<PAGE>
Filed Pursuant to Rule 424(b)(2)
File No. 333-67383
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 2, 1999)
$1,000,000,000
BANKBOSTON CORPORATION
MEDIUM-TERM NOTES
---------------
BankBoston Corporation may offer from time to time Medium-Term Notes. The
specific terms of any Notes offered will be included in a Pricing Suppplement.
Unless the Pricing Supplement provides otherwise, the Notes offered will have
the following general terms:
<TABLE>
<S> <C>
. Stated maturities of 9 months or . Interest payments on Fixed Rate
more Notes on each June 15 and December 15
. Fixed or floating interest rate. . Interest payments on Floating
The floating interest rate formula Rate Notes monthly, quarterly,
will be based on: semi-annually or annually
-- CMT rate . Redemption and/or repayment
provisions, if applicable,
-- Commercial paper rate whether mandatory or at our
option
-- Federal Funds Rate
. Payments in U.S. dollars or a
-- LIBOR foreign or composite currency
-- Prime rate . Minimum denominations of $1,000
or other specified denominations
-- Treasury rate for a foreign currency or unit of
currencies
-- Any other rate specified in the
applicable Pricing Supplement
</TABLE>
---------------
Investing in the Notes involves certain risks. See "Risk Factors" on page S-3.
---------------
<TABLE>
<CAPTION>
Price to Agents' Discounts Proceeds to
Public and Commissions Corporation
-------------- ----------------------- ---------------------------
<S> <C> <C> <C>
Per Note.. 100% .125% - .750% 99.875% - 99.250%
Total..... $1,000,000,000 $1,250,000 - $7,500,000 $998,750,000 - $992,500,000
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities or determined if this Prospectus
Supplement or the accompanying Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Each Agent will solicit offers to purchase the Notes as an agent for BankBoston
Corporation. Each Agent has agreed to use its reasonable efforts to sell the
Notes.
The Notes constitute our unsecured obligations and are not savings accounts,
deposits or other obligations of any of our bank or nonbank subsidiaries. The
Notes are not insured by the Federal Deposit Insurance Corporation, the Bank
Insurance Fund or any other governmental agency.
---------------
MORGAN STANLEY DEAN WITTER BANCBOSTON ROBERTSON STEPHENS INC.
BEAR, STEARNS & CO. INC. CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON LEHMAN BROTHERS
MERRILL LYNCH & CO. SALOMON SMITH BARNEY
February 3, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement
Risk Factors............................................................. S-3
Consolidated Ratios of Earnings to Fixed Charges......................... S-4
Description of Notes..................................................... S-5
Special Provisions Relating to Foreign Currency Notes.................... S-24
Certain United States Federal Income Tax Considerations.................. S-27
Plan of Distribution..................................................... S-37
Legal Opinions........................................................... S-38
Prospectus
BankBoston Corporation................................................... 3
Where You can Find More Information...................................... 3
Incorporation of Information We File with the SEC........................ 3
Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed
Charges and Preferred Stock Dividend Requirements....................... 4
Supervision and Regulation............................................... 4
Use of Proceeds.......................................................... 5
Description of Debt Securities........................................... 6
Description of Preferred Stock........................................... 16
Description of Common Stock.............................................. 21
Description of Capital Securities........................................ 23
Description of Securities Warrants....................................... 23
Plan of Distribution..................................................... 25
Legal Opinions........................................................... 26
Experts.................................................................. 26
</TABLE>
You should rely only on the information contained or incorporated by
reference in this Prospectus Supplement and in the accompanying Prospectus. We
have not, and the Agents have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the Agents
are not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information
appearing in this Prospectus Supplement and in the accompanying Prospectus, as
well as information we previously filed with the Securities and Exchange
Commission and incorporated by reference, is accurate as of the date on the
front cover of this Prospectus Supplement only. Our business, financial
condition, results of operations and prospects may have changed since that
date.
S-2
<PAGE>
RISK FACTORS
Your investment in the Notes will include certain risks. This Prospectus
Supplement does not describe all of the risks of an investment in Notes,
whether resulting from such Notes being denominated or payable in, or
determined by reference to, a currency or composite currency other than U.S.
dollars or to one or more interest rate, currency or other indices or formulas,
or otherwise. We and the Agents disclaim any responsibility to advise you of
such risks as they exist at the date of this Prospectus Supplement or as they
change from time to time. You should consult your own financial and legal
advisors as to the risks entailed by an investment in such Notes and the
suitability of investing in such Notes in light of your particular
circumstances. Such Notes are not an appropriate investment for investors who
are unsophisticated with respect to foreign currency transactions or
transactions involving the applicable interest rate or currency index or other
indices or formulas. Prospective investors should carefully consider, among
other factors, the matters described below.
Structure Risks
General
If you invest in Notes indexed to one or more interest rate, currency or
other indices or formulas, there will be significant risks not associated with
a conventional fixed rate or floating rate debt security. These risks include
fluctuation of the indices or formulas and the possibility that principal,
premium or interest may not be paid or, if paid, may be a lower amount and at
different times than you may have expected. We have no control over many
matters, including economic, financial and political events, that are important
in determining the existence, magnitude and longevity of these risks and their
results. In addition, if an index or formula used to determine any amounts
payable with respect to the Notes contains a multiplier or leverage factor, the
effect of any change in the index or formula will be magnified. In recent
years, values of certain indices and formulas have been volatile and volatility
in those and other indices and formulas may continue in the future.
Fluctuations in the past, however, are not necessarily indicative of what may
occur in the future.
Redemption
If your Notes are redeemable at our option or are otherwise subject to
mandatory redemption, we may (in the case of optional redemption) or must (in
the case of mandatory redemption) choose to redeem the Notes at times when
prevailing interest rates may be relatively low. Accordingly, you may not be
able to reinvest the redemption proceeds in a comparable security at an
effective interest rate as high as that of the Notes.
Uncertain Trading Markets
The Notes will not have an established trading market when issued and we
cannot assure that a trading market for your Notes will ever develop or be
maintained. Many factors independent of our creditworthiness affect the trading
market. These factors include:
. complexity and volatility of the index or formula applicable to the
Notes,
. method of calculating the principal, any premium and interest in respect
of the Notes,
. time remaining to the maturity of the Notes,
. outstanding amount of the Notes,
. redemption features of the Notes,
. amount of other debt securities linked to the index or formula
applicable to the Notes,
. index or formula applicable to the Notes, and
. level, direction and volatility of market interest rates.
In addition, certain Notes may have a more limited trading market and
experience more price volatility because they were designed for specific
investment objectives or strategies. There may be a limited number of buyers
when you decide to sell the Notes. This may affect the price you receive for
the Notes or your ability to
S-3
<PAGE>
sell the Notes at all. You should not purchase Notes unless you understand and
know you can bear the risk that such Notes may not be readily saleable, that
the value of such Notes will fluctuate over time and that such fluctuations may
be significant.
Exchange Rates and Exchange Controls
If you invest in Notes that are denominated and/or payable in a currency
other than U.S. dollars or in a composite currency ("Foreign Currency Notes"),
there will be significant risks that are not associated with an investment in a
debt security denominated and payable in U.S. dollars. Such risks include the
possibility of material changes in the exchange rate between U.S. dollars and
your payment currency and the possible imposition or modification of exchange
controls by the applicable governments. We have no control over the factors
that generally affect these risks, such as economic, financial and political
events and the supply and demand for the applicable currencies or composite
currencies. Moreover, if payments on your Foreign Currency Notes are determined
by reference to a formula containing a multiplier or leverage factor, the
effect of any change in the exchange rates between the applicable currencies
will be magnified. In recent years, exchange rates between certain currencies
have been highly volatile and volatility between these currencies or with other
currencies may be expected in the future. Fluctuations between currencies in
the past are not necessarily indicative, however, of fluctuations that may
occur in the future. Depreciation of your payment currency would result in a
decrease in the U.S. dollar-equivalent yield of your Foreign Currency Notes, in
the U.S. dollar-equivalent value of the principal and any premium payable at
maturity or earlier redemption of your Foreign Currency Notes and, generally,
in the U.S. dollar-equivalent market value of your Foreign Currency Notes.
Governmental exchange controls could affect exchange rates and the
availability of your payment currency on a required payment date. Even if there
are no exchange controls, it is possible that your payment currency will not be
available on a required payment date due to other circumstances beyond our
control. In these cases, we will be allowed to satisfy our obligations in
respect of your Foreign Currency Notes in U.S. dollars.
Credit Ratings
The credit ratings of our medium-term note program may not reflect the
potential impact of all risks related to structure and other factors on the
value of your Notes. In addition, real or anticipated changes in our credit
ratings will generally affect the market value of your Notes.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
Our ratios of earnings to fixed charges are set forth below for the periods
indicated:
<TABLE>
<CAPTION>
Nine
Months
Ended
September
30,
----------
1998 1997
---- ----
<S> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on Deposits.................................... 2.03x 2.33x
Including Interest on Deposits.................................... 1.41 1.53
</TABLE>
For purposes of computing the above ratios, we have included in "earnings"
our consolidated net income (without taking into account extraordinary items
and the cumulative effect of changes in accounting principles) plus applicable
income taxes and fixed charges.
To compute fixed charges, excluding interest on deposits, we have included
interest expense (other than on deposits) and the portion of rent expense that
we consider approximates interest, minus sublease rental income. To compute
fixed charges, including interest on deposits, we have included all interest
expense and the portion of rent expense that we consider approximates interest,
minus sublease rental income.
S-4
<PAGE>
DESCRIPTION OF NOTES
The following description of the Notes supplements the description of the
general terms and provisions of the Debt Securities as set forth under the
heading "DESCRIPTION OF DEBT SECURITIES" in the accompanying Prospectus. If the
following description is inconsistent with the description contained in the
accompanying Prospectus, then the following description replaces and supersedes
the description contained in the accompanying Prospectus. The following
description will apply to each Note unless otherwise specified in the
applicable Pricing Supplement. If we have not defined certain terms in this
Prospectus Supplement, then we have defined them in the accompanying Prospectus
or the Indentures described below.
General
The Notes will be either Senior Notes or Subordinated Notes. The Senior
Notes and the Subordinated Notes are referred to in the accompanying Prospectus
as "Senior Securities" and "Subordinated Securities," respectively. We will
issue the Senior Notes as a single series under an indenture that we entered
into as of June 15, 1992 (the "Senior Indenture") with Norwest Bank Minnesota,
National Association, as trustee ("Norwest" or the "Trustee"). We will issue
the Subordinated Notes as a single series under an indenture that we entered
into as of June 15, 1992 with Norwest, as trustee. We amended the indenture for
the Subordinated Securities by the First Supplemental Indenture dated as of
June 24, 1993 (the indenture for the Subordinated Securities, as amended, is
the "Subordinated Indenture", together with the Senior Indenture, they are
referred to as the "Indentures"). Under each of these Indentures, Norwest will
act as Trustee for the security holders. We may use this Prospectus Supplement,
together with the accompanying Prospectus and any Pricing Supplement, in
connection with the offer and sale of the Notes in an aggregate initial
offering price of up to $1,000,000,000 (or its equivalent in foreign currencies
or composite currencies). This amount is subject to reduction as a result of
our future sales of Securities described in the accompanying Prospectus.
Neither of the Indentures limit the aggregate principal amount of Debt
Securities that we may issue. Each Indenture provides that we may issue Debt
Securities from time to time in one or more series up to the aggregate
principal amount that we may authorize from time to time. As of the date of
this Prospectus Supplement, we had issued $2,815,000,000 aggregate principal
amount of Debt Securities under the Indentures, $2,215,000,000 of which was
then outstanding. As of such date, $2,065,000,000 aggregate initial offering
price of Senior Notes had been issued, $1,465,000,000 of which were then
outstanding, and $750,000,000 aggregate initial offering price of Subordinated
Notes had been issued, $750,000,000 of which were then outstanding. As of the
date hereof, we have authorized the issuance and sale of up to an additional
$1,000,000,000 aggregate initial offering price, or the equivalent thereof in
one or more foreign or composite currencies, of Notes. We may, from time to
time, without the consent of the Holders of the Notes, provide for the issuance
of Notes or other Debt Securities under the Indentures in addition to the
$1,000,000,000 aggregate initial offering price of Notes offered hereby and the
other Debt Securities previously issued.
The Notes will not be entitled to the benefit of a sinking fund or to the
defeasance and covenant defeasance provisions contained in the Indentures.
The Notes are our unsecured obligations and are not savings accounts,
deposits or other obligations of any of our bank or nonbank subsidiaries and
are not insured by the FDIC, the Bank Insurance Fund or any other government
agency.
We will offer the Notes on a continuous basis and they will mature on any
day nine months or more from their dates of issue (the "Stated Maturity Date"),
as specified in the applicable Pricing Supplement. Unless we specify otherwise
in the applicable Pricing Supplement, interest-bearing Notes will either be
Fixed Rate Notes or Floating Rate Notes. The Notes may also be issued with
original issue discount ("Discount Notes") and these Notes may or may not bear
any interest.
The Notes will be our unsecured obligations. The Senior Notes will rank on a
parity with our other unsecured and unsubordinated indebtedness. The
Subordinated Notes will be subordinate in right of payment to
S-5
<PAGE>
all of our existing and future Senior Indebtedness as described under
"DESCRIPTION OF DEBT SECURITIES--SUBORDINATED SECURITIES--Subordination" in the
accompanying Prospectus. At September 30, 1998, our outstanding Senior
Indebtedness, exclusive of our guarantees and other contingent obligations, was
approximately $1.6 billion.
Payment of principal of the Subordinated Notes may be accelerated only in
the case of our bankruptcy, insolvency or reorganization or the receivership of
BankBoston, N.A. (the "Bank"). You have no right of acceleration of the payment
of principal of the Subordinated Notes upon our default in the payment of
principal or interest on the Subordinated Notes or in our performance of any
covenant contained in the Subordinated Indenture. See "DESCRIPTION OF DEBT
SECURITIES--SUBORDINATED SECURITIES--Events of Default; Defaults" in the
accompanying Prospectus. Except as we may set forth in a supplement to this
Prospectus Supplement, we may not convert the Subordinated Notes into any other
securities. The Subordinated Notes are not Securities for which we may exchange
Capital Securities. See "DESCRIPTION OF DEBT SECURITIES--SUBORDINATED
SECURITIES--Exchangeability" in the accompanying Prospectus.
Unless we specify otherwise in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, and premium,
if any, and interest on, the Notes will be made in U.S. dollars. The Notes may
also be denominated in, and payments of principal of, and premium, if any, and
interest in respect thereof may be made in, currencies other than U.S. dollars
or composite currencies ("Foreign Currency Notes"). The currency or composite
currency in which a Note is denominated, whether U.S. dollars or otherwise, is
referred to as the "Specified Currency" with respect to that Note. If a
currency or composite currency is no longer legal tender for the payment of
public and private debts in the relevant country, then another currency or
composite currency which is then legal tender in that country for the payment
of such debts will be the Specified Currency. See "SPECIAL PROVISIONS RELATING
TO FOREIGN CURRENCY NOTES--Payments of Principal and Premium, if any, and
Interest."
Unless we specify otherwise in the applicable Pricing Supplement, you are
required to pay for Foreign Currency Notes in the Specified Currency in which
the Notes are denominated. At the present time, the United States has limited
facilities for the conversion of U.S. dollars into foreign currencies or
composite currencies and vice versa, and commercial banks do not generally
offer non-U.S. dollar checking or savings account facilities in the United
States. The Agents may arrange for the conversion of U.S. dollars into the
Specified Currency to enable the purchasers to pay for the Notes, if the
purchaser makes a request on or prior to the third Business Day (as defined
below) preceding the date of delivery of the Foreign Currency Notes, or by such
other day as the applicable Agent determines. The applicable Agent will make
each such conversion on the terms and subject to the conditions, limitations
and charges as the Agent may from time to time establish in accordance with its
regular foreign exchange practices. The purchasers of the Foreign Currency
Notes will bear all costs of exchange. See "SPECIAL PROVISIONS RELATING TO
FOREIGN CURRENCY NOTES."
Interest rates on the Notes that we offer may differ depending upon, among
other things, the aggregate principal amount of Notes purchased in any single
transaction. We may change the interest rates, interest rate formulas and other
variable terms of the Notes from time to time, but no such change will affect
any Note that we have already issued or as to which we have accepted an offer
to purchase.
We will issue each Note in fully registered form as a Book-Entry Note. The
authorized denominations of each Note, other than a Foreign Currency Note, will
be $1,000 and integral multiples thereof, unless otherwise specified in the
applicable Pricing Supplement. The authorized denominations of each Foreign
Currency Note will be specified in the applicable Pricing Supplement. You may
transfer or exchange Book-Entry Notes only through the Depositary. See "Book-
Entry System."
Our principal subsidiary, BankBoston, N.A. (the "Bank"), will act as our
paying agent with respect to the Notes through its head office in Boston,
Massachusetts and through its agent, the Boston EquiServe Division of EquiServe
Limited Partnership at the office of Securities Transfer and Reporting
Services, Inc. in the Borough of Manhattan in The City of New York
(collectively, the "Paying Agents"). We will make payments of principal of, and
premium, if any, and interest on, Book-Entry Notes to the Depositary through
the Paying
S-6
<PAGE>
Agents. For special payment terms applicable to Foreign Currency Notes, see
"SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES--Payments of Principal
and Premium, if any, and Interest."
As used in this Prospectus Supplement, "Business Day" means any day, other
than a Saturday or Sunday, that is not:
(i) a legal holiday, nor
(ii) a day on which commercial banks are authorized or required by law,
regulation or executive order to close in The City of New York or
Boston, Massachusetts, nor
(iii) with respect to Foreign Currency Notes where the payment is to be
made in a Specified Currency other than U.S. dollars, a day on
which commercial banks are authorized or required by law,
regulation or executive order to close in the Principal Financial
Center (as defined below) of the country issuing the Specified
Currency, nor
(iv) where the Specified Currency is euro, a day on which the Trans-
European Automated Real-Time Gross Settlement Express Target
(TARGET) System is closed.
With respect to Notes as to which LIBOR is an applicable Interest Rate
Basis, such day must also be a London Business Day. "London Business Day" means
any day on which commercial banks are open for business, including dealings in
the Designated LIBOR Currency, in London. References to "Principal Financial
Center" mean:
(i) the capital city of the country issuing the Specified Currency, or
(ii) the capital city of the country to which the Designated LIBOR
Currency relates, as applicable,
except, in the case of (i) or (ii) above, that with respect to U.S. dollars,
Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders,
Portuguese escudos, South African rand and Swiss francs, the "Principal
Financial Center" shall be The City of New York, Sydney and (solely in the case
of the Specified Currency) Melbourne, Toronto, Frankfurt, Amsterdam, London
(solely in the case of the Designated LIBOR Currency), Johannesburg and Zurich,
respectively.
Interest
General
We have provided a Glossary at the end of this section to define the
capitalized words used in discussing the interest rates borne by the Notes.
The interest rate on the Notes will either be fixed (the "Fixed Rate Notes")
or floating (the "Floating Rate Notes"). The interest paid will include
interest accrued from and including the immediately preceding Interest Payment
Date or the date of issue, if no interest has been paid with respect to the
Notes, to, but excluding, the related Interest Payment Date or the Maturity
Date, as applicable.
Each Fixed Rate Note will bear interest from its date of issue at the rate
per annum specified in the Pricing Supplement for that offering. Each Floating
Rate Note will bear interest from its date of issue pursuant to the interest
rate formula specified in the applicable Pricing Supplement. In each case, we
will pay interest until the principal of the Note is paid or duly made
available for payment.
Interest will be payable in arrears on:
(a) each Interest Payment Date specified in the applicable Pricing
Supplement on which an installment of interest is due and payable and
(b) on the Stated Maturity Date or any prior date on which the principal, or
an installment of principal, of a Note becomes due and payable, whether by
the declaration of acceleration, call for redemption at our option,
repayment at the option of the Holder or otherwise (the Stated Maturity
Date or the prior date, as the case may be, is referred to as the
"Maturity Date").
S-7
<PAGE>
Unless we otherwise specify in the applicable Pricing Supplement, the first
payment of interest on any Note originally issued between a Record Date and the
related Interest Payment Date or on an Interest Payment Date will be made on
the Interest Payment Date immediately following the next succeeding Record Date
to the Holder on the next succeeding Record Date. Unless otherwise specified,
"Record Date" means the fifteenth calendar day (whether or not a Business Day)
immediately preceding the related Interest Payment Date.
Fixed Rate Notes
Unless we otherwise specify in the applicable Pricing Supplement, the
"Interest Payment Dates" for the Fixed Rate Notes will be June 15 and December
15 of each year and the Maturity Date. Interest on Fixed Rate Notes will be
computed on the basis of a 360-day year of twelve 30-day months unless
otherwise set forth in the related Pricing Supplement.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note falls
on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day as if made on the date the payment was due. No interest will accrue on the
payment for the period from and after the Interest Payment Date or the Maturity
Date, as the case may be, to the date of the payment on the next succeeding
Business Day.
Floating Rate Notes
Unless we otherwise specify in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. In the applicable Pricing
Supplement we will specify the "Interest Rate Basis" or "Interest Rate Bases"
by reference to which interest will be determined, which may be one or more of:
(i) the "CMT Rate," in which case the Notes will be a "CMT Rate Note,"
(ii) the "Commercial Paper Rate," in which case the Note will be a
"Commercial Paper Rate Note,"
(iii) the "Federal Funds Rate," in which case the Note will be a
"Federal Funds Rate Note,"
(iv) "LIBOR," in which case the Note will be a "LIBOR Note,"
(v) the "Prime Rate," in which case the Note will be a "Prime Rate
Note,"
(vi) the "Treasury Rate," in which case the Note will be a "Treasury
Rate Note," or
(vii) such other Interest Rate Basis or interest rate formula as we may
set forth in the applicable Pricing Supplement.
In the applicable Pricing Supplement we will also specify certain additional
terms with respect to the Floating Rate Notes offered thereby, including:
(i) whether the Floating Rate Note is a "Regular Floating Rate Note," a
"Floating Rate/Fixed Rate Note" or an "Inverse Floating Rate Note,"
(ii) the Fixed Rate Commencement Date and Fixed Interest Rate, as
applicable,
(iii) the Initial Interest Rate, Interest Reset Period and Dates,
(iv) Record Dates, Interest Payment Period and Dates,
(v) Index Maturity, Maximum Interest Rate and Minimum Interest Rate, if
any,
(vi) the Spread and/or Spread Multiplier, if any, and
(vii) if one or more of the applicable Interest Rate Bases is LIBOR,
the Designated LIBOR Currency and the Designated LIBOR Page.
S-8
<PAGE>
The interest rate borne by the Floating Rate Notes will be determined as
follows:
1. Unless we designate the Floating Rate Note as a "Floating Rate/Fixed
Rate Note," an "Inverse Floating Rate Note" or as having an Addendum
attached, the Floating Rate Note will be designated as a "Regular Floating
Rate Note" and, except as described below or in the applicable Pricing
Supplement, will bear interest at the rate determined by reference to the
applicable Interest Rate Basis or Bases (a) plus or minus the applicable
Spread, if any, and/or (b) multiplied by the applicable Spread Multiplier,
if any. Commencing on the first Interest Reset Date, the rate at which
interest on the Regular Floating Rate Note shall be payable shall be reset
as of each Interest Reset Date; provided, however, that the interest rate
in effect for the period from the date of issue to the first Interest Reset
Date will be the Initial Interest Rate.
2. If we designate the Floating Rate Note as a "Floating Rate/Fixed Rate
Note," then, except as described below or in the applicable Pricing
Supplement, the Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on the Floating Rate/Fixed Rate Note
shall be payable shall be reset as of each Interest Reset Date. The
interest rate in effect for the period from the date of issue to the first
Interest Reset Date will be the Initial Interest Rate and the interest rate
in effect for the period commencing on, and including, the Fixed Rate
Commencement Date to, but excluding, the Maturity Date shall be the Fixed
Interest Rate, if the rate is specified in the applicable Pricing
Supplement or, if no Fixed Interest Rate is so specified, the interest rate
in effect thereon on the Business Day immediately preceding the Fixed Rate
Commencement Date.
3. If we designate the Floating Rate Note as an "Inverse Floating Rate
Note," then, except as described below or in the applicable Pricing
Supplement, the Floating Rate Note will bear interest equal to the Fixed
Interest Rate specified in the applicable Pricing Supplement minus the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Unless we otherwise specify in the
applicable Pricing Supplement, the interest rate on the Note will not be
less than zero percent. Commencing on the first Interest Reset Date, the
rate at which interest on the Inverse Floating Rate Note is payable shall
be reset as of each Interest Reset Date. The interest rate in effect for
the period from the date of issue to the first Interest Reset Date will be
the Initial Interest Rate.
If we designate the Floating Rate Note as having an Addendum attached, the
Floating Rate Note will bear interest in accordance with the terms described in
the Addendum and the applicable Pricing Supplement.
Unless we specify otherwise in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined as
described below. Except as set forth above or in the applicable Pricing
Supplement, the interest rate in effect on each day shall be (i) if such day is
an Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding such Interest Reset Date or (ii) if
such day is not an Interest Reset Date, the interest rate determined as of the
Interest Determination Date immediately preceding the most recent Interest
Reset Date.
In the applicable Pricing Supplement we will specify whether the rate of
interest on the related Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually, annually or such other specified period (each
referred to as an "Interest Reset Period") and the dates on which the rate of
interest will be reset (each referred to as an "Interest Reset Date").
Unless we otherwise specify in the applicable Pricing Supplement, the
Interest Reset Date will be, in the case of Floating Rate Notes which reset:
(i) daily, each Business Day;
(ii) weekly, the Wednesday of each week (with the exception of weekly
reset Floating Rate Notes as to which the Treasury Rate is an
applicable Interest Rate Basis, which will reset the Tuesday of
each week, except as described below);
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(iii) monthly, the third Wednesday of each month;
(iv) quarterly, the third Wednesday of March, June, September and
December of each year,
(v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and
(vi) annually, the third Wednesday of the month specified in the
applicable Pricing Supplement;
With respect to Floating Rate/Fixed Rate Notes, the rate of interest in
effect for the period from the Fixed Rate Commencement Date to the Maturity
Date shall be the Fixed Interest Rate or, if no Fixed Interest Rate is
specified, the interest rate in effect on the day immediately preceding the
Fixed Rate Commencement Date, as specified in the applicable Pricing
Supplement.
If any Interest Reset Date for any Floating Rate Note would otherwise be a
day that is not a Business Day, the Interest Reset Date will be postponed to
the next succeeding day that is a Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis, if
the Business Day falls in the next succeeding calendar month, the Interest
Reset Date will be the immediately preceding Business Day.
The interest rate applicable to each day in an Interest Reset Period will be
the rate determined by the Calculation Agent as of the Interest Determination
Date immediately preceding the Interest Reset Date on which the Interest Reset
Period commenced and calculated on or prior to the Calculation Date, except
with respect to LIBOR, which will be calculated on the Interest Determination
Date.
Each Floating Rate Note will bear interest from the date of issue at the
rates specified in the applicable Pricing Supplement until the principal
thereof is paid or otherwise made available for payment.
If any Interest Payment Date for any Floating Rate Note (other than the
Maturity Date) would otherwise be a day that is not a Business Day, the
Interest Payment Date will be postponed to the next succeeding day that is a
Business Day. In the case of a Floating Rate Note as to which LIBOR is an
applicable Interest Rate Basis, if that Business Day falls in the next
succeeding calendar month, the Interest Payment Date will be the immediately
preceding Business Day. If the Maturity Date of a Floating Rate Note falls on a
day that is not a Business Day, the required payment of principal, premium, if
any, and/or interest will be made on the next succeeding Business Day as if
made on the date the payment was due, and no interest shall accrue on the
payment for the period from and after the Maturity Date to the date of the
payment on the next succeeding Business Day.
A Floating Rate Note may also have either or both of the following:
(i) a maximum numerical limitation, or ceiling, on the rate at which
interest may accrue during any interest period, referred to as a
"Maximum Interest Rate" and
(ii) a minimum numerical limitation, or floor, on the rate at which
interest may accrue during any interest period, referred to as a
"Minimum Interest Rate."
In addition to any Maximum Interest Rate that may be applicable to any
Floating Rate Note pursuant to the above provisions, the interest rate on
Floating Rate Notes will in no event be higher than the maximum rate permitted
by Massachusetts law, as the same may be modified by United States law of
general application.
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. The accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated. Unless we
otherwise specify in the applicable Pricing Supplement, the interest factor for
each day will be computed by dividing the interest rate applicable to that day
by 360, in the case of Floating Rate Notes for which the Interest Rate Basis is
the Commercial Paper Rate, the Federal Funds Rate, LIBOR or the Prime Rate, or
by the actual number of days in the year in the case of Floating Rate Notes for
which the Interest Rate Basis is the CMT Rate or the Treasury
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Rate. Unless we otherwise specify in the applicable Pricing Supplement, the
interest factor for Floating Rate Notes for which the interest rate is
calculated with reference to two or more Interest Rate Bases will be calculated
in each period in the same manner as if only one of the applicable Interest
Rate Bases applied.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)). All amounts used in or
resulting from the calculation on Floating Rate Notes will be rounded, in the
case of U.S. dollars, to the nearest cent or, in the case of a Specified
Currency other than U.S. dollars, to the nearest unit (with one-half cent or
unit being rounded upward).
Unless we otherwise specify in the applicable Pricing Supplement, the Bank
will be the "Calculation Agent." Upon request of the Holder of any Floating
Rate Note, the Calculation Agent will disclose the interest rate then in effect
and, if determined, the interest rate that will become effective as a result of
a determination made for the next succeeding Interest Reset Date with respect
to the Floating Rate Note. The determination of any interest rate by the
Calculation Agent will be final and binding absent manifest error.
CMT Rate. CMT Rate Notes will bear interest at the rates specified in the
CMT Rate Notes and in the applicable Pricing Supplement. The rates will be
calculated with reference to the CMT Rate and the Spread and/or Spread
Multiplier, if any.
For any Interest Determination Date relating to a CMT Rate Note or any
Floating Rate Note for which the interest rate is determined with reference to
the CMT Rate (a "CMT Rate Interest Determination Date"), "CMT Rate" means:
1. the rate displayed on the Designated CMT Telerate Page under the
caption ". . . Treasury Constant Maturities . . . Federal Reserve Board
Release H.15 . . . Mondays Approximately 3:45 P.M.," under the column for
the Designated CMT Maturity Index for
a) if the Designated CMT Telerate Page is 7051, the rate on the CMT
Rate Interest Determination Date and
b) if the Designated CMT Telerate Page is 7052, the weekly or
monthly average, as specified in the applicable Pricing Supplement, for
the week or the month, as applicable, ended immediately preceding the
week or the month, as applicable, in which the related CMT Rate
Interest Determination Date falls.
2. If the rate is no longer displayed on the relevant page, or if it is
not displayed by 3:00 P.M., New York City time, on the related Calculation
Date, then the CMT Rate for that CMT Rate Interest Determination Date will
be the treasury constant maturity rate for the Designated CMT Maturity
Index as published by the Board of Governors of the Federal Reserve System
in the relevant weekly statistical release designated as such, or any
successor publication ("H.15(519)").
3. If the rate described in paragraph 2 above is no longer published, or
if it is not published by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for that CMT Rate Interest
Determination Date will be the treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date
with respect to that Interest Reset Date as may then be published by either
the Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate
Page and published in H.15(519).
4. If the information called for in paragraph 3 above is not provided by
3:00 P.M., New York City time, on the related Calculation Date, then the
CMT Rate for the CMT Rate Interest Determination Date will be calculated by
the Calculation Agent. The rate will be a yield to maturity, based on the
arithmetic
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mean of the secondary market offered rates as of approximately 3:30 P.M.,
New York City time, on the CMT Rate Interest Determination Date for the
most recently issued direct noncallable fixed rate obligations of the
United States ("Treasury Notes") with an original maturity of approximately
the Designated CMT Maturity Index and a remaining term to maturity of not
less than the Designated CMT Maturity Index minus one year as reported,
according to their written records, by three leading primary United States
government securities dealers (each, a "Reference Dealer") in The City of
New York (which may include the Agents or their respective affiliates). The
quotations will be selected by the Calculation Agent (from five Reference
Dealers selected by the Calculation Agent) by eliminating the highest
quotation (or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest).
5. If the Calculation Agent cannot obtain the three Treasury Note
quotations referred to in paragraph 4 above, then the CMT Rate for that CMT
Rate Interest Determination Date will be calculated by the Calculation
Agent. The rate will be a yield to maturity based on the arithmetic mean of
the secondary market offered rates as of approximately 3:30 P.M., New York
City time, on the CMT Rate Interest Determination Date for Treasury Notes
with an original maturity of the number of years that is the next highest
to the Designated CMT Maturity Index and a remaining term to maturity
closest to the Designated CMT Maturity Index and in an amount of at least
$100 million, as reported by three Reference Dealers in The City of New
York. The Calculation Agent will determine the quotations (from five
Reference Dealers selected by the Calculation Agent) by eliminating the
highest quotation (or, in the event of equality, one of the highest) and
the lowest quotation (or, in the event of equality, one of the lowest).
6. If three or four (and not five) of the Reference Dealers are quoting
as described above, then the CMT Rate will be based on the arithmetic mean
of the offered rates obtained and neither the highest nor the lowest of the
quotes will be eliminated. If fewer than three Reference Dealers selected
by the Calculation Agent are quoting, the CMT Rate will be the CMT Rate in
effect on the CMT Rate Interest Determination Date. If two Treasury Notes
with an original maturity as described in paragraph 5 above have remaining
terms to maturity equally close to the Designated CMT Maturity Index, the
quotes for the Treasury Note with the shorter remaining term to maturity
will be used.
Commercial Paper Rate. Commercial Paper Rate Notes will bear interest at the
rates specified in the Commercial Paper Rate Notes and in the applicable
Pricing Supplement. The rates will be calculated with reference to the
Commercial Paper Rate and the Spread and/or Spread Multiplier, if any.
For any Interest Determination Date relating to a Commercial Paper Rate Note
or any Floating Rate Note for which the interest rate is determined with
reference to the Commercial Paper Rate (a "Commercial Paper Rate Interest
Determination Date"), "Commercial Paper Rate" means:
1. the Money Market Yield on the date of the rate for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement as
published in H.15(519) under the caption "Commercial Paper--Nonfinancial"
or, if not so published by 3:00 P.M., New York City time, on the related
Calculation Date, the rate on such Commercial Paper Rate Interest
Determination Date for commercial paper having the Index Maturity specified
in the applicable Pricing Supplement as published in H.15 Daily Update, or
such other recognized electronic source used for the purpose of displaying
such rate, under the caption "Commercial Paper--Nonfinancial."
2. In the event that the rate is not published in H.15 (519), H.15 Daily
Update or another recognized electronic source by 3:00 P.M., New York City
time, on the related Calculation Date, then the Commercial Paper Rate on
the Commercial Paper Rate Interest Determination Date will be calculated by
the Calculation Agent. The rate will be the Money Market Yield of the
arithmetic mean of the offered rates at approximately 11:00 A.M., New York
City time, on the Commercial Paper Rate Interest Determination Date for
commercial paper having the Index Maturity specified in the applicable
Pricing Supplement placed for industrial issuers whose bond rating is "Aa",
or the equivalent from a nationally recognized statistical rating
organization, as reported by three leading dealers of U.S. dollar
commercial
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paper in The City of New York (which may include the Agents or their
respective affiliates) selected by the Calculation Agent.
3. If any of the dealers selected by the Calculation Agent are not
quoting, the Commercial Paper Rate determined as of the Commercial Paper
Rate Interest Determination Date will be the Commercial Paper Rate in
effect on the Commercial Paper Rate Interest Determination Date.
Federal Funds Rate. Federal Funds Rate Notes will bear interest at the rates
specified in the Federal Funds Rate Notes and in the applicable Pricing
Supplement. The rates will be calculated with reference to the Federal Funds
Rate and the Spread and/or Spread Multiplier, if any.
For any Interest Determination Date relating to a Federal Funds Rate Note or
any Floating Rate Note for which the interest rate is determined with reference
to the Federal Funds Rate (a "Federal Funds Rate Interest Determination Date"),
"Federal Funds Rate" means:
1. the rate on that date for U.S. dollar federal funds as published in
H.15(519) under the caption "Federal Funds (Effective)" on Telerate Page
120, or if such rate does not appear on Telerate Page 120 or, if not
published by 3:00 P.M., New York City time, on the related Calculation
Date, the rate on the Federal Funds Rate Interest Determination Date for
U.S. dollar federal funds as published in H.15 Daily Update, or such other
recognized electronic source used for the purpose of displaying such rate,
under the caption "Federal Funds (Effective)."
2. If by 3:00 P.M., New York City time, on the related Calculation Date
the rate does not appear on Telerate Page 120 or is not published in
H.15(519), H.15 Daily Update or another recognized electronic source, then
the Federal Funds Rate on the Federal Funds Rate Interest Determination
Date will be calculated by the Calculation Agent. The rate will be the
arithmetic mean of the rates for the last transaction in overnight U.S.
dollar federal funds arranged prior to 9:00 A.M., New York City time, on
that Federal Funds Rate Interest Determination Date by three leading
brokers of U.S. dollar federal funds transactions in The City of New York
(which may include the Agents or their respective affiliates) selected by
the Calculation Agent.
3. If the brokers so selected by the Calculation Agent are not quoting,
the Federal Funds Rate determined as of the Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on the Federal
Funds Rate Interest Determination Date.
LIBOR. LIBOR Notes will bear interest at the rates specified in the LIBOR
Notes and in any applicable Pricing Supplement. The rates will be calculated
with reference to LIBOR and the Spread and/or Spread Multiplier, if any.
For any Interest Determination Date relating to a Floating Rate Note for
which the interest rate is determined with reference to LIBOR (a "LIBOR
Interest Determination Date"), "LIBOR" means:
1. the rate determined by the Calculation Agent in accordance with the
following provisions:
a) If "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the
Designated LIBOR Page by its terms provides only for a single rate, in
which case the single rate shall be used) for deposits in the
Designated LIBOR Currency having the Index Maturity specified in the
Pricing Supplement, commencing on the applicable Interest Reset Date,
that appear (or, if only a single rate is required as aforesaid
appears) on the Designated LIBOR Page as of 11:00 A.M., London time, on
the LIBOR Interest Determination Date, or
b) If "LIBOR Telerate" is specified in the applicable Pricing
Supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Pricing Supplement as the method for
calculating LIBOR, the rate for deposits in the Designated LIBOR
Currency having the Index Maturity specified in the Pricing Supplement,
commencing on the Interest Reset Date, that appears on the Designated
LIBOR Page as of 11:00 A.M., London time, on the LIBOR Interest
Determination Date.
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If fewer than two offered rates so appear, or if no rate appears, as
applicable, LIBOR on the LIBOR Interest Determination Date will be determined
in accordance with the provisions described in paragraph 2 below.
2. With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the Designated LIBOR Page as specified in paragraph 1 above, the
Calculation Agent will determine the rate in accordance with the following
provisions:
a) The Calculation Agent will request the principal London offices
of each of four major reference banks (which may include affiliates of
the Agents) in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Designated LIBOR Currency for the period
of the Index Maturity specified in the applicable Pricing Supplement,
commencing on the applicable Interest Reset Date, to prime banks in the
London interbank market at approximately 11:00 A.M., London time, on
the LIBOR Interest Determination Date and in a principal amount that is
representative for a single transaction in the Designated LIBOR
Currency in the market at that time.
b) If at least two quotations are so provided, then LIBOR on the
LIBOR Interest Determination Date will be the arithmetic mean of the
quotations.
c) If fewer than two quotations are so provided, then LIBOR on the
LIBOR Interest Determination Date will be the arithmetic mean of the
rates quoted at approximately 11:00 A.M., in the applicable Principal
Financial Center, on the LIBOR Interest Determination Date by three
major banks (which may include affiliates of the Agents) in the
Principal Financial Center selected by the Calculation Agent for loans
in the Designated LIBOR Currency to leading European banks, having the
Index Maturity specified in the applicable Pricing Supplement and in a
principal amount that is representative for a single transaction in the
Designated LIBOR Currency in the market at that time.
d) If the banks selected by the Calculation Agent are not quoting,
LIBOR determined as of the LIBOR Interest Determination Date will be
LIBOR in effect on the LIBOR Interest Determination Date.
Prime Rate. Prime Rate Notes will bear interest at the rates specified in
the Prime Rate Notes and the applicable Pricing Supplement. The rates will be
calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any.
For any Interest Determination Date relating to a Prime Rate Note or any
Floating Rate Note for which the interest rate is determined with reference to
the Prime Rate (a "Prime Rate Interest Determination Date"), "Prime Rate"
means:
1. the rate on that date as such rate is published in H.15(519) under
the caption "Bank Prime Loan." If the rate is not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such Prime
Rate Interest Determination Date as published in H.15 Daily Update, or such
other recognized electronic source used for the purpose of displaying such
rate, under the caption "Bank Prime Loan." If such rate is not yet
published in H.15(519), H.15 Daily Update or another recognized electronic
source by 3:00 P.M., New York City time, on the related Calculation Date,
then the Prime Rate shall be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the Reuters Screen USPRIME1
Page as the bank's prime rate or base lending rate as of 11:00 A.M., New
York City time, on such Prime Rate Interest Determination Date.
2. If fewer than four rates appear on the Reuters Screen USPRIME1 Page
for the Prime Rate Interest Determination Date, then the Prime Rate shall
be the arithmetic mean of the prime rates or base lending rates quoted on
the basis of the actual number of days in the year divided by a 360-day
year as of the close of business on the Prime Rate Interest Determination
Date by three major banks (which may include affiliates of the Agents) in
The City of New York selected by the Calculation Agent.
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3. If the banks selected by the Calculation Agent are not quoting, the
Prime Rate determined as of the Prime Rate Interest Determination Date will
be the Prime Rate in effect on the Prime Rate Interest Determination Date.
Treasury Rate. Treasury Rate Notes will bear interest at the rates specified
in the Treasury Rate Notes and in the applicable Pricing Supplement. The rates
will be calculated with reference to the Treasury Rate and the Spread and/or
Spread Multiplier, if any.
For any Interest Determination Date relating to a Treasury Rate Note or any
Floating Rate Note for which the interest rate is determined by reference to
the Treasury Rate (a "Treasury Rate Interest Determination Date"), "Treasury
Rate" means:
1. the rate from the auction held on such Treasury Rate Interest
Determination Date (the "Auction") of direct obligations of the United
States ("Treasury Bills") having the Index Maturity specified in the
applicable Pricing Supplement, as that rate is published under the caption
"AVGE INVEST YIELD" on Telerate Page 56 or Telerate Page 57 or, if not
published by 3:00 P.M., New York City time, on the related Calculation
Date, the auction average rate of such Treasury Bills (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States
Department of the Treasury.
2. In the event that the results of the Auction of Treasury Bills having
the Index Maturity specified in the applicable Pricing Supplement are not
published by 3:00 P.M., New York City time, on the Calculation Date, or if
no Auction is held, then the Treasury Rate will be the rate (expressed as a
bond equivalent on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) on such Treasury Rate Interest Determination
Date of Treasury Bills having the Index Maturity specified in the
applicable Pricing Supplement as published in H.15(519) under the caption
"U.S. Government Securities/Treasury Bills/Secondary Market" or, if not yet
published by 3:00 P.M., New York City time, on the related Calculation
Date, the rate on such Treasury Rate Interest Determination Date of such
Treasury Bills as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption "U.S. Government Securities/Treasury Bills/Secondary Market." If
such rate is not yet published in H.15(519), H.15 Daily Update or another
recognized electronic source, then the Treasury Rate will be calculated by
the Calculation Agent and will be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market
bid rates, as of approximately 3:30 P.M., New York City time, on the
Treasury Rate Interest Determination Date for the issue of Treasury Bills
with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement as reported by three primary United States
government securities dealers (which may include the Agents or their
respective affiliates) selected by the Calculation Agent.
3. If the dealers selected by the Calculation Agent are not quoting, the
Treasury Rate determined as of that Treasury Rate Interest Determination
Date will be the Treasury Rate in effect on the Treasury Rate Interest
Determination Date.
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GLOSSARY
The "Calculation Date,"if applicable, pertaining to any Interest
Determination Date will be the earlier of:
(i) the tenth calendar day after the Interest Determination Date, or, if
that day is not a Business Day, the next succeeding Business Day or
(ii) the Business Day immediately preceding the applicable Interest
Payment Date or the Maturity Date, as the case may be.
"Designated CMT Telerate Page" means the display on Bridge Telerate, Inc.
(or any successor service) on the page specified in the applicable Pricing
Supplement (or any other page as may replace that page on that service) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page shall be 7052.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no maturity is specified in the applicable Pricing Supplement,
the Designated CMT Maturity Index shall be 2 years.
"Designated LIBOR Currency" means the currency specified in the applicable
Pricing Supplement as to which LIBOR shall be calculated or, if no such
currency is specified in the applicable Pricing Supplement, U.S. dollars.
"Designated LIBOR Page" means:
(i) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the display on the Reuters Monitor Money Rates Service (or any
successor service) on the page specified in the Pricing Supplement (or any
other page as may replace that page on that service) for the purpose of
displaying the London interbank rates of major banks for the Designated
LIBOR Currency, or
(ii) if "LIBOR Telerate" is specified in the applicable Pricing
Supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in
the applicable Pricing Supplement as the method for calculating LIBOR, the
display on Bridge Telerate, Inc. (or any successor service) on the page
specified in the Pricing Supplement (or any other page as may replace that
page on that service) for the purpose of displaying the London interbank
rates of major banks for the Designated LIBOR Currency.
The "Index Maturity" is the period to maturity of the instrument or
obligation with respect to which the related Interest Rate Basis or Bases will
be calculated.
The "Interest Determination Date" means:
(i) with respect to the CMT Rate, the Commercial Paper Rate, the Federal
Funds Rate and the Prime Rate--the second Business Day immediately
preceding the applicable Interest Reset Date;
(ii) with respect to LIBOR--the second London Business Day immediately
preceding the applicable Interest Reset Date unless the Designated LIBOR
Currency is British pounds sterling, in which case the Interest
Determination Date will be the applicable Interest Reset Date.
(iii) with respect to the Treasury Rate--the day in the week in which
the applicable Interest Reset Date falls on which day Treasury Bills are
normally auctioned. Treasury Bills are normally sold at an auction held on
Monday of each week, unless that day is a legal holiday, in which case the
auction is normally held on the following Tuesday or the preceding Friday.
If an auction is held on the Friday of the week preceding the applicable
Interest Reset Date, the Interest Determination Date will be that preceding
Friday; and provided, further, that if the Interest Determination Date
falls on the applicable Interest Reset Date, then the Interest Reset Date
will instead be the first Business Day following the Interest Determination
Date.
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(iv) with respect to Floating Rate Notes the interest rate of which is
determined by reference to two or more Interest Rate Bases--the most recent
Business Day which is at least two Business Days prior to the applicable
Interest Reset Date for the Floating Rate Note on which each Interest Rate
Basis is determinable. Each Interest Rate Basis will be determined on that
date, and the applicable interest rate will take effect on the applicable
Interest Reset Date.
The "Interest Payment Dates" for the Floating Rate Notes will be, in the
case of Floating Rate Notes which reset:
(i) daily, weekly or monthly, the third Wednesday of each month or the
third Wednesday of March, June, September and December of each year,
as specified in the applicable Pricing Supplement;
(ii) quarterly, the third Wednesday of March, June, September and
December of each year,
(iii) semiannually, the third Wednesday of the two months of each year
specified in the applicable Pricing Supplement;
(iv) annually, the third Wednesday of the month of each year specified
in the applicable Pricing Supplement and,
(v) in each case, interest will be payable on the Maturity Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
D X 360
Money Market Yield = ---------------- x 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the applicable Interest Reset Period.
"Reuters Screen USPRIME1 Page" means the display on the Reuters Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on that service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to a Floating Rate Note.
The "Spread Multiplier" is the percentage of the related Interest Rate Basis
or Bases applicable to a Floating Rate Note by which the Interest Rate Basis or
Bases will be multiplied to determine the applicable interest rate on a
Floating Rate Note.
"Telerate Page 56" means the display on Bridge Telerate, Inc. (or any
successor service) on page 56 (or such other page as may replace the 56 page on
that service).
"Telerate Page 57" means the display on Bridge Telerate, Inc. (or any
successor service) on page 57 (or such other page as may replace the 57 page on
that service).
"Telerate Page 120" means the display on Bridge Telerate, Inc. (or any
successor service) on page 120 (or such other page as may replace the 120 page
on that service).
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Discount Notes
We may from time to time offer Notes that have an original issue price,
referred to as the "Issue Price," (which will be specified in the applicable
Pricing Supplement) that is less than the principal amount of the Notes by more
than an amount equal to the product of the principal amount of the Notes, 0.25%
and the number of full years to the Stated Maturity Date. Such Notes will be
referred to as Discount Notes.
Discount Notes may not bear any interest currently or may bear interest at a
rate that is below market rates at the time of issuance. The difference between
the Issue Price of a Discount Note and par is referred to as the "Discount."
In the event of redemption, repayment or acceleration of maturity of a
Discount Note, the amount payable to the Holder of the Discount Note will be
equal to the sum of:
(i) the Issue Price (increased by any accruals of Discount) and, in the
event of any redemption of the Discount Note (if applicable), multiplied by
the Initial Redemption Percentage (as adjusted by the Annual Redemption
Percentage Reduction, if applicable) and
(ii) any unpaid interest accrued to the date of the redemption,
repayment or acceleration of maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for a
Discount Note, the Discount will be accrued using a constant yield method. The
constant yield will be calculated using a 30-day month, 360-day year
convention, a compounding period that, except for the Initial Period (as
defined below), corresponds to the shortest period between Interest Payment
Dates for the applicable Discount Note (with ratable accruals within a
compounding period), a coupon rate equal to the initial coupon rate applicable
to the Discount Note and an assumption that the maturity of the Discount Note
will not be accelerated. If the period from the date of issue to the initial
Interest Payment Date for a Discount Note (the "Initial Period") is shorter
than the compounding period for the Discount Note, a proportionate amount of
the yield for an entire compounding period will be accrued during the Initial
Period. If the Initial Period is longer than the compounding period, then the
period will be divided into a regular compounding period and a short period
with the short period being treated as provided in the preceding sentence. The
accrual of the applicable Discount may differ from the accrual of original
issue discount for purposes of the United States Internal Revenue Code of 1986,
as amended (the "Code"), certain Discount Notes may not be treated as having
original issue discount within the meaning of the Code, and Notes other than
Discount Notes may be treated as issued with original issue discount for United
States federal income tax purposes. See "CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSIDERATIONS."
Foreign-Currency Notes
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, and premium,
if any, and interest on, the Notes will be made in U.S. dollars. Foreign
Currency Notes will be denominated in a currency, including a composite
currency, other than U.S. dollars. We will describe special provisions relating
to Foreign Currency Notes in the applicable Note and the Pricing Supplement
with respect to that offering.
An investment in Foreign Currency Notes entails significant risks that are
not associated with similar investments in debt securities that are denominated
in U.S. dollars and the payments with respect to which are made in U.S.
dollars. See "RISK FACTORS" and "SPECIAL PROVISIONS RELATING TO FOREIGN
CURRENCY NOTES."
Indexed Notes
Notes may be issued with the amount of principal, premium and/or interest
payable with respect to the Notes to be determined with reference to the price
or prices of specified commodities or stocks, the exchange
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rate of one or more specified currencies (including a composite currency)
relative to an indexed currency or such other price or exchange rate, referred
to as "Indexed Notes", as set forth in the applicable Pricing Supplement. In
certain cases, Holders of Indexed Notes may receive a principal amount on the
Maturity Date that is greater than or less than the face amount of the Indexed
Notes depending upon the relative value on the Maturity Date of the specified
indexed item. We will set forth information as to the method for determining
the amount of principal, premium and/or interest payable in respect of Indexed
Notes, certain historical information with respect to the specified indexed
item and tax considerations associated with an investment in the Indexed Notes
in the applicable Pricing Supplement. See "RISK FACTORS."
Redemption at our Option
Unless we otherwise specify in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. If agreed to by us and the purchaser,
a Note will be redeemable on and after a date fixed at the time of sale and
specified in the applicable Pricing Supplement (the "Initial Redemption Date")
either in whole or in part, at our option. We must give written notice to the
Holder in accordance with the provisions of the applicable Indenture not more
than 60 nor less than 30 calendar days prior to the date of redemption. On and
after the Initial Redemption Date, if any, the Note will be redeemable in
increments of $1,000 or any other integral multiple of an authorized
denomination specified in the applicable Pricing Supplement (provided that any
remaining principal amount of the Note shall be at least $1,000 or the
authorized minimum denomination of the Note) at our option at the applicable
Redemption Price, together with unpaid interest accrued at the applicable rate
borne by the Note to the date of redemption.
The "Redemption Price," with respect to a Note, will initially be the
Initial Redemption Percentage (as specified in the applicable Pricing
Supplement) of the principal amount of the Note to be redeemed and will decline
at each anniversary of the Initial Redemption Date by the Annual Redemption
Percentage Reduction (as specified in the applicable Pricing Supplement), if
any, of the principal amount to be redeemed until the Redemption Price is 100%
of the principal amount.
Whenever less than all the Notes at any time outstanding are to be redeemed,
the terms of the Notes to be so redeemed shall be selected by us. If we elect
to redeem any Note in part only, the remaining principal amount of the Note
will be an authorized denomination of the Note. If no Initial Redemption Date
is specified in the applicable Pricing Supplement, the Note will not be
redeemable prior to its Stated Maturity Date.
Repayment at the Option of the Holder
The Notes will be subject to repayment in accordance with their terms at the
option of the Holders on the Optional Repayment Dates, if any. These dates, if
any, are agreed upon by us and the purchasers at the time of sale and are
specified in the applicable Pricing Supplement. If no Optional Repayment Date
is specified with respect to a Note, the Note will not be repayable at the
option of the Holder prior to the Stated Maturity Date. On any Optional
Repayment Date with respect to a Note, the Note will be repayable in whole or
in part in increments of $1,000 or any other integral multiple of an authorized
denomination specified in the applicable Pricing Supplement. Any remaining
principal amount of the Note shall be at least $1,000 or the authorized minimum
denomination of the Note. Unless otherwise specified in the Pricing Supplement
for that offering, the repayment price for any Note to be repaid means an
amount equal to the sum of 100% of the unpaid principal amount of the Note or
the portion of the Note, plus accrued interest to the date of repayment.
Information with respect to the repayment price for Indexed Notes will be
set forth in the related Pricing Supplement. For any Note to be repaid, the
Note must be received, together with a completed "Option to Elect Repayment"
form, by one of the Paying Agents. The Note and form must be provided to the
Paying Agent at its office (or the other address of which we will from time to
time notify the Holders) not more than 60 nor less than 30 days prior to the
date of repayment. Exercise of the repayment option by the Holder is
irrevocable.
While the Book-Entry Notes are represented by the Global Securities held by
or on behalf of the Depositary, and registered in the name of the Depositary or
the Depositary's nominee, the option for repayment
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may be exercised by the applicable participant that has an account with the
Depositary, on behalf of the beneficial owners of the Global Security or
Securities representing the Book-Entry Notes. The participant may exercise the
option by delivering a written notice to one of the Paying Agents at its office
(or such other address of which we will from time to time notify the Holders),
not more than 60 nor less than 30 days prior to the date of repayment. Notices
of elections from participants on behalf of beneficial owners of the Global
Security or Securities representing the Book-Entry Notes to exercise their
option to have the Book-Entry Notes repaid must be received by one of the
Paying Agents, not later than 5:00 P.M., New York City time, on the last day
for giving that notice.
In order to ensure that a notice is received by one of the Paying Agents on
a particular day, the beneficial owner of the Global Security or Securities
representing the Book-Entry Notes must direct the applicable participant before
the participant's deadline for accepting instructions for that day. Different
firms may have different deadlines for accepting instructions from their
customers. Accordingly, beneficial owners of the Global Security or Securities
representing Book-Entry Notes should consult the participants through which
they own their interest for the respective deadlines for the participants. All
notices must be executed by a duly authorized officer of the participant (with
signature guaranteed) and shall be irrevocable. In addition, beneficial owners
of the Global Security or Securities representing Book-Entry Notes shall effect
delivery at the time the notices of election are given to the Depositary by
causing the applicable participant to transfer the beneficial owner's interest
in the Global Security or Securities representing the Book-Entry Notes, on the
Depositary's records, to the Trustee. See "Book-Entry System."
If applicable, we will comply with the requirements of Rule 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any other
securities laws or regulations in connection with any repayment. We may at any
time purchase Notes at any price or prices in the open market or otherwise.
Notes purchased by us may be held or resold or, at our discretion, may be
surrendered to the Trustee for cancellation.
Other Provisions; Addenda
We may modify or amend any provisions with respect to the Notes, including:
(i) the determination of an Interest Rate Basis,
(ii) the calculation of the interest rate applicable to a Floating
Rate Note,
(iii) the specification of one or more Interest Rate Bases,
(iv) the Interest Payment Dates,
(v) the Maturity Date or
(vi) any other variable term relating to the Notes.
We may modify the provisions as set forth under "Other Provisions" on the
face of the Notes or in an Addendum to the Notes, if specified on the face of
the Note and in the Pricing Supplement related to that offering.
Book-Entry System
We have established a depository arrangement with The Depository Trust
Company (the "Depositary") with respect to the Book-Entry Notes, the terms of
which are summarized below. We will describe any additional or differing terms
of the depository arrangement with respect to the Book-Entry Notes in the
applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes of like tenor and terms up to
$200,000,000 aggregate principal amount and having the same original issue date
will be represented by a single Global Security. Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depositary, located in the Borough of Manhattan, The City of New York, and will
be registered in the name of the Depositary or its
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nominee. No Global Security described above may be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor depositary or a nominee of such
successor depository.
Book-Entry Notes represented by a Global Security are exchangeable for
definitive Notes in registered form, of like tenor and of an equal aggregate
principal amount, only if:
(i) the Depositary notifies us in writing that it is unwilling or unable
to continue as Depositary for such Global Security or if at any time the
Depositary ceases to be a clearing agency registered under the Exchange
Act, and we do not appoint a successor depositary within 60 days,
(ii) we, in our sole discretion, determine not to have the Book-Entry
Notes represented by one or more Global Securities or
(iii) an event shall have happened and be continuing which, after notice
or lapse of time, or both, would constitute an Event of Default with
respect to the Book-Entry Notes.
Any Global Security representing Book-Entry Notes that is exchangeable
pursuant to the preceding paragraph shall be exchangeable in whole for
definitive Notes in registered form, of like tenor and of an equal aggregate
principal amount, in minimum denominations of $1,000 and integral multiples of
$1,000 in excess thereof (or in such amounts in other currencies or composite
currencies as specified in the applicable Pricing Supplement). Such definitive
Notes shall be registered in the name or names of such person or persons as the
Depositary shall instruct the Security Registrar. It is expected that the
instructions may be based upon directions received by the Depositary from its
participants with respect to ownership of Book-Entry Notes.
Except as provided above, owners of Book-Entry Notes will not be entitled to
receive physical delivery of Notes in definitive form and no Global Security
representing Book-Entry Notes shall be exchangeable, except for another Global
Security of like denomination and tenor to be registered in the name of the
Depositary or its nominee. Accordingly, each Beneficial Owner owning a Book-
Entry Note must rely on the procedures of the Depositary and, if the Beneficial
Owner is not a participant, on the procedures of the participant through which
the Beneficial Owner owns its beneficial interest, to exercise any rights of a
Holder under the Notes. We understand that, under existing industry practices,
in the event that (i) we request any action of Holders or (ii) an owner of a
Book-Entry Note desires to give or take any action which a Holder is entitled
to give or take under the Notes in accordance with the terms of the Notes, the
Depositary would authorize the participants owning the relevant Book-Entry
Notes to give or take such action, and the participants would authorize
beneficial owners owning through the participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning
through them.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry Notes.
The Book-Entry Notes will be issued as fully registered securities registered
in the name of Cede & Co. (the Depositary's partnership nominee). One fully
registered Global Security will be issued for each issue of Book-Entry Notes,
each in the aggregate principal amount of the issue, and will be deposited with
the Depositary. If, however, the aggregate principal amount of any issue
exceeds $200,000,000, one Global Security will be issued with respect to each
$200,000,000 of principal amount and an additional Global Security will be
issued with respect to any remaining principal amount of that issue.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act . The Depositary holds securities that its participants ("Participants")
deposit with the Depositary. The Depositary also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges,
in
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deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates.
Direct Participants of the Depositary ("Direct Participants") include
securities brokers and dealers (including the Agents), banks, trust companies,
clearing corporations and certain other organizations. The Depositary is owned
by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the Depositary's system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable
to the Depositary and its Participants are on file with the Securities and
Exchange Commission.
Purchase of Book-Entry Notes under the Depositary's system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Notes on the Depositary's records. The ownership interest of each actual
purchaser of each Book-Entry Note represented by a Global Security ("Beneficial
Owner") is in turn to be recorded on the records of Direct Participants and
Indirect Participants. Beneficial Owners will not receive written confirmation
from the Depositary of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct Participants or Indirect
Participants through which the Beneficial Owner entered into the transaction.
Transfers of ownership interest in a Global Security representing Book-Entry
Notes are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners of a Global Security
representing Book-Entry Notes will not receive Certificated Notes representing
their ownership interests, except in the event that use of the book-entry
system for the Book-Entry Notes is discontinued. To facilitate subsequent
transfers, all Global Securities representing Book-Entry Notes which are
deposited with, or on behalf of, the Depositary are registered in the name of
the Depositary's nominee, Cede & Co. The deposit of Global Securities with, or
on behalf of, the Depositary and their registration in the name of Cede & Co.
effect no change in beneficial ownership. The Depositary has no knowledge of
the actual Beneficial Owners of the Global Securities representing the Book-
Entry Notes; the Depository's records reflect only the identity of the Direct
Participants to whose accounts the Book-Entry Notes are credited, which may or
may not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to us as soon as possible
after the applicable record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Book-Entry Notes are credited on the applicable record date (identified in a
listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on the Global
Securities representing the Book-Entry Notes will be made in immediately
available funds to the Depositary. The Depositary's practice is to credit
Direct Participants' accounts on the applicable payment date in accordance with
their respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payment on such date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of the Participant and not our responsibility or the
Depositary or Trustee, subject to any statutory or regulatory requirements as
may be in effect from time to
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time. Payment of principal, premium, if any, and/or interest, if any, to the
Depositary is our responsibility and the Trustee, disbursement of the payments
to Direct Participants shall be the responsibility of the Depositary, and
disbursement of the payments to the Beneficial Owners shall be the
responsibility of Direct Participants and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the Book-Entry Notes of like tenor and terms are being redeemed, the
Depositary's practice is to determine by lot the amount of the interest of each
Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by us, through its Participant, to the Trustee, and
shall effect delivery of the Book-Entry Notes by causing the Direct Participant
to transfer the Participant's interest in the Global Security or Securities
representing the Book-Entry Notes, on the Depositary's records, to the Trustee.
The requirement for physical delivery of Book-Entry Notes in connection with a
demand for repayment will be deemed satisfied when the ownership rights in the
Global Security or Securities representing the Book-Entry Notes are transferred
by Direct Participants on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances, in
the event that a successor securities depository is not obtained, Certificated
Notes are required to be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through the Depositary (or a successor securities depository). In that event,
Certificated Notes will be printed and delivered.
The Depositary has advised the Company that management of the Depositary is
aware that some computer applications, systems, and the like for processing
data ("Systems") that are dependent upon calendar dates, including dates
before, on, and after January 1, 2000, may encounter "Year 2000 problems". The
Depositary has informed Direct and Indirect Participants and other members of
the financial community (the "Industry") that it has developed and is
implementing a program so that its Systems, as the same relate to the timely
payment of distributions (including principal and interest payments) to
security holders, book-entry deliveries, and settlement of trades within the
Depositary ("Depositary Services"), continue to function appropriately. This
program includes a technical assessment and a remediation plan, each of which
is complete. Additionally, the Depositary's plan includes a testing phase,
which is expected to be completed within appropriate time frames.
However, the Depositary's ability to perform properly its services is also
dependent upon other parties, including, but not limited to, issuers and their
agents, as well as the Depositary's Direct Participants and Indirect
Participants, and third party vendors from whom the Depositary licenses
software and hardware, and third party vendors on whom the Depositary relies
for information or the provision of services, including telecommunication and
electrical utility service providers, among others. The Depositary has informed
the Industry that it is contacting (and will continue to contact) third party
vendors from whom the Depositary acquires services to: (i) impress upon them
the importance of such services being Year 2000 compliant; and (ii) determine
the extent of their efforts for Year 2000 remediation (and, as appropriate,
testing) of their services. In addition, the Depositary is in the process of
developing such contingency plans as it deems appropriate.
According to the Depositary, the information in the preceding two paragraphs
with respect to the Depositary has been provided to the Industry for
informational purposes only and is not intended to serve as a representation,
warranty, or contract modification of any kind.
The information in this Prospectus Supplement concerning the Depositary and
the Depositary's system has been obtained from sources that we believe to be
reliable, but neither we nor any Agent takes any responsibility for its
accuracy.
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SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
General
Unless we specify otherwise in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
Specified Currency in which the particular Notes are denominated. The
information set forth in this Prospectus Supplement is directed to prospective
purchasers who are United States residents. Therefore, with respect to Foreign
Currency Notes, the information set forth in this Prospectus Supplement is
incomplete. We and the Agents disclaim any responsibility to advise prospective
purchasers who are residents of countries other than the United States with
respect to any matters that may affect the purchase, holding or receipt of
payments of principal of and premium, if any, and interest on the Foreign
Currency Notes. Residents of countries other than the United States should
consult their own financial and legal advisors with regard to such matters. See
"RISK FACTORS--Exchange Rates And Exchange Controls."
Governing Law; Judgments
The Notes will be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts. If a plaintiff commenced an action based on
Foreign Currency Notes in a court of the United States, it is likely that the
court would grant judgment relating to the Notes only in U.S. dollars. It is
not clear, however, whether, in granting the judgment, the court would
determine the rate of conversion into U.S. dollars with reference to the date
of default, the date judgment is rendered or some other date. Under current
Massachusetts law, a state court in the Commonwealth of Massachusetts rendering
a judgment on a Foreign Currency Note would be required to render the judgment
in the Specified Currency in which the Foreign Currency Note is denominated,
and the judgment would be converted into U.S. dollars at the exchange rate
prevailing on the date of entry of the judgment. Accordingly, Holders of
Foreign Currency Notes would bear the risk of exchange rate fluctuations
between the time the amount of the judgment is calculated and the time that
amount is converted from U.S. dollars into the applicable Specified Currency.
Payment of Principal and Premium, if any, and Interest
Unless we specify otherwise in the applicable Pricing Supplement, we are
obligated to make payments of principal of and premium, if any, and interest on
Foreign Currency Notes in the applicable Specified Currency. If the Specified
Currency is not legal tender for the payment of public and private debts at the
time of the payment, then we may make payments in another coin or currency of
the country which issued the Specified Currency that is legal tender for the
payment of the debts at the time of the payment. Any such amounts paid by us in
the Specified Currency will, unless otherwise specified in the applicable
Pricing Supplement, be converted by the Exchange Rate Agent named in the
applicable Pricing Supplement (the "Exchange Rate Agent") into U.S. dollars for
payment to Holders. However, unless we specify otherwise in the applicable
Pricing Supplement, the Holder of a Foreign Currency Note may elect to receive
such payments in the applicable Specified Currency.
Any U.S. dollar amount that a Holder of a Foreign Currency Note will receive
will be based on the highest bid quotation in The City of New York that the
Exchange Rate Agent receives at approximately 11:00 a.m., New York City time,
on the second Business Day preceding the applicable payment date. The bid
quotations will come from three recognized foreign exchange dealers (one of
whom may be the Exchange Rate Agent) selected by the Exchange Rate Agent and
approved by us. The bid by the quoting dealer will be for the purchase of the
Specified Currency for U.S. dollars with the settlement of the purchase to
occur on the payment date of the principal, premium, or interest, as
applicable. The bid at which the applicable dealer commits to execute a
contract will be for the aggregate amount of the Specified Currency that is
payable to all Holders of Foreign Currency Notes who are scheduled to receive
U.S. dollar payments. The Holder of the Foreign Currency Note will bear all
currency exchange costs through deductions that we make from the payments. If
three such bid quotations are not available, payments will be made in the
Specified Currency.
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Unless we specify otherwise in the applicable Pricing Supplement, a Holder
of a Foreign Currency Note may elect to receive payment of the principal of and
premium, if any, and/or interest on the Note in the Specified Currency. A
Holder of a Foreign Currency Note may do this by submitting a written request
for the payment to the Trustee at its principal corporate trust office in
Minneapolis, Minnesota on or prior to the applicable Record Date or at least
fifteen calendar days prior to the Maturity Date, as the case may be. A Holder
of a Foreign Currency Note may mail or hand deliver the written request. Or,
they may send it by cable, telex or other form of facsimile transmission. A
Holder of a Foreign Currency Note may elect to receive payment in the
applicable Specified Currency for all the principal, premium, if any, and
interest payments and need not file a separate election for each payment. Such
election will remain in effect until revoked by written notice to the Trustee,
but written notice of any such revocation must be received by the Trustee on or
prior to the applicable Record Date or at least fifteen calendar days prior to
the Maturity Date, as the case may be. Holders of Foreign Currency Notes whose
Notes are to be held in the name of a broker or nominee should contact the
broker or nominee to determine whether and how an election to receive payments
in the applicable Specified Currency may be made.
Payments of the principal of and premium, if any, and interest on Foreign
Currency Notes which are to be made in U.S. dollars will be made in the manner
specified in this Prospectus Supplement with respect to Notes denominated in
U.S. dollars. See "DESCRIPTION OF NOTES--General." We will make payments of
interest on Foreign Currency Notes in the applicable Specified Currency on an
Interest Payment Date (other than the Maturity Date) by check mailed to the
address of the Persons entitled to the interest payment as it appears in the
Security Register. We will make payments of principal of and premium, if any,
and interest on Foreign Currency Notes in the applicable Specified Currency on
the Maturity Date by wire transfer of immediately available funds to an account
with a bank, designated by the applicable Holder at least fifteen calendar days
prior to the Maturity Date. Such bank, however, must have appropriate
facilities and the Holder must present the applicable Note at the principal
corporate trust office of the Trustee in time for the Trustee to make the
payments in such funds in accordance with its normal procedures.
Unless we otherwise specify in the applicable Pricing Supplement, a
beneficial owner of a Global Security or Securities representing Book-Entry
Notes denominated in a Specified Currency other than U.S. dollars which elects
to receive payments of principal, premium, if any, and interest in the
Specified Currency must notify the participant through which its interest is
held on or prior to the applicable Record Date or at least fifteen calendar
days prior to the Maturity Date, as the case may be, of the beneficial owner's
election to receive all or a portion of the payment in the Specified Currency.
Such participant must notify the Depositary of the election on or prior to the
third Business Day after the Record Date or at least ten calendar days prior to
the Maturity Date, as the case may be. The Depositary will then notify the
Trustee of the election on or prior to the fifth Business Day after the Record
Date or at least ten calendar days prior to the Maturity Date, as the case may
be. If complete instructions are received by the participant and forwarded by
the participant to the Depositary, and by the Depositary to the Trustee, on or
prior to such dates, then the beneficial owner will receive payments in the
Specified Currency.
Payment Currency
Except as set forth below, if the applicable Specified Currency is not
available for the payment of principal, premium, if any, or interest with
respect to a Foreign Currency Note due to the imposition of exchange controls
or other circumstances beyond our control, we will have certain rights with
respect to the payments. We will be entitled to satisfy our obligations to the
Holder of the Foreign Currency Note by making the payment in U.S. dollars on
the basis of the Market Exchange Rate (as defined below) on the second Business
Day prior to the payment, or if the Market Exchange Rate is not then available,
on the basis of the most recently available Market Exchange Rate or as
otherwise specified in the applicable Pricing Supplement. The "Market Exchange
Rate" for a Specified Currency other than U.S. dollars means the noon dollar
buying rate in The City of New York for cable transfer for the Specified
Currency as certified for customs purposes (or if not so certified, as
otherwise determined) by the Federal Reserve Bank of New York. Any payment made
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under such circumstances in U.S. dollars where the required payment is in a
Specified Currency other than U.S. dollars will not constitute an Event of
Default under the applicable Indenture with respect to the Notes.
If we are required to make payment in respect of a Foreign Currency Note in
any currency unit, and the currency unit is unavailable due to the imposition
of exchange controls or other circumstances beyond our control, then we will be
entitled, but not required, to make any payments in respect of the Foreign
Currency Note in U.S. dollars until the currency unit is again available. The
amount of each payment in U.S. dollars shall be computed on the basis of the
equivalent of the currency unit in U.S. dollars, which the Exchange Rate Agent
shall determine on the following basis. The component currencies of the
currency unit for this purpose (collectively, the "Component Currencies" and
each, a "Component Currency") shall be the currency amounts that were
components of the currency unit as of the last day on which the currency unit
was available. The equivalent of the currency unit in U.S. dollars shall be
calculated by aggregating the U.S. dollar equivalents of the Component
Currencies. The U.S. dollar equivalent of each of the Component Currencies
shall be determined by the Exchange Rate Agent on the second Business Day prior
to the required payment or, if the Market Exchange Rate is not then available,
on the basis of the most recently available Market Exchange Rate for each such
Component Currency, or as otherwise specified in the applicable Pricing
Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
All determinations referred to above that are made by us or our agent
(including the Exchange Rate Agent) shall be at its sole discretion and shall,
in the absence of manifest error, be conclusive for all purposes and binding on
the Holders of the Foreign Currency Notes.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of United States federal income tax consequences of
the purchase, ownership and disposition of the Notes is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including changes in effective dates) or possible differing
interpretations. The summary deals only with Notes held as capital assets. The
summary does not address persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the U.S. dollar. The summary also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). You should consult your own tax advisor concerning the application of
United States federal income tax laws to your particular situation as well as
any consequences of the purchase, ownership and disposition of the Notes
arising under the laws of any other taxing jurisdiction.
The term "U.S. Holder" means a beneficial owner of a Note that is for United
States federal income tax purposes:
(i) a citizen or resident of the United States
(ii) a corporation, partnership or other entity treated as a corporation or a
partnership for United States federal income tax purposes created or
organized in or under the laws of the United States or of any state or
the District of Columbia (other than a partnership that is not treated
as a U. S. person under any applicable Treasury regulations),
(iii) an estate whose income is subject to United States federal income
tax regardless of its source of income, or
(iv) a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or
more U.S. persons have the authority to control all substantial
decisions of the trust.
Notwithstanding the foregoing, to the extent provided in regulations,
certain trusts in existence on August 20, 1996 and treated as U.S. persons
prior to that date that elect to continue to be treated as U.S. persons are
considered U.S. Holders as well. The term "non-U.S. Holder" means a beneficial
owner of a Note that is not a U.S. Holder.
U.S. Holders
Payments of Interest. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time the payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting).
Discount Notes. The following summary is a general discussion of the United
States federal income tax consequences to U.S. Holders of the purchase,
ownership and disposition of Notes issued with original issue discount. The
summary is based upon final Treasury regulations, referred to as "OID
Regulations," released by the Internal Revenue Service in January 1994, and as
amended in June 1996, under the original issue discount provisions of the Code.
For United States federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if the excess equals or exceeds a de minimis amount. The de minimis
amount is generally 1/4 of 1% of the Note's stated redemption price at maturity
multiplied by the number of complete years to its maturity from its issue date
or, in the case of a Note providing for the payment of any amount other than
qualified stated interest prior to maturity, multiplied by the weighted average
maturity of the Note. The issue price of each Note in an issue of Notes equals
the first price at which a substantial amount of the Notes has been sold. For
purposes of determining this price, sales to bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters, placement
agents, or wholesalers are ignored.
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The stated redemption price at maturity of a Note is the sum of all payments
provided by the Note other than "qualified stated interest" payments. The term
"qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a single fixed rate.
Under the OID Regulations, if a Note:
(i) bears interest for one or more accrual periods at a rate below the
rate applicable for the remaining term of the Note (e.g., Notes with
teaser rates or interest holidays), and
(ii) if the greater of either the resulting foregone interest on the Note
or any "true" discount on the Note (i.e., the excess of the Note's
stated principal amount over its issue price) equals or exceeds a
specified de minimis amount,
then the stated interest on the Note would be treated as original issue
discount rather than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time the payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to the income, regardless of such U.S. Holder's
regular method of tax accounting. The amount of original issue discount
included in income by the initial U.S. Holder of a Discount Note is the sum of
the daily portions of original issue discount with respect to the Discount Note
for each day during the taxable year (or portion of the taxable year) on which
the U.S. Holder held that Discount Note. The "daily portion" of original issue
discount on any Discount Note is determined by allocating to each day in any
accrual period a ratable portion of the original issue discount allocable to
that accrual period. An "accrual period" may be of any length and the accrual
periods may vary in length over the term of the Discount Note, provided that
each accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the final day of an accrual period or on
the first day of an accrual period.
The amount of original issue discount allocable to each accrual period is
equal to the difference between the
(i) product of the Discount Note's adjusted issue price at the
beginning of the accrual period and its yield to maturity
(determined on the basis of compounding at the close of each
accrual period and adjusted to take into account the length of the
accrual period) and
(ii) the amount of any qualified stated interest payments allocable to
the accrual period.
The "adjusted issue price" of a Discount Note at the beginning of any
accrual period is the sum of the issue price of the Discount Note plus the
amount of original issue discount allocable to all prior accrual periods minus
the amount of any prior payments on the Discount Note that were not qualified
stated interest payments. Under these rules, U.S. Holders generally will have
to include in income increasingly greater amounts of original issue discount in
successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which the U.S. Holder must
include in its gross income with respect to the Discount Note for any taxable
year (or portion thereof in which the U.S. Holder holds the Discount Note) will
be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
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Under the OID Regulations, Floating Rate Notes and Indexed Notes, referred
to as "Variable Notes", are subject to special rules. Under these rules a
Variable Note will qualify as a "variable rate debt instrument" if:
(a) its issue price does not exceed the total noncontingent principal
payments due under the Variable Note by more than a specified de
minimis amount and
(b) it provides for stated interest, paid or compounded at least
annually, at current values of
(i) one or more qualified floating rates,
(ii) a single fixed rate and one or more qualified floating rates,
(iii) a single objective rate, or
(iv) a single fixed rate and a single objective rate that is a
qualified inverse floating rate.
A "qualified floating rate" means any variable rate where variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. A multiple of a qualified floating rate will
generally not itself constitute a qualified floating rate. A variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than 0.65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate.
Two or more qualified floating rates that can reasonably be expected to have
approximately the same values throughout the term of the Variable Note (e.g.,
two or more qualified floating rates with values within 25 basis points of each
other as determined on the Variable Note's issue date) will be treated as a
single qualified floating rate.
A variable rate that would otherwise constitute a qualified floating rate
but which is subject to one or more restrictions such as a maximum numerical
limitation (i.e., a cap) or a minimum numerical limitation (i.e., a floor) may,
under certain circumstances, fail to be treated as a qualified floating rate
under the OID Regulations unless the cap or floor is fixed throughout the term
of the Note.
An "objective rate" means a rate that is not itself a qualified floating
rate but which is determined using a single fixed formula and that is based on
objective financial or economic information. A rate will not qualify as an
objective rate if it is based on information that is within the control of the
issuer (or a related party) or that is unique to the circumstances of the
issuer (or a related party), such as dividends, profits, or the value of the
issuer's stock. A rate does not fail to be an objective rate merely because it
is based on the credit quality of the issuer.
A "qualified inverse floating rate" means any objective rate where the rate
is equal to a fixed rate minus a qualified floating rate, as long as variations
in the rate can reasonably be expected to inversely reflect contemporaneous
variations in the qualified floating rate.
The OID Regulations also provide that:
(i) a Variable Note provides for stated interest at a fixed rate for an
initial period of less than one year followed by a variable rate
that is either a qualified floating rate or an objective rate and
(ii) if the variable rate on the Variable Note's issue date is intended
to approximate the fixed rate (e.g., the value of the variable
rate on the issue date does not differ from the value of the fixed
rate by more than 25 basis points),
then the fixed rate and the variable rate together will constitute either a
single qualified floating rate or objective rate, as the case may be.
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If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout its term:
(i) qualifies as a "variable rate debt instrument" under the OID
Regulations, and
(ii) if the interest on the Note is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least
annually,
then all stated interest on the Note will constitute qualified stated interest
and will be taxed accordingly.
A Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout its term and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (i.e., at a price below
the Note's stated principal amount) in excess of a specified de minimis amount.
The amount of qualified stated interest and the amount of original issue
discount, if any, that accrues during an accrual period on the Variable Note is
determined under the rules applicable to fixed rate debt instruments.
Original issue discount on the Variable Note arising from "true" discount is
allocated to an accrual period using the constant yield method described above.
This is accomplished by assuming that the variable rate is a fixed rate equal
to:
(i) in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date, of the qualified floating rate
or qualified inverse floating rate, or
(ii) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is
reasonably expected for the Variable Note.
The qualified stated interest allocable to an accrual period is increased (or
decreased) if the interest actually paid during an accrual period exceeds (or
is less than) the interest assumed to be paid during the accrual period
pursuant to the foregoing rules.
Any other Variable Note that qualifies as a "variable rate debt instrument"
will be converted into an "equivalent" fixed rate debt instrument for purposes
of determining the amount and accrual of original issue discount and qualified
stated interest on the Variable Note. The OID Regulations require that the
Variable Note be converted into an "equivalent" fixed rate debt instrument by
substituting any qualified floating rate or qualified inverse floating rate
provided for under the terms of the Variable Note with a fixed rate equal to
the value of the qualified floating rate or qualified inverse floating rate, as
the case may be, as of the Variable Note's issue date. Any objective rate
(other than a qualified inverse floating rate) provided for under the terms of
the Variable Note is converted into a fixed rate that reflects the yield that
is reasonably expected for the Variable Note.
In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Variable Note as of the Variable
Note's issue date is approximately the same as the fair market value of an
otherwise identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed rate.
Subsequent to converting the fixed rate into either a qualified floating rate
or a qualified inverse floating rate, the Variable Note is then converted into
an "equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument, the amount of original issue discount and qualified stated
interest, if any, are determined for the "equivalent" fixed rate debt
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instrument. This is determined by applying the general original issue discount
rules to the "equivalent" fixed rate debt instrument. A U.S. Holder of the
Variable Note will account for the original issue discount and qualified stated
interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. For each accrual period, appropriate adjustments will be made to
the amount of qualified stated interest or original issue discount assumed to
have been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that the amounts differ from the actual amount of
interest accrued or paid on the Variable Note during that period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. You should be aware that in June 1996, the
Treasury Department issued final regulations concerning the proper United
States federal income tax treatment of contingent payment debt instruments.
These regulations (referred to as the "CPDI Regulations") would cause the
timing and character of income, gain or loss reported on a contingent payment
debt instrument to substantially differ from the timing and character of
income, gain or loss reported on a contingent payment debt instrument under
general principles of current United States federal income tax law. The CPDI
Regulations require a U.S. Holder of such an instrument to include future
contingent and noncontingent interest payments in income as the interest
accrues based upon a projected payment schedule. Any gain recognized by a U.S.
Holder on the sale, exchange, or retirement of a contingent payment debt
instrument will be treated as ordinary income and all or a portion of any loss
realized could be treated as ordinary loss as opposed to capital loss
(depending upon the circumstances). The CPDI Regulations apply to debt
instruments issued on or after August 13, 1996.
The proper United States federal income tax treatment of Variable Notes that
are treated as contingent payment debt obligations will be more fully described
in a Pricing Supplement with respect to that offering. Any other special United
States federal income tax considerations, not otherwise discussed here, which
are applicable to any particular issue of Notes will be discussed in the
Pricing Supplement for that offering.
Certain of the Notes may be (i) redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable
at the option of the holder prior to their stated maturity (a "put option").
Notes containing those features may be subject to rules that differ from the
general rules discussed above. If you intend to purchase Notes with those
features, then you should consult your own tax advisor, since the original
issue discount consequences will depend, in part, on the particular terms and
features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes. Notes that have a fixed maturity of one year or less are
referred to in this section as "Short-Term Notes" and are treated as having
been issued with original issue discount. In general, an individual or other
cash method U.S. Holder is not required to accrue the original issue discount
unless the U.S. Holder elects to do so. Unless an election is made, any gain
recognized by the U.S. Holder on the sale, exchange or maturity of the Short-
Term Note will be ordinary income to the extent of the original issue discount
accrued on a straight-line basis, or upon election under the constant yield
method (based on daily compounding), through the date of sale or maturity. A
portion of the deductions otherwise allowable to the U.S. Holder for interest
on borrowings allocable to the Short-Term Note will be deferred until a
corresponding amount of income is realized.
U.S. Holders who report income for United States federal income tax purposes
under the accrual method, and certain other holders including banks and dealers
in securities, are required to accrue original issue discount on a Short-Term
Note on a straight-line basis unless an election is made to accrue the original
issue discount under a constant yield method (based on daily compounding).
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Market Discount. If a U.S. Holder purchases:
(i) a Note for an amount that is less than its issue price (or, in the
case of a subsequent purchaser, its stated redemption price at
maturity), or
(ii) a Discount Note, for an amount that is less than its adjusted
issue price as of the purchase date,
then the U.S. Holder will be treated as having purchased the Note at a "market
discount," unless the difference is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Note, any payment that
does not constitute qualified stated interest) on, or any gain realized on the
sale, exchange, retirement or other disposition of, a Note as ordinary income.
The payment or gain will be treated as ordinary income to the extent of the
lesser of:
(i) the amount of the payment or realized gain or
(ii) the market discount which has not previously been included in
income and is treated as having accrued on the Note at the time of
the payment or disposition.
Market discount will be considered to accrue ratably during the period from
the date of acquisition to the maturity date of the Note, unless the U.S.
Holder elects to accrue market discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions. This deferral may be required because a current
deduction is only allowed to the extent the interest expense exceeds an
allocable portion of market discount.
A U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or semiannual compounding basis). In the event of
such an election, the rules described above with respect to the treatment as
ordinary income of gain upon the disposition of the Note and upon the receipt
of certain cash payments and with respect to the deferral of interest
deductions will not apply. Generally, the currently included market discount is
treated as ordinary interest for United States federal income tax purposes. The
election will apply to all debt instruments acquired by the U.S. Holder on or
after the first day of the taxable year to which the election applies and may
be revoked only with the consent of the IRS.
Premium. If a U.S. Holder purchases a Note for an amount that is greater
than the sum of all amounts payable on the Note after the purchase date (other
than payments of qualified stated interest), then the U.S. Holder will be
considered to have purchased the Note with "amortizable bond premium" equal in
amount to that excess. A U.S. Holder may elect to amortize this premium using a
constant yield method over the remaining term of the Note and may offset
interest otherwise required to be included in respect of the Note during any
taxable year by the amortized amount of the excess for the taxable year.
However, if the Note may be redeemed at our option, after the U.S. Holder
acquires it, at a price in excess of its stated redemption price at maturity,
special rules would apply. These rules could result in a deferral of the
amortization of the bond premium until later in the term of the Note. Any
election to amortize bond premium applies to all taxable debt obligations held
by the U.S. Holder during or after the first day of the taxable year to which
the election applies and may be revoked only with the consent of the IRS.
Disposition of a Note. Except as discussed above, upon the sale, exchange or
retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized
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on the sale, exchange or retirement (other than amounts representing accrued
and unpaid interest) and the U.S. Holder's adjusted tax basis in the Note. A
U.S. Holder's adjusted tax basis in a Note generally will equal:
(i) the U.S. Holder's initial investment in the Note, plus
(ii) any original issue discount included in income (and accrued
market discount, if any, if the U.S. Holder has included the
market discount in income), minus
(iii) the amount of any payments, other than qualified stated interest
payments, received and amortizable bond premium taken with
respect to the Note.
This gain or loss generally will be long-term capital gain or loss if the
Note has been held for more than one year .
Notes Denominated or on which Interest is Payable in a Foreign Currency.
As used in this section, the term "Foreign Currency" means a currency or
currency unit other than U.S. dollars.
Payments of Interest in a Foreign Currency.
Cash Method. A U.S. Holder who uses the cash method of accounting for United
States federal income tax purposes and who receives a payment of interest on a
Note (other than original issue discount or market discount) will be required
to include in income the U.S. dollar value of the Foreign Currency payment. The
U.S. dollar value is determined on the date that the payment is received. This
value is required to be included in income regardless of whether the payment is
in fact converted to U.S. dollars at that time. This U.S. dollar value will be
the U.S. Holder's tax basis in the Foreign Currency.
Accrual Method. A U.S. Holder who uses the accrual method of accounting for
United States federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the
U.S. dollar value of the amount of interest income that has accrued and is
otherwise required to be taken into account with respect to a Note during an
accrual period. The accrued interest income must include any original issue
discount or market discount and may be reduced by amortizable bond premium to
the extent applicable.
The U.S. dollar value of the accrued interest income will be determined by
translating the income at the average rate of exchange for the accrual period
or, with respect to an accrual period that spans two taxable years, at the
average rate for the partial period within the taxable year. A U.S. Holder may
elect, however, to translate the accrued interest income using the rate of
exchange on the last day of the accrual period or, with respect to an accrual
period that spans two taxable years, using the rate of exchange on the last day
of the taxable year. If the last day of an accrual period is within five
business days of the date of receipt of the accrued interest, a U.S. Holder may
convert the interest using the rate of exchange on the date of receipt.
The above election will apply to other debt obligations held by the U.S.
Holder and may not be changed without the consent of the IRS. A U.S. Holder
should consult a tax advisor before making the above election. A U.S. Holder
will recognize exchange gain or loss (which will be treated as ordinary income
or loss) with respect to accrued interest income on the date the income is
received. The amount of ordinary income or loss recognized will equal the
difference, if any, between the U.S. dollar value of the Foreign Currency
payment received (determined on the date the payment is received) in respect of
the accrual period and the U.S. dollar value of interest income that has
accrued during that accrual period (as determined above).
Purchase, Sale and Retirement of Notes. A U.S. Holder who purchases a Note
with previously owned Foreign Currency will recognize ordinary income or loss
in an amount equal to the difference, if any, between the U.S. Holder's tax
basis in the Foreign Currency and the U.S. dollar fair market value of the
Foreign Currency used to purchase the Note, determined on the date of purchase.
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Except for Short-Term Notes discussed above, upon the sale, exchange or
retirement of a Note, a U.S. Holder will recognize taxable gain or loss equal
to the difference between the amount realized on the sale, exchange or
retirement and the U.S. Holder's adjusted tax basis in the Note. This gain or
loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income).
It will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by the U.S. Holder for more than one year.
To the extent the amount realized represents accrued but unpaid interest,
however, the amounts must be taken into account as interest income, with
exchange gain or loss computed as described in "Payments of Interest in a
Foreign Currency" above. If a U.S. Holder receives Foreign Currency on that
sale, exchange or retirement, the amount realized will be based on the U.S.
dollar value of the Foreign Currency on:
(i) the date of receipt of the Foreign Currency for a cash basis U.S.
Holder and
(ii) the date of disposition for an accrual basis U.S. Holder.
In the case of a Note that is denominated in Foreign Currency and is traded
on an established securities market, a cash basis U.S. Holder (or, upon
election, an accrual basis U.S. Holder) will determine the U.S. dollar value
of the amount realized by converting the Foreign Currency payment at the spot
rate of exchange on the settlement date of the sale.
A U.S. Holder's adjusted tax basis in a Note will equal:
(i) the cost of the Note to that holder, plus
(ii) the amounts of any market discount or original issue discount
previously included in income by the holder with respect to that
Note, minus
(iii) any amortized acquisition or other premium and any principal
payments received by the holder.
A U.S. Holder's tax basis in a Note, and the amount of any subsequent
adjustments to the holder's tax basis, will be the U.S. dollar value of the
Foreign Currency amount paid for the Note, or of the Foreign Currency amount
of the adjustment, determined on the date of the purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain
or loss attributable to fluctuations in exchange rates will equal the
difference between the U.S. dollar value of the Foreign Currency principal
amount of the Note, determined on the date the payment is received or the Note
is disposed of, and the U.S. dollar value of the Foreign Currency principal
amount of the Note, determined on the date the U.S. Holder acquired the Note.
The Foreign Currency gain or loss will be recognized only to the extent of the
total gain or loss realized by the U.S. Holder on the sale, exchange or
retirement of the Note.
Original Issue Discount. In the case of a Discount Note or Short-Term Note:
(i) the original issue discount is determined in units of the Foreign
Currency,
(ii) the accrued original issue discount is translated into U.S. dollars
as described in "Payments of Interest in a Foreign Currency--
Accrual Method" above and
(iii) the amount of Foreign Currency gain or loss on the accrued original
issue discount is determined by comparing the amount of income
received attributable to the discount (either upon payment,
maturity or an earlier disposition), as translated into U.S.
dollars at the rate of exchange on the date of receipt, with the
amount of original issue discount accrued, as converted above.
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Premium and Market Discount. In the case of a Note with market discount:
(i) market discount is determined in units of the Foreign Currency,
(ii) accrued market discount taken into account upon the receipt of any
partial principal payment or upon the sale, exchange, retirement or
other disposition of the Note is translated into U.S. dollars at
the exchange rate on the disposition date (and no part of the
accrued market discount is treated as exchange gain or loss), and
(iii) accrued market discount currently includible in income by a U.S.
Holder for any accrual period is translated into U.S. dollars on
the basis of the average exchange rate in effect during the accrual
period, and the exchange gain or loss is determined upon the
receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note. See
"Payments of Interest in a Foreign Currency--Accrual Method" above
with respect to computation of exchange gain or loss on accrued
interest.
For a Note that is issued with amortizable bond premium, the premium is
determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. A U.S. Holder should recognize exchange gain or
loss equal to the difference between the U.S. dollar value of the bond premium
amortized with respect to a period, determined on the date the interest
attributable to that period is received, and the U.S. dollar value of the bond
premium determined on the date of the acquisition of the Note.
Exchange of Foreign Currencies. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of that Foreign Currency. The value will
be determined at the time the interest is received or at the time of the sale,
exchange or retirement. Any gain or loss realized by a U.S. Holder on a sale or
other disposition of Foreign Currency (including its exchange for U.S. dollars
or its use to purchase Notes) will be ordinary income or loss.
Non-U.S. Holders
A non-U.S. Holder will not be subject to United States federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, except in certain circumstances. These
circumstances arise when the non-U.S. Holder is a direct or indirect 10% or
greater shareholder of the Company, a controlled foreign corporation related to
the Company or a bank receiving interest described in section 881(c)(3)(A) of
the Code.
To qualify for the exemption from taxation, the last U. S. payor (referred
to as the "Withholding Agent") in the chain of payment prior to payment to a
non-U.S. Holder must receive a statement from the beneficial owner of the Note.
The statement must be received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years. The
statement must (i) be signed by the beneficial owner of the Note under
penalties of perjury, (ii) certify that the owner is a non-U.S. Holder and
(iii) provide the name and address of the beneficial owner. The statement may
be made on an IRS Form W-8 or a substantially similar form. The beneficial
owner must inform the Withholding Agent of any change in the information on the
statement within 30 days of that change. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide a signed statement to the Withholding Agent.
However, in that event, the signed statement must be accompanied by a copy of
the IRS Form W-8 or the substitute form provided by the beneficial owner to the
organization or institution.
A non-U.S. Holder generally will not be subject to United States federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a Note if the gain is not connected with the conduct of a trade
or business in the United States by that non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult a tax
advisor in this regard.
S-35
<PAGE>
The Notes generally would not be includible in the estate of a non-U.S.
Holder except in certain circumstances. These circumstances are if the
individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of the individual's death, payments in respect of the Notes
were connected with the conduct of a trade or business by the individual in the
United States.
Backup Withholding
Backup withholding of United States federal income tax at a rate of 31%
applies to payments made on Notes to registered owners who are (1) not "exempt
recipients," or (2) who fail to provide identifying information (such as a
taxpayer identification number). Payments made on Notes to a U.S. Holder must
be reported to the IRS, unless the U.S. Holder is an exempt recipient or
establishes an exemption. Generally, individuals are not exempt recipients.
Corporations and certain other entities generally are exempt recipients.
Compliance with the identification procedures described in the preceding
section would establish an exemption from backup withholding for those non-U.S.
Holders who are not exempt recipients.
Upon the sale of a Note to (or through) a broker, the broker must report the
sale to the IRS and withhold 31% of the entire purchase price, unless either
(i) the broker determines that the seller is a corporation or other exempt
recipient or (ii) the seller provides, in the required manner, certain
identifying information and, in the case of a non-U.S. Holder, certifies that
the seller is a non-U.S. Holder (and certain other conditions are met).
Certification of the registered owner's non-U.S. status would be made normally
on an IRS Form W-8 under penalties of perjury, although in certain cases it may
be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to
you would be allowed as a refund or a credit against your United States federal
income taxes as long as the required information has been furnished to the IRS.
Withholding Regulations
In 1997, the Treasury Department issued new regulations which make
modifications to the withholding, backup withholding and information reporting
rules. These regulations unify certification requirements and modify reliance
standards. These regulations effect payments made after December 31, 1999. We
recommend that you consult you tax advisors regarding these regulations.
S-36
<PAGE>
PLAN OF DISTRIBUTION
We may offer the Notes for sale on a continuous basis to or through Morgan
Stanley & Co. Incorporated, BancBoston Robertson Stephens Inc. (our wholly-
owned subsidiary), Bear, Stearns & Co. Inc., Chase Securities Inc., Credit
Suisse First Boston Corporation, Lehman Brothers Inc., Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Smith Barney
Inc. The Agents may purchase Notes, as principal, from us from time to time for
resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the applicable
Agent. Or, if we so specify in the applicable Pricing Supplement, the Agents
may purchase Notes for resale at a fixed public offering price. Unless we
specify otherwise in the applicable Pricing Supplement, any Note that we sell
to an Agent as principal will be purchased by such Agent at a price equal to
100% of the principal amount thereof less a percentage of the principal amount
equal to the commission applicable to an agency sale (as described below) of a
Note of identical maturity. If we agree with the Agent, the Agent may utilize
its reasonable efforts on an agency basis to solicit offers to purchase Notes
at 100% of the principal amount thereof, unless otherwise specified in the
applicable Pricing Supplement. We will pay a commission to each Agent ranging
from .125% to .750% of the principal amount of each Note, depending upon its
stated maturity, sold through the Agent. Commissions with respect to Notes with
stated maturities in excess of 30 years that are sold through an Agent will be
negotiated between us and the Agent at the time of the sale.
An Agent may sell Notes it has purchased from us as principal to other
dealers for resale to investors and other purchasers, and may allow any portion
of the discount received in connection with the purchase from us to the
dealers. After the initial public offering of Notes, the public offering price
(in the case of Notes to be resold at a fixed public offering price), the
concession and the discount may be changed.
We have reserved the right to sell Notes to investors directly on our own
behalf only in those jurisdictions where we are authorized to do so. No
commission will be payable nor will a discount be allowed on any sales made
directly by us.
We reserve the right to withdraw, cancel or modify the offer made hereby
without notice and may reject orders in whole or in part (whether placed
directly by us or through one of the Agents). The Agents will have the right,
in their discretion reasonably exercised, to reject in whole or in part any
offer to purchase Notes received by them on an agency basis.
Unless we specify otherwise in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the applicable Specified Currency in The City of New York on
the date of settlement. See "DESCRIPTION OF NOTES--General."
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. Each of the Agents may
from time to time purchase and sell Notes in the secondary market, but no Agent
is obligated to do so, and there can be no assurance that there will be a
secondary market for the Notes or liquidity in the secondary market if one
develops. From time to time, each of the Agents may make a market in the Notes,
but no Agent is obligated to do so and may discontinue any market-making
activity at any time.
Each of the Agents may be deemed to be an "underwriter" within the meaning
of the Securities Act of 1933, as amended (the "Securities Act"). We have
agreed to indemnify the Agents against certain liabilities (including
liabilities under the Securities Act), or to contribute to payments the Agents
may be required to make in respect thereof. We have agreed to reimburse each of
the Agents for certain other expenses.
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, the Agent(s) will be permitted to
engage in certain transactions that stabilize the price of Notes. Such
transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of Notes. If an Agent creates or the Agents
create, as the case may be, a short position in Notes, i.e., if it sells
S-37
<PAGE>
or they sell Notes in an aggregate principal amount exceeding that set forth in
the applicable Pricing Supplement, the Agent(s) may reduce that short position
by purchasing Notes in the open market. In general, purchases of Notes for the
purpose of stabilization or to reduce a short position could cause the price of
Notes to be higher than it might be in the absence of such purchases.
Neither we nor any of the Agents make any representation or prediction as to
the direction or magnitude of any effect that the transactions described in the
immediately preceding paragraph may have on the price of Notes. In addition,
neither we nor any of the Agents make any representation that the Agents will
engage in any such transactions or that such transactions, once commenced, will
not be discontinued without notice.
Certain of the Agents and their affiliates may be customers of, including
borrowers from, engage in transactions with, and perform services for, us and
the Bank in the ordinary course of business. In connection with any particular
issue of Notes, we may enter into swaps or other hedging transactions with, or
arranged by, the applicable Agent or an affiliate thereof. Such Agent or such
affiliate thereof may receive compensation, trading gain or other benefits from
the transaction.
BancBoston Robertson Stephens Inc. ("BRS") is our wholly-owned subsidiary.
Accordingly, the Notes will be offered in compliance with Rule 2720 of the
Conduct Rules of the National Association of Securities Dealers, Inc. ("NASD").
No NASD member participating in the offering of the Notes will execute a
transaction in the Notes in a discretionary account without the prior written
specific approval of the member's customer. This Prospectus Supplement and the
accompanying Prospectus may be used by BRS in connection with offers and sales
related to secondary market transactions in the Notes. BRS may act as principal
or agent in these transactions. Such sales will be made at prices related to
prevailing market prices at the time of sale.
Concurrently with the offering of Notes described in this Prospectus
Supplement, we may issue other Debt Securities described in the accompanying
Prospectus pursuant to the Indentures.
LEGAL OPINIONS
Gary A. Spiess, who is Executive Vice President and General Counsel of the
Company, will pass upon the validity of the Notes offered hereby. Brown & Wood
LLP, New York, New York will pass upon certain legal matters relating to the
Notes for the Agents. Brown & Wood LLP will rely as to all matters of
Massachusetts law on the opinion of Mr. Spiess. As of December 31, 1998, Mr.
Spiess had a direct or indirect interest in 90,823 shares of our Common Stock
and had options to purchase an additional 96,264 shares, of which options to
purchase 64,027 shares will be exercisable within 60 days after December 31,
1998.
S-38
<PAGE>
PROSPECTUS
[BANKBOSTON LOGO APPEARS HERE]
BankBoston
BANKBOSTON CORPORATION
100 Federal Street
Boston, MA 02110
(617) 434-2200
$1,500,000,000
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
----------------
This Prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission under a "shelf" registration process. Under
that process, we may sell any combination of the Securities described in this
Prospectus in one or more offerings up to a total initial offering price of
$1,500,000,000. This Prospectus provides you with a general description of the
Securities we may offer. Each time we sell Securities registered under this
shelf process, we will provide a Prospectus Supplement that will contain the
specific terms of that offering. The Prospectus Supplement may also add, update
or change information contained in this Prospectus. You should read this
Prospectus and any supplement carefully before you invest.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these Securities or determined if
this Prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------
The Securities constitute our unsecured obligations and are not savings
accounts, deposits or other obligations of any of our bank or nonbank
subsidiaries. The Securities are not insured by the Federal Deposit Insurance
Corporation, the Bank Insurance Fund or any other governmental agency.
The date of this Prospectus is February 2,1999.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
BankBoston Corporation................................................... 3
Where You Can Find More Information...................................... 3
Incorporation of Information We File with the SEC........................ 3
Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed
Charges and Preferred Stock Dividend Requirements....................... 4
Supervision and Regulation............................................... 4
Use of Proceeds.......................................................... 5
Description of Debt Securities........................................... 6
Description of Preferred Stock........................................... 16
Description of Common Stock.............................................. 21
Description of Capital Securities........................................ 23
Description of Securities Warrants....................................... 23
Plan of Distribution..................................................... 25
Legal Opinions........................................................... 26
Experts.................................................................. 26
</TABLE>
2
<PAGE>
BANKBOSTON CORPORATION
BankBoston Corporation (the "Company", "we", "us" and "our") is a bank
holding company with both national and international operations. We offer a
full range of banking services to consumers, small businesses and corporate
customers in southern New England, deliver sophisticated financial solutions to
mid-size and large corporations nationally and internationally, and provide
full-service banking in leading Latin American markets.
Our principal subsidiary is BankBoston, N.A. (the "Bank"), a national
banking association with its headquarters in Massachusetts. The Bank maintains
branches in Massachusetts, Connecticut, Rhode Island and New Hampshire and
operates a network of offices across the United States and in 20 countries in
Latin America, Asia and Europe.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC"). You may read
and copy any reports, statements or other information that we file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. For more information about the SEC's public reference rooms and their
copy charges, please call the SEC at 1-800-SEC-0330. Our filings with the SEC
are also available to the public from the website maintained by the SEC at
http://www.sec.gov. Our securities are listed on the New York Stock Exchange
and the Boston Stock Exchange, and such reports, proxy statements and other
information concerning us also may be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, and the Boston
Stock Exchange Incorporated, One Boston Place, Boston, Massachusetts 02108.
We have filed a registration statement on Form S-3 with the SEC covering
the Securities described in this Prospectus. For further information regarding
the Company and the Securities, you should refer to our registration statement
and its exhibits. This Prospectus summarizes material provisions of contracts
and other documents to which we refer you. Since the Prospectus may not contain
all the information that you may find important, you should review the full
text of these documents. We have included copies of these documents as exhibits
to our registration statement.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the information that we
file with them, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be part of this Prospectus, and later information filed with
the SEC will update and supersede this information. We are incorporating by
reference the documents listed below and any future filings that we make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), until this offering is completed:
1. Annual Report on Form 10-K for our fiscal year ended December 31,
1997;
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998;
3. Current Reports on Form 8-K dated January 15, 1998, April 16, 1998,
May 29, 1998, July 16, 1998, August 31, 1998, October 15, 1998,
December 17, 1998 and January 21, 1999; and
4. Description of our Common Stock, Preferred Stock and Preferred Stock
Purchase Rights contained in our registration statements filed under
Section 12 of the Exchange Act, including any amendment or report
filed for the purpose of updating such description.
3
<PAGE>
You may request a copy of these filings at no cost by writing or
telephoning us at this address and telephone number:
BankBoston Corporation
Investor Relations
P.O. Box 2016, MA BOS 01-20-02
Boston, Massachusetts 02106-2016
(617) 434-7858.
You should rely only on the information provided in this Prospectus or in
any later Prospectus Supplement or incorporated by reference in either
document. We have not authorized anyone to provide you with different or
additional information. We are not making an offer to sell securities in any
state or country where the offer is not permitted. You should not assume that
the information in this Prospectus or any later Prospectus Supplement is
accurate as of any date other than the date on the front of the document.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDEND REQUIREMENTS
Our ratios of earnings to fixed charges and earnings to combined fixed
charges and preferred stock dividend requirements for each of the periods
indicated are as follows :
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Years Ended December 31,
-------------- ----------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on
Deposits..................... 2.03x 2.33x 2.35x 2.24x 2.08x 1.90x 2.44x
Including Interest on
Deposits..................... 1.41 1.53 1.53 1.44 1.42 1.41 1.38
Earnings to Combined Fixed
Charges
and Preferred Stock Dividend
Requirements:
Excluding Interest on
Deposits..................... 2.00 2.20 2.24 2.09 1.96 1.79 2.13
Including Interest on
Deposits..................... 1.40 1.49 1.50 1.40 1.38 1.37 1.33
</TABLE>
For purposes of computing the above ratios, we have included in
"earnings" our consolidated net income (without taking into account
extraordinary items and the cumulative effect of changes in accounting
principles) plus applicable income taxes and fixed charges.
To compute fixed charges, excluding interest on deposits, we have
included interest expense (other than on deposits) and the portion of rent
expense that we consider approximates interest, minus sublease rental income.
To compute fixed charges, including interest on deposits, we have included all
interest expense and the portion of rent expense that we consider approximates
interest, minus sublease rental income. We calculated the pretax earnings
required for preferred stock dividends by using income tax rates for the
applicable year.
SUPERVISION AND REGULATION
We are registered with the Board of Governors of the Federal Reserve
System, which has the authority to regulate bank holding companies. The Board
of Governors expects us to act as a source of financial strength to our
subsidiary banks and to commit resources to support such subsidiary banks in
circumstances where we might not otherwise do so. The Federal Reserve Bank of
Boston also supervises and regulates the Company's activities. The Bank is
organized as a national banking association. The Office of the Comptroller of
the Currency and the FDIC are the regulatory authorities for the Bank. Our most
recent Annual Report on Form 10-K sets forth a summary of certain of these
regulations, which you may consult for further information.
4
<PAGE>
Federal and state laws can change in unpredictable ways. These changes
can have significant effects on the way in which banks may conduct business.
Recent laws have substantially increased the level of competition among
commercial banks, thrift institutions and non-banking institutions, such as
insurance companies, brokerage firms, mutual funds, investment banks and major
retailers. Two statutes have affected the banking industry by broadening the
regulatory powers of the federal banking agencies. They are the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") and the
Federal Deposit Insurance Company Improvement Act of 1991. Under FIRREA, the
FDIC can hold an FDIC-insured bank liable for any loss incurred or reasonably
expected to be incurred by the FDIC in connection with certain events relating
to that bank. These events include (i) a default by a commonly controlled FDIC-
insured bank or (ii) the FDIC providing assistance to a commonly controlled
FDIC-insured bank in danger of defaulting. "Default" generally means the
appointment of a conservator or receiver and "in danger of defaulting"
generally means the existence of certain conditions indicating that a "default"
is likely to occur if the regulators do not assist the bank. FIRREA broadened
the enforcement powers of the federal banking agencies by giving them the power
to impose fines and penalties on all financial institutions. Under FIRREA, if a
bank fails to meet capital guidelines, the FDIC can take a variety of
regulatory actions against that bank, including terminating deposit insurance.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the Securities
described in this Prospectus for our general corporate purposes. General
corporate purposes include the following: investing in our subsidiaries, making
advances to our subsidiaries, financing future acquisitions of financial
institutions and other assets, and redeeming certain of our other outstanding
Securities. The precise amounts of proceeds that we will use for various
corporate purposes and the timing of our use of the proceeds will depend upon
our funding requirements and what other funds are available to us and to our
subsidiaries at that particular time.
5
<PAGE>
DESCRIPTION OF DEBT SECURITIES
General
The Debt Securities will be our direct, unsecured general obligations.
The Debt Securities will be either our Senior Securities or our Subordinated
Securities, the provisions of which we have summarized in the Sections that
follow. We will describe the particular terms of any Debt Securities in the
Prospectus Supplement relating to those Debt Securities.
We will issue the Senior Securities under an indenture that we entered
into as of June 15, 1992, with Norwest Bank Minnesota, National Association as
Trustee (the "Senior Indenture"). We will issue the Subordinated Securities
under an indenture that we entered into as of June 15, 1992, with Norwest as
Trustee. We amended the indenture for the Subordinated Securities in the First
Supplemental Indenture dated as of June 24, 1993 (the indenture for the
Subordinated Securities, as amended, is the "Subordinated Indenture"). Under
each of these Indentures, Norwest will act as the Trustee for the security
holders. We have filed copies of the Indentures as exhibits to the Registration
Statement. For your convenience we have included references to the specific
sections of the Indentures in the descriptions below. The following summary of
selected provisions of the Indentures is not complete, however, and you should
read the Indentures for provisions that may be important to you. Capitalized
terms used in this Prospectus have the meanings specified in the Indentures.
We are a holding company and conduct most of our operations through our
subsidiaries. Our rights and the rights of our creditors, including you, to the
assets of any subsidiary of ours upon that subsidiary's liquidation or
reorganization or otherwise would be subject to the prior claims of that
subsidiary's creditors, except to the extent that we may be a creditor with
recognized claims against such subsidiary. Our subsidiaries' creditors would
include trade creditors, debt holders, secured creditors and taxing
authorities. Neither the Debt Securities nor the Indentures restrict us or any
of our subsidiaries from incurring indebtedness.
Neither of the Indentures limits the amount of Debt Securities that we
may issue. Each Indenture provides that Debt Securities may be issued up to the
principal amount that we may separately authorize from time to time. Each also
provides that the Debt Securities may be denominated in any currency or
currency unit designated by us. Unless otherwise set forth in the Prospectus
Supplement related to that offering, neither the Indentures nor the Debt
Securities will contain any provisions to afford holders of any Debt Securities
protection in the event of a takeover, recapitalization or similar
restructuring of our business. The Senior Securities will rank equally with all
of our other unsecured and unsubordinated debt. The Subordinated Securities
will rank junior to all of our Senior Indebtedness as we describe below under
"Subordination."
We may issue Debt Securities in one or more separate series of Senior or
Subordinated Securities. We will include specific terms relating to a
particular series of Debt Securities in a Prospectus Supplement relating to the
offering. The terms we will describe in the Prospectus Supplement will include
some or all of the following:
(1) The distinct title and type of the Debt Securities;
(2) The total principal amount or initial offering price of the Debt
Securities;
(3) The date or dates when the principal of the Debt Securities will be
payable;
(4) The rate at which the Debt Securities will bear interest;
(5) The date from which interest on the Debt Securities will accrue;
(6) The dates when interest on the Debt Securities will be payable and
the regular record date for such interest payment dates;
(7) The place where (i) the principal, premium, if any, and interest on
the Debt Securities will be paid, (ii) registered Debt Securities
may be surrendered for registration of transfer, and (iii) Debt
Securities may be surrendered for exchange;
6
<PAGE>
(8) Any sinking fund or other provisions that would obligate us to
repurchase or otherwise redeem the Debt Securities;
(9) The terms and conditions upon which we will have the option to
redeem the Debt Securities;
(10) The denominations in which any registered Debt Securities will be
issuable (if other than denominations of $1,000 or integral
multiples) and the denominations in which any bearer Debt
Securities will be issuable (if other than a denomination of
$5,000);
(11) The identity of each Security Registrar, Paying Agent and Exchange
Rate Agent (if other than the Trustee);
(12) The portion of the principal amount of Debt Securities that will be
payable upon acceleration of the Maturity of the Debt Securities;
(13) The currency used to pay principal, premium and interest on such
Debt Securities (if other than U.S. Dollars) and whether you or we
may elect to have principal, premium and interest paid in a
currency other than the currency in which the Debt Securities are
denominated;
(14) Any index, formula or other method used to determine the amount of
principal, premium or interest on the Debt Securities;
(15) Any terms upon which you may convert Subordinated Securities into,
or exchange Subordinated Securities for, Capital Securities;
(16) Whether such Debt Securities are Senior Securities or Subordinated
Securities;
(17) Whether provisions relating to defeasance and covenant defeasance
will be applicable to such series of Debt Securities;
(18) Any provisions granting special rights to you when a specified
event occurs;
(19) Any changes to the Events of Default, Defaults (in the case of
Subordinated Securities) or to our covenants;
(20) Whether the Debt Securities are issuable as registered Debt
Securities or bearer Debt Securities, whether there are any
restrictions relating to the form in which they are issued and
whether bearer and registered Debt Securities may be exchanged for
each other;
(21) To whom interest will be payable (i) if other than the registered
Holder (for registered Debt Securities), (ii) if other than upon
presentation and surrender of the related coupons (for bearer Debt
Securities), or (iii) if other than as specified in the Indentures
(for global Debt Securities);
(22) The time, manner and place for Debt Securities to be authenticated
and delivered if they are to be issued upon the exercise of
warrants;
(23) Whether we will pay Additional Amounts regarding any tax,
assessment or government charge to any holder of Debt Securities
who is not a United States person and, if so, whether we will have
the option to redeem such Debt Securities instead of paying such
Additional Amounts; and
(24) Any other terms of the Debt Securities.
We may issue Debt Securities as Original Issue Discount Debt Securities
to be sold at a substantial discount below their principal amount. If we issue
Original Issue Discount Debt Securities, then the special federal income tax
rules that apply will be described in the Prospectus Supplement for those Debt
Securities.
We may also issue Debt Securities upon the exercise of Debt Warrants. See
"Description of Securities Warrants."
We also have the ability under the Indentures to "reopen" a previously
issued series of Debt Securities and issue additional Debt Securities of such
series or establish additional terms of such series. We are also permitted to
issue Debt Securities with the same terms as previously issued Debt Securities.
7
<PAGE>
Registration and Transfer
We plan to issue each series of Debt Securities only as registered
securities. However, we may issue a series of Debt Securities as bearer
securities, or a combination of both registered securities and bearer
securities. If we issue Debt Securities as bearer securities they will have
interest coupons attached unless we elect to issue them as zero coupon
securities. (Section 201, 301.) If we issue bearer securities, we will describe
the U.S. federal income tax consequences and any other applicable
considerations, procedures and limitations in the Prospectus Supplement for
that offering.
You may present registered securities for transfer or exchange for other
Debt Securities of the same series at the office of our agent, Securities
Transfer and Reporting Services, Inc., in New York City, or the Bank's
principal office in Boston. The registered securities must be duly endorsed or
accompanied by a written instrument of transfer, if the Company or the Security
Registrar so requires. The agent will not impose a service charge on you for
the transfer or exchange. We may, however, require that you pay any applicable
tax or other governmental charge. We will describe any procedures for the
exchange of bearer securities for other Debt Securities of the same series in
the Prospectus Supplement for that offering. Generally, we will not allow you
to exchange registered securities for bearer securities. (Sections 301, 305,
1002.)
In general, we will issue registered securities without coupons and in
denominations of $1,000 (or integral multiples) and bearer securities in
denominations of $5,000. We may also issue both registered and bearer
securities in global form and we may issue global securities in any
denominations. (Section 301, 302.)
Global Securities
We may issue Debt Securities of a series in whole or in part in the form
of one or more global securities which we will deposit with a depositary. We
will identify the depositary in the Prospectus Supplement related to that
offering. We may issue global securities in either registered or bearer form
and in either temporary or permanent form. Unless and until it is exchanged in
whole or part for the individual Debt Securities it represents, a global
security may not be transferred except as a whole by the depositary or its
nominee. The depositary and its nominee for a global security may only transfer
the global security between themselves or their successors. (Sections 203, 303,
304.)
If we issue bearer securities in the form of global securities, we will
describe in the Prospectus Supplement for that offering the specific terms of
the depository arrangement. We will also describe in that Prospectus Supplement
any limitations and restrictions, including special U.S. federal income tax
consequences, relating to those securities.
We will make principal, premium and interest payments on global
securities to the depositary or its nominee designated as the registered owner
for such global securities. The depositary or its nominee will be responsible
for making payments to you and other holders of interests in the global
securities. We and the paying agents will treat the persons in whose names the
global securities are registered as the owners of such global securities for
all purposes. Neither we nor the paying agents have any direct responsibility
or liability for the payment of principal, premium or interest to owners of
beneficial interests in the global securities.
Payment and Paying Agents
In general, our agent will make payment of principal, premium, if any,
and interest on registered securities at its office in New York City or at the
Bank's principal office in Boston. We also have the option of paying interest
by mailing a check to you. If we make the payment by check, we will mail it to
you at your address as it appears in our records. (Sections 301, 307, 1002.)
Subject to applicable laws, we will pay principal, premium, if any, and
interest on bearer securities at an office outside the United States that we
will specify in the Prospectus Supplement related to that offering. We may also
designate from time to time another office for such payments or transfer the
payments to an
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account maintained by you with a bank located outside the United States. To
receive payment of interest on bearer securities you must surrender the coupon
for that interest payment date. We will not make any payments with respect to
bearer securities at any of our offices or agencies in the United States nor
will we mail payment checks to any address in the United States or transfer
payment to an account maintained with a bank located in the United States.
(Sections 301, 307.)
Restriction on Certain Distributions
We have agreed under the terms of the Senior Indenture to limit certain
payments and distributions while the Senior Securities are outstanding. In
particular, we have agreed that we will not make any payment or other
distribution in shares of capital stock of the Bank or its successor. We are
bound by this limitation unless the Bank or it's successor unconditionally
guarantees the payment when due of principal, premium, if any, and interest on
the Senior Securities issued pursuant to the Senior Indenture. (Section 1008.)
Restrictions on Liens
Under the terms of the Senior Indenture, we are also prohibited from,
directly or indirectly, creating, assuming or incurring any Lien upon any
shares of capital stock of the Bank or any shares of capital stock of a
Subsidiary which owns shares of capital stock of the Bank. We are subject to
this limitation except for Liens for (1) taxes, (2) assessments, (3) judgments
or (4) other governmental charges or levies. The exceptions only apply if the
amount to which the Lien relates is (1) not yet due, (2) payable without
penalty, or (3) being contested by us in good faith and we have set aside
adequate reserves on our books for that amount. (Section 1009.)
Consolidation, Merger and Sale of Assets
We may, without the consent of the holders of any Outstanding Debt
Securities, consolidate with or merge into any other corporation or convey,
transfer or lease our properties and assets substantially as an entirety.
However, we may only do this if:
(1) our successor will be a corporation organized and existing under the
laws of the United States, any state thereof or the District of
Columbia;
(2) our successor expressly assumes our obligation to pay the principal,
premium, if any, and interest on the Outstanding Debt Securities and
to perform the indenture covenants;
(3) after giving effect to the transaction, no Event of Default under
the Senior Indenture (or Default under the Subordinated Indenture),
and no event which after notice or lapse of time or both would
become an Event of Default (or Default), has occurred and is
continuing; and
(4) certain other conditions described in the Indentures are satisfied.
(Section 801.)
Modification and Waiver
We and the Trustee may modify or amend either Indenture with the consent
of the holders of 66 2/3% of the principal amount of the Outstanding Debt
Securities of each series that will be affected by the modification or
amendment. However, we cannot make any of the following modifications or
amendments without the consent of the holder of each Outstanding Debt Security
affected:
(1) change the Stated Maturity of the principal or any installment of
interest;
(2) reduce the principal amount, interest rate, or any premium payable,
or (in the case of Subordinated Securities) exchange any Debt
Securities;
(3) change our obligations to pay Additional Amounts required;
(4) reduce the amount of principal of any Original Issue Discount
Security that is due and payable upon acceleration of Maturity or
provable in bankruptcy;
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(5) adversely affect any holder's optional right of repayment;
(6) change the place, currency, or (in the case of Subordinated
Securities) class of Capital Securities for payments;
(7) impair the right to institute suit for the enforcement of any
payments on or after the date on which the payments are due;
(8) adversely affect the right to convert any convertible security (in
the case of Subordinated Securities);
(9) reduce the percentage of the principal amount of Outstanding Debt
Securities for which the holders' consent is required for
modifications, amendments, or waivers, or reduce the requirements
for quorum or voting by the holders; or
(10) modify certain provisions unless it is to increase the percentage
required to consent to amendments or modifications or to give
waivers, or to provide that other provisions cannot be modified or
waived without the consent of the holder of each Outstanding Debt
Security affected. (Section 902.)
The holders of 66 2/3% in principal amount of the Outstanding Debt
Securities of each series may waive (on behalf of all holders of that series)
compliance by us with certain terms or provisions of the applicable Indenture.
(Section 1011.) The holders of a majority in principal amount of the
Outstanding Debt Securities of any series also may waive (on behalf of all
holders of that series) most past defaults by us under the applicable
Indenture. However, the consent of the holder of each affected Debt Security is
required to waive any default by us with respect to payment or a covenant or
provision which cannot be modified or amended without the consent of the holder
of each affected Debt Security. (Section 513.)
To determine if holders having the requisite principal amount of the
Outstanding Debt Securities have given any consent, waiver, notice or demand or
otherwise taken any action, or whether quorum requirements have been satisfied,
we will calculate the principal amount of the following types of Debt
Securities in the manner described below:
(1) For an Original Issue Discount Security: the amount of principal
that would be due and payable as of the date of the determination if
its maturity had been accelerated;
(2) For a Debt Security in a Foreign Currency: the dollar equivalent of
the principal amount of such security determined as of the date of
its original issuance, (or for an Original Issue Discount Security,
the U.S. Dollar equivalent of the amount determined above,
determined as of the date of its original issuance); and
(3) For an Indexed Debt Security: the face amount of principal of the
Indexed Debt Security at its original issuance. (Section 101.)
Defeasance and Covenant Defeasance
Under the Indentures, if we take certain steps (referred to as defeasance
or covenant defeasance), we can be relieved of a number of our obligations with
respect to the Debt Securities of or within a series. To obtain that relief, we
would be required to do the following:
(1) deposit irrevocably with the Trustee as trust funds an amount in
cash, Capital Securities (in the case of certain Subordinated
Securities) or government obligations or in combination, that
provides sufficient money to pay the principal, premium, if any, and
interest on such Debt Securities on the applicable payment due
dates, and any applicable sinking fund or similar payments;
(2) deliver an opinion of counsel that the holders of such Debt
Securities will not have any U.S. federal income tax consequences as
a result of our deposit with the Trustee and termination of our
obligations; and
(3) satisfy certain other conditions specified in the Indentures.
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Despite the above steps, we cannot be relieved of the following obligations:
(1) to pay any Additional Amounts required under the Indentures;
(2) to register the transfer or exchange of Debt Securities and any
related coupons;
(3) to replace temporary or mutilated, destroyed, lost or stolen Debt
Securities and any related coupons;
(4) to maintain an office or agency in respect of the Debt Securities
and any related coupons; and
(5) to hold money for payment in trust. (Senior Indenture, Article 14;
Subordinated Indenture Article 15)
In the event that we take the steps noted above to be relieved of certain
obligations, the money, Capital Securities and government obligations that we
place on deposit with the Trustee will be sufficient to pay amounts due on the
Debt Securities to be defeased at their Stated Maturity. If such Debt
Securities are subsequently declared due and payable prior to their Stated
Maturity because of the occurrence of an Event of Default, the money, Capital
Securities and government obligations may not be sufficient to pay amounts due
at the time of acceleration. However, if the Event of Default relates to a
covenant from which we have not been relieved, we would remain liable to make
payment of the remaining amount due at the time of acceleration.
We will describe any other provisions permitting defeasance or covenant
defeasance with respect to any series of Debt Securities in the Prospectus
Supplement for that offering.
When we refer to "government obligations" we mean securities that are (1)
direct obligations of the government that issued the currency in which the
security is payable or (2) obligations of an agency or instrumentality of that
government, the payment of which is unconditionally guaranteed by such
government. In either case, these securities are full faith and credit
obligations of such government and are not callable or redeemable at the option
of the issuer, and also include a depositary receipt issued by a bank or trust
company as custodian with respect to any such government obligation. (Section
101.)
Regarding the Trustee
The Trustee under the Indentures, Norwest, has its principal corporate
trust office at Sixth Street and Marquette Avenue, Minneapolis, Minnesota
55479. The Trustee maintains banking relationships with us and our subsidiaries
and has acted as trustee in connection with prior offerings of our securities.
SENIOR SECURITIES
The Senior Securities will be our direct, unsecured obligations. The
Senior Securities will constitute Senior Indebtedness (as defined below) and
will rank equally with our other Senior Indebtedness.
Events of Default
The following will be Events of Default under the Senior Indenture with
respect to Senior Securities of any series:
(1) our failure to pay principal or premium, if any, on any Senior
Security of that series at Maturity;
(2) our failure to pay, continued for 30 days, any interest on any
Senior Security of that series when due and payable;
(3) our failure to deposit any sinking fund payment in respect of any
Senior Security of that series when due;
(4) our failure to perform any of our covenants or warranties in the
Senior Indenture (but not if such covenant or warranty is solely for
the benefit of another series of Senior Securities) continued for 60
days after we receive written notice provided for in the Senior
Indenture;
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(5) our default or a default by the Bank under certain indebtedness for
money borrowed in an aggregate principal amount that exceeds
$3,000,000 (including a default with respect to Senior Securities of
another series), provided that:
(i) such default results in the acceleration of such indebtedness,
and
(ii) such acceleration is not rescinded or annulled, or the
indebtedness discharged by us, within ten days after we
receive written notice provided for in the Senior Indenture;
(6) certain events relating to bankruptcy, insolvency or reorganization
of us or the Bank; and
(7) any other Event of Default with respect to Senior Securities of that
series. (Senior Indenture, Section 501.)
If an Event of Default with respect to any series of Senior Securities
occurs and continues, the Trustee or the holders of at least 25% in aggregate
principal amount of the Outstanding Senior Securities of that series may
declare the principal amount of all the Senior Securities of that series to be
due and payable immediately. If the Senior Securities of that series are
Original Issue Discount Senior Securities or Indexed Securities, then the terms
of that series will specify the portion of the principal amount of such Senior
Securities that may declare an acceleration and the portion of the principal
amount that will be due and payable upon such declaration. To make a
declaration, the Trustee must deliver a written notice to us (and if the
declaration is made by holders, they must deliver such written notice to the
Trustee as well as to us). Upon any declaration, the principal amount (or
specified amount) will become immediately due and payable. At any time after
the Trustee or the holders have made a declaration of acceleration with respect
to Senior Securities of any series, but before the Trustee has obtained a
judgment or decree for payment of the money due, the holders of a majority in
principal amount of Outstanding Senior Securities of that series may, under
certain circumstances, rescind and annul such declaration and its consequences.
This rescission by the holders could occur only if we have made or provided for
all payments due (other than those due as a result of acceleration) on the
Senior Securities of that series and (i) all Events of Default with respect to
Senior Securities of that series have been cured by us or (ii) if permitted,
waived by the holders of at least a majority in aggregate principal amount of
the Outstanding Senior Securities of that series. (Senior Indenture, Section
502.)
Other than its duty to act with the required standard of care upon the
occurrence of a default, the Trustee is not obligated to exercise any of its
rights or powers under the Senior Indenture at the request, order or direction
of any holders unless the holders offer the Trustee reasonable indemnity or
security against the costs, expenses and liabilities which may be incurred.
(Senior Indenture, Section 602.) Subject to certain conditions, the holders of
a majority in principal amount of any series of Senior Securities may direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or for exercising any power conferred upon the
Trustee, for that series. (Senior Indenture, Section 512.)
Once a year, we are required to deliver an officers' certificate to the
Trustee. In this certificate we certify as to our performance and observance of
certain terms, provisions and conditions in the Senior Indenture and as to the
absence of default. (Senior Indenture, Section 1010.)
SUBORDINATED SECURITIES
The Subordinated Securities will be our direct, unsecured obligations.
Our obligations pursuant to the Subordinated Securities will be subordinate in
right of payment to all Senior Indebtedness as defined below under
"Subordination." Unless otherwise indicated in the applicable Prospectus
Supplement, the Stated Maturity of the Subordinated Securities will be subject
to acceleration only in the case of certain events of bankruptcy, insolvency or
reorganization of us or the receivership of the Bank. See "Events of Default;
Defaults" below.
Subordination
Our obligation to make any payment on account of the principal of or
premium, if any, and interest, if any, on the Subordinated Securities will be
subordinate and junior in right of payment to our obligations to the
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holders of our Senior Indebtedness. (Subordinated Indenture, Section 1301.)
"Senior Indebtedness" is defined to include:
(a) any obligation of ours, or any obligation of another guaranteed by
us, for the repayment of borrowed money,
(b) any deferred obligations for the payment of the purchase price of
property or assets,
(c) all of our obligations associated with derivative products such as
interest rate and foreign exchange rate contracts, commodity
contracts and similar arrangements, in each case whether existing
currently or subsequently created, assumed or incurred, and
(d) any deferrals, renewals or extensions of such Senior Indebtedness.
(Subordinated Indenture, Section 101.)
Senior Indebtedness does not include:
(i) our indebtedness described in clauses (a) and (b) above which
specifically by its terms ranks equally with and not prior to the
Subordinated Securities, and
(ii) our indebtedness described in clauses (a) and (b) above which
specifically by its terms ranks junior to and not equally with or
prior to the Subordinated Securities.
Indebtedness that ranks equally with the Subordinated Securities includes our
following obligations:
(1) Floating Rate Subordinated Notes Due 2001, issued pursuant to a
Fiscal and Paying Agency Agreement, dated as of February 10, 1986,
between us and Bankers Trust Company, as fiscal agent;
(2) 6 7/8% Subordinated Notes Due 2003, issued under the Subordinated
Indenture on June 30, 1993;
(3) 6 5/8% Subordinated Notes Due 2005, issued under the Subordinated
Indenture on November 22, 1993; and
(4) 6 5/8% Subordinated Notes Due 2004, issued under the Subordinated
Indenture on January 12, 1994.
In the event of any bankruptcy, insolvency, reorganization or other
similar proceeding relating to us, whether voluntary or involuntary, all of our
obligations to holders of Senior Indebtedness (other than our obligations
associated with derivative products) shall be entitled to be paid in full
before any payment shall be made on account of the principal (including
principal to be paid by delivery of Capital Securities) of, or premium, if any,
or interest, if any, on the Subordinated Securities of any series.
In the event of any such bankruptcy, insolvency, reorganization or other
similar proceeding, holders of the Subordinated Securities of any series,
together with holders of indebtedness ranking equally with the Subordinated
Securities, shall be entitled, ratably, to be paid amounts that are due to
them, but only from assets remaining after we pay in full the amounts that we
owe on our Senior Indebtedness (other than our obligations associated with
derivative products). We will make these payments before we make any payment or
other distribution on account of any capital stock or any indebtedness that
ranks junior to the Subordinated Securities. However, if we have paid in full
all of the sums that we owe with respect to our Senior Indebtedness (other than
our obligations associated with derivative products) and creditors in respect
of our obligations associated with such derivative products have not received
payment in full of amounts due to them, then the available remaining assets
shall be applied to payment in full of those obligations before any payment is
made on the Subordinated Securities. (Subordinated Indenture, Section 1301.)
In the event that we are in default on any of our Senior Indebtedness
(other than obligations associated with derivative products) or in the event
that any such default would occur as a result of certain payments, then we may
not make any payments on the Subordinated Securities or effect any exchange or
retirement of any of the Subordinated Securities unless and until such default
has been cured or waived or otherwise ceases to exist.
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(Subordinated Indenture, Section 1303.) Because of these subordination
provisions, if we become insolvent, then holders of the Subordinated Securities
may recover less, ratably, than our other creditors, including holders of
Senior Securities.
Events of Default; Defaults
The following will be Events of Default under the Subordinated Indenture
with respect to Subordinated Securities of any series:
(1) certain events in bankruptcy, insolvency or reorganization of us or
the receivership of the Bank; and
(2) any other Event of Default provided with respect to Subordinated
Securities of that series. (Subordinated Indenture, Section 501.)
If an Event of Default with respect to any series of Subordinated
Securities occurs and continues, the Trustee or the holders of at least 25% in
aggregate principal amount of the Outstanding Subordinated Securities of that
series may declare the principal amount of all the Subordinated Securities of
that series to be due and payable immediately. If the Subordinated Securities
of that series are Original Issue Discount Subordinated Securities or Indexed
Securities, then the terms of that series will specify the portion of the
principal amount that will be due and payable upon such declaration. To make
such a declaration, the Trustee must deliver a written notice to us (and if the
declaration is made by holders, they must deliver such written notice to the
Trustee as well as to us). Upon any declaration, the principal amount (or
specified amount) will become immediately due and payable. In the event of our
bankruptcy or insolvency, a Federal bankruptcy court would have broad powers to
enforce the foregoing provisions and determine the nature and status of the
payment claims of the holders of the Subordinated Securities. At any time after
the Trustee or the holders have made a declaration of acceleration with respect
to Subordinated Securities of any series, but before the Trustee has obtained a
judgment or decree for payment of the money due, the holders of a majority in
principal amount of Outstanding Subordinated Securities of that series may,
under certain circumstances, rescind and annul such declaration and its
consequences. This rescission by the holders could occur if we have made or
provided for all payments due (other than those due as a result of
acceleration) on the Subordinated Securities of that series and (i) all Events
of Default with respect to Subordinated Securities of that series have been
cured by us or (ii) if permitted, waived by the holders of at least a majority
in aggregate principal amount of the Outstanding Subordinated Securities of
that series. (Subordinated Indenture, Section 502.)
The following events will be Defaults under the Subordinated Indenture
with respect to Subordinated Securities of any series:
(1) an Event of Default with respect to such series of Subordinated
Securities;
(2) our failure to pay principal or premium, if any, (including our
failure to deliver any Capital Securities in exchange for or upon
the conversion of Subordinated Securities) on any Subordinated
Security of that series at Maturity;
(3) our failure to pay, continued for 30 days, any interest on any
Subordinated Security of that series when due and payable;
(4) our failure to deposit any sinking fund payment in respect of any
Subordinated Security of that series when due;
(5) our failure to perform any of our covenants or warranties in the
Subordinated Indenture (but not if such covenant or warranty is
solely for the benefit of another series of Subordinated
Securities), continued for 60 days after the written notice provided
for in the Subordinated Indenture;
(6) our default or a default by the Bank under certain indebtedness for
money borrowed in an aggregate principal amount exceeding $3,000,000
(including a default with respect to Subordinated Securities of
another series), provided that:
(i) such default results in the acceleration of such indebtedness,
and
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(ii) such acceleration is not rescinded or annulled, or the
indebtedness discharged by us, within ten days after we
receive written notice provided for in the Senior
Indebtedness; and
(7) any other default with respect to Subordinated Securities of that
series. (Subordinated Indenture, Section 507.)
There will be no right of acceleration of the payment of principal of the
Subordinated Securities of such series if we default in the payment or default
in the performance of any covenant or agreement relating to the Subordinated
Securities or the Subordinated Indenture (including any obligation to exchange
Capital Securities for Subordinated Securities of such series), unless the
terms of a series of Subordinated Securities provide otherwise. If we Default
on any series of the Subordinated Securities, then the Trustee may seek to
enforce its rights and the rights of the holders of Subordinated Securities of
such series or seek the performance of any covenant or agreement in the
Subordinated Indenture. (Subordinated Indenture, Section 503.)
Other than its duty to exercise the required standard of care upon the
occurrence of a Default, the Trustee is not obligated to exercise any of its
rights or powers under the Subordinated Indenture at the request, order or
direction of any holders unless the holders offer the Trustee reasonable
indemnity or security against the costs, expenses and liabilities which may be
incurred. (Subordinated Indenture, Section 602.) Subject to certain conditions,
the holders of a majority in principal amount of any series of Subordinated
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or for exercising any power conferred
upon the Trustee, for any series of Debt Securities. (Subordinated Indenture,
Section 512.)
Once a year, we are required to deliver an officers' certificate to the
Trustee. In this certificate we certify as to our performance and observance of
the terms, provisions and conditions in the Subordinated Indenture and as to
the absence of default. (Subordinated Indenture, Section 1010.)
Conversion
We will describe in the Prospectus Supplement for any series of
Subordinated Securities, the terms, if any, on which that series is convertible
into Capital Securities ("Subordinated Convertible Securities"). Such
Subordinated Convertible Securities will be convertible into Capital Securities
at the conversion price and at the times set forth in the Prospectus
Supplement. The terms of such Subordinated Convertible Securities may also
include a right for us to redeem, exchange, repay or repurchase those
Subordinated Convertible Securities.
Exchangeability
The holders of Subordinated Securities of a series may be obligated at
any time or at Maturity to exchange them for our Capital Securities. We will
describe the terms of any exchange and any Capital Securities in the Prospectus
Supplement relating to such series of Subordinated Securities. We describe our
Preferred Stock, Common Stock, and Capital Securities below under "Description
of Preferred Stock," "Description of Common Stock," and "Description of Capital
Securities," respectively.
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DESCRIPTION OF PREFERRED STOCK
The following summary describes general terms of our Preferred Stock. If
the Board of Directors authorizes a new series of Preferred Stock, then the
specific provisions establishing the series will be set forth in a Certificate
of Vote of Directors. The Certificate of Vote will then be filed with the SEC
and with the Massachusetts Secretary of State as an amendment to our Restated
Articles of Organization. The terms of any series of the Preferred Stock
offered by us will also be described in the Prospectus Supplement for that
offering. Currently, we have no shares of Preferred Stock outstanding.
General
Under our Articles of Organization, our Board of Directors may provide
for the issuance of up to 10,000,000 shares of Preferred Stock, without par
value, in one or more series. When establishing a series of Preferred Stock,
the Board will determine the following matters with respect to that series:
(1) designations or titles;
(2) dividend rates;
(3) rights in the event of liquidation, distribution or sale of assets
or dissolution or winding up;
(4) sinking fund provisions;
(5) redemption or purchase account provisions;
(6) conversion provisions; and
(7) voting rights.
Holders of shares of Preferred Stock do not have any preemptive rights as
to any future issuances of preferred stock by us. Each series of our Preferred
Stock will have a liquidation preference. The liquidation preference does not
reflect the price at which the shares will trade in the market. The market
price of any series of our Preferred Stock will fluctuate with changes in
market and economic conditions as well as with changes in our financial
condition and prospects.
When we issue shares of Preferred Stock, the shares are fully paid and
non-assessable. There is a provision of Massachusetts law (MGL Sec. 45, C.156B)
that relates to distributions by us to our stockholders (other than a
distribution of our stock). If we make a distribution when we are insolvent, or
that renders us insolvent, then our stockholders would be required to pay back
to us the amount of the distribution we made to them (or the portion of the
distribution that caused us to become insolvent).
Rank
With respect to dividend rights and rights on liquidation, winding up and
dissolution, any series of our Preferred Stock will rank senior to all classes
of our common stock and our Junior Participating Preferred Stock, Series D, and
any equity securities we issue that by their terms rank junior to the Preferred
Stock (collectively referred to as "junior securities").
With respect to dividend rights and rights on liquidation, winding up and
dissolution, any series of Preferred Stock will rank equally with any equity
securities we issue that by their terms rank equally with the Preferred Stock
(collectively referred to as "parity securities"). Likewise, with respect to
such rights, the shares of any series of Preferred Stock will rank junior to
any equity securities we issue that by their terms rank senior to the Preferred
Stock (collectively referred to as "Senior Securities").
For these purposes, the term "equity securities" does not include debt
securities convertible into or exchangeable for equity securities.
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Dividends
You will be entitled to receive cash dividends on your shares of
Preferred Stock, when, as and if our Board of Directors declares those
dividends out of funds legally available for that purpose. We will describe the
rates and payment dates applicable to each series of Preferred Stock in the
Prospectus Supplement relating to that offering. We will pay dividends to the
holders of record of the Preferred Stock that appear on our books (or, if
applicable, the records of the Depositary) on the record dates set by our
Board. The dividends on any series of Preferred Stock may be cumulative or non-
cumulative.
Our Board may not declare and we may not pay (or set apart funds for the
payment of) any full dividends on any parity securities unless we have paid or
set apart funds for the payment of dividends on the Preferred Stock. If we do
not pay full dividends, the Preferred Stock shall share dividends pro rata with
the parity securities. If dividends are cumulative, any accumulated unpaid
dividends will not bear interest.
Conversion
We will describe in the Prospectus Supplement for any series of the
Preferred Stock the terms, if any, on which shares of that series are
convertible into shares of another series of Preferred Stock or Capital
Securities.
For any series of our Preferred Stock which is convertible, we will
reserve and keep available the number of shares of Preferred Stock or Capital
Securities that are deliverable upon the conversion of the shares of that
series. We will not issue any fractional shares or scrip for fractional shares
of Preferred Stock or Capital Securities in connection with a conversion. In
lieu of issuing fractional shares, we will make cash payment for all such
fractional shares. We may elect to make this cash payment equal to either (1)
the current market price of a holder's fractional interest, or (2) the holder's
proportionate interest in the net proceeds (following the deduction of
applicable transaction costs) from the sale by an agent of shares of Preferred
Stock or Capital Securities representing the aggregate of all holders'
fractional shares.
If you are the holder of shares of Preferred Stock at the close of
business on a dividend payment record date, you are entitled to receive the
dividend payable on such shares on the corresponding dividend payment date.
Your right to that dividend will continue to exist notwithstanding any
subsequent conversion of the shares or our default in payment of the dividend
due. (If your shares of Preferred Stock are called for redemption and the
redemption date falls between a record date and a dividend payment date, then
you will receive accrued and unpaid dividends to such redemption date instead
of the regular dividend for that period.) Except as noted, we will not make any
payment or allowance for unpaid dividends, whether or not in arrears, on
converted shares or for dividends on the shares of Preferred Stock or Capital
Securities that we issue upon conversion.
Exchangeability
The holders of shares of Preferred Stock of any series may be obligated
at any time or at maturity to exchange the shares for our Capital Securities or
our other debt securities. We will describe the terms of any exchange and any
Capital Securities or other debt securities in the Prospectus Supplement
relating to that offering. Our Capital Securities are described below under
"Description of Capital Securities."
Redemption
In general, a series of Preferred Stock may be redeemable at any time, in
whole or in part, at our option or that of the holder upon terms and at the
redemption prices set forth in the Prospectus Supplement relating to such
series. In the event of partial redemptions of our Preferred Stock, our Board
of Directors will decide the manner in which the shares to be redeemed are to
be selected.
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On and after a redemption date, dividends cease to accrue on shares of
Preferred Stock called for redemption unless we default in the payment of the
redemption price. Your rights as a holder of such shares will terminate on the
redemption date, except for the right to receive the redemption price.
Liquidation Preference
If you purchase shares of a series of our Preferred Stock that rank
senior to our junior securities, then in the event of our liquidation,
dissolution or winding up, whether voluntary or involuntarily, you will be
entitled to receive a liquidation payment plus an amount equal to any accrued
and unpaid dividends. The payment will be made to you out of our assets that
are available for distribution to stockholders. The payment on your Preferred
Stock will be made prior to any distribution to holders of any junior
securities, including our Common Stock. We will describe the specific
provisions with respect to the liquidation payment to which you will be
entitled on any series of Preferred Stock in the Prospectus Supplement with
respect to that offering.
If the amounts to which you are entitled upon our liquidation,
dissolution or winding up are not paid in full, then you and the other holders
of the Preferred Stock of that series will be entitled to share in any
distribution of our assets. You and the other holder of that series and the
holders of any parity securities will share ratably in proportion to the full
liquidation preferences to which each of you is entitled. After you have
received payment of the full amount of the liquidation preference to which you
are entitled, you will not be entitled to any further participation in any
distribution of our assets.
We shall not be deemed to have been voluntary or involuntarily
liquidated, dissolved or wound up in the following instances:
(1) the merger or consolidation of us with or into one or more
corporations pursuant to any statute which provides in effect that
our stockholders shall continue as stockholders of the continuing or
combined corporation; or
(2) the acquisition by us of assets or stock of another corporation.
Voting Rights
In general, if you purchase shares of Preferred Stock, you will not have
voting rights with respect to those shares. Under Massachusetts law, however,
you are entitled to vote in certain limited circumstances. If we wish to amend
our Restated Articles of Organization and such amendment would adversely affect
the rights of a particular class or series of stock, we would be required to
obtain the affirmative vote of at least two-thirds of the shares of that class
or series. If you were a holder of shares of the affected class or series, you
would be entitled to vote on the proposed amendment. In such an instance, all
series of a class of stock which are adversely affected in the same manner vote
together as one class and any other series, which is adversely affected in a
different manner, votes as a separate class.
You would also be entitled to a vote during any period in which dividends
on the series of Preferred Stock that you hold are cumulatively in arrears in
the amount of six or more full quarterly dividends. Under those circumstances,
you and the other holders of that series, would be entitled to elect one
director to serve until we have cured the arrearage. We will describe any
additional provisions related to voting rights for a particular series of
Preferred Stock in the Prospectus Supplement for that offering.
The Board of Governors of the Federal Reserve oversees matters relating
to bank holding companies like us. Under its regulations, if the holders of
shares of any series of our Preferred Stock become entitled to vote for the
election of directors, that series may be deemed a "class of voting
securities." Upon that occurrence, if you held 25% or more of that series (or
5% if you otherwise exercise a controlling influence over us) you might become
subject to regulation as a bank holding company. If you held a lesser amount
and wished to acquire or retain shares of that series, you might need the
approval of the Board of Governors to do so depending on the amount of shares
you hold.
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Depositary Shares
General. We may from time to time elect to offer fractional shares of
Preferred Stock, rather than full shares of Preferred Stock. In such an event,
we will issue receipts for Depositary Shares, each of which will represent a
fraction (to be set forth in the Prospectus Supplement relating to a particular
series of Preferred Stock) of a share of a particular series of Preferred
Stock.
We will deposit the shares of any series of Preferred Stock represented
by Depositary Shares under a Deposit Agreement between us and a bank or trust
company that we select to act as Depositary. The bank or trust company that we
select will have its principal office in the United States and a combined
capital and surplus of at least $50,000,000. The rights of each owner of a
Depositary Share will be set forth in the Deposit Agreement. In general, you
would be entitled to all the rights and preferences of the Preferred Stock
represented by your Depositary Share, in proportion to the applicable fraction
represented by such Depositary Share. These rights include dividend, voting,
redemption, conversion and liquidation rights.
The Depositary will issue Depositary Receipts that represent the
Depositary Shares. The Depositary will distribute the Depositary Receipts to
those persons purchasing the fractional shares of Preferred Stock in accordance
with the terms of the offering. We have filed the forms of Deposit Agreement
and Depositary Receipt as exhibits to the Registration Statement. Please review
those documents for further details not set forth in the summary below.
We may order the Depositary to issue temporary Depositary Receipts to
holders in the event the definitive receipts are not ready at the time of
distribution. The temporary Depositary Receipts are substantially identical to
the definitive Depositary Receipts and entitle the holders to all the rights
pertaining to the definitive Depositary Receipts. In such an event, we will
have the definitive Depositary Receipts prepared without unreasonable delay.
The holders may exchange the temporary Depositary Receipts for definitive
Depositary Receipts at our expense.
Dividends and Other Distributions. The Depositary will distribute cash
dividends or other cash distributions received from us to the record holders of
Depositary Shares relating to the Preferred Stock. The Depositary will make the
distributions to each record holder in proportion to the numbers of such
Depositary Shares owned by such holder.
In the event of a distribution other than in cash, the Depositary will
distribute the property received from us to the record holders of Depositary
Shares. If the Depositary determines that it is not feasible to make such
distribution, it may, with our approval, sell such property and distribute the
net proceeds from such sale to such holders.
Redemption or Exchange of Stock. If we decide to redeem a series of
Preferred Stock represented by Depositary Shares, the Depositary will redeem
the Depositary Shares from the proceeds resulting from the redemption of the
Preferred Stock. If we decide to exchange a series of Preferred Stock
represented by Depositary Shares, the Depositary will exchange the Depositary
Shares for the Capital Securities or other debt securities to be issued in
exchange for the Preferred Stock in accordance with the terms of such series of
Preferred Stock. The Depositary will redeem or exchange the Depositary Shares
at a price per Depositary Share equal to the applicable fraction of the
redemption price per share or market value of Capital Securities or other debt
securities per Depositary Share paid in respect of the shares of Preferred
Stock so redeemed or exchanged. Whenever we redeem or exchange shares of
Preferred Stock held by the Depositary, the Depositary will redeem or exchange
as of the same date the number of Depositary Shares representing shares of
Preferred Stock so redeemed or exchanged. If the Depositary is to redeem or
exchange fewer than all the Depositary Shares, the Depositary Shares to be
redeemed or exchanged will be selected by the Depositary by lot or pro rata or
by any other equitable method that we may determine.
Withdrawal of Stock. As a holder of Depositary Shares, you may surrender
your Depositary Receipts to the Depositary and receive the number of whole
shares of the related series of Preferred Stock and
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any money or other property represented by such Depositary Receipts. You will
be entitled to receive whole shares of Preferred Stock on the basis set forth
in the related Prospectus Supplement for such series of Preferred Stock. You
will not thereafter be entitled to deposit such Preferred Stock under the
Deposit Agreement or to receive Depositary Receipts for your shares of
Preferred Stock. If the Depositary Shares you surrendered exceed the number of
Depositary Shares that represent the number of whole shares of Preferred Stock
to be withdrawn, the Depositary will deliver to you at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares.
Voting the Preferred Stock. We will send to the Depositary all notices of
meetings at which the holders of the Preferred Stock are entitled to vote. The
Depositary will mail the information contained in such notice of meeting to the
record holders of the Depositary Shares relating to such Preferred Stock. Each
record holder of such Depositary Shares on the record date (which will be the
same date as the record date of the Preferred Stock) may instruct the
Depositary how to vote with respect to the amount of Preferred Stock
represented by such holder's Depositary Shares. The Depositary will endeavor,
insofar as practicable, to vote the amount of the Preferred Stock represented
by such Depositary Shares in accordance with such instructions. We agree to
take all reasonable actions deemed necessary by the Depositary in order to
enable the Depositary to do so. The Depositary will abstain from voting shares
of the Preferred Stock for which it has not received specific instructions from
the holders of Depositary Shares representing such Preferred Stock.
Conversion Rights. As a holder of Depositary Shares, you may instruct us
to convert your Depositary Shares into Capital Securities or other Preferred
Stock in accordance with the terms of the series of Preferred Stock for which
you hold Depositary Shares. When you deliver such instructions you must also
surrender your Depositary Receipts. We will convert the shares of Preferred
Stock for which you hold Depositary Shares into a specified number of whole
shares of our Capital Securities or our other Preferred Stock (as the case may
be, in accordance with the terms of such series of the Preferred Stock). We
will determine the number of resulting shares that you are to receive by
dividing the aggregate liquidation preference of such Depositary Shares by the
Conversion Price then in effect. We may adjust the Conversion Price from time
to time. We will make a cash payment to you in lieu of any fractional shares
that would result from the conversion.
Amendment and Termination of the Deposit Agreement. We and the Depositary
may at any time agree to amend the form of Depositary Receipt that evidences
the Depositary Shares and any provision of the Deposit Agreement. We may not,
however, make any amendment that materially and adversely alters the rights of
the holders of Depositary Shares unless the holders of at least a majority of
the Depositary Shares then outstanding have approved such amendment. The
Deposit Agreement will automatically terminate if any of the following occurs:
(1) we have redeemed all outstanding Depositary Shares;
(2) each share of Preferred Stock has been converted into Capital
Securities or other Preferred Stock or has been exchanged for
Capital Securities or other debt securities; or
(3) there has been a final distribution in respect of the Preferred
Stock in connection with any liquidation, dissolution or winding up
of our business and such distribution has been distributed to the
holders of Depositary Shares.
We may also terminate the Deposit Agreement at any time upon 60 days
prior written notice to the Depositary. If we terminate the Deposit Agreement,
the Depositary will deliver to the record holders, upon surrender of the
Depositary Receipts, the number of whole or fractional shares of Preferred
Stock as are represented by their Depositary Receipts.
Charges of Depositary. We will pay all transfer and other taxes and
governmental charges arising solely from the existence of the depositary
arrangements. We will also pay all charges of the Depositary in connection with
(1) the initial deposit of the Preferred Stock, (2) the initial issuance of the
Depositary Shares, (3) all withdrawals of shares of Preferred Stock by owners
of Depositary Shares, and (4) any redemption or
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exchange of the Preferred Stock. As a holder of Depositary Shares, you must pay
any other transfer and other taxes and governmental charges and such other
charges or expenses that the Deposit Agreement expressly provides are for your
account.
Miscellaneous. We will provide to the Depositary all reports and
communications that we are required to furnish to our Preferred Stock holders.
The Depositary will forward these reports and communications to the holders of
the Depositary Shares.
We and the Depositary are not liable for failing to perform our
obligations under the Deposit Agreement if our performance of those obligations
is prevented or delayed by law or any circumstance beyond our control. Our
obligations under the Deposit Agreement and those of the Depositary are limited
to performance in good faith of our duties under the agreement. We and the
Depositary are not obligated to prosecute or defend any legal proceeding in
respect of any Depositary Shares or Preferred Stock unless satisfactory
indemnity is furnished. The Depositary may rely upon (1) written advice of
counsel or accountants, (2) information it receives from persons presenting
Preferred Stock for deposit, (3) holders of Depositary Receipts, (4) other
persons it believes to be competent, and (5) documents it believes to be
genuine.
Resignation and Removal of Depositary. The Depositary may resign at any
time by giving us notice. We also may remove the Depositary at any time by
giving it notice. We will appoint a successor Depositary prior to any such
resignation or removal becoming effective. We must appoint a successor
Depositary within 60 days after delivery of the notice of resignation or
removal. The successor Depositary must be a bank or trust company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000.
DESCRIPTION OF COMMON STOCK
General
Our Common Stock as of November 30, 1998 consisted of 500,000,000
authorized shares, par value $1.00 per share, of which there were 294,952,148
shares outstanding. Our Common Stock is traded on the New York Stock Exchange
and the Boston Stock Exchange. The Bank, through its agent Boston EquiServe, is
the transfer agent and registrar for our Common Stock.
We may issue Common Stock from time to time. Our Board of Directors must
approve the amount of stock we sell and the price for which it is sold. Holders
of our Common Stock do not have any preferential rights or preemptive rights to
buy or subscribe for capital stock or other securities that we may issue. Our
Common Stock does not have any redemption or sinking fund provisions or any
conversion rights.
We issue shares of our Common Stock in connection with our dividend
reinvestment and common stock purchase plan. We also issue shares in connection
with our employee benefit, stock option and incentive plans (and those of our
subsidiaries).
When we issue shares of Common Stock, the shares will be fully paid and
non-assessable. There is a provision of Massachusetts law (MGL Sec. 45, C.156B)
that relates to distributions by us to our stockholders (other than a
distribution of our stock). If we make a distribution when we are insolvent, or
that renders us insolvent, then our stockholders would be required to pay back
to us the amount of the distribution we made to them (or the portion of the
distribution that caused us to become insolvent).
Liquidation
If we liquidate, dissolve, or wind up, whether voluntarily or
involuntarily, then you, as a holder of our Common Stock, would be entitled to
share proportionally in any of our assets to which Common Stock holders are
entitled when such events occur. Your rights, however, would rank behind those
of our creditors and behind those of any holders of our Preferred Stock.
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Voting
If you are a holder of our Common Stock, you are entitled to one vote per
share for all matters on which stockholders are entitled to vote. Our Common
Stock has non-cumulative voting rights. This means holders of the majority of
our shares can elect all of our directors.
Dividends
If our Board of Directors declares a dividend (out of funds legally
available for dividends), holders of our Common Stock are entitled to share
equally (share for share) in such dividends whether they are payable in cash,
stock or other property. We cannot pay any Common Stock dividends, however,
until we have paid any accrued but unpaid Preferred Stock dividends.
Stockholder Rights Plan
In 1990, our Board of Directors adopted a stockholder rights program and
entered into a Rights Agreement with the Bank, as rights agent. Under the
program, each of our common stockholders received a dividend of one Preferred
Stock purchase right for each outstanding share of our Common Stock that the
stockholder owned at the time of the rights dividend. We refer to these
Preferred Stock purchase rights as the "rights." Each share of common stock
issued after our common stockholders received the rights dividend has also
received a right. As a result of our 2-for-1 stock split in June, 1998, the
rights have been adjusted so that one-half of a right is associated with each
currently outstanding share of our Common Stock. Each newly issued share of
Common Stock will also have one-half of a right associated with it under the
program. The rights trade automatically with our shares of Common Stock and
become exercisable only under certain circumstances described below. The
purpose of the rights is to encourage potential acquirors to negotiate with our
Board of Directors prior to attempting a takeover bid and to provide our Board
with leverage in negotiating on behalf of all of our stockholders the terms of
any proposed takeover. The rights may have certain anti-takeover effects. They
should not, however, interfere with any merger or other business combination
approved by our Board of Directors.
Until a right is exercised, the holder of a right will not have any
rights as a stockholder. When the rights become exercisable, holders of the
rights will be able to purchase from us a unit equal to one one-thousandth of a
share of our Series D Junior Participating Preferred Stock at a price of $50
per unit, subject to adjustment. In general, the rights will become exercisable
upon the earlier of:
. ten days following a public announcement by us that a person or group
has acquired (i) beneficial ownership of 15% or more of our Common
Stock or (ii) voting securities representing 15% or more of the total
voting power of the Company, or
. ten business days (or a later date if determined by our Board) after
the beginning of a tender offer or exchange offer that would result in
a person or group beneficially owning (i) 15% or more of our Common
Stock or (ii) voting securities representing 15% or more of the total
voting power of the Company.
In general, if a person or group becomes the beneficial owner of 15% or
more of our Common Stock or of voting securities representing 15% or more of
our total voting power, each right (other than those owned by that person or
group) will then entitle its holder to receive, upon exercise, Common Stock
equal to two times the exercise price of the right. We refer to this occurrence
as a "flip-in event". A flip-in event does not occur if there is an offer for
all of our outstanding shares of Common Stock and voting securities that our
Board believes is fair to our stockholders and in the Company's best interest.
In addition, at any time after a flip-in event, the Board may give rights
holders (other than rights held by the person or group who triggered the flip-
in event) the opportunity to exchange the rights for our Common Stock (one
share of our Common Stock for each right). If after we announce that someone
has acquired beneficial ownership of 15% or more of the Common Stock or voting
securities representing 15% or more of the total voting power of the Company,
we are acquired or more than 50% of our assets, cash flow or earning
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power is sold or transferred, then each right (other than those owned by the
person or group who triggered the flip-in event), will entitle the holder to
receive, upon exercise, shares of stock in that person or group having a value
equal to two times the exercise price of the right.
We may redeem the rights at $.01 per right at any time before the date
that is ten days after the date in which 15% or more of our Common Stock or
voting power is acquired. We may extend this redemption period at any time
while the rights are still redeemable. The rights will expire at the close of
business on July 12, 2000 unless we redeem or exchange them before that date.
In December, 1998, our Board of Directors renewed the existing Rights
Agreement by adopting a Renewed Rights Agreement. The terms of the Renewed
Rights Agreement are substantially similar to those of the existing Rights
agreement. Under the Renewed Rights Agreement, however, the exercise price will
be $160 per unit and the beneficial ownership percentage relating to the
exercisability of the rights will be 10%. The new rights will be issued
effective with the expiration or earlier termination of the existing rights.
The above description of the rights plan is not intended to be a complete
description. For a full description of the rights plan, you should read the
existing Rights Agreement, as amended through December 12, 1995, and the
Renewed Rights Agreement. The existing Rights Agreement and the Renewed Rights
Agreement are between us and the Bank as rights agent. A copy of the existing
Rights Agreement is included as an exhibit to our Registration Statement on
Form 8-A dated July 2, 1990 and our Annual Report on Form 10-K for the year
ended December 31, 1996. A copy of the Renewed Rights Agreement is included as
an exhibit to our Current Report on Form 8-K dated December 17, 1998. You may
obtain a copy of these agreements at no charge by writing to us at the address
listed on page 4.
DESCRIPTION OF CAPITAL SECURITIES
General
A Prospectus Supplement may provide that we may issue Capital Securities
in exchange for or upon conversion of Subordinated Securities or Preferred
Stock of any series. "Capital Securities" may consist of Common Stock,
perpetual Preferred Stock or, if the Board of Governors (or our primary federal
banking regulator at that time) permits, our other Securities. The Prospectus
Supplement relating to a series of Subordinated Securities or Preferred Stock
which are exchangeable for or convertible into Capital Securities will contain
a description of the Capital Securities.
Tender Offer Rules
The SEC's rules and regulations relating to tender offers may be
applicable to exchanges or conversions such as that of Capital Securities for
Subordinated Securities or for Preferred Stock of any series. The applicable
SEC rules are Rules 13e-4 and 14e-1. If Rule 13e-4 or Rule 14e-1 (or any
successor rule or rules) applies to such transactions at the time of such
exchange or conversion, we will comply with such rule and will afford holders
of such Subordinated Securities or Preferred Stock all rights to which they are
entitled. In addition, we will make all filings required by such rule.
DESCRIPTION OF SECURITIES WARRANTS
We may issue Securities Warrants for the purchase of other Debt
Securities or Preferred Stock or Common Stock. We may issue these Securities
Warrants together with any Debt Securities or Preferred Stock or Common Stock
offered by any Prospectus Supplement or we may issue them separately. We will
issue Securities Warrants under Securities Warrant Agreements to be entered
into between us and a bank or trust company, as the Securities Warrant Agent.
The specific information will be set forth in the Prospectus Supplement
relating to the particular issue of Securities Warrants. The form of Securities
Warrant Agreement, including the form of certificates representing the
Securities Warrant, is filed as an exhibit to the Registration Statement. The
form reflects the alternative provisions that we may include in the Securities
Warrant
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Agreements that will be entered into with respect to particular offerings of
Securities Warrants. The following summaries of certain provisions of the
Securities Warrant Agreement and the Securities Warrant Certificates are not
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Securities Warrant Agreement and the Securities
Warrant Certificates including the definitions therein of certain terms.
Wherever we refer to defined terms of the Securities Warrant Agreement, we
intend that such defined terms shall be incorporated herein by reference.
General
The Prospectus Supplement relating to the particular issue of Securities
Warrants will describe the terms of the offered Securities Warrants, the
Securities Warrant Agreement relating to the offered Securities Warrants and
the Securities Warrant Certificates representing the offered Securities
Warrants, including the following:
(1) if we offer Securities Warrants for separate consideration, the
offering price and the currency for which Securities Warrants may be
purchased;
(2) the designation, aggregate principal amount, currency and terms of
the series of Debt Securities purchasable upon exercise of the
offered Securities Warrants;
(3) the designation, number, stated value and terms (including, without
limitation, liquidation, dividend, conversion and voting rights) of
the series of Preferred Stock purchasable upon exercise of Preferred
Stock Warrants and the price at which such number of shares of
Preferred Stock of such series may be purchased upon such exercise;
(4) the number of shares of Common Stock purchasable upon exercise of
Common Stock Warrants and the price at which such number of shares
of Common Stock may be purchased upon such exercise;
(5) the date, if any, on and after which the offered Securities Warrants
and the related Debt Securities and/or Preferred Stock and/or Common
Stock will be separately transferable;
(6) the date on which the right to exercise the offered Securities
Warrants shall commence and the date on which such right shall
expire;
(7) a discussion of the specific U.S. federal income tax, accounting and
other considerations applicable to the Securities Warrants;
(8) whether we will issue the offered Securities Warrants represented by
the Securities Warrant Certificates in registered or bearer form,
and if registered, where they may be transferred and registered; and
(9) any other terms of the offered Securities Warrants.
A holder of Securities Warrant Certificates may exchange them on the
terms specified in the Prospectus Supplement for new Securities Warrant
Certificates of different denominations. A holder of Securities Warrants may
exercise such Securities Warrants at the corporate trust office of the
Securities Warrant Agent or at any other office indicated in the Prospectus
Supplement relating to those Securities Warrants. Prior to exercising their
Securities Warrants, holders of Securities Warrants will not have any of the
rights of holders of the Debt Securities or Preferred Stock or Common Stock
purchasable upon such exercise. The rights that a holder of Securities Warrants
would not have prior to exercise include:
(1) the right in the case of Debt Warrants to payments of principal of
or any premium or interest, if any, on the Debt Securities
purchasable upon such exercise, or to enforce covenants in the
Indentures, and
(2) the right in the case of Preferred Stock Warrants and Common Stock
Warrants to receive payments of dividends or distributions of any
kind, if any, on the Preferred Stock and Common Stock, respectively,
or to exercise any applicable right to vote.
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Exercise of Warrants
Each Securities Warrant will entitle the holder to purchase a certain
principal amount of Debt Securities or a certain number of shares of Preferred
Stock or Common Stock, at a certain exercise price. In each case, we shall set
forth this information in the Prospectus Supplement relating to the Securities
Warrants. Your right to purchase the Securities will be contingent on your
paying such exercise price in full in the currency and in the manner specified
in the Prospectus Supplement. You may exercise your Securities Warrants at any
time up to the close of business on the expiration date (or such later date to
which we may extend such expiration date). Securities Warrants that you do not
exercise will become void.
We will forward the Debt Securities or Preferred Stock or Common Stock to
you upon the exercise of the Securities Warrant after the Securities Warrant
Agent receives (i) payment of the exercise price and (ii) the Securities
Warrant Certificate properly completed and duly executed. If you exercise fewer
than all of the Securities Warrants represented by such Warrant Certificate, we
will issue you a new Securities Warrant Certificate for the remaining number of
Securities Warrants.
PLAN OF DISTRIBUTION
We may sell the offered Securities (i) through underwriters or dealers
(including through BancBoston Robertson Stephens Inc., our wholly-owned
subsidiary), (ii) directly to one or more purchasers, or (iii) through agents,
including BancBoston Robertson Stephens. We will identify any such underwriter,
dealer or agent involved in the offer and sale of the Securities in the related
Prospectus Supplement. We will also include in the Prospectus Supplement the
purchase price or prices of the offered Securities, our proceeds from the sale,
any underwriting discounts or commissions and other items constituting
underwriters' compensation.
If underwriters are used in the sale, the offered Securities will be
acquired by the underwriters for their own account and may be resold in one or
more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
obligations of the underwriters to purchase such offered Securities will be
subject to certain conditions. The underwriters will be obligated to purchase
all the offered Securities if they purchase any of such offered Securities. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Offered Securities may also be sold directly by us or through agents
designated by us. Unless indicated in the Prospectus Supplement, any such agent
is acting on a best efforts basis for the period of its appointment.
Underwriters, dealers and agents that participate in the distribution of
the offered Securities may be underwriters as defined in the Securities Act of
1933, as amended (the "Act"), and any discounts or commissions received by them
from us and any profit on the resale of the offered Securities by them may be
treated as underwriting discounts and commissions under the Act.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Act, or to contribute with respect to payments which the underwriters,
dealers or agents may be required to make.
BancBoston Robertson Stephens is our wholly-owned subsidiary.
Accordingly, the distribution of Securities will conform to the requirements
set forth in Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc.
Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock which is listed on the NYSE and the BSE. Any shares
of Common Stock sold pursuant to a Prospectus Supplement will be listed on the
NYSE and the BSE, subject to official notice of issuance. We may elect to list
any other securities on an exchange, but we are not obligated to do so.
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Any underwriter may engage in over-allotment, stabilizing transactions,
short covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves sales in excess of the offering
size, which creates a short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed
a specified maximum. Short covering transactions involve purchases of the
Securities in the open market after the distribution is completed to cover
short positions. Penalty bids permit the underwriters to reclaim a selling
concession from a dealer when the Securities originally sold by the dealer are
purchased in a covering transaction to cover short positions. Those activities
may cause the price of the Securities to be higher than it would otherwise be.
If commenced, the underwriters may discontinue those activities at any time.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our subsidiaries in the ordinary course of their
business. In connection with any particular distribution of Securities, we may
enter into swaps or other hedging transactions with, or arranged by, an
underwriter, dealer or agent participating in such distribution or one of their
affiliates. The underwriter, dealer, agent or affiliate may receive
compensation, trading gain or other benefits from such transaction.
LEGAL OPINIONS
Gary A. Spiess, who is our General Counsel and Clerk, will give an
opinion on the validity of the Securities that we offer under this Prospectus.
Brown & Wood LLP, New York, New York will pass upon certain legal matters
relating to the offered Securities for the underwriters. Brown & Wood LLP will
rely as to all matters of Massachusetts law on the opinion of Mr. Spiess. As of
December 31, 1998, Mr. Spiess had a direct or indirect interest in 90,823
shares of our Common Stock and had options to purchase an additional 96,264
shares, of which options to purchase 64,027 shares will be exercisable within
60 days after December 31, 1998.
EXPERTS
PricewaterhouseCoopers LLP, independent accountants, audited our
financial statements for the fiscal year ended December 31, 1997 incorporated
by reference into this Prospectus and elsewhere into the registration
statement. The financial statements contained in and incorporated by reference
into our Annual Report on Form 10-K for the fiscal year ended December 31, 1997
have been incorporated herein by reference in reliance upon the report set
forth therein of, and upon the authority of, PricewaterhouseCoopers LLP as
experts in accounting and auditing. The report of PricewaterhouseCoopers LLP
contained in our 1997 Annual Report on Form 10-K includes an explanatory
paragraph related to the restatement of our 1995 consolidated financial
statements to retroactively reflect the acquisition of BayBanks, Inc., which we
completed in July 1996 and which we accounted for as a pooling of interests.
Any audited financial statements and schedules that we incorporate or
that are deemed to be incorporated by reference into this Prospectus that are
the subject of a report by independent accountants will be so incorporated by
reference in reliance upon such reports and upon the authority of such firms as
experts in accounting and auditing to the extent covered by consents of these
accountants filed with the SEC.
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