<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-40837
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 12, 1998)
8,000,000 Trust Preferred Securities
BNY Capital IV
6 7/8% Trust Preferred Securities, Series E
(Liquidation Amount $25 per Trust Preferred Security)
fully and unconditionally guaranteed by
The Bank of New York Company, Inc.
---------------
A brief description of the 6 7/8% Trust Preferred Securities, Series E
can be found under "Summary" in this Prospectus Supplement.
Investing in the Series E Trust Preferred Securities involves risks that
are described in the "Risk Factors" section beginning on page S-7 of this
Prospectus Supplement.
We plan to list the Series E Trust Preferred Securities on the New York
Stock Exchange under the trading symbol "BKPrE". We expect that the Series E
Trust Preferred Securities will begin trading on the New York Stock Exchange
within 30 days after they are first issued.
---------------
<TABLE>
<CAPTION>
Per Series E Trust
Preferred
Security Total
------------------ ------------
<S> <C> <C>
Public Offering Price(1)........................ $25 $200,000,000
Underwriting Discount........................... (2) (2)
Proceeds, before expenses, to BNY Capital IV.... $25 $200,000,000
</TABLE>
-------
(1) Any accumulated distributions from the original issue date
should be added to the Public Offering Price.
(2) The underwriting discount of $0.7875 per Series E Trust
Preferred Security (or $6,300,000 for all Series E Trust
Preferred Securities) will be paid by The Bank of New York
Company, Inc.
---------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this Prospectus Supplement or the accompanying Prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
We expect that the Series E Trust Preferred Securities will be ready for
delivery in book-entry form only through The Depository Trust Company on or
about January 25, 1999, which will be the sixth business day following the
date of this Prospectus Supplement. If you consider purchasing any Series E
Trust Preferred Securities, you should note that trading of the Series E Trust
Preferred Securities may be affected by this six-day settlement cycle.
---------------
Morgan Stanley Dean Witter Merrill Lynch & Co.
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Smith Barney
---------------
The date of this Prospectus Supplement is January 14, 1999.
<PAGE>
No dealer, salesperson or other individual has been authorized to give
any information or to make any representations other than those contained or
incorporated by reference in this Prospectus 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 E Trust or 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 E Trust 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.
----------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary................................................................... S-3
Risk Factors.............................................................. S-7
BNY Capital IV............................................................ S-11
The Corporation........................................................... S-11
Recent Developments....................................................... S-12
Consolidated Ratios of Earnings to Fixed Charges.......................... S-13
Use of Proceeds........................................................... S-13
Capitalization............................................................ S-14
Accounting Treatment...................................................... S-15
Certain Terms of Series E Trust Preferred Securities...................... S-15
Certain Terms of Series E Subordinated Debentures......................... S-17
Certain Terms of Series E Guarantee....................................... S-22
Certain Federal Income Tax Consequences................................... S-23
ERISA Considerations...................................................... S-26
Underwriting.............................................................. S-26
Validity of Securities.................................................... S-29
Prospectus
Available Information..................................................... 4
Incorporation of Certain Documents by Reference........................... 5
The Corporation........................................................... 6
Certain Regulatory Considerations......................................... 6
The Issuers............................................................... 9
Use of Proceeds........................................................... 10
Description of Junior Subordinated Debentures............................. 10
Description of Preferred Securities....................................... 22
Book-Entry Issuance....................................................... 34
Description of Guarantees................................................. 36
Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debentures, the Expense Agreement and the Guarantees........ 39
Plan of Distribution...................................................... 40
Validity of Securities.................................................... 41
Experts................................................................... 41
</TABLE>
S-2
<PAGE>
SUMMARY
This summary highlights information contained elsewhere in this
Prospectus Supplement. This summary is not complete and does not contain all
the information that you should consider before investing in the Series E Trust
Preferred Securities. You should read the entire Prospectus Supplement
carefully, especially the discussion of the risks of investing in the Series E
Trust Preferred Securities discussed under "Risk Factors".
The Corporation
The Bank of New York Company, Inc., also referred to as "we" or the
"Corporation", is located at One Wall Street, New York, New York 10286, and its
telephone number is (212) 495-1784. It is a bank holding company subject to the
regulation and supervision of the Board of Governors of the Federal Reserve
System (the "Federal Reserve"). Through its subsidiaries, which include The
Bank of New York (the "Bank"), it provides a complete range of banking and
other financial services to corporations and individuals worldwide through its
core businesses: Securities Servicing and Cash Processing; Trust, Investment
Management and Private Banking; Corporate Banking; Retail Banking; Asset Based
Lending; and Financial Market Services.
BNY Capital IV
BNY Capital IV, also referred to as the "Series E Trust", is located at
One Wall Street, New York, New York 10286, Attention: Secretary, and its
telephone number is (212) 495-1784. It is a statutory business trust created
under Delaware law.
At the closing of this offering, the Series E Trust will issue the 6 7/8%
Trust Preferred Securities, Series E (the "Series E Trust Preferred
Securities"), which will represent preferred undivided beneficial interests in
the assets of the Series E Trust. It will also issue common securities (the
"Series E Common Securities"), which will represent common undivided beneficial
interests in the assets of the Series E Trust. The Corporation will purchase
all of the Series E Common Securities from the Series E Trust. The Series E
Common Securities will equal at least 3% of the total capital of the Series E
Trust. The Series E Trust Preferred Securities will equal the remaining capital
of the Series E Trust. The Series E Trust Preferred Securities and the Series E
Common Securities, together also referred to as the "Series E Securities", will
have substantially similar terms, except that the holders of the Series E Trust
Preferred Securities will have priority in right of payment under certain
circumstances and the holders of Series E Common Securities will have broader
voting rights.
The Series E Trust will use the proceeds from the sale of the Series E
Securities to purchase the 6 7/8% Junior Subordinated Deferrable Interest
Debentures, Series E (the "Series E Subordinated Debentures") from the
Corporation. The Series E Subordinated Debentures will have payment terms
similar to those of the Series E Trust Preferred Securities, and the Series E
Trust will rely on the payments it receives on the Series E Subordinated
Debentures to make all payments on the Series E Trust Preferred Securities.
The Series E Trust exists solely to:
. issue and sell the Series E Securities,
. use the proceeds from the sale of the Series E Securities to purchase
the Series E Subordinated Debentures from the Corporation and
. engage in other activities that are necessary or incidental to the
foregoing.
The Series E Trust will have no assets other than the Series E
Subordinated Debentures and the right to receive reimbursement of certain
expenses under its Agreement as to Expenses and Liabilities with the
Corporation (the "Expense Agreement"). Consequently, the Series E Trust will
have no revenue other than payments under the Series E Subordinated Debentures
and the Expense Agreement.
S-3
<PAGE>
The Offering
The following is a brief summary of the offering of the Series E Trust
Preferred Securities (the "Offering"). You should refer to "Certain Terms of
Series E Trust Preferred Securities", "Certain Terms of Series E Subordinated
Debentures" and "Certain Terms of Series E Guarantee" for a more detailed
description of the Series E Trust Preferred Securities and the Series E
Subordinated Debentures and for definitions of certain capitalized terms used
below.
Securities Offered.......... 8,000,000 6 7/8% Trust Preferred Securities,
Series E (Liquidation Amount $25 per Trust
Preferred Security).
Issuer...................... BNY Capital IV, a Delaware statutory business
trust.
Offering Price.............. $25 per Series E Trust Preferred Security, plus
accumulated and unpaid Distributions, if any,
from the original issue date.
Series E Subordinated The Series E Trust will use the proceeds from the
Debentures.................. sale of the Series E Securities to purchase from
the Corporation $206,186,000 aggregate principal
amount of 6 7/8% Junior Subordinated Deferrable
Interest Debentures, Series E, initially due on
December 1, 2028.
Distribution Rate........... 6 7/8% of the liquidation amount, annually.
Distribution Dates.......... March 1, June 1, September 1 and December 1 of
each year, beginning on March 1, 1999, subject to
any deferral.
Deferral of Distributions... Subject to certain exceptions, the Corporation
will have the right, at one or more times, to
defer interest payments on the Series E
Subordinated Debentures for up to 20 consecutive
quarters. Each period during which interest
payments are deferred is called an "Extension
Period". The deferral period may not extend
beyond the Stated Maturity of the Series E
Subordinated Debentures. If the Corporation
defers interest payments on the Series E
Subordinated Debentures, the Series E Trust also
will defer the payment of Distributions on the
Series E Trust Preferred Securities. During an
Extension Period, you will still accumulate
Distributions at an annual rate of 6 7/8% of the
Liquidation Amount of the Series E Trust
Preferred Securities, and you will accumulate
additional distributions on the deferred
Distributions at the same rate (to the extent
permitted by law). During an Extension Period,
you will also be required to accrue interest
income and include it in your gross income for
United States federal income tax purposes, even
if you are a cash basis taxpayer.
Mandatory Redemption of
Series E Trust Preferred The Series E Trust must redeem a Like Amount of
Securities................. the Series E Securities, allocated between the
Series E Common Securities and the Series E Trust
Preferred Securities in proportion to their
respective Liquidation Amounts, when the
Corporation repays the principal of the Series E
Subordinated Debentures, whether at their Stated
Maturity, on acceleration or on redemption.
Stated Maturity of Series E
Subordinated Debentures.... The Series E Subordinated Debentures mature on
December 1, 2028, which date may be extended or
shortened by the
S-4
<PAGE>
Corporation. The Corporation may shorten the
Stated Maturity to any date on or after December
1, 2013. In addition, as long as certain
conditions are met, the Corporation may extend
the Stated Maturity to any date not later than
December 1, 2047.
Optional Redemption of
Series E Subordinated The Corporation may redeem the Series E
Debentures................. Subordinated Debentures, at its option, before
their Stated Maturity at a price equal to their
principal amount plus interest accrued to the
date of redemption, as follows:
. at any time on or after January 25, 2004,
in whole or in part, and
. at any time (in whole, but not in part)
within 90 days following the occurrence and
continuation of a Tax Event or a Capital
Treatment Event.
However, the Corporation will commit to the
Federal Reserve not to exercise this option
without first obtaining any approval from the
Federal Reserve that may be required.
Redemption Price of Series
E Trust Preferred Upon redemption of the Series E Trust Preferred
Securities................. Securities, you will receive the Liquidation
Amount, plus any accumulated and unpaid
Distributions to the date of redemption.
Exchange of Series E
Securities for Series E The Corporation will have the right at any time
Subordinated Debentures.... to terminate the Series E Trust. In that event,
the Property Trustee will distribute the Series E
Subordinated Debentures to you in exchange for
those securities.
Liquidation Distribution.... If the Series E Trust terminates while the Series
E Trust Preferred Securities are outstanding,
including at the Corporation's option, then the
Property Trustee will either:
. distribute the Series E Subordinated
Debentures to you, or
. if the Property Trustee decides that
distributing the Series E Subordinated
Debentures is not practical, distribute
assets of the Series E Trust to you in an
amount equal to the Liquidation Amount of
the Series E Trust Preferred Securities
plus accumulated and unpaid Distributions.
In all cases, however, the Series E Trust will
make distributions only to the extent that the
Series E Trust has available assets after the
Series E Trust has satisfied all of its
liabilities to its creditors.
Guarantee................... The Corporation will guarantee payments on the
Series E Trust Preferred Securities, but only to
the extent that the Series E Trust has funds
legally and immediately available to make those
payments (the "Series E Guarantee"). The
Corporation's
S-5
<PAGE>
obligations under the Series E Guarantee will
rank junior in right of payment to the
Corporation's Senior Debt.
Expense Agreement........... The Corporation will agree in the Expense
Agreement to reimburse the Series E Trust for any
expenses and liabilities it may incur, other than
amounts payable in respect of the Series E
Securities.
Trustees and The First National Bank of Chicago, as Property
Administrators............. Trustee, and First Chicago Delaware Inc., as
Delaware Trustee, will conduct the business and
affairs of the Series E Trust. In addition, two
individuals who are employees or officers of the
Corporation will initially be selected by the
Corporation to act as administrative trustees of
the Series E Trust.
Use of Proceeds............. The Corporation intends to use the net proceeds
from the sale of the Series E Subordinated
Debentures for general corporate purposes.
Proposed New York Stock
Exchange Symbol............ BKPrE.
Book-Entry Issuance Only.... The Series E Trust Preferred Securities will be
represented by a global security that will be
deposited with and registered in the name of The
Depository Trust Company ("DTC") or its nominee.
This means that, except in limited circumstances,
you will not receive a certificate for the Series
E Trust Preferred Securities.
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>
Nine Months Year Ended December 31,
Ended ----------------------------
Sept. 30, 1998 1997 1996 1995 1994 1993
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on
Deposits................. 4.83x 5.12x 4.30x 3.61x 3.75x 3.61x
Including Interest on
Deposits................. 2.04 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................. 4.08x 4.35x 4.15x 3.51x 3.58x 3.23x
Including Interest on
Deposits................. 1.94 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.
S-6
<PAGE>
RISK FACTORS
An investment in the Series E Trust Preferred Securities involves a
number of risks, some of which relate to the Series E Trust Preferred
Securities and others of which relate to the Corporation. You should carefully
consider the following information about these risks, together with the other
information in this Prospectus Supplement, the accompanying Prospectus and the
documents incorporated by reference, before buying any Series E Trust
Preferred Securities.
Risks Relating to the Series E Trust Preferred Securities
You are making an investment decision with regard to the Series E
Subordinated Debentures as well as the Series E Trust Preferred Securities
because the Series E Trust will rely on the payments it receives on the
Series E Subordinated Debentures to make all payments on the Series E Trust
Preferred Securities and because the Series E Trust may distribute the Series
E Subordinated Debentures in exchange for the Series E Trust Preferred
Securities upon liquidation of the Series E Trust. You should carefully review
the information in this Prospectus Supplement and the accompanying Prospectus
about both of these securities.
The Corporation's Obligations Will Be Deeply Subordinated
The Series E Subordinated Debentures are not secured by any property or
assets of the Corporation. The Corporation's obligations under the Series E
Subordinated Debentures will rank junior in right of payment to all Senior
Debt of the Corporation. "Senior Debt" includes substantially all current and
future indebtedness of the Corporation, other than trade accounts payable and
accrued liabilities arising in the ordinary course of business.
Because the Corporation is a holding company, the Corporation's right to
participate in any asset distribution of any of its subsidiaries, on
liquidation, reorganization or otherwise, will rank junior to all creditors of
that subsidiary (except to the extent that the Corporation may itself be a
creditor of that subsidiary). The rights of holders of Series E Trust
Preferred Securities or Series E Subordinated Debentures to benefit from those
distributions will also be junior to those prior claims. Consequently, the
Series E Guarantee and the Series E Subordinated Debentures (and, therefore,
the Series E Trust Preferred Securities) will be effectively subordinated to
all liabilities of the Corporation's subsidiaries. You should look only to the
assets of the Corporation for payments in respect of the Series E Guarantee
and the Series E Subordinated Debentures (and the Series E Trust Preferred
Securities).
The Series E Subordinated Debentures, the Indenture and the Series E
Guarantee do not limit the ability of the Corporation or its subsidiaries to
incur additional indebtedness, including indebtedness that ranks senior to the
Series E Subordinated Debentures and the Series E Guarantee. For more
information, please refer to "Description of Guarantees--Status of the
Guarantees" and "Description of Junior Subordinated Debentures--Subordination"
in the accompanying Prospectus.
Payments on Series E Trust Preferred Securities Are Dependent on the
Corporation's Payments on Series E Subordinated Debentures
The ability of the Series E Trust to timely pay Distributions on the
Series E Trust Preferred Securities and to pay the Liquidation Amount is
dependent solely upon the Corporation's making the related payments on the
Series E Subordinated Debentures when due.
If the Corporation defaults on its obligation to pay principal of or
interest on the Series E Subordinated Debentures, the Series E Trust will not
have sufficient funds to pay Distributions or the Liquidation Amount. As a
result, you will not be able to rely upon the Series E Guarantee for payment
of these amounts. Instead, you or the Property Trustee may sue the Corporation
to enforce the rights of the Series E Trust under the Series
S-7
<PAGE>
E Subordinated Debentures. For more information, please refer to "Relationship
Among the Preferred Securities, the Corresponding Junior Subordinated
Debentures, the Expense Agreement and the Guarantees--Full and Unconditional
Guarantee" in the accompanying Prospectus.
Holders of the Series E Trust Preferred Securities will have no
protection under the terms of the Series E Trust Preferred Securities or the
Indenture against any sudden and dramatic decline in credit quality of the
Corporation resulting from any highly leveraged transaction, takeover, merger,
recapitalization or similar restructuring or change in control.
Distribution Payments on the Series E Trust Preferred Securities Could Be
Deferred for Substantial Periods, but Holders Would Continue to Recognize
Income for Tax Purposes
As long as there is no event of default under the Indenture that has
occurred but has not been cured, the Corporation will have the right, at one or
more times, to defer interest payments on the Series E Subordinated Debentures
for up to 20 consecutive quarters (but not beyond the Stated Maturity). There
is no limit on the number of Extension Periods that the Corporation may begin.
If the Corporation defers interest payments on the Series E Subordinated
Debentures, the Series E Trust also will defer payment of Distributions on the
Series E Trust Preferred Securities. During an Extension Period, you will still
accumulate Distributions at an annual rate of 6 7/8% of the Liquidation Amount
of the Series E Trust Preferred Securities. If the Corporation exercises its
right to defer interest payments on the Series E Subordinated Debentures, the
Series E Trust Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid Distributions on the Series E Trust
Preferred Securities. If you sell your Series E Trust Preferred Securities
during an Extension Period, you may not receive the same return on your
investment as someone else who continues to hold the Series E Trust Preferred
Securities. See "Certain Terms of Series E Trust Preferred Securities--
Distributions" and "Certain Terms of Series E Subordinated Debentures--Option
to Defer Interest Payments".
During an Extension Period, you will be required to accrue interest
income for United States federal income tax purposes in respect of your pro
rata share of the Series E Subordinated Debentures held by the Series E Trust,
even if you are a cash basis taxpayer. As a result, you will be required to
include that accrued interest income in your gross income for U.S. federal
income tax purposes before you actually receive any cash attributable to that
income. You also will not receive the cash related to any accrued and unpaid
interest from the Series E Trust if you sell the Series E Trust Preferred
Securities before the end of any Extension Period. See "Certain Federal Income
Tax Consequences--Interest Income and Original Issue Discount" and "--Sale or
Redemption of Series E Trust Preferred Securities".
The Corporation May Redeem the Series E Subordinated Debentures if Certain Tax
or Regulatory Events Occur
If a Tax Event or a Capital Treatment Event occurs, the Corporation has
the right to redeem the Series E Subordinated Debentures in whole, but not in
part, within 90 days. If the Corporation redeems the Series E Subordinated
Debentures, the Series E Trust will be required to redeem the Series E Trust
Preferred Securities. Thus, it is possible that the Series E Trust Preferred
Securities could be redeemed before January 25, 2004. See "Certain Terms of
Series E Subordinated Debentures--Redemption" and "Certain Terms of Series E
Trust Preferred Securities--Redemption".
A Tax Event, generally described, could result from amendments or changes
in U.S. federal income tax laws or regulations, including those arising from
judicial decisions or administrative pronouncements, that could have adverse
tax consequences for the Corporation or the Series E Trust in connection with
the Series E Subordinated Debentures or the Series E Trust Preferred
Securities. We are aware that in the past the Clinton
S-8
<PAGE>
Administration proposed legislation that, if enacted, would have resulted in a
Tax Event had the Series E Trust Preferred Securities been outstanding at that
time. While legislation of that kind is not currently pending, we can give no
assurance that similar legislation will not ultimately be enacted into law. See
"Certain Federal Income Tax Consequences--Possible Tax Law Changes".
A Capital Treatment Event, generally described, could result from
amendments or changes in laws, including those arising from judicial decisions
or administrative pronouncements, that could have adverse consequences for the
Corporation under the capital adequacy guidelines of the Federal Reserve. See
"Certain Terms of Series E Subordinated Debentures--Redemption".
The Series E Trust May Distribute the Series E Subordinated Debentures in
Exchange for the Series E Trust Preferred Securities, which Could Affect the
Market Price and Could Be a Taxable Event in Certain Circumstances
The Series E Trust will terminate upon the occurrence of certain events,
including if the Corporation in its sole discretion elects to terminate the
Series E Trust. Upon termination of the Series E Trust, subject to the terms of
the Trust Agreement and after satisfying all liabilities to the Series E
Trust's creditors, the Property Trustee may distribute the Series E
Subordinated Debentures to the holders of the Series E Securities in exchange
for those securities. The Corporation must use its best efforts to list the
Series E Subordinated Debentures on the New York Stock Exchange (or such other
stock exchange or organization, if any, on which the Series E Trust Preferred
Securities are listed) if an exchange distribution occurs. However, we can give
no assurance that the Series E Subordinated Debentures will be approved for
listing or that a trading market will exist for the Series E Subordinated
Debentures. See "Certain Terms of Series E Trust Preferred Securities--
Liquidation of Series E Trust and Distribution of Series E Subordinated
Debentures to Holders".
The Corporation cannot predict the market prices for the Series E
Subordinated Debentures that may be distributed. Accordingly, the Series E
Subordinated Debentures that you receive upon an exchange distribution, or the
Series E Trust Preferred Securities that you hold pending such a distribution,
may trade at a discount to the price that you paid for the Series E Trust
Preferred Securities.
Under current United States federal income tax law and assuming, as we
expect, that the Series E Trust will not be classified as an association
taxable as a corporation, you would not be taxed if the Property Trustee
distributed the Series E Subordinated Debentures to you upon liquidation of the
Series E Trust. However, if a Tax Event were to occur and the Series E Trust
were subject to taxation on income received or accrued on the Series E
Subordinated Debentures, you and the Series E Trust could be taxed on that
distribution. See "Certain Federal Income Tax Consequences--Distribution of
Series E Subordinated Debentures to Holders of Series E Trust Preferred
Securities".
The Corporation May Change the Stated Maturity of the Series E Subordinated
Debentures and May Redeem the Series E Subordinated Debentures
As long as certain conditions are met, the Corporation will have the
right to extend the Stated Maturity of the Series E Subordinated Debentures--
and therefore the mandatory redemption date for the Series E Trust Preferred
Securities--to December 1, 2047. You should assume that the Corporation will
exercise its option to extend the Stated Maturity if the Corporation is unable
to refinance at a lower interest rate or it is in the interest of the
Corporation to defer the Stated Maturity of the Series E Subordinated
Debentures. Consequently, you could have to wait nineteen years beyond the
initial Stated Maturity before the Series E Trust redeems the Series E Trust
Preferred Securities. See "Certain Terms of Series E Subordinated Debentures--
General".
The Corporation will have an option to redeem the Series E Subordinated
Debentures--and therefore cause the Series E Trust to redeem a Like Amount of
the Series E Securities--at any time on or after January 25, 2004. You should
assume that the Corporation will exercise its redemption option if the
Corporation is able to refinance at a lower interest rate or it is in the
interest of the Corporation to redeem the Series E
S-9
<PAGE>
Subordinated Debentures at such time. Consequently, your Series E Trust
Preferred Securities could be redeemed as early as five years after the issue
date of the Series E Trust Preferred Securities. See "Certain Terms of Series E
Trust Preferred Securities--Redemption".
The Corporation's Deferral and Extension Rights, and the Tax Treatment of the
Series E Trust Preferred Securities, Could Adversely Affect Market Prices for
the Series E Trust Preferred Securities
Because of the Corporation's rights to defer interest payments and to
extend the Stated Maturity on the Series E Subordinated Debentures, the market
price of the Series E Trust Preferred Securities may be more volatile than the
market prices of similar securities that are not subject to these rights. Any
exercise of these rights could cause the market price of the Series E Trust
Preferred Securities to decline. Accordingly, the Series E Trust Preferred
Securities that you purchase, whether in this Offering or in the secondary
market, or the Series E Subordinated Debentures that you may receive on
liquidation of the Series E Trust, may trade at a discount to the price that
you paid for the Series E Trust Preferred Securities. See "Certain Terms of the
Series E Subordinated Debentures" and "Description of Junior Subordinated
Debentures--Corresponding Junior Subordinated Debentures" in the accompanying
Prospectus.
If you sell your Series E Trust Preferred Securities before the record
date for the payment of Distributions, then you will not receive payment of a
Distribution for the period before the disposition. However, you will be
required to include accrued but unpaid interest on the Series E Subordinated
Debentures through the date of disposition as ordinary income for United States
federal income tax purposes and, if the Corporation has at any time deferred
interest payments on the Series E Subordinated Debentures, add the amount of
the accrued but unpaid interest to your tax basis in the Series E Trust
Preferred Securities. Your increased tax basis in the Series E Trust Preferred
Securities will increase the amount of any capital loss or decrease the amount
of any capital gain that you may have otherwise realized on the sale. Subject
to certain limited exceptions, you cannot offset ordinary income against
capital losses for United States federal income tax purposes. See "Certain
Federal Income Tax Consequences--Sale or Redemption of Series E Trust Preferred
Securities".
Holders of Series E Trust Preferred Securities Will Have Limited Voting Rights
Holders of Series E Trust Preferred Securities will have limited voting
rights relating principally to the amendment of the Trust Agreement and the
Series E Guarantee. Holders of Series E Trust Preferred Securities will not be
entitled to appoint, remove or replace the Property Trustee or the Delaware
Trustee except upon the occurrence of certain events.
The Corporation, in general, can replace or remove any of the trustees of
the Series E Trust. In addition, the Corporation generally may amend the Trust
Agreement and the Indenture without the consent of the holders of Series E
Trust Preferred Securities. See "Description of Preferred Securities--Voting
Rights; Amendment of Each Trust Agreement" and "--Removal of Issuer Trustees"
in the accompanying Prospectus.
There Has Been No Prior Market for the Series E Trust Preferred Securities
Before this Offering, there has been no market for the Series E Trust
Preferred Securities. Although the Series E Trust has applied to list the
Series E Trust Preferred Securities on the New York Stock Exchange, a listing
does not guarantee that a trading market for the Series E Trust Preferred
Securities will develop or, if a trading market for the Series E Trust
Preferred Securities does develop, the depth of that market and the ability of
the holders to easily sell their Series E Trust Preferred Securities.
S-10
<PAGE>
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 E Trust 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"), the Administrative Trustees named therein (collectively, with the
Property Trustee and Delaware Trustee, the "Issuer Trustees") and the several
Holders (as defined therein). 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. The Series E Trust
Preferred Securities represent "Preferred Securities" within the meaning of the
accompanying Prospectus.
BNY CAPITAL IV
BNY Capital IV is a statutory business trust created under Delaware law
pursuant to the Trust Agreement and the filing of a certificate of trust with
the Delaware Secretary of State on November 12, 1996. The Series E Trust'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 E Trust exists
for the exclusive purposes of (i) issuing and selling the Series E Securities,
(ii) using the proceeds from the sale of Series E Securities to acquire Series
E 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 E Trust Preferred Securities). Accordingly, the Series E
Subordinated Debentures will be the sole assets of the Series E Trust, and
payments under the Series E Subordinated Debentures will be the sole revenue of
the Series E Trust. All of the Series E Common Securities will be owned by the
Corporation. The Series E Common Securities will rank pari passu, and payments
will be made thereon pro rata, with the Series E Trust 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 E 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 E
Trust Preferred Securities. See "Description of Preferred Securities--
Subordination of Common Securities" in the accompanying Prospectus. The
Corporation will acquire Series E Common Securities in an aggregate liquidation
amount equal to at least 3% of the total capital of the Series E Trust. The
Series E Trust has a term of 55 years, but may terminate earlier as provided in
the Trust Agreement. The principal executive office of the Series E Trust is
One 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 E Trust 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
subsidiary is the Bank. The Corporation provides a complete range of banking
and other financial services to corporations and individuals worldwide through
its core businesses: Securities Servicing and Cash Processing; Trust,
Investment Management and Private Banking; Corporate Banking; Retail Banking;
Asset Based Lending; and Financial Market Services. At September 30, 1998, the
Corporation had consolidated total assets of approximately $64 billion,
consolidated total deposits of approximately $44 billion and consolidated
shareholders' equity of approximately $5 billion. On the basis of consolidated
total assets at September 30, 1998, the Corporation was the seventeenth largest
bank holding company in the United States.
S-11
<PAGE>
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 southeastern Connecticut, and provides a
comprehensive range of corporate and personal trust, securities processing and
investment services.
The Corporation has its principal executive offices at One Wall Street,
New York, New York 10286, telephone number (212) 495-1784.
RECENT DEVELOPMENTS
Common Stock Buyback. On December 8, 1998 the Corporation's Board of
Directors approved a plan to buy back up to 18,000,000 shares of the
Corporation's common stock through the end of 1999. The Corporation previously
completed the repurchase of 30,000,000 shares of its common stock as part of a
buyback program announced in December 1997.
Year 2000 Readiness Disclosure. The Corporation is on schedule in
implementing its Year 2000 compliance program, and has achieved the following
milestones since the end of the third quarter of 1998:
The Corporation has completed its four-phase process of assessment,
renovation, certification testing and implementation with respect to all of
its major proprietary applications systems. Year 2000 compliant versions of
all such systems are currently in use by the Corporation.
The Corporation has certified all of its critical vendor-supplied
systems to be Year 2000 compliant in accordance with procedures established by
the Corporation.
As of December 31, 1998, the Corporation had expended approximately $51
million (out of an estimated total cost of $82 million) for its Year 2000
compliance program.
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>
Nine Months Year Ended December 31,
Ended ----------------------------
Sept. 30, 1998 1997 1996 1995 1994 1993
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on
Deposits................. 4.83x 5.12x 4.30x 3.61x 3.75x 3.61x
Including Interest on
Deposits................. 2.04 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................. 4.08x 4.35x 4.15x 3.51x 3.58x 3.23x
Including Interest on
Deposits................. 1.94 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 E Preferred Securities will
be invested by the Series E Trust in Series E Subordinated Debentures. The
Corporation intends that the proceeds from the sale of such Series E
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 E 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 E
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 September 30, 1998 and as adjusted to
give effect to the consummation of the offering of the Series E Trust 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>
September 30, 1998
---------------------
As
Actual Adjusted
--------- ----------
(in millions)
<S> <C> <C>
Total Long-term Debt.................................... $ 2,022 $ 2,022
--------- ---------
Guaranteed Preferred Beneficial Interests in
Corporation's Junior Subordinated
Deferrable Interest Debentures(1) ..................... $ 1,300 $ 1,500
Shareholders' Equity
Preferred Stock....................................... 1 1
Common Stock.......................................... 7,154 7,154
Capital Surplus....................................... 72 72
Retained Earnings..................................... 1,110 1,110
Accumulated Other Comprehensive Income................ 221 221
Treasury Stock, at Cost............................... (3,529) (3,529)
Loan to ESOP, at Cost................................. (15) (15)
--------- ---------
Total Stockholders' Equity.......................... 5,014 5,014
--------- ---------
Total Capitalization.............................. $ 8,336 $ 8,536
========= =========
</TABLE>
- --------
(1) As described herein, the sole assets of the Series E Trust will be
$206,186,000 of Series E Subordinated Debentures, issued by the Corporation to
the Series E Trust. The Series E Subordinated Debentures will mature on
December 1, 2028 which date may be shortened to a date not earlier than
December 1, 2013 or extended to a date not later than December 1, 2047 if
certain conditions are met. The Corporation owns all of the Series E Common
Securities of the Series E Trust, which accrue distributions at the rate of 6
7/8% per annum.
S-14
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Series E Trust will be treated as a
subsidiary of the Corporation and, accordingly, the accounts of the Series E
Trust will be included in the consolidated financial statements of the
Corporation. The Series E Trust 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 disclosure about
the Series E Trust Preferred Securities, the Series E Guarantee and the Series
E Subordinated Debentures will be included in the notes to the Corporation's
consolidated financial statements. For financial reporting purposes, the
Corporation will record Distributions payable on the Series E Trust 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 Trust 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 E TRUST PREFERRED SECURITIES
General
The following summary of certain terms and provisions of the Series E
Trust Preferred Securities supplements the description of the terms and
provisions of the Trust 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 E Trust 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 E Trust Preferred Securities represent preferred beneficial
interests in the Series E Trust, and preferential cumulative cash distributions
("Distributions") on the Series E Trust Preferred Securities will be payable at
the annual rate of 6 7/8% 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 E Trust
Preferred Securities at the close of business on the fifteenth day (whether or
not a Business Day (as defined below)) immediately preceding the relevant
Distribution Date. Distributions will accumulate from the date of original
issuance. The first Distribution payment date for the Series E Trust Preferred
Securities will be March 1, 1999. The amount of Distributions payable for any
period will be computed on the basis of a 360-day year of twelve 30-day months
and the actual number of days elapsed in a partial month during such period. In
the event that any date on which Distributions are payable on the Series E
Trust 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 Series E
Trust Preferred Securities shall be the Bank. 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 payments
of interest on the Series E 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 E Subordinated Debentures. As a consequence of
any such deferral of interest payments by the Corporation, quarterly
Distributions on the Series E Trust Preferred Securities will also be deferred
by the Series E Trust during any such Extension Period. Distributions to which
holders of the Series E Trust Preferred Securities are entitled will accumulate
additional Distributions thereon at the rate per annum of 6 7/8% thereof,
compounded quarterly from the relevant payment date for such Distributions. The
term "Distributions" as used herein shall include any such additional
Distributions. See "Certain Terms of Series E Subordinated Debentures--Option
to Defer Interest Payments".
Redemption
Upon the repayment or redemption, in whole or in part, of the Series E
Subordinated Debentures, whether at Stated Maturity, upon acceleration 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 of the Series E Securities, allocated between the Series E Common
Securities and the Series E Trust Preferred Securities in proportion to their
respective Liquidation Amounts, 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 E Trust Preferred Securities (the "Redemption
Price"), equal to the aggregate Liquidation Amount of such Series E Trust
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 E
Subordinated Debentures, see "Certain Terms of Series E Subordinated
Debentures--General" and "--Redemption."
Liquidation of Series E Trust and Distribution of Series E Subordinated
Debentures to Holders
The Corporation will have the right at any time to liquidate the Series E
Trust and cause the Series E Subordinated Debentures to be distributed to the
holders of the Series E Trust Preferred Securities in exchange therefor upon
liquidation of the Series E Trust. The Corporation will commit to the Federal
Reserve that, so long as the Corporation (or any affiliate) is a holder of
Series E 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 E Subordinated Debentures in exchange for Series E Trust Preferred
Securities would not be a taxable event to holders of the Series E Trust
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 E Subordinated Debentures could be a taxable event to holders of
the Series E Trust Preferred Securities. See "Certain Federal Income Tax
Consequences--Distribution of Series E Subordinated Debentures to Holders of
Series E Trust Preferred Securities." If the Corporation elects neither to
redeem the Series E Subordinated Debentures prior to maturity nor to liquidate
the Series E Trust and distribute the Series E Subordinated Debentures to
holders of the Series E Trust Preferred Securities in exchange therefor, the
Series E Trust Preferred Securities will remain outstanding until the Stated
Maturity of the Series E Subordinated Debentures.
If the Corporation elects to liquidate the Series E Trust and thereby
causes the Series E Subordinated Debentures to be distributed to holders of the
Series E Trust Preferred Securities in exchange therefor upon liquidation of
the Series E Trust, the Corporation shall continue to have the right to shorten
or extend the maturity of the Series E Subordinated Debentures, subject to
certain conditions as described under "Certain Terms of Series E Subordinated
Debentures--General."
Liquidation Value
The amount payable on the Series E Trust Preferred Securities in the
event of any liquidation of the Series E Trust is $25 per Series E Trust
Preferred Security plus accumulated and unpaid Distributions, which
S-16
<PAGE>
may be in the form of a distribution of a Like Amount of Series E Subordinated
Debentures, subject to certain exceptions. See "Description of Preferred
Securities--Liquidation Distribution Upon Termination" in the accompanying
Prospectus.
Registration of Series E Trust Preferred Securities
The Series E Trust Preferred Securities will be represented by a global
certificate registered in the name of DTC or its nominee. Beneficial interests
in the Series E Trust Preferred Securities 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 E
Trust 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 E Trust Preferred
Securities registered in the names of persons other than DTC or its nominee
only if (i) DTC notifies the Series E Trust 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 E Trust 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 E 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 E Trust Preferred
Securities are issued in definitive form, such Series E Trust 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 E Trust Preferred Securities represented by a global
security will be made to DTC, as the depositary for the Series E Trust
Preferred Securities. In the event Series E Trust Preferred Securities are
issued in certificated form, the Liquidation Amount and Distributions will be
payable, the transfer of the Series E Trust Preferred Securities will be
registrable, and Series E Trust Preferred Securities will be exchangeable for
Series E Trust 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 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 E
Trust Preferred Securities are issued in certificated form, the record dates
for payment of Distributions will be the fifteenth day (whether or not a
Business Day) immediately preceding the relevant Distribution Date. 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 E SUBORDINATED DEBENTURES
General
The following summary of certain terms and provisions of the Series E
Subordinated Debentures supplements the description of the terms and provisions
of the Junior Subordinated Debentures set forth in the accompanying Prospectus
under the headings "Description of Junior Subordinated Debentures", generally,
and "Description of Junior Subordinated Debentures--Corresponding Junior
Subordinated Debentures", specifically, to which description reference is
hereby made. The summary of certain terms and provisions of the Series E
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.
S-17
<PAGE>
Concurrently with the issuance of the Series E Trust Preferred
Securities, the Series E Trust will invest the proceeds thereof, together with
the consideration paid by the Corporation for the Series E Common Securities,
in the Series E Subordinated Debentures issued by the Corporation. The Series E
Subordinated Debentures will bear interest at the annual rate of 6 7/8% 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 March 1, 1999, to the person in whose name each Series E
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 E
Trust, the Series E Subordinated Debentures will be held in the name of the
Property Trustee in trust for the benefit of the holders of the Series E
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 and the actual number of
days elapsed in a partial month during such period. In the event that any date
on which interest is payable on the Series E 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 6 7/8% 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.
The Series E Subordinated Debentures will be issued as a series of junior
subordinated deferrable interest debentures under the Indenture. The Series E
Subordinated Debentures will mature on December 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 December 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 December 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 E Subordinated Debentures, (iii) if the
Series E Trust has not been liquidated, the Series E Trust is not in arrears on
payments of Distributions on the Series E Trust Preferred Securities and no
deferred Distributions are accumulated, (iv) the Series E Subordinated
Debentures are rated not less than BBB- by Standard & Poor's Ratings Services
or Baa3 by Moody's Investors Service, Inc. or the equivalent by any other
nationally recognized statistical rating organization and (v) after such
extension the Series E 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 E 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 E
Subordinated Debentures no more than 30 and no less than 60 days prior to the
effectiveness thereof.
The Series E 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. At September 30, 1998, the Corporation's
Senior Debt totaled approximately $4,407,453,984. 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, upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability
of holders of the Series E Trust 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 E Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of the
S-18
<PAGE>
Corporation's subsidiaries, and holders of Series E Subordinated Debentures
should look only to the assets of the Corporation for payments on the Series E
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 E Subordinated Debentures to
defer payment of interest on the Series E 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 E 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 6 7/8%, 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 E Subordinated Debentures (or holders
of Series E Trust 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 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 E 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 E
Subordinated Debentures, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Series E
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 6 7/8% 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 on which
Distributions on the Series E Trust Preferred Securities would have been
payable except for the election to begin such Extension Period and (ii) the
date on which the Property Trustee is required to give notice to the New York
Stock Exchange, the Nasdaq National Market or other applicable stock exchange
or automated quotation
S-19
<PAGE>
system on which the Series E Trust Preferred Securities are then listed or
quoted or to holders of Series E Trust Preferred Securities of the record date
or the date such Distributions are payable. The Debenture Trustee shall give
notice of the Corporation's election to begin a new Extension Period to the
holders of the Series E 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.
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series E
Subordinated Debentures.
Additional Sums
If the Series E Trust is required to pay any additional taxes, duties or
other governmental charges as a result of a Tax Event, the Corporation will pay
as additional amounts on the Series E Subordinated Debentures such amounts as
shall be required so that the Distributions payable by the Series E Trust shall
not be reduced as a result of any such additional taxes, duties or other
governmental charges.
Pursuant to the Expense Agreement, the Corporation, as the holder of the
Series E Common Securities, will agree to pay all debts and other obligations
(other than with respect to the Series E Trust Preferred Securities) and all
costs and expenses of the Series E Trust (including costs and expenses relating
to the organization of the Series E Trust, the fees and expenses of the Issuer
Trustees and the costs and expenses relating to the operation of the Series E
Trust). The form of Expense Agreement is included as Exhibit D to 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 E Subordinated Debentures are redeemable prior to their Stated
Maturity at the option of the Corporation (i) on or after January 25, 2004, 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 in whole (but not in part)
prior to January 25, 2004 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 E
Subordinated Debentures so redeemed to the date fixed for redemption, plus 100%
of the principal amount thereof.
A "Tax Event" means the receipt by the Series E Trust of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance
of the Series E Trust Preferred Securities under the Trust Agreement, there is
more than an insubstantial risk that (i) the Series E Trust is, or will be
within 90 days of the date of such opinion, subject to United States federal
income tax with respect to income received or accrued on the Series E
Subordinated Debentures, (ii) interest payable by the Corporation on the Series
E 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 E Trust is, or will be within
90 days of the date of such opinion, subject to more than a de minimis amount
of other taxes, duties or the 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 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
S-20
<PAGE>
announced on or after the date of issuance of the Series E 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 E Trust Preferred Securities under the Trust
Agreement 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 "Description of Junior Subordinated
Debentures--Redemption" in the accompanying Prospectus.
Distribution of Series E Subordinated Debentures
As described under "Certain Terms of Series E Trust Preferred
Securities--Liquidation of Series E Trust and Distribution of Series E
Subordinated Debentures to Holders", under certain circumstances involving the
termination of the Series E Trust, Series E Subordinated Debentures may be
distributed to the holders of the Series E Trust Preferred Securities in
exchange therefor upon liquidation of the Series E Trust after satisfaction of
liabilities to creditors of the Series E Trust as provided by applicable law.
If distributed to holders of Series E Trust Preferred Securities, the Series E
Subordinated Debentures will initially be issued in the form of one or more
global securities and DTC, or any successor depositary for the Series E Trust
Preferred Securities, will act as depositary for the Series E Subordinated
Debentures. It is anticipated that the depositary arrangements for the Series E
Subordinated Debentures would be substantially identical to those in effect for
the Series E Trust Preferred Securities. If Series E Subordinated Debentures
are distributed to the holders of Series E Trust Preferred Securities in
exchange therefor upon liquidation of the Series E Trust, the Corporation will
use its best efforts to list the Series E Subordinated Debentures on the New
York Stock Exchange or such other stock exchange or automated quotation system,
if any, on which the Series E Trust Preferred Securities are then listed or
quoted. There can be no assurance as to the market price of any Series E
Subordinated Debentures that may be distributed to the holders of Series E
Trust Preferred Securities.
Registration of Series E Subordinated Debentures
If Series E Subordinated Debentures are distributed to holders of the
Series E Trust Preferred Securities, such Series E Subordinated Debentures will
be represented by global certificates registered in the name of DTC or its
nominee. Beneficial interests in the Series E 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 E 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 E 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 E 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 E Subordinated
Debentures are issued in definitive form, such Series E 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 E Subordinated Debentures represented by a global
security will be made to DTC, as the depositary for the Series E Subordinated
Debentures. In the event Series E Subordinated Debentures are issued in
certificated form, principal and interest will be payable, the transfer of the
Series E Subordinated Debentures will be registrable, and Series E Subordinated
Debentures will be exchangeable for Series E
S-21
<PAGE>
Subordinated Debentures of other denominations of a like aggregate principal
amount, at the corporate office of 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 E Subordinated Debentures are
issued in certificated form and not held by the Property Trustee, the record
dates for payment of interest will be the fifteenth day (whether or not a
Business Day) immediately preceding the relevant Interest Payment Date. 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 E GUARANTEE
The Series E Guarantee guarantees to the holders of the Series E Trust
Preferred Securities the following payments, to the extent not paid by or on
behalf of the Series E Trust: (i) any accumulated and unpaid Distributions
required to be paid on the Series E Trust Preferred Securities, to the extent
that the Series E Trust has funds on hand available therefor at such time, (ii)
the Redemption Price with respect to any Series E Trust Preferred Securities
called for redemption by the Series E Trust, to the extent that the Series E
Trust has funds on hand available therefor at such time, and (iii) upon a
voluntary or involuntary termination, winding-up or liquidation of the Series E
Trust (unless the Series E Subordinated Debentures are distributed to holders
of the Series E Trust 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 E Trust has funds on hand available
therefor at such time, and (b) the amount of assets of the Series E Trust
remaining available for distribution to holders of the Series E Trust Preferred
Securities after payment of creditors of the Series E Trust as required by
applicable law. The Series E 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 E Guarantee (the "Guarantee Trustee") for the purposes of compliance
with the Trust Indenture Act and will hold the Series E Guarantee for the
benefit of the holders of the Series E Trust Preferred Securities. The First
National Bank of Chicago will also act as Debenture Trustee for the Series E
Subordinated Debentures and as Property Trustee.
The holders of not less than a majority in aggregate Liquidation Amount
of the Series E Trust 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 the Series E Guarantee or to direct the
exercise of any trust power conferred upon the Guarantee Trustee under the
Series E Guarantee. Any holder of the Series E Trust Preferred Securities may
institute a legal proceeding directly against the Corporation to enforce its
rights under the Series E Guarantee without first instituting a legal
proceeding against the Series E Trust, 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 E Subordinated Debentures, the Series E Trust
would lack funds for the payment of Distributions or amounts payable on
redemption of the Series E Trust Preferred Securities or otherwise, and, in
such event, holders of the Series E Trust Preferred Securities would not be
able to rely upon the Series E 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 on or principal of the Series E Subordinated Debentures on the
applicable payment date, then a holder of Series E Trust Preferred Securities
may institute a legal proceeding directly 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 E Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Series E Trust Preferred Securities of such holder (a "Direct Action").
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 E Securities in the Direct Action. Except
as described herein, holders of Series E Trust Preferred Securities will not be
able to exercise directly any other remedy available to the holders of the
Series E Subordinated Debentures or assert directly any other rights in respect
of the Series E
S-22
<PAGE>
Subordinated Debentures. See "Description of Guarantees" in the accompanying
Prospectus. The Trust Agreement provides that each holder of Series E Trust
Preferred Securities by acceptance thereof agrees to the provisions of the
Series E Guarantee, the Expense Agreement and the Indenture.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income
tax consequences of the purchase, ownership and disposition of Series E Trust
Preferred Securities. This summary only addresses such tax consequences to a
person that acquires Series E Trust 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 E Trust 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 E
Trust Preferred Securities as part of a position in a "straddle" or as part of
a "hedging", "conversion" or other integrated investment transaction for United
States federal income tax purposes, (iv) persons whose functional currency is
not the United States dollar or (v) persons that do not hold Series E Trust
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 E Trust. This summary is based upon the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations, Internal Revenue Service
("IRS") 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 E Trust 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 E
Subordinated Debentures, which could in turn permit the Corporation to cause a
redemption of the Series E Trust 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 United States federal
income tax treatment of the purchase, ownership and disposition of Series E
Trust 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 UNITED STATES FEDERAL
TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SERIES E TRUST
PREFERRED SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX
LAWS.
Classification of the Series E Trust
Under current law and assuming compliance with the Trust Agreement and
certain factual matters, the Series E Trust 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 E Trust Preferred Securities (a "Securityholder") will be required to
include in its gross income its pro rata share of the interest income,
including any original issue discount ("OID"), paid or accrued with respect to
the Series E 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 E Trust
Preferred Securities will be eligible for the dividends-received deduction.
S-23
<PAGE>
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 of the relevant
debt instrument, will be ignored in determining whether such debt instrument is
issued with OID. As a result of terms and conditions of the Series E
Subordinated Debentures that prohibit certain payments with respect to the
Corporation's capital stock and indebtedness if the Corporation elects to defer
interest payments, 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 E 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 E Subordinated Debentures.
The Regulations have not been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation herein. If the option to defer any
payment of interest was determined not to be "remote" or if the Corporation
exercised its option to defer any payment of interest, the Series E
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 E Subordinated Debentures would thereafter be treated as
OID as long as the Series E Subordinated Debentures remained outstanding. In
such event, all of a Securityholder's taxable interest income with respect to
the Series E 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.
Distribution of Series E Subordinated Debentures to Holders of Series E Trust
Preferred Securities
Under current law, a distribution by the Series E Trust of the Series E
Subordinated Debentures as described under the caption "Certain Terms of Series
E Trust Preferred Securities--Liquidation of Series E Trust and Distribution of
Series E Subordinated Debentures to Holders" will be non-taxable and will
result in the Securityholder receiving directly its pro rata share of the
Series E Subordinated Debentures previously held indirectly through the Series
E Trust, with a holding period and aggregate tax basis equal to the holding
period and aggregate tax basis such Securityholder had in its Series E Trust
Preferred Securities before such distribution. If, however, the liquidation of
the Series E Trust were to occur because the Series E Trust is subject to
United States federal income tax with respect to income accrued or received on
the Series E Subordinated Debentures, as the case would be if the Series E
Trust were treated as an association taxable as a corporation, the distribution
of Series E Subordinated Debentures to Securityholders by the Series E Trust
would be a taxable event to the Series E Trust and each Securityholder, and
each Securityholder would recognize gain or loss as if the Securityholder had
exchanged its Series E Trust Preferred Securities for the Series E Subordinated
Debentures it received upon the liquidation of the Series E Trust. A
Securityholder will include interest in income in respect of Series E
Subordinated Debentures received from the Series E Trust in the manner
described above under "--Interest Income and Original Issue Discount".
Sale or Redemption of Series E Trust Preferred Securities
A Securityholder that sells (including a complete redemption for cash)
Series E Trust Preferred Securities will recognize gain or loss equal to the
difference between its adjusted tax basis in the Series E Trust Preferred
Securities and the amount realized on the sale of such Series E Trust Preferred
Securities. Assuming that the Corporation does not exercise its option to defer
payment of interest on the Series E Subordinated Debentures and the Series E
Subordinated Debentures are not otherwise considered issued with OID, a
Securityholder's adjusted tax basis in the Series E Trust Preferred Securities
generally will be its initial purchase price. If the Series E Subordinated
Debentures are deemed to be issued with OID as a result of the Corporation's
deferral of interest payments, a Securityholder's adjusted tax basis in the
Series E Trust Preferred
S-24
<PAGE>
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 E Trust Preferred Securities since and including the date of the first
Extension Period. Such gain or loss generally will be 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 E
Subordinated Debentures required to be included in income), and will be long-
term capital gain or loss if the Series E Trust Preferred Securities have been
held for more than one year. 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 E Trust
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 E Trust 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 E Trust Preferred Securities
will be reported to holders on Form 1099 and mailed to holders of the Series E
Trust 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 E 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 E Subordinated
Debentures. Such a change could give rise to a Tax Event, which may permit the
Corporation to cause a redemption of the Series E Trust Preferred Securities,
as described more fully under "Certain Terms of Series E Trust Preferred
Securities--Redemption".
A shortening of the Stated Maturity of the Series E Subordinated
Debentures as described under "Certain Terms of Series E Subordinated
Debentures--General" after a Tax Event may be treated as a taxable disposition
of the Series E Subordinated Debentures.
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<PAGE>
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 E Trust 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 transactions involving "plan
assets" with persons 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 Series
E Trust 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 E Trust Preferred Securities will meet the criteria of
"publicly-offered securities" above. The Underwriters expect that the Series E
Trust Preferred Securities will be beneficially held by at least 100
independent investors at the conclusion of the Offering; there are no
restrictions imposed on the transfer of the Series E Trust Preferred Securities
and the Series E Trust 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 E Trust 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 E Trust 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.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Series E Trust has agreed to sell to each of the Underwriters
named below (the "Underwriters"), for whom Morgan Stanley & Co. Incorporated
and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated are
acting as representatives (the "Representatives"), and the Underwriters have
severally agreed to purchase from the Series E Trust, the respective number of
Series E Trust Preferred Securities set forth opposite their names
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<PAGE>
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 E Trust Preferred Securities offered
hereby if any of the Series E Trust 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 E
Trust Preferred
Underwriter Securities
----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated.......................... 992,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................... 992,000
PaineWebber Incorporated................................... 992,000
Prudential Securities Incorporated......................... 992,000
Salomon Smith Barney Inc. ................................. 992,000
ABN AMRO Incorporated...................................... 140,000
Bear, Stearns & Co. Inc. .................................. 140,000
BNY Capital Markets, Inc. ................................. 140,000
CIBC Oppenheimer Corp. .................................... 140,000
Credit Suisse First Boston Corporation..................... 140,000
Donaldson, Lufkin & Jenrette Securities Corporation........ 140,000
A.G. Edwards & Sons, Inc. ................................. 140,000
EVEREN Securities, Inc. ................................... 140,000
Fidelity Capital Markets, A Division of National Financial
Services Corporation...................................... 140,000
Goldman, Sachs & Co. ...................................... 140,000
J.P. Morgan Securities Inc. ............................... 140,000
Lehman Brothers Inc. ...................................... 140,000
NationsBanc Montgomery Securities LLC...................... 140,000
Schroder & Co. Inc. ....................................... 140,000
SG Cowen Securities Corporation............................ 140,000
Warburg Dillon Read LLC.................................... 140,000
Wheat First Securities, Inc. .............................. 140,000
Advest, Inc. .............................................. 20,000
Robert W. Baird & Co. Incorporated......................... 20,000
George K. Baum & Company................................... 20,000
J.C. Bradford & Co. ....................................... 20,000
Craigie Incorporated....................................... 20,000
Crowell, Weedon & Co. ..................................... 20,000
Dain Rauscher Wessels...................................... 20,000
Davenport & Company LLC.................................... 20,000
D.A. Davidson & Co. Incorporated........................... 20,000
Fahnestock & Co. Inc....................................... 20,000
Ferris, Baker Watts, Incorporated.......................... 20,000
Fifth Third/The Ohio Company............................... 20,000
First Albany Corporation................................... 20,000
Gibraltar Securities Co. .................................. 20,000
J.J.B. Hilliard, W.L. Lyons, Inc. ......................... 20,000
Interstate/Johnson Lane Corporation........................ 20,000
Janney Montgomery Scott Inc. .............................. 20,000
Kirkpatrick, Pettis, Smith, Polian Inc. ................... 20,000
Legg Mason Wood Walker, Incorporated....................... 20,000
McDonald Investments Inc., a Keycorp Company............... 20,000
Mesirow Financial, Inc. ................................... 20,000
Morgan Keegan & Company, Inc. ............................. 20,000
</TABLE>
S-27
<PAGE>
<TABLE>
<CAPTION>
Number of
Series E
Trust Preferred
Underwriter Securities
----------- ---------------
<S> <C>
Olde Discount Corporation.................................... 20,000
Piper Jaffray Inc. .......................................... 20,000
Raymond James & Associates, Inc. ............................ 20,000
The Robinson-Humphrey Company, LLC........................... 20,000
Roney Capital Markets, a Division of First Chicago........... 20,000
Charles Schwab & Co., Inc. .................................. 20,000
Scott & Stringfellow, Inc. .................................. 20,000
Southwest Securities, Inc. .................................. 20,000
Stifel, Nicolaus & Company, Incorporated..................... 20,000
Tucker Anthony Incorporated.................................. 20,000
Wedbush Morgan Securities.................................... 20,000
---------
Total................................................... 8,000,000
=========
</TABLE>
The Representatives have advised the Corporation that they propose
initially to offer the Series E Trust 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 E Trust Preferred Security. The Underwriters may allow, and such
dealers may reallow, a discount not in excess of $0.45 per Series E Trust
Preferred Security to certain other dealers. After the initial public offering,
the public offering price, concession and discount may be changed by the
Representatives.
In view of the fact that the proceeds from the sale of the Series E Trust
Preferred Securities will be used to purchase the Series E Subordinated
Debentures issued by the Corporation, the Underwriting Agreement provides that
the Corporation will pay to the Underwriters as compensation for their
arranging the investment therein of such proceeds an amount of $0.7875 per
Series E Trust Preferred Security for the accounts of the several Underwriters.
The Corporation estimates that the total expenses of the Offering, excluding
the underwriting discount, will be $400,000.
The Corporation and the Series E Trust 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 E Trust Preferred Securities, as determined by the Representatives, and
(ii) the closing date, they will not offer, sell, contract to sell or otherwise
dispose of any trust preferred securities in any trust similar to the Series E
Trust, any other beneficial interests in the assets of the Series E Trust or
any trust similar to the Series E Trust, or any preferred securities or any
other securities of the Series E Trust or the Corporation, as the case may be,
that are substantially similar to the Series E Trust 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 E
Trust, any trust similar to the Series E Trust or the Corporation that are
subordinated to the Corporation's Senior Debt in a manner substantially similar
to the subordination of the Series E Subordinated Debentures, without the prior
written consent of the Underwriters, except for the Series E Trust Preferred
Securities offered in connection with this Offering.
Prior to this Offering, there has been no public market for the Series E
Trust Preferred Securities. The Series E Trust and the Corporation have applied
for listing the Series E Trust Preferred Securities on the New York Stock
Exchange under the symbol "BKPrE". Trading of the Series E Trust Preferred
Securities on the New York Stock Exchange is expected to commence within a 30-
day period after the initial delivery of the Series E Trust Preferred
Securities. The Representatives have advised the Corporation that they intend
to make a market in the Series E Trust 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
E Trust Preferred Securities.
S-28
<PAGE>
In order to meet one of the requirements for listing the Series E Trust
Preferred Securities on the New York Stock Exchange, the Underwriters will
undertake to sell lots of 100 or more Series E Trust Preferred Securities to a
minimum of 400 beneficial holders.
The Corporation and the Series E Trust 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 E Trust Preferred
Securities, the Underwriters may engage in transactions that stabilize,
maintain or otherwise affect the price of the Series E Trust Preferred
Securities. Specifically, the Underwriters may overallot in connection with the
offering, creating a short position in the Series E Trust Preferred Securities
for their own account. In addition, to cover overallotments or to stabilize the
price of the Series E Trust Preferred Securities, the Underwriters may bid for,
and purchase, the Series E Trust 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 E Trust Preferred
Securities in the offering, if the syndicate repurchases previously distributed
Series E Trust 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 E Trust 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 E Trust 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 sixth business day following the date of pricing of the Series E Trust
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 E Trust Preferred Securities who wish to
trade such securities will be required, by virtue of the fact that the Series E
Trust Preferred Securities initially will settle within six business days
("T+6"), to specify an alternate settlement cycle at the time of any such trade
to prevent a failed settlement. Prospective purchasers of the Series E Trust
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.
BNY Capital Markets, Inc., one of the Underwriters, is an affiliate of the
Corporation.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series E
Trust Preferred Securities, the enforceability of the Trust Agreement and the
formation of the Series E Trust 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 E Trust. The validity of the Series E
Guarantee and the Series E 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 Winthrop, Stimson, Putnam & Roberts, One Battery
Park Plaza, New York, New York 10004. Winthrop, Stimson, Putnam & Roberts 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.
Winthrop, Stimson, Putnam & Roberts from time to time performs legal services
for the Corporation and the Bank.
S-29
<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.
5
<PAGE>
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
6
<PAGE>
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
7
<PAGE>
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 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,
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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 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
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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 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.
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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.
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.
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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.
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.
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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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8,000,000 Trust Preferred Securities
BNY Capital IV
6 7/8% Trust Preferred Securities, Series E
(Liquidation Amount $25 per Trust Preferred Security)
fully and unconditionally guaranteed by
The Bank of New York Company, Inc.
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PROSPECTUS SUPPLEMENT
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Morgan Stanley Dean Witter
Merrill Lynch & Co.
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Smith Barney
January 14, 1999
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