As filed with the Securities and Exchange Commission on September 24, 1997
Registration No. 333-____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Banknorth Group, Inc. Banknorth Capital Trust I
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Delaware Delaware
(State of incorporation) (State of incorporation)
_________ ___________
(Primary Standard Industrial (Primary Standard Industrial)
Classification Code Number) Classification Code Number
03-0321189 (Applied for)
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
300 Financial Plaza
Burlington, Vermont 05401
(802) 658-9959
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
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Thomas J. Pruitt Thomas J. Pruitt
Executive Vice President Administrative Trustee
and Chief Financial Officer Banknorth Capital Trust I
Banknorth Group, Inc. 300 Financial Plaza
300 Financial Plaza Burlington, Vermont 05401
Burlington, Vermont 05401 (802) 658-9959
(802) 658-9959
(Address, including zip code, and telephone number,
including area code, of agents for service)
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Copies to:
Edward F. Petrosky, Esq.
Brown & Wood LLP
One World Trade Center
New York, New York 10048
Approximate date of commencement of proposed sale of the securities to
the public. As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
Calculation of Registration Fee
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Amount Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Unit (1) Offering Price (1) Fee
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10.52% Capital Securities, Series B, of Banknorth Capital $30,000,000 100% $30,000,000 $9,091
Trust I
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10.52% Junior Subordinated Deferrable Interest Debentures,
Series B, of Banknorth Group, Inc. (2)
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Series B Capital Securities Guarantee of Banknorth Group,
Inc. (3)
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Total (4) $30,000,000(5) 100% $30,000,000 $9,091
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(1) Estimated solely for the purpose of computing the registration fee.
(2) No separate consideration will be received for the 10.52% Junior
Subordinated Deferrable Interest Debentures, Series B, of Banknorth Group,
Inc. distributed upon any liquidation of Banknorth Capital Trust I.
(3) No separate consideration will be received for the Series B Capital
Securities Guarantee of Banknorth Group, Inc.
(4) This Registration Statement is deemed to cover rights of holders of 10.52%
Junior Subordinated Deferrable Interest Debentures, Series B, under the
Indenture, the rights of holders of 10.52% Capital Securities, Series B,
under the Trust Agreement and under the Series B Capital Securities
Guarantee and certain backup undertakings as described herein.
(5) Such amount represents the liquidation amount of 10.52% Capital Securities,
Series B, to be exchanged hereunder and under the principal amount of 10.52%
Junior Subordinated Deferrable Interest Debentures, Series B, that may be
distributed to holders of such Capital Securities upon any liquidation of
Banknorth Capital Trust I.
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The Registrants hereby amend this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrants shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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(A redherring appears on the left-hand side of this page, rotated 90 degrees.
Text follows.)
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these Securities has been filed with the
Securities and Exchange Commission. These Securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospective Supplement shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there by any sale of these
Securities in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to the registration or qualification under the securities laws
of any such jurisdiction.
SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 1997
PROSPECTUS
BANKNORTH CAPITAL TRUST I
OFFER TO EXCHANGE ITS
10.52% CAPITAL SECURITIES, SERIES B
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
10.52% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
BANKNORTH GROUP, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON _________, 1997, UNLESS EXTENDED.
Banknorth Capital Trust I, a trust formed under the laws of the state of
Delaware (the "Trust"), hereby offers, upon the terms and subject to the
conditions set forth in this prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying Letter
of Transmittal (which together constitute the "Exchange Offer"), to exchange up
to and including $30,000,000 aggregate Liquidation Amount of its 10.52% Capital
Securities, Series B (the "Exchange Capital Securities"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like Liquidation Amount of its outstanding
10.52% Capital Securities, Series A (the "Original Capital Securities"), of
which $30,000,000 aggregate Liquidation Amount is outstanding. Pursuant to the
Exchange Offer, Banknorth Group, Inc., a Delaware corporation (the "Corporation"
or "Banknorth"), is also offering to exchange (i) its guarantee of payments of
cash distributions and payments on liquidation of the Trust or redemption of the
Exchange Capital Securities (the "Exchange Guarantee") for a like guarantee in
respect of the Original Capital Securities (the "Original Guarantee") and (ii)
its 10.52% Junior Subordinated Deferrable Interest Debentures due May 1, 2027,
Series B (the "Exchange Junior Subordinated
(Continued on next page)
This Prospectus and the Letter of Transmittal are first mailed to all holders of
Original Capital Securities on or about ____________, 1997.
See "Risk Factors" beginning on page for certain information that should be
considered by holders in deciding whether to tender Original Capital Securities
in the Exchange Offer.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER OBLIGATIONS
OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September __, 1997.
(Continued from the previous page)
Debentures") for its 10.52% Junior Deferrable Interest Debentures due May 1,
2027, Series A (the "Original Junior Subordinated Debentures"), in an aggregate
principal amount corresponding to the aggregate Liquidation Amount of Original
Capital Securities accepted for exchange, which Exchange Guarantee and Exchange
Junior Subordinated Debentures also have been registered under the Securities
Act. The Original Capital Securities, the Original Guarantee and the Original
Junior Subordinated Debentures are collectively referred to herein as the
"Original Securities" and the Exchange Capital Securities, the Exchange
Guarantee and the Exchange Junior Subordinated Debentures are collectively
referred to herein as the "Exchange Securities."
The terms of the Exchange Securities are identical in all material
respects to the respective terms of the Original Securities, except that (i) the
Exchange Securities have been registered under the Securities Act and therefore
will not be subject to certain restrictions on transfer applicable to the
Original Securities, (ii) the Exchange Capital Securities will not provide for
any increase in the Distribution rate thereon and (iii) the Exchange Junior
Subordinated Debentures will not provide for any liquidated damages thereon.
See "Description of Exchange Securities" and "Description of Original
Securities." The Exchange Capital Securities are being offered for exchange in
order to satisfy certain obligations of the Corporation and the Trust under the
Registration Rights Agreement, dated as of May 1, 1997 (the "Registration Rights
Agreement"), among the Corporation, the Trust and Sandler O'Neill & Partners,
L.P. (the "Initial Purchaser"). In the event that the Exchange Offer is
consummated, any Original Capital Securities that remain outstanding after
consummation of the Exchange Offer and the Exchange Capital Securities issued in
the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Trust Agreement (as defined herein).
The Exchange Capital Securities and the Original Capital Securities
(together, the "Capital Securities") represent beneficial interests in the
assets of the Trust. The Corporation is the owner of all of the beneficial
interests represented by common securities of the Trust (the "Common
Securities," and together with the Capital Securities, the "Trust Securities").
The First National Bank of Chicago is the Property Trustee (the "Property
Trustee") of the Trust. The Trust exists for the sole purpose of issuing the
Trust Securities and investing the proceeds thereof in the Junior Subordinated
Debentures (as defined herein). The Exchange Junior Subordinated Debentures will
mature on May 1, 2027 (the "Stated Maturity Date"). The Exchange Capital
Securities will have a preference over the Common Securities under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise. See "Description of Exchange
Securities--Description of Exchange Capital Securities--Subordination of Common
Securities".
As used herein, (i) the "Indenture" means the Indenture, dated as of
May 1, 1997, as amended and supplemented from time to time, between the
Corporation and The First National Bank of Chicago, as Trustee (the "Debenture
Trustee"), relating to the Junior Subordinated Debentures and (ii) the "Trust
Agreement" means the Amended and Restated Declaration of Trust relating to the
Trust, dated as of May 1, 1997, among the Corporation, as Sponsor, The First
National Bank of Chicago, as Property Trustee, First Chicago Delaware Inc., as
Delaware Trustee (the "Delaware Trustee"), and the Administrative Trustees named
therein (collectively, with the Property Trustee and Delaware Trustee, the
"Issuer Trustees"). In addition, as the context may require, (i)"Junior
Subordinated Debentures" includes the Original Junior Subordinated Debentures
and the Exchange
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Junior Subordinated Debentures and (ii) "Guarantee" includes the Original
Guarantee and the Exchange Guarantee.
Holders of the Exchange Capital Securities will be entitled to receive
cumulative cash distributions arising from the payment of interest on the
Exchange Junior Subordinated Debentures, accumulating from May 1, 1997 (to the
extent that the Original Capital Securities are accepted for exchange on or
prior to October 15, 1997) or November 1, 1997 (to the extent that the Original
Capital Securities are accepted for exchange after October 15, 1997), payable
semi-annually in arrears on May 1 and November l of each year, commencing
November 1, 1997 or May 1, 1998, as the case may be, at the annual rate of
10.52% of the Liquidation Amount of $1,000 per Exchange Capital Security
("Distributions"). So long as no Debenture Event of Default (as defined herein)
has occurred and is continuing, the Corporation has the right to defer payments
of interest on the Exchange Junior Subordinated Debentures for a period not
exceeding 10 consecutive semi-annual periods to each deferral period (each, an
"Extension Period"), provided that an Extension Period must end on an Interest
Payment Date (as defined herein) and may not extend beyond the Stated Maturity
Date. Upon the termination of any such Extension Period and the payment of all
amounts then due, the Corporation may elect to begin a new Extension Period,
subject to the requirements set forth herein. If and for so long as interest
payments on the Exchange Junior Subordinated Debentures are so deferred,
Distributions on the Exchange Capital Securities also will be deferred, and the
Corporation will not be permitted, subject to certain exceptions described
herein, to declare or pay any cash distributions with respect to the
Corporation's capital stock or to make any payment with respect to debt
securities of the Corporation that rank pari passu with or junior to the
Exchange Junior Subordinated Debentures.
During an Extension Period, interest on the Exchange Junior
Subordinated Debentures will continue to accrue (and the amount of Distributions
to which holders of the Exchange Capital Securities are entitled will continue
to accumulate) at the rate of 10.52% per annum, compounded semi-annually, and
holders of Trust Securities will be required to include deferred interest income
in their gross income for United States federal income tax purposes prior to the
receipt of the cash attributable to such income. See "Description of Exchange
Securities-Description of Exchange Junior Subordinated Debentures--Option to
Extend Interest Payment Date" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount." Distributions to
which holders of the Trust Securities are entitled during any such Extension
Period will accumulate additional Distributions thereon at the rate per annum of
10.52% thereof, compounded semi-annually from the relevant Distribution Date,
but not exceeding the interest rate then accruing on the Exchange Junior
Subordinated Debentures. The term "Distributions," as used herein, shall include
any such additional Distributions.
Through the Guarantee, the guarantee of the Corporation relating to the
Common Securities (the "Common Guarantee"), the Trust Agreement, the Junior
Subordinated Debentures and the Indenture, taken together, the Corporation has
guaranteed or will guarantee, as the case may be, all of the Trust's obligations
under the Trust Securities. See "Relationship Among the Exchange Capital
Securities, the Exchange Junior Subordinated Debentures and the Exchange
Guarantee--Full and Unconditional Guarantee." The Exchange Guarantee and the
Common Guarantee will guarantee payments of Distributions and payments upon
liquidation of the Trust or redemption of the Exchange Capital Securities and
Common Securities, but in each case only to the extent that the Trust has funds
legally available therefor and has failed to make such payments, as described
herein. See "Description of Exchange Securities--Description of Exchange
Guarantee." If the Corporation fails to make a required payment on the Exchange
Junior Subordinated Debentures, the Trust will not have sufficient funds to make
the related payments, including Distributions, on the Trust Securities. The
Exchange Guarantee will not cover any such payment when the Trust does not have
sufficient funds legally available therefor. In such event, a holder of Exchange
Capital Securities may institute a legal
3
proceeding directly against the Corporation to enforce its rights in respect of
such payment. See "Description of Exchange Securities--Description of Exchange
Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of
Exchange Capital Securities." The obligations of the Corporation under the
Exchange Guarantee, the Common Guarantee and the Exchange Junior Subordinated
Debentures will be unsecured and will rank subordinate and junior in right of
payment to all Senior Indebtedness (as defined in "Description of Exchange
Securities-Description of Exchange Junior Subordinated
Debentures--Subordination"). See "Risk Factors--Ranking of Subordinated
Obligations under the Exchange Guarantee and the Exchange Junior Subordinated
Debentures: Limitation on Source of Funds."
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated Maturity
Date upon repayment of the Exchange Junior Subordinated Debentures at a
redemption price equal to the principal amount of, plus accrued and unpaid
interest on, the Exchange Junior Subordinated Debentures (the "Maturity
Redemption Price"), (ii) in whole but not in part, at any time prior to May 1,
2007 (the "Initial Optional Redemption Date"), contemporaneously with the
optional prepayment of the Exchange Junior Subordinated Debentures by the
Corporation, upon the occurrence and continuation of a Special Event (as defined
herein) at a redemption price equal to the Special Event Prepayment Price (as
defined herein) (the "Special Event Redemption Price"), and (iii) in whole or in
part, on or after the Initial Optional Redemption Date, contemporaneously with
the optional prepayment by the Corporation of all or part of the Exchange Junior
Subordinated Debentures, at a redemption price equal to the Optional Prepayment
Price (as defined herein) (the "Optional Redemption Price"). Any of the Maturity
Redemption Price, the Special Event Redemption Price and the Optional Redemption
Price may be referred to herein as the "Redemption Price." See "Description of
Exchange Securities--Description of Exchange Capital Securities--Redemption."
Subject to the Corporation having received any required regulatory
approvals, the Exchange Junior Subordinated Debentures will be prepayable prior
to the Stated Maturity Date at the option of the Corporation (i) on or after the
Initial Optional Redemption Date, in whole or in part, at a price (the "Optional
Prepayment Price") equal to 105.260% of the principal amount thereof on the
Initial Optional Redemption Date, declining ratably on each May 1 thereafter to
100% on or after May 1, 2017 or (ii) at any time prior to the Initial Optional
Redemption Date, in whole but not in part, upon the occurrence and continuation
of a Special Event, at a prepayment price (the "Special Event Prepayment Price")
equal to the Make-Whole Amount (as defined herein). The "Make-Whole Amount"
shall be equal to the greater of (a) 100% of the principal amount thereof or (b)
the sum, as determined by a Quotation Agent (as defined herein), of the present
values of the remaining scheduled payments of principal and interest on the
Exchange Junior Subordinated Debentures, discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined herein) plus, in the case of each of
clauses (a) and (b), accrued and unpaid interest thereon, including Compounded
Interest and Additional Sums (as defined herein), if any, to the date of
prepayment. Either of the Optional Prepayment Price or the Special Event
Prepayment Price may be referred to herein as the "Prepayment Price." See
"Description of Exchange Securities--Description of Exchange Junior Subordinated
Debentures--Optional Prepayment" and "--Special Event Prepayment."
The Corporation has the right at any time to terminate the Trust and,
after satisfaction of liabilities of creditors of the Trust as required by
applicable law, to cause a Like Amount of the Junior Subordinated Debentures to
be distributed to the holders of the Trust Securities in liquidation of the
Trust, subject to the Corporation's having received (i) an opinion of counsel to
the effect that such distribution will not be a taxable event to the holders of
Exchange Capital Securities and (ii) any
4
required regulatory approvals. Unless the Junior Subordinated Debentures are
distributed to the holders of the Trust Securities, in the event of a
liquidation of the Trust as described herein, after satisfaction of liabilities
to creditors of the Trust as required by applicable law, the holders of the
Trust Securities generally will be entitled to receive a Liquidation Amount of
$1,000 per Trust Security plus accumulated and unpaid Distributions thereon to
the date of payment. See "Description of Exchange Securities--Description of
Exchange Capital Securities--Liquidation of the Trust and Distribution of
Exchange Junior Subordinated Debentures."
THE CAPITAL SECURITIES, INCLUDING THE EXCHANGE CAPITAL SECURITIES, MAY
BE TRANSFERRED ONLY IN A BLOCK HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN
$100,000 (100 CAPITAL SECURITIES). ANY TRANSFER OF EXCHANGE CAPITAL SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO
BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED
NOT TO BE THE HOLDER OF SUCH EXCHANGE CAPITAL SECURITIES FOR ANY PURPOSE,
INCLUDING BUT NOT LIMITED TO THE RECEIPT OF DISTRIBUTIONS ON SUCH EXCHANGE
CAPITAL SECURITIES, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST
WHATSOEVER IN SUCH EXCHANGE CAPITAL SECURITIES.
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The Trust is making the Exchange Offer of the Exchange Capital
Securities in reliance on the position of the staff of the Division of
Corporation Finance (the "Staff') of the Securities and Exchange Commission (the
"Commission") as set forth in certain interpretive letters addressed to third
parties in other transactions. However, neither the Corporation nor the Trust
has sought its own interpretive letter and there can be no assurance that the
Staff of the Commission would make a similar determination with respect to the
Exchange Offer as it has in such interpretive letters to third parties. Based on
these interpretations by the Staff of the Commission, and subject to the two
immediately following sentences, the Corporation and the Trust believe that
Exchange Capital Securities issued pursuant to this Exchange Offer in exchange
for Original Capital Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a holder who is a broker-dealer)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. However, any holder of
Original Capital Securities who is an "affiliate" of the Corporation or the
Trust or who intends to participate in the Exchange Offer for the purpose of
distributing Exchange Capital Securities, or any broker-dealer who purchased
Original Capital Securities from the Trust for resale pursuant to Rule 144A
under the Securities Act ("Rule 144A") or any other available exemption under
the Securities Act, (i) will not be able to rely on the interpretations of the
Staff of the Commission set forth in the above-mentioned interpretive letters,
(ii) will not be permitted or entitled to tender such Original Capital
Securities in the Exchange Offer and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or other transfer of such Original Capital Securities unless such sale is
made pursuant to an exemption from such requirements. In addition, as described
herein, if any broker-dealer holds Original Capital Securities acquired for its
own account as a result of market-making or other trading activities and
exchanges such Original Capital Securities for Exchange Capital Securities, then
such broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such Exchange Capital
Securities.
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Each holder of Original Capital Securities who wishes to exchange
Original Capital Securities for Exchange Capital Securities in the Exchange
Offer will be required to represent that (i) it is not an "affiliate" of the
Corporation or the Trust, (ii) any Exchange Capital Securities to be received by
it are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Capital Securities,
and (iv) if such holder is not a broker-dealer, such holder is not engaged in,
and does not intend to engage in, a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. In addition, the
Corporation and the Trust may require such holder, as a condition to such
holder's eligibility to participate in the Exchange Offer, to furnish to the
Corporation and the Trust (or an agent thereof) in writing information as to the
number of "beneficial owners" (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), on behalf of
whom such holder holds the Original Capital Securities to be exchanged in the
Exchange Offer. Each broker-dealer that receives Exchange Capital Securities for
its own account pursuant to the Exchange Offer must acknowledge that it acquired
the Original Capital Securities for its own account as the result of market
making activities or other trading activities and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Capital Securities. The Letter of
Transmittal states that, by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the position taken by the Staff of the
Commission in the interpretive letters referred to above, the Corporation and
the Trust believe that broker-dealers who acquired Original Capital Securities
for their own accounts, as a result of market-making activities or other trading
activities ("Participating Broker-Dealers"), may fulfill their prospectus
delivery requirements with respect to the Exchange Capital Securities received
upon exchange of such Original Capital Securities (other than Original Capital
Securities which represent an unsold allotment from the initial sale of the
Original Capital Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Capital Securities. Each broker-dealer that receives
Exchange Capital Securities for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Capital Securities. The Letter of Transmittal states that, by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Capital
Securities received in exchange for Original Capital Securities acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Trust and the Corporation have agreed that, ending on the close
of business on the 90th day following the Expiration Date (as defined herein),
it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution." However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of Exchange Capital Securities received in exchange for Original
Capital Securities pursuant to the Exchange Offer must notify the Corporation or
the Trust, or cause the Corporation or the Trust to be notified, on or prior to
the Expiration Date, that it is a Participating Broker-Dealer. Such notice may
be given in the space provided for that purpose in the Letter of Transmittal or
may be delivered to The First National Bank of Chicago (the "Exchange Agent") at
the address set forth herein under "The Exchange Offer--Exchange Agent." Any
Participating Broker-Dealer who is an "affiliate" of the Corporation or the
Trust may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer--Resales of
Exchange Capital Securities."
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In that regard, each Participating Broker-Dealer who surrenders
Original Capital Securities pursuant to the Exchange Offer will be deemed to
have agreed, by execution of the Letter of Transmittal, that upon receipt of
notice from the Corporation or the Trust of the occurrence of any event or the
discovery of any fact that (i) makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect or (ii) causes this
Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference herein, in the light of the
circumstances under which they were made, not misleading, or upon the occurrence
of certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of Exchange Capital Securities
(or the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) pursuant to this Prospectus until the Corporation or the Trust has
amended or supplemented this Prospectus to correct such misstatement or omission
and has furnished copies of the amended or supplemented Prospectus to such
Participating Broker-Dealer, or the Corporation or the Trust has given notice
that the sale of the Exchange Capital Securities (or the Exchange Guarantee or
the Exchange Junior Subordinated Debentures, as applicable) may be resumed, as
the case may be. If the Corporation or the Trust gives such notice to suspend
the sale of the Exchange Capital Securities (or the Exchange Guarantee or the
Exchange Junior Subordinated Debentures, as applicable), it shall extend the
90-day period referred to above during which Participating Broker-Dealers are
entitled to use this Prospectus in connection with the resale of Exchange
Capital Securities by the number of days during the period from and including
the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the Exchange Capital
Securities or to and including the date on which the Corporation or the Trust
has given notice that the sale of Exchange Capital Securities (or the Exchange
Guarantee or the Exchange Junior Subordinated Debentures, as applicable) may be
resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary
market and no public market for the Original Capital Securities. The Exchange
Capital Securities will be a new issue of securities for which there currently
is no market. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Capital Securities. The Corporation and
the Trust do not intend to apply for listing of the Exchange Capital Securities
on any securities exchange or for inclusion in the Nasdaq Stock Market, the
electronic securities market operated by the National Association of Securities
Dealers, Inc. ("Nasdaq").
Any Original Capital Securities not tendered and accepted in the
Exchange Offer will remain outstanding and will be entitled to all the same
rights and will be subject to the same limitations applicable thereto under the
Trust Agreement (except for those rights which terminate upon consummation of
the Exchange Offer). Following consummation of the Exchange Offer, the holders
of Original Capital Securities will continue to be subject to all of the
existing restrictions upon transfer thereof and neither the Corporation nor the
Trust will have any further obligation to such holders (other than under certain
limited circumstances) to provide for registration under the Securities Act of
the Original Capital Securities held by them. To the extent that Original
Capital Securities are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered Original Capital Securities could be adversely
affected. See "Risk Factors--Consequences of a Failure to Exchange Original
Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER.
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Original Capital Securities may be tendered for exchange on or prior to
5:00 p.m., New York City time, on _____, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is extended
by the Corporation or the Trust (in which case the term "Expiration Date" shall
mean the latest date and time to which the Exchange Offer is extended). Tenders
of Original Capital Securities may be withdrawn at any time on or prior to the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Original Capital Securities being tendered for exchange.
However, the Exchange Offer is subject to certain events and conditions which
may be waived by the Corporation or the Trust and to the terms and provisions of
the Registration Rights Agreement. Original Capital Securities may be tendered
in whole or in part having an aggregate Liquidation Amount of not less than
$100,000 (100 Capital Securities) or any integral multiple of $1,000 Liquidation
Amount (one Capital Security) in excess thereof. The Corporation has agreed to
pay all expenses of the Exchange Offer. See "The Exchange Offer--Fees and
Expenses." Holders of the Original Capital Securities whose Original Capital
Securities are accepted for exchange on or prior to October 15, 1997 will not
receive Distributions on such Original Capital Securities and will be deemed to
have waived the right to receive any Distributions on such Original Capital
Securities accumulated from and including May 1, 1997. See "The Exchange
Offer--Distributions on the Exchange Capital Securities."
Neither the Corporation nor the Trust will receive any cash proceeds
from the issuance of the Exchange Capital Securities offered hereby. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
8
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at 7 World Trade Center,
13th Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material may also be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. If available, such information also may be accessed through the
Commission's electronic data gathering, analysis and retrieval system ("EDGAR")
via electronic means, including the Commission's home page on the Internet
(http://www.sec.gov). The Corporation's common stock is traded on the Nasdaq
National Market. Such reports, proxy statements and other information concerning
the Corporation also may be inspected at the offices of the National Association
of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
No separate financial statements of the Trust have been included
herein. The Corporation and the Trust do not consider that such financial
statements would be material to holders of the Exchange Capital Securities
because the Trust is a newly-formed special purpose entity, has no operating
history or independent operations and is not engaged in and does not propose to
engage in any activity other than holding as trust assets the Junior
Subordinated Debentures, issuing the Trust Securities and engaging in activities
necessary, advisable or incidental thereto. See "Banknorth Capital Trust I,"
"Description of Exchange Securities-Description of Exchange Capital Securities,"
"Description of Exchange Securities--Description of Exchange Junior Subordinated
Debentures" and "Description of Exchange Securities--Description of Exchange
Guarantee." In addition, the Corporation does not expect that the Trust will
file reports, proxy statements and other information under the Exchange Act with
the Commission.
This Prospectus constitutes a part of a registration statement on Form
S-4 (the "Registration Statement") filed by the Corporation and the Trust with
the Commission under the Securities Act. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Corporation and the
Exchange Securities. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and, in each instance, reference
is made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission
are incorporated into this Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K, as amended by
Form 10-K/A, for the year ended December 31, 1996;
2. The Corporation's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997 and June 30, 1997; and
3. The Corporation's Current Report on Form 8-K filed on April
14, 1997.
All documents subsequently filed by the Corporation pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the termination of the offering of the Exchange Securities offered hereby shall
be deemed to be incorporated by reference into this Prospectus and to be a part
of this Prospectus from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this
Prospectus, including the documents incorporated or deemed to be incorporated
herein by reference, as the same may be amended, supplemented or otherwise
modified from time to time. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein do not purport to
be complete and, where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document.
This Prospectus incorporates documents by reference that are not
presented herein or delivered herewith. The Corporation will provide without
charge to any person to whom this Prospectus is delivered, on the written or
oral request of such person, a copy of any or all of the foregoing documents
incorporated by reference herein (other than exhibits, unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
documents should be directed to: Banknorth Group, Inc., 300 Financial Plaza,
P.O. Box 5420, Burlington, Vermont 05401, Attention: Neal E. Robinson (telephone
(802) 658-2492).
10
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. Reference is made to and
this summary is qualified in its entirety by, the more detailed information and
financial statements including the notes thereto contained elsewhere in this
Prospectus and in documents incorporated by reference hereto.
Banknorth Group, Inc.
The Corporation is a multi-bank holding company organized as a Delaware
corporation in 1989 as the result of the merger of two Vermont-based bank
holding companies. The Corporation is the sole owner of five Vermont banks;
namely, First Vermont Bank and Trust Company, Franklin Lamoille Bank, The Howard
Bank, N.A., Granite Savings Bank and Trust Company and Woodstock National Bank;
one Vermont limited charter bank, The Stratevest Group, N.A., a consolidated
trust subsidiary; one New Hampshire holding company; namely, North American Bank
Corporation and its sole subsidiary, Farmington National Bank; and one
Massachusetts bank; First Massachusetts Bank, N.A. The Corporation is also the
sole owner of North Group Realty, Inc., which owns real estate utilized in the
operation of the Corporation.
Acquisitions have been, and continue to be, an important part of the
expansion of the Corporation's business. On February 16, 1996, the Corporation
completed the purchase of thirteen banking offices from Shawmut Bank, N.A. A new
subsidiary, First Massachusetts Bank, N.A., with principal offices in Worcester,
Massachusetts, was organized to own and operate the acquired offices. In
addition, on October 14, 1994, the Corporation acquired North American Bank
Corporation and its sole subsidiary, Farmington National Bank. The acquisition,
which was accounted for as a purchase, was the first for the Corporation in the
state of New Hampshire.
The Corporation engages in discussions concerning potential
acquisitions from time to time, but currently has no commitments, agreements or
understandings to acquire any additional financial institutions. The Corporation
expects to continue to take advantage of the consolidation of the financial
services industry by further developing its community bank franchise within its
own and contiguous market areas.
The Corporation's banking subsidiaries (the "Banks") offer a full range
of loan, deposit, investment products and trust services designed to meet the
financial needs of individual consumers, businesses and municipalities. Mortgage
banking services are also offered through Banknorth Mortgage Company, a
wholly-owned subsidiary of First Vermont Bank and Trust Company. These services
are currently offered throughout the states of Vermont, Massachusetts and New
Hampshire through a network of 58 banking offices.
The Corporation's network of community Banks is committed to providing
superior, efficient and personalized service to customers in chosen market
areas. To that end, operating efficiencies are achieved through the
centralization of all major support functions at the parent company level. The
Corporation's community banking management structure allows each Bank's local
management team and board of directors to focus on such Bank's customers and to
set its own loan and deposit prices in light of local competition and other
market factors.
11
The Corporation believes that local business and community focus, knowledge
of customers and their needs, the provision of a broad array of financial
services and products, together with decentralized decision making at the branch
and community level, enables the Corporation to effectively compete in its
chosen markets.
Based on total assets as of December 31, 1996, the Corporation is the
largest bank holding company headquartered in Vermont. At December 31, 1996, the
Corporation had total assets, deposits and shareholders' equity of $2.6 billion,
$2.1 billion and $206.7 million, respectively. In December 1996, the Corporation
and its subsidiaries employed 1,108 on a full-time equivalent basis.
The principal executive office of the Corporation is located at 300
Financial Plaza, Burlington, Vermont 05401, and its telephone number is (802)
658-9959.
Banknorth Capital Trust I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Trust Agreement and (ii) the filing of a certificate of trust with
the Delaware Secretary of State on April 9, 1997. The Trust's business and
affairs are conducted by the Issuer Trustees: the Property Trustee, the Delaware
Trustee, and the three individual Administrative Trustees, who are officers or
other employees of the Corporation. The Trust exists for the exclusive purposes
of (i) issuing and selling the Trust Securities, (ii) using the proceeds from
the sale of the Trust Securities to acquire the Junior Subordinated Debentures
issued by the Corporation and (ii) engaging in only those other activities
necessary, advisable or incidental thereto. Accordingly, the Junior Subordinated
Debentures will be the sole assets of the Trust and payments under the Junior
Subordinated Debentures are and will be the sole revenue of the Trust. All of
the Common Securities will be owned by the Corporation. The principal executive
office of the Trust is c/o Banknorth Group, Inc., 300 Financial Plaza,
Burlington, Vermont 05401.
The Exchange Offer
The Exchange Offer......................... Up to and including $30,000,000
aggregate Liquidation Amount of
Exchange Capital Securities are
being offered in exchange for a like
aggregate Liquidation Amount of
Original Capital Securities.
Original Capital Securities may be
tendered for exchange in whole or in
part in a Liquidation Amount of
$100,000 (100 Capital Securities) or
any integral multiple of $1,000
(one Capital Security) in excess
thereof. The Corporation and the
Trust are making the Exchange Offer
in order to satisfy their
obligations under the Registration
Rights Agreement relating to the
Original Capital Securities. For a
description of the procedures for
tendering Original Capital
Securities, see "The Exchange
Offer--Procedures for Tendering
Original Capital Securities."
Expiration Date............................ 5:00 p.m., New York City time, on
____, 1997 unless the Exchange Offer
is extended by the Corporation and
the
12
Trust (in which case the Expiration
Date will be the latest date and
time to which the Exchange Offer is
extended). See "The Exchange
Offer--Terms of the Exchange Offer."
Conditions to
the Exchange Offer......................... The Exchange Offer is subject to
certain conditions, which may be
waived by the Corporation and the
Trust in their sole discretion. The
Exchange Offer is not conditioned
upon any minimum Liquidation Amount
of Original Capital Securities being
tendered. See "The Exchange
Offer--Conditions to the Exchange
Offer."
Terms of the Exchange Offer................ The Corporation and the Trust
reserve the right in their sole and
absolute discretion, subject to
applicable law, at any time and from
time to time, (i) to delay the
acceptance of the Original Capital
Securities, (ii) to terminate the
Exchange Offer if certain specified
conditions have not been satisfied,
(iii) to extend the Expiration Date
of the Exchange Offer and retain all
Original Capital Securities tendered
pursuant to the Exchange Offer,
subject, however, to the right of
holders of Original Capital
Securities to withdraw their
tendered Original Capital
Securities, or (iv) to waive any
condition or otherwise amend the
terms of the Exchange Offer in any
respect. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal Rights.......................... Tenders of Original Capital
Securities may be withdrawn at any
time on or prior to the Expiration
Date by delivering a written notice
of such withdrawal to the Exchange
Agent in conformity with certain
procedures as set forth herein under
"The Exchange Offer--Withdrawal
Rights."
Procedures for Tendering
Original Capital Securities................ Certain brokers, dealers, commercial
banks, trust companies and other
nominees who hold Original Capital
Securities through The Depository
Trust Company ("DTC") must effect
tenders by book entry transfer
through DTC's Automated Tender Offer
Program ("ATOP'). Beneficial owners
of Original Capital Securities
registered in the name of a broker,
dealer, commercial bank, trust
company or other nominee are urged
to contact such person promptly if
they wish to tender Original Capital
Securities pursuant to the Exchange
Offer. Tendering holders of Original
Capital Securities that do not use
ATOP must complete and sign a Letter
of Transmittal in accordance with
the instructions contained therein
and forward the same by mail,
facsimile transmission or hand
delivery, together with any other
required documents, to the Exchange
13
Agent, either with the certificates
of the Original Capital Securities
to be tendered or in compliance with
the specified procedures for
guaranteed delivery of Original
Capital Securities. Tendering
holders of Original Capital
Securities that use ATOP will, by so
doing, acknowledge that they are
bound by the terms of the Letter of
Transmittal. See "The Exchange
Offer--Procedures for Tendering
Original Capital Securities."
Letters of Transmittal and
certificates representing Original
Capital Securities should not be
sent to the Corporation or the
Trust. Such documents should only be
sent to the Exchange Agent.
Resales of Exchange
Capital Securities......................... The Corporation and the Trust are
making the Exchange Offer in
reliance on the position of the
Staff of the Commission as set forth
in certain interpretive letters
addressed to third parties in other
transactions. However, neither the
Corporation nor the Trust has sought
its own interpretive letter and
there can be no assurance that the
Staff of the Commission would make a
similar determination with respect
to the Exchange Offer as it has in
such interpretive letters to third
parties. Based on these
interpretations by the Staff of the
Commission, and subject to the two
immediately following sentences, the
Corporation and the Trust believe
that Exchange Capital Securities
issued pursuant to this Exchange
Offer in exchange for Original
Capital Securities may be offered
for resale, resold and otherwise
transferred by a holder thereof
(other than a holder who is a
broker-dealer) without further
compliance with the registration and
prospectus delivery requirements of
the Securities Act, provided that
such Exchange Capital Securities are
acquired in the ordinary course of
such holder's business and that such
holder is not participating, and has
no arrangement or understanding with
any person to participate, in a
distribution (within the meaning of
the Securities Act) of such Exchange
Capital Securities. However, any
holder of Original Capital
Securities who is an "affiliate" of
the Corporation or the Trust or who
intends to participate in the
Exchange Offer for the purpose of
distributing the Exchange Capital
Securities, or any broker-dealer who
purchased the Original Capital
Securities from the Trust for resale
pursuant to Rule 144A or any other
available exemption under the
Securities Act, (i) will not be able
to rely on the interpretations of
the Staff of the Commission set
forth in the above-mentioned
interpretive
14
letters, (ii) will not be permitted
or entitled to tender such Original
Capital Securities in the Exchange
Offer and (iii) must comply with the
registration and prospectus delivery
requirements of the Securities Act
in connection with any sale or other
transfer of such Original Capital
Securities unless such sale is made
pursuant to an exemption from such
requirements. In addition, as
described herein, if any
broker-dealer holds Original Capital
Securities acquired for its own
account as a result of market-making
or other trading activities and
exchanges such Original Capital
Securities for Exchange Capital
Securities, then such broker-dealer
must deliver a prospectus meeting
the requirements of the Securities
Act in connection with any resales
of such Exchange Capital Securities.
Each holder of Original Capital
Securities who wishes to exchange
Original Capital Securities for
Exchange Capital Securities in the
Exchange Offer will be required to
represent that (i) it is not an
"affiliate" of the Corporation or
the Trust, (ii) any Exchange Capital
Securities to be received by it are
being acquired in the ordinary
course of its business, (iii) it has
no arrangement or understanding with
any person to participate in a
distribution (within the meaning of
the Securities Act) of such Exchange
Capital Securities, and (iv) if such
holder is not a broker-dealer, such
holder is not engaged in, and does
not intend to engage in, a
distribution (within the meaning of
the Securities Act) of such Exchange
Capital Securities. Each
broker-dealer that receives Exchange
Capital Securities for its own
account in exchange for Original
Capital Securities, where such
Original Capital Securities were
acquired by such broker-dealer as a
result of market-making activities
or other trading activities, must
acknowledge that it will deliver a
prospectus meeting the requirements
of the Exchange Act in connection
with any resale of such Exchange
Capital Securities. See "Plan of
Distribution." The Letter of
Transmittal states that, by so
acknowledging and by delivering a
prospectus, a broker-dealer will not
be deemed to admit that it is an
"underwriter" within the meaning of
the Securities Act. Based on the
position taken by the Staff of the
Commission in the interpretive
letters referred to above, the
Corporation and the Trust believe
that Participating Broker-Dealers
who acquired Original Capital
Securities for their own accounts as
a result of market-making activities
or other trading activities may
fulfill their prospectus delivery
requirements with respect to the
Exchange Capital Securities received
upon exchange of such Original
Capital Securities
15
(other than Original Capital
Securities that represent an unsold
allotment from the initial sale of
the Original Capital Securities)
with a prospectus meeting the
requirements of the Securities Act,
which may be the prospectus prepared
for an exchange offer so long as it
contains a description of the plan
of distribution with respect to the
resale of such Exchange Capital
Securities. Accordingly, this
Prospectus, as it may be amended or
supplemented from time to time, may
be used by a Participating
Broker-Dealer in connection with
resales of Exchange Capital
Securities received in exchange for
Original Capital Securities where
such Original Capital Securities
were acquired by such Participating
Broker-Dealer for its own account as
a result of market-making or other
trading activities. Subject to
certain provisions set forth in the
Registration Rights Agreement and to
the limitations described herein
under "The Exchange Offer-Resales of
Exchange Capital Securities," the
Corporation and the Trust have
agreed that this Prospectus, as it
may be amended or supplemented from
time to time, may be used by a
Participating Broker-Dealer in
connection with resales of such
Exchange Capital Securities for a
period ending 90 days after the
Expiration Date (subject to
extension under certain limited
circumstances) or, if earlier, when
all such Exchange Capital Securities
have been disposed of by such
Participating Broker-Dealer. See
"Plan of Distribution." Any
Participating Broker-Dealer who is
an "affiliate" of the Corporation or
the Trust may not rely on such
interpretive letters and must comply
with the registration and prospectus
delivery requirements of the
Securities Act in connection with
any resale transaction. See "The
Exchange Offer--Resales of Exchange
Capital Securities."
Exchange Agent............................. The Exchange Agent with respect to
the Exchange Offer is The First
National Bank of Chicago. The
address, and telephone and facsimile
number of the Exchange Agent are set
forth in "The Exchange
Offer--Exchange Agent" and in the
Letter of Transmittal.
Use of Proceeds............................ Neither the Corporation nor the
Trust will receive any cash proceeds
from the issuance of the Exchange
Capital Securities offered hereby.
See "Use of Proceeds."
Federal Income Tax
Considerations............................. The exchange of Original Capital
Securities for Exchange Capital
Securities should not be a taxable
exchange for federal income tax
purposes, and holders should not
recognize any
16
taxable gain or loss or any interest
income as a result of such exchange.
See "Certain Federal Income Tax
Consequences--Exchange of Capital
Securities."
ERISA Considerations....................... Holders of Original Capital
Securities should review the
information set forth under "ERISA
Considerations" prior to tendering
Original Capital Securities in the
Exchange Offer.
The Exchange Capital Securities
Securities Offered......................... Up to and including $30,000,000
aggregate Liquidation Amount of
Exchange Capital Securities
(Liquidation Amount $1,000 per
Exchange Capital Security) will have
been registered under the Securities
Act. The Exchange Capital Securities
will be issued, and the Original
Capital Securities were issued,
under the Trust Agreement. The
Exchange Capital Securities and any
Original Capital Securities that
remain outstanding after
consummation of the Exchange Offer
will vote together as a single class
for purposes of determining whether
holders of the requisite percentage
in outstanding Liquidation Amount
thereof have taken certain actions
or exercised certain rights under
the Trust Agreement. See
"Description of Exchange
Securities--Description of Exchange
Capital Securities--Voting Rights;
Amendment of the Trust Agreement."
The terms of the Exchange Capital
Securities are identical in all
material respects to the terms of
the Original Capital Securities,
except that the Exchange Capital
Securities have been registered
under the Securities Act, will not
be subject to certain restrictions
on transfer applicable to the
Original Capital Securities and will
not provide for any increase in the
Distribution rate thereon. See "The
Exchange Offer--Purpose and Effect
of the Exchange Offer," "Description
of Exchange Securities" and
"Description of Original
Securities."
Distribution Dates......................... May 1 and November 1 of each year,
commencing November 1, 1997, (to the
extent that the Original Capital
Securities are accepted for exchange
on or prior to October 15, 1997) or
May 1, 1998 (to the extent that the
Original Capital Securities are
accepted for exchange after October
15, 1997).
Extension Periods.......................... So long as no Debenture Event of
Default has occurred and is
continuing, Distributions on
Exchange Capital Securities will be
deferred for the duration of any
Extension Period elected by the
Corporation with respect to the
payment of interest on the Exchange
Junior Subordinated Debentures. No
Extension Period will exceed 10
consecutive semi-annual periods, end
on a date other than an Interest
Payment Date or extend beyond the
Stated Maturity Date. During an
Extension Period, the
17
holders of Exchange Capital
Securities will be required to
include deferred interest income in
their gross income for United States
federal income tax purposes in
advance of any corresponding cash
distributions. See "Description of
Exchange Securities--Description of
Exchange Junior Subordinated
Debentures--Option to Extend
Interest Payment Date" and "Certain
Federal Income Tax
Consequences--Interest Income and
Original Issue Discount."
Ranking.................................... The Exchange Capital Securities will
rank pari passu, and payments
thereon will be made pro rata, with
the Original Capital Securities and
the Common Securities except as
described under "Description of
Exchange Securities--Description of
Exchange Capital
Securities--Subordination of Common
Securities." The Exchange Junior
Subordinated Debentures will rank
pari passu with the Original Junior
Subordinated Debentures and all
other junior subordinated debentures
(if any) issued by the Corporation
(the "Other Debentures"), which are
issued and sold (if at all) to other
trusts to be established by the
Corporation (if any), in each case
similar to the Trust ("Other
Trusts"), and will constitute
unsecured obligations of the
Corporation and will rank
subordinate and junior in right of
payment to all Senior Indebtedness
to the extent and in the manner set
forth in the Indenture. See
"Description of Exchange
Securities--Description of Exchange
Junior Subordinated Debentures." The
Exchange Guarantee will rank pari
passu with the Original Guarantee
and all other guarantees (if any)
issued by the Corporation with
respect to preferred beneficial
interests (if any) issued by Other
Trusts ("Other Guarantees") and will
constitute an unsecured obligation
of the Corporation and will rank
subordinate and junior in right of
payment to all Senior Indebtedness
to the extent and in the manner set
forth in the Exchange Guarantee. See
"Description of Exchange
Securities--Description of Exchange
Guarantee" In addition, because the
Corporation is a holding company,
the Exchange Junior Subordinated
Debentures and the Exchange
Guarantee will be effectively
subordinated to all existing and
future liabilities of the
Corporation's subsidiaries. See
"Description of Exchange Securities
- Description of Exchange Junior
Subordinated Debentures -
Subordination."
Redemption................................. The Trust Securities will be subject
to mandatory redemption in a Like
Amount, (i) in whole but not in
part, on the Stated Maturity Date
upon repayment of the Junior
Subordinated
18
Debentures, (ii) in whole but not in
part, at any time prior to the
Initial Optional Redemption Date,
contemporaneously with the optional
prepayment of the Junior
Subordinated Debentures by the
Corporation upon the occurrence and
continuation of a Special Event and
(iii) in whole or in part, on or
after the Initial Optional
Redemption Date, contemporaneously
with the optional prepayment by the
Corporation of all or part of the
Junior Subordinated Debentures, in
each case, at the applicable
Redemption Price. See "Description
of Exchange Securities--Description
of Exchange Capital
Securities--Redemption" and
"--Description of Exchange Junior
Subordinated Debentures--Special
Event Prepayment."
Ratings .................................. The Exchange Capital Securities are
expected to be rated BB by Duff &
Phelps Credit Rating Co. A security
rating is not a recommendation to
buy, sell or hold securities and may
be subject to revision or withdrawal
at any time by the assigning rating
organization.
Transfer Restrictions...................... The Exchange Capital Securities will
be issued, and may be transferred,
only in blocks having a Liquidation
Amount of not less than $100,000
(100 Capital Securities). See
"Description of Exchange
Securities--Description of Exchange
Capital Securities--Restrictions on
Transfer." Any such transfer of
Exchange Capital Securities in a
block having a Liquidation Amount of
less than $100,000 shall be deemed
to be void and of no legal effect
whatsoever.
ERISA Considerations....................... Prospective purchasers must
carefully consider the restrictions
on purchase set forth under "ERISA
Considerations."
Absence of Market for the
Exchange Capital Securities................ The Exchange Capital Securities will
be a new issue of securities for
which there currently is no market.
Accordingly, there can be no
assurance as to the development or
liquidity of any market for the
Exchange Capital Securities. The
Trust and the Corporation do not
intend to apply for listing of the
Exchange Capital Securities on any
securities exchange or for quotation
through Nasdaq. See "Plan of
Distribution."
Risk Factors
Prospective investors should carefully consider the matters set forth
under "Risk Factors".
19
RISK FACTORS
Prospective investors should carefully review the information contained
elsewhere in this Prospectus and should particularly consider the following
matters. In addition, information contained in, or incorporated by reference in,
this Prospectus contains "forward-looking statements" which can be identified by
the use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should," "projected," "contemplates" or "anticipates" or the negative
thereof or other variations thereon or comparable terminology. No assurance can
be given that the future results covered by the forward-looking statements will
be achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to vary
materially from the future results covered in such forward-looking statements.
Other factors, such as the general state of the economy, could also cause actual
results to vary materially from the future results covered in such
forward-looking statements.
Ranking of Subordinated Obligations Under the Exchange Guarantee and the
Exchange Junior Subordinated Debentures; Limitations on Source of Funds
The obligations of the Corporation under the Exchange Guarantee issued
by it for the benefit of the holders of Exchange Capital Securities, as well as
under the Exchange Junior Subordinated Debentures, will be unsecured and will
rank subordinate and junior in right of payment to all Senior Indebtedness to
the extent and in the manner set forth in the Exchange Guarantee and the
Indenture, respectively. No payment may be made of the principal of or premium,
if any, or interest on the Junior Subordinated Debentures, or in respect of any
redemption, retirement, purchase or other acquisition of any of the Junior
Subordinated Debentures, (i) when there shall have occurred and be continuing a
default in any payment in respect of any Senior Indebtedness, or there has been
an acceleration of the maturity thereof because of a default thereunder, or (ii)
in the event of the acceleration of the maturity of the Junior Subordinated
Debentures, until payment has been made on all Senior Indebtedness. At December
31, 1996, the Corporation had approximately $13.0 million of Senior Indebtedness
outstanding.
Because the Corporation is a holding company, the Corporation's
operations are conducted by its subsidiaries, including the Banks, which are
subject to significant federal and state regulation. As a result, the
Corporation's ability to receive dividends and loans from its subsidiaries is
restricted. As of December 31, 1996, the Banks were able to declare dividends to
the Corporation in 1997, without regulatory approval, of approximately $4.7
million. In addition, in February 1996, as part of its plan to capitalize the
Corporation's newly formed subsidiary bank, First Massachusetts Bank, N.A., at a
"well-capitalized" level for regulatory capital purposes, the Corporation
redeployed accumulated capital of $45.6 million in the form of special dividends
from certain of the Banks. Because the amounts of the special dividends exceeded
applicable regulatory limitations, the Corporation obtained the necessary
regulatory approvals to effect such redeployment. Payment of the special
dividends has significantly restricted the dividend paying capacity of the
Banks. Accordingly, payment of any dividends to the Corporation by certain of
the Banks currently requires regulatory approval on account of the
aforementioned special dividends, and payments of dividends by the Banks in the
future will require their generation of sufficient future earnings. Further, the
right of the Corporation
20
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Exchange Capital Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of such subsidiary
(including depositors in the case of the Banks), except to the extent that the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Exchange Junior Subordinated Debentures effectively will be
subordinated to all existing and future liabilities of the Corporation's
subsidiaries (including deposit liabilities of the Banks), and holders of
Exchange Junior Subordinated Debentures should look only to the assets of the
Corporation for payments on the Exchange Junior Subordinated Debentures. At
December 31, 1996, the subsidiaries of the Corporation had total liabilities
(excluding liabilities owed to the Corporation) of approximately $2.4 billion.
The Exchange Guarantee will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in right of payment to all
Senior Indebtedness to the same extent and in the same manner as the Exchange
Junior Subordinated Debentures. None of the Indenture, the Exchange Guarantee or
the Trust Agreement places any limitation on the amount of secured or unsecured
debt, including Senior Indebtedness, that may be incurred by the Corporation or
any of its subsidiaries. See "Description of Exchange Junior Subordinated
Debentures--General," "--Subordination" and "Description of Exchange
Guarantee--Status of the Exchange Guarantee." The Corporation expects from time
to time that it will incur additional indebtedness constituting Senior
Indebtedness and that its subsidiaries will incur additional liabilities.
The ability of the Trust to pay amounts due on the Exchange Capital
Securities is solely dependent upon the Corporation making payments on the
Exchange Junior Subordinated Debentures as and when required.
Option to Extend Interest Payment Period; Tax Consequences; Market Price
Consequences
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that an Extension Period must end on
an Interest Payment Date and may not extend beyond the Stated Maturity Date. As
a consequence of any such deferral, semi-annual Distributions on the Trust
Securities will be deferred from the relevant Distribution Date for such
Distributions during any such Extension Period (and the amount of Distributions
to which holders of the Trust Securities are entitled will accumulate additional
Distributions thereon at the rate of 10.52% per annum, compounded semi-annually,
but not exceeding the interest rate then accruing on the Junior Subordinated
Debentures). During an Extension Period, the Corporation generally will be
prohibited from (i) declaring or paying dividends on the Corporation's capital
stock, (ii) making payments of principal of or interest or premium, if any, on
its debt securities other than debt securities ranking senior to the Junior
Subordinated Debentures or (iii) making any guarantee payments with respect to
any guarantee by the Corporation of debt securities of any subsidiary of the
Corporation other than guarantees ranking senior to the Junior Subordinated
Debentures. See "Description of Exchange Securities--Description of Exchange
Capital Securities--Distributions."
21
Before the end of an Extension Period, the Corporation may further
extend such Extension Period, provided that such extension does not cause such
Extension Period to exceed 10 consecutive semi-annual periods, end on a date
other than an Interest Payment Date or extend beyond the Stated Maturity Date.
Upon the termination of any Extension Period and the payment of all interest
then accrued and unpaid on the Junior Subordinated Debentures (together with
interest thereon at the annual rate of 10.52%, compounded semi-annually, to the
extent permitted by applicable law), the Corporation may begin a new Extension
Period, subject to the above requirements. There is no limitation on the number
of times that the Corporation may begin an Extension Period. See "Description of
Exchange Securities--Description of Exchange Capital Securities--Distributions"
and "--Description of Exchange Junior Subordinated Debentures--Option to Extend
Interest Payment Date."
The Corporation has no plan to exercise its right to defer payments of
interest on the Junior Subordinated Debentures. However, should the Corporation
exercise its right to defer payments of interest on the Junior Subordinated
Debentures, each holder of Trust Securities will be required to accrue income
(as original issue discount ("OID")) in respect of the deferred stated interest
allocable to its Trust Securities for United States federal income tax purposes,
which will be allocated but not distributed to holders of Trust Securities. As a
result, each holder of Capital Securities will recognize income for United
States federal income tax purposes in advance of the receipt of cash and will
not receive the cash related to such income from the Trust if the holder
disposes of the Capital Securities prior to the record date for the payment of
Distributions thereafter. See "Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount" and "--Sales of Capital Securities."
If the Corporation exercises its right to defer payments of interest on
the Junior Subordinated Debentures, the market price of the Capital Securities
is likely to be affected. A holder that disposes of its Capital Securities
during an Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Capital Securities. In
addition, the mere existence of the Corporation's right to defer payments of
interest on the Junior Subordinated Debentures may cause the market price of the
Capital Securities to be more volatile than the market prices of other
securities on which OID accrues that are not subject to such deferrals.
Special Event Redemption
If a Special Event occurs before May 1, 2007, the Corporation will have
the right to prepay the Junior Subordinated Debentures in whole (but not in
part) at the Special Event Prepayment Price within 90 days following the
occurrence of such Special Event and therefore cause a mandatory redemption of
the Trust Securities at the Special Event Redemption Price. The exercise of such
right is subject to the Corporation having received any required regulatory
approvals. See "Description of Exchange Securities--Description of Exchange
Capital Securities--Redemption."
Proposed Tax Legislation
The Taxpayer Relief Act of 1997, enacted on August 5, 1997, did not
contain certain provisions of President Clinton's Fiscal 1998 Budget Proposal
(the "Proposed Legislation") that would, among other things, have denied an
issuer a deduction for United States federal income tax purposes for the payment
of interest on instruments with characteristics similar to the Junior
22
Subordinated Debentures. There can be no assurances, however, that the proposed
legislation, if enacted, or similar legislation enacted after the date hereof
would not adversely affect the tax treatment of the Junior Subordinated
Debentures, resulting in a Tax Event, which would permit the Corporation, upon
the receipt of any required regulatory approval, to cause a redemption of the
Trust Securities at the Special Event Redemption Price by electing to prepay the
Junior Subordinated Debentures at the Special Event Prepayment Price. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Redemption" and "--Description of Exchange Junior Subordinated
Debentures--Special Event Prepayment." See also "Certain Federal Income Tax
Consequences--Proposed Tax Legislation."
Liquidation Distribution of Exchange Junior Subordinated Debentures
The Corporation will have the right to terminate the Trust and, after
satisfaction of liabilities of creditors of the Trust as required by applicable
law, to cause the Junior Subordinated Debentures to be distributed to the
holders of the Trust Securities. Under current United States federal income tax
law, a distribution of Exchange Junior Subordinated Debentures upon the
liquidation of the Trust would not be a taxable event to holders of the Exchange
Capital Securities. Upon the occurrence of a Special Event, however, a
liquidation of the Trust in which the Exchange Capital Securities are redeemed
for cash would be a taxable event to the holders thereof. See "Certain Federal
Income Tax Considerations--Receipt of Junior Subordinated Debentures or Cash
Upon Liquidation of the Trust."
Possible Adverse Effect on Market Prices
There can be no assurance as to the market prices for Exchange Capital
Securities or the Exchange Junior Subordinated Debentures that may be
distributed in exchange for Exchange Capital Securities if a termination of the
Trust were to occur. Accordingly, the Exchange Capital Securities or the
Exchange Junior Subordinated Debentures may trade at a discount from the price
that the investor paid to purchase such securities. Because holders of Exchange
Capital Securities may receive Exchange Junior Subordinated Debentures in
liquidation of the Trust and because Distributions are otherwise limited to
interest payments on the Exchange Junior Subordinated Debentures, prospective
purchasers of Exchange Capital Securities are also making an investment decision
with regard to the Exchange Junior Subordinated Debentures and should carefully
review all the information regarding the Exchange Junior Subordinated Debentures
contained herein. See "Description of Exchange Securities--Description of
Exchange Capital Securities--Liquidation of the Trust and Distribution of
Exchange Junior Subordinated Debentures" and "--Description of Exchange Junior
Subordinated Debentures."
Rights Under the Exchange Guarantee
The Exchange Guarantee will guarantee to the holders of the Exchange
Capital Securities the following payments, to the extent not paid by or on
behalf of the Trust: (i) any accumulated and unpaid Distributions required to be
paid on the Exchange Capital Securities, to the extent that the Trust has funds
legally available therefor at such time; (ii) the applicable Redemption Price
with respect to the Exchange Capital Securities called for redemption, to the
extent that the Trust has funds legally available therefor at such time; and
(iii) upon a voluntary or involuntary termination, winding up or liquidation of
the Trust (unless the Exchange Junior Subordinated Debentures are distributed to
23
holders of the Exchange Capital Securities), the lesser of (a) the aggregate of
the Liquidation Amount and all accumulated and unpaid Distributions to the date
of payment, to the extent that the Trust has funds legally available therefor at
such time and (b) the amount of assets of the Trust remaining available for
distribution to holders of the Exchange Capital Securities at such time, after
the satisfaction of liabilities to creditors of the Trust as provided by
applicable law.
The holders of a majority in Liquidation Amount of the Exchange Capital
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Exchange Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Exchange Guarantee. Any holder of
the Exchange Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Exchange Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity. If the Corporation defaults on its
obligation to pay amounts payable under the Exchange Junior Subordinated
Debentures, the Trust will not have sufficient funds for the payment of
Distributions or amounts payable on redemption of the Exchange Capital
Securities or otherwise, and, in such event, holders of the Exchange Capital
Securities will not be able to rely upon the Exchange Guarantee for payment of
such amounts. Instead, if a Debenture Event of Default has occurred and is
continuing and such event is attributable to the failure of the Corporation to
pay the principal of (or premium, if any) or interest (including Additional Sums
(as defined below) and Compounded Interest (as defined below), if any) or
Liquidated Damages, if any, on the Exchange Junior Subordinated Debentures when
such payment is due and payable, then a holder of Exchange Capital Securities
may institute a legal proceeding directly against the Corporation for
enforcement of payment to such holder of the principal of (or premium, if any)
or interest (including Additional Sums and Compounded Interest, if any) or
Liquidated Damages, if any, on such Exchange Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of the Exchange
Capital Securities of such holder (a "Direct Action"). Notwithstanding any
payments made to a holder of Exchange Capital Securities by the Corporation in
connection with a Direct Action, the Corporation shall remain obligated to pay
the principal of (and premium, if any) and interest (including Additional Sums
and Compounded Interest, if any) or Liquidated Damages, if any, on the Exchange
Junior Subordinated Debentures, and the rights of the Corporation shall be
subrogated to the rights of the holder of such Exchange Capital Securities with
respect to payments on the Exchange Capital Securities to the extent of any
payments made by the Corporation to such holder in any Direct Action. Except as
described herein, holders of Exchange Capital Securities will not be able to
exercise directly any other remedy available to the holders of the Exchange
Junior Subordinated Debentures or to assert directly any other rights in respect
of the Exchange Junior Subordinated Debentures. See "Description of Exchange
Securities--Description of Exchange Junior Subordinated Debentures--Enforcement
of Certain Rights by Holders of Exchange Capital Securities," "--Debenture
Events of Default" and "Description of Exchange Securities--Description of
Exchange Guarantee." The Trust Agreement provides that each holder of Exchange
Capital Securities by acceptance thereof agrees to the provisions of the
Indenture and the Exchange Guarantee. The First National Bank of Chicago will
act as Guarantee Trustee under the Exchange Guarantee and will hold the Exchange
Guarantee for the benefit of the holders of the Exchange Capital Securities. The
First National Bank of Chicago also acts as Property Trustee under the Trust
Agreement and as Debenture Trustee under the Indenture.
24
Limited Voting Rights
Holders of Exchange Capital Securities generally will have voting
rights relating only to the modification of the Exchange Capital Securities and
the exercise of the Trust's rights as holder of Exchange Junior Subordinated
Debentures. Holders of Exchange Capital Securities will not be entitled to vote
to appoint, remove or replace, or to increase or decrease the number of, the
Issuer Trustees, which voting rights are vested exclusively in the holder of the
Common Securities except upon the occurrence of certain events described herein.
The Property Trustee, the Administrative Trustees and the Corporation may amend
the Trust Agreement without the consent of holders of Exchange Capital
Securities to ensure that the Trust will be classified for United States federal
income tax purposes as a grantor trust. Holders of Exchange Capital Securities
will have no voting rights with respect to any matters submitted to a vote of
the Corporation's stockholders. See "Description of Exchange
Securities--Description of Exchange Capital Securities--Voting Rights; Amendment
of the Trust Agreement" and "--Removal of Issuer Trustees."
Trading Characteristics of the Capital Securities
The Capital Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying Exchange
Junior Subordinated Debentures. A holder who uses the accrual method of
accounting for tax purposes (and a cash method holder, if the Exchange Junior
Subordinated Debentures are deemed to have been issued with OID) and who
disposes of its Exchange Capital Securities between record dates for payments of
Distributions thereon will be required to include accrued but unpaid interest on
the Exchange Junior Subordinated Debentures through the date of disposition in
income as ordinary income (i.e., interest or, possibly, OID), and to add such
amount to its adjusted tax basis in its share of the underlying Exchange Junior
Subordinated Debentures deemed disposed of. If the selling price is less than
the holder's adjusted tax basis (which will include all accrued but unpaid
interest), a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes. See "Certain Federal Income Tax
Considerations--Interest Income and Original Issue Discount" and "--Sales of
Capital Securities."
Consequences of a Failure to Exchange Original Capital Securities
The Original Capital Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not subject thereto, and
in each case in compliance with certain other conditions and restrictions.
Original Capital Securities that remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of
Original Capital Securities that remain outstanding will not be entitled to any
rights to have such Original Capital Securities registered under the Securities
Act or to any similar rights under the Registration Rights Agreement (subject to
certain limited exceptions). The Corporation and the Trust do not intend to
register under the Securities Act any Original Capital Securities that remain
outstanding after consummation of the Exchange Offer (subject to such limited
exceptions, if applicable). To the extent
25
that Original Capital Securities are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Original Capital Securities could
be adversely affected.
The Exchange Capital Securities and any Original Capital Securities that
remain outstanding after consummation of the Exchange Offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Trust Agreement. See "Description of
Exchange Securities--Description of Exchange Capital Securities--Voting Rights;
Amendment of the Trust
Agreement."
The Original Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed with
the Securities and Exchange Commission (the "Commission") by September 27, 1997
and declared effective by the Commission by October 27, 1997, the Distribution
rate borne by the Original Capital Securities commencing on September 27, 1997
or October 27, 1997, as the case may be, will increase by 0.25% until the
Exchange Offer is consummated. Upon consummation of the Exchange Offer, holders
of Original Capital Securities will not be entitled to any increase in the
Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See
"Description of Original Securities."
Absence of Public Market and Restrictions on Resale
The Original Capital Securities were issued to, and the Corporation
believes such securities are currently owned by, a relatively small number of
beneficial owners. The Original Capital Securities have not been registered
under the Securities Act and will be subject to restrictions on transferability
if they are not exchanged for the Exchange Capital Securities. Although the
Exchange Capital Securities may be resold or otherwise transferred by the
holders (who are not affiliates of the Corporation or the Trust) without
compliance with the registration requirements under the Securities Act, they
will constitute a new issue of securities with no established trading market.
Capital Securities may be transferred by the holders thereof only in blocks
having a Liquidation Amount of not less than $100,000 (100 Capital Securities).
In addition, any market-making activity, should it develop, will be subject to
the limits imposed by the Securities Act and the Exchange Act and may be limited
during the Exchange Offer. Accordingly, no assurance can be given that an active
public or other market will develop for the Capital Securities, or as to the
liquidity of, or the trading market for, the Exchange Capital Securities. If an
active public market does not develop, the market price and liquidity of the
Exchange Capital Securities may be adversely affected.
If a public trading market develops for the Exchange Capital Securities,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the financial condition and results of
operations of the Corporation and the market for similar securities. Depending
on these and other factors, the Exchange Capital Securities may trade at a
discount.
Notwithstanding the registration of the Exchange Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Corporation or the Trust may publicly offer for sale or
resell the Exchange Capital Securities only in compliance with the provisions of
Rule 144 under the Securities Act.
26
Each broker-dealer that receives Exchange Capital Securities for its own
account in exchange for Original Capital Securities, where such Original Capital
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
See "Plan of Distribution."
Exchange Offer Procedures
Subject to conditions set forth under "The Exchange Offer--Conditions to
the Exchange Offer," issuance of the Exchange Capital Securities in exchange for
Original Capital Securities pursuant to the Exchange Offer will be made only
after a timely receipt by the Trust of a book-entry confirmation evidencing the
tender of such Original Capital Securities through ATOP or certificates
representing such Original Capital Securities, a properly completed and duly
executed Letter of Transmittal, with any required signature guarantees, and all
other required documents. See "The Exchange Offer--Acceptance for Exchange and
Issuance of Exchange Capital Securities" and "--Procedures for Tendering
Original Capital Securities." Therefore, holders of the Original Capital
Securities desiring to tender such Original Capital Securities in exchange for
Exchange Capital Securities should allow sufficient time to ensure timely
delivery. Neither the Corporation nor the Trust is under any duty to give
notification of defects or irregularities with respect to the tenders of
Original Capital Securities for exchange.
27
BANKNORTH GROUP, INC.
The Corporation is a multi-bank holding company organized as a Delaware
corporation in 1989 as the result of the merger of two Vermont-based bank
holding companies. The Corporation is the sole owner of five Vermont banks,
namely, First Vermont Bank and Trust Company, Franklin Lamoille Bank, The Howard
Bank, N.A., Granite Savings Bank and Trust Company and Woodstock National Bank;
one Vermont limited charter bank, The Stratevest Group, N.A., a consolidated
trust subsidiary; one New Hampshire holding company, namely, North American Bank
Corporation and its sole subsidiary, Farmington National Bank; and one
Massachusetts bank, First Massachusetts Bank, N.A. The Corporation is also the
sole owner of North Group Realty, Inc., which owns real estate utilized in the
operation of the Corporation.
Acquisitions have been, and continue to be, an important part of the
expansion of the Corporation's business. On February 16, 1996, the Corporation
completed the purchase of thirteen banking offices from Shawmut Bank, N.A. A new
subsidiary, First Massachusetts Bank, N.A., with principal offices in Worcester,
Massachusetts, was organized to own and operate the acquired offices. In
addition, on October 14, 1994, the Corporation acquired North American Bank
Corporation and its sole subsidiary, Farmington National Bank. The acquisition,
which was accounted for as a purchase, was the first for the Corporation in the
state of New Hampshire.
The Corporation engages in discussions concerning potential acquisitions
from time to time, but currently has no material commitments, agreements or
understandings to acquire any additional financial institutions. The Corporation
expects to continue to take advantage of the consolidation of the financial
services industry by further developing its community bank franchise within its
own and contiguous market areas.
The Corporation's banking subsidiaries (the "Banks") offer a full range of
loan, deposit, investment products and trust services designed to meet the
financial needs of individual consumers, businesses and municipalities. Mortgage
banking services are also offered through Banknorth Mortgage Company, a
wholly-owned subsidiary of First Vermont Bank and Trust Company. These services
are currently offered throughout the states of Vermont, Massachusetts and New
Hampshire through a network of 58 banking offices.
The Corporation's network of community Banks is committed to providing
superior, efficient and personalized service to customers in chosen market
areas. To that end, operating efficiencies are achieved through the
centralization of all major support functions at the parent company level. The
Corporation's community banking management structure allows each Bank's local
management team and board of directors to focus on such Bank's customers and to
set its own loan and deposit prices in light of local competition and other
market factors.
The Corporation believes that local business and community focus, knowledge
of customers and their needs, the provision of a broad array of financial
services and products, together with decentralized decision making at the branch
and community level, enables the Corporation to effectively compete in its
chosen markets.
28
Based on total assets as of December 31, 1996, the Corporation is the
largest bank holding company headquartered in Vermont. At December 31, 1996, the
Corporation had total assets, deposits and shareholders' equity of $2.6 billion,
$2.1 billion and $206.7 million, respectively. In December 1996, the Corporation
and its subsidiaries employed 1,108 on a full-time equivalent basis.
BANKNORTH CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law upon the
filing of a certificate of trust with the Delaware Secretary of State. The Trust
exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of Trust Securities to acquire
the Junior Subordinated Debentures and (iii) engaging in only those other
activities necessary, advisable or incidental thereto. The Junior Subordinated
Debentures are and will be the sole assets of the Trust, and payments under the
Junior Subordinated Debentures will be the sole revenues of the Trust. All of
the Common Securities are owned by the Corporation. The Common Securities rank
pari passu, and payments will be made thereon pro rata, with the Capital
Securities, except that if there is an event of default under the Trust
Agreement resulting from a Debenture Event of Default, the rights of the
Corporation as holder of the Common Securities to payments in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Capital Securities. See
"Description of Exchange Capital Securities--Subordination of Common
Securities." The Corporation acquired Common Securities in an aggregate
Liquidation Amount equal to at least 3% of the total capital of the Trust. The
Trust has a term of approximately 31 years, but may be terminated earlier as
provided in the Trust Agreement. The Trust's business and affairs are conducted
by the Issuer Trustees, each appointed by the Corporation as holder of the
Common Securities. The Issuer Trustees for the Trust are The First National Bank
of Chicago, as the Property Trustee, First Chicago Delaware, Inc., as the
Delaware Trustee and the three Administrative Trustees who are officers or other
employees of the Corporation. The First National Bank of Chicago also acts as
guarantee trustee under the Guarantee and as debenture trustee under the
Indenture. See "Description of Exchange Securities--Description of Exchange
Guarantee" and "--Description of Exchange Junior Subordinated Debentures." The
holder of the Common Securities or, if an Event of Default under the Trust
Agreement has occurred and is continuing, the holders of a majority in
Liquidation Amount of the Capital Securities are entitled to appoint, remove or
replace the Property Trustee and/or the Delaware Trustee. In no event will the
holders of the Exchange Capital Securities have the right to vote to appoint,
remove or replace the Administrative Trustees; such voting rights will be vested
exclusively in the holder of the Common Securities. The duties and obligations
of each Issuer Trustee are governed by the Trust Agreement. The Corporation, as
issuer of the Junior Subordinated Debentures, has agreed to pay all fees,
expenses, debts and obligations (other than the payment of principal of, and
premium, if any, and interest on, the Trust Securities) related to the Trust and
the offering of the Capital Securities and has agreed to pay, directly or
indirectly, all ongoing costs, expenses and liabilities (other than the payment
of principal of, and premium, if any, and interest on, the Trust Securities) of
the Trust.
29
USE OF PROCEEDS
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities. In consideration for issuing
the Exchange Capital Securities in exchange for Original Capital Securities as
described in this Prospectus, the Trust will receive Original Capital Securities
in like Liquidation Amount. The Original Capital Securities surrendered in
exchange for the Exchange Capital Securities will be retired and canceled.
The proceeds to the Trust (without giving effect to expenses of the
offering payable by the Corporation) from the offering of the Original Capital
Securities was $30,000,000. All of the proceeds from the sale of the Original
Capital Securities were invested by the Trust in the Original Junior
Subordinated Debentures. The Corporation intends that the net proceeds from the
sale of the Original Junior Subordinated Debentures will be used for general
corporate purposes.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
The following table sets forth the ratios of earnings to combined fixed
charges of the Corporation on a consolidated basis for the respective periods
indicated.
Six
Months
Ended
June 30, Year Ended December 31,
---------- ----------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
Ratio of Earnings to Combined Fixed Charges:
Excluding interest on deposits ..................... 3.09x 4.35x 3.00x 2.78x 3.38x 1.75x
Including interest on deposits ..................... 1.44 1.46 1.45 1.43 1.37 1.04
For purposes of computing the ratios of earnings to combined fixed charges,
earnings represent net income (loss) before extraordinary items and cumulative
effect of changes in accounting principles plus applicable income taxes and
fixed charges. Fixed charges, excluding interest on deposits, include gross
interest expense (other than on deposits) and the proportion deemed
representative of the interest factor of rent expense, net of income from
subleases. Fixed charges, including gross interest on deposits, include all
interest expense and the proportion deemed representative of the interest factor
of rent expense, net of income from subleases.
30
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust is treated as a subsidiary of
the Corporation and, accordingly, the accounts of the Trust are included in the
consolidated financial statements of the Corporation. The Capital Securities are
shown in the consolidated balance sheets of the Corporation as
"Corporation-Obligated Mandatorily Redeemable Capital Securities of Subsidiary
Trust Holding Solely Junior Subordinated Debentures of the Corporation."
31
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Corporation as of June 30, 1997, and such capitalization as adjusted to give
effect to the consummation of the offering of the Original Securities. The
following data should be read in conjunction with the financial information and
discussion thereof included in documents incorporated by reference in this
Prospectus. See "Incorporation of Certain Documents by Reference."
June 30, 1997
---------------------
Actual
---------
(in thousands)
(unaudited)
Long-Term Borrowings:
Federal Home Loan Bank Term Notes ..................... $ 9,722
Bank term loan ........................................ 11,700
---------
Total Long-Term Borrowings ..................... 21,422
---------
Corporation-Obligated Mandatorily Redeemable Capital
Securities of Subsidiary Trust Holding Solely Junior
Subordinated Debentures of the Corporation (1) .......... 30,000
---------
Shareholders' equity:
Common stock, par value $1.00 per share, 20,000,000
shares authorized, 7,826,648 issued and outstanding 7,827
Surplus ............................................... 87,566
Retained earnings ..................................... 124,532
Unamortized employee restricted stock ................. (1,047)
Net unrealized losses on securities available for sale,
net of tax ......................................... (2,012)
---------
Total Shareholders' Equity ..................... 216,866
---------
Total Capitalization .................. $ 268,288
=========
- ----------
(1) Reflects the Original Securities. As described herein, the sole assets of
the Trust, which is a subsidiary of the Corporation, are $30,928,000
aggregate principal amount of the Junior Subordinated Debentures (including
the amounts attributable to the issuance of the Common Securities of the
Trust), which will mature on May 1, 2027. The Corporation owns all of the
Common Securities issued by the Trust.
32
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data below should be read in connection
with the financial information included in the Corporation's 1996 Annual Report
on Form 10-K for the year ended December 31, 1996 and its Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997. See "Available Information" and
"Incorporation of Certain Documents by Reference." Results for the six months
ended June 30, 1997 are not necessarily indicative of results that may be
expected for any other interim period or for the year as a whole.
================================================================================
Six Months Ended June 30, Years Ended December 31,
--------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------ --------- --------- ---------- --------- --------- ----------
(In thousands, except for share data)
Statement of Income Data:
Interest income................... 105,294 90,587 $190,008 $152,624 $124,403 $113,178 $123,671
Interest expense.................. 46,882 38,575 81,140 67,980 49,599 44,670 58,575
------------ --------- --------- ---------- --------- --------- ----------
Net interest income............... 58,412 52,012 108,868 84,644 74,804 68,508 65,096
Provision for loan losses......... 3,686 2,600 5,600 4,375 3,210 4,700 13,333
------------ --------- --------- ---------- --------- --------- ----------
Net interest income after
provision for loan losses....... 54,726 49,412 103,268 80,269 71,594 63,808 51,763
Other income...................... 13,201 12,342 25,303 20,910 19,971 24,757 23,687
Other expenses.................... 47,015 44,663 91,200 70,589 69,928 71,869 73,116
------------ --------- --------- ---------- --------- --------- ----------
Income before income taxes........ 20,912 17,091 37,371 30,590 21,637 16,696 2,334
Income tax expense................ 6,773 5,547 11,981 8,217 5,734 5,235 163
------------ --------- --------- ---------- --------- --------- ----------
Income before cumulative effect of
accounting changes................ 14,139 11,544 25,390 22,373 15,903 11,461 2,171
Cumulative effect of accounting
changes........................... 0 0 0 0 138 (3,500) 0
------------ --------- --------- ---------- --------- --------- ----------
Net income........................ $14,139 $11,544 $25,390 $22,373 $16,041 $7,961 $2,171
============ ========= ========= ========== ========= ========= ==========
Share Data:
Shares outstanding, period end.... 7,826,648 7,826,648 7,826,648 6,804,425 6,804,425 6,804,425 6,804,425
Weighted average shares outstanding 7,826,648 7,579,517 7,703,758 6,804,425 6,804,425 6,804,425 6,804,425
Tangible book value, period end... $23.42 $19.89 $21.80 $22.25 $18.54 $19.40 $18.71
Cash dividends declared........... .58 .50 1.00 0.92 0.60 0.40 0
Income before cumulative effect of
accounting changes.............. 1.81 1.52 3.30 3.29 2.34 1.68 0.32
Net income........................ 1.81 1.52 3.30 3.29 2.36 1.17 0.32
Average Balance Sheet Data:
Loans............................. $1,889,495 1,642,670 $1,730,720 $1,329,188 $1,187,773 $1,091,851 $1,125,675
Loans charged off, net of recoveries 3,243 1,676 5,825 3,717 4,744 5,436 13,330
Non-performing assets,period end.. 16,302 23,248 19,889 15,140 19,964 32,460 50,847
Total earning assets.............. 2,530,128 2,147,379 2,252,385 1,781,836 1,621,251 1,486,899 1,474,584
Total assets...................... 2,680,834 2,294,483 2,405,407 1,875,400 1,713,814 1,594,188 1,591,908
Total deposits.................... 2,072,532 1,913,164 1,989,006 1,453,878 1,306,749 1,278,284 1,374,017
Short-term borrowings............. 341,640 126,567 159,672 164,010 145,616 130,176 57,875
Long-term debt.................... 23,740 49,861 43,951 94,107 113,364 41,312 14,834
Shareholders' equity.............. 209,303 183,621 191,279 145,950 131,008 128,309 124,996
Ratios:
Return on average assets
before cumulative effect of
accounting changes................ 1.06% 1.01% 1.06% 1.19% 0.93% 0.72% 0.14%
Net income........................ 1.06 1.01 1.06 1.19 0.94 0.50 0.14
Return on average shareholders'
equity before cumulative effect of
accounting changes ............. 13.62 12.64 13.27 15.33 12.14 8.93 1.74
Return on average shareholders'
equity............................ 13.62 12.64 13.27 15.33 12.24 6.20 1.74
Net interest margin............... 4.68 4.90 4.86 4.79 4.65 4.65 4.47
Efficiency ratio.................. 61.40 62.38 62.11 65.11 69.76 72.88 75.37
Expense ratio..................... 2.47 2.62 2.59 2.70 2.84 2.96 2.98
As a percent of risk-adjusted assets:
Total capital..................... 11.72 10.37 10.35 12.48 11.86 12.95 12.71
Tier 1 capital.................... 10.55 9.12 9.11 11.22 10.61 11.70 11.45
As a percent of total assets:
Tier 1 capital (regulatory leverage) 7.94 6.72 6.91 8.05 7.41 7.96 8.19
Tangible shareholders' equity, period 6.51
end, to tangible assets, period end 6.44 6.65 7.96 6.77 7.86 8.15
33
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
In connection with the sale of the Original Capital Securities, the
Corporation and the Trust entered into the Registration Rights Agreement with
the Initial Purchaser, pursuant to which the Corporation and the Trust agreed to
file and use commercially reasonable efforts to cause to become effective with
the Commission a registration statement relating to the exchange of the New
Capital Securities for the Original Capital Securities. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations
of the Corporation and the Trust under the Registration Rights Agreement. The
form and terms of the Exchange Capital Securities are the same as the form and
terms of the Original Capital Securities except that the Exchange Capital
Securities have been registered under the Securities Act, will not be subject to
certain restrictions on transfer applicable to the Original Capital Securities
and will not provide for any increase in the Distribution rate thereon. In that
regard, the Original Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by
September 27, 1997 and declared effective by October 27, 1997, the Distribution
rate borne by the Original Capital Securities will increase by 0.25% per annum
until such registration statement is filed or declared effective, as the case
may be. In addition, the Original Capital Securities provide that, if the Trust
has not exchanged Exchange Capital Securities for all Original Capital
Securities validly tendered by the 45th day after the date on which the
registration statement is declared effective, the Distribution rate borne by the
Original Capital Securities will increase by 0.25% per annum for the period from
the occurrence of such event until the Exchange Offer has been consummated. Upon
consummation of the Exchange Offer, holders of Original Capital Securities will
not be entitled to any increase in the Distribution rate thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors--Consequences of a Failure to Exchange
Original Capital Securities" and "Description of Original Securities."
The Exchange Offer is not being made to, nor will the Trust accept
tenders for exchange from, holders of Original Capital Securities in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect
to the Exchange Offer means any person in whose name the Original Capital
Securities are registered on the books of the Trust or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose Original Capital Securities are held of record by DTC who desires
to deliver such Original Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, as soon as practicable after the
Expiration Date, the Corporation will exchange the Exchange Junior Subordinated
Debentures for the Original Junior Subordinated Debentures in a principal
amount corresponding to the Liquidation Amount of the Original Capital
Securities accepted for exchange and will execute the Exchange Guarantee in
respect of the Exchange Capital Securities exchanged for such Original Capital
Securities. The Exchange Guarantee and the Exchange Junior Subordinated
Debentures have been registered under the Securities Act.
34
Terms of the Exchange Offer
The Trust hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to and including $30,000,000 aggregate Liquidation Amount of
Exchange Capital Securities for a like aggregate Liquidation Amount of Original
Capital Securities properly tendered on or prior to the Expiration Date and not
properly withdrawn in accordance with the procedures described herein. The Trust
will issue, as soon as practicable after the Expiration Date, an aggregate
Liquidation Amount of up to and including $30,000,000 of Exchange Capital
Securities in exchange for a like Liquidation Amount of outstanding Original
Capital Securities tendered and accepted in connection with the Exchange Offer.
Holders may tender their Original Capital Securities in whole or in part in a
Liquidation Amount of not less than $100,000 (100 Capital Securities) or any
integral multiple of $1,000 Liquidation Amount (one Capital Security) in excess
thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation
Amount of Original Capital Securities being tendered. As of the date of this
Prospectus, $30,000,000 aggregate Liquidation Amount of the Original Capital
Securities is outstanding.
Holders of Original Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Original Capital
Securities that are not tendered for or are tendered but not accepted in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Trust Agreement, but will not be entitled to any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors--Consequences of a Failure to Exchange
Original Capital Securities" and "Description of Original Securities."
If any tendered Original Capital Securities are not accepted for
exchange because of an invalid tender, the occurrence of certain other events
set forth herein or otherwise, certificates for any such unaccepted Original
Capital Securities will be returned, without expense, to the tendering holder
thereof as soon as practicable after the Expiration Date.
Holders who tender Original Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Original Capital Securities in connection with the
Exchange Offer. The Corporation will pay all charges and expenses, other than
certain applicable taxes described herein, in connection with the Exchange
Offer. See "--Fees and Expenses."
NEITHER THE CORPORATION, THE BOARD OF DIRECTORS OF THE CORPORATION NOR
ANY ISSUER TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF ORIGINAL
CAPITAL SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY
PORTION OF THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN
ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. EACH
HOLDER OF ORIGINAL CAPITAL SECURITIES MUST DECIDE WHETHER TO TENDER PURSUANT TO
THE EXCHANGE OFFER AND, IF SO, THE LIQUIDATION AMOUNT OF ORIGINAL CAPITAL
SECURITIES TO TENDER BASED ON SUCH HOLDER'S OWN FINANCIAL POSITION AND
REQUIREMENTS.
35
Expiration Date, Extensions, Amendments
The term "Expiration Date" means 5:00 p.m., New York City time, on ,
1997 unless the Exchange Offer is extended by the Corporation or the Trust (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Corporation and the Trust expressly reserve the right in their sole
and absolute discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Original Capital Securities for
exchange, (ii) to terminate the Exchange Offer (whether or not any Original
Capital Securities have theretofore been accepted for exchange) if the Trust
determines, in its sole and absolute discretion that if any of the events or
conditions referred to under "--Conditions to the Exchange Offer" have occurred
or exist or have not been satisfied, (iii) to extend the Expiration Date of the
Exchange Offer and retain all Original Capital Securities tendered pursuant to
the Exchange Offer, subject, however, to the right of holders of Original
Capital Securities to withdraw their tendered Original Capital Securities as
described under "--Withdrawal Rights," and (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in any respect. If the Exchange
Offer is amended in a manner determined by the Corporation and the Trust to
constitute a material change, or if the Corporation and the Trust waive a
material condition of the Exchange Offer, the Corporation and the Trust will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the holders of the Original Capital Securities, and the
Corporation and the Trust will extend the Exchange Offer to the extent required
by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will
be followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
Business Day (as defined herein) after the previously scheduled Expiration Date.
Without limiting the manner in which the Corporation and the Trust may choose to
make any public announcement and subject to applicable laws, the Corporation and
the Trust shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to an
appropriate news agency.
Acceptance for Exchange and Issuance of Exchange Capital Securities
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, Exchange Capital
Securities for Original Capital Securities validly tendered and not withdrawn
promptly after the Expiration Date.
In all cases, delivery of Exchange Capital Securities in exchange for
Original Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(i) the book-entry confirmation described below under "--Procedures for
Tendering Original Capital Securities--Book-Entry Transfer" or (ii) certificates
representing such Original Capital Securities, and the Letter of Transmittal (or
facsimile thereof) properly completed and duly executed, with any required
signature guarantees, and any other documents required by the Letter of
Transmittal.
Subject to the terms and conditions of the Exchange Offer, the Trust
will be deemed to have accepted for exchange, and thereby exchanged, Original
Capital Securities validly tendered and not withdrawn as, if and when the Trust
gives oral or written notice to the Exchange Agent (any such oral notice to be
promptly confirmed in writing) of the Trust's acceptance of such Original
Capital
36
Securities for exchange pursuant to the Exchange Offer. The Exchange Agent will
act as agent for the Trust for the purpose of receiving tenders of book-entry
confirmations or certificates representing Original Capital Securities, Letters
of Transmittal and related documents, and as agent for tendering holders for the
purpose of receiving book-entry confirmations or certificates representing
Original Capital Securities, Letters of Transmittal and related documents and
transmitting Exchange Capital Securities to validly tendering holders. Such
exchange will be made as soon as practicable after the Expiration Date. If for
any reason whatsoever, acceptance for exchange or the exchange of any Original
Capital Securities tendered pursuant to the Exchange Offer is delayed (whether
before or after the Trust's acceptance for exchange of Original Capital
Securities) or the Trust extends the Exchange Offer or is unable to accept for
exchange or exchange Original Capital Securities tendered pursuant to the
Exchange Offer, then, without prejudice to the Trust's rights set forth herein,
the Exchange Agent may, nevertheless, on behalf of the Trust and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Original Capital Securities and
such Original Capital Securities may not be withdrawn except to the extent
tendering holders are entitled to withdrawal rights as described under
"--Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Original Capital
Securities will represent, warrant and agree that it has full power and
authority to tender, exchange, sell, assign and transfer Original Capital
Securities, that the Trust will acquire good, marketable and unencumbered title
to the tendered Original Capital Securities, free and clear of all liens,
restrictions, charges and encumbrances, and the Original Capital Securities
tendered for exchange are not subject to any adverse claims or proxies. The
holder also will represent, warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Trust or the Exchange
Agent to be necessary or desirable to complete the exchange, sale, assignment,
and transfer of the Original Capital Securities tendered pursuant to the
Exchange Offer. Tendering holders of Original Capital Securities that use ATOP
will, by doing so, acknowledge that they are bound by the terms of the Letter of
Transmittal.
Procedures for Tendering Original Capital Securities
Valid Tender. Except as set forth herein, in order for Original Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees and any other required documents, must be
received by the Exchange Agent at its address set forth under "--Exchange
Agent," and (i) tendered Original Capital Securities must be received by the
Exchange Agent, or (ii) such Original Capital Securities must be tendered
pursuant to the procedures for book-entry transfer set forth herein and a
book-entry confirmation must be received by the Exchange Agent, in each case on
or prior to the Expiration Date, or (iii) the guaranteed delivery procedures set
forth herein must be complied with.
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the Liquidation Amount of Original Capital
Securities being tendered in the appropriate box on the Letter of Transmittal or
so indicate in an agent's message in lieu of the Letter of Transmittal. The
entire Liquidation Amount of Original Capital Securities delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF THE BOOK-ENTRY CONFIRMATIONS OR CERTIFICATES,
THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND
SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE
37
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. For purposes of the Exchange Offer, the Exchange
Agent will establish an account with respect to the Original Capital Securities
at DTC within two Business Days after the date of this Prospectus. Any tendering
financial institution that is a participant in DTC's book-entry transfer
facility system must make a book-entry delivery of the Original Capital
Securities by causing DTC to transfer such Original Capital Securities into the
Exchange Agent's account at DTC in accordance with DTC's ATOP procedures for
transfers. Such holder of Original Capital Securities using ATOP should transmit
its acceptance to DTC on or prior to the Expiration Date (or comply with the
guaranteed delivery procedures set forth below). DTC will verify such
acceptance, execute a book-entry transfer of the tendered Original Capital
Securities into the Exchange Agent's account at DTC and then send to the
Exchange Agent confirmation of such book-entry transfer, including an agent's
message confirming that DTC has received an express acknowledgment from such
holder that such holder has received and agrees to be bound by the Letter of
Transmittal and that the Trust and the Corporation may enforce the Letter of
Transmittal against such holder (a "book-entry confirmation").
A beneficial owner of Original Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial owner wishes to participate in the Exchange Offer.
Certificates. If the tender is not made through ATOP, certificates
representing Original Capital Securities, as well as the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other required documents required by the Letter of
Transmittal, must be received by the Exchange Agent at its address set forth
under "--Exchange Agent" on or prior to the Expiration Date in order for such
tender to be effective (or the guaranteed delivery procedure set forth herein
must be complied with).
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the Liquidation Amount of Original Capital
Securities being tendered in the appropriate box on the Letter of Transmittal.
The entire Liquidation Amount of Original Capital Securities delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
Signature Guarantees. Certificates for the Original Capital Securities
need not be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (i) a certificate for the Original Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (ii) such holder completes the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" in the Letter of Transmittal. In the case of
(i) or (ii) above, such certificates for Original Capital Securities must be
duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the Letter of Transmittal
guaranteed by a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein): (a) a bank; (b) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (c) a credit union;
(d) a national securities exchange, registered securities association or
clearing agency; or (e) a savings association that is a participant in a
Securities Transfer Association (each of the foregoing, an "Eligible
Institution"), unless surrendered on behalf of such Eligible Institution. See
Instruction 1 to the Letter of Transmittal.
38
Delivery. The method of delivery of the book-entry confirmation or
certificates representing tendered Original Capital Securities, the Letter of
Transmittal, and all other required documents is at the option and sole risk of
the tendering holder, and delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail, return
receipt requested, properly insured, or an overnight delivery service is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
Notwithstanding any other provision hereof, the delivery of Exchange
Capital Securities in exchange for Original Capital Securities tendered and
accepted for exchange pursuant to the Exchange Offer will in all cases be made
only after timely receipt by the Exchange Agent of (i) a book-entry confirmation
with respect to such Original Capital Securities or (ii) certificates
representing Original Capital Securities and a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees and any other documents required by the Letter of
Transmittal. Accordingly, the delivery of Exchange Capital Securities might not
be made to all tendering holders at the same time and will depend upon when
book-entry confirmations with respect to Original Capital Securities or
certificates representing Original Capital Securities and other required
documents are received by the Exchange Agent.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Guaranteed Delivery. If a holder desires to tender Original Capital
Securities pursuant to the Exchange Offer and the certificates for such Original
Capital Securities are not immediately available or time will not permit all
required documents to reach the Exchange Agent on or prior to the Expiration
Date, or the procedure for book-entry transfer cannot be completed on a timely
basis, such Original Capital Securities may nevertheless be tendered, provided
that all of the following guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed notice to the Exchange
Agent guaranteeing delivery to the Exchange Agent of either certificates
representing Original Capital Securities or a book-entry confirmation in
compliance with the requirements set forth herein (a "Notice of Guaranteed
Delivery"), substantially in the form accompanying the Letter of Transmittal, is
received by the Exchange Agent, as provided herein, on or prior to Expiration
Date; and
(iii) a book-entry confirmation or the certificates representing all
tendered Original Capital Securities, in proper form for transfer, together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other documents
required by the Letter of Transmittal, are, in any case, received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
The Trust's acceptance for exchange of Original Capital Securities
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering holder and the Trust upon the terms and
subject to the conditions of the Exchange Offer.
39
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Original Capital Securities will be determined by the Corporation
and the Trust, in their sole discretion, whose determination shall be final and
binding on all parties. The Corporation and the Trust reserve the absolute
right, in their sole and absolute discretion, to reject any and all tenders
determined by them not to be in proper form or the acceptance of which, or
exchange for, may, in the opinion of counsel to the Corporation and the Trust,
be unlawful. The Corporation and the Trust also reserve the absolute right,
subject to applicable law, to waive any of the conditions of the Exchange Offer
as set forth under "--Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Original Capital Securities of any particular
holder, whether or not similar conditions or irregularities are waived in the
case of other holders.
The interpretation by the Corporation and the Trust of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Original Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. None of the Corporation,
the Trust, any affiliates or assigns of the Corporation or the Trust, the
Exchange Agent or any other person shall be under any duty to give any
notification of any irregularities in tenders or incur any liability for failure
to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of
attorney, or any other document required by the Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the
Corporation and the Trust, proper evidence satisfactory to the Corporation and
the Trust, in their sole discretion, of such person's authority to so act must
be submitted.
Resales of Exchange Capital Securities
The Trust is making the Exchange Offer for the Exchange Capital
Securities in reliance on the position of the Staff of the Commission as set
forth in certain interpretive letters addressed to third parties in other
transactions. However, neither the Corporation nor the Trust sought its own
interpretive letter and there can be no assurance that the Staff of the
Commission would make a similar determination with respect to the Exchange Offer
as it has in such interpretive letters to third parties. Based on these
interpretations by the Staff of the Commission, and subject to the two
immediately following sentences, the Corporation and the Trust believe that
Exchange Capital Securities issued pursuant to the Exchange Offer in exchange
for Original Capital Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a holder who is a broker-dealer)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. However, any holder of
Original Capital Securities who is an "affiliate" of the Corporation or the
Trust or who intends to participate in the Exchange Offer for the purpose of
distributing Exchange Capital Securities, or any broker-dealer who purchased
Original Capital Securities from the Trust for resale pursuant to Rule 144A or
any other available exemption under the Securities Act, (i) will not be able to
rely on the interpretations of the Staff of the Commission set forth in the
above-mentioned interpretive letters, (ii) will not be permitted or entitled to
tender such Original Capital Securities in the Exchange Offer and (iii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or
40
other transfer of such Original Capital Securities unless such sale is made
pursuant to an exemption from such requirements. In addition, as described
herein, if any broker-dealer holds Original Capital Securities acquired for its
own account as a result of market-making or other trading activities and
exchanges such New Capital Securities for Original Capital Securities, then such
broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such Exchange Capital
Securities.
Each holder of Original Capital Securities who wishes to exchange
Original Capital Securities for Exchange Capital Securities in the Exchange
Offer will be required to represent that (i) it is not an "affiliate" of the
Corporation or the Trust, (ii) any Exchange Capital Securities to be received by
it are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Capital Securities,
and (iv) if such holder is not a broker-dealer, such holder is not engaged in,
and does not intend to engage in, a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. In addition, the
Corporation and the Trust may require such holder, as a condition to such
holder's eligibility to participate in the Exchange Offer, to furnish to the
Corporation and the Trust (or an agent thereof) in writing information as to the
number of "beneficial owners" (within the meaning of Rule 13d-3 under the
Exchange Act) on behalf of whom such holder holds the Original Capital
Securities to be exchanged in the Exchange Offer. Each broker-dealer that
receives Exchange Capital Securities for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Original Capital Securities
for its own account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Capital Securities. The Letter of Transmittal states that, by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the Staff of the Commission in the interpretive
letters referred to above, the Corporation and the Trust believe that
Participating Broker-Dealers who acquired Original Capital Securities for their
own accounts as a result of market-making activities or other trading activities
may fulfill their prospectus delivery requirements with respect to the Exchange
Capital Securities received upon exchange of such Original Capital Securities
(other than Original Capital Securities which represent an unsold allotment from
the initial sale of the Original Capital Securities) with a prospectus meeting
the requirements of the Securities Act, which may be the prospectus prepared for
an exchange offer so long as it contains a description of the plan of
distribution with respect to the resale of such Exchange Capital Securities.
Accordingly, this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer during the period referred to
below in connection with resales of Exchange Capital Securities received in
exchange for Original Capital Securities where such Original Capital Securities
were acquired by such Participating Broker-Dealer for its own account as a
result of market-making or other trading activities. Subject to certain
provisions set forth in the Registration Rights Agreement, the Corporation and
the Trust have agreed that this Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer in connection
with resales of such Exchange Capital Securities for a period ending 90 days
after the Expiration Date (subject to extension under certain limited
circumstances described herein) or, if earlier, when all such Exchange Capital
Securities have been disposed of by such Participating Broker-Dealer. See "Plan
of Distribution." However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of Exchange Capital Securities received
in exchange for Original Capital Securities pursuant to the Exchange Offer must
notify the Corporation or the Trust, or cause the Corporation or the Trust to be
notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at its
address set forth herein under
41
"--Exchange Agent." Any Participating Broker-Dealer who is an "affiliate" of the
Corporation or the Trust may not rely on such interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders
Original Capital Securities pursuant to the Exchange Offer will be deemed to
have agreed, by execution of the Letter of Transmittal, that, upon receipt of
notice from the Corporation or the Trust of the occurrence of any event or the
discovery of (i) any fact that makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect or (ii) any fact
that causes this Prospectus to omit to state a material fact necessary in order
to make the statements contained or incorporated by reference herein, in the
light of the circumstances under which they were made, not misleading, or of the
occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) pursuant to this Prospectus until the
Corporation or the Trust has amended or supplemented this Prospectus to correct
such misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer, or the Corporation
or the Trust has given notice that the sale of the Exchange Capital Securities
(or the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the Corporation or the Trust
gives such notice to suspend the sale of the Exchange Capital Securities (or the
Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable), it shall extend the 90-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in connection
with the resale of Exchange Capital Securities by the number of days during the
period from and including the date of the giving of such notice to and including
the date when Participating Broker-Dealers shall have received copies of the
amended or supplemented Prospectus necessary to permit resales of the Exchange
Capital Securities or to and including the date on which the Corporation or the
Trust has given notice that the sale of Exchange Capital Securities (or the
Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be.
Withdrawal Rights
Except as otherwise provided herein, tenders of Original Capital
Securities may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective, a written, telegraphic or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under "--Exchange Agent" on or prior
to the Expiration Date. Any such notice of withdrawal must specify the name of
the person who tendered the Original Capital Securities to be withdrawn, the
aggregate Liquidation Amount of Original Capital Securities to be withdrawn, and
(if certificates for such Original Capital Securities have been tendered) the
name of the registered holder of the Original Capital Securities as set forth on
the certificates if different from that of the person who tendered such Original
Capital Securities. If certificates representing Original Capital Securities
have been delivered or otherwise identified to the Exchange Agent, then prior to
the physical release of such certificates, the tendering holder must submit the
serial numbers shown on the particular certificates to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Original Capital Securities tendered for the
account of an Eligible Institution. If Original Capital Securities have been
tendered pursuant to the procedures for book-entry transfer set forth in
"--Procedures for Tendering Original Capital Securities--Book-Entry Transfer,"
the notice of withdrawal must specify the name and number of the account at DTC
to be
42
credited with the withdrawal of Original Capital Securities. Withdrawals of
tenders of Original Capital Securities may not be rescinded. Original Capital
Securities properly withdrawn will not be deemed validly tendered for purposes
of the Exchange Offer, but may be retendered at any subsequent time on or prior
to the Expiration Date by following any of the procedures described above under
"--Procedures for Tendering Original Capital Securities."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Trust, in its
sole discretion, whose determination shall be final and binding on all parties.
None of the Corporation, the Trust, any affiliates or assigns of the Corporation
or the Trust, the Exchange Agent or any other person shall be under any duty to
give any notification of any irregularities in any notice of withdrawal or incur
any liability for failure to give any such notification. Any Original Capital
Securities that have been tendered but are withdrawn will be returned to the
holder thereof promptly after withdrawal.
Distributions on the Exchange Capital Securities
Holders of Original Capital Securities whose Original Capital
Securities are accepted for exchange on or prior to October 15, 1997 will not
receive Distributions on such Original Capital Securities and will be deemed to
have waived the right to receive any Distributions on such Original Capital
Securities accumulated from and including May 1, 1997. Accordingly, holders of
Exchange Capital Securities as of the close of business on October 15, 1997
will be entitled to receive Distributions accumulated from and including
May 1, 1997. To the extent that the Original Capital Securities are accepted for
exchange after October 15, 1997, holders of Exchange Capital Securities will be
entitled to receive Distributions accumulated from and including November 1,
1997.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Corporation and the Trust will not be
required to accept for exchange, or to exchange, any Original Capital Securities
for any Exchange Capital Securities, and, as described herein, may terminate the
Exchange Offer (whether or not any Original Capital Securities have theretofore
been accepted for exchange) or may waive any conditions to or amend the Exchange
Offer, if any of the following conditions have occurred or exists or have not
been satisfied:
(i) there shall occur a change in the current interpretation by the
Staff of the Commission that permits the Exchange Capital Securities issued
pursuant to the Exchange Offer in exchange for Original Capital Securities to be
offered for resale, resold and otherwise transferred by holders thereof (other
than broker-dealers and any such holder that is an "affiliate" of the
Corporation or the Trust within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Exchange Capital Securities are
acquired in the ordinary course of such holders' business and such holders have
no arrangement or understanding with any person to participate in the
distribution of such Exchange Capital Securities; or
(ii) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of Corporation or the Trust, would reasonably be
expected to impair its ability to proceed with the Exchange Offer; or
(iii) a stop order shall have been issued by the Commission or any
state securities authority suspending the effectiveness of the Registration
Statement, or proceedings shall have been initiated or, to the knowledge of the
Corporation or the Trust, threatened for that purpose, or any governmental
43
approval has not been obtained, which approval the Corporation or the Trust
shall, in its sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby; or
(iv) the Corporation shall have determined in good faith that there is
a reasonable likelihood that, or a material uncertainty exists as to whether,
consummation of the Exchange Offer would result in an adverse tax consequence to
the Trust or the Corporation.
If the Corporation or the Trust determine in its sole and absolute
discretion that any of the foregoing events or conditions has occurred or exists
or has not been satisfied, it may, subject to applicable law, terminate the
Exchange Offer (whether or not any Original Capital Securities have theretofore
been accepted for exchange) or may waive any such condition or otherwise amend
the terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Corporation or the
Trust will promptly disclose such waiver or amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Original
Capital Securities and will extend the Exchange Offer to the extent required by
Rule 14e-1 under the Exchange Act.
Exchange Agent
The First National Bank of Chicago has been appointed as Exchange Agent
for the Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
By Mail:
(Registered or Certified
Mail Recommended)
The First National Bank of
Chicago
153 West 51st Street
5th Floor,
New York, New York
10019
Facsimile Transmitter:
(Eligible Institutions Only)
(212) 240-8938
To Confirm by Telephone
(212) 240-8801
By Hand or Overnight
Delivery:
The First National Bank of
Chicago
153 West 51st Street
5th Floor
New York, New York
10019
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
Fees and Expenses
The Corporation has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Corporation will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Original Capital Securities,
and in handling or tendering for their customers.
Holders who tender their Original Capital Securities for exchange will
not be obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Capital Securities are to be
44
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Original Capital Securities tendered, or if a transfer
tax is imposed for any reason other than the exchange of Original Capital
Securities in connection with the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
Neither the Corporation nor the Trust will make any payment to brokers,
dealers or others soliciting acceptances of the Exchange Offer.
The Registration Rights Agreement is governed by, and construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the Registration Rights Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Registration Rights Agreement, a form of which is
available upon request to the Corporation. See "Incorporation of Certain
Documents by Reference." In addition, the information set forth above concerning
certain interpretations of and positions taken by the Staff of the Commission is
not intended to constitute legal advice, and prospective investors should
consult their own legal advisors with respect to such matters.
DESCRIPTION OF EXCHANGE SECURITIES
Description of Exchange Capital Securities
Pursuant to the terms of the Trust Agreement, the Trust will issue the
Exchange Capital Securities. The Exchange Capital Securities will represent
beneficial interests in the Trust and the holders thereof will be entitled to a
preference over the Common Securities in certain circumstances with respect to
Distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Trust. See "--Subordination of Common Securities." The Trust
Agreement has been qualified under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). This summary of certain provisions of the Exchange
Capital Securities and the Trust Agreement does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, all of the
provisions of the Trust Agreement, including the definitions therein of certain
terms.
General. The Exchange Capital Securities will be limited to $30,000,000
aggregate Liquidation Amount at any one time outstanding. The Exchange Capital
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Original Capital Securities and the Common Securities except as
described under "--Subordination of Common Securities." Legal title to the
Exchange Junior Subordinated Debentures will be held by the Property Trustee on
behalf of the Trust in trust for the benefit of the holders of the Exchange
Capital Securities and the related Common Securities. The Exchange Guarantee
will not guarantee payment of Distributions or amounts payable on redemption of
the Exchange Capital Securities or liquidation of the Trust when the Trust does
not have funds legally available for such payments. See "--Description of
Exchange Guarantee."
Distributions. Distributions on the Exchange Capital Securities will be
cumulative, will accumulate from May 1, 1997 (to the extent that the Original
Capital Securities are accepted for exchange on or prior to October 15, 1997) or
November 1, 1997 (to the extent that the Original Capital Securities are
accepted for exchange after October 15, 1997) and will be payable semi-annually
in arrears on May 1 and November 1 of each year, commencing November 1, 1997 or
May 1, 1998, as the case may be, at the annual rate of 10.52% of the Liquidation
Amount to the holders of the Exchange Capital Securities on the relevant record
dates. The record dates will be the 15th day of the month next preceding that in
which the relevant
45
Distribution Date (as defined herein) falls. The amount of Distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which Distributions are payable on the
Exchange Capital Securities is not a Business Day (as defined below), payment of
the Distributions payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect to
any such delay), with the same force and effect as if made on such date (each
date on which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). A "Business Day" shall mean any day other than a Saturday
or a Sunday, or a day on which banking institutions in New York, New York or
Burlington, Vermont are authorized or required by law or executive order to
remain closed.
So long as no Debenture Event of Default has occurred and is
continuing, the Corporation will have the right under the Indenture to elect to
defer the payment of interest on the Junior Subordinated Debentures at any time
or from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each Extension Period, provided that no Extension Period
shall end on a date other than an Interest Payment Date or extend beyond the
Stated Maturity Date. Upon any such election, semi-annual Distributions on the
Capital Securities will be deferred by the Trust during such Extension Period.
Distributions to which holders of the Capital Securities are entitled during any
such Extension Period will accumulate additional Distributions thereon at the
rate per annum of 10.52% thereof, compounded semi-annually from the relevant
Distribution Date, but not exceeding the interest rate then accruing on the
Junior Subordinated Debentures. The term "Distributions," as used herein shall
include any such additional Distributions.
Prior to the termination of any Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods, to end
on a date other than an Interest Payment Date or to extend beyond the Stated
Maturity Date. Upon the termination of any such Extension Period and the payment
of all amounts then due on the applicable Interest Payment Date, the Corporation
may elect to begin a new Extension Period, subject to the above requirements. No
interest shall be due and payable during an Extension Period, except at the end
thereof. The Corporation must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of any Extension
Period (or an extension thereof) at least five Business Days prior to the
earlier of (i) the date the Distributions on the Exchange Capital Securities
would have been payable except for the election to begin such Extension Period
and (ii) the date the Trust is required to give notice to any securities
exchange or automated quotation system or to holders of the Exchange Capital
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record date. There is
no limitation on the number of times that the Corporation may elect to begin an
Extension Period. See "--Description of Exchange Junior Subordinated
Debentures--Option to Extend Interest Payment Date" and "Certain Federal Income
Tax Consequences--Interest Income and Original Issue Discount."
During any Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock,
(ii) make any payment of principal of or premium, if any, or interest on or
repay, repurchase or redeem any debt securities of the Corporation (including
Other Debentures) that rank pari passu with or junior in right of payment to the
Junior Subordinated Debentures or (iii) make any guarantee payments with respect
to any guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation (including Other Guarantees) if such guarantee ranks pari passu
with or junior in right of payment to the Junior Subordinated Debentures (other
than (a) dividends or distributions in shares of, or options, warrants or rights
to subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the
46
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee, (d) as a result of a
reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for another
class or series of the Corporation's capital stock, (e) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged and (f) purchases of common stock of the
Corporation related to the issuance of common stock or rights under any of the
Corporation's benefit or compensation plans for its directors, officers or
employees or any of the Corporation's dividend reinvestment plans). The
Corporation has no current intention to exercise its option to defer payments of
interest on the Junior Subordinated Debentures thereby triggering a deferral of
Distributions on the Trust Securities.
The revenue of the Trust available for distribution to holders of the
Exchange Capital Securities will be limited to payments under the Exchange
Junior Subordinated Debentures in which the Trust will invest the proceeds from
the issuance and sale of the Trust Securities. See "--Description of Exchange
Junior Subordinated Debentures--General." If the Corporation does not make
interest payments on the Exchange Junior Subordinated Debentures, the Property
Trustee will not have funds available to pay Distributions on the Exchange
Capital Securities. The payment of Distributions on the Exchange Capital
Securities (if and to the extent the Trust has funds legally available for the
payment of such Distributions) will be guaranteed by the Corporation on a
limited basis as set forth herein under "--Description of Exchange Guarantee."
Redemption. Upon the repayment on the Stated Maturity Date or
prepayment in whole or in part prior to the Stated Maturity Date of the Junior
Subordinated Debentures (other than following the distribution of the Junior
Subordinated Debentures to the holders of the Trust Securities), the proceeds
from such repayment or prepayment shall be applied by the Property Trustee to
redeem a Like Amount (as defined below) of the Trust Securities, upon not less
than 30 nor more than 60 days' prior written notice of a date of redemption (the
"Redemption Date"), at the applicable Redemption Price, which shall be equal to
(i) in the case of the repayment of the Junior Subordinated Debentures on the
Stated Maturity Date, the Maturity Redemption Price (equal to the principal of,
and accrued and unpaid interest on, the Junior Subordinated Debentures), (ii) in
the case of the optional prepayment of the Junior Subordinated Debentures before
the Initial Optional Redemption Date upon the occurrence and continuation of a
Special Event (as defined herein), the Special Event Redemption Price (equal to
the Special Event Prepayment Price in respect of the Junior Subordinated
Debentures) and (iii) in the case of the optional prepayment of the Junior
Subordinated Debentures on or after the Initial Optional Redemption Date, the
Optional Redemption Price (equal to the Optional Prepayment Price in respect of
the Junior Subordinated Debentures). See "--Description of Exchange Junior
Subordinated Debentures--Optional Prepayment" and "--Special Event Prepayment."
If less than all of the Exchange Junior Subordinated Debentures are to be
prepaid prior to the Stated Maturity Date, then the proceeds of such prepayment
shall be allocated pro rata to the Trust Securities. If less than all of the
Capital Securities held in book-entry form are to be redeemed, such Capital
Securities will be redeemed in accordance with the procedures of DTC as
described under "--Form, Denomination, Book-Entry Procedures and Transfer."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Junior Subordinated Debentures to be paid in accordance with their
terms and (ii) with respect to a distribution of Junior Subordinated Debentures
upon the liquidation of the Trust, Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
holder to whom such Junior Subordinated Debentures are distributed.
47
The Corporation will have the option to prepay the Exchange Junior
Subordinated Debentures, (i) in whole or in part, on or after the Initial
Optional Redemption Date, at the applicable Optional Prepayment Price and (ii)
in whole but not in part, at any time prior to the Initial Optional Redemption
Date, upon the occurrence of a Special Event, at the Special Event Prepayment
Price, in each case subject to the receipt of any required regulatory approvals.
See "--Description of Exchange Junior Subordinated Debentures--Optional
Prepayment" and "--Special Event Prepayment."
Liquidation of the Trust and Distribution of Exchange Junior
Subordinated Debentures. The Corporation will have the right at any time to
terminate the Trust and, after satisfaction of liabilities to creditors of the
Trust as required by applicable law, to cause the Junior Subordinated Debentures
to be distributed to the holders of the Trust Securities in liquidation of the
Trust. Such right is subject to the Corporation's having received (i) an opinion
of counsel to the effect that such distribution will not cause the holders of
Capital Securities to recognize gain or loss for federal income tax purposes and
(ii) any required regulatory approvals.
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Junior Subordinated Debentures to
the holders of the Trust Securities, if the Corporation, as Sponsor, has given
written direction to the Property Trustee to terminate the Trust (which
direction is optional and, except as described above, wholly within the
discretion of the Corporation, as Sponsor); (iii) redemption of all of the Trust
Securities as described under "--Redemption;" (iv) expiration of the term of the
Trust; and (v) the entry of an order for the dissolution of the Trust by a court
of competent jurisdiction.
If a termination occurs as described in clause (i), (ii), (iv), or (v)
above, the Trust shall be liquidated by the Issuer Trustees as expeditiously as
the Issuer Trustees determine to be possible by distributing, after satisfaction
of liabilities to creditors of the Trust as provided by applicable law, to the
holders of the Trust Securities a Like Amount of the Junior Subordinated
Debentures, unless such distribution is determined by the Property Trustee not
to be practicable, in which event such holders will be entitled to receive out
of the assets of the Trust legally available for distribution to holders, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, an amount equal to the aggregate of the Liquidation Amount plus accumulated
and unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because the Trust has insufficient assets legally available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on the Trust Securities shall be paid on a pro rata basis, except
that if a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a priority over the Common Securities in respect of such
amounts. See "--Subordination of Common Securities." If an early termination
occurs, the Junior Subordinated Debentures will be subject to optional
prepayment, in whole or in part, on or after the Initial Optional Redemption
Date, unless such termination relates to the circumstances described in clause
(v) above, in which case the Junior Subordinated Debentures will be subject to
optional prepayment, in whole, but not in part, on or after the Initial Optional
Redemption Date.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee
will receive, in respect of each Global Capital Security held by it, a
registered global certificate representing the Junior Subordinated Debentures to
be delivered upon such distribution and (iii) any certificates representing
Trust Securities not held by DTC or its nominee will be deemed to represent
Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of such Trust Securities, and bearing accrued and unpaid
interest in an
48
amount equal to the accumulated and unpaid Distributions on such Trust
Securities until such certificates are presented to the Administrative Trustees
or their agent for cancellation, whereupon the Corporation will issue to such
holder, and the Debenture Trustee will authenticate, a certificate representing
such Junior Subordinated Debentures.
There can be no assurance as to the market prices for the Exchange
Capital Securities or the Exchange Junior Subordinated Debentures that may be
distributed in exchange for the Trust Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Exchange Capital
Securities that an investor may purchase, or the Exchange Junior Subordinated
Debentures that the investor may receive on dissolution and liquidation of the
Trust, may trade at a discount to the price that the investor paid to purchase
such securities.
Redemption Procedures. If applicable, Trust Securities shall be
redeemed at the applicable Redemption Price with the proceeds from the
contemporaneous repayment or prepayment of the Junior Subordinated Debentures.
Any redemption of Trust Securities shall be made and the applicable Redemption
Price shall be payable on the Redemption Date only to the extent that the Trust
has funds legally available for the payment of such applicable Redemption Price.
See "--Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the Exchange
Capital Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, to the extent funds are legally available, with respect to the Exchange
Capital Securities held by DTC or its nominees, the Property Trustee will
deposit or cause the Paying Agent (as defined herein) to deposit irrevocably
with DTC funds sufficient to pay the applicable Redemption Price. See "--Form,
Denomination, Book-Entry Procedures and Transfer." With respect to the Exchange
Capital Securities held in certificated form, the Property Trustee, to the
extent funds are legally available, will irrevocably deposit with the paying
agent for the Exchange Capital Securities funds sufficient to pay the applicable
Redemption Price and will give such paying agent irrevocable instructions and
authority to pay the applicable Redemption Price to the holders thereof upon
surrender of their certificates evidencing the Exchange Capital Securities. See
"--Payment and Paying Agency." Notwithstanding the foregoing, Distributions
payable on or prior to the Redemption Date shall be payable to the holders of
such Exchange Capital Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of the Exchange Capital Securities called for redemption will cease,
except the right of the holders of such Exchange Capital Securities to receive
the applicable Redemption Price, but without interest on such Redemption Price,
and such Exchange Capital Securities will cease to be outstanding. In the event
that any Redemption Date of Exchange Capital Securities is not a Business Day,
then the applicable Redemption Price payable on such date will be paid on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), with the same force and effect as if made
on such date, except that, if such next succeeding Business Day falls in the
next calendar year, such payment shall be made on the immediately preceding
Business Day. In the event that payment of the applicable Redemption Price is
improperly withheld or refused and not paid either by the Trust or by the
Corporation pursuant to the Exchange Guarantee as described under "--Description
of Exchange Guarantee" (i) Distributions on Exchange Capital Securities will
continue to accumulate at the then-applicable rate, from the Redemption Date
originally established by the Trust to the date such applicable Redemption Price
is actually paid and (ii) the actual payment date will be the Redemption Date
for purposes of calculating the applicable Redemption Price.
49
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time and
from time to time purchase outstanding Exchange Capital Securities by tender, in
the open market or by private agreement.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days prior to the Redemption Date to each holder of Trust Securities at
its registered address. Unless the Corporation defaults in payment of the
applicable Prepayment Price on, or in the repayment of, the Junior Subordinated
Debentures, on and after the Redemption Date. Distributions will cease to accrue
on the Trust Securities called for redemption.
Subordination of Common Securities. Payment of Distributions on, and
the Redemption Price of, the Trust Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of the Trust Securities; provided, however,
that if on any Distribution Date or Redemption Date a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution on, or
applicable Redemption Price of, any of the Common Securities, and no other
payment on account of the redemption, liquidation or other acquisition of the
Common Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the outstanding Capital
Securities for all Distribution periods terminating on or prior thereto, or in
the case of payment of the applicable Redemption Price the full amount of such
Redemption Price, shall have been made or provided for, and all funds available
to the Property Trustee shall first be applied to the payment in full in cash of
all Distributions on, or Redemption Price of, the Capital Securities then due
and payable.
In the case of any Event of Default, the Corporation as holder of the
Common Securities will be deemed to have waived any right to act with respect to
such Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Capital Securities and not on behalf of the
Corporation as holder of the Common Securities, and only the holders of the
Capital Securities will have the right to direct the Property Trustee to act on
their behalf.
Events of Default; Notice. The occurrence of a Debenture Event of
Default (see "--Description of Exchange Junior Subordinated
Debentures--Debenture Events of Default") constitutes an "Event of Default"
under the Trust Agreement.
Within ten Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Exchange Capital
Securities, the Administrative Trustees and the Corporation, as Sponsor, unless
such Event of Default shall have been cured or waived. The Corporation, as
Sponsor, and the Administrative Trustees are required to file annually with the
Property Trustee a certificate as to whether or not they are in compliance with
all the conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Capital Securities shall have a preference over the Common Securities as
described under "--Liquidation of the Trust and Distribution of Exchange Junior
Subordinated Debentures" and "--Subordination of Common
Securities."
Removal of Issuer Trustees. Unless a Debenture Event of Default shall
have occurred and be continuing, any Issuer Trustee may be removed at any time
by the holder of the Common Securities.
50
If a Debenture Event of Default has occurred and is continuing, the Property
Trustee and the Delaware Trustee may be removed at such time by the holders of a
majority in Liquidation Amount of the outstanding Capital Securities. In no
event will the holders of the Exchange Capital Securities have the right to vote
to appoint, remove or replace the Administrative Trustees, which voting rights
are vested exclusively in the Corporation as the holder of the Common
Securities. No resignation or removal of an Issuer Trustee and no appointment of
a successor trustee shall be effective until the acceptance of appointment by
the successor trustee in accordance with the provisions of the Trust Agreement.
Merger or Consolidation of Issuer Trustees. Any Person into which the
Property Trustee, the Delaware Trustee or any Administrative Trustee that is not
a natural person may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which such Issuer Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of such
Issuer Trustee, shall be the successor of such Issuer Trustee under the Trust
Agreement, provided such Person shall be otherwise qualified and eligible.
Mergers, Consolidations, Amalgamation or Replacements of the Trust. The
Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any corporation or other Person, except as
described below or as otherwise described under "--Liquidation of the Trust and
Distribution of Exchange Junior Subordinated Debentures." The Trust may, at the
request of the Corporation, as Sponsor, with the consent of the Administrative
Trustees but without the consent of the holders of the Exchange Capital
Securities, merge with or into, consolidate, amalgamate, or be replaced by or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to a trust organized as such under the laws of any
State; provided, that (i) such successor entity either (a) expressly assumes all
of the obligations of the Trust with respect to the Trust Securities or (b)
substitutes for the Trust Securities other securities having substantially the
same terms as the Trust Securities (the "Successor Securities") so long as the
Successor Securities rank the same as the Trust Securities rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Corporation expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee with
respect to the Junior Subordinated Debentures, (iii) the Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on each national securities exchange or other organization on which
the Trust Securities are then listed or quoted, if any, (iv) if the Capital
Securities (including any Successor Securities) or Junior Subordinated
Debentures are rated by any nationally recognized statistical rating
organization prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, such transaction does not cause the Capital
Securities (including any Successor Securities) or Junior Subordinated
Debentures to be downgraded by any such nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect (other than any dilution of such holders'
interests in the new entity), (vi) such successor entity has a purpose identical
to that of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Corporation has received an
opinion from independent counsel to the Trust experienced in such matters to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect (other than any dilution of such holders'
interests in the new entity) and (b) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither the Trust
51
nor such successor entity will be required to register as an investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and (viii) the Corporation or any permitted successor or assignee owns
all of the common securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee and the Common Guarantee. Notwithstanding
the foregoing, the Trust shall not, except with the consent of holders of 100%
in Liquidation Amount of the Trust Securities, consolidate, amalgamate, merge
with or into, or be replaced by or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to, any other entity or
permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease would cause the Trust or the successor entity not to be
classified as a grantor trust for United States federal income tax purposes.
Voting Rights: Amendment of the Trust Agreement. Except as provided
below and under "--Mergers, Consolidations, Amalgamation or Replacements of the
Trust" and "--Description of Exchange Guarantee--Amendments and Assignment" and
as otherwise required by law and the Trust Agreement, the holders of the
Exchange Capital Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the
Corporation, the Property Trustee and the Administrative Trustees, without the
consent of the holders of the Trust Securities (i) to cure any ambiguity,
correct or supplement any provisions in the Trust Agreement that may be
inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under the Trust Agreement, which shall
not be inconsistent with the other provisions of the Trust Agreement, (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such extent
as shall be necessary to ensure that the Trust will be classified for United
States federal income tax purposes as a grantor trust at all times that any
Trust Securities are outstanding or to ensure that the Trust will not be
required to register as an "investment company" under the Investment Company Act
or (iii) to modify, eliminate or add any provisions of the Trust Agreement to
such extent as shall be necessary to enable the Trust or the Corporation to
conduct an Exchange Offer in the manner contemplated by the Registration Rights
Agreement; provided, however, that in each case, such action shall not adversely
affect in any material respect the interests of the holders of the Trust
Securities. Any amendments of the Trust Agreement pursuant to the foregoing
shall become effective when notice thereof is given to the holders of the Trust
Securities. The Trust Agreement may be amended by the Issuer Trustees and the
Corporation (i) with the consent of holders representing a majority (based upon
Liquidation Amount) of the outstanding Trust Securities and (ii) upon receipt by
the Issuer Trustees of an opinion of counsel experienced in such matters to the
effect that such amendment or the exercise of any power granted to the Issuer
Trustees in accordance with such amendment will not affect the Trust's status as
a grantor trust for United States federal income tax purposes or the Trust's
exemption from status as an "investment company" under the Investment Company
Act, provided that, without the consent of each holder of Trust Securities, the
Trust Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
The Exchange Capital Securities and any Original Capital Securities that remain
outstanding after consummation of the Exchange Offer will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Trust Agreement.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy
52
available to the Debenture Trustee, or execute any trust or power conferred on
the Debenture Trustee with respect to the Junior Subordinated Debentures, (ii)
waive certain past defaults under the Indenture, (iii) exercise any right to
rescind or annul a declaration of acceleration of the maturity of the principal
of the Junior Subordinated Debentures or (iv) consent to any amendment,
modification or termination of the Indenture or the Junior Subordinated
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of a majority in Liquidation Amount
of all outstanding Capital Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Junior
Subordinated Debentures affected thereby, no such consent shall be given by the
Property Trustee without the prior approval of each holder of the Capital
Securities. The Issuer Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Capital Securities except
by subsequent vote of such holders. The Property Trustee shall notify each
holder of Capital Securities of any notice of default with respect to the Junior
Subordinated Debentures. In addition to obtaining the foregoing approvals of
such holders of the Capital Securities, prior to taking any of the foregoing
actions, the Issuer Trustees shall obtain an opinion of counsel experienced in
such matters to the effect that the Trust will not be classified as an
association taxable as a corporation for United States federal income tax
purposes on account of such action.
Any required approval of holders of Exchange Capital Securities may be
given at a meeting of such holders convened for such purpose or pursuant to
written consent. The Property Trustee will cause a notice of any meeting at
which holders of Exchange Capital Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of Exchange Capital Securities in the manner
set forth in the Trust Agreement.
No vote or consent of the holders of Exchange Capital Securities will
be required for the Trust to redeem and cancel the Exchange Capital Securities
in accordance with the Trust Agreement.
Notwithstanding that holders of the Exchange Capital Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Exchange Capital Securities that are owned by the Corporation or any
affiliate of the Corporation shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
Form, Denomination, Book-Entry Procedures and Transfer. The Exchange
Capital Securities initially will be represented by one or more Exchange Capital
Securities in registered, global form (the "Global Capital Securities"). The
Global Capital Securities will be deposited upon issuance with the Property
Trustee as custodian for DTC, in New York, New York, and registered in the name
of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below.
In the event that Exchange Capital Securities are issued in
certificated form, the Exchange Capital Securities will be in blocks having a
Liquidation Amount of not less than $100,000 (100 Capital Securities) and may be
transferred or exchanged on in such blocks in the manner described herein.
Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Capital
Securities may not be exchanged for Exchange Capital Securities in certificated
form except in the limited circumstances described below. See "--Exchange of
Book-Entry Capital Securities for Certificated Capital Securities."
53
Depositary Procedures. DTC has advised the Trust and the Corporation
that DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Indirect
access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital Securities,
DTC will credit the accounts of Participants designated by the Initial Purchaser
with portions of the Liquidation Amount of the Global Capital Securities and
(ii) ownership of such interests in the Global Capital Securities will be shown
on, and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants and
the Indirect Participants (with respect to other owners of beneficial interests
in the Global Capital Securities).
Investors in the Global Capital Securities may hold their interests
therein directly through DTC if they are Participants, or indirectly through
organizations that are Participants. All interests in a Global Capital Security
will be subject to the procedures and requirements of DTC. The laws of some
states require that certain persons take physical delivery in certificated form
of securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Capital Security to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having beneficial interests in a Global Capital Security to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Exchange Capital Securities, see
"--Exchange of Book-Entry Capital Securities for Certificated Capital
Securities" and Exchange of Certificated Capital Securities for Book-Entry
Capital Securities."
Except as described below, owners of interests in the Global Capital
Securities will not have Exchange Capital Securities registered in their names,
will not receive physical delivery of Exchange Capital Securities in
certificated form and will not be considered the registered owners or holders
thereof under the Trust Agreement for any purpose.
Payments in respect of the Global Capital Security registered in the
name of DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms of
the Trust Agreement, the Property Trustee will treat the persons in whose names
the Exchange Capital Securities, including the Global Capital Securities, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Property
Trustee nor any agent thereof has or will
54
have any responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interests in the Global Capital Securities, or
for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Capital Securities or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants or
Indirect Participants. DTC has advised the Trust and the Corporation that its
current practice, upon receipt of any payment in respect of securities such as
the Global Capital Securities, is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in Liquidation Amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of the
Global Capital Securities will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Property
Trustee, the Trust or the Corporation. None of the Trust, the Corporation or the
Property Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Global Capital Securities, and the
Trust or the Corporation and the Property Trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee for all
purposes.
Secondary market trading activity in interests in the Global Capital
Securities will settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its Participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will settle in same-day funds.
DTC has advised the Trust and the Corporation that it will take any
action permitted to be taken by a holder of Exchange Capital Securities
(including, without limitation, the presentation of Exchange Capital Securities
for exchange as described below) only at the direction of one or more
Participants to whose account with DTC interests in the Global Capital
Securities are credited and only in respect of such portion of the Liquidation
Amount of the Exchange Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event of
Default under the Trust Agreement, DTC reserves the right to exchange the Global
Capital Securities for Exchange Capital Securities in certificated form and to
distribute such Exchange Capital Securities to its Participants.
The information in this section concerning DTC and its book-entry
system has been obtained from sources that the Trust and the Corporation believe
to be reliable, but neither the Trust nor the Corporation takes responsibility
for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interest in the Global Capital Securities among Participants in
DTC, it is under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. None of the
Trust, the Corporation or the Property Trustee will have any responsibility for
the performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing DTC's
operations.
Exchange of Book-Entry Capital Securities for Certificated Capital
Securities. A Global Capital Security is exchangeable for Exchange Capital
Securities in registered certificated form if (i) DTC (x) notifies the Trust
that it is unwilling or unable to continue as Depositary for the Global Capital
Security and the Trust thereupon fails to appoint a successor Depositary within
90 days or (y) has ceased to be a clearing agency registered under the Exchange
Act, and the Trust thereupon fails
55
to appoint a successor Depositary within 90 days, (ii) the Corporation in its
sole discretion elects to cause the issuance of the Exchange Capital Securities
in certificated form or (iii) there shall have occurred and be continuing an
Event of Default or any event which after notice or lapse of time or both would
be an Event of Default under the Trust Agreement. In addition, beneficial
interests in a Global Capital Security may be exchanged by or on behalf of DTC
for certificated Exchange Capital Securities upon request by DTC, but only upon
at least 20 days' prior written notice given to the Property Trustee in
accordance with DTC's customary procedures. In all cases, certificated Exchange
Capital Securities delivered in exchange for any Global Capital Security or
beneficial interests therein will be registered in the names, and issued in any
approved denominations, requested by or on behalf of DTC (in accordance with its
customary procedures), unless the Property Trustee determines otherwise in
compliance with applicable law.
Exchange of Certificated Capital Securities for Book-Entry Capital
Securities. Other Capital Securities, which will be issued in certificated form,
may not be exchanged for beneficial interests in any Global Capital Security
unless such exchange occurs in connection with a transfer of such Other Capital
Securities and the transferor first delivers to the Property Trustee a written
certificate (in the form provided in the Trust Agreement) to the effect that
such transfer will comply with the appropriate transfer restrictions applicable
to such Capital Securities.
Payment and Paying Agency. Payments in respect of the Global Capital
Securities shall be made to DTC which shall credit the relevant accounts at DTC
on the applicable Distribution Dates and payments in respect of the Exchange
Capital Securities that are not held by DTC shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
register. The paying agent (the "Paying Agent") shall initially be the Property
Trustee and any co-paying agent chosen by the Property Trustee and acceptable to
the Administrative Trustees and the Corporation. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' prior written notice to the
Property Trustee, the Administrative Trustees and the Corporation. In the event
that the Property Trustee shall no longer be the Paying Agent, the
Administrative Trustees shall appoint a successor (which shall be a bank or
trust company acceptable to the Administrative Trustees and the Corporation) to
act as Paying Agent.
Restrictions on Transfer. The Exchange Capital Securities will be
issued, and may be transferred only in blocks having a Liquidation Amount of not
less than $100,000 (100 Capital Securities) and multiples of $1,000 in excess
thereof. Any attempted sale, transfer or other disposition of Exchange Capital
Securities in a block having an aggregate Liquidation Amount of less than
$100,000 shall be deemed to be void and of no legal effect whatsoever. Any such
transferee shall be deemed not to be the holder of such Exchange Capital
Securities for any purpose, including but not limited to the receipt of
Distributions on such Exchange Capital Securities, and such transferee shall be
deemed to have no interest whatsoever in such Exchange Capital Securities.
Registrar and Transfer Agent. The Property Trustee will act as
registrar and transfer agent for the Exchange Capital Securities.
Registration of transfers of the Exchange Capital Securities will be
effected without charge by or on behalf of the Trust, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required to register or cause to be
registered the transfer of the Exchange Capital Securities after they have been
called for redemption.
56
Information Concerning the Property Trustee. The Property Trustee,
other than during the occurrence and continuance of an Event of Default, will
undertake to perform only such duties as are specifically set forth in the Trust
Agreement and, during the existence of an Event of Default, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Trust Agreement at the request of any holder of Trust Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. If no Event of Default has occurred and is continuing
and the Property Trustee is required to decide between alternative causes of
action, construe ambiguous provisions in the Trust Agreement or is unsure of the
application of any provision of the Trust Agreement, and the matter is not one
on which holders of the Exchange Capital Securities or the Common Securities are
entitled under the Trust Agreement to vote, then the Property Trustee shall take
such action as is directed by the Corporation and, if not so directed, shall
take such action as it deems advisable and in the best interests of the holders
of the Trust Securities and will have no liability except for its own bad faith,
negligence or willful misconduct.
Miscellaneous. The Administrative Trustees are authorized and directed
to conduct the affairs of and to operate the Trust in such a way that (i) the
Trust will not be deemed to be an "investment company" required to be registered
under the Investment Company Act, (ii) the Trust will be classified as a grantor
trust for United States federal income tax purposes and (iii) the Junior
Subordinated Debentures will be treated as indebtedness of the Corporation for
United States federal income tax purposes. The Corporation and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of the Trust or the Trust Agreement,
that the Administrative Trustees determine in their discretion to be necessary
or desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Trust Securities.
The Trust Agreement provides that (i) holders of the Trust Securities
have no preemptive or similar rights to subscribe for any additional Trust
Securities, and (ii) the issuance of the Trust Securities are not subject to
preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge
any of its assets.
Description of Exchange Junior Subordinated Debentures
The Exchange Junior Subordinated Debentures are to be issued under an
Indenture, as amended and supplemented from time to time (as so amended and
supplemented, the "Indenture"), between the Corporation and The First National
Bank of Chicago, as Debenture Trustee (the "Debenture Trustee"). The Indenture
will be qualified under the Trust Indenture Act and, by its terms, will
incorporate certain provisions of the Trust Indenture Act. The Indenture will be
subject to and governed by the Trust Indenture Act. This summary of certain
terms and provisions of the Exchange Junior Subordinated Debentures and the
Indenture does not purport to be complete, and where reference is made to
particular provisions of the Indenture, such provisions, including the
definitions of certain terms, some of which are not otherwise defined herein,
are qualified in their entirety by reference to all of the provisions of the
Indenture and those terms made a part of the Indenture by the Trust Indenture
Act.
General. Concurrently with the issuance of the Original Capital
Securities, the Trust invested the proceeds thereof, together with the
consideration paid by the Corporation for the Common Securities, in Original
Junior Subordinated Debentures issued by the Corporation. Pursuant to the
57
Exchange Offer, the Corporation will exchange the Exchange Junior Subordinated
Debentures for Original Junior Subordinated Debentures accepted for exchange.
The Exchange Junior Subordinated Debentures will bear interest at the
annual rate of 10.52% of the principal amount thereof, payable semi-annually in
arrears on May 1 and November 1 of each year, commencing November 1, 1997 or
May 1, 1998, as the case may be (each, an "Interest Payment Date"), to the
person in whose name each Exchange Junior Subordinated Debenture is registered,
subject to certain exceptions, at the close of business on the 15th day of the
month next preceding that in which the relevant Interest Payment Date falls. It
is anticipated that, until the liquidation, if any, of the Trust, each Junior
Subordinated Debenture will be held in the name of the Property Trustee in trust
for the benefit of the holders of the Trust Securities. The amount of interest
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which interest is payable on the
Exchange Junior Subordinated Debentures is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay), with the same force and effect as if made on such date. Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
the rate per annum of 10.52% thereof, compounded semi-annually. The term
"interest," as used herein, shall include semi-annual interest payments,
interest on semi-annual interest payments not paid on the applicable Interest
Payment Date and Additional Sums (as defined below), as applicable.
The Exchange Junior Subordinated Debentures will be issued pursuant to
the Indenture. The Exchange Junior Subordinated Debentures will mature on May 1,
2027.
The Exchange Junior Subordinated Debentures will be unsecured and will
rank pari passu with the Original Junior Subordinated Debentures and all Other
Debentures and subordinate and junior in right of payment to all Senior
Indebtedness to the extent and in the manner set forth in the Indenture. See
"--Subordination."
Almost all of the operating assets of the Corporation and its
consolidated subsidiaries are owned by such subsidiaries. The Corporation is a
legal entity separate and distinct from the Banks and its other subsidiaries.
Holders of Junior Subordinated Debentures should look only to the Corporation
for payments on the Junior Subordinated Debentures. The principal sources of the
Corporation's income are dividends and interest from the Banks and its other
subsidiaries, and there are various limitations on the Banks to pay such
dividends, as discussed below. The Banks are also subject to certain
restrictions on the transfer of funds by each of such depository institutions to
the Corporation and certain other affiliates, in the form of loans, other
extensions of credit, investments or purchases of assets. Transfers by any Bank
to the Corporation or any single affiliate are generally limited in amount as to
the Corporation and as to each of such other affiliates to 10% of such Bank's
capital and surplus and transfers to all affiliates are limited in the aggregate
to 20% of such Bank's capital and surplus. Furthermore, such loans and
extensions of credit are subject to various collateral requirements.
Because the Corporation is a holding company, the Corporation's
operations are conducted by its subsidiaries, including the Banks, which are
subject to significant federal and state regulation. The Corporation's ability
to receive dividends and loans from its subsidiaries is restricted. As of
December 31, 1996, the Banks were able to declare dividends to the Corporation
in 1997, without regulatory approval, of approximately $4.7 million. In
addition, in February 1996, as part of its plan to capitalize the Corporation's
newly formed subsidiary bank, First Massachusetts Bank, N.A., at a
"well-capitalized" level for regulatory capital purposes, the Corporation
redeployed accumulated
58
capital of $45.6 million in the form of special dividends from certain of the
Banks. Because the amounts of the special dividends exceeded applicable
regulatory limitations, the Corporation obtained the necessary regulatory
approvals to effect such redeployment. Payment of the special dividends has
significantly restricted the dividend paying capacity of the Banks. Accordingly,
payment of any dividends to the Corporation by certain of the Banks currently
requires regulatory approval on account of the aforementioned special dividends,
and payments of dividends by the Banks in the future will require their
generation of sufficient future earnings. Further, the right of the Corporation
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Capital Securities to benefit indirectly from such distribution )
is subject to the prior claims of creditors of such subsidiary (including
depositors in the case of the Banks), except to the extent that the Corporation
may itself be recognized as a creditor of that subsidiary. Accordingly, the
Junior Subordinated Debentures effectively will be subordinated to all existing
and future liabilities of the Corporation's subsidiaries (including deposit
liabilities of the Banks), and holders of Junior Subordinated Debentures should
look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures.
The Indenture does not limit the amount of secured or unsecured debt,
including Senior Indebtedness, that may be incurred by the Corporation or any of
its subsidiaries. At December 31, 1996, the Corporation had $13.0 million of
Senior Indebtedness outstanding, and the Corporation's subsidiaries had total
liabilities (excluding liabilities owed to the Corporation) of $2.4 billion. See
"--Subordination." The Corporation expects from time to time that it will incur
additional indebtedness constituting Senior Indebtedness and that its
subsidiaries will incur additional liabilities.
Form, Registration and Transfer. If the Exchange Junior Subordinated
Debentures are distributed to the holders of the Trust Securities, the Exchange
Junior Subordinated Debentures may be represented by a global certificate
registered in the name of Cede & Co. as the nominee of DTC. The depositary
arrangements for such Exchange Junior Subordinated Debentures are expected to be
substantially similar to those in effect for the Exchange Capital Securities.
For a description of DTC and the terms of the depositary arrangements relating
to payments, transfers, voting rights, prepayments, notices and other matters,
see "--Description of Exchange Capital Securities--Form, Denomination,
Book-Entry Procedures and Transfer."
Payment and Paying Agents. Payment of principal of (and premium, if
any) and interest on Exchange Junior Subordinated Debentures will be made at the
office of the Debenture Trustee in New York, New York or at the office of such
Paying Agent or Paying Agents as the Corporation may designate from time to
time, except that at the option of the Corporation payment of any interest may
be made, except in the case of Exchange Junior Subordinated Debentures in global
form, (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the register for Exchange Junior Subordinated Debentures
or (ii) by transfer to an account maintained by the Person entitled thereto as
specified in such register, provided that proper transfer instructions have been
received by the relevant record date. Payment of any interest on any Exchange
Junior Subordinated Debenture will be made to the Person in whose name such
Exchange Junior Subordinated Debenture is registered at the close of business on
the record date for such interest, except in the case of defaulted interest. The
Corporation may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent; provided, however, the Corporation will at all
times be required to maintain a Paying Agent in each place of payment for the
Exchange Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any
59
Exchange Junior Subordinated Debenture and remaining unclaimed for two years
after such principal (and premium, if any) or interest has become due and
payable shall, at the request of the Corporation, be repaid to the Corporation
and the holder of such Exchange Junior Subordinated Debenture shall thereafter
look, as a general unsecured creditor, only to the Corporation for payment
thereof.
Option to Extend Interest Payment Date. So long as no Debenture Event
of Default has occurred and is continuing, the Corporation will have the right
under the Indenture to defer the payment of interest on the Junior Subordinated
Debentures at any time and from time to time for a period not exceeding 10
consecutive semi-annual periods with respect to each Extension Period, provided
that no Extension Period shall end on a date other than an Interest Payment Date
or extend beyond the Stated Maturity Date. At the end of an Extension Period,
the Corporation must pay all interest then accrued and unpaid (together with
interest thereon at the annual rate of 10.52%, compounded semi-annually, to the
extent permitted by applicable law ("Compounded Interest")). During an Extension
Period, interest will continue to accrue and holders of Junior Subordinated
Debentures (or holders of the Trust Securities while Trust Securities are
outstanding) will be required to accrue such deferred interest income for United
States federal income tax purposes prior to the receipt of cash attributable to
such income. See "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
During any Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock,
(ii) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Corporation (including
any Other Debentures) that rank pari passu with or junior in right of payment to
the Junior Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation (including any Other Guarantees) if such guarantee
ranks pari passu with or junior in right of payment to the Junior Subordinated
Debentures (other than (a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, common stock of the
Corporation, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee, (d) as a result of a
reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for another
class or series of the Corporation's capital stock, (e) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged and (f) purchases of common stock of the
Corporation related to the issuance of common stock or rights under any of the
Corporation's benefit or compensation plans for its directors, officers or
employees or any of the Corporation's dividend reinvestment plans).
Prior to the termination of any such Extension Period, the Corporation
may further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods, end on
a date other than an Interest Payment Date or extend beyond the Stated Maturity
Date. Upon the termination of any such Extension Period and the payment of all
amounts then due on any Interest Payment Date, the Corporation may elect to
begin a new Extension Period, subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
The Corporation must give the Property Trustee, the Administrative Trustees and
the Debenture Trustee notice of its election of any Extension Period (or an
extension thereof) at least five Business Days prior to the earlier of (i) the
date the Distributions on the Trust Securities would have been payable except
for the election to begin or
60
extend such Extension Period or (ii) the date the Property Trustee is required
to give notice to any securities exchange or to holders of Exchange Capital
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record date. The
Debenture Trustee shall give notice of the Corporation's election to begin or
extend a new Extension Period to the holders of the Exchange Capital Securities.
There is no limitation on the number of times that the Corporation may elect to
begin an Extension Period.
Optional Prepayment. The Exchange Junior Subordinated Debentures will
be prepayable, in whole or in part, at the option of the Corporation on or after
the Initial Optional Redemption Date, subject to the Corporation having received
any required regulatory approvals, at a prepayment price (the "Optional
Prepayment Price") equal to the percentage of the outstanding principal amount
of the Exchange Junior Subordinated Debentures specified below, plus, in each
case, accrued and unpaid interest thereon, including Compounded Interest, if
any, to the date of prepayment if prepaid during the 12-month period beginning
May 1 of the years indicated below:
Year Percentage
---- ----------
2007 105.260%
2008 104.734%
2009 104.208%
2010 103.682%
2011 103.156%
2012 102.630%
2013 102.104%
2014 101.578%
2015 101.052%
2016 100.526%
2017 and thereafter 100.000%
Special Event Prepayment. Prior to the Initial Optional Redemption
Date, if a Special Event shall occur and be continuing, the Corporation may, at
its option and subject to receipt of any required regulatory approvals, prepay
the Exchange Junior Subordinated Debentures in whole (but not in part) at any
time within 90 days of the occurrence of such Special Event, at a prepayment
price (the "Special Event Prepayment Price") equal to the Make-Whole Amount. The
"Make-Whole Amount" shall be equal to the greater of (x) 100% of the principal
amount thereof or (y) the sum, as determined by a Quotation Agent (as defined
herein), of the present values of the remaining scheduled payments of principal
and interest on the Exchange Junior Subordinated Debentures, discounted to the
prepayment date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in the case of each
of clauses (x) and (y), accrued and unpaid interest thereon (including
Compounded Interest and Additional Sums, if any) to the date of prepayment.
A "Special Event" means a Tax Event or a Regulatory Capital Event, as
the case may be.
A "Tax Event" means the receipt by the Corporation and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after
61
April 28, 1997, there is more than an insubstantial risk that (i) the Trust is,
or will be within 90 days of the date of such opinion, subject to United States
federal income tax with respect to income received or accrued on the Junior
Subordinated Debentures, (ii) the interest payable by the Corporation on the
Junior Subordinated Debentures is not, or within 90 days of the date of such
opinion will not be, deductible by the Corporation, in whole or in part, for
United States federal income tax purposes or (iii) the Trust is, or will be
within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
A "Regulatory Capital Event" means that the Corporation shall have
received an opinion of independent bank regulatory counsel experienced in such
matters to the effect that, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any rules, guidelines or policies of an
applicable regulatory authority for the Corporation or (b) any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after April 28, 1997, the Capital
Securities do not constitute, or within 90 days of the date thereof, will not
constitute, Tier 1 Capital (or its then-equivalent); provided, however, that the
distribution of the Junior Subordinated Debentures in connection with the
liquidation of the Trust by the Corporation shall not in and of itself
constitute a Regulatory Capital Event unless such liquidation shall have
occurred in connection with a Tax Event.
"Adjusted Treasury Rate" means, with respect to any prepayment date,
the rate per annum equal to (i) the yield, under the heading which represents
the average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15 (519)" or any successor
publication which is published weekly by the Board of Governors of the Federal
Reserve System and which establishes yields on actively traded United States
Treasury securities adjusted to constant maturity under the caption "Treasury
Constant Maturities," for the maturity corresponding to the Remaining Life (if
no maturity is within three months before or after the maturity corresponding to
the Remaining Life, yields for the two published maturities most closely
corresponding to the Remaining Life shall be determined, and the Adjusted
Treasury Rate shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding to the nearest month) or (ii) if such release (or
any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such prepayment date, in each case calculated on the third Business Day
preceding the prepayment date, plus in each case (a) 3.31% if such prepayment
date occurs on or prior to May 1, 1998 and (b) 2.76% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the Remaining
Life of the Junior Subordinated Debentures that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining Life
of the Junior Subordinated Debentures, provided that if no United States
Treasury security has a maturity which is within a period from three months
before to three months after the Remaining Life, the two most closely
corresponding United States Treasury securities shall be used as the Comparable
Treasury Issue, and the Adjusted Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month, using such
securities.
"Comparable Treasury Price" means, with respect to any prepayment date,
(i) the average of three Reference Treasury Dealer Quotations for such
prepayment date, after excluding the highest and
62
lowest Reference Treasury Dealer Quotations, or (ii) if the Debenture Trustee
obtains fewer than five such Reference Treasury Dealer Quotations, the average
of all such Reference Treasury Dealer Quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Corporation. "Reference Treasury Dealer" means a nationally-recognized U.S.
Government securities dealer in New York City selected by the Corporation.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined by
the Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such prepayment date.
"Remaining Life" means the term of the Junior Subordinated Debentures
from the prepayment date to the Stated Maturity Date.
Notice of any prepayment will be mailed at least 30 days but not more
than 60 days before the prepayment date to each holder of Exchange Junior
Subordinated Debentures to be prepaid at its registered address. Unless the
Corporation defaults in payment of the prepayment price, on and after the
prepayment date interest ceases to accrue on such Exchange Junior Subordinated
Debentures called for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Junior Subordinated Debentures such amounts as shall
be necessary in order that the amount of Distributions then due and payable by
the Trust on the outstanding Trust Securities shall not be reduced as a result
of any additional taxes, duties and other governmental charges to which the
Trust has become subject as a result of a Tax Event ("Additional Sums").
Certain Covenants of the Corporation. The Corporation will also
covenant that it will not (i) declare or pay any dividends or distributions on,
or redeem, purchase, acquire or make a liquidation payment with respect to, any
of the Corporation's capital stock, (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including Other Debentures) that rank pari passu
with or junior in right of payment to the Junior Subordinated Debentures or
(iii) make any guarantee payments other than payments under the Guarantee with
respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation (including under Other Guarantees) if such
guarantee ranks pari passu or junior in right of payment to the Junior
Subordinated Debentures (other than (a) dividends or distributions in shares of,
or options, warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) as a result of a reclassification of the
Corporation's capital stock or the exchange or conversion of one class or series
of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (d) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (e) purchases of common stock related to the issuance of common stock or
rights under any of the Corporation's benefit or compensation plans for its
directors, officers or employees or any of the Corporation's dividend
reinvestment plans) if at such time (1) there shall have occurred any event of
63
which the Corporation has actual knowledge that (a) is, or with the giving of
notice or the lapse of time, or both, would be, a Debenture Event of Default and
(b) in respect of which the Corporation shall not have taken reasonable steps to
cure, (2) if such Junior Subordinated Debentures are held by the Trust, the
Corporation shall be in default with respect to its payment of any obligations
under the Guarantee or (3) the Corporation shall have given notice of its
election to exercise its right to commence an Extension Period as provided in
the Indenture and shall not have rescinded such notice, and such Extension
Period, or any extension thereof, shall have commenced and be continuing.
So long as the Trust Securities remain outstanding, the Corporation
also will covenant (i) to maintain 100% direct or indirect ownership of the
Common Securities, provided, however, that any permitted successor of the
Corporation under the Indenture may succeed to the Corporation's ownership of
such Common Securities, (ii) to use commercially reasonable efforts to cause the
Trust (a) to remain a business trust, except in connection with the distribution
of Junior Subordinated Debentures to the holders of Trust Securities in
liquidation of the Trust, the prepayment of all of the Trust Securities of the
Trust, or certain mergers, consolidations or amalgamations, each as permitted by
the Trust Agreement, and (b) to otherwise continue to be classified as a grantor
trust for United States federal income tax purposes (iii) to use its reasonable
efforts to cause each holder of Trust Securities to be treated as owning an
undivided beneficial interest in the Junior Subordinated Debentures and (iv) not
to cause, as sponsor of the Trust, or to permit, as Holder of the Common
Securities, the dissolution, winding-up or termination of the Trust, except as
provided in the Trust Agreement.
Modification of Indenture. From time to time the Corporation and the
Debenture Trustee may, without the consent of the holders of Junior Subordinated
Debentures, amend, waive or supplement the Indenture for specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies or
enabling the Corporation and the Trust to conduct an Exchange Offer as
contemplated by the Registration Rights Agreement, provided that any such action
does not materially adversely affect the interest of the holders of Junior
Subordinated Debentures, and qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Corporation and the Debenture Trustee, with the consent of the
holders of a majority in principal amount of Junior Subordinated Debentures, to
modify the Indenture in a manner affecting the rights of the holders of Junior
Subordinated Debentures; provided that no such modification may, without the
consent of the holders of each outstanding Junior Subordinated Debenture so
affected, (i) change the Stated Maturity Date, or reduce the principal amount of
the Junior Subordinated Debentures or reduce the amount payable on redemption
thereof or reduce the rate or extend the time of payment of interest thereon
except pursuant to the Corporation's right under the Indenture to defer the
payment of interest as provided therein (see "--Option to Extend Interest
Payment Date") or make the principal of, or interest or premium on, the Junior
Subordinated Debentures payable in any coin or currency other than that provided
in the Junior Subordinated Debentures, or impair or affect the right of any
holder of Junior Subordinated Debentures to institute suit for the payment
thereof, or (ii) reduce the percentage of principal amount of Junior
Subordinated Debentures, the holders of which are required to consent to any
such modification of the Indenture.
Debenture Events of Default. The Indenture provides that any one or
more of the following described events with respect to the Junior Subordinated
Debentures constitutes a "Debenture Event of Default" (whatever the reason for
such Debenture Event of Default and whether it shall be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
64
(i) failure for 30 days to pay any interest (including
Compounded Interest and Additional Sums, if any) or Liquidated Damages,
if any, on the Junior Subordinated Debentures or any Other Debentures,
when due (subject to the deferral of any due date in the case of an
Extension Period in respect of the Junior Subordinated Debentures or
Other Debentures, as the case may be); or
(ii) failure to pay any principal or premium, if any, on the
Junior Subordinated Debentures or any Other Debentures when due whether
at maturity, upon prepayment, by declaration of acceleration of
maturity or otherwise; or
(iii) failure to observe or perform any other covenants
contained in the Indenture for 90 days after written notice to the
Corporation from the Debenture Trustee or the holders of at least 25%
in aggregate outstanding principal amount of Junior Subordinated
Debentures; or
(iv) certain events in bankruptcy, insolvency or
reorganization of the Corporation.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures have, subject to certain exceptions, the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Debenture Trustee. The Debenture Trustee or the holders
of not less than 25% in aggregate outstanding principal amount of the Junior
Subordinated Debentures may declare the principal due and payable immediately
upon a Debenture Event of Default. The holders of a majority in aggregate
outstanding principal amount of the Junior Subordinated Debentures may annul
such declaration and waive the default if the default (other than the
non-payment of the principal of the Junior Subordinated Debentures which has
become due solely by such acceleration) has been cured and a sum sufficient to
pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures affected thereby may, on behalf of the
holders of all the Junior Subordinated Debentures, waive any past default,
except a default in the payment of principal of (or premium, if any) on or
interest (unless such default has been cured and a sum sufficient to pay all
matured installments of interest (and premium, if any) and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee),
or a default in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding Junior Subordinated Debenture.
The Indenture requires the annual filing by the Corporation with the
Debenture Trustee of a certificate as to the absence of certain defaults under
the Indenture.
The Indenture provides that the Debenture Trustee may withhold notice
of a Debenture Event of Default from the holders of the Exchange Junior
Subordinated Debentures if the Debenture Trustee considers it in the interest of
such holders to do so.
Enforcement of Certain Rights by Holders of Exchange Capital
Securities. If a Debenture Event of Default shall have occurred and be
continuing and shall be attributable to the failure of the Corporation to pay
the principal of (or premium, if any), or interest (including Compounded
Interest and Additional Sums, if any) or Liquidated Damages, if any, on the
Exchange Junior Subordinated Debentures on the due date, a holder of Exchange
Capital Securities may institute a Direct Action.
65
The Corporation may not amend the Indenture to remove the foregoing right to
bring a Direct Action without the prior written consent of the holders of all of
the Exchange Capital Securities. Notwithstanding any payments made to a holder
of Exchange Capital Securities by the Corporation in connection with a Direct
Action, the Corporation shall remain obligated to pay the principal of (or
premium, if any) or interest (including Compounded Interest and Additional Sums,
if any) or Liquidated Damages, if any, on the Exchange Junior Subordinated
Debentures, and the Corporation shall be subrogated to the rights of the holder
of such Exchange Capital Securities with respect to payments on the Exchange
Capital Securities to the extent of any payments made by the Corporation to such
holder in any Direct Action.
The holders of the Exchange Capital Securities will not be able to
exercise directly any remedies other than those set forth in the preceding
paragraph, available to the holders of the Exchange Junior Subordinated
Debentures unless there shall have been an Event of Default under the Trust
Agreement. See "--Description of Exchange Capital Securities--Events of Default;
Notice."
Consolidation, Merger, Sale of Assets and Other Transactions. The
Indenture provides that the Corporation shall not consolidate with or merge into
any other Person or convey, transfer or lease its properties as an entirety or
substantially as an entirety to any Person, and no Person shall consolidate with
or merge into the Corporation or convey, transfer or lease its properties as an
entirety or substantially as an entirety to the Corporation, unless: (i) in case
the Corporation consolidates with or merges into another Person or conveys or
transfers its properties as an entirety or substantially as an entirety to any
Person, the successor Person is organized under the laws of the United States or
any state or the District of Columbia, and such successor Person expressly
assumes the Corporation's obligations on the Junior Subordinated Debentures;
(ii) immediately after giving effect thereto, no Debenture Event of Default, and
no event which, after notice or lapse of time or both, would become a Debenture
Event of Default, shall have occurred and be continuing; and (iii) certain other
conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Exchange Junior Subordinated Debentures protection in the event of a highly
leveraged or other transaction involving the Corporation that may adversely
affect holders of the Exchange Junior Subordinated Debentures.
Satisfaction and Discharge. The Indenture provides that when, among
other things, all Exchange Junior Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation (i) have become due and
payable or (ii) will become due and payable at maturity or upon prepayment
within one year, and the Corporation deposits or causes to be deposited with the
Debenture Trustee funds, in trust, for the purpose and in an amount sufficient
to pay and discharge the entire indebtedness on the Exchange Junior Subordinated
Debentures not previously delivered to the Debenture Trustee for cancellation,
for the principal (and premium, if any) and interest to the date of the deposit
or to the Stated Maturity Date, as the case may be, then the Indenture will
cease to be of further effect (except as to the Corporation's obligations to pay
all other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Corporation
will be deemed to have satisfied and discharged the Indenture.
Subordination. In the Indenture, the Corporation has covenanted and
agreed that any Junior Subordinated Debentures issued thereunder will rank
subordinate and junior in right of payment to all Senior Indebtedness to the
extent provided in the Indenture. Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any bankruptcy,
insolvency, debt restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding of the Corporation, the
66
holders of all Senior Indebtedness will first be entitled to receive payment in
full of such Senior Indebtedness before the holders of Junior Subordinated
Debentures will be entitled to receive or retain any payment in respect thereof.
In the event of the acceleration of the maturity of the Junior
Subordinated Debentures, the holders of all Senior Indebtedness outstanding at
the time of such acceleration will first be entitled to receive payment in full
of such Senior Indebtedness before the holders of the Junior Subordinated
Debentures will be entitled to receive or retain any payment in respect of the
Junior Subordinated Debentures.
No payments on account of principal (or premium, if any) or interest in
respect of the Junior Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Indebtedness" shall mean: (i) every obligation of the Corporation for
money borrowed; (ii) every obligation of the Corporation evidenced by bonds,
debentures, notes or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or businesses; (iii)
every reimbursement obligation of the Corporation with respect to letters of
credit, banker's acceptances or similar facilities issued for the account of the
Corporation; (iv) every obligation of the Corporation issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business); (v)
every capital lease obligation of the Corporation; (vi) all indebtedness of the
Corporation, whether incurred on or prior to the date of the Indenture or
thereafter incurred, for claims in respect of derivative products, including
interest rate, foreign exchange rate and commodity forward contracts, options
and swaps and similar arrangements; and (vii) every obligation of the type
referred to in clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, the Corporation has
guaranteed or is responsible or liable for, directly or indirectly, as obligor
or otherwise.
"Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures" shall mean (i) Indebtedness, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred, to the
extent such indebtedness specifically by its terms ranks pari passu with and not
prior to the Junior Subordinated Debentures in the right of payment upon the
happening of the dissolution or winding-up or liquidation or reorganization of
the Corporation and (ii) all other debt securities, and guarantees in respect of
those debt securities, issued to any other trust, or a trustee of such trust,
partnership or other entity affiliated with the Corporation that is a financing
vehicle of the Corporation (a "financing entity") in connection with the
issuance by such financing entity of equity securities or other securities
guaranteed by the Corporation pursuant to an instrument that ranks pari passu
with or junior in right of payment to the Guarantee. The securing of any
Indebtedness otherwise constituting Indebtedness Ranking on a Parity with the
Junior Subordinated Debentures shall not be deemed to prevent such Indebtedness
from constituting Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures.
"Indebtedness Ranking Junior to the Junior Subordinated Debentures"
shall mean any Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, to the extent such
indebtedness by its terms ranks junior to and not pari passu with or prior to
the Junior Subordinated Debentures (and any other Indebtedness Ranking on a
Parity with the Junior Subordinated Debentures) in right of payment upon the
happening of the dissolution
67
or winding up or liquidation or reorganization of the Corporation. The securing
of any Indebtedness otherwise constituting Indebtedness Ranking Junior to the
Junior Subordinated Debentures shall not be deemed to prevent such Indebtedness
from constituting Indebtedness Ranking Junior to the Junior Subordinated
Debentures.
"Senior Indebtedness" shall mean all Indebtedness, whether outstanding
on the date of execution of the Indenture or thereafter created, assumed or
incurred, except Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures or Indebtedness Ranking Junior to the Junior Subordinated Debentures,
and any deferrals, renewals or extensions of such Senior Indebtedness.
Almost all of the operating assets of the Corporation and its
consolidated subsidiaries are owned by such subsidiaries. The Corporation is a
legal entity separate and distinct from the Banks and its other subsidiaries.
Holders of Exchange Junior Subordinated Debentures should look only to the
Corporation for payments on the Exchange Junior Subordinated Debentures. The
principal sources of the Corporation's income are dividends and interest from
the Banks and its other subsidiaries, and there are various limitations on the
Banks to pay such dividends, as discussed below. The Banks are also subject to
certain restrictions on the transfer of funds by each of such depository
institutions to the Corporation and certain other affiliates, in the form of
loans, other extensions of credit, investments or purchases of assets. Transfers
by any Bank to the Corporation or any single affiliate are generally limited in
amount as to the Corporation and as to each of such other affiliates to 10% of
such Bank's capital and surplus and transfers to all affiliates are limited to
an aggregate of 20% of such Bank's capital and surplus. Furthermore, such loans
and extensions of credit are subject to various collateral requirements.
Because the Corporation is a holding company, the Corporation's
operations are conducted by its subsidiaries, including the Banks, which are
subject to significant federal and state regulation. As a result, the
Corporation's ability to receive dividends and loans from its subsidiaries is
restricted. As of December 31, 1996, the Banks were able to declare dividends to
the Corporation in 1997, without regulatory approval, of approximately $4.7
million. In addition, in February 1996, as part of its plan to capitalize the
Corporation's newly formed subsidiary bank, First Massachusetts Bank, N.A., at a
"well-capitalized" level for regulatory capital purposes, the Corporation
redeployed accumulated capital of $45.6 million in the form of special dividends
from certain of the Banks. Because the amounts of the special dividends exceeded
applicable regulatory limitations, the Corporation obtained the necessary
regulatory approvals to effect such redeployment. Payment of the special
dividends has significantly restricted the dividend paying capacity of the
Banks. Accordingly, payment of any dividends to the Corporation by certain of
the Banks currently requires regulatory approval on account of the
aforementioned special dividends, and payments of dividends by the Banks in the
future will require their generation of sufficient future earnings. Further, the
right of the Corporation to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the Capital Securities to benefit indirectly
from such distribution) is subject to the prior claims of creditors of such
subsidiary (including depositors in the case of the Banks), except to the extent
that the Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Exchange Junior Subordinated Debentures effectively will be
subordinated to all existing and future liabilities of the Corporation's
subsidiaries (including deposit liabilities of the Banks), and holders of
Exchange Junior Subordinated Debentures should look only to the assets of the
Corporation for payments on the Exchange Junior Subordinated Debentures.
The Indenture does not limit the amount of secured or unsecured debt,
including Senior Indebtedness, that may be incurred by the Corporation or any of
its subsidiaries. At December 31,
68
1996, the Corporation had $13.0 million of Senior Indebtedness outstanding, and
the Corporation's subsidiaries had total liabilities (excluding liabilities owed
to the Corporation) of $2.4 billion. See "--Subordination." The Corporation
expects from time to time that it will incur additional indebtedness
constituting Senior Indebtedness and that its subsidiaries will incur additional
liabilities.
Restrictions on Transfer. The Exchange Junior Subordinated Debentures
will be issued, and may be transferred, only in blocks having an aggregate
principal amount of not less than $100,000 and multiples of $1,000 in excess
thereof. Any such transfer of Exchange Junior Subordinated Debentures in a block
having an aggregate principal amount of less than $100,000 shall be deemed to be
void and of no legal effect whatsoever. Any such transferee shall be deemed not
to be the holder of such Exchange Junior Subordinated Debentures for any
purpose, including but not limited to the receipt of payments on such Exchange
Junior Subordinated Debentures, and such transferee shall be deemed to have no
interest whatsoever in such Exchange Junior Subordinated Debentures.
Information Concerning the Debenture Trustee. Following the Exchange
Offer and the qualification of the Indenture under the Trust Indenture Act, the
Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to the foregoing, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Exchange Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
Governing Law. The Indenture and the Exchange Junior Subordinated
Debentures will be governed by and construed in accordance with the laws of the
State of New York.
Description of Exchange Guarantee
The Exchange Guarantee will be executed and delivered by the
Corporation concurrently with the issuance by the Trust of the Exchange Capital
Securities for the benefit of the holders from time to time of the Exchange
Capital Securities. The terms of the Exchange Guarantee are identical in all
material respects to the terms of the Original Guarantee. The First National
Bank of Chicago will act as Guarantee Trustee under the Exchange Guarantee. The
Exchange Guarantee has been qualified under the Trust Indenture Act. This
summary of certain provisions of the Exchange Guarantee does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of the Exchange Guarantee, including the definitions therein
of certain terms, and those made part of the Guarantee by the Trust Indenture
Act. The Guarantee Trustee will hold the Exchange Guarantee for the benefit of
the holders of the Exchange Capital Securities.
Status of Original Guarantee. If not all the Original Capital
Securities are exchanged for Exchange Capital Securities in the Exchange Offer,
the Original Guarantee will not terminate, but will continue to guarantee the
obligations of the Corporation for the benefit of the holders of the Original
Capital Securities. The Original Guarantee will terminate upon full payment of
the applicable Redemption Price of the Original Capital Securities, upon full
payment of the Liquidation Amount payable upon liquidation of the Trust or upon
distribution of Original Junior Subordinated Debentures to the holders of the
Original Capital Securities. The Original Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the Original Capital Securities
69
must restore payment of any sums paid under the Original Capital Securities or
the Original Guarantee.
General. The Corporation will irrevocably agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined below) to the holders of the Exchange Capital Securities, as and when
due, regardless of any defense, right of set-off or counterclaim that the Trust
may have or assert other than the defense of payment. The following payments
with respect to the Exchange Capital Securities, to the extent not paid by or on
behalf of the Trust (the "Guarantee Payments"), will be subject to the Exchange
Guarantee: (i) any accumulated and unpaid Distributions required to be paid on
the Exchange Capital Securities, to the extent that the Trust has funds legally
available therefor at such time; (ii) the applicable Redemption Price with
respect to the Exchange Capital Securities called for redemption, to the extent
that the Trust has funds legally available therefor at such time; and (iii) upon
a voluntary or involuntary dissolution, winding-up or liquidation of the Trust
(other than in connection with the distribution of the Exchange Junior
Subordinated Debentures to holders of the Exchange Capital Securities or the
redemption of all Exchange Capital Securities), the lesser of (a) the
Liquidation Distribution, to the extent that the Trust has funds legally
available therefor at the time, and (b) the amount of assets of the Trust
remaining available for distribution to holders of Exchange Capital Securities
after satisfaction of liabilities to creditors of the Trust as required by
applicable law. The Corporation's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Corporation to the
holders of the Exchange Capital Securities or by causing the Trust to pay such
amounts to such holders.
The Corporation will, through the Exchange Guarantee, the Trust
Agreement, the Exchange Junior Subordinated Debentures and the Indenture, taken
together, fully, irrevocably and unconditionally guarantee all of the Trust's
obligations under the Exchange Capital Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the Trust's obligations under the Exchange Capital Securities. See
"Relationship Among the Exchange Capital Securities, the Exchange Junior
Subordinated Debentures and the Exchange Guarantee."
Status of the Exchange Guarantee. The Exchange Guarantee will
constitute an unsecured obligation of the Corporation and will rank subordinate
and junior in right of payment to all Senior Indebtedness in the same manner as
the Exchange Junior Subordinated Debentures. See "Description of Exchange Junior
Subordinated Debentures--Subordination." Because the Corporation is a holding
company, the right of the Corporation to participate in any distribution of
assets of any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise is subject to the prior claims of creditors of such subsidiary
(including depositors in the case of the Banks), except to the extent the
Corporation may itself be recognized as a creditor of such subsidiary.
Accordingly, the Corporation's obligations under the Exchange Guarantee
effectively will be subordinated to all existing and future liabilities
(including deposit liabilities of the Banks) of the Corporation's present and
future subsidiaries. Claimants should look only to the assets of the Corporation
for payments under the Exchange Guarantee. See "Description of Exchange Junior
Subordinated Debentures--General." The Exchange Guarantee does not limit the
amount of secured or unsecured debt, including Senior Indebtedness, that may be
incurred by the Corporation or any of its subsidiaries. The Corporation expects
from time to time that it will incur additional indebtedness constituting Senior
Indebtedness and that its subsidiaries will incur additional liabilities.
The Exchange Guarantee will rank pari passu with all Other Guarantees
issued by the Corporation with respect to preferred beneficial interests (if
any) issued by Other Trusts. The
70
Exchange Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Corporation to enforce its rights under the Exchange Guarantee without first
instituting a legal proceeding against any other person or entity). The Exchange
Guarantee will be held for the benefit of the holders of the Exchange Capital
Securities. The Exchange Guarantee will not be discharged except by payment of
the Guarantee Payments in full to the extent not paid by the Trust or upon
distribution to the holders of the Exchange Capital Securities of the Exchange
Junior Subordinated Debentures.
Events of Default. An event of default under the Exchange Guarantee
will occur upon the failure of the Corporation to perform any of its payment or
other obligations thereunder, provided, however, that except with respect to a
default in respect of any Guarantee Payment, the Corporation shall have received
notice of default and shall not have cured such default within 60 days after
receipt of such notice.
The holders of a majority in Liquidation Amount of the Exchange Capital
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Exchange Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Exchange Guarantee. If the
Guarantee Trustee fails to enforce the Exchange Guarantee, any holder of the
Exchange Capital Securities may institute a legal proceeding directly against
the Corporation to enforce its rights under the Exchange Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity.
The Corporation, as guarantor, will be required to file annually with
the Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Exchange Guarantee.
Amendments and Assignment. Except with respect to any changes that do
not materially adversely affect the rights of holders of the Exchange Capital
Securities (in which case no consent will be required), the Exchange Guarantee
may not be amended without the prior approval of the holders of a majority of
the Liquidation Amount of such outstanding Exchange Capital Securities. The
manner of obtaining any such approval will be as set forth under "--Description
of Exchange Capital Securities--Voting Rights; Amendment of the Trust
Agreement." All guarantees and agreements contained in the Exchange Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Corporation and shall inure to the benefit of the holders of the Exchange
Capital Securities then outstanding.
Termination of the Exchange Guarantee. The Exchange Guarantee will
terminate and be of no further force and effect upon full payment of the
applicable Redemption Price of the Exchange Capital Securities, upon full
payment of the Liquidation Amount payable upon liquidation of the Trust or upon
distribution of Exchange Junior Subordinated Debentures to the holders of the
Exchange Capital Securities. The Exchange Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the Exchange Capital Securities must restore payment of any sums paid under
the Exchange Capital Securities or the Exchange Guarantee.
Information Concerning the Guarantee Trustee. The Guarantee Trustee,
other than during the occurrence and continuance of a default by the Corporation
in performance of the Exchange Guarantee, will undertake to perform only such
duties as are specifically set forth in the Exchange Guarantee and, in case a
default with respect to the Exchange Guarantee has occurred, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or
71
her own affairs. Subject to this provision, the Guarantee Trustee will be under
no obligation to exercise any of the powers vested in it by the Exchange
Guarantee at the request of any holder of the Exchange Capital Securities unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby.
Governing Law. The Exchange Guarantee will be governed by and construed
in accordance with the laws of the State of New York.
DESCRIPTION OF ORIGINAL SECURITIES
The terms of the Original Securities are identical in all materials
respects to the Exchange Securities, except that (i) the Original Securities
have not been registered under the Securities Act, are subject to certain
restrictions on transfer and are entitled to certain rights under the applicable
Registration Rights Agreement (which rights will terminate upon consummation of
the Exchange Offer, except under limited circumstances), (ii) the Exchange
Capital Securities will not provide for any increase in the Distribution rate
thereon and (iii) the Exchange Junior Subordinated Debentures will not provide
for any liquidated damages thereon. The Original Securities provide that, if a
registration statement relating to the Exchange Offer has not been filed by
September 27, 1997 and been declared effective by October 27, 1997, then
liquidated damages will accrue at the rate of 0.25% per annum on the principal
amount of the Original Junior Subordinated Debentures and Distributions will
accrue at the rate of 0.25% per annum on the Liquidation Amount of the Original
Capital Securities, for the period from the occurrence of such event until such
time as such registration statement has been filed or declared effective, as the
case may be. In addition, the Original Capital Securities provide that, if the
Trust has not exchanged Exchange Capital Securities for all Original Capital
Securities validly tendered by the 45th day after the date on which the
registration statement is declared effective, the Distribution rate borne by the
Original Capital Securities will increase by .25% per annum for the period from
the occurrence of such event until such time as the Exchange Offer has been
consummated. The Exchange Securities are not, and upon consummation of the
Exchange Offer the Original Securities will not be, entitled to any such
additional interest or Distributions. Accordingly, holders of Original Capital
Securities should review the information set forth under "Risk
Factors--Consequences of a Failure to Exchange Original Capital Securities" and
"Description of Exchange Securities."
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE EXCHANGE
JUNIOR SUBORDINATED DEBENTURES AND THE EXCHANGE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Exchange Capital
Securities (to the extent the Trust has funds legally available for the payment
of such Distributions) will be irrevocably guaranteed by the Corporation as and
to the extent set forth under "Description of Exchange Securities--Description
of Exchange Guarantee." Taken together, the Corporation's obligations under the
Exchange Junior Subordinated Debentures, the Indenture, the Trust Agreement and
the Exchange Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of Distributions and other amounts due on
the Exchange Capital Securities. No single document standing alone or operating
in conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Exchange Capital Securities. If and to the extent
that the Corporation does not make the required payments on the Exchange Junior
Subordinated Debentures, the Trust will not have sufficient funds to make the
related
72
payments, including Distributions, on the Exchange Capital Securities. The
Exchange Guarantee will not cover any such payment when the Trust does not have
sufficient funds legally available therefor. In such event, the remedy of a
holder of Exchange Capital Securities is to institute a Direct Action. The
obligations of the Corporation under the Exchange Guarantee will be subordinate
and junior in right of payment to all Senior Indebtedness.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on
the Exchange Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Exchange Capital Securities,
primarily because: (i) the aggregate principal amount or Prepayment Price of the
Junior Subordinated Debentures will be equal to the sum of the aggregate
Liquidation Amount or Redemption Price, as applicable, of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the Junior
Subordinated Debentures will match the Distribution rate and Distribution and
other payment rates for the Trust Securities; (iii) the Corporation, as Sponsor,
shall pay for all and any costs, expenses and liabilities of the Trust except
the Trust's obligations to holders of Trust Securities; and (iv) the Trust
Agreement further provides that the Trust is not authorized to engage in any
activity that is not consistent with the limited purposes thereof.
Enforcement Rights of Holders of Exchange Capital Securities
A holder of any Exchange Capital Security may institute a legal
proceeding directly against the Corporation to enforce its rights under the
Exchange Guarantee without first instituting a legal proceeding against the
Guarantee Trustee, the Trust or any other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Trust Agreement. However, in
the event of payment defaults under, or acceleration of, Senior Indebtedness,
the subordination provisions of the Indenture provide that no payments may be
made in respect of the Exchange Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on Exchange Junior
Subordinated Debentures would constitute an Event of Default under the Trust
Agreement.
Limited Purpose of the Trust
The Exchange Capital Securities will represent beneficial interests in
the Trust, and the Trust exists for the sole purpose of issuing and selling the
Trust Securities, using the proceeds from the sale of the Trust Securities to
acquire the Exchange Junior Subordinated Debentures, exchanging the Exchange
Capital Securities and the Original Junior Subordinated Debentures in the
Exchange Offer, and engaging in only those other activities necessary, advisable
or incidental thereto.
Rights Upon Termination
Unless the Exchange Junior Subordinated Debentures are distributed to
holders of the Exchange Capital Securities, upon any voluntary or involuntary
termination, winding-up or liquidation of the Trust, after satisfaction of the
liabilities of creditors of the Trust as required by applicable law, the holders
of the Exchange Capital Securities will be entitled to receive, out of assets
held by the Trust, the Liquidation Distribution in cash. See "Description of
Exchange Securities--Description of Exchange Capital Securities--Liquidation of
the Trust and Distribution of Exchange Junior
73
Subordinated Debentures." Upon any voluntary or involuntary liquidation or
bankruptcy of the Corporation, the Property Trustee, as holder of the Exchange
Junior Subordinated Debentures, would be a subordinated creditor of the
Corporation, subordinated in right of payment to all Senior Indebtedness as set
forth in the Indenture, but entitled to receive payment in full of principal
(and premium, if any) and interest, before any stockholders of the Corporation
receive payments or distributions.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of certain of the material United States
federal income tax consequences associated with the exchange of Original Capital
Securities for Exchange Capital Securities and with the ownership and
disposition of Capital Securities held as capital assets by a holder who
purchased Original Capital Securities upon initial issuance. It does not purport
to deal with all aspects of U.S. federal income taxation that might be relevant
to particular holders in light of their personal investment circumstances or
status, nor does it discuss the U.S. federal income tax consequences to certain
types of holders subject to special treatment under the U.S. federal income tax
laws, such as banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors, United States Alien Holders (as defined herein) engaged in
a U.S. trade or business or persons that will hold the Capital Securities as a
position in a "straddle," as part of a "synthetic security" or "hedge," as part
of a "conversion transaction" or other integrated investment, or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of Capital
Securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the Capital Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations thereunder and the administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis. Brown & Wood LLP ("Tax Counsel") has
reviewed this summary and is of the opinion that, to the extent that it
constitutes matters of law or purports to describe certain provisions of the
U.S. federal income tax laws, it is a correct summary in all material respects
of the matters discussed herein.
Exchange of Capital Securities
The exchange of Original Capital Securities for Exchange Capital
Securities should not be a taxable event to holders for United States federal
income tax purposes. The exchange of Original Capital Securities for Exchange
Capital Securities pursuant to the Exchange Offer should not be treated as an
"exchange" for United States federal income tax purposes because the Exchange
Capital Securities should not be considered to differ materially in kind or
extent from the Original Capital Securities and because the exchange will occur
by operation of the terms of the Original Capital Securities. Accordingly, the
Exchange Capital Securities should have the same issue price as the Original
Capital Securities, and a holder should have the same adjusted tax basis and
holding period in the Exchange Capital Securities immediately after the exchange
as the holder had in the Original Capital Securities immediately before the
exchange.
74
Classification of the Junior Subordinated Debentures
The Corporation intends to take the position that the Junior
Subordinated Debentures will be classified for United States federal income tax
purposes as indebtedness of the Corporation. The Corporation, the Trust and the
holders of the Capital Securities (by acceptance of a beneficial interest in a
Capital Security) will agree to treat the Junior Subordinated Debentures as
indebtedness of the Corporation and the Capital Securities as evidence of a
beneficial ownership interest in the Junior Subordinated Debentures for all
United States federal income tax purposes. No assurance can be given, however,
that such position will not be challenged by the Internal Revenue Service (the
"IRS") or, if challenged, that such a challenge will not be successful. The
remainder of this discussion assumes that the Junior Subordinated Debentures
will be classified as indebtedness of the Corporation for United States federal
income tax purposes.
Classification of the Trust
In connection with the issuance of the Capital Securities, Tax Counsel
is of the opinion generally to the effect that, under then-current law and
assuming full compliance with the terms of the Trust Agreement and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, the Trust will be classified for United States
federal income tax purposes as a grantor trust and not as an association taxable
as a corporation. Accordingly, for United States federal income tax purposes,
each holder of Capital Securities generally will be considered the owner of an
undivided interest in the Junior Subordinated Debentures, and each holder will
be required to include in its gross income any interest (or OID accrued) with
respect to its allocable share of those Junior Subordinated Debentures.
An opinion of Tax Counsel is not binding on the IRS or the courts. No
rulings have been or are expected to be sought from the IRS with respect to any
of the transactions described herein and no assurance can be given that the IRS
will not take contrary positions. Moreover, no assurance can be given that the
opinion expressed herein will not be challenged by the IRS or, if challenged,
that such a challenge would not be successful.
Interest Income and Original Issue Discount
Under recently issued Treasury regulations (the "Treasury Regulations")
applicable to debt instruments issued on or after August 13, 1996, a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. The Corporation
believes that the likelihood of its exercising its option to defer payments of
interest is "remote" since exercising that option would, among other things,
prevent the Corporation from declaring dividends on any class of its equity
securities. Accordingly, the Corporation intends to take the position that the
Junior Subordinated Debentures will not be considered to be issued with OID and,
accordingly, stated interest on the Junior Subordinated Debentures generally
will be taxable to a holder as ordinary income at the time it is paid or accrued
in accordance with such holder's method of tax accounting.
Under the Treasury Regulations, if the Corporation were to exercise its
option to defer payments of interest, the Junior Subordinated Debentures would
at that time be treated as issued with OID, and all stated interest on the
Junior Subordinated Debentures would thereafter be treated as OID as long as the
Junior Subordinated Debentures remain outstanding. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures would thereafter be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and
75
actual distributions of stated interest would not be reported as taxable income.
Consequently, a holder of Capital Securities would be required to include in
gross income OID even though the Corporation would not make actual cash payments
during an Extension Period. Moreover, under the Treasury Regulations, if the
option to defer the payment of interest was determined not to be "remote," the
Junior Subordinated Debentures would be treated as having been originally issued
with OID. In such event, all of a holder's taxable interest income with respect
to the Junior Subordinated Debentures would be accounted for on an economic
accrual basis regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
The Treasury Regulations have not yet been addressed in any rulings or
other interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation described herein.
Because income on the Capital Securities will constitute interest or
OID, corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Capital Securities.
Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of the Trust
The Corporation will have the right at any time to liquidate the Trust
and cause the Junior Subordinated Debentures to be distributed to the holders of
the Trust Securities. Under current law, such a distribution, for United States
federal income tax purposes, would be treated as a nontaxable event to each
holder, and each holder would receive an aggregate tax basis in the Junior
Subordinated Debentures equal to such holder's aggregate tax basis in its
Capital Securities. A holder's holding period in the Junior Subordinated
Debentures so received in liquidation of the Trust would include the period
during which the Capital Securities were held by such holder. If, however, the
Trust were characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of its dissolution, the
distribution of the Junior Subordinated Debentures may constitute a taxable
event to holders of Capital Securities and a holder's holding period in Junior
Subordinated Debentures would begin on the date such Junior Subordinated
Debentures were received.
Under certain circumstances described herein (see "Description of
Exchange Securities--Description of Exchange Capital Securities"), the Junior
Subordinated Debentures may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Capital Securities.
Under current law, such a redemption would, for United States federal income tax
purposes, constitute a taxable disposition of the redeemed Capital Securities,
and a holder could recognize gain or loss as if it sold such redeemed Capital
Securities for cash. See "--s
Sales of Capital Securities."
Sales of Capital Securities
A holder that sells Capital Securities (including a redemption of the
Capital Securities either on the Stated Maturity Date or upon an optional
redemption of the Junior Subordinated Debentures by the Corporation) will
recognize gain or loss equal to the difference between its adjusted tax basis in
Capital Securities and the amount realized on the sale of such Capital
Securities (other than with respect to accrued and unpaid interest which has not
yet been included in income, which will be treated as ordinary income). A
holder's adjusted tax basis in the Capital Securities generally will be its
initial purchase price increased by OID (if any) previously includible in such
holder's gross income to the date of disposition and decreased by payments (if
any) received on the Capital Securities in respect of OID. Such gain or loss
generally will be a capital gain or loss and generally will be a
76
long-term capital gain or loss if the Capital Securities have been held for more
than the applicable holding period.
The Taxpayer Relief Act of 1997 reduces the maximum rates on long-term
capital gains recognized on capital assets held by individuals taxpayers for
more than eighteen months as of the date of disposition (and would further
reduce the maximum rates on such gains in the year 2001 and thereafter for
certain individual taxpayers who meet specified conditions). Prospective
investors should consult their own tax advisors concerning these tax law
changes.
The Capital Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Debentures. A holder who uses the accrual method of
accounting for tax purposes (and a cash method holder, if the Junior
Subordinated Debentures are deemed to have been issued with OID) who disposes of
his Capital Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income (i.e., interest or, if applicable, OID), and to add such amount to his
adjusted tax basis in his pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include all accrued but unpaid
interest), a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
Proposed Tax Legislation
The Taxpayer Relief Act of 1997, enacted on August 7, 1997, did not
contain certain provisions of President Clinton's Fiscal 1998 Budget Proposal
(the "Proposed Legislation") that would, among other things, have denied an
issuer a deduction for United States federal income tax purposes for the payment
of interest on instruments with characteristics similar to the Junior
Subordinated Debentures. There can be no assurances, however, that the proposed
legislation, if enacted, or similar legislation enacted after the date hereof
would not adversely affect the tax treatment of the Junior Subordinated
Debentures, resulting in a Tax Event. The occurrence of a Tax Event may result
in the redemption of the Junior Subordinated Debentures for cash, in which event
the holders of the Capital Securities would receive cash in redemption of their
Capital Securities. See "Description of Exchange Securities--Description of
Exchange Capital Securities--Redemption" and "Description of Exchange
Securities--Description of Exchange Junior Subordinated Debentures--Special
Event Prepayment."
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes.
A "U.S. Holder" is a holder of Capital Securities who or which is (i) a
citizen or individual resident (or is treated as a citizen or individual
resident) of the United States for federal income tax purposes, (ii) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, (other than a partnership
that is not treated as a United States person under any applicable Treasury
regulations) or (iii) a trust or estate the income of which is includible in its
gross income for federal income tax purposes without regard to its source. For
taxable years beginning after December 31, 1996 (or for taxable years ending
after August 20, 1996, if the trustee so elects), a trust is a U.S. Holder if,
and only if, (a) a court within the United States is
77
able to exercise primary supervision over the administration of the trust and
(b) one or more United States persons have the authority to control all
substantial decisions of the trust. To the extent provided in Treasury
regulations, certain trusts in existence on August 20, 1996 and treated as
United States persons prior to such date, that elect to continue to be treated
as United States persons, will be treated as a U.S. Holder.
Under present United States federal income tax laws: (i) payments by
the Trust or any of its paying agents to any holder of a Capital Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the Capital
Security does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of the Corporation entitled to
vote, (b) the beneficial owner of the Capital Security is not a controlled
foreign corporation that is related to the Corporation through stock ownership,
and (c) either (1) the beneficial owner of the Capital Security certifies to the
Trust or its agent, under penalties of perjury, that it is not a United States
holder and provides its name and address or (2) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Capital Security in such capacity, certifies to the
Trust or its agent, under penalties of perjury, that such statement has been
received from the beneficial owner by it or by a Financial Institution between
it and the beneficial owner and furnishes the Trust or its agent with a copy
thereof; and (ii) a United States Alien Holder of a Capital Security will not be
subject to United States federal withholding tax on any gain realized upon the
sale or other disposition of a Capital Security unless (i) the gain is
effectively connected with the conduct of a trade or business within the United
States or (ii) the holder is an individual who was present in the United States
for at least 183 days during the taxable year of the sale and certain other
conditions are met.
As discussed above, changes in legislation affecting the United States
federal income tax treatment of the Junior Subordinated Debentures are possible,
and could adversely affect the ability of the Corporation to deduct the interest
payable on the Junior Subordinated Debentures. Moreover, any such legislation
could adversely affect United States Alien Holders by characterizing income
derived from the Junior Subordinated Debentures as dividends, generally subject
to a 30% income tax (on a withholding basis) when paid to a United States Alien
Holder, rather than as interest which, as discussed above, is generally exempt
from income tax in the hands of a United States Alien Holder.
Information Reporting to Holders
Generally, income on the Capital Securities will be reported to holders
on Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
Backup Withholding
Payments made on, and proceeds from the sale of, the Capital Securities
may be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will be
allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF ORIGINAL CAPITAL
SECURITIES FOR EXCHANGE
78
CAPITAL SECURITIES AND OF THE OWNERSHIP AND DISPOSITION OF THE CAPITAL
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER
TAX LAWS.
ERISA CONSIDERATIONS
Each of the Corporation (the obligor with respect to the Exchange
Junior Subordinated Debentures held by the Trust), and its affiliates and the
Property Trustee may be considered a "party in interest" (within the meaning of
ERISA) or a "disqualified person" (within the meaning of Section 4975 of the
Code) with respect to many Plans. The purchase and/or holding of Exchange
Capital Securities by a Plan with respect to which the Corporation, the Property
Trustee or any affiliate is a service provider (or otherwise is a party in
interest or a disqualified person) may constitute or result in a prohibited
transaction under ERISA or Section 4975 of the Code, unless such Exchange
Capital Securities are acquired pursuant to and in accordance with an applicable
exemption, such as Prohibited Transaction Class Exemption ("PTCE") 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts), PTCE 95-60
(an exemption for transactions involving certain insurance company general
accounts) or PTCE 96-23 (an exemption for certain transactions determined by an
in-house asset manager). In addition, a Plan fiduciary considering the purchase
of Exchange Capital Securities should be aware that the assets of the Trust may
be considered "plan assets" for ERISA purposes. In such event, the Property
Trustee, as well as any other persons exercising discretion with respect to the
Exchange Junior Subordinated Debentures, may become fiduciaries, parties in
interest or disqualified persons with respect to investing Plans. In order to
avoid certain prohibited transactions under ERISA and the Code that could
thereby result, each investing Plan, by purchasing the Exchange Capital
Securities, will be deemed to have directed the Trust to invest in the Exchange
Junior Subordinated Debentures and to have consented to the appointment of the
Property Trustee. In this regard, it should be noted that, in an Event of
Default, the Corporation may not remove the Property Trustee without the
approval of a majority of the holders of the Exchange Capital Securities.
A Plan fiduciary should consider whether the purchase of Exchange
Capital Securities could result in a delegation of fiduciary authority to the
Property Trustee, and, if so, whether such a delegation of authority is
permissible under the Plan's governing instrument or any investment management
agreement with the Plan.
THE SALE OF INVESTMENTS TO PLANS IS IN NO RESPECT A REPRESENTATION BY
THE TRUST, THE CORPORATION, THE PROPERTY TRUSTEE, THE INITIAL PURCHASER OR ANY
OTHER PERSON ASSOCIATED WITH THE SALE OF THE EXCHANGE CAPITAL SECURITIES THAT
SUCH SECURITIES MEET RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY
PLANS GENERALLY OR ANY PARTICULAR PLAN, OR THAT SUCH SECURITIES ARE OTHERWISE
APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR PLAN. ANY PURCHASER PROPOSING
TO ACQUIRE EXCHANGE CAPITAL SECURITIES WITH ASSETS OF ANY PLAN SHOULD CONSULT
WITH ITS COUNSEL.
79
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Capital Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Capital
Securities received in exchange for Original Capital Securities where such
Original Capital Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Trust and the
Corporation have agreed that, starting on the Expiration Date and ending on the
close of business on the 90th day following the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, for a period of 90 days
after the Expiration Date, all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.
The Trust and the Corporation will not receive any proceeds from any
issuance of Exchange Capital Securities. Exchange Capital Securities received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions, in the over-the-counter market,
in negotiated transactions, through the writing of options on the Exchange
Capital Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Capital Securities. Any broker-dealer that
resells Exchange Capital Securities that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Capital Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit of any
such resale of Exchange Capital Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
VALIDITY OF EXCHANGE SECURITIES
The validity of the Exchange Junior Subordinated Debentures and the
Exchange Guarantee will be passed upon for the Corporation by Brown & Wood LLP,
New York, New York. Certain matters of Delaware law relating to the validity of
the Exchange Capital Securities will be passed upon on behalf of the Trust by
Richards, Layton & Finger, Wilmington, Delaware. Certain matters relating to
United States federal income tax considerations will be passed upon by Brown &
Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Corporation and its
subsidiaries incorporated by reference in the Corporation's Annual Report on
Form 10-K, as amended by Form 10-K/A, for the year ended December 31, 1996 and
incorporated by reference in this Prospectus have been audited by KPMG Peat
Marwick LLP, independent auditors, as stated in their report appearing therein.
Their report refers to changes in accounting for mortgage servicing rights in
1996, for impaired loans in 1995 and for certain investments in debt and equity
securities in 1994.
80
No dealer, salesperson or other individual has been authorized to give
any information or to make any representations other than those contained or
incorporated by reference in this Prospectus in connection with this Exchange
Offer and, if given or made, such information or representations must not be
relied upon as having been authorized by the Corporation or the Trust. Neither
the delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create an implication that there has not been any change in the
affairs of the Corporation or the Trust since the date hereof. This Prospectus
does not constitute an offer or solicitation by anyone in any jurisdiction in
which such offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so or to anyone to whom it is
unlawful to make such offer or solicitation.
-----------------------------
TABLE OF CONTENTS
Page
----
Available Information.................................... 9
Incorporation of Certain Documents by Reference......... 10
Summary ................................................ 11
Risk Factors ........................................... 20
Banknorth Group, Inc. .................................. 28
Banknorth Capital Trust I. ............................. 29
Use of Proceeds ........................................ 30
Ratios of Earnings to Combined Fixed Charges ........... 30
Accounting Treatment.................................... 31
Capitalization ......................................... 32
Selected Consolidated Financial Data.................... 33
The Exchange Offer ..................................... 34
Description of Exchange Securities ..................... 45
Description of Original Securities ..................... 72
Relationship Among the Exchange Capital
Securities, the Exchange Junior
Subordinated Debentures and the
Exchange Guarantee ................................... 72
Certain Federal Income Tax Consequences ............... 74
ERISA Considerations ................................. 79
Plan of Distribution ................................... 80
Validity of Exchange Securities ........................ 80
Experts ..................................................80
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware authorizes the
registrant to indemnify its directors and officers under specified
circumstances. Article Twelfth of the certificate of incorporation of the
registrant provides in effect that the registrant shall provide certain
indemnification of its directors and officers.
Section 145 of the General Corporation Law of Delaware also authorizes
Banknorth Group, Inc. to indemnify persons who serve as directors or officers of
the registrant at the request of Banknorth Group, Inc. under specified
circumstances. Article Eleventh of the certificate of incorporation of Banknorth
Group, Inc. provides in effect that Banknorth Group, Inc. shall provide certain
indemnification to such persons.
The directors and officers of the registrant are insured, under
policies of insurance maintained by the registrant, within the limits and
subject to the limitations of the policies, against certain expenses in
connection with the defense of actions, suits or proceedings, to which they are
parties by reason of being or having been such directors or officers.
Item 21. Exhibits and Financial Statement Schedules.
4.1 Indenture, dated as of May 1, 1997, between the Corporation and The
First National Bank of Chicago, as Debenture Trustee.
4.2 Form of Exchange Junior Subordinated Debenture.
4.3 Certificate of Trust of Banknorth Capital Trust I, dated April 9,
1997.
4.4 Declaration of Trust of Banknorth Capital Trust I, dated as of April
9, 1997.
4.5 Amended and Restated Declaration of Trust of Banknorth Capital Trust
I, dated as of May 1, 1997.
4.6 Form of Exchange Capital Security.
4.7 Form of Exchange Guarantee.
4.8 Registration Rights Agreement, dated as of May 1, 1997, among
Banknorth Group, Inc., Banknorth Capital Trust I and the Initial
Purchaser.
4.9 Liquidated Damages Agreement, dated as of May 1, 1997, among the
Banknorth Group, Inc., Banknorth Capital Trust I and the Initial
Purchaser.
5.1 Opinion of Brown & Wood LLP as to the legality of the Exchange Junior
Subordinated Debentures and the Exchange Guarantee.
5.2 Opinion of Richards, Layton & Finger as to the legality of the
Exchange Capital Securities.
8.1 Opinion of Brown & Wood LLP as to certain federal income tax matters.
12.1 Computation of ratio of earnings to fixed charges (excluding interest
on deposits).
12.2 Computation of ratio of earnings to fixed charges (including interest
on deposits).
23.1 Consent of Brown & Wood LLP (included as part of Exhibit 5.1 and
Exhibit 8.1).
23.2 Consent of Richards, Layton & Finger (included as part of Exhibit 5.2)
23.3 Consent of KPMG Peat Marwick LLP.
II-2
26.1 Form T-1 Statement of Eligibility of The First National Bank of
Chicago to act as Property Trustee under the Amended and Restated
Declaration of Trust.
26.2 Form T-1 Statement of Eligibility of The First National Bank of
Chicago to act as Guarantee Trustee under the Exchange Guarantee.
26.3 Form T-1 Statement of Eligibility of The First National Bank of
Chicago to act as Debenture Trustee under the Indenture.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agent Agreement.
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
99.5 Form of Letter to Clients.
Item 22. Undertakings.
Each of the undersigned registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
such registrant's annual report pursuant to section 13(a) or section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, each of the
registrants has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of such registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, each registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the Prospectus
pursuant to Items 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Burlington,
state of Vermont, on the 23rd day of September, 1997.
Banknorth Group, Inc.
By:
--------------------------------------------
Name: William H. Chadwick
Title: President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below appoints Luther F. Hackett, William H. Chadwick and R. Allen Paul,
jointly and severally, each in his own capacity, his true and lawful
attorneys-in-fact, with full power of substitution for him and in his name,
place and stead, in any and all capacities to sign any amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Commission, hereby ratifying
and confirming all that said attorney-in-fact, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 23rd day of September, 1997.
Signature Title
--------- -----
- -------------------------- Chairman of the Board
Luther F. Hackett
- -------------------------- President, Chief Executive Officer and Director
William H. Chadwick
- -------------------------- Executive Vice President and Chief Financial Officer
Thomas J. Pruitt
- -------------------------- Treasurer and Principal Accounting Officer
Neal E. Robinson
- -------------------------- Director
Thomas J. Amidon
- -------------------------- Director
Jacqueline D. Arthur
II-4
- -------------------------- Director
Robert A. Carrara
- -------------------------- Director
Susan C. Crampton
- -------------------------- Director
Richard J. Fleming
- -------------------------- Director
Douglas G. Hyde
- -------------------------- Director
Kathleen Hoisington
- -------------------------- Director
Richard M. Narkewicz, M.D.
- -------------------------- Director
John B. Packard
- -------------------------- Director
R. Allan Paul
- -------------------------- Director
Angelo P. Pizzagalli
- -------------------------- Director
Thomas P. Salmon
II-5
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Burlington,
state of Vermont, on the 23rd day of September, 1997.
BANKNORTH CAPITAL TRUST I
By:
--------------------------------------
Thomas J. Pruitt
as Administrative Trustee
By:
--------------------------------------
Neal E. Robinson
as Administrative Trustee
II-6
EXHIBIT INDEX
Exhibit
No. Exhibit
- ------- -------
4.1 Indenture, dated as of May 1, 1997, between the Corporation
and The First National Bank of Chicago, as Debenture Trustee.
4.2 Form of Exchange Junior Subordinated Debenture.
4.3 Certificate of Trust of Banknorth Capital Trust I, dated April
9, 1997.
4.4 Declaration of Trust of Banknorth Capital Trust I, dated as of
April 9, 1997.
4.5 Amended and Restated Declaration of Trust of Banknorth Capital
Trust I, dated as of May 1, 1997.
4.6 Form of Exchange Capital Security.
4.7 Form of Exchange Guarantee Agreement.
4.8 Registration Rights Agreement, dated May 1, 1997, among
Banknorth Group, Inc., Banknorth Capital Trust I and the
Initial Purchaser.
4.9 Liquidated Damages Agreement, dated May 1, 1997, among the
Banknorth Group, Inc., Banknorth Capital Trust I and the
Initial Purchaser.
5.1 Opinion of Brown & Wood LLP as to the legality of the Exchange
Junior Subordinated Debentures and the Exchange Guarantee.
5.2 Opinion of Richards, Layton & Finger as to the legality of the
Exchange Capital Securities.
8.1 Opinion of Brown & Wood LLP as to certain federal income tax
matters.
12.1 Computation of ratio of earnings to fixed charges (excluding
interest on deposits).
12.2 Computation of ratio of earnings to fixed charges (including
interest on deposits).
23.1 Consent of Brown & Wood LLP (included as part of Exhibit 5.1
and Exhibit 8.1).
23.2 Consent of Richards, Layton & Finger (included as part of
Exhibit 5.2)
23.3 Consent of KPMG Peat Marwick LLP.
26.1 Form T-1 Statement of Eligibility of The First National Bank
of Chicago to act as Property Trustee under the Amended and
Restated Declaration of Trust.
26.2 Form T-1 Statement of Eligibility of The First National Bank
of Chicago to act as Guarantee Trustee under the Exchange
Guarantee.
26.3 Form T-1 Statement of Eligibility of The First National Bank
of Chicago to act as Debenture Trustee under the Indenture.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agent Agreement.
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.5 Form of Letter to Clients.