FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NO. 333-49143
333-49143-02
333-2143
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 15, 1998
$150,000,000
STATE STREET CAPITAL TRUST I
FLOATING RATE CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
[LOGO] FULLY AND UNCONDITIONALLY GUARANTEED BY
STATE STREET CORPORATION
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The Floating Rate Capital Securities, Series A (the "Capital Securities"),
offered hereby represent preferred beneficial ownership interests in the
assets of State Street Capital Trust I, a statutory business trust created
under the laws of the State of Delaware ("State Street Capital Trust" or the
"Issuer Trust"). State Street Corporation, a Massachusetts corporation ("State
Street" or the "Company"), will own all the common securities (the "Common
Securities" and, together with the Capital Securities, the "Trust Securities")
representing common beneficial ownership interests in the assets of the Issuer
Trust. State Street Capital Trust exists for the sole purpose of issuing the
Trust Securities and investing the proceeds
(Continued on next page)
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SEE "RISK FACTORS" BEGINNING ON PAGE S-5 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE CAPITAL SECURITIES.
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THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO ISSUER
OFFERING PRICE(1) COMPENSATION(2) TRUST(3)(4)
----------------- --------------- ------------------
Per Capital Security....... $990.02 (3) $990.02
Total...................... $148,503,000 (3) $148,503,000
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(1) Plus accrued distributions, if any, from May 15, 1998.
(2) State Street Capital Trust and State Street have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Capital
Securities will be invested in the Junior Subordinated Debentures, State
Street has agreed to pay to the Underwriters as compensation for their
arranging the investment therein of such proceeds $10.00 per Capital
Security (or $1,500,000 in the aggregate). See "Underwriting."
(4) Before deducting expenses of the offering payable by State Street
estimated at $300,000.
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The Capital Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Capital Securities will be made in book-entry
form only through the facilities of The Depository Trust Company in New York,
New York, on or about May 15, 1998 against payment therefor in immediately
available funds.
GOLDMAN, SACHS & CO.
BLAYLOCK & PARTNERS, L.P.
SALOMON SMITH BARNEY
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The date of this Prospectus Supplement is May 12, 1998.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CAPITAL
SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
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(cover page continued)
thereof in Floating Rate Junior Subordinated Deferrable Interest Debentures,
Series A, to be issued by State Street (the "Junior Subordinated Debentures").
The Junior Subordinated Debentures will mature on May 15, 2028 (the "Stated
Maturity"). Upon an event of default under the Trust Agreement (as defined
herein), the holders of Capital Securities will have a preference over the
holders of the Common Securities with respect to cash distributions and
amounts payable upon redemption or liquidation.
Holders of the Capital Securities are entitled to receive cumulative cash
distributions at a variable annual rate equal to 3-Month LIBOR (as defined
herein) plus 0.56% (the "Distribution Rate") in respect of the liquidation
amount of $1,000 per Capital Security, accruing from the date of original
issuance and payable quarterly in arrears on the 15th day of August, November,
February and May of each year, commencing August 15, 1998 ("Distributions").
So long as State Street is not in default in the payment of interest on the
Junior Subordinated Debentures. State Street shall have the right to defer
payments of interest on the Junior Subordinated Debentures by extending the
interest payment period on the Junior Subordinated Debentures at any time, and
from time to time, for up to 20 consecutive quarters (each, an "Extension
Period"), provided that an Extension Period may not extend beyond the Stated
Maturity of the Junior Subordinated Debentures. As a consequence of any
Extension Period, Distributions on the Capital Securities will also be
deferred. During such Extension Period, Distributions will continue to accrue
with interest thereon (to the extent permitted by applicable law) at the
Distribution Rate compounded quarterly, and during any Extension Period,
holders of Capital Securities will be required to include deferred interest
income allocable to such holder's Capital Securities in their gross income for
United States federal income tax purposes in advance of receipt of the cash
Distributions with respect to such deferred interest payments. There could be
multiple Extension Periods of varying lengths throughout the term of the
Junior Subordinated Debentures. See "Description of Junior Subordinated
Debentures--Option to Extend Interest Payment Period," "Risk Factors--Option
to Extend Interest Payment Period" and "United States Federal Income
Taxation--Interest Income and Original Issue Discount."
The payment of Distributions out of moneys held by State Street Capital
Trust and payments upon dissolution of the Issuer Trust or the redemption of
Capital Securities, as set forth below, are guaranteed by State Street (the "
Guarantee") to the extent described herein and under "Description of
Guarantees" in the accompanying Prospectus. The Guarantee covers payments of
Distributions and other payments on the Capital Securities only if and to the
extent that the Issuer Trust has funds available therefor, which will not be
the case unless State Street has made a payment of interest or principal or
other payments on the Junior Subordinated Debentures held by the Issuer Trust,
which will be its only assets. The Guarantee, when taken together with State
Street's obligations under the Junior Subordinated Debentures and the
Indenture (as defined herein) and its obligations under the Trust Agreement,
including its obligations to pay costs, expenses, debts and other obligations
of State Street Capital Trust (other than with respect to the payment of
principal of, premium, if any, or interest on the Trust Securities), provides
a full and unconditional guarantee of amounts due on the Capital Securities.
The Distribution Rate and the distribution payment dates and other payment
dates for the Capital Securities will correspond to the interest rate and
interest payment dates and other payment dates for the Junior Subordinated
Debentures, which will be the only assets of the Issuer Trust. As a result, if
State Street does not make principal or interest payments on the Junior
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Subordinated Debentures, the Issuer Trust will not have sufficient funds to
make such Distributions on the Capital Securities, in which event the
Guarantee will not apply to such Distributions until the Issuer Trust has
sufficient funds available therefor. The obligations of State Street under the
Guarantee are unsecured and subordinate and junior in right of payment to all
present and future Senior Debt of State Street (as defined in "Description of
Junior Subordinated Debentures--Subordination").
The Junior Subordinated Debentures are unsecured and subordinate and junior
in right of payment to all present and future Senior Debt of State Street,
which aggregated approximately $253 million at March 31, 1998. In addition,
because State Street is a holding company, the Junior Subordinated Debentures
(and the Guarantee) will be effectively subordinated to all existing and
future liabilities of State Street's subsidiaries, including depositors, and
holders of Junior Subordinated Debentures and the Guarantee should look only
to the assets of the Company for payment on the Junior Subordinated Debentures
and the Guarantee. The Junior Subordinated Debentures purchased by the Issuer
Trust may be subsequently distributed pro rata to holders of the Trust
Securities in connection with the dissolution of the Issuer Trust.
Subject to State Street's having received prior approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") if then
required under applicable law, rules, guidelines or policies of the Federal
Reserve Board, the Junior Subordinated Debentures are redeemable prior to
maturity by State Street (i) in whole or in part, from time to time, on or
after May 15, 2008 or (ii) in whole, but not in part, at any time within 90
days following the occurrence of a Tax Event, Investment Company Event or
Capital Treatment Event (each as defined herein) or, if the prior approval of
the Federal Reserve Board is then required for such redemption, on such later
date as promptly as practicable after such approval is obtained, in each case
at a redemption price equal to 100% of the principal amount of the Junior
Subordinated Debentures so redeemed plus accrued and unpaid interest thereon
to the redemption date. If State Street redeems Junior Subordinated
Debentures, the Issuer Trust must redeem Trust Securities on a pro rata basis
having an aggregate liquidation amount equal to the aggregate principal amount
of the Junior Subordinated Debentures so redeemed at $1,000 per Capital
Security plus accrued and unpaid Distributions thereon to the redemption date
(the "Redemption Price"). See "Description of Capital Securities--Redemption."
The Capital Securities will be redeemed upon repayment or redemption of the
Junior Subordinated Debentures.
State Street will have the right at any time to dissolve the Issuer Trust
and, after satisfaction of liabilities to creditors of the Issuer Trust as
provided by applicable law, cause the Junior Subordinated Debentures to be
distributed pro rata to holders of the Trust Securities, subject to State
Street's having received prior approval of the Federal Reserve Board if then
required under applicable law, rules, guidelines or policies of the Federal
Reserve Board. See "Description of Capital Securities--Tax Event, Investment
Company Event and Capital Treatment Event Redemption" and "Description of
Junior Subordinated Debentures." In the event of the involuntary or voluntary
dissolution, winding up or termination of the Issuer Trust, the holders of the
Capital Securities will be entitled to receive for each Capital Security a
liquidation amount of $1,000 plus accrued and unpaid Distributions thereon to
the date of payment, unless, in connection with such dissolution, winding up
or termination, the Junior Subordinated Debentures are distributed to the
holders of the Capital Securities. See "Description of Capital Securities--
Liquidation Distribution Upon Dissolution" in the accompanying Prospectus.
The Capital Securities will be represented by one or more global
certificates registered in the name of The Depository Trust Company ("DTC") or
its nominee. Beneficial interests in the Capital Securities will be shown on,
and transfers thereof will be effected only through, records maintained by DTC
and its participants, including depositaries for Morgan Guaranty Trust Company
of New York, Brussels Office, as operator of the Euroclear System
("Euroclear"), and CEDEL Bank, societe anonyme ("Cedel"). Except as described
herein, Capital Securities in certificated form will not be
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issued in exchange for the global certificates. See "Description of the
Capital Securities--Book-Entry Only Issuance--The Depository Trust Company." A
portion of the Capital Securities will be offered by the Underwriters
specified herein directly or through their representative selling agents
outside the United States. Investors may elect to hold a beneficial interest
in Capital Securities through either DTC (in the United States) or Cedel or
Euroclear (outside the United States), if they are participants of such
systems, or indirectly through organizations that are participants in such
systems.
NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH, A
"PLAN"), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF
ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON
INVESTING "PLAN ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD THE CAPITAL
SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS
ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1 OR
84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED
BY ITS PURCHASE AND HOLDING THEREOF THAT IT EITHER (A) IS NOT A PLAN OR A PLAN
ASSET ENTITY AND IS NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN
ASSETS" OF ANY PLAN OR (B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR
HOLDING.
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 Company 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 Issuer Trust among the Company, 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 holders from time to time
of undivided beneficial interests of the Issuer Trust. 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.
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RISK FACTORS
Prospective purchasers of Capital Securities should carefully review the
information contained or incorporated by reference in this Prospectus
Supplement and in the accompanying Prospectus and should particularly consider
the following risk factors. In addition, because holders of Capital Securities
may receive Junior Subordinated Debentures in exchange therefor upon
dissolution of the Issuer Trust, prospective purchasers of Capital Securities
are also making an investment decision with regard to the Junior Subordinated
Debentures and should carefully review all the information regarding the
Junior Subordinated Debentures contained herein.
RANKING OF SUBORDINATED OBLIGATIONS UNDER JUNIOR SUBORDINATED DEBENTURES AND
THE GUARANTEE
State Street's obligations under the Junior Subordinated Debentures and
Guarantee are unsecured and subordinate and junior in right of payment to all
present and future Senior Debt of State Street. No direct or indirect payment
may be made of principal of, premium, if any, or interest on the Junior
Subordinated Debentures, or in respect of any redemption, repayment,
retirement, purchase or other acquisition of any of the Junior Subordinated
Debentures at any time when there is a default in the payment of the principal
of, premium, if any, or interest on, or otherwise in respect of any Senior
Debt, whether at their Stated Maturity or at a date fixed for prepayment or by
declaration or otherwise, unless and until such default shall have been cured
or waived or shall have ceased to exist or all Senior Debt shall have been
repaid. As of March 31, 1998, Senior Debt of State Street totaled
approximately $253 million. Because State Street is a holding company, the
right of State Street to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the Capital Securities to benefit
indirectly from such distribution), is subject to the prior claims of
creditors of that subsidiary except to the extent that State Street may itself
be recognized as a creditor of that subsidiary. There are various legal
limitations on the extent to which State Street's subsidiaries may extend
credit, pay dividends or otherwise supply funds to State Street or certain of
its other subsidiaries. Accordingly, the Junior Subordinated Debentures and
Guarantee will be effectively subordinated to all existing and future
liabilities of State Street's subsidiaries, including depositors, and holders
of Junior Subordinated Debentures and the Guarantee should look only to the
assets of State Street for payments on the Junior Subordinated Debentures and
the Guarantee. There are no terms in the Capital Securities, the Junior
Subordinated Debentures or the Guarantee that limit State Street's ability to
incur additional Debt, including indebtedness that ranks senior to the Junior
Subordinated Debentures and the Guarantee. See "Description of Guarantees--
Status of the Guarantees" and "Description of Junior Subordinated Debentures"
in the accompanying Prospectus and "Description of Junior Subordinated
Debentures--Subordination" herein. The ability of the Issuer Trust to pay
amounts due on the Capital Securities depends entirely upon State Street's
making payments on the Junior Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default (as defined herein) has occurred
and is continuing, State Street has the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures by extending the
interest payment period at any time, and from time to time, for a period not
exceeding 20 consecutive quarterly periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. As a consequence of any
Extension Period, quarterly Distributions on the Capital Securities will also
be deferred by the Issuer Trust (and the amount of Distributions to which
holders of the Capital Securities are entitled will accumulate at a variable
annual rate equal to 3-Month LIBOR plus 0.56%, compounded quarterly from the
relevant payment date for such Distributions) during any such Extension
Period. Prior to the termination of any such Extension Period,
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State Street may further extend the payment of interest provided that such
Extension Period may not exceed 20 consecutive quarters or extend beyond the
Stated Maturity of the Junior Subordinated Debentures. Upon the termination of
any Extension Period and the payment of all interest accrued and unpaid
(together with interest thereon at a variable annual rate equal to 3-Month
LIBOR plus 0.56%, compounded quarterly from the interest payment date for such
interest, to the extent permitted by applicable law), State Street may
commence a new Extension Period subject to the foregoing requirements. There
is no limitation on the number of times that the Company may elect to begin an
Extension Period. The Company has no current intention of exercising its right
to defer payments of interest by extending the interest payment period of the
Junior Subordinated Debentures. See "Description of the Capital Securities--
Distributions" and "Description of the Junior Subordinated Debentures--Option
to Extend Interest Payment Period."
Should an Extension Period occur, each holder of Capital Securities will be
required to accrue income (as original issue discount ("OID")) in respect of
the deferred stated interest allocable to such holder's Capital Securities for
United States federal income tax purposes, even though no cash is distributed.
As a result, each such holder of Capital Securities will include such income
in gross income for United States federal income tax purposes in advance of
the receipt of cash attributable thereto and will not receive the cash from
State Street Capital Trust related to such income if such holder disposes of
its Capital Securities prior to the record date for the payment of
Distributions. State Street has no current intention of exercising its right
to defer payments of interest by commencing an Extension Period with respect
to the Junior Subordinated Debentures. However, should State Street elect to
exercise such right in the future, the market price of the Capital Securities
is likely to be affected. A holder that disposes of its Capital Securities
during an Extension Period, therefore, might not receive the same return on
its investment as a holder that continues to hold its Capital Securities. In
addition, as a result of the existence of State Street's right to defer
interest payments on the Junior Subordinated Debentures, the market price of
the Capital Securities (which represent beneficial ownership interests in the
Junior Subordinated Debentures) may be more volatile than the price of other
securities that are not subject to such deferrals. See "Description of the
Junior Subordinated Debentures--Option to Extend Interest Payment Period."
TAX EVENT, INVESTMENT COMPANY EVENT OR CAPITAL TREATMENT EVENT--REDEMPTION
Upon the occurrence and continuation of a Tax Event, Investment Company
Event or Capital Treatment Event (whether occurring before, on or after May
15, 2008), the Company has the right, if certain conditions are met, to redeem
the Junior Subordinated Debentures in whole (but not in part) within 90 days
following the occurrence of such Tax Event, Investment Company Event or
Capital Treatment Event and thereby cause a mandatory redemption of the
Capital Securities. The exercise of such right is subject to the Company's
having received prior approval of the Federal Reserve Board if then required
under applicable capital guidelines or policies. See "Description of the
Junior Subordinated Debentures--Optional Redemption."
REDEMPTION OR DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
State Street will have the right at any time to dissolve the Issuer Trust
and, after satisfaction of liabilities to creditors of the Issuer Trust as
required by law, cause the Junior Subordinated Debentures to be distributed to
the holders of Trust Securities in exchange therefor upon liquidation of the
Issuer Trust. Furthermore, State Street has the right to redeem the Junior
Subordinated Debentures (i) in whole or in part, from time to time, on or
after May 15, 2008 or (ii) in whole, but not in part, at any time within 90
days following the occurrence of a Tax Event, Investment Company Event or
Capital Treatment Event. The exercise of such rights is subject to State
Street's having received prior approval of the Federal Reserve Board if then
required under applicable law, rules, capital guidelines or policies. See
"Description of Junior Subordinated Debentures--Optional Redemption" and
"Description of Capital Securities--Tax Event, Investment Company Event and
Capital Treatment Event Redemption."
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Under current United States federal income tax law and interpretations
thereof and assuming, as expected, that the Issuer Trust is not classified as
a corporation for such purposes, a distribution of Junior Subordinated
Debentures upon a dissolution of the Issuer Trust should not be a taxable
event to holders of the Capital Securities. Upon occurrence of a Tax Event, an
Investment Company Event or a Capital Treatment Event, however, a dissolution
of the Issuer Trust in which holders of the Capital Securities receive cash
could be a taxable event to the Issuer Trust and such holders. See "United
States Federal Income Taxation--Receipt of Junior Subordinated Debentures or
Cash Upon Dissolution of the Issuer Trust."
There can be no assurance as to the market prices for the Capital Securities
or the Junior Subordinated Debentures that may be distributed in exchange for
Capital Securities upon a dissolution of the Issuer Trust. Accordingly, the
Capital Securities that an investor may purchase, whether pursuant to the
offer made hereby or in the secondary market, or the Junior Subordinated
Debentures that a holder of Capital Securities may receive upon a dissolution
of the Issuer Trust, may trade at a discount to the price that the investor
paid to purchase the Capital Securities offered hereby. Because holders of
Capital Securities may receive Junior Subordinated Debentures, prospective
purchasers of Capital Securities are also making an investment decision with
regard to the Junior Subordinated Debentures and should carefully review all
the information regarding the Junior Subordinated Debentures contained herein
and in the accompanying Prospectus. See "Description of Junior Subordinated
Debentures."
POTENTIAL MARKET VOLATILITY DURING EXTENSION PERIOD
As described above, the Company has the right to extend an interest payment
period on the Junior Subordinated Debentures from time to time for a period
not exceeding 20 consecutive quarterly periods. If the Company elects to begin
an Extension Period, or if the Company thereafter extends an Extension Period
or prepays interest accrued during an Extension Period as described above, the
market price of the Capital Securities is likely to be affected. In addition,
as a result of such right to defer interest on the Junior Subordinated
Debentures, the market price of the Capital Securities (which represent
beneficial ownership interests in the Junior Subordinated Debentures) may be
more volatile than other securities that are not subject to optional
deferrals. A holder that disposes of its Capital Securities during an
Extension Period, therefore, may not receive the same return on its investment
as a holder that continues to hold its Capital Securities. See "Description of
Junior Subordinated Debentures--Option to Extend Interest Payment Period."
CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Indenture does not contain provisions that afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged
transaction, including a change of control, or other similar transaction
involving State Street that may adversely affect such holders. See
"Description of Junior Subordinated Debentures--General."
LIMITED VOTING RIGHTS
Holders of Capital Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, Issuer Trustees (as defined herein), which voting rights are
vested exclusively in the holder of the Common Securities. The Property
Trustee, the Administrative Trustees (each as defined herein) and State Street
may amend the Trust Agreement without the consent of the holders of the
Capital Securities to ensure that the Issuer Trust will not be taxable as a
corporation or classified as other than a grantor trust for United States
federal income tax purposes unless such action materially and adversely
affects the interests of such holders. See "Description of Capital
Securities--Voting Rights."
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ABSENCE OF PRIOR PUBLIC MARKET
Prior to this offering, there has been no public market for the Capital
Securities. There can be no assurance that an active trading market will
develop for the Capital Securities or that, if such market develops, the
market price will equal or exceed the public offering price set forth on the
cover page of this Prospectus Supplement. The public offering price for the
Capital Securities has been determined through negotiations between the
Company and the Underwriters. Prices for the Capital Securities will be
determined in the marketplace and may be influenced by many factors, including
the liquidity of the market for the Capital Securities, investor perceptions
of the Company and general industry and economic conditions.
TRADING CHARACTERISTICS OF THE CAPITAL SECURITIES
The Company does not intend to have the Capital Securities listed on The New
York Stock Exchange or any other securities exchange.
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest (or OID if the Junior Subordinated
Debentures are treated as having been issued, or re-issued, with OID) with
respect to the underlying Junior Subordinated Debentures. A holder that
disposes of its Capital Securities between record dates for payments of
Distributions thereon will be required to include as ordinary income either
OID (if applicable) or accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition. To the extent the amount realized
is less than the holder's adjusted tax basis, a holder generally will
recognize a capital loss. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for United States federal
income tax purposes. See "United States Federal Income Taxation--Sales of
Capital Securities."
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USE OF PROCEEDS
The Issuer Trust will use all proceeds received from the sale of the Capital
Securities to purchase Junior Subordinated Debentures from State Street. State
Street intends to use the net proceeds from the sale of the Junior
Subordinated Debentures for general corporate purposes, including investments
in the capital of or extensions of credit to its subsidiary State Street Bank
and Trust Company ("State Street Bank") and the repayment or refinancing of
long and short-term debt. Pending such use, the proceeds may be temporarily
invested in short-term securities. State Street expects that it will engage
from time to time in additional financings of a character and in an amount to
be determined. The Company and State Street Bank regularly investigate
possible acquisitions. The Company and State Street Bank are currently
investigating or in discussions with respect to potential acquisitions, but
have no agreements or understandings with respect thereto which, either
individually or in the aggregate, are material to the Company.
The Company is required by the Federal Reserve Board to maintain certain
levels of capital for bank regulatory purposes. On October 21, 1996, the
Federal Reserve Board announced that cumulative preferred securities having
the characteristics of the Capital Securities could be included as Tier 1
Capital for bank holding companies. Such Tier 1 Capital treatment, together
with State Street's ability to deduct, for federal income tax purposes,
interest payable on the Junior Subordinated Debentures, will provide State
Street with a more cost-effective means of obtaining capital for bank
regulatory purposes than other Tier 1 Capital alternatives currently available
to it.
ACCOUNTING TREATMENT
For financial reporting purposes, the Issuer Trust will be treated as a
subsidiary of the Company and, accordingly, the accounts of the Issuer Trust
will be included in the consolidated financial statements of the Company. The
Capital Securities will be treated as long-term debt in the consolidated
balance sheets of the Company and appropriate disclosures about the Capital
Securities, the Guarantee and the Junior Subordinated Debentures will be
included in the notes to the consolidated financial statements. For financial
reporting purposes, the Company will record Distributions payable on the
Capital Securities as an expense in the consolidated statements of income.
DESCRIPTION OF CAPITAL SECURITIES
The Capital Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement has been qualified as an indenture under the
Trust Indenture Act. The Property Trustee will act as indenture trustee for
the Capital Securities under the Trust Agreement for the purpose of compliance
with the Trust Indenture Act. The terms of the Capital Securities will include
those stated in the Trust Agreement and those made part of the Trust Agreement
by the Trust Indenture Act. The following description of the Capital
Securities supplements, and to the extent inconsistent therewith, replaces,
the description of the general terms and provisions of the Capital Securities
set forth in the accompanying Prospectus. The following description does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Trust Agreement, a copy of the form of which is filed as an
exhibit to the Registration Statement of which this Prospectus Supplement and
the accompanying Prospectus form a part, and to the Trust Act and the Trust
Indenture Act.
GENERAL
The Trust Agreement authorizes the Administrative Trustees to issue on
behalf of the Issuer Trust the Trust Securities, which represent undivided
beneficial ownership interests in the assets of the Issuer Trust. All of the
Common Securities will be owned, directly or indirectly, by State Street. The
Common Securities rank pari passu, and payments will be made thereon on a pro
rata basis, with the
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Capital Securities, except that upon the occurrence and during the continuance
of an Event of Default, the rights of the holders of the Common Securities to
receive payment of periodic distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Capital Securities. The Trust Agreement does not permit the issuance by
the Issuer Trust of any securities other than the Trust Securities or the
incurrence of any indebtedness by the Issuer Trust. Pursuant to the Trust
Agreement, the Property Trustee will hold the Junior Subordinated Debentures
purchased by the Issuer Trust for the benefit of the holders of the Trust
Securities. The Guarantee will be held by The First National Bank of Chicago,
the Guarantee Trustee, for the benefit of the holders of the Capital
Securities. The Guarantee does not cover payment of Distributions when the
Issuer Trust does not have sufficient available funds to pay such
Distributions. In such event, the remedy of a holder of Capital Securities is
to vote to direct the Property Trustee to enforce the Property Trustee's
rights under the Junior Subordinated Debentures, except in the limited
circumstances in which the holder may take Direct Action. See "Description of
Capital Securities--Events of Default; Notice" in the accompanying Prospectus
and "--Voting Rights" herein.
DISTRIBUTIONS
Each Capital Security will be entitled to Distributions at the Distribution
Rate in respect of the liquidation amount of $1,000 per Capital Security.
Distributions on the Capital Securities will be cumulative, will accrue from
May 15, 1998 and, except as otherwise described below, will be payable
quarterly in arrears on the 15th day of August, November, February and May of
each year, commencing August 15, 1998, when, as and if available for payment.
Distributions in arrears for more than one quarter will bear interest thereon
at the Distribution Rate, compounded quarterly.
Distributions on the Capital Securities must be paid on the dates payable to
the extent that the Issuer Trust has funds available for the payment of such
Distributions in the Property Account. The Trust's funds available to pay
Distributions to the holders of the Capital Securities will be limited to
payments received from State Street on the Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures." The payment of Distributions
out of moneys held by the Issuer Trust and payments upon redemption of the
Capital Securities or liquidation of the Issuer Trust are guaranteed by State
Street as and to the extent described under "Description of Guarantees" in the
accompanying Prospectus.
Distributions on the Capital Securities will be payable to the holders
thereof as they appear on the books and records of the Issuer Trust on the
relevant record dates, which, as long as the Capital Securities remain in
book-entry only form, will be one Business Day (as defined below) prior to the
relevant payment dates. Such Distributions will be paid through the Property
Trustee, which will hold amounts received in respect of the Junior
Subordinated Debentures in the Property Account for the benefit of the holders
of the Capital Securities. The Property Account may be held by the Property
Trustee or any Paying Agent of the Property Trustee. Subject to any applicable
laws and regulations and the provisions of the Trust Agreement, each such
payment will be made as described under "--Book-Entry Only Issuance--The
Depository Trust Company" below. In the event that the Capital Securities do
not continue to remain in book-entry form, the record dates for payment of
Distributions will be August 1, November 1, February 1 and May 1, as
applicable. In the event that any date on which Distributions are payable 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, 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 such payment date (the date on which
Distributions are actually payable, a "Distribution Date"). The period
beginning on, and including, the date of original issuance of the Capital
Securities, and ending on, but excluding, the first Distribution Date, and
each successive period beginning on, and including, a Distribution Date, and
ending on, but excluding, the next succeeding Distribution Date is herein
called
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a "Distribution Period." A "Business Day" shall mean any day other than (a) a
day on which banking institutions in New York, New York or Boston,
Massachusetts are authorized or required by law or executive order to remain
closed or (b) a day on which the Corporate Trust Office of the Debenture
Trustee is closed for business.
Determination of 3-Month LIBOR
The Distribution Rate in respect of the Capital Securities will be a
floating rate per annum determined by reference to 3-Month LIBOR, determined
as described below, plus a spread of 0.56%. "3-Month LIBOR" means the London
interbank offered rate for three-month, U.S. dollar deposits and, with respect
to any Distribution Period, will be calculated by The First National Bank of
Chicago, as calculation agent (the "Calculation Agent"), as follows:
(a) On the second Market Day (as defined below) preceding the
commencement of such Distribution Period (each, a "Determination Date"), 3-
Month LIBOR will be determined on the basis of the offered rate for
deposits of not less than U.S. $1,000,000 for a period of three months (the
"Index Maturity"), commencing on the second Market Day immediately
preceding the commencement of such Distribution Period, which appears on
the display designated as Page 3750 on the Dow Jones Telerate Service (or
such other pages as may replace Page 3750 on that service for the purpose
of displaying London interbank offered rates of major banks) ("Telerate
Page 3750") as of 11:00 a.m., London time on said Determination Date. If no
such offered rate appears, 3-Month LIBOR with respect to such Distribution
Period will be determined as described in (b) below.
(b) With respect to a Determination Date on which no such offered rate
appears on Telerate Page 3750 as described in (a) above, 3-Month LIBOR
shall be the arithmetic mean, expressed as a percentage, of the offered
rates (unless by its terms such display provides for only a single rate, in
which case a single rate shall be used) for deposits in U.S. dollars for
the Index Maturity that appears on the display designated as "LIBO" on the
Reuters Monitor Money Market Rates Service (or such other page as may
replace the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks) ("Reuters Screen LIBO Page") as of
11:00 a.m., London time, on such date. If, in turn, at least two such rates
are not displayed on the Reuters Screen LIBO Page at such time (unless, as
aforesaid, only a single rate is required), the Calculation Agent will
obtain from each of four reference banks in London selected by the
Calculation Agent ("Reference Banks") such bank's offered quotation
(expressed as a percentage per annum) as of approximately 11:00 a.m.,
London time, on such date for deposits in U.S. dollars to prime banks in
the London interbank market for the Index Maturity. If two or more such
quotations are provided as requested, then 3-Month LIBOR for such date
shall be the arithmetic average of such quotations. If, in turn, fewer than
two such quotations are provided as requested, then 3-Month LIBOR for such
date will be obtained from the preceding Market Day for which the Telerate
Page 3750 displayed a rate for the Index Maturity.
(c) If on any Determination Date, the Calculation Agent is required but
unable to determine 3-Month LIBOR in the manner provided in paragraphs (a)
and (b) above, 3-Month LIBOR for such Distribution Period shall be 3-Month
LIBOR as determined on the previous Determination Date.
The term "Market Day" means any Business Day on which commercial banks and
foreign exchange markets are open for business (including dealings in foreign
exchange and foreign currency deposits) in New York and London.
The Distribution Rate for any Distribution Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be
modified by United States law.
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All percentages resulting from any calculations referred to in this
Prospectus Supplement will be rounded, if necessary, to the nearest one ten-
thousandth of a percentage point, with five hundred-thousandths of a
percentage point being rounded upwards (e.g., 6.87655% (or .0687655) would be
rounded to 6.8766% (or .068766)), and all U.S. dollar amounts used in or
resulting from such calculations will be rounded to the nearest cent (with
one-half cent or more being rounded upwards).
Determination of Distribution Rate and Calculation of Distribution Amount
The Calculation Agent shall, as soon as practicable after 11:00 a.m., London
time, on each Determination Date, determine the Distribution Rate and inform
the Debenture Trustee, the Property Trustee and the Paying Agent. Unless
otherwise provided by the Property Trustee, the Paying Agent will calculate
the amount of Distributions payable in respect of the following Distribution
Period (the "Distribution Amount"). The Distribution Amount shall be
calculated by applying the Distribution Rate to the liquidation amount of each
Capital Security outstanding at the commencement of the Distribution Period,
multiplying each such liquidation amount by the actual number of days in the
Distribution Period concerned (which actual number of days shall include the
first day but exclude the last day of such Distribution Period) divided by 360
and rounding the resulting figure to the nearest cent (with one-half cent or
more being rounded upwards). The determination of the Distribution Rate by the
Calculation Agent and the Distribution Amount by the Paying Agent will (in the
absence of willful default, bad faith or manifest error) be final, conclusive
and binding on all concerned. None of the Debenture Trustee, the Property
Trustee, the Paying Agent, the Calculation Agent, the Issuer Trust or the
Company (or any of their respective officers, directors, agents,
beneficiaries, employees or affiliates) shall have any liability to any person
for (i) the selection of any Reference Bank or (ii) any inability to retain
major banks in the London interbank market, in the case of the Calculation
Agent, which is caused by circumstances beyond its reasonable control.
Upon the request of a holder of a Capital Security, the Calculation Agent
will provide the Distribution Rate then in effect and, if determined, the
Distribution Rate for the next Distribution Period with respect to the Capital
Securities. Each such Distribution Rate may be obtained by telephoning the
Calculation Agent.
Certificates to be Final
All certificates, communications, opinions, determinations, calculations,
quotations and decisions given, expressed, made or obtained for the purposes
of the provisions relating to the payment and calculation of Distributions on
the Capital Securities, whether by the Reference Banks (or any of them) or the
Calculation Agent, Property Trustee, Debenture Trustee or Paying Agent, will
(in the absence of willful default, bad faith or manifest error) be binding on
the Issuer Trust, the Company, the Trustees and all of the holders of the
Capital Securities, and no liability will (in the absence of willful default,
bad faith or manifest error) attach to the Calculation Agent, Property
Trustee, Debenture Trustee or Paying Agent in connection with the exercise or
non-exercise by any of them of their powers, duties and discretion.
Deferral of Distributions
So long as no Debenture Event of Default has occurred and is continuing,
State Street has the right under the Indenture to defer payments of interest
on the Junior Subordinated Debentures by extending the interest payment period
at any time, and from time to time, for a period not exceeding 20 consecutive
quarterly periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. As a consequence of any Extension Period, quarterly
Distributions on the Capital Securities will also be deferred by the Issuer
Trust (and the amount of Distributions to which holders of the Capital
Securities are entitled will accumulate at a variable annual rate equal to 3-
Month LIBOR plus 0.56%,
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compounded quarterly from the relevant payment date for such Distributions)
during any Extension Period. During any such Extension Period, State Street
shall be subject to the restrictions on payments and distributions described
in "Description of Capital Securities--Distributions" in the accompanying
Prospectus. Prior to the termination of any such Extension Period, State
Street may further extend the payment of interest provided that such Extension
Period may not exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Junior Subordinated Debentures. Upon the termination of any
Extension Period and the payment of all interest accrued and unpaid (together
with interest thereon at a variable annual rate equal to 3-Month LIBOR plus
0.56%, compounded quarterly from the interest payment date for such interest,
to the extent permitted by applicable law), State Street may commence a new
Extension Period subject to the foregoing requirements. There is no limitation
on the number of times that the Company may elect to begin an Extension
Period. See "Description of the Junior Subordinated Debentures--Interest" and
"--Option to Extend Interest Payment Period."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period of the Junior
Subordinated Debentures.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Junior
Subordinated Debentures, whether at Stated Maturity or upon earlier
redemption, the proceeds from such repayment or redemption shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debentures so repaid or redeemed, upon not less than 30 nor more
than 60 days' notice prior to the date fixed for redemption, at the Redemption
Price. The Junior Subordinated Debentures will mature on May 15, 2028.
Moreover, the Junior Subordinated Debentures are redeemable (i) in whole or in
part, from time to time, on or after May 15, 2008 or (ii) in whole, but not in
part, at any time within 90 days following the occurrence of a Tax Event,
Investment Company Event or Capital Treatment Event (or, if the approval of
the Federal Reserve Board is then required for such redemption, on such later
date as promptly as practicable after such approval is obtained), in each case
at a redemption price equal to 100% of the principal amount of the Junior
Subordinated Debentures so redeemed plus accrued and unpaid interest thereon
to the redemption date. See "Description of the Junior Subordinated
Debentures--Optional Redemption." If less than all of the Capital Securities
are to be redeemed, then such Capital Securities shall be redeemed pro rata as
described under "--Book-Entry Only Issuance--the Depository Trust Company"
below. Any such repayment or redemption of the Junior Subordinated Debentures
is subject to the prior approval of the Federal Reserve Board, if such
approval is then required under applicable law, rules, guidelines or policies.
TAX EVENT, INVESTMENT COMPANY EVENT AND CAPITAL TREATMENT EVENT REDEMPTION
Subject to the prior approval of the Federal Reserve Board, if such approval
is then required under applicable law, rules, guidelines or policies, if at
any time a Tax Event, Investment Company Event or Capital Treatment Event
shall occur and be continuing, State Street shall have the right, upon not
less than 30 nor more than 60 days' notice, to redeem the Junior Subordinated
Debentures, in whole, but not in part, for cash within 90 days following the
occurrence of such Tax Event, Investment Company Event or Capital Treatment
Event (or, if the approval of the Federal Reserve Board is then required for
such redemption, on such later date as promptly as practicable after such
approval is obtained) and, following such redemption, all Trust Securities
shall be redeemed by the Issuer Trust at the Redemption Price.
See "Description of Capital Securities--Redemption or Exchange" in the
accompanying Prospectus.
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VOTING RIGHTS
Except as described in "Description of Capital Securities--Voting Rights;
Amendment of Each Trust Agreement" in the accompanying Prospectus, as provided
under the Trust Act and the Trust Indenture Act, and as otherwise required by
law and the Trust Agreement, the holders of the Capital Securities will have
no voting rights.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary (the
"Depositary") for the Capital Securities. The Capital Securities will be
issued only as fully registered securities registered in the name of Cede &
Co. (DTC's nominee) or such other nominee as selected by DTC. One or more
fully registered global Capital Securities certificates (the "Global
Certificates"), representing the total aggregate number of Capital Securities,
will be issued and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form ("Certificated
Securities"). Such laws may impair the ability to transfer beneficial
interests in the global Capital Securities as represented by a global
certificate.
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 ("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. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Participants and by the New York Stock Exchange, 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
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the SEC.
Purchases of Capital Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Capital Securities
on DTC's records. The ownership interest of each actual purchaser of each
Capital Security ("Beneficial Owner") is in turn to be recorded on the
Participants' and Indirect Participants' records, including Euroclear and
Cedel. 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 Capital Securities. Transfers of
ownership interests in the Capital Securities 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 the Capital Securities, except in the event that use of
the book-entry system for the Capital Securities is discontinued.
Transfers between Participants will be effected in accordance with DTC's
procedures and will be settled in same-day funds. Transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between Participants, on the one hand, and Euroclear
participants or Cedel participants, on the other hand, will be effected in DTC
in accordance with DTC's rules on
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behalf of Euroclear or Cedel, as the case may be, by its respective
depositary; however, such cross-market transactions will require delivery of
instructions to Euroclear or Cedel, as the case may be, by the counterparty in
such system in accordance with the rules and procedures and within the
established deadlines (Brussels time) of such system. Euroclear or Cedel, as
the case may be, will, if the transaction meets its settlement requirements,
deliver instructions to its respective depositary to take action to effect
final settlement on its behalf by delivering or receiving interests in the
Capital Securities in DTC, and making or receiving payment in accordance with
normal procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Cedel participants may not deliver instructions directly to
the depositaries for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Capital Security from a
Participant in DTC will be credited, and any such crediting will be reported
to the relevant Euroclear participant or Cedel participant, during the
securities settlement processing day (which must be a business day for
Euroclear and Cedel, as the case may be) immediately following the DTC
settlement date. Cash received in Euroclear or Cedel as a result of sales of
interests in a Capital Security by or through a Euroclear or Cedel participant
to a Participant in DTC will be received with value on the DTC settlement
date, but will be available in the relevant Euroclear or Cedel cash account
only as of the business day for Euroclear or Cedel following the DTC
settlement date.
DTC has no knowledge of the actual Beneficial Owners of the Capital
Securities. DTC's records reflect only the identity of the Direct Participants
to whose accounts such Capital Securities are credited, which may or may not
be the Beneficial Owners. The Participants and Indirect Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Capital Securities represented
thereby for all purposes under the Trust Agreement and the Capital Securities.
No beneficial owner of an interest in a Global Certificate will be able to
transfer that interest except in accordance with DTC's applicable procedures,
in addition to those provided for under the Trust Agreement.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Capital Securities (including the presentation of Capital
Securities for exchange as described below) only at the direction of one or
more Participants to whose account the DTC interests in the Global
Certificates are credited and only in respect of such portion of the aggregate
liquidation amount of Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event
of Default under the Capital Securities, DTC will exchange the Global
Certificates for Certificated Securities, which it will distribute to its
Participants.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Capital Securities held in book-entry
form will be sent to Cede & Co. If less than all of the Capital Securities are
being redeemed, DTC will determine the amount of the interest of each
Participant to be redeemed in accordance with its procedures.
Although voting with respect to the Capital Securities is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will itself consent
or vote with respect to Capital Securities. Under its usual procedures, DTC
would mail an Omnibus Proxy to the Issuer Trust as soon as
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possible after, the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Participants to whose accounts the
Capital Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Distributions on the Capital Securities held in book-entry form will be made
to DTC in immediately available funds. DTC's practice is to credit
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 and Indirect Participants to Beneficial Owners will be governed
by standing instructions and customary practices and will be the
responsibility of such Participants and Indirect Participants and not of DTC,
the Issuer Trust or the Company, 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 Issuer Trust, disbursement of such
payments to Participants is the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners is the responsibility of Participants
and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Capital
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Capital Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC,
DTC is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Company, the
Issuer Trust nor the Issuer Trustees will have any responsibility for the
performance by DTC or its Participants or Indirect Participants under the
rules and procedures governing DTC. DTC may discontinue providing its services
as securities depositary with respect to the Capital Securities at any time by
giving notice to the Issuer Trust. Under such circumstances, in the event that
a successor securities depositary is not obtained, Capital Security
certificates are required to be printed and delivered. Additionally, the
Issuer Trust (with the consent of the Company) may decide to discontinue use
of the system of book-entry transfers through DTC (or a successor depositary).
In that event, certificates for the Capital Securities will be printed and
delivered. In each of the above circumstances, the Company will appoint a
paying agent with respect to the Capital Securities.
The information in this section concerning DTC and DTC's book entry system
has been obtained from sources that the Company and the Issuer Trust believe
to be reliable, but neither the Company nor the Issuer Trust takes
responsibility for the accuracy thereof.
PAYMENT
Payments in respect of the Capital Securities represented by the Global
Certificates shall be made to DTC, which shall credit the relevant accounts at
DTC on the applicable Distribution Dates or, in the case of Capital Securities
represented by Certificated Securities, such payments shall be made by check
mailed to the address of the holder entitled thereto as such address shall
appear on the Securities Register.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The First National Bank of Chicago will act as registrar, transfer agent and
paying agent for the Capital Securities (in such capacity, the "Paying
Agent"). The Paying Agent is presently located at One First National Plaza,
Suite 0126, Chicago, Illinois 60670-0126. If the Capital Securities do not
remain in book-entry only form, one or more additional paying agents may be
appointed if so required by any rule or regulation of any securities exchange
upon which the Capital Securities may be listed at such time. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written
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notice to the Issuer Trustees. In the event that The First National Bank of
Chicago shall no longer be the Paying Agent, the Property Trustee shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company acceptable to the Company).
Registration of transfers of Capital Securities will be effected without
charge by or on behalf of the Issuer Trust, but upon payment (with the giving
of such indemnity as the Issuer Trust or the Company may require) in respect
of any tax or other government charges that may be imposed in relation
thereto.
The Issuer Trust will not be required to register or cause to be registered
the transfer of Capital Securities after such Capital Securities have been
called for redemption.
DESCRIPTION OF GUARANTEE
Pursuant to the Guarantee, State Street will irrevocably and unconditionally
agree, to the extent set forth therein, to pay in full to the holders of the
Capital Securities issued by the Issuer Trust, the Guarantee Payments (as
defined in the accompanying Prospectus) (except to the extent paid by the
Issuer Trust), as and when due, regardless of any defense, right of set-off or
counterclaim that the Issuer Trust may have or assert. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Company to the holders of Capital Securities or by
causing the Issuer Trust to pay such amounts to such holders. The Guarantee
will be qualified as an indenture under the Trust Indenture Act. The First
National Bank of Chicago will act as the Guarantee Trustee under the
Guarantee. The terms of the Guarantee will be those set forth in such
Guarantee and those made part of such Guarantee by the Trust Indenture Act.
The Guarantee will be held by the Guarantee Trustee for the benefit of the
holders of the Capital Securities. A summary description of the Guarantee
appears in the accompanying Prospectus under the caption "Description of
Guarantees."
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The following description of the specific terms of the Junior Subordinated
Debentures supplements the description of the general terms and provisions of
the Junior Subordinated Debentures set forth in the accompanying Prospectus
under the caption "Description of the Junior Subordinated Debentures" to which
description reference is hereby made. The following description does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Indenture, dated as of December 15, 1996 (the "Indenture"),
between State Street and The First National Bank of Chicago, as Trustee (the
"Debenture Trustee"). Certain capitalized terms used herein are defined in the
Indenture.
GENERAL
The Junior Subordinated Debentures will be issued as unsecured indebtedness
under the Indenture. The Company may issue additional series of junior
subordinated debentures under the Indenture, and any such series will rank
pari passu with the Junior Subordinated Debentures. The Junior Subordinated
Debentures that are the subject of this Prospectus Supplement will be limited
in aggregate principal amount to $154,640,000, such amount being the sum of
the aggregate stated liquidation amount of the Capital Securities and the
Common Securities.
The Junior Subordinated Debentures are not subject to a sinking fund
provision. The entire principal amount of the Junior Subordinated Debentures
will mature and become due and payable, together with any accrued and unpaid
interest thereon including Compounded Interest (as defined herein) on May 15,
2028.
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If Junior Subordinated Debentures are distributed to holders of Trust
Securities in liquidation of such holders' interests in the Issuer Trust, such
Junior Subordinated Debentures will initially be issued as a Global Security
(as defined herein). As described herein, Junior Subordinated Debentures may
be issued in certificated form in exchange for a Global Security. See "--Book-
Entry and Settlement" below. In the event that Junior Subordinated Debentures
are issued in certificated form, such Junior Subordinated Debentures will be
in denominations of $1,000 and integral multiples thereof and may be
transferred or exchanged at the offices described below. Payments on Junior
Subordinated Debentures issued as a Global Security will be made to DTC, a
successor depositary or, in the event that no depositary is used, to a Paying
Agent for the Junior Subordinated Debentures. In the event Junior Subordinated
Debentures are issued in certificated form, principal and interest will be
payable, the transfer of the Junior Subordinated Debentures will be
registrable and Junior Subordinated Debentures will be exchangeable for Junior
Subordinated Debentures of other denominations of a like aggregate principal
amount at the corporate trust office of (i) the Property Trustee in New York,
New York (currently located at c/o First Chicago Trust Company of New York, 14
Wall Street, 8th Floor--Window 2, New York, New York 10005) or (ii) any other
Paying Agent or transfer agent appointed in addition or in lieu thereof
provided, that payment of interest may be made at the option of State Street
by check mailed to the address of the holder entitled thereto or by wire
transfer to an account appropriately designated by the holder entitled
thereto. Notwithstanding the foregoing, so long as the holder of any Junior
Subordinated Debentures is the Property Trustee, the payment of principal and
interest on the Junior Subordinated Debentures held by the Property Trustee
will be made at such place and to such account as may be designated by the
Property Trustee.
Any moneys deposited with or paid to the Debenture Trustee or any Paying
Agent for payment of the principal of, premium, if any, or interest on, Junior
Subordinated Debentures and not applied but remaining unclaimed by the holders
thereof for two years after the date upon which such principal of, premium, if
any, or interest on such Junior Subordinated Debentures, as the case may be,
shall have become due and payable, shall be repaid to State Street by the
Debenture Trustee or Paying Agent on written demand. Thereafter the holder of
any such Junior Subordinated Debenture shall look only to State Street for any
payment that such holder may be entitled to collect and all liability of the
Debenture Trustee or Paying Agent with respect to such moneys shall thereupon
cease.
The Indenture does not contain provisions that afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving State Street that may
adversely affect such holders.
SUBORDINATION
In the Indenture, State Street has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Debt to the extent set forth therein. See
"Description of Junior Subordinated Debentures--Subordination" in the
accompanying Prospectus.
The Indenture does not limit the aggregate amount of Senior Debt that may be
incurred by State Street. As of March 31, 1998, Senior Debt of State Street
aggregated approximately $253 million. In addition, because State Street is a
holding company, the Junior Subordinated Debentures are effectively
subordinated to all existing and future liabilities of State Street's
subsidiaries, including depositors of its banking subsidiaries.
OPTIONAL REDEMPTION
Subject to State Street's having received prior approval of the Federal
Reserve Board if then required under applicable law, rules, guidelines or
policies of the Federal Reserve Board, State Street shall have the right to
redeem the Junior Subordinated Debentures, (i) in whole or in part, from time
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to time, on or after May 15, 2008 or (ii) in whole, but not in part, at any
time within 90 days following the occurrence of a Tax Event, Investment
Company Event or Capital Treatment Event (or, if the approval of the Federal
Reserve Board is then required for such redemption, on such later date as
promptly as practicable after such approval is obtained), in either case, upon
not less than 30 nor more than 60 days' notice, at a redemption price equal to
100% of the principal amount to be redeemed plus accrued and unpaid interest
thereon to the redemption date. See "Description of Junior Subordinated
Debentures--Redemption" in the accompanying Prospectus.
INTEREST
The Junior Subordinated Debentures shall bear interest at a floating rate
per annum equal to 3-Month LIBOR (determined in the same manner as the
Distribution Rate, as described under "Description of the Capital Securities--
Distributions--Determination of 3-Month LIBOR") plus a spread of 0.56% (the
"Interest Rate"), from May 15, 1998, payable quarterly in arrears on the 15th
day of August, November, February and May of each year, commencing August 15,
1998, to the person in whose name such Junior Subordinated Debentures is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date (as defined below). In
the event the Junior Subordinated Debentures are not in book-entry form
(except if the Junior Subordinated Debentures are held by the Property
Trustee), the record dates shall be the August 1, November 1, February 1 and
May 1 prior to the applicable Interest Payment Date.
In the event that any interest payment date 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, 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 such date (the date on which the interest payment is
actually payable, an "Interest Payment Date"). The period beginning on, and
including, the date of original issuance of the Junior Subordinated
Debentures, and ending on, but excluding, the first Interest Payment Date, and
each successive period beginning on, and including, an Interest Payment Date,
and ending on, but excluding, the next succeeding Interest Payment Date is
herein called an "Interest Period." The amount of interest payable on the
Junior Subordinated Debentures for any Interest Period will be computed on the
basis of the actual number of days in the applicable Interest Period divided
by 360 and rounding the resulting figure to the nearest cent (with one-half
cent or more being rounded upwards).
The Interest Rate and the amount of interest payable in respect of each
Interest Period will be calculated by the Calculation Agent or the Debenture
Trustee or any paying agent, as the case may be, in the same manner as the
Distribution Rate and Distribution Amount in respect of each Distribution
Period, as described under "Description of the Capital Securities--
Distributions."
THE DEPOSITARY
If Junior Subordinated Debentures are distributed to holders of Capital
Securities in liquidation of such holders' interests in the Issuer Trust, DTC
will act as securities depositary for the Junior Subordinated Debentures. For
a description of DTC and the specific terms of the depositary arrangements,
see "Description of the Capital Securities--Book-Entry Only Issuance--The
Depository Trust Company." As of the date of this Prospectus Supplement, the
description therein of DTC's book-entry system and DTC's practices as they
relate to purchases, transfers, notices and payments with respect to the
Capital Securities apply in all material respects to any debt obligations
represented by one or more Global Securities held by the Depositary. State
Street may appoint a successor to DTC or any successor depositary in the event
DTC or such successor depositary is unable or unwilling to continue as a
depositary for the Global Securities.
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None of State Street, the Issuer Trust, the Property Trustee, any paying
agent and any other agent of State Street, or the Debenture Trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global
Security for such Junior Subordinated Debentures or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is continuing,
State Street has the right under the Indenture to defer payments of interest
on the Junior Subordinated Debentures by extending the interest payment period
at any time, and from time to time, for a period not exceeding 20 consecutive
quarterly periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. As a consequence of any Extension Period, quarterly
Distributions on the Trust Securities would also be deferred by the Issuer
Trust (and the amount of Distributions to which holders of the Trust
Securities are entitled will accumulate at a variable annual rate equal to 3-
Month LIBOR plus 0.56%, compounded quarterly from the relevant payment date
for such Distributions) during such Extension Period. During any such
Extension Period, State Street shall be subject to the restrictions on
payments described in "Description of Junior Subordinated Debentures--
Restrictions on Certain Payments" in the accompanying Prospectus.
Prior to the termination of any such Extension Period, State Street may
further extend the payment of interest provided that such Extension Period, as
extended, may not exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Junior Subordinated Debentures. Upon the termination of any
Extension Period and the payment of all interest accrued and unpaid (together
with interest thereon at a variable annual rate equal to 3-Month LIBOR plus
0.56%, compounded quarterly from the interest payment date for such interest,
to the extent permitted by applicable law), State Street may commence a new
Extension Period subject to the foregoing requirements. There is no limitation
on the number of times that the Company may elect to begin an Extension
Period. No interest shall be due and payable during an Extension Period,
except at the end thereof. State Street has no present intention of exercising
its right to defer payments of interest by extending any interest payment
period on the Junior Subordinated Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Capital Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Issuer
Trust, the Junior Subordinated Debentures will be issued in the form of one or
more global certificates (each a "Global Security") registered in the name of
the Depositary or its nominee. Except under the limited circumstances
described below, Junior Subordinated Debentures represented by the Global
Security will not be exchangeable for, and will not otherwise be issuable as,
Junior Subordinated Debentures in definitive form. The Global Securities
described above may not be transferred except by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debentures in definitive form and will not be considered the
holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debentures
shall be exchangeable, except
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for another Global Security of like denomination and tenor to be registered in
the name of the Depositary or its nominee or to a successor depositary or its
nominee. Accordingly, each Beneficial Owner must rely on the procedures of the
Depositary or, if such person is not a Participant, on the procedures of the
Participant through which such person owns its interest to exercise any rights
of a holder under the Indenture.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the Depositary or its nominee
only if (i) the Depositary notifies State Street that it is unwilling or
unable to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the Depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
Depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed, (iii) State Street, in its
sole discretion, determines that such Global Security shall be so exchangeable
or (iv) there shall have occurred an Debenture Event of Default with respect
to such Junior Subordinated Debentures. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
Junior Subordinated Debentures registered in such names as the Depositary
shall direct. It is expected that such instructions will be based upon
directions received by the Depositary from its Participants with respect to
ownership of beneficial interests in such Global Security.
RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE SUBORDINATED
DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Capital Securities
(to the extent the Issuer Trust has funds available for the payment of such
Distributions and other amounts) are irrevocably guaranteed by State Street as
and to the extent set forth under "Description of Guarantees" in the
accompanying Prospectus. Taken together, State Street's obligations under each
of the Junior Subordinated Debentures, the Indenture, the Trust Agreement and
the Guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of Distributions and other amounts due on the Capital
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only
the combined operation of these documents that has the effect of providing a
full, irrevocable and unconditional guarantee of the Issuer Trust's
obligations under the Capital Securities. If and to the extent that State
Street does not make payments on any series of Junior Subordinated Debentures,
the Issuer Trust will not pay Distributions or other amounts due on the
Capital Securities. The Guarantee does not cover payment of Distributions when
the Issuer Trust does not have sufficient funds to pay such Distributions. In
such event, the remedy of a holder of Capital Securities is to institute a
legal proceeding directly against State Street for enforcement of payment of
amounts equal to such Distributions to such holder. The obligations of State
Street under the Guarantee are subordinate and junior in right of payment to
all Senior Debt of State Street. See "Relationship Among the Capital
Securities, the Corresponding Junior Subordinated Debentures and the
Guarantees" in the accompanying Prospectus.
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UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain United States federal income tax
consequences of the purchase, ownership, and disposition of the Capital
Securities. Unless otherwise stated, this summary deals only with Capital
Securities held as capital assets (generally, assets held for investment) by
holders who purchase the Capital Securities upon original issuance. The tax
treatment of a holder of Capital Securities may vary depending on such
holder's particular situation. This summary does not address all of the tax
consequences that may be relevant to holders who may be subject to special tax
treatment such as, for example, insurance companies, broker-dealers, tax-
exempt organizations, or, except to the extent described below, foreign
taxpayers. In addition, this summary does not address any aspects of state,
local, or foreign tax laws. This summary is based on the United States federal
income tax law in effect as of the date hereof, which is subject to change,
possibly on a retroactive basis. Each investor is urged to consult a tax
advisor as to the particular tax consequences of purchasing, owning, and
disposing of the Capital Securities, including the application and effect of
United States federal, state, local, foreign, and other tax laws.
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 Capital Securities. 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 Capital 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 CAPITAL
SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES AND THE ISSUER TRUST
Under current law and assuming compliance with the terms of the Trust
Agreement, the Issuer Trust will not be taxable as a corporation for United
States federal income tax purposes. As a result, each beneficial owner of
Capital Securities (a "Securityholder") will be required to include in its
gross income its pro rata share of the interest income, including original
issue discount ("OID"), paid or accrued with respect to the Junior
Subordinated Debentures whether or not cash is actually distributed to the
Securityholders. See "--Interest Income and Original Issue Discount." The
Junior Subordinated Debentures will be classified as indebtedness of the
Company for United States federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations (the "Regulations"), a debt instrument
will be deemed to be issued with OID if there is more than a "remote"
contingency that periodic, stated interest payments due on the instrument will
not be timely paid. Because the exercise by State Street of its option to
defer the payment of stated interest on the Junior Subordinated Debentures
would prevent State Street from declaring dividends on any class of equity,
State Street believes that the likelihood of its exercising the option is
"remote" within the meaning of the Regulations. As a result, State Street
intends to take the position that the Junior Subordinated Debentures will not
be deemed to be issued
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with OID. Accordingly, based on this position, stated interest payments on the
Junior Subordinated Debentures will be includible in the gross income of a
Securityholder at the time that such payments are paid or accrued in
accordance with the holder's regular method of accounting. Because the
provisions of the Regulations have not yet been addressed in any published
rulings or other published interpretations issued by the IRS, it is possible
that the IRS could take a position contrary to the position taken by State
Street.
Exercise of Deferral Option. If State Street were to exercise its option to
defer the payment of stated interest on the Junior Subordinated Debentures,
the Junior Subordinated Debentures would be treated, solely for purposes of
the OID rules, as being "re-issued" at such time with OID. Under these rules,
a holder of the Junior Subordinated Debentures would be required to include
OID in gross income, on a current basis, over the period that the instrument
is held, even though State Street would not be making any actual cash payments
during the Extension Period. The amount of interest income includible in the
taxable income of a holder of the Junior Subordinated Debentures would be
determined on the basis of a constant yield method over the remaining term of
the instrument and the actual receipt of future payments of stated interest on
the Junior Subordinated Debentures would no longer be separately reported as
taxable income. The amount of OID that would accrue, in the aggregate, during
the extended interest payment period would be approximately equal to the
amount of the cash payment of accrued interest due at the end of such period.
Any OID included in income would increase the holder's adjusted tax basis in
the Junior Subordinated Debentures and the holder's actual receipt of interest
payments would reduce such basis.
Because income on the Capital Securities will constitute interest income for
United States federal income tax purposes, corporate holders of Capital
Securities will not be entitled to claim a dividends-received deduction in
respect of such income.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST
State Street has the right, at any time, to dissolve the Issuer Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of
the Capital Securities in exchange therefor upon liquidation of the Issuer
Trust. Such right is subject to State Street having received prior approval of
the Federal Reserve Board if then required under applicable capital guidelines
or policies. If State Street exercises its right to dissolve the Issuer Trust
and cause the Junior Subordinated Debentures to be distributed on a pro rata
basis to the holders of the Capital Securities, such distribution (assuming
that the Issuer Trust is not then classified as a corporation for United
States federal income tax purposes ) would be treated as a nontaxable event to
the holders. In such event, each holder of Capital Securities would have an
adjusted tax basis in the Junior Subordinated Debentures received in the
liquidation equal to the adjusted tax basis in its Capital Securities
surrendered therefor and the holding period of the Junior Subordinated
Debentures would include the period during which the holder had held the
Capital Securities. If, however, at the time of such liquidation, the Issuer
Trust is classified as a corporation for United States federal income tax
purposes, the distribution would be a taxable event to holders of the Capital
Securities.
If the Junior Subordinated Debentures are redeemed for cash and the proceeds
of such redemption are distributed to holders in redemption of their Capital
Securities, the redemption would be treated as a sale of the Capital
Securities, in which gain or loss would be recognized, as described
immediately below.
SALES OF CAPITAL SECURITIES
Upon the sale of Capital Securities, a holder will recognize gain or loss
(which generally will be capital gain or loss) in an amount equal to the
difference between such holder's adjusted tax basis in
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the Capital Securities and the amount realized (except to the extent of any
amount received in respect of accrued but unpaid interest not previously
included in income). Capital gain realized by an individual on the disposition
of an asset held for more than one year but not more than 18 months is
currently taxed at a maximum rate of 28% and capital gain realized on the
disposition of an asset held for more than 18 months is currently taxed at a
maximum rate of 20%.
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder that disposes of its Capital Securities
between record dates for payments of Distributions thereon will be required to
include as ordinary income either OID (if applicable) or accrued but unpaid
interest on the Junior Subordinated Debentures through the date of
disposition. To the extent the amount realized is less than a holder's
adjusted tax basis, the holder generally will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
NON-U. S. HOLDERS
For purposes of this discussion, a "Non-U. S. Holder" is any corporation,
individual, partnership, estate or trust that is, as to the United States, a
foreign corporation, a nonresident alien individual, a foreign partnership, a
foreign estate or a foreign trust. A "Non-U. S. Holder" does not include,
however, any person whose income or gain in respect of the Capital Securities
is effectively connected with the conduct of a United States trade or
business.
Interest payments made to a holder of a Capital Securities who is a Non-U.
S. Holder generally will not be subject to withholding of United States
federal income tax, provided that (a) the beneficial owner of the Capital
Securities does not actually or constructively (as determined under certain
attribution rules prescribed by the Code) own 10% or more of the total
combined voting power of all classes of stock of State Street entitled to
vote, (b) the beneficial owner of the Capital Securities is not a controlled
foreign corporation that is related to State Street through stock ownership,
(c) the beneficial owner of the Capital Securities is not a bank receiving
interest described in section 881(c)(3)(A) of the Code and (d) either (A) the
beneficial owner of the Capital Securities certifies to the Issuer Trust or
its agent, under the penalty of perjury, that it is not a United States holder
and provides its name and address or (B) a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution"), and
holds the Capital Securities in such capacity, certifies to the Issuer Trust
or its agent, under the penalty of perjury, that such statement has been
received from the beneficial owner by it or by a Financial Institution between
it and the beneficial owner and furnishes the Issuer Trust or its agent with a
copy thereof. Recently issued Treasury regulations provide alternative methods
for satisfying the identification and certification requirements described in
the preceding sentence. These regulations generally are effective for payments
made after December 31, 1999, subject to certain transition rules. Non-U. S.
Holders are urged to consult their tax advisors about these new regulations.
A Non-U. S. Holder of Capital Securities generally will not be subject to
United States federal income tax or withholding tax on any gain realized upon
the sale or other disposition of a Capital Security. In the case of a Non-U.
S. Holder who is an individual, however, gain realized on the disposition of
the Capital Securities may be subject to United States federal income tax if
(i) such individual is present in the United States for a period or periods
aggregating 183 days or more during the taxable year of the disposition and
(ii) either (A) such individual has a "tax home" in the United States or
(B) the disposition is attributable to an office or other fixed place of
business maintained by such individual in the United States.
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INFORMATION REPORTING TO HOLDERS
Interest paid on the Junior Subordinated Debentures, or the amount of OID
accruing on the Junior Subordinated Debentures (if any), deemed held of record
by individual citizens or residents of the United States, or certain trusts,
estates, and partnerships, will be reported to the IRS on Forms 1099, which
forms should be mailed to such holders of Capital Securities by January 31
following each calendar year. Payments made on, and proceeds from the sale of,
the Capital Securities may be subject to a "backup" withholding tax (currently
at 31%) unless the holder complies with certain identification and other
requirements. Any amounts withheld under the backup withholding rules will be
allowed as a credit against the holder's United States federal income tax
liability, provided that the required information is furnished to the IRS.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on (a) employee benefit plans (as
defined in Section 3(3) of ERISA which are subject to the fiduciary
responsibility provisions of Part 4 of Title I of ERISA), (b) plans described
in Section 4975(e)(1) of the Code, including individual retirement accounts
and plans maintained for self-employed individuals, (c) any entities whose
underlying assets include plan assets by reason of a plan's investment in such
entities (each plan and entity described in (a), (b) and this (c) being a
"Plan") and on (d) persons who have certain relationships to any such Plan
which are defined in ERISA and the Code (each such person being a "party in
interest" under ERISA and a "disqualified person" under the Code). ERISA also
imposes duties on a person who is a fiduciary with respect to a Plan which is
subject to ERISA and makes any such person liable for a violation of such
duty, and ERISA and the Code prohibit certain transactions between a Plan and
a party in interest or a disqualified person with respect to such Plan and can
impose sanctions on any party in interest or disqualified person who engages
in any such transactions.
The Company (the obligor with respect to the Junior Subordinated Debentures
held by the Issuer Trust) and its affiliates and the Property Trustee may be a
party in interest or a disqualified person with respect to a Plan which
purchases or holds Capital Securities, and a prohibited transaction under
ERISA and the Code includes a direct or indirect loan or other extension of
credit between a Plan and a party in interest or a disqualified person with
respect to such Plan. Thus, a purchase or holding of Capital Securities by a
Plan may constitute or result in a prohibited transaction under ERISA or
Section 4975 of the Code, unless such Capital Securities are acquired pursuant
to and in accordance with an applicable class prohibited transaction
exemption, such as Prohibited Transaction Class Exemption ("PTCE") 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for
certain transactions involving insurance company pooled separate accounts),
PTCE 95-60 (an exemption for transactions involving certain insurance company
general accounts) or PTCE 96-23 (an exemption for certain transactions
determined by an in-house asset manager). Any purchaser or holder of the
Capital Securities or any interest therein will be deemed to have represented
by its purchase and holding thereof that either (a) it is not a Plan or an
entity whose underlying assets include "plan assets" by reason of any Plan's
investment in that entity and is not purchasing such securities on behalf of
or with "plan assets" of any Plan or (b) such purchase or holding is exempt
from the prohibited transaction provisions of ERISA and the Code under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14 with respect to such purchase or holding.
In addition, a Plan fiduciary considering the purchase of Capital Securities
should be aware that the assets of the Issuer Trust may be considered "plan
assets" of the Plan under ERISA unless either participation in the Issuer
Trust by "benefit plan investors" is not significant or the Capital Securities
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meet the conditions for the "publicly offered security" exception to the
Department of Labor's plan asset regulations as set forth in 29 CFR (S)
2510.3-101. No assurance can be made that benefit plan investor participation
in the Issuer Trust will satisfy the "insignificant participation" exception
to the Department of Labor's plan asset regulations. The "publicly offered
security" exception (in relevant part) requires that the Capital Securities
(i) be freely transferable, (ii) be a part of a class of securities that is
widely held and (iii) be sold to the Plan as part of an offering of securities
to the public pursuant to an effective registration statement under the
Securities Act of 1933 and be registered under the Exchange Act within the
time period prescribed in these regulations. Whether a security is freely
transferable is a facts and circumstances question. On the other hand, a class
of securities will be deemed to be widely held only if it is a class of
securities that is owned by 100 or more investors independent of the issuer
and one another. While the Capital Securities will be sold pursuant to an
effective registration statement under the Securities Act of 1933 and while
the Company proposes to register such securities under the Exchange Act; no
assurance can be made that the Capital Securities will satisfy all the
conditions to this exemption.
In the event that the "publicly offered securities" exception were not
available and the assets of the Issuer Trust were, accordingly, deemed to be
"plan assets" of each Plan that invests in the Capital Securities, the
Property Trustee, as well as any other person who exercises any discretion
with respect to the Junior Subordinated Debentures, could be a fiduciary and
party in interest with respect to the investing Plan. In an effort to avoid
certain additional prohibited transactions under ERISA and the Code that could
thereby result, each investing Plan, by purchasing the Capital Securities,
will be deemed to have directed the Issuer Trust to invest in the Junior
Subordinated Debentures and to have appointed the Property Trustee. In this
regard, it should be noted that, in the event of an Event of Default, the
Company may not remove the Property Trustee. Any Plan fiduciary proposing to
acquire Capital Securities for any Plan should consult with its counsel before
effecting such purchase.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
State Street Capital Trust has agreed to sell to each of the Underwriters
named below, and each of the Underwriters has severally agreed to purchase the
number of Capital Securities set forth opposite its name below.
NUMBER OF
UNDERWRITER CAPITAL SECURITIES
----------- ------------------
Goldman, Sachs & Co...................................... 90,000
Blaylock & Partners, L.P. ............................... 30,000
Salomon Brothers Inc .................................... 30,000
-------
Total................................................ 150,000
=======
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Capital Securities
offered hereby, if any are taken.
The Underwriters propose to offer the Capital Securities in part directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and in part to certain securities dealers at such price less a
concession of $6.00 per Capital Security. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $2.50 per Capital Security
to certain brokers and dealers. After the Capital Securities are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the Underwriters.
In view of the fact that the proceeds of the sale of the Capital Securities
will ultimately be used to purchase the Junior Subordinated Debentures of
State Street, the Underwriting Agreement provides that State Street will pay
as compensation ("Underwriters' Compensation") to the Underwriters arranging
the investment therein of such proceeds, an amount in immediately available
funds of $10.00 per Capital Security for the accounts of the several
Underwriters.
The Company and the Issuer Trust have agreed that, during the period
beginning from the date of the Underwriting Agreement and continuing to and
including the later of (i) the termination of trading restrictions on the
Capital Securities, as determined by the Underwriters, and (ii) the closing
date, they will not offer, sell, contract to sell or otherwise dispose of any
Capital Securities, any other beneficial interests in the assets of the Issuer
Trust, or any preferred securities or any other securities of the Issuer Trust
or the Company, as the case may be, that are substantially similar to the
Capital Securities (including any guarantee of such securities) or any
securities that are convertible into or exchangeable for, or that represent
the right to receive, securities, preferred securities or any such
substantially similar securities of either the Issuer Trust or the Company
without the prior written consent of the Underwriters, except for the Capital
Securities offered in connection with this offering.
In connection with the offering, the Underwriters may purchase and sell the
Capital Securities in the open market. These transactions may include over-
allotment and stabilizing transactions and purchases to cover short positions
created by the Underwriters in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Capital
Securities; and short positions created by the Underwriters involve the sale
by the Underwriters of a greater number of Capital Securities than they are
required to purchase from the Company in the offering. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to broker-
dealers in respect of the Capital Securities sold in the
offering may be reclaimed by the Underwriters if such Capital Securities are
repurchased by the Underwriters in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Capital Securities, which may be higher than the price that might otherwise
prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be affected in the over-the-
counter market or otherwise.
S-27
The Capital Securities are a new issue of securities with no established
trading market. The Company has been advised by the Underwriters that the
Underwriters intend to make a market in the Capital Securities 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 Capital Securities.
State Street Capital Trust and State Street have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
Certain of the Underwriters and their affiliates engage in transactions
with, and, from time to time, have performed services for, State Street and
its affiliates in the ordinary course of business.
LEGAL MATTERS
The validity of the Junior Subordinated Debentures and the Guarantee will be
passed upon for State Street by Ropes & Gray, Boston, Massachusetts. Certain
matters of Delaware law relating to the validity of the Capital Securities
will be passed upon for State Street Capital Trust by Richards, Layton &
Finger, P.A., special Delaware counsel to State Street Capital Trust. Certain
United States income taxation matters will be passed upon for State Street and
State Street Capital Trust by Ropes & Gray, Boston, Massachusetts. Certain
other legal matters will be passed upon for State Street by Maureen Scannell
Bateman, Executive Vice President and General Counsel of State Street. Certain
legal matters will be passed upon for the Underwriters by Cravath,
Swaine & Moore, New York, New York. Ropes & Gray will rely as to all matters
of New York law on the opinion of Cravath, Swaine & Moore. Ropes & Gray and
Cravath, Swaine & Moore will rely on Richards, Layton & Finger, P.A. as to all
matters of Delaware law. Truman S. Casner, a director of State Street, is a
partner of Ropes & Gray. Mr. Casner owns beneficially a total of 13,858 shares
of Common Stock of State Street. Ropes & Gray performs services for State
Street from time to time.
S-28
$350,000,000
STATE STREET CORPORATION
DEBT SECURITIES
PREFERRED STOCK
--------------
STATE STREET CAPITAL TRUST I
STATE STREET CAPITAL TRUST II
STATE STREET CAPITAL TRUST III
CAPITAL SECURITIES
FULLY AND UNCONDITIONALLY
GUARANTEED BY
STATE STREET CORPORATION
--------------
State Street Corporation, a Massachusetts corporation ("State Street" or the
"Corporation"), may from time to time offer in one or more series or issuances
(i) shares of its preferred stock, no par value (the "Preferred Stock"), and
(ii) its unsecured debt securities (the "Debt Securities") which may be either
senior debt securities ("Senior Debt Securities"), subordinated debt
securities ("Subordinated Debt Securities") or junior subordinated debentures
("Junior Subordinated Debentures"). State Street Capital Trust I, State Street
Capital Trust II and State Street Capital Trust III, each a statutory business
trust created under the laws of the State of Delaware (each, an "Issuer Trust"
and collectively, the "Issuer Trusts"), may severally offer, from time to
time, preferred undivided beneficial interests (the "Capital Securities") in
the assets of such Issuer Trust. The Debt Securities, Preferred Stock, Capital
Securities and Guarantees (as defined herein) are referred to herein
collectively as the "Securities." The Securities may be offered (the "Offered
Securities") as separate series in amounts, at prices, and on terms to be
determined at the time of sale and to be set forth in a supplement to this
Prospectus (the "Prospectus Supplement"), and will be limited to $350,000,000
aggregate public offering price (or its equivalent (based on the applicable
exchange rate at the time of sale) to the extent Debt Securities are issued
with principal amounts denominated in one or more foreign currencies or
currency units). State Street will own all of the common securities (the
"Common Securities" and, together with the Capital Securities, the "Trust
Securities") representing common beneficial ownership interests in each such
Issuer Trust. Holders of the Capital Securities will be entitled to receive
preferential cumulative cash distributions ("Distributions") accumulating from
the date of original issuance and payable periodically as specified in an
accompanying Prospectus Supplement.
Payment of the principal of the Subordinated Debt Securities may be
accelerated only in the case of certain events involving the bankruptcy,
insolvency or reorganization of State Street. There is otherwise no right of
acceleration in the case of a default in the performance of any covenant of
State Street related to the Subordinated Debt Securities, including the
payment of principal and interest. See "Description of Debt Securities--Events
of Default--The Subordinated Indenture." In addition, unless otherwise
indicated in the Prospectus Supplement pursuant to which any Securities are
offered, such Offered Securities and the covenants contained in the indentures
pursuant to which such Offered Securities are issued will not protect holders
in the event of a sudden decline in the creditworthiness of State Street that
might result from a recapitalization, restructuring or other highly leveraged
transaction. See "Description of Debt Securities--General."
If provided in an accompanying Prospectus Supplement, State Street 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, State Street 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, State Street's capital stock or debt securities that
rank pari passu 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."
Concurrently with the issuance by an Issuer Trust of its Capital Securities,
such Issuer Trust will invest the proceeds thereof and of contributions
received in respect of the Common Securities in a corresponding series of
State Street's Junior Subordinated Debentures (the "Corresponding Junior
Subordinated Debentures") with terms corresponding to the terms of that Issuer
Trust's Capital Securities (the "Related Capital Securities"). Accordingly,
if, as provided in an accompanying Prospectus Supplement, State Street has the
right to defer the payment of interest on a series of Corresponding Junior
Subordinated Debentures, then, if interest payments are so deferred,
Distributions on the Related Capital Securities would also be deferred, but
would continue to accumulate at the rate per annum set forth in the related
Prospectus Supplement. See "Description of Capital Securities--Distributions."
(continued on next page)
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES 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.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
--------------
The date of this Prospectus is April 15, 1998.
(continued from cover page)
Taken together, State Street's obligations under each series of
Corresponding Junior Subordinated Debentures, the Junior Subordinated
Indenture, the related Trust Agreement and the related Guarantee (each, as
defined herein), in the aggregate, will provide a full, irrevocable and
unconditional guarantee of payments of Distributions and other amounts due on
the Related Capital Securities. See "Relationship Among the Capital
Securities, the Corresponding Junior Subordinated Debentures and the
Guarantees--Full and Unconditional Guarantee." The payment of Distributions
with respect to the Capital Securities of each Issuer Trust and payments on
liquidation of such Issuer Trust or redemption of such Capital Securities, in
each case out of funds held by such Issuer Trust, will be irrevocably
guaranteed by State Street to the extent described herein (each, a
"Guarantee"). See "Description of Guarantees." The obligations of State Street
under each Guarantee will be unsecured and subordinate and junior in right of
payment to all Senior Indebtedness (as defined in "Description of Junior
Subordinated Debentures--Subordination") of State Street.
The Corresponding Junior Subordinated Debentures will be the sole assets of
each Issuer Trust, and payments under the Corresponding Junior Subordinated
Debentures will be the only revenue of each Issuer Trust. If so provided in an
accompanying Prospectus Supplement, State Street may, upon receipt of approval
of the Federal Reserve (if such approval is then required under the Federal
Reserve's applicable capital guidelines or policies), redeem the Corresponding
Junior Subordinated Debentures (and thereby cause the redemption of the Trust
Securities) or may dissolve each Issuer Trust and, after satisfaction of
liabilities to the creditors of such Issuer Trust as required by applicable
law, cause the Corresponding Junior Subordinated Debentures to be distributed
to the holders of Capital Securities in exchange therefor upon liquidation of
their interests in such Issuer Trust. See "Description of Capital Securities--
Liquidation Distribution Upon Dissolution."
State Street's principal asset and source of cash revenues is its investment
in State Street Bank and Trust Company ("State Street Bank"). As a bank
holding company, State Street is a legal entity separate and distinct from
State Street Bank and its nonbank subsidiaries and is subject to supervision
and examination by the Board of Governors of the Federal Reserve System (the
"Federal Reserve"). State Street's principal source of cash revenues is cash
dividends paid by State Street Bank, and consequently, its ability to satisfy
its financial obligations, including the payment of interest or dividends on
the Securities, is dependent upon State Street Bank's ability to pay cash
dividends or make other distributions to State Street. Payment of dividends to
State Street by State Street Bank is subject to legal restrictions imposed by
the Federal Reserve Act and Massachusetts banking law.
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be as set forth in the accompanying Prospectus
Supplement, such as, where applicable (i) in the case of Debt Securities, the
specific designation, aggregate principal amount, denominations, maturity,
premium, if any, rate (which may be fixed or variable) and time of payment of
interest, if any, terms for redemption at the option of State Street or the
holder, if any, terms for sinking or purchase fund payments, if any, currency
or currencies of denomination and payment, if other than U.S. dollars, the
securities exchanges on which the Debt Securities are to be listed, if any,
and any other terms in connection with the offering and sale of the Debt
Securities in respect of which this Prospectus is being delivered, as well as
the initial public offering price, and the principal amounts, if any, to be
purchased by underwriters; (ii) in the case of Preferred Stock, the specific
title and stated value, number of shares or fractional interests therein, any
dividend, liquidation, redemption, voting and other rights, the terms for
conversion into other preferred stock or for exchange for Debt Securities, the
securities exchanges on which such Preferred Stock is to be listed, if any,
the initial public offering price, and the number of shares, if any, to be
purchased by underwriters; (iii) in the case of Junior Subordinated
Debentures, the specified 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 (iv) in the case of Capital
Securities, the identity of the Issuer Trust, specific title, aggregate 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. The Prospectus Supplement will
also contain information, where applicable, about certain United States
federal income tax considerations relating to the Securities covered by the
Prospectus Supplement. All or a portion of the Debt Securities may be issued
in permanent global form.
The Senior Debt Securities, when issued, will rank on a parity with all
other unsecured and unsubordinated indebtedness of State Street. State
Street's obligations under the Subordinated Debt Securities and the Junior
Subordinated Debentures will be unsecured and subordinate and junior in right
of payment to State Street's Senior Indebtedness and Senior Debt,
respectively, as described herein or as may be described in an accompanying
Prospectus Supplement. See "Description of Debt Securities--Subordination of
Subordinated Debt Securities" and "Description of Junior Subordinated
Debentures--Subordination."
The Offered Securities may be sold directly by State Street, through agents
of State Street designated from time to time, to or through underwriters,
through dealers, remarketing firms or agents or through a combination of such
methods. If any agents, underwriters or dealers are involved in the sale of
the Securities, the names of such agents, underwriters or dealers and any
applicable commission or discounts will be set forth in the Prospectus
Supplement with respect to such Securities. The Prospectus Supplement will
state whether the Offered Securities will be listed on any national securities
exchange or automated quotation system. If the Offered 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
Securities. See "Plan of Distribution."
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED BY STATE
STREET OR ANY OF THE ISSUER TRUSTS TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION OR ANY OF THE
ISSUER TRUSTS SINCE THE DATE HEREOF.
---------------
2
AVAILABLE INFORMATION
State Street 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.,
Judiciary Plaza, 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., Judiciary Plaza, 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 State Street can be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
State Street and the Issuer Trusts 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 State Street 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 Trust have been included
herein. State Street and the Issuer Trusts do not consider that such financial
statements would be material to holders of the Capital Securities because each
Issuer Trust is a newly formed special purpose entity, has no operating
history or independent operations and is not engaged in and does not propose
to engage in any activity other than holding as trust assets the Corresponding
Junior Subordinated Debentures of State Street and issuing the Trust
Securities. See "The Issuer Trusts," "Description of Capital Securities,"
"Description of Junior Subordinated Debentures--Corresponding Junior
Subordinated Debentures" and "Description of Guarantees." In addition, State
Street does not expect that any of the Issuer Trusts will be filing reports
under the Exchange Act with the Commission.
3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
State Street's Annual Report on Form 10-K for the year ended December 31,
1997, which has been filed with the Commission, is incorporated into this
Prospectus by reference.
Each document or report filed by State Street 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.
State Street 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: State
Street Corporation, 225 Franklin Street, Boston, Massachusetts 02110,
Attention: Marketing Services, telephone number (617) 664-3383.
4
STATE STREET CORPORATION
State Street is a bank holding company organized under the laws of the
Commonwealth of Massachusetts and is a leading provider of services to
institutional investors and investment management worldwide. State Street was
organized in 1970 and conducts its business principally through its
subsidiary, State Street Bank and Trust Company ("State Street Bank"), which
traces its beginnings to the founding of the Union Bank in 1792. The charter
under which State Street Bank now operates was authorized by a special act of
the Massachusetts Legislature in 1891, and its present name was adopted in
1960. State Street's executive offices are located at 225 Franklin Street,
Boston, Massachusetts 02110 (telephone (617) 786-3000).
THE ISSUER TRUSTS
Each Issuer Trust is a statutory business trust created under Delaware law
pursuant to (i) a trust agreement executed by State Street, as Depositor of
the Issuer Trust, and the Property Trustee, the Delaware Trustee, and the
Administrative Trustees (each as defined herein) of such Issuer Trust, and
(ii) the filing of a certificate of trust with the Delaware Secretary of
State. The trust agreement of each Issuer Trust will be amended and restated
in its entirety (each, as so amended and restated, a "Trust Agreement") prior
to the issuance of Capital Securities by such Issuer Trust, 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 Trust 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 State Street, and (iii) engaging in only
those other activities necessary or incidental thereto (such as registering
the transfer of Trust Securities). Accordingly, the Corresponding Junior
Subordinated Debentures will be the sole assets of each Issuer Trust, and
payments under the Corresponding Junior Subordinated Debentures will be the
sole revenue of each Issuer Trust.
All of the Common Securities of each Issuer Trust will be owned by State
Street. The Common Securities of an Issuer Trust will rank pari passu, and
payments will be made thereon pro rata with the Capital Securities of each
Issuer Trust, 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 State Street 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 Capital
Securities of such Issuer Trust. See "Description of Capital Securities--
Subordination of Common Securities." State Street will acquire Common
Securities in an aggregate Liquidation Amount equal to not less than 3% of the
total capital of each Issuer Trust.
Unless otherwise specified in the applicable Prospectus Supplement, each
Issuer Trust has a term of approximately 55 years, but may dissolve earlier as
provided in the applicable Trust Agreement. Each Issuer Trust's business and
affairs are conducted by its trustees, each appointed by State Street as
holder of the Common Securities. The trustees for each Issuer Trust 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 State Street (collectively, the
"Issuer Trustees"). The First National Bank of Chicago, as Property Trustee,
will act as sole 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 Junior Subordinated Indenture. See
"Description of Guarantees" and "Description of Junior Subordinated
Debentures." The holder of the Common Securities of an Issuer Trust, or the
holders of a majority in Liquidation Amount of the Related Capital Securities
if an event of default under the Trust Agreement
5
for such Issuer Trust has occurred and is continuing, will be entitled to
appoint, remove or replace the Property Trustee and/or the Delaware Trustee
for such Issuer Trust. In no event will the holders of the Capital Securities
have the right to vote to appoint, remove or replace the Administrative
Trustees; such voting rights 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. State Street will pay all fees and
expenses related to each Issuer Trust and the offering of the Capital
Securities and will pay, directly or indirectly, all ongoing costs, expenses
and liabilities of each Issuer Trust.
The principal executive office of each Issuer Trust is c/o State Street Bank
and Trust Company, N.A., 61 Broadway, 15th Floor, New York, New York 10005,
and each Issuer Trust's telephone number is (212) 612-3000.
USE OF PROCEEDS
The net proceeds from the sale of any Offered Securities will be used for
the purposes specified in the applicable Prospectus Supplement, which may
include, but are not limited to, being added to State Street's general funds
and being used for general corporate purposes, including investments in the
capital of or extensions of credit to State Street Bank and the repayment or
refinancing of long and short-term debt. Pending such use, the proceeds may be
temporarily invested in short-term securities. State Street expects that it
will engage from time to time in additional financings of a character and in
an amount to be determined. The Corporation and State Street Bank regularly
investigate possible acquisitions. The Corporation and State Street Bank are
currently investigating or in discussions with respect to potential
acquisitions, but have no agreements or understandings with respect thereto.
All of the proceeds to an Issuer Trust from the sale of any Capital Securities
will be invested by the Issuer Trust in the Corresponding Junior Subordinated
Debentures.
6
DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities are to be issued under an Indenture, dated as of
August 2, 1993 (the "Senior Indenture"), between State Street and U.S. Bank
Trust National Association, as successor Trustee. The Subordinated Debt
Securities (other than the Junior Subordinated Debentures) are to be issued
under a second Indenture (the "Subordinated Indenture") that is expected to be
entered into between State Street and U.S. Bank Trust National Association, as
Trustee. The Junior Subordinated Debentures are to be issued under a Junior
Subordinated Indenture, dated as of December 15, 1996, as supplemented from
time to time (as so supplemented, the "Junior Subordinated Indenture"),
between State Street and The First National Bank of Chicago, as Trustee (the
"Debenture Trustee"). The form of the Subordinated Indenture has been filed
with the Commission as an Exhibit to the Registration Statement. The Senior
Indenture has been filed with the Commission as Exhibit 4 to State Street's
Current Report on Form 8-K dated October 8, 1993. The Junior Subordinated
Indenture has been filed with the Commission as Exhibit 1 to State Street's
Current Report on Form 8-K dated February 27, 1997. The Senior Indenture and
the Subordinated Indenture are sometimes referred to collectively as the
"Indentures." See "Description of Junior Subordinated Debentures--The Junior
Subordinated Indenture" for information on the Junior Subordinated Indenture.
U.S. Bank Trust National Association is hereinafter referred to as the "Senior
Trustee" when referring to it in its capacity as trustee under the Senior
Indenture, as the "Subordinated Trustee" when referring to it in its capacity
as trustee under the Subordinated Indenture, and as the "Trustee" when
referring to it in its capacity as trustee under the Senior Indenture and the
Subordinated Indenture. The following summaries of certain provisions of the
Senior Debt Securities, the Subordinated Debt Securities and the Indentures do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Indenture applicable to a
particular series of Senior Debt Securities or Subordinated Debt Securities
(the "Applicable Indenture"), including the definitions therein of certain
terms. Article and Section references used herein are references to the
Applicable Indenture. Capitalized terms not otherwise defined herein shall
have the meaning given to them in the Applicable Indenture. The following sets
forth certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of any specific series
of Securities offered by any Prospectus Supplement (the "Applicable Prospectus
Supplement") will be described in such Prospectus Supplement.
GENERAL
The Indentures do not limit the amount of Debt Securities that may be issued
thereunder and provide that Debt Securities may be issued thereunder from time
to time in one or more series. The Debt Securities will be unsecured
obligations of State Street. Because State Street is a holding company, the
right of State Street to participate in any distribution of assets of any
subsidiary, including State Street Bank, upon such subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of
the subsidiary, except to the extent State Street may itself be recognized as
a creditor of that subsidiary. Accordingly, the Debt Securities will be
effectively subordinated to all existing and future liabilities of State
Street's subsidiaries, and holders of Debt Securities should look only to the
assets of State Street for payments on the Debt Securities.
Unless otherwise indicated in the Applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities will be
payable, and the transfer of the Debt Securities will be registrable, at the
office or agency of State Street maintained for such purpose, except that, at
the option of State Street, interest may be paid by mailing a check to the
address of the Person entitled thereto as it appears on the register for the
Debt Securities. The Debt Securities will be issued only in fully registered
form without coupons and, unless otherwise indicated in the Applicable
Prospectus Supplement, in denominations of $1,000 or any integral multiple
thereof. No service charge will be made for any registration of transfer or
exchange of the Debt Securities, but State
7
Street may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
The Applicable Prospectus Supplement will describe the following terms of
the Debt Securities offered thereby, to the extent applicable: (1) the title
of the Debt Securities; (2) whether the Debt Securities are Senior Debt
Securities or Subordinated Debt Securities; (3) any limit on the aggregate
principal amount of the Debt Securities; (4) the date or dates on which the
Debt Securities will mature; (5) the rate or rates (which may be fixed or
variable) per annum at which the Debt Securities will bear interest, if any,
and the date or dates from which such interest, if any, will accrue; (6) the
dates on which such interest, if any, on the Debt Securities will be payable
and the Regular Record Dates for such Interest Payment Dates; (7) any
mandatory or optional sinking funds or analogous provisions; (8) the date, if
any, after which and the price or prices at which the Debt Securities may,
pursuant to any optional or mandatory redemption provisions, be redeemed and
the other detailed terms and provisions of any such optional or mandatory
redemption provision; (9) the obligation of State Street, if any, to redeem or
repurchase the Debt Securities at the option of the Holder; (10) if other than
denominations of $1,000 and any integral multiple thereof, the denominations
in which the Debt Securities will be issuable; (11) if other than the
principal amount thereof, the portion of the principal amount of the Debt
Securities that will be payable upon the declaration of acceleration of the
Maturity thereof; (12) if other than U.S. dollars, the currency of payment of
principal of and any premium and interest on the Debt Securities; (13) any
index used to determine the amount of payment of principal of and any premium
and interest on the Debt Securities; (14) the applicability of the provisions
described under Defeasance with respect to the Debt Securities; (15) if the
Debt will be issuable only in the form of a Global Security, the Depositary or
its nominee with respect to the Debt Securities and the circumstances under
which the Global Security may be registered for transfer or exchange in the
name of a Person other than the Depository or its nominee; (16) the person to
whom any interest on the Debt Securities of the series shall be payable if
other than the person in whose name the Debt Securities is registered at the
close of business on the Regular Record Date for such interest; (17) the place
or places where the principal of and any premium and interest on any Debt
Securities of the series shall be payable; (18) if the principal of or any
premium or interest on any Debt Securities of the series is to be payable, at
the election of State Street or the Holder thereof, in one or more currencies
or currency units other than that or those in which such Debt Securities are
stated to be payable, the currency, currencies or currency units in which the
principal of or any premium or interest on such Debt Securities as to which
such election is made shall be payable, the periods within which and the terms
and conditions upon which such election is to be made and the amount so
payable (or the manner in which such amount shall be determined); (19) if the
principal amount payable at the Stated Maturity of any Debt Securities of the
series will not be determinable as of any one or more dates prior to the
Stated Maturity, the amount which shall be deemed to be the principal amount
of such Debt Securities as of any such date, including the principal amount
thereof which shall be due and payable upon any Maturity other than the Stated
Maturity or which shall be deemed to be Outstanding as of any date prior to
the Stated Maturity (or, in any such case, the manner in which such amount
deemed to be the principal amount shall be determined); (20) any addition to
or change in the Events of Default which applies to any Debt Securities of the
series and any change in the right of the Trustee or the requisite Holders of
such Debt Securities to declare the principal amount thereof due and payable;
(21) any addition to or change in the covenants which applies to Debt
Securities of the series; and (22) any other terms of the Debt Securities.
Both Senior Debt Securities and Subordinated Debt Securities may be issued
as discounted Debt Securities (bearing no interest or interest at a rate which
at the time of issuance is below market rates) to be sold at a substantial
discount below their stated principal amount. Federal income tax consequences
and other special considerations applicable to any such discounted Securities
will be described in the Applicable Prospectus Supplement.
8
Both Indentures provide that without the consent of any Holders, State
Street and the Trustee may enter into one or more supplemental indentures for
certain purposes, including (1) to add to the covenants of State Street for
the benefit of the Holders of all or any series of Debt Securities or to
surrender any right or power conferred upon State Street in the Indentures and
(2) to add any additional Events of Default, in the case of the Senior
Indenture, and Events of Default or Defaults, in the case of the Subordinated
Indenture.
In the event any sinking fund is established for the retirement of Debt
Securities of any series, State Street may satisfy all or any part of the
sinking fund payments with Debt Securities of such series under certain
circumstances and to the extent provided for by the terms of such Debt
Securities.
Unless otherwise indicated in the Applicable Prospectus Supplement, the
covenants contained in the Indentures and the Debt Securities will not afford
Holders protection in the event of a sudden decline in the creditworthiness of
State Street that might result from a recapitalization, restructuring, or
other highly leveraged transaction.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Applicable Prospectus Supplement, the
following provisions shall apply to the Subordinated Debt Securities.
The payment of the principal of, premium, if any, and interest on the
Subordinated Debt Securities will be subordinated in right of payment to the
prior payment in full of all Senior Indebtedness. In certain events of
insolvency, the payment of the principal of, premium, if any, and interest on
the Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, also be subordinated in right of payment to the prior
payment in full of all Other Financial Obligations. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors, marshaling of
assets or any bankruptcy, insolvency or similar proceedings of State Street,
the holders of all Senior Indebtedness will first be entitled to receive
payment in full of all amounts due or to become due thereon before the Holders
of the Subordinated Debt Securities will be entitled to receive any payment in
respect of the principal of, premium, if any, or interest on the Subordinated
Debt Securities. If upon any such payment or distribution of assets to
creditors, there remain, after giving effect to such subordination provisions
in favor of the holders of Senior Indebtedness, any amounts of cash, property
or securities available for payment or distribution in respect of Subordinated
Debt Securities ("Excess Proceeds") and if, at such time, any Entitled Persons
in respect of Other Financial Obligations have not received payment in full of
all amounts due or to become due on or in respect of such Other Financial
Obligations, then such Excess Proceeds shall first be applied to pay or
provide for the payment in full of such Other Financial Obligations before any
payment or distribution may be made in respect of the Subordinated Debt
Securities. In the event of the acceleration of the maturity of any
Subordinated Debt Securities, the holders of all Senior Indebtedness will
first be entitled to receive payment in full of all amounts due or to become
due thereon before the Holders of the Subordinated Debt Securities will be
entitled to receive any payment of the principal of, premium, if any, or
interest on the Subordinated Debt Securities. Accordingly, in case of such an
acceleration, all Senior Indebtedness would have to be repaid before any
payment could be made in respect of the Subordinated Debt Securities. No
payments on account of principal, premium, if any, or interest in respect of
the Subordinated Debt Securities may be made if there shall have occurred and
be continuing a default in any payment with respect to any Senior
Indebtedness, or if any judicial proceeding shall be pending with respect to
any such default.
By reason of such subordination, in the event of the insolvency of State
Street, creditors of State Street who are not holders of Senior Indebtedness
or the Subordinated Debt Securities may recover
9
less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than Holders of the Subordinated Debt Securities. By reason of the
obligation of the Holders of Subordinated Debt Securities to pay over any
Excess Proceeds to Entitled Persons in respect of Other Financial Obligations,
in the event of the insolvency of State Street, holders of Existing
Subordinated Indebtedness (as defined in the Subordinated Indenture) may
recover less, ratably, than Entitled Persons in respect of Other Financial
Obligations and may recover more, ratably, than the Holders of Subordinated
Debt Securities. State Street's obligations under the Subordinated Debt
Securities shall rank pari passu in right of payment with each other and with
the Existing Subordinated Indebtedness, subject to the obligations of the
Holders of Subordinated Debt Securities to pay over any Excess Proceeds to
Entitled Persons in respect of Other Financial Obligations as provided in the
Subordinated Indenture.
The Subordinated Indenture permits, at any time, the modification or
elimination of the rights of Entitled Persons in respect of Other Financial
Obligations described above without the consent of any Entitled Persons in
respect of Other Financial Obligations.
"Senior Indebtedness" is defined in the Subordinated Indenture to mean the
principal of and premium, if any, and interest on (1) indebtedness of State
Street (other than the Subordinated Debt Securities) whether or not secured
and whether incurred previously or subsequent to the date of execution of the
Subordinated Indenture (A) for borrowed money, or (B) incurred in connection
with the acquisition by State Street of assets other than in the ordinary
course of business, in each case described in clause (A) or (B) for the
payment of which State Street (or any corporation or person which becomes a
successor to State Street pursuant to the terms of the Subordinated Indenture
described below under the heading "Consolidation, Merger and Sale of Assets")
is liable directly or indirectly by guarantee, letter of credit, obligation to
purchase or acquire or otherwise, unless in the terms of the instrument
creating or evidencing any such indebtedness or pursuant to which it is
outstanding it is specifically provided that such indebtedness is not superior
in right of payment to the Subordinated Debt Securities or ranks pari passu
with the Subordinated Debt Securities and (2) renewals, extensions or
deferrals of any such indebtedness.
"Existing Subordinated Indebtedness" is defined in the Subordinated
Indenture as State Street's 7.75% Convertible Subordinated Debentures.
"Other Financial Obligations" is defined in the Subordinated Indenture as,
unless otherwise determined with respect to any series of Securities pursuant
to terms described in the Applicable Prospectus Supplement, (a) obligations of
State Street under credit substitutes, (b) obligations and guaranties of State
Street for purchased money or funds, (c) any deferred obligation of, or any
direct or indirect guaranty of any such obligation by, State Street incurred
in connection with the acquisition by State Street of assets, and (d) all
obligations of State Street to make payment pursuant to the terms of financial
instruments, such as (i) securities contracts and foreign currency exchange
contracts, (ii) derivative instruments, such as swap agreements (including
interest rate and foreign exchange rate swap agreements), cap agreements,
floor agreements, collar agreements, interest rate agreements, foreign
exchange rate agreements, options, commodity futures contracts and commodity
option contracts and (iii) financial instruments similar to those set forth in
(d)(i) and (ii); provided that Other Financial Obligations do not include (A)
obligations on account of Senior Indebtedness and (B) obligations on account
of indebtedness for money borrowed ranking pari passu with or subordinate to
the Subordinated Debt Securities including Existing Subordinated Indebtedness.
"Entitled Person" is defined in the Subordinated Indenture as any person who
is entitled to payment pursuant to the terms of Other Financial Obligations.
The Subordinated Indenture will not limit the amount of other indebtedness,
including Senior Indebtedness or Other Financial Obligations, that may be
issued by State Street, State Street Bank
10
or any of its other Subsidiaries. As of December 31, 1997, State Street had
approximately $253 million of Senior Indebtedness outstanding and no Other
Financial Obligations outstanding.
LIMITATION UPON DISPOSITION OF VOTING STOCK OR ASSETS OF STATE STREET BANK
The Senior Indenture contains a covenant by State Street that, so long as
any of the Senior Debt Securities are outstanding, it will not sell, assign,
transfer, grant a security interest in or otherwise dispose of any shares of,
or securities convertible into, or options, warrants or rights to subscribe
for or purchase shares of, Voting Stock of State Street Bank or of any
Subsidiary which owns Voting Stock of State Street Bank, nor will it permit
State Street Bank to issue any shares of, or securities convertible into, or
options, warrants or rights to subscribe for or purchase shares of, Voting
Stock of State Street Bank (except for mergers, consolidations or combinations
of State Street with State Street Bank or in conjunction with a merger of
State Street and State Street Bank with a third corporation) or to sell, lease
or otherwise dispose of all or substantially all of its property, assets and
business, unless (a) any sale, assignment, transfer, grant of a security
interest, lease or other disposition is made for fair market value, as
determined by the Board of Directors of State Street and (b) in the case of
any such sale, assignment, transfer, grant of a security interest or other
disposition of shares of, securities convertible into or options, warrants or
rights to subscribe for or purchase shares of Voting Stock of State Street
Bank or of any such Subsidiary, State Street will own at least 80% of the
issued and outstanding Voting Stock of State Street Bank free and clear of any
security interest after giving effect to such transaction.
The Subordinated Indenture does not contain a similar restriction on State
Street's ability to engage in or permit such transactions to occur.
EVENTS OF DEFAULT
THE SENIOR INDENTURE
The Senior Indenture (with respect to any series of Senior Debt Securities)
defines an Event of Default as any one of the following events: (a) default in
the payment of any interest upon any Senior Security when it becomes due and
payable, and continuance of such default for a period of 30 days; (b) default
in the payment of the principal of (or premium, if any, on) any Senior
Security at its Maturity; (c) failure to deposit any sinking fund payment when
due; (d) failure to perform any other covenants or warranties of State Street
in the Senior Indenture (other than a covenant or warrant included in the
Senior Indenture solely for the benefit of a series of Senior Debt Securities
thereunder other than that series) continued for a period of 60 days after the
holders of at least 10% in principal amount of the Outstanding Senior Debt
Securities have given written notice as provided in the Senior Indenture; (e)
acceleration of any indebtedness for borrowed money in an aggregate principal
amount exceeding $20,000,000 of State Street or of State Street Bank, if such
acceleration is not annulled within 30 days after written notice as provided
in the Senior Indenture; (f) certain events in bankruptcy, insolvency or
reorganization of State Street or State Street Bank; and (g) any other Event
of Default provided with respect to Senior Debt Securities of that series.
If an Event of Default with respect to the Senior Debt Securities of any
series at the time Outstanding occurs and is continuing, either the Senior
Trustee or the Holders of at least 25% in aggregate principal amount of the
Outstanding Senior Debt Securities of that series may, by notice, declare the
principal amount (or, if the Senior Debt Securities of that series are
Original Issue Discount Securities, such portion of the principal amount as
may be specified in the terms thereof) of all the Securities of that series to
be due and payable immediately. At any time after the declaration of
acceleration with respect to Senior Debt Securities of any series has been
made, but before a judgment or decree based on acceleration has been obtained,
the Holders of a majority in aggregate principal amount of Outstanding Senior
Debt Securities of that series may, under certain circumstances, rescind and
annul such acceleration.
11
THE SUBORDINATED INDENTURE
The Subordinated Indenture defines an Event of Default (with respect to any
series of Subordinated Debt Securities) as certain events involving the
bankruptcy, insolvency or reorganization of State Street.
If an Event of Default with respect to Subordinated Debt Securities of any
series at the time Outstanding occurs and is continuing, either the
Subordinated Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Subordinated Debt Securities of that series may declare the
principal amount (or, if the Subordinated Debt Securities of that series are
Original Issue Discount Securities, such portion of the principal amount as
may be specified in the terms of that series) of all Subordinated Debt
Securities of that series to be due and payable immediately. At any time after
a declaration of acceleration with respect to Subordinated Debt Securities of
any series has been made, but before a judgment or decree based on the
acceleration has been obtained, Holders of a majority in principal amount of
the Outstanding Subordinated Debt Securities of that series may, under certain
circumstances, rescind and annul such acceleration.
Rights of acceleration are limited to circumstances involving an Event of
Default. The Subordinated Indenture does not provide for any right of
acceleration of the payment of principal of a series of Subordinated Debt
Securities upon a default in the payment of principal, premium, if any, or
interest or in the performance of any covenant or agreement in the
Subordinated Debt Securities of the particular series or in the Subordinated
Indenture.
The Subordinated Indenture defines a Default as any one of the following
events: (a) an Event of Default; (b) default in the payment of interest on any
Subordinated Security when such interest becomes due and payable and such
default continues for a period of 30 days or in the payment of the principal
of (or premium, if any, on) any Subordinated Security at its Maturity (whether
or not payment is prohibited by the subordinated provisions); (c) failure to
deposit any sinking fund payment when due (whether or not payment is
prohibited by the subordination provisions); (d) failure to perform any other
covenants or warranties of State Street in the Subordinated Indenture (other
than a covenant or warranty included in the Subordinated Indenture solely for
the benefit of a series of Subordinated Debt Securities thereunder other than
that series) continued for a period of 60 days after the holders of at least
10% in principal amount of the Outstanding Subordinated Debt Securities have
given written notice as provided in the Subordinated Indenture; (e)
acceleration of any indebtedness for borrowed money in an aggregate principal
amount exceeding $20,000,000 of State Street or of State Street Bank, if such
acceleration is not annulled within 30 days after written notice as provided
in the Subordinated Indenture; (f) certain events in bankruptcy, insolvency or
reorganization of State Street or State Street Bank; and (g) any other Default
provided with respect to Securities of that series. In case a Default shall
occur and be continuing, the Subordinated Trustee may in its discretion
proceed to protect and enforce its rights and the rights of the Holders of
Subordinated Debt Securities to the payment of due and unpaid principal and
interest or the performance of such covenant or agreement by appropriate
judicial proceedings as the Subordinated Trustee deems most effectual,
including proceedings seeking the payment by State Street of money damages for
the breach by State Street of its obligations and the execution upon any
judgment entered against State Street. Unless such a Default involved an Event
of Default, the Subordinated Trustee would have no rights of acceleration.
BOTH INDENTURES
Both Indentures provide that, subject to the duty of the Trustee during
default to act with the required standard of care set forth therein, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indentures at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity. Subject to such provisions
12
for the indemnification of the Trustee and to certain other conditions, the
Holders of a majority in aggregate principal amount of Outstanding Senior Debt
Securities or Outstanding Subordinated Debt Securities of any series will have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Senior Trustee and Subordinated Trustee,
respectively, or exercising any trust or power conferred on the Senior Trustee
and Subordinated Trustee, respectively.
No Holder of any series of Debt Securities will have any right to institute
any proceeding with respect to the Applicable Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the Trustee
under the Applicable Indenture written notice of a continuing Event of Default
and unless the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities of that series shall have made written request, and
offered reasonable indemnity, to such Trustee to institute such proceeding as
trustee, and such Trustee shall not have received from the Holders of a
majority in aggregate principal amount of the Outstanding Securities of that
series a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, such limitations do not
apply to a suit instituted by a Holder of a Debt Security for enforcement of
payment of the principal of, premium, if any, or interest, if any, on such
Debt Security on or after the respective due dates expressed in such Debt
Security.
State Street is required to furnish to the Trustee annually a statement as
to the performance by State Street of certain of its obligations under the
Indentures and as to any default in such performance.
MODIFICATION AND WAIVER
Modifications and amendments of each of the Senior Indenture and the
Subordinated Indenture may be made by State Street and the Trustee under the
Applicable Indenture with the consent of the Holders of not less than two-
thirds in aggregate principal amount of the Debt Securities of each series
issued under such Indenture and affected by the modification or amendment;
provided, however, that no such modification or amendment may, without the
consent of the Holders of all Debt Securities affected thereby, (1) change the
Stated Maturity of the principal of, or any installment of principal of or
interest on, any Debt Security; (2) reduce the principal amount of or the
premium, if any, or (unless otherwise provided in the Applicable Prospectus
Supplement) interest on, any Debt Security (including in the case of any
discounted Debt Security the amount payable upon acceleration of the maturity
thereof); (3) change the place or currency of payment of principal of,
premium, if any, or interest on any Debt Security; (4) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Debt Security; (5) in the case of the Subordinated Indenture, modify the
subordination provisions in a manner adverse to the Holders of the
Subordinated Debt Securities; or (6) reduce the percentage in principal amount
of Debt Securities, the consent of whose Holders is required for modification
or amendment of the Indenture or for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults.
The Holders of at least two-thirds in aggregate principal amount of the
Senior Debt Securities or Subordinated Debt Securities may, on behalf of all
Holders of the Senior Debt Securities or Subordinated Debt Securities,
respectively, waive compliance by State Street with certain restrictive
provisions of the Applicable Indenture. The effect of any such waiver would be
to excuse State Street from complying with such provisions which may include
certain covenants for the benefit of Holders. The Holders of a majority in
aggregate principal amount of the Senior Debt Securities or the Subordinated
Debt Securities may, on behalf of all Holders of the Senior Debt Securities or
the Subordinated Debt Securities, respectively, waive any past default under
the Applicable Indenture, except a default in the payment of principal,
premium or interest or in the performance of certain covenants.
13
CONSOLIDATION, MERGER AND SALE OF ASSETS
State Street, without the consent of the Holders of any of the Debt
Securities under the Indentures, may consolidate with or merge into any other
corporation, may transfer or lease its assets substantially as an entirety to
any Person, or may acquire or lease the assets of any Person substantially as
an entirety, or may permit any Person to merge into or consolidate with State
Street, provided that (1) any successor or purchaser is a corporation
organized under the laws of any domestic jurisdiction; (2) any such successor
or purchaser assumes State Street's obligations on such Debt Securities and
under the Indenture; (3) after giving effect to the transaction no Event of
Default in the case of Senior Debt Securities and no Default in the case of
Subordinated Debt Securities, and no event that, after notice or lapse of
time, would become an Event of Default or Default, as the case may be, shall
have occurred and be continuing; and (4) certain other conditions are met.
DEFEASANCE
The Indentures provide that State Street, at State Street's option, will be
discharged from any and all obligations in respect of the Debt Securities of
any series (except for certain obligations to register the transfer of or to
exchange Debt Securities of such series, to replace stolen, lost or mutilated
Debt Securities of such series, to maintain paying agencies and hold moneys
for payment in trust) if State Street deposits, in trust, with the Trustee
money or U.S. Government Obligations, which through the payment of interest
thereon and principal thereof in accordance with their terms will provide
money in an amount sufficient to pay all the principal of, premium, if any,
and interest on the Debt Securities of such series on the dates such payments
are due in accordance with the terms of the Debt Securities of such series.
Such a trust may be established only if, among other things, (i) no Event of
Default under the Senior Indenture or Default under the Subordinated Indenture
or event which with the giving of notice or lapse of time, or both, would
become such an Event of Default under the Senior Indenture or Default under
the Subordinated Indenture shall have occurred and be continuing on the date
of such deposit, (ii) such deposit will not result in a breach or violation of
any agreement or instrument to which State Street is a party and (iii) State
Street shall have delivered an Opinion of Counsel to the effect that the
Holders will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit of defeasance and will be subject to
Federal income tax in the same manner as if such defeasance had not occurred.
CONCERNING THE TRUSTEE
U.S. Bank Trust National Association is the Trustee under both the Senior
Indenture and the Subordinated Indenture. State Street and certain of its
subsidiaries, including State Street Bank, conduct banking transactions with
U.S. Bank Trust National Association and its affiliates in the ordinary course
of business.
GOVERNING LAW
Both Indentures are, and the Senior Debt Securities and Subordinated Debt
Securities will be, governed by and construed in accordance with the laws of
the State of New York.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more series
under the Junior Subordinated Indenture. This summary of certain terms and
provisions of the Junior Subordinated Debentures, Corresponding Junior
Subordinated Debentures and the Junior Subordinated 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
Junior Subordinated Indenture, a copy of the form
14
of which is filed as an Exhibit to the Registration Statement, and the Trust
Indenture Act. The Junior Subordinated 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 heretofore or hereafter issued
pursuant to the Junior Subordinated Indenture, and will be unsecured and
subordinate and junior in right of payment to the extent and in the manner set
forth in the Junior Subordinated Indenture to all Senior Debt (as defined
below) of State Street. See "--Subordination." Because State Street is a
holding company, the right of State Street to participate in any distribution
of assets of any subsidiary, including State Street Bank, upon such
subsidiary's liquidation or reorganization or otherwise, is subject to the
prior claims of creditors of the subsidiary, except to the extent State Street
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 State Street's subsidiaries, and holders of
Junior Subordinated Debentures should look only to the assets of State Street
for payments on the Junior Subordinated Debentures. Except as otherwise
provided in the Applicable Prospectus Supplement, the Junior Subordinated
Indenture does not limit the incurrence or issuance of other secured or
unsecured debt of State Street, including Senior Debt Securities and
Subordinated Debt Securities, whether under the Junior Subordinated Indenture,
the Senior Indenture, the Subordinated Indenture, any other existing indenture
or any other indenture that State Street may enter into in the future or
otherwise. See "--Subordination" and the Applicable Prospectus Supplement
relating to any offering of Capital 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 or
State Street's Board of Directors or a committee thereof.
The Applicable Prospectus Supplement will describe the following terms of
the Junior Subordinated Debentures offered thereby: (1) the title of such
Junior Subordinated Debentures; (2) any limit upon the aggregate principal
amount of such Junior Subordinated Debentures; (3) the date or dates on which
the principal of such Junior Subordinated Debentures is payable (the "Stated
Maturity") or the method of determination thereof; (4) the rate or rates, if
any, at which any such interest shall be payable (the "Interest Payment
Dates"), the right, if any, of State Street to defer or extend an Interest
Payment Date (the "Regular Record Dates") and the method by which any of the
foregoing shall be determined; (5) the place or places where, subject to the
terms of the Junior Subordinated Indenture as described below under "--Payment
and Paying Agents," the principal of and premium, if any, and interest on such
Junior Subordinated Debentures will be payable and where, subject to the terms
of the Junior Subordinated Indenture as described below under "--
Denominations, Registration and Transfer," such Junior Subordinated Debentures
may be presented for registration of transfer or exchange and the place or
places where notices and demands to or upon State Street in respect of such
Junior Subordinated Debentures and the Junior Subordinated Indenture 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 such Junior Subordinated Debentures may be redeemed, in whole or in
part, at the option of State Street or a holder thereof; (7) the obligation or
the right, if any, of State Street or a holder thereof to redeem, purchase or
repay such 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
such Junior Subordinated Debentures shall be redeemed, repaid or purchased, in
whole or in part, pursuant to such obligation or right; (8) the denominations
in
15
which such Junior Subordinated Debentures shall be issuable; (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, if any, on the
Junior Subordinated Debentures shall be payable, or in which such Junior
Subordinated Debentures shall be payable, or in which such Junior Subordinated
Debentures shall be denominated; (10) any additions, modifications or
deletions in the events of default under the Junior Subordinated Indenture or
in the covenants of State Street specified in the Junior Subordinated
Indenture with respect to such Junior Subordinated Debentures; (11) if other
than the principal amount thereof, the portion of the principal amount of such
Junior Subordinated Debentures that shall be payable upon declaration of
acceleration of the maturity thereof; (12) any additions or changes to the
Junior Subordinated Indenture with respect to such Junior Subordinated
Debentures as shall be necessary to permit or facilitate the issuance of such
Junior Subordinated Debentures 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 such 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 such Junior
Subordinated Debentures 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 such Junior Subordinated Debentures 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
State Street or a holder to convert or exchange such Junior Subordinated
Debentures into Capital Securities; (18) the form of Trust Agreement and
Guarantee Agreement, if applicable; and (19) any other terms of the Junior
Subordinated Debentures not inconsistent with the provisions of the Junior
Subordinated 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 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 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. 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.
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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 State Street 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 Junior
Subordinated Indenture. State Street will appoint the Debenture Trustee as
securities registrar under the Junior Subordinated Indenture. If the
Applicable Prospectus Supplement refers to any transfer agents (in addition to
the securities registrar) initially designated by State Street with respect to
any series of Junior Subordinated Debentures, State Street 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 State
Street maintains a transfer agent in each place of payment of such series.
State Street may at any time designate additional transfer agents with respect
to any series of Junior Subordinated Debentures.
In the event of any redemption, neither State Street nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during a 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 of 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.
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 (other than any Junior Subordinated Debentures represented by
Global 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 State Street may designate from time to time, except
that at the option of State Street 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 such 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 Debentures are registered at the close of
business on the Regular Record Date for such interest, except in the case of
defaulted interest. State Street may at any time designate additional paying
agents or rescind the designation of any paying agent; however, State Street
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 State Street 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 State Street,
be repaid to State Street and the holder of such Junior Subordinated Debenture
shall thereafter look, as a general unsecured creditor, only to State Street
for payment thereof.
OPTION TO DEFER INTEREST PAYMENTS
If provided in the Applicable Prospectus Supplement, State Street will have
the right at any time and from time to time during the term of any series of
Junior Subordinated Debentures to defer
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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, State
Street may, at its option and subject to receipt of prior approval by the
Federal Reserve if 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 Statement
will specify such date or describe such conditions. 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 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 an Investment Company Event or Capital Treatment Event (each as
defined below) shall occur and be continuing, State Street may, at its option
and subject to receipt of prior approval by the Federal Reserve if 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 of the occurrence of such Tax Event, Investment
Company 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 the Issuer Trust of a series of Capital
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
proposed 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 proposed change, pronouncement or decision is announced
on or after the date of issuance of such Capital Securities, there is more
than an insubstantial risk that (i) such Issuer 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 corresponding series of
Corresponding Junior Subordinated Debentures, (ii) interest payable by State
Street 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
State Street, in whole or in part, for United States federal income tax
purposes, or (iii) such Issuer Trust is, or will be within 90 days of the date
of such opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
"Investment Company Event" means the receipt by the Issuer Trust of an
opinion of counsel to the Corporation experienced in such matters to the
effect that, as a result of the occurrence of a change in law or regulation or
a written change (including any announced prospective change) in
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interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, there is more than an
insubstantial risk that the Issuer Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act, which change or prospective change becomes effective or would
become effective, as the case may be, on or after the date of the issuance of
the Capital Securities.
"Capital Treatment Event" means the reasonable determination by State Street
that, as a result of any amendment to, or change (including any proposed
change) in, the laws (or any regulations thereunder) of the United States or
any political subdivision thereof or therein, or as a result of any official
or administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which proposed change, pronouncement, action or decision is announced on or
after the date of issuance of the applicable Capital Securities under the
applicable Trust Agreement, there is more than an insubstantial risk that
State Street will not be entitled to treat an amount equal to the Liquidation
Amount of the applicable Capital Securities as "Tier I Capital" (or the then
equivalent thereof) for purposes of the capital adequacy guidelines of the
Federal Reserve, as then in effect and applicable to State Street.
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 Junior Subordinated
Debentures to be redeemed at its registered address. Unless State Street
defaults in payment of the redemption price, on and after the redemption date,
interest will cease to accrue on such Junior Subordinated Debentures or
portions thereof called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
Pursuant to the Junior Subordinated Indenture, State Street has covenanted
with respect to each series of Junior Subordinated Debentures that it will not
(x) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of State Street that rank pari
passu in all respects with or junior in interest to the Junior Subordinated
Debentures of such series, or (y) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any shares of State Street's capital stock (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of
State Street in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of any 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 State Street (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 an exchange
or conversion of any class or series of State Street's capital stock (or any
capital stock of a Subsidiary of State Street) for any class or series of
State Street's capital stock or of any class or series of State Street's
indebtedness for any class or series of State Street's capital stock, (c) the
purchase of fractional interests in shares of State Street's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
securities being converted or exchanged, (d) any declaration of a dividend in
connection with any rights plan, or the issuance of rights, stock or other
property under any 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 (A) of which State
Street has actual knowledge that with the giving of notice or the lapse of
time, or both, would constitute an Event of Default with respect to the Junior
Subordinated Debentures of such series, and (B) which State Street shall not
have taken reasonable steps to cure, (ii) if the Junior Subordinated
Debentures of such series are held by an Issuer Trust, State Street shall be
in default with respect to its payment of any obligations under the Guarantee
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Agreement relating to the Capital Securities issued by such Issuer Trust, or
(iii) State Street shall have given notice of its election to begin an
Extension Period 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 JUNIOR SUBORDINATED INDENTURE
From time to time State Street and the Debenture Trustee may, without the
consent of the holders of any series of Junior Subordinated Debentures, amend,
waive or supplement the Junior Subordinated Indenture for specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies
(provided that any such action does not materially adversely affect the
interests of the holders of any series of Junior Subordinated Debentures or,
in the case of Corresponding Junior Subordinated Debentures, the holders of
the Related Capital Securities so long as they remain outstanding) and
qualifying, or maintaining the qualification of, the Junior Subordinated
Indenture under the Trust Indenture Act. The Junior Subordinated Indenture
contains provisions permitting State Street 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 Junior Subordinated Indenture in a manner adversely affecting 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 Debentures 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 Junior Subordinated
Indenture, provided further that, in the case of Corresponding Junior
Subordinated Debentures, so long as any Related Capital Securities remain
outstanding, (a) no such modification may be made that adversely affects the
holders of such Capital Securities in any material respect, and no termination
of the Junior Subordinated Indenture may occur, and no waiver of any event of
default or compliance with any covenant under the Junior Subordinated
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 Capital 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 Junior Subordinated Indenture
would require the consent of each holder of Corresponding Junior Subordinated
Debentures, no such consent shall be given by the Property Trustee without the
prior consent of each holder of Related Capital Securities.
In addition, State Street and the Debenture Trustee may execute, without the
consent of any holder of Junior Subordinated Debentures, any supplemental
Junior Subordinated Indenture for the purpose of creating any new series of
Junior Subordinated Debentures.
DEBENTURE EVENTS OF DEFAULT
The Junior Subordinated 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 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
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(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to
State Street 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 State
Street.
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 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 Capital 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 Capital Securities affected shall have such right.
The holders of a majority in aggregate outstanding principal amount of each
series of the 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 (unless
such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee) or a default in respect of a
covenant or provision which under the Junior Subordinated Indenture cannot be
modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture. In the case of Corresponding Junior Subordinate
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 Capital Securities affected shall have such
right. State Street is required to file annually with the Debenture Trustee a
certificate as to whether or not State Street is in compliance with all the
conditions and covenants applicable to it under the Junior Subordinated
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 Junior Subordinated Indenture, to be forthwith due and payable and
to enforce its other rights as a creditor with respect to such Corresponding
Junior Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL 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 State Street 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 Related Capital Securities may
institute a legal proceeding directly against State Street for enforcement of
payment to such holder of the principal of or interest on such Corresponding
Junior Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Related Capital Securities of such holder
(a "Direct Action"). State Street may not amend the Indenture to remove the
foregoing right to bring a Direct
21
Action without the prior written consent of the holders of all of the Capital
Securities outstanding. If the right to bring a Direct Action is removed, the
applicable Issuer Trust may become subject to the reporting obligations under
the Exchange Act. State Street shall have the right under the Junior
Subordinated Indenture to set off any payment made to such holder of Capital
Securities by State Street in connection with a Direct Action.
The holders of the Capital Securities will not be able to exercise directly
any remedies other than those set forth in the preceding paragraph available
to the holders of the Junior Subordinated Debentures unless there shall have
been an event of default under the Trust Agreement. See "Description of
Capital Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Junior Subordinated Indenture provides that State Street 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 State Street or convey, transfer
or lease its properties and assets substantially as an entirety to State
Street, unless (i) in case State Street 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 State Street's obligations on the Junior
Subordinated Debentures issued under the Junior Subordinated 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; (iii) in the case of
Corresponding Junior Subordinated Debentures, such transaction is permitted
under the related Trust Agreement and Guarantee and does not give rise to any
breach or violation of the related Trust Agreement or Guarantee, and (iv)
certain other conditions as prescribed by the Junior Subordinated Indenture
are met.
The general provisions of the Junior Subordinated Indenture do not afford
holders of the Junior Subordinated Debentures protection in the event of a
highly leveraged or other transaction involving State Street that may
adversely affect holders of the Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Junior Subordinated 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 State Street
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 to the date of the deposit or to the Stated
Maturity, as the case may be, then the Junior Subordinated Indenture will
cease to be of further effect (except as to State Street's obligations to pay
all other sums due pursuant to the Junior Subordinated Indenture and to
provide the officers' certificates and opinions of counsel described therein),
and State Street will be deemed to have satisfied and discharged the Junior
Subordinated Indenture.
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
Capital 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
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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 State Street, in which case the number of shares of Capital
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
In the Junior Subordinated Indenture, State Street has covenanted and agreed
that any Junior Subordinated Debentures issued thereunder will be subordinate
and junior in right of payment to all Senior Debt to the extent provided in
the Junior Subordinated Indenture. Upon any payment or distribution of assets
of State Street upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any
bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with any insolvency or bankruptcy proceeding of State Street, the
holders of Senior Debt will first be entitled to receive payment in full of
principal of (and premium, if any) and interest, if any, on such Senior Debt
before the holders of Junior Subordinated Debentures will be entitled to
receive or retain any payment in respect of the principal of (and premium, if
any) or interest, if any, on the Junior Subordinated Debentures; provided,
however, that holders of Senior Debt shall not be entitled to receive payment
of any such amounts to the extent that such holders would be required by the
subordination provisions of such Senior Debt to pay such amounts over to the
obligees on trade accounts payable or other liabilities arising in the
ordinary course of State Street's business.
In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration thereof) before the
holders of Junior Subordinated Debentures will be entitled to receive or
retain any payment in respect of the principal of (or premium, if any) or
interest, if any, on the Junior Subordinated Debentures; provided, however,
that holders of Senior Debt shall not be entitled to receive payment of any
such amounts to the extent that such holders would be required by the
subordination provisions of such Senior Debt to pay such amounts over to the
obligees on trade accounts payable or other liabilities arising in the
ordinary course of State Street's business.
No payments on accounts of principal (or premium, if any) or interest in
respect of the Junior Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Debt or an event of default with respect to any Senior Debt resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
"Debt" means with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of such Person; (iv) every obligation of such Person
issued or assumed as the deferred purchase price of property or services (but
excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business); (v) every capital lease obligation of such
Person; (vi) every obligation of such Person for claims in respect of
derivative products such as interest and foreign exchange rate contracts,
commodity contracts and similar arrangements; and (vii) every obligation of
the type referred to in clauses (i) through (vi) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has guaranteed or is responsible or liable for, directly or indirectly, as
obligor or otherwise.
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"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to State Street whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Junior Subordinated Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated
Debentures or to other Debt which is pari passu with, or subordinated to, the
Junior Subordinated Debentures; provided, however, that Senior Debt shall not
be deemed to include (i) any Debt of State Street which when incurred and
without respect to any election under Section 1111(b) of the United States
Bankruptcy Code of 1978, as amended, was without recourse to State Street,
(ii) any Debt of State Street to any of its subsidiaries, (iii) Debt to any
employee of State Street, (iv) Debt which by its terms is subordinated to
trade accounts payable or accrued liabilities arising in the ordinary course
of business to the extent that payments made to the holders of such Debt by
the holders of the Junior Subordinated Debentures as a result of the
subordination provisions of the Junior Subordinated Indenture would be greater
than such payments otherwise would have been as a result of any obligation of
such holders of such Debt to pay amounts over to the obligees on such trade
accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which such Debt is
subject, and (v) any other debt securities issued pursuant to the Junior
Subordinated Indenture.
The Junior Subordinated Indenture places no limitation on the amount of
Senior Debt that may be incurred by State Street. State Street expects from
time to time to incur additional indebtedness and other obligations
constituting Senior Debt.
The Junior Subordinated Indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular issue of Junior
Subordinated Debentures, may be changed prior to such issuance. Any such
change would be described in the Applicable Prospectus Supplement.
GOVERNING LAW
The Junior Subordinated Indenture is, 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 Junior
Subordinated 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 Junior Subordinated
Indenture with terms corresponding to the terms of a series of Related Capital
Securities. In that event, concurrently with the issuance of each Issuer
Trust's Capital Securities, such Issuer Trust will invest the proceeds thereof
and the consideration paid by State Street for the Common Securities of such
Issuer Trust in such series of Corresponding Junior Subordinated Debentures
issued by State Street to such Issuer Trust. Each
24
series of Corresponding Junior Subordinated Debentures will be in the
principal amount equal to the aggregate stated Liquidation Amount of the
Related Capital Securities and the Common Securities of such Issuer Trust and
will rank pari passu with all other series of Junior Subordinated Debentures.
Holders of the Related Capital Securities for a series of Corresponding Junior
Subordinated Debentures will have the rights, in connection with modifications
to the Junior Subordinated Indenture or upon occurrence of Debenture Events of
Default, as described under "--Modification of Indenture," "--Debenture Events
of Default" and "--Enforcement of Certain Rights by Holders of Capital
Securities," unless provided otherwise in the Prospectus Supplement for such
Related Capital Securities.
Unless otherwise specified in the Applicable Prospectus Supplement, if a Tax
Event in respect of an Issuer Trust shall occur and be continuing, State
Street 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 Junior Subordinated Indenture and whether or not such
Corresponding Junior Subordinated Debentures are then otherwise redeemable at
the option of State Street. 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 Trust is the holder of all the outstanding Corresponding
Junior Subordinated Debentures of such series, the proceeds of any such
redemption will be used by the Issuer Trust to redeem the corresponding Trust
Securities in accordance with their terms. State Street 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
proceeds terminating on or prior to the Redemption Date.
State Street will 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 Trust to which such Corresponding
Junior Subordinated Debentures have been issued, provided that certain
successors which are permitted pursuant to the Junior Subordinated Indenture
may succeed to State Street's ownership of Common Securities, (ii) not to
voluntarily terminate, wind up or liquidate any Issuer Trust, except (a) in
connection with a distribution of Corresponding Junior Subordinated Debentures
to the holders of the Capital Securities in exchange therefor upon liquidation
of such Issuer Trust, 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
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 Trust to remain classified as a grantor trust and not as an
association taxable as a corporation for United States federal income tax
purposes.
DESCRIPTION OF CAPITAL SECURITIES
Each Issuer Trust will issue Capital Securities and Common Securities
pursuant to the terms of the Trust Agreement for such Issuer Trust. The First
National Bank of Chicago, as Property Trustee, will act as indenture trustee
under each Trust Agreement for purposes of compliance with the Trust Indenture
Act, and each Trust Agreement will be qualified as an indenture under the
Trust Indenture Act. The Capital Securities of a particular issue will
represent beneficial ownership interests in the Issuer Trust 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 Trust, as well as other benefits as described
in the corresponding Trust
25
Agreement. This summary of certain provisions of the Capital 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, reference
to each of which 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 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 Issuer Trusts is a legally separate entity and the assets of one
are not available to satisfy the obligations of any of the others or of any
other statutory business trust whose Common Securities are owned by State
Street.
GENERAL
The Capital Securities of an Issuer Trust will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of that Issuer Trust
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
Capital Securities and Common Securities. Each Guarantee Agreement executed by
State Street for the benefit of the holders of an Issuer Trust's Trust
Securities (a "Guarantee") 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 Trust
Securities when the related Issuer Trust does not have funds on hand available
to make such payments. See "Descriptions of Guarantees."
DISTRIBUTIONS
Distributions on the Capital 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 Capital 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 Trust is closed for business.
Each Issuer Trust's Capital Securities represent beneficial ownership
interests in the applicable Issuer Trust, and the Distributions on each
Capital Security will by payable at a rate specified in the Applicable
Prospectus Supplement for such Capital 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 Capital 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, State Street has the
right under the Junior Subordinated 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 up to such number of consecutive interest
payment periods which will be specified in such Prospectus Supplement relating
to such series (each,
26
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 Capital
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 Capital Securities) by the Issuer Trust of such Capital
Securities during any such Extension Period. During any Extension Period,
State Street may not (i) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt securities of
State Street that rank pari passu in all respects with or junior in interest
to the Junior Subordinated Debentures of such series, or (ii) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any shares of State Street's capital
stock (other than (a) repurchases, redemptions or other acquisitions of shares
of capital stock of State Street in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of any 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 State Street (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 an exchange or conversion of any class or series of State Street's
capital stock (or any capital stock of a Subsidiary of State Street) for any
class or series of State Street's capital stock or of any class or series of
State Street's indebtedness for any class or series of State Street's capital
stock, (c) the purchase of fractional interests in shares of State Street's
capital stock pursuant to the conversion or exchange provisions of such
capital stock or the securities being converted or exchanged, (d) any
declaration of a dividend in connection with any rights plan, or the issuance
of rights, stock or other property under any 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 Trust available for distribution to holders of
its Capital Securities will be limited to payments under the Corresponding
Junior Subordinated Debentures in which the Issuer Trust will invest the
proceeds from the issuance and sale of its Trust Securities. See "Description
of Junior Subordinated Debentures--Corresponding Junior Subordinated
Debentures." If State Street 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 Capital Securities.
The payment of Distributions (if and to the extent the Issuer Trust has funds
legally available for the payment of such Distributions and cash sufficient to
make such payments) is guaranteed by State Street on the basis set forth
herein under "Description of Guarantees."
Distributions on the Capital Securities will be payable to the holders
thereof as they appear on the register of such Issuer Trust on the relevant
record dates, which, as long as the Capital 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 Capital Securities are not in book-
entry form, the relevant record date for such Capital 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 Junior Subordinated 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
27
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 State Street upon the concurrent
redemption of such 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
Capital Securities and the Common Securities. The amount of premium, if any,
paid by State Street 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
Capital Securities and the Common Securities.
State Street 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, or (ii) at any time, in whole (but not in part), upon the
occurrence of a Tax Event, Investment Company Event or Capital Treatment
Event, in either case subject to receipt of prior approval by the Federal
Reserve if then required under applicable capital guidelines or policies. See
"Description of Junior Subordinated Debentures--Redemption."
If a Tax Event, Investment Company Event or Capital Treatment Event in
respect of a series of Capital Securities and Common Securities shall occur
and be continuing, State Street shall have the right to redeem the
Corresponding Junior Subordinated Debentures in whole (but not in part) and
thereby cause a mandatory redemption of such Capital Securities and Common
Securities in whole (but not in part) at the Redemption Price within 90 days
following the occurrence of such Tax Event, Investment Company Event or
Capital Treatment Event. In the event a Tax Event, Investment Company Event or
Capital Treatment Event in respect of a series of Capital Securities and
Common Securities has occurred and is continuing and State Street does not
elect to redeem the Corresponding Junior Subordinated Debentures and thereby
cause a mandatory redemption of such Capital Securities and Common Securities
or to dissolve the related Issuer Trust and cause the Corresponding Junior
Subordinated Debentures to be distributed to holders of such Capital
Securities and Common Securities in exchange therefor upon liquidation of the
Issuer Trust as described below, such Capital Securities will remain
outstanding.
"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 that portion of the principal amount of Corresponding
Junior Subordinated Debentures to be contemporaneously redeemed in accordance
with the Junior Subordinated 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 exchange therefor in connection with a
dissolution or liquidation of the related Issuer Trust, Corresponding Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Corresponding Junior
Subordinated Debentures would be distributed.
"Liquidation Amount" means the stated amount per Trust Security as set forth
in the Applicable Prospectus Supplement.
Distribution of Corresponding Junior Subordinated Debentures. Subject to
State Street's having received prior approval of the Federal Reserve to do so
if then required under applicable capital guidelines or policies, State Street
has the right at any time to dissolve any Issuer Trust and, after satisfaction
of the liabilities of creditors of such Issuer Trust as provided by applicable
law, cause such Corresponding Junior Subordinated Debentures in respect of the
Related Capital Securities and
28
Common Securities issued by such Issuer Trust to be distributed to the holders
of such Related Capital Securities and Common Securities in exchange therefor
upon liquidation of such Issuer Trust.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debentures for any series of Capital Securities (i) such
series of Capital Securities will no longer be deemed to be outstanding, (ii)
the depositary or its nominee, as the record holder of such series of Capital
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
Capital Securities not held by The Depository Trust Company ("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 Capital Securities, and bearing accrued and unpaid interest in
an amount equal to the accrued and unpaid Distributions on such series of
Capital 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 Capital Securities
or the Corresponding Junior Subordinated Debentures that may be distributed in
exchange for Capital Securities if a dissolution and liquidation of an Issuer
Trust were to occur. Accordingly, the Capital Securities that an investor may
purchase, or the Corresponding Junior Subordinated Debentures that the
investor may receive on dissolution and liquidation of an Issuer Trust, may
trade at a discount to the price that the investor paid to purchase the
Capital Securities offered hereby.
REDEMPTION PROCEDURES
Capital 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 Debentures. Redemptions of
the Capital Securities shall be made and the Redemption Price shall be payable
on each Redemption Date only to the extent that the related Issuer Trust has
funds on hand available for the payment of such Redemption Price. See also "--
Subordination of Common Securities."
If an Issuer Trust gives a notice of redemption in respect of its Capital
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 Capital Securities. See "Book-Entry Issuance." If
such Capital 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 Capital 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 Capital Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Capital Securities called for redemption shall be
payable to the holders of such Capital Securities on the relevant record dates
for the related Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then upon the date of such deposit, all
rights of the holders of such Capital Securities so called for redemption will
cease, except the right of the holders of such Capital Securities to receive
the Redemption Price, but without interest on such Redemption Price, and such
Capital Securities will cease to be outstanding. In the event that any date
fixed for redemption of Capital 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 any 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 the event that payment of the Redemption Price in
respect of Capital Securities called for redemption is improperly withheld or
refused and not paid either by the Issuer Trust or by State Street
29
pursuant to the relevant Guarantee as described under "Description of
Guarantees," Distributions on such Capital Securities will continue to accrue
at the then applicable rate, from the Redemption Date originally established
by the Issuer Trust for such Capital 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), State Street or its subsidiaries may at any time and
from time to time purchase outstanding Capital Securities by tender, in the
open market or by private agreement.
Payment of the Redemption Price on the Capital Securities and any
distribution of Corresponding Junior Subordinated Debentures to holders of
Capital Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Capital 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
Capital Securities are not in book-entry form, the relevant record date for
such Capital 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 Capital Securities and Common Securities issued by
an Issuer Trust are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Capital Securities and Common Securities to be
redeemed shall be allocated pro rata to the Capital Securities and the Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Capital 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 Capital 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
of the Liquidation Amount of Capital Securities in such minimum amounts as
shall be specified in the Applicable Prospectus Supplement. The Property
Trustee shall promptly notify the trust registrar in writing of the Capital
Securities selected for redemption and, in the case of any Capital Securities
selected for 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 Capital Securities shall relate,
in the case of any Capital Securities redeemed or to be redeemed only in part,
to the portion of the aggregate Liquidation Amount of Capital 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.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Issuer
Trust's Capital Securities and Common Securities, as applicable, shall be made
pro rata based on the Liquidation Amount of such Capital Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date a Debenture Event of Default shall have occurred and be continuing, no
payment of any Distribution on, or Redemption Price of, any of the Issuer
Trust'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 Trust's outstanding Capital 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
Trust's outstanding Capital Securities then called for redemption, 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 Trust's Capital Securities then due and
payable.
30
In the case of any event of default under the applicable Trust Agreement
resulting from a Debenture Event of Default, State Street as holder of such
Issuer Trust'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
Capital Securities have been cured, waived or otherwise eliminated. Until all
events of default under applicable Trust Agreement with respect to the Capital
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the holders of such Capital Securities
and not behalf of State Street as holder of the Issuer Trust's Common
Securities, and only the holders of such Capital Securities will have the
right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to each Trust Agreement, each Issuer Trust shall automatically
dissolve upon expiration of its term and shall dissolve on the first to occur
of: (i) certain events of bankruptcy, dissolution or liquidation of State
Street; (ii) the distribution of a Like Amount of the Corresponding Junior
Subordinated Debentures to the holders of its Trust Securities, if State
Street, as Depositor, has given written direction to the Property Trustee to
dissolve such Issuer Trust (subject to State Street having received prior
approval of the Federal Reserve if so required under applicable capital
guidelines or policies); (iii) redemption of all of the Issuer Trust's Capital
Securities as described under "--Redemption or Exchange--Mandatory
Redemption;" and (iv) the entry of an order for the dissolution of the Issuer
Trust by a court of competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii) or (iv)
above, the Issuer Trust shall be liquidated by the Issuer Trustees as
expeditiously as the Issuer Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of such Issuer Trust 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 Trust available for distribution to holders, after
satisfaction of liabilities to creditors of such Issuer Trust as provided by
applicable law, an amount equal to, in the case of holders of Capital
Securities, the aggregate 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 Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by such Issuer Trust on its Capital Securities shall be paid on a pro rata
basis. The holder(s) of such Issuer Trust's Common Securities will be entitled
to receive distributions upon any such liquidation pro rata with the holders
of its Capital Securities, except that if a Debenture Event of Default has
occurred and is continuing, the Capital Securities shall have a priority over
the Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events shall constitute an "Event of Default" under
the Trust Agreement of an Issuer Trust (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 with respect to the
Corresponding Junior Subordinated Debentures held by such Issuer Trust (see
"Description of Junior Subordinated Debentures--Debenture Events of
Default"); or
(ii) the default by the Property Trustee in the payment of any
Distribution on any Trust Security of such Issuer Trust when such becomes
due and payable, and continuation of such default for a period of 30 days;
or
31
(iii) the default by the Property Trustee in the payment of any
Redemption Price of any Trust Security of such Issuer Trust when such
becomes due and payable; or
(iv) the 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 of 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 90 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 Capital Securities of the applicable Issuer
Trust, 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 State Street to appoint
a successor Property Trustee within 90 days thereof.
Within the ninety 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 Trust's Capital
Securities, the Administrative Trustees and State Street, as Depositor, unless
such Event of Default shall have been cured or waived. State Street, 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 with respect to the Corresponding Junior
Subordinated Debentures held by an Issuer Trust has occurred and is
continuing, the Capital Securities of such Issuer Trust shall have a
preference over such Issuer Trust's Common Securities as described above. See
"--Subordination of Common Securities" and "--Liquidation Distribution Upon
Termination." The existence of an Event of Default does not entitle the
holders of Capital Securities to accelerate the maturity thereof.
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing,
the Property Trustee and the Delaware Trustee may be removed at such time by
the holders of a majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in State Street 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, State Street, as the holder of the
Common Securities, and the Administrative Trustees shall have the 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
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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 ISSUER TRUSTS
An Issuer Trust 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 State Street or other Person, except as
described below or as otherwise described in the Trust Agreement. An Issuer
Trust may, at the request of State Street, with the consent of the
Administrative Trustees and without the consent of the holders of the Capital
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 Trust with
respect to the Capital Securities or (b) substitutes for the Capital
Securities other securities having substantially the same terms as the Capital
Securities (the "Successor Securities") so long as the Successor Securities
rank the same as the Capital Securities in priority with respect to
distributions and payments upon liquidation, redemption and otherwise, (ii)
State Street 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 Capital Securities are then listed, if any, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not cause the Capital Securities to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the Capital Securities
(including any Successor Securities) in any material respect, (vi) such
successor entity has a purpose substantially identical to that of the Issuer
Trust, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, State Street has received an opinion from
independent counsel to the Issuer Trust experienced in such matters to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Capital Securities (including
any Successor Securities) in any material respect, and (b) following such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, neither the Issuer Trust nor such successor entity will be required to
register as an investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act") and (viii) State Street 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 Trust shall not, except with the
consent of holders of 100% in Liquidation Amount of the Capital 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 Trust or the
successor entity to be classified as other than a grantor trust for United
States federal income tax purposes.
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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 Capital Securities will have no voting rights.
Each Trust Agreement may be amended from time to time by State Street and
the Administrative Trustees, without the consent of the holders of the Capital
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 Trust will be classified for United States federal
income tax purposes as a grantor trust at all times that any Trust Securities
are outstanding or to ensure that the Issuer Trust 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 Capital Securities, and any such 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 Administrative
Trustees, the Property Trustee and State Street 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 affect the Issuer Trust's status as a grantor trust for United States
federal income tax purposes or the Issuer Trust's exemption from status as an
"investment company" under the Investment Company Act, provided that without
the consent of each holder of Trust Securities, such Trust Agreement may not
be amended to (i) change the amount or timing of any Distribution required to
be made in respect of the Trust Securities as of a specified dates 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 corresponding Junior Subordinated Debentures shall be due and payable or
(iv) consent to any amendment, modification or termination of the Junior
Subordinated Indenture or such Corresponding Junior Subordinated Debentures,
where such consent shall be required, without, in each case, obtaining the
prior approval of the holders of a majority in aggregate Liquidation Amount of
all outstanding Capital Securities; provided, however, that where a consent
under the Junior Subordinated 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 Capital Securities. The Issuer Trustees
shall not revoke any action previously authorized or approved by a vote of the
holders of the Capital Securities except by subsequent vote of the holders of
the Capital Securities. The Property Trustee shall notify each holder of the
Capital 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 Capital Securities, prior to taking any of the
foregoing actions, the Issuer Trustees shall obtain an opinion of counsel
experienced in such matters to the effect that such action would not cause the
Issuer Trust to be classified as other than a grantor trust for United States
federal income tax purposes.
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Any required approval of holders of Capital Securities may be given at a
meeting of holders of Capital Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
given to each holder of record of Capital Securities in the manner set forth
in each Trust Agreement.
No vote or consent of the holders of Capital Securities will be required for
an Issuer Trust to redeem and cancel its Capital Securities in accordance with
the applicable Trust Agreement.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned by State Street, the Issuer Trustees or any
affiliate of State Street or any Issuer Trustees, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital 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 Trust's Capital 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 State Street. The Paying Agent shall be permitted
to resign as Paying Agent upon 30 days' written notice to the Property Trustee
and State Street. In the event that the Property Trustee shall no longer be
the Paying Agent, the Administers shall appoint a successor (which shall be a
bank or trust company acceptable to the Administrative Trustees and State
Street) 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 Capital
Securities.
Registration of transfers of Capital Securities will be effected without
charge by or on behalf of each Issuer Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Issuer Trusts will not be required to register or cause to be
registered the transfer of their Capital Securities after such Capital
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
Capital 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
35
Capital Securities are entitled under such Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by State Street 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.
TRUST EXPENSES
Pursuant to the Trust Agreement of each Issuer Trust, State Street, as
Depositor, shall agree to pay all debts and other obligations (other than with
respect to the Capital Securities) and all costs and expenses of each Issuer
Trust (including costs and expenses relating to the organization of each
Issuer Trust, the fees and expenses of the Issuer Trustees and the cost and
expenses relating to the operation of each Issuer Trust) and to pay any and
all taxes and costs and expenses with respect thereto (other than United
States withholding taxes) to which each Issuer Trust might become subject.
GOVERNING LAW
Each Trust Agreement will be governed by and construed in accordance with
the laws of the State of Delaware.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuer Trusts in such a way that no Issuer Trust
will be deemed to be an "investment company" required to be registered under
the Investment Company Act or classified 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 State Street for
United States federal income tax purposes. In this connection, State Street
and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of each Issuer
Trust or each Trust Agreement, that State Street 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 Capital Securities.
Holders of the Capital Securities have no preemptive or similar rights.
No Issuer Trust may borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by State Street concurrently with
the issuance by each Issuer Trust of its Capital Securities for the benefit of
the holders from time to time of such Capital Securities and Common
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
Guarantee, 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 Capital Securities means that Issuer Trust's Capital
Securities to which a Guarantee relates. The Guarantee Trustee will hold each
Guarantee for the benefit of the holders of the related Issuer Trust's Capital
Securities and Common Securities.
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GENERAL
State Street 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 Trust Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that such Issuer Trust may have or
assert other than the defense of payment. The following payments with respect
to the Capital Securities, to the extent not paid by or on behalf of the
related Issuer Trust (the "Guarantee Payments"), will be subject to the
Guarantee: (i) any accumulated and unpaid Distributions required to be paid on
such Capital Securities, to the extent that such Issuer Trust has funds on
hand available therefor at such time, (ii) the Redemption Price with respect
to any Capital Securities called for redemption, to the extent that such
Issuer Trust has funds on hand available therefor at such time, or (iii) upon
a voluntary or involuntary dissolution, winding up or liquidation of such
Issuer Trust (unless the Corresponding Junior Subordinated Debentures are
distributed to holders of such Capital Securities in exchange therefor), the
lesser of (a) the Liquidation Distribution and (b) the amount of assets of
such Issuer Trust remaining available for distribution to holders of Trust
Securities after satisfaction of liabilities to creditors of such Issuer Trust
as required by applicable law. State Street's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by State
Street to the holders of the applicable Trust Securities or by causing the
Issuer Trust to pay such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Issuer Trust's obligations under the Trust Securities, but will
apply only to the extent that such related Issuer Trust has funds sufficient
to make such payments, and is not a guarantee of collection.
If State Street does not make interest payments on the Corresponding Junior
Subordinated Debentures held by the Issuer Trust, the Issuer Trust will not be
able to pay Distributions on the Capital 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 State Street. See "--Status of the
Guarantees." Because State Street is a holding company, the right of State
Street 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 State
Street may itself be recognized as a creditor of that subsidiary. Accordingly,
State Street's obligations under the Guarantees will be effectively
subordinated to all existing and future liabilities of State Street's
subsidiaries, and claimants should look only to the assets of State Street for
payments thereunder. 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 State Street, including Senior Debt, whether
under the Indenture, any other existing indenture or any other indenture that
State Street may enter into in the future or otherwise.
State Street has, through the applicable Guarantee, the applicable Trust
Agreement, the applicable series of Corresponding Junior Subordinated
Debentures and the Junior Subordinated Indenture, taken together, fully,
irrevocably and unconditionally guaranteed all of the Issuer Trust's
obligations under the Capital Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer Trust's obligations under the Capital
Securities. See "Relationship Among the Capital Securities, the Corresponding
Junior Subordinated Debentures and the Guarantees."
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of State Street and
will rank subordinate and junior in right of payment to all Senior Debt of
State Street in the same manner as the Junior Subordinated Debentures.
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Each Guarantee will rank pari passu with all other Guarantees issued by
State Street. 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 Guarantor 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 Trust Securities. Each Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Issuer
Trust or upon Junior Subordinated Debentures. None of the Guarantees places a
limitation on the amount of additional Senior Debt that may be incurred by
State Street. State Street 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 rights of holders of the related Trust 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 Trust Securities. The manner of obtaining any such approval
will be as set forth under "Description of Capital 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 State Street and shall inure to the benefit of the holders
of the related Trust Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of
State Street to perform any of its payment or other obligations thereunder.
The holders of not less than a majority in aggregate Liquidation Amount of the
related Trust 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 Trust Securities may institute a legal proceeding directly
against State Street to enforce its rights under such Guarantee without first
instituting a legal proceeding against the Issuer Trust, the Guarantee Trustee
or any other person or entity.
State Street, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not State Street 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 State Street 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 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 Trust 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 Trust Securities, upon
full payment of the amounts payable upon
38
liquidation of the related Issuer Trust or upon distribution of Corresponding
Junior Subordinated Debentures to the holders of the related Trust 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 Trust
Securities must restore payment of any sums paid under such Trust 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.
RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE CORRESPONDING
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Capital Securities
(to the extent the Issuer Trust has funds available for the payment of such
Distributions and other amounts) are irrevocably guaranteed by State Street as
and to the extent set forth under "Description of Guarantees." Taken together,
State Street's obligations under each series of Corresponding Junior
Subordinated Debentures, the Junior Subordinated Indenture, the related Trust
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 Capital Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer Trust's obligations under the Related
Capital Securities. If and to the extent that State Street does not make
payments on any series of Corresponding Junior Subordinated Debentures, such
Issuer Trust will not pay Distributions or other amounts due on the Related
Capital Securities. The Guarantees do not cover payment of Distributions when
the related Issuer Trust does not have sufficient funds to pay such
Distributions. In such event, the remedy of a holder of a series of Capital
Securities is to institute a legal proceeding directly against State Street
pursuant to the terms of the Indenture for enforcement of payment of amounts
equal to such Distributions to such holder. The obligations of State Street
under each Guarantee are subordinate and junior in right of payment to all
Senior Debt of State Street.
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
Capital 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 Capital
Securities and the 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 Capital Securities; (iii) State Street
shall pay for all and any costs, expenses and liabilities of such Issuer Trust
except the Issuer Trust's obligations to holders of its Capital Securities
under such Capital Securities; and (iv) each Trust Agreement further provides
that the Issuer Trust will not engage in any activity that is not consistent
with the limited purposes of such Issuer Trust.
Notwithstanding anything to the contrary in the Junior Subordinated
Indenture, State Street has the right to set off any payment it is otherwise
required to make thereunder with and to the extent State Street has
theretofore made, or is concurrently on the date of such payment making, a
payment under the related Guarantee.
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ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of any related Capital Security may institute a legal proceeding
directly against State Street to enforce its rights under the related
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the related Issuer Trust or any other person or entity.
A default or event of default under any Senior Debt of State Street would
not constitute a default or Event of Default under the Junior Subordinated
Indenture. However, in the event of payment defaults under, or acceleration
of, Senior Debt of State Street, the subordination provisions of the Junior
Subordinated 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 Junior
Subordinated Indenture.
LIMITED PURPOSE OF ISSUER TRUSTS
Each Issuer Trust's Capital Securities evidence a beneficial interest in
such Issuer Trust, and each Issuer Trust exists for the sole purpose of
issuing its Capital Securities and Common Securities and investing the
proceeds thereof in Corresponding Junior Subordinated Debentures. A principal
difference between the rights of a holder of a Capital 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 State
Street the principal amount of and interest accrued on Corresponding Junior
Subordinated Debentures held, while a holder of Capital Securities is entitled
to receive Distributions from such Issuer Trust (or from State Street under
the applicable Guarantee) if and to the extent such Issuer Trust has funds
available for the payment of such Distributions.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution, winding up or liquidation of
any Issuer Trust involving the liquidation of the Corresponding Junior
Subordinated Debentures, after satisfaction of liabilities to creditors of the
Issuer Trust as required by applicable law, the holders of the related Capital
Securities will be entitled to receive, out of the assets held by such Issuer
Trust, the Liquidation Distribution in cash. See "Description of Capital
Securities--Liquidation Distribution Upon Termination." Upon any voluntary or
involuntary liquidation or bankruptcy of State Street, the Property Trustee,
as holder of the Corresponding Junior Subordinated Debentures, would be a
subordinated creditor of State Street, subordinated in right of payment to all
Senior Debt as set forth in the Junior Subordinated Indenture, but entitled to
receive payment in full of principal and interest, before any stockholders of
State Street receive payments or distributions. Since State Street is the
guarantor under each Guarantee and has agreed to pay for all costs, expenses
and liabilities of each Issuer Trust (other than the Issuer Trust's
obligations to the holders of its Capital Securities), the positions of a
holder of such Capital Securities and a holder of such Corresponding Junior
Subordinated Debentures relative to other creditors and to stockholders of
State Street in the event of liquidation or bankruptcy of State Street are
expected to be substantially the same.
DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain terms of any series of the Preferred
Stock offered by any Prospectus Supplement will be described in such
Prospectus Supplement. If so indicated in the Prospectus Supplement, the terms
of any series of Preferred Stock may differ from the terms set forth below.
The description of certain provisions of the Preferred Stock set forth below
and in any Prospectus Supplement does not purport to be complete
40
and is subject to and qualified in its entirety by reference to State Street's
Articles of Organization, including the definitions therein or certain terms,
and the certificate of designation (each a "Certificate of Designation")
relating to each series of the Preferred Stock that will be filed with the
Commission at or prior to the time of the issuance of such series of the
Preferred Stock. State Street's Articles of Organization have been filed as
Exhibit 3.1 to State Street's Annual Report on Form 10-K for the year ended
December 31, 1997 and are incorporated by reference thereto into the
Registration Statement of which this Prospectus is part.
The following sets forth certain general terms and provisions of the
Preferred Stock to which any Prospectus Supplement may relate.
GENERAL
Under State Street's Articles of Organization, State Street is authorized,
without further stockholder action, to issue up to 3,500,000 shares of
Preferred Stock, without par value, in one or more series, with such
designations, voting powers, preferences and relative limitations or
restrictions thereon, as may be stated or expressed in resolutions providing
for the creation and issuance thereof adopted by the Board of Directors of
State Street. Thus, without stockholder approval, the Board of Directors could
authorize the issuance of Preferred Stock with voting, conversion and other
rights that could dilute the voting power and other rights of the holders of
Common Stock. No Preferred Stock is currently outstanding.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below, unless otherwise provided in a Prospectus
Supplement relating to a particular series of the Preferred Stock. Reference
is made to the Prospectus Supplement relating to the particular series of the
Preferred Stock offered hereby for specific terms, including: (i) the
designation and stated value per share of such Preferred Stock and the number
of shares offered; (ii) the amount of liquidation preference per share; (iii)
the initial public offering price at which such Preferred Stock will be
issued; (iv) the dividend rate or rates (or method or methods of calculation),
the dates on which dividends shall be payable and the dates from which
dividends shall commence to cumulate, if any; (v) any redemption or sinking
fund provisions; (vi) any conversion provisions; and (vii) any additional
voting, dividend, liquidation, redemption, sinking fund and other rights,
preferences, privileges, limitations and restrictions.
The Preferred Stock will, when issued, be fully paid and nonassessable and
holders thereof will have no preemptive rights in connection therewith. Unless
otherwise provided in the Applicable Prospectus Supplement, each series of the
Preferred Stock will rank on a parity as to payment of dividends and amounts
upon dissolution, liquidation or winding up of State Street. The rights of
holders of shares of each series of the Preferred Stock will be subordinate to
those of State Street's general creditors.
RANK
Any series of the Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding up and dissolution rank (i) senior to all
classes of common stock of State Street and with all equity securities issued
by State Street, the terms of which specifically provide that such equity
securities will rank junior to the Preferred Stock (collectively referred to
as the "Junior Stock"); (ii) on a parity with all equity securities issued by
State Street, the terms of which specifically provide that such equity
securities will rank on a parity with the Preferred Stock (collectively
referred to as the "Parity Securities"); and (iii) junior to all equity
securities issued by State Street, the terms of which specifically provide
that such equity securities will rank on a parity with to the Preferred Stock.
All shares of Preferred Stock, will, regardless of series, be of equal rank.
As used in any Certificate of Designation for these purposes, the term "equity
securities" will not include debt securities convertible into or exchangeable
for equity securities.
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DIVIDEND RIGHTS
Holders of each series of the Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors of State Street, out of
funds of State Street legally available therefor, cash dividends on such dates
and at such rates as are set forth in, or as are determined by the method
described in, the Prospectus Supplement relating to such series of the
Preferred Stock. Such rate may be fixed or variable or both. Each such
dividend will be payable to the holders of record as they appear on the stock
books of State Street on such record dates, fixed by the Board of Directors of
State Street, as specified in the Prospectus Supplement relating to such
series of the Preferred Stock.
Such dividends may be cumulative or noncumulative, as provided in the
Prospectus Supplement relating to such series of Preferred Stock. If the Board
of Directors of State Street fails to declare a dividend payable on a dividend
payment date on any series of Preferred Stock for which dividends are
noncumulative, then the right to receive a dividend in respect of the dividend
period ending on such dividend payment date will be lost, and State Street
will have no obligation to pay the dividend accrued for such period, whether
or not dividends on such series are declared payable on any future dividend
payment dates. Dividends on the shares of each series of Preferred Stock for
which dividends are cumulative will accrue from the date on which State Street
initially issues shares of such series or such other dates as may be set forth
in the Applicable Prospectus Supplement.
Unless otherwise specified in the Applicable Prospectus Supplement, so long
as the shares of any series of the Preferred Stock are outstanding, unless (i)
full dividends (including, if such Preferred Stock is cumulative, dividends
for prior dividend periods) have been paid or declared and set apart for
payment on all outstanding shares of the Preferred Stock of such series (other
than Junior Stock) and (ii) State Street is not in default or in arrears with
respect to the mandatory or optional redemption or mandatory repurchase or
other mandatory retirement of, or with respect to any sinking or other
analogous fund for, any shares of Preferred Stock of such series (other than
Junior Stock), State Street may not declare any dividends on any shares of
Junior Stock, or make any payment on account of, or set apart money for, the
purchase, redemption or other retirement of, or for a sinking or other
analogous fund for, any shares of Junior Stock or make any distribution in
respect thereof, whether in cash or property or in obligations or stock of
State Street, other than Junior Stock that is neither convertible into, nor
exchangeable or exercisable for, any securities of State Street other than
Junior Stock and other than as a result of the reclassification of Junior
Stock.
LIQUIDATION PREFERENCE
Unless otherwise specified in the Applicable Prospectus Supplement, in the
event of any liquidation, dissolution or winding up of State Street, whether
voluntary or involuntary, the holders of a series of Preferred Stock will be
entitled to receive out of the assets of State Street available for
distribution to stockholders, before any distribution of assets is made to the
holders of Junior Stock, the amount set forth in the Prospectus Supplement
relating to such series of the Preferred Stock. If, upon any voluntary or
involuntary liquidation, dissolution or winding up of State Street, the
amounts payable with respect to the Preferred Stock of any series and any
other shares of preferred stock of State Street (including any other series of
the Preferred Stock) ranking as to the payment of amounts upon the
dissolution, liquidation or winding up of State Street on a party with such
series of the Preferred Stock are not paid in full, the holders of the
Preferred Stock of such series and of such other shares of preferred stock of
State Street will share ratably in any such distribution of assets of State
Street in proportion to the full respective preferential amounts to which they
are entitled. After payment to the holders of the Preferred Stock of each
series of the full preferential amounts of the liquidating distribution to
which they are entitled, the holders of each such series of the Preferred
Stock will be entitled to no further participation in any distribution of
assets by State Street.
REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or from time to
time in part, at the option of State Street with prior Federal Reserve Board
approval, and may be subject to mandatory
42
redemption pursuant to a sinking fund or otherwise, in each case upon terms,
at the times and at the redemption prices set forth in the Prospectus
Supplement relating to such series. Shares of the Preferred Stock redeemed by
State Street will be restored to the status of authorized but unissued shares
of preferred stock of State Street.
In the event that fewer than all of the outstanding shares of a series of
the Preferred Stock are to be redeemed, whether by mandatory or optional
redemption, the number of shares to be redeemed will be determined by lot or
pro rata (subject to rounding to avoid fractional shares) as may be determined
by State Street or by any other method as may be determined by State Street in
its sole discretion to be equitable. From and after the redemption date
(unless default is made by State Street in providing for the payment of the
redemption price plus accumulated and unpaid dividends, if any) dividends will
cease to accumulate on the shares of the Preferred Stock called for redemption
and all rights of the holders thereof (except the right to receive the
redemption price plus accumulated and unpaid dividends, if any) will cease.
Unless otherwise specified in the Applicable Prospectus Supplement, so long
as any dividends on shares of any series of the Preferred Stock or any other
series of preferred stock of State Street ranking on a parity as to payment of
dividends and amounts upon the liquidation, dissolution or winding up of State
Street with such series of the Preferred Stock are in arrears, no shares of
any such series of the Preferred Stock or such other series of preferred stock
of State Street will be redeemed (whether by mandatory or optional redemption)
unless all such shares are simultaneously redeemed, and State Street will not
purchase or otherwise acquire any such shares; provided, however, that the
foregoing will not prevent the purchase or acquisition of such shares pursuant
to a purchase or exchange offer made on the same terms to holders of all such
shares outstanding.
CONVERSION RIGHTS
Shares of Preferred Stock of any series offered hereunder may not be
exchanged for or converted (mandatorily or otherwise) into shares of Common
Stock but may be exchanged for or converted (mandatorily or otherwise) into
shares of another series of Preferred Stock.
EXCHANGEABILITY
The holders of shares of Preferred Stock of any series may be obligated at
any time or at maturity to exchange such shares for debt securities of State
Street. The terms of any such exchange and any such debt securities will be
described in the Prospectus Supplement relating to such series of Preferred
Stock.
VOTING RIGHTS
Except as indicated in a Prospectus Supplement relating to a particular
series of the Preferred Stock, or except as required by applicable
Massachusetts law or in State Street's Articles of Organization, the holders
of the Preferred Stock will not be entitled to vote for any purpose.
Under regulations adopted by the Federal Reserve Board, if the holders of
shares of any series of Preferred Stock of State Street become entitled to
vote for the election of directors, such series may then be deemed a "class of
voting securities" and a holder of 25% or more of such series (or a holder of
5% if it otherwise exercises a "controlling influence" over State Street) may
then be subject to regulation as a bank holding company in accordance with the
Bank Holding Company Act of 1956, as amended. In addition, at such time as
such series is deemed a class of voting securities, (i) any other bank holding
company may be required to obtain the approval of the Federal Reserve Board to
acquire or retain 5% or more of such series, and (ii) any person other than a
bank holding company may be required to file with the Federal Reserve Board
under the Change in Bank Control Act to acquire or retain 10% or more of such
series.
43
TRANSFER AGENT AND REGISTRAR
Unless otherwise indicated in a Prospectus Supplement relating thereto,
State Street Bank and Trust Company will be the transfer agent, dividend and
redemption price disbursement agent and registrar for shares of each series of
the Preferred Stock.
GLOBAL SECURITIES
GENERAL
The Offered Securities of a series that are Debt Securities or Capital
Securities may be issued in whole or in part in the form of one or more fully
registered global Offered Securities (respectively, the "Global Debt
Securities" and the "Global Capital Securities," each of which is a "Global
Security," and together which are the "Global Securities") that will be
deposited with, or on behalf of, a depository (the "Depository") which unless
otherwise indicated in the Applicable Prospectus Supplement for such series
will be DTC. Global Capital Securities may be issued in either temporary or
permanent form. Unless and until it is exchanged in whole or in part for
Offered Securities in definitive form, a Global Security may not be
transferred except as a whole by the Depository for such Global Security to a
nominee of such Depository or by a nominee of such Depository to such
Depository or another nominee of such Depository or by such Depository or any
such nominee to a successor of such Depository or a nominee of such successor
or in the manner provided in the final paragraph under this heading.
The specific terms of the depository arrangement with respect to any Offered
Securities will be described in the Applicable Prospectus Supplement. State
Street anticipates that the following provisions will apply to all depository
arrangements.
Upon the issuance of a Global Security and the deposit of such Global
Capital Security with or on behalf of the Depository, the Depository for such
Global Security will credit, on its book-entry registration and transfer
system, the respective principal amounts or aggregate Liquidation Amounts, as
the case may be, of the Offered Securities represented by such Global Security
to the accounts of persons that have accounts with such Depository
("Participant"), which may include Euroclear and Cedel. The accounts to be
credited shall be designated by the dealers, underwriters or agents
participating in the distribution of such Offered Securities or by State
Street, if such Offered Securities are offered and sold directly by State
Street. Ownership of beneficial interests in a Global Security will be limited
to Participants or persons that may hold interest through Participants.
Ownership of beneficial interest in such Global Security will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the Depository for such Global Security (with respect to
interests of Participants) or by Participants or persons that hold through
Participants (with respect to interests of persons other than 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 own, transfer or pledge beneficial interests in
a Global Security.
So long as the Depository for a Global Security, or its nominee, is the
holder of such Global Security, such Depository or such nominee, as the case
may be, will be considered the sole owner or holder of the Offered Securities
represented by such Global Security for all purposes under the applicable
Indenture or Trust Agreement, as the case may be. Except as set forth below,
owners of beneficial interests in a Global Security will not be entitled to
have Offered Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Offered Securities of such series in definitive form and will not
be considered the owners or holders thereof under the applicable Indenture or
Trust Agreement, as the case may be.
44
Accordingly, each person owning a beneficial interest in a Global Security
must rely on the procedures of the Depository for such Global Security and, if
such person is not a Participant, on the procedures of the Participant through
which such person owns its interest, to exercise any rights of a holder under
the applicable Indenture. State Street understands that under existing
industry practices, if State Street requests any action of holders or if an
owner of a beneficial interest in a Global Security desires to give or take
any action which a holder is entitled to give or take under the applicable
Indenture, the Depository for such Global Security would authorize the
Participants holding the relevant beneficial interest to give or take such
action, and such Participants would authorize beneficial owners owning through
such Participants to give or take such action or would otherwise act upon the
instructions of beneficial owners holding through them.
Payments of principal of or premium, if any, and interest, if any, on
Offered Securities represented by a Global Security registered in the name of
a Depository or its nominee will be made to such Depository or its nominee, as
the case may be, as the registered owner or the holder of the Global Security
representing such Offered Securities. None of State Street, the Trustee for
such Offered Securities, any paying agent for such Offered Securities, the
Property Trustee or the Securities Registrar, as applicable, will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global
Security for such Offered Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
State Street expects that the Depository for any Offered Securities
represented by a Global Debt Security, upon receipt of any payment of
principal, premium or interest, will credit immediately Participants' accounts
with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Debt Security as shown on the
records of such Depository. State Street expects that the Depository for a
series of Capital Securities or its nominee, upon receipt of any payment of
Liquidation Amount, Redemption Price, premium or Distributions in respect of a
permanent Global Capital Security representing any of such Capital Securities,
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the aggregate
Liquidation Amount of such Global Capital Security for such Capital Securities
as shown on the records of such Depositary or its nominee. State Street also
expects that payments by Participants to owners of beneficial interests in
such Global 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," and will be the responsibility of such Participants.
No Global Debt Security may be exchanged in whole or in part for Debt
Securities registered, and no transfer of a Global Debt Security in whole or
in part may be registered, in the name of any Person other than the Depository
for such Global Debt Security or a nominee thereof unless (a) such Depository
(i) has notified State Street that it is unwilling or unable to continue as
Depository for such Global Debt Security or (ii) has ceased to be a clearing
agency registered under the Exchange Act, (b) there shall have occurred and be
continuing an Event of Default or a Default, as the case may be, with respect
to such Global Debt Security or (c) there shall exist such circumstances, if
any, in addition to or in lieu of the foregoing as have been specified for
this purpose as contemplated by the Indentures. (Section 305)
Unless otherwise specified in the Applicable Prospectus Supplement, if a
Depository for a series of Capital Securities is at any time unwilling, unable
or ineligible to continue as Depository and a successor Depository is not
appointed by the Issuer Trust within 90 days, the Issuer Trust will issue
individual Capital Securities of such series in exchange for the Global
Capital Security representing such series of Capital Securities. In addition,
the Issuer Trust may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Capital
Securities, determine not to have any Capital Securities of such series
represented by one or more
45
Global Capital Securities and, in such event, will issue individual Capital
Securities of such series in exchange for the Global Capital Security or
Securities representing such series of Capital Securities. Further, if the
Issuer Trust so specifies with respect to the Capital Securities of a series,
an owner of a beneficial interest in a Global Capital Security representing
Capital Securities of such series may, on terms acceptable to the Issuer
Trust, the Property Trustee and the Depository for such Global Capital
Security, receive individual Capital Securities of such series in exchange for
such beneficial interests, subject to any limitations described in the
Prospectus Supplement relating to such Capital Securities. In any such
instance, an owner of a beneficial interest in a Global Capital Security will
be entitled to a physical delivery of individual Capital Securities of the
series represented by such Global Capital Security equal in principal amount
to such beneficial interest and to have such Capital Securities registered in
its name.
BOOK-ENTRY ISSUANCE
DTC will act as securities Depository for all of the Capital Securities and
the Debt Securities, including the Junior Subordinated Debentures, unless
otherwise referred to in the Prospectus Supplement relating to an offering of
Capital Securities or Debt Securities. The Capital Securities and the Debt
Securities 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 Capital Securities of each Issuer Trust
and the Debt Securities, representing in the aggregate the total number of
such Issuer Trust's Capital Securities or aggregate principal balance of Debt
Securities, respectively, and will be deposited with the Property Trustee as
custodian for 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 Capital Securities or Debt Securities within the DTC system
must be made by or through Direct Participants, which will receive a credit
for the Capital Securities or Debt Securities on DTC's records. The ownership
interest of each actual purchaser of each Capital Security and each Debt
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records, including Euroclear and Cedel. 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 Capital Securities or Junior Subordinated Debentures. Transfers of
ownership interests in the Capital Securities or Debt Securities 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 Capital Securities or Debt
Securities, except in the event that use of the book-entry system for the
Capital Securities of such Issuer Trust or Debt Securities is discontinued.
46
Transfers between Participants will be effected in accordance with DTC's
procedures and will be settled in same-day funds. Transfers between
Participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between Participants, on the one hand, and Euroclear
Participants or Cedel Participants, on the other hand, will be effected in DTC
in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case
may be, by its respective Depository; however, such cross-market transaction
will require delivery of instructions to Euroclear or Cedel, as the case may
be, by the counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time) of such
system. Euroclear or Cedel, as the case may be, will, if the transaction meets
its settlement requirements, deliver instructions to its respective Depository
to take action to effect final settlement on its behalf by delivering or
receiving interests in the Capital Securities or Debt Securities in DTC, and
making or receiving payment in accordance with normal procedures and Cedel
Participants may not deliver instructions directly to the depositaries for
Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel Participant purchasing an interest in a Capital Security or Debt
Security from a Participant in DTC will be credited, and any such crediting
will be reported to the relevant Euroclear Participant or Cedel Participant,
during the securities settlement processing day (which must be a business day
for Euroclear and Cedel, as the case may be) immediately following the DTC
settlement date. Cash received in Euroclear or Cedel as a result of sales of
interests in a Capital Security or Debt Security by or through a Euroclear or
Cedel Participant to a Participant in DTC will be received with value on the
DTC settlement date but will be available in the relevant Euroclear or Cedel
cash account only as of the business day for Euroclear or Cedel following the
DTC settlement date.
DTC has no knowledge of the actual Beneficial Owners of the Capital
Securities or Debt Securities; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Capital Securities or Debt
Securities 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 Capital Securities or Debt Securities. If less than all of an Issuer
Trust's Capital Securities or the Debt Securities are being redeemed, DTC's
current practice is to determine by lot the amount of the interest of each
Direct Participant to be redeemed.
Although voting with respect to the Capital Securities or the Debt
Securities is limited to the holders of record of the Capital Securities or
Debt Securities, in those instances in which a vote is required, neither DTC
nor Cede & Co. will itself consent or vote with respect to Capital Securities
or Debt Securities. 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 Capital Securities
or Debt Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Distribution payments on the Capital Securities or the Debt Securities will
be made by the relevant Trustee to DTC. DTC's practice is to credit Direct
Participants' accounts on the relevant
47
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 Trust thereof or State Street, 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, 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 Depository with
respect to any of the Capital Securities or the Debt Securities at any time by
giving reasonable notice to the relevant Trustee and State Street. In the
event that a successor securities Depository is not obtained, definitive
Capital Security or Junior Subordinated Debenture certificates representing
such Capital Securities or Debt Securities are required to be printed or
delivered. State Street, at its option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor Depository). After
a Debenture Event of Default, the holders of a majority in liquidation
preference of Capital Securities or aggregate principal amount of Debt
Securities may determine to discontinue the system of book-entry transfers
through DTC. In any event, definitive certificates for such Capital Securities
or Debt Securities 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 Issuer Trusts and State Street believe
to be accurate, but the Issuer Trusts and State Street assume no
responsibility for the accuracy thereof. Neither the Issuer Trusts nor State
Street 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.
PLAN OF DISTRIBUTION
The Offered Securities may be sold in a public offering to or through
underwriters or dealers designated from time to time. State Street may sell
its Debt Securities or Preferred Stock, and each Issuer Trust may sell its
Capital 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 such Securities in respect
of which this Prospectus is delivered, the amount or number of such 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 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 Securities, underwriters may be deemed
to have received compensation from State Street and/or the applicable Issuer
Trust in the form of underwriting discounts or commissions and may also
receive commissions. Underwriters may sell Offered 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 State Street and/or the applicable
Issuer Trust to underwriters in connection with the offering of Securities,
and any discounts, concessions or commissions allowed by such underwriters to
participating dealers, will be described in the accompanying Prospectus
Supplement. Underwriters and dealers participating in the distribution of
Offered 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
Offered Securities may be deemed to be underwriting discounts and commissions,
under the Securities Act. Underwriters and dealers may be entitled, under
agreement with State Street and the applicable Issuer Trust, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by State
Street for certain expenses.
48
In connection with the offering of the Capital Securities of any Issuer
Trust, such Issuer Trust may grant to the underwriters an option to purchase
additional Capital 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 Trust
grants any over-allotment option, the terms of such over-allotment option will
be set forth in the Prospectus Supplement for such Capital Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, State Street and/or the applicable Issuer Trust and/or any of
their affiliates in the ordinary course of business.
The Offered Securities will be new issues of securities and will have no
established trading market. Any underwriters to whom Offered Securities are
sold for public offering and sale may make a market in such Offered
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. Such Offered
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 Offered Securities.
VALIDITY OF SECURITIES
Unless otherwise indicated in the Applicable Prospectus Supplement, certain
matters of Delaware law relating to the validity of the Capital Securities,
the enforceability of the applicable Trust Agreement and the creation of each
Issuer Trust will be passed upon for State Street and for the Issuer Trusts by
Richards, Layton & Finger P.A., special Delaware counsel to State Street and
the Issuer Trusts. Unless otherwise indicated in the Applicable Prospectus
Supplement, certain legal matters will be passed upon by Ropes & Gray for
State Street and the Issuer Trusts and for the Underwriters by Cravath, Swaine
& Moore. Ropes & Gray will rely as to all matters of New York law on the
opinion of Cravath, Swaine & Moore. Truman S. Casner, a director of State
Street, is a partner of Ropes & Gray. Mr. Casner owns beneficially a total of
13,365 shares of Common Stock of State Street. Ropes & Gray performs services
for State Street from time to time. Ropes & Gray and Cravath, Swaine & Moore
will rely on Richards, Layton & Finger P.A. as to all matters of Delaware law.
EXPERTS
The consolidated financial statements and schedules of State Street at
December 31, 1997 and 1996, and for each of the three years in the period
ended December 31, 1997, incorporated by reference in State Street's Annual
Report on Form 10-K for the year ended December 31, 1997, have been audited by
Ernst & Young LLP, as set forth in their report thereon incorporated therein
and herein by reference. Such consolidated financial statements and schedules
are incorporated herein by reference in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
49
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPEC-
TUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE ISSUER TRUST OR BY THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUM-
STANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY OR THE ISSUER TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLE-
MENT 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.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Risk Factors............................................................. S-5
Use of Proceeds.......................................................... S-9
Accounting Treatment..................................................... S-9
Description of Capital Securities........................................ S-9
Description of Guarantee................................................. S-17
Description of Junior Subordinated Debentures............................ S-17
Relationship Among the Capital Securities, the Subordinated Debentures
and the Guarantee....................................................... S-21
United States Federal Income Taxation.................................... S-22
ERISA Considerations..................................................... S-25
Underwriting............................................................. S-27
Legal Matters............................................................ S-28
PROSPECTUS
Available Information.................................................... 3
Incorporation of Certain Documents by Reference.......................... 4
State Street Corporation................................................. 5
The Issuer Trusts........................................................ 5
Use of Proceeds.......................................................... 6
Description of Debt Securities........................................... 7
Description of Junior Subordinated Debentures............................ 14
Description of Capital Securities........................................ 25
Description of Guarantees................................................ 36
Relationship Among the Capital Securities, the Corresponding Junior
Subordinated Debentures and the Guarantees.............................. 39
Description of Preferred Stock........................................... 40
Global Securities........................................................ 44
Plan of Distribution..................................................... 48
Validity of Securities................................................... 49
Experts.................................................................. 49
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$150,000,000
STATE STREET
CAPITAL TRUST I
FLOATING RATE
CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED BY
STATE STREET
CORPORATION
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LOGO
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GOLDMAN, SACHS & CO.
BLAYLOCK & PARTNERS, L.P.
SALOMON SMITH BARNEY
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