As Filed with the Securities and Exchange Commission on September 14, 1998
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
Liberty Financial Companies, Inc. Liberty Financial Capital Trust I
Liberty Financial Capital Trust II
(Exact name of registrant as (Exact name of each registrant as
specified in its charter) specified in its Trust Agreement)
Massachusetts Delaware
(State or other jurisdiction of (State of other jurisdiction of Incorporation
incorporation or organization) or organization of each registrant)
04-3260640 Each to be Applied for
(I.R.S. Employer (I.R.S. Employer
Identification Number) Identification No.)
600 Atlantic Avenue c/o Liberty Financial Companies, Inc.
Boston, Massachusetts 02210-2214 600 Atlantic Avenue
(617) 722-6000 Boston, Massachusetts 02210-2214
(Address, including zip code, (617) 722-6000
and telephone number, including (Address, including zip code, and
area code, of registrant's telephone number, including area code, of
principal executive offices) each registrant's principal executive offices)
----------------------------------------
JOHN A. BENNING, ESQ.
Senior Vice President and General Counsel
Liberty Financial Companies, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210-2214
(617) 722-6000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
----------------------------------------
With copies to:
WILLIAM P. GELNAW, JR., ESQ. MICHAEL A. KING, ESQ.
JAMES W. HACKETT, JR., ESQ. Brown & Wood LLP
Choate, Hall & Stewart One World Trade Center
53 State Street New York, New York 10048
Boston, Massachusetts 02109 (212) 839-5300
(617) 248-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is to be a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
registration statement of the earlier effective registration statement for the
same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [X]
----------------------------------------
CALCULATION OF REGISTRATION FEE
=========================================================================================================
Proposed Proposed
Maximum Maximum
Offering Price Aggregate
Title of Each Class of Amount to be Per Unit Offering Price Amount of
Securities to be Registered Registered(1) (1)(2)(3) (1)(2)(3) Registration Fee(2)
--------------------------- ------------- ----------- ----------- -------------------
Securities of Liberty Financial
Companies, Inc.:
Debt Securities......................
Preferred Stock, $.01 par value(4)...
Common Stock, $.01 par value.........
Warrants.............................
Stock Purchase Contracts.............
Stock Purchase Units.................
Preferred Securities of Liberty
Financial Capital Trust I...............
Preferred Securities of Liberty
Financial Capital Trust II..............
Guarantees of Preferred Securities
of Liberty Financial Capital Trust I and
Liberty Financial Capital Trust II by
Liberty Financial Companies, Inc.(5) ...
Total................................ $800,000,000 $236,000
========================================================================================================
(1) Such indeterminate number or amount of Debt Securities, Preferred Stock,
Common Stock, Warrants, Stock Purchase Contracts and Stock Purchase Units
of Liberty Financial Companies, Inc. and Preferred Securities of Liberty
Financial Capital Trust I and Liberty Financial Capital Trust II as may
from time to time be issued at indeterminate prices. Junior Subordinated
Debt Securities may be issued and sold to Liberty Financial Capital Trust I
and Liberty Financial Capital Trust II in which event such Junior
Subordinated Debt Securities may later be distributed to the holders of
Preferred Securities upon a dissolution of Liberty Financial Capital Trust
I and Liberty Financial Capital Trust II and the distribution of the assets
thereof.
(2) Such amount in U.S. dollars or the equivalent thereof in foreign currencies
as shall result in an aggregate initial offering price for all securities
of $800,000,000. In addition, this Registration Statement includes such
presently indeterminate number of Offered Securities (as defined herein) as
may be issuable from time to time upon conversion or exchange of the
Offered Securities being registered hereunder.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended
("Securities Act"), and exclusive of accrued interest and dividends, if
any.
(4) The Preferred Stock may include Common Stock Purchase Rights which, prior
to the occurrence of certain events, would not be exercisable or evidenced
separately from the Preferred Stock.
(5) Liberty Financial Companies, Inc. is also registering under this
registration statement all other obligations that it may have with respect
to Preferred Securities issued by Liberty Financial Capital Trust I and
Liberty Financial Capital Trust II. No separate consideration will be
received for any Guarantee or any other such obligations.
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 14, 1998
P R O S P E C T U S
- -------------------
LIBERTY FINANCIAL COMPANIES, INC.
LIBERTY FINANCIAL CAPITAL TRUST I
LIBERTY FINANCIAL CAPITAL TRUST II
By this prospectus, we may offer up to $800,000,000 of our:
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
PREFERRED SECURITIES OF LIBERTY FINANCIAL CAPITAL TRUST I
PREFERRED SECURITIES OF LIBERTY FINANCIAL CAPITAL TRUST II
Liberty Financial Companies, Inc. is a Massachusetts corporation.
Liberty Financial Capital Trust I and Liberty Financial Capital Trust II are
both Delaware business trusts. We are the sponsor of the Liberty Financial
Trusts.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
We will provide the specific terms of these securities in supplements
to this prospectus. You should read this prospectus and the supplements
carefully before you invest.
We may offer the securities directly or through underwriters, agents or
dealers. The supplement will describe the terms of that plan of distribution.
"Plan of Distribution" contained in this prospectus also provides more
information on this topic.
The date of this prospectus is _____________ __, 1998.
Certain persons participating in this offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the securities covered by
this prospectus. Those transactions include over-allotment, stabilizing
transactions, short covering transactions and penalty bids. For a description of
those activities, see "Plan of Distribution" in this prospectus. If begun, they
may discontinue those activities at any time.
WHERE YOU CAN FIND MORE INFORMATION
Liberty Financial Companies, Inc. files annual, quarterly and current
reports, proxy and information statements and other information with the SEC.
You may read and copy any document we file at the SEC's public reference rooms
in Washington, D.C., New York, New York and Chicago, Illinois. Please call the
SEC at 1-800-SEC-0330 for more information on the public reference rooms and
their copy charges. Our SEC filings are also available to the public from the
SEC's web site at http://www.sec.gov. You may also inspect our SEC reports and
other information at the National Association of Securities Dealers, Inc.,
Reports Section, 1735 K Street N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" the information we file
with them, which means we can disclose information to you by referring you to
those documents. Information incorporated by reference is part of this
prospectus. Later information filed with the SEC updates and supersedes this
prospectus.
We incorporate by reference the documents listed below and any future
filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until this offering is completed, or subsequent
to the date of the initial Registration Statement and prior to effectiveness of
the Registration Statement:
o Annual Report on Form 10-K of the Company for the year ended
December 31, 1997.
o Portions of the Proxy Statement on Schedule 14A for the Company's
Annual meeting of Shareholders held on May 11, 1998 that have been
incorporated by reference into our 10-K.
o Quarterly Reports on Form 10-Q of the Company for the quarters
ended March 31 and June 30, 1998.
These filings include important business and financial information
which we are not delivering to you. You may request a copy of those filings,
other than exhibits, at no cost, by contacting us at:
Investor Relations
Liberty Financial Companies, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210-2214
(617) 722-6000
CERTAIN INFORMATION REGARDING THE OFFERING
Liberty Financial Companies, Inc., a Massachusetts corporation (the
"Company" or "Liberty Financial"), may offer and sell from time to time (i) its
unsecured senior debt securities ("Senior Debt Securities") and its unsecured
junior subordinated debt securities (the "Junior Subordinated Debt Securities"),
consisting of debentures, notes and/or other evidences of indebtedness (the
"Debt Securities"), (ii) shares of its preferred stock, $.01 par value per share
(the "Preferred Stock"), which may be represented by depositary shares as
described herein, (iii) shares of its common stock, $.01 par value per share
(the "Common Stock"), (iv) warrants to purchase any of the foregoing Debt
Securities, Preferred Stock and Common Stock (the "Warrants"), (v) stock
purchase contracts ("Stock Purchase Contracts") to purchase shares of Common
Stock or (vi) stock purchase units ("Stock Purchase Units"), each representing
ownership of a Stock Purchase Contract and any of (x) Debt Securities, (y) debt
obligations of third parties, including U.S. Treasury Securities, or (z)
Preferred Securities (as defined below) of a Liberty Financial Trust (as defined
below), securing the holder's obligation to purchase Common Stock under the
Stock Purchase Contract. Such securities may be offered in one or more separate
classes or series, in amounts, at prices and on terms to be determined by market
conditions at the time of sale and to be set forth in a supplement or
supplements to this Prospectus (a "Prospectus Supplement"). Such securities may
be sold for U.S. dollars, foreign denominated currency or currency units;
amounts payable with respect to any such securities may likewise be payable in
U.S. dollars, foreign denominated currency or currency units, in each case as
the Company specifically designates.
Liberty Financial Capital Trust I and Liberty Financial Capital Trust
II, each a statutory business trust formed under the laws of the State of
Delaware (each a "Liberty Financial Trust" and collectively, the "Liberty
Financial Trusts"), may offer, from time to time, preferred securities (the
"Preferred Securities") representing preferred undivided beneficial interests in
such Liberty Financial Trust. The Company will be the owner of the common
securities (the "Common Securities" and, together with the Preferred Securities,
the "Trust Securities") of each Liberty Financial Trust. The payment of periodic
cash distributions ("Distributions") with respect to Preferred Securities of
each of the Liberty Financial Trusts out of monies held by the Property Trustee
(as defined herein) of each of the Liberty Financial Trusts and payments on
liquidation of each Liberty Financial Trust and on redemption of Preferred
Securities of such Liberty Financial Trust, will be guaranteed by the Company as
and to the extent described herein (each, a "Guarantee"). See "Description of
Guarantees." The Company's obligation under each Guarantee is an unsecured
obligation of the Company and will rank subordinate and junior in right of
payment to all Senior Debt (as defined herein) of the Company and pari passu
with its obligations under the senior most preferred or preference stock of the
Company. Except as otherwise provided in the applicable Prospectus Supplement,
(i) concurrently with the issuance by a Liberty Financial Trust of its Preferred
Securities, such Liberty Financial Trust will invest the proceeds thereof and
any contributions made in respect of the Common Securities in a corresponding
series of the Company's Junior Subordinated Debt Securities (the "Corresponding
Junior Subordinated Debt Securities") with terms directly corresponding to the
terms of that Liberty Financial Trust's Preferred Securities (the "Related
Preferred Securities"), (ii) the Corresponding Junior Subordinated Debt
Securities will be the sole assets of each Liberty Financial Trust and (iii)
payments under the Corresponding Junior Subordinated Debt Securities and the
related Expense Agreement (as defined herein) will be the only revenue of each
Liberty Financial Trust. The Company may redeem the Corresponding Junior
Subordinated Debt Securities (and cause the redemption of the Trust Securities)
or may terminate each Liberty Financial Trust and cause the Corresponding Junior
Subordinated Debt Securities to be distributed to the holders of Preferred
Securities in liquidation of their interests in such Issuer in certain
circumstances. See "Description of Preferred Securities -- Liquidation
Distribution Upon Termination."
1
Specific terms of the particular Debt Securities, Preferred Stock,
Common Stock, Warrants, Stock Purchase Contracts, Stock Purchase Units,
Preferred Securities and the related Guarantee, in respect of which this
Prospectus is being delivered (the "Offered Securities") will be set forth in an
accompanying Prospectus Supplement or Supplements, together with the terms of
the offering of the Offered Securities, the initial price thereof and the net
proceeds from the sale thereof. The Prospectus Supplement will set forth with
regard to the particular Offered Securities, certain terms thereof, including,
where applicable, (i) in the case of Debt Securities, the ranking as senior or
junior subordinated Debt Securities, the specific designation, aggregate
principal amount, purchase price, maturity, interest rate (which may be fixed or
variable), if any, the term and method of calculating interest payments, if any,
the right of the Company, if any, to defer payments of interest on the Junior
Subordinated Debt Securities and the maximum length of such deferred period,
time of payment of interest, if any, listing, if any, on a securities exchange,
authorized denomination, any exchangeability, conversion, redemption, prepayment
or sinking fund provisions, the currency or currencies or currency unit or units
in which principal, premium, if any, or interest, if any, is payable, public
offering price and any other specific terms of the Debt Securities; (ii) in the
case of Preferred Stock, the specific designation, number of shares, purchase
price and the rights, preferences and privileges thereof and any qualifications
or restrictions thereon (including dividends, liquidation value, voting rights,
terms for the redemption, conversion or exchange thereof and any other specific
terms of the Preferred Stock), listing, if any, on a securities exchange and
whether the Company has elected to offer the Preferred Stock in the form of
depositary shares; (iii) in the case of Common Stock, the number of shares
offered, the initial offering price, market price and dividend information; (iv)
in the case of Warrants, the specific designation, the number, purchase price
and terms thereof, any listing of the Warrants or the underlying securities on a
securities exchange or any other terms in connection with the offering, sale and
exercise of the Warrants, as well as the terms on which and the securities for
which such Warrants may be exercised; (v) in the case of Stock Purchase
Contracts, the designation and number of shares of Common Stock issuable
thereunder, the purchase price of the Common Stock, the date or dates on which
the Common Stock is required to be purchased by the holders of the Stock
Purchase Contracts, any periodic payments required to be made by the Company to
the holders of the Stock Purchase Contracts or vice versa, and the terms of the
offering and sale thereof; (vi) in the case of Stock Purchase Units, the
specific terms of the Stock Purchase Contracts and any Debt Securities or debt
obligations of the third parties or Preferred Securities of a Liberty Financial
Trust securing the holders' obligation to purchase the Common Stock under the
Stock Purchase Contracts, the ability of a holder of such Stock Purchase Units
to settle early the underlying Stock Purchase Contract by delivering cash in
exchange for the underlying collateral and, if applicable, whether the Company
will issue to such holder a Prepaid Stock Purchase Contract as a result of such
early settlement and the specific terms of the Prepaid Stock Purchase Contract
and the terms of the offering and sale of such Stock Purchase Units; and (vii)
in the case of Preferred Securities of a Liberty Financial Trust, the specific
designation, number of securities, liquidation amount per security, initial
public offering price, and any listing on a securities exchange, distribution
rate (or method of calculation thereof), dates on which distributions shall be
payable and dates from which distributions shall accrue, voting rights, if any,
terms for any conversion or exchange into other securities, any redemption or
sinking fund provisions, any other rights, preferences, privileges, limitations
or restrictions relating to the Preferred Securities and the terms upon which
the proceeds of the sale of the Preferred Securities shall be used to purchase a
specific series of Junior Subordinated Debt Securities of the Company.
The Offered Securities may be offered in amounts, at prices and on
terms to be determined at the time of offering; provided, however, that the
aggregate offering price to the public of the Offered Securities will be limited
to $800 million. Any Prospectus Supplement relating to any Offered
2
Securities will contain information concerning certain United States federal
income tax considerations, if applicable, to the Offered Securities.
The Company and/or each Liberty Financial Trust may sell the Offered
Securities directly, through agents designated from time to time or through
underwriters or dealers. See "Plan of Distribution." If any agents of the
Company and/or any Liberty Financial Trust or any underwriters or dealers are
involved in the sale of the Offered Securities, the names of such agents,
underwriters or dealers and any applicable commissions and discounts will be set
forth in the related Prospectus Supplement. The managing underwriter or
underwriters with respect to each series sold to or through underwriters will be
named in the accompanying Prospectus Supplement. See "Plan of Distribution" for
possible indemnification arrangements for dealers, underwriters and agents.
A majority of Liberty Financial's issued and outstanding shares of
Common Stock and of the combined voting power of Liberty Financial's voting
stock is indirectly owned by Liberty Mutual Insurance Company ("Liberty
Mutual").
Liberty Financial has insurance subsidiaries organized under the laws
of the State of Rhode Island. Rhode Island law prohibits any person from
directly or indirectly acquiring control of any domestic insurer unless such
person has provided certain required information to the state insurance
commission and such acquisition of control has been approved by the state's
insurance commissioner. Under these insurance laws, any person acquiring 10% or
more of the outstanding voting stock of a corporation is presumed to have
acquired control of that corporation and its subsidiaries. Consequently, no
person may acquire, directly or indirectly, 10% or more of the voting stock or
voting power of the Company outstanding unless such person has provided such
required information to the Rhode Island Insurance Commission and such
acquisition is approved by the insurance commissioner of such state.
Liberty Financial's Restated Articles of Organization (the "Restated
Articles") include provisions limiting the voting power of shares of the
Company's Voting Stock (as defined in the Restated Articles) held by holders of
20% or more of such Voting Stock (other than Liberty Mutual and its subsidiaries
and its affiliates) in certain circumstances. These provisions are designed to
prevent, under certain circumstances, a deemed assignment under the Investment
Advisers Act of 1940 or the Investment Company Act of 1940 of investment
advisory contracts to which certain of the Company's subsidiaries are or may
become parties. See "DESCRIPTION OF CAPITAL STOCK."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, AND, WITH RESPECT TO PARTICULAR OFFERED SECURITIES, THE PROSPECTUS
SUPPLEMENT RELATING THERETO, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THIS
PROSPECTUS NOR SUCH PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER FOR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS OR SUCH PROSPECTUS SUPPLEMENT
NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR ANY LIBERTY FINANCIAL
TRUST SINCE THE DATE HEREOF OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.
FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY OF
THIS PROSPECTUS.
3
LIBERTY FINANCIAL COMPANIES, INC.
Liberty Financial is a leading asset accumulation and management
company. The Company has two core product lines--retirement-oriented insurance
products and investment management products. Retirement-oriented insurance
products consist substantially of annuities. Investment management products
consist of mutual funds, wealth management and institutional asset management.
The Company sells its products through multiple distribution channels, including
brokerage firms, banks and other depository institutions, financial planners and
insurance agents, as well as directly to investors.
Liberty Financial's principal executive offices are located at 600
Atlantic Avenue, Boston, Massachusetts 02210-2214. Its telephone number is (617)
722-6000.
THE LIBERTY FINANCIAL TRUSTS
Each Liberty Financial Trust is a statutory business trust formed under
Delaware law pursuant to (i) a trust agreement executed by the Company, as
sponsor of the Liberty Financial Trust, and the Delaware Trustee (as defined
herein) of such Liberty Financial Trust and (ii) the filing of a certificate of
trust with the Delaware Secretary of State. Each trust agreement will be amended
and restated in its entirety (each, as so amended and restated, a "Trust
Agreement") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Each Trust Agreement will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). Each Liberty Financial Trust exists for the exclusive
purposes of (i) issuing and selling its Trust Securities, (ii) using the
proceeds from the sale of such Trust Securities to acquire a series of
Corresponding Junior Subordinated Debt Securities issued by the Company, and
(iii) engaging in only those other activities necessary, convenient or
incidental thereto.
All of the Common Securities of each Liberty Financial Trust will be
owned, directly or indirectly, by the Company. The Common Securities of a
Liberty Financial Trust will rank pari passu, and payments will be made thereon
pro rata, with the Preferred Securities of such Liberty Financial Trust, except
that upon the occurrence and continuance of an event of default under a Trust
Agreement resulting from a Junior Subordinated Debt Security Event of Default
(as defined herein), the rights of the Company as holder of the Common
Securities to payment in respect to Distributions and payments upon liquidation,
redemption or otherwise will be subordinated to the rights of the holders of the
Preferred Securities of such Liberty Financial Trust. See "Description of
Preferred Securities -- Subordination of Common Securities." The Company will
acquire Common Securities in an aggregate liquidation amount equal to not less
than 3% of the total capital of each Liberty Financial Trust.
Unless otherwise specified in the applicable Prospectus Supplement,
each Liberty Financial Trust has a term of approximately 55 years, but may
terminate earlier as provided in the applicable Trust Agreement. Each Liberty
Financial Trust's business and affairs are conducted by its trustees, each
appointed by the Company as holder of the Common Securities. Unless otherwise
specified in the applicable Prospectus Supplement, the trustees for each Liberty
Financial Trust will be State Street Bank and Trust Company, as the Property
Trustee (the "Property Trustee"), Wilmington Trust Company, as the Delaware
Trustee (the "Delaware Trustee"), and two individual trustees (the
"Administrative Trustees") who are employees or officers of or affiliated with
the Company (collectively, the "Issuer Trustees"). State Street Bank and Trust
Company, as Property Trustee, will act as sole indenture trustee under each
Trust Agreement for purposes of compliance with the Trust Indenture Act. State
Street Bank and Trust Company will also act as trustee under the Guarantees and
the Junior Subordinated Indenture (as defined herein). See "Description of
Guarantees" and "Description of Junior Subordinated Debt Securities." The holder
of the Common Securities of
4
a Liberty Financial Trust, or the holders of a majority in liquidation
preference of the related Preferred Securities if a Junior Subordinated Debt
Security Event of Default under the Trust Agreement for such Liberty Financial
Trust has occurred and is continuing, will be entitled to appoint, remove or
replace the Property Trustee and/or the Delaware Trustee for such Liberty
Financial Trust. In no event will the holders of the Preferred Securities have
the right to vote to appoint, remove or replace the Administrative Trustees;
such voting rights are vested exclusively in the holder of the Common
Securities. The duties and obligations of each Issuer Trustee are governed by
the applicable Trust Agreement. The Company will pay all fees and expenses
related to each Liberty Financial Trust and the offering of the Preferred
Securities and will pay, directly or indirectly, all ongoing costs, expenses and
liabilities of each Liberty Financial Trust.
The principal executive office of each Liberty Financial Trust is 600
Atlantic Avenue, Boston, Massachusetts 02210-2214, and its telephone number is
(617) 722-6000.
5
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement
with respect to the proceeds from the sale of the particular Offered Securities
to which such Prospectus Supplement relates, the net proceeds from the sale of
the Offered Securities are expected to be used by the Company for general
corporate purposes, including repayment or redemption of outstanding debt
(including without limitation indebtedness owed to Liberty Mutual) or preferred
stock, the possible acquisition of financial services businesses or assets
thereof, investments in portfolio assets and working capital needs. The Company
routinely reviews opportunities to acquire financial services businesses or
assets thereof. Each Liberty Financial Trust will use all proceeds received from
the sale of its Trust Securities to purchase Junior Subordinated Debt Securities
of the Company. The specific allocations, if any, of the proceeds of any of the
Offered Securities will be described in the Prospectus Supplement relating
thereto.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's historical consolidated
ratios of earnings to fixed charges and earnings to combined fixed charges and
preferred stock dividends for the six months ended June 30, 1998 and 1997 and
for each of the years in the five-year period ended December 31, 1997.
Six Months Ended
June 30 Year Ended December 31
---------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
Ratio of earnings to fixed charges: (1)
Excluding interest on fixed annuities
and financial products (2) 8.00 x 8.14 x 8.42 x 7.11 x 6.55 x 13.07 x 24.23 x
------ ------ ------ ------ ------ ------- -------
Including interest on fixed annuities
and financial products 1.30 x 1.31 x 1.31 x 1.25 x 1.20 x 1.17 x 1.12 x
------ ------ ------ ------ ------ ------ ------
Ratio of earnings to combined fixed
charges and preferred stock dividends: (1)
Excluding interest on
fixed annuities and
financial products (2) 7.58 x 7.74 x 7.99 x 6.73 x 6.22 x 13.07 x 24.23 x
------ ------- ------ ------ ------- ------- -------
Including interest on
fixed annuities and
financial products 1.30 x 1.31 x 1.31 x 1.25 x 1.20 x 1.17 x 1.12 x
------ ------ ------ ------ ------ ------ ------
(1) For purposes of determining these ratios, earnings consist of pretax income
plus fixed charges. Fixed charges consist of (i) interest on indebtedness,
(ii) the portion of operating leases that are representative of the
interest factor, (iii) accretion to face value of redeemable convertible
preferred stock, and (iv) interest on fixed annuities and financial
products.
(2) These ratios are included to assist the reader in analyzing the impact of
interest on annuities and financial products, which is not generally
required to be paid in cash in the period it is recognized. These ratios
exclude interest credited to annuities and financial products of $282.3
million and $294.5 million for the six months ended June 30, 1998 and 1997,
respectively, and $594.1 million, $572.7 million, $555.8 million, $481.9
million, and $504.2 million for the years ended December 31, 1997, 1996,
1995, 1994 and 1993, respectively.
6
DESCRIPTION OF THE SENIOR DEBT SECURITIES
The Senior Debt Securities (for purposes of this Section only, the
"Debt Securities") may be issued in one or more series under an Indenture, as
supplemented from time to time (as so supplemented, the "Indenture"), between
the Company and State Street Bank and Trust Company, as trustee (the "Trustee").
This summary of certain terms and provisions of the Indenture does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to the Indenture, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and to the Trust Indenture Act.
The Indenture is qualified under the Trust Indenture Act. Parenthetical
references in this Section are to provisions of the Indenture. Certain terms
defined in the Indenture are capitalized in this Prospectus. Whenever particular
defined terms of the Indenture are referred to herein or in a Prospectus
Supplement, such defined terms are incorporated herein or therein by reference.
GENERAL
The Debt Securities will be unsecured and will rank on the parity with
all other unsecured and unsubordinated indebtedness of the Company.
The Indenture does not limit the amount of Debt Securities which may be
issued thereunder and provides that Debt Securities may be issued up to the
aggregate principal amounts which may be authorized from time to time by the
Company. Reference is made to the Prospectus Supplement for the following terms
of Debt Securities being offered thereby: (i) the title, aggregate principal
amount and authorized denominations of Debt Securities; (ii) the percentage of
their principal amount at which such Debt Securities will be issued; (iii) date
or dates on which Debt Securities will mature; (iv) the rate or rates per annum
(which may be fixed or variable), if any, at which Debt Securities will bear
interest (or the method of determination or calculation thereof); (v) the times
at which any such interest will be payable; (vi) the currency or units based on
or relating to currencies in which the Debt Securities are denominated and in
which principal, premium, if any, any interest and Additional Amounts (as
defined below) will or may be payable; (vii) the dates, if any, on which and the
price or prices at which the Debt Securities will, pursuant to any mandatory
sinking fund provisions, or may, pursuant to any optional sinking fund
provisions, be redeemed by the Company, and other terms and provisions of such
sinking fund; (viii) any redemption terms or any terms for repayment of
principal amount at the option of the holder; (ix) whether and under what
circumstances the Company will pay additional amounts ("Additional Amounts") in
respect of certain taxes imposed on certain holders or as otherwise provided;
(x) the terms and conditions upon which such Debt Securities may be convertible
into shares of Common Stock or other securities of the Company, including the
conversion price, conversion period and other conversion provisions; (xi) the
defeasance provisions, if any, that are applicable to such Debt Securities
(other than those described herein); (xii) whether the Debt Securities are to be
issuable in global form and, if so, the terms and conditions, if any, upon which
interests in such Debt Securities in global form may be exchanged, in whole or
in part, for the individual Debt Securities represented thereby and the initial
Depository with respect to such global Debt Security; (xiii) the person to whom
any interest on a Registered Security is payable, if other than the registered
holder thereof, or the manner in which any interest is payable on a Bearer
Security if other than upon presentation of the coupons pertaining thereto, as
the case may be; or (xiv) any other specific terms of such Debt Securities.
Principal, interest and premium and Additional Amounts, if any, will be
payable in the manner, at the places and subject to the restrictions set forth
in the Indenture, the Debt Securities and the Prospectus Supplement relating
thereto.
7
Unless otherwise indicated in the Prospectus Supplement relating
thereto, the Debt Securities will be issued in fully registered form without
coupons. Where Debt Securities of any series are issued in bearer form, the
special restrictions and considerations, including special offering restrictions
and special Federal income tax considerations, applicable to any such Debt
Securities and to payment on and transfer and exchange of such Debt Securities
will be described in the applicable Prospectus Supplement.
Some of the Debt Securities may be issued as discounted Debt Securities
(bearing no interest or at a rate which at the time of issuance is below market
rates) to be sold at the substantial discount below their stated principal
amount. Federal income tax consequences and other special considerations
applicable to any such discounted Debt Securities will be described in the
Prospectus Supplement relating thereto.
If the purchase price of any Debt Securities is payable in one or more
foreign currencies or currency units or if any Debt Securities are denominated
in one or more foreign currencies or currency units or if the principal of,
premium, if any, or interest, if any, on any Debt Securities is payable in one
or more foreign currencies or currency units, the restrictions, elections,
certain Federal income tax considerations, specific terms and other information
with respect to such issue of Debt Securities and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
Debt Securities may be presented for exchange, and registered Debt
Securities may be presented for transfer, in the manner, at the places and
subject to the restrictions set forth in the Indenture, the Debt Securities and
the Prospectus Supplement relating thereto. Debt Securities in bearer form and
the coupons, if any, appertaining thereto will be transferable by delivery. No
service charge will be made for any transfer or exchange of Debt Securities, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Section 2.06)
Unless otherwise indicated in the applicable Prospectus Supplement, the
covenants contained in the Indenture and the Debt Securities would not
necessarily afford Holders of the Debt Securities protection in the event of a
highly leveraged or other transaction involving the Company that may adversely
affect Holders.
If the Debt Securities are convertible into shares of Common Stock, the
conversion price payable and the number of shares purchasable upon conversion
may be subject to adjustment in certain events as set forth in the applicable
Prospectus Supplement.
FORM, REGISTRATION, TRANSFER AND EXCHANGE
The Debt Securities of a series may be issued solely as Registered
Securities, solely as Bearer Securities (with or without coupons attached) or as
both Registered Securities and Bearer Securities. Debt Securities of a series
may be issuable in whole or part in the form of one or more global Debt
Securities ("Global Securities"), as described below under "Book-Entry Debt
Securities".
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series or any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Debt Securities of
any series are issuable as both Registered Securities and as Bearer Securities,
at the option of the holder, subject to the terms of the Indenture, Bearer
Securities (accompanied by all unmatured coupons, except as provided below, and
all matured coupons in default) of such series will be exchangeable for
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. Unless otherwise indicated in the
8
applicable Prospectus Supplement, any Bearer Security surrendered in exchange
for a Registered Security between a record date or a special record date for
defaulted interest and the relevant date for payment of interest will be
surrendered without the coupon relating to such date for payment of interest and
interest will not be payable in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the holder of
such coupon when due in accordance with the terms of the Indenture. Bearer
Securities will not be issued in exchange for Registered Securities. (Sections
2.06, 2.12 and 4.01)
Debt Securities may be presented for exchange as provided above, and
unless otherwise indicated in the applicable Prospectus Supplement, Registered
Securities may be presented for registration of transfer (duly endorsed, or
accompanied by a duly executed written instrument of transfer), at the office of
any transfer agent designated by the Company for such purpose with respect to
any series of Debt Securities and referred to in the applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental charges as described in the Indenture. Such transfer or exchange
will be effected upon such transfer agent being satisfied with the documents of
title and identity of the person making the request. The Company may at any time
rescind the designation of any transfer agent, provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in each Place of Payment for Debt
Securities of such series. The Company may at any time designate additional
transfer agents with respect to any series of Debt Securities. (Sections 2.06
and 4.02)
In the event of any redemption of Debt Securities of any series, the
Company will not be required to (i) register the transfer of or exchange Debt
Securities of that series during a period of 15 days next preceding the
selection of securities of such series to be redeemed; (ii) register the
transfer of or exchange any Registered Security, or portion thereof, called for
redemption, except the unredeemed portion of any Registered Security being
redeemed in part; or (iii) exchange any Bearer Security called for redemption
except, to the extent provided with respect to any series of Debt Securities and
referred to in the applicable Prospectus Supplement, to exchange such Bearer
Security for a Registered Security of that series and of like tenor and
principal amount that is immediately surrendered for redemption. (Section 2.06)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of principal, premium, if any, interest and Additional Amounts, if any,
on Registered Securities will be made at the office of such paying agent or
paying agents as the Company may designate from time to time, except that at the
option of the Company payment of any interest and any Additional Amounts may be
made by check or draft mailed to the address of the Person entitled thereto as
such address shall appear in the Debt Security Register. Unless indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Registered Securities will be made to the Person in whose name such Registered
Security is registered at the close of business on the record date for such
interest. (Section 4.01)
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of principal, premium, if any, interest and Additional Amounts, if any,
on Bearer Securities will be payable, subject to any applicable laws and
regulations, at the offices of such paying agents outside the United States as
the Company may designate from time to time, or by check or by transfer to an
account maintained by the payee outside the United States. Unless otherwise
indicated in the applicable Prospectus Supplement, any payment of interest on
any Bearer Securities will be made only against surrender of the coupon relating
to such interest installment. (Sections 2.06 and 4.02)
9
Any paying agents in or outside the United States initially designated
by the Company for the Debt Securities will be named in the applicable
Prospectus Supplement. If the Debt Securities of a series are listed on a stock
exchange located outside the United Sates, and such stock exchange shall so
require, the Company will maintain a paying agent with respect to such series in
London, Luxembourg or any other city so required located outside the United
States so long as the Debt Securities of such series are listed on such
exchange. The Company may at any time designate additional paying agents or
rescind the designation of any paying agent, provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in each Place of Payment. (Section
4.20)
All monies paid by the Company to a paying agent for the payment of
principal of or interest or Additional Amounts, if any, on any Debt Security
which remain unclaimed at the end of one year after such principal, interest or
Additional Amounts shall have become due and payable will be repaid to the
Company and the holder of such Debt Security or any coupon will thereafter look
only to the Company for payment thereof. (Section 4.03)
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in the form of one or
more Global Securities that will be deposited with a Depository or its nominee
identified in the applicable Prospectus Supplement. In such a case, one or more
Global Securities will be issued in a denomination or aggregate denominations
equal to the portion of the aggregate principal amount of outstanding Debt
Securities of the series to be represented by such Global Security or Global
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in registered form, a Global Security may not, subject to certain
exceptions, be registered for transfer or exchange except to the Depository for
such Global Security or a nominee of such Depository. (Section 2.06)
The specific terms of the depository arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the provisions described below will be applicable to depository
arrangements.
Unless otherwise specified in the applicable Prospectus Supplement,
Debt Securities which are to be represented by a Global Security to be deposited
with or on behalf of a Depository will be represented by a Global Security
registered in the name of such Depository or its nominee. Upon the issuance of
such Global Security and the deposit of such Global Security with or on behalf
of the Depository for such Global Security, the Depository will credit on its
book-entry registration and transfer system the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depository or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Company if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in such Global Security will be limited to participants or persons
that may hold interests through participants. Ownership of beneficial interest
by participants in such Global Security will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depository for such Global Security. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Global Securities.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities
10
represented by such Global Security for all purposes under the Indenture. Unless
otherwise specified in the applicable Prospective Supplement, owners of
beneficial interests in such Global Security will not be entitled to have Debt
Securities of the Series represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of Debt
Securities of such series in certificated form and will not be considered the
holders thereof for any purposes under the Indenture. (Sections 2.06 and 11.03)
Accordingly, each person owning a beneficial interest in such Global Security
must rely on the procedures of the Depository and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest to exercise any rights of a holder under the Indenture. The Company
understands that, under existing industry practices, if the Company requests any
action of holders or an owner of a beneficial interest in such Global Security
desires to give any notice or take any action a holder is entitled to give or
take under the Indenture, the Depository would authorize the participants to
give such notice or take such action, and participants would authorize
beneficial owners owning through such participants to give such notice or take
such notice or would otherwise act upon the instructions of beneficial owners
owning through them.
Principal of and any premium, interest and Additional Amounts on a
Global Security will be payable in the manner described in the applicable
Prospectus Supplement.
LIMITATION ON LIENS ON STOCK OF RESTRICTED SUBSIDIARIES
Unless otherwise specified in the applicable Prospectus Supplement, the
Company will not, nor will it permit any Restricted Subsidiary to, issue, assume
or guarantee any indebtedness for borrowed money (hereinafter referred to as
"Debt") secured by a mortgage, security interest, pledge, lien or other
encumbrance upon any shares of stock of any Restricted Subsidiary without
effectively providing that the Debt Securities (together with, if the Company
shall so determine, any other indebtedness of or guarantee by the Company
ranking equally with the Debt Securities and then existing or thereafter
created) shall be secured equally and ratably with such Debt. (Section 4.06)
For purposes of the Indenture, "Restricted Subsidiary" means any
operating subsidiary that accounts for 10% or more of the consolidated revenues
and/or assets of the Company.
LIMITATION ON ISSUANCE OR DISPOSITION OF STOCK OF RESTRICTED SUBSIDIARIES
The Company will not, nor will it permit any Restricted Subsidiary to,
issue, sell, assign, transfer or otherwise dispose of, directly or indirectly,
any Capital Stock (other than nonvoting preferred stock) of any Restricted
Subsidiary, except for (i) the purpose of qualifying directors; (ii) sales or
other dispositions to the Company or one or more Restricted Subsidiaries; (iii)
the disposition of all or any part of the Capital Stock of any Restricted
Subsidiary for consideration which is at least equal to the fair value of such
Capital Stock as determined by the Company's Board of Directors (acting in good
faith); or (iv) an issuance, sale, assignment, transfer or other disposition
required to comply with an order of a court or regulatory authority of competent
jurisdiction, other than an order issued at the request of the Company or any
Restricted Subsidiary. (Section 4.07)
For the purposes of the Indenture, "Capital Stock" means any and all
shares, interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) corporate stock.
(Section 1.01)
11
DEFAULTS AND REMEDIES
An Event of Default with respect to Debt Securities of any series is
defined in the Indenture as being: (a) default for thirty (30) days in payment
of any interest or Additional Amounts on the Debt Securities of such series; (b)
default in payment of principal or premium, if any, on the Debt Securities of
such series when due either at maturity, upon redemption, by declaration or
otherwise (except a failure to make payment resulting from mistake, oversight or
transfer difficulties not continuing for more than three (3) Business Days
beyond the date on which such payment is due); (c) default in payment of any
sinking fund installment when due and payable (except a failure to make payment
result from mistake, oversight or transfer difficulties not continuing for more
than three (3) Business Days beyond the date on which such payment is due); (d)
default by the Company in the performance or breach of any other covenant or
warranty of the Company in respect of the Debt Securities of such series for a
period of sixty (60) days after notice thereof to the Company or Trustee (other
than a covenant default which is specifically designed as having a different
time period); (e) certain events involving the bankruptcy or insolvency of the
Company; or (f) other Events of Default as specified in the Supplemental
Indenture or Board Resolution under which such series of Debt Securities was
issued. (Section 6.01)
The Indenture provides that (1) if an Event of Default described in
clauses (a), (b), (c) or, in the event of a default with respect to less than
all Outstanding series under the Indenture, (d) above shall have occurred and be
continuing with respect to one or more series, either the Trustee or the holders
of 25% in aggregate principal amount of the Debt Securities of such series then
Outstanding (each such series voting as a separate class) may declare the
principal (or, in the case of original issue discount Debt Securities, the
portion thereof specified in the terms thereof) of all Outstanding Debt
Securities of such series and the interest accrued thereon and Additional
Amounts payable in respect thereof, if any, to be due and payable immediately
and (2) if an Event of Default described in clause (d) (in the event of a
default with respect to all Outstanding series) or (e) above shall have occurred
and be continuing, either the Trustee or the holders of 25% in principal amount
of all Debt Securities then Outstanding (voting as one class) may declare the
principal (or, in the case of original issue discount Debt Securities, the
portion of the principal amount thereof specified in the terms thereof) of all
Debt Securities then Outstanding and the interest accrued thereon and Additional
Amounts payable in respect thereof, if any, to be due and payable immediately,
but upon certain conditions such declarations may be annulled and past defaults
(except for defaults in the payment of principal of, or premium, interest or
Additional Amounts, if any, on such Debt Securities) may be waived by the
holders of a majority in principal amount of the Debt Securities of such series
(or of all series, as the case may be) then Outstanding. (Sections 6.01 and
6.10)
Holders may not enforce the Indenture or the Debt Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Debt Securities unless it receives indemnity satisfactory to it. Subject to
certain limitations, holders of a majority in principal amount of the Debt
Securities of any series may direct the Trustee in its exercise of any trust or
power. The Company is required to deliver annually to the Trustee an officer's
statement indicating whether the signer knows of any default by the Company in
performing any of its obligations under the Indenture. The Trustee may withhold
from Holders notice of any continuing default (except a default in payment of
principal, premium, if any, interest or Additional Amounts, if any, or any
sinking or purchase fund installment) if it determines that withholding notice
is in their interest. (Sections 4.05, 6.06, 6.09, 6.11, 7.01 and 7.05)
DEFEASANCE
Unless otherwise described in a Prospectus Supplement with respect to
any series of Debt Securities, the Company, at its option, (a) will be
discharged from any and all obligations in respect of such Debt Securities
(except in each
12
case for certain obligations to register the transfer or exchange of such Debt
Securities, replace stolen, lost or mutilated Debt Securities, maintain paying
agencies and hold moneys for payment in trust) on the ninety-first day after
satisfaction of all conditions thereto or (b) effective upon the satisfaction of
all conditions thereto, need not comply with certain restrictive covenants
(including any covenants or agreements applicable with respect to a particular
series of Debt Securities) under the Indenture and will not be limited by any
restrictions with respect to merger, consolidation or sales of assets, in each
case if the Company deposits with the Trustee, in trust, (x) money or (y)
Government Obligations or a combination of (x) and (y) which, through the
payment of interest thereon and principal thereof in accordance with their
terms, will in the written opinion of independent public accountants selected by
the Company, provide money in an amount sufficient to pay all the principal
(including any mandatory sinking fund payments) of, and interest and Additional
Amounts, if any, and premium, if any, on, such Debt Securities on the dates such
payment are due in accordance with the terms of such series. (Section 8.02) In
order to avail itself of either of the foregoing options, no Event of Default
shall have occurred and be continuing under the Indenture and the Company must
provide to the Trustee (i) an opinion of counsel to the effect that holders of
the Debt Securities of such series will not recognize income, gain or loss for
Federal income tax purposes as a result of the Company's exercise of its option
and will be subject to Federal income tax on the same amount and in the same
manner, and at the same time as would have been the case if such option had not
been exercised and, in the case of Debt Securities being discharged, such
opinion shall be accompanied by a private letter ruling to that effect received
from the United States Internal Revenue Service (the "Service") or a revenue
ruling pertaining to a comparable form of transaction to that effect published
by the Service, (ii) an officers' certificate to the effect that no Event of
Default or event which with the giving of notice or lapse of time, or both,
would become an Event of Default, with respect to such Debt Securities shall
have occurred and be continuing on the date of the deposit, and (iii) if the
Debt Securities are listed on the New York Stock Exchange, an opinion of counsel
to the effect that the exercise of such option will not cause the Debt
Securities to be delisted. (Section 8.02) "Governmental Obligations" means
generally direct noncallable obligations of the government which issued the
currency in which the Debt Securities of the applicable series are denominated,
noncallable obligations the payment of the principal of and interest on which is
fully guaranteed by such government, and noncallable obligations on which the
full faith and credit of such government is pledged to the payment of the
principal thereof and interest thereon. (Section 1.01). In addition, the Company
may obtain a discharge under the Indenture with respect to all the Debt
Securities of a series by depositing with the Trustee, in trust, moneys or
Government Obligations sufficient to pay at maturity or upon redemption
principal of, premium, if any, and any interest and Additional Amounts on, all
of the Debt Securities of such series, provided that all of the Debt Securities
of such series are by their terms to become due and payable within one year or
are to be called for redemption within one year. No opinion of counsel or ruling
relating to the tax consequences to holders is required with respect to a
discharge pursuant to the provisions described in the immediately preceding
sentence. (Section 8.01) In the event of any discharge of Debt Securities
pursuant to the terms of the Indenture described above, the holders of such Debt
Securities will thereafter be able to look solely to such trust fund, and not to
the Company, for payments of principal, premium, if any, and interest and
Additional Amounts, if any. (Sections 8.01 and 8.02)
CONSOLIDATION, MERGER AND SALE OF ASSETS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company may not consolidate with or merge into, or sell, lease or convey all or
substantially all of its assets to, another corporation unless (i) the successor
or transferee corporation, which shall be a corporation organized and existing
under the laws of the United States or a State thereof, assumes by supplemental
indenture all the obligations of the Company under the Debt Securities and the
13
Indenture and (ii) the Company or successor corporation, as the case may be,
will not, immediately after such consolidation or merger or sale, lease or
conveyance, be in default in the performance of any covenant or condition with
respect to the Debt Securities or the Indenture. The Company will deliver to the
Trustee an Officer's Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture comply
with the terms of the Indenture. Upon any consolidation or merger, or any sale,
lease or conveyance of all or substantially all of the assets of the Company,
the successor corporation formed by such consolidation or into which the Company
is merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under the Indenture.
Sections 5.01 and 5.02). Thereafter all obligations of the predecessor
corporation shall terminate. (Section 5.01)
MODIFICATION OF THE INDENTURE
The Indenture permits the Company and the Trustee to amend or
supplement the Indenture or the Debt Securities without notice to or consent of
any holder of a Debt Security for certain purposes, including without
limitation, to cure any ambiguity, defect or inconsistency, to comply with
Section 5.01 (relating to when the Company may consolidate, merge or sell all or
substantially all of its assets), to provide for uncertificated Debt Securities,
to establish the form or terms of Debt Securities of any series or to make any
change that does not adversely affect the rights of any holder of a Debt
Security. (Section 9.01) Certain modifications and amendments of the Indenture
may be made by the Company and the Trustee only with the consent of the holders
of at least a majority in aggregate principal amount of the Outstanding Debt
Securities of each series issued under the Indenture which is affected by the
modification or amendment (voting as one class). However, no such modification
or amendment may, without the consent of the holder of each Debt Security
affected thereby, (i) reduce the aforesaid percentage of Debt Securities whose
holders must consent to an amendment, supplement or waiver; (ii) reduce the rate
or rates or extend the time for payment of interest or Additional Amounts, if
any, on any Debt Security; (iii) reduce the principal of or premium, if any, on
or extend the fixed maturity of any Debt Security; (iv) modify or effect in any
manner adverse to the holders of Debt Securities the terms and conditions of the
obligations of the Company in respect of its obligations under the Indenture;
(v) waive a default in the payment of principal of or premium or interest or
Additional Amounts, if any, on any Debt Security; (vi) impair the right to
institute a suit for the enforcement of any payment on or with respect to any
series of Debt Securities; (vii) change a Place of Payment; or (viii) make any
Debt Security payable in currency other than that stated in the Debt Security.
(Section 9.02)
DESCRIPTION OF JUNIOR SUBORDINATED DEBT SECURITIES
The Junior Subordinated Debt Securities may be issued in one or more
series under a Junior Subordinated Indenture, as supplemented from time to time
(as so supplemented, the "Junior Subordinated Indenture"), between the Company
and State Street Bank and Trust Company as trustee (the "Junior Subordinated
Indenture Trustee"). This summary of certain terms and provisions of the Junior
Subordinated Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Junior Subordinated Indenture,
the form of which is filed as an exhibit to the Registration Statement of which
this prospectus forms a part, and to the Trust Indenture Act. The Junior
Subordinated Indenture is qualified under the Trust Indenture Act. Parenthetical
references in this Section are to provisions of the Junior Subordinated
Indenture. Certain terms defined in the Junior Subordinated indenture are
capitalized in this Prospectus. Whenever particular defined terms of the Junior
Subordinated Indenture are referred to herein or in a Prospectus Supplement,
such defined terms are incorporated herein or therein by reference.
14
GENERAL
Each series of Junior Subordinated Debt Securities will rank PARI PASSU
with all other series of Junior Subordinated Debt Securities and will be
unsecured and subordinate and junior in right of payment to the extent and in
the manner set forth in the Junior Subordinated Indenture to all Senior Debt (as
defined below) of the Company. See "--Subordination." The Company is a
non-operating holding company and substantially all of the operating assets of
the Company and its consolidated subsidiaries are owned by such subsidiaries.
The Company relies primarily on dividends from such subsidiaries to meet its
obligations. The payment of dividends by Keyport is limited under the insurance
company holding company laws of the State of Rhode Island. Accordingly, the
Junior Subordinated Debt Securities will be effectively subordinated to all
existing and future liabilities of the Company's subsidiaries, and holders of
Junior Subordinated Debt Securities should look only to the assets of the
Company for payments on the Junior Subordinated Debt Securities. Except as
otherwise provided in the applicable Prospectus Supplement, the Junior
Subordinated Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Company, whether under the Junior Subordinated
Indenture, any other indenture that the Company may enter into in the future or
otherwise. See "-- Subordination" and the Prospectus Supplement relating to any
offering of Offered Securities.
The Junior Subordinated Debt Securities will be issuable in one or more
series pursuant to an indenture supplemental to the Junior Subordinated
Indenture or a resolution of the Company's Board of Directors or a committee
thereof.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the Junior Subordinated Debt Securities: (1) the
title of the Junior Subordinated Debt Securities; (2) any limit upon the
aggregate principal amount of the Junior Subordinated Debt Securities; (3) the
date or dates on which the principal of the Junior Subordinated Debt Securities
is payable (the "Stated Maturity") or the method of determination thereof; (4)
the rate or rates, if any, at which the Junior Subordinated Debt Securities
shall bear interest, the Interest Payment Dates on which any such interest shall
be payable, the right, if any, of the Company to defer or extend an Interest
Payment Date, and the Regular Record Date for any interest payable on any
Interest Payment Date or the method by which any of the foregoing shall be
determined; (5) the place or places where, subject to the terms of the Junior
Subordinated Indenture as described below under "Payment and Paying Agents", the
principal of and premium, if any, and interest on the Junior Subordinated Debt
Securities will be payable and where, subject to the terms of the Junior
Subordinated Indenture as described below under "--Denominations, Registration
and Transfer," the Junior Subordinated Debt Securities may be presented for
registration of transfer or exchange and the place or places where notices and
demands to or upon the Company in respect of the Junior Subordinated Debt
Securities and the Junior Subordinated Indentures may be made ("Place of
Payment"); (6) any period or periods within or date or dates on which, the price
or prices at which and the terms and conditions upon which Junior Subordinated
Debt Securities may be redeemed, in whole or in part, at the option of the
Company or a holder thereof; (7) the obligation or the right, if any, of the
Company or a holder thereof to redeem, purchase or repay the Junior Subordinated
Debt Securities and the period or periods within which, the price or prices at
which, the currency or currencies (including currency unit or units) in which
and the other terms and conditions upon which the Junior Subordinated Debt
Securities shall be redeemed, repaid or purchased, in whole or in part, pursuant
to such obligation; (8) the denominations in which any Junior Subordinated Debt
Securities shall be issuable if other than denominations of $25 and any integral
multiple thereof; (9) if other than in U.S. Dollars, the currency or currencies
(including currency unit or units) in which the principal of (and premium, if
any) and interest, if any, on the Junior Subordinated Debt Securities shall be
payable, or in which the Junior Subordinated Debt Securities shall be
denominated; (10) any additions, modifications or deletions in the
15
Events of Default or covenants of the Company specified in the Junior
Subordinated Indenture with respect to the Junior Subordinated Debt Securities;
(11) if other than the principal amount thereof, the portion of the principal
amount of Junior subordinated Debt Securities that shall be payable upon
declaration of acceleration of the maturity thereof; (12) any additions or
changes to the Junior Subordinated Indenture with respect to a series of Junior
Subordinated Debt Securities as shall be necessary to permit or facilitate the
issuance of such series in bearer form, registrable or not registrable as to
principal, and with or without interest coupons; (13) any index or indices used
to determine the amount of payments of principal of and premium, if any, on the
Junior Subordinated Debt Securities and the manner in which such amounts will be
determined; (14) the terms and conditions relating to the issuance of a
temporary Global Security representing all of the Junior Subordinated Debt
Securities of such series and the exchange of such temporary Global Security for
definitive Junior Subordinated Debt Securities of such series; (15) subject to
the terms described under "--Global Junior Subordinated Debt Securities",
whether the Junior Subordinated Debt Securities of the series shall be issued in
whole or in part in the form of one or more Global Securities and, in such case,
the Depositary for such Global Securities, which Depositary shall be a clearing
agency registered under the Exchange Act; (16) the appointment of any Paying
Agent or Agents; (17) the terms and conditions of any obligation or right of the
Company or a holder to convert or exchange the Junior Subordinated Debt
Securities into Preferred Securities; (18) the form of Trust Agreement and
Guarantee Agreement, if applicable; (19) the relative degree, if any, to which
such Junior Subordinated Debt Securities of the series shall be senior to or be
subordinated to other series of such Junior Subordinated Debt Securities or
other indebtedness of the Company in right of payment, whether such other series
of Junior Subordinated Debt Securities or other indebtedness are outstanding or
not; and (20) any other terms of the Junior Subordinated Debt Securities not
inconsistent with the provisions of the Junior Subordinated Indenture.
Junior Subordinated Debt Securities may be sold at a substantial
discount below their stated principal amount, bearing no interest or interest at
a rate which at the time of issuance is below market rates. Certain United
States Federal income tax consequences and special considerations applicable to
any such Junior Subordinated Debt Securities will be described in the applicable
Prospectus Supplement.
If the purchase price of any of the Junior Subordinated Debt Securities
is payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debt Securities are denominated in one or more foreign currencies
or currency units or if the principal of, premium, if any, or interest, if any,
on any Junior Subordinated Debt Securities is payable in one or more foreign
currencies or currency units, the restrictions, elections, certain United States
Federal income tax consequences, specific terms and other information with
respect to such issue of Junior Subordinated Debt Securities and such foreign
currency or currency units will be set forth in the applicable Prospectus
Supplement.
If any index is used to determine the amount of payments of principal
of, premium, if any, or interest on any series of Junior Subordinated Debt
Securities, special United States Federal income tax, accounting and other
considerations applicable thereto will be described in the applicable Prospectus
Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debt Securities will be issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof.
Junior Subordinated Debt Securities of any series will be exchangeable for other
Junior Subordinated Debt Securities of the same issue and series, of any
16
authorized denominations, of a like aggregate principal amount, of the same
Original Issue Date and Stated Maturity and bearing the same interest rate.
Junior Subordinated Debt Securities may be presented for exchange as
provided above, and may be presented for registration of transfer (with the form
of transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate Securities Registrar or at the
office of any transfer agent designated by the Company for such purpose with
respect to any series of Junior Subordinated Debt Securities and referred to in
the applicable Prospectus Supplement, without service charge and upon payment of
any taxes and other governmental charges as described in the Junior Subordinated
Indenture. The Company will appoint the Trustee as Securities Registrar under
the Junior Subordinated indenture. If the applicable Prospectus Supplement
refers to any transfer agents (in addition to the Securities Registrar)
initially designated by the Company with respect to any series of Junior
Subordinated Debt Securities, the Company may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, provided that the Company maintains
a transfer agent in each Place of Payment for such series. The Company may at
any time designate additional transfer agents with respect to any series of
Junior Subordinated Debt Securities.
In the event of any redemption, neither the Company nor the Junior
Subordinated Indenture Trustee shall be required to (i) issue, register the
transfer of or exchange Junior Subordinated Debt Securities of any series during
a period beginning at the opening of business 15 days before the day of
selection for redemption of Junior Subordinated Debt Securities of that series
and ending at the close of business on the day of mailing of the relevant notice
of redemption or (ii) transfer or exchange any Junior Subordinated Debt
Securities so selected for redemption, except, in the case of any Junior
Subordinated Debt Securities being redeemed in part, any portion thereof not to
be redeemed.
17
GLOBAL JUNIOR SUBORDINATED DEBT SECURITIES
The Junior Subordinated Debt Securities of a series may be issued in
whole or in part in the form of one or more Global Junior Subordinated Debt
Securities that will be deposited with, or on behalf of, a depositary (the
"Depositary") identified in the Prospectus Supplement relating to such series.
Global Junior Subordinated Debt Securities may be issued only in fully
registered form and in either temporary or permanent form. Unless and until it
is exchanged in whole or in part for the individual Junior Subordinated Debt
Securities represented thereby, a Global Junior Subordinated Debt Security may
not be transferred except as a whole by the depositary for such Global Junior
Subordinated Debt Security to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
the Depositary or any nominee to a successor Depositary or any nominee of such
successor.
The specific terms of the depositary arrangement with respect to a
series of Junior Subordinated Debt Securities will be described in the
Prospectus Supplement relating to such series. The Company anticipates that the
following provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debt security, and
the deposit of such Global Junior Subordinated Debt Security with or on behalf
of the Depositary, the Depositary for such Global Junior Subordinated Debt
Security or its nominee will credit, on its book-entry registration and transfer
system, the respective principal amounts of the individual Junior Subordinated
Debt Securities represented by such Global Junior Subordinated Debt Security to
the accounts of persons that have accounts with such Depositary
("Participants"). Such accounts shall be designated by the dealers, underwriters
or agents with respect to such Junior Subordinated Debt Securities or by the
Company if such Junior Subordinated Debt Securities are offered and sold
directly by the Company. Ownership of beneficial interests in a Global Junior
Subordinated Debt Security will be limited to participants or persons that my
hold interests through Participants. Ownership of beneficial interests in such
Global Junior Subordinated Debt Security will be shown on, and the transfer of
that ownership will be effected only through, records maintained by the
applicable Depositary or its nominee (with respect to interests of Participants)
and the records of participants (with respect to interests of persons who hold
through Participants). The laws of some states require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Junior Subordinated Debt Security.
So long as the Depositary for a Global Junior Subordinated Debt
Security, or its nominee, is the registered owner of such Global Junior
Subordinated Debt Security, such Depositary or such nominee, as the case may be,
will be considered the sole owner or holder of the Junior Subordinated Debt
Securities represented by such Global Junior Subordinated Debt Security for all
purposes under the Junior Subordinated Indenture governing such Junior
Subordinated Debt Securities. Except as provided below, owners of beneficial
interests in a Global Junior Subordinated Debt Security will not be entitled to
have any of the individual Junior Subordinated Debt Securities of the series
represented by such Global Junior Subordinated Debt Security registered in their
names, will not receive or be entitled to receive physical delivery of any such
Junior Subordinated Debt Securities of such series in definitive form and will
not be considered the owners or holders thereof under the Junior Subordinated
Indenture.
Payments of principal of (and premium, if any) and interest on
individual Junior Subordinated Debt Securities represented by a Global Junior
Subordinated Debt Security registered in the name of a Depositary or its nominee
will be made to the Depositary or its nominee, as the case may be, as the
registered owner of the Global Junior Subordinated Debt Security representing
such Junior Subordinated Debt Securities. None of the Company, the Junior
Subordinated
18
Indenture Trustee, any Paying Agent, or the Securities Registrar for such Junior
Subordinated Debt Securities will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of the Global Junior Subordinated Debt Security representing
such Junior Subordinated Debt Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that the Depositary for a series of Junior
Subordinated Debt Securities or its nominee, upon receipt of any payment of
principal, premium or interest in respect of a permanent Global Junior
Subordinated Debt Security representing any of such Junior Subordinated Debt
Securities, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of such Global Junior Subordinated Debt Security for such Junior
Subordinated Debt Securities as shown on the records of such Depositary or its
nominee. The Company also expects that payments by Participants to owners of
beneficial interests in such Global Junior Subordinated Debt Security held
through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if
a Depositary for a series of Junior Subordinated Debt Securities is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
issue individual Junior Subordinated Debt Securities of such series in exchange
for the Global Junior Subordinated Debt Security representing such series of
Junior Subordinated Debt Securities. In addition, the Company may at any time
and in its sole discretion, subject to any limitations described in the
Prospectus Supplement relating to such Junior Subordinated Debt Securities,
determine not to have any Junior Subordinated Debt Securities of such series
represented by one or more Global Junior Subordinated Debt Securities and, in
such event, will issue individual Junior Subordinated Debt Securities of such
series in exchange for the Global Junior Subordinated Debt Security or
Securities representing such series of Junior Subordinated Debt Securities.
Further, if the Company so specifies with respect to the Junior Subordinated
Debt Securities of a series, an owner of a beneficial interest in a Global
Junior Subordinated Debt Security representing Junior Subordinated Debt
Securities of such series may, on terms acceptable to the Company, the Junior
Subordinated Indenture Trustee and the Depositary for such Global Junior
Subordinated Debt Security, receive individual Junior Subordinated Debt
Securities of such series in exchange for such beneficial interests, subject to
any limitations described in the Prospectus Supplement relating to such Junior
Subordinated Debt Securities. In any such instance, an owner of a beneficial
interest in a Global Junior Subordinated Debt Security will be entitled to
physical delivery of individual Junior Subordinated Debt Securities of the
series represented by such Global Junior Subordinated Debt Security equal in
principal amount to such beneficial interest and to have such Junior
Subordinated Debt Securities registered in its name. Individual Junior
Subordinated Debt Securities of such series so issued will be issued in
denominations, unless otherwise specified by the Company, of $25 and integral
multiples thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of principal of (and premium, if any) and any interest on Junior
Subordinated Debt Securities will be made at the office of the Junior
Subordinated Indenture Trustee in the City of New York or at the office of such
Paying Agent or Paying Agents as the Company may designate from time to time in
the applicable Prospectus Supplement, except that at the option of the Company
payment of any interest may be made (i), except in the case of Global Junior
Subordinated Debt Securities, by check mailed to the address of the Person
entitled thereto as such
19
address shall appear in the Securities Register or (ii) by transfer to an
account maintained by the Person entitled thereto as specified in the Securities
Register, provided that proper transfer instructions have been received by the
Regular Record Date. Unless otherwise indicated in the applicable Prospectus
Supplement, payment of any interest on Junior Subordinated Debt Securities will
be made to the Person in whose name such Junior Subordinated Debt Securities are
registered at the close of business on the Regular Record Date for such
interest, except in the case of Defaulted Interest. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent; however the Company will at all times be required to maintain a Paying
Agent in each Place of Payment for each series of Junior Subordinated Debt
Securities.
Any moneys deposited with the Junior Subordinated Indenture Trustee or
any Paying Agent, or then held by the Company in trust, for the payment of the
principal of (and premium, if any) or interest on any Junior Subordinated Debt
Security 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 Company, be repaid to the Company and the holder of such Junior Subordinated
Debt Security shall thereafter look, as a general unsecured creditor, only to
the Company for payment thereof.
OPTION TO EXTEND INTEREST PAYMENT DATE
If provided in the applicable Prospectus Supplement, the Company shall
have the right at any time and from time to time during the term of any series
of Junior Subordinated Debt Securities to defer payment of interest for such
number of consecutive interest payment periods as may be specified in the
applicable Prospectus Supplement (each, an "Extension Period"), subject to the
terms, conditions and covenants, if any, specified in such Prospectus
Supplement, PROVIDED that such Extension Period may not extend beyond the Stated
Maturity of such series of Junior Subordinated Debt Securities. Certain United
States Federal income tax consequences and special considerations applicable to
any such Junior Subordinated Debt Securities will be described in the applicable
Prospectus Supplement.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement,
Junior Subordinated Debt Securities will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company may, at its option, redeem the Junior Subordinated Debt Securities of
any series in whole at any time or in part from time to time. Junior
Subordinated Debt Securities in denominations larger than $25 may be redeemed in
part but only in integral multiples of $25. Except as otherwise specified in the
applicable prospectus Supplement, the redemption price for any Junior
Subordinated Debt Security so redeemed shall equal any accrued and unpaid
interest thereon to the redemption date, plus the principal amount thereof.
Except as otherwise specified in the applicable Prospectus Supplement,
if a Junior Subordinated Debt Security Tax Event (as defined below) in respect
of a series of Junior Subordinated Debt Securities shall occur and be
continuing, the Company may, at its option, redeem such series of Junior
Subordinated Debt Securities in whole (but not in part) at any time within 90
days of the occurrence of such Junior Subordinated Debt Security Tax Event, at a
redemption price equal to 100% of the principal amount of such junior
Subordinated Debt Securities then outstanding plus accrued and unpaid interest
to the date fixed for redemption.
"Junior Subordinated Debt Security Tax Event" means the receipt by the
Company 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
20
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the applicable series of Junior Subordinated Debt Securities under the Junior
Subordinated Indenture, there is more than an insubstantial risk that interest
payable by the Company on such series of Junior Subordinated Debt Securities is
not, or within 90 days of the date of such opinion will not be, deductible by
the Company, in whole or in part, for United States Federal income tax purposes.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Junior Subordinated
Debt Securities to be redeemed at its registered address. Unless the Company
defaults in payment of the redemption price, on and after the redemption date
interest ceases to accrue on such junior Subordinated Debt Securities or
portions thereof called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company will also covenant, as to each series of Junior Subordinated Debt
Securities, that it will not, and will not permit any subsidiary of the Company
to, (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock or (ii) make any payment of principal, interest or premium, if
any, on or repay or repurchase or redeem any debt securities of the Company
(including other Junior Subordinated Debt Securities) that rank PARI PASSU with
or junior in interest to the Junior Subordinated Debt Securities or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks PARI PASSU
or junior in interest to the Junior Subordinated Debt Securities (other than (a)
dividends or distributions in common stock of the Company, (b) redemptions or
purchases of any rights pursuant to any rights plan adopted by the Company, or
any successor to any such rights plan, and the declaration of a dividend of such
rights or the issuance of stock under such plans in the future, (c) payments
under any Guarantee and (d) purchases of common stock related to the issuance of
common stock under any of the Company's benefit plans for its directors,
officers or employees) if at such time (i) there shall have occurred any event
of which the Company has actual knowledge that (a) with the giving of notice or
the lapse of time, or both, would constitute an "Event of Default" under the
Junior Subordinated Indenture with respect to the Junior Subordinated Debt
Securities of such series and (b) in respect of which the Company shall not have
taken reasonable steps to cure, (ii) if such Junior Subordinated Debt Securities
are held by a Liberty Financial Trust of a series of Related Preferred
Securities, the Company shall be in default with respect to its payment of any
obligations under the Guarantee relating to such Related Preferred Securities or
(iii) the Company shall have given notice of its selection of an Extension
Period as provided in the Junior Subordinated Indenture with respect to the
Junior Subordinated Debt Securities of such series and shall not have rescinded
such notice, or such Extension Period, or any extension thereof, shall be
continuing.
MODIFICATION OF JUNIOR SUBORDINATED INDENTURE
From time to time the Company and the Junior Subordinated Indenture
Trustee may, without the consent of the holders of any series of Junior
Subordinated Debt Securities, amend, waive or supplement the Junior Subordinated
Indenture for specified purposes, including, among other things, curing
ambiguities, defects of inconsistencies (provided that any such action does not
materially adversely affect the interest of the holders of any series of Junior
Subordinated Debt Securities or, in the case of Corresponding Junior
Subordinated Debt Securities, the holders of the Related Preferred Securities so
long as they remain
21
outstanding) and qualifying, or maintaining the qualification of, the Junior
Subordinated Indenture under the Trust Indenture Act. The Junior Subordinated
Indenture contains provisions permitting the Company and the Junior Subordinated
Indenture Trustee, with the consent of the holders of not less than a majority
in principal amount of each outstanding series of Junior Subordinated Debt
Securities affected, to modify the Junior Subordinated Indenture in a manner
affecting the rights of the holders of such series of the Junior Subordinated
Debt Securities; PROVIDED, that no such modification may, without the consent of
the holder of each outstanding Junior Subordinated Debt Security so affected,
(i) change the Stated Maturity of any series of Junior Subordinated Debt
Securities, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon (except such extension as is
contemplated hereby) or (ii) reduce the percentage of principal amount of Junior
Subordinated Debt Securities of any series, the holders of which are required to
consent to any such modification of the Junior Subordinated Indenture, PROVIDED
that, in the case of Corresponding Junior Subordinated Debt Securities, so long
as any of the Related Preferred Securities remain outstanding, no such
modification may be made that adversely affects the holders of such Preferred
Securities in any material respect, and no termination of the Junior
Subordinated Indenture may occur, and no waiver of any Junior Subordinated Debt
Security Event of Default or compliance with any covenant under the Junior
Subordinated Indenture may be effective, without the prior consent of the
holders of at least a majority of the aggregate liquidation preference of such
Related Preferred Securities unless and until the principal of the Corresponding
Junior Subordinated Debt Securities and all accrued and unpaid interest thereon
have been paid in full and certain other conditions are satisfied.
In addition, the Company and the Junior Subordinated Indenture Trustee
may execute, without the consent of any holder of Junior Subordinated Debt
Securities, any supplemental Junior Subordinated Indenture for the purpose of
creating any new series of Junior Subordinated Debt Securities.
JUNIOR SUBORDINATED DEBT SECURITY EVENTS OF DEFAULT
The Junior Subordinated Indenture provides that any one or more of the
following described events with respect to a series of Junior Subordinated Debt
Securities that has occurred and is continuing constitutes a "Junior
Subordinated Debt Security Event of Default" with respect to such series of
Junior Subordinated Debt Securities:
(i) failure for 30 days to pay any interest on such series of the
Junior Subordinated Debt Securities, when due (subject to the deferral of any
due date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series of
Junior Subordinated Debt Securities when due whether at maturity, upon
redemption by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Junior Subordinated Indenture for 90 days after
written notice to the Company from the Junior Subordinated Indenture Trustee or
the holders of at least 25% in aggregate outstanding principal amount of such
series of outstanding Junior Subordinated Debt Securities; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of
such series of Junior Subordinated Debt Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Junior Subordinated Indenture Trustee. The Junior Subordinated Indenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of
22
such series of Junior Subordinated Debt Securities may declare the principal due
and payable immediately upon a Junior Subordinated Debt Security Event of
Default, and, in the case of Corresponding Junior Subordinated Debt Securities,
should the Junior Subordinated Indenture Trustee or such holders of such
Corresponding Junior Subordinated Debt Securities fail to make such declaration,
the holders of at least 25% in aggregate liquidation preference of the Related
Preferred Securities shall have such right. The holders of a majority in
aggregate outstanding principal amount of such series of Junior Subordinated
Debt Securities may annul such declaration and waive the default if the default
(other than the non-payment of the principal of such series of Junior
Subordinated Debt Securities 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
Junior Subordinated Indenture Trustee. In the case of Corresponding Junior
Subordinated Debt Securities, should the holders of such Corresponding Junior
Subordinated Debt Securities fail to annul such declaration and waive such
default, the holders of a majority in aggregate liquidation preference of the
Related Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debt Securities affected thereby may, on behalf of the
holders of all the Junior Subordinated Debt Securities, waive any past default,
except a default in the payment of principal or interest (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Junior Subordinated Indenture Trustee) or a default in respect of a covenant or
provision which under the Junior Subordinated Indenture cannot be modified or
amended without the consent of the holder of each outstanding Junior
Subordinated Debt Security. In the case of Corresponding Junior Subordinated
Debt Securities, should the holders of such Corresponding Junior Subordinated
Debt Securities fail to annul such declaration and waive such default, the
holders of a majority in aggregate liquidation preference of the Related
Preferred Securities shall have such right. The Company is required to file
annually with the Junior Subordinated Indenture Trustee a certificate as to
whether or not the Company is in compliance with all the conditions and
covenants applicable to it under the Junior Subordinated Indenture.
In case a Junior Subordinated Debt Security Event of Default shall
occur and be continuing as to a series of Corresponding Junior Subordinated Debt
Securities, the Property Trustee will have the right to declare the principal of
and the interest on such Corresponding Junior Subordinated Debt Securities, and
any other amounts payable under the Junior Subordinated Indenture, to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to such Corresponding Junior Subordinated Debt Securities.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Junior Subordinated Debt Security Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest or principal on the related Junior Subordinated Debt Securities
on the date such interest or principal is otherwise payable, a holder of
Preferred Securities may institute a legal proceeding directly against the
Company for enforcement of payment to such holder of the principal of or
interest on such related Junior Subordinated Debt Securities having a principal
amount equal to the aggregate Liquidation Amount of the related Preferred
Securities of such holder (a "Direct Action"). The Company may not amend the
Junior Subordinated Indenture to remove the foregoing right to bring a Direct
Action without the prior written consent of the holders of all of the Preferred
Securities. If the right to bring a Direct Action is removed, the applicable
Issue may become subject to the reporting obligations under the Exchange Act.
The Company shall have the right under the Junior Subordinated Indenture to
set-off any payment made to such holder of Preferred Securities by the Company
in connection with a
23
Direct Action. The holders of Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the related Junior
Subordinated Debt Securities.
The holders of the Preferred Securities would not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debt Securities unless there
shall have been an Event of Default under the Trust Agreement. See "Description
of Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Junior Subordinated Indenture provides that the Company shall not
consolidate with or merge into any other Person or convey, transfer or lease its
properties and assets substantially as an entirety to any Person, and no Person
shall consolidate with or merge into the Company or convey, transfer or lease
its properties and assets substantially as an entirety to the Company, unless
(i) in case the Company consolidates with or merges into another Person or
conveys or transfers its properties and assets substantially as an entirety to
any Person, the successor Person is organized under the laws of the United
States or any state or the District of Columbia, and such successor Person
expressly assumes the Company's obligations on the Junior Subordinated Debt
Securities issued under the Junior Subordinated Indenture; (ii) immediately
after giving effect thereto, no Junior Subordinated Debt Security Event of
Default, and no event which, after notice or lapse of time or both, would become
a Junior Subordinated Debt Security Event of Default, shall have happened and be
continuing; (iii) in the case of Corresponding Junior Subordinated Debt
Securities, such transaction is permitted under the related Trust Agreement or
Guarantee and does not give rise to any breach or violation of the related Trust
Agreement and Guarantee, and (iv) certain other conditions as prescribed in the
Junior Subordinated Indenture are met.
The general provisions of the Junior Subordinated Indenture do not
afford holders of the Junior Subordinated Debt Securities protection in the
event of a highly leveraged or other transaction involving the Company that may
adversely affect holders of the Junior Subordinated Debt Securities.
SATISFACTION AND DISCHARGE
The Junior Subordinated Indenture provides that when, among other
things, all Junior Subordinated Debt Securities not previously delivered to the
Junior Subordinated Indenture Trustee for cancellation (i) have become due and
payable or (ii) will become due and payable at their Stated Maturity within one
year, and the Company deposits or causes to be deposited with the Junior
Subordinated Indenture Trustee trust funds, in trust, for the purpose and in an
amount in the currency or currencies in which the Junior Subordinated Debt
Securities are payable sufficient to pay and discharge the entire indebtedness
on the Junior Subordinated Debt Securities not previously delivered to the
Junior Subordinated Indenture Trustee for cancellation, for the principal (and
premium, if any) and interest to the date of the deposit or to the Stated
Maturity, as the case may be, then the Junior Subordinated Indenture will cease
to be of further effect (except as to the Company's obligations to pay all other
sums pursuant to the Junior Subordinated Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Company will be
deemed to have satisfied and discharged the Junior Subordinated Indenture.
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement,
the Junior Subordinated Debt Securities of any series may be convertible or
exchangeable into Preferred Securities or other securities. The specific terms
on which Junior Subordinated Debt Securities of any series may be so converted
24
or exchanged will be set forth in the applicable Prospectus Supplement. Such
terms may include provisions for conversion or exchange, either mandatory, at
the option of the holder, or at the option of the Company, in which case the
number of shares of Preferred Securities or other securities to be received by
the Holders of Junior Subordinated Debt Securities would be calculated as of a
time and in the manner stated in the applicable Prospectus Supplement.
SUBORDINATION
In the Junior Subordinated Indenture, the Company has covenanted and
agreed that any Junior Subordinated Debt Securities issued thereunder will be
subordinate and junior in right of payment to all Senior Debt to the extent
provided in the Junior Subordinated Indenture. Upon any payment or distribution
of assets 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 Company, the
holders of Senior Debt will first be entitled to receive payment in full of
principal of (and premium, if any) and interest, if any, on such Senior Debt
before the holders of Junior Subordinated Debt Securities or, in the case of
Corresponding Junior Subordinated Debt Securities, the Property Trustee on
behalf of the holders, will be entitled to receive or retain any payment in
respect of the principal of (and premium, if any) or interest, if any, on the
Junior Subordinated Debt Securities.
In the event of the acceleration of the maturity of any Junior
Subordinated Debt Securities, the holders of all Senior Debt outstanding at the
time of such acceleration will be entitled to receive payment in full of all
amounts due thereon (including any amounts due upon acceleration) before the
holders of Junior Subordinated Debt Securities will be entitled to receive or
retain any payment in respect of the principal of (or premium, if any) or
interest, if any, on the Junior Subordinated Debt Securities.
No payments on account of principal (or premium, if any) or interest,
if any, in respect of the Junior Subordinated Debt Securities may be made if
there shall have occurred and be continuing a default in any payment with
respect to Senior Debt, or an event of default with respect to any Senior Debt
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Junior Subordinated
Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same
25
or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated Debt
Securities or to other Debt which is PARI PASSU with, or subordinated to, the
Junior Subordinated Debt Securities; PROVIDED, however, that Senior Debt shall
not be deemed to include (i) any Debt of the Company which when incurred and
without respect to any election under Section 1111(b) of the Bankruptcy Code,
was without recourse to the Company, (ii) any Debt of the Company to any of its
subsidiaries, (iii) Debt to any employee of the Company, (iv) any liability for
taxes, (v) indebtedness or monetary obligations to trade creditors or assumed by
the Company or any of its subsidiaries in the ordinary course of business in
connection with the obtaining of materials or services, and (vi) any other debt
securities issued pursuant to the Junior Subordinated Indenture.
The Company is a non-operating holding company and almost all of the
operating assets of the Company are owned by such subsidiaries. The Company
relies primarily on dividends from such subsidiaries to meet its obligations for
payment of principal and interest on its outstanding debt obligations and
corporate expenses. Accordingly, the Junior Subordinated Debt Securities will be
effectively subordinated to all existing and future liabilities of the Company's
subsidiaries, including liabilities under contracts of insurance and annuities
written by the Company's insurance subsidiaries. Holders of Junior Subordinated
Debt Securities should look only to the assets of the Company for payments of
interest and principal and premium, if any.
The Junior Subordinated Indenture places no limitation on the amount of
additional Senior Debt that may be incurred by the Company. The Company expects
from time to time to incur additional indebtedness constituting Senior Debt.
The Junior Subordinated Indenture provides that the foregoing
subordination provisions, insofar as they relate to any particular issue of
Junior Subordinated Debt Securities, may be changed prior to such issuance. Any
such change would be described in the applicable Prospectus Supplement.
GOVERNING LAW
The Junior Subordinated Indenture and the Junior Subordinated Debt
Securities will be governed by and construed in accordance with the laws of the
State of New York.
INFORMATION CONCERNING THE JUNIOR SUBORDINATED INDENTURE TRUSTEE
The Junior Subordinated Indenture Trustee shall have and be subject to
all the duties and responsibilities specified with respect to an indenture
trustee under the Trust Indenture Act. Subject to such provisions, the Junior
Subordinated Indenture Trustee is under no obligation to exercise any of the
powers vested in it by the Junior Subordinated Indenture at the request of any
holder of Junior Subordinated Debt Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Junior Subordinated Indenture 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 Junior Subordinated Indenture Trustee
reasonably believes that repayment or adequate indemnity is not reasonably
assured to it.
CORRESPONDING JUNIOR SUBORDINATED DEBT SECURITIES
The Corresponding Junior Subordinated Debt Securities may be issued in
one or more series of Junior Subordinated Debt Securities under the Junior
Subordinated Indenture with terms corresponding to the terms of a series of
Related Preferred Securities. In that event, concurrently with the issuance of
each Liberty Financial Trust's Preferred Securities, such Liberty Financial
Trust will invest the proceeds thereof and the consideration paid by the Company
for
26
the Common Securities in a series of Corresponding Junior Subordinated Debt
Securities issued by the Company to such Liberty Financial Trust. Each series of
Corresponding Junior Subordinated Debt Securities will be in the principal
amount equal to the aggregate stated Liquidation Amount of the Related Preferred
Securities and the Common Securities of such Liberty Financial Trust and will
rank pari passu with all other series of Junior Subordinated Debt Securities.
Holders of the Related Preferred Securities for a series of Corresponding Junior
Subordinated Debt Securities will have the rights in connection with
modifications to the Junior Subordinated Indenture or upon occurrence of Junior
Subordinated Debt Security Events of Default described under "--Modification of
Junior Subordinated Indenture" and "--Junior Subordinated Debt Security Events
of Default", unless provided otherwise in the Prospectus Supplement for such
Related Preferred Securities.
If a Special Event in respect of a Liberty Financial Trust of Related
Preferred Securities shall occur and be continuing, the Company may, at its
option, redeem the Corresponding Junior Subordinated Debt Securities at any time
within 90 days of the occurrence of such Special Event, in whole but not in
part, subject to the provisions of the Junior Subordinated Indenture. The
Redemption price for any Corresponding Junior Subordinated Debt Securities shall
be equal to 100% of the principal amount of such Corresponding Junior
Subordinated Debt Securities then outstanding plus accrued and unpaid interest
to the date fixed for redemption. For so long as the applicable Liberty
Financial Trust is the holder of all the outstanding series of Corresponding
Junior Subordinated Debt Securities, the proceeds of any such redemption will be
used by the Liberty Financial Trust to redeem the corresponding Trust Securities
in accordance with their terms. The Company may not redeem a series of
Corresponding Junior Subordinated Debt Securities in part unless all accrued and
unpaid interest has been paid in full on all outstanding Corresponding Junior
Subordinated Debt Securities of such series for all interest periods terminating
on or prior to the Redemption Date.
The Company will covenant in the Junior Subordinated Indenture as to
each series of Corresponding Junior Subordinated Debt Securities, that if and so
long as (i) the Liberty Financial Trust of the related series of Trust
Securities is the holder of all such Corresponding Junior Subordinated Debt
Securities, (ii) a Tax Event in respect of Liberty Financial Trust has occurred
and is continuing and (iii) the Company has elected, and has not revoked such
election, to pay Additional Sums (as defined under "Description of Preferred
Securities-- Redemption or Exchange") in respect of such Trust Securities, the
Company will pay to such Liberty Financial Trust such Additional Sums. The
Company will also covenant, as to each series of Corresponding Junior
Subordinated Debt Securities, (i) to maintain directly or indirectly 100%
ownership of the Common Securities of the Liberty Financial Trust to which
Corresponding Junior Subordinated Debt Securities have been issued, provided
that certain successors which are permitted pursuant to the Junior Subordinated
Indenture may succeed to the Company's ownership of the Common Securities, (ii)
not to voluntarily terminate, wind-up or liquidate any Liberty Financial Trust,
except (a) in connection with a distribution of Corresponding Junior
Subordinated Debt Securities to the holders of the Preferred Securities in
liquidation of such Liberty Financial Trust, or (b) in connection with certain
mergers, consolidations or amalgamations permitted by the related Trust
Agreement and (iii) to use its reasonable efforts, consistent with the terms and
provisions of the related Trust Agreement, to cause such Liberty Financial Trust
to remain classified as a grantor trust and not as an association taxable as a
corporation for United States Federal income tax purposes.
27
DESCRIPTION OF CAPITAL STOCK
VOTING RIGHTS
The Company's Restated Articles of Organization (the "Restated
Articles") provide that the holders of shares of Common Stock have a right to
vote on all matters submitted to a vote of Liberty Financial stockholders,
except that no person or group other than Liberty Mutual, certain affiliates of
Liberty Mutual, certain employee benefit plans established by Liberty Financial
or certain of its subsidiaries and other persons approved in advance by the
Board of Directors of Liberty Financial shall have the right to vote more than
20% of the combined voting power of Liberty Financial's Voting Stock (as defined
in the Restated Articles and below). Accordingly, assuming such 20% voting
restriction does not apply, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. As of September 9, 1998, Liberty Mutual owned
approximately 72.7% of the outstanding Common Stock.
The provisions in the Restated Articles regarding the 20% voting
restriction are designed to prevent a deemed assignment under the Advisers Act
or the Investment Company Act of investment contracts that Liberty Financial's
subsidiaries have with their clients. The Advisers Act and the Investment
Company define the term "assignment" to include any "direct or indirect
transfer" of "a controlling block of the voting securities" of the issuer's
outstanding voting securities. The Investment Company Act presumes that any
person holding 25% of the voting stock of Liberty Financial "controls" Liberty
Financial. The Restated Articles provide that a person or "group" (which
includes affiliates and associates of a person, as defined in the Restated
Articles) that owns (as defined in the Restated Articles) more than 20% of the
voting shares of Liberty Financial's issued and outstanding capital stock
("Voting Stock") shall have the right to vote not more than 20% of the
outstanding shares of Voting Stock entitled to vote. The remaining shares of
Voting Stock owned by such person or group ("Excludable Shares") shall have no
voting rights and shall not be counted for quorum or stockholder approval
purposes. These provisions do not apply to Liberty Mutual, affiliates of Liberty
Mutual, direct or indirect subsidiaries of Liberty Financial and certain
employee plans established or to be established by Liberty Financial or certain
of its subsidiaries. The Board of Directors of Liberty Financial may approve the
exemption of other persons or groups from the provisions described above. The
foregoing limitation is intended to have the effect of decreasing the chance of
any assignment occurring for purposes of the Advisers Act and the Investment
Company Act, including in connection with future issuances on sales of Common
Stock. However, no assurances can be given that such an "assignment" will not
occur under these or other circumstances.
The 20% voting restriction may be viewed as having the effect of making
more difficult or of discouraging, absent the support of Liberty Mutual, a proxy
contest, a merger or other combination involving Liberty Financial, a tender
offer, an open-market purchase program or other purchase of Common Stock that
could give Liberty Financial stockholders an opportunity to realize a premium
over the then-prevailing market price for their shares. However, given the fact
that Liberty Mutual owns, and will continue to own following the offering
contemplated in this Prospectus, more than 67% of the outstanding Voting Stock,
this effect is not considered significant.
OTHER PROVISIONS PERTAINING TO A CHANGE IN CONTROL
The Restated Articles and Restated By-Laws of Liberty Financial (the
"Restated By-Laws") also contain certain provisions that are intended to enhance
the likelihood of continuity and stability in the composition of the Board of
Directors of Liberty Financial and in the policies formulated by the Board.
These provisions may serve to delay, defer or present a change in control of
Liberty Financial if the Board of Directors determines that such a change in
28
control is not in the Company's best interests. These provisions, which are
summarized below, could have the effect of discouraging certain attempts to
acquire Liberty Financial or remove incumbent management even if some or a
majority of Liberty Financial's stockholders deemed such an attempt to be in
their best interest.
Although the Company has elected to be exempt from the statutory
staggered board provisions of Massachusetts General Laws, Chapter 156B ("Chapter
156B"), ss.50A, the Restated Articles provide that, except for Liberty Financial
directors elected by holders of shares of any outstanding series of Preferred
Stock having the right to elect directors, the Liberty Financial directors shall
be elected on a staggered basis. This means that Liberty Financial's Board of
Directors is divided into three classes whose members each serve for staggered
three-year terms, with one class being elected each year.
The Restated Articles and Restated By-Laws contain provisions
concerning the removal of directors and the filling of vacancies. Directors may
be removed only for cause (as defined in the Restated Articles) and only upon
the affirmative vote of the holders of at least 67% of the outstanding shares of
Voting Stock entitled to vote thereon, voting as a single class. The number of
directors may be increased to a maximum of 30 or decreased to a minimum of three
(but only to eliminate vacancies) by a majority of the directors. No decrease in
the number of directors may reduce the term of any incumbent director. A
majority of the remaining directors then in office are empowered to fill any
vacancy on the Board of Directors.
The Restated Articles and Restated By-Laws establish procedures with
regard to the nomination of candidates for election as directors who have not
been nominated by the Company's Board of Directors. In general, notice must be
received by the Company not less than 60 days and no more than 90 days prior to
the applicable stockholder meeting and must contain certain specified
information concerning the persons to be nominated and the stockholder
submitting the proposal. In addition, any such nomination of candidates for
election as a director must be accompanied by a petition signed by at least 100
record holders of capital stock entitled to vote in the election of the
Company's directors, representing in the aggregate at least 1% of the
outstanding Liberty Financial capital stock entitled to vote thereon. The
Restated Articles and Restated By-Laws also establish procedures with regard to
stockholder proposals for bringing business for consideration at stockholder
meetings, which procedures apply to proposals that Liberty Financial
stockholders are entitled to make under applicable law. In general, notice must
be received by the Company not less than 60 days and no more than 90 days prior
to the applicable stockholder meeting and must contain certain specified
information concerning the business desired to be brought before the meeting and
the stockholder submitting the proposal. The Restated By-Laws provide that a
special meeting of stockholders shall be called at the request of stockholders
only upon the application of the holders of shares of Voting Stock representing
at least 67% of the outstanding shares of Voting Stock entitled to vote
generally in the election of directors.
The Board of Directors is permitted pursuant to Massachusetts law and
the Restated Articles to consider special factors when evaluating proposed
tender or exchange offers or certain consolidations, mergers or other
fundamental transactions. These special factors may include, but are not limited
to, social, legal and economic effects upon employees, suppliers, customers and
others having similar relationships with Liberty Financial, the communities in
which the Company conducts its business, and its future prospects.
The affirmative vote of stockholders representing a majority of the
combined voting power of the outstanding shares of Voting Stock, voting as a
single class, is required to amend certain provisions of the Restated Articles
and Restated by-Laws, including the provisions discussed herein concerning the
inability to vote certain shares of Voting Stock defined as Excludable Shares,
29
the staggered term of the Board of Directors, the removal of directors, the
filling of vacancies on the Board of Directors and increasing and decreasing the
size of the Board of Directors, the regulation of stockholder nominations of
candidates for election as directors and of stockholder proposals, and the
special factors which may be considered by the Board of Directors in evaluating
tender or exchange offers or certain mergers or fundamental transactions. In
addition, the Restated Articles require the affirmative vote of stockholders
representing a majority of the combined voting power of the outstanding shares
of Voting Stock for adoption, amendment or repeal of the Restated By-laws by the
stockholders.
EXCULPATION AND INDEMNIFICATION FOR OFFICERS AND DIRECTORS
As permitted by Chapter 156B, the Restated Articles contain a provision
which eliminates the personal liability of directors of the Company for monetary
damages for breach of their fiduciary duty of care as a director. Under current
Massachusetts law and the Restated Articles, liability is not eliminated for (i)
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) unlawful payment of dividends or stock
purchases or redemptions pursuant to Section 61 and Section 62 of Chapter 156B,
or (iv) any transaction from which the director derived an improper personal
benefit. The provision does not eliminate a stockholder's right to seek
non-monetary remedies, such as an injunction or rescission, which are equitable,
to redress action taken by directors. However, equitable remedies may not be
available in all situations, and there may be instances in which no effective
equitable remedy is available.
The Restated Articles provide that the Company shall, to the maximum
extent permitted from time to time under Massachusetts law, indemnify any person
who is or was a party or is threatened to be made a party to any threatened,
pending or completed action, suit, proceeding or claim, by reason of the fact
that such person is or was a director, officer, employee or other agent of the
Company and any person who at the request of Liberty Financial is or was serving
as a director, officer, employee or other agent of the Company and any person
who at the request of Liberty Financial is or was serving as a director,
officer, employee or other agent of another organization, including service in
any capacity with respect to employee benefit plans, against expenses (including
attorneys' fees and expenses), judgments, fines, penalties and amounts paid in
settlement incurred in connection with the investigating, preparation to defend
or defense of such action, suit, proceeding or claim. Such indemnification is
not exclusive of other indemnification rights arising under any by-law,
agreement, vote of directors or stockholders or otherwise.
Currently applicable Massachusetts law provides that officers and
directors may receive indemnification from their corporations for actual or
threatened lawsuits, except that indemnification may not be provided for any
person with respect to any matter to which such person has been adjudicated not
to have acted in good faith in the reasonable belief that such person's action
was in the best interest of the corporation or, to the extent that such matter
relates to service with respect to any employee benefit plan, in the best
interest of the participants or beneficiaries of such employee benefit plan.
Massachusetts law further provides that a corporation may purchase
indemnification insurance, such insurance providing indemnification for the
officers and directors whether or not the corporation would have the power to
indemnify them against such liability under the provisions of the Massachusetts
law. Liberty Financial currently maintains such insurance.
CERTAIN OTHER MASSACHUSETTS LAW PROVISIONS
The Restated By-Laws include a provision that will exclude Liberty
Financial from the applicability of Chapter ll0D of the Massachusetts General
30
Laws, entitled "Regulation of Control Share Acquisitions." In general, Chapter
110D provides that any stockholder of a corporation subject to this statute who
acquires 20% or more of the outstanding voting stock of a corporation may not
vote such stock unless the stockholders of the corporation so authorize. Either
the Board of Directors of Liberty Financial, by majority vote, or the
stockholders by vote of stockholders representing a majority of the combined
voting power of the outstanding shares of Voting Stock entitled to vote thereon,
voting as a single class, may amend the Restated By-laws at any time to make the
Company subject to this statute prospectively.
The Restated By-Laws also include a provision that excludes Liberty
Financial from the applicability of Chapter 110F of the Massachusetts General
Laws, entitled "Business combinations with Interested Shareholders." Chapter
110F prohibits Massachusetts corporations from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless: (a) the interested stockholder obtains the approval of the
board of directors prior to becoming an interested stockholder, or (b) the
interested stockholder acquires 90% of the outstanding voting stock of the
corporation (excluding shares held by certain affiliates of the corporation) at
the time that he becomes an interested stockholder, or (c) the business
combination is approved by both the board of directors and two-thirds of the
outstanding voting stock of the corporation (excluding shares held by the
interested stockholder). Under Chapter 110F an "interested stockholder" is a
person who, together with affiliates and associates, owns (or at any time within
the prior three years did own) 5% or more of a corporation's voting stock. A
"business combination" includes mergers, stock and asset sales and other
transactions resulting in a financial benefit to the stockholders. Under Chapter
110F, the stockholders of the Company may, by amendment to the Restated Articles
or Restated By-Laws, provide that the provisions of Chapter 110F apply to the
Company.
Massachusetts law explicitly permits directors to adopt stockholder
rights plans (so-called "poison pills"). At present, Liberty Financial has no
plans to adopt any such plan, but may do so in the future.
GENERAL PROVISIONS REGARDING COMMON STOCK AND PREFERRED STOCK
The authorized capital stock of Liberty Financial consists of
100,000,000 shares of Common Stock, $.01 par value per share, and 10,000,000
shares of Preferred Stock, $.01 par value per share, of which 324,759 shares
have been designated as Series A Convertible Preferred Stock. The Restated
Articles and Restated By-Laws do not grant the holders of Common Stock any
preemptive, subscription, redemption or conversion rights or the right to
accumulate votes for the election of directors. Subject to prior dividend rights
and preferences of holders of shares of Preferred Stock, if any, holders of
Common Stock are entitled to receive such dividends as may be declared by the
Board of Directors of Liberty Financial from funds legally available therefor.
Holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors of the Company out of funds,
legally available therefor, subject to any preferential dividend rights of then
outstanding Preferred Stock. Upon the liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to receive ratably the net
assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding Preferred Stock.
The rights, preferences and privileges of holders of Common Stock are subject to
and may be adversely affected by, the rights of the holders of shares of any
series of Preferred Stock which Liberty Financial may designate and issue in the
future.
Under the Restated Articles, the Board of Directors of the Company has
the authority, subject to any limitations prescribed by law, without further
action by or notice to the stockholders, to issue from time to time shares of
Preferred
31
Stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions),
liquidation preferences and the number of shares constituting any series or
designation of such series. The ability of the Board of Directors to issue
additional Preferred Stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to remove current Liberty Financial
management, even if such removal may be in the stockholders' best interest, and
may have the effect of delaying, deterring or preventing a change in control of
Liberty Financial, or of discouraging a third party from acquiring a majority of
its outstanding voting stock. Other than the Preferred Stock described below
issued in connection with the Company's acquisition of Colonial, there are no
outstanding shares of Preferred Stock and the Company has no present plans to
issue any of the Preferred Stock. Shares of Common Stock or Preferred Stock may
be issued in connection with acquisitions by the Company.
The Common Stock is listed on the New York Stock Exchange and the
Boston Stock Exchange.
SUMMARY OF TERMS OF SERIES A CONVERTIBLE PREFERRED STOCK
In connection with the Colonial acquisition, the Company issued an
aggregate of 328,209 shares of Series A Convertible Preferred Stock (the "Series
A Preferred Stock"), of which 324,759 remained outstanding as of September 9,
1998. The Series A Preferred Stock has the following preferences, voting powers,
qualifications, and special or relative rights and privileges (the following
summary is qualified in its entirety by reference to the Certificate of
Designation filed by the Company with the Massachusetts Secretary of State and
included as an Exhibit to the Registration Statement of which this Prospectus is
a part (the "Certificate")).
Dividends. The face amount of each share of Series A Preferred Stock is
$50.00. The holders of shares of the Series A Preferred Stock are entitled to
receive cumulative cash dividends at the rate of $2.875 per annum per share,
payable in equal quarterly installments. Such dividends shall be cumulative from
the date of original issue to and including the date provision for the payment
of liquidation value, or redemption price, as the case may be, plus all then
accrued and unpaid dividends, has been made whether or not such dividends are
declared and whether or note there are profits, surplus or other funds of
Liberty Financial legally available for the payment of dividends. No dividends
may be paid on the Common Stock and no Common Stock may be redeemed,
repurchased, or otherwise acquired by the Company or any of its subsidiaries
unless full cumulative dividends on the shares of Series A Preferred Stock have
been paid or declared in full and sums set aside for the payment thereof.
Redemption. The shares of the Series A Preferred Stock are redeemable
at the option of Liberty Financial and at the price set forth in the Certificate
by resolution of the Board of Directors, in whole or from time to time in part,
at any time on or after March 24, 1998; provided, however, that prior to March
24, 2000 a condition to any such redemption shall be that the Trading Price (as
defined in the Certificate) of the Common Stock shall have exceeded $39.47
(adjusted from time to time for any stock split, stock dividend, combination of
shares, recapitalization or similar event pertaining to the Common Stock) for 20
Trading Days out of the 30 consecutive Trading Days immediately preceding the
date notice of such Redemption is mailed by the Liberty Financial.
Pursuant to a Stockholder Agreement entered into in connection with the
Colonial transaction, at any time during the first sixty days after March 24,
2000, the holder of any shares of Series A Preferred Stock subject to the
Stockholders Agreement may elect to sell to Liberty Mutual, and Liberty Mutual
shall be obligated to purchase, all, but not less than all, of the Series A
32
Preferred Stock then owned by such stockholder at a price of $50 per share plus
accrued but unpaid dividends on such shares through the date of purchase.
Liberty Mutual may designate Liberty Financial (without any further action or
approval by Liberty Financial), or any other person, as the purchaser of such
shares, in which event such person shall be required to pay the full purchase
price.
Voting Rights. Each share of Series A Preferred Stock is entitled to
such number of votes as equals the number of shares of Common Stock into which
such share is then convertible. Except as otherwise provided in the Certificate,
or by the Restated Articles, as amended from time to time, or by law, the shares
of Series A Preferred Stock, the shares of Common Stock and any other shares of
Preferred Stock at the time entitled to vote generally shall vote together as
one class on all matters submitted to a vote of stockholders.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the affairs of the Company, whether voluntary or otherwise, after
payment or provision for payment of its debts and other liabilities, the holders
of shares of the Series A Preferred Stock shall be entitled to receive, in cash,
out of the remaining net assets of Liberty Financial, the amount of Fifty
Dollars ($50.00) for each share of the Series A Preferred Stock held, plus an
amount equal to all dividends accrued and unpaid on each such share up to and
including the date fixed for distribution, before any distribution shall be made
to the holders of shares of the Common Stock or before the Company shall redeem,
repurchase or otherwise acquire any shares of Common Stock. After the payment of
the full preferential amounts to the holders of shares of the Series A Preferred
Stock or funds necessary for such payment have been set aside in trust for the
holders thereof, such holders shall be entitled to no other or further
participation in the distribution of the assets of Liberty Financial.
Conversion. Holders of shares of the Series A Preferred Stock have the
right, exercisable at any time and from time to time to convert all or any such
shares of the Series A Preferred Stock into shares of Common Stock at a rate of
1.58385 shares of Common Stock for each share of the Series A Preferred Stock so
converted, subject to anti-dilution adjustment from time to time as described in
detail in Section 6 of the Certificate.
Limitations. The Certificate provides that, in addition to any other
rights provided by applicable law, so long as any shares of the Series A
Preferred Stock are outstanding, the Company shall not, without the affirmative
vote of the holders of at least two-thirds of the outstanding shares of the
Series A Preferred Stock, voting separately, create authorize or issue any class
or series of capital stock ranking either as to payment of dividends or
distribution of assets upon liquidation prior to or on a parity with the Series
A Preferred Stock; provided, however, that no such vote of the holders of the
Series A Preferred Stock shall be required if, at or prior to the time when the
issuance of any such shares ranking prior to the Series A Preferred Stock is to
be made or any such change is to take effect, as the case may be, provision is
made for the redemption of all of the then outstanding shares of the Series A
Preferred Stock in accordance with the provisions of the Certificate.
Transfer Agent and Registrar
The transfer agent and the registrar for the Common Stock is Boston
EquiServe.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of
certain provisions of the Deposit Agreement (as defined below) and of the
Depositary Shares and Depositary Receipts summarizes the material terms of the
Deposit
33
Agreement and of the Depositary Shares and Depositary Receipts, and is qualified
in its entirety by reference to, the form of Deposit Agreement and form of
Depositary Receipts relating to each series of the Preferred Stock.
GENERAL
The Company may, at its option, elect to have shares of Preferred Stock
be represented by Depositary Shares. The shares of any series of the Preferred
Stock underlying the Depositary Shares will be deposited under a separate
deposit agreement (the "Deposit Agreement") between the Company and a bank or
trust company selected by the Company (the "Preferred Stock Depositary"). The
Prospectus Supplement relating to a series of Depositary Shares will set forth
the name and address of the Preferred Stock Depositary. Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled,
proportionately, to all the rights, preferences and privileges of the Preferred
Stock represented thereby (including dividend, voting, redemption, conversion,
exchange and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement, each of which will represent the applicable
interest in a number of shares of a particular series of the Preferred Stock
described in the applicable Prospectus Supplement.
A holder of Depositary Shares will be entitled to receive the shares of
Preferred Stock (but only in whole shares of Preferred Stock) underlying such
Depositary Shares. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the whole number of shares of Preferred
Stock to be withdrawn, the Depositary will deliver to such holder at the same
time a new Depositary Receipt evidencing such excess number of Depositary
Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or
other cash distributions in respect to the Preferred Stock to the record holders
of Depositary Receipts in proportion, insofar as possible, to the number of
Depositary Shares owned by such holders.
In the event of a distribution other than in cash in respect to the
Preferred Stock, the Preferred Stock Depositary will distribute property
received by it to the record holders of Depositary Receipts in proportion,
insofar as possible, to the number of Depositary Shares owned by such holders,
unless the Preferred Stock Depositary determines that it is not feasible to make
such distribution, in which case the Preferred Stock Depositary may, with the
approval of the Company, adopt such method as it deems equitable and practicable
for the purpose of effecting such distribution, including sale (at public or
private sale) of such property and distribution of the net proceeds from such
sale to such holders.
The amount so distributed in any of the foregoing cases will be reduced
by any amount required to be withheld by the Company or the Preferred Stock
Depositary on account of taxes.
CONVERSION AND EXCHANGE
If any Preferred Stock underlying the Depositary Shares is subject to
provisions relating to its conversion or exchange as set forth in the Prospectus
Supplement relating thereto, each record holder of Depositary Shares will have
the right or obligation to convert or exchange such Depositary Shares pursuant
to the terms thereof.
34
REDEMPTION OF DEPOSITARY SHARES
If Preferred Stock underlying the Depositary Shares is subject to
redemption, the Depositary Shares will be redeemed from the proceeds received by
the Preferred Stock Depositary resulting from the redemption, in whole or in
part, of the Preferred Stock held by the Preferred Stock Depositary. The
redemption price per Depositary Share will be equal to the aggregate redemption
price payable with respect to the number of shares of Preferred Stock underlying
the Depositary Shares. Whenever the Company redeems Preferred Stock from the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of the
same redemption date a proportionate number of Depositary Shares representing
the shares of Preferred Stock that were redeemed. If less than all of the
Depositary Shares are to be redeemed, the Depositary Shares to be redeemed will
be selected by lot or pro rata as may be determined by the Company.
After the date fixed for redemption, the Depositary Shares so called
for redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
redemption price upon such redemption. Any funds deposited by the Company with
the Preferred Stock Depositary for any Depositary Shares which the holders
thereof fail to redeem shall be returned to the Company after a period of two
years from the date such funds are so deposited.
VOTING
Upon receipt of notice of any meeting at which the holders of any
shares of Preferred Stock underlying the Depositary Shares are entitled to vote,
the Preferred Stock Depositary will mail the information contained in such
notice to the record holders of the Depositary Receipts. Each record holder of
such Depositary Receipts on the record date (which will be the same date as of
the record date for the Preferred Stock) will be entitled to instruct the
Preferred Stock Depositary as to the exercise of the voting rights pertaining to
the number of shares of Preferred Stock underlying such holder's Depositary
Shares. The Preferred Stock Depositary will endeavor, insofar as practicable, to
vote the number of shares of Preferred Stock underlying such Depositary Shares
in accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting the Preferred Stock to the
extent it does not receive specific written instructions from holders of
Depositary Receipts representing such Preferred Stock.
RECORD DATE
Whenever (i) any cash dividend or other cash distribution shall become
payable, any distribution other than cash shall be made, or any rights,
preferences or privileges shall be offered with respect to the Preferred Stock,
or (ii) the Preferred Stock Depositary shall receive notice of any meeting at
which holders of Preferred Stock are entitled to vote or of which holders of
Preferred Stock are entitled to notice, or of the mandatory conversion of or any
election on the part of the Company to call for the redemption of any Preferred
Stock, the Preferred Stock Depositary shall in each such instance fix a record
date (which shall be the same as the record date for the Preferred Stock) for
the determination of the holders of Depositary Receipts (x) who shall be
entitled to receive such dividend, distribution, rights, preferences or
privileges or the net proceeds of the sale thereof or (y) who shall be entitled
to give instructions for the exercise of voting rights at any such meeting or to
receive notice of such meeting or of such redemption or conversion, subject to
the provisions of the Deposit Agreement.
35
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt and any provision of the Depositary
Agreement may at any time be amended by agreement between the Company and the
Preferred Stock Depositary. However, any amendment which imposes or increases
any fees, taxes or other charges payable by the holders of Depositary Receipts
(other than taxes and other governmental charges, fees and other expenses
payable by such holders as stated under "Charges of Preferred Stock
Depositary"), or which otherwise prejudices any substantial existing right of
holders of Depositary Receipts, will not take effect as to outstanding
Depositary Receipts until the expiration of 90 days after notice of such
amendment has been mailed to the record holders of outstanding Depositary
Receipts.
Whenever so directed by the Company, the Preferred Stock Depositary
will terminate the Deposit Agreement by mailing notice of such termination to
the record holders of all Depositary Receipts then outstanding at least 30 days
prior to the date fixed in such notice for such termination. The Preferred Stock
Depositary may likewise terminate the Deposit Agreement if at any time 45 days
shall have expired after the Preferred Stock Depositary shall have delivered to
the Company a written notice of its election to resign and a successor
depositary shall not have been appointed and accepted its appointment. If any
Depositary Receipts remain outstanding after the date of termination, the
Preferred Stock Depositary thereafter will discontinue the transfer of
Depositary Receipts, will suspend the distribution of dividends to the holders
thereof, and will not give any further notices (other than notice of such
termination) or perform any further acts under the Deposit Agreement except as
provided below and except that the Preferred Stock Depositary will continue (i)
to collect dividends on the Preferred Stock and any other distributions with
respect thereto and (ii) to deliver the Preferred Stock together with such
dividends and distributions and the net proceeds of any sales of rights,
preferences, privileges or other property, without liability for interest
thereon, in exchange for Depositary Receipts surrendered. At any time after the
expiration of two years from the date of termination, the Preferred Stock
Depositary may sell the Preferred Stock then held by it at public or private
sales, at such place or places and upon such terms as it deems proper and may
thereafter hold the net proceeds of any such sale, together with any money and
other property then held by it, without liability for interest thereon, for the
pro rata benefit of the holders of Depositary Receipts which have not been
surrendered.
CHARGES OF PREFERRED STOCK DEPOSITARY
The Company will pay all charges of the Preferred Stock Depositary
including charges in connection with the initial deposit of the Preferred Stock,
the initial issuance of the Depositary Receipts, the distribution of information
to the holders of Depositary Receipts with respect to matters on which Preferred
Stock is entitled to vote, withdrawals of the Preferred Stock by the holders of
Depositary Receipts or redemption or conversion of the Preferred Stock, except
for taxes (including transfer taxes, if any) and other governmental charges and
such other charges as are expressly provided in the Deposit Agreement to be at
the expense of holders of Depositary Receipts or persons depositing Preferred
Stock.
MISCELLANEOUS
The Preferred Stock Depositary will make available for inspection by
holders of Depositary Receipts at its corporate office and its New York office,
all reports and communications from the Company which are delivered to the
Preferred Stock Depositary as the holder of Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable
if it is prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The obligations of the
36
Preferred Stock Depositary under the Deposit Agreement are limited to performing
its duties thereunder without negligence or bad faith. The obligations of the
Company under the Deposit Agreement are limited to performing its duties
thereunder in good faith. Neither the Company nor the Preferred Stock Depositary
is obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is furnished.
The Company and the Preferred Stock Depositary are entitled to rely upon advice
of or information from counsel, accountants or other persons believed to be
competent and on documents believed to be genuine.
The Preferred Stock Depositary may resign at any time or be removed by
the Company, effective upon the acceptance by its successor of its appointment;
provided, that if a successor Preferred Stock Depositary has not been appointed
or accepted such appointment within 45 days after the Preferred Stock Depositary
has delivered a notice of election to resign to the Company, the Preferred Stock
Depositary may terminate the Deposit Agreement. See "Amendment and Termination
of Deposit Agreement" above.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants to purchase Debt Securities, Preferred
Stock (or Depositary Shares representing Preferred Stock) or Common Stock
(collectively, the "Underlying Warrant Securities"), and such Warrants may be
issued independently or together with any such Underlying Warrant Securities and
may be attached to or separate from such Underlying Warrant Securities. Each
series of Warrants will be issued under a separate warrant agreement (each a
"Warrant Agreement") to be entered into between the Company and a warrant agent
("Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the warrants of such series and will not assume any
obligation or relationship of agency for or with holders or beneficial owners of
Warrants. The following sets forth certain general terms and provisions of the
Warrants offered hereby. Further terms of the Warrants and the applicable
Warrant Agreement are set forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of any
Warrants in respect of which this Prospectus is being delivered, including the
following: (i) the title of such Warrants; (ii) the aggregate number of such
Warrants; (iii) the price or prices at which such Warrants will be issued; (iv)
the currency or currencies, including composite currencies, in which the price
of such Warrants may be payable; (v) the designation and terms of the Underlying
Warrant Securities purchasable upon exercise of such Warrants may be purchased;
(vii) the date on which the right to exercise such Warrants shall commence and
the date on which such right shall expire; (viii) whether such warrants will be
issued in registered form or bearer form; (ix) if applicable, the minimum or
maximum amount of such Warrants which may be exercised at any one time; (x) if
applicable, the designation and terms of the Underlying Warrant Securities with
which such Warrants are issued and the number of such Warrants issue with each
such Underlying Warrant Security; (xi) if applicable, the date on and after
which such Warrants and the related Underlying Warrant Securities will be
separately transferable; (xii) information with respect to book-entry
procedures, if any; (xiii) if applicable, a discussion of certain United States
federal income tax considerations; and (xiv) any other terms of such Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Warrants.
DESCRIPTION OF PREFERRED SECURITIES OF LIBERTY FINANCIAL TRUSTS
Pursuant to the terms of the Trust Agreement for each Liberty Financial
Trust, the Issuer Trustees on behalf of such Liberty Financial Trust will issue
37
the Preferred Securities and the Common Securities. The Preferred Securities of
a particular issue will represent preferred beneficial interests in the Liberty
Financial Trust and the holders thereof will be entitled to a preference in
certain circumstances with respect to Distributions and amounts payable on
redemption or liquidation over the Common Securities of such Liberty Financial
Trust, as well as other benefits as described in the corresponding Trust
Agreement. This summary of certain provisions of the Preferred Securities and
each trust Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of each Trust
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act. Wherever particular defined terms of a Trust Agreement (as
amended or supplemented from time to time) are referred to herein or in a
Prospectus Supplement, such defined terms are incorporated herein or therein by
reference. The form of the Trust Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. Each of the
Liberty Financial Trusts is a legally separate entity and the assets of one not
available to satisfy the obligations of any of the others.
GENERAL
The Preferred Securities of a Liberty Financial Trust will rank pari
passu, and payments will be made thereon PRO RATA, with the Common Securities of
that Liberty Financial Trust except as described under "--Subordination of
Common Securities." Legal title to the Corresponding Junior Subordinated Debt
Securities will be held by the Property Trustee in trust for the benefit of the
holders of the related Preferred Securities and Common Securities. Each
Guarantee Agreement executed by the Company for the benefit of the holders of a
Liberty Financial Trust's Preferred Securities (the "Guarantee" for such
Preferred Securities) will be a guarantee on a subordinated basis with respect
to the related Preferred Securities but will not guarantee payment of
Distributions or amounts payable on redemption or liquidation of such Preferred
Securities when the related Liberty Financial Trust does not have funds on hand
available to make such payments. See "Description of Guarantees."
DISTRIBUTIONS
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such dates
as specified in the applicable Prospectus Supplement. In the event that any date
on which Distributions are payable on the Preferred Securities is not a Business
Day (as defined below), payment of the Distribution payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect to any such delay) except that, if such Business Day
is in the next succeeding calendar year, payment of such Distribution shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date (each date on which Distributions are payable
in accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office of
the Property Trustee or the Junior Subordinated Indenture Trustee (as defined
herein) is closed for business.
Each Liberty Financial Trust's Preferred Securities represent preferred
beneficial interests in the applicable Liberty Financial Trust, and the
Distributions on each Preferred Security will be payable at a rate specified in
the Prospectus Supplement for such Preferred Securities. The amount of
Distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months unless otherwise specified in the applicable
Prospectus Supplement. Distributions to which holders of Preferred Securities
are entitled will accumulate additional Distributions at the rate per annum if
and as specified in the applicable Prospectus Supplement. The term
38
"Distributions" as used herein includes any such additional Distributions unless
otherwise stated.
If provided in the applicable Prospectus Supplement, the Company has
the right under the Junior Subordinated Indenture, pursuant to which it will
issue the Corresponding Junior Subordinated Debt Securities, to defer the
payment of interest at any time or from time to time on any series of the
Corresponding Junior Subordinated Debt Securities for a period which will be
specified in such Prospectus Supplement relating to such series (each, an
"Extension Period"), PROVIDED that no Extension Period may extend beyond the
Stated Maturity of the Corresponding Junior Subordinated Debt Securities. As a
consequence of any such extension, Distributions on the corresponding Preferred
Securities would be deferred (but would continue to accumulate additional
Distributions thereon at the rate per annum set forth in the Prospectus
Supplement for such Preferred Securities) by the Liberty Financial Trust which
issues such Preferred Securities during any such Extension Period. During such
Extension period the Company may not, and may not permit any subsidiary of the
Company to, (i) declare or pay an dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock or (ii) make any payment or principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank PARI PASSU with or junior in interest to the Corresponding
Junior Subordinated Debt Securities or make any guarantee payments with respect
to any guarantee by the Company of debt securities of any subsidiary of the
Company if such guarantee ranks PARI PASSU or junior in interest to the
Corresponding Junior Subordinated Debt Securities (other than (a) dividends or
distributions in common stock or the Company, (b) payments under any Guarantee
and (c) purchases of common stock related to the issuance of common stock under
any of the Company's benefit plans for its directors, officers or employees).
The revenue of each Liberty Financial Trust available for distribution
to holders of its Preferred Securities will be limited to payments under the
Corresponding Junior Subordinated Debt Securities in which the Liberty Financial
Trust will invest the proceeds from the issuance and sale of its Trust
Securities. See "Description of Junior Subordinated Debt Securities--
Corresponding Junior Subordinated Debt Securities." If the Company does not make
interest payments on such Corresponding Junior Subordinated Debt Securities, the
Property Trustee will not have funds available to pay Distributions on the
Related Preferred Securities. The payment of Distributions (if and to the extent
the Liberty Financial Trust has funds legally available for the payment of such
Distributions and cash sufficient to make such payments) is guaranteed by the
company on a limited basis as set forth herein under "Description of
Guarantees."
Distributions on the Preferred Securities will be payable to the
holders thereof as they appear on the register of such Liberty Financial Trust
on the relevant record dates, which, as long as the Preferred Securities remain
in book-entry form, will be one Business Day prior to the relevant distribution
Date. Subject to any applicable laws and regulations and the provisions of the
applicable Trust Agreement, each such payment will be made as described under
"Book-Entry Issuance." In the event any Preferred Securities are not in
book-entry form, the relevant record date for such Preferred Securities shall be
the date at least 15 days prior to the relevant Distribution Date, as specified
in the applicable Prospectus Supplement.
REDEMPTION OR EXCHANGE
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in
part, of any Corresponding Junior Subordinated Debt Securities, whether at
maturity or upon earlier redemption as provided in the Junior Subordinated
Indenture, the proceeds from such repayment or redemption shall be applied by
the Property Trustee to redeem a Like Amount (as defined below) of the Trust
Securities, upon not less than 30 nor more than 60 days notice, at a redemption
39
price (the "Redemption Price") equal to the aggregate Liquidation Amount of such
Trust Securities plus accumulated but unpaid Distributions thereon to the date
of redemption (the "Redemption Date") and the related amount of the premium, if
any, paid by the Company upon the concurrent redemption of such Corresponding
Junior Subordinated Debt Securities. See "Description of Junior Subordinated
Debt Securities--Redemption." If less than all of any series of Corresponding
Junior Subordinated Debt Securities are to be repaid or redeemed on a Redemption
Date, then the proceeds from such repayment or redemption shall be allocated to
the redemption PRO RATA of the related Preferred Securities and the Common
Securities. The amount of premium, if any, paid by the Company upon the
redemption of all or any part of any series of any Corresponding Junior
Subordinated Debt Securities to be repaid or redeemed on a Redemption Date shall
be allocated to the redemption PRO RATA of the related Preferred Securities and
the Common Securities.
The Company will have the right to redeem any series of Corresponding
Junior Subordinated Debt Securities (i) in whole at any time or in part form
time to time, subject to the conditions described under "Description of Junior
Subordinated Debt Securities--Redemption," (ii) at any time, in whole (but not
in part), upon the occurrence of a Tax Event or an Investment Company Event
(each as defined below, a "Special Event") and subject to the further conditions
described under "Description of Junior Subordinated Debt
Securities--Redemption," or (iii) as may be otherwise specified in the
applicable Prospectus Supplement.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION OF CORRESPONDING JUNIOR
SUBORDINATED DEBT SECURITIES. If a Special Event in respect of a series of
Preferred Securities and Common Securities shall occur and be continuing, the
Company has the right to redeem the Corresponding Junior Subordinated Debt
Securities in whole (but not in part) and thereby cause a mandatory redemption
of such Preferred Securities and Common Securities in whole (but not in part) at
the Redemption Price within 90 days following the occurrence of such Special
Event. At any time, the Company has the right to terminate the related Liberty
Financial Trust and, after satisfaction of the liabilities of creditors of such
Liberty Financial Trust as provided by applicable law, cause such Corresponding
Junior Subordinated Debt Securities to be distributed to the holders of such
Preferred Securities and Common Securities in liquidation of the Liberty
Financial Trust. If the Company does not elect either option described above,
the applicable series of Preferred Securities will remain outstanding and, in
the event a Tax Event has occurred and is continuing, Additional Sums (as
defined below) may be payable on the Corresponding Junior Subordinated Debt
Securities.
EXTENSION OF MATURITY OF CORRESPONDING JUNIOR SUBORDINATED DEBT
SECURITIES. If provided in the applicable Prospectus Supplement, the Company
shall have the right to extend or shorten the maturity of any series of
Corresponding Junior Subordinated Debt Securities at the time that the Company
exercises its right to elect to terminate the related Liberty Financial Trust
and cause such Corresponding Junior Subordinated Debt Securities to be
distributed to the holders of such Preferred Securities and Common Securities in
liquidation of the Liberty Financial Trust, provided that it can extend the
maturity only if certain conditions specified in the applicable Prospectus
Supplement are met at the time such election is made and at the time of such
extension.
"Additional Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by a Liberty
Financial Trust on the outstanding Preferred Securities and Common Securities of
the Liberty Financial Trust shall not be reduced as a result of any additional
taxes, duties and other governmental charges to which such Liberty Financial
Trust has become subject as a result of a Tax Event.
"Investment Company Event" means the receipt by the applicable Liberty
Financial Trust of an opinion of counsel experienced in such matters to the
effect that, as a result of the occurrence of a change in law or regulation or
40
a change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a "Change
in 1940 Act Law"), the applicable Liberty Financial Trust is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), which
Change in 1940 Act Law becomes effective on or after the date of original
issuance of the series of Preferred Securities issued by the Liberty Financial
Trust.
"Like Amount" means (i) with respect to a redemption of any series of
Trust Securities, Trust Securities of such series having a Liquidation Amount
(as defined below) equal to that portion of the principal amount of
Corresponding Junior Subordinated Debt Securities to be contemporaneously
redeemed in accordance with the Junior Subordinated Indenture, allocated to the
Common Securities and to the Preferred Securities based upon the relative
Liquidation Amounts of such classes and the proceeds of which will be used to
pay the Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Corresponding Junior Subordinated Debt Securities to holders of
any series of Trust Securities in connection with a dissolution or liquidation
of the related Liberty Financial Trust, Corresponding Junior Subordinated Debt
Securities having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Corresponding Junior Subordinated
Debt Securities are distributed. "Liquidation Amount" means the stated amount of
$25 per Trust Security.
"Tax Event" means the receipt by the applicable Liberty Financial Trust
of an opinion of counsel experienced in such matters to the effect that, as a
result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Liberty Financial Trust is, or will be within 90
days of the date of such opinion, subject to the United States Federal income
tax with respect to income received or accrued on the corresponding series of
Corresponding Junior Subordinated Debt Securities, (ii) interest payable by the
Company on such series of Corresponding Junior Subordinated Debt Securities is
not, or within 90 days of the date of such opinion, will not be, deductible by
the Company, in whole or in part, for United States Federal income tax purposes,
or (iii) the applicable Liberty Financial 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.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debt Securities for any series of Preferred Securities (i)
such series of Preferred Securities will no longer be deemed to be outstanding,
(ii) The Depository Trust Company ("DTC") or its nominee, as the record holder
of such series of Preferred Securities, will receive a registered global
certificate or certificates representing the Corresponding Junior Subordinated
Debt Securities to be delivered upon such distribution and (iii) any
certificates representing such series of Preferred Securities not held by DTC or
its nominee will be deemed to represent the Corresponding Junior Subordinated
Debt Securities having a principal amount equal to the stated liquidation
preference of such series of Preferred Securities, and bearing accrued and
unpaid interest in an amount equal to the accrued and unpaid Distributions on
such series of Preferred Securities until such certificates are presented to the
Administrative Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Corresponding Junior Subordinated Debt Securities that may be
distributed in exchange for Preferred Securities if a dissolution and
liquidation
41
of a Liberty Financial Trust were to occur. Accordingly, the Preferred
Securities that an investor may purchase, or the Corresponding Junior
Subordinated Debt Securities that the investor may receive on dissolution and
liquidation of a Liberty Financial Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed
at the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated Debt Securities. Redemptions
of the Preferred Securities shall be made and the Redemption Price shall be
payable on each Redemption Date only to the extent that the related Liberty
Financial Trust has funds on hand available for the payment of such Redemption
Price. See also "--Subordination of Common Securities."
If Liberty Financial Trust gives a notice of redemption in respect of
its Preferred Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, to the extent funds are available, the Property Trustee will
deposit irrevocably with DTC funds sufficient to pay the applicable Redemption
Price and will give DTC irrevocable instructions and authority to pay the
Redemption Price to the holders of such Preferred Securities. See "Book-Entry
Issuance." If such Preferred Securities are no longer in book-entry form, the
Property Trustee, to the extent funds are available, will irrevocably deposit
with the paying agent for such Preferred Securities funds sufficient to pay the
applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing such Preferred Securities.
Notwithstanding the foregoing, distributions payable on or prior to the
Redemption Date for any Preferred Securities called for redemption shall be
payable to the holders of such Preferred Securities on the relevant record dates
for the related Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then upon the date of such deposit, all
rights of the holders of such Preferred Securities so called for redemption will
cease, except the right of the holders of such Preferred Securities to receive
the Redemption Price, but without interest on such Redemption Price, and such
Preferred Securities will cease to be outstanding. In the event that any date
fixed for redemption of Preferred Securities is not a Business Day, then payment
of the Redemption Price payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Preferred
Securities called for redemption is improperly withheld or refused and not paid
either by the Liberty Financial Trust or by the Company pursuant to the
Guarantee as described under "Description of Guarantees", Distributions on such
Preferred Securities will continue to accrue at the then applicable rate, from
the Redemption Date originally established by the Liberty Financial Trust for
such Preferred Securities to the date such Redemption Price is actually paid, in
which case the actual payment date will be the date fixed for redemption for
purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
Federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Corresponding Junior Subordinated Debt Securities to holders of
Preferred Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Preferred Securities on the relevant record
date, which shall be one Business Day prior to the relevant Redemption Date or
42
liquidation date, as applicable; PROVIDED, HOWEVER, that in the event that any
Preferred Securities are not in book-entry form, the relevant record date for
such Preferred Securities shall be a date at least 15 days prior to the
Redemption Date or liquidation date, as applicable, as specified in the
applicable Prospectus Supplement.
If less than all of the Preferred Securities and Common Securities
issued by an issuer are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata to the Preferred Securities and the Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Preferred Securities to be redeemed shall be selected on a PRO RATA
basis not more than 60 days prior to the Redemption Date by the Property Trustee
from the outstanding Preferred Securities not previously called for redemption,
by such method as the Property Trustee shall deem fair and appropriate and which
may provide for the selection for redemption of portions (equal to $25 or an
integral multiple of $25 in excess thereof) of the Liquidation Amount of
Preferred Securities of a denomination larger than $25. The Property Trustee
shall promptly notify the trust registrar in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of each Trust Agreement, unless the context otherwise requires, all
provision relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only in part, to
the portion of the aggregate Liquidation Amount of Preferred Securities which
has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Trust Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the Redemption Price on the Corresponding Junior Subordinated Debt Securities,
on and after the Redemption Date interest ceases to accrue on such Junior
Subordinated Debt Securities or portions thereof (and distributions cease to
accrue on the Related Preferred Securities or portions thereof) called for
redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Liberty
Financial Trust's Preferred Securities and Common Securities, as applicable,
shall be made PRO RATA based on the Liquidation Amount of such Preferred
Securities and Common Securities; PROVIDED, HOWEVER, that if on any Distribution
Date or Redemption Date a Junior Subordinated Debt Security Event of Default
shall have occurred and be continuing, no payment of any Distribution on, or
Redemption Price of any of the Liberty Financial Trust's Common Securities, and
no other payment on account of the redemption, liquidation or other acquisition
of such Common Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the Liberty Financial Trust's
outstanding Preferred Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price the full amount
of such Redemption Price on all of the Liberty Financial Trust's outstanding
Preferred Securities then called for redemption, shall have been made or
provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions on, or Redemption
Price of, the Liberty Financial Trust's Preferred Securities then due and
payable.
In the case of any Event of Default resulting from a Junior
Subordinated Debt Security Event of Default, the Company as holder of such
Liberty Financial Trust's Common Securities will be deemed to have waived any
right to act with respect to any such Event of Default under the applicable
Trust Agreement until the effect of all such Events of Default with respect to
such Preferred Securities have been cured, waived or otherwise eliminated. Until
any such
43
Events of Default under the applicable Trust Agreement with respect to the
Preferred Securities have been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the holders of such Preferred
Securities and not on behalf of the Company as holder of the Liberty Financial
Trust's Common Securities, and only the holders of such Preferred Securities
will have the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Liberty Financial Trust shall
automatically terminate upon expiration of its term and shall terminate on the
first to occur of: (i) certain events of bankruptcy, dissolution or liquidation
of the Company; (ii) the distribution of a Like Amount of the Corresponding
Junior Subordinated Debt Securities to the holders of its Trust Securities, if
the Company, as Depositor, has given written direction to the Property Trustee
to terminate such Liberty Financial Trust (which direction is optional and
wholly within the discretion of the Company, as Depositor); (iii) the redemption
of all of the Liberty Financial Trust's Trust Securities following a Special
Event; (iv) redemption of all of the Preferred Securities as described under
"Description of Preferred Securities" --Redemption or Exchange--Mandatory
Redemption", and (v) the entry of an order for the dissolution of the Liberty
Financial Trust by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (v)
above, the Liberty Financial Trust shall be liquidated by the Issuer Trustees as
expeditiously as the Issuer Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of such Liberty Financial Trust
as provided by applicable law, to the holders of such Trust Securities a Like
Amount of the Corresponding Junior Subordinated Debt Securities, unless such
distribution is determined by the Property Trustee not to be practical, in which
event such holders will be entitled to receive out of the assets of the Liberty
Financial Trust available for distribution to holders, after satisfaction of
liabilities to creditors of such Liberty Financial Trust as provided by
applicable law, an amount equal to, in the case of holders of Preferred
Securities, the aggregate of the Liquidation Amount plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because such Liberty Financial Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by such Liberty Financial Trust on its Preferred Securities shall be paid on a
PRO RATA basis. The holder(s) of such Liberty Financial Trust's Common
Securities will be entitled to receive distributions upon any such liquidation
PRO RATA with the holders of its Preferred Securities, except that if a Junior
Subordinated Debt Security Event of Default has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities. A
supplemental Indenture may provide that if an early termination occurs as
described in clause (v) above, the Corresponding Junior Subordinated Debt
Securities may be subject to optional redemption in whole (but not in part).
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under
each Trust Agreement (an "Event of Default") with respect to the Preferred
Securities issued thereunder (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) the occurrence of a Junior Subordinated Debt Security Event of Default
under the Junior Subordinated Indenture (see "Description of Junior
Subordinated Debt Securities -- Junior Subordinated Debt Security Events
of Default"); or
44
(ii) default by the Property Trustee in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a period
of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption Price of
any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which
or the breach of which is dealt with in clause (ii) above), and
continuation of such default or breach for a period of 60 days after
there has been given by registered or certified mail, to the defaulting
Issuer Trustee or Trustees by the holders of at least 25% in aggregate
liquidation preference of the outstanding Preferred Securities of the
applicable Liberty Financial Trust, a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" under such Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with respect
to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Liberty Financial Trust's
Preferred Securities, the Administrative Trustees and the Company, as Depositor,
unless such Event of Default shall have been cured or waived. The Company, as
Depositor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under each Trust
Agreement.
If a Junior Subordinated Debt Security Event of Default has occurred
and is continuing, the Preferred Securities shall have a preference over the
Common Securities upon termination of each Liberty Financial Trust as described
above. See "--Liquidation Distribution Upon Termination." The existence of an
Event of Default does not entitle the holders of Preferred Securities to
accelerate the maturity thereof.
REMOVAL OF ISSUER TRUSTEES
Unless a Junior Subordinated Debt Security Event of Default shall have
occurred and be continuing, any Issuer Trustee may be removed at any time by the
holder of the Common Securities. If a Junior Subordinated Debt Security Event of
Default has occurred and is continuing, the Property Trustee and the Delaware
Trustee may be removed at such time by the holders of a majority in Liquidation
Amount of the outstanding Preferred Securities. In no event will the holders of
the Preferred Securities have the right to vote to appoint, remove or replace
the Administrative Trustees, which voting rights are vested exclusively in the
Company as the holder of the Common Securities. No resignation or removal of an
Issuer Trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor trustee in accordance with
the provisions of the applicable Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the Company, as the holder of the Common
Securities, and the Administrative Trustees shall have power to appoint one or
more persons either to act as a co-trustee, jointly with the Property Trustee,
of all or any
45
part of such Trust Property, or to act as separate trustee of any such property,
in either case with such powers as may be provided in the instrument of
appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the applicable Trust Agreement. In case a Junior Subordinated Debt
Security Event of Default has occurred and is continuing, the Property Trustee
alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any corporation 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 corporation resulting
from any merger, conversion or consolidation to which such Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of such Trustee, shall be the successor of such Trustee under
each Trust Agreement, provided such corporation shall be otherwise qualified and
eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE LIBERTY FINANCIAL
TRUSTS
Unless otherwise provided in the applicable Prospectus Supplement, a
Liberty Financial Trust may not merge with or into, consolidated, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. A Liberty Financial Trust may, at the request of the Company,
with the consent of the Administrative Trustees and without the consent of the
holders of the Preferred Securities, merge with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to a trust organized as such under the laws
of any State, provided, that (i) such successor entity either (a) expressly
assumes all of the obligations of such Liberty Financial Trust with respect to
the Preferred Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) the Company expressly appoints
a trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Corresponding Junior Subordinated Debt
Securities, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities are
then listed, if any, (iv) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Preferred Securities (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation,
replacement, conveyance transfer of lease does not adversely affect the rights,
preferences and privileges of the holders of the Preferred Securities (including
any Successor Securities) in any material respect, (vi) such successor entity
has a purpose identical in all material respects to that of the Liberty
Financial Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Company has received an opinion
from independent counsel to the Liberty Financial 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 Preferred Securities (including
any Successor Securities) in any material respect, and (b) following such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Liberty Financial Trust nor such successor entity will be required
to register as an investment company under the Investment Company Act and (viii)
the Company or any permitted successor or assignee owns all of the Common
Securities of such successor entity and guarantees the obligations of such
successor entity
46
under the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, a Liberty Financial Trust shall not, except with
the consent of holders of 100% in Liquidation Amount of the Preferred
Securities, consolidate, amalgamate, merge with or into or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to any other entity or permit any other entity to consolidate, amalgamate, merge
with or into, or replace it if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Liberty Financial
Trust or the successor entity to be classified as other than a grantor trust for
United States Federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
Except as provided below and under "Description of Guarantees --
Amendments and Assignment" and as otherwise required by law and the applicable
Trust Agreement, the holders of the Preferred Securities will have no voting
rights.
Each Trust Agreement may be amended from time to time by the Company,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under such Trust Agreement, which shall not be inconsistent
with the other provisions of such Trust Agreement, or (ii) to modify, eliminate
or add to any provision of such Trust Agreement to such extent as shall be
necessary to ensure that the Liberty Financial 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 Liberty Financial
Trust will not be required to register as an "investment company" under the
Investment Company Act; PROVIDED, HOWEVER, that in the case of clause (i), such
action shall not adversely affect in any material respect the interests of any
holder of Trust Securities, and any amendments of such Trust Agreement shall
become effective when notice thereof is given to the holders of Trust
Securities. Each Trust Agreement may be amended by the Issuer Trustees and the
Company with (i) the consent of holders representing not less than a majority
(based upon Liquidation Amounts) of the outstanding Trust Securities, and (ii)
receipt by the Issuer Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not affect the Liberty Financial Trust's
status as a grantor trust for United States Federal income tax purposes or the
Liberty Financial Trust's exemption from status as an "investment company" under
the Investment Company Act, provided that without the consent of each holder of
Trust Securities, such Trust Agreement may not be amended to (i) change the
amount or timing of any Distribution on the Trust Securities or otherwise
adversely affect the amount of any Distribution required to be made in respect
of the Trust Securities as of a specified date or (ii) restrict the right of a
holder of Trust Securities to institute suit for the enforcement of any such
payment on or after such date.
So long as any Corresponding Junior Subordinated Debt Securities are
held by the Property Trustee, the Issuer Trustees shall not (i) direct the time,
method and place of conducting any proceeding for any remedy available to the
Junior Subordinated Indenture Trustee, or executing any trust or power conferred
on the Property Trustee with respect to such Corresponding Junior Subordinated
Debt Securities, (ii) waive a past default that is waivable under Section 513 of
the Junior Subordinated Indenture, (iii) exercise any right to rescind or annul
a declaration that the principal of all the Junior Subordinated Debt Securities
shall be due and payable or (iv) consent to any amendment, modification or
termination of the Junior Subordinated Indenture or such Corresponding Junior
Subordinated Debt Securities, where such consent shall be required, without, in
each case, obtaining the prior approval of the holders of a majority in
aggregate Liquidation Amount of all outstanding Preferred Securities; PROVIDED,
HOWEVER, that where a consent under the Junior Subordinated Indenture would
require the
47
consent of each holder of Corresponding Junior Subordinated Debt Securities
affected thereby, no such consent shall be given by the Property Trustee without
the prior consent of each holder of the corresponding Preferred Securities. The
Issuer Trustees shall not revoke any action previously authorized or approved by
a vote of the holders of the Preferred Securities except by subsequent vote of
the holders of the Preferred Securities. The Property Trustee shall notify each
holder of Preferred Securities of any notice of default with respect to the
Corresponding Junior Subordinated Debt Securities. In addition to obtaining the
foregoing approvals of the holders of the Preferred Securities, prior to taking
any of the foregoing actions, the Issuer Trustees shall obtain an opinion of
counsel experienced in such matters to the effect that the Liberty Financial
Trust will not be classified as a corporation for United States federal income
tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given
at a meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of Preferred Securities in the manner set
forth in each Trust Agreement.
No vote or consent of the holders of Preferred Securities will be
required for a Liberty Financial Trust to redeem and cancel its Preferred
Securities in accordance with the applicable Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Company, the Issuer Trustees or any
affiliate of the or any Issuer Trustees, shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of a series may be issued in whole or in part
in the form of one or more Global Preferred Securities that will be deposited
with, or on behalf of, the Depositary identified in the Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable Prospectus
Supplement for such series, the Depositary will be DTC. Global Preferred
Securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Preferred Securities represented thereby, a Global Preferred Security
may not be transferred except as a whole by the Depositary for such Global
Preferred Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor.
The specific terms of the depositary arrangement with respect to a
series of Preferred Securities will be described in the Prospectus Supplement
relating to such series. The Company anticipates that the following provisions
will generally apply to depositary arrangements.
Upon the insurance of a Global Preferred Security, and the deposit of
such Global Preferred Security with or on behalf of the Depositary, the
Depositary for such Global Preferred Security or its nominee will credit, on its
book-entry registration and transfer system, the respective aggregate
Liquidation Amounts of the individual Preferred Securities represented by such
Global Preferred Securities to the accounts of Participants. Such accounts shall
be designated by the dealers, underwriters or agents with respect to such
Preferred Securities or by the Company if such Preferred Securities are offered
and sold directly by the Company. Ownership of beneficial interests in a Global
Preferred Security
48
will be limited to participants or persons that may hold interests through
Participants. Ownership of beneficial interests in such Global Preferred
Security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the applicable Depositary or its nominee
(with respect to interests of Participants) and the records of participants
(with respect to interests of persons who hold through Participants). The laws
of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Preferred
Security.
So long as the Depositary for a Global Preferred Security, or its
nominee, is the registered owner of such Global Preferred Security, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Preferred Securities represented by such Global Preferred
Security for all purposes under the Trust Agreement governing such Preferred
Securities. Except as provided below, owners of beneficial interests in a Global
Preferred Security will not be entitled to have any of the individual Preferred
Securities of the series represented by such Global Preferred Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Preferred Securities of such series in definitive form and
will not be considered the owners or holders thereof under the Trust Agreement.
Payments of principal of (and premium, if any) and interest on
individual Preferred Securities represented by a Global Preferred Security
registered in the name of a Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner of the
Global Preferred Security representing such Preferred Securities. None of the
Company, the Property Trustee, any Paying Agent, or the Securities Registrar for
such Preferred Securities will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that the Depositary for a series of Preferred
Securities or its nominee, upon receipt of any payment of Liquidation Amount,
premium or Distributions in respect of a permanent Global Preferred Security
representing any of such Preferred Securities, immediately will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the aggregate Liquidation Amount of such
Global Preferred Security for such Preferred Securities as shown on the records
of such Depositary or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Preferred Security
held through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name". Such payments will be
the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if
a Depositary for a series of Preferred Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, the Company will issue individual
Preferred Securities of such series in exchange for the Global Preferred
Security representing such series of Preferred Securities. In addition, the
Company may at any time and in its sole discretion, subject to any limitations
described in the Prospectus Supplement relating to such Preferred Securities,
determine not to have any Preferred Securities of such series represented by one
or more Global Preferred Securities and, in such event, will issue individual
Preferred Securities of such series in exchange for the Global Preferred
Security or Securities representing such series of Preferred Securities.
Further, if the Company so specifies with respect to the Preferred Securities of
a series, an owner of a beneficial interest in a Global Preferred Security
representing
49
Preferred Securities of such series may, on terms acceptable to the Company, the
Property Trustee and the Depositary for such Global Preferred Security, receive
individual Preferred Securities of such series in exchange for such beneficial
interests, subject to any limitations described in the Prospectus Supplement
relating to such Preferred Securities. In any such instance, an owner of a
beneficial interest in a Global Preferred Security will be entitled to physical
delivery of individual Preferred Securities of the series represented by such
Global Preferred Security equal in principal amount to such beneficial interest
and to have such Preferred Securities registered in its name. Individual
Preferred Securities of such series so issued will be issued in denominations,
unless otherwise specified by the Company, of $25 and integral multiples
thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any Liberty Financial Trust's Preferred
Securities are not held by the Depositary, such payments shall be made by check
mailed to the address of the holder entitled thereto as such address shall
appear on the Register. Unless otherwise specified in the applicable Prospectus
Supplement, the paying agent (the "Paying Agent") shall initially be the
Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrative Trustees and the Company. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee and the Company. 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 Company) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected
without charge by or on behalf of each Liberty Financial Trust, but upon payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. The Liberty Financial Trusts will not be required to
register or cause to be registered the transfer of their Preferred Securities
after such Preferred Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property Trustee, other than during the occurrence and continuance
of an Event of Default, undertakes to perform only such duties as are
specifically set forth in each Trust Agreement and, after such Event of Default,
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the applicable Trust Agreement at the request of any
holder of Preferred Securities unless it is offered reasonable indemnity against
the costs, expenses and liabilities that might be incurred thereby. If no Event
of Default has occurred and is continuing and the Property Trustee is required
to decide between alternative causes of action, construe ambiguous provisions in
the applicable Trust Agreement or is unsure of the application of any provision
of the applicable Trust Agreement, and the matter is not one on which holders of
Preferred Securities are entitled under such Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by the Company and if not
so directed, shall take such action as it deems advisable and in the best
interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
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MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Liberty Financial Trusts in such a way that no
Liberty Financial Trust will be deemed to be an "investment company" required to
be registered under the Investment Company Act or classified as an association
taxable as a corporation for United States Federal income tax purposes and so
that the Corresponding Junior Subordinated Debt Securities will be treated as
indebtedness of the Company for United States Federal income tax purposes. In
this connection, the Company and the Administrative Trustees are authorized to
take any action, not inconsistent with applicable law, the certificate of trust
of each Liberty Financial Trust or each Trust Agreement, that the Company and
the Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the related Preferred
Securities.
Holders of the Preferred Securities have no preemptive or similar
rights.
No Liberty Financial Trust may borrow money or issue debt or mortgage
or pledge any of its assets.
51
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Company concurrently
with the issuance by each Liberty Financial Trust of its Preferred Securities
for the benefit of the holders from time to time of such Preferred Securities.
State Street Bank and Trust Company will act as indenture trustee ("Guarantee
Trustee") under each Guarantee for the purposes of compliance with the Trust
Indenture Act and each Guarantee will be qualified as an indenture under the
Trust Indenture Act. This summary of certain provisions of the Guarantees does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of each Guarantee Agreement, including the
definitions therein of certain terms, and the Trust Indenture Act. The form of
the Guarantee has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. Reference in this summary to Preferred
Securities means that Liberty Financial Trust's Preferred Securities to which a
Guarantee relates. The Guarantee Trustee will hold each Guarantee for the
benefit of the holders of the related Liberty Financial Trust's Preferred
Securities.
GENERAL
The Company will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined below)
to the holders of the Preferred Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that such Liberty Financial Trust may
have or assert other than the defense of payment. The following payments with
respect to the Preferred Securities, to the extent not paid by or on behalf of
the related Liberty Financial Trust (the "Guarantee Payments"), will be subject
to the Guarantee: (i) any accumulated and unpaid Distributions required to be
paid on such Preferred Securities, to the extent that such Liberty Financial
Trust has funds on hand available therefor at such time, (ii) the Redemption
Price with respect to any Preferred Securities called for redemption to the
extent that such Liberty Financial Trust has funds on hand available therefor at
such time, or (iii) upon a voluntary or involuntary dissolution, winding up or
liquidation of such Liberty Financial Trust (unless the Corresponding Junior
Subordinated Debt Securities are distributed to holders of such Preferred
Securities), the lesser of (a) the Liquidation Distribution and (b) the amount
of assets of such Liberty Financial Trust remaining available for distribution
to holders of Preferred Securities. The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of the applicable Preferred Securities or by causing the
Liberty Financial Trust to pay such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis
of the related Liberty Financial Trust's obligations under the Preferred
Securities, but will apply only to the extent that such related Liberty
Financial Trust has funds sufficient to make such payments, and is not a
guarantee of collection.
If the Company does not make interest payments on the Corresponding
Junior Subordinated Debt Securities held by the Liberty Financial Trust, the
Liberty Financial Trust will not be able to pay Distributions on the Preferred
Securities and will not have funds legally available therefor. Each Guarantee
will rank subordinate and junior in right of payment to all Senior Debt of the
Company. See "--Status of the Guarantees." The Company is a non-operating
holding company and almost all of the operating assets of the Company and its
consolidated subsidiaries are owned by such subsidiaries. The Company relies
primarily on dividends from such subsidiaries to meet its obligations for
payment of principal and interest on its outstanding debt obligations and
corporate expenses. Accordingly, the Company's obligations under the Guarantees
will be effectively subordinated to all existing and future liabilities of the
Company's subsidiaries, and claimants should look only to the assets of the
Company for payments thereunder. The payment of dividends by the Company's
insurance company subsidiaries is limited under the insurance holding company
laws in which such
52
subsidiaries are domiciled. See "Liberty Financial Companies Inc." Except as
otherwise provided in the applicable Prospectus Supplement, the Guarantees do
not limit the incurrence or issuance of other secured or unsecured debt of the
Company, whether under the Indenture, any other indenture that the Company may
enter into in the future or otherwise. See the Prospectus Supplement relating to
any offering of Preferred Securities.
The Company's obligations described herein and in any accompanying
Prospectus Supplement, through the applicable Guarantee, the applicable Trust
Agreement, the Junior Subordinated Debt Securities, the Junior Subordinated
Indenture and any supplemental indentures thereto, and the Expense Agreement,
taken together, constitute a full, irrevocable and unconditional guarantee by
the Company of payments due on the Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and unconditional
guarantee of the Liberty Financial Trust's obligations under the Preferred
Securities. See "The Liberty Financial Trusts," "Description of Preferred
Securities," and "Description of Junior Subordinated Debt Securities."
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior in right of payment to all Senior Debt.
Each Guarantee will rank PARI PASSU with all other Guarantees issued by
the Company. Each Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). Each
Guarantee will be held for the benefit of the holders of the related Preferred
Securities. Each Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Liberty Financial Trust
or upon distribution to the holders of the Preferred Securities of the
Corresponding Junior Subordinated Debt Securities. None of the Guarantees places
a limitation on the amount of additional Senior Debt that may be incurred by the
Company. The Company expects from time to time to incur additional indebtedness
constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely
affect the rights of holders of the related Preferred Securities (in which case
no vote will be required), no Guarantee may be amended without the prior
approval of the holders of not less than a majority of the aggregate Liquidation
Amount of such outstanding Preferred Securities. The manner of obtaining any
such approval will be as set forth under "Description of the Preferred
Securities--Voting Rights; Amendment of Each Trust Agreement." All guarantees
and agreements contained in each Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the related Preferred Securities then outstanding.
53
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation amount of the
related Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such guarantee.
Any holder of the Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under such Guarantee without
first instituting a legal proceeding against the Liberty Financial Trust, the
Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Company in performance of any Guarantee, undertakes to
perform only such duties as are specifically set forth in each Guarantee and,
after default with respect to any Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by any Guarantee at the
request of any holder of any Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect
upon full payment of the Redemption Price of the related Preferred Securities,
upon full payment of the amounts payable upon liquidation of the related Liberty
Financial Trust or upon distribution of Corresponding Junior Subordinated Debt
Securities to the holders of the related Preferred Securities. Each Guarantee
will continue to be effective or will be reinstated, as the case may be, if at
any time any holder of the related Preferred Securities must restore payment of
any sums paid under such Preferred Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by the Company under
each Trust Agreement (the "Expense Agreement"), the Company will irrevocably and
unconditionally guarantee to each person or entity to whom the Liberty Financial
Trust becomes indebted or liable, the full payment of any costs, expenses or
liabilities of the Liberty Financial Trust, other than obligations of the
Liberty Financial Trust to pay to the holders of any Preferred Securities or
other similar interests in the Liberty Financial Trust of the amounts due such
holders pursuant to the terms of the Preferred Securities or such other similar
interests, as the case may be.
54
DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, representing contracts
obligating holders to purchase from the Company, and the Company to sell to the
holders, a specified number of shares of Common Stock at a future date or dates.
The price per share of Common Stock may be fixed at the time the Stock Purchase
Contracts are issued or may be determined by reference to a specific formula set
forth in the Stock Purchase Contracts. The Stock Purchase Contracts may be
issued separately or as a part of units ("Stock Purchase Units") consisting of a
Stock Purchase Contract and either (x) Senior Debt Securities, Subordinated Debt
Securities or Junior Subordinated Debt Securities, (y) debt obligations of third
parties, including U.S. Treasury securities, or (z) Preferred Securities of a
Liberty Financial Trust, securing the holder's obligations to purchase the
Common Stock under the Stock Purchase Contracts. The Stock Purchase Contracts
may require the Company to make periodic payments to the holders of the Stock
Purchase Unites or vice versa, and such payments may be unsecured or prefunded
on some basis. The Stock Purchase Contracts may require holders to secure their
obligations thereunder in a specified manner and in certain circumstances the
Company may deliver newly issued prepaid stock purchase contracts ("Prepaid
Securities") upon release to a holder of any collateral securing such holder's
obligations under the original Stock Purchase Contract.
The applicable Prospectus Supplement will describe the terms of any
Stock Purchase Contracts or Stock Purchase Units and, if applicable, Prepaid
Securities. The description in the Prospectus Supplement will not purport to be
complete and will be qualified in its entirety by reference to the Stock
Purchase Contracts, the collateral arrangements and depositary arrangements, if
applicable, relating to such Stock Purchase Contracts or Stock Purchase Units
and, if applicable, the Prepaid Securities and the document pursuant to which
such Prepaid Securities will be issued.
BOOK-ENTRY ISSUANCE
Depository Trust Company ("DTC") will act as securities depositary for
all of the Preferred Securities and the Junior Subordinated Debt Securities,
unless otherwise referred to in the Prospectus Supplement relating to an
offering of Preferred Securities or Junior Subordinated Debt Securities. The
Preferred Securities and the Junior Subordinated Debt Securities will be issued
only as fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global certificates will be issued for
the Preferred Securities of each Liberty Financial Trust and the Junior
Subordinated Debt Securities, representing in the aggregate the total number of
such Liberty Financial Trust's Preferred Securities or aggregate principal
balance of Junior Subordinated Debt Securities, respectively, and will be
deposited with DTC.
DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain custodial
55
relationships with Direct Participants, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchase of Preferred Securities or Junior Subordinated Debt Securities
within the DTC system must be made by or through Direct Participants, which will
receive a credit for the Preferred Securities or Junior Subordinated Debt
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security and each Junior Subordinated Debt Security ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Preferred Securities or Junior
Subordinated Debt Securities. Transfers of ownership interests in the Preferred
Securities or Junior Subordinated Debt Securities are to be accomplished by
entries made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Preferred Securities or Junior Subordinated Debt Securities, except
in the event that use of the book-entry system for the Preferred Securities of
such Liberty Financial Trust or Junior Subordinated Debt Securities is
discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities or Junior Subordinated Debt Securities; DTC's records reflect only
the identity of the Direct Participants to whose accounts such Preferred
Securities or Junior Subordinated Debt Securities are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications buy DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. as the registered holder
of the Preferred Securities or Junior Subordinated Debt Securities. If less than
all of a Liberty Financial Trust's Preferred Securities or the Junior
Subordinated Debt Securities are being redeemed, DTC's current practice is to
determine by lot the amount of the interest of each Direct Participant to be
redeemed.
Although voting with respect to the Preferred Securities or the Junior
Subordinated Debt Securities is limited to the holders of record of the
Preferred Securities or Junior Subordinated Debt Securities, in those instances
in which a vote is required, neither the DTC nor Cede & Co. will itself consent
or vote with respect to Preferred Securities or Junior Subordinated Debt
Securities. Under its usual procedures, DTC would mail an omnibus proxy (the
"Omnibus Proxy") to the relevant Trustee as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts such Preferred Securities or Junior
Subordinated Debt Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Distribution payments on the Preferred Securities or the Junior
Subordinated Debt Securities will be made by he relevant Trustee to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
56
Participant and not of DTC, the relevant Trustee, the Liberty Financial Trust
thereof or the Company, subject to any statutory regulatory requirements as may
be in effect from time to time. Payment of Distributions to DTC is the
responsibility of the relevant Trustee, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursements of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary
with respect to any of the Preferred Securities or the Junior Subordinated Debt
Securities at any time by giving reasonable notice to the relevant Trustee and
the Company. In the event that a successor securities depositary is not
obtained, definitive Preferred Security or Junior Subordinated Debt Security
certificates representing such Preferred Securities or Junior Subordinated Debt
Securities are required to be printed and delivered. The Company, at its option,
may decide to discontinue use of the system of book-entry transfers through DTC
(or a successor depositary). After a Junior Subordinated Debt Security Event of
Default, the holders of a majority in liquidation preference of Preferred
Securities or aggregate principal amount of Junior Subordinated Debt Securities
may determine to discontinue the system of book-entry transfers through DTC. In
any such event, definitive certificates for such Preferred Securities or Junior
Subordinated Debt Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Liberty Financial Trusts and the
Company believe to be accurate, but the Liberty Financial Trusts and the Company
assume no responsibility for the accuracy thereof. Neither the Liberty Financial
Trusts nor the Company has any responsibility for the performance by DTC or its
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE CORRESPONDING JUNIOR SUBORDINATED DEBT SECURITIES
AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred
Securities (to the extent the Liberty Financial Trust has funds available for
the payment of such Distributions) are irrevocably guaranteed by the Company as
and to the extent set forth under "Description of Guarantees." Taken together,
the Company's obligations under each series of Junior Subordinated Debt
Securities, the Junior Subordinated Indenture, the related Trust Agreement, the
related Expense Agreement, and the related Guarantee provide, in the aggregate,
a full, irrevocable and unconditional guarantee of payments of distributions and
other amounts due on the related series of Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Liberty Financial Trust's obligations under the
Preferred Securities. If and to the extent that the Company does not make
payments on any series of Corresponding Junior Subordinated Debt Securities,
such Liberty Financial Trust will not pay Distributions or other amounts due on
its Preferred Securities. The Guarantees do not cover payment of Distributions
when the related Liberty Financial Trust does not have sufficient funds to pay
such Distributions. In such event, the remedy of a holder of a series of
Preferred Securities is to institute a legal proceeding directly against the
Company for enforcement of payment of such Distributions to such holder. The
obligations of the Company under each Guarantee are subordinate and junior in
right of payment to all Senior Debt of the Company.
57
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
each series of Corresponding Junior Subordinated Debt Securities, such payments
will be sufficient to cover Distributions and other payments due on the related
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debt Securities will be equal
to the sum of the aggregate stated Liquidation Amount of the Related Preferred
Securities and related Common Securities; (ii) the interest rate and interest
and other payment dates on each series of Corresponding Junior Subordinated Debt
Securities will match the Distribution rate and Distribution and other payment
dates for the related Preferred Securities; (iii) the Company shall pay for all
and any costs, expenses and liabilities of such Liberty Financial Trust except
the Liberty Financial Trust's obligations to holders of its Preferred Securities
under such Preferred Securities; and (iv) each Trust Agreement further provides
that the Liberty Financial Trust will not engage in any activity that is not
consistent with the limited purposes of such Liberty Financial Trust.
Notwithstanding anything to the contrary in the Junior Subordinated
Indenture, the Company has the right to set-off any payment it is otherwise
required to make thereunder with and to the extent the Company has theretofore
made, or is concurrently on the date of such payment making, a payment under the
related Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any related Preferred Security may institute a legal
proceeding directly against the Company to enforce its rights under the related
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the related Liberty Financial Trust or any other person or entity.
A default or event of default under any Senior Debt of the Company
would not constitute a default or Event of Default. However, in the event of
payment defaults under, or acceleration of, Senior Debt of the Company, the
subordination provisions of the Junior Subordinated Indenture provide that no
payments may be made in respect of the Corresponding Junior Subordinated Debt
Securities until such Senior Debt has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on any
series of Corresponding Junior Subordinated Debt Securities would constitute an
Event of Default.
LIMITED PURPOSE OF LIBERTY FINANCIAL TRUSTS
Each Liberty Financial Trust's Preferred Securities evidence a
beneficial interest in such Liberty Financial Trust, and each Liberty Financial
Trust exists for the sole purpose of issuing its Preferred Securities and Common
Securities and investing the proceeds thereof in Corresponding Junior
Subordinated Debt Securities. A principal difference between the rights of a
holder of a Preferred Security and a holder of a Corresponding Junior
Subordinated Debt Security is that a holder of a Corresponding Junior
Subordinated Debt Security is entitled to receive from the Company the principal
amount of and interest accrued on Corresponding Junior Subordinated Debt
Securities held, while a holder of a Preferred Securities is entitled to receive
Distributions from such Liberty Financial Trust (or from the Company under the
applicable Guarantee) if and to the extent such Liberty Financial Trust has
funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or
liquidation of any Liberty Financial Trust involving the liquidation of the
Corresponding Junior Subordinated Debt Securities, the holders of the related
Preferred
58
Securities will be entitled to receive, out of assets held by such Liberty
Financial Trust, the Liquidation Distribution in cash. See "Description of
Preferred Securities--Liquidation Distribution Upon Termination." Upon any
voluntary or involuntary liquidation or bankruptcy of the Company, the Property
Trustee, as holder of the Corresponding Junior Subordinated Debt Securities,
would be a subordinated creditor of the Company, subordinated in right of
payment to all Senior Debt, but entitled to receive payment in full of principal
and interest, before any stockholders of the Company receive payments or
distributions. Since the Company is the guarantor under each Guarantee and has
agreed to pay for all costs, expenses and liabilities of each Liberty Financial
Trust (other than the Liberty Financial Trust's obligations to the holders of
its Preferred Securities), the positions of a holder of such Preferred
Securities and a holder of such Corresponding Junior Subordinated Debt
Securities relative to other creditors and to stockholders of the Company in the
event of liquidation or bankruptcy of the Company are expected to be
substantially the same.
PLAN OF DISTRIBUTION
The Company and/or any Liberty Financial Trust may sell any of the
Offered Securities in any one or more of the following ways from time to time:
(i) through agents; (ii) to or through underwriters; (iii) through dealers; or
(iv) directly to purchasers.
The Prospectus Supplement with respect to the Offered Securities will
set forth the terms of the offering of the Offered Securities, including the
name or names of any underwriters, dealers or agents; the purchase price of the
Offered Securities and the proceeds to the Company and/or a Liberty Financial
Trust from such sale; any underwriting discounts and commissions or agency fees
and other items constituting underwriters' or agents' compensation; any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers and any securities exchange on which such Offered Securities may
be listed. Any initial public offering price, discounts or concessions allowed
or reallowed or paid to dealers and any securities exchange on which such
Offered Securities may be listed. Any initial public offering price, discounts
or concessions allowed or reallowed or paid to dealers may be changed from time
to time.
The distribution of the Offered Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, at prevailing market prices at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
Offers to purchase Offered Securities may be solicited by agents
designated by the Company from time to time. Any such agent involved in the
offer or sale of the Offered Securities in respect of which this Prospectus is
delivered will be named, and any commissions payable by the Company and/or the
applicable Liberty Financial Trust to such agent will be set forth, in the
applicable Prospectus Supplement. Unless otherwise indicated in such Prospectus
Supplement, any such agent will be acting on a reasonable best efforts basis for
the period of its appointment. Any such agent may be deemed to be an
underwriter, as that term is defined in the Securities Act, of the Offered
Securities so offered and sold.
If Offered Securities are sold by means of an underwritten offering,
the Company and/or the applicable Liberty Financial Trust will execute an
underwriting agreement with an underwriter or underwriters at the time an
agreement for such sale is reached, and the names of the specific managing
underwriter or underwriters, as well as any other underwriters, and the terms of
the transaction, including commissions, discounts and any other compensation of
the underwriters and dealers, if any, will be set forth in the Prospectus
Supplement which will be used by the underwriters to make resales of the Offered
Securities in respect of which this Prospectus is delivered to the public. If
59
underwriters are utilized in the sale of the Offered Securities in respect of
which this Prospectus is delivered, the Offered Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at fixed public
offering prices or at varying prices determined by the underwriter at the time
of sale. Offered Securities may be offered to the public either through
underwriting syndicates represented by managing underwriters or directly by the
managing underwriters. If any underwriter or underwriters are utilized in the
sale of the Offered Securities, unless otherwise indicated in the Prospectus
Supplement, the underwriting agreement will provide that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of Offered Securities will be obligated to
purchase all such Offered Securities of a series if any are purchased.
If a dealer is utilized in the sales of the Offered Securities in
respect of which this Prospectus is delivered, the Company and/or the applicable
Liberty Financial Trust will sell such Offered Securities to the dealer as
principal. The dealer may then resell such Offered Securities to the public at
varying prices to be determined by such dealer at the time of resale. Any such
dealer may be deemed to be an underwriter, as such term is defined in the
Securities Act, of the Offered Securities so offered and sold. The name of the
dealer and the terms of the transaction will be set forth in the Prospectus
Supplement relating thereto.
Offers to purchase Offered Securities may be solicited directly by the
Company and/or the applicable Liberty Financial Trust and the sale thereof may
be made by the Company and/or the applicable Liberty Financial Trust directly to
institutional investors or others, who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale thereof. The terms
of any such sales will be described in the Prospectus Supplement relating
thereto.
Agents, underwriters and dealers may be entitled under relevant
agreements to indemnification or contribution by the Company and/or the
applicable Liberty Financial Trust against certain liabilities, including
liabilities under the Securities Act.
Agents, underwriters and dealers may be customers of, engage in
transactions with, or perform services for, the Company and its subsidiaries in
the ordinary course of business.
Offered Securities may also be offered and sold, if so indicated in the
applicable Prospectus Supplement, in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by one or more firms ("remarketing firms"), acting as principals
for their own accounts or as agents for the Company and/or the applicable
Liberty Financial Trust. Any remarketing firm will be identified and the terms
of its agreement, if any, with its compensation will be described in the
applicable Prospectus Supplement. Remarketing firms may be deemed to be
underwriters, as such term is defined in the Securities Act, in connection with
the Offered Securities remarketed thereby. Remarketing firms may be entitled
under agreements which may be entered into with the Company and/or the
applicable Liberty Financial Trust to indemnification or contribution by the
Company and/or the applicable Liberty Financial Trust against certain civil
liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for the Company
and its subsidiaries in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company
and/or the applicable Liberty Financial Trust may authorize agents, underwriters
or dealers to solicit offers by certain types of institutions to purchase
Offered Securities from the Company and/or the applicable Liberty Financial
Trust at the
60
public offering prices set forth in the applicable Prospectus Supplement
pursuant to delayed delivery contracts providing for payment and delivery on a
specified date or dates in the future. A commission indicated in the applicable
Prospectus Supplement will be paid to underwriters, dealers and agents
soliciting purchases of Offered Securities pursuant to any such delayed
contracts accepted by the Company and/or the applicable Liberty Financial Trust.
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement,
certain legal matters will be passed upon for the Company and the Liberty
Financial Trusts by Choate, Hall & Stewart (a partnership including professional
corporations), Boston, Massachusetts, counsel to the Company, and for the
Liberty Financial Trusts by Richards, Layton & Finger, Wilmington, Delaware,
special Delaware counsel to the Liberty Financial Trusts. Certain legal matters
in connection with the Offered Securities will be passed upon for the
underwriter(s), dealer(s) or agent(s) by Brown & Wood LLP, New York New York.
EXPERTS
The consolidated financial statements and schedules of Liberty
Financial Companies, Inc. and subsidiaries appearing in the Company's Annual
Report on Form 10-K at and for the two years ended December 31, 1997 have been
audited by Ernst & Young LLP, independent auditors, and for the year ended
December 31, 1995 have been audited by KPMG Peat Marwick, LLP, independent
auditors, as set forth in their respective reports thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
schedules are incorporated herein by reference in reliance upon such report
given upon the authority of such firms as experts in accounting and auditing.
61
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You should rely only on the
information contained in or
incorporated by reference in this
Prospectus or any Supplement hereto.
We have authorized no one to provide
you with different information.
We are not making an offer of these
securities in any location where the
offer is not permitted.
You should not assume that the
information in this Prospectus,
including information incorporated by
reference, is accurate as of any date
other than the date on the front of
the Prospectus.
TABLE OF CONTENTS
Page
----
Where You Can Find More
Information......................
Certain Information Regarding
the Offering.....................
Liberty Financial Companies, Inc...
The Liberty Financial Trusts.......
Special Note Regarding
Forward-Looking Statements.......
Consolidated Ratios of Earnings
to Fixed Charges and Earnings
to Combined Fixed Charges
and Preferred Stock Dividends....
Use of Proceeds....................
Description of the Senior
Debt Securities..................
Description of the Junior
Subordinated Debt Securities.......
Description of Capital Stock.......
Description of Depositary Shares...
Description of Warrants............
Description of Preferred
Securities of Liberty
Financial Trusts..................
Description of Stock
Purchase Contracts
and Stock Purchase Units.........
Description of Guarantees..........
Plan of Distribution...............
Legal Matters......................
Experts............................
=======================================
=======================================
$800,000,000
LIBERTY FINANCIAL COMPANIES, INC.
Debt Securities, Preferred Stock,
Common Stock, Depositary Shares
Warrants Stock Purchase Contracts
and Stock Purchase Units of
LIBERTY FINANCIAL COMPANIES, INC.
Trust Preferred Securities of
LIBERTY FINANCIAL CAPITAL TRUST I
LIBERTY FINANCIAL CAPITAL TRUST II
PROSPECTUS
, 1998
======================================
PART II
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses (other than underwriting
discounts and commissions) expected to be incurred in connection with the
Offering described in this Registration Statement.
SEC Registration Fee.............................................. $236,000
Blue sky fees and expenses (including legal fees)................. $5,000*
Legal fees and expenses........................................... $150,000*
Indenture trustee's fee and expense............................... $20,000*
Accounting fees and expenses...................................... $50,000*
Printing and engraving expenses................................... $20,000*
Miscellaneous..................................................... $20,000*
----------
Total Expenses........................................... $501,000*
==========
||
* Estimated
Item 15. Indemnification of Directors and Officers.
Section 67 of chapter 156B of the Massachusetts General Laws provides
that a corporation may indemnify its directors and officers to the extent
specified in or authorized by (i) the articles of organization, (ii) a by-law
adopted by the stockholders, or (iii) a vote adopted by the holders of a
majority of the shares of stock entitled to vote on the election of director. In
all instances, the extent to which a corporation provides indemnification to its
directors and officers under Section 67 is optional. In its Restated Articles of
Organization, the Company has elected to commit to provide indemnification to
its directors and officers in specified circumstances. Generally, the Restated
Articles of Organization provide that the Company shall indemnify directors and
officers of the Company against liabilities and expenses arising out of legal
proceedings brought against them by reason of their status as directors or
officers or by reason of their agreeing to serve, at the request of the Company,
as a director or officer with another organization. Under this provision, a
director or officer of the Company shall be indemnified by the Company for all
costs and expenses (including attorneys' fees), judgments, liabilities and
amounts paid in settlement of such proceedings, even if he is not successful on
the merits, if he acted in good faith in the reasonable belief that his action
was in the best interest of the Company. The Board of Directors may authorize
advancing litigation expenses to a director or officer at his request upon
receipt of an undertaking by any such director or officer to repay such expenses
if it is ultimately determined that he is not entitled to indemnification for
such expense.
Article 6 of the Company's Restated Articles of Organization eliminates
the personal liability of the Company's directors to the Company or its
stockholders for monetary damages for breach of a director's fiduciary duty,
II-1
except to the extent that Chapter 156B of the Massachusetts General Laws
prohibits the elimination or limitation of such liability.
Section of the Purchase Agreement provides that the Underwriters are
obligated, under certain circumstances, to indemnify the Registrants, and
directors, officers and controlling persons against certain liabilities,
including liabilities under the Securities Act. Reference is made to the form of
Purchase Agreement filed as Exhibit 1.1 hereto.
In addition, pursuant to an Intercompany Agreement (the "Intercompany
Agreement") between the Company and Liberty Mutual, the Company will indemnify
Liberty Mutual, its subsidiaries (other than the Company and its subsidiaries),
and each of their respective officers, directors, employees, and agents, against
losses from third-party claims based on, arising out of or resulting from (i)
the activities of the Company or its subsidiaries (including without limitation
liabilities under the Securities Act, the Exchange Act and other securities
laws) and (ii) any other acts or omissions arising out of performance of the
Intercompany Agreement.
The Company maintains directors' and officers' liability insurance for
the benefit of its directors and certain of its officers.
Under each Trust Agreement, the Company will agree to indemnify each of
the Trustees of the Liberty Financial Trust or any predecessor Trustee for the
Liberty Financial Trust, and to hold the Trustee harmless against, any loss,
damage, claims, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or administration
of the Trust Agreements, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties under the Trust Agreements.
Item 16. Exhibits.
See Index to Exhibits immediately preceding the Exhibits included as
part of this Registration Statement.
Item 17. Undertakings.
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in
"Calculation of Registration Fee" table in the effective registration
statement;
II-2
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrants pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrants' annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 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.
(c) If the securities to be registered are to be offered at competitive
bidding, the undersigned registrants hereby undertake: (1) to use its best
efforts to distribute prior to the opening of bids, to prospective bidders,
underwriters, and dealers, a reasonable number of copies of a prospectus which
at that time meets the requirements of Section 10(a) of the Act, and relating to
the securities offered at competitive bidding, as contained in the Registration
Statement, together with any supplements thereto, and (2) to file an amendment
to the Registration Statement reflecting the results of bidding, the terms of
the reoffering and related matters to the extent required by the applicable
form, not later than the first use, authorized by the issuer after the opening
of bids, of a prospectus relating to the securities offered at competitive
bidding, unless no further public offering of such securities by the issuer and
no reoffering of such securities by the purchasers is proposed to be made.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the provisions described under Item 15
above, or otherwise, the Registrants have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants 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, the Registrants 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
II-3
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(e) The undersigned registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
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.
(f) The undersigned registrants hereby undertake to file, if necessary,
an application for the purpose of determining the eligibility of the Trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act of 1939, as
amended, in accordance with the rules and regulations prescribed by the
Securities and Exchange Commission under Section 305(b)(2) of such Act.
(g) The undersigned registrants hereby undertake to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Liberty Financial Companies, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston in The
Commonwealth of Massachusetts on September 14, 1998.
LIBERTY FINANCIAL COMPANIES, INC.
By: /s/ Kenneth R. Leibler
-----------------------------------
Kenneth R. Leibler
Chief Executive Officer,
President and Director
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Liberty Financial
Companies, Inc., hereby severally constitute and appoint Kenneth R. Leibler,
John A. Benning and James A. Hilbert, and each of them singly, our true and
lawful attorneys, with full power to them and each of them singly, to sign for
us in our names in the capacities indicated below, all pre-effective and
post-effective amendments to this Registration Statement, and generally to do
all things in our names and on our behalf in such capacities to enable Liberty
Financial Companies, Inc., to comply with the provisions of the Securities Act
of 1933, as amended, and all requirements of the Securities and Exchange
Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and as of the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Kenneth R. Leibler
- ---------------------------- Chief Executive Officer, September 14, 1998
Kenneth R. Leibler President and Director
/s/ James A. Hilbert
- ---------------------------- Senior Vice President, September 14, 1998
James A. Hilbert Chief Financial Officer
and Treasurer
/s/ Gary L. Countryman
- ---------------------------- Chairman and Director September 14, 1998
Gary L. Countryman
/s/ Gerald E. Anderson Director September 14, 1998
- ----------------------------
Gerald E. Anderson
/s/ Michael J. Babcock Director September 14, 1998
- ----------------------------
Michael J. Babcock
/s/ Paul J. Darling, II Director September 14, 1998
- ----------------------------
Paul J. Darling, II
/s/ David F. Figgins Director September 14, 1998
- ----------------------------
David F. Figgins
II-5
Signature Title Date
- --------- ----- ----
/s/ John B. Gray
- ---------------------------- Director September 14, 1998
John B. Gray
/s/ John P. Hamill
- ---------------------------- Director September 14, 1998
John P. Hamill
/s/ Marian L. Heard
- ---------------------------- Director September 14, 1998
Marian L. Heard
/s/ Raymond H. Hefner, Jr.
- ---------------------------- Director September 14, 1998
Raymond H. Hefner, Jr.
/s/ Edmund F. Kelly
- ---------------------------- Director September 14, 1998
Edmund F. Kelly
/s/ Sabino Marinella
- ---------------------------- Director September 14, 1998
Sabino Marinella
/s/ Thomas J. May
- ---------------------------- Director September 14, 1998
Thomas J. May
/s/ Ray B. Mundt
- ---------------------------- Director September 14, 1998
Ray B. Mundt
/s/ Glenn P. Strehle
- ---------------------------- Director September 14, 1998
Glenn P. Strehle
/s/ Stephen J. Sweeney
- ---------------------------- Director September 14, 1998
Stephen J. Sweeney
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Liberty
Financial Capital Trust I and Liberty Financial Capital Trust II each certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston in The Commonwealth of Massachusetts on September 14, 1998.
LIBERTY FINANCIAL CAPITAL TRUST I
By Liberty Financial Corporation,
as Depositor
By: /s/ James A. Hilbert
----------------------------------
Name: James A. Hilbert
Title: Senior Vice President
LIBERTY FINANCIAL CAPITAL TRUST II
By Liberty Financial Corporation,
as Depositor
By: /s/ James A. Hilbert
----------------------------------
Name: James A. Hilbert
Title: Senior Vice President
II-7
Exhibit Index
Exhibit
Number Description
1.1+ Form of Underwriting Agreement for debt Securities and Preferred Stock
1.2+ Form of Underwriting Agreement (Warrants)
1.3+ Form of Underwriting Agreement (Preferred Securities)
1.4+ Form of Underwriting Agreement (Stock Purchase Contracts)
1.5+ Form of Underwriting Agreement (Stock Purchase Units)
3.1(1) Form of Restated Articles of Organization of the Company
3.2(1) Form of Certificate of Designation of Series A Convertible Preferred
Stock of the Company
3.3(7) Restated By-laws of the Company, as amended
4.1(1) Form of Certificate for Common Stock of the Company
4.2(1) Form of Certificate for Series A Convertible Preferred Stock of the
Company
4.3 Form of Indenture between the Company and State Street Bank and Trust
Company as Trustee
4.4* First Supplemental Indenture to Indenture between the Company and State
Street Bank and Trust Company as Trustee
4.5 Form of Senior Note
4.6 Form of Junior Subordinated Indenture
4.7* Form of Junior Subordinated Debenture
4.8 Form of Guarantee Agreement for Liberty Financial Capital Trust I
4.9 Form of Guarantee Agreement for Liberty Financial Capital Trust II
4.10 Certificate of Trust of Liberty Financial Capital Trust I
4.11 Trust Agreement of Liberty Financial Capital Trust I
4.12 Form of Amended and Restated Trust Agreement for Liberty Financial
Capital Trust I (including Form of Preferred Security)
4.13 Certificate of Trust of Liberty Financial Capital Trust II
4.14 Trust Agreement of Liberty Financial Capital Trust II
4.15 Form of Amended and Restated Trust Agreement for Liberty Financial
Capital Trust II (including Form of Preferred Security)
5.1* Opinion of Choate, Hall & Stewart
5.2* Opinion of Richards, Layton & Finger as to legality of the Preferred
Securities to be issued by Liberty Financial Capital Trust I and Liberty
Financial Capital Trust II
8.* Opinion of counsel as to certain federal income tax matters
12(6) Statement re computation of ratios
21(7) Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3* Consent of Choate, Hall & Stewart (to be included in Exhibit 5.1)
23.4* Consent of Richards, Layton & Finger (to be included in Exhibit 5.2)
23.5* Consent of tax counsel (to be included in Exhibit 8)
24.1 Powers of Attorney (included on signature page)
25.1 Form T-1 Statement of Eligibility of State Street Bank and Trust Company
to act as trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of State Street Bank and Trust Company
to act as trustee under the Junior Subordinated Indenture
25.3 Form T-1 Statement of Eligibility of State Street Bank and Trust Company
to act as trustee under the Amended and Restated Trust Agreement for
Liberty Financial Capital Trust I
25.4 Form T-1 Statement of Eligibility of State Street Bank and Trust Company
to act as trustee under the Amended and Restated Trust Agreement of
Liberty Financial Capital Trust II
25.5 Form T-1 Statement of Eligibility of State Street Bank and Trust Company
under the Guarantee for the benefit of the holders of Preferred
Securities of Liberty Financial Capital Trust I
25.6 Form T-1 Statement of Eligibility of State Street Bank and Trust Company
under the Guarantee for the benefit of the holders of Preferred
Securities of Liberty Financial Capital Trust II
99.3(1)Form of Stockholders' Agreement among the Company, Liberty Mutual
Insurance Company and certain holders of the Company's Series A
Convertible Preferred Stock
- ------------------------
* To be filed by amendment.
+ To be filed under subsequent Form 8-K.
(1) Incorporated by reference to the same Exhibit Number in the Company's
Registration Statement on Form S-4 (filed under the name NEW LFC, INC.)
(Registration No. 33-88824).
(2) Incorporated by reference to the same Exhibit number in the Company's 1994
Annual Report on Form 10-K filed March 30, 1995.
(3) Incorporated by reference to the same Exhibit Number in the Company's 1995
Annual Report on Form 10-K filed March 29, 1996.
(4) Incorporated by reference to the same Exhibit Number in the Company's
Registration Statement on Form S-3 (Registration Number 333-29315).
(5) Incorporated by reference to the same Exhibit Number in the Company's 1996
Annual Report on Form 10-K filed March 28, 1997.
(6) Incorporated by reference to the same Exhibit Number in the Company's
Quarterly Report on Form 10-Q filed August 13, 1998.
(6) Incorporated by reference to Prospectus contained in the Company's
Registration Statement on Form S-3 (Registration Number 333-20067).
(7) Incorporated by reference to the same Exhibit Number in the Company's 1997
Annual Report on Form 10-K filed March 31, 1998.