<PAGE>
PROSPECTUS
BANKNORTH CAPITAL TRUST I
OFFER TO EXCHANGE ITS
10.52% CAPITAL SECURITIES, SERIES B
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
10.52% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
BANKNORTH GROUP, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON NOVEMBER 6, 1997, UNLESS EXTENDED.
Banknorth Capital Trust I, a trust formed under the laws of the state of
Delaware (the "Trust"), hereby offers, upon the terms and subject to the
conditions set forth in this prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying Letter
of Transmittal (which together constitute the "Exchange Offer"), to exchange up
to and including $30,000,000 aggregate Liquidation Amount of its 10.52% Capital
Securities, Series B (the "Exchange Capital Securities"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like Liquidation Amount of its outstanding
10.52% Capital Securities, Series A (the "Original Capital Securities"), of
which $30,000,000 aggregate Liquidation Amount is outstanding. Pursuant to the
Exchange Offer, Banknorth Group, Inc., a Delaware corporation (the "Corporation"
or "Banknorth"), is also offering to exchange (i) its guarantee of payments of
cash distributions and payments on liquidation of the Trust or redemption of the
Exchange Capital Securities (the "Exchange Guarantee") for a like guarantee in
respect of the Original Capital Securities (the "Original Guarantee") and (ii)
its 10.52% Junior Subordinated Deferrable Interest Debentures due May 1, 2027,
Series B (the "Exchange Junior Subordinated Debentures") for its 10.52%
(CONTINUED ON NEXT PAGE)
This Prospectus and the Letter of Transmittal are first mailed to all
holders of Original Capital Securities on or about October 8, 1997.
See "Risk Factors" beginning on page 15 for certain information that should
be considered by holders in deciding whether to tender Original Capital
Securities in the Exchange Offer.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is October 8, 1997.
<PAGE>
(CONTINUED FROM THE PREVIOUS PAGE)
Junior Deferrable Interest Debentures due May 1, 2027, Series A (the "Original
Junior Subordinated Debentures"), in an aggregate principal amount corresponding
to the aggregate Liquidation Amount of Original Capital Securities accepted for
exchange, which Exchange Guarantee and Exchange Junior Subordinated Debentures
also have been registered under the Securities Act. The Original Capital
Securities, the Original Guarantee and the Original Junior Subordinated
Debentures are collectively referred to herein as the "Original Securities" and
the Exchange Capital Securities, the Exchange Guarantee and the Exchange Junior
Subordinated Debentures are collectively referred to herein as the "Exchange
Securities."
The terms of the Exchange Securities are identical in all material respects
to the respective terms of the Original Securities, except that (i) the Exchange
Securities have been registered under the Securities Act and therefore will not
be subject to certain restrictions on transfer applicable to the Original
Securities, (ii) the Exchange Capital Securities will not provide for any
increase in the Distribution rate thereon and (iii) the Exchange Junior
Subordinated Debentures will not provide for any liquidated damages thereon. See
"Description of Exchange Securities" and "Description of Original Securities."
The Exchange Capital Securities are being offered for exchange in order to
satisfy certain obligations of the Corporation and the Trust under the
Registration Rights Agreement, dated as of May 1, 1997 (the "Registration Rights
Agreement"), among the Corporation, the Trust and Sandler O'Neill & Partners,
L.P. (the "Initial Purchaser"). In the event that the Exchange Offer is
consummated, any Original Capital Securities that remain outstanding after
consummation of the Exchange Offer and the Exchange Capital Securities issued in
the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Trust Agreement (as defined herein). The Exchange Capital
Securities and the Original Capital Securities (together, the "Capital
Securities") represent beneficial interests in the assets of the Trust. The
Corporation is the owner of all of the beneficial interests represented by
common securities of the Trust (the "Common Securities," and together with the
Capital Securities, the "Trust Securities"). The First National Bank of Chicago
is the Property Trustee (the "Property Trustee") of the Trust. The Trust exists
for the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in the Junior Subordinated Debentures (as defined herein). The Exchange
Junior Subordinated Debentures will mature on May 1, 2027 (the "Stated Maturity
Date"). The Exchange Capital Securities will have a preference over the Common
Securities under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise. See "Description of
Exchange Securities -- Description of Exchange Capital
Securities -- Subordination of Common Securities".
As used herein, (i) the "Indenture" means the Indenture, dated as of May 1,
1997, as amended and supplemented from time to time, between the Corporation and
The First National Bank of Chicago, as Trustee (the "Debenture Trustee"),
relating to the Junior Subordinated Debentures and (ii) the "Trust Agreement"
means the Amended and Restated Declaration of Trust relating to the Trust, dated
as of May 1, 1997, among the Corporation, as Sponsor, The First National Bank of
Chicago, as Property Trustee, First Chicago Delaware Inc., as Delaware Trustee
(the "Delaware Trustee"), and the Administrative Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees"). In addition, as the context may require, (i) "Junior Subordinated
Debentures" includes the Original Junior Subordinated Debentures and the
Exchange Junior Subordinated Debentures and (ii) "Guarantee" includes the
Original Guarantee and the Exchange Guarantee.
Holders of the Exchange Capital Securities will be entitled to receive
cumulative cash distributions arising from the payment of interest on the
Exchange Junior Subordinated Debentures, accumulating from November 1, 1997,
payable semi-annually in arrears on May 1 and November l of each year,
commencing May 1, 1998, at the annual rate of 10.52% of the Liquidation Amount
of $1,000 per Exchange Capital Security ("Distributions"). So long as no
Debenture Event of Default (as defined herein) has occurred and is continuing,
the Corporation has the right to defer payments of interest on the Exchange
Junior Subordinated Debentures for a period not exceeding 10 consecutive
semi-annual periods to each deferral period (each, an "Extension Period"),
provided that an Extension Period must end on an Interest Payment Date (as
defined herein) and may not extend beyond the Stated Maturity Date. Upon the
termination of any such Extension Period and the payment of all amounts then
due, the Corporation may elect to begin a new Extension Period, subject to the
requirements set forth herein. If and for so long as interest payments on the
Exchange Junior Subordinated Debentures are so deferred, Distributions on the
Exchange Capital Securities also will be deferred, and the Corporation will not
be permitted, subject to certain exceptions described herein, to declare or pay
any cash distributions with respect to the Corporation's capital stock or to
make any payment with respect to debt securities of the Corporation that rank
pari passu with or junior to the Exchange Junior Subordinated Debentures.
2
<PAGE>
During an Extension Period, interest on the Exchange Junior Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Exchange Capital Securities are entitled will continue to
accumulate) at the rate of 10.52% per annum, compounded semi-annually, and
holders of Trust Securities will be required to include deferred interest income
in their gross income for United States federal income tax purposes prior to the
receipt of the cash attributable to such income. See "Description of Exchange
Securities -- Description of Exchange Junior Subordinated Debentures -- Option
to Extend Interest Payment Date" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount." Distributions to
which holders of the Trust Securities are entitled during any such Extension
Period will accumulate additional Distributions thereon at the rate per annum of
10.52% thereof, compounded semi-annually from the relevant Distribution Date,
but not exceeding the interest rate then accruing on the Exchange Junior
Subordinated Debentures. The term "Distributions," as used herein, shall include
any such additional Distributions.
Through the Guarantee, the guarantee of the Corporation relating to the
Common Securities (the "Common Guarantee"), the Trust Agreement, the Junior
Subordinated Debentures and the Indenture, taken together, the Corporation has
guaranteed or will guarantee, as the case may be, all of the Trust's obligations
under the Trust Securities. See "Relationship Among the Exchange Capital
Securities, the Exchange Junior Subordinated Debentures and the Exchange
Guarantee -- Full and Unconditional Guarantee." The Exchange Guarantee and the
Common Guarantee will guarantee payments of Distributions and payments upon
liquidation of the Trust or redemption of the Exchange Capital Securities and
Common Securities, but in each case only to the extent that the Trust has funds
legally available therefor and has failed to make such payments, as described
herein. See "Description of Exchange Securities -- Description of Exchange
Guarantee." If the Corporation fails to make a required payment on the Exchange
Junior Subordinated Debentures, the Trust will not have sufficient funds to make
the related payments, including Distributions, on the Trust Securities. The
Exchange Guarantee will not cover any such payment when the Trust does not have
sufficient funds legally available therefor. In such event, a holder of Exchange
Capital Securities may institute a legal proceeding directly against the
Corporation to enforce its rights in respect of such payment. See "Description
of Exchange Securities -- Description of Exchange Junior Subordinated
Debentures -- Enforcement of Certain Rights by Holders of Exchange Capital
Securities." The obligations of the Corporation under the Exchange Guarantee,
the Common Guarantee and the Exchange Junior Subordinated Debentures will be
unsecured and will rank subordinate and junior in right of payment to all Senior
Indebtedness (as defined in "Description of Exchange Securities -- Description
of Exchange Junior Subordinated Debentures -- Subordination"). See "Risk
Factors -- Ranking of Subordinated Obligations under the Exchange Guarantee and
the Exchange Junior Subordinated Debentures; Limitations on Source of Funds."
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated Maturity
Date upon repayment of the Exchange Junior Subordinated Debentures at a
redemption price equal to the principal amount of, plus accrued and unpaid
interest on, the Exchange Junior Subordinated Debentures (the "Maturity
Redemption Price"), (ii) in whole but not in part, at any time prior to May 1,
2007 (the "Initial Optional Redemption Date"), contemporaneously with the
optional prepayment of the Exchange Junior Subordinated Debentures by the
Corporation, upon the occurrence and continuation of a Special Event (as defined
herein) at a redemption price equal to the Special Event Prepayment Price (as
defined herein) (the "Special Event Redemption Price"), and (iii) in whole or in
part, on or after the Initial Optional Redemption Date, contemporaneously with
the optional prepayment by the Corporation of all or part of the Exchange Junior
Subordinated Debentures, at a redemption price equal to the Optional Prepayment
Price (as defined herein) (the "Optional Redemption Price"). Any of the Maturity
Redemption Price, the Special Event Redemption Price and the Optional Redemption
Price may be referred to herein as the "Redemption Price." See "Description of
Exchange Securities -- Description of Exchange Capital
Securities -- Redemption."
Subject to the Corporation having received any required regulatory
approvals, the Exchange Junior Subordinated Debentures will be prepayable prior
to the Stated Maturity Date at the option of the Corporation (i) on or after the
Initial Optional Redemption Date, in whole or in part, at a price (the "Optional
Prepayment Price") equal to 105.260% of the principal amount thereof on the
Initial Optional Redemption Date, declining ratably on each May 1 thereafter to
100% on or after May 1, 2017 or (ii) at any time prior to the Initial Optional
Redemption Date, in whole but not in part, upon the occurrence and continuation
of a Special Event, at a prepayment price (the "Special Event Prepayment Price")
equal to the Make-Whole Amount (as defined herein). The "Make-Whole Amount"
shall be equal to the greater of (a) 100% of the principal amount thereof or (b)
the sum, as determined by a Quotation Agent (as defined herein), of the present
values of the remaining scheduled payments of principal and interest on the
Exchange Junior Subordinated Debentures, discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined herein) plus, in the case of each of
clauses (a) and (b), accrued and unpaid interest thereon, including Compounded
Interest and Additional Sums (as defined herein), if any, to the date of
prepayment. Either of the Optional Prepayment Price or the Special Event
Prepayment Price may be referred to herein as the "Prepayment Price." See
3
<PAGE>
"Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debentures -- Optional Prepayment" and " -- Special Event
Prepayment."
The Corporation has the right at any time to terminate the Trust and, after
satisfaction of liabilities of creditors of the Trust as required by applicable
law, to cause a Like Amount of the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the Trust,
subject to the Corporation's having received (i) an opinion of counsel to the
effect that such distribution will not be a taxable event to the holders of
Exchange Capital Securities and (ii) any required regulatory approvals. Unless
the Junior Subordinated Debentures are distributed to the holders of the Trust
Securities, in the event of a liquidation of the Trust as described herein,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, the holders of the Trust Securities generally will be entitled
to receive a Liquidation Amount of $1,000 per Trust Security plus accumulated
and unpaid Distributions thereon to the date of payment. See "Description of
Exchange Securities -- Description of Exchange Capital Securities -- Liquidation
of the Trust and Distribution of Exchange Junior Subordinated Debentures."
THE CAPITAL SECURITIES, INCLUDING THE EXCHANGE CAPITAL SECURITIES, MAY BE
TRANSFERRED ONLY IN A BLOCK HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN
$100,000 (100 CAPITAL SECURITIES). ANY TRANSFER OF EXCHANGE CAPITAL SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO
BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED
NOT TO BE THE HOLDER OF SUCH EXCHANGE CAPITAL SECURITIES FOR ANY PURPOSE,
INCLUDING BUT NOT LIMITED TO THE RECEIPT OF DISTRIBUTIONS ON SUCH EXCHANGE
CAPITAL SECURITIES, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST
WHATSOEVER IN SUCH EXCHANGE CAPITAL SECURITIES.
The Trust is making the Exchange Offer of the Exchange Capital Securities
in reliance on the position of the staff of the Division of Corporation Finance
(the "Staff") of the Securities and Exchange Commission (the "Commission") as
set forth in certain interpretive letters addressed to third parties in other
transactions. However, neither the Corporation nor the Trust has sought its own
interpretive letter and there can be no assurance that the Staff of the
Commission would make a similar determination with respect to the Exchange Offer
as it has in such interpretive letters to third parties. Based on these
interpretations by the Staff of the Commission, and subject to the two
immediately following sentences, the Corporation and the Trust believe that
Exchange Capital Securities issued pursuant to this Exchange Offer in exchange
for Original Capital Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a holder who is a broker-dealer)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. However, any holder of
Original Capital Securities who is an "affiliate" of the Corporation or the
Trust or who intends to participate in the Exchange Offer for the purpose of
distributing Exchange Capital Securities, or any broker-dealer who purchased
Original Capital Securities from the Trust for resale pursuant to Rule 144A
under the Securities Act ("Rule 144A") or any other available exemption under
the Securities Act, (i) will not be able to rely on the interpretations of the
Staff of the Commission set forth in the above-mentioned interpretive letters,
(ii) will not be permitted or entitled to tender such Original Capital
Securities in the Exchange Offer and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or other transfer of such Original Capital Securities unless such sale is
made pursuant to an exemption from such requirements. In addition, as described
herein, if any broker-dealer holds Original Capital Securities acquired for its
own account as a result of market-making or other trading activities and
exchanges such Original Capital Securities for Exchange Capital Securities, then
such broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such Exchange Capital
Securities.
Each holder of Original Capital Securities who wishes to exchange Original
Capital Securities for Exchange Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate" of the Corporation or
the Trust, (ii) any Exchange Capital Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such Exchange Capital Securities. In addition, the Corporation and the Trust
may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to the Corporation and the Trust
(or an agent thereof) in writing information as to the number of "beneficial
owners" (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), on behalf of whom such holder holds the
Original Capital Securities to be exchanged in the Exchange
4
<PAGE>
Offer. Each broker-dealer that receives Exchange Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it acquired the
Original Capital Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Capital Securities. The Letter of Transmittal states
that, by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the Staff of the Commission in
the interpretive letters referred to above, the Corporation and the Trust
believe that broker-dealers who acquired Original Capital Securities for their
own accounts, as a result of market-making activities or other trading
activities ("Participating Broker-Dealers"), may fulfill their prospectus
delivery requirements with respect to the Exchange Capital Securities received
upon exchange of such Original Capital Securities (other than Original Capital
Securities which represent an unsold allotment from the initial sale of the
Original Capital Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Capital Securities. Each broker-dealer that receives
Exchange Capital Securities for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Capital Securities. The Letter of Transmittal states that, by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Capital
Securities received in exchange for Original Capital Securities acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Trust and the Corporation have agreed that, ending on the close
of business on the 90th day following the Expiration Date (as defined herein),
it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution." However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of Exchange Capital Securities received in exchange for Original
Capital Securities pursuant to the Exchange Offer must notify the Corporation or
the Trust, or cause the Corporation or the Trust to be notified, on or prior to
the Expiration Date, that it is a Participating Broker-Dealer. Such notice may
be given in the space provided for that purpose in the Letter of Transmittal or
may be delivered to The First National Bank of Chicago (the "Exchange Agent") at
the address set forth herein under "The Exchange Offer -- Exchange Agent." Any
Participating Broker-Dealer who is an "affiliate" of the Corporation or the
Trust may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer -- Resales of
Exchange Capital Securities."
In that regard, each Participating Broker-Dealer who surrenders Original
Capital Securities pursuant to the Exchange Offer will be deemed to have agreed,
by execution of the Letter of Transmittal, that upon receipt of notice from the
Corporation or the Trust of the occurrence of any event or the discovery of any
fact that (i) makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or (ii) causes this Prospectus to omit
to state a material fact necessary in order to make the statements contained or
incorporated by reference herein, in the light of the circumstances under which
they were made, not misleading, or upon the occurrence of certain other events
specified in the Registration Rights Agreement, such Participating Broker-Dealer
will suspend the sale of Exchange Capital Securities (or the Exchange Guarantee
or the Exchange Junior Subordinated Debentures, as applicable) pursuant to this
Prospectus until the Corporation or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer, or
the Corporation or the Trust has given notice that the sale of the Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) may be resumed, as the case may be. If
the Corporation or the Trust gives such notice to suspend the sale of the
Exchange Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable), it shall extend the 90-day period
referred to above during which Participating Broker-Dealers are entitled to use
this Prospectus in connection with the resale of Exchange Capital Securities by
the number of days during the period from and including the date of the giving
of such notice to and including the date when Participating Broker-Dealers shall
have received copies of the amended or supplemented Prospectus necessary to
permit resales of the Exchange Capital Securities or to and including the date
on which the Corporation or the Trust has given notice that the sale of Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Original Capital Securities. The Exchange Capital
Securities will be a new issue of securities for which there currently is no
market. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Capital Securities. The Corporation and
the Trust do not intend to apply for listing of the Exchange Capital Securities
on any securities exchange
5
<PAGE>
or for inclusion in the Nasdaq Stock Market, the electronic securities market
operated by the National Association of Securities Dealers, Inc. ("Nasdaq").
Any Original Capital Securities not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to all the same rights and
will be subject to the same limitations applicable thereto under the Trust
Agreement (except for those rights which terminate upon consummation of the
Exchange Offer). Following consummation of the Exchange Offer, the holders of
Original Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither the Corporation nor the Trust
will have any further obligation to such holders (other than under certain
limited circumstances) to provide for registration under the Securities Act of
the Original Capital Securities held by them. To the extent that Original
Capital Securities are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered Original Capital Securities could be adversely
affected. See "Risk Factors -- Consequences of a Failure to Exchange Original
Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER.
Original Capital Securities may be tendered for exchange on or prior to
5:00 p.m., New York City time, on November 6, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is extended
by the Corporation or the Trust (in which case the term "Expiration Date" shall
mean the latest date and time to which the Exchange Offer is extended). Tenders
of Original Capital Securities may be withdrawn at any time on or prior to the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Original Capital Securities being tendered for exchange.
However, the Exchange Offer is subject to certain events and conditions which
may be waived by the Corporation or the Trust and to the terms and provisions of
the Registration Rights Agreement. Original Capital Securities may be tendered
in whole or in part having an aggregate Liquidation Amount of not less than
$100,000 (100 Capital Securities) or any integral multiple of $1,000 Liquidation
Amount (one Capital Security) in excess thereof. The Corporation has agreed to
pay all expenses of the Exchange Offer. See "The Exchange Offer -- Fees and
Expenses." Holders of the Original Capital Securities whose Original Capital
Securities are accepted for exchange will not thereafter receive Distributions
on such Original Capital Securities and will be deemed to have waived the right
to receive any Distributions on such Original Capital Securities accumulated
from and including November 1, 1997. See "The Exchange Offer -- Distributions on
the Exchange Capital Securities."
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities offered hereby. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at 7 World Trade Center,
13th Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material may also be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. If available, such information also may be accessed through the
Commission's electronic data gathering, analysis and retrieval system ("EDGAR")
via electronic means, including the Commission's home page on the Internet
(http://www.sec.gov). The Corporation's common stock is traded on the Nasdaq.
Such reports, proxy statements and other information concerning the Corporation
also may be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
No separate financial statements of the Trust have been included herein.
The Corporation and the Trust do not consider that such financial statements
would be material to holders of the Exchange Capital Securities because the
Trust is a newly-formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Junior Subordinated
Debentures, issuing the Trust Securities and engaging in activities necessary,
advisable or incidental thereto. See "Banknorth Capital Trust I," "Description
of Exchange Securities -- Description of Exchange Capital Securities,"
"Description of Exchange Securities -- Description of
6
<PAGE>
Exchange Junior Subordinated Debentures" and "Description of Exchange
Securities -- Description of Exchange Guarantee." In addition, the Corporation
does not expect that the Trust will file reports, proxy statements and other
information under the Exchange Act with the Commission.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Corporation and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Corporation and the
Exchange Securities. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and, in each instance, reference
is made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated into this Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K, as amended by Form
10-K/A, for the year ended December 31, 1996;
2. The Corporation's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997 and June 30, 1997; and
3. The Corporation's Current Report on Form 8-K filed on April 14,
1997.
All documents subsequently filed by the Corporation pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the termination of the offering of the Exchange Securities offered hereby shall
be deemed to be incorporated by reference into this Prospectus and to be a part
of this Prospectus from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete and,
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO ANY
PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF
SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED BY
REFERENCE HEREIN (OTHER THAN EXHIBITS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). REQUESTS FOR SUCH DOCUMENTS SHOULD
BE DIRECTED TO: BANKNORTH GROUP, INC., 300 FINANCIAL PLAZA, P.O. BOX 5420,
BURLINGTON, VERMONT 05401, ATTENTION: NEAL E. ROBINSON (TELEPHONE (802)
658-2492).
7
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. Reference is made to and
this summary is qualified in its entirety by, the more detailed information and
financial statements including the notes thereto contained elsewhere in this
Prospectus and in documents incorporated by reference hereto.
BANKNORTH GROUP, INC.
The Corporation is a multi-bank holding company organized as a Delaware
corporation in 1989 as the result of the merger of two Vermont-based bank
holding companies. The Corporation is the sole owner of five Vermont banks;
namely, First Vermont Bank and Trust Company, Franklin Lamoille Bank, The Howard
Bank, N.A., Granite Savings Bank and Trust Company and Woodstock National Bank;
one Vermont limited charter bank, The Stratevest Group, N.A., a consolidated
trust subsidiary; one New Hampshire holding company, namely, North American Bank
Corporation and its sole subsidiary, Farmington National Bank; and one
Massachusetts bank, First Massachusetts Bank, N.A. The Corporation is also the
sole owner of North Group Realty, Inc., which owns real estate utilized in the
operation of the Corporation.
Acquisitions have been, and continue to be, an important part of the
expansion of the Corporation's business. On February 16, 1996, the Corporation
completed the purchase of thirteen banking offices from Shawmut Bank, N.A. A new
subsidiary, First Massachusetts Bank, N.A., with principal offices in Worcester,
Massachusetts, was organized to own and operate the acquired offices. In
addition, on October 14, 1994, the Corporation acquired North American Bank
Corporation and its sole subsidiary, Farmington National Bank. The acquisition,
which was accounted for as a purchase, was the first for the Corporation in the
state of New Hampshire.
The Corporation engages in discussions concerning potential acquisitions
from time to time, but currently has no commitments, agreements or
understandings to acquire any additional financial institutions. The Corporation
expects to continue to take advantage of the consolidation of the financial
services industry by further developing its community bank franchise within its
own and contiguous market areas.
The Corporation's banking subsidiaries (the "Banks") offer a full range of
loan, deposit, investment products and trust services designed to meet the
financial needs of individual consumers, businesses and municipalities. Mortgage
banking services are also offered through Banknorth Mortgage Company, a
wholly-owned subsidiary of First Vermont Bank and Trust Company. These services
are currently offered throughout the states of Vermont, Massachusetts and New
Hampshire through a network of 58 banking offices.
The Corporation's network of community Banks is committed to providing
superior, efficient and personalized service to customers in chosen market
areas. To that end, operating efficiencies are achieved through the
centralization of all major support functions at the parent company level. The
Corporation's community banking management structure allows each Bank's local
management team and board of directors to focus on such Bank's customers and to
set its own loan and deposit prices in light of local competition and other
market factors.
The Corporation believes that local business and community focus, knowledge
of customers and their needs, the provision of a broad array of financial
services and products, together with decentralized decision making at the branch
and community level, enables the Corporation to effectively compete in its
chosen markets.
Based on total assets as of December 31, 1996, the Corporation is the
largest bank holding company headquartered in Vermont. At December 31, 1996, the
Corporation had total assets, deposits and shareholders' equity of $2.6 billion,
$2.1 billion and $206.7 million, respectively. In December 1996, the Corporation
and its subsidiaries employed 1,108 on a full-time equivalent basis.
The principal executive office of the Corporation is located at 300
Financial Plaza, Burlington, Vermont 05401, and its telephone number is (802)
658-9959.
BANKNORTH CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Trust Agreement and (ii) the filing of a certificate of trust with
the Delaware Secretary of State on April 9, 1997. The Trust's business and
affairs are conducted by the Issuer Trustees: the Property Trustee, the Delaware
Trustee, and the three individual Administrative Trustees, who are officers or
other employees of the Corporation. The Trust exists for the exclusive purposes
of (i) issuing and selling the Trust Securities, (ii) using the proceeds from
the sale of the Trust Securities to acquire the Junior Subordinated Debentures
issued
8
<PAGE>
by the Corporation and (ii) engaging in only those other activities necessary,
advisable or incidental thereto. Accordingly, the Junior Subordinated Debentures
will be the sole assets of the Trust and payments under the Junior Subordinated
Debentures are and will be the sole revenue of the Trust. All of the Common
Securities will be owned by the Corporation. The principal executive office of
the Trust is c/o Banknorth Group, Inc., 300 Financial Plaza, Burlington, Vermont
05401.
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer.................................... Up to and including $30,000,000 aggregate Liquidation Amount of
Exchange Capital Securities are being offered in exchange for a like
aggregate Liquidation Amount of Original Capital Securities. Original
Capital Securities may be tendered for exchange in whole or in part
in a Liquidation Amount of $100,000 (100 Capital Securities) or any
integral multiple of $1,000 (one Capital Security) in excess thereof.
The Corporation and the Trust are making the Exchange Offer in order
to satisfy their obligations under the Registration Rights Agreement
relating to the Original Capital Securities. For a description of the
procedures for tendering Original Capital Securities, see "The
Exchange Offer -- Procedures for Tendering Original Capital
Securities."
Expiration Date....................................... 5:00 p.m., New York City time, on November 6, 1997 unless the
Exchange Offer is extended by the Corporation and the Trust (in which
case the Expiration Date will be the latest date and time to which
the Exchange Offer is extended). See "The Exchange Offer -- Terms of
the Exchange Offer."
Conditions to the Exchange Offer...................... The Exchange Offer is subject to certain conditions, which may be
waived by the Corporation and the Trust in their sole discretion. The
Exchange Offer is not conditioned upon any minimum Liquidation Amount
of Original Capital Securities being tendered. See "The Exchange
Offer -- Conditions to the Exchange Offer."
Terms of the Exchange Offer........................... The Corporation and the Trust reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from
time to time, (i) to delay the acceptance of the Original Capital
Securities, (ii) to terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Original Capital Securities
tendered pursuant to the Exchange Offer, subject, however, to the
right of holders of Original Capital Securities to withdraw their
tendered Original Capital Securities, or (iv) to waive any condition
or otherwise amend the terms of the Exchange Offer in any respect.
See "The Exchange Offer -- Terms of the Exchange Offer."
Withdrawal Rights..................................... Tenders of Original Capital Securities may be withdrawn at any time
on or prior to the Expiration Date by delivering a written notice of
such withdrawal to the Exchange Agent in conformity with certain
procedures as set forth herein under "The Exchange Offer --
Withdrawal Rights."
Procedures for Tendering Original Capital Certain brokers, dealers, commercial banks, trust companies and other
Securities.......................................... nominees who hold Original Capital Securities through The Depository
Trust Company ("DTC") must effect tenders by book entry transfer
through DTC's Automated Tender Offer Program ("ATOP"). Beneficial
owners of Original Capital Securities registered in the name of a
broker, dealer, commercial bank, trust company or other nominee are
urged to contact such person promptly if they wish to tender Original
Capital Securities pursuant
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
to the Exchange Offer. Tendering holders of Original Capital
Securities that do not use ATOP must complete and sign a Letter of
Transmittal in accordance with the instructions contained therein and
forward the same by mail, facsimile transmission or hand delivery,
together with any other required documents, to the Exchange Agent,
either with the certificates of the Original Capital Securities to be
tendered or in compliance with the specified procedures for
guaranteed delivery of Original Capital Securities. Tendering holders
of Original Capital Securities that use ATOP will, by so doing,
acknowledge that they are bound by the terms of the Letter of
Transmittal. See "The Exchange Offer -- Procedures for Tendering
Original Capital Securities."
Letters of Transmittal and certificates representing Original Capital
Securities should not be sent to the Corporation or the Trust. Such
documents should only be sent to the Exchange Agent.
Resales of Exchange Capital Securities................ The Corporation and the Trust are making the Exchange Offer in
reliance on the position of the Staff of the Commission as set forth
in certain interpretive letters addressed to third parties in other
transactions. However, neither the Corporation nor the Trust has
sought its own interpretive letter and there can be no assurance that
the Staff of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters
to third parties. Based on these interpretations by the Staff of the
Commission, and subject to the two immediately following sentences,
the Corporation and the Trust believe that Exchange Capital
Securities issued pursuant to this Exchange Offer in exchange for
Original Capital Securities may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a holder who is
a broker-dealer) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that
such Exchange Capital Securities are acquired in the ordinary course
of such holder's business and that such holder is not participating,
and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities
Act) of such Exchange Capital Securities. However, any holder of
Original Capital Securities who is an "affiliate" of the Corporation
or the Trust or who intends to participate in the Exchange Offer for
the purpose of distributing the Exchange Capital Securities, or any
broker-dealer who purchased the Original Capital Securities from the
Trust for resale pursuant to Rule 144A or any other available
exemption under the Securities Act, (i) will not be able to rely on
the interpretations of the Staff of the Commission set forth in the
above-mentioned interpretive letters, (ii) will not be permitted or
entitled to tender such Original Capital Securities in the Exchange
Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any
sale or other transfer of such Original Capital Securities unless
such sale is made pursuant to an exemption from such requirements. In
addition, as described herein, if any broker-dealer holds Original
Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Original
Capital Securities for Exchange Capital Securities, then such
broker-dealer must deliver a prospectus meeting the
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
requirements of the Securities Act in connection with any resales of
such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to exchange
Original Capital Securities for Exchange Capital Securities in the
Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Corporation or the Trust, (ii) any Exchange
Capital Securities to be received by it are being acquired in the
ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Capital
Securities, and (iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities Act) of such
Exchange Capital Securities. Each broker-dealer that receives
Exchange Capital Securities for its own account in exchange for
Original Capital Securities, where such Original Capital Securities
were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will
deliver a prospectus meeting the requirements of the Exchange Act in
connection with any resale of such Exchange Capital Securities. See
"Plan of Distribution." The Letter of Transmittal states that, by so
acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning
of the Securities Act. Based on the position taken by the Staff of
the Commission in the interpretive letters referred to above, the
Corporation and the Trust believe that Participating Broker-Dealers
who acquired Original Capital Securities for their own accounts as a
result of market-making activities or other trading activities may
fulfill their prospectus delivery requirements with respect to the
Exchange Capital Securities received upon exchange of such Original
Capital Securities (other than Original Capital Securities that
represent an unsold allotment from the initial sale of the Original
Capital Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange
offer so long as it contains a description of the plan of
distribution with respect to the resale of such Exchange Capital
Securities. Accordingly, this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of Exchange Capital
Securities received in exchange for Original Capital Securities where
such Original Capital Securities were acquired by such Participating
Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in
the Registration Rights Agreement and to the limitations described
herein under "The Exchange Offer -- Resales of Exchange Capital
Securities," the Corporation and the Trust have agreed that this
Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in connection with
resales of such Exchange Capital Securities for a period ending 90
days after the Expiration Date (subject to extension under certain
limited circumstances) or, if earlier, when all such Exchange Capital
Securities have been disposed of by such Participating Broker-Dealer.
See "Plan of Distribution." Any Participating Broker-Dealer who is an
"affiliate" of the Corporation
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
or the Trust may not rely on such interpretive letters and must
comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. See
"The Exchange Offer -- Resales of Exchange Capital Securities."
Exchange Agent........................................ The Exchange Agent with respect to the Exchange Offer is The First
National Bank of Chicago. The address, and telephone and facsimile
number of the Exchange Agent are set forth in "The Exchange
Offer -- Exchange Agent" and in the Letter of Transmittal.
Use of Proceeds....................................... Neither the Corporation nor the Trust will receive any cash proceeds
from the issuance of the Exchange Capital Securities offered hereby.
See "Use of Proceeds."
Federal Income Tax Considerations..................... The exchange of Original Capital Securities for Exchange Capital
Securities should not be a taxable exchange for federal income tax
purposes, and holders should not recognize any taxable gain or loss
or any interest income as a result of such exchange. See "Certain
Federal Income Tax Consequences -- Exchange of Capital Securities."
ERISA Considerations.................................. Holders of Original Capital Securities should review the information
set forth under "ERISA Considerations" prior to tendering Original
Capital Securities in the Exchange Offer.
</TABLE>
THE EXCHANGE CAPITAL SECURITIES
<TABLE>
<S> <C>
Securities Offered.................................... Up to and including $30,000,000 aggregate Liquidation Amount of
Exchange Capital Securities (Liquidation Amount $1,000 per Exchange
Capital Security) will have been registered under the Securities Act.
The Exchange Capital Securities will be issued, and the Original
Capital Securities were issued, under the Trust Agreement. The
Exchange Capital Securities and any Original Capital Securities that
remain outstanding after consummation of the Exchange Offer will vote
together as a single class for purposes of determining whether
holders of the requisite percentage in outstanding Liquidation Amount
thereof have taken certain actions or exercised certain rights under
the Trust Agreement. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Voting
Rights; Amendment of the Trust Agreement." The terms of the Exchange
Capital Securities are identical in all material respects to the
terms of the Original Capital Securities, except that the Exchange
Capital Securities have been registered under the Securities Act,
will not be subject to certain restrictions on transfer applicable to
the Original Capital Securities and will not provide for any increase
in the Distribution rate thereon. See "The Exchange Offer -- Purpose
and Effect of the Exchange Offer," "Description of Exchange
Securities" and "Description of Original Securities."
Distribution Dates.................................... May 1 and November 1 of each year, commencing May 1, 1998.
Extension Periods..................................... So long as no Debenture Event of Default has occurred and is
continuing, Distributions on Exchange Capital Securities will be
deferred for the duration of any Extension Period elected by the
Corporation with respect to the payment of interest on the Exchange
Junior Subordinated Debentures. No Extension Period will exceed 10
consecutive semi-annual periods, end on a date other than an Interest
Payment Date or extend beyond the Stated Maturity Date.
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
During an Extension Period, the holders of Exchange Capital
Securities will be required to include deferred interest income in
their gross income for United States federal income tax purposes in
advance of any corresponding cash distributions. See "Description of
Exchange Securities -- Description of Exchange Junior Subordinated
Debentures -- Option to Extend Interest Payment Date" and "Certain
Federal Income Tax Consequences -- Interest Income and Original Issue
Discount."
Ranking............................................... The Exchange Capital Securities will rank PARI PASSU, and payments
thereon will be made PRO RATA, with the Original Capital Securities
and the Common Securities except as described under "Description of
Exchange Securities -- Description of Exchange Capital
Securities -- Subordination of Common Securities." The Exchange
Junior Subordinated Debentures will rank PARI PASSU with the Original
Junior Subordinated Debentures and all other junior subordinated
debentures (if any) issued by the Corporation (the "Other
Debentures"), which are issued and sold (if at all) to other trusts
to be established by the Corporation (if any), in each case similar
to the Trust ("Other Trusts"), and will constitute unsecured
obligations of the Corporation and will rank subordinate and junior
in right of payment to all Senior Indebtedness to the extent and in
the manner set forth in the Indenture. See "Description of Exchange
Securities -- Description of Exchange Junior Subordinated
Debentures." The Exchange Guarantee will rank PARI PASSU with the
Original Guarantee and all other guarantees (if any) issued by the
Corporation with respect to preferred beneficial interests (if any)
issued by Other Trusts ("Other Guarantees") and will constitute an
unsecured obligation of the Corporation and will rank subordinate and
junior in right of payment to all Senior Indebtedness to the extent
and in the manner set forth in the Exchange Guarantee. See
"Description of Exchange Securities -- Description of Exchange
Guarantee." In addition, because the Corporation is a holding
company, the Exchange Junior Subordinated Debentures and the Exchange
Guarantee will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries. See "Description of
Exchange Securities -- Description of Exchange Junior Subordinated
Debentures -- Subordination."
Redemption............................................ The Trust Securities will be subject to mandatory redemption in a
Like Amount, (i) in whole but not in part, on the Stated Maturity
Date upon repayment of the Junior Subordinated Debentures, (ii) in
whole but not in part, at any time prior to the Initial Optional
Redemption Date, contemporaneously with the optional prepayment of
the Junior Subordinated Debentures by the Corporation upon the
occurrence and continuation of a Special Event and (iii) in whole or
in part, on or after the Initial Optional Redemption Date, contempo-
raneously with the optional prepayment by the Corporation of all or
part of the Junior Subordinated Debentures, in each case, at the
applicable Redemption Price. See "Description of Exchange
Securities -- Description of Exchange Capital Securities --
Redemption" and " -- Description of Exchange Junior Subordinated
Debentures -- Special Event Prepayment."
Ratings............................................... The Exchange Capital Securities are expected to be rated BB by Duff &
Phelps Credit Rating Co. A security rating is not a recommendation to
buy, sell or hold securities and may be subject to
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
revision or withdrawal at any time by the assigning rating
organization.
Transfer Restrictions................................. The Exchange Capital Securities will be issued, and may be
transferred, only in blocks having a Liquidation Amount of not less
than $100,000 (100 Capital Securities) and multiples of $1,000
Liquidation Amount in excess thereof. See "Description of Exchange
Securities -- Description of Exchange Capital
Securities -- Restrictions on Transfer." Any such transfer of
Exchange Capital Securities in a block having a Liquidation Amount of
less than $100,000 shall be deemed to be void and of no legal effect
whatsoever.
ERISA Considerations.................................. Prospective purchasers must carefully consider the restrictions on
purchase set forth under "ERISA Considerations."
Absence of Market for the Exchange Capital
Securities.......................................... The Exchange Capital Securities will be a new issue of securities for
which there currently is no market. Accordingly, there can be no
assurance as to the development or liquidity of any market for the
Exchange Capital Securities. The Trust and the Corporation do not
intend to apply for listing of the Exchange Capital Securities on any
securities exchange or for quotation through Nasdaq. See "Plan of
Distribution."
</TABLE>
RISK FACTORS
Prospective investors should carefully consider the matters set forth under
"Risk Factors."
14
<PAGE>
RISK FACTORS
Prospective investors should carefully review the information contained
elsewhere in this Prospectus and should particularly consider the following
matters. In addition, information contained in, or incorporated by reference in,
this Prospectus contains "forward-looking statements" which can be identified by
the use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should," "projected," "contemplates" or "anticipates" or the negative
thereof or other variations thereon or comparable terminology. No assurance can
be given that the future results covered by the forward-looking statements will
be achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to vary
materially from the future results covered in such forward-looking statements.
Other factors, such as the general state of the economy, could also cause actual
results to vary materially from the future results covered in such
forward-looking statements.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE EXCHANGE GUARANTEE AND
THE EXCHANGE JUNIOR SUBORDINATED DEBENTURES; LIMITATIONS ON SOURCE OF FUNDS
The obligations of the Corporation under the Exchange Guarantee issued by
it for the benefit of the holders of Exchange Capital Securities, as well as
under the Exchange Junior Subordinated Debentures, will be unsecured and will
rank subordinate and junior in right of payment to all Senior Indebtedness to
the extent and in the manner set forth in the Exchange Guarantee and the
Indenture, respectively. No payment may be made of the principal of or premium,
if any, or interest on the Junior Subordinated Debentures, or in respect of any
redemption, retirement, purchase or other acquisition of any of the Junior
Subordinated Debentures, (i) when there shall have occurred and be continuing a
default in any payment in respect of any Senior Indebtedness, or there has been
an acceleration of the maturity thereof because of a default thereunder, or (ii)
in the event of the acceleration of the maturity of the Junior Subordinated
Debentures, until payment has been made on all Senior Indebtedness. At December
31, 1996, the Corporation had approximately $13.0 million of Senior Indebtedness
outstanding.
Because the Corporation is a holding company, the Corporation's operations
are conducted by its subsidiaries, including the Banks, which are subject to
significant federal and state regulation. As a result, the Corporation's ability
to receive dividends and loans from its subsidiaries is restricted. As of
December 31, 1996, the Banks were able to declare dividends to the Corporation
in 1997, without regulatory approval, of approximately $4.7 million. In
addition, in February 1996, as part of its plan to capitalize the Corporation's
newly formed subsidiary bank, First Massachusetts Bank, N.A., at a
"well-capitalized" level for regulatory capital purposes, the Corporation
redeployed accumulated capital of $45.6 million in the form of special dividends
from certain of the Banks. Because the amounts of the special dividends exceeded
applicable regulatory limitations, the Corporation obtained the necessary
regulatory approvals to effect such redeployment. Payment of the special
dividends has significantly restricted the dividend paying capacity of the
Banks. Accordingly, payment of any dividends to the Corporation by certain of
the Banks currently requires regulatory approval on account of the
aforementioned special dividends, and payments of dividends by the Banks in the
future will require their generation of sufficient future earnings. Further, the
right of the Corporation to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the Exchange Capital Securities to benefit
indirectly from such distribution) is subject to the prior claims of creditors
of such subsidiary (including depositors in the case of the Banks), except to
the extent that the Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Exchange Junior Subordinated Debentures effectively
will be subordinated to all existing and future liabilities of the Corporation's
subsidiaries (including deposit liabilities of the Banks), and holders of
Exchange Junior Subordinated Debentures should look only to the assets of the
Corporation for payments on the Exchange Junior Subordinated Debentures. At
December 31, 1996, the subsidiaries of the Corporation had total liabilities
(excluding liabilities owed to the Corporation) of approximately $2.4 billion.
The Exchange Guarantee will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in right of payment to all
Senior Indebtedness to the same extent and in the same manner as the Exchange
Junior Subordinated Debentures. None of the Indenture, the Exchange Guarantee or
the Trust Agreement places any limitation on the amount of secured or unsecured
debt, including Senior Indebtedness, that may be incurred by the Corporation or
any of its subsidiaries. See "Description of Exchange Junior Subordinated
Debentures -- General," " -- Subordination" and "Description of Exchange
Guarantee -- Status of the Exchange Guarantee." The Corporation expects from
time to time that it will incur additional indebtedness constituting Senior
Indebtedness and that its subsidiaries will incur additional liabilities.
The ability of the Trust to pay amounts due on the Exchange Capital
Securities is solely dependent upon the Corporation making payments on the
Exchange Junior Subordinated Debentures as and when required.
15
<PAGE>
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that an Extension Period must end on
an Interest Payment Date and may not extend beyond the Stated Maturity Date. As
a consequence of any such deferral, semi-annual Distributions on the Trust
Securities will be deferred from the relevant Distribution Date for such
Distributions during any such Extension Period (and the amount of Distributions
to which holders of the Trust Securities are entitled will accumulate additional
Distributions thereon at the rate of 10.52% per annum, compounded semi-annually,
but not exceeding the interest rate then accruing on the Junior Subordinated
Debentures). During an Extension Period, the Corporation generally will be
prohibited from (i) declaring or paying dividends on the Corporation's capital
stock, (ii) making payments of principal of or interest or premium, if any, on
its debt securities other than debt securities ranking senior to the Junior
Subordinated Debentures or (iii) making any guarantee payments with respect to
any guarantee by the Corporation of debt securities of any subsidiary of the
Corporation other than guarantees ranking senior to the Junior Subordinated
Debentures. See "Description of Exchange Securities -- Description of Exchange
Capital Securities -- Distributions."
Before the end of an Extension Period, the Corporation may further extend
such Extension Period, provided that such extension does not cause such
Extension Period to exceed 10 consecutive semi-annual periods, end on a date
other than an Interest Payment Date or extend beyond the Stated Maturity Date.
Upon the termination of any Extension Period and the payment of all interest
then accrued and unpaid on the Junior Subordinated Debentures (together with
interest thereon at the annual rate of 10.52%, compounded semi-annually, to the
extent permitted by applicable law), the Corporation may begin a new Extension
Period, subject to the above requirements. There is no limitation on the number
of times that the Corporation may begin an Extension Period. See "Description of
Exchange Securities -- Description of Exchange Capital Securities --
Distributions" and " -- Description of Exchange Junior Subordinated
Debentures -- Option to Extend Interest Payment Date."
The Corporation has no plan to exercise its right to defer payments of
interest on the Junior Subordinated Debentures. However, should the Corporation
exercise its right to defer payments of interest on the Junior Subordinated
Debentures, each holder of Trust Securities will be required to accrue income
(as original issue discount ("OID")) in respect of the deferred stated interest
allocable to its Trust Securities for United States federal income tax purposes,
which will be allocated but not distributed to holders of Trust Securities. As a
result, each holder of Capital Securities will recognize income for United
States federal income tax purposes in advance of the receipt of cash and will
not receive the cash related to such income from the Trust if the holder
disposes of the Capital Securities prior to the record date for the payment of
Distributions thereafter. See "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount" and " -- Sales of
Capital Securities."
If the Corporation exercises its right to defer payments of interest on the
Junior Subordinated Debentures, the market price of the Capital Securities is
likely to be affected. A holder that disposes of its Capital Securities during
an Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Capital Securities. In
addition, the mere existence of the Corporation's right to defer payments of
interest on the Junior Subordinated Debentures may cause the market price of the
Capital Securities to be more volatile than the market prices of other
securities on which OID accrues that are not subject to such deferrals.
SPECIAL EVENT REDEMPTION
If a Special Event occurs before May 1, 2007, the Corporation will have the
right to prepay the Junior Subordinated Debentures in whole (but not in part) at
the Special Event Prepayment Price within 90 days following the occurrence of
such Special Event and therefore cause a mandatory redemption of the Trust
Securities at the Special Event Redemption Price. The exercise of such right is
subject to the Corporation having received any required regulatory approvals.
See "Description of Exchange Securities -- Description of Exchange Capital
Securities -- Redemption."
PROPOSED TAX LEGISLATION
The Taxpayer Relief Act of 1997, enacted on August 5, 1997, did not contain
certain provisions of President Clinton's Fiscal 1998 Budget Proposal (the
"Proposed Legislation") that would, among other things, have denied an issuer a
deduction for United States federal income tax purposes for the payment of
interest on instruments with characteristics similar to the Junior Subordinated
Debentures. There can be no assurances, however, that the proposed legislation,
if enacted, or similar legislation enacted after the date hereof would not
adversely affect the tax treatment of the Junior Subordinated Debentures,
resulting in a Tax Event, which would permit the Corporation, upon the receipt
of any required regulatory approval, to cause
16
<PAGE>
a redemption of the Trust Securities at the Special Event Redemption Price by
electing to prepay the Junior Subordinated Debentures at the Special Event
Prepayment Price. See "Description of Exchange Securities -- Description of
Exchange Capital Securities -- Redemption" and " -- Description of Exchange
Junior Subordinated Debentures -- Special Event Prepayment." See also "Certain
Federal Income Tax Consequences -- Proposed Tax Legislation."
LIQUIDATION DISTRIBUTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Corporation will have the right to terminate the Trust and, after
satisfaction of liabilities of creditors of the Trust as required by applicable
law, to cause the Junior Subordinated Debentures to be distributed to the
holders of the Trust Securities. Under current United States federal income tax
law, a distribution of Exchange Junior Subordinated Debentures upon the
liquidation of the Trust would not be a taxable event to holders of the Exchange
Capital Securities. Upon the occurrence of a Special Event, however, a
liquidation of the Trust in which the Exchange Capital Securities are redeemed
for cash would be a taxable event to the holders thereof. See "Certain Federal
Income Tax Considerations -- Receipt of Junior Subordinated Debentures or Cash
Upon Liquidation of the Trust."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for Exchange Capital
Securities or the Exchange Junior Subordinated Debentures that may be
distributed in exchange for Exchange Capital Securities if a termination of the
Trust were to occur. Accordingly, the Exchange Capital Securities or the
Exchange Junior Subordinated Debentures may trade at a discount from the price
that the investor paid to purchase such securities. Because holders of Exchange
Capital Securities may receive Exchange Junior Subordinated Debentures in
liquidation of the Trust and because Distributions are otherwise limited to
interest payments on the Exchange Junior Subordinated Debentures, prospective
purchasers of Exchange Capital Securities are also making an investment decision
with regard to the Exchange Junior Subordinated Debentures and should carefully
review all the information regarding the Exchange Junior Subordinated Debentures
contained herein. See "Description of Exchange Securities -- Description of
Exchange Capital Securities -- Liquidation of the Trust and Distribution of
Exchange Junior Subordinated Debentures" and " -- Description of Exchange Junior
Subordinated Debentures."
RIGHTS UNDER THE EXCHANGE GUARANTEE
The Exchange Guarantee will guarantee to the holders of the Exchange
Capital Securities the following payments, to the extent not paid by or on
behalf of the Trust: (i) any accumulated and unpaid Distributions required to be
paid on the Exchange Capital Securities, to the extent that the Trust has funds
legally available therefor at such time; (ii) the applicable Redemption Price
with respect to the Exchange Capital Securities called for redemption, to the
extent that the Trust has funds legally available therefor at such time; and
(iii) upon a voluntary or involuntary termination, winding up or liquidation of
the Trust (unless the Exchange Junior Subordinated Debentures are distributed to
holders of the Exchange Capital Securities), the lesser of (a) the aggregate of
the Liquidation Amount and all accumulated and unpaid Distributions to the date
of payment, to the extent that the Trust has funds legally available therefor at
such time and (b) the amount of assets of the Trust remaining available for
distribution to holders of the Exchange Capital Securities at such time, after
the satisfaction of liabilities to creditors of the Trust as provided by
applicable law.
The holders of a majority in Liquidation Amount of the Exchange Capital
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Exchange Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Exchange Guarantee. Any holder of
the Exchange Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Exchange Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity. If the Corporation defaults on its
obligation to pay amounts payable under the Exchange Junior Subordinated
Debentures, the Trust will not have sufficient funds for the payment of
Distributions or amounts payable on redemption of the Exchange Capital
Securities or otherwise, and, in such event, holders of the Exchange Capital
Securities will not be able to rely upon the Exchange Guarantee for payment of
such amounts. Instead, if a Debenture Event of Default has occurred and is
continuing and such event is attributable to the failure of the Corporation to
pay the principal of (or premium, if any) or interest (including Additional Sums
(as defined below) and Compounded Interest (as defined below), if any) on the
Exchange Junior Subordinated Debentures when such payment is due and payable,
then a holder of Exchange Capital Securities may institute a legal proceeding
directly against the Corporation for enforcement of payment to such holder of
the principal of (or premium, if any) or interest (including Additional Sums and
Compounded Interest, if any) on such Exchange Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of the Exchange
Capital Securities of such holder (a "Direct Action"). Notwithstanding any
payments made to a holder of Exchange Capital Securities by the Corporation in
connection with a Direct Action, the Corporation shall remain obligated to pay
the principal
17
<PAGE>
of (and premium, if any) and interest (including Additional Sums and Compounded
Interest, if any) on the Exchange Junior Subordinated Debentures, and the rights
of the Corporation shall be subrogated to the rights of the holder of such
Exchange Capital Securities with respect to payments on the Exchange Capital
Securities to the extent of any payments made by the Corporation to such holder
in any Direct Action. Except as described herein, holders of Exchange Capital
Securities will not be able to exercise directly any other remedy available to
the holders of the Exchange Junior Subordinated Debentures or to assert directly
any other rights in respect of the Exchange Junior Subordinated Debentures. See
"Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debentures -- Enforcement of Certain Rights by Holders of Exchange
Capital Securities," " -- Debenture Events of Default" and "Description of
Exchange Securities -- Description of Exchange Guarantee." The Trust Agreement
provides that each holder of Exchange Capital Securities by acceptance thereof
agrees to the provisions of the Indenture and the Exchange Guarantee. The First
National Bank of Chicago will act as Guarantee Trustee under the Exchange
Guarantee and will hold the Exchange Guarantee for the benefit of the holders of
the Exchange Capital Securities. The First National Bank of Chicago also acts as
Property Trustee under the Trust Agreement and as Debenture Trustee under the
Indenture.
LIMITED VOTING RIGHTS
Holders of Exchange Capital Securities generally will have voting rights
relating only to the modification of the Exchange Capital Securities and the
exercise of the Trust's rights as holder of Exchange Junior Subordinated
Debentures. Holders of Exchange Capital Securities will not be entitled to vote
to appoint, remove or replace, or to increase or decrease the number of, the
Issuer Trustees, which voting rights are vested exclusively in the holder of the
Common Securities except upon the occurrence of certain events described herein.
The Property Trustee, the Administrative Trustees and the Corporation may amend
the Trust Agreement without the consent of holders of Exchange Capital
Securities to ensure that the Trust will be classified for United States federal
income tax purposes as a grantor trust. Holders of Exchange Capital Securities
will have no voting rights with respect to any matters submitted to a vote of
the Corporation's stockholders. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Voting Rights;
Amendment of the Trust Agreement" and " -- Removal of Issuer Trustees."
TRADING CHARACTERISTICS OF THE CAPITAL SECURITIES
The Capital Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying Exchange
Junior Subordinated Debentures. A holder who uses the accrual method of
accounting for tax purposes (and a cash method holder, if the Exchange Junior
Subordinated Debentures are deemed to have been issued with OID) and who
disposes of its Exchange Capital Securities between record dates for payments of
Distributions thereon will be required to include accrued but unpaid interest on
the Exchange Junior Subordinated Debentures through the date of disposition in
income as ordinary income (i.e., interest or, possibly, OID), and to add such
amount to its adjusted tax basis in its share of the underlying Exchange Junior
Subordinated Debentures deemed disposed of. If the selling price is less than
the holder's adjusted tax basis (which will include all accrued but unpaid
interest), a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes. See "Certain Federal Income Tax
Considerations -- Interest Income and Original Issue Discount" and " -- Sales of
Capital Securities."
CONSEQUENCES OF A FAILURE TO EXCHANGE ORIGINAL CAPITAL SECURITIES
The Original Capital Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not subject thereto, and
in each case in compliance with certain other conditions and restrictions.
Original Capital Securities that remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of
Original Capital Securities that remain outstanding will not be entitled to any
rights to have such Original Capital Securities registered under the Securities
Act or to any similar rights under the Registration Rights Agreement (subject to
certain limited exceptions). The Corporation and the Trust do not intend to
register under the Securities Act any Original Capital Securities that remain
outstanding after consummation of the Exchange Offer (subject to such limited
exceptions, if applicable). To the extent that Original Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Original Capital Securities could be adversely affected.
The Exchange Capital Securities and any Original Capital Securities that
remain outstanding after consummation of the Exchange Offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in
18
<PAGE>
outstanding Liquidation Amount thereof have taken certain actions or exercised
certain rights under the Trust Agreement. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Voting Rights;
Amendment of the Trust Agreement."
The Original Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed with
the Securities and Exchange Commission (the "Commission") by September 27, 1997
and declared effective by the Commission by October 27, 1997, the Distribution
rate borne by the Original Capital Securities commencing on September 27, 1997
or October 27, 1997, as the case may be, will increase by 0.25% until the
Exchange Offer is consummated. Upon consummation of the Exchange Offer, holders
of Original Capital Securities will not be entitled to any increase in the
Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See
"Description of Original Securities."
ABSENCE OF PUBLIC MARKET AND RESTRICTIONS ON RESALE
The Original Capital Securities were issued to, and the Corporation
believes such securities are currently owned by, a relatively small number of
beneficial owners. The Original Capital Securities have not been registered
under the Securities Act and will be subject to restrictions on transferability
if they are not exchanged for the Exchange Capital Securities. Although the
Exchange Capital Securities may be resold or otherwise transferred by the
holders (who are not affiliates of the Corporation or the Trust) without
compliance with the registration requirements under the Securities Act, they
will constitute a new issue of securities with no established trading market.
Capital Securities may be transferred by the holders thereof only in blocks
having a Liquidation Amount of not less than $100,000 (100 Capital Securities).
In addition, any market-making activity, should it develop, will be subject to
the limits imposed by the Securities Act and the Exchange Act and may be limited
during the Exchange Offer. Accordingly, no assurance can be given that an active
public or other market will develop for the Capital Securities, or as to the
liquidity of, or the trading market for, the Exchange Capital Securities. If an
active public market does not develop, the market price and liquidity of the
Exchange Capital Securities may be adversely affected.
If a public trading market develops for the Exchange Capital Securities,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the financial condition and results of
operations of the Corporation and the market for similar securities. Depending
on these and other factors, the Exchange Capital Securities may trade at a
discount.
Notwithstanding the registration of the Exchange Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Corporation or the Trust may publicly offer for sale or
resell the Exchange Capital Securities only in compliance with the provisions of
Rule 144 under the Securities Act.
Each broker-dealer that receives Exchange Capital Securities for its own
account in exchange for Original Capital Securities, where such Original Capital
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
See "Plan of Distribution."
EXCHANGE OFFER PROCEDURES
Subject to conditions set forth under "The Exchange Offer -- Conditions to
the Exchange Offer," issuance of the Exchange Capital Securities in exchange for
Original Capital Securities pursuant to the Exchange Offer will be made only
after a timely receipt by the Trust of a book-entry confirmation evidencing the
tender of such Original Capital Securities through ATOP or certificates
representing such Original Capital Securities, a properly completed and duly
executed Letter of Transmittal, with any required signature guarantees, and all
other required documents. See "The Exchange Offer -- Acceptance for Exchange and
Issuance of Exchange Capital Securities" and " -- Procedures for Tendering
Original Capital Securities." Therefore, holders of the Original Capital
Securities desiring to tender such Original Capital Securities in exchange for
Exchange Capital Securities should allow sufficient time to ensure timely
delivery. Neither the Corporation nor the Trust is under any duty to give
notification of defects or irregularities with respect to the tenders of
Original Capital Securities for exchange.
19
<PAGE>
BANKNORTH GROUP, INC.
The Corporation is a multi-bank holding company organized as a Delaware
corporation in 1989 as the result of the merger of two Vermont-based bank
holding companies. The Corporation is the sole owner of five Vermont banks,
namely, First Vermont Bank and Trust Company, Franklin Lamoille Bank, The Howard
Bank, N.A., Granite Savings Bank and Trust Company and Woodstock National Bank;
one Vermont limited charter bank, The Stratevest Group, N.A., a consolidated
trust subsidiary; one New Hampshire holding company, namely, North American Bank
Corporation and its sole subsidiary, Farmington National Bank; and one
Massachusetts bank, First Massachusetts Bank, N.A. The Corporation is also the
sole owner of North Group Realty, Inc., which owns real estate utilized in the
operation of the Corporation.
Acquisitions have been, and continue to be, an important part of the
expansion of the Corporation's business. On February 16, 1996, the Corporation
completed the purchase of thirteen banking offices from Shawmut Bank, N.A. A new
subsidiary, First Massachusetts Bank, N.A., with principal offices in Worcester,
Massachusetts, was organized to own and operate the acquired offices. In
addition, on October 14, 1994, the Corporation acquired North American Bank
Corporation and its sole subsidiary, Farmington National Bank. The acquisition,
which was accounted for as a purchase, was the first for the Corporation in the
state of New Hampshire.
The Corporation engages in discussions concerning potential acquisitions
from time to time, but currently has no material commitments, agreements or
understandings to acquire any additional financial institutions. The Corporation
expects to continue to take advantage of the consolidation of the financial
services industry by further developing its community bank franchise within its
own and contiguous market areas.
The Corporation's banking subsidiaries (the "Banks") offer a full range of
loan, deposit, investment products and trust services designed to meet the
financial needs of individual consumers, businesses and municipalities. Mortgage
banking services are also offered through Banknorth Mortgage Company, a
wholly-owned subsidiary of First Vermont Bank and Trust Company. These services
are currently offered throughout the states of Vermont, Massachusetts and New
Hampshire through a network of 58 banking offices.
The Corporation's network of community Banks is committed to providing
superior, efficient and personalized service to customers in chosen market
areas. To that end, operating efficiencies are achieved through the
centralization of all major support functions at the parent company level. The
Corporation's community banking management structure allows each Bank's local
management team and board of directors to focus on such Bank's customers and to
set its own loan and deposit prices in light of local competition and other
market factors.
The Corporation believes that local business and community focus, knowledge
of customers and their needs, the provision of a broad array of financial
services and products, together with decentralized decision making at the branch
and community level, enables the Corporation to effectively compete in its
chosen markets.
Based on total assets as of December 31, 1996, the Corporation is the
largest bank holding company headquartered in Vermont. At December 31, 1996, the
Corporation had total assets, deposits and shareholders' equity of $2.6 billion,
$2.1 billion and $206.7 million, respectively. In December 1996, the Corporation
and its subsidiaries employed 1,108 on a full-time equivalent basis.
BANKNORTH CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law upon the
filing of a certificate of trust with the Delaware Secretary of State. The Trust
exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of Trust Securities to acquire
the Junior Subordinated Debentures and (iii) engaging in only those other
activities necessary, advisable or incidental thereto. The Junior Subordinated
Debentures are and will be the sole assets of the Trust, and payments under the
Junior Subordinated Debentures will be the sole revenues of the Trust. All of
the Common Securities are owned by the Corporation. The Common Securities rank
pari passu, and payments will be made thereon pro rata, with the Capital
Securities, except that if there is an event of default under the Trust
Agreement resulting from a Debenture Event oF Default, the rights of the
Corporation as holder of the Common Securities to payments in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Capital Securities. See
"Description of Exchange Capital Securities -- Subordination of Common
Securities." The Corporation acquired Common Securities in an aggregate
Liquidation Amount equal to at least 3% of the total capital of the Trust. The
Trust has a term of approximately 31 years, but may be terminated earlier as
provided in the Trust Agreement. The Trust's
20
<PAGE>
business and affairs are conducted by the Issuer Trustees, each appointed by the
Corporation as holder of the Common Securities. The Issuer Trustees for the
Trust are The First National Bank of Chicago, as the Property Trustee, First
Chicago Delaware, Inc., as the Delaware Trustee and the three Administrative
Trustees who are officers or other employees of the Corporation. The First
National Bank of Chicago also acts as guarantee trustee under the Guarantee and
as debenture trustee under the Indenture. See "Description of Exchange
Securities -- Description of Exchange Guarantee" and " -- Description of
Exchange Junior Subordinated Debentures." The holder of the Common Securities
or, if an Event of Default under the Trust Agreement has occurred and is
continuing, the holders of a majority in Liquidation Amount of the Capital
Securities are entitled to appoint, remove or replace the Property Trustee
and/or the Delaware Trustee. In no event will the holders of the Exchange
Capital Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights will be vested exclusively in the
holder of the Common Securities. The duties and obligations of each Issuer
Trustee are governed by the Trust Agreement. The Corporation, as issuer of the
Junior Subordinated Debentures, has agreed to pay all fees, expenses, debts and
obligations (other than the payment of principal of, and premium, if any, and
interest on, the Trust Securities) related to the Trust and the offering of the
Capital Securities and has agreed to pay, directly or indirectly, all ongoing
costs, expenses and liabilities (other than the payment of principal of, and
premium, if any, and interest on, the Trust Securities) of the Trust.
USE OF PROCEEDS
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities. In consideration for issuing
the Exchange Capital Securities in exchange for Original Capital Securities as
described in this Prospectus, the Trust will receive Original Capital Securities
in like Liquidation Amount. The Original Capital Securities surrendered in
exchange for the Exchange Capital Securities will be retired and canceled.
The proceeds to the Trust (without giving effect to expenses of the
offering payable by the Corporation) from the offering of the Original Capital
Securities was $30,000,000. All of the proceeds from the sale of the Original
Capital Securities were invested by the Trust in the Original Junior
Subordinated Debentures. The Corporation intends that the net proceeds from the
sale of the Original Junior Subordinated Debentures will be used for general
corporate purposes.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
The following table sets forth the ratios of earnings to combined fixed
charges of the Corporation on a consolidated basis for the respective periods
indicated.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed Charges:
Excluding interest on deposits........................................... 3.09x 4.35x 3.00x 2.78x 3.38x 1.75x
Including interest on deposits........................................... 1.44 1.46 1.45 1.43 1.37 1.04
</TABLE>
For purposes of computing the ratios of earnings to combined fixed charges,
earnings represent net income (loss) before extraordinary items and cumulative
effect of changes in accounting principles plus applicable income taxes and
fixed charges. Fixed charges, excluding interest on deposits, include gross
interest expense (other than on deposits) and the proportion deemed
representative of the interest factor of rent expense, net of income from
subleases. Fixed charges, including gross interest on deposits, include all
interest expense and the proportion deemed representative of the interest factor
of rent expense, net of income from subleases.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust is treated as a subsidiary of
the Corporation and, accordingly, the accounts of the Trust are included in the
consolidated financial statements of the Corporation. The Capital Securities are
shown in the consolidated balance sheets of the Corporation as
"Corporation-Obligated Mandatorily Redeemable Capital Securities of Subsidiary
Trust Holding Solely Junior Subordinated Debentures of the Corporation."
21
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Corporation as of June 30, 1997. The following data should be read in
conjunction with the financial information and discussion thereof included in
documents incorporated by reference in this Prospectus. See "Incorporation of
Certain Documents by Reference."
<TABLE>
<CAPTION>
JUNE 30, 1997
<S> <C>
(IN THOUSANDS)
(UNAUDITED)
Long-Term Borrowings:
Federal Home Loan Bank Term Notes............................................................................ $ 9,722
Bank term loan............................................................................................... 11,700
Total Long-Term Borrowings................................................................................ 21,422
Corporation-Obligated Mandatorily Redeemable Capital
Securities of Subsidiary Trust Holding Solely Junior
Subordinated Debentures of the Corporation (1)............................................................ 30,000
Shareholders' equity:
Common stock, par value $1.00 per share, 20,000,000
shares authorized, 7,826,648 issued and outstanding....................................................... 7,827
Surplus...................................................................................................... 87,566
Retained earnings............................................................................................ 124,532
Unamortized employee restricted stock........................................................................ (1,047)
Net unrealized losses on securities available for sale,
net of tax................................................................................................ (2,012)
Total Shareholders' Equity.............................................................................. 216,866
Total Capitalization.................................................................................... $268,288
</TABLE>
(1) Reflects the Original Securities. As described herein, the sole assets of
the Trust, which is a subsidiary of the Corporation, are $30,928,000
aggregate principal amount of the Junior Subordinated Debentures (including
the amounts attributable to the issuance of the Common Securities of the
Trust), which will mature on May 1, 2027. The Corporation owns all of the
Common Securities issued by the Trust.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data below should be read in connection
with the financial information included in the Corporation's 1996 Annual Report
on Form 10-K for the year ended December 31, 1996 and its Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997. See "Available Information" and
"Incorporation of Certain Documents by Reference." Results for the six months
ended June 30, 1997 are not necessarily indicative of results that may be
expected for any other interim period or for the year as a whole.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
1997 1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
Statement of Income Data:
Interest income.............................. $ 105,294 $ 90,587 $ 190,008 $ 152,624 $ 124,403 $ 113,178
Interest expense............................. 46,882 38,575 81,140 67,980 49,599 44,670
Net interest income.......................... 58,412 52,012 108,868 84,644 74,804 68,508
Provision for loan losses.................... 3,686 2,600 5,600 4,375 3,210 4,700
Net interest income after
provision for loan losses.................. 54,726 49,412 103,268 80,269 71,594 63,808
Other income................................. 13,201 12,342 25,303 20,910 19,971 24,757
Other expenses............................... 47,015 44,663 91,200 70,589 69,928 71,869
Income before income taxes................... 20,912 17,091 37,371 30,590 21,637 16,696
Income tax expense........................... 6,773 5,547 11,981 8,217 5,734 5,235
Income before cumulative effect of
accounting changes......................... 14,139 11,544 25,390 22,373 15,903 11,461
Cumulative effect of accounting changes...... 0 0 0 0 138 (3,500)
Net income................................... $ 14,139 $ 11,544 $ 25,390 $ 22,373 $ 16,041 $ 7,961
Share Data:
Shares outstanding, period end............... 7,826,648 7,826,648 7,826,648 6,804,425 6,804,425 6,804,425
Weighted average shares outstanding.......... 7,826,648 7,579,517 7,703,758 6,804,425 6,804,425 6,804,425
Tangible book value, period end.............. $ 23.42 $ 19.89 $ 21.80 $ 22.25 $ 18.54 $ 19.40
Cash dividends declared...................... .58 .50 1.00 0.92 0.60 0.40
Income before cumulative effect of
accounting changes......................... 1.81 1.52 3.30 3.29 2.34 1.68
Net income................................... 1.81 1.52 3.30 3.29 2.36 1.17
Average Balance Sheet Data:
Loans........................................ $1,889,495 $1,642,670 $1,730,720 $1,329,188 $1,187,773 $1,091,851
Loans charged off, net of recoveries......... 3,243 1,676 5,825 3,717 4,744 5,436
Non-performing assets, period end............ 16,302 23,248 19,889 15,140 19,964 32,460
Total earning assets......................... 2,530,128 2,147,379 2,252,385 1,781,836 1,621,251 1,486,899
Total assets................................. 2,680,834 2,294,483 2,405,407 1,875,400 1,713,814 1,594,188
Total deposits............................... 2,072,532 1,913,164 1,989,006 1,453,878 1,306,749 1,278,284
Short-term borrowings........................ 341,640 126,567 159,672 164,010 145,616 130,176
Long-term debt............................... 23,740 49,861 43,951 94,107 113,364 41,312
Shareholders' equity......................... 209,303 183,621 191,279 145,950 131,008 128,309
Ratios:
Return on average assets before cumulative
effect of accounting changes............... 1.06% 1.01% 1.06% 1.19% 0.93% 0.72%
Net income................................... 1.06 1.01 1.06 1.19 0.94 0.50
Return on average shareholders'
equity before cumulative effect of
accounting changes......................... 13.62 12.64 13.27 15.33 12.14 8.93
Return on average shareholders' equity....... 13.62 12.64 13.27 15.33 12.24 6.20
Net interest margin.......................... 4.68 4.90 4.86 4.79 4.65 4.65
Efficiency ratio............................. 61.40 62.38 62.11 65.11 69.76 72.88
Expense ratio................................ 2.47 2.62 2.59 2.70 2.84 2.96
As a percent of risk-adjusted assets:
Total capital................................ 11.72 10.37 10.35 12.48 11.86 12.95
Tier 1 capital............................... 10.55 9.12 9.11 11.22 10.61 11.70
As a percent of total assets:
Tier 1 capital (regulatory leverage)......... 7.94 6.72 6.91 8.05 7.41 7.96
Tangible shareholders' equity, period
end, to tangible assets, period end........ 6.51 6.44 6.65 7.96 6.77 7.86
<CAPTION>
YEARS ENDED DECEMBER 31,
1992
<S> <C>
Statement of Income Data:
Interest income.............................. $ 123,671
Interest expense............................. 58,575
Net interest income.......................... 65,096
Provision for loan losses.................... 13,333
Net interest income after
provision for loan losses.................. 51,763
Other income................................. 23,687
Other expenses............................... 73,116
Income before income taxes................... 2,334
Income tax expense........................... 163
Income before cumulative effect of
accounting changes......................... 2,171
Cumulative effect of accounting changes...... 0
Net income................................... $ 2,171
Share Data:
Shares outstanding, period end............... 6,804,425
Weighted average shares outstanding.......... 6,804,425
Tangible book value, period end.............. $ 18.71
Cash dividends declared...................... 0
Income before cumulative effect of
accounting changes......................... 0.32
Net income................................... 0.32
Average Balance Sheet Data:
Loans........................................ $1,125,675
Loans charged off, net of recoveries......... 13,330
Non-performing assets, period end............ 50,847
Total earning assets......................... 1,474,584
Total assets................................. 1,591,908
Total deposits............................... 1,374,017
Short-term borrowings........................ 57,875
Long-term debt............................... 14,834
Shareholders' equity......................... 124,996
Ratios:
Return on average assets before cumulative
effect of accounting changes............... 0.14%
Net income................................... 0.14
Return on average shareholders'
equity before cumulative effect of
accounting changes......................... 1.74
Return on average shareholders' equity....... 1.74
Net interest margin.......................... 4.47
Efficiency ratio............................. 75.37
Expense ratio................................ 2.98
As a percent of risk-adjusted assets:
Total capital................................ 12.71
Tier 1 capital............................... 11.45
As a percent of total assets:
Tier 1 capital (regulatory leverage)......... 8.19
Tangible shareholders' equity, period
end, to tangible assets, period end........ 8.15
</TABLE>
23
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Original Capital Securities, the
Corporation and the Trust entered into the Registration Rights Agreement with
the Initial Purchaser, pursuant to which the Corporation and the Trust agreed to
file and use commercially reasonable efforts to cause to become effective with
the Commission a registration statement relating to the exchange of the New
Capital Securities for the Original Capital Securities. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Corporation and the Trust under the Registration Rights Agreement. The form
and terms of the Exchange Capital Securities are the same as the form and terms
of the Original Capital Securities except that the Exchange Capital Securities
have been registered under the Securities Act, will not be subject to certain
restrictions on transfer applicable to the Original Capital Securities and will
not provide for any increase in the Distribution rate thereon. In that regard,
the Original Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by
September 27, 1997 and declared effective by October 27, 1997, the Distribution
rate borne by the Original Capital Securities will increase by 0.25% per annum
until such registration statement is filed or declared effective, as the case
may be. In addition, the Original Capital Securities provide that, if the Trust
has not exchanged Exchange Capital Securities for all Original Capital
Securities validly tendered by the 45th day after the date on which the
registration statement is declared effective, the Distribution rate borne by the
Original Capital Securities will increase by 0.25% per annum for the period from
the occurrence of such event until the Exchange Offer has been consummated. Upon
consummation of the Exchange Offer, holders of Original Capital Securities will
not be entitled to any increase in the Distribution rate thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors -- Consequences of a Failure to
Exchange Original Capital Securities" and "Description of Original Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of Original Capital Securities in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Original Capital
Securities are registered on the books of the Trust or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose Original Capital Securities are held of record by DTC who desires
to deliver such Original Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, as soon as practicable after the Expiration
Date, the Corporation will exchange the Exchange Junior Subordinated Debentures
for the Original Junior Subordinated Debentures in a principal amount
corresponding to the Liquidation Amount of the Original Capital Securities
accepted for exchange and will execute the Exchange Guarantee in respect of the
Exchange Capital Securities exchanged for such Original Capital Securities. The
Exchange Guarantee and the Exchange Junior Subordinated Debentures have been
registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to and including $30,000,000 aggregate Liquidation Amount of
Exchange Capital Securities for a like aggregate Liquidation Amount of Original
Capital Securities properly tendered on or prior to the Expiration Date and not
properly withdrawn in accordance with the procedures described herein. The Trust
will issue, as soon as practicable after the Expiration Date, an aggregate
Liquidation Amount of up to and including $30,000,000 of Exchange Capital
Securities in exchange for a like Liquidation Amount of outstanding Original
Capital Securities tendered and accepted in connection with the Exchange Offer.
Holders may tender their Original Capital Securities in whole or in part in a
Liquidation Amount of not less than $100,000 (100 Capital Securities) or any
integral multiple of $1,000 Liquidation Amount (one Capital Security) in excess
thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount
of Original Capital Securities being tendered. As of the date of this
Prospectus, $30,000,000 aggregate Liquidation Amount of the Original Capital
Securities is outstanding.
Holders of Original Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Original Capital
Securities that are not tendered for or are tendered but not accepted in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Trust Agreement, but will not be entitled to any further
24
<PAGE>
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors -- Consequences of a Failure to
Exchange Original Capital Securities" and "Description of Original Securities."
If any tendered Original Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Original Capital
Securities will be returned, without expense, to the tendering holder thereof as
soon as practicable after the Expiration Date.
Holders who tender Original Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Original Capital Securities in connection with the
Exchange Offer. The Corporation will pay all charges and expenses, other than
certain applicable taxes described herein, in connection with the Exchange
Offer. See " -- Fees and Expenses."
NEITHER THE CORPORATION, THE BOARD OF DIRECTORS OF THE CORPORATION NOR ANY
ISSUER TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF ORIGINAL
CAPITAL SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY
PORTION OF THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN
ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. EACH
HOLDER OF ORIGINAL CAPITAL SECURITIES MUST DECIDE WHETHER TO TENDER PURSUANT TO
THE EXCHANGE OFFER AND, IF SO, THE LIQUIDATION AMOUNT OF ORIGINAL CAPITAL
SECURITIES TO TENDER BASED ON SUCH HOLDER'S OWN FINANCIAL POSITION AND
REQUIREMENTS.
EXPIRATION DATE, EXTENSIONS, AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on November
6, 1997 unless the Exchange Offer is extended by the Corporation or the Trust
(in which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Corporation and the Trust expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Original Capital Securities for
exchange, (ii) to terminate the Exchange Offer (whether or not any Original
Capital Securities have theretofore been accepted for exchange) if the Trust
determines, in its sole and absolute discretion that if any of the events or
conditions referred to under " -- Conditions to the Exchange Offer" have
occurred or exist or have not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Original Capital Securities tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Original Capital Securities to withdraw their tendered Original Capital
Securities as described under " -- Withdrawal Rights," and (iv) to waive any
condition or otherwise amend the terms of the Exchange Offer in any respect. If
the Exchange Offer is amended in a manner determined by the Corporation and the
Trust to constitute a material change, or if the Corporation and the Trust waive
a material condition of the Exchange Offer, the Corporation and the Trust will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the holders of the Original Capital Securities, and the
Corporation and the Trust will extend the Exchange Offer to the extent required
by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
Business Day (as defined herein) after the previously scheduled Expiration Date.
Without limiting the manner in which the Corporation and the Trust may choose to
make any public announcement and subject to applicable laws, the Corporation and
the Trust shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to an
appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, Exchange Capital
Securities for Original Capital Securities validly tendered and not withdrawn
promptly after the Expiration Date.
In all cases, delivery of Exchange Capital Securities in exchange for
Original Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(i) the book-entry confirmation described below under " -- Procedures for
Tendering Original Capital Securities -- Book-Entry Transfer"
25
<PAGE>
or (ii) certificates representing such Original Capital Securities, and the
Letter of Transmittal (or facsimile thereof) properly completed and duly
executed, with any required signature guarantees, and any other documents
required by the Letter of Transmittal.
Subject to the terms and conditions of the Exchange Offer, the Trust will
be deemed to have accepted for exchange, and thereby exchanged, Original Capital
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the Exchange Agent (any such oral notice to be
promptly confirmed in writing) of the Trust's acceptance of such Original
Capital Securities for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Trust for the purpose of receiving tenders of
book-entry confirmations or certificates representing Original Capital
Securities, Letters of Transmittal and related documents, and as agent for
tendering holders for the purpose of receiving book-entry confirmations or
certificates representing Original Capital Securities, Letters of Transmittal
and related documents and transmitting Exchange Capital Securities to validly
tendering holders. Such exchange will be made as soon as practicable after the
Expiration Date. If for any reason whatsoever, acceptance for exchange or the
exchange of any Original Capital Securities tendered pursuant to the Exchange
Offer is delayed (whether before or after the Trust's acceptance for exchange of
Original Capital Securities) or the Trust extends the Exchange Offer or is
unable to accept for exchange or exchange Original Capital Securities tendered
pursuant to the Exchange Offer, then, without prejudice to the Trust's rights
set forth herein, the Exchange Agent may, nevertheless, on behalf of the Trust
and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Original
Capital Securities and such Original Capital Securities may not be withdrawn
except to the extent tendering holders are entitled to withdrawal rights as
described under " -- Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Original Capital
Securities will represent, warrant and agree that it has full power and
authority to tender, exchange, sell, assign and transfer Original Capital
Securities, that the Trust will acquire good, marketable and unencumbered title
to the tendered Original Capital Securities, free and clear of all liens,
restrictions, charges and encumbrances, and the Original Capital Securities
tendered for exchange are not subject to any adverse claims or proxies. The
holder also will represent, warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Trust or the Exchange
Agent to be necessary or desirable to complete the exchange, sale, assignment,
and transfer of the Original Capital Securities tendered pursuant to the
Exchange Offer. Tendering holders of Original Capital Securities that use ATOP
will, by doing so, acknowledge that they are bound by the terms of the Letter of
Transmittal.
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
VALID TENDER. Except as set forth herein, in order for Original Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees and any other required documents, must be
received by the Exchange Agent at its address set forth under " -- Exchange
Agent," and (i) tendered Original Capital Securities must be received by the
Exchange Agent, or (ii) such Original Capital Securities must be tendered
pursuant to the procedures for book-entry transfer set forth herein and a
book-entry confirmation must be received by the Exchange Agent, in each case on
or prior to the Expiration Date, or (iii) the guaranteed delivery procedures set
forth herein must be complied with.
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the Liquidation Amount of Original Capital
Securities being tendered in the appropriate box on the Letter of Transmittal or
so indicate in an agent's message in lieu of the Letter of Transmittal. The
entire Liquidation Amount of Original Capital Securities delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF THE BOOK-ENTRY CONFIRMATIONS OR CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE
RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED
MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY
SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. For purposes of the Exchange Offer, the Exchange Agent
will establish an account with respect to the Original Capital Securities at DTC
within two Business Days after the date of this Prospectus. Any tendering
financial institution that is a participant in DTC's book-entry transfer
facility system must make a book-entry delivery of the Original Capital
Securities by causing DTC to transfer such Original Capital Securities into the
Exchange Agent's account at DTC in accordance with DTC's ATOP procedures for
transfers. Such holder of Original Capital Securities using ATOP should transmit
its acceptance to DTC on or prior to the Expiration Date (or comply with the
guaranteed delivery procedures set forth below). DTC will verify such
acceptance, execute a book-entry transfer of the tendered Original Capital
Securities into the
26
<PAGE>
Exchange Agent's account at DTC and then send to the Exchange Agent confirmation
of such book-entry transfer, including an agent's message confirming that DTC
has received an express acknowledgment from such holder that such holder has
received and agrees to be bound by the Letter of Transmittal and that the Trust
and the Corporation may enforce the Letter of Transmittal against such holder (a
"book-entry confirmation").
A beneficial owner of Original Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial owner wishes to participate in the Exchange Offer.
CERTIFICATES. If the tender is not made through ATOP, certificates
representing Original Capital Securities, as well as the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other required documents required by the Letter of
Transmittal, must be received by the Exchange Agent at its address set forth
under " -- Exchange Agent" on or prior to the Expiration Date in order for such
tender to be effective (or the guaranteed delivery procedure set forth herein
must be complied with).
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the Liquidation Amount of Original Capital
Securities being tendered in the appropriate box on the Letter of Transmittal.
The entire Liquidation Amount of Original Capital Securities delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
SIGNATURE GUARANTEES. Certificates for the Original Capital Securities need
not be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (i) a certificate for the Original Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (ii) such holder completes the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" in the Letter of Transmittal. In the case of
(i) or (ii) above, such certificates for Original Capital Securities must be
duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the Letter of Transmittal
guaranteed by a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein): (a) a bank; (b) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (c) a credit union;
(d) a national securities exchange, registered securities association or
clearing agency; or (e) a savings association that is a participant in a
Securities Transfer Association (each of the foregoing, an "Eligible
Institution"), unless surrendered on behalf of such Eligible Institution. See
Instruction 1 to the Letter of Transmittal.
DELIVERY. The method of delivery of the book-entry confirmation or
certificates representing tendered Original Capital Securities, the Letter of
Transmittal, and all other required documents is at the option and sole risk of
the tendering holder, and delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail, return
receipt requested, properly insured, or an overnight delivery service is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
Notwithstanding any other provision hereof, the delivery of Exchange
Capital Securities in exchange for Original Capital Securities tendered and
accepted for exchange pursuant to the Exchange Offer will in all cases be made
only after timely receipt by the Exchange Agent of (i) a book-entry confirmation
with respect to such Original Capital Securities or (ii) certificates
representing Original Capital Securities and a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees and any other documents required by the Letter of
Transmittal. Accordingly, the delivery of Exchange Capital Securities might not
be made to all tendering holders at the same time and will depend upon when
book-entry confirmations with respect to Original Capital Securities or
certificates representing Original Capital Securities and other required
documents are received by the Exchange Agent.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
GUARANTEED DELIVERY. If a holder desires to tender Original Capital
Securities pursuant to the Exchange Offer and the certificates for such Original
Capital Securities are not immediately available or time will not permit all
required documents to reach the Exchange Agent on or prior to the Expiration
Date, or the procedure for book-entry transfer cannot be completed on a timely
basis, such Original Capital Securities may nevertheless be tendered, provided
that all of the following guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
27
<PAGE>
(ii) a properly completed and duly executed notice to the Exchange Agent
guaranteeing delivery to the Exchange Agent of either certificates representing
Original Capital Securities or a book-entry confirmation in compliance with the
requirements set forth herein (a "Notice of Guaranteed Delivery"), substantially
in the form accompanying the Letter of Transmittal, is received by the Exchange
Agent, as provided herein, on or prior to Expiration Date; and
(iii) a book-entry confirmation or the certificates representing all
tendered Original Capital Securities, in proper form for transfer, together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other documents
required by the Letter of Transmittal, are, in any case, received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
The Trust's acceptance for exchange of Original Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and subject
to the conditions of the Exchange Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Original Capital Securities will be determined by the Corporation
and the Trust, in their sole discretion, whose determination shall be final and
binding on all parties. The Corporation and the Trust reserve the absolute
right, in their sole and absolute discretion, to reject any and all tenders
determined by them not to be in proper form or the acceptance of which, or
exchange for, may, in the opinion of counsel to the Corporation and the Trust,
be unlawful. The Corporation and the Trust also reserve the absolute right,
subject to applicable law, to waive any of the conditions of the Exchange Offer
as set forth under " -- Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Original Capital Securities of any particular
holder, whether or not similar conditions or irregularities are waived in the
case of other holders.
The interpretation by the Corporation and the Trust of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Original Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. None of the Corporation,
the Trust, any affiliates or assigns of the Corporation or the Trust, the
Exchange Agent or any other person shall be under any duty to give any
notification of any irregularities in tenders or incur any liability for failure
to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the
Corporation and the Trust, proper evidence satisfactory to the Corporation and
the Trust, in their sole discretion, of such person's authority to so act must
be submitted.
RESALES OF EXCHANGE CAPITAL SECURITIES
The Trust is making the Exchange Offer for the Exchange Capital Securities
in reliance on the position of the Staff of the Commission as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither the Corporation nor the Trust sought its own interpretive
letter and there can be no assurance that the Staff of the Commission would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Staff of the Commission, and subject to the two immediately following sentences,
the Corporation and the Trust believe that Exchange Capital Securities issued
pursuant to the Exchange Offer in exchange for Original Capital Securities may
be offered for resale, resold and otherwise transferred by a holder thereof
(other than a holder who is a broker-dealer) without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such Exchange Capital Securities are acquired in the ordinary
course of such holder's business and that such holder is not participating, and
has no arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of such Exchange Capital
Securities. However, any holder of Original Capital Securities who is an
"affiliate" of the Corporation or the Trust or who intends to participate in the
Exchange Offer for the purpose of distributing Exchange Capital Securities, or
any broker-dealer who purchased Original Capital Securities from the Trust for
resale pursuant to Rule 144A or any other available exemption under the
Securities Act, (i) will not be able to rely on the interpretations of the Staff
of the Commission set forth in the above-mentioned interpretive letters, (ii)
will not be
28
<PAGE>
permitted or entitled to tender such Original Capital Securities in the Exchange
Offer and (iii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Original Capital Securities unless such sale is made pursuant to an
exemption from such requirements. In addition, as described herein, if any
broker-dealer holds Original Capital Securities acquired for its own account as
a result of market-making or other trading activities and exchanges such New
Capital Securities for Original Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to exchange Original
Capital Securities for Exchange Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate" of the Corporation or
the Trust, (ii) any Exchange Capital Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such Exchange Capital Securities. In addition, the Corporation and the Trust
may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to the Corporation and the Trust
(or an agent thereof) in writing information as to the number of "beneficial
owners" (within the meaning of Rule 13d-3 under the Exchange Act) on behalf of
whom such holder holds the Original Capital Securities to be exchanged in the
Exchange Offer. Each broker-dealer that receives Exchange Capital Securities for
its own account pursuant to the Exchange Offer must acknowledge that it acquired
the Original Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Capital Securities. The Letter of
Transmittal states that, by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the position taken by the Staff of the
Commission in the interpretive letters referred to above, the Corporation and
the Trust believe that Participating Broker-Dealers who acquired Original
Capital Securities for their own accounts as a result of market-making
activities or other trading activities may fulfill their prospectus delivery
requirements with respect to the Exchange Capital Securities received upon
exchange of such Original Capital Securities (other than Original Capital
Securities which represent an unsold allotment from the initial sale of the
Original Capital Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Capital Securities. Accordingly, this Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer during the period referred to below in connection
with resales of Exchange Capital Securities received in exchange for Original
Capital Securities where such Original Capital Securities were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Corporation and the Trust have agreed that
this Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of such
Exchange Capital Securities for a period ending 90 days after the Expiration
Date (subject to extension under certain limited circumstances described herein)
or, if earlier, when all such Exchange Capital Securities have been disposed of
by such Participating Broker-Dealer. See "Plan of Distribution." However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of Exchange Capital Securities received in exchange for Original
Capital Securities pursuant to the Exchange Offer must notify the Corporation or
the Trust, or cause the Corporation or the Trust to be notified, on or prior to
the Expiration Date, that it is a Participating Broker-Dealer. Such notice may
be given in the space provided for that purpose in the Letter of Transmittal or
may be delivered to the Exchange Agent at its address set forth herein under
" -- Exchange Agent." Any Participating Broker-Dealer who is an "affiliate" of
the Corporation or the Trust may not rely on such interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Original
Capital Securities pursuant to the Exchange Offer will be deemed to have agreed,
by execution of the Letter of Transmittal, that, upon receipt of notice from the
Corporation or the Trust of the occurrence of any event or the discovery of (i)
any fact that makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or (ii) any fact that causes this
Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference herein, in the light of the
circumstances under which they were made, not misleading, or of the occurrence
of certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of Exchange Capital Securities
(or the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) pursuant to this Prospectus until the Corporation or the Trust has
amended or supplemented this Prospectus to correct such misstatement or omission
and has furnished copies of the amended or supplemented Prospectus to such
Participating Broker-Dealer, or the Corporation or the
29
<PAGE>
Trust has given notice that the sale of the Exchange Capital Securities (or the
Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the Corporation or the Trust
gives such notice to suspend the sale of the Exchange Capital Securities (or the
Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable), it shall extend the 90-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in connection
with the resale of Exchange Capital Securities by the number of days during the
period from and including the date of the giving of such notice to and including
the date when Participating Broker-Dealers shall have received copies of the
amended or supplemented Prospectus necessary to permit resales of the Exchange
Capital Securities or to and including the date on which the Corporation or the
Trust has given notice that the sale of Exchange Capital Securities (or the
Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Original Capital Securities
may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective, a written, telegraphic or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under " -- Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Original Capital Securities to be withdrawn,
the aggregate Liquidation Amount of Original Capital Securities to be withdrawn,
and (if certificates for such Original Capital Securities have been tendered)
the name of the registered holder of the Original Capital Securities as set
forth on the certificates if different from that of the person who tendered such
Original Capital Securities. If certificates representing Original Capital
Securities have been delivered or otherwise identified to the Exchange Agent,
then prior to the physical release of such certificates, the tendering holder
must submit the serial numbers shown on the particular certificates to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution, except in the case of Original Capital Securities tendered
for the account of an Eligible Institution. If Original Capital Securities have
been tendered pursuant to the procedures for book-entry transfer set forth in
" -- Procedures for Tendering Original Capital Securities -- Book-Entry
Transfer," the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of Original Capital
Securities. Withdrawals of tenders of Original Capital Securities may not be
rescinded. Original Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described above under " -- Procedures for Tendering Original Capital
Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its sole
discretion, whose determination shall be final and binding on all parties. None
of the Corporation, the Trust, any affiliates or assigns of the Corporation or
the Trust, the Exchange Agent or any other person shall be under any duty to
give any notification of any irregularities in any notice of withdrawal or incur
any liability for failure to give any such notification. Any Original Capital
Securities that have been tendered but are withdrawn will be returned to the
holder thereof promptly after withdrawal.
DISTRIBUTIONS ON THE EXCHANGE CAPITAL SECURITIES
Holders of Original Capital Securities whose Original Capital Securities
are accepted for exchange will not thereafter receive Distributions on such
Original Capital Securities and will be deemed to have waived the right to
receive any Distributions on such Original Capital Securities accumulated from
and including November 1, 1997. Accordingly, holders of Exchange Capital
Securities as of the close of business on April 15, 1998 will be entitled to
receive Distributions on May 1, 1998, accumulated from and including November 1,
1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Corporation and the Trust will not be
required to accept for exchange, or to exchange, any Original Capital Securities
for any Exchange Capital Securities, and, as described herein, may terminate the
Exchange Offer (whether or not any Original Capital Securities have theretofore
been accepted for exchange) or may waive any conditions to or amend the Exchange
Offer, if any of the following conditions have occurred or exists or have not
been satisfied:
(i) there shall occur a change in the current interpretation by the Staff
of the Commission that permits the Exchange Capital Securities issued pursuant
to the Exchange Offer in exchange for Original Capital Securities to be offered
for resale,
30
<PAGE>
resold and otherwise transferred by holders thereof (other than broker-dealers
and any such holder that is an "affiliate" of the Corporation or the Trust
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Capital Securities are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such
Exchange Capital Securities; or
(ii) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of Corporation or the Trust, would reasonably be
expected to impair its ability to proceed with the Exchange Offer; or
(iii) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration Statement,
or proceedings shall have been initiated or, to the knowledge of the Corporation
or the Trust, threatened for that purpose, or any governmental approval has not
been obtained, which approval the Corporation or the Trust shall, in its sole
discretion, deem necessary for the consummation of the Exchange Offer as
contemplated hereby; or
(iv) the Corporation shall have determined in good faith that there is a
reasonable likelihood that, or a material uncertainty exists as to whether,
consummation of the Exchange Offer would result in an adverse tax consequence to
the Trust or the Corporation.
If the Corporation or the Trust determine in its sole and absolute
discretion that any of the foregoing events or conditions has occurred or exists
or has not been satisfied, it may, subject to applicable law, terminate the
Exchange Offer (whether or not any Original Capital Securities have theretofore
been accepted for exchange) or may waive any such condition or otherwise amend
the terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Corporation or the
Trust will promptly disclose such waiver or amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Original
Capital Securities and will extend the Exchange Offer to the extent required by
Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
The First National Bank of Chicago has been appointed as Exchange Agent for
the Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMITTER: BY HAND OR OVERNIGHT
(Registered or Certified (Eligible Institutions Only) DELIVERY:
Mail Recommended) (212) 240-8938 The First National Bank of Chicago
The First National Bank of Chicago TO CONFIRM BY TELEPHONE: c/o First Chicago Trust Company of New York
c/o First Chicago Trust Company of New York (212) 240-8801 14 Wall Street
14 Wall Street 8th Floor, Window 2
8th Floor, Window 2 New York, New York 10005
New York, New York 10005
</TABLE>
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Corporation has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Corporation will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Original Capital Securities,
and in handling or tendering for their customers.
Holders who tender their Original Capital Securities for exchange will not
be obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Capital Securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the Original Capital
Securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of Original Capital Securities in connection with the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
31
<PAGE>
Neither the Corporation nor the Trust will make any payment to brokers,
dealers or others soliciting acceptances of the Exchange Offer.
The Registration Rights Agreement is governed by, and construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the Registration Rights Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Registration Rights Agreement, a form of which is
available upon request to the Corporation. See "Incorporation of Certain
Documents by Reference." In addition, the information set forth above concerning
certain interpretations of and positions taken by the Staff of the Commission is
not intended to constitute legal advice, and prospective investors should
consult their own legal advisors with respect to such matters.
DESCRIPTION OF EXCHANGE SECURITIES
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement, the Trust will issue the
Exchange Capital Securities. The Exchange Capital Securities will represent
beneficial interests in the Trust and the holders thereof will be entitled to a
preference over the Common Securities in certain circumstances with respect to
Distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Trust. See " -- Subordination of Common Securities." The
Trust Agreement has been qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). This summary of certain provisions of the
Exchange Capital Securities and the Trust Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Trust Agreement, including the definitions therein
of certain terms.
GENERAL. The Exchange Capital Securities will be limited to $30,000,000
aggregate Liquidation Amount at any one time outstanding. The Exchange Capital
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Original Capital Securities and the Common Securities except as
described under " -- Subordination of Common Securities." Legal title to the
Exchange Junior Subordinated Debentures will be held by the Property Trustee on
behalf of the Trust in trust for the benefit of the holders of the Exchange
Capital Securities and the related Common Securities. The Exchange Guarantee
will not guarantee payment of Distributions or amounts payable on redemption of
the Exchange Capital Securities or liquidation of the Trust when the Trust does
not have funds legally available for such payments. See " -- Description of
Exchange Guarantee."
DISTRIBUTIONS. Distributions on the Exchange Capital Securities will be
cumulative, will accumulate from November 1, 1997 and will be payable
semi-annually in arrears on May 1 and November 1 of each year, commencing May 1,
1998, at the annual rate of 10.52% of the Liquidation Amount to the holders of
the Exchange Capital Securities on the relevant record dates. The record dates
will be the 15th day of the month next preceding that in which the relevant
Distribution Date (as defined herein) falls. The amount of Distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which Distributions are payable on the
Exchange Capital Securities is not a Business Day (as defined below), payment of
the Distributions payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect to
any such delay), with the same force and effect as if made on such date (each
date on which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). A "Business Day" shall mean any day other than a Saturday
or a Sunday, or a day on which banking institutions in New York, New York or
Burlington, Vermont are authorized or required by law or executive order to
remain closed.
So long as no Debenture Event of Default has occurred and is continuing,
the Corporation will have the right under the Indenture to elect to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period shall end on
a date other than an Interest Payment Date or extend beyond the Stated Maturity
Date. Upon any such election, semi-annual Distributions on the Capital
Securities will be deferred by the Trust during such Extension Period.
Distributions to which holders of the Capital Securities are entitled during any
such Extension Period will accumulate additional Distributions thereon at the
rate per annum of 10.52% thereof, compounded semi-annually from the relevant
Distribution Date, but not exceeding the interest rate then accruing on the
Junior Subordinated Debentures. The term "Distributions," as used herein shall
include any such additional Distributions.
Prior to the termination of any Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods, to end
on a date
32
<PAGE>
other than an Interest Payment Date or to extend beyond the Stated Maturity
Date. Upon the termination of any such Extension Period and the payment of all
amounts then due on the applicable Interest Payment Date, the Corporation may
elect to begin a new Extension Period, subject to the above requirements. No
interest shall be due and payable during an Extension Period, except at the end
thereof. The Corporation must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of any Extension
Period (or an extension thereof) at least five Business Days prior to the
earlier of (i) the date the Distributions on the Exchange Capital Securities
would have been payable except for the election to begin such Extension Period
and (ii) the date the Trust is required to give notice to any securities
exchange or automated quotation system or to holders of the Exchange Capital
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record date. There is
no limitation on the number of times that the Corporation may elect to begin an
Extension Period. See " -- Description of Exchange Junior Subordinated
Debentures -- Option to Extend Interest Payment Date" and "Certain Federal
Income Tax Consequences -- Interest Income and Original Issue Discount."
During any Extension Period, the Corporation may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock,
(ii) make any payment of principal of or premium, if any, or interest on or
repay, repurchase or redeem any debt securities of the Corporation (including
Other Debentures) that rank pari passu with or junior in right of payment to the
Junior Subordinated Debentures or (iii) make any guarantee payments with respect
to any guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation (including Other Guarantees) if such guarantee ranks pari passu
with or junior in right of payment to the Junior Subordinated Debentures (other
than (a) dividends or distributions in shares of, or options, warrants or rights
to subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) as a result of a reclassification of the
Corporation's capital stock or the exchange or conversion of one class or series
of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (e) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
and (f) purchases of common stock of the Corporation related to the issuance of
common stock or rights under any of the Corporation's benefit or compensation
plans for its directors, officers or employees or any of the Corporation's
dividend reinvestment plans). The Corporation has no current intention to
exercise its option to defer payments of interest on the Junior Subordinated
Debentures thereby triggering a deferral of Distributions on the Trust
Securities.
The revenue of the Trust available for distribution to holders of the
Exchange Capital Securities will be limited to payments under the Exchange
Junior Subordinated Debentures in which the Trust will invest the proceeds from
the issuance and sale of the Trust Securities. See " -- Description of Exchange
Junior Subordinated Debentures -- General." If the Corporation does not make
interest payments on the Exchange Junior Subordinated Debentures, the Property
Trustee will not have funds available to pay Distributions on the Exchange
Capital Securities. The payment of Distributions on the Exchange Capital
Securities (if and to the extent the Trust has funds legally available for the
payment of such Distributions) will be guaranteed by the Corporation on a
limited basis as set forth herein under " -- Description of Exchange Guarantee."
REDEMPTION. Upon the repayment on the Stated Maturity Date or prepayment in
whole or in part prior to the Stated Maturity Date of the Junior Subordinated
Debentures (other than following the distribution of the Junior Subordinated
Debentures to the holders of the Trust Securities), the proceeds from such
repayment or prepayment shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days' prior written notice of a date of redemption (the
"Redemption Date"), at the applicable Redemption Price, which shall be equal to
(i) in the case of the repayment of the Junior Subordinated Debentures on the
Stated Maturity Date, the Maturity Redemption Price (equal to the principal of,
and accrued and unpaid interest on, the Junior Subordinated Debentures), (ii) in
the case of the optional prepayment of the Junior Subordinated Debentures before
the Initial Optional Redemption Date upon the occurrence and continuation of a
Special Event (as defined herein), the Special Event Redemption Price (equal to
the Special Event Prepayment Price in respect of the Junior Subordinated
Debentures) and (iii) in the case of the optional prepayment of the Junior
Subordinated Debentures on or after the Initial Optional Redemption Date, the
Optional Redemption Price (equal to the Optional Prepayment Price in respect of
the Junior Subordinated Debentures). See " -- Description of Exchange Junior
Subordinated Debentures -- Optional Prepayment" and " -- Special Event
Prepayment." If less than all of the Exchange Junior Subordinated Debentures are
to be prepaid prior to the Stated Maturity Date, then the proceeds of such
prepayment shall be allocated pro rata to the Trust Securities. If less than all
of the Capital Securities held in book-entry form are to be redeemed, such
Capital Securities will be redeemed in accordance with the procedures of DTC as
described under " -- Form, Denomination, Book-Entry Procedures and Transfer."
33
<PAGE>
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Junior Subordinated Debentures to be paid in accordance with their
terms and (ii) with respect to a distribution of Junior Subordinated Debentures
upon the liquidation of the Trust, Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
holder to whom such Junior Subordinated Debentures are distributed.
The Corporation will have the option to prepay the Exchange Junior
Subordinated Debentures, (i) in whole or in part, on or after the Initial
Optional Redemption Date, at the applicable Optional Prepayment Price and (ii)
in whole but not in part, at any time prior to the Initial Optional Redemption
Date, upon the occurrence of a Special Event, at the Special Event Prepayment
Price, in each case subject to the receipt of any required regulatory approvals.
See " -- Description of Exchange Junior Subordinated Debentures -- Optional
Prepayment" and " -- Special Event Prepayment."
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF EXCHANGE JUNIOR SUBORDINATED
DEBENTURES. The Corporation will have the right at any time to terminate the
Trust and, after satisfaction of liabilities to creditors of the Trust as
required by applicable law, to cause the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the Trust.
Such right is subject to the Corporation's having received (i) an opinion of
counsel to the effect that such distribution will not cause the holders of
Capital Securities to recognize gain or loss for federal income tax purposes and
(ii) any required regulatory approvals.
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Junior Subordinated Debentures to
the holders of the Trust Securities, if the Corporation, as Sponsor, has given
written direction to the Property Trustee to terminate the Trust (which
direction is optional and, except as described above, wholly within the
discretion of the Corporation, as Sponsor); (iii) redemption of all of the Trust
Securities as described under " -- Redemption"; (iv) expiration of the term of
the Trust; and (v) the entry of an order for the dissolution of the Trust by a
court of competent jurisdiction.
If a termination occurs as described in clause (i), (ii), (iv), or (v)
above, the Trust shall be liquidated by the Issuer Trustees as expeditiously as
the Issuer Trustees determine to be possible by distributing, after satisfaction
of liabilities to creditors of the Trust as provided by applicable law, to the
holders of the Trust Securities a Like Amount of the Junior Subordinated
Debentures, unless such distribution is determined by the Property Trustee not
to be practicable, in which event such holders will be entitled to receive out
of the assets of the Trust legally available for distribution to holders, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, an amount equal to the aggregate of the Liquidation Amount plus accumulated
and unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because the Trust has insufficient assets legally available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on the Trust Securities shall be paid on a pro rata basis, except
that if a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a priority over the Common Securities in respect of such
amounts. See " -- Subordination of Common Securities." If an early termination
occurs, the Junior Subordinated Debentures will be subject to optional
prepayment, in whole or in part, on or after the Initial Optional Redemption
Date, unless such termination relates to the circumstances described in clause
(v) above, in which case the Junior Subordinated Debentures will be subject to
optional prepayment, in whole, but not in part, on or after the Initial Optional
Redemption Date.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee
will receive, in respect of each Global Capital Security held by it, a
registered global certificate representing the Junior Subordinated Debentures to
be delivered upon such distribution and (iii) any certificates representing
Trust Securities not held by DTC or its nominee will be deemed to represent
Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of such Trust Securities, and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid Distributions on such
Trust Securities until such certificates are presented to the Administrative
Trustees or their agent for cancellation, whereupon the Corporation will issue
to such holder, and the Debenture Trustee will authenticate, a certificate
representing such Junior Subordinated Debentures.
There can be no assurance as to the market prices for the Exchange Capital
Securities or the Exchange Junior Subordinated Debentures that may be
distributed in exchange for the Trust Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Exchange Capital
Securities that an investor may purchase, or the Exchange Junior Subordinated
Debentures that the investor may receive on dissolution and liquidation of the
Trust, may trade at a discount to the price that the investor paid to purchase
such securities.
34
<PAGE>
REDEMPTION PROCEDURES. If applicable, Trust Securities shall be redeemed at
the applicable Redemption Price with the proceeds from the contemporaneous
repayment or prepayment of the Junior Subordinated Debentures. Any redemption of
Trust Securities shall be made and the applicable Redemption Price shall be
payable on the Redemption Date only to the extent that the Trust has funds
legally available for the payment of such applicable Redemption Price. See
" -- Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the Exchange
Capital Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, to the extent funds are legally available, with respect to the Exchange
Capital Securities held by DTC or its nominees, the Property Trustee will
deposit or cause the Paying Agent (as defined herein) to deposit irrevocably
with DTC funds sufficient to pay the applicable Redemption Price. See " -- Form,
Denomination, Book-Entry Procedures and Transfer." With respect to the Exchange
Capital Securities held in certificated form, the Property Trustee, to the
extent funds are legally available, will irrevocably deposit with the paying
agent for the Exchange Capital Securities funds sufficient to pay the applicable
Redemption Price and will give such paying agent irrevocable instructions and
authority to pay the applicable Redemption Price to the holders thereof upon
surrender of their certificates evidencing the Exchange Capital Securities. See
" -- Payment and Paying Agency." Notwithstanding the foregoing, Distributions
payable on or prior to the Redemption Date shall be payable to the holders of
such Exchange Capital Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of the Exchange Capital Securities called for redemption will cease,
except the right of the holders of such Exchange Capital Securities to receive
the applicable Redemption Price, but without interest on such Redemption Price,
and such Exchange Capital Securities will cease to be outstanding. In the event
that any Redemption Date of Exchange Capital Securities is not a Business Day,
then the applicable Redemption Price payable on such date will be paid on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), with the same force and effect as if made
on such date, except that, if such next succeeding Business Day falls in the
next calendar year, such payment shall be made on the immediately preceding
Business Day. In the event that payment of the applicable Redemption Price is
improperly withheld or refused and not paid either by the Trust or by the
Corporation pursuant to the Exchange Guarantee as described under
" -- Description of Exchange Guarantee" (i) Distributions on Exchange Capital
Securities will continue to accumulate at the then-applicable rate, from the
Redemption Date originally established by the Trust to the date such applicable
Redemption Price is actually paid and (ii) the actual payment date will be the
Redemption Date for purposes of calculating the applicable Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time and
from time to time purchase outstanding Exchange Capital Securities by tender, in
the open market or by private agreement.
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Corporation defaults in payment of the applicable
Prepayment Price on, or in the repayment of, the Junior Subordinated Debentures,
on and after the Redemption Date. Distributions will cease to accrue on the
Trust Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES. Payment of Distributions on, and the
Redemption Price of, the Trust Securities, as applicable, shall be made pro rata
based on the Liquidation Amount of the Trust Securities; provided, however, that
if on any Distribution Date or Redemption Date a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution on, or
applicable Redemption Price of, any of the Common Securities, and no other
payment on account of the redemption, liquidation or other acquisition of the
Common Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the outstanding Capital
Securities for all Distribution periods terminating on or prior thereto, or in
the case of payment of the applicable Redemption Price the full amount of such
Redemption Price, shall have been made or provided for, and all funds available
to the Property Trustee shall first be applied to the payment in full in cash of
all Distributions on, or Redemption Price of, the Capital Securities then due
and payable.
In the case of any Event of Default, the Corporation as holder of the
Common Securities will be deemed to have waived any right to act with respect to
such Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Capital Securities and not on behalf of the
Corporation as holder of the Common Securities, and only the holders of the
Capital Securities will have the right to direct the Property Trustee to act on
their behalf.
EVENTS OF DEFAULT; NOTICE. The occurrence of a Debenture Event of Default
(see " -- Description of Exchange Junior Subordinated Debentures -- Debenture
Events of Default") constitutes an "Event of Default" under the Trust Agreement.
35
<PAGE>
Within ten Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Exchange Capital
Securities, the Administrative Trustees and the Corporation, as Sponsor, unless
such Event of Default shall have been cured or waived. The Corporation, as
Sponsor, and the Administrative Trustees are required to file annually with the
Property Trustee a certificate as to whether or not they are in compliance with
all the conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described under
" -- Liquidation of the Trust and Distribution of Exchange Junior Subordinated
Debentures" and " -- Subordination of Common Securities."
REMOVAL OF ISSUER TRUSTEES. Unless a Debenture Event of Default shall have
occurred and be continuing, any Issuer Trustee may be removed at any time by the
holder of the Common Securities. If a Debenture Event of Default has occurred
and is continuing, the Property Trustee and the Delaware Trustee may be removed
at such time by the holders of a majority in Liquidation Amount of the
outstanding Capital Securities. In no event will the holders of the Exchange
Capital Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Corporation as the holder of the Common Securities. No resignation or removal of
an Issuer Trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor trustee in accordance with
the provisions of the Trust Agreement.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES. Any Person into which the
Property Trustee, the Delaware Trustee or any Administrative Trustee that is not
a natural person may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which such Issuer Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of such
Issuer Trustee, shall be the successor of such Issuer Trustee under the Trust
Agreement, provided such Person shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATION OR REPLACEMENTS OF THE TRUST. The
Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any corporation or other Person, except as
described below or as otherwise described under " -- Liquidation of the Trust
and Distribution of Exchange Junior Subordinated Debentures." The Trust may, at
the request of the Corporation, as Sponsor, with the consent of the
Administrative Trustees but without the consent of the holders of the Exchange
Capital Securities, merge with or into, consolidate, amalgamate, or be replaced
by or convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to a trust organized as such under the laws of any
State; provided, that (i) such successor entity either (a) expressly assumes all
of the obligations of the Trust with respect to the Trust Securities or (b)
substitutes for the Trust Securities other securities having substantially the
same terms as the Trust Securities (the "Successor Securities") so long as the
Successor Securities rank the same as the Trust Securities rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Corporation expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee with
respect to the Junior Subordinated Debentures, (iii) the Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on each national securities exchange or other organization on which
the Trust Securities are then listed or quoted, if any, (iv) if the Capital
Securities (including any Successor Securities) or Junior Subordinated
Debentures are rated by any nationally recognized statistical rating
organization prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, such transaction does not cause the Capital
Securities (including any Successor Securities) or Junior Subordinated
Debentures to be downgraded by any such nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect (other than any dilution of such holders'
interests in the new entity), (vi) such successor entity has a purpose identical
to that of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Corporation has received an
opinion from independent counsel to the Trust experienced in such matters to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect (other than any dilution of such holders'
interests in the new entity) and (b) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor
such successor entity will be required to register as an investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and (viii) the Corporation or any permitted successor or assignee owns
all of the common securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee and the Common Guarantee. Notwithstanding
the foregoing, the Trust shall not, except with the consent of holders of 100%
in Liquidation Amount of the Trust Securities, consolidate, amalgamate, merge
with or into, or be replaced by or convey,
36
<PAGE>
transfer or lease its properties and assets as an entirety or substantially as
an entirety to, any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or the successor entity not to be classified as a grantor trust for United
States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT. Except as provided below
and under " -- Mergers, Consolidations, Amalgamation or Replacements of the
Trust" and " -- Description of Exchange Guarantee -- Amendments and Assignment"
and as otherwise required by law and the Trust Agreement, the holders of the
Exchange Capital Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Corporation,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities (i) to cure any ambiguity, correct or supplement
any provisions in the Trust Agreement that may be inconsistent with any other
provision, or to make any other provisions with respect to matters or questions
arising under the Trust Agreement, which shall not be inconsistent with the
other provisions of the Trust Agreement, (ii) to modify, eliminate or add to any
provisions of the Trust Agreement to such extent as shall be necessary to ensure
that the Trust will be classified for United States federal income tax purposes
as a grantor trust at all times that any Trust Securities are outstanding or to
ensure that the Trust will not be required to register as an "investment
company" under the Investment Company Act or (iii) to modify, eliminate or add
any provisions of the Trust Agreement to such extent as shall be necessary to
enable the Trust or the Corporation to conduct an Exchange Offer in the manner
contemplated by the Registration Rights Agreement; provided, however, that in
each case, such action shall not adversely affect in any material respect the
interests of the holders of the Trust Securities. Any amendments of the Trust
Agreement pursuant to the foregoing shall become effective when notice thereof
is given to the holders of the Trust Securities. The Trust Agreement may be
amended by the Issuer Trustees and the Corporation (i) with the consent of
holders representing a majority (based upon Liquidation Amount) of the
outstanding Trust Securities and (ii) upon receipt by the Issuer Trustees of an
opinion of counsel experienced in such matters to the effect that such amendment
or the exercise of any power granted to the Issuer Trustees in accordance with
such amendment will not affect the Trust's status as a grantor trust for United
States federal income tax purposes or the Trust's exemption from status as an
"investment company" under the Investment Company Act, provided that, without
the consent of each holder of Trust Securities, the Trust Agreement may not be
amended to (i) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Trust Securities as of a specified date or (ii)
restrict the right of a holder of Trust Securities to institute suit for the
enforcement of any such payment on or after such date. The Exchange Capital
Securities and any Original Capital Securities that remain outstanding after
consummation of the Exchange Offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain actions or exercised
certain rights under the Trust Agreement.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
execute any trust or power conferred on the Debenture Trustee with respect to
the Junior Subordinated Debentures, (ii) waive certain past defaults under the
Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Junior Subordinated
Debentures or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
a majority in Liquidation Amount of all outstanding Capital Securities;
provided, however, that where a consent under the Indenture would require the
consent of each holder of Junior Subordinated Debentures affected thereby, no
such consent shall be given by the Property Trustee without the prior approval
of each holder of the Capital Securities. The Issuer Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Capital Securities except by subsequent vote of such holders. The Property
Trustee shall notify each holder of Capital Securities of any notice of default
with respect to the Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of such holders of the Capital Securities, prior to taking
any of the foregoing actions, the Issuer Trustees shall obtain an opinion of
counsel experienced in such matters to the effect that the Trust will not be
classified as an association taxable as a corporation for United States federal
income tax purposes on account of such action.
Any required approval of holders of Exchange Capital Securities may be
given at a meeting of such holders convened for such purpose or pursuant to
written consent. The Property Trustee will cause a notice of any meeting at
which holders of Exchange Capital Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of Exchange Capital Securities in the manner
set forth in the Trust Agreement.
37
<PAGE>
No vote or consent of the holders of Exchange Capital Securities will be
required for the Trust to redeem and cancel the Exchange Capital Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Exchange Capital Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Exchange Capital Securities that are owned by the Corporation or any
affiliate of the Corporation shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER. The Exchange
Capital Securities initially will be represented by one or more Exchange Capital
Securities in registered, global form (the "Global Capital Securities"). The
Global Capital Securities will be deposited upon issuance with the Property
Trustee as custodian for DTC, in New York, New York, and registered in the name
of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below.
In the event that Exchange Capital Securities are issued in certificated
form, the Exchange Capital Securities will be in blocks having a Liquidation
Amount of not less than $100,000 (100 Capital Securities) and may be transferred
or exchanged on in such blocks in the manner described herein.
Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Capital
Securities may not be exchanged for Exchange Capital Securities in certificated
form except in the limited circumstances described below. See " -- Exchange of
Book-Entry Capital Securities for Certificated Capital Securities."
Depositary Procedures. DTC has advised the Trust and the Corporation that
DTC is a limited-purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Indirect
access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital Securities,
DTC will credit the accounts of Participants designated by the Initial Purchaser
with portions of the Liquidation Amount of the Global Capital Securities and
(ii) ownership of such interests in the Global Capital Securities will be shown
on, and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants and
the Indirect Participants (with respect to other owners of beneficial interests
in the Global Capital Securities).
Investors in the Global Capital Securities may hold their interests therein
directly through DTC if they are Participants, or indirectly through
organizations that are Participants. All interests in a Global Capital Security
will be subject to the procedures and requirements of DTC. The laws of some
states require that certain persons take physical delivery in certificated form
of securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Capital Security to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having beneficial interests in a Global Capital Security to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Exchange Capital Securities, see
" -- Exchange of Book-Entry Capital Securities for Certificated Capital
Securities" and "Exchange of Certificated Capital Securities for Book-Entry
Capital Securities."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL CAPITAL
SECURITIES WILL NOT HAVE EXCHANGE CAPITAL SECURITIES REGISTERED IN THEIR NAMES,
WILL NOT RECEIVE PHYSICAL DELIVERY OF EXCHANGE CAPITAL SECURITIES IN
CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS
THEREOF UNDER THE TRUST AGREEMENT FOR ANY PURPOSE.
38
<PAGE>
Payments in respect of the Global Capital Security registered in the name
of DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms of
the Trust Agreement, the Property Trustee will treat the persons in whose names
the Exchange Capital Securities, including the Global Capital Securities, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Property
Trustee nor any agent thereof has or will have any responsibility or liability
for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Capital Securities, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Capital Securities or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised the Trust and the Corporation that its current practice, upon receipt of
any payment in respect of securities such as the Global Capital Securities, is
to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in
Liquidation Amount of beneficial interests in the relevant security as shown on
the records of DTC unless DTC has reason to believe it will not receive payment
on such payment date. Payments by the Participants and the Indirect Participants
to the beneficial owners of the Global Capital Securities will be governed by
standing instructions and customary practices and will be the responsibility of
the Participants or the Indirect Participants and will not be the responsibility
of DTC, the Property Trustee, the Trust or the Corporation. None of the Trust,
the Corporation or the Property Trustee will be liable for any delay by DTC or
any of its Participants in identifying the beneficial owners of the Global
Capital Securities, and the Trust or the Corporation and the Property Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee for all purposes.
Secondary market trading activity in interests in the Global Capital
Securities will settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its Participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will settle in same-day funds.
DTC has advised the Trust and the Corporation that it will take any action
permitted to be taken by a holder of Exchange Capital Securities (including,
without limitation, the presentation of Exchange Capital Securities for exchange
as described below) only at the direction of one or more Participants to whose
account with DTC interests in the Global Capital Securities are credited and
only in respect of such portion of the Liquidation Amount of the Exchange
Capital Securities as to which such Participant or Participants has or have
given such direction. However, if there is an Event of Default under the Trust
Agreement, DTC reserves the right to exchange the Global Capital Securities for
Exchange Capital Securities in certificated form and to distribute such Exchange
Capital Securities to its Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Trust and the Corporation believe to be
reliable, but neither the Trust nor the Corporation takes responsibility for the
accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Capital Securities among Participants in DTC, it is
under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. None of the Trust, the
Corporation or the Property Trustee will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing DTC's
operations.
Exchange of Book-Entry Capital Securities for Certificated Capital
Securities. A Global Capital Security is exchangeable for Exchange Capital
Securities in registered certificated form if (i) DTC (x) notifies the Trust
that it is unwilling or unable to continue as Depositary for the Global Capital
Security and the Trust thereupon fails to appoint a successor Depositary within
90 days or (y) has ceased to be a clearing agency registered under the Exchange
Act, and the Trust thereupon fails to appoint a successor Depositary within 90
days, (ii) the Corporation in its sole discretion elects to cause the issuance
of the Exchange Capital Securities in certificated form or (iii) there shall
have occurred and be continuing an Event of Default or any event which after
notice or lapse of time or both would be an Event of Default under the Trust
Agreement. In addition, beneficial interests in a Global Capital Security may be
exchanged by or on behalf of DTC for certificated Exchange Capital Securities
upon request by DTC, but only upon at least 20 days' prior written notice given
to the Property Trustee in accordance with DTC's customary procedures. In all
cases, certificated Exchange Capital Securities delivered in exchange for any
Global Capital Security or beneficial interests therein will be registered in
the names, and issued in any approved denominations, requested by or on behalf
of DTC (in accordance with its customary procedures), unless the Property
Trustee determines otherwise in compliance with applicable law.
39
<PAGE>
Exchange of Certificated Capital Securities for Book-Entry Capital
Securities. Other Capital Securities, which will be issued in certificated form,
may not be exchanged for beneficial interests in any Global Capital Security
unless such exchange occurs in connection with a transfer of such Other Capital
Securities and the transferor first delivers to the Property Trustee a written
certificate (in the form provided in the Trust Agreement) to the effect that
such transfer will comply with the appropriate transfer restrictions applicable
to such Capital Securities.
PAYMENT AND PAYING AGENCY. Payments in respect of the Global Capital
Securities shall be made to DTC which shall credit the relevant accounts at DTC
on the applicable Distribution Dates and payments in respect of the Exchange
Capital Securities that are not held by DTC shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
register. The paying agent (the "Paying Agent") shall initially be the Property
Trustee and any co-paying agent chosen by the Property Trustee and acceptable to
the Administrative Trustees and the Corporation. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' prior written notice to the
Property Trustee, the Administrative Trustees and the Corporation. In the event
that the Property Trustee shall no longer be the Paying Agent, the
Administrative Trustees shall appoint a successor (which shall be a bank or
trust company acceptable to the Administrative Trustees and the Corporation) to
act as Paying Agent.
RESTRICTIONS ON TRANSFER. The Exchange Capital Securities will be issued,
and may be transferred only in blocks having a Liquidation Amount of not less
than $100,000 (100 Capital Securities) and multiples of $1,000 Liquidation
Amount in excess thereof. Any attempted sale, transfer or other disposition of
Exchange Capital Securities in a block having an aggregate Liquidation Amount of
less than $100,000 shall be deemed to be void and of no legal effect whatsoever.
Any such transferee shall be deemed not to be the holder of such Exchange
Capital Securities for any purpose, including but not limited to the receipt of
Distributions on such Exchange Capital Securities, and such transferee shall be
deemed to have no interest whatsoever in such Exchange Capital Securities.
REGISTRAR AND TRANSFER AGENT. The Property Trustee will act as registrar
and transfer agent for the Exchange Capital Securities.
Registration of transfers of the Exchange Capital Securities will be
effected without charge by or on behalf of the Trust, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required to register or cause to be
registered the transfer of the Exchange Capital Securities after they have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE. The Property Trustee, other
than during the occurrence and continuance of an Event of Default, will
undertake to perform only such duties as are specifically set forth in the Trust
Agreement and, during the existence of an Event of Default, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Trust Agreement at the request of any holder of Trust Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. If no Event of Default has occurred and is continuing
and the Property Trustee is required to decide between alternative causes of
action, construe ambiguous provisions in the Trust Agreement or is unsure of the
application of any provision of the Trust Agreement, and the matter is not one
on which holders of the Exchange Capital Securities or the Common Securities are
entitled under the Trust Agreement to vote, then the Property Trustee shall take
such action as is directed by the Corporation and, if not so directed, shall
take such action as it deems advisable and in the best interests of the holders
of the Trust Securities and will have no liability except for its own bad faith,
negligence or willful misconduct.
MISCELLANEOUS. The Administrative Trustees are authorized and directed to
conduct the affairs of and to operate the Trust in such a way that (i) the Trust
will not be deemed to be an "investment company" required to be registered under
the Investment Company Act, (ii) the Trust will be classified as a grantor trust
for United States federal income tax purposes and (iii) the Junior Subordinated
Debentures will be treated as indebtedness of the Corporation for United States
federal income tax purposes. The Corporation and the Administrative Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Trust or the Trust Agreement, that the
Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Trust Securities.
The Trust Agreement provides that (i) holders of the Trust Securities have
no preemptive or similar rights to subscribe for any additional Trust
Securities, and (ii) the issuance of the Trust Securities are not subject to
preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
40
<PAGE>
DESCRIPTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Exchange Junior Subordinated Debentures are to be issued under an
Indenture, as amended and supplemented from time to time (as so amended and
supplemented, the "Indenture"), between the Corporation and The First National
Bank of Chicago, as Debenture Trustee (the "Debenture Trustee"). The Indenture
will be qualified under the Trust Indenture Act and, by its terms, will
incorporate certain provisions of the Trust Indenture Act. The Indenture will be
subject to and governed by the Trust Indenture Act. This summary of certain
terms and provisions of the Exchange Junior Subordinated Debentures and the
Indenture does not purport to be complete, and where reference is made to
particular provisions of the Indenture, such provisions, including the
definitions of certain terms, some of which are not otherwise defined herein,
are qualified in their entirety by reference to all of the provisions of the
Indenture and those terms made a part of the Indenture by the Trust Indenture
Act.
GENERAL. Concurrently with the issuance of the Original Capital Securities,
the Trust invested the proceeds thereof, together with the consideration paid by
the Corporation for the Common Securities, in Original Junior Subordinated
Debentures issued by the Corporation. Pursuant to the Exchange Offer, the
Corporation will exchange the Exchange Junior Subordinated Debentures for
Original Junior Subordinated Debentures accepted for exchange.
The Exchange Junior Subordinated Debentures will bear interest at the
annual rate of 10.52% of the principal amount thereof, payable semi-annually in
arrears on May 1 and November 1 of each year, commencing May 1, 1998 (each, an
"Interest Payment Date"), to the person in whose name each Exchange Junior
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the 15th day of the month next preceding that in which the
relevant Interest Payment Date falls. It is anticipated that, until the
liquidation, if any, of the Trust, each Junior Subordinated Debenture will be
held in the name of the Property Trustee in trust for the benefit of the holders
of the Trust Securities. The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on the Exchange Junior Subordinated
Debentures is not a Business Day, then payment of the interest payable on such
date will be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay), with the same force
and effect as if made on such date. Accrued interest that is not paid on the
applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at the rate per annum of 10.52%
thereof, compounded semi-annually. The term "interest," as used herein, shall
include semi-annual interest payments, interest on semi-annual interest payments
not paid on the applicable Interest Payment Date and Additional Sums (as defined
below), as applicable.
The Exchange Junior Subordinated Debentures will be issued pursuant to the
Indenture. The Exchange Junior Subordinated Debentures will mature on May 1,
2027.
The Exchange Junior Subordinated Debentures will be unsecured and will rank
pari passu with the Original Junior Subordinated Debentures and all Other
Debentures and subordinate and junior in right of payment to all Senior
Indebtedness to the extent and in the manner set forth in the Indenture. See
" -- Subordination."
Almost all of the operating assets of the Corporation and its consolidated
subsidiaries are owned by such subsidiaries. The Corporation is a legal entity
separate and distinct from the Banks and its other subsidiaries. Holders of
Junior Subordinated Debentures should look only to the Corporation for payments
on the Junior Subordinated Debentures. The principal sources of the
Corporation's income are dividends and interest from the Banks and its other
subsidiaries, and there are various limitations on the Banks to pay such
dividends, as discussed below. The Banks are also subject to certain
restrictions on the transfer of funds by each of such depository institutions to
the Corporation and certain other affiliates, in the form of loans, other
extensions of credit, investments or purchases of assets. Transfers by any Bank
to the Corporation or any single affiliate are generally limited in amount as to
the Corporation and as to each of such other affiliates to 10% of such Bank's
capital and surplus and transfers to all affiliates are limited in the aggregate
to 20% of such Bank's capital and surplus. Furthermore, such loans and
extensions of credit are subject to various collateral requirements.
Because the Corporation is a holding company, the Corporation's operations
are conducted by its subsidiaries, including the Banks, which are subject to
significant federal and state regulation. The Corporation's ability to receive
dividends and loans from its subsidiaries is restricted. As of December 31,
1996, the Banks were able to declare dividends to the Corporation in 1997,
without regulatory approval, of approximately $4.7 million. In addition, in
February 1996, as part of its plan to capitalize the Corporation's newly formed
subsidiary bank, First Massachusetts Bank, N.A., at a "well-capitalized" level
for regulatory capital purposes, the Corporation redeployed accumulated capital
of $45.6 million in the form of special dividends from certain of the Banks.
Because the amounts of the special dividends exceeded applicable regulatory
limitations, the Corporation obtained the necessary regulatory approvals to
effect such redeployment. Payment of the special dividends has
41
<PAGE>
significantly restricted the dividend paying capacity of the Banks. Accordingly,
payment of any dividends to the Corporation by certain of the Banks currently
requires regulatory approval on account of the aforementioned special dividends,
and payments of dividends by the Banks in the future will require their
generation of sufficient future earnings. Further, the right of the Corporation
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Capital Securities to benefit indirectly from such distribution)
is subject to the prior claims of creditors of such subsidiary (including
depositors in the case of the Banks), except to the extent that the Corporation
may itself be recognized as a creditor of that subsidiary. Accordingly, the
Junior Subordinated Debentures effectively will be subordinated to all existing
and future liabilities of the Corporation's subsidiaries (including deposit
liabilities of the Banks), and holders of Junior Subordinated Debentures should
look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures.
The Indenture does not limit the amount of secured or unsecured debt,
including Senior Indebtedness, that may be incurred by the Corporation or any of
its subsidiaries. At December 31, 1996, the Corporation had $13.0 million of
Senior Indebtedness outstanding, and the Corporation's subsidiaries had total
liabilities (excluding liabilities owed to the Corporation) of $2.4 billion. See
" -- Subordination." The Corporation expects from time to time that it will
incur additional indebtedness constituting Senior Indebtedness and that its
subsidiaries will incur additional liabilities.
FORM, REGISTRATION AND TRANSFER. If the Exchange Junior Subordinated
Debentures are distributed to the holders of the Trust Securities, the Exchange
Junior Subordinated Debentures may be represented by a global certificate
registered in the name of Cede & Co. as the nominee of DTC. The depositary
arrangements for such Exchange Junior Subordinated Debentures are expected to be
substantially similar to those in effect for the Exchange Capital Securities.
For a description of DTC and the terms of the depositary arrangements relating
to payments, transfers, voting rights, prepayments, notices and other matters,
see " -- Description of Exchange Capital Securities -- Form, Denomination,
Book-Entry Procedures and Transfer."
PAYMENT AND PAYING AGENTS. Payment of principal of (and premium, if any)
and interest on Exchange Junior Subordinated Debentures will be made at the
office of the Debenture Trustee in New York, New York or at the office of such
Paying Agent or Paying Agents as the Corporation may designate from time to
time, except that at the option of the Corporation payment of any interest may
be made, except in the case of Exchange Junior Subordinated Debentures in global
form, (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the register for Exchange Junior Subordinated Debentures
or (ii) by transfer to an account maintained by the Person entitled thereto as
specified in such register, provided that proper transfer instructions have been
received by the relevant record date. Payment of any interest on any Exchange
Junior Subordinated Debenture will be made to the Person in whose name such
Exchange Junior Subordinated Debenture is registered at the close of business on
the record date for such interest, except in the case of defaulted interest. The
Corporation may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent; provided, however, the Corporation will at all
times be required to maintain a Paying Agent in each place of payment for the
Exchange Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Exchange Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any) or
interest has become due and payable shall, at the request of the Corporation, be
repaid to the Corporation and the holder of such Exchange Junior Subordinated
Debenture shall thereafter look, as a general unsecured creditor, only to the
Corporation for payment thereof.
OPTION TO EXTEND INTEREST PAYMENT DATE. So long as no Debenture Event of
Default has occurred and is continuing, the Corporation will have the right
under the Indenture to defer the payment of interest on the Junior Subordinated
Debentures at any time and from time to time for a period not exceeding 10
consecutive semi-annual periods with respect to each Extension Period, provided
that no Extension Period shall end on a date other than an Interest Payment Date
or extend beyond the Stated Maturity Date. At the end of an Extension Period,
the Corporation must pay all interest then accrued and unpaid (together with
interest thereon at the annual rate of 10.52%, compounded semi-annually, to the
extent permitted by applicable law ("Compounded Interest")). During an Extension
Period, interest will continue to accrue and holders of Junior Subordinated
Debentures (or holders of the Trust Securities while Trust Securities are
outstanding) will be required to accrue such deferred interest income for United
States federal income tax purposes prior to the receipt of cash attributable to
such income. See "Certain Federal Income Tax Consequences -- Interest Income and
Original Issue Discount."
During any Extension Period, the Corporation may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock,
(ii) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Corporation (including
any Other Debentures) that rank pari passu with or junior in right of payment to
the Junior Subordinated
42
<PAGE>
Debentures or (iii) make any guarantee payments with respect to any guarantee by
the Corporation of the debt securities of any subsidiary of the Corporation
(including any Other Guarantees) if such guarantee ranks pari passu with or
junior in right of payment to the Junior Subordinated Debentures (other than (a)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) as a result of a reclassification of the
Corporation's capital stock or the exchange or conversion of one class or series
of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (e) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
and (f) purchases of common stock of the Corporation related to the issuance of
common stock or rights under any of the Corporation's benefit or compensation
plans for its directors, officers or employees or any of the Corporation's
dividend reinvestment plans).
Prior to the termination of any such Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods, end on
a date other than an Interest Payment Date or extend beyond the Stated Maturity
Date. Upon the termination of any such Extension Period and the payment of all
amounts then due on any Interest Payment Date, the Corporation may elect to
begin a new Extension Period, subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
The Corporation must give the Property Trustee, the Administrative Trustees and
the Debenture Trustee notice of its election of any Extension Period (or an
extension thereof) at least five Business Days prior to the earlier of (i) the
date the Distributions on the Trust Securities would have been payable except
for the election to begin or extend such Extension Period or (ii) the date the
Property Trustee is required to give notice to any securities exchange or to
holders of Exchange Capital Securities of the record date or the date such
Distributions are payable, but in any event not less than five Business Days
prior to such record date. The Debenture Trustee shall give notice of the
Corporation's election to begin or extend a new Extension Period to the holders
of the Exchange Capital Securities. There is no limitation on the number of
times that the Corporation may elect to begin an Extension Period.
OPTIONAL PREPAYMENT. The Exchange Junior Subordinated Debentures will be
prepayable, in whole or in part, at the option of the Corporation on or after
the Initial Optional Redemption Date, subject to the Corporation having received
any required regulatory approvals, at a prepayment price (the "Optional
Prepayment Price") equal to the percentage of the outstanding principal amount
of the Exchange Junior Subordinated Debentures specified below, plus, in each
case, accrued and unpaid interest thereon, including Compounded Interest, if
any, to the date of prepayment if prepaid during the 12-month period beginning
May 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2007 105.260%
2008...................................... 104.734%
2009...................................... 104.208%
2010...................................... 103.682%
2011...................................... 103.156%
2012...................................... 102.630%
2013...................................... 102.104%
2014...................................... 101.578%
2015...................................... 101.052%
2016...................................... 100.526%
2017 and thereafter....................... 100.000%
</TABLE>
SPECIAL EVENT PREPAYMENT. Prior to the Initial Optional Redemption Date, if
a Special Event shall occur and be continuing, the Corporation may, at its
option and subject to receipt of any required regulatory approvals, prepay the
Exchange Junior Subordinated Debentures in whole (but not in part) at any time
within 90 days of the occurrence of such Special Event, at a prepayment price
(the "Special Event Prepayment Price") equal to the Make-Whole Amount. The
"Make-Whole Amount" shall be equal to the greater of (x) 100% of the principal
amount thereof or (y) the sum, as determined by a Quotation Agent (as defined
herein), of the present values of the remaining scheduled payments of principal
and interest on the Exchange Junior Subordinated Debentures, discounted to the
prepayment date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in the case of each
of clauses (x) and (y), accrued and unpaid interest thereon (including
Compounded Interest and Additional Sums, if any) to the date of prepayment.
43
<PAGE>
A "Special Event" means a Tax Event or a Regulatory Capital Event, as the
case may be.
A "Tax Event" means the receipt by the Corporation and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after April 28, 1997, there
is more than an insubstantial risk that (i) the Trust is, or will be within 90
days of the date of such opinion, subject to United States federal income tax
with respect to income received or accrued on the Junior Subordinated
Debentures, (ii) the interest payable by the Corporation on the Junior
Subordinated Debentures is not, or within 90 days of the date of such opinion
will not be, deductible by the Corporation, in whole or in part, for United
States federal income tax purposes or (iii) the Trust is, or will be within 90
days of the date of such opinion, subject to more than a de minimis amount of
other taxes, duties or other governmental charges.
A "Regulatory Capital Event" means that the Corporation shall have received
an opinion of independent bank regulatory counsel experienced in such matters to
the effect that, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any rules, guidelines or policies of an applicable
regulatory authority for the Corporation or (b) any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which pronouncement or
decision is announced on or after April 28, 1997, the Capital Securities do not
constitute, or within 90 days of the date thereof, will not constitute, Tier 1
Capital (or its then-equivalent); provided, however, that the distribution of
the Junior Subordinated Debentures in connection with the liquidation of the
Trust by the Corporation shall not in and of itself constitute a Regulatory
Capital Event unless such liquidation shall have occurred in connection with a
Tax Event.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently published
statistical release designated "H.15 (519)" or any successor publication which
is published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Remaining Life (if no maturity is within
three months before or after the maturity corresponding to the Remaining Life,
yields for the two published maturities most closely corresponding to the
Remaining Life shall be determined, and the Adjusted Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis, rounding
to the nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such prepayment date, in each case
calculated on the third Business Day preceding the prepayment date, plus in each
case (a) 3.31% if such prepayment date occurs on or prior to May 1, 1998 and (b)
2.76% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the Remaining
Life of the Junior Subordinated Debentures that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining Life
of the Junior Subordinated Debentures, provided that if no United States
Treasury security has a maturity which is within a period from three months
before to three months after the Remaining Life, the two most closely
corresponding United States Treasury securities shall be used as the Comparable
Treasury Issue, and the Adjusted Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month, using such
securities.
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
the average of three Reference Treasury Dealer Quotations for such prepayment
date, after excluding the highest and lowest Reference Treasury Dealer
Quotations, or (ii) if the Debenture Trustee obtains fewer than five such
Reference Treasury Dealer Quotations, the average of all such Reference Treasury
Dealer Quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Corporation. "Reference Treasury Dealer" means a nationally-recognized U.S.
Government securities dealer in New York City selected by the Corporation.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined by
the Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue
44
<PAGE>
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such prepayment date.
"Remaining Life" means the term of the Junior Subordinated Debentures from
the prepayment date to the Stated Maturity Date.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the prepayment date to each holder of Exchange Junior
Subordinated Debentures to be prepaid at its registered address. Unless the
Corporation defaults in payment of the prepayment price, on and after the
prepayment date interest ceases to accrue on such Exchange Junior Subordinated
Debentures called for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Junior Subordinated Debentures such amounts as shall
be necessary in order that the amount of Distributions then due and payable by
the Trust on the outstanding Trust Securities shall not be reduced as a result
of any additional taxes, duties and other governmental charges to which the
Trust has become subject as a result of a Tax Event ("Additional Sums").
CERTAIN COVENANTS OF THE CORPORATION. The Corporation will also covenant
that it will not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Corporation's capital stock, (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including Other Debentures) that rank pari passu
with or junior in right of payment to the Junior Subordinated Debentures or
(iii) make any guarantee payments other than payments under the Guarantee with
respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation (including under Other Guarantees) if such
guarantee ranks pari passu or junior in right of payment to the Junior
Subordinated Debentures (other than (a) dividends or distributions in shares of,
or options, warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) as a result of a reclassification of the
Corporation's capital stock or the exchange or conversion of one class or series
of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (d) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (e) purchases of common stock related to the issuance of common stock or
rights under any of the Corporation's benefit or compensation plans for its
directors, officers or employees or any of the Corporation's dividend
reinvestment plans) if at such time (1) there shall have occurred any event of
which the Corporation has actual knowledge that (a) is, or with the giving of
notice or the lapse of time, or both, would be, a Debenture Event of Default and
(b) in respect of which the Corporation shall not have taken reasonable steps to
cure, (2) if such Junior Subordinated Debentures are held by the Trust, the
Corporation shall be in default with respect to its payment of any obligations
under the Guarantee or (3) the Corporation shall have given notice of its
election to exercise its right to commence an Extension Period as provided in
the Indenture and shall not have rescinded such notice, and such Extension
Period, or any extension thereof, shall have commenced and be continuing.
So long as the Trust Securities remain outstanding, the Corporation also
will covenant (i) to maintain 100% direct or indirect ownership of the Common
Securities, provided, however, that any permitted successor of the Corporation
under the Indenture may succeed to the Corporation's ownership of such Common
Securities, (ii) to use commercially reasonable efforts to cause the Trust (a)
to remain a business trust, except in connection with the distribution of Junior
Subordinated Debentures to the holders of Trust Securities in liquidation of the
Trust, the prepayment of all of the Trust Securities of the Trust, or certain
mergers, consolidations or amalgamations, each as permitted by the Trust
Agreement, and (b) to otherwise continue to be classified as a grantor trust for
United States federal income tax purposes (iii) to use its reasonable efforts to
cause each holder of Trust Securities to be treated as owning an undivided
beneficial interest in the Junior Subordinated Debentures and (iv) not to cause,
as sponsor of the Trust, or to permit, as Holder of the Common Securities, the
dissolution, winding-up or termination of the Trust, except as provided in the
Trust Agreement.
MODIFICATION OF INDENTURE. From time to time the Corporation and the
Debenture Trustee may, without the consent of the holders of Junior Subordinated
Debentures, amend, waive or supplement the Indenture for specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies or
enabling the Corporation and the Trust to conduct an Exchange Offer as
contemplated by the Registration Rights Agreement, provided that any such action
does not materially adversely affect the interest of the holders of Junior
Subordinated Debentures, and qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Corporation and the Debenture Trustee, with the consent of the
holders of a majority in principal amount of Junior Subordinated Debentures, to
45
<PAGE>
modify the Indenture in a manner affecting the rights of the holders of Junior
Subordinated Debentures; provided that no such modification may, without the
consent of the holders of each outstanding Junior Subordinated Debenture so
affected, (i) change the Stated Maturity Date, or reduce the principal amount of
the Junior Subordinated Debentures or reduce the amount payable on redemption
thereof or reduce the rate or extend the time of payment of interest thereon
except pursuant to the Corporation's right under the Indenture to defer the
payment of interest as provided therein (see " -- Option to Extend Interest
Payment Date") or make the principal of, or interest or premium on, the Junior
Subordinated Debentures payable in any coin or currency other than that provided
in the Junior Subordinated Debentures, or impair or affect the right of any
holder of Junior Subordinated Debentures to institute suit for the payment
thereof, or (ii) reduce the percentage of principal amount of Junior
Subordinated Debentures, the holders of which are required to consent to any
such modification of the Indenture.
DEBENTURE EVENTS OF DEFAULT. The Indenture provides that any one or more of
the following described events with respect to the Junior Subordinated
Debentures constitutes a "Debenture Event of Default" (whatever the reason for
such Debenture Event of Default and whether it shall be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
(i) failure for 30 days to pay any interest (including Compounded
Interest and Additional Sums, if any) or Liquidated Damages, if any, on the
Junior Subordinated Debentures or any Other Debentures, when due (subject
to the deferral of any due date in the case of an Extension Period in
respect of the Junior Subordinated Debentures or Other Debentures, as the
case may be); or
(ii) failure to pay any principal or premium, if any, on the Junior
Subordinated Debentures or any Other Debentures when due whether at
maturity, upon prepayment, by declaration of acceleration of maturity or
otherwise; or
(iii) failure to observe or perform any other covenants contained in
the Indenture for 90 days after written notice to the Corporation from the
Debenture Trustee or the holders of at least 25% in aggregate outstanding
principal amount of Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Corporation.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have, subject to certain exceptions, the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Debenture Trustee. The Debenture Trustee or the holders of not
less than 25% in aggregate outstanding principal amount of the Junior
Subordinated Debentures may declare the principal due and payable immediately
upon a Debenture Event of Default. The holders of a majority in aggregate
outstanding principal amount of the Junior Subordinated Debentures may annul
such declaration and waive the default if the default (other than the
non-payment of the principal of the Junior Subordinated Debentures which has
become due solely by such acceleration) has been cured and a sum sufficient to
pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures affected thereby may, on behalf of the holders of
all the Junior Subordinated Debentures, waive any past default, except a default
in the payment of principal of (or premium, if any) on or interest (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest (and premium, if any) and principal due otherwise than by acceleration
has been deposited with the Debenture Trustee), or a default in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each outstanding Junior Subordinated
Debenture.
The Indenture requires the annual filing by the Corporation with the
Debenture Trustee of a certificate as to the absence of certain defaults under
the Indenture.
The Indenture provides that the Debenture Trustee may withhold notice of a
Debenture Event of Default from the holders of the Exchange Junior Subordinated
Debentures if the Debenture Trustee considers it in the interest of such holders
to do so.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF EXCHANGE CAPITAL SECURITIES. If
a Debenture Event of Default shall have occurred and be continuing and shall be
attributable to the failure of the Corporation to pay the principal of (or
premium, if any) or interest (including Compounded Interest and Additional Sums,
if any) on the Exchange Junior Subordinated Debentures on the due date, a holder
of Exchange Capital Securities may institute a Direct Action. The Corporation
may not amend the Indenture to remove the foregoing right to bring a Direct
Action without the prior written consent of the holders of all of the Exchange
Capital Securities. Notwithstanding any payments made to a holder of Exchange
Capital Securities by the
46
<PAGE>
Corporation in connection with a Direct Action, the Corporation shall remain
obligated to pay the principal of (or premium, if any) or interest (including
Compounded Interest and Additional Sums, if any) on the Exchange Junior
Subordinated Debentures, and the Corporation shall be subrogated to the rights
of the holder of such Exchange Capital Securities with respect to payments on
the Exchange Capital Securities to the extent of any payments made by the
Corporation to such holder in any Direct Action.
The holders of the Exchange Capital Securities will not be able to exercise
directly any remedies other than those set forth in the preceding paragraph,
available to the holders of the Exchange Junior Subordinated Debentures unless
there shall have been an Event of Default under the Trust Agreement. See
" -- Description of Exchange Capital Securities -- Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS. The Indenture
provides that the Corporation shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties as an entirety or
substantially as an entirety to any Person, and no Person shall consolidate with
or merge into the Corporation or convey, transfer or lease its properties as an
entirety or substantially as an entirety to the Corporation, unless: (i) in case
the Corporation consolidates with or merges into another Person or conveys or
transfers its properties as an entirety or substantially as an entirety to any
Person, the successor Person is organized under the laws of the United States or
any state or the District of Columbia, and such successor Person expressly
assumes the Corporation's obligations on the Junior Subordinated Debentures;
(ii) immediately after giving effect thereto, no Debenture Event of Default, and
no event which, after notice or lapse of time or both, would become a Debenture
Event of Default, shall have occurred and be continuing; and (iii) certain other
conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Exchange Junior Subordinated Debentures protection in the event of a highly
leveraged or other transaction involving the Corporation that may adversely
affect holders of the Exchange Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE. The Indenture provides that when, among other
things, all Exchange Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation (i) have become due and payable or (ii)
will become due and payable at maturity or upon prepayment within one year, and
the Corporation deposits or causes to be deposited with the Debenture Trustee
funds, in trust, for the purpose and in an amount sufficient to pay and
discharge the entire indebtedness on the Exchange Junior Subordinated Debentures
not previously delivered to the Debenture Trustee for cancellation, for the
principal (and premium, if any) and interest to the date of the deposit or to
the Stated Maturity Date, as the case may be, then the Indenture will cease to
be of further effect (except as to the Corporation's obligations to pay all
other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Corporation
will be deemed to have satisfied and discharged the Indenture.
SUBORDINATION. In the Indenture, the Corporation has covenanted and agreed
that any Junior Subordinated Debentures issued thereunder will rank subordinate
and junior in right of payment to all Senior Indebtedness to the extent provided
in the Indenture. Upon any payment or distribution of assets to creditors upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of all Senior Indebtedness
will first be entitled to receive payment in full of such Senior Indebtedness
before the holders of Junior Subordinated Debentures will be entitled to receive
or retain any payment in respect thereof.
In the event of the acceleration of the maturity of the Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full of such
Senior Indebtedness before the holders of the Junior Subordinated Debentures
will be entitled to receive or retain any payment in respect of the Junior
Subordinated Debentures.
No payments on account of principal (or premium, if any) or interest in
respect of the Junior Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Indebtedness" shall mean: (i) every obligation of the Corporation for
money borrowed; (ii) every obligation of the Corporation evidenced by bonds,
debentures, notes or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or businesses; (iii)
every reimbursement obligation of the Corporation with respect to letters of
credit, banker's acceptances or similar facilities issued for the account of the
Corporation; (iv) every obligation of the Corporation issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
47
<PAGE>
payable or accrued liabilities arising in the ordinary course of business); (v)
every capital lease obligation of the Corporation; (vi) all indebtedness of the
Corporation, whether incurred on or prior to the date of the Indenture or
thereafter incurred, for claims in respect of derivative products, including
interest rate, foreign exchange rate and commodity forward contracts, options
and swaps and similar arrangements; and (vii) every obligation of the type
referred to in clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, the Corporation has
guaranteed or is responsible or liable for, directly or indirectly, as obligor
or otherwise.
"Indebtedness Ranking on a Parity with the Junior Subordinated Debentures"
shall mean (i) Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, to the extent such
indebtedness specifically by its terms ranks pari passu with and not prior to
the Junior Subordinated Debentures in the right of payment upon the happening of
the dissolution or winding-up or liquidation or reorganization of the
Corporation and (ii) all other debt securities, and guarantees in respect of
those debt securities, issued to any other trust, or a trustee of such trust,
partnership or other entity affiliated with the Corporation that is a financing
vehicle of the Corporation (a "financing entity") in connection with the
issuance by such financing entity of equity securities or other securities
guaranteed by the Corporation pursuant to an instrument that ranks pari passu
with or junior in right of payment to the Guarantee. The securing of any
Indebtedness otherwise constituting Indebtedness Ranking on a Parity with the
Junior Subordinated Debentures shall not be deemed to prevent such Indebtedness
from constituting Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures.
"Indebtedness Ranking Junior to the Junior Subordinated Debentures" shall
mean any Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, to the extent such
indebtedness by its terms ranks junior to and not pari passu with or prior to
the Junior Subordinated Debentures (and any other Indebtedness Ranking on a
Parity with the Junior Subordinated Debentures) in right of payment upon the
happening of the dissolution or winding up or liquidation or reorganization of
the Corporation. The securing of any Indebtedness otherwise constituting
Indebtedness Ranking Junior to the Junior Subordinated Debentures shall not be
deemed to prevent such Indebtedness from constituting Indebtedness Ranking
Junior to the Junior Subordinated Debentures.
"Senior Indebtedness" shall mean all Indebtedness, whether outstanding on
the date of execution of the Indenture or thereafter created, assumed or
incurred, except Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures or Indebtedness Ranking Junior to the Junior Subordinated Debentures,
and any deferrals, renewals or extensions of such Senior Indebtedness.
Almost all of the operating assets of the Corporation and its consolidated
subsidiaries are owned by such subsidiaries. The Corporation is a legal entity
separate and distinct from the Banks and its other subsidiaries. Holders of
Exchange Junior Subordinated Debentures should look only to the Corporation for
payments on the Exchange Junior Subordinated Debentures. The principal sources
of the Corporation's income are dividends and interest from the Banks and its
other subsidiaries, and there are various limitations on the Banks to pay such
dividends, as discussed below. The Banks are also subject to certain
restrictions on the transfer of funds by each of such depository institutions to
the Corporation and certain other affiliates, in the form of loans, other
extensions of credit, investments or purchases of assets. Transfers by any Bank
to the Corporation or any single affiliate are generally limited in amount as to
the Corporation and as to each of such other affiliates to 10% of such Bank's
capital and surplus and transfers to all affiliates are limited to an aggregate
of 20% of such Bank's capital and surplus. Furthermore, such loans and
extensions of credit are subject to various collateral requirements.
Because the Corporation is a holding company, the Corporation's operations
are conducted by its subsidiaries, including the Banks, which are subject to
significant federal and state regulation. As a result, the Corporation's ability
to receive dividends and loans from its subsidiaries is restricted. As of
December 31, 1996, the Banks were able to declare dividends to the Corporation
in 1997, without regulatory approval, of approximately $4.7 million. In
addition, in February 1996, as part of its plan to capitalize the Corporation's
newly formed subsidiary bank, First Massachusetts Bank, N.A., at a
"well-capitalized" level for regulatory capital purposes, the Corporation
redeployed accumulated capital of $45.6 million in the form of special dividends
from certain of the Banks. Because the amounts of the special dividends exceeded
applicable regulatory limitations, the Corporation obtained the necessary
regulatory approvals to effect such redeployment. Payment of the special
dividends has significantly restricted the dividend paying capacity of the
Banks. Accordingly, payment of any dividends to the Corporation by certain of
the Banks currently requires regulatory approval on account of the
aforementioned special dividends, and payments of dividends by the Banks in the
future will require their generation of sufficient future earnings. Further, the
right of the Corporation to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the Capital Securities to benefit indirectly
from such distribution) is subject to the prior claims of creditors of such
subsidiary (including depositors in the case of the Banks),
48
<PAGE>
except to the extent that the Corporation may itself be recognized as a creditor
of that subsidiary. Accordingly, the Exchange Junior Subordinated Debentures
effectively will be subordinated to all existing and future liabilities of the
Corporation's subsidiaries (including deposit liabilities of the Banks), and
holders of Exchange Junior Subordinated Debentures should look only to the
assets of the Corporation for payments on the Exchange Junior Subordinated
Debentures.
The Indenture does not limit the amount of secured or unsecured debt,
including Senior Indebtedness, that may be incurred by the Corporation or any of
its subsidiaries. At December 31, 1996, the Corporation had $13.0 million of
Senior Indebtedness outstanding, and the Corporation's subsidiaries had total
liabilities (excluding liabilities owed to the Corporation) of $2.4 billion. See
" -- Subordination." The Corporation expects from time to time that it will
incur additional indebtedness constituting Senior Indebtedness and that its
subsidiaries will incur additional liabilities.
RESTRICTIONS ON TRANSFER. The Exchange Junior Subordinated Debentures will
be issued, and may be transferred, only in blocks having an aggregate principal
amount of not less than $100,000 and multiples of $1,000 in excess thereof. Any
such transfer of Exchange Junior Subordinated Debentures in a block having an
aggregate principal amount of less than $100,000 shall be deemed to be void and
of no legal effect whatsoever. Any such transferee shall be deemed not to be the
holder of such Exchange Junior Subordinated Debentures for any purpose,
including but not limited to the receipt of payments on such Exchange Junior
Subordinated Debentures, and such transferee shall be deemed to have no interest
whatsoever in such Exchange Junior Subordinated Debentures.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE. Following the Exchange Offer
and the qualification of the Indenture under the Trust Indenture Act, the
Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to the foregoing, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Exchange Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
GOVERNING LAW. The Indenture and the Exchange Junior Subordinated
Debentures will be governed by and construed in accordance with the laws of the
State of New York.
DESCRIPTION OF EXCHANGE GUARANTEE
The Exchange Guarantee will be executed and delivered by the Corporation
concurrently with the issuance by the Trust of the Exchange Capital Securities
for the benefit of the holders from time to time of the Exchange Capital
Securities. The terms of the Exchange Guarantee are identical in all material
respects to the terms of the Original Guarantee. The First National Bank of
Chicago will act as Guarantee Trustee under the Exchange Guarantee. The Exchange
Guarantee has been qualified under the Trust Indenture Act. This summary of
certain provisions of the Exchange Guarantee does not purport to be complete and
is subject to, and qualified in its entirety by reference to, all of the
provisions of the Exchange Guarantee, including the definitions therein of
certain terms, and those made part of the Guarantee by the Trust Indenture Act.
The Guarantee Trustee will hold the Exchange Guarantee for the benefit of the
holders of the Exchange Capital Securities.
STATUS OF ORIGINAL GUARANTEE. If not all the Original Capital Securities
are exchanged for Exchange Capital Securities in the Exchange Offer, the
Original Guarantee will not terminate, but will continue to guarantee the
obligations of the Corporation for the benefit of the holders of the Original
Capital Securities. The Original Guarantee will terminate upon full payment of
the applicable Redemption Price of the Original Capital Securities, upon full
payment of the Liquidation Amount payable upon liquidation of the Trust or upon
distribution of Original Junior Subordinated Debentures to the holders of the
Original Capital Securities. The Original Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the Original Capital Securities must restore payment of any sums paid under
the Original Capital Securities or the Original Guarantee.
GENERAL. The Corporation will irrevocably agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined below) to the holders of the Exchange Capital Securities, as and when
due, regardless of any defense, right of set-off or counterclaim that the Trust
may have or assert other than the defense of payment. The following payments
with respect to the Exchange Capital Securities, to the extent not paid by or on
behalf of the Trust (the "Guarantee Payments"), will be subject to the Exchange
Guarantee: (i) any accumulated and unpaid Distributions required to be paid on
the Exchange Capital Securities, to the extent that the Trust has funds legally
available therefor at such time; (ii) the applicable Redemption Price with
respect to the Exchange Capital Securities called for redemption, to the extent
that the Trust has
49
<PAGE>
funds legally available therefor at such time; and (iii) upon a voluntary or
involuntary dissolution, winding-up or liquidation of the Trust (other than in
connection with the distribution of the Exchange Junior Subordinated Debentures
to holders of the Exchange Capital Securities or the redemption of all Exchange
Capital Securities), the lesser of (a) the Liquidation Distribution, to the
extent that the Trust has funds legally available therefor at the time, and (b)
the amount of assets of the Trust remaining available for distribution to
holders of Exchange Capital Securities after satisfaction of liabilities to
creditors of the Trust as required by applicable law. The Corporation's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Corporation to the holders of the Exchange Capital
Securities or by causing the Trust to pay such amounts to such holders.
The Corporation will, through the Exchange Guarantee, the Trust Agreement,
the Exchange Junior Subordinated Debentures and the Indenture, taken together,
fully, irrevocably and unconditionally guarantee all of the Trust's obligations
under the Exchange Capital Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Exchange Capital Securities. See "Relationship
Among the Exchange Capital Securities, the Exchange Junior Subordinated
Debentures and the Exchange Guarantee."
STATUS OF THE EXCHANGE GUARANTEE. The Exchange Guarantee will constitute an
unsecured obligation of the Corporation and will rank subordinate and junior in
right of payment to all Senior Indebtedness in the same manner as the Exchange
Junior Subordinated Debentures. See "Description of Exchange Junior Subordinated
Debentures -- Subordination." Because the Corporation is a holding company, the
right of the Corporation to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise is
subject to the prior claims of creditors of such subsidiary (including
depositors in the case of the Banks), except to the extent the Corporation may
itself be recognized as a creditor of such subsidiary. Accordingly, the
Corporation's obligations under the Exchange Guarantee effectively will be
subordinated to all existing and future liabilities (including deposit
liabilities of the Banks) of the Corporation's present and future subsidiaries.
Claimants should look only to the assets of the Corporation for payments under
the Exchange Guarantee. See "Description of Exchange Junior Subordinated
Debentures -- General." The Exchange Guarantee does not limit the amount of
secured or unsecured debt, including Senior Indebtedness, that may be incurred
by the Corporation or any of its subsidiaries. The Corporation expects from time
to time that it will incur additional indebtedness constituting Senior
Indebtedness and that its subsidiaries will incur additional liabilities.
The Exchange Guarantee will rank pari passu with all Other Guarantees
issued by the Corporation with respect to preferred beneficial interests (if
any) issued by Other Trusts. The Exchange Guarantee will constitute a guarantee
of payment and not of collection (i.e., the guaranteed party may institute a
legal proceeding directly against the Corporation to enforce its rights under
the Exchange Guarantee without first instituting a legal proceeding against any
other person or entity). The Exchange Guarantee will be held for the benefit of
the holders of the Exchange Capital Securities. The Exchange Guarantee will not
be discharged except by payment of the Guarantee Payments in full to the extent
not paid by the Trust or upon distribution to the holders of the Exchange
Capital Securities of the Exchange Junior Subordinated Debentures.
EVENTS OF DEFAULT. An event of default under the Exchange Guarantee will
occur upon the failure of the Corporation to perform any of its payment or other
obligations thereunder, provided, however, that except with respect to a default
in respect of any Guarantee Payment, the Corporation shall have received notice
of default and shall not have cured such default within 60 days after receipt of
such notice.
The holders of a majority in Liquidation Amount of the Exchange Capital
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Exchange Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Exchange Guarantee. If the
Guarantee Trustee fails to enforce the Exchange Guarantee, any holder of the
Exchange Capital Securities may institute a legal proceeding directly against
the Corporation to enforce its rights under the Exchange Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity.
The Corporation, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Exchange Guarantee.
AMENDMENTS AND ASSIGNMENT. Except with respect to any changes that do not
materially adversely affect the rights of holders of the Exchange Capital
Securities (in which case no consent will be required), the Exchange Guarantee
may not be amended without the prior approval of the holders of a majority of
the Liquidation Amount of such outstanding Exchange
50
<PAGE>
Capital Securities. The manner of obtaining any such approval will be as set
forth under " -- Description of Exchange Capital Securities -- Voting Rights;
Amendment of the Trust Agreement." All guarantees and agreements contained in
the Exchange Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Corporation and shall inure to the benefit of the
holders of the Exchange Capital Securities then outstanding.
TERMINATION OF THE EXCHANGE GUARANTEE. The Exchange Guarantee will
terminate and be of no further force and effect upon full payment of the
applicable Redemption Price of the Exchange Capital Securities, upon full
payment of the Liquidation Amount payable upon liquidation of the Trust or upon
distribution of Exchange Junior Subordinated Debentures to the holders of the
Exchange Capital Securities. The Exchange Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the Exchange Capital Securities must restore payment of any sums paid under
the Exchange Capital Securities or the Exchange Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE. The Guarantee Trustee, other
than during the occurrence and continuance of a default by the Corporation in
performance of the Exchange Guarantee, will undertake to perform only such
duties as are specifically set forth in the Exchange Guarantee and, in case a
default with respect to the Exchange Guarantee has occurred, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee will be under no obligation to exercise any of the powers vested in it
by the Exchange Guarantee at the request of any holder of the Exchange Capital
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby.
GOVERNING LAW. The Exchange Guarantee will be governed by and construed in
accordance with the laws of the State of New York.
DESCRIPTION OF ORIGINAL SECURITIES
The terms of the Original Securities are identical in all materials
respects to the Exchange Securities, except that (i) the Original Securities
have not been registered under the Securities Act, are subject to certain
restrictions on transfer and are entitled to certain rights under the applicable
Registration Rights Agreement (which rights will terminate upon consummation of
the Exchange Offer, except under limited circumstances), (ii) the Exchange
Capital Securities will not provide for any increase in the Distribution rate
thereon and (iii) the Exchange Junior Subordinated Debentures will not provide
for any liquidated damages thereon. The Original Securities provide that, if a
registration statement relating to the Exchange Offer has not been filed by
September 27, 1997 and been declared effective by October 27, 1997, then
liquidated damages will accrue at the rate of 0.25% per annum on the principal
amount of the Original Junior Subordinated Debentures and Distributions will
accrue at the rate of 0.25% per annum on the Liquidation Amount of the Original
Capital Securities, for the period from the occurrence of such event until such
time as such registration statement has been filed or declared effective, as the
case may be. In addition, the Original Capital Securities provide that, if the
Trust has not exchanged Exchange Capital Securities for all Original Capital
Securities validly tendered by the 45th day after the date on which the
registration statement is declared effective, the Distribution rate borne by the
Original Capital Securities will increase by .25% per annum for the period from
the occurrence of such event until such time as the Exchange Offer has been
consummated. The Exchange Securities are not, and upon consummation of the
Exchange Offer the Original Securities will not be, entitled to any such
additional interest or Distributions. Accordingly, holders of Original Capital
Securities should review the information set forth under "Risk
Factors -- Consequences of a Failure to Exchange Original Capital Securities"
and "Description of Exchange Securities."
51
<PAGE>
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE EXCHANGE
JUNIOR SUBORDINATED DEBENTURES AND THE EXCHANGE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Exchange Capital
Securities (to the extent the Trust has funds legally available for the payment
of such Distributions) will be irrevocably guaranteed by the Corporation as and
to the extent set forth under "Description of Exchange Securities -- Description
of Exchange Guarantee." Taken together, the Corporation's obligations under the
Exchange Junior Subordinated Debentures, the Indenture, the Trust Agreement and
the Exchange Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of Distributions and other amounts due on
the Exchange Capital Securities. No single document standing alone or operating
in conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Exchange Capital Securities. If and to the extent
that the Corporation does not make the required payments on the Exchange Junior
Subordinated Debentures, the Trust will not have sufficient funds to make the
related payments, including Distributions, on the Exchange Capital Securities.
The Exchange Guarantee will not cover any such payment when the Trust does not
have sufficient funds legally available therefor. In such event, the remedy of a
holder of Exchange Capital Securities is to institute a Direct Action. The
obligations of the Corporation under the Exchange Guarantee will be subordinate
and junior in right of payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Exchange Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Exchange Capital Securities,
primarily because: (i) the aggregate principal amount or Prepayment Price of the
Junior Subordinated Debentures will be equal to the sum of the aggregate
Liquidation Amount or Redemption Price, as applicable, of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the Junior
Subordinated Debentures will match the Distribution rate and Distribution and
other payment rates for the Trust Securities; (iii) the Corporation, as Sponsor,
shall pay for all and any costs, expenses and liabilities of the Trust except
the Trust's obligations to holders of Trust Securities; and (iv) the Trust
Agreement further provides that the Trust is not authorized to engage in any
activity that is not consistent with the limited purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF EXCHANGE CAPITAL SECURITIES
A holder of any Exchange Capital Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the Exchange
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Trust Agreement. However, in
the event of payment defaults under, or acceleration of, Senior Indebtedness,
the subordination provisions of the Indenture provide that no payments may be
made in respect of the Exchange Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on Exchange Junior
Subordinated Debentures would constitute an Event of Default under the Trust
Agreement.
LIMITED PURPOSE OF THE TRUST
The Exchange Capital Securities will represent beneficial interests in the
Trust, and the Trust exists for the sole purpose of issuing and selling the
Trust Securities, using the proceeds from the sale of the Trust Securities to
acquire the Exchange Junior Subordinated Debentures, exchanging the Exchange
Capital Securities and the Original Junior Subordinated Debentures in the
Exchange Offer, and engaging in only those other activities necessary, advisable
or incidental thereto.
RIGHTS UPON TERMINATION
Unless the Exchange Junior Subordinated Debentures are distributed to
holders of the Exchange Capital Securities, upon any voluntary or involuntary
termination, winding-up or liquidation of the Trust, after satisfaction of the
liabilities of creditors of the Trust as required by applicable law, the holders
of the Exchange Capital Securities will be entitled to receive, out of assets
held by the Trust, the Liquidation Distribution in cash. See "Description of
Exchange Securities -- Description of Exchange Capital Securities -- Liquidation
of the Trust and Distribution of Exchange Junior Subordinated Debentures."
52
<PAGE>
Upon any voluntary or involuntary liquidation or bankruptcy of the Corporation,
the Property Trustee, as holder of the Exchange Junior Subordinated Debentures,
would be a subordinated creditor of the Corporation, subordinated in right of
payment to all Senior Indebtedness as set forth in the Indenture, but entitled
to receive payment in full of principal (and premium, if any) and interest,
before any stockholders of the Corporation receive payments or distributions.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences associated with the exchange of Original Capital
Securities for Exchange Capital Securities and with the ownership and
disposition of Capital Securities held as capital assets by a holder who
purchased Original Capital Securities upon initial issuance. It does not purport
to deal with all aspects of U.S. federal income taxation that might be relevant
to particular holders in light of their personal investment circumstances or
status, nor does it discuss the U.S. federal income tax consequences to certain
types of holders subject to special treatment under the U.S. federal income tax
laws, such as banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors, United States Alien Holders (as defined herein) engaged in
a U.S. trade or business or persons that will hold the Capital Securities as a
position in a "straddle," as part of a "synthetic security" or "hedge," as part
of a "conversion transaction" or other integrated investment, or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of Capital
Securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the Capital Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations thereunder and the administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis. Brown & Wood LLP ("Tax Counsel") has
reviewed this summary and is of the opinion that, to the extent that it
constitutes matters of law or purports to describe certain provisions of the
U.S. federal income tax laws, it is a correct summary in all material respects
of the matters discussed herein.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Original Capital Securities for Exchange Capital Securities
should not be a taxable event to holders for United States federal income tax
purposes. The exchange of Original Capital Securities for Exchange Capital
Securities pursuant to the Exchange Offer should not be treated as an "exchange"
for United States federal income tax purposes because the Exchange Capital
Securities should not be considered to differ materially in kind or extent from
the Original Capital Securities and because the exchange will occur by operation
of the terms of the Original Capital Securities. Accordingly, the Exchange
Capital Securities should have the same issue price as the Original Capital
Securities, and a holder should have the same adjusted tax basis and holding
period in the Exchange Capital Securities immediately after the exchange as the
holder had in the Original Capital Securities immediately before the exchange.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Corporation intends to take the position that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Corporation. The Corporation, the Trust and the holders of
the Capital Securities (by acceptance of a beneficial interest in a Capital
Security) will agree to treat the Junior Subordinated Debentures as indebtedness
of the Corporation and the Capital Securities as evidence of a beneficial
ownership interest in the Junior Subordinated Debentures for all United States
federal income tax purposes. No assurance can be given, however, that such
position will not be challenged by the Internal Revenue Service (the "IRS") or,
if challenged, that such a challenge will not be successful. The remainder of
this discussion assumes that the Junior Subordinated Debentures will be
classified as indebtedness of the Corporation for United States federal income
tax purposes.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Capital Securities, Tax Counsel is
of the opinion generally to the effect that, under then-current law and assuming
full compliance with the terms of the Trust Agreement and the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Trust will be classified for United States federal income
tax purposes as a grantor trust and not as an association taxable as a
corporation. Accordingly, for United States federal income tax purposes, each
holder of Capital Securities generally will be considered the owner of an
53
<PAGE>
undivided interest in the Junior Subordinated Debentures, and each holder will
be required to include in its gross income any interest (or OID accrued) with
respect to its allocable share of those Junior Subordinated Debentures.
An opinion of Tax Counsel is not binding on the IRS or the courts. No
rulings have been or are expected to be sought from the IRS with respect to any
of the transactions described herein and no assurance can be given that the IRS
will not take contrary positions. Moreover, no assurance can be given that the
opinion expressed herein will not be challenged by the IRS or, if challenged,
that such a challenge would not be successful.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Treasury Regulations")
applicable to debt instruments issued on or after August 13, 1996, a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. The Corporation
believes that the likelihood of its exercising its option to defer payments of
interest is "remote" since exercising that option would, among other things,
prevent the Corporation from declaring dividends on any class of its equity
securities. Accordingly, the Corporation intends to take the position that the
Junior Subordinated Debentures will not be considered to be issued with OID and,
accordingly, stated interest on the Junior Subordinated Debentures generally
will be taxable to a holder as ordinary income at the time it is paid or accrued
in accordance with such holder's method of tax accounting.
Under the Treasury Regulations, if the Corporation were to exercise its
option to defer payments of interest, the Junior Subordinated Debentures would
at that time be treated as issued with OID, and all stated interest on the
Junior Subordinated Debentures would thereafter be treated as OID as long as the
Junior Subordinated Debentures remain outstanding. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures would thereafter be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income. Consequently, a
holder of Capital Securities would be required to include in gross income OID
even though the Corporation would not make actual cash payments during an
Extension Period. Moreover, under the Treasury Regulations, if the option to
defer the payment of interest was determined not to be "remote," the Junior
Subordinated Debentures would be treated as having been originally issued with
OID. In such event, all of a holder's taxable interest income with respect to
the Junior Subordinated Debentures would be accounted for on an economic accrual
basis regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
The Treasury Regulations have not yet been addressed in any rulings or
other interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation described herein.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
The Corporation will have the right at any time to liquidate the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities. Under current law, such a distribution, for United States
federal income tax purposes, would be treated as a nontaxable event to each
holder, and each holder would receive an aggregate tax basis in the Junior
Subordinated Debentures equal to such holder's aggregate tax basis in its
Capital Securities. A holder's holding period in the Junior Subordinated
Debentures so received in liquidation of the Trust would include the period
during which the Capital Securities were held by such holder. If, however, the
Trust were characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of its dissolution, the
distribution of the Junior Subordinated Debentures may constitute a taxable
event to holders of Capital Securities and a holder's holding period in Junior
Subordinated Debentures would begin on the date such Junior Subordinated
Debentures were received.
Under certain circumstances described herein (see "Description of Exchange
Securities -- Description of Exchange Capital Securities"), the Junior
Subordinated Debentures may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Capital Securities.
Under current law, such a redemption would, for United States federal income tax
purposes, constitute a taxable disposition of the redeemed Capital Securities,
and a holder could recognize gain or loss as if it sold such redeemed Capital
Securities for cash. See " -- Sales of Capital Securities."
54
<PAGE>
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities (including a redemption of the
Capital Securities either on the Stated Maturity Date or upon an optional
redemption of the Junior Subordinated Debentures by the Corporation) will
recognize gain or loss equal to the difference between its adjusted tax basis in
Capital Securities and the amount realized on the sale of such Capital
Securities (other than with respect to accrued and unpaid interest which has not
yet been included in income, which will be treated as ordinary income). A
holder's adjusted tax basis in the Capital Securities generally will be its
initial purchase price increased by OID (if any) previously includible in such
holder's gross income to the date of disposition and decreased by payments (if
any) received on the Capital Securities in respect of OID. Such gain or loss
generally will be a capital gain or loss and generally will be a long-term
capital gain or loss if the Capital Securities have been held for more than the
applicable holding period.
The Taxpayer Relief Act of 1997 reduces the maximum rates on long-term
capital gains recognized on capital assets held by individuals taxpayers for
more than eighteen months as of the date of disposition (and would further
reduce the maximum rates on such gains in the year 2001 and thereafter for
certain individual taxpayers who meet specified conditions). Prospective
investors should consult their own tax advisors concerning these tax law
changes.
The Capital Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Debentures. A holder who uses the accrual method of
accounting for tax purposes (and a cash method holder, if the Junior
Subordinated Debentures are deemed to have been issued with OID) who disposes of
his Capital Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income (i.e., interest or, if applicable, OID), and to add such amount to his
adjusted tax basis in his pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include all accrued but unpaid
interest), a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
PROPOSED TAX LEGISLATION
The Taxpayer Relief Act of 1997, enacted on August 7, 1997, did not contain
certain provisions of President Clinton's Fiscal 1998 Budget Proposal (the
"Proposed Legislation") that would, among other things, have denied an issuer a
deduction for United States federal income tax purposes for the payment of
interest on instruments with characteristics similar to the Junior Subordinated
Debentures. There can be no assurances, however, that the proposed legislation,
if enacted, or similar legislation enacted after the date hereof would not
adversely affect the tax treatment of the Junior Subordinated Debentures,
resulting in a Tax Event. The occurrence of a Tax Event may result in the
redemption of the Junior Subordinated Debentures for cash, in which event the
holders of the Capital Securities would receive cash in redemption of their
Capital Securities. See "Description of Exchange Securities -- Description of
Exchange Capital Securities -- Redemption" and "Description of Exchange
Securities -- Description of Exchange Junior Subordinated Debentures -- Special
Event Prepayment."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes.
A "U.S. Holder" is a holder of Capital Securities who or which is (i) a
citizen or individual resident (or is treated as a citizen or individual
resident) of the United States for federal income tax purposes, (ii) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, (other than a partnership
that is not treated as a United States person under any applicable Treasury
regulations) or (iii) a trust or estate the income of which is includible in its
gross income for federal income tax purposes without regard to its source. For
taxable years beginning after December 31, 1996 (or for taxable years ending
after August 20, 1996, if the trustee so elects), a trust is a U.S. Holder if,
and only if, (a) a court within the United States is able to exercise primary
supervision over the administration of the trust and (b) one or more United
States persons have the authority to control all substantial decisions of the
trust. To the extent provided in Treasury regulations, certain trusts in
existence on August 20, 1996 and treated as United States persons prior to such
date, that elect to continue to be treated as United States persons, will be
treated as a U.S. Holder.
Under present United States federal income tax laws: (i) payments by the
Trust or any of its paying agents to any holder of a Capital Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the Capital
Security does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of the Corporation entitled to
vote, (b) the beneficial owner of the
55
<PAGE>
Capital Security is not a controlled foreign corporation that is related to the
Corporation through stock ownership, and (c) either (1) the beneficial owner of
the Capital Security certifies to the Trust or its agent, under penalties of
perjury, that it is not a United States holder and provides its name and address
or (2) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
(a "Financial Institution"), and holds the Capital Security in such capacity,
certifies to the Trust or its agent, under penalties of perjury, that such
statement has been received from the beneficial owner by it or by a Financial
Institution between it and the beneficial owner and furnishes the Trust or its
agent with a copy thereof; and (ii) a United States Alien Holder of a Capital
Security will not be subject to United States federal withholding tax on any
gain realized upon the sale or other disposition of a Capital Security unless
(i) the gain is effectively connected with the conduct of a trade or business
within the United States or (ii) the holder is an individual who was present in
the United States for at least 183 days during the taxable year of the sale and
certain other conditions are met.
As discussed above, changes in legislation affecting the United States
federal income tax treatment of the Junior Subordinated Debentures are possible,
and could adversely affect the ability of the Corporation to deduct the interest
payable on the Junior Subordinated Debentures. Moreover, any such legislation
could adversely affect United States Alien Holders by characterizing income
derived from the Junior Subordinated Debentures as dividends, generally subject
to a 30% income tax (on a withholding basis) when paid to a United States Alien
Holder, rather than as interest which, as discussed above, is generally exempt
from income tax in the hands of a United States Alien Holder.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will be
allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF ORIGINAL CAPITAL SECURITIES FOR
EXCHANGE CAPITAL SECURITIES AND OF THE OWNERSHIP AND DISPOSITION OF THE CAPITAL
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER
TAX LAWS.
ERISA CONSIDERATIONS
Each of the Corporation (the obligor with respect to the Exchange Junior
Subordinated Debentures held by the Trust), and its affiliates and the Property
Trustee may be considered a "party in interest" (within the meaning of ERISA) or
a "disqualified person" (within the meaning of Section 4975 of the Code) with
respect to many Plans. The purchase and/or holding of Exchange Capital
Securities by a Plan with respect to which the Corporation, the Property Trustee
or any affiliate is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such Exchange Capital Securities are
acquired pursuant to and in accordance with an applicable exemption, such as
Prohibited Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset manager),
PTCE 91-38 (an exemption for certain transactions involving bank collective
investment funds), PTCE 90-1 (an exemption for certain transactions involving
insurance company pooled separate accounts), PTCE 95-60 (an exemption for
transactions involving certain insurance company general accounts) or PTCE 96-23
(an exemption for certain transactions determined by an in-house asset manager).
In addition, a Plan fiduciary considering the purchase of Exchange Capital
Securities should be aware that the assets of the Trust may be considered "plan
assets" for ERISA purposes. In such event, the Property Trustee, as well as any
other persons exercising discretion with respect to the Exchange Junior
Subordinated Debentures, may become fiduciaries, parties in interest or
disqualified persons with respect to investing Plans. In order to avoid certain
prohibited transactions under ERISA and the Code that could thereby result, each
investing Plan, by purchasing the Exchange Capital Securities, will be deemed to
have directed the Trust to invest in the Exchange Junior Subordinated Debentures
and to have consented to the appointment
56
<PAGE>
of the Property Trustee. In this regard, it should be noted that, in an Event of
Default, the Corporation may not remove the Property Trustee without the
approval of a majority of the holders of the Exchange Capital Securities.
A Plan fiduciary should consider whether the purchase of Exchange Capital
Securities could result in a delegation of fiduciary authority to the Property
Trustee, and, if so, whether such a delegation of authority is permissible under
the Plan's governing instrument or any investment management agreement with the
Plan.
THE SALE OF INVESTMENTS TO PLANS IS IN NO RESPECT A REPRESENTATION BY THE
TRUST, THE CORPORATION, THE PROPERTY TRUSTEE, THE INITIAL PURCHASER OR ANY OTHER
PERSON ASSOCIATED WITH THE SALE OF THE EXCHANGE CAPITAL SECURITIES THAT SUCH
SECURITIES MEET RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY PLANS
GENERALLY OR ANY PARTICULAR PLAN, OR THAT SUCH SECURITIES ARE OTHERWISE
APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR PLAN. ANY PURCHASER PROPOSING
TO ACQUIRE EXCHANGE CAPITAL SECURITIES WITH ASSETS OF ANY PLAN SHOULD CONSULT
WITH ITS COUNSEL.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Capital
Securities received in exchange for Original Capital Securities where such
Original Capital Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Trust and the
Corporation have agreed that, starting on the Expiration Date and ending on the
close of business on the 90th day following the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, for a period of 90 days
after the Expiration Date, all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.
The Trust and the Corporation will not receive any proceeds from any
issuance of Exchange Capital Securities. Exchange Capital Securities received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions, in the over-the-counter market,
in negotiated transactions, through the writing of options on the Exchange
Capital Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Capital Securities. Any broker-dealer that
resells Exchange Capital Securities that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Capital Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit of any
such resale of Exchange Capital Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
VALIDITY OF EXCHANGE SECURITIES
The validity of the Exchange Junior Subordinated Debentures and the
Exchange Guarantee will be passed upon for the Corporation by Brown & Wood LLP,
New York, New York. Certain matters of Delaware law relating to the validity of
the Exchange Capital Securities will be passed upon on behalf of the Trust by
Richards, Layton & Finger, Wilmington, Delaware. Certain matters relating to
United States federal income tax considerations will be passed upon by Brown &
Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Corporation and its
subsidiaries incorporated by reference in the Corporation's Annual Report on
Form 10-K, as amended by Form 10-K/A, for the year ended December 31, 1996 and
incorporated by reference in this Prospectus have been audited by KPMG Peat
Marwick LLP, independent auditors, as stated in their report appearing therein.
Their report refers to changes in accounting for mortgage servicing rights in
1996, for impaired loans in 1995 and for certain investments in debt and equity
securities in 1994.
57
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE TRUST. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
AFFAIRS OF THE CORPORATION OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information................................ 6
Incorporation of Certain Documents by Reference...... 7
Summary.............................................. 8
Risk Factors......................................... 15
Banknorth Group, Inc................................. 20
Banknorth Capital Trust I............................ 20
Use of Proceeds...................................... 21
Ratios of Earnings to Combined Fixed Charges......... 21
Accounting Treatment................................. 21
Capitalization....................................... 22
Selected Consolidated Financial Data................. 23
The Exchange Offer................................... 24
Description of Exchange Securities................... 32
Description of Original Securities................... 51
Relationship Among the Exchange Capital Securities,
the Exchange Junior Subordinated Debentures and the
Exchange Guarantee................................. 52
Certain Federal Income Tax Consequences.............. 53
ERISA Considerations................................. 56
Plan of Distribution................................. 57
Validity of Exchange Securities...................... 57
Experts.............................................. 57
</TABLE>
BANKNORTH CAPITAL TRUST I
OFFER TO EXCHANGE ITS
10.52% CAPITAL SECURITIES, SERIES B
(LIQUIDATION AMOUNT
$1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
10.52% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT
$1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
BANKNORTH GROUP, INC.
PROSPECTUS
OCTOBER 8, 1997
