with portions of the Liquidation Amount of the Global Capital
Securities and (ii) ownership of such interests in the Global Capital
Securities will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Capital
Securities).
Except as described below, owners of beneficial interests in the Global
Capital Securities will not have Capital Securities registered in their name,
will not receive physical delivery of Capital Securities in certificated form
and will not be considered the registered owners or holders thereof under the
Trust Agreement for any purpose.
Payments in respect of the Global Capital Security registered in the name of
DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms
of the Trust Agreement, the Property Trustee will treat the persons in whose
names the Capital Securities, including the Global Capital Securities, are
registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither the
Property Trustee nor any agent thereof has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
interests in the Global Capital Securities, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial interests in the Global Capital Securities
or (ii) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants. DTC has advised the Trust and
the Corporation that its current practice, upon receipt of any payment in
respect of securities such as the Capital Securities, is to credit the
accounts of the relevant Participants with
24
<PAGE>
the payment on the payment date, in amounts proportionate to their respective
holdings in Liquidation Amount of beneficial interests in the relevant
security as shown on the records of DTC unless DTC has reason to believe it
will not receive payment on such payment date. Payments by the Participants
and the Indirect Participants to the beneficial owners of Capital Securities
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will
not be the responsibility of DTC, the Property Trustee, the Trust or the
Corporation. Neither the Trust or the Corporation nor the Property Trustee
will be liable for any delay by DTC or any of its Participants in identifying
the beneficial owners of the Capital Securities, and the Trust or the
Corporation and the Property Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
Beneficial interests in the Global Capital Securities will trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its participants.
DTC has advised the Trust and the Corporation that it will take any action
permitted to be taken by a holder of Capital Securities only at the direction
of one or more Participants to whose account with DTC interests in the Global
Capital Securities are credited and only in respect of such portion of the
Liquidation Amount of the Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event
of Default under the Trust Agreement, DTC reserves the right to exchange the
Global Capital Securities for legended Capital Securities in certificated form
and to distribute such Capital Securities to its Participants.
The information in this section concerning DTC and its book-entry system has
been obtained from sources that the Trust and the Corporation believe to be
reliable, but neither the Trust nor the Corporation takes responsibility for
the accuracy thereof.
Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A Global Capital Security is exchangeable for Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Capital Security
or (y) has ceased to be a clearing agency registered under the Exchange Act,
and the Trust thereupon fails to appoint a successor Depositary within 90
days, (ii) the Corporation in its sole discretion elects to cause the issuance
of the Capital Securities in certificated form or (iii) there shall have
occurred and be continuing an Event of Default or any event which after notice
or lapse of time or both would be an Event of Default under the Trust
Agreement. In addition, beneficial interests in a Global Capital Security may
be exchanged for certificated Capital Securities upon request but only upon at
least 20 days prior written notice given to the Property Trustee by or on
behalf of DTC in accordance with customary procedures. In all cases,
certificated Capital Securities delivered in exchange for any Global Capital
Security or beneficial interests therein will be registered in the names, and
issued in any approved denominations, requested by or on behalf of the
Depositary (in accordance with its customary procedures), unless the Property
Trustee determines otherwise in compliance with applicable law.
PAYMENT AND PAYING AGENCY
Payments in respect of Global Capital Securities shall be made to DTC, which
shall credit the relevant accounts at DTC on the applicable Distribution
Dates, while payments in respect of Capital Securities in certificated form
shall be made by check mailed to the address of the holder entitled thereto as
such address shall appear on the register. The paying agent (the "Paying
Agent") shall initially be the Property Trustee and any co-paying agent chosen
by the Property Trustee and acceptable to the Administrative Trustees and the
Corporation. The Paying Agent shall be permitted to resign as Paying Agent
upon 30 days' written notice to the Property Trustee and the Corporation. In
the event that the Property Trustee shall no longer be the Paying Agent, the
Administrative Trustees shall appoint a successor (which shall be a bank or
trust company acceptable to the Administrative Trustees and the Corporation)
to act as Paying Agent.
25
<PAGE>
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
Capital Securities.
Registration of transfers of the Capital Securities will be effected without
charge by or on behalf of the Trust, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Trust will not be required to register or cause to be registered
the transfer of the Capital Securities after they have been called for
redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically
set forth in the Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision,
the Property Trustee is under no obligation to exercise any of the powers
vested in it by the Trust Agreement at the request of any holder of Trust
Securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of the Capital
Securities or the Common Securities are entitled under the Trust Agreement to
vote, then the Property Trustee shall take such action as is directed by the
Corporation and if not so directed, shall take such action as it deems
advisable and in the best interests of the holders of the Trust Securities and
will have no liability except for its own bad faith, negligence or willful
misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a
corporation for United States federal income tax purposes and so that the
Junior Subordinated Debentures will be treated as indebtedness of the
Corporation for United States federal income tax purposes. In this connection,
the Corporation and the Administrative Trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of the
Trust or the Trust Agreement, that the Corporation and the Administrative
Trustees determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not materially adversely affect the
interests of the holders of the Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
26
<PAGE>
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under an Indenture, as
supplemented from time to time (as so supplemented, the "Indenture"), between
the Corporation and the Debenture Trustee. The Indenture is qualified under
the Trust Indenture Act. This summary of certain terms and provisions of the
Junior Subordinated Debentures and the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Indenture, including the definitions therein of
certain terms, and those terms made a part of the Indenture by the Trust
Indenture Act.
GENERAL
Concurrently with the issuance of the Trust Securities, the Trust will
invest the proceeds thereof, together with the consideration paid by the
Corporation for the Common Securities, in Junior Subordinated Debentures
issued by the Corporation. The Junior Subordinated Debentures will bear
interest at a rate per annum reset quarterly equal to LIBOR plus 0.75% (the
"Interest Rate") on the principal amount thereof, payable quarterly in arrears
on March 15, June 15, September 15 and December 15 of each year, commencing
September 15, 1997 (each, an "Interest Payment Date"), to the person in whose
name each Junior Subordinated Debenture is registered, subject to certain
exceptions, at the close of business on the first day of the month in which
the relevant Interest Payment Date falls. It is anticipated that, until the
liquidation, if any, of the Trust, each Junior Subordinated Debenture will be
held in the name of the Property Trustee in trust for the benefit of the
holders of the Trust Securities. The amount of interest payable for any period
will be computed on the basis of the actual number of days elapsed in such
period and a year of 360 days. In the event that any Interest Payment Date is
not a Business Day, then such Interest Payment Date shall be postponed to the
next succeeding Business Day, except that if such Business Day falls in the
next succeeding calendar month then such Interest Payment Date shall be the
immediately preceding Business Day. If the Stated Maturity Date or earlier
prepayment date for the Junior Subordinated Debentures falls on a day that is
not a Business Day, payment of interest on such date will be made on the next
succeeding Business Day, and no interest or other payment will accrue for the
period from and after the Stated Maturity Date or such prepayment date, as the
case may be. Accrued interest that is not paid on the applicable Interest
Payment Date will bear additional interest on the amount thereof (to the
extent permitted by law) at the Interest Rate, compounded quarterly. The term
"interest", as used herein, shall include quarterly interest payments,
interest on quarterly interest payments not paid on the applicable Interest
Payment Date and Additional Sums (as defined below), as applicable.
The Junior Subordinated Debentures will be issued in denominations of $1,000
and integral multiples thereof. The Junior Subordinated Debentures will mature
on June 15, 2027 (the "Stated Maturity Date").
The Junior Subordinated Debentures will rank pari passu with all Other
Debentures and will be unsecured and subordinate and junior in right of
payment to the extent and in the manner set forth in the Indenture to all
Senior Indebtedness. See "--Subordination." The Corporation is a non-operating
holding company and almost all of the operating assets of the Corporation and
its consolidated subsidiaries are owned by such subsidiaries. The Corporation
relies primarily on dividends from such subsidiaries to meet its obligations.
The Corporation is a legal entity separate and distinct from its banking and
non-banking affiliates. The principal sources of the Corporation's income are
dividends, interest and fees from its banking and non-banking affiliates. The
bank subsidiaries of the Corporation (the "Banks") are subject to certain
restrictions imposed by federal law on any extensions of credit to, and
certain other transactions with, the Corporation and certain other affiliates,
and on investments in stock or other securities thereof. Such restrictions
prevent the Corporation and such other affiliates from borrowing from the
Banks unless the loans are secured by various types of collateral. Further,
such secured loans, other transactions and investments by any of the Banks are
generally limited in amount as to the Corporation and as to each of such other
affiliates to 10% of such Bank's capital and surplus and as to the Corporation
and all of such other affiliates to an aggregate of 20% of such Bank's capital
and surplus. In addition, payment of dividends to the Corporation by the
subsidiary banks is subject to ongoing review by banking regulators and is
subject to various statutory limitations and in certain circumstances requires
approval by
27
<PAGE>
banking regulatory authorities. Because the Corporation is a holding company,
the right of the Corporation to participate in any distribution of assets of
any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise, is subject to the prior claims of creditors of the subsidiary,
except to the extent the Corporation may itself be recognized as a creditor of
that subsidiary. Accordingly, the Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Junior Subordinated Debentures
should look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. The Indenture does not limit the incurrence or
issuance of other secured or unsecured debt, including Senior Indebtedness, of
the Corporation or its subsidiaries. See "--Subordination."
INTEREST RATE
The interest period with respect to the Junior Subordinated Debentures is
each successive period from and including the immediately preceding Interest
Payment Date (or the date of original issuance, in the case of the initial
interest period) to but excluding the applicable Interest Payment Date. The
Bank of New York, as Calculation Agent (the "Calculation Agent"), will
calculate the Interest Rate for each interest period based on LIBOR determined
as of two London Business Days (defined as any day, other than a Saturday or
Sunday, on which banks are open for business in London) prior to the first day
of such interest period (each, a "Determination Date"). "LIBOR" means, with
respect to an interest period relating to an Interest Payment Date (in the
following order of priority):
(1) the rate (expressed as a percentage per annum) for Eurodollar
deposits having a three-month maturity that appears on Telerate Page 3750
as of 11:00 a.m. (London time) on the related Determination Date;
(2) if such rate does not appear on Telerate Page 3750 as of 11:00 a.m.
(London time) on the related Determination Date, LIBOR will be the
arithmetic mean (if necessary rounded upwards to the nearest whole multiple
of 0.00001%) of the rates (expressed as percentages per annum) for
Eurodollar deposits having a three-month maturity that appear on Reuter
Monitor Money Rates Page LIBO ("Reuters Page LIBO") as of 11:00 a.m.
(London time) on such Determination Date;
(3) if such rate does not appear on Reuters Page LIBO as of 11:00 a.m.
(London time) on the related Determination Date, the Calculation Agent will
request the principal London offices of four leading banks in the London
interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for
Eurodollar deposits having a three-month maturity as of 11:00 a.m. (London
time) on such Determination Date and, if at least two quotations are so
provided, LIBOR will be the arithmetic mean (if necessary rounded upwards
to the nearest whole multiple of 0.00001%) of such quotations;
(4) if fewer than two such quotations are provided as requested in clause
(3) above, the Calculation Agent will request four major New York City
banks to provide such banks' offered quotations (expressed as percentages
per annum) to leading European banks for loans in Eurodollars having a
three-month maturity as of 11:00 a.m. (London time) on the related
Determination Date and, if at least two such quotations are so provided,
LIBOR will be the arithmetic mean (if necessary rounded upwards to the
nearest whole multiple of 0.00001%) of such quotations; and
(5) if fewer than two such quotations are provided as requested in clause
(4) above, LIBOR will be LIBOR as determined on the immediately preceding
Determination Date.
If the rate for Eurodollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 or Reuters Page LIBO, as the case may
be, as of 11:00 a.m. (London time) on the related Determination Date is
superseded on Telerate Page 3750 or Reuters Page LIBO, as the case may be, by
a corrected rate before 12:00 noon (London time) on such Determination Date,
such corrected rate will be the applicable LIBOR for such Determination Date.
28
<PAGE>
Absent manifest error, the Calculation Agent's determination of LIBOR and
its calculation of the applicable Interest Rate for each interest period will
be final and binding. Investors may obtain the interest rates for the current
and preceding interest period by writing or calling the Corporate Trust
Department of the Calculation Agent at 101 Barclay Street, New York, New York
10286 (telephone (212) 815-5915).
FORM, REGISTRATION AND TRANSFER
If the Junior Subordinated Debentures are distributed to the holders of the
Trust Securities, the Junior Subordinated Debentures may be represented by one
or more global certificates registered in the name of Cede & Co. as the
nominee of DTC. The depositary arrangements for such Junior Subordinated
Debentures are expected to be substantially similar to those in effect for the
Capital Securities. For a description of DTC and the terms of the depositary
arrangements relating to payments, transfers, voting rights, prepayments,
notices and other matters, see "Description of Capital Securities--Form,
Denomination, Book-Entry Procedures and Transfer."
PAYMENT AND PAYING AGENTS
Payment of principal of (and premium, if any) and any interest on Junior
Subordinated Debentures will be made at the office of the Debenture Trustee in
The City of New York or at the office of such Paying Agent or Paying Agents as
the Corporation may designate from time to time, except that at the option of
the Corporation payment of any interest may be made except in the case of
Junior Subordinated Debentures in global form, (i) by check mailed to the
address of the Person entitled thereto as such address shall appear in the
register for Junior Subordinated Debentures or (ii) by transfer to an account
maintained by the Person entitled thereto as specified in such register,
provided that proper transfer instructions have been received by the relevant
Record Date. Payment of any interest on any Junior Subordinated Debenture will
be made to the Person in whose name such Junior Subordinated Debenture is
registered at the close of business on the Record Date for such interest,
except in the case of defaulted interest. The Corporation may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent; however, the Corporation will at all times be required to maintain a
Paying Agent in each Place of Payment for the Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any)
or interest has become due and payable shall, at the request of the
Corporation, be repaid to the Corporation and the holder of such Junior
Subordinated Debenture shall thereafter look, as a general unsecured creditor,
only to the Corporation for payment thereof.
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no Debenture Event of Default has occurred and is continuing, the
Corporation will have the right under the Indenture at any time during the
term of the Junior Subordinated Debentures to defer the payment of interest at
any time or from time to time for a period not exceeding 20 consecutive
quarterly periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity Date. At the end of
such Extension Period, the Corporation must pay all interest then accrued and
unpaid (together with interest thereon at the applicable Interest Rate,
compounded quarterly, to the extent permitted by applicable law). During an
Extension Period, interest will continue to accrue and holders of Junior
Subordinated Debentures (and holders of the Trust Securities while Trust
Securities are outstanding) will be required to accrue interest income for
United States federal income tax purposes prior to the receipt of cash
attributable to such income. See "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
During any Extension Period, the Corporation may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock) or (ii) make any payment of
principal, interest or premium,
29
<PAGE>
if any, on or repay, repurchase or redeem any debt securities of the
Corporation (including any Other Debentures) that rank pari passu with or
junior in right of payment to the Junior Subordinated Debentures or (iii) make
any guarantee payments with respect to any guarantee by the Corporation of the
debt securities of any subsidiary of the Corporation (including any Other
Guarantees) if such guarantee ranks pari passu with or junior in right of
payment to the Junior Subordinated Debentures (other than (a) dividends or
distributions in shares of or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, (d) as a result of a reclassification of the Corporation's capital
stock or the exchange or conversion of one class or series of the
Corporation's capital stock for another class or series of the Corporation's
capital stock (e) the purchase of fractional interests in shares of the
Corporation's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged, and (f)
purchases of common stock related to the issuance of common stock or rights
under any of the Corporation's benefit plans for its directors, officers or
employees or any of the Corporation's dividend reinvestment plans).
Prior to the termination of any Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 20 consecutive quarterly periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest
Payment Date, the Corporation may elect to begin a new Extension Period,
subject to the above requirements. No interest shall be due and payable during
an Extension Period, except at the end thereof. The Corporation must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election of any Extension Period (or an extension thereof) at least
five Business Days prior to the earlier of (i) the date the Distributions on
the Trust Securities would have been payable except for the election to begin
or extend such Extension Period or (ii) the date the Administrative Trustees
are required to give notice to any securities exchange or to holders of
Capital Securities of the record date or the date such Distributions are
payable, but in any event not less than five Business Days prior to such
record date. The Debenture Trustee shall give notice of the Corporation's
election to begin or extend a new Extension Period to the holders of the
Capital Securities. There is no limitation on the number of times that the
Corporation may elect to begin an Extension Period.
OPTIONAL PREPAYMENT
The Junior Subordinated Debentures will be prepayable, in whole or in part,
at the option of the Corporation on or after June 15, 2007, subject to the
Corporation having received prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal
Reserve, at a Prepayment Price equal to 100% of the principal amount of the
Junior Subordinated Debentures so redeemed plus accrued interest thereon to
the date of prepayment.
SPECIAL EVENT PREPAYMENT
If a Special Event shall occur and be continuing, the Corporation may, at
its option and subject to receipt of prior approval of the Federal Reserve if
then required under applicable capital guidelines or policies of the Federal
Reserve, prepay the Junior Subordinated Debentures in whole (but not in part)
at any time within 90 days of the occurrence of such Special Event, at a
Prepayment Price equal to 100% of the principal amount of the Junior
Subordinated Debentures plus accrued interest thereon to the date of
prepayment.
A "Special Event" means a Tax Event or a Regulatory Capital Event (as
defined below), as the case may be.
A "Tax Event" means the receipt by the Corporation and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change)
in, the laws or any regulations thereunder of the United States or any
political subdivision or taxing
30
<PAGE>
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which pronouncement or
decision is announced on or after May 30, 1997, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the Junior Subordinated Debentures, (ii) the
interest payable by the Corporation on the Junior Subordinated Debentures is
not, or within 90 days of the date of such opinion will not be, deductible by
the Corporation, in whole or in part, for United States federal income tax
purposes, or (iii) the Trust is, or will be within 90 days of the date of such
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
A "Regulatory Capital Event" means that the Corporation shall have received
an opinion of independent bank regulatory counsel experienced in such matters
to the effect that, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any rules, guidelines or policies of the Federal
Reserve or (b) any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change
is effective or which pronouncement or decision is announced on or after May
30, 1997, the Capital Securities do not constitute, or within 90 days of the
date thereof, will not constitute, Tier 1 capital (or its then equivalent);
provided, however, that the distribution of the Junior Subordinated Debentures
in connection with the liquidation of the Trust by the Corporation shall not
in and of itself constitute a Regulatory Capital Event unless such liquidation
shall have occurred in connection with a Tax Event.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by the Trust on the
outstanding Capital Securities and Common Securities shall not be reduced as a
result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be prepaid at its registered address. Unless the Corporation
defaults in payment of the prepayment price, on and after the prepayment date
interest ceases to accrue on such Junior Subordinated Debentures called for
prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums.
RESTRICTIONS ON CERTAIN PAYMENTS
The Corporation will also covenant that it will not, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock) or (ii) make any payment of
principal, interest or premium, if any, on or repay or repurchase or redeem
any debt securities of the Corporation (including Other Debentures) that rank
pari passu with or junior in right of payment to the Junior Subordinated
Debentures or (iii) make any guarantee payments with respect to any guarantee
by the Corporation of the debt securities of any subsidiary of the Corporation
(including under Other Guarantees) if such guarantee ranks pari passu or
junior in right of payment to the Junior Subordinated Debentures (other than
(a) dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee, (d) as a result of a reclassification of the
Corporation's capital stock or the exchange or conversion of one class or
series of the Corporation's capital stock for another class or series of the
Corporation's capital stock (e) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (f) purchases of common stock related to the issuance of common stock or
rights under any of the Corporation's
31
<PAGE>
benefit plans for its directors, officers or employees or any of the
Corporation's dividend reinvestment plans) if at such time (1) there shall
have occurred any event of which the Corporation has actual knowledge that (a)
is, or with the giving of notice or the lapse of time, or both, would be, a
Debenture Event of Default and (b) in respect of which the Corporation shall
not have taken reasonable steps to cure, (2) if such Junior Subordinated
Debentures are held by the Trust, the Corporation shall be in default with
respect to its payment of any obligations under the Guarantee or (3) the
Corporation shall have given notice of its election of an Extension Period as
provided in the Indenture and shall not have rescinded such notice, and such
Extension Period, or any extension thereof, shall have commenced.
MODIFICATION OF INDENTURE
From time to time the Corporation and the Debenture Trustee may, without the
consent of the holders of Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies (provided that any such
action does not materially adversely affect the interest of the holders of
Junior Subordinated Debentures) and qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting the Corporation and the Debenture Trustee, with
the consent of the holders of a majority in principal amount of Junior
Subordinated Debentures, to modify the Indenture in a manner affecting the
rights of the holders of Junior Subordinated Debentures; provided, that no
such modification may, without the consent of the holders of each outstanding
Junior Subordinated Debenture so affected, (i) change the Stated Maturity
Date, or reduce the principal amount of the Junior Subordinated Debentures or
reduce the rate or extend the time of payment of interest thereon or (ii)
reduce the percentage of principal amount of Junior Subordinated Debentures,
the holders of which are required to consent to any such modification of the
Indenture.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures constitutes a
"Debenture Event of Default" (whatever the reason for such Debenture Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures or any Other Debentures when due (subject to the deferral of any
due date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on the Junior
Subordinated Debentures or any Other Debentures when due, whether at
maturity, upon redemption, by declaration of acceleration of maturity or
otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to
the Corporation from the Debenture Trustee or the holders of at least 25%
in aggregate outstanding principal amount of Junior Subordinated
Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Corporation.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Junior Subordinated Debentures
may declare the principal due and payable immediately upon a Debenture Event
of Default. The holders of a majority in aggregate outstanding principal
amount of the Junior Subordinated Debentures may annul such declaration and
waive the default if the default (other than the non-payment of the principal
of the Junior Subordinated Debentures which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee.
32
<PAGE>
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures affected thereby may, on behalf of the holders
of all the Junior Subordinated Debentures, waive any past default, except a
default in the payment of principal (or premium, if any) on or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest (and premium, if any) and principal due otherwise
than by acceleration has been deposited with the Debenture Trustee) or a
default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Debenture Event of Default shall have occurred and be continuing and
shall be attributable to the failure of the Corporation to pay interest (or
premium, if any) on principal of the Junior Subordinated Debentures on the due
date, a holder of Capital Securities may institute a Direct Action. The
Corporation may not amend the Indenture to remove the foregoing right to bring
a Direct Action without the prior written consent of the holders of all of the
Capital Securities outstanding. If the right to bring a Direct Action is
removed, the Trust may become subject to the reporting obligations under the
Exchange Act. Notwithstanding any payments made to a holder of Capital
Securities by the Corporation in connection with a Direct Action, the
Corporation shall remain obligated to pay the principal of (or premium, if
any) or interest on the Junior Subordinated Debentures, and the Corporation
shall be subrogated to the rights of the holder of such Capital Securities
with respect to payments on the Capital Securities to the extent of any
payments made by the Corporation to such holder in any Direct Action.
The holders of the Capital Securities will not be able to exercise directly
any remedies, other than those set forth in the preceding paragraph, available
to the holders of the Junior Subordinated Debentures unless there shall have
been an Event of Default under the Trust Agreement. See "Description of
Capital Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Corporation shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any Person, and no
Person shall consolidate with or merge into the Corporation or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to the Corporation, unless: (i) in case the Corporation
consolidates with or merges into another Person or conveys or transfers its
properties and assets substantially as an entirety to any Person, the
successor Person is organized under the laws of the United States or any State
or the District of Columbia, and such successor Person expressly assumes the
Corporation's obligations on the Junior Subordinated Debentures; (ii)
immediately after giving effect thereto, no Debenture Event of Default, and no
event which, after notice or lapse of time or both, would become a Debenture
Event of Default, shall have occurred and be continuing; and (iii) certain
other conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Corporation that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at maturity within one year, and the Corporation deposits or causes to
be deposited with the Debenture Trustee funds, in trust, for the purpose and
in an amount sufficient to pay and discharge the entire indebtedness on the
Junior Subordinated Debentures not previously delivered to the Debenture
Trustee for cancellation, for the principal (and premium, if any) and interest
to the date of the deposit or to the Stated Maturity Date, as the case may be,
then the Indenture will cease to be of further effect (except as to the
Corporation's obligations to
33
<PAGE>
pay all other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Corporation
will be deemed to have satisfied and discharged the Indenture.
SUBORDINATION
In the Indenture, the Corporation has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Indebtedness to the extent provided in the
Indenture. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Indebtedness
will first be entitled to receive payment in full of all Allocable Amounts (as
defined below) in respect of such Senior Indebtedness before the holders of
Junior Subordinated Debentures will be entitled to receive or retain any
payment in respect thereof.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full of all
Allocable Amounts in respect of such Senior Indebtedness before the holders of
Junior Subordinated Debentures will be entitled to receive or retain any
payment in respect of the Junior Subordinated Debentures.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Junior Subordinated Debentures may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Indebtedness, or an event of default with respect to any Senior
Indebtedness resulting in the acceleration of the maturity thereof, or if any
judicial proceeding shall be pending with respect to any such default.
"Allocable Amounts," when used with respect to any Senior Indebtedness,
means all amounts due or to become due on such Senior Indebtedness less, if
applicable, any amount which would have been paid to, and retained by, the
holders of such Senior Indebtedness (whether as a result of the receipt of
payments by the holders of such Senior Indebtedness from the Corporation or
any other obligor thereon or from any holders of, or trustee in respect of,
other indebtedness that is subordinate and junior in right of payment to such
Senior Indebtedness pursuant to any provision of such indebtedness for the
payment over of amounts received on account of such indebtedness to the
holders of such Senior Indebtedness or otherwise) but for the fact that such
Senior Indebtedness is subordinate or junior in right of payment to (or
subject to a requirement that amounts received on such Senior Indebtedness be
paid over to obligees on) trade accounts payable or accrued liabilities
arising in the ordinary course of business.
"Indebtedness for Money Borrowed" shall mean 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.
"Indebtedness Ranking on a Parity with the Junior Subordinated Debentures"
shall mean (i) Indebtedness for Money Borrowed, whether outstanding on the
date of execution of the Indenture or thereafter created, assumed or incurred,
which specifically by its terms ranks equally with and not prior to the Junior
Subordinated Debentures in the right of payment upon the happening of the
dissolution or winding-up or liquidation or reorganization of the Corporation
and (ii) all other debt securities, and guarantees in respect of those debt
securities, issued to any other trust, or a trustee of such trust, partnership
or other entity affiliated with the Corporation that is a financing vehicle of
the Corporation (a "financing entity") in connection with the issuance by such
financing entity of equity securities or other securities guaranteed by the
Corporation pursuant to an instrument that ranks pari passu with or junior in
right of payment to the Guarantee.
"Indebtedness Ranking Junior to the Junior Subordinated Debentures" shall
mean any Indebtedness for Money Borrowed, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred, which
specifically by its terms ranks junior to and not equally with or prior to the
Junior
34
<PAGE>
Subordinated Debentures (and any other Indebtedness Ranking on a Parity with
the Junior Subordinated Debentures) in right of payment upon the happening of
the dissolution or winding-up or liquidation or reorganization of the
Corporation. The securing of any Indebtedness for Money Borrowed, otherwise
constituting Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures or Indebtedness Ranking Junior to the Junior Subordinated
Debentures, as the case may be, shall not be deemed to prevent such
Indebtedness for Money Borrowed from constituting Indebtedness Ranking on a
Parity with the Junior Subordinated Debentures or Indebtedness Ranking Junior
to the Junior Subordinated Debentures, as the case may be.
"Senior Indebtedness" shall mean all Indebtedness for Money Borrowed,
whether outstanding on the date of execution of the Indenture or thereafter
created, assumed or incurred, except Indebtedness Ranking on a Parity with the
Junior Subordinated Debentures or Indebtedness Ranking Junior to the Junior
Subordinated Debentures, and any deferrals, renewals or extensions of such
Senior Indebtedness.
The Indenture places no limitation on the amount of secured or unsecured
debt, including Senior Indebtedness, that may be incurred by the Corporation
or its subsidiaries. The Corporation and its subsidiaries expect from time to
time to incur additional indebtedness, including Senior Indebtedness.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee is subject to all the duties and responsibilities
specified with respect to an indenture trustee under the Trust Indenture Act.
Subject to such provisions, the Debenture Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of any
holder of Junior Subordinated Debentures, unless offered reasonable indemnity
by such holder against the costs, expenses and liabilities which might be
incurred thereby. The Debenture Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance
of its duties if the Debenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
35
<PAGE>
DESCRIPTION OF GUARANTEE
The Guarantee will be executed and delivered by the Corporation concurrently
with the issuance by the Trust of the Capital Securities for the benefit of
the holders from time to time of the Capital Securities. The Bank of New York
will act as indenture trustee ("Guarantee Trustee") under the Guarantee. The
Guarantee is qualified as an indenture under the Trust Indenture Act. The
Guarantee Trustee will act as the Guarantee Trustee for the purposes of
compliance with the Trust Indenture Act and will hold the Guarantee for the
benefit of the holders of the Capital Securities. This summary of certain
terms and provisions of the Guarantee does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the
provisions of the Guarantee, including the definitions therein of certain
terms, and those made a part of the Guarantee by the Trust Indenture Act.
GENERAL
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
below) to the holders of the Capital Securities, as and when due, regardless
of any defense, right of set-off or counterclaim that the Trust may have or
assert other than the defense of payment. The following payments with respect
to the Capital Securities, to the extent not paid by or on behalf of the Trust
(the "Guarantee Payments"), will be subject to the Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on Capital
Securities, to the extent that the Trust has funds on hand legally available
therefor at such time, (ii) the applicable Redemption Price with respect to
Capital Securities called for redemption, to the extent that the Trust has
funds on hand legally available therefor at such time, or (iii) upon a
voluntary or involuntary termination and liquidation of the Trust (unless the
Junior Subordinated Debentures are distributed to holders of the Capital
Securities), the lesser of (a) the Liquidation Distribution and (b) the amount
of assets of the Trust remaining available for distribution to holders of
Capital Securities. The Corporation's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by the Corporation
to the holders of the Capital Securities or by causing the Trust to pay such
amounts to such holders.
The Corporation will, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures and the Indenture, taken together, fully, irrevocably
and unconditionally guarantee all of the Trust's obligations under the Capital
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only
the combined operation of these documents that has the effect of providing a
full, irrevocable and unconditional guarantee of the Trust's obligations under
the Capital Securities. See "Relationship Among the Capital Securities, the
Junior Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Corporation and
will rank subordinate and junior in right of payment to all Senior
Indebtedness in the same manner as Junior Subordinated Debentures, except in
the case of a bankruptcy or insolvency proceeding in respect of the
Corporation, in which case the Guarantee will rank subordinate and junior in
right of payment to all liabilities (other than Other Guarantees) of the
Corporation. The Guarantee will rank pari passu with all Other Guarantees
issued by the Corporation.
Because the Corporation is a holding company, the right of the Corporation
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise, is subject to the
prior claims of creditors of that subsidiary, except to the extent the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Corporation's obligations under the Guarantee will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and claimants should look only to the assets of
the Corporation for payments thereunder. See "Description of the Junior
Subordinated Debentures--General." The Guarantee does not limit the incurrence
or issuance of debt of the Corporation's subsidiaries.
36
<PAGE>
The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Corporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held for the benefit of the holders of the Capital
Securities. The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Trust or upon
distribution to the holders of the Capital Securities of the Junior
Subordinated Debentures. The Guarantee does not place a limitation on the
amount of additional Senior Indebtedness that may be incurred by the
Corporation. The Corporation expects from time to time to incur additional
indebtedness constituting Senior Indebtedness.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Capital Securities (in which case no vote or
consent will be required), the Guarantee may not be amended without the prior
approval of the holders of a majority of the Liquidation Amount of such
outstanding Capital Securities. The manner of obtaining any such approval will
be as set forth under "Description of the Capital Securities--Voting Rights;
Amendment of the Trust Agreement." All guarantees and agreements contained in
the Guarantee Agreement shall bind the successors, assigns, receivers,
trustees and representatives of the Corporation and shall inure to the benefit
of the holders of the Capital Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Corporation to perform any of its payment or other obligations thereunder. The
holders of a majority in Liquidation Amount of the Capital Securities will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee.
Any holder of the Capital Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity.
The Corporation, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Corporation in performance of the Guarantee, will undertake to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee will be
under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of the Capital Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the applicable Redemption Price of the Capital Securities, upon
full payment of the Liquidation Amount payable upon liquidation of the Trust
or upon distribution of Junior Subordinated Debentures to the holders of the
Capital Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the Capital
Securities must restore payment of any sums paid under the Capital Securities
or the Guarantee.
37
<PAGE>
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Capital Securities
(to the extent the Trust has funds on hand legally available for the payment
of such Distributions) will be irrevocably guaranteed by the Corporation as
and to the extent set forth under "Description of Guarantee." Taken together,
the Corporation's obligations under the Junior Subordinated Debentures, the
Indenture, the Trust Agreement and the Guarantee will provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the Capital Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation
of these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Capital
Securities. If and to the extent that the Corporation does not make the
required payments on the Junior Subordinated Debentures, the Trust will not
have sufficient funds to make the related payments, including Distributions,
on the Capital Securities. The Guarantee will not cover any such payment when
the Trust does not have sufficient funds on hand legally available therefor.
In such event, the remedy of a holder of Capital Securities is to institute a
Direct Action. The obligations of the Corporation under the Guarantee will
rank subordinate and junior in right of payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Capital Securities, primarily
because: (i) the aggregate principal amount or Prepayment Price of the Junior
Subordinated Debentures will be equal to the sum of the Liquidation Amount or
Redemption Price, as applicable, of the Capital Securities and related Common
Securities; (ii) the Interest Rate and interest and other payment dates on the
Junior Subordinated Debentures will match the Distribution Rate and
Distribution and other payment dates for the Trust Securities; (iii) the
Corporation shall pay for all and any costs, expenses and liabilities of the
Trust except the Trust's obligations to holders of Trust Securities under such
Trust Securities; and (iv) the Trust Agreement will provide that the Trust is
not authorized to engage in any activity that is not consistent with the
limited purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of any Capital Security may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Trust
or any other person or entity. A default or event of default under any Senior
Indebtedness would not constitute a default or Event of Default under the
Trust Agreement. However, in the event of payment defaults under, or
acceleration of, Senior Indebtedness, the subordination provisions of the
Indenture will provide that no payments may be made in respect of the Junior
Subordinated Debentures until such Senior Indebtedness has been paid in full
or any payment default thereunder has been cured or waived. Failure to make
required payments on Junior Subordinated Debentures would constitute an Event
of Default under the Trust Agreement.
LIMITED PURPOSE OF THE TRUST
The Capital Securities will represent beneficial interests in the Trust, and
the Trust exists for the sole purpose of issuing and selling the Trust
Securities, using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures and engaging in only those other
activities necessary, advisable or
38
<PAGE>
incidental thereto. A principal difference between the rights of a holder of a
Capital Security and a holder of a Junior Subordinated Debenture is that a
holder of a Junior Subordinated Debenture will be entitled to receive from the
Corporation the principal amount of (and premium, if any) and interest on
Junior Subordinated Debentures held, while a holder of Capital Securities is
entitled to receive Distributions from the Trust (or, in certain
circumstances, from the Corporation under the Guarantee) if and to the extent
the Trust has funds on hand legally available for the payment of such
Distributions.
RIGHTS UPON TERMINATION
Unless the Junior Subordinated Debentures are distributed to holders of the
Trust Securities, upon any voluntary or involuntary termination and
liquidation of the Trust, the holders of the Trust Securities will be entitled
to receive, out of assets held by the Trust, the Liquidation Distribution in
cash. See "Description of Capital Securities--Liquidation of the Trust and
Distribution of Junior Subordinated Debentures." Upon any voluntary or
involuntary liquidation or bankruptcy of the Corporation, the Property
Trustee, as holder of the Junior Subordinated Debentures, would be a
subordinated creditor of the Corporation, subordinated in right of payment to
all Senior Indebtedness as set forth in the Indenture, but entitled to receive
payment in full of principal (and premium, if any) and interest, before any
stockholders of the Corporation receive payments or distributions. Since the
Corporation will be the guarantor under the Guarantee and will agree to pay
for all costs, expenses and liabilities of the Trust (other than the Trust's
obligations to the holders of its Trust Securities), the positions of a holder
of Capital Securities and a holder of Junior Subordinated Debentures relative
to stockholders of the Corporation in the event of liquidation or bankruptcy
of the Corporation are expected to be substantially the same.
39
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Brown & Wood LLP, counsel to the Corporation and the Trust
("Tax Counsel"), the following is a summary of certain of the material United
States federal income tax consequences of the purchase, ownership and
disposition of Capital Securities held as capital assets by a holder who
purchases such Capital Securities upon initial issuance. It does not deal with
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, or persons that will hold the
Capital Securities as a position in a "straddle," as part of a "synthetic
security" or "hedge," as part of a "conversion transaction" or other
integrated investment, or as other than a capital asset. This summary also
does not address the tax consequences to persons that have a functional
currency other than the U.S. dollar or the tax consequences to shareholders,
partners or beneficiaries of a holder of Capital Securities. Further, it does
not include any description of any alternative minimum tax consequences or the
tax laws of any state or local government or of any foreign government that
may be applicable to the Capital Securities. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
thereunder, the administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change, possibly on a retroactive
basis.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Junior Subordinated Debentures, Tax
Counsel will render its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Junior Subordinated Debentures will be classified for
United States federal income tax purposes as indebtedness of the Corporation.
An opinion of Tax Counsel, however, is not binding on the Internal Revenue
Service (the "IRS") or the courts. Prospective investors should note that no
rulings have been or are expected to be sought from the IRS with respect to
any of these issues and no assurance can be given that the IRS will not take
contrary positions. Moreover, no assurance can be given that any of the
opinions expressed herein will not be challenged by the IRS or, if challenged,
that such a challenge would not be successful.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Capital Securities, Tax Counsel will
render its opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Trust Agreement and the
Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Trust will be classified for United
States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Accordingly, for United States federal
income tax purposes, each holder of Capital Securities generally will be
considered the owner of an undivided interest in the Junior Subordinated
Debentures, and each holder will be required to include in its gross income
any interest (or OID accrued) with respect to its allocable share of those
Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations") applicable to
debt instruments issued on or after August 13, 1996, a "remote" contingency
that stated interest will not be timely paid will be ignored in determining
whether a debt instrument is issued with OID. The Corporation believes that
the likelihood of its exercising its option to defer payments of interest is
"remote" since exercising that option would prevent the Corporation from
declaring dividends on any class of its equity securities. Accordingly, the
Corporation intends to take the position, based on the advice of Tax Counsel,
that the Junior Subordinated Debentures will not be considered to be issued
with OID and, accordingly, stated interest on the Junior Subordinated
Debentures generally will be taxable to a holder as ordinary income at the
time it is paid or accrued in accordance with such holder's method of
accounting.
40
<PAGE>
Under the Regulations, if the Corporation were to exercise its option to
defer payments of interest, the Junior Subordinated Debentures would at that
time be treated as issued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the
Junior Subordinated Debentures remain outstanding. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures would thereafter be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income. Consequently, a
holder of Capital Securities would be required to include in gross income OID
even though the Corporation would not make actual cash payments during an
Extension Period. Moreover, under the Regulations, if the option to defer the
payment of interest was determined not to be "remote", the Junior Subordinated
Debentures would be treated as having been originally issued with OID. In such
event, all of a holder's taxable interest income with respect to the Junior
Subordinated Debentures would be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with
respect to the Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST
The Corporation will have the right at any time to liquidate the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of
the Trust Securities, subject to (i) the Corporation having received an
opinion of counsel to the effect that such distribution will not be a taxable
event to holders of Capital Securities and (ii) the prior approval of the
Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve. Such a distribution, for United States
federal income tax purposes, would be treated as a nontaxable event to each
holder, and each holder would receive an aggregate tax basis in the Junior
Subordinated Debentures equal to such holder's aggregate tax basis in its
Capital Securities. A holder's holding period in the Junior Subordinated
Debentures so received in liquidation of the Trust would include the period
during which the Capital Securities were held by such holder. If, however, the
Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of its dissolution, the
distribution of the Junior Subordinated Debentures may constitute a taxable
event to holders of Capital Securities and a holder's holding period in Junior
Subordinated Debentures would begin on the date such Junior Subordinated
Debentures were received.
Under certain circumstances described herein (see "Description of Capital
Securities"), the Junior Subordinated Debentures may be prepaid for cash and
the proceeds of such prepayment distributed to holders in redemption of their
Capital Securities. Under current law, such a redemption would, for United
States federal income tax purposes, constitute a taxable disposition of the
redeemed Capital Securities, and a holder could recognize gain or loss as if
it sold such redeemed Capital Securities for cash. See "--Sales of Capital
Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities (including a redemption of such
Capital Securities by the Corporation) will recognize gain or loss equal to
the difference between its adjusted tax basis in the Capital Securities and
the amount realized on the sale of such Capital Securities (other than with
respect to accrued and unpaid interest which has not yet been included in
income, which will be treated as ordinary income). A holder's adjusted tax
basis in the Capital Securities generally will be its initial purchase price
increased by OID (if any) previously includible in such holder's gross income
to the date of disposition and decreased by payments (if any) received on the
Capital Securities in respect of OID. Such gain or loss generally will be a
capital gain or loss and generally will be a long-term capital gain or loss if
the Capital Securities have been held for more than one year.
41
<PAGE>
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who uses the accrual method of accounting
for tax purposes (and a cash method holder, if the Junior Subordinated
Debentures are deemed to have been issued with OID) who disposes of his
Capital Securities between record dates for payments of distributions thereon
will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income (i.e., interest or, possibly, OID), and to add such amount to his
adjusted tax basis in his pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than
the holder's adjusted tax basis (which will include all accrued but unpaid
interest) a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the Clinton Administration's Fiscal 1998
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate
issuers a deduction for interest in respect of certain debt obligations, such
as the Junior Subordinated Debentures, issued on or after the date of "first
committee action," if such debt obligations have a maximum term in excess of
15 years and are not shown as indebtedness on the issuer's applicable
consolidated balance sheet. Since the Proposed Legislation has not yet been
introduced by any member of the 105th Congress, the Proposed Legislation
should not apply to the Junior Subordinated Debentures. It is possible,
however, that the Proposed Legislation or any other legislation enacted by
Congress may give rise to a Tax Event, in which event the Corporation would be
permitted, upon approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve, to cause a
redemption of the Trust Securities at the Early Redemption Price by electing
to prepay the Junior Subordinated Debentures at the Prepayment Price. See
"Description of the Capital Securities--Redemption" and "Description of Junior
Subordinated Debentures--Special Event Prepayment."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S.
Holder for United States federal income tax purposes. A "U.S. Holder" is a
holder of Capital Securities who or which is (i) a citizen or individual
resident (or is treated as a citizen or individual resident) of the United
States for federal income tax purposes, (ii) a corporation or partnership
created or organized (or treated as created or organized for federal income
tax purposes) in or under the laws of the United States or any political
subdivision thereof, (iii) an estate the income of which is includible in its
gross income for federal income tax purposes without regard to its source or
(iv) a trust if, and only if, (a) a court within the United States is able to
exercise primary supervision over the administration of the trust and (b) one
or more United States trustees have the authority to control all substantial
decisions of the trust). Under present United States federal income tax laws:
(i) payments by the Trust or any of its paying agents to any holder of a
Capital Security who or which is a United States Alien Holder will not be
subject to United States federal withholding tax; provided that, (a) the
beneficial owner of the Capital Security does not actually or constructively
own 10 percent or more of the total combined voting power of all classes of
stock of the Corporation entitled to vote, (b) the beneficial owner of the
Capital Security is not a controlled foreign corporation that is related to
the Corporation through stock ownership, and (c) either (A) the beneficial
owner of the Capital Security certifies to the Trust or its agent, under
penalties of perjury, that it is not a United States holder and provides its
name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business (a "Financial Institution"), and holds the Capital
Security in such capacity, certifies to the Trust or its agent, under
penalties of perjury, that such statement has been received from the
beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes the Trust or its agent with a copy thereof; and
(ii) a United States Alien Holder of a Capital Security will not be subject to
United States federal withholding tax on any gain realized upon the sale or
other disposition of a Capital Security.
42
<PAGE>
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will
be allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
43
<PAGE>
ERISA CONSIDERATIONS
The Corporation, the obligor with respect to the Junior Subordinated
Debentures held by the Trust, and its affiliates and the Property Trustee may
be considered a "party in interest" (within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) or a
"disqualified person" (within the meaning of Section 4975 of the Code) with
respect to many employee benefit plans ("Plans") that are subject to ERISA.
Any purchaser proposing to acquire Capital Securities with assets of any Plan
should consult with its counsel. The purchase and/or holding of Capital
Securities by a Plan that is subject to the fiduciary responsibility
provisions of ERISA or the prohibited transaction provisions of Section 4975
of the Code (including individual retirement arrangements and other plans
described in Section 4975(e)(1) of the Code) and with respect to which the
Corporation, the Property Trustee or any affiliate is a service provider (or
otherwise is a party in interest or a disqualified person) may constitute or
result in a prohibited transaction under ERISA or Section 4975 of the Code,
unless such Capital Securities are acquired pursuant to and in accordance with
an applicable exemption, such as Prohibited Transaction Class Exemption
("PTCE") 84-14 (an exemption for certain transactions determined by an
independent qualified professional asset manager), PTCE 91-38 (an exemption
for certain transactions involving bank collective investment funds), PTCE 90-
1 (an exemption for certain transactions involving insurance company pooled
separate accounts), PTCE 95-60 (an exemption for transactions involving
certain insurance company general accounts) or PTCE 96-23 (an exemption for
certain transactions determined by an in-house manager). In addition, a Plan
fiduciary considering the purchase of Capital Securities should be aware that
the assets of the Trust may be considered "plan assets" for ERISA purposes.
Therefore, a Plan fiduciary should consider whether the purchase of Capital
Securities could result in a delegation of fiduciary authority to the Property
Trustee, and, if so, whether such a delegation of authority is permissible
under the Plan's governing instrument or any investment management agreement
with the Plan. In making such determination, a Plan fiduciary should note that
the Property Trustee is a bank qualified to be an investment manager (within
the meaning of section 3(38) of ERISA) to which such a delegation of authority
generally would be permissible under ERISA. Further, prior to an Event of
Default with respect to the Junior Subordinated Debentures, the Property
Trustee will have only limited custodial and ministerial authority with
respect to Trust assets.
44
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase Agreement (the
"Purchase Agreement") among the Corporation, the Trust and Morgan Stanley &
Co. Incorporated ("Morgan Stanley"), Credit Suisse First Boston Corporation,
Lehman Brothers Inc. and Salomon Brothers Inc (collectively, the
"Underwriters"), the Corporation and the Trust have agreed that the Trust will
sell to the Underwriters, and the Underwriters have agreed, severally and not
jointly, to purchase from the Trust, the respective number of Capital
Securities set forth below opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER CAPITAL SECURITIES
----------- ------------------
<S> <C>
Morgan Stanley & Co. Incorporated...................... 62,500
Credit Suisse First Boston Corporation................. 62,500
Lehman Brothers Inc. .................................. 62,500
Salomon Brothers Inc................................... 62,500
-------
Total................................................ 250,000
=======
</TABLE>
The Underwriters propose to offer the Capital Securities initially at the
price to public set forth on the cover of this Prospectus and to certain
dealers at such price less a concession of not more than $6.00 per Capital
Security. The Underwriters may allow and such dealers may reallow a concession
of not more than $2.50 per Capital Security to certain other dealers. After
the initial offering, the price to public, concession and reallowance may be
changed.
The Purchase Agreement provides that the obligation of the Underwriters to
pay for and accept delivery of the Capital Securities is subject to certain
conditions, including delivery of certain legal opinions by counsel for the
Underwriters.
In view of the fact that the proceeds of the sale of the Capital Securities
will be invested in the Junior Subordinated Debentures, the Purchase Agreement
provides that the Corporation will pay, as compensation to the Underwriters,
an amount of $10.00 per Capital Security. The Underwriters have agreed to
reimburse the Corporation for expenses incurred by the Corporation in
connection with this offering and certain related expenses.
The Capital Securities constitute a new issue of securities with no
established trading market. The Corporation has been advised by the
Underwriters that they intend to make a market in the Capital Securities, but
they are not obligated to do so and such market making may be interrupted or
discontinued without notice. No assurance can be given as to the development
or liquidity of any trading market for the Capital Securities.
The Corporation and the Trust have agreed in the Purchase Agreement that,
subject to certain conditions, prior to the closing under the Purchase
Agreement, neither will offer, sell, contract to sell or otherwise dispose of
any securities that are substantially similar to the Capital Securities or
that are convertible into or exchangeable for, or otherwise represent a right
to acquire, any such securities, except in the offering or with the prior
written consent of Morgan Stanley.
The Corporation and the Trust have agreed to indemnify the Underwriters and
certain other persons against certain liabilities, including liabilities under
the Securities Act, and to contribute to payments the Underwriters may be
required to make in respect thereof.
Any or all of the Underwriters have in the past and may in the future serve
as a financial advisor to the Corporation.
Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the Capital Securities offered hereby as interests in a
direct participation program, the offering is being made in compliance with
Rule 2810 of the NASD's Conduct Rules. Offers and sales of Capital Securities
will be made only to (i)
45
<PAGE>
"qualified institutional buyers," as defined in Rule 144A under the Securities
Act or (ii) institutional "accredited
investors," as defined in Rule 501(a)(1), (2) or (3) of Regulation D under the
Securities Act, for whom an investment in the Capital Securities is
appropriate. The Underwriters may not confirm sales to any accounts over which
they exercise discretionary authority without the prior written approval of
the transaction by the customer.
In order to facilitate the offering of the Capital Securities, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Capital Securities. Specifically, the Underwriters may
overallot in connection with the offering, creating a short position in the
Capital Securities for their own account. In addition, to cover overallotments
or to stabilize the price of the Capital Securities, the Underwriters may bid
for, and purchase, the Capital Securities in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the Capital Securities in the
offering, if the syndicate repurchases previously distributed Capital
Securities in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Capital Securities above independent
market levels. The Underwriters are not required to engage in these
activities, and may end any of these activities at any time.
Neither the Trust nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Capital Securities.
In addition, neither the Trust nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
VALIDITY OF SECURITIES
The validity of the Capital Securities, the Guarantee and the Junior
Subordinated Debentures will be passed upon for the Corporation and the Trust
by Brown & Wood LLP, New York, New York and for the Underwriters by Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York. Certain matters relating
to United States federal income tax considerations will be passed upon for the
Corporation and the Trust by Brown & Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Corporation and subsidiaries,
contained in and incorporated by reference into the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996, have been
incorporated herein by reference in reliance upon the reports set forth
therein of Coopers & Lybrand L.L.P., independent auditors, and upon the
authority of such firm as experts in accounting and auditing.
46
