<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-40837
PROSPECTUS SUPPLEMENT
(To Prospectus Dated March 12, 1998)
$300,000,000
BNY Capital III
7.05% Preferred Securities, Series D
(Liquidation Amount $25 per Preferred Security)
fully and unconditionally guaranteed, as described herein, by
The Bank of New York Company, Inc.
---------------
THE 7.05% PREFERRED SECURITIES, SERIES D (THE "SERIES D PREFERRED
SECURITIES"), OFFERED HEREBY REPRESENT BENEFICIAL INTERESTS IN BNY CAPITAL
III, A STATUTORY BUSINESS TRUST CREATED UNDER THE LAWS OF THE STATE OF
DELAWARE (THE "SERIES D ISSUER"). THE BANK OF NEW YORK COMPANY, INC., A NEW
YORK CORPORATION (THE "CORPORATION"), WILL BE THE OWNER OF ALL OF THE
BENEFICIAL INTERESTS REPRESENTED BY COMMON SECURITIES OF THE SERIES D ISSUER
(THE "SERIES D COMMON SECURITIES" AND, COLLECTIVELY WITH THE SERIES D
PREFERRED SECURITIES, THE "SERIES D
(Continued on next page)
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-6 HEREOF FORCERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE SERIES D PREFERRED SECURITIES.
---------------
THESE SECURITIES 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 SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING THE SERIES D
PUBLIC COMMISSION(1) ISSUER(2)(3)
-------- ------------- ------------
<S> <C> <C> <C>
Per Preferred Security................. $25 (2) $25
Total.................................. $300,000,000 (2) $300,000,000
</TABLE>
- -------
(1) The Series D Issuer and the Corporation have each agreed to indemnify
the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) In view of the fact that the proceeds of the sale of the Series D
Preferred Securities will be invested in the Series D Subordinated
Debentures, the Corporation has agreed to pay to the Underwriters as
compensation ("Underwriters' Compensation") for their arranging the
investment therein of such proceeds $0.7875 per Series D Preferred
Security (or $9,450,000 in the aggregate). See "Underwriting."
(3) Expenses of the offering which are payable by the Corporation are
estimated to be $400,000.
---------------
The Series D Preferred Securities offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and acceptance by
them and subject to their right to reject any order in whole or in part. It is
expected that the Series D Preferred Securities will be ready for delivery in
book-entry form only through the facilities of The Depository Trust Company in
New York, New York, on or about March 24, 1998, which will be the eighth
business day ("T+8") following the date of this Prospectus Supplement, against
payment therefor in immediately available funds. Prospective purchasers of the
Series D Preferred Securities should note that trading of the Series D
Preferred Securities may be affected by the T+8 Settlement. See
"Underwriting."
---------------
MORGAN STANLEY DEAN WITTER
A.G. EDWARDS & SONS, INC.
GOLDMAN, SACHS & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
March 12, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
WHICH STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SERIES D
PREFERRED SECURITIES. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN
CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE SERIES D
PREFERRED SECURITIES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
----------------
(cover page continued)
Securities"). The First National Bank of Chicago is the Property Trustee of
the Series D Issuer. The Series D Issuer exists for the sole purpose of
issuing the Series D Securities and investing the proceeds thereof, together
with the proceeds of the Series D Common Securities, in $309,278,350 initial
principal amount of 7.05% Junior Subordinated Deferrable Interest Debentures,
Series D (the "Series D Subordinated Debentures"), to be issued by the
Corporation and engaging in only those other activities necessary or
incidental thereto. The Series D Subordinated Debentures will mature on March
1, 2028, which date may be (i) shortened to a date not earlier than March 1,
2013 or (ii) extended to a date not later than March 1, 2047, in each case if
certain conditions are met. The Corporation has committed to the Board of
Governors of the Federal Reserve System (the "Federal Reserve") not to
exercise its right to shorten the Stated Maturity of the Series D Subordinated
Debentures without having received the prior approval of the Federal Reserve
to do so, if then required under applicable Federal Reserve capital guidelines
or policies. The Series D Preferred Securities will have a preference under
certain circumstances with respect to cash distributions and amounts payable
on liquidation, redemption or otherwise over the Series D Common Securities.
See "Description of Preferred Securities--Subordination of Common Securities"
in the accompanying Prospectus.
Holders of the Series D Preferred Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable quarterly in arrears on the first day of March, June,
September and December of each year, commencing on June 1, 1998, at the annual
rate of 7.05% of the Liquidation Amount of $25 per Series D Preferred Security
("Distributions"). Subject to certain exceptions, as described herein, the
Corporation has the right to defer payment of interest on the Series D
Subordinated Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each deferral period (each,
an "Extension Period"), provided that no Extension Period may extend beyond
the Stated Maturity of the Series D Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all interest then
accrued and unpaid (together with interest thereon at the rate of 7.05% per
annum, compounded quarterly, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest payments on the Series D
Subordinated Debentures are so deferred, Distributions on the Series D
Preferred Securities will also be deferred and the Corporation will not be
permitted, subject to certain exceptions described herein, to declare or pay
any cash distributions with respect to the Corporation's capital stock or debt
securities that rank pari passu with or junior to the Series D Subordinated
Debentures. During an Extension Period, interest on the Series D Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Series D Preferred Securities are entitled will accumulate) at
the rate of 7.05% per annum, compounded quarterly from the relevant payment
date for such interest, and holders of Series D Preferred Securities will be
required to accrue interest income for United States federal income tax
purposes. See "Certain Terms of Series D Subordinated Debentures--Option to
Defer Interest Payments" and "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
The Series D Subordinated Debentures are unsecured and subordinated to all
Senior Debt (as defined in the accompanying Prospectus). Substantially all of
the Corporation's existing indebtedness constitutes Senior Debt. Because the
Corporation is a holding company, the right of the Corporation to participate
in any distribution of assets of any subsidiary, including The Bank of New
York and The Bank of New York (Delaware), upon such subsidiary's liquidation
or reorganization or otherwise is subject to the prior claims of creditors of
that subsidiary except to the extent that the Corporation may itself be
recognized as a creditor of that subsidiary. Accordingly, the Series D
Subordinated Debentures (and therefore the Series D Preferred Securities) will
be effectively
S-2
<PAGE>
(cover page continued)
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and holders thereof should look only to the assets of the
Corporation for payments on the Series D Subordinated Debentures. See
"Description of Subordinated Debentures--Subordination" in the accompanying
Prospectus.
The Corporation has, through the Series D Guarantee, the Trust Agreement,
the Series D Subordinated Debentures, the Indenture and the Expense Agreement
(each as defined herein), taken together, fully, irrevocably and
unconditionally guaranteed all of the Series D Issuer's obligations under the
Series D Preferred Securities. See "Relationship Among the Preferred
Securities, the Corresponding Junior Subordinated Debentures, the Expense
Agreement and the Guarantees--Full and Unconditional Guarantee" in the
accompanying Prospectus. The Series D Guarantee of the Corporation guarantees
the payment of Distributions and payments on liquidation or redemption of the
Series D Preferred Securities, but only in each case to the extent of funds
held by the Series D Issuer, as described herein (the "Series D Guarantee").
See "Description of Guarantees" in the accompanying Prospectus. If the
Corporation does not make interest payments on the Series D Subordinated
Debentures held by the Series D Issuer, the Series D Issuer will have
insufficient funds to pay Distributions on the Series D Preferred Securities.
The Series D Guarantee does not cover payment of Distributions when the Series
D Issuer has insufficient funds to pay such Distributions. In such event, a
holder of Series D Preferred Securities may institute a legal proceeding
directly against the Corporation pursuant to the terms of the Indenture to
enforce payment of amounts equal to such Distributions to such holder. See
"Description of Junior Subordinated Debentures--Enforcement of Certain Rights
By Holders of Preferred Securities" in the accompanying Prospectus. The
obligations of the Corporation under the Series D Guarantee and the Series D
Preferred Securities are subordinate and junior in right of payment to all
Senior Debt of the Corporation.
The Series D Preferred Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Series D Subordinated Debentures at
maturity or their earlier redemption. The Series D Subordinated Debentures are
redeemable prior to maturity at the option of the Corporation (i) on or after
March 24, 2003, in whole at any time or in part from time to time, with not
less than 30 days' and not more than 60 days' notice, or (ii) at any time
prior to March 24, 2003, in whole (but not in part), at any time within 90
days following the occurrence and continuation of a Tax Event or a Capital
Treatment Event (each as defined herein), in each case at a redemption price
equal to 100% of the principal amount of the Series D Subordinated Debentures
so redeemed plus accrued and unpaid interest thereon to the date fixed for
redemption. See "Certain Terms of Series D Preferred Securities--Redemption."
The Corporation has committed to the Federal Reserve that the Corporation will
not exercise its right to redeem the Series D Subordinated Debentures prior to
the Stated Maturity without having received the prior approval of the Federal
Reserve to do so, if then required under applicable Federal Reserve capital
guidelines or policies.
The Corporation will have the right at any time to terminate the Series D
Issuer and cause the Series D Subordinated Debentures to be distributed to the
holders of the Series D Preferred Securities in liquidation of the Series D
Issuer. The Corporation has committed to the Federal Reserve that, so long as
the Corporation (or any affiliate) is a holder of Common Securities, the
Corporation will not so terminate the Series D Issuer without having received
the prior approval of the Federal Reserve to do so, if then required under
applicable Federal Reserve capital guidelines or policies. See "Certain Terms
of Series D Preferred Securities--Liquidation of Series D Issuer and
Distribution of Series D Subordinated Debentures to Holders."
In the event of the termination of the Series D Issuer, after satisfaction
of liabilities to creditors of the Series D Issuer as required by applicable
law, the holders of the Series D Preferred Securities will be entitled to
receive a Liquidation Amount of $25 per Series D Preferred Security plus
accumulated and unpaid Distributions thereon to the date of payment, which may
be in the form of a distribution of such amount in Series D Subordinated
Debentures, subject to certain exceptions. See "Description of Preferred
Securities--Liquidation Distribution Upon Termination" in the accompanying
Prospectus.
S-3
<PAGE>
(cover page continued)
The Series D Preferred Securities have been authorized, subject to notice of
issuance, for listing on the New York Stock Exchange under the symbol "BKPrD".
If the Series D Subordinated Debentures are distributed to the holders of
Series D Preferred Securities upon the liquidation of the Series D Issuer, the
Corporation will use its best efforts to list the Series D Subordinated
Debentures on the New York Stock Exchange or such other stock exchanges or
other automated quotation systems, if any, on which the Series D Preferred
Securities are then listed or traded.
The Series D Preferred Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Series D Preferred Securities will be shown on,
and transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described in the accompanying Prospectus,
Series D Preferred Securities in certificated form will not be issued in
exchange for the global certificates. See "Book-Entry Issuance" in the
accompanying Prospectus.
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PROSPECTUS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
Risk Factors....................... S-6 Available Information.............. 4
BNY Capital III.................... S-11 Incorporation of Certain Documents
The Corporation.................... S-11 by Reference...................... 5
Recent Developments................ S-12 The Corporation.................... 6
Consolidated Ratios of Earnings to Certain Regulatory Considerations.. 6
Fixed Charges..................... S-13 The Issuers........................ 9
Use of Proceeds.................... S-13 Use of Proceeds.................... 10
Capitalization..................... S-14 Description of Junior Subordinated
Accounting Treatment............... S-15 Debentures........................ 10
Certain Terms of Series D Preferred Description of Preferred
Securities........................ S-15 Securities........................ 22
Certain Terms of Series D Book-Entry Issuance................ 34
Subordinated Debentures........... S-18 Description of Guarantees.......... 36
Certain Terms of Series D Relationship Among the Preferred
Guarantee......................... S-23 Securities, the Corresponding
Certain Federal Income Tax Junior Subordinated Debentures,
Consequences...................... S-24 the Expense Agreement and the
ERISA Considerations............... S-26 Guarantees........................ 39
Underwriting....................... S-28 Plan of Distribution............... 40
Validity of Securities............. S-30 Validity of Securities............. 41
Experts............................ 41
</TABLE>
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 SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION, THE SERIES D
ISSUER OR BY THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL
UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE CORPORATION OR THE SERIES D ISSUER SINCE THE DATE HEREOF.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO 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.
S-4
<PAGE>
(cover page continued)
The information in this Prospectus Supplement supplements and should be read
in conjunction with the information contained in the accompanying Prospectus.
As used herein, (i) the "Indenture" means the Junior Subordinated Indenture,
as amended and supplemented from time to time, between the Corporation and The
First National Bank of Chicago, as trustee (the "Debenture Trustee"), and (ii)
the "Trust Agreement" means the Amended and Restated Trust Agreement relating
to the Series D Issuer among the Corporation, as Depositor, The First National
Bank of Chicago as Property Trustee (the "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"). Each of the other capitalized
terms used in this Prospectus Supplement and not otherwise defined in this
Prospectus Supplement has the meaning set forth in the accompanying
Prospectus.
S-5
<PAGE>
RISK FACTORS
Prospective purchasers of the Series D Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and
in the accompanying Prospectus and should particularly consider the following
matters. In addition, because holders of Series D Preferred Securities may
receive Series D Subordinated Debentures in exchange therefor upon liquidation
of the Series D Issuer, prospective purchasers of Series D Preferred
Securities are also making an investment decision with regard to the Series D
Subordinated Debentures and should carefully review all the information
regarding the Series D Subordinated Debentures contained herein.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES D GUARANTEE AND THE
SERIES D SUBORDINATED DEBENTURES
The obligations of the Corporation under the Series D Guarantee issued by
the Corporation for the benefit of the holders of Series D Preferred
Securities and under the Series D Subordinated Debentures are unsecured and
rank subordinate and junior in right of payment to all Senior Debt of the
Corporation. Substantially all of the Corporation's existing indebtedness
constitutes Senior Debt. Because the Corporation is a holding company, the
right of the Corporation to participate in any distribution of assets of any
subsidiary, including The Bank of New York and The Bank of New York
(Delaware), upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the Series D Preferred Securities to
benefit indirectly from such distribution), is subject to the prior claims of
creditors of that subsidiary, except to the extent that the Corporation may
itself be recognized as a creditor of that subsidiary. Accordingly, the Series
D Subordinated Debentures will be effectively subordinated to all existing and
future liabilities of the Corporation's subsidiaries, and holders of Series D
Subordinated Debentures should look only to the assets of the Corporation for
payments on the Series D Subordinated Debentures. See "The Corporation." None
of the Indenture, the Series D Guarantee, the Trust Agreement or the Expense
Agreement places any limitation on the amount of secured or unsecured debt,
including Senior Debt, that may be incurred by the Corporation. See
"Description of Guarantees--Status of the Guarantees" and "Description of
Junior Subordinated Debentures--Subordination" in the accompanying Prospectus.
The ability of the Series D Issuer to pay amounts due on the Series D
Preferred Securities is solely dependent upon the Corporation making payments
on the Series D Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no event of default under the Indenture has occurred or is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Series D Subordinated Debentures at any time or from time
to time for a period not exceeding 20 consecutive quarters with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Series D Subordinated Debentures. As a consequence of
any such deferral, quarterly Distributions on the Series D Preferred
Securities by the Series D Issuer will also be deferred (and the amount of
Distributions to which holders of the Series D Preferred Securities are
entitled will accumulate additional Distributions thereon at the rate of 7.05%
per annum, compounded quarterly from the relevant payment date for such
Distributions) during any such Extension Period. During any such 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 or (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 that rank pari
passu in all respects with or junior in interest to the Series D Subordinated
Debentures (other than (a) repurchases, redemptions or other acquisitions of
shares of capital stock of the Corporation in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
one or more employees, officers, directors or consultants, in connection with
a dividend reinvestment or stockholder stock purchase plan or in connection
with the issuance of capital stock of the Corporation (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition
S-6
<PAGE>
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series
of the Corporation's capital stock, (c) 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, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise
of such warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks pari passu with or junior to such stock).
Prior to the termination of any such Extension Period, the Corporation may
further defer the payment of interest, provided that no Extension Period may
exceed 20 consecutive quarters or extend beyond the Stated Maturity of the
Series D Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all interest then accrued and unpaid (together with
interest thereon at the annual rate of 7.05%, compounded quarterly from the
interest payment date for such interest, to the extent permitted by applicable
law), the Corporation may elect to begin a new Extension Period subject to the
above requirements. There is no limitation on the number of times that the
Corporation may elect to begin an Extension Period. See "Certain Terms of
Series D Preferred Securities--Distributions" and "Certain Terms of Series D
Subordinated Debentures--Option to Defer Interest Payments."
Should an Extension Period occur, a holder of Series D Preferred Securities
will be required to recognize income (in the form of original issue discount
on a constant yield method) in respect of its pro rata share of the Series D
Subordinated Debentures held by the Series D Issuer for United States federal
income tax purposes. As a result, a holder of Series D Preferred Securities
will be required to include such income in gross income for United States
federal income tax purposes in advance of the receipt of cash attributable to
such income, and will not receive the cash related to such income from the
Series D Issuer if the holder disposes of the Series D Preferred Securities
prior to the record date for the payment of Distributions. See "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount"
and "--Sale or Redemption of Series D Preferred Securities."
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series D
Subordinated Debentures. However, should the Corporation elect to exercise
such right in the future, the market price of the Series D Preferred
Securities is likely to be affected. A holder that disposes of its Series D
Preferred Securities during an Extension Period, therefore, might not receive
the same return on its investment as a holder that continues to hold its
Series D Preferred Securities.
TAX EVENT OR CAPITAL TREATMENT EVENT--REDEMPTION
Upon the occurrence and continuation of a Tax Event or a Capital Treatment
Event (whether occurring before or after March 24, 2003), the Corporation has
the right to redeem the Series D Subordinated Debentures in whole (but not in
part) prior to March 24, 2003 and within 90 days following the occurrence and
continuation of such Tax Event or Capital Treatment Event and thereby cause a
mandatory redemption of the Series D Preferred Securities before, as well as
after, March 24, 2003. The Corporation has committed to the Federal Reserve
that it will not exercise such right unless it has received prior approval of
the Federal Reserve to do so, if such approval is then required under
applicable guidelines or policies of the Federal Reserve.
A "Tax Event" means the receipt by the Series D Issuer 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
such pronouncement or decision is announced on or after the date of issuance
of the Series D Preferred Securities under the Trust Agreement, there is more
than an insubstantial risk that (i) the Series D Issuer is, or will be
S-7
<PAGE>
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 Series D
Subordinated Debentures, (ii) interest payable by the Corporation on the
Series D Subordinated Debentures is not, or within 90 days 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 Series D Issuer is, or will
be within 90 days of the date of the opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
A "Capital Treatment Event" means the reasonable determination by the
Corporation 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 thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws, rules or regulations, which
amendment or change is effective or which pronouncement, action or decision is
announced on or after the date of issuance of the Series D Preferred
Securities under the Trust Agreement, there is more than an insubstantial risk
that the Corporation will not be entitled to treat an amount equal to the
aggregate Liquidation Amount of the Series D Preferred Securities as "Tier 1
Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Corporation.
See "Risk Factors--Possible Tax Law Changes Affecting the Series D Preferred
Securities" for a discussion of certain legislative proposals that, if
adopted, could give rise to a Tax Event, which may permit the Corporation to
cause a redemption of the Series D Preferred Securities prior to March 24,
2003.
EXCHANGE OF SERIES D PREFERRED SECURITIES FOR SERIES D SUBORDINATED DEBENTURES
The Corporation will have the right at any time to terminate the Series D
Issuer and after satisfaction of liabilities to creditors of the Series D
Issuer as required by applicable law cause the Series D Subordinated
Debentures to be distributed to the holders of the Series D Preferred
Securities in exchange therefor upon liquidation of the Series D Issuer. The
exercise of such right is subject to the Corporation having received prior
approval of the Federal Reserve if such approval is then required under
applicable capital guidelines or policies of the Federal Reserve. See "Certain
Terms of Series D Preferred Securities--Liquidation of Series D Issuer and
Distribution of Series D Subordinated Debentures to Holders."
Under current United States Federal income tax law and interpretations, a
distribution of the Series D Subordinated Debentures upon liquidation of the
Series D Issuer should not be a taxable event to holders of the Series D
Preferred Securities. However, if a Tax Event were to occur which would cause
the Series D Issuer to be subject to United States Federal income tax with
respect to income received or accrued on the Series D Subordinated Debentures,
as the case would be if the Series D Issuer were treated as an association
taxable as a corporation, a distribution of the Series D Subordinated
Debentures by the Series D Issuer could be a taxable event to the Series D
Issuer and the holders of the Series D Preferred Securities. See "Certain
Federal Income Tax Consequences--Distribution of the Series D Subordinated
Debentures to Holders of Series D Preferred Securities."
SHORTENING OF STATED MATURITY OF SERIES D SUBORDINATED DEBENTURES
The Corporation will have the right at any time to shorten the maturity of
the Series D Subordinated Debentures to a date not earlier than March 1, 2013
and thereby cause the Series D Preferred Securities to be redeemed on such
earlier date. The Corporation has committed to the Federal Reserve that the
Corporation will not exercise such right without having received prior
approval of the Federal Reserve to do so, if then required under applicable
Federal Reserve capital guidelines or policies.
EXTENSION OF STATED MATURITY OF SERIES D SUBORDINATED DEBENTURES
The Corporation will also have the right to extend the maturity of the
Series D Subordinated Debentures whether or not the Series D Issuer is
liquidated and the Series D Subordinated Debentures are distributed to
S-8
<PAGE>
holders of the Series D Preferred Securities to a date no later than March 1,
2047, provided that the Corporation can extend the maturity only if at the
time such election is made and at the time of such extension (i) the
Corporation is not in bankruptcy, otherwise insolvent or in liquidation, (ii)
the Corporation is not in default in the payment of any interest or principal
on the Series D Subordinated Debentures, (iii) if the Series D Issuer has not
been liquidated, the Series D Issuer is not in arrears on payments of
Distributions on the Series D Preferred Securities and no deferred
Distributions are accumulated, (iv) the Series D Subordinated Debentures are
rated not less than BBB- by Standard & Poor's Ratings Services ("Standard &
Poor's") or Baa3 by Moody's Investors Service, Inc. ("Moody's") or the
equivalent by any other nationally recognized statistical rating organization
and (v) after such extension, the Series D Subordinated Debentures shall not
have a remaining term to maturity of more than 30 years. To the extent that
the Stated Maturity of the Series D Subordinated Debentures is extended at
such time as the Series D Preferred Securities are outstanding, the Series D
Preferred Securities would remain outstanding until such extended date or
until redeemed at an earlier date.
MARKET PRICES
There can be no assurance as to the market prices for Series D Preferred
Securities or Series D Subordinated Debentures that may be distributed in
exchange for Series D Preferred Securities upon liquidation of the Series D
Issuer. Accordingly, the Series D Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary
market, or the Series D Subordinated Debentures that a holder of Series D
Preferred Securities may receive on liquidation of the Series D Issuer, may
trade at a discount to the price that the investor paid to purchase the Series
D Preferred Securities offered hereby. As a result of the existence of the
Corporation's right to defer interest payments, the market price of the Series
D Preferred Securities (which represent preferred beneficial interests in the
Series D Issuer) may be more volatile than the market prices of other
securities on which original issue discount accrues that are not subject to
such deferrals. In addition, because the Corporation has the right (i) to
shorten the Stated Maturity of the Series D Subordinated Debentures (subject
to its commitment to the Federal Reserve not to do so without the Federal
Reserve's prior approval if such approval is then required under applicable
Federal Reserve guidelines or policies) or (ii) to extend the maturity of the
Series D Subordinated Debentures (subject to the conditions described above),
there can be no assurance that the Corporation will not exercise its option to
change the maturity of the Series D Subordinated Debentures as permitted by
the terms thereof and of the Indenture. If the Corporation does exercise such
option, there can be no assurance that the shortening or extending of the
maturity of the Series D Subordinated Debentures will not have an effect on
the market price of the Series D Preferred Securities. See "Certain Terms of
the Series D Subordinated Debentures" and "Description of Junior Subordinated
Debentures--Corresponding Junior Subordinated Debentures" in the accompanying
Prospectus.
RIGHTS UNDER THE SERIES D GUARANTEE; DIRECT ACTION
The Series D Guarantee guarantees to the holders of the Series D Preferred
Securities the following payments, to the extent not paid by the Series D
Issuer: (i) any accumulated and unpaid Distributions required to be paid on
the Series D Securities, to the extent that the Series D Issuer has funds on
hand available therefor at such time, (ii) the redemption price with respect
to any Series D Securities called for redemption, to the extent that the
Series D Issuer has funds on hand available therefor at such time, and (iii)
upon a voluntary or involuntary dissolution, winding-up or liquidation of the
Series D Issuer (unless the Series D Subordinated Debentures are distributed
to holders of the Series D 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 Series D Issuer has funds on hand available
therefor at such time and (b) the amount of assets of the Series D Issuer
remaining available for distribution to holders of the Series D Securities.
The Series D Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The First
National Bank of Chicago will act as the indenture trustee under the Series D
Guarantee (the "Guarantee Trustee") for the purposes of compliance with the
Trust Indenture Act and will hold the Series D Guarantee for the benefit of
the holders of the Series D Preferred Securities. The First National Bank of
Chicago will also act as Debenture Trustee for the Series D Subordinated
Debentures and as Property Trustee under the Trust Agreement and First Chicago
Delaware Inc. will act as Delaware Trustee under the Trust Agreement.
S-9
<PAGE>
The holders of not less than a majority in aggregate liquidation amount of
the Series D Securities 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 Series D Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Series D Guarantee. Any holder
of the Series D Securities may institute a legal proceeding directly against
the Corporation to enforce its rights under the Series D Guarantee without
first instituting a legal proceeding against the Series D Issuer, the
Guarantee Trustee or any other person or entity. If the Corporation were to
default on its obligation to pay amounts payable under the Series D
Subordinated Debentures, the Series D Issuer would lack funds for the payment
of Distributions or amounts payable on redemption of the Series D Securities
or otherwise, and, in such event, holders of the Series D Securities would not
be able to rely upon the Series D Guarantee for payment of such amounts.
Instead, in the event a Debenture Event of Default shall have occurred and be
continuing and such event is attributable to the failure of the Corporation to
pay interest on or principal of the Series D Subordinated Debentures on the
payment date on which such payment is due and payable, then a holder of Series
D Securities may institute a legal proceeding directly against the Corporation
for enforcement of payment to such holder of the principal of or interest on
such Series D Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Series D Securities of such holder (a
"Direct Action"). In connection with such Direct Action, the Corporation will
have a right of set-off under the Indenture to the extent of any payment made
by the Corporation to such holder of Series D Securities in the Direct Action.
Except as described herein, holders of Series D Securities will not be able to
exercise directly any other remedy available to the holders of the Series D
Subordinated Debentures or assert directly any other rights in respect of the
Series D Subordinated Debentures. See "Description of Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of Preferred Securities"
and "--Debenture Events of Default" and "Description of Guarantees" in the
accompanying Prospectus. The Trust Agreement provides that each holder of
Series D Preferred Securities by acceptance thereof agrees to the provisions
of the Series D Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Series D Preferred Securities generally will have limited voting
rights relating only to the modification of the Series D Preferred Securities
and the exercise of the Series D Issuer's rights as holder of Series D
Subordinated Debentures and the Series D Guarantee. Holders of Series D
Preferred Securities will not be entitled to vote to appoint, remove or
replace the Property Trustee, the Delaware Trustee or any Administrative
Trustee, and such voting rights are vested exclusively in the holder of the
Series D Common Securities except, with respect to the Property Trustee and
the Delaware Trustee, upon the occurrence of certain events described in the
accompanying Prospectus. The Property Trustee, the Administrative Trustees and
the Corporation may amend the Trust Agreement without the consent of holders
of Series D Preferred Securities to ensure that the Series D Issuer will be
classified for United States federal income tax purposes as a grantor trust or
as other than as an association taxable as a corporation unless such action
materially adversely affects the interests of such holders. See "Description
of Preferred Securities--Voting Rights; Amendment of Each Trust Agreement" and
"--Removal of Issuer Trustees" in the accompanying Prospectus.
TRADING CHARACTERISTICS OF SERIES D PREFERRED SECURITIES
The Series D Preferred Securities have been authorized, subject to notice of
issuance, for listing on the New York Stock Exchange under the symbol "BKPrD".
The Series D Preferred Securities may trade at prices that do not fully
reflect the value of accrued but unpaid interest with respect to the
underlying Series D Subordinated Debentures. A holder of Series D Preferred
Securities that disposes of its Series D Preferred Securities between record
dates for payments of Distributions (and consequently does not receive a
Distribution from the Series D Issuer for the period prior to such
disposition) will nevertheless be required to include accrued but unpaid
interest on the Series D Subordinated Debentures through the date of
disposition in income as ordinary income. Such holder will recognize a capital
loss to the extent the selling price (which may not fully reflect the value of
accrued but unpaid interest) is less than its adjusted tax basis. 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 Consequences--Sale or Redemption of Series D Preferred
Securities."
S-10
<PAGE>
As indicated above, the Series D Preferred Securities have been authorized,
subject to notice of issuance, for listing on the New York Stock Exchange. If
the Series D Preferred Securities are not listed on a national securities
exchange or the NASDAQ National Market and the underwriters do not make a
market for the securities, the liquidity of the Series D Preferred Securities
could be adversely affected.
POSSIBLE TAX LAW CHANGES AFFECTING THE SERIES D PREFERRED SECURITIES
Prospective investors should be aware that legislation was proposed in the
United States Congress in the past that, if enacted, would have denied an
interest deduction to issuers of instruments such as the Series D Subordinated
Debentures. No such legislation is currently pending. There can be no
assurance, however, that similar legislation will not ultimately be enacted
into law, or that other developments will not occur after the date hereof that
would adversely affect the tax treatment of the Series D Subordinated
Debentures. Such a change could give rise to a Tax Event, which may permit the
Corporation to cause a redemption of the Series D Preferred Securities, as
described more fully under "Description of Preferred Securities--Redemption or
Exchange" in the accompanying Prospectus. See also "Certain Federal Income Tax
Consequences--Possible Tax Law Changes."
BNY CAPITAL III
BNY Capital III is a statutory business trust created under Delaware law
pursuant to (i) the Trust Agreement executed by the Corporation, as Depositor,
The First National Bank of Chicago, as Property Trustee, First Chicago
Delaware Inc., as Delaware Trustee, and the Administrative Trustees named
therein, and (ii) the filing of a certificate of trust with the Delaware
Secretary of State on November 12, 1996. The Series D Issuer's business and
affairs are conducted by The First National Bank of Chicago, as Property
Trustee, and two individual Administrative Trustees who are employees or
officers of, or affiliated with, the Corporation. The Series D Issuer exists
for the exclusive purposes of (i) issuing and selling the Series D Securities,
(ii) using the proceeds from the sale of Series D Securities to acquire Series
D Subordinated Debentures issued by the Corporation and (iii) engaging in only
those other activities necessary or incidental thereto (such as registering
the transfer of the Series D Preferred Securities). Accordingly, the Series D
Subordinated Debentures will be the sole assets of the Series D Issuer, and
payments under the Series D Subordinated Debentures will be the sole revenue
of the Series D Issuer. All of the Series D Common Securities will be owned by
the Corporation. The Series D Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the Series D Preferred
Securities, except that upon the occurrence and continuance of an event of
default under the Trust Agreement resulting from an Event of Default under the
Indenture, the rights of the Corporation, as holder of the Series D Common
Securities, to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Series D Preferred Securities. See "Description of Preferred
Securities--Subordination of Common Securities" in the accompanying
Prospectus. The Corporation will acquire Series D Common Securities in an
aggregate liquidation amount equal to 3% of the total capital of the Series D
Issuer. The Series D Issuer has a term of 55 years, but may terminate earlier
as provided in the Trust Agreement. The principal executive office of the
Series D Issuer is 48 Wall Street, New York, New York 10286, Attention:
Secretary, and its telephone number is (212) 495-1784. See "The Issuers" in
the accompanying Prospectus.
It is anticipated that the Series D Issuer will not be subject to the
reporting requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
THE CORPORATION
The Corporation is a bank holding company subject to the regulation and
supervision of the Federal Reserve Board under the Bank Holding Company Act of
1956, as amended ("BHC Act"). The Corporation is also subject to regulation by
the New York State Banking Department. Its principal wholly-owned banking
subsidiaries are The Bank of New York (the "Bank") and The Bank of New York
(Delaware). The Corporation
S-11
<PAGE>
provides a complete range of banking and other financial services to
corporations and individuals worldwide through its core businesses: Corporate
Banking, Retail Banking, Securities and Other Processing, Trust, Investment
Management and Private Banking and Financial Market Services. At December 31,
1997, the Corporation had consolidated total assets of approximately $60
billion, consolidated total deposits of approximately $41.4 billion and
consolidated shareholders' equity of approximately $5.0 billion. On the basis
of consolidated total assets at December 31, 1997, the Corporation was the
eighteenth largest bank holding company in the United States.
The Bank, which was founded in 1784, was New York's first bank and is the
oldest in the country still operating under its original name. The Bank is a
state-chartered New York banking corporation and a member of the Federal
Reserve System. The Bank conducts a national and international wholesale
banking business and a retail banking business in the metropolitan New York
City area including New Jersey and south eastern Connecticut, and provides a
comprehensive range of corporate and personal trust, securities processing and
investment services.
The Bank of New York (Delaware) is a Delaware chartered, FDIC insured non-
member bank.
The Corporation has its principal executive offices at 48 Wall Street, New
York, New York 10286, telephone number (212) 495-1784.
RECENT DEVELOPMENTS
In the fourth quarter of 1997, the Corporation adopted a new accounting
principle relating to the calculation of earnings per share ("EPS"), as set
forth in a statement (SFAS No. 128) issued by the Financial Accounting
Standards Board. Accordingly, the presentation of "primary" and "fully
diluted" EPS in the Corporation's earnings statements is replaced with "basic"
and "diluted" EPS. The effect of the new accounting pronouncement on the
calculation of EPS is not material. On February 27, 1998, the Corporation
filed a Current Report on Form 8-K restating certain financial data appearing
in the Corporation's Annual Report on Form 10-K for the year ended December
31, 1996 to reflect the change in accounting principles.
S-12
<PAGE>
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Corporation's ratios of earnings to fixed
charges and ratios of earnings to combined fixed charges, distribution on
Trust Preferred Securities and preferred stock dividend requirements for the
years and periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on Deposits................ 5.12 4.30 3.61 3.75 3.61
Including Interest on Deposits................ 2.06 2.00 1.81 1.94 1.85
Earnings to Combined Fixed Charges, distribution
on Trust Preferred Securities and Preferred
Stock Dividend Requirements:
Excluding Interest on Deposits................ 4.35 4.15 3.51 3.58 3.23
Including Interest on Deposits................ 1.97 1.98 1.79 1.91 1.78
</TABLE>
For purposes of computing both the ratios of earnings to fixed charges and
earnings to combined fixed charge, distribution on Trust Preferred Securities
and preferred stock dividend requirements, earnings represent net income
(loss) before extraordinary items plus applicable income taxes and fixed
charges. Fixed charges, excluding interest on deposits, include interest
expense (other than on deposits) and the proportion deemed representative of
the interest factor of rent expense, net of income from subleases. Fixed
charges, including interest on deposits, include all interest expense and the
proportion deemed representative of the interest factor of rent expense, net
of income from subleases. Pretax earnings required for preferred stock
dividends were computed using tax rates for the applicable year.
USE OF PROCEEDS
All of the proceeds from the sale of Series D Preferred Securities will be
invested by the Series D Issuer in Series D Subordinated Debentures. The
Corporation intends that the proceeds from the sale of such Series D
Subordinated Debentures will be added to its general corporate funds and will
be used for general corporate purposes.
The Corporation is required by the Federal Reserve to maintain certain
levels of capital for bank regulatory purposes. On October 21, 1996, the
Federal Reserve announced that cumulative preferred securities having the
characteristics of the Series D Preferred Securities which qualify as a
minority interest could be included as Tier 1 capital for bank holding
companies. Such Tier 1 capital treatment, together with the Corporation's
ability to deduct, for income tax purposes, interest payable on the Series D
Subordinated Debentures, will provide the Corporation with a more cost-
effective means of obtaining capital for regulatory purposes than other Tier 1
capital alternatives currently available to it.
S-13
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation and its subsidiaries as of December 31, 1997 and as adjusted to
give effect to the consummation of the offering of the Series D Preferred
Securities. The following data should be read in conjunction with the
consolidated financial statements and notes thereto of the Corporation and its
subsidiaries incorporated herein by reference.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------
AS
ACTUAL ADJUSTED
-------- ---------
(IN MILLIONS)
<S> <C> <C>
Total Long-term debt....................................... $ 1,809 $ 1,809
-------- --------
Guaranteed Preferred Beneficial Interests in Corporation's
Junior Subordinated
Deferrable Interest Debentures(a) ........................ $ 1,000 $ 1,300
Shareholders' Equity
Preferred Stock.......................................... 1 1
Common Stock............................................. 3,452 3,452
Capital Surplus.......................................... 465 465
Retained Earnings........................................ 3,493 3,493
Securities Valuation Allowance........................... 320 320
Treasury Stock, at Cost.................................. (2,714) (2,714)
Loan to ESOP, at Cost.................................... (15) (15)
-------- --------
Total Stockholders' Equity............................. 5,002 5,002
-------- --------
Total Capitalization................................. $ 7,811 $ 8,111
======== ========
</TABLE>
(a) As described herein, the sole assets of the Series D Issuer will be
$309,278,350 of 7.05% Series D Subordinated Debentures, issued by the
Corporation to the Series D Issuer. The Series D Subordinated Debentures will
mature on March 1, 2028 which date may be shortened to a date not earlier than
March 1, 2013 or extended to a date not later than March 1, 2047 if certain
conditions are met. The Corporation owns all of the Series D Common Securities
of the Series D Issuer, which accrue distributions at the rate of 7.05% per
annum.
S-14
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Series D Issuer will be treated as a
subsidiary of the Corporation and, accordingly, the accounts of the Series D
Issuer will be included in the consolidated financial statements of the
Corporation. The Series D Preferred Securities will be presented as a separate
line item in the consolidated balance sheets of the Corporation, entitled
"Guaranteed Preferred Beneficial Interests in Corporation's Junior
Subordinated Deferrable Interest Debentures" and appropriate disclosures about
the Series D Preferred Securities, the Series D Guarantee and the Series D
Subordinated Debentures will be included in the notes to the consolidated
financial statements. For financial reporting purposes, the Corporation will
record Distributions payable on the Series D Preferred Securities as an
expense in the consolidated statements of income.
The Corporation has agreed that future financial reports of the Corporation
will: (i) present the Preferred Securities issued by other Issuer Trusts on
the Corporation's balance sheet as a separate line item entitled "Guaranteed
Preferred Beneficial Interests in Corporation's Junior Subordinated Deferrable
Interest Debentures"; (ii) include in a footnote to the financial statements
disclosure that the sole assets of the trusts are the Junior Subordinated
Debentures (specifying as to each trust the principal amount, interest rate
and maturity date of the Junior Subordinated Debentures held); and (iii) if
Staff Accounting Bulletin 53 treatment is sought, include, in an audited
footnote to the financial statements, disclosure that (a) the trusts are
wholly owned, (b) the sole assets of the trusts are the Junior Subordinated
Debentures (specifying as to each trust the principal amount, interest rate
and maturity date of the Junior Subordinated Debentures held) and (c) the
obligations of the Corporation under the Junior Subordinated Debentures, the
relevant Indenture, Trust Agreement, Guarantee and Expense Agreement, in the
aggregate, constitute a full and unconditional guarantee by the Corporation of
such trust's obligations under the preferred securities issued by such trust.
CERTAIN TERMS OF SERIES D PREFERRED SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series D
Preferred Securities supplements the description of the terms and provisions
of the Preferred Securities set forth in the accompanying Prospectus under the
heading "Description of Preferred Securities," to which description reference
is hereby made. This summary of certain terms and provisions of the Series D
Preferred Securities, which describes the material provisions thereof, does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the Trust Agreement to which reference is hereby made. The form
of Trust Agreement has been filed as an exhibit to the Registration Statement
of which this Prospectus Supplement and accompanying Prospectus form a part.
DISTRIBUTIONS
The Series D Preferred Securities represent beneficial interests in the
Series D Issuer, and Distributions on the Series D Preferred Securities will
be payable at the annual rate of 7.05% of the stated Liquidation Amount of
$25, payable quarterly in arrears on March 1, June 1, September 1 and December
1 of each year (each a "Distribution Date"), to the holders of the Series D
Preferred Securities at the close of business on the fifteenth day (whether or
not a Business Day (as defined below)) next preceding the relevant
Distribution Date. Distributions will accumulate from the date of original
issuance. The first Distribution payment date for the Series D Preferred
Securities will be June 1, 1998. 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
Series D Preferred Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day
that is a Business Day (and without any additional Distributions or other
payment in respect of any such delay) with the same force and effect as if
made on the date such payment was originally payable. The Paying Agent for the
Preferred Securities shall be the Bank of New York. See "Description of
Preferred Securities--Distributions" in the accompanying Prospectus.
S-15
<PAGE>
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Series D Subordinated Debentures at any time or from time
to time for a period not exceeding 20 consecutive quarters with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Series D Subordinated Debentures. As a consequence of
any such deferral of interest payments by the Corporation, quarterly
Distributions on the Series D Preferred Securities will also be deferred by
the Series D Issuer during any such Extension Period. Distributions to which
holders of the Series D Preferred Securities are entitled will accumulate
additional Distributions thereon at the rate per annum of 7.05% thereof,
compounded quarterly from the relevant payment date for such Distributions.
The term "Distributions" as used herein shall include any such additional
Distributions. During any such 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 or (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 that rank pari passu in all respects with or
junior in interest to the Series D Subordinated Debentures (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of
the Corporation in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of one or more employees,
officers, directors or consultants, in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of
capital stock of the Corporation (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series
of the Corporation's capital stock, (c) 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, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise
of such warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks pari passu with or junior to such stock).
Prior to the termination of any such Extension Period, the Corporation may
further defer the payment of interest on the Series D Subordinated Debentures,
provided that no Extension Period may exceed 20 consecutive quarters or extend
beyond the Stated Maturity of the Series D Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all interest then
accrued and unpaid (together with interest thereon at the rate of 7.05% per
annum, compounded quarterly, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period. There is no limitation
on the number of times that the Corporation may elect to begin an Extension
Period. See "Certain Terms of Series D Subordinated Debentures--Option to
Defer Interest Payments" and "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series D
Subordinated Debentures.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series D
Subordinated Debentures, whether at Stated Maturity or upon earlier redemption
as provided in the Indenture, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount (as defined
in the accompanying Prospectus) of the Series D Securities, upon not less than
30 nor more than 60 days notice prior to the date fixed for repayment or
redemption, at a redemption price, with respect to the Series D Preferred
Securities (the "Redemption Price"), equal to the aggregate Liquidation Amount
of such Series D Preferred Securities plus accumulated and unpaid
Distributions thereon to the date of redemption (the "Redemption Date"). See
"Description of Preferred Securities--Redemption or Exchange" in the
accompanying Prospectus. For a description of the Stated Maturity and
redemption provisions of the Series D Subordinated Debentures, see "Certain
Terms of Series D Subordinated Debentures--General" and "--Redemption."
S-16
<PAGE>
LIQUIDATION OF SERIES D ISSUER AND DISTRIBUTION OF SERIES D SUBORDINATED
DEBENTURES TO HOLDERS
The Corporation will have the right at any time to liquidate the Series D
Issuer and cause the Series D Subordinated Debentures to be distributed to the
holders of the Series D Preferred Securities in exchange therefor upon
liquidation of the Series D Issuer. The Corporation has committed to the
Federal Reserve that, so long as the Corporation (or any affiliate) is a
holder of Series D Common Securities, the Corporation will not exercise such
right without having received the prior approval of the Federal Reserve to do
so, if then required under applicable Federal Reserve capital guidelines or
policies.
Under current United States Federal income tax law, a distribution of Series
D Subordinated Debentures in exchange for Series D Preferred Securities should
not be a taxable event to holders of the Series D Preferred Securities. Should
there be a change in law, a change in legal interpretation, a Tax Event or
other circumstances, however, the distribution of the Series D Subordinated
Debentures could be a taxable event to holders of the Series D Preferred
Securities. See "Certain Federal Income Tax Consequences--Distribution of
Series D Subordinated Debentures to Holders of Series D Preferred Securities."
If the Corporation elects neither to redeem the Series D Subordinated
Debentures prior to maturity nor to liquidate the Series D Issuer and
distribute the Series D Subordinated Debentures to holders of the Series D
Preferred Securities in exchange therefor, the Series D Preferred Securities
will remain outstanding until the Stated Maturity of the Series D Subordinated
Debentures.
If the Corporation elects to liquidate the Series D Issuer and thereby
causes the Series D Subordinated Debentures to be distributed to holders of
the Series D Preferred Securities in exchange therefor upon liquidation of the
Series D Issuer, the Corporation shall continue to have the right to shorten
or extend the maturity of the Series D Subordinated Debentures, subject to
certain conditions as described under "Certain Terms of Series D Subordinated
Debentures--General."
LIQUIDATION VALUE
The amount payable on the Series D Preferred Securities in the event of any
liquidation of the Series D Issuer is $25 per Series D Preferred Security plus
accumulated and unpaid Distributions, which may be in the form of a
distribution of a Like Amount in Series D Subordinated Debentures, subject to
certain exceptions. See "Description of Preferred Securities--Liquidation
Distribution Upon Termination" in the accompanying Prospectus.
REGISTRATION OF SERIES D PREFERRED SECURITIES
The Series D Preferred Securities will be represented by global certificates
registered in the name of DTC or its nominee. Beneficial interests in the
Series D Preferred Securities will be shown on, and transfers thereof will be
effected only through, records maintained by Participants in DTC (as defined
in the accompanying Prospectus). Except as described below and in the
accompanying Prospectus, Series D Preferred Securities in certificated form
will not be issued in exchange for the global certificates. See "Book-Entry
Issuance" in the accompanying Prospectus.
A global security shall be exchangeable for Series D Preferred Securities
registered in the names of persons other than DTC or its nominee only if (i)
DTC notifies the Series D Issuer that it is unwilling or unable to continue as
a depository for such global security and no successor depository shall have
been appointed, or if at any time DTC ceases to be a clearing agency
registered under the Exchange Act, at a time when DTC is required to be so
registered to act as such depository, (ii) the Series D Issuer in its sole
discretion determines that such global security shall be so exchangeable or
(iii) there shall have occurred and be continuing an event of default under
the Indenture with respect to the Series D Subordinated Debentures. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants with respect to ownership of beneficial
interests in such global security. In the event
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that Series D Preferred Securities are issued in definitive form, such Series
D Preferred Securities will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Series D Preferred Securities represented by a global security
will be made to DTC, as the depositary for the Series D Preferred Securities.
In the event Series D Preferred Securities are issued in certificated form,
the Liquidation Amount and Distributions will be payable, the transfer of the
Series D Preferred Securities will be registrable, and Series D Preferred
Securities will be exchangeable for Series D Preferred Securities of other
denominations of a like aggregate Liquidation Amount, at the corporate office
of the Property Trustee in New York, New York, or at the offices of any paying
agent or transfer agent appointed by the Administrative Trustees, provided
that payment of any Distribution may be made at the option of the
Administrative Trustees by check mailed to the address of the persons entitled
thereto or by wire transfer. In addition, if the Series D Preferred Securities
are issued in certificated form, the record dates for payment of Distributions
will be the 15th day of the month in which the relevant Distribution payment
is scheduled to be made. For a description of DTC and the terms of the
depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance" in
the accompanying Prospectus.
CERTAIN TERMS OF SERIES D SUBORDINATED DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Series D
Subordinated Debentures supplements the description of the terms and
provisions of the Corresponding Junior Subordinated Debentures set forth in
the accompanying Prospectus under the headings "Description of Junior
Subordinated Debentures", to which description reference is hereby made. The
summary of certain terms and provisions of the Series D Subordinated
Debentures set forth below, which describes the material provisions thereof,
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the Indenture to which reference is hereby made. The
form of Indenture has been filed as an exhibit to the Registration Statement
of which this Prospectus Supplement and accompanying Prospectus form a part.
Concurrently with the issuance of the Series D Preferred Securities, the
Series D Issuer will invest the proceeds thereof, together with the
consideration paid by the Corporation for the Series D Common Securities, in
the Series D Subordinated Debentures issued by the Corporation. The Series D
Subordinated Debentures will bear interest at the annual rate of 7.05% of the
principal amount thereof, payable quarterly in arrears on March 1, June 1,
September 1 and December 1 of each year (each, an "Interest Payment Date"),
commencing June 1, 1998, to the person in whose name each Series D
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the Business Day next preceding such Interest Payment
Date. It is anticipated that, until the liquidation, if any, of the Series D
Issuer, the Series D Subordinated Debentures will be held in the name of the
Property Trustee in trust for the benefit of the holders of the Series D
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 Series D 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), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on the date such payment was originally payable.
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 7.05% thereof, compounded quarterly from the
relevant Interest Payment Date. The term "interest" as used herein shall
include quarterly interest payments, interest on quarterly interest payments
not paid on the applicable Interest Payment Date and Additional Sums (as
defined below), as applicable.
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The Series D Subordinated Debentures will be issued as a series of junior
subordinated deferrable interest debentures under the Indenture. The Series D
Subordinated Debentures will mature on March 1, 2028 (such date, as it may be
shortened or extended as hereinafter described, the "Stated Maturity"). Such
date may be shortened at any time by the Corporation to any date not earlier
than March 1, 2013, subject to the Corporation's commitment to the Federal
Reserve not to do so without its prior approval if such approval is then
required under applicable Federal Reserve capital guidelines or policies. Such
date may also be extended at any time at the election of the Corporation for
one or more periods, but in no event to a date later than March 1, 2047,
provided that at the time such election is made and at the time of extension
(i) the Corporation is not in bankruptcy, otherwise insolvent or in
liquidation, (ii) the Corporation is not in default in the payment of any
interest or principal on the Series D Subordinated Debentures, (iii) if the
Series D Issuer has not been liquidated, the Series D Issuer is not in arrears
on payments of Distributions on the Series D Preferred Securities and no
deferred Distributions are accumulated, (iv) the Series D Subordinated
Debentures are rated not less than BBB- by Standard & Poor's or Baa3 by
Moody's or the equivalent by any other nationally recognized statistical
rating organization and (v) after such extension the Series D Subordinated
Debentures shall not have a remaining term to maturity of more than 30 years.
In the event the Corporation elects to shorten or extend the Stated Maturity
of the Series D Subordinated Debentures, it shall give notice to the Debenture
Trustee, and the Debenture Trustee shall give notice of such shortening or
extension to the holders of the Series D Subordinated Debentures no more than
30 and no less than 60 days prior to the effectiveness thereof.
The Series D Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt of the Corporation.
See "Description of Junior Subordinated Debentures--Subordination" in the
accompanying Prospectus. Substantially all of the Corporation's existing
indebtedness constitutes Senior Debt. Because the Corporation is a holding
company, the right of the Corporation to participate in any distribution of
assets of any subsidiary, including The Bank of New York and The Bank of New
York (Delaware), upon such subsidiary's liquidation or reorganization or
otherwise (and thus the ability of holders of the Series D Preferred
Securities to benefit indirectly from such distribution), is subject to the
prior claims of creditors of that subsidiary, except to the extent that the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Series D Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and holders of Series D Subordinated Debentures should look only
to the assets of the Corporation for payments on the Series D Subordinated
Debentures. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Corporation, including Senior Debt, whether
under the Indenture or any existing or other indenture that the Corporation
may enter into in the future or otherwise. See "Description of Junior
Subordinated Debentures--Subordination" in the accompanying Prospectus.
OPTION TO DEFER INTEREST PAYMENTS
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture at any time or
from time to time during the term of the Series D Subordinated Debentures to
defer payment of interest on the Series D Subordinated Debentures for a period
not exceeding 20 consecutive quarters with respect to each Extension Period,
provided that no Extension Period may extend beyond the Stated Maturity of the
Series D Subordinated Debentures. At the end of such Extension Period, the
Corporation must pay all interest then accrued and unpaid on the Subordinated
Debentures (together with interest on such unpaid interest at the annual rate
of 7.05%, compounded quarterly from the relevant Interest Payment Date, to the
extent permitted by applicable law). During an Extension Period, interest will
continue to accrue and holders of Series D Subordinated Debentures (or holders
of Series D Preferred Securities while such series is outstanding) will be
required to accrue interest income for United States federal income tax
purposes. See "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
During any such 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
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stock or (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 Junior Subordinated Debentures) that rank pari passu in all
respects with or junior in interest to the Series D Subordinated Debentures
(other than (a) repurchases, redemptions or other acquisitions of shares of
capital stock of the Corporation in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of one or
more employees, officers, directors or consultants, in connection with a
dividend reinvestment or stockholder stock purchase plan or in connection with
the issuance of capital stock of the Corporation (or securities convertible
into or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series
of the Corporation's capital stock, (c) 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, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise
of such warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks pari passu with or junior to such stock).
Prior to the termination of any such Extension Period, the Corporation may
further defer the payment of interest on the Series D Subordinated Debentures,
provided that no Extension Period may exceed 20 consecutive quarters or extend
beyond the Stated Maturity of the Series D Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all interest then
accrued and unpaid (together with interest thereon at the rate of 7.05% per
annum compounded quarterly, to the extent permitted by applicable law), 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 to
begin such Extension Period at least one Business Day prior to the earlier of
(i) the date interest on the Series D Subordinated Debentures would have been
payable except for the election to begin such Extension Period or (ii) the
date the Administrative Trustees are required to give notice to the New York
Stock Exchange, the Nasdaq National Market or other applicable stock exchange
or automated quotation system on which the Series D Preferred Securities are
then listed or quoted or to holders of Series D Subordinated Debentures of the
record date or (iii) the date such interest is payable, but in any event not
less than one Business Day prior to such record date. The Debenture Trustee
shall give notice of the Corporation's election to begin a new Extension
Period to the holders of the Series D Subordinated Debentures. There is no
limitation on the number of times that the Corporation may elect to begin an
Extension Period. See "Description of Junior Subordinated Debentures--Option
to Defer Interest Payments" in the accompanying Prospectus.
ADDITIONAL SUMS
If the Series D Issuer 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 Series D Subordinated Debentures such amounts
as shall be required so that the Distributions payable by the Series D Issuer
shall not be reduced as a result of any such additional taxes, duties or other
governmental charges.
Pursuant to the Agreement as to Expenses and Liabilities, the Corporation,
as the holder of the Series D Common Securities, will agree to pay all debts
and other obligations (other than with respect to the Series D Preferred
Securities) and all costs and expenses of the Series D Issuer (including costs
and expenses relating to the organization of the Series D Issuer, the fees and
expenses of the Issuer Trustees and the costs and expenses relating to the
operation of the Series D Issuer). The form of Agreement as to Expenses and
Liabilities is included as Exhibit D in the form of Trust Agreement, which has
been filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and accompanying Prospectus form a part.
REDEMPTION
The Series D Subordinated Debentures are redeemable prior to maturity at the
option of the Corporation (i) on or after March 24, 2003, in whole at any time
or in part from time to time, with not less than 30 days' and
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not more than 60 days' notice, or (ii) at any time in whole (but not in part)
prior to March 24, 2003 and within 90 days following the occurrence and
continuation of a Tax Event or Capital Treatment Event, in either case at a
redemption price equal to the accrued and unpaid interest on the Series D
Subordinated Debentures so redeemed to the date fixed for redemption, plus
100% of the principal amount thereof. See "Description of Junior Subordinated
Debentures--Redemption" in the accompanying Prospectus.
DISTRIBUTION OF SERIES D SUBORDINATED DEBENTURES
As described under "Certain Terms of Series D Preferred Securities--
Liquidation of Series D Issuer and Distribution of Series D Subordinated
Debentures to Holders", under certain circumstances involving the termination
of the Series D Issuer, Series D Subordinated Debentures may be distributed to
the holders of the Series D Preferred Securities in exchange therefor upon
liquidation of the Series D Issuer after satisfaction of liabilities to
creditors of the Series D Issuer as provided by applicable law. If distributed
to holders of Series D Preferred Securities, the Series D Subordinated
Debentures will initially be issued in the form of one or more global
securities and DTC, or any successor depositary for the Series D Preferred
Securities, will act as depositary for the Series D Subordinated Debentures.
It is anticipated that the depositary arrangements for the Series D
Subordinated Debentures would be substantially identical to those in effect
for the Series D Preferred Securities. If Series D Subordinated Debentures are
distributed to the holders of Series D Preferred Securities in exchange
therefor upon liquidation of the Series D Issuer, the Corporation will use its
best efforts to list the Series D Subordinated Debentures on the New York
Stock Exchange or such other stock exchanges or automated quotation system, if
any, on which the Series D Preferred Securities are then listed or quoted.
There can be no assurance as to the market price of any Series D Subordinated
Debentures that may be distributed to the holders of Series D Preferred
Securities.
REGISTRATION OF SERIES D SUBORDINATED DEBENTURES
The Series D Subordinated Debentures will be represented by global
certificates registered in the name of DTC or its nominee. Beneficial
interests in the Series D Subordinated Debentures will be shown on, and
transfers thereof will be effected only through, records maintained by
Participants in DTC. Except as described below and in the accompanying
Prospectus, Series D Subordinated Debentures in certificated form will not be
issued in exchange for the global certificates. See "Book-Entry Issuance" in
the accompanying Prospectus.
A global security shall be exchangeable for Series D Subordinated Debentures
registered in the names of persons other than DTC or its nominee only if (i)
DTC notifies the Corporation that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have
been appointed, or if at any time DTC ceases to be a clearing agency
registered under the Exchange Act, at a time when DTC is required to be so
registered to act as such depositary, (ii) the Corporation in its sole
discretion determines that such global security shall be so exchangeable, or
(iii) there shall have occurred and be continuing an event of default under
the Indenture with respect to the Series D Subordinated Debentures. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants with respect to ownership of beneficial
interests in such global security. In the event that Series D Subordinated
Debentures are issued in definitive form, such Series D Subordinated
Debentures will be in denominations of $25 and integral multiples thereof and
may be transferred or exchanged at the offices described below.
Payments on Series D Subordinated Debentures represented by a global
security will be made to DTC, as the depositary for the Series D Subordinated
Debentures. In the event Series D Subordinated Debentures are issued in
certificated form, principal and interest will be payable, the transfer of the
Series D Subordinated Debentures will be registrable, and Series D
Subordinated Debentures will be exchangeable for Series D Subordinated
Debentures of other denominations of a like aggregate principal amount, at the
corporate office of
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the Debenture Trustee in New York, New York, or at the offices of any paying
agent or transfer agent appointed by the Corporation, provided that payment of
interest may be made at the option of the Corporation by check mailed to the
address of the persons entitled thereto or by wire transfer. In addition, if
the Series D Subordinated Debentures are issued in certificated form, the
record dates for payment of interest will be the 15th day of the last month of
each calendar quarter. For a description of DTC and the terms of the
depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance" in
the accompanying Prospectus.
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CERTAIN TERMS OF SERIES D GUARANTEE
The Series D Guarantee guarantees to the holders of the Series D Preferred
Securities the following payments, to the extent not paid by the Series D
Issuer: (i) any accumulated and unpaid Distributions required to be paid on
the Series D Preferred Securities, to the extent that the Series D Issuer has
funds on hand available therefor at such time, (ii) the Redemption Price with
respect to any Series D Preferred Securities called for redemption, to the
extent that the Series D Issuer has funds on hand available therefor at such
time, and (iii) upon a voluntary or involuntary dissolution, winding-up or
liquidation of the Series D Issuer (unless the Series D Subordinated
Debentures are distributed to holders of the Series D Preferred 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 Series
D Issuer has funds on hand available therefor at such time, and (b) the amount
of assets of the Series D Issuer remaining available for distribution to
holders of the Series D Preferred Securities after payment of creditors of the
Series D Issuer as required by applicable law. The Series D Guarantee will be
qualified as an indenture under the Trust Indenture Act. The First National
Bank of Chicago will act as the Guarantee Trustee for the purposes of
compliance with the Trust Indenture Act and will hold the Series D Guarantee
for the benefit of the holders of the Series D Preferred Securities. The First
National Bank of Chicago will also act as Debenture Trustee for the Series D
Subordinated Debentures and as Property Trustee.
The holders of not less than a majority in aggregate Liquidation Amount of
the Series D Preferred Securities have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect to the Series D Guarantee or to direct the
exercise of any trust power conferred upon the Guarantee Trustee under the
Series D Guarantee. Any holder of the Series D Preferred Securities may
institute a legal proceeding directly against the Corporation to enforce its
rights under the Series D Guarantee without first instituting a legal
proceeding against the Series D Issuer, the Guarantee Trustee or any other
person or entity. If the Corporation were to default on its obligation to pay
amounts payable under the Series D Subordinated Debentures, the Series D
Issuer would lack funds for the payment of Distributions or amounts payable on
redemption of the Series D Preferred Securities or otherwise, and, in such
event, holders of the Series D Preferred Securities would not be able to rely
upon the Series D Guarantee for payment of such amounts. Instead, if any event
of default under the Indenture shall have occurred and be continuing and such
event is attributable to the failure of the Corporation to pay interest or
premium, if any, on or principal of the Series D Subordinated Debentures on
the applicable payment date, then a holder of Series D Preferred Securities
may institute a Direct Action against the Corporation pursuant to the terms of
the Indenture for enforcement of payment to such holder of the principal of or
interest or premium, if any, on such Series D Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Series D
Preferred Securities of such holder. In connection with such Direct Action,
the Corporation will have a right to set-off under the Indenture to the extent
of any payment made by the Corporation to such holder of Series D Securities
in the Direct Action. Except as described herein, holders of Series D
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Series D Subordinated Debentures or assert
directly any other rights in respect of the Series D Subordinated Debentures.
See "Description of Guarantees" in the accompanying Prospectus. The Trust
Agreement provides that each holder of Series D Preferred Securities by
acceptance thereof agrees to the provisions of the Series D Guarantee, the
Expense Agreement and the Indenture.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income tax
consequences of the purchase, ownership and disposition of Series D Preferred
Securities. This summary only addresses the tax consequences to a person that
acquires Series D Preferred Securities on their original issue at their
original offering price and that is (i) an individual citizen or resident of
the United States, (ii) a corporation or partnership organized in or under the
laws of the United States or any state thereof or the District of Columbia,
(iii) an estate the income of which is subject to United States federal income
tax without regard to its source or (iv) a trust if a United States court is
able to exercise primary supervision over the administration of the trust and
one or more United States persons have authority to control all substantial
decisions of the trust (a "United States Person"). This summary does not
address all tax consequences that may be applicable to a United States Person
that is a beneficial owner of Series D Preferred Securities, nor does it
address the tax consequences to (i) persons that are not United States
Persons, (ii) persons that may be subject to special treatment under United
States federal income tax law, such as banks, insurance companies, thrift
institutions, regulated investment companies, real estate investment trusts,
tax-exempt organizations, traders in securities that elect to mark to market
and dealers in securities or currencies, (iii) persons that will hold Series D
Preferred Securities as part of a position in a "straddle" or as part of a
"hedging," "conversion" or other integrated investment transaction for federal
income tax purposes, (iv) persons whose functional currency is not the United
States dollar or (v) persons that do not hold Series D Preferred Securities as
capital assets.
The statements of law or legal conclusion set forth in this summary
constitute the opinion of Sullivan & Cromwell, counsel to the Corporation and
the Series D Issuer. This summary is based upon the Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service
rulings and pronouncements and judicial decisions now in effect, all of which
are subject to change at any time. Such changes may be applied retroactively
in a manner that could cause the tax consequences to vary substantially from
the consequences described below, possibly adversely affecting a beneficial
owner of Series D Preferred Securities. In particular, legislation has been
proposed in the past that could adversely affect the Corporation's ability to
deduct interest on the Series D Subordinated Debentures, which may in turn
permit the Corporation to cause a redemption of the Series D Preferred
Securities. See "--Possible Tax Law Changes." The authorities on which this
summary is based are subject to various interpretations, and it is therefore
possible that the federal income tax treatment of the purchase, ownership and
disposition of Series D Preferred Securities may differ from the treatment
described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SERIES D PREFERRED SECURITIES,
AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE SERIES D ISSUER
Under current law and assuming compliance with the terms of the Trust
Agreement and certain factual matters, the Series D Issuer will not be
classified as an association taxable as a corporation for United States
federal income tax purposes. As a result, a United States Person that is a
beneficial owner of Series D Preferred Securities (a "Securityholder") will be
required to include in its gross income its pro rata share of the interest
income, including original issue discount, paid or accrued with respect to the
Series D Subordinated Debentures whether or not cash is actually distributed
to the Securityholders. See "--Interest Income and Original Issue Discount."
No amount included in income with respect to the Series D Preferred Securities
will be eligible for the dividends-received deduction.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under Treasury regulations applicable to debt instruments issued on or after
August 13, 1996 (the "Regulations"), a contingency that stated interest will
not be timely paid that is "remote", because of the terms
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of the relevant debt instrument, will be ignored in determining whether such
debt instrument is issued with original issue discount ("OID"). As a result of
terms and conditions of the Series D Subordinated Debentures that prohibit
certain payments with respect to the Corporation's capital stock and
indebtedness if the Corporation elects to extend interest payment periods, the
Corporation believes that the likelihood of its exercising its option to defer
payments is remote. Based on the foregoing, the Corporation believes that the
Series D Subordinated Debentures will not be considered to be issued with OID
at the time of their original issuance and, accordingly, a Securityholder
should include in gross income such holder's allocable share of interest on
the Series D Subordinated Debentures.
If the option to defer any payment of interest was determined not to be
"remote" or if the Corporation exercises its option to defer any payment of
interest, the Series D Subordinated Debentures would be treated as issued with
OID at the time of issuance or at the time of such exercise, as the case may
be, and all stated interest on the Series D Subordinated Debentures would
thereafter be treated as OID as long as the Series D Subordinated Debentures
remained outstanding. In such event, all of a Securityholder's taxable
interest income with respect to the Series D Subordinated Debentures would be
accounted for as OID on a constant yield method regardless of such holder's
method of tax accounting, and actual distributions of stated interest would
not be reported as taxable income. Consequently, a Securityholder would be
required to include OID in gross income even though the Corporation would not
make any actual cash payments during an Extension Period.
The Regulations have not been addressed in any rulings or other
interpretations by the Internal Revenue Service (the "IRS"), and it is
possible that the IRS could take a position contrary to the interpretation
herein.
DISTRIBUTION OF SERIES D SUBORDINATED DEBENTURES TO HOLDERS OF SERIES D
PREFERRED SECURITIES
Under current law, a distribution by the Series D Issuer of the Series D
Subordinated Debentures as described under the caption "Certain Terms of
Series D Preferred Securities--Liquidation of Series D Issuer and Distribution
of Series D Subordinated Debentures to Holders" will be non-taxable and will
result in the Securityholder receiving directly its pro rata share of the
Series D Subordinated Debentures previously held indirectly through the Series
D Issuer, with a holding period and aggregate-tax basis equal to the holding
period and aggregate-tax basis such Securityholder had in its Series D
Preferred Securities before such distribution. If, however, the liquidation of
the Series D Issuer were to occur because the Series D Issuer is subject to
United States Federal income tax with respect to income accrued or received on
the Series D Subordinated Debentures, as the case would be if the Series D
Issuer were treated as an association taxable as a corporation, the
distribution of Series D Subordinated Debentures to Securityholders by the
Series D Issuer would be a taxable event to the Series D Issuer and each
Securityholder, and each Securityholder would recognize gain or loss as if the
Securityholder had exchanged its Series D Preferred Securities for the Series
D Subordinated Debentures it received upon the liquidation of the Series D
Issuer. A Securityholder will include interest in income in respect of Series
D Subordinated Debentures received from the Series D Issuer in the manner
described above under "--Interest Income and Original Issue Discount."
SALE OR REDEMPTION OF SERIES D PREFERRED SECURITIES
A Securityholder that sells (including a redemption for cash) Series D
Preferred Securities will recognize gain or loss equal to the difference
between its adjusted-tax basis in the Series D Preferred Securities and the
amount realized on the sale of such Series D Preferred Securities. Assuming
that the Corporation does not exercise its option to defer payment of interest
on the Series D Subordinated Debentures and the Series D Subordinated
Debentures are not considered issued with OID, a Securityholder's adjusted tax
basis in the Series D Preferred Securities generally will be its initial
purchase price. If the Series D Subordinated Debentures are deemed to be
issued with OID, as a result of the Corporation's deferral of interest
payments, a Securityholder's
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<PAGE>
adjusted tax basis in the Series D Preferred Securities generally will be its
initial purchase price, increased by OID previously includible in such
Securityholder's gross income to the date of disposition and decreased by
Distributions or other payments received on the Series D Preferred Securities
since and including the date of the first Extension Period. Such gain or loss
generally will be a capital gain or loss (except to the extent any amount
realized is treated as a payment of accrued interest with respect to such
Securityholder's pro rata share of the Series D Subordinated Debentures
required to be included in income). Capital gain derived by non-corporate
Securityholders on the sale of Series D Preferred Securities that have been
held for more than eighteen months will be subject to a 20% maximum tax rate
and capital gain derived by non-corporate Securityholders on the sale of
Series D Preferred Securities that have been held for more than one year but
less than eighteen months will be subject to a 28% maximum tax rate. To the
extent the selling price is less than the Securityholder's adjusted-tax basis,
such 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.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest income paid and OID accrued on the Series D Preferred
Securities held of record by Securityholders (other than corporations and
other exempt Securityholders) will be reported to the IRS. "Backup"
withholding at a rate of 31% will apply to payments of interest to nonexempt
United States Persons unless the Securityholder furnishes its taxpayer
identification number in the manner prescribed in applicable Treasury
Regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions.
Payment of the proceeds from the disposition of Series D Preferred
Securities to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner establishes an exemption from information reporting and backup
withholding.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information
is furnished to the IRS.
It is anticipated that income on the Series D Preferred Securities will be
reported to holders on Form 1099 and mailed to holders of the Series D
Preferred Securities by January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
Prospective investors should be aware that legislation was proposed in the
United States Congress in the past that, if enacted, would have denied an
interest deduction to issuers of instruments such as the Series D Subordinated
Debentures. No such legislation is currently pending. There can be no
assurance, however, that similar legislation will not ultimately be enacted
into law, or that other developments will not occur after the date hereof that
would adversely affect the tax treatment of the Series D Subordinated
Debentures. Such a change could give rise to a Tax Event, which may permit the
Corporation to cause a redemption of the Series D Preferred Securities, as
described more fully under "Description of Preferred Securities--Redemption or
Exchange" in the accompanying Prospectus.
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), should consider the fiduciary standards of ERISA in the context of
the plan's particular circumstances before authorizing an investment in the
Series D Preferred Securities. Among other factors, the fiduciary should
consider whether the investment would satisfy the prudence and diversification
requirements of ERISA and would be in accordance with the documents governing
the plan. Section 406 of ERISA and Section 4975 of the Code prohibit an
employee benefit plan from engaging in certain
S-26
<PAGE>
transactions involving "plan assets" with person who are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to the plan.
Therefore, a fiduciary of an employee benefit plan should also consider
whether an investment in the Preferred Securities might constitute or give
rise to a prohibited transaction under ERISA and the Code. The prohibited
transaction rules under Section 4975 of the Code also apply to Individual
Retirement Accounts.
The U.S. Department of Labor (the "DOL") has issued a final regulation with
regard to whether the underlying assets of an entity in which employee benefit
plans acquire equity interests would be deemed to be plan assets. The
regulation provides that the underlying assets of an entity will not be
considered to be plan assets if the equity interests acquired by employee
benefit plans are "publicly-offered securities" -- that is, they are (1)
widely held (i.e., owned by more than 100 investors independent of the
Corporation and of each other), (2) freely transferable and (3) sold as part
of an offering pursuant to an effective registration statement under the
Securities Act and then timely registered under Section 12(b) or 12(g) of the
Exchange Act. It is expected that the Series D Preferred Securities will meet
the criteria of "publicly-offered securities" above. The Underwriters expect
that the Series D Preferred Securities will be held by at least 100
independent investors at the conclusion of the offering; there are no
restrictions imposed on the transfer of the Series D Preferred Securities and
the Series D Preferred Securities will be sold as part of an offering pursuant
to an effective registration statement under the Securities Act, and then will
be timely registered under the Exchange Act.
The Corporation and certain of its subsidiaries could be a party in interest
or disqualified person with respect to an employee benefit plan or an
Individual Retirement Account. Special caution should be exercised before
purchasing Series D Preferred Securities in such event, including the
availability of a class exemption issued by the DOL which could apply to
exempt the purchase of such securities from the prohibited transaction
provision of ERISA and the Code--e.g., Prohibited Transaction Exemption 84-14,
for certain transactions determined by independent qualified professional
asset managers, Prohibited Transaction Exemption 90-1, for certain
transactions involving insurance company pooled separate accounts, Prohibited
Transaction Exemption 91-38, for certain transactions involving bank
collective investment funds, Prohibited Transaction Exemption 95-60 for
certain transactions involving insurance company general accounts, and
Prohibited Transaction Exemption 96-23, for certain transactions determined by
in-house asset managers.
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is important that an employee benefit
plan considering the purchase of Series D Preferred Securities consult with
its counsel regarding the consequences under ERISA of the acquisition of such
securities. Employee benefit plans which are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in section 3(33)
of ERISA) generally are not subject to ERISA requirements.
S-27
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Corporation and the Series D Issuer have agreed that the Series D Issuer
will sell to each of the Underwriters named below (the "Underwriters"), and
the Underwriters have severally agreed to purchase from the Series D Issuer,
the respective number of Series D Preferred Securities set forth opposite
their names below. In the Underwriting Agreement, the several Underwriters
have agreed, subject to the terms and conditions set forth therein (including,
without limitation, the approval of certain legal matters by counsel to the
Underwriters), to purchase all the Series D Preferred Securities offered
hereby if any of the Series D Preferred Securities are purchased. In the event
of default by an Underwriter, the Underwriting Agreement provides that, in
certain circumstances, the purchase commitments of the nondefaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
SERIES D
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Morgan Stanley & Co. Incorporated............................... 1,495,000
A.G. Edwards & Sons, Inc. ...................................... 1,465,000
Goldman, Sachs & Co. ........................................... 1,465,000
PaineWebber Incorporated........................................ 1,465,000
Prudential Securities Incorporated.............................. 1,465,000
Smith Barney Inc. .............................................. 1,465,000
BT Alex Brown Incorporated...................................... 120,000
Bear, Stearns & Co. Inc. ....................................... 120,000
CIBC Oppenheimer Corp. ......................................... 120,000
Credit Suisse First Boston Corporation.......................... 120,000
Donaldson, Lufkin & Jenrette Securities Corporation............. 120,000
Piper Jaffray Inc. ............................................. 120,000
Wheat First Securities, Inc. ................................... 120,000
Advest, Inc. ................................................... 60,000
Robert W. Baird & Co. Incorporated.............................. 60,000
J.C. Bradford & Co. ............................................ 60,000
Blaylock & Partners, L.P. ...................................... 60,000
Cowen & Company................................................. 60,000
Craigie Incorporated............................................ 60,000
Crowell, Weedon & Co. .......................................... 60,000
Dain Rauscher Incorporated...................................... 60,000
Davenport & Company LLC......................................... 60,000
Fahnestock & Co. Inc. .......................................... 60,000
Fidelity Capital Markets, A Division of National Financial
Services Corporation........................................... 60,000
First Albany Corporation........................................ 60,000
First of Michigan Corporation................................... 60,000
Gibraltar Securities Co. ....................................... 60,000
H.J. Meyers & Co., Inc. ........................................ 60,000
Interstate/Johnson Lane Corporation............................. 60,000
J.J.B. Hilliard, W.L. Lyons, Inc. .............................. 60,000
Janney Montgomery Scott Inc. ................................... 60,000
Legg Mason Wood Walker, Incorporated............................ 60,000
McDonald & Company Securities, Inc. ............................ 60,000
McGinn, Smith & Co., Inc. ...................................... 60,000
Mesirow Financial, Inc. ........................................ 60,000
Morgan Keegan & Company, Inc. .................................. 60,000
</TABLE>
S-28
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SERIES D
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Muriel Siebert & Co., Inc. ....................................... 60,000
NationsBanc Montgomery Securities LLC............................. 60,000
The Ohio Company.................................................. 60,000
Olde Discount Corporation......................................... 60,000
Raymond James & Associates, Inc. ................................. 60,000
The Robinson-Humphrey Company, LLC................................ 60,000
Roney & Co., L.L.C. .............................................. 60,000
Scott & Stringfellow, Inc. ....................................... 60,000
Stephens Inc. .................................................... 60,000
Sterne, Agee & Leach, Inc. ....................................... 60,000
Stifel, Nicolaus & Company, Incorporated.......................... 60,000
Sutro & Co. Incorporated.......................................... 60,000
TD Securities (USA) Inc. ......................................... 60,000
Tucker Anthony Incorporated....................................... 60,000
U.S. Clearing Corp. .............................................. 60,000
Wedbush Morgan Securities......................................... 60,000
----------
Total........................................................... 12,000,000
==========
</TABLE>
The Underwriters have advised the Corporation that they propose initially to
offer the Series D Preferred Securities to the public at the public offering
price set forth on the cover page of this Prospectus Supplement and to certain
dealers at such price less a concession not in excess of $0.50 per Series D
Preferred Security. The Underwriters may allow, and such dealers may reallow,
a discount not in excess of $0.45 per Series D Preferred Security to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed by the Underwriters named on the cover
page hereof.
In view of the fact that the proceeds from the sale of the Series D
Preferred Securities will be used to purchase the Series D Subordinated
Debentures issued by the Corporation, the Underwriting Agreement provides that
the Corporation will pay as Underwriters' compensation for the Underwriters'
arranging the investment therein of such proceeds an amount of $0.7875 per
Series D Preferred Security for the accounts of the several Underwriters.
The Corporation and the Series D Issuer have agreed that, during the period
beginning from the date of the Underwriting Agreement and continuing to and
including the earlier of (i) the termination of trading restrictions on the
Series D Preferred Securities, as determined by the Underwriters, and (ii) 30
days after the closing date,
they will not offer, sell, contract to sell or otherwise dispose of any
Preferred Securities, any other beneficial interests in the assets of the
Series D Issuer, or any preferred securities or any other securities of the
Series D Issuer or the Corporation which are substantially similar to the
Series D Preferred Securities, including any guarantee of such securities, or
any securities convertible into or exchangeable for or representing the right
to receive securities, preferred securities or any such substantially similar
securities of either the Series D Issuer or the Corporation, without the prior
written consent of the Underwriters, except for the Series D Preferred
Securities offered in connection with this offering.
Prior to this offering, there has been no public market for the Series D
Preferred Securities. The Series D Preferred Securities have been authorized,
subject to notice of issuance, for listing on the New York Stock Exchange
under the symbol "BKPrD". Trading of the Series D Preferred Securities on the
New York Stock Exchange is expected to commence within a 30-day period after
the initial delivery of the Series D Preferred Securities. The Underwriters
have advised the Corporation that they intend to make a market in the Series D
S-29
<PAGE>
Preferred Securities prior to commencement of trading on the New York Stock
Exchange, but are not obligated to do so and may discontinue market making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the Series D Preferred Securities.
In order to meet one of the requirements for listing the Series D Preferred
Securities on the New York Stock Exchange, the Underwriters will undertake to
sell lots of 100 or more Series D Preferred Securities to a minimum of 400
beneficial holders.
The Corporation and the Series D Issuer have agreed to indemnify the several
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
In order to facilitate the offering of the Series D Preferred Securities,
the Underwriters may engage in transactions that stabilize, maintain or
otherwise affect the price of the Series D Preferred Securities. Specifically,
the Underwriters may overallot in connection with the offering, creating a
short position in the Series D Preferred Securities for their own account. In
addition, to cover overallotments or to stabilize the price of the Series D
Preferred Securities, the Underwriters may bid for, and purchase, the Series D
Preferred Securities in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an Underwriter or a dealer for
distributing the Series D Preferred Securities in the offering, if the
syndicate repurchases previously distributed Series D Preferred Securities in
transactions to cover syndicate short positions, in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market
price of the Series D Preferred Securities above independent market levels.
The Underwriters are not required to engage in these activities, and may end
any of these activities at any time.
It is expected that delivery of the Series D Preferred Securities will be
made against payment therefor on or about the date specified in the last
paragraph of the cover page of this Prospectus Supplement, which will be the
eighth business day following the date of pricing of the Series D Preferred
Securities. Under Rule 15c6-1 under the Securities Exchange Act of 1934, as
amended, purchases or sales of securities in the secondary market generally
are required to settle within three business days ("T+3"), unless the parties
to any such transactions expressly agree otherwise. Accordingly, prospective
purchasers of the Series D Preferred Securities who wish to trade such
securities will be required, by virtue of the fact that the Series D Preferred
Securities initially will settle within eight business days ("T+8"), to
specify an alternate settlement cycle at the time of any such trade to prevent
a failed settlement. Prospective purchasers of the Series D Preferred
Securities who wish to trade prior to the settlement date should consult their
own legal advisors.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to the Corporation and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series D
Preferred Securities, the enforceability of the Trust Agreement and the
formation of the Series D Issuer will be passed upon by Richards, Layton &
Finger, P.A., One Rodney Square, Wilmington, Delaware 19801, special Delaware
Counsel to the Corporation and the Series D Issuer. The validity of the Series
D Guarantee and the Series D Subordinated Debentures will be passed upon for
the Corporation by Sullivan & Cromwell, 125 Broad Street, New York, New York
10004 and for the Underwriters by Milbank, Tweed, Hadley & McCloy, One Chase
Manhattan Plaza, New York, New York 10005. Milbank, Tweed, Hadley & McCloy
will rely on the opinion of Richards, Layton & Finger, P.A. as to matters of
Delaware law. Certain matters relating to United States federal income tax
considerations will be passed upon for the Corporation by Sullivan & Cromwell.
Milbank, Tweed, Hadley & McCloy from time to time performs legal services for
the Corporation.
S-30
<PAGE>
$500,000,000
THE BANK OF NEW YORK COMPANY, INC.
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
BNY CAPITAL III
BNY CAPITAL IV
BNY CAPITAL V
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED HEREIN, BY
THE BANK OF NEW YORK COMPANY, INC.
The Bank of New York, Company, Inc., a New York corporation (the
"Corporation"), may from time to time offer in one or more series or issuances
its junior subordinated deferrable interest debentures (the "Junior
Subordinated Debentures"). The Junior Subordinated Debentures will be
unsecured and subordinate and junior in right of payment to all Senior Debt
(as defined in "Description of Junior Subordinated Debentures--Subordination")
of the Corporation. If provided in an accompanying Prospectus Supplement, the
Corporation will have the right to defer payments of interest on any series of
Junior Subordinated Debentures by extending the interest payment period
thereon at any time or from time to time for up to such number of consecutive
interest payment periods (which shall not extend beyond the Stated Maturity
(as defined herein) of the Junior Subordinated Debentures) with respect to
each deferral period as may be specified in such Prospectus Supplement (each,
an "Extension Period"). In such circumstances, however, the Corporation would
not be permitted, subject to certain exceptions set forth herein, to declare
or pay any dividends, distributions or other payments with respect to, or
repay, repurchase, redeem or otherwise acquire, the Corporation's capital
stock or debt securities that rank pari passu in all respects with or junior
to such series of Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures--Option to Defer Interest Payments" and "--
Restrictions on Certain Payments".
BNY Capital III, BNY Capital IV and BNY Capital V, each a statutory business
trust created under the laws of the State of Delaware (each, an "Issuer," and
collectively, the "Issuers"), may severally offer, from time to time,
preferred securities (the "Preferred Securities") representing preferred
beneficial interests in such Issuer. The Corporation will be the owner of the
common securities representing common ownership interests in such Issuer (the
"Common Securities" and, together with the Preferred Securities, the "Trust
Securities"). Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash distributions ("Distributions") accumulating from
the date of original issuance and payable periodically as provided in an
accompanying Prospectus Supplement. Concurrently with the issuance by an
Issuer of its Preferred Securities,
(continued on next page)
----------------
THESE SECURITIES 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 March 12, 1998
<PAGE>
(cover page continued)
such Issuer will invest the proceeds thereof and of any contributions received
in respect of the Common Securities in a corresponding series of the
Corporation's Junior Subordinated Debentures (the "Corresponding Junior
Subordinated Debentures") with terms corresponding to the terms of that
Issuer's Preferred Securities (the "Related Preferred Securities"). The
Corresponding Junior Subordinated Debentures will be the sole assets of each
Issuer, and payments under the Corresponding Junior Subordinated Debentures
will be the only revenue of each Issuer. If provided in an accompanying
Prospectus Supplement, the Corporation may, upon receipt of approval of the
Federal Reserve (if such approval is then required), redeem the Corresponding
Junior Subordinated Debentures (and cause the redemption of the related Trust
Securities) or may terminate each Issuer and cause the Corresponding Junior
Subordinated Debentures to be distributed to the holders of the Related
Preferred Securities in liquidation of their interests in such Issuer. See
"Description of Preferred Securities--Liquidation Distribution Upon
Termination".
If provided in an accompanying Prospectus Supplement, the Corporation will
have the right to defer payments of interest on any series of Corresponding
Junior Subordinated Debentures. If interest payments are so deferred,
Distributions on the Related Preferred Securities will also be deferred and
the Corporation will not be permitted, subject to certain exceptions set forth
herein, to declare or pay any cash distributions with respect to the
Corporation's capital stock or debt securities that rank pari passu with or
junior to the Corresponding Junior Subordinated Debentures. During an
Extension Period, Distributions will continue to accumulate (and the Preferred
Securities will accumulate additional Distributions thereon at the rate per
annum set forth in the related Prospectus Supplement). See "Description of
Preferred Securities--Distributions".
Taken together, the Corporation's obligations under each series of Junior
Subordinated Debentures, the Indenture, the related Trust Agreement, the
related Expense Agreement and the related Guarantee (each, as defined herein),
in the aggregate, provide a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the related series of
Preferred Securities. See "Relationship Among the Preferred Securities, the
Corresponding Junior Subordinated Debentures, the Expense Agreements and the
Guarantees--Full and Unconditional Guarantee". The payment of Distributions
with respect to the Preferred Securities of each Issuer and payments on
liquidation or redemption with respect to such Preferred Securities, in each
case out of funds held by such Issuer, are each irrevocably guaranteed by the
Corporation to the extent described herein (each, a "Guarantee"). See
"Description of Guarantees". The obligations of the Corporation under each
Guarantee will be subordinate and junior in right of payment to all Senior
Debt of the Corporation.
The Junior Subordinated Debentures and Preferred Securities may be offered
in amounts, at prices and on terms to be determined at the time of offering;
provided, however, the aggregate initial public offering price of all Junior
Subordinated Debentures (other than Corresponding Junior Subordinated
Debentures) and Preferred Securities (including the Corresponding Junior
Subordinated Debentures) issued pursuant to the Registration Statement of
which this Prospectus forms a part shall not exceed $500,000,000. Certain
specific terms of the Junior Subordinated Debentures or Preferred Securities
in respect of which this Prospectus is being delivered will be described in an
accompanying Prospectus Supplement, including without limitation and where
applicable and to the extent not set forth herein, (a) in the case of Junior
Subordinated Debentures, the specific designation, aggregate principal amount,
denominations, Stated Maturity (including any provisions for the shortening or
extension thereof), interest payment dates, interest rate (which may be fixed
or variable) or method of calculating interest, if any, applicable Extension
Period or interest deferral terms, if any, place or places where principal,
premium, if any, and interest, if any, will be payable, any terms of
redemption, any sinking fund provisions, terms for any conversion or exchange
into other securities, initial offering or purchase price, methods of
distribution and any other special terms, and (b) in the case of Preferred
Securities, the identity of the Issuer, specific title, aggregate amount,
stated liquidation amount, number of securities, Distribution rate or method
of calculating such rate, Distribution payment dates, applicable Distribution
deferral terms, if any, place or places where Distributions will be payable,
any terms of redemption, exchange, initial offering or purchase price, methods
of distribution and any other special terms.
2
<PAGE>
(cover page continued)
The Prospectus Supplement also will contain information, as applicable,
about certain United States Federal income tax consequences relating to the
Junior Subordinated Debentures or Preferred Securities.
The Junior Subordinated Debentures and Preferred Securities may be sold to
or through underwriters, through dealers, remarketing firms or agents or
directly to purchasers. See "Plan of Distribution". The names of any
underwriters, dealers, remarketing firms or agents involved in the sale of
Junior Subordinated Debentures or Preferred Securities in respect of which
this Prospectus is being delivered and any applicable fee, commission or
discount arrangements with them will be set forth in a Prospectus Supplement.
The Prospectus Supplement will state whether the Junior Subordinated
Debentures or Preferred Securities will be listed on any national securities
exchange or automated quotation system. If the Junior Subordinated Debentures
or Preferred Securities are not listed on any national securities exchange or
automated quotation system, there can be no assurance that there will be a
secondary market for the Junior Subordinated Debentures or Preferred
Securities.
This Prospectus may not be used to consummate sales of Junior Subordinated
Debentures or Preferred Securities unless accompanied by a Prospectus
Supplement.
3
<PAGE>
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York
10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be
accessed electronically by means of the Commission's home page on the Internet
at http://www.sec.gov. In addition, such reports, proxy statements and other
information concerning the Corporation can be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Corporation and the Issuers have filed with the Commission a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Corporation and the securities offered hereby,
reference is made to the Registration Statement and the exhibits and the
financial statements, notes and schedules filed as a part thereof or
incorporated by reference therein, which may be inspected at the public
reference facilities of the Commission at the addresses set forth above or
through the Commission's home page on the Internet. Statements made in this
Prospectus concerning the contents of any documents referred to herein are not
necessarily complete, and in each instance are qualified in all respects by
reference to the copy of such document filed as an exhibit to the Registration
Statement.
No separate financial statements of any Issuer have been included herein.
The Corporation and the Issuers do not consider that such financial statements
would be material to holders of the Preferred Securities because each Issuer
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 Corresponding Junior
Subordinated Debentures of the Corporation and issuing the Trust Securities.
Furthermore, taken together, the Corporation's obligations under each series
of Corresponding Junior Subordinated Debentures, the Indenture, the related
Trust Agreement, the related Expense Agreement and the related Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of Distributions and other amounts due on the related Preferred
Securities of an Issuer. See "The Issuers", "Description of Preferred
Securities", "Description of Junior Subordinated Debentures--Corresponding
Junior Subordinated Debentures" and "Description of Guarantees". In addition,
the Corporation does not expect that any of the Issuers will be filing reports
under the Exchange Act with the Commission.
4
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated into this Prospectus by reference:
1. the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. the Corporation's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997; and
3. the Corporation's Current Reports on Form 8-K dated January 16, 1997,
April 14, 1997, June 5, 1997, July 14, 1997, October 21, 1997, December 18,
1997, January 20, 1998 and February 27, 1998.
Each document or report 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 any offering of securities made by this Prospectus shall be
deemed to be incorporated by reference into this Prospectus and to be a part
of this Prospectus from the date of filing of such document. Any statement
contained herein, or in a document all or a portion of which is incorporated
or deemed to be incorporated by reference herein, shall be deemed to be
modified or superseded for purposes of the Registration Statement and 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 such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Corporation will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein
(other than exhibits not specifically incorporated by reference into the texts
of such documents). Requests for such documents should be directed to The Bank
of New York Company, Inc., 48 Wall Street, New York, New York 10286, Attention
Jacqueline R. McSwiggan, Assistant Secretary, telephone number (212) 495-1784.
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THE CORPORATION
The Corporation is a bank holding company subject to the regulation and
supervision of the Federal Reserve Board under the Bank Holding Company Act of
1956, as amended ("BHC Act"). The Corporation is also subject to regulation by
the New York State Banking Department. Its principal wholly-owned banking
subsidiaries are The Bank of New York (the "Bank") and The Bank of New York
(Delaware). The Corporation provides a complete range of banking and other
financial services to corporations and individuals worldwide through its core
businesses: Corporate Banking, Retail Banking, Securities and Other
Processing, Trust, Investment Management and Private Banking and Financial
Market Services.
The Corporation has its principal executive offices at 48 Wall Street, New
York, New York 10286, telephone number (212) 495-1784.
CERTAIN REGULATORY CONSIDERATIONS
The Corporation's principal assets and sources of income are its investments
in its bank subsidiaries, and it is a legal entity separate and distinct from
its banks and other subsidiaries. There are various legal limitations on the
extent to which these banks and other subsidiaries can finance or otherwise
supply funds to the Corporation and certain of its affiliates.
DIVIDENDS
The Bank is subject to dividend limitations under the Federal Reserve Act
and the New York Banking Law. Under these statutes, prior regulatory approval
is required for dividends in any year that would exceed the net profits of the
bank declaring the dividend for such year combined with retained net profits
for the prior two years. Also, the Bank is prohibited from paying a dividend
in an amount greater than "undivided profits then on hand" less "bad debts"
(generally loans six months or more past due).
Under the first of these two standards, in 1998 the Bank could declare
dividends of approximately $839 million plus net profits earned in 1998. As of
December 31, 1997, the second standard was less restrictive than the first.
In addition to these statutory tests, the Bank's primary federal regulator
The Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), could prohibit a dividend if it determined that the payment would
constitute an unsafe or unsound banking practice. The Federal Reserve Board
has indicated that, generally, dividends should be paid by banks only to the
extent of earnings from continuing operations.
Consistent with its policy regarding bank holding companies serving as a
source of financial strength for their subsidiary banks, the Federal Reserve
Board has indicated that, as a matter of prudent banking, a bank holding
company generally should not maintain a rate of cash dividends unless its net
income available to common stockholders has been sufficient to fully fund the
dividends, and the prospective rate of earnings retention appears consistent
with the bank holding company's capital needs, asset quality and overall
financial condition. In the year ended December 31, 1997, the Corporation's
net income available to common stockholders was $1,095 million and it paid
common stock dividends totaling $373 million.
CAPITAL ADEQUACY
The Federal bank regulators have adopted risk-based capital guidelines for
bank holding companies and banks. The minimum ratio of qualifying total
capital ("Total Capital") to risk-weighted assets (including certain off-
balance sheet items) is 8%. At least half of the Total Capital is to be
comprised of common stock, retained
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earnings, noncumulative perpetual preferred stock, minority interests, and,
for bank holding companies, a limited amount of qualifying cumulative
perpetual preferred stock, less most intangibles including goodwill ("Tier 1
Capital"). The remainder ("Tier 2 Capital") may consist of other preferred
stock, certain other instruments, and limited amounts of subordinated debt and
the loan and lease loss allowance.
In addition, the Federal Reserve Board has established minimum Leverage
Ratio (Tier 1 capital to average total assets) guidelines for bank holding
companies and banks. The Federal Reserve Board's guidelines provide for a
minimum Leverage Ratio of 3% for bank holding companies and banks that meet
certain specified criteria, including those having the highest regulatory
rating. All other banking organizations will be required to maintain a
Leverage Ratio of at least 3% plus an additional cushion of 100 to 200 basis
points. The guidelines also provide that banking organizations experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets. As of December 31, 1997, the
Federal Reserve Board had not advised the Corporation of any specific minimum
Leverage Ratio applicable to it.
Federal banking agencies recently have issued regulations that modify
existing rules related to capital ratios with respect to various areas of risk
including interest rate exposure and other market risk. The Corporation does
not believe that the aggregate impact of these modifications will have a
significant impact on its capital position. Most banks and bank holding
companies operate with capital ratios substantially above these regulatory
minimums.
Certain consolidated ratios of the Corporation are included in the
Corporation's Current Report on Form 8-K dated January 20, 1998.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, requires the federal banking regulators to
take prompt corrective action in respect of FDIC-insured depository
institutions (such as the Bank) that do not meet minimum capital requirements.
FDICIA establishes five capital tiers: "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized." A depository institution's capital tier will
depend upon how its capital levels compare to various relevant capital
measures and certain other factors, as established by regulation. Under
applicable regulations, an FDIC-insured bank is defined to be well capitalized
if it maintains a Leverage Ratio of at least 5%, a Tier 1 Capital Ratio (Tier
1 Capital to risk-weighted assets and certain off-balance sheet items) of at
least 6% and a Total Capital Ratio of at least 10% and is not otherwise in a
"troubled condition" as specified by its appropriate federal regulatory
agency. A bank is generally considered to be adequately capitalized if it is
not defined to be well capitalized but meets all of its minimum capital
requirements, i.e., if it has a Total Capital Ratio of 8% or greater, a Tier 1
Capital Ratio of 4% or greater. A bank will be considered undercapitalized if
it fails to meet any minimum required measure, significantly undercapitalized
if it is significantly below such measure and critically undercapitalized if
it maintains a level of tangible equity capital equal to or less than 2% of
total assets. A bank may be deemed to be in a capitalization category that is
lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
FDICIA generally prohibits an FDIC-insured depository institution from
making any capital distribution (including payment of dividends) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions are
subject to restrictions on borrowing from the Federal Reserve Board. In
addition, under-capitalized depository institutions are subject to growth
limitations and are required to submit a capital restoration plan. The federal
banking agencies may not accept a capital plan without determining, among
other things, that the plan is based on realistic assumptions and is likely to
succeed in restoring the depository institution's capital. In addition, for an
undercapitalized depository institution's capital restoration plan to be
acceptable, its holding company must guarantee the capital plan up to an
amount equal to the lesser of 5% of the depository institution's assets at the
time it became undercapitalized or the amount of the capital deficiency when
the institution fails to comply with
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the plan. In the event of the parent holding company's bankruptcy, such
guarantee would take priority over the parent's general unsecured creditors.
If a depository institution fails to submit an acceptable plan, it is treated
as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator. A depositary institution that is not well
capitalized is subject to certain limitations on brokered deposits.
At December 31, 1997, the Bank and The Bank of New York (Delaware) were well
capitalized. At December 31, 1997, the Bank had a Leverage Ratio of 7.42%, a
risk-based Total Capital Ratio of 10.38% and a risk-based Tier 1 Capital Ratio
of 7.70%.
INTERSTATE BANKING
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("IBBEA") permits bank holding companies, with Federal Reserve Board approval,
to acquire banks located in states other than the bank holding company's home
state without regard to whether the transaction is prohibited under state law.
In addition, national banks and state banks with different home states are
permitted to merge across state lines, with the approval of the appropriate
federal banking agency, unless the home state of a participating bank passed
legislation between the date of enactment of IBBEA and May 31, 1997 expressly
prohibiting interstate mergers. Most states, including New York, New Jersey
and Connecticut have not passed legislation prohibiting interstate mergers. A
bank may also establish and operate a de novo branch in a state in which the
bank does not maintain a branch if that state expressly permits de novo
branching. Once a bank has established branches in a state through an
interstate merger transaction, the bank may establish and acquire additional
branches at any location in the state where any bank involved in the
interstate merger transaction could have established or acquired branches
under applicable federal or state law. A bank that has established a branch in
a state through de novo branching may establish and acquire additional
branches in such state in the same manner and to the same extent as a bank
having a branch in such state as a result of an interstate merger.
TRANSACTIONS WITH AFFILIATES
The Federal Reserve Act limits amounts of, and requires collateral on,
extensions of credit by the Corporation's insured bank subsidiaries to the
Corporation and, with certain exceptions, its nonbank affiliates; also, there
are restrictions on the amounts of investment by such banks in stock and other
securities of the Corporation and such affiliates, and restrictions on the
acceptance of their securities as collateral for loans by such banks.
Extensions of credit by insured bank subsidiaries to each of the Corporation
and such affiliates are limited to 10% of such bank subsidiary's capital and
surplus, and in the aggregate for the Corporation and all such affiliates to
20%.
PROPOSED LEGISLATION
Various bills have been introduced into the United States Congress that
would revise the current limitations on affiliations between banks and
securities companies, insurance companies and (generally to a limited extent)
other companies. Other proposals to change the laws and regulations governing
the banking industry are frequently introduced in Congress, in the state
legislatures and before the various bank regulatory agencies. The Corporation
cannot determine the ultimate effect that potential legislation, if enacted,
or implementing regulations, would have upon its financial condition or
results of operations.
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THE ISSUERS
Each Issuer is a statutory business trust created under Delaware law
pursuant to (i) a trust agreement executed by the Corporation, as Depositor of
the Issuer, and the Delaware Trustee (as defined herein) of such Issuer and
(ii) the filing of a certificate of trust with the Delaware Secretary of
State. Each trust agreement will be amended and restated in its entirety
(each, as so amended and restated, a "Trust Agreement") substantially in the
form filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each Trust Agreement will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Each Issuer exists for the exclusive purposes of (i) issuing
and selling its Trust Securities, (ii) using the proceeds from the sale of
such Trust Securities to acquire a series of Corresponding Junior Subordinated
Debentures issued by the Corporation, and (iii) engaging in only those other
activities necessary or incidental thereto (such as registering the transfer
of the Trust Securities). Accordingly, the Corresponding Junior Subordinated
Debentures and the right to reimbursement of expenses under the related
Expense Agreement will be the sole assets of each Issuer, and payments under
the Corresponding Junior Subordinated Debentures and the related Expense
Agreement will be the sole revenue of each Issuer.
All of the Common Securities of each Issuer will be owned by the
Corporation. The Common Securities of an Issuer will rank pari passu, and
payments will be made thereon pro rata, with the Preferred Securities of such
Issuer, except that upon the occurrence and continuance of an event of default
under a Trust Agreement resulting from an event of default under the
Indenture, the rights of the Corporation, as holder of the Common Securities,
to payment in respect of Distributions and payments upon liquidation or
redemption will be subordinated to the rights of the holders of the Preferred
Securities of such Issuer. See "Description of Preferred Securities--
Subordination of Common Securities". The Corporation will acquire Common
Securities in an aggregate Liquidation Amount equal to not less than 3% of the
total capital of each Issuer.
Unless otherwise specified in the applicable Prospectus Supplement, each
Issuer has a term of approximately 55 years, but may terminate earlier as
provided in the applicable Trust Agreement. Each Issuer's business and affairs
are conducted by its trustees, each appointed by the Corporation as holder of
the Common Securities. The trustees for each Issuer will be The First National
Bank of Chicago, as the Property Trustee (the "Property Trustee"), First
Chicago Delaware Inc., as the Delaware Trustee (the "Delaware Trustee"), and
two individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with the Corporation (collectively, the "Issuer
Trustees"). The First National Bank of Chicago, as Property Trustee, will act
as sole indenture trustee under each Trust Agreement for purposes of
compliance with the Trust Indenture Act. The First National Bank of Chicago
will also act as trustee under the Guarantees and the Indenture (each as
defined herein). See "Description of Guarantees" and "Description of Junior
Subordinated Debentures". The holder of the Common Securities of an Issuer, or
the holders of a majority in Liquidation Amount of the Related Preferred
Securities if an event of default under the Trust Agreement for such Issuer
has occurred and is continuing, will be entitled to appoint, remove or replace
the Property Trustee and/or the Delaware Trustee for such Issuer. In no event
will the holders of the Preferred Securities have the right to vote to
appoint, remove or replace the Administrative Trustees; such voting rights are
vested exclusively in the holder of the Common Securities. The duties and
obligations of each Issuer Trustee are governed by the applicable Trust
Agreement. The Corporation will pay all fees and expenses related to each
Issuer and the offering of the Preferred Securities and will pay, directly or
indirectly, all ongoing costs, expenses and liabilities of each Issuer.
The principal executive office of each issuer is 48 Wall Street, New York,
New York 10286 and its telephone number is (212) 495-1784.
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USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Corporation intends to use the proceeds from the sale of its Junior
Subordinated Debentures (including Corresponding Junior Subordinated
Debentures issued to the Issuers in connection with the investment by the
Issuers of all of the proceeds from the sale of Preferred Securities) for
general corporate purposes, including working capital, capital expenditures,
investments in or loans to subsidiaries, refinancing of debt, including
outstanding commercial paper and other short-term indebtedness, redemption or
repurchase of shares of its outstanding common and preferred stock, the
satisfaction of other obligations or for such other purposes as may be
specified in the applicable Prospectus Supplement.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more series
under a Junior Subordinated Indenture, as supplemented from time to time (as
so supplemented, the "Indenture"), between the Corporation and The First
National Bank of Chicago, as trustee (the "Debenture Trustee"). This summary
of certain terms and provisions of the Junior Subordinated Debentures,
Corresponding Junior Subordinated Debentures and the Indenture, which
summarizes the material provisions thereof, does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Indenture, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and to the Trust Indenture
Act, to each of which reference is hereby made. The Indenture is qualified
under the Trust Indenture Act. Whenever particular defined terms of the
Indenture (as supplemented or amended from time to time) are referred to
herein or in a Prospectus Supplement, such defined terms are incorporated
herein or therein by reference.
GENERAL
Each series of Junior Subordinated Debentures will rank pari passu with all
other series of Junior Subordinated Debentures and will be unsecured and
subordinate and junior in right of payment to the extent and in the manner set
forth in the Indenture to all Senior Debt (as defined below) of the
Corporation. See "--Subordination". The Corporation is a non-operating holding
company and almost all of the operating assets of the Corporation and its
consolidated subsidiaries are owned by such subsidiaries. The Corporation
relies primarily on dividends from such subsidiaries to meet its obligations.
See "Certain Regulatory Considerations--Dividends". Because the Corporation is
a holding company, the right of the Corporation to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of
the subsidiary, except to the extent the Corporation may itself be recognized
as a creditor of that subsidiary. Accordingly, the Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, and holders of Junior
Subordinated Debentures should look only to the assets of the Corporation for
payments on the Junior Subordinated Debentures. Except as otherwise provided
in the applicable Prospectus Supplement, the Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the Corporation,
including Senior Debt, whether under the Indenture, any other existing
indenture or any other indenture that the Corporation may enter into in the
future or otherwise. See "--Subordination" and the Prospectus Supplement
relating to any offering of Preferred Securities or Junior Subordinated
Debentures.
The Junior Subordinated Debentures will be issuable in one or more series
pursuant to an indenture supplemental to the Indenture or a resolution of the
Corporation's Board of Directors or a committee thereof.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the Junior Subordinated Debentures: (1) the title of
the Junior Subordinated Debentures; (2) any limit upon the aggregate principal
amount of the Junior Subordinated Debentures; (3) the date or dates on which
the principal of the Junior Subordinated Debentures is payable (the "Stated
Maturity") or the method of determination thereof; (4) the rate or rates, if
any, at which the Junior Subordinated Debentures shall bear interest, the
dates on
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which any such interest shall be payable (the "Interest Payment Dates"), the
right, if any, of the Corporation to defer or extend an Interest Payment Date,
and the record dates for any interest payable on any Interest Payment Date or
the method by which any of the foregoing shall be determined; (5) the place or
places where, subject to the terms of the Indenture as described below under
"--Payment and Paying Agents", the principal of and premium, if any, and
interest on the Junior Subordinated Debentures will be payable and where,
subject to the terms of the Indenture as described below under "--
Denominations, Registration and Transfer," the Junior Subordinated Debentures
may be presented for registration of transfer or exchange and the place or
places where notices and demands to or upon the Corporation in respect of the
Junior Subordinated Debentures and the Indentures may be made ("Place of
Payment"); (6) any period or periods within which or date or dates on which,
the price or prices at which and the terms and conditions upon which Junior
Subordinated Debentures may be redeemed, in whole or in part, at the option of
the Corporation or a holder thereof; (7) the obligation or the right, if any,
of the Corporation or a holder thereof to redeem, purchase or repay the Junior
Subordinated Debentures and the period or periods within which, the price or
prices at which, the currency or currencies (including currency unit or units)
in which and the other terms and conditions upon which the Junior Subordinated
Debentures shall be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation; (8) the denominations in which any Junior
Subordinated Debentures shall be issuable if other than denominations of $25
and any integral multiple thereof; (9) if other than in U.S. Dollars, the
currency or currencies (including currency unit or units) in which the
principal of (and premium, if any) and interest and Additional Interest, if
any, on the Junior Subordinated Debentures shall be payable, or in which the
Junior Subordinated Debentures shall be denominated; (10) any additions,
modifications or deletions in the events of default under the Indenture or
covenants of the Corporation specified in the Indenture with respect to the
Junior Subordinated Debentures; (11) if other than the principal amount
thereof, the portion of the principal amount of Junior Subordinated Debentures
that shall be payable upon declaration of acceleration of the maturity
thereof; (12) any additions or changes to the Indenture with respect to a
series of Junior Subordinated Debentures as shall be necessary to permit or
facilitate the issuance of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons; (13) any
index or indices used to determine the amount of payments of principal of and
premium, if any, on the Junior Subordinated Debentures and the manner in which
such amounts will be determined; (14) the terms and conditions relating to the
issuance of a temporary Global Security representing all of the Junior
Subordinated Debentures of such series and the exchange of such temporary
Global Security for definitive Junior Subordinated Debentures of such series;
(15) subject to the terms described herein under "--Global Junior Subordinated
Debentures", whether the Junior Subordinated Debentures of the series shall be
issued in whole or in part in the form of one or more Global Securities and,
in such case, the Depositary for such Global Securities, which Depositary
shall be a clearing agency registered under the Exchange Act; (16) the
appointment of any paying agent or agents; (17) the terms and conditions of
any obligation or right of the Corporation or a holder to convert or exchange
the Junior Subordinated Debentures into Preferred Securities; (18) the form of
Trust Agreement, Guarantee Agreement and Expense Agreement, if applicable;
(19) the relative degree, if any, to which such Junior Subordinated Debentures
of the series shall be senior to or be subordinated to other series of such
Junior Subordinated Debentures or other indebtedness of the Corporation in
right of payment, whether such other series of Junior Subordinated Debentures
or other indebtedness are outstanding or not; and (20) any other terms of the
Junior Subordinated Debentures not inconsistent with the provisions of the
Indenture.
Junior Subordinated Debentures may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. Certain United States Federal
income tax consequences and special considerations applicable to any such
Junior Subordinated Debentures will be described in the applicable Prospectus
Supplement.
If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest, if any,
on any Junior Subordinated Debentures is payable in one or more foreign
currencies or currency units, the restrictions, elections, certain United
States Federal income tax consequences, specific terms and other information
with respect to such series
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of Junior Subordinated Debentures and such foreign currency or currency units
will be set forth in the applicable Prospectus Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of Junior Subordinated Debentures,
special United States Federal income tax, accounting and other considerations
applicable thereto will be described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof.
Junior Subordinated Debentures of any series will be exchangeable for other
Junior Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same original
issue date and stated maturity and bearing the same interest rate.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate securities registrar or at
the office of any transfer agent designated by the Corporation for such
purpose with respect to any series of Junior Subordinated Debentures and
referred to in the applicable Prospectus Supplement, without service charge
and upon payment of any taxes and other governmental charges as described in
the Indenture. The Corporation will appoint the Trustee as securities
registrar under the Indenture. If the applicable Prospectus Supplement refers
to any transfer agents (in addition to the securities registrar) initially
designated by the Corporation with respect to any series of Junior
Subordinated Debentures, the Corporation may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, provided that the Corporation
maintains a transfer agent in each place of payment for such series. The
Corporation may at any time designate additional transfer agents with respect
to any series of Junior Subordinated Debentures.
In the event of any redemption, neither the Corporation nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during the period beginning at
the opening of business 15 days before the day of selection for redemption of
Junior Subordinated Debentures of that series and ending at the close of
business on the day of mailing of the relevant notice of redemption or (ii)
transfer or exchange any Junior Subordinated Debentures so selected for
redemption, except, in the case of any Junior Subordinated Debentures being
redeemed in part, any portion thereof not to be redeemed.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole or in
part in the form of one or more Global Junior Subordinated Debentures that
will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the Prospectus Supplement relating to such series. Global Junior
Subordinated Debentures may be issued only in fully registered form and in
either temporary or permanent form. Unless and until it is exchanged in whole
or in part for the individual Junior Subordinated Debentures represented
thereby, a Global Junior Subordinated Debenture may not be transferred except
as a whole by the Depositary for such Global Junior Subordinated Debenture to
a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by the Depositary or any
nominee to a successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Junior Subordinated Debentures will be described in the Prospectus Supplement
relating to such series. The Corporation anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the deposit
of such Global Junior Subordinated Debenture with or on behalf of the
Depositary, the Depositary for such Global Junior Subordinated
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Debenture or its nominee will credit, on its book-entry registration and
transfer system, the respective principal amounts of the individual Junior
Subordinated Debentures represented by such Global Junior Subordinated
Debenture to the accounts of persons that have accounts with such Depositary
("Participants"). Such accounts shall be designated by the dealers,
underwriters or agents with respect to such Junior Subordinated Debentures or
by the Corporation if such Junior Subordinated Debentures are offered and sold
directly by the Corporation. Ownership of beneficial interests in a Global
Junior Subordinated Debenture will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global Junior Subordinated Debenture will be shown on, and the transfer
of that ownership will be effected only through, records maintained by the
applicable Depositary or its nominee (with respect to interests of
Participants) and the records of Participants (with respect to interests of
persons who hold through Participants). The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Junior Subordinated Debenture.
So long as the Depositary for a Global Junior Subordinated Debenture, or its
nominee, is the registered owner of such Global Junior Subordinated Debenture,
such Depositary or such nominee, as the case may be, will be considered the
sole owner or holder of the Junior Subordinated Debentures represented by such
Global Junior Subordinated Debenture for all purposes under the Indenture
governing such Junior Subordinated Debentures. Except as provided below,
owners of beneficial interests in a Global Junior Subordinated Debenture will
not be entitled to have any of the individual Junior Subordinated Debentures
of the series represented by such Global Junior Subordinated Debenture
registered in their names, will not receive or be entitled to receive physical
delivery of any such Junior Subordinated Debentures of such series in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Junior Subordinated Debentures represented by a Global Junior Subordinated
Debenture registered in the name of a Depositary or its nominee will be made
to the Depositary or its nominee, as the case may be, as the registered owner
of the Global Junior Subordinated Debenture representing such Junior
Subordinated Debentures. None of the Corporation, the Debenture Trustee, any
Paying Agent, or the Securities Registrar for such Junior Subordinated
Debentures will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Junior Subordinated Debenture representing such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Corporation expects that the Depositary for a series of Junior
Subordinated Debentures or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of a permanent Global
Junior Subordinated Debenture representing any of such Junior Subordinated
Debentures, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of such Global Junior Subordinated Debenture for such Junior
Subordinated Debentures as shown on the records of such Depositary or its
nominee. The Corporation also expects that payments by Participants to owners
of beneficial interests in such Global Junior Subordinated Debenture held
through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name." Such payments will
be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depositary and the Corporation
is unable to locate a qualified successor, the Corporation will issue
individual Junior Subordinated Debentures of such series in exchange for the
Global Junior Subordinated Debenture representing such series of Junior
Subordinated Debentures. In addition, the Corporation may at any time and in
its sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Junior Subordinated Debentures, determine not to
have any Junior Subordinated Debentures of such series represented by one or
more Global Junior Subordinated Debentures and, in such event, will issue
certificated Junior Subordinated Debentures of
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such series in exchange for the Global Junior Subordinated Debenture or
Securities representing such series of Junior Subordinated Debentures.
Further, if the Corporation so specifies with respect to the Junior
Subordinated Debentures of a series, an owner of a beneficial interest in a
Global Junior Subordinated Debenture representing Junior Subordinated
Debentures of such series may, on terms acceptable to the Corporation, the
Debenture Trustee and the Depositary for such Global Junior Subordinated
Debenture, receive certificated Junior Subordinated Debentures of such series
in exchange for such beneficial interests, subject to any limitations
described in the Prospectus Supplement relating to such Junior Subordinated
Debentures. In any such instance, an owner of a beneficial interest in a
Global Junior Subordinated Debenture will be entitled to physical delivery of
certificated Junior Subordinated Debentures of the series represented by such
Global Junior Subordinated Debenture equal in principal amount to such
beneficial interest and to have such Junior Subordinated Debentures registered
in its name. Individual Junior Subordinated Debentures of such series so
issued will be issued in denominations, unless otherwise specified by the
Corporation, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in the City of
New York or at the office of such paying agent or paying agents as the
Corporation may designate from time to time, except that at the option of the
Corporation payment of any interest may be made (i) except in the case of
Global Junior Subordinated Debentures, by check mailed to the address of the
Person entitled thereto as such address shall appear in the securities
register or (ii) by transfer to an account maintained by the person entitled
thereto as specified in the securities register, provided that proper transfer
instructions have been received by the Regular Record Date. Unless otherwise
indicated in the applicable Prospectus Supplement, payment of any interest on
Junior Subordinated Debentures will be made to the person in whose name such
Junior Subordinated Debenture is registered at the close of business on the
Regular Record Date for such interest, except in the case of Defaulted
Interest. The Corporation may at any time designate additional Paying Agents
or rescind the designation of any paying agent; however the Corporation will
at all times be required to maintain a paying agent in each place of payment
for each series of Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent, or then
held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any)
or interest has become due and payable shall, at the request of the
Corporation, be repaid to the Corporation and the holder of such Junior
Subordinated Debenture shall thereafter look, as a general unsecured creditor,
only to the Corporation for payment thereof.
OPTION TO DEFER INTEREST PAYMENTS
If provided in the applicable Prospectus Supplement, the Corporation will
have the right at any time and from time to time during the term of any series
of Junior Subordinated Debentures to defer payment of interest for up to such
number of consecutive interest payment periods as may be specified in the
applicable Prospectus Supplement (each, an "Extension Period"), subject to the
terms, conditions and covenants, if any, specified in such Prospectus
Supplement, provided that such Extension Period may not extend beyond the
Stated Maturity of such series of Junior Subordinated Debentures. Certain
United States Federal income tax consequences and special considerations
applicable to any such Junior Subordinated Debentures will be described in the
applicable Prospectus Supplement.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, Junior
Subordinated Debentures will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation may, at its option and subject to receipt of prior approval by the
Board of Governors of the Federal Reserve System (the "Federal
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Reserve") if such approval is then required under applicable capital
guidelines or policies, redeem the Junior Subordinated Debentures of any
series in whole at any time or in part from time to time. If the Junior
Subordinated Debentures of any series are so redeemable only on or after a
specified date or upon the satisfaction of additional conditions, the
applicable Prospectus Supplement will specify such date or describe such
conditions. Junior Subordinated Debentures in denominations larger than $25
may be redeemed in part but only in integral multiples of $25. Except as
otherwise specified in the applicable Prospectus Supplement, the redemption
price for any Junior Subordinated Debenture so redeemed shall equal any
accrued and unpaid interest (including Additional Interest) thereon to the
redemption date, plus 100% of the principal amount thereof.
Except as otherwise specified in the applicable Prospectus Supplement, if a
Tax Event (as defined below) in respect of a series of Junior Subordinated
Debentures or a Capital Treatment Event (as defined below) shall occur and be
continuing, the Corporation may, at its option and subject to receipt of prior
approval by the Federal Reserve if such approval is then required under
applicable capital guidelines or policies, redeem such series of Junior
Subordinated Debentures in whole (but not in part) at any time within 90 days
following the occurrence of such Tax Event or Capital Treatment Event, at a
redemption price equal to 100% of the principal amount of such Junior
Subordinated Debentures then outstanding plus accrued and unpaid interest to
the date fixed for redemption, except as otherwise specified in the applicable
Prospectus Supplement.
"Tax Event" means the receipt by an Issuer of a series of Preferred
Securities 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 the
date of issuance of such Preferred Securities under the Trust Agreement, there
is more than an insubstantial risk that (i) such Issuer 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 corresponding series of Corresponding Junior Subordinated Debentures,
(ii) interest payable by the Corporation on such series of Corresponding
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) such Issuer 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 "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such
laws, rules or regulations, which amendment or change is effective or which
pronouncement, action or decision is announced on or after the date of
issuance of the Preferred Securities, there is more than an insubstantial risk
that the Corporation will not be entitled to treat an amount equal to the
aggregate Liquidation Amount of the Preferred Securities as "Tier 1 Capital"
(or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Corporation.
Notice of any redemption will be mailed at least 45 days but not more than
75 days before the redemption date to each Holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Corporation
defaults in payment of the redemption price, on and after the redemption date
interest shall cease to accrue on such Junior Subordinated Debentures or
portions thereof called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
The Corporation will also covenant, as to each series of Junior Subordinated
Debentures, that it will not, and will not permit any subsidiary of the
Corporation to, (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 or (ii) make any payment of principal of or
interest or premium, if any, on or repay or repurchase or redeem any
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debt securities of the Corporation (including other Junior Subordinated
Debentures) that rank pari passu in all respects with or junior in interest to
the Junior Subordinated Debentures (other than (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Corporation in connection
with any employment contract, benefit plan or other similar arrangement with
or for the benefit of one or more employees, officers, directors or
consultants, in connection with a dividend reinvestment or stockholder stock
purchase plan or in connection with the issuance of capital stock of the
Corporation (or securities convertible into or exercisable for such capital
stock) as consideration in an acquisition transaction entered into prior to
the applicable Extension Period, (b) as a result of any exchange or conversion
of any class or series of the Corporation's capital stock (or any capital
stock of a subsidiary of the Corporation) for any class or series of the
Corporation's capital stock or of any class or series of the Corporation's
indebtedness for any class or series of the Corporation's capital stock, (c)
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, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in
the form of stock, warrants, options or other rights where the dividend stock
or the stock issuable upon exercise of such warrants, options or other rights
is the same stock as that on which the dividend is being paid or ranks pari
passu with or junior to such stock), if at such time (i) there shall have
occurred any event of which the Corporation has actual knowledge that (a) with
the giving of notice or the lapse of time, or both, would constitute an "Event
of Default" under the Indenture with respect to the Junior Subordinated
Debentures of such series and (b) in respect of which the Corporation shall
not have taken reasonable steps to cure, (ii) if such Junior Subordinated
Debentures are held by an Issuer of a series of Related Preferred Securities,
the Corporation shall be in default with respect to its payment of any
obligations under the Guarantee relating to such Related Preferred Securities
or (iii) the Corporation shall have given notice of its selection of an
Extension Period as provided in the Indenture with respect to the Junior
Subordinated Debentures of such series and shall not have rescinded such
notice, or such Extension Period, or any extension thereof, shall be
continuing.
MODIFICATION OF INDENTURE
From time to time the Corporation and the Debenture Trustee may, without the
consent of the holders of any series of Junior Subordinated Debentures, amend,
waive or supplement the Indenture for specified purposes, including, among
other things, curing ambiguities, defects or inconsistencies (provided that
any such action does not materially adversely affect the interest of the
holders of any series of Junior Subordinated Debentures or, in the case of
Corresponding Junior Subordinated Debentures, the holders of the Related
Preferred Securities so long as they remain outstanding) 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 not less than a majority in
principal amount of each outstanding series of Junior Subordinated Debentures
affected, to modify the Indenture in a manner affecting adversely the rights
of the holders of such series of the Junior Subordinated Debentures in any
material respect, provided that no such modification may, without the consent
of the holder of each outstanding Junior Subordinated Debenture so affected,
(i) change the Stated Maturity of any series of Junior Subordinated Debentures
(except as otherwise specified in the applicable Prospectus Supplement), or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon or (ii) reduce the percentage of principal amount
of Junior Subordinated Debentures of any series, the holders of which are
required to consent to any such modification of the Indenture, provided that,
in the case of Corresponding Junior Subordinated Debentures, so long as any of
the Related Preferred Securities remain outstanding, (a) no such modification
may be made that adversely affects the holders of such Preferred Securities in
any material respect, and no termination of the Indenture may occur, and no
waiver of any event of default or compliance with any covenant under the
Indenture may be effective, without the prior consent of the holders of at
least a majority of the aggregate Liquidation Amount of all outstanding
Related Preferred Securities affected unless and until the principal of the
Corresponding Junior Subordinated Debentures and all accrued and unpaid
interest thereon have been paid in full and certain other conditions have been
satisfied and (b) where a consent under the Indenture would require the
consent of each holder of Corresponding Junior Subordinated Debentures, no
such consent will be given by the Property Trustee without the prior consent
of each holder of Related Preferred Securities.
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In addition, the Corporation and the Debenture Trustee may execute, without
the consent of any holder of Junior Subordinated Debentures, any supplemental
Indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default" with
respect to such series of Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on such series of Junior
Subordinated Debentures, including any Additional Interest in respect
thereof, when due (subject to the deferral of any interest payment in the
case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series of
Junior Subordinated Debentures when due whether at maturity or upon
redemption; 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 such affected series of outstanding 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
Junior Subordinated Debentures of each series affected have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Debenture Trustee. The Debenture Trustee or the holders of
not less than 25% in aggregate outstanding principal amount of Junior
Subordinated Debentures of each series affected may declare the principal (or,
if the Preferred Securities of such series are Discount Securities, such
portion of the principal amount as may be specified in a Prospectus
Supplement) due and payable immediately upon a Debenture Event of Default,
and, in the case of Corresponding Junior Subordinated Debentures, should the
Debenture Trustee or such holders of such Corresponding Junior Subordinated
Debentures fail to make such declaration, the holders of at least 25% in
aggregate Liquidation Amount of the Related Preferred Securities shall have
such right. The holders of a majority in aggregate outstanding principal
amount of Junior Subordinated Debentures of each series affected may annul
such declaration. In the case of Corresponding Junior Subordinated Debentures,
should the holders of such Corresponding Junior Subordinated Debentures fail
to annul such declaration and waive such default, the holders of a majority in
aggregate Liquidation Amount of the Related Preferred Securities shall have
such right.
The holders of a majority in aggregate outstanding principal amount of each
series of Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures of such series, waive
any default, except a default in the payment of principal or interest
(including any Additional Interest) (unless such default has been cured and a
sum sufficient to pay all matured installments of interest (including any
Additional Interest) 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 of
such series. In the case of Corresponding Junior Subordinated Debentures,
should the holders of such Corresponding Junior Subordinated Debentures fail
to waive such default, the holders of a majority in aggregate Liquidation
Amount of the Related Preferred Securities shall have such right. The
Corporation is required to file annually with the Debenture Trustee a
certificate as to whether or not the Corporation is in compliance with all the
conditions and covenants applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as to a
series of Corresponding Junior Subordinated Debentures, the Property Trustee
will have the right to declare the principal of and the interest on such
Corresponding Junior Subordinated Debentures, and any other amounts payable
under the Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Corresponding Junior Subordinated
Debentures.
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ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default with respect to a series of Corresponding
Junior Subordinated Debentures has occurred and is continuing and such event
is attributable to the failure of the Corporation to pay interest or principal
on such Corresponding Junior Subordinated Debentures on the date such interest
or principal is due and payable, a holder of Preferred Securities may
institute a legal proceeding directly against the Corporation for enforcement
of payment to such holder of the principal of or interest (including any
Additional Interest) on such Corresponding Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Related Preferred Securities of such holder (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
Preferred Securities outstanding. If the right to bring a Direct Action is
removed, the applicable Issuer may become subject to the reporting obligations
under the Exchange Act. The Corporation shall have the right under the
Indenture to set-off any payment made to such holder of Preferred Securities
by the Corporation in connection with a Direct Action.
The holders of the Preferred Securities will not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an event of default under the Trust Agreement. See
"Description of Preferred Securities--Events of Default; Notice".
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Corporation shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Corporation or convey, transfer or lease
its properties and assets substantially as an entirety to the Corporation,
unless (i) in case the Corporation consolidates with or merges into another
Person or conveys or transfers its properties and assets substantially as an
entirety to any Person, the successor Person is organized under the laws of
the United States or any state or the District of Columbia, and such successor
Person expressly assumes the Corporation's obligations on the Junior
Subordinated Debentures issued under the Indenture; (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 by the Indenture are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Corporation that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at their Stated Maturity within one year, and the Corporation deposits
or causes to be deposited with the Debenture Trustee funds, in trust, for the
purpose and in an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal (and premium, if
any) and interest (including any Additional Interest) to the date of the
deposit or to the Stated Maturity, 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.
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CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures of any series may be convertible or
exchangeable into Junior Subordinated Debentures of another series or into
Preferred Securities of another series. The specific terms on which Junior
Subordinated Debentures of any series may be so converted or exchanged will be
set forth in the applicable Prospectus Supplement. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at the option of the Corporation, in which case the number of
shares of Preferred Securities or other securities to be received by the
holders of Junior Subordinated Debentures would be calculated as of a time and
in the manner stated in the applicable Prospectus Supplement.
SUBORDINATION
The Junior Subordinated Debentures will be subordinate in right of payment,
to the extent set forth in the Indenture, to all Senior Debt (as defined
below) of the Corporation. If the Corporation defaults in the payment of any
principal, premium, if any, or interest, if any, or any other amount payable
on any Senior Debt when the same becomes due and payable, whether at maturity
or at a date fixed for redemption or by declaration of acceleration or
otherwise, then, unless and until such default has been cured or waived or has
ceased to exist or all Senior Debt has been paid, no direct or indirect
payment (in cash, property, securities, by set-off or otherwise) may be made
or agreed to be made on the Junior Subordinated Debentures, or in respect of
any redemption, repayment, retirement, purchase or other acquisition of any of
the Junior Subordinated Debentures.
As used herein, "Senior Debt" means any obligation of the Corporation to its
creditors, whether now outstanding or subsequently incurred, other than any
obligation as to which, in the instrument creating or evidencing the
obligation or pursuant to which the obligation is outstanding, it is provided
that such obligation is not Senior Debt, but does not include trade accounts
payable and accrued liabilities arising in the ordinary course of business.
Senior Debt includes the Corporation's outstanding subordinated debt
securities and any subordinated debt securities issued in the future with
substantially similar subordination terms, but does not include the Junior
Subordinated Debentures of any Series or any junior subordinated debt
securities issued in the future with subordination terms substantially similar
to those of the Junior Subordinated Debentures. Substantially all of the
existing indebtedness of the Corporation constitutes Senior Debt.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Corporation, its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding up of the Corporation, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by the Corporation for the benefit of creditors or (iv)
any other marshalling of the assets of the Corporation, all Senior Debt
(including any interest thereon accruing after the commencement of any such
proceedings) shall first be paid in full before any payment or distribution,
whether in cash, securities or other property, shall be made on account of the
Junior Subordinated Debentures. In such event, any payment or distribution on
account of the Junior Subordinated Debentures, whether in cash, securities or
other property, that would otherwise (but for the subordination provisions) be
payable or deliverable in respect of the Junior Subordinated Debentures will
be paid or delivered directly to the holders of Senior Debt in accordance with
the priorities then existing among such holders until all Senior Debt
(including any interest thereon accruing after the commencement of any such
proceedings) has been paid in full.
In the event of any such proceeding, after payment in full of all sums owing
with respect to Senior Debt, the holders of Junior Subordinated Debentures,
together with the holders of any obligations of the Corporation ranking on a
parity with the Junior Subordinated Debentures, will be entitled to be paid
from the remaining assets of the Corporation the amounts at the time due and
owing on the Junior Subordinated Debentures and such other obligations before
any payment or other distribution, whether in cash, property or otherwise,
will be made on account of any capital stock or obligations of the Corporation
ranking junior to the Junior Subordinated Debentures. If any payment or
distribution on account of the Junior Subordinated Debentures of any character
or
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any security, whether in cash, securities or other property is received by any
holder of any Junior Subordinated Debentures in contravention of any of the
terms hereof and before all the Senior Debt has been paid in full, such
payment or distribution or security will be received in trust for the benefit
of, and must be paid over or delivered and transferred to, the holders of the
Senior Debt at the time outstanding in accordance with the priorities then
existing among such holders for application to the payment of all Senior Debt
remaining unpaid to the extent necessary to pay all such Senior Debt in full.
By reason of such subordination, in the event of the insolvency of the
Corporation, holders of Senior Debt may receive more, ratably, and holders of
the Junior Subordinated Debentures may receive less, ratably, than the other
creditors of the Corporation. Such subordination will not prevent the
occurrence of any Event of Default under the Indenture.
The Junior Subordinated Indenture places no limitation on the amount of
additional Senior Debt that may be incurred by the Corporation. The
Corporation expects from time to time to incur additional indebtedness
constituting Senior Debt.
TRUST EXPENSES
Pursuant to the Expense Agreement for each series of Corresponding Junior
Subordinated Debentures, the Corporation, as holder of the Common Securities,
will irrevocably and unconditionally agree with each Issuer that holds Junior
Subordinated Debentures that the Corporation will pay to such Issuer, and
reimburse such Issuer for, the full amounts of any costs, expenses or
liabilities of the Issuer, other than obligations of the Issuer to pay to the
holders of any Preferred Securities or other similar interests in the Issuer
the amounts due such holders pursuant to the terms of the Preferred Securities
or such other similar interests, as the case may be. Such payment obligation
will include any such costs, expenses or liabilities of the Issuer that are
required by applicable law to be satisfied in connection with a termination of
such Issuer.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee 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 such provisions, the Debenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Junior Subordinated Debentures,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
The Corresponding Junior Subordinated Debentures may be issued in one or
more series of Junior Subordinated Debentures under the Indenture with terms
corresponding to the terms of a series of Related Preferred Securities. In
that event, concurrently with the issuance of each Issuer's Preferred
Securities, such Issuer will invest the proceeds thereof and the consideration
paid by the Corporation for the Common Securities of such Issuer in such
series of Corresponding Junior Subordinated Debentures issued by the
Corporation to such Issuer. Each series of Corresponding Junior Subordinated
Debentures will be in the principal amount equal to the aggregate stated
Liquidation Amount of the Related Preferred Securities and the Common
Securities of such Issuer and will rank pari passu with all other series of
Junior Subordinated Debentures. Holders of the Related Preferred Securities
for a series of Corresponding Junior Subordinated Debentures will have the
rights in connection with modifications to the Indenture or upon occurrence of
Debenture Events of Default, as described under "--Modification of Indenture"
and "--Debenture Events of Default", unless provided otherwise in the
Prospectus Supplement for such Related Preferred Securities.
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Unless otherwise specified in the applicable Prospectus Supplement, if a Tax
Event in respect of an Issuer shall occur and be continuing, the Corporation
may, at its option and subject to prior approval of the Federal Reserve if
then so required under applicable capital guidelines or policies, redeem the
Corresponding Junior Subordinated Debentures at any time within 90 days of the
occurrence of such Tax Event, in whole but not in part, subject to the
provisions of the Indenture and whether or not such Corresponding Junior
Subordinated Debentures are then otherwise redeemable at the option of the
Corporation. The redemption price for any Corresponding Junior Subordinated
Debentures shall be equal to 100% of the principal amount of such
Corresponding Junior Subordinated Debentures then outstanding plus accrued and
unpaid interest to the date fixed for redemption. For so long as the
applicable Issuer is the holder of all the outstanding Corresponding Junior
Subordinated Debentures of such Issuer, the proceeds of any such redemption
will be used by the Issuer to redeem the corresponding Trust Securities in
accordance with their terms. The Corporation may not redeem a series of
Corresponding Junior Subordinated Debentures in part unless all accrued and
unpaid interest has been paid in full on all outstanding Corresponding Junior
Subordinated Debentures of such series for all interest periods terminating on
or prior to the Redemption Date.
The Corporation will covenant in the Indenture, as to each series of
Corresponding Junior Subordinated Debentures, that if and so long as (i) the
Issuer of the related series of Trust Securities is the holder of all such
Corresponding Junior Subordinated Debentures, (ii) a Tax Event in respect of
such Issuer has occurred and is continuing and (iii) the Corporation has
elected, and has not revoked such election, to pay Additional Sums (as defined
under "Description of Preferred Securities--Redemption or Exchange") in
respect of such Trust Securities, the Corporation will pay to such Issuer such
Additional Sums. The Corporation will also covenant, as to each series of
Corresponding Junior Subordinated Debentures, (i) to maintain directly or
indirectly 100% ownership of the Common Securities of the Issuer to which such
Corresponding Junior Subordinated Debentures have been issued, provided that
certain successors which are permitted pursuant to the Indenture may succeed
to the Corporation's ownership of the Common Securities, (ii) not to
voluntarily terminate, wind-up or liquidate any Issuer, except (a) in
connection with a distribution of Corresponding Junior Subordinated Debentures
to the holders of the Preferred Securities in exchange therefor upon
liquidation of such Issuer or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the related Trust Agreement, in
either such case, if so specified in the applicable Prospectus Supplement upon
prior approval of the Federal Reserve, if then so required under applicable
Federal Reserve capital guidelines or policies, and (iii) to use its
reasonable efforts, consistent with the terms and provisions of the related
Trust Agreement, to cause such Issuer to be classified as a grantor trust and
not as an association taxable as a corporation for United States Federal
income tax purposes.
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DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement for each Issuer, the Issuer
Trustees on behalf of such Issuer will issue the Preferred Securities and the
Common Securities. The Preferred Securities of a particular Issuer will
represent preferred beneficial interests in the Issuer and the holders thereof
will be entitled to a preference in certain circumstances with respect to
Distributions and amounts payable on redemption or liquidation over the Common
Securities of such Issuer, as well as other benefits as described in the
corresponding Trust Agreement. This summary of certain provisions of the
Preferred Securities and each Trust Agreement, which summarizes the material
terms thereof, does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of each Trust
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act, to which reference is hereby made. Wherever particular defined
terms of a Trust Agreement (as amended or supplemented from time to time) are
referred to herein or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference. The form of the Trust Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each of the Issuers is a legally separate entity and
the assets of one are not available to satisfy the obligations of any of the
others.
GENERAL
The Preferred Securities of an Issuer will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of that Issuer
except as described under "--Subordination of Common Securities". Legal title
to the Corresponding Junior Subordinated Debentures will be held by the
Property Trustee in trust for the benefit of the holders of the related
Preferred Securities and Common Securities. Each Guarantee Agreement executed
by the Corporation for the benefit of the holders of an Issuer's Trust
Securities (the "Guarantee" for such Preferred Securities) will be a guarantee
on a subordinated basis with respect to the related Trust Securities but will
not guarantee payment of Distributions or amounts payable on redemption or
liquidation of such Preferred Securities when the related Issuer does not have
funds on hand available to make such payments. See "Description of
Guarantees."
DISTRIBUTIONS
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such
dates as specified in the applicable Prospectus Supplement. In the event that
any date on which Distributions are payable on the Preferred Securities is not
a Business Day (as defined below), payment of the Distribution 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) except
that, if such Business Day is in the next succeeding calendar year, payment of
such Distribution shall be made on the immediately preceding Business Day, in
either case 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 The City of
New York are authorized or required by law or executive order to remain closed
or a day on which the corporate trust office of the Property Trustee or the
Debenture Trustee is closed for business.
Each Issuer's Preferred Securities represent preferred beneficial interests
in the applicable Issuer, and the Distributions on each Preferred Security
will be payable at a rate specified in the applicable Prospectus Supplement
for such Preferred Securities. The amount of Distributions payable for any
period will be computed on the basis of a 360-day year of twelve 30-day months
unless otherwise specified in the applicable Prospectus Supplement.
Distributions to which holders of Preferred Securities are entitled will
accumulate additional Distributions at the rate per annum if and as specified
in the applicable Prospectus Supplement. The term "Distributions" as used
herein includes any such additional Distributions unless otherwise stated.
If provided in the applicable Prospectus Supplement, the Corporation has the
right under the Indenture, pursuant to which it will issue the Corresponding
Junior Subordinated Debentures, to defer the payment of interest at any time
or from time to time on any series of the Corresponding Junior Subordinated
Debentures for
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up to such number of consecutive interest payment periods which will be
specified in such Prospectus Supplement relating to such series (each, an
"Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity of the Corresponding Junior Subordinated Debentures. As a
consequence of any such deferral, Distributions on the Related Preferred
Securities would be deferred (but would continue to accumulate additional
Distributions thereon at the rate per annum set forth in the Prospectus
Supplement for such Preferred Securities) by the Issuer of such Preferred
Securities during any such Extension Period. During any such 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 or (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 that rank pari passu in all respects with or
junior in interest to the Corresponding Junior Subordinated Debentures (other
than (a) repurchases, redemptions or other acquisitions of shares of capital
stock of the Corporation in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Corporation (or securities convertible into
or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series
of the Corporation's capital stock, (c) 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, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise
of such warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks pari passu with or junior to such stock).
The revenue of each Issuer available for distribution to holders of its
Preferred Securities will be limited to payments under the Corresponding
Junior Subordinated Debentures in which the Issuer will invest the proceeds
from the issuance and sale of its Trust Securities. See "Description of Junior
Subordinated Debentures--Corresponding Junior Subordinated Debentures." If the
Corporation does not make interest payments on such Corresponding Junior
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Related Preferred Securities. The payment of
Distributions (if and to the extent the Issuer has funds legally available for
the payment of such Distributions and cash sufficient to make such payments)
is guaranteed by the Corporation on a limited basis as set forth herein under
"Description of Guarantees".
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of such Issuer on the relevant record
dates, which, as long as the Preferred Securities remain in book-entry form,
will be one Business Day prior to the relevant Distribution Date. Subject to
any applicable laws and regulations and the provisions of the applicable Trust
Agreement, each such payment will be made as described under "Book-Entry
Issuance." In the event any Preferred Securities are not in book-entry form,
the relevant record date for such Preferred Securities shall be the date at
least 15 days prior to the relevant Distribution Date, as specified in the
applicable Prospectus Supplement.
REDEMPTION OR EXCHANGE
Mandatory Redemption. Upon the repayment or redemption, in whole or in part,
of any Corresponding Junior Subordinated Debentures, whether at maturity or
upon earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption 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 notice, at a redemption price (the "Redemption Price")
equal to the aggregate Liquidation Amount of such Trust Securities plus
accumulated but unpaid Distributions thereon to the date of redemption (the
"Redemption Date") and the related amount of the premium, if any, paid by the
Corporation upon the concurrent redemption of such
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Corresponding Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures--Redemption". If less than all of any series of
Corresponding Junior Subordinated Debentures are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or redemption shall be
allocated to the redemption pro rata of the Related Preferred Securities and
the Common Securities. The amount of premium, if any, paid by the Corporation
upon the redemption of all or any part of any series of any Corresponding
Junior Subordinated Debentures to be repaid or redeemed on a Redemption Date
shall be allocated to the redemption pro rata of the Related Preferred
Securities and the Common Securities.
The Corporation will have the right to redeem any series of Corresponding
Junior Subordinated Debentures (i) on or after such date as may be specified
in the applicable Prospectus Supplement, in whole at any time or in part from
time to time, (ii) at any time, in whole (but not in part), upon the
occurrence of a Tax Event or Capital Treatment Event or (iii) as may be
otherwise specified in the applicable Prospectus Supplement, in each case
subject to receipt of prior approval by the Federal Reserve if then so
required under applicable Federal Reserve capital guidelines or policies.
Distribution of Corresponding Junior Subordinated Debentures. Subject to the
Corporation having received prior approval of the Federal Reserve to do so if
such approval is then required under applicable capital guidelines or policies
of the Federal Reserve, the Corporation has the right at any time to terminate
any Issuer and, after satisfaction of the liabilities of creditors of such
Issuer as provided by applicable law, cause such Corresponding Junior
Subordinated Debentures in respect of the Preferred Securities and Common
Securities issued by such Issuer to be distributed to the holders of such
Preferred Securities and Common Securities in liquidation of the Issuer.
Tax Event or Capital Treatment Event Redemption. If a Tax Event or Capital
Treatment Event in respect of a series of Preferred Securities and Common
Securities shall occur and be continuing, the Corporation has the right to
redeem the Corresponding Junior Subordinated Debentures in whole (but not in
part) and thereby cause a mandatory redemption of such Preferred Securities
and Common Securities in whole (but not in part) at the Redemption Price
within 90 days following the occurrence of such Tax Event or Capital Treatment
Event. In the event a Tax Event or Capital Treatment Event in respect of a
series of Preferred Securities and Common Securities has occurred and is
continuing and the Corporation does not elect to redeem the Corresponding
Junior Subordinated Debentures and thereby cause a mandatory redemption of
such Preferred Securities or to liquidate the related Issuer and cause the
Corresponding Junior Subordinated Debentures to be distributed to holders of
such Preferred Securities and Common Securities in exchange therefor upon
liquidation of the Issuer as described above, such Preferred Securities will
remain outstanding and Additional Sums (as defined below) may be payable on
the Corresponding Junior Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by an Issuer on the
outstanding Preferred Securities and Common Securities of the Issuer shall not
be reduced as a result of any additional taxes, duties and other governmental
charges to which such Issuer has become subject as a result of a Tax Event.
"Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such
laws, rules or regulations, which amendment or change is effective or such
pronouncement, action or decision is announced on or after the date of
issuance of the Preferred Securities of an Issuer, there is more than an
insubstantial risk that the Corporation will not be entitled to treat an
amount equal to the aggregate Liquidation Amount of such Preferred Securities
as "Tier 1 Capital" (or the then equivalent thereof) for purposes of the
capital adequacy guidelines of the Federal Reserve, as then in effect and
applicable to the Corporation.
"Like Amount" means (i) with respect to a redemption of any series of Trust
Securities, Trust Securities of such series having a Liquidation Amount (as
defined below) equal to the principal amount of Corresponding
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Junior Subordinated Debentures to be contemporaneously redeemed in accordance
with the Indenture, the proceeds of which will be used to pay the Redemption
Price of such Trust Securities, and (ii) with respect to a distribution of
Corresponding Junior Subordinated Debentures to holders of any series of Trust
Securities in connection with a dissolution or liquidation of the related
Issuer, Corresponding Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of the Trust Securities in respect of which
such distribution is made.
"Liquidation Amount" means the stated amount per Trust Security of $25 (or
such other stated amount as is set forth in the applicable Prospectus
Supplement).
"Tax Event" with respect to an Issuer means the receipt by the Issuer of a
series of Preferred Securities 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 the date of issuance of such Preferred
Securities under the Trust Agreement, there is more than an insubstantial risk
that (i) such Issuer 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 corresponding series of Corresponding Junior
Subordinated Debentures, (ii) interest payable by the Corporation on such
series of Corresponding 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)
such Issuer 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.
Possible Tax Law Changes. On August 5, 1997, the Taxpayer Relief Act of 1997
(the "Act") was signed by President Clinton. The Act did not adopt several tax
law changes that the President had originally proposed that, if such changes
had been enacted, would have denied the Corporation the ability to deduct
interest on the Series D Subordinated Debentures. There can be no assurance
that future legislative proposals or final legislation will not affect the
ability of the Corporation to deduct interest on the Preferred Securities.
Such a change could give rise to a Tax Event, which may permit the Corporation
to cause a redemption of the Preferred Securities, as described more fully
herein.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debentures for any series of Preferred Securities (i) such
series of Preferred Securities will no longer be deemed to be outstanding,
(ii) the depositary or its nominee, as the record holder of such series of
Preferred Securities, will receive a registered global certificate or
certificates representing the Corresponding Junior Subordinated Debentures to
be delivered upon such distribution and (iii) any certificates representing
such series of Preferred Securities not held by DTC or its nominee will be
deemed to represent the Corresponding Junior Subordinated Debentures having a
principal amount equal to the stated Liquidation Amount of such series of
Preferred Securities, and bearing accrued and unpaid interest in an amount
equal to the accrued and unpaid Distributions on such series of Preferred
Securities until such certificates are presented to the Administrative
Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Corresponding Junior Subordinated Debentures that may be
distributed in exchange for Preferred Securities if a dissolution and
liquidation of an Issuer were to occur. Accordingly, the Preferred Securities
that an investor may purchase, or the Corresponding Junior Subordinated
Debentures that the investor may receive on dissolution and liquidation of an
Issuer, may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated
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Debentures. Redemptions of the Preferred Securities shall be made and the
Redemption Price shall be payable on each Redemption Date only to the extent
that the related Issuer has funds on hand available for the payment of such
Redemption Price. See also "--Subordination of Common Securities".
If the Property Trustee gives a notice of redemption in respect of its
Preferred Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, to the extent funds are available, the Property Trustee will
deposit irrevocably with DTC funds sufficient to pay the applicable Redemption
Price and will give DTC irrevocable instructions and authority to pay the
Redemption Price to the holders of such Preferred Securities. See "Book-Entry
Issuance". If such Preferred Securities are no longer in book-entry form, the
Property Trustee, to the extent funds are available, will irrevocably deposit
with the paying agent for such Preferred Securities funds sufficient to pay
the applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing such Preferred Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Preferred Securities called for redemption shall be
payable to the holders of such Preferred 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 such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price and any Distribution payable in
respect of the Preferred Securities on or prior to the Redemption Date, but
without interest on such Redemption Price, and such Preferred Securities will
cease to be outstanding. In the event that any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day, in each
case, with the same force and effect as if made on such date. In the event
that payment of the Redemption Price in respect of Preferred Securities called
for redemption is improperly withheld or refused and not paid either by the
Issuer or by the Corporation pursuant to the Guarantee as described under
"Description of Guarantees", Distributions on such Preferred Securities will
continue to accrue at the then applicable rate from the Redemption Date
originally established by the Issuer for such Preferred Securities to the date
such Redemption Price is actually paid, in which case the actual payment date
will be the date fixed for redemption for purposes of calculating the
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 Preferred Securities by tender, in
the open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Corresponding Junior Subordinated Debentures to holders of
Preferred Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Preferred Securities on the relevant
record date, which shall be one Business Day prior to the relevant Redemption
Date or liquidation date, as applicable; provided, however, that in the event
that any Preferred Securities are not in book-entry form, the relevant record
date for such Preferred Securities shall be a date at least 15 days prior to
the Redemption Date or liquidation date, as applicable, as specified in the
applicable Prospectus Supplement.
If less than all of the Preferred Securities and Common Securities issued by
an Issuer are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata to the Preferred Securities and the
Common Securities based upon the relative Liquidation Amounts of such classes.
The particular Preferred Securities to be redeemed shall
be selected on a pro rata basis not more than 60 days prior to the Redemption
Date by the Property Trustee from the outstanding Preferred Securities not
previously called for redemption, by such method as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to $25 or an integral multiple of $25 in excess
thereof, unless a different amount is specified in the
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applicable Prospectus Supplement) of the Liquidation Amount of Preferred
Securities of a denomination larger than $25 (or such other denomination as is
specified in the applicable Prospectus Supplement). The Property Trustee shall
promptly notify the Securities registrar in writing of the Preferred
Securities selected for redemption and, in the case of any Preferred
Securities selected for partial redemption, the Liquidation Amount thereof to
be redeemed. For all purposes of each Trust Agreement, unless the context
otherwise requires, all provisions relating to the redemption of Preferred
Securities shall relate, in the case of any Preferred Securities redeemed or
to be redeemed only in part, to the portion of the aggregate Liquidation
Amount of Preferred Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless the Corporation defaults in payment
of the Redemption Price on the Corresponding Junior Subordinated Debentures,
on and after the Redemption Date interest will cease to accrue on such Junior
Subordinated Debentures or portions thereof (and Distributions will cease to
accrue on the Related Preferred Securities or portions thereof) called for
redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Issuer's
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of such Preferred Securities and Common
Securities, provided, however, that if on any Distribution Date, Redemption
Date or Liquidation Date a Debenture Event of Default shall have occurred and
be continuing, no payment of any Distribution on, or Redemption Price of, or
Liquidation Distribution in respect of, any of the Issuer's Common Securities,
and no other payment on account of the redemption, liquidation or other
acquisition of such Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all of the Issuer's
outstanding Preferred Securities for all Distribution periods terminating on
or prior thereto, or in the case of payment of the Redemption Price the full
amount of such Redemption Price on all of the Issuer's outstanding Preferred
Securities then called for redemption, or in the case of payment of the
Liquidation Distribution the full amount of such Liquidation Distribution on
all Outstanding Preferred Securities, 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
Issuer's Preferred Securities then due and payable.
In the case of any event of default under the applicable Trust Agreement
resulting from a Debenture Event of Default, the Corporation as holder of such
Issuer's Common Securities will be deemed to have waived any right to act with
respect to any such Event of Default under the applicable Trust Agreement
until the effect of all such Events of Default with respect to such Preferred
Securities have been cured, waived or otherwise eliminated. Until any such
Events of Default under the applicable Trust Agreement with respect to the
Preferred Securities have been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the holders of such Preferred
Securities and not on behalf of the Corporation as holder of the Issuer's
Common Securities, and only the holders of such Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Issuer shall automatically terminate
upon expiration of its term and shall terminate on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the holder of the
Common Securities; (ii) the distribution of a Like Amount of the Corresponding
Junior Subordinated Debentures to the holders of its Trust Securities, if the
Corporation, as Depositor, has given written direction to the Property Trustee
to terminate such Issuer (subject to the Corporation having received prior
approval of the Federal Reserve if then so required under applicable capital
guidelines or policies); (iii) redemption of all of the Issuer's Preferred
Securities as described under "Description of Preferred Securities--Redemption
or Exchange--Mandatory Redemption"; and (iv) the entry of an order for the
dissolution of the Issuer by a court of competent jurisdiction.
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If an early termination occurs as described in clause (i), (ii) or (iv)
above, the Issuer 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 such Issuer as provided by
applicable law, to the holders of such Trust Securities in exchange therefor a
Like Amount of the Corresponding Junior Subordinated Debentures, unless such
distribution is determined by the Property Trustee not to be practical, in
which event such holders will be entitled to receive out of the assets of the
Issuer available for distribution to holders, after satisfaction of
liabilities to creditors of such Issuer as provided by applicable law, an
amount equal to, in the case of holders of Preferred Securities, the aggregate
of the Liquidation Amount plus accrued 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 such Issuer has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by such Issuer on its
Preferred Securities shall be paid on a pro rata basis. The holder(s) of such
Issuer's Common Securities will be entitled to receive distributions upon any
such liquidation pro rata with the holders of its Preferred Securities, except
that if a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under each
Trust Agreement with respect to the Preferred Securities issued thereunder
(whatever the reason for such 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) the occurrence of a Debenture Event of Default under the Indenture
(see "Description of Junior Subordinated Debentures--Debenture Events of
Default"); or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Trustees by the holders of at least 25% in aggregate Liquidation
Amount of the outstanding Preferred Securities of the applicable Issuer, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under such
Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Corporation to
appoint a successor Property Trustee within 90 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer's Preferred
Securities, the Administrative Trustees and the Corporation, as Depositor,
unless such Event of Default shall have been cured or waived. The Corporation,
as Depositor, 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 each
Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities as
described above. See "--Liquidation Distribution Upon Termination." The
existence of an Event of Default does not entitle the holders of Preferred
Securities to accelerate the maturity thereof.
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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 Preferred
Securities. In no event will the holders of the Preferred 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
applicable Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or from time to time, for the purpose of meeting the legal requirements
of the Trust Indenture Act or of any jurisdiction in which any part of the
Trust Property may at the time be located, the Corporation, as the holder of
the Common Securities, and the Administrative Trustees shall have power to
appoint one or more persons either to act as a co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to act as
separate trustee of any such property, in either case with such powers as may
be provided in the instrument of appointment, and to vest in such person or
persons in such capacity any property, title, right or power deemed necessary
or desirable, subject to the provisions of the applicable Trust Agreement. In
case a Debenture Event of Default has occurred and is continuing, the Property
Trustee alone shall have power to make such appointment.
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 Trustee shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under each Trust
Agreement, provided such Person shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUERS
An Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. An Issuer may, at the request of the Corporation, with the
consent of the Administrative Trustees and without the consent of the holders
of the Preferred Securities, the Property Trustee or the Delaware Trustee,
merge with or into, consolidate, amalgamate, or be replaced by or convey,
transfer or lease its properties and assets 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 such
Issuer with respect to the Preferred Securities or (b) substitutes for the
Preferred Securities other securities having substantially the same terms as
the Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities 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 as the holder of
the Corresponding Junior Subordinated Debentures, (iii) the Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then listed, if any,
(iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Preferred Securities to be downgraded by
any nationally recognized statistical rating organization which assigns
ratings to the Preferred Securities, (v) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the material rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose identical to that of the
Issuer, (vii) prior to such merger, consolidation, amalgamation, replacement,
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conveyance, transfer or lease, the Corporation has received an opinion from
independent counsel to the Issuer experienced in such matters to the effect
that (a) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the material rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Issuer nor such successor entity will be required to register as
an investment company under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), and (viii) the Corporation or any permitted
successor or assignee owns all of the Common Securities of such successor
entity and guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, an Issuer shall not, except with the consent of
holders of 100% in Liquidation Amount of the Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to
any 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 Issuer or the
successor entity to be classified as an association taxable as a corporation
or as other than a grantor trust for United States Federal income tax
purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
Except as provided below and under "Description of Guarantees--Amendments
and Assignment" and as otherwise required by law and the applicable Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
Each 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 Preferred Securities (i) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent
with any other provision, or to make any other provisions with respect to
matters or questions arising under such Trust Agreement, which shall not be
inconsistent with the other provisions of such Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of such Trust Agreement to such
extent as shall be necessary to ensure that the Issuer will be classified for
United States Federal income tax purposes as a grantor trust or as other than
an association taxable as a corporation at all times that any Trust Securities
are outstanding or to ensure that the Issuer will not be required to register
as an "investment company" under the Investment Company Act, provided,
however, that in the case of either clause (i) or clause (ii), such action
shall not adversely affect in any material respect the interests of any holder
of Preferred Securities, and any amendments of such Trust Agreement shall
become effective when notice thereof is given to the holders of Trust
Securities. Each Trust Agreement may be amended by the Issuer Trustees and the
Corporation with (i) the consent of holders representing not less than a
majority (based upon Liquidation Amounts) of the outstanding Trust Securities,
and (ii) receipt by the Issuer Trustees of an opinion of counsel to the effect
that such amendment or the exercise of any power granted to the Issuer
Trustees in accordance with such amendment will not cause the Issuer to be
taxable as a corporation or affect the Issuer's status as a grantor trust for
United States Federal income tax purposes or the Issuer's exemption from
status as an "investment company" under the Investment Company Act, provided
that without the consent of each holder of Trust Securities, such Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount
of any Distribution required to be made in respect of the Trust Securities as
of a specified date or (ii) restrict the right of a holder of Trust Securities
to institute suit for the enforcement of any such payment on or after such
date.
So long as any Corresponding Junior Subordinated Debentures are held by the
Property Trustee, the Issuer Trustees shall not (i) direct the time, method
and place of conducting any proceeding for any remedy available to the
Debenture Trustee, or executing any trust or power conferred on the Property
Trustee with respect to such
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Corresponding Junior Subordinated Debentures, (ii) waive any past default that
is waivable under the Indenture, (iii) exercise any right to rescind or annul
a declaration that the principal of all the Junior Subordinated Debentures
shall be due and payable or (iv) consent to any amendment, modification or
termination of the Indenture or such Corresponding Junior Subordinated
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Preferred Securities, provided, however,
that where a consent under the Indenture would require the consent of each
holder of Corresponding Junior Subordinated Debentures affected thereby, no
such consent shall be given by the Property Trustee without the prior consent
of each holder of the corresponding Preferred Securities. The Issuer Trustees
shall not revoke any action previously authorized or approved by a vote of the
holders of the Preferred Securities except by subsequent vote of the holders
of the Preferred Securities. The Property Trustee shall notify each holder of
Preferred Securities of any notice of default with respect to the
Corresponding Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of the holders of the Preferred 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 Issuer
will not be classified as an association taxable as a corporation for United
States Federal income tax purposes on account of such action and such action
would not cause the Issuer to be classified as other than a grantor trust for
United States Federal income tax purposes.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred 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 Preferred Securities in the
manner set forth in each Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for an Issuer to redeem and cancel its Preferred Securities in accordance with
the applicable Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Corporation, the Issuer Trustees or any
affiliate of the Corporation or any Issuer Trustees, shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of a series may be issued in whole or in part in
the form of one or more Global Preferred Securities that will be deposited
with, or on behalf of, the Depositary identified in the Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable
Prospectus Supplement for such series, the Depositary will be DTC. Global
Preferred Securities may be issued only in fully registered form and in either
temporary or permanent form. Unless and until it is exchanged in whole or in
part for the individual Preferred Securities represented thereby, a Global
Preferred Security may not be transferred except as a whole by the Depositary
for such Global Preferred Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by the Depositary or any nominee to a successor Depositary or
any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Preferred Securities will be described in the Prospectus Supplement relating
to such series. The Corporation anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Preferred Security, and the deposit of such
Global Preferred Security with or on behalf of the Depositary, the Depositary
for such Global Preferred Security or its nominee will credit, on its book-
entry registration and transfer system, the respective aggregate Liquidation
Amounts of the individual
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Preferred Securities represented by such Global Preferred Securities to the
accounts of Participants. Such accounts shall be designated by the dealers,
underwriters or agents with respect to such Preferred Securities or by the
Corporation if such Preferred Securities are offered and sold directly by the
Corporation. Ownership of beneficial interests in a Global Preferred Security
will be limited to Participants or persons that may hold interests through
Participants. Ownership of beneficial interests in such Global Preferred
Security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the applicable Depositary or its nominee
(with respect to interests of Participants) and the records of Participants
(with respect to interests of persons who hold through Participants). The laws
of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Preferred
Security.
So long as the Depositary for a Global Preferred Security, or its nominee,
is the registered owner of such Global Preferred Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder
of the Preferred Securities represented by such Global Preferred Security for
all purposes under the Indenture governing such Preferred Securities. Except
as provided below, owners of beneficial interests in a Global Preferred
Security will not be entitled to have any of the individual Preferred
Securities of the series represented by such Global Preferred Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Preferred Securities of such series in definitive form
and will not be considered the owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Preferred Securities represented by a Global Preferred Security registered in
the name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Preferred
Security representing such Preferred Securities. None of the Corporation, the
Property Trustee, any Paying Agent, or the Securities Registrar for such
Preferred Securities will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
The Corporation expects that the Depositary for a series of Preferred
Securities or its nominee, upon receipt of any payment of Liquidation Amount,
premium or Distributions, including any payment of Redemption Price, in
respect of a permanent Global Preferred Security representing any of such
Preferred Securities immediately will credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interest in
the aggregate Liquidation Amount of such Global Preferred Security for such
Preferred Securities as shown on the records of such Depositary or its
nominee. The Corporation also expects that payments by Participants to owners
of beneficial interests in such Global Preferred Security held through such
Participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Preferred Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is
not appointed by the Issuer within 90 days, or if there shall have occurred
and be continuing an event of default under the Indenture with respect to the
Subordinated Debentures of such series, the Issuer will issue individual
Preferred Securities of such series in exchange for the Global Preferred
Security representing such series of Preferred Securities. In addition, the
Issuer may at any time and in its sole discretion, subject to any limitations
described in the Prospectus Supplement relating to such Preferred Securities,
determine not to have any Preferred Securities of such series represented by
one or more Global Preferred Securities and, in such event, will issue
individual Preferred Securities of such series in exchange for the Global
Preferred Security or Securities representing such series of Preferred
Securities. Further, if the Issuer so specifies with respect to the Preferred
Securities of a series, an owner of a beneficial interest in a Global
Preferred Security representing Preferred
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Securities of such series may, on terms acceptable to the Issuer, the Property
Trustee and the Depositary for such Global Preferred Security, receive
individual Preferred Securities of such series in exchange for such beneficial
interests, subject to any limitations described in the Prospectus Supplement
relating to such Preferred Securities. In any such instance, an owner of a
beneficial interest in a Global Preferred Security will be entitled to
physical delivery of individual Preferred Securities of the series represented
by such Global Preferred Security equal in principal amount to such beneficial
interest and to have such Preferred Securities registered in its name.
Individual Preferred Securities of such series so issued will be issued in
denominations, unless otherwise specified by the Issuer, and integral
multiples thereof that are the same as the denominations and multiples in
which the Preferred Securities are issued.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any Issuer's Preferred Securities are not
held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. Unless otherwise specified in the applicable Prospectus Supplement,
the paying agent (the "Paying Agent") shall initially be the Property Trustee
and any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Corporation. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee and the Corporation. In the event that the Property Trustee
shall no longer be the Paying Agent, the Administrative Trustees shall appoint
a successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and the Corporation) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of each Issuer, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Issuers will not be required to register or cause to be
registered the transfer of their Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically
set forth in each Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision,
the Property Trustee is under no obligation to exercise any of the powers
vested in it by the applicable Trust Agreement at the request of any holder of
Preferred 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 applicable Trust Agreement or is unsure of the application of any
provision of the applicable Trust Agreement, and the matter is not one on
which holders of Preferred Securities are entitled under such 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.
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MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuers in such a way that no Issuer will be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a
corporation or as other than a grantor trust for United States Federal income
tax purposes and so that the Corresponding Junior Subordinated Debentures will
be treated as indebtedness of the Corporation for United States Federal income
tax purposes. In this connection, the Corporation and the Administrative
Trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust of each Issuer or each Trust Agreement, that the
Corporation and the Administrative Trustees determine in their discretion to
be necessary or desirable for such purposes, as long as such action does not
materially adversely affect the interests of the holders of the related
Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Issuer may borrow money or issue debt or mortgage or pledge any of its
assets.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Preferred Securities
and the Junior Subordinated Debentures, unless otherwise referred to in the
Prospectus Supplement relating to an offering of Preferred Securities or
Junior Subordinated Debentures. The Preferred Securities and the Junior
Subordinated Debentures will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more fully-
registered global certificates will be issued for the Preferred Securities of
each Issuer and the Junior Subordinated Debentures, representing in the
aggregate the total number of such Issuer's Preferred Securities or aggregate
principal balance of Junior Subordinated Debentures, respectively, and will be
deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. "Direct Participants" include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants
are on file with the Commission.
Purchases of Preferred Securities or Junior Subordinated Debentures within
the DTC system must be made by or through Direct Participants, which will
receive a credit for the Preferred Securities or Junior Subordinated
Debentures on DTC's records. The ownership interest of each actual purchaser
of each Preferred Security and each Junior Subordinated Debenture ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
their purchases, but Beneficial Owners are expected to receive written
confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Preferred Securities or Junior
Subordinated Debentures. Transfers of ownership interests in the Preferred
Securities or Junior Subordinated Debentures are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Preferred Securities or Junior Subordinated Debentures, except in
the event that use of the book-entry system for the Preferred Securities of
such Issuer or Junior Subordinated Debentures is discontinued.
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DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities or Junior Subordinated Debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Preferred
Securities or Junior Subordinated Debentures are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Preferred Securities or Junior Subordinated Debentures. If less than all
of an Issuer's Preferred Securities or the Junior Subordinated Debentures are
being redeemed, DTC's current practice is to determine by lot the amount of
the interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Preferred
Securities or Junior Subordinated Debentures, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities or Junior Subordinated Debentures. Under its
usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
relevant Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts such Preferred Securities or Junior Subordinated Debentures
are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Distribution payments on the Preferred Securities or the Junior Subordinated
Debentures will be made by the relevant Trustee to DTC. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the relevant Trustee, the Issuer thereof or the
Corporation, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of Distributions to DTC is the
responsibility of the relevant Trustee, disbursement of such payments to
Direct Participants is the responsibility of DTC, and disbursements of such
payments to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Preferred Securities or the Junior Subordinated
Debentures at any time by giving reasonable notice to the relevant Trustee and
the Corporation. In the event that a successor securities depositary is not
obtained, definitive Preferred Security or Junior Subordinated Debenture
certificates representing such Preferred Securities or Junior Subordinated
Debentures are required to be printed and delivered. The Corporation, at its
option, may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary). After a Debenture Event of Default,
the holders of a majority in liquidation preference of Preferred Securities or
aggregate principal amount of Junior Subordinated Debentures may determine to
discontinue the system of book-entry transfers through DTC. In any such event,
definitive certificates for such Preferred Securities or Junior Subordinated
Debentures will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and the Corporation believe to
be accurate, but the Issuers and the Corporation assume no responsibility for
the accuracy thereof. Neither the Issuers nor the Corporation has any
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
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DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Corporation concurrently
with the issuance by each Issuer of its Preferred Securities for the benefit
of the holders from time to time of such Preferred Securities. The First
National Bank of Chicago will act as indenture trustee ("Guarantee Trustee")
under each Guarantee for the purposes of compliance with the Trust Indenture
Act and each Guarantee will be qualified as an indenture under the Trust
Indenture Act. This summary of certain provisions of the Guarantees, which
summarizes the material terms thereof, does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the
provisions of each Guarantee, including the definitions therein of certain
terms, and the Trust Indenture Act, to each of which reference is hereby made.
The form of the Guarantee has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Reference in this summary to
Preferred Securities means that Issuer's Preferred Securities to which a
Guarantee relates. The Guarantee Trustee will hold each Guarantee for the
benefit of the holders of the related Issuer's Preferred Securities.
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 Preferred Securities, as and when due, regardless
of any defense, right of set-off or counterclaim that such Issuer may have or
assert other than the defense of payment. The following payments with respect
to the Preferred Securities, to the extent not paid by or on behalf of the
related Issuer (the "Guarantee Payments"), will be subject to the Guarantee:
(i) any accumulated and unpaid Distributions required to be paid on such
Preferred Securities, to the extent that such Issuer has funds on hand
available therefor at such time, (ii) the Redemption Price with respect to any
Preferred Securities called for redemption, to the extent that such Issuer has
funds on hand available therefor at such time, or (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of such Issuer (unless the
Corresponding Junior Subordinated Debentures are distributed to holders of
such Preferred Securities in exchange therefor), the lesser of (a) the
Liquidation Distribution and (b) the amount of assets of such Issuer remaining
available for distribution to holders of Preferred Securities after
satisfaction of liabilities to creditors of such Issuer 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 applicable Preferred Securities or by causing the Issuer to
pay such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Issuer's obligations under the Preferred Securities, but will
apply only to the extent that such related Issuer has funds sufficient to make
such payments, and is not a guarantee of collection.
If the Corporation does not make interest payments on the Corresponding
Junior Subordinated Debentures held by the Issuer, the Issuer will not be able
to pay Distributions on the Preferred Securities and will not have funds
legally available therefor. Each Guarantee will rank subordinate and junior in
right of payment to all Senior Debt of the Corporation. See "--Status of the
Guarantees". Because the Corporation is a holding company, the right of the
Corporation to participate in any distribution of assets of any subsidiary
upon such subsidiary's liquidation or reorganization or otherwise, is subject
to the prior claims of creditors of that subsidiary, except to the extent the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Corporation's obligations under the Guarantees will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and claimants should look only to the assets of
the Corporation for payments thereunder. See "The Corporation." Except as
otherwise provided in the applicable Prospectus Supplement, the Guarantees do
not limit the incurrence or issuance of other secured or unsecured debt of the
Corporation, including Senior Debt, whether under the Indenture, any other
existing indenture or any other indenture that the Corporation may enter into
in the future or otherwise. See the applicable Prospectus Supplement relating
to any offering of Preferred Securities.
The Corporation has, through the applicable Guarantee, the applicable Trust
Agreement, the applicable series of Corresponding Junior Subordinated
Debentures, the Indenture and the applicable Expense Agreement,
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taken together, fully, irrevocably and unconditionally guaranteed all of the
Issuer's obligations under the Preferred 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 Issuer's obligations under the Preferred
Securities. See "Relationship Among the Preferred Securities, the
Corresponding Junior Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Corporation
and will rank subordinate and junior in right of payment to all Senior Debt of
the Corporation in the same manner as Junior Subordinated Debentures.
Each Guarantee will rank pari passu with all other Guarantees issued by the
Corporation. Each Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Corporation to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). Each Guarantee will be held for the benefit of the holders of the
related Preferred Securities. Each Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Issuer
or upon distribution to the holders of the Preferred Securities of the
Corresponding Junior Subordinated Debentures. None of the Guarantees places a
limitation on the amount of additional Senior Debt that may be incurred by the
Corporation. The Corporation expects from time to time to incur additional
indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the material rights of holders of the related Preferred Securities (in which
case no vote will be required), no Guarantee may be amended without the prior
approval of the holders of not less than a majority of the aggregate
Liquidation Amount of such outstanding Preferred Securities. The manner of
obtaining any such approval will be as set forth under "Description of
Preferred Securities--Voting Rights; Amendment of Each Trust Agreement." All
guarantees and agreements contained in each Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the
Corporation and shall inure to the benefit of the holders of the related
Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of the
Corporation to perform any of its payment obligations thereunder or to perform
any non-payment obligations if such non-payment default remains unremedied for
30 days. The holders of not less than a majority in aggregate Liquidation
Amount of the related Preferred Securities 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 such Guarantee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under such Guarantee.
Any holder of the Preferred Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under such Guarantee
without first instituting a legal proceeding against the Issuer, the Guarantee
Trustee or any other person or entity.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Corporation in performance of any Guarantee, undertakes to
perform only such duties as are specifically set forth in each Guarantee and,
after default with respect to any Guarantee, must exercise the same degree of
care and skill as a
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prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the Guarantee Trustee is under no obligation to
exercise any of the powers vested in it by any Guarantee at the request of any
holder of any Preferred Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Preferred Securities, upon
full payment of the amounts payable upon liquidation of the related Issuer or
upon distribution of Corresponding Junior Subordinated Debentures to the
holders of the related Preferred Securities in exchange therefor. Each
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the related Preferred Securities must restore
payment of any sums paid under such Preferred Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by the Corporation under each
Trust Agreement (the "Expense Agreement"), the Corporation will irrevocably
and unconditionally guarantee to each Person or entity to whom the Issuer
becomes indebted or liable, the full payment of any costs, expenses or
liabilities of the Issuer, other than obligations of the Issuer to pay to the
holders of any Preferred Securities or other similar interests in the Issuer
of the amounts due such holders pursuant to the terms of the Preferred
Securities or such other similar interests, as the case may be. The Expense
Agreement will be enforceable by third parties.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE CORRESPONDING JUNIOR
SUBORDINATED DEBENTURES, THE EXPENSE AGREEMENT AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Corporation as and to the
extent set forth under "Description of Guarantees." Taken together, the
Corporation's obligations under each series of Corresponding Junior
Subordinated Debentures, the Indenture, the related Trust Agreement, the
related Expense Agreement, and the related Guarantee provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the Related Preferred 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 Issuer's obligations under the
Related Preferred Securities. If and to the extent that the Corporation does
not make payments on any series of Corresponding Junior Subordinated
Debentures, such Issuer will not pay Distributions or other amounts due on its
Related Preferred Securities. The Guarantees do not cover payment of
Distributions when the related Issuer does not have sufficient funds to pay
such Distributions. In such event, the remedy of a holder of a series of
Preferred Securities is to institute a legal proceeding directly against the
Corporation pursuant to the terms of the Indenture for enforcement of payment
of amounts of such Distributions to such holder. The obligations of the
Corporation under each Guarantee are subordinate and junior in right of
payment to all Senior Debt of the Corporation.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on each
series of Corresponding Junior Subordinated Debentures, such payments will be
sufficient to cover Distributions and other payments due on the Related
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to
the sum of the aggregate stated Liquidation Amount of the Related Preferred
Securities and related Common Securities; (ii) the interest rate and interest
and other payment dates on each series of Corresponding Junior Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Related Preferred Securities; (iii) the Corporation shall pay
for all and any costs, expenses and liabilities of such Issuer except the
Issuer's obligations to holders of its Preferred Securities under such
Preferred Securities; and (iv) each Trust Agreement provides that the Issuer
will not engage in any activity that is not consistent with the limited
purposes of such Issuer.
Notwithstanding anything to the contrary in the Indenture, the Corporation
has the right to set-off any payment it is otherwise required to make
thereunder with and to the extent the Corporation has theretofore made, or is
concurrently on the date of such payment making, a payment under the related
Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any related Preferred Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the related
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the related Issuer or any other person or entity.
A default or event of default under any Senior Debt of the Corporation would
not constitute a default or Event of Default under the Indenture. However, in
the event of payment defaults under, or acceleration of, Senior Debt of the
Corporation, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Corresponding Junior Subordinated
Debentures until such Senior Debt has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on any
series of Corresponding Junior Subordinated Debentures would constitute an
Event of Default under the Indenture.
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LIMITED PURPOSE OF ISSUERS
Each Issuer's Preferred Securities evidence a beneficial interest in such
Issuer, and each Issuer exists for the sole purpose of issuing its Preferred
Securities and Common Securities and investing the proceeds thereof in
Corresponding Junior Subordinated Debentures and engaging in only those other
activities necessary or incidental thereto. A principal difference between the
rights of a holder of a Preferred Security and a holder of a Corresponding
Junior Subordinated Debenture is that a holder of a Corresponding Junior
Subordinated Debenture is entitled to receive from the Corporation the
principal amount of and interest accrued on Corresponding Junior Subordinated
Debentures held, while a holder of Preferred Securities is entitled to receive
Distributions from such Issuer (or from the Corporation under the applicable
Guarantee) if and to the extent such Issuer has funds available for the
payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Issuer involving the liquidation of the Corresponding Junior Subordinated
Debentures, the holders of the related Preferred Securities will be entitled
to receive, out of the assets held by such Issuer, the Liquidation
Distribution in cash. See "Description of Preferred Securities--Liquidation
Distribution Upon Termination." Upon any voluntary or involuntary liquidation
or bankruptcy of the Corporation, the Property Trustee, as holder of the
Corresponding Junior Subordinated Debentures, would be a subordinated creditor
of the Corporation, subordinated in right of payment to all Senior Debt as set
forth in the Indenture, but entitled to receive payment in full of principal
and interest, before any stockholders of the Corporation receive payments or
distributions. Since the Corporation is the guarantor under each Guarantee and
has agreed to pay for all costs, expenses and liabilities of each Issuer
(other than the Issuer's obligations to the holders of its Preferred
Securities), the positions of a holder of such Preferred Securities and a
holder of such Corresponding Junior Subordinated Debentures relative to other
creditors and to stockholders of the Corporation in the event of liquidation
or bankruptcy of the Corporation are expected to be substantially the same.
PLAN OF DISTRIBUTION
The Junior Subordinated Debentures or the Preferred Securities may be sold
in a public offering to or through underwriters or dealers designated from
time to time. The Corporation and each Issuer may sell its Junior Subordinated
Debentures or Preferred Securities as soon as practicable after effectiveness
of the Registration Statement of which this Prospectus forms a part. The names
of any underwriters or dealers involved in the sale of the Junior Subordinated
Debentures or Preferred Securities in respect of which this Prospectus is
delivered, the amount or number of Junior Subordinated Debentures and
Preferred Securities to be purchased by any such underwriters and any
applicable commissions or discounts will be set forth in the applicable
Prospectus Supplement.
Underwriters may offer and sell Junior Subordinated Debentures or Preferred
Securities at a fixed price or prices, which may be changed, or from time to
time at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. In connection with the
sale of Preferred Securities, underwriters may be deemed to have received
compensation from the Corporation and/or the applicable Issuer in the form of
underwriting discounts or commissions and may also receive commissions.
Underwriters may sell Junior Subordinated Debentures or Preferred Securities
to or through dealers, and such dealers may receive compensation in the form
of discounts, concessions or commissions from the underwriters.
Any underwriting compensation paid by the Corporation and/or the applicable
Issuer to underwriters in connection with the offering of Junior Subordinated
Debentures or Preferred Securities, and any discounts, concessions or
commissions allowed by such underwriters to participating dealers, will be
described in an accompanying Prospectus Supplement. Underwriters and dealers
participating in the distribution of Junior Subordinated Debentures or
Preferred Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of such
Junior Subordinated Debentures or Preferred Securities may be deemed to be
underwriting discounts and commissions, under the Securities Act.
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Underwriters and dealers may be entitled, under agreement with the Corporation
and the applicable Issuer, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act, and
to reimbursement by the Corporation for certain expenses.
In connection with the offering of the Preferred Securities of any Issuer,
such Issuer may grant to the underwriters an option to purchase additional
Preferred Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set
forth in the accompanying Prospectus Supplement. If such Issuer grants any
over-allotment option, the terms of such over-allotment option will be set
forth in the Prospectus Supplement for such Preferred Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, the Corporation and/or the applicable Issuer and/or any of their
affiliates in the ordinary course of business.
The Junior Subordinated Debentures and the Preferred Securities will be new
issues of securities and will have no established trading market. Any
underwriters to whom Junior Subordinated Debentures or Preferred Securities
are sold for public offering and sale may make a market in such Junior
Subordinated Debentures and Preferred Securities, but such underwriters will
not be obligated to do so and may discontinue any market making at any time
without notice. Such Junior Subordinated Debentures or Preferred Securities
may or may not be listed on a national securities exchange or the Nasdaq
National Market. No assurance can be given as to the liquidity of or the
existence of trading markets for any Junior Subordinated Debentures or
Preferred Securities.
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, certain
matters of Delaware law relating to the validity of the Preferred Securities,
the enforceability of the Trust Agreements and the formation of the Issuers
will be passed upon by Richards, Layton & Finger, P.A. One Rodney Square,
Wilmington, Delaware 19801, special Delaware counsel to the Corporation and
the Issuers. Unless otherwise indicated in the applicable Prospectus
Supplement, the validity of the Guarantees and the Junior Subordinated
Debentures will be passed upon for the Corporation by Sullivan & Cromwell, 125
Broad Street, New York, New York 10004, and for the underwriters by Milbank,
Tweed, Hadley & McCloy, One Chase Manhattan Plaza, New York, New York 10005.
Certain matters relating to United States Federal income tax considerations
will be passed upon for the Corporation by Sullivan & Cromwell, as special tax
counsel for the Corporation. Milbank, Tweed, Hadley & McCloy from time to time
performs legal services for the Corporation.
EXPERTS
The consolidated financial statements of the Corporation appearing in its
Annual Report on Form 10-K, dated December 31, 1996, and for the year then
ended, have been audited by Ernst & Young LLP, independent auditors, and at
December 31, 1995, and for each of the two years in the period ended December
31, 1995, by Deloitte & Touche LLP, independent auditors, as set forth in
their respective reports thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.
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