As filed with the Securities and Exchange Commission on September 25, 1998
Registration No. 333-30461 and 333-30461-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HUNTINGTON BANCSHARES HUNTINGTON
INCORPORATED CAPITAL I
(Exact name of Registrant as specified in its charter) (Exact name of Registrant as specified in its charter)
Maryland Delaware
(State or other jurisdiction (State or other jurisdiction
of incorporation or organization) of incorporation or organization)
6711 6719
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
31-0724920 31-1546176
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
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Huntington Center c/o Huntington Bancshares Incorporated
41 South High Street Huntington Center
Columbus, Ohio 43287 41 South High Street
(614) 480-8300 Columbus, Ohio 43287
(614) 480-8300
(Address, including zip code, and telephone (Address, including zip code, and telephone
number, including area code, of Registrant's number, including area code, of Registrant's
principal executive offices) principal executive offices)
------------------------------------
Richard A. Cheap, Esq.
General Counsel and Secretary
Huntington Bancshares Incorporated
Huntington Center; 41 South High Street
Columbus, Ohio 43287
(614) 480-4647
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of Correspondence to:
Mary Beth M. Clary, Esq.
Porter, Wright, Morris & Arthur
4501 Tamiami Trail North, Suite 400
Naples, Florida 34103-3013
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PROSPECTUS
$15,000,000
HUNTINGTON CAPITAL I
OFFER TO EXCHANGE ITS FLOATING RATE CAPITAL SECURITIES
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING FLOATING RATE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED TO THE EXTENT DESCRIBED HEREIN BY
HUNTINGTON BANCSHARES INCORPORATED
The Exchange Offer and Withdrawal Rights will expire at 5:00 p.m.,
New York City Time, on ____________, 1998, unless extended.
On September 9, 1997, Huntington Capital I, a statutory business trust
created under the laws of the State of Delaware (the "Trust"), exchanged (the
"Initial Exchange") $185,000,000 aggregate Liquidation Amount (as defined
herein) of its Floating Rate Capital Securities (Liquidation Amount $1,000 per
Capital Security) (together with the securities offered hereby, the "New Capital
Securities"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement (as defined
herein) of which this Prospectus (as the same may be amended or supplemented
from time to time, the "Prospectus") constitutes a part, for a like Liquidation
Amount of its outstanding Floating Rate Capital Securities (Liquidation Amount
$1,000 per Capital Security) (the "Old Capital Securities"), of which
$200,000,000 aggregate Liquidation Amount were outstanding immediately prior to
the Initial Exchange. In connection with the Initial Exchange, Huntington
Bancshares Incorporated, a Maryland corporation (the "Company"), also exchanged
i) its guarantee with respect to the payment of Distributions (as defined
herein) and other payments on liquidation or redemption of the Old Capital
Securities (the "Old Guarantee") for a like guarantee with respect to the New
Capital Securities (the "New Guarantee"), and (ii) all of its outstanding
Floating Rate Junior Subordinated Debentures (the "Old Subordinated
Debentures"), of which $206,186,000 aggregate principal amount is outstanding,
for a like aggregate principal amount of its Floating Rate Junior Subordinated
Debentures (the "New Subordinated Debentures"). The New Guarantee and
$200,000,000 aggregate principal amount of the New Subordinated Debentures were
also registered under the Securities Act. The Old Capital Securities, the Old
Guarantee, and the Old Subordinated Debentures are collectively referred to
herein as the "Old Securities" and the New Capital Securities, the New
Guarantee, and the New Subordinated Debentures are collectively referred to
herein as the "New Securities." On the date hereof, $15,000,000 of the Old
Capital Securities remain outstanding. The Trust hereby offers, upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange New Capital Securities for the remaining Old Capital
Securities.
The New Capital Securities were initially offered for exchange in order to
satisfy certain obligations of the Company and the Trust under a Registration
Rights Agreement, dated as of January 31, 1997 (the "Registration Rights
Agreement"), among the Company, the Trust, and the Initial Purchasers (as
defined herein) of the Old Capital Securities. The current Exchange Offer is
being made so that holders of the remaining Old Capital Securities have the
opportunity to exchange those securities for New Capital Securities. The terms
of the New Securities are identical in all material respects to the respective
terms of the Old Securities, except that the New Securities have been registered
under the Securities Act and therefore will not be subject to certain
restrictions on transfer applicable to the Old Securities. Prior to the Initial
Exchange, the Old Capital Securities provided for an increase in the
distribution rate thereon and the Old Subordinated Debentures provided for any
increase in the interest rate thereon. As a result of the Initial Exchange, the
remaining Old Capital Securities are no longer entitled to an increase in the
distribution rate and the Old Subordinated Debentures are no longer outstanding.
See "Description of New Securities" and "Description of Old Securities."
(CONTINUED ON NEXT PAGE)
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SEE "RISK FACTORS" BEGINNING ON PAGE 18 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE NEW CAPITAL SECURITIES INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENT OF DISTRIBUTIONS ON THE NEW CAPITAL
SECURITIES MAY BE DEFERRED AND CERTAIN RELATED UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
------------------------------------
The date of this Prospectus is September __, 1998
(cover page continued)
Any Old Capital Securities which remain outstanding after consummation of
the Exchange Offer and the New Capital Securities both currently outstanding and
issued in the Exchange Offer will vote together as a single class for purposes
of determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Declaration (as defined herein).
The New Capital Securities represent undivided beneficial ownership
interests in the assets of the Trust. The Company is the owner of all of the
beneficial ownership interests represented by common securities of the Trust
(the "Common Securities"; together with the Capital Securities (as defined
herein), the "Trust Securities"). The Trust exists for the sole purpose of
issuing the Trust Securities and investing the proceeds thereof in the
Subordinated Debentures (as defined herein). The Subordinated Debentures will
mature on February 1, 2027 (the "Stated Maturity"). The Capital Securities will
have a preference under certain circumstances with respect to Distributions and
amounts payable on liquidation, redemption, or otherwise over the Common
Securities. See "Description of New Securities -- Description of Capital
Securities -- Subordination of Common Securities."
As used herein, (i) the "Indenture" means the Indenture, dated as of
January 31, 1997, relating to the Subordinated Debentures, as amended and
supplemented from time to time, between the Company and The Chase Manhattan
Bank, as trustee (the "Indenture Trustee"), (ii) the "Declaration" means the
Amended and Restated Declaration of Trust relating to the Trust, dated as of
January 31, 1997, among the Company, as Sponsor, The Chase Manhattan Bank, as
Property Trustee (the "Property Trustee"), The Chase Manhattan Bank Delaware, as
Delaware Trustee (the "Delaware Trustee"), and three individuals who are
employees or officers of, or who are affiliated with, the Company (the "Regular
Trustees," and collectively with the Property Trustee and the Delaware Trustee,
the "Declaration Trustees"); (iii) the "Guarantee Agreement" means the Guarantee
Agreement, dated as of January 31, 1997, between the Company and The Chase
Manhattan Bank, as trustee (the "Guarantee Trustee"), providing a guarantee, on
the terms and conditions described herein, for the benefit of holders of the
Capital Securities. In addition, as the context may require, unless expressly
stated otherwise, (i) the "Capital Securities" means the Old Capital Securities
and the New Capital Securities, (ii) the "Subordinated Debentures" means the Old
Subordinated Debentures and the New Subordinated Debentures, and (iii) the
"Guarantee" means the Old Guarantee and the New Guarantee.
Holders of the Capital Securities are entitled to receive cumulative cash
distributions accruing from the date of original issuance of the Old Capital
Securities and payable quarterly in arrears on the last day of January, April,
July, and October of each year, commencing April 30, 1997, at a variable annual
rate equal to LIBOR (as defined herein) plus .70% on the Liquidation Amount of
$1,000 per Capital Security ("Distributions"). The final Distributions will be
payable on February 1, 2027, and will accrue from the last distribution payment
date prior to such date up to and including January 31, 2027. The distribution
rate and the distribution payment dates and other payment dates for the Capital
Securities correspond to the interest rate and interest payment dates and other
payment dates on the Subordinated Debentures, which are the sole assets of the
Trust. The Company has guaranteed the payment of Distributions and payments on
liquidation of the Trust or redemption of the Capital Securities, but only in
each case to the extent of funds held by the Trust, as described herein. See
"Description of New Securities -- Description of Guarantee." If the Company does
not make interest payments on the Subordinated Debentures held by the Trust, the
Trust will have insufficient funds to pay Distributions on the Capital
Securities. The Company's obligations under the Guarantee, taken together with
its obligations under the Subordinated Debentures and the Indenture, including
its obligation to pay all costs, expenses, and liabilities of the Trust (other
than with respect to the Capital Securities), constitute a full and
unconditional guarantee of all of the Trust's obligations under the Capital
Securities. The obligations of the Company under the Guarantee and the
Subordinated Debentures are subordinate and junior in right of payment to all
Indebtedness (as defined in "Description of New Securities -- Description of
Subordinated Debentures -- Subordination") of the Company, are structurally
subordinated to all liabilities and obligations of the Company's subsidiaries,
and are pari passu with $100 million of obligations of the Company associated
with the Floating Rate Capital Securities, Series B, issued by Huntington
Capital II (the "Outstanding Capital Securities"). As of June 30, 1998,
approximately $279.4 million aggregate principal amount of Indebtedness was
outstanding, and the Company's subsidiaries had approximately $25.3 billion of
indebtedness and other liabilities (including $19.7 billion of bank deposits).
The terms of the Subordinated Debentures place no limitation on the amount of
Indebtedness that may be incurred by the Company or on the amount of liabilities
and obligations of the Company's subsidiaries. See "Description of New
Securities -- Description of Subordinated Debenture -- Subordination."
The Company has the right to defer payment of interest on the Subordinated
Debentures at any time or from time to time for a period not exceeding 20
consecutive quarters with respect to each deferral period (each, an "Extension
Period"), provided that no Extension Period may extend beyond the Stated
Maturity of the Subordinated Debentures. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest Payment
2
(cover page continued)
Date (as defined herein), the Company may elect to begin a new Extension Period
subject to the requirements set forth herein. Accordingly, there could be
multiple Extension Periods of varying lengths throughout the term of the
Subordinated Debentures. If interest payments on the Subordinated Debentures are
so deferred, distributions on the Capital Securities will also be deferred and
the Company may not, and may 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, the Company's capital stock or
(ii) make any payment of principal, interest, or premium, if any, on or repay,
repurchase, or redeem any debt securities that rank pari passu with or junior to
the Subordinated Debentures 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 with or junior to the Subordinated Debentures
(other than (a) repurchases, redemptions, or other acquisitions of shares of
capital stock of the Company in connection with any employment contract, benefit
plan, or other similar arrangement with or for the benefit of any one or more
employees, officers, directors, or consultants, or in connection with a dividend
reinvestment or stockholder stock purchase plan, (b) as a result of an exchange
or conversion of any class or series of the Company's capital stock (or any
capital stock of a subsidiary of the Company) for any other class or series of
the Company's capital stock or of any class or series of the Company's
indebtedness for any class or series of the Company's capital stock, (c) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholders' rights plan, or the issuance of rights, stock,
or other property under any stockholders' rights plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options, or other rights where the dividend stock or the stock
issuable upon exercise of such warrants, options, or other rights is the same
stock as that on which the dividend is being paid (or ranks pari passu with or
junior to such stock)). During an Extension Period, interest on the Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Capital Securities are entitled will accumulate) at a variable
rate equal to LIBOR plus .70%, compounded quarterly, and holders of the Capital
Securities will be required to accrue interest income for United States federal
income tax purposes prior to receipt of the cash related to such interest
income. See "Description of New Securities -- Description of Subordinated
Debentures -- Option to Extend Interest Payment Period" and "Certain United
States Federal Income Tax Consequences -- Interest Income and Original Issue
Discount."
The Subordinated Debentures are not redeemable prior to February 1, 2007,
unless a Special Event (as defined herein) has occurred. The Subordinated
Debentures are redeemable prior to maturity at the option of the Company,
subject to the receipt of any necessary prior approval from the Board of
Governors of the Federal Reserve System (the "Federal Reserve") (i) on or after
February 1, 2007, in whole or in part, at a redemption price equal to the
principal amount of the Subordinated Debentures so redeemed plus the accrued and
unpaid interest thereon to the redemption date, or (ii) at any time, in whole
(but not in part), upon the occurrence and continuation of a Special Event, at
such redemption price. The Capital Securities are subject to mandatory
redemption, in whole or in part, upon repayment of the Subordinated Debentures
at Stated Maturity or their earlier redemption, in an amount equal to the amount
of related Subordinated Debentures maturing or being redeemed and at a
redemption price equal to the redemption price of such Subordinated Debentures,
in each case plus accumulated and unpaid Distributions thereon to the date of
redemption.
Upon the occurrence and continuation of a Special Event, the Company will
have the right, subject to the receipt of any necessary prior approval from the
Federal Reserve, to dissolve the Trust and cause the Subordinated Debentures to
be distributed to the holders of the Capital Securities and the Common
Securities in liquidation of the Trust. See "Description of New Securities --
Description of Capital Securities -- Redemption -- Special Event Redemption or
Distribution of Subordinated Debentures."
In the event of the liquidation of the Trust, after satisfaction of the
claims of creditors of the Trust, if any, as provided by applicable law, the
holders of the Capital Securities will be entitled to receive a Liquidation
Amount of $1,000 per Capital Security plus accumulated and unpaid Distributions
thereon to the date of payment, which may be in the form of a distribution of
such amount in Subordinated Debentures as described above. If such Liquidation
Amount can be paid only in part because the Trust has insufficient assets
available to pay in full the aggregate Liquidation Amount, then the amounts
payable directly by the Trust on the Capital Securities shall be paid on a pro
rata basis. The holder of the Common Securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of the Capital
Securities, except that if an Indenture Event of Default (as defined herein) has
occurred and is continuing, the Capital Securities will have a priority over the
Common Securities. See "Description of New Securities -- Description of Capital
Securities -- Liquidation Distribution Upon Dissolution."
3
(cover page continued)
The Trust is making the Exchange Offer of the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance of
the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither the Company nor the Trust has sought its own interpretive
letter, and there can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance, and subject to the two immediately following sentences, the
Company and the Trust believe that New Capital Securities issued in exchange for
Old Capital Securities may be offered for resale, resold, and otherwise
transferred by a holder thereof (other than a holder who is a broker-dealer)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Capital Securities
are acquired in the ordinary course of such holder's business and that such
holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
Act) of such New Capital Securities. However, any holder of Old Capital
Securities who is an "affiliate" of the Company or the Trust within the meaning
of Rule 405 under the Securities Act (an "Affiliate") or who intends to
participate in the Exchange Offer for the purpose of distributing New Capital
Securities, or any broker-dealer who purchased Old Capital Securities from the
Trust to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or
any other available exemption under the Securities Act, (i) will not be able to
rely on the interpretations of the staff of the Division of Corporation Finance
of the Commission set forth in the above-mentioned interpretive letters, (ii)
will not be entitled to tender such Old Capital Securities in the Exchange
Offer, and (iii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Capital Securities unless such sale is made pursuant to an exemption
from such requirements. In addition, as described below, if any broker-dealer (a
"Participating Broker-Dealer") holds Old Capital Securities acquired for its own
account as a result of market-making or other trading activities and exchanges
such Old Capital Securities for New Capital Securities, then such Participating
Broker-Dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required to
represent that (i) it is not an Affiliate, (ii) any New Capital Securities to be
received by it are being acquired in the ordinary course of its business, (iii)
it has no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of such New Capital
Securities, and (iv) if such holder is not a broker-dealer, such holder is not
engaged in, and does not intend to engage in, a distribution (within the meaning
of the Securities Act) of such New Capital Securities. The Letter of Transmittal
contains the foregoing representations. In addition, the Company and the Trust
may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to the Company and the Trust (or
an agent thereof) in writing information as to the number of "beneficial owners"
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) on behalf of whom such holder holds the Old
Capital Securities to be exchanged in the Exchange Offer. Each Participating
Broker-Dealer that receives New Capital Securities for its own account pursuant
to the Exchange Offer will be deemed to have acknowledged by execution of the
Letter of Transmittal or delivery of an Agent's Message (as defined herein) that
it acquired the Old Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Capital Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Based on the position
taken by the staff of the Division of Corporation Finance of the Commission in
the interpretive letters referred to above, the Company and the Trust believe
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the New Capital Securities received upon exchange
of such Old Capital Securities (other than Old Capital Securities which
represent an unsold allotment from the original sale of the Old Capital
Securities) with a prospectus meeting the requirements of the Securities Act,
which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale of
such New Capital Securities. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Capital
Securities received in exchange for Old Capital Securities where such Old
Capital Securities were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the Company
and the Trust have agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such New Capital Securities for a period ending 180
days after the Expiration Date (as defined herein) or, if earlier, when all such
New Capital Securities have been disposed of by such Participating
Broker-Dealer. See "Plan of Distribution." Any person, including any
Participating Broker-Dealer, who is an Affiliate
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may not rely on such interpretive letters and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction. See "The Exchange Offer -- Resales of New Capital
Securities."
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal or delivery of an Agent's Message, that,
upon receipt of notice from the Company or the Trust of the occurrence of any
event or the discovery of any fact which makes any statement contained or
incorporated by reference in this Prospectus untrue in any material respect or
which causes this Prospectus to omit to state a material fact necessary in order
to make the statements contained or incorporated by reference herein, in the
light of the circumstances under which they were made, not misleading, or of the
occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of New Capital
Securities pursuant to this Prospectus until the Company or the Trust has
amended or supplemented this Prospectus to correct such misstatement or omission
and has furnished copies of the amended or supplemented Prospectus to such
Participating Broker-Dealer, or the Company or the Trust has given notice that
the sale of the New Capital Securities may be resumed, as the case may be.
New Capital Securities issued in registered, global form will be deposited
with a custodian for and registered in the name of a nominee of The Depository
Trust Company ("DTC") and beneficial interests in such New Capital Securities
will be shown on and transfers thereof will be effected through records
maintained by DTC and its participants.
The Old Capital Securities were listed on the Luxembourg Stock Exchange as
of January 31, 1997. Old Capital Securities not exchanged in the Exchange Offer
will remain listed on the Luxembourg Stock Exchange. The New Capital Securities
were listed on the Luxembourg Stock Exchange as of September 9, 1997. The
Company currently does not intend to apply for listing of the Old Capital
Securities or the New Capital Securities on any securities exchange in the
United States or for quotation through the National Association of Securities
Dealers Automated Quotation System, but the Old Capital Securities are eligible
for trading in the National Association of Securities Dealers, Inc.'s Private
Offerings, Resales, and Trading through Automatic Linkages (PORTAL) market.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market in the United States for the Old Capital Securities. The
New Capital Securities are a separate issue of securities; there can be no
assurance as to the liquidity of any market for the New Capital Securities.
Any Old Capital Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Declaration.
Following consummation of the Exchange Offer, the holders of any remaining Old
Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof. To the extent that Old Capital Securities
are tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Capital Securities could be adversely affected. See "Risk Factors
- -- Consequences of a Failure to Exchange Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS PROSPECTUS
AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO
TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on ___________________, 1998 (such time on such date
being hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by the Company and the Trust (in which case the term "Expiration Date"
shall mean the latest date and time to which the Exchange Offer is extended).
Tenders of Old Capital Securities may be withdrawn at any time on or prior to
the Expiration Date. The Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Old Capital Securities being tendered for exchange.
However, the Exchange Offer is subject to certain events and conditions which
may be waived by the Company or the Trust. Old Capital Securities may be
tendered in whole or in part having a Liquidation Amount of not less than
$100,000 (100 Capital Securities) and or any integral multiple of $1,000
Liquidation Amount (One Capital Security) in excess thereof. Manufacturers and
Traders Trust Company, the holder of all remaining Old Capital Securities, has
agreed to pay all expenses of the Exchange Offer. See "The Exchange Offer --
Fees and Expenses."
5
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Each New Capital Security will pay cumulative Distributions from the most
recent Distribution Date (as defined herein) on the Old Capital Securities
surrendered in exchange for such New Capital Securities. Holders of the Old
Capital Securities whose Old Capital Securities are accepted for exchange will
not receive accumulated Distributions on such Old Capital Securities for any
period from and after the last Distribution Date on such Old Capital Securities
prior to the original issue date of the New Capital Securities and will be
deemed to have waived the right to receive any Distributions on such Old Capital
Securities accumulated from and after such Distribution Date. This Prospectus,
together with the Letter of Transmittal, is being sent to all registered holders
of Old Capital Securities as of October 1, 1998.
Neither the Company nor the Trust will receive any proceeds from the
issuance of the New Capital Securities offered hereby. No dealer-manager is
being used in connection with this Exchange Offer. See "Use of Proceeds" and
"Plan of Distribution."
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
CHERI GRAY, INVESTOR RELATIONS ANALYST, HUNTINGTON BANCSHARES INCORPORATED,
HUNTINGTON CENTER, 41 SOUTH HIGH STREET, COLUMBUS, OHIO 43287, TELEPHONE NUMBER
614- 480-3803. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY _______________, 1998.
THE NEW CAPITAL SECURITIES WILL BE ISSUED, AND CAPITAL SECURITIES MAY BE
TRANSFERRED, ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN
$100,000. ANY TRANSFER, SALE, OR OTHER DISPOSITION OF CAPITAL SECURITIES IN A
BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE
VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED NOT
TO BE THE HOLDER OF SUCH CAPITAL SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT
LIMITED TO THE RECEIPT OF DISTRIBUTIONS ON SUCH CAPITAL SECURITIES, AND SUCH
TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL
SECURITIES. EACH HOLDER OF OLD CAPITAL SECURITIES WHO TENDERS SUCH OLD CAPITAL
SECURITIES PURSUANT TO THIS EXCHANGE OFFER WILL, BY PARTICIPATING IN THE
EXCHANGE OFFER AND EXECUTING THE LETTER OF TRANSMITTAL, BE DEEMED TO HAVE AGREED
AND CONSENTED TO (A) THIS TRANSFER RESTRICTION ON THE NEW CAPITAL SECURITIES,
AND (B) THE PLACEMENT OF A LEGEND TO THE FOREGOING EFFECT ON EACH CERTIFICATE
EVIDENCING THE NEW CAPITAL SECURITIES, WHICH AGREEMENT AND CONSENT SHALL BE
BINDING UPON SUCH HOLDER AND ALL SUCCESSORS AND ASSIGNS.
NO EMPLOYEE BENEFIT OR OTHER PLAN OR INDIVIDUAL RETIREMENT ACCOUNT SUBJECT
TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED,
OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A
"PLAN"), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF
ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON
INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE CAPITAL SECURITIES
OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASE OR HOLDING IS COVERED BY THE
EXEMPTIVE RELIEF PROVIDED BY U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION
CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1, OR 84-14 OR ANOTHER
APPLICABLE EXEMPTION WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR
HOLDER OF THE CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE
REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (A) THE PURCHASER
AND HOLDER IS NOT A PLAN OR A PLAN ASSET ENTITY AND IS NOT PURCHASING SUCH
SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN OR (B) THE PURCHASE
AND HOLDING OF THE CAPITAL SECURITIES IS COVERED BY THE EXEMPTIVE RELIEF
PROVIDED BY PTCE 96-23, 95-60, 91-38, 90-1, OR 84-14 OR ANOTHER APPLICABLE
EXEMPTION WITH RESPECT TO SUCH PURCHASE OR HOLDING.
6
TABLE OF CONTENTS
Page
----
Available Information ...........................................................................8
Incorporation of Certain Information by Reference ...............................................9
Summary ........................................................................................10
Risk Factors ...................................................................................17
The Trust ......................................................................................22
The Company.....................................................................................23
Selected Financial Data of the Company .........................................................24
Ratio of Earnings to Fixed Charges .............................................................25
Capitalization .................................................................................25
Use of Proceeds ................................................................................26
Accounting Treatment ...........................................................................26
Exchange Offer .................................................................................26
Description of New Securities ..................................................................35
Description of Old Capital Securities ..........................................................55
Relationship Among the Capital Securities, the Subordinated Debentures, and the Guarantee ......55
Certain United States Federal Income Tax Consequences ..........................................57
Book-Entry Issuance ............................................................................64
Benefit Plan Considerations ....................................................................66
Plan of Distribution ...........................................................................68
Legal Matters ..................................................................................69
Experts ........................................................................................69
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH
INFORMATION.
7
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of Sections 13 and
15(d) of the Exchange Act. Any reports and other information filed by the
Company with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices in
Chicago, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and in
New York, 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of
such material may also be obtained by mail from the Public Reference Section of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such material may also be accessed electronically by
means of the Commission's home page on the Internet (http://www.sec.gov).
The Company and the Trust filed with the Commission a Registration
Statement on Form S-4 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
For further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement and the exhibits and
financial statements, notes, and schedules filed as part thereof or incorporated
by reference therein, which may be inspected at the public reference facilities
of the Commission, at the addresses set forth above. Statements made in this
Prospectus concerning the contents of any documents referred to herein are not
necessarily complete, and in each instance are qualified in all respects by
reference to the copy of such document filed as an exhibit to the Registration
Statement.
No separate financial statements of the Trust have been included herein
and no separate financial statements will be prepared in the future. The Company
and the Trust do not consider that such financial statements would be material
to holders of the securities offered hereby because (i) all of the voting
securities of the Trust will be owned, directly or indirectly, by the Company,
(ii) the Trust has no independent operations and exists for the sole purpose of
issuing securities representing undivided beneficial interests in the assets of
the Trust and investing the proceeds thereof in the representative series of
Subordinated Debentures issued by the Company, and (iii) the obligations of the
Trust under its Capital Securities are fully and unconditionally guaranteed by
the Company to the extent the Trust has funds available to meet such
obligations. In addition, the Company does not expect that the Trust will be
filing reports under the Exchange Act with the Commission.
8
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act, are
incorporated by reference in this Prospectus to the extent provided below:
(i) Annual Report on Form 10-K for the year ended December 31, 1997;
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, and June 30, 1998; and
(iii) Current Reports on Form 8-K, dated January 14, 1998, March 11,
1998, April 14, 1998, and July 14, 1998.
All documents filed by the Company pursuant to Sections 13(a), 14, or
15(d) of the Exchange Act, after the date hereof and prior to the termination of
the offering hereunder shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for all purposes of this Prospectus to the extent that a statement contained
herein or in any subsequently filed document that is also incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, on the written or oral request of such
person, a copy of any or all of the documents referred to above that have been
or may be incorporated in this Prospectus by reference, other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
therein. Requests for such copies should be directed to: Cheri Gray, Investor
Relations Analyst, Huntington Bancshares Incorporated, Huntington Center, 41
South High Street, Columbus, Ohio 43287, telephone number 614-480-3803. In
addition, such documents are available, free of charge, from Chase Manhattan
Bank Luxembourg S.A. 5 Rue Plaetis, L-2338, Luxembourg.
9
SUMMARY
The following information is a summary of certain information contained
herein and should be read in conjunction with such information contained
elsewhere in this Prospectus and is subject to, and qualified in its entirety by
reference to, such information. Capitalized terms used herein have the
respective meanings ascribed to them elsewhere in this Prospectus.
THE COMPANY
The Company, a multi-state bank holding company incorporated under the
laws of the State of Maryland in 1966, is headquartered in Columbus, Ohio. At
June 30, 1998, the Company had total assets of approximately $28.2 billion and
total deposits of approximately $19.7 billion. The Company, through its
affiliates, conducts a full service commercial and consumer banking business,
engages in mortgage banking, lease financing, trust services, discount brokerage
services, underwriting credit life and disability insurance, and issuing
commercial paper guaranteed by the Company, and provides other financial
products and services. At June 30, 1998, the Company's affiliates had 205
banking offices in Ohio and Northern Kentucky, 44 banking offices in West
Virginia, 135 banking offices in Michigan, 111 banking offices in Florida, 24
banking offices in Indiana, and one foreign office in each of the Cayman Islands
and Hong Kong. In addition, the Company's mortgage company affiliate has loan
origination offices throughout the Midwest and East Coast.
The principal executive offices of the Company are located at Huntington
Center, 41 South High Street, Columbus, Ohio 43287 (telephone number
614-480-8300).
THE EXCHANGE OFFER
General....................... Up to $15,000,000 aggregate Liquidation Amount
of New Capital Securities are being offered in
exchange for a like aggregate Liquidation Amount
of Old Capital Securities. Old Capital
Securities may be tendered for exchange in whole
or in part in a Liquidation Amount of $100,000
(100 Capital Securities) or any integral
multiple of $1,000 in excess thereof, provided
that if any Old Capital Securities are tendered
in exchange for part, the untendered Liquidation
Amount must be $100,000 or any integral multiple
of $1,000 in excess thereof. For a description
of the procedures for tendering Old Capital
Securities, see "The Exchange Offer --
Procedures for Tendering Old Capital
Securities."
Expiration Date............... The Expiration Date of the Exchange Offer will
be 5:00 p.m., New York City time, on
___________________, 1998, unless the Exchange
Offer is extended by the Company and the Trust.
See "The Exchange Offer -- Expiration Date;
Extensions; Amendments."
Conditions to
Exchange Offer............ The Exchange Offer is subject to certain
conditions, which may be waived by the Company
and the Trust in their sole discretion. The
Exchange Offer is not conditioned upon any
minimum Liquidation Amount of Old Capital
Securities being tendered. See "The Exchange
Offer -- Conditions to Exchange Offer." The
Company and the Trust reserve the right in their
sole discretion, subject to applicable law, at
any time and from time to time, (i) to delay the
acceptance of the Old Capital Securities for
exchange, (ii) to terminate the Exchange Offer
if certain specified conditions have not been
satisfied, (iii) to extend the Expiration Date
of the Exchange Offer and retain all Old Capital
Securities
10
tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of Old
Capital Securities to withdraw their tendered
Old Capital Securities, or (iv) to waive any
condition or otherwise amend the terms of the
Exchange Offer in any respect. See "The Exchange
Offer -- Expiration Date; Extensions;
Amendments."
Withdrawal Rights............. Tenders of Old Capital Securities may be
withdrawn at any time on or prior to the
Expiration Date by delivering a written notice
of such withdrawal to The Chase Manhattan Bank,
as Exchange Agent (the "Exchange Agent"), in
conformity with certain procedures set forth
below under "The Exchange Offer -- Withdrawal
Rights."
Procedures for Tendering
Old Capital Securities.... Tendering holders of Old Capital Securities must
complete and sign a Letter of Transmittal in
accordance with the instructions contained
therein and forward the same by mail, facsimile,
or hand delivery, together with any other
required documents, to the Exchange Agent,
either with the Old Capital Securities to be
tendered or in compliance with the specified
procedures for guaranteed delivery of Old
Capital Securities. Certain brokers, dealers,
commercial banks, trust companies, and other
nominees may also effect tenders by book-entry
transfer, including an Agent's Message in lieu
of the Letter of Transmittal. Holders of Old
Capital Securities registered in the name of a
broker, dealer, commercial bank, trust company,
or other nominee are urged to contact such
person promptly if they wish to tender Old
Capital Securities pursuant to the Exchange
Offer. See "The Exchange Offer -- Procedures for
Tendering Old Capital Securities." Letters of
Transmittal and certificates representing Old
Capital Securities should not be sent to the
Company or the Trust. Such documents should only
be sent to the Exchange Agent. Questions
regarding how to tender and requests for
information should be directed to the Exchange
Agent. See "The Exchange Offer -- Exchange
Agent."
Resales of New Capital
Securities................ The Company and the Trust are making the
Exchange Offer in reliance on the position of
the staff of the Division of Corporation Finance
of the Commission as set forth in certain
interpretive letters addressed to third parties
in other transactions. However, neither the
Company nor the Trust has sought its own
interpretive letter and there can be no
assurance that the staff of the Division of
Corporation Finance of the Commission would make
a similar determination with respect to the
Exchange Offer as it has in such interpretive
letters to third parties. Based on these
interpretations by the staff of the Division of
Corporation Finance, and subject to the two
immediately following sentences, the Company and
the Trust believe that New Capital Securities
issued pursuant to this Exchange Offer in
exchange for Old Capital Securities may be
offered for resale, resold, and otherwise
transferred by a holder thereof (other than a
holder who is a broker-dealer) without further
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such New Capital Securities are
acquired in the ordinary course of such holder's
business and that such holder is not
participating, and has no arrangement or
understanding with any person to participate, in
a distribution (within the meaning of the
Securities Act) of such New Capital Securities.
However, any holder of Old Capital Securities
who is an Affiliate or who intends to
participate in the Exchange Offer for the
purpose of distributing the
11
New Capital Securities, or any broker-dealer who
purchased the Old Capital Securities from the
Trust to resell pursuant to Rule 144A or any
other available exemption under the Securities
Act, (i) will not be able to rely on the
interpretations of the staff of the Division of
Corporation Finance of the Commission set forth
in the above-mentioned interpretive letters,
(ii) will not be permitted or entitled to tender
such Old Capital Securities in the Exchange
Offer, and (iii) must comply with the
registration and prospectus delivery
requirements of the Securities Act in connection
with any sale or other transfer of such Old
Capital Securities unless such sale is made
pursuant to an exemption from such requirements.
In addition, as described below, any
Participating Broker-Dealer must deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resales of
such New Capital Securities.
Each holder of Old Capital Securities that
wishes to exchange Old Capital Securities for
New Capital Securities in the Exchange Offer
will be required to represent that (i) it is not
an Affiliate, (ii) any New Capital Securities to
be received by it are being acquired in the
ordinary course of its business, (iii) it has no
arrangement or understanding with any person to
participate in a distribution (within the
meaning of the Securities Act) of such New
Capital Securities, and (iv) if such holder is
not a broker-dealer, such holder is not engaged
in, and does not intend to engage in, a
distribution (within the meaning of the
Securities Act) of such New Capital Securities.
The Letter of Transmittal contains the foregoing
representations. Each Participating
Broker-Dealer will be deemed to have
acknowledged by execution of the Letter of
Transmittal or delivery of an Agent's Message
that it acquired the Old Capital Securities for
its own account as the result of market-making
activities or other trading activities and must
agree that it will deliver a prospectus meeting
the requirements of the Securities Act in
connection with any resale of such New Capital
Securities. The Letter of Transmittal states
that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. Any person, including any
Participating Broker-Dealer, who is an Affiliate
may not rely on such interpretive letters and
must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. See "The
Exchange Offer -- Resales of New Capital
Securities."
Exchange Agent................ The Exchange Agent is The Chase Manhattan Bank.
The address and telephone and facsimile numbers
of the Exchange Agent are set forth under "The
Exchange Offer -- Exchange Agent" and in the
Letter of Transmittal.
Use of Proceeds............... Neither the Company nor the Trust will receive
any proceeds from the issuance of the New
Capital Securities offered hereby. See "Use of
Proceeds."
Certain Tax and ERISA
Considerations............ Holders of Old Capital Securities should review
the information set forth under "Certain United
States Federal Income Tax Considerations" and
"Benefit Plan Considerations" prior to tendering
Old Capital Securities in the Exchange Offer.
12
THE NEW SECURITIES
General....................... The Capital Securities represent undivided
beneficial ownership interests in the assets of
the Trust. The holders thereof will be entitled
to a preference in certain circumstances with
respect to Distributions and amounts payable on
redemption, liquidation, or otherwise over the
Common Securities. See "Description of New
Securities -- Description of Capital Securities
-- Subordination of Common Securities." The sole
assets of the Trust are the Subordinated
Debentures, and payments under the Subordinated
Debentures will be the sole revenue of the
Trust. The Subordinated Debentures are unsecured
subordinated debt securities issued under the
Indenture.
Securities Offered............ The Trust is offering to exchange up to
$15,000,000 aggregate Liquidation Amount of its
New Capital Securities which have been
registered under the Securities Act (Liquidation
Amount $1,000 per Capital Security) for the
remaining $15,000,000 Old Capital Securities.
The New Capital Securities being offered hereby
will be issued, and the outstanding New Capital
Securities and Old Capital Securities were
issued, under the Declaration. The New Capital
Securities and any Old Capital Securities which
remain outstanding after consummation of the
Exchange Offer will constitute a single series
of Capital Securities under the Declaration, and
accordingly, will vote together as a single
class for purposes of determining whether
holders of the requisite percentage in
outstanding Liquidation Amount thereof have
taken certain actions or exercised certain
rights under the Declaration. See "Description
of New Securities -- Description of Capital
Securities." The terms of the New Capital
Securities are identical in all material
respects to the terms of the Old Capital
Securities, except that the New Capital
Securities have been registered under the
Securities Act and therefore are not subject to
certain restrictions on transfer applicable to
the Old Capital Securities. See "The Exchange
Offer -- Purpose and Effect of Exchange Offer,"
"Description of New Securities," and
"Description of Old Securities."
Distributions................. Holders of the Capital Securities will be
entitled to receive cumulative Distributions at
a variable annual rate equal to LIBOR plus .70%
on the Liquidation Amount of $1,000 per Capital
Security, accruing from the date of original
issuance of the Old Capital Securities and
payable quarterly in arrears on the last day of
January, April, July, and October of each year
commencing on April 30, 1997, to the persons in
whose names the Capital Securities are
registered at the close of business on the
relevant record dates. See "Description of New
Securities -- Description of Capital
Securities." The final Distributions will be
payable on February 1, 2027, and will accrue
from the last distribution payment date prior to
such date up to and including January 31, 2027.
The distribution rate and the distribution and
other payment dates for the Capital Securities
will correspond to the interest rate and
interest and other payment dates on the
Subordinated Debentures. See "Description of New
Securities -- Description of Capital
Securities."
Holders of Old Capital Securities whose Old
Capital Securities are accepted for exchange
will not receive accumulated Distributions on
such Old Capital Securities for any period from
and after the last Distribution Date with
respect to such Old Capital Securities prior to
the original issue date of the New Capital
Securities and will be deemed to have waived the
right to receive any
13
Distributions on such Old Capital Securities
accumulated from and after such Distribution
Date.
Subordinated Debentures....... The Subordinated Debentures mature on February
1, 2027. The Subordinated Debentures rank
subordinate and junior in right of payment to
all Indebtedness of the Company to the extent
described herein and are pari passu with the
obligations of the Company associated with the
Outstanding Capital Securities. In addition, the
Company's obligations under the Subordinated
Debentures are effectively subordinated to all
existing and future liabilities and obligations
of its subsidiaries. See "Risk Factors --
Ranking of Subordinated Obligations Under the
Guarantee and the Subordinated Debentures" and
"Description of New Securities -- Description of
Subordinated Debentures -- Subordination."
Guarantee..................... The payment of Distributions out of moneys held
by the Trust and payments on liquidation of the
Trust or the redemption of Capital Securities
are guaranteed by the Company to the extent the
Trust has funds available therefor. If the
Company does not make principal or interest
payments on the Subordinated Debentures, the
Trust will not have sufficient funds to make
Distributions on the Capital Securities, in
which event the Guarantee shall not apply to
such Distributions until the Trust has
sufficient funds available therefor. The
Company's obligations under the Guarantee, taken
together with its obligations under the
Subordinated Debentures and the Indenture,
including its obligation to pay all costs,
expenses, and liabilities of the Trust (other
than with respect to the Capital Securities),
constitute a full and unconditional guarantee of
all of the Trust's obligations under the Capital
Securities. See "Description of New Securities
-- Description of Guarantee" and "Relationship
Among the Capital Securities, the Subordinated
Debentures, and the Guarantee." The obligations
of the Company under the Guarantee are
subordinate and junior in right of payment to
all Indebtedness of the Company to the extent
described herein and are pari passu with the
obligations of the Company associated with the
Outstanding Capital Securities. See "Risk
Factors -- Ranking of Subordinated Obligations
Under the Guarantee and the Subordinated
Debentures" and "Description of New Securities
-- Description of Guarantee."
Right to Defer Interest....... The Company has the right to defer payment of
interest on the Subordinated Debentures by
extending the interest payment period on the
Subordinated Debentures, from time to time, for
up to 20 consecutive quarters. There could be
multiple Extension Periods of varying lengths
throughout the term of the Subordinated
Debentures. If interest payments on the
Subordinated Debentures are so deferred,
distributions on the Capital Securities will
also be deferred for an equivalent period and
the Company may not, and may 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, the Company's capital stock, or
(ii) make any payment of principal, interest, or
premium, if any, on, or repay, repurchase, or
redeem any debt securities that rank pari passu
with or junior to the Subordinated Debentures 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 with or junior to the
Subordinated Debentures (other than (a)
repurchases, redemptions, or other acquisitions
of shares of capital stock of the Company in
connection with any employment contract, benefit
plan, or other similar arrangement with or for
the benefit of any one or
14
more employees, officers, directors, or
consultants, or in connection with a dividend
reinvestment or stockholder stock purchase plan,
(b) as a result of an exchange or conversion of
any class or series of the Company's capital
stock (or any capital stock of a subsidiary of
the Company) for any other class or series of
the Company's capital stock or of any class or
series of the Company's indebtedness for any
class or series of the Company's capital stock,
(c) the purchase of fractional interests in
shares of the Company's capital stock pursuant
to the conversion or exchange provisions of such
capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in
connection with any stockholders' rights plan,
or the issuance of rights, stock, or other
property under any stockholders' rights plan, or
the redemption or repurchase of rights pursuant
thereto, or (e) any dividend in the form of
stock, warrants, options, or other rights where
the dividend stock or the stock issuable upon
exercise of such warrants, options, or other
rights is the same stock as that on which the
dividend is being paid (or ranks pari passu with
or junior to such stock)). During an Extension
Period, interest on the Subordinated Debentures
will continue to accrue (and the amount of
Distributions to which holders of the Capital
Securities are entitled will accumulate) at a
variable annual rate equal to LIBOR plus .70%,
compounded quarterly. During an Extension
Period, holders of Capital Securities will be
required to include the interest (and the de
minimis original issue discount ("OID")) accrued
on their pro rata share of the Subordinated
Debentures in their gross income as OID even
though the cash payments attributable thereto
have not been made. See "Description of New
Securities -- Description of Subordinated
Debentures -- Option to Extend Interest Payment
Period" and "Certain United States Federal
Income Tax Consequences -- Interest Income and
Original Issue Discount."
The Company has no current plan to exercise its
right to defer payments of interest by extending
the interest payment period on the Subordinated
Debentures. However, should the Company elect to
exercise such right in the future, the market
price of the Capital Securities is likely to be
affected. See "Risk Factors -- Option to Extend
Interest Payment Period; Tax Consequences"
"Description of New Securities -- Description of
Subordinated Debentures," and "Certain United
States Federal Income Tax Consequences --
Interest Income and Original Issue Discount."
Redemption ................... The Subordinated Debentures are redeemable by
the Company in whole or in part on or after
February 1, 2007, or at any time, in whole but
not in part, upon the occurrence of a Special
Event, in either case subject to any necessary
prior approval of the Federal Reserve. If the
Subordinated Debentures are redeemed, the Trust
must redeem Trust Securities having an aggregate
Liquidation Amount equal to the aggregate
principal amount of the Subordinated Debentures
so redeemed. The Trust Securities will be
redeemed upon maturity of the Subordinated
Debentures. See "Description of New Securities
-- Description of Capital Securities --
Redemption -- Mandatory Redemption" and "--
Special Event Redemption or Distribution of
Subordinated Debentures."
See "Risk Factors -- Special Event Redemption --
Possible Tax Law Changes" for a discussion of
pending tax court litigation and legislative
proposals that, if adopted, could give rise to a
Tax Event (as defined herein), which may permit
the Corporation to cause a redemption of the
Capital Securities prior to February 1, 2007.
15
No sinking fund will be established for the
benefit of the Capital Securities.
Liquidation of the Trust...... Upon the occurrence and continuation of a
Special Event, the Company will have the right,
subject to any necessary prior approval of the
Federal Reserve, to dissolve the Trust and cause
the Subordinated Debentures to be distributed to
the holders of the Capital Securities and the
Common Securities in liquidation of the Trust.
See "Description of New Securities --
Description of Capital Securities -- Redemption
-- Special Event Redemption or Distribution of
Subordinated Debentures."
In the event of the liquidation of the Trust,
after satisfaction of the claims of creditors of
the Trust, if any, as provided by applicable
law, the holders of the Capital Securities will
be entitled to receive a Liquidation Amount of
$1,000 per Capital Security plus accumulated and
unpaid Distributions thereon to the date of
payment, which may be in the form of a
distribution of such amount in Subordinated
Debentures as described above. If such
Liquidation Distribution (as defined herein) can
be paid only in part because the Trust has
insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the
amounts payable directly by the Trust on the
Capital Securities shall be paid on a pro rata
basis. The holder of the Common Securities will
be entitled to receive distributions upon any
such liquidation pro rata with the holders of
the Capital Securities, except that if an
Indenture Event of Default has occurred and is
continuing, the Capital Securities shall have a
priority over the Common Securities. See
"Description of New Securities -- Description of
Capital Securities -- Liquidation Distribution
Upon Dissolution."
Market for and Liquidity of
New Capital Securities.... Morgan Stanley & Co. Incorporated, Lehman
Brothers Inc., and Salomon Brothers Inc, the
initial purchasers of the Old Capital Securities
(the "Initial Purchasers"), informed the Company
and the Trust in connection with the offering of
the Old Capital Securities that the Initial
Purchasers intended to make a market in the Old
Capital Securities; however, the Initial
Purchasers are not obligated to make a market in
the Old Capital Securities or the New Capital
Securities, and any such market-making activity
with respect to the Old Capital Securities or
the New Capital Securities may be discontinued
at any time without notice. Accordingly, no
assurance can be given that an active public or
other market will develop for the Old Capital
Securities or the New Capital Securities and no
representations can be made as to the liquidity
of or the trading market for the Old Capital
Securities or the New Capital Securities.
Listing/Applications.......... The New Capital Securities were listed on the
Luxembourg Stock Exchange on September 9, 1997.
16
RISK FACTORS
Holders of Old Capital Securities should carefully review the
information contained elsewhere in this Prospectus and should particularly
consider the following matters prior to tendering Old Capital Securities in the
Exchange Offer. Certain statements in this Prospectus and documents incorporated
herein by reference are forward-looking and are identified by the use of
forward-looking words or phrases such as "intended," "will be positioned,"
"expects," is or are "expected," "anticipates," and "anticipated." These
forward-looking statements are based on the Company's current expectations. To
the extent any of the information contained or incorporated by reference in this
Prospectus constitutes a "forward-looking statement" as defined in Section
21E(i)(1) of the Exchange Act, the risk factors set forth below are cautionary
statements identifying important factors that could cause actual results to
differ materially from those in the forward-looking statements.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE SUBORDINATED
DEBENTURES
The obligations of the Company under the Guarantee issued by the Company
for the benefit of the holders of Capital Securities and under the Subordinated
Debentures are unsecured and rank subordinate and junior in right of payment to
all Indebtedness of the Company to the extent described herein and are pari
passu with the obligations of the Company associated with the Outstanding
Capital Securities. At June 30, 1998, the Indebtedness of the Company aggregated
approximately $279.4 million. Because the Company is a holding company, the
right of the Company to participate in any distributions of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the Capital Securities to benefit indirectly
from such distribution), is subject to the prior claims of creditors of that
subsidiary, except to the extent that the Company may itself be recognized as a
creditor of that subsidiary. There are various legal limitations on the extent
to which certain of the Company's subsidiaries may extend credit, pay dividends,
or otherwise supply funds to, or engage in transactions with, the Company.
Accordingly, the Subordinated Debentures will effectively be subordinated to all
existing and future liabilities of the Company's subsidiaries, and holders of
the Subordinated Debentures should look only to the assets of the Company for
payments on the Subordinated Debentures. None of the Indenture, the Guarantee
Agreement, or the Declaration places any limitation on the amount of secured or
unsecured Indebtedness that may be incurred by the Company or on the amount of
liabilities and obligations of the Company's subsidiaries. See "Description of
New Securities -- Description of Guarantee -- Status of the Guarantee" and "--
Description of Subordinated Debentures -- Subordination."
The ability of the Trust to pay amounts due on the Capital Securities is
solely dependent upon the Company making payments on the Subordinated Debentures
as and when required.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Trust Enforcement Event (as defined herein) occurs and is
continuing, then the holders of Capital Securities would rely on the enforcement
by the Property Trustee of its rights as a holder of the Subordinated Debentures
against the Company. The holders of a majority in Liquidation Amount of the
Capital Securities will have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Property Trustee or to
direct the exercise of any trust or power conferred upon the Property Trustee
under the Declaration, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the Subordinated
Debentures. All New Capital Securities and any Old Capital Securities which
remain outstanding after consummation of the Exchange Offer will constitute a
single series of Capital Securities under the Declaration, and accordingly, will
vote together as a single class for purposes of determining whether holders of
the requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Declaration. If the
Property Trustee fails to enforce its rights with respect to the Subordinated
Debentures held by the Trust, any record holder of Capital Securities may, to
the fullest extent permitted by law, institute legal proceedings directly
against the Company to enforce the Property
17
Trustee's rights under such Subordinated Debentures without first instituting
any legal proceedings against such Property Trustee or any other person or
entity.
If the Company were to default on its obligation to pay amounts payable
under the Subordinated Debentures, the Trust would lack funds for the payment of
Distributions or amounts payable on redemption of the Capital Securities or
otherwise, and, in such event, holders of the Capital Securities would not be
able to rely upon the Guarantee for payment of such amounts. However, in the
event the Company failed to pay interest on or principal of the Subordinated
Debentures on the payment date on which such payment is due and payable, then a
holder of Capital Securities may institute a proceeding directly against the
Company under the Indenture for enforcement of payment to such holder of the
interest on or principal of Subordinated Debentures having a principal amount
equal to the aggregate Liquidation Amount of the Capital Securities of such
holder (a "Direct Action"). In connection with such Direct Action, the Company
will be subrogated to the rights of such holder of Capital Securities under the
Declaration to the extent of any payment made by the Company to such holder of
Capital Securities in such Direct Action. Except as set forth herein, holders of
Capital Securities will not be able to exercise directly any other remedy
available to the holders of Subordinated Debentures or assert directly any other
rights in respect of the Subordinated Debentures. See "Description of New
Securities -- Description of Capital Securities -- Trust Enforcement Events, "--
Description of Guarantee" and "-- Description of Subordinated Debentures --
Indenture Events of Default."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
The Company has the right under the Indenture to defer the payment of
interest on the Subordinated Debentures at any time or from time to time for a
period not exceeding 20 consecutive quarters, provided that no Extension Period
may extend beyond the Stated Maturity of the Subordinated Debentures. As a
consequence of any such deferral, quarterly Distributions on the Capital
Securities by the Trust will be deferred during any such Extension Period but
would continue to accumulate at a variable annual rate equal to LIBOR plus .70%,
compounded quarterly during any such Extension Period. During any such Extension
Period, the Company may not, and may 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, repurchase, or redeem any debt securities of the Company that
rank pari passu with or junior to the Subordinated Debentures 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
with or junior to the Subordinated Debentures (other than (a) repurchases,
redemptions, or other acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan, or other similar
arrangement with or for the benefit of any one or more employees, officers,
directors, or consultants, or in connection with a dividend reinvestment or
stockholder stock purchase plan, (b) as a result of an exchange or conversion of
any class or series of the Company's capital stock (or any capital stock, of a
subsidiary of the Company) for any other class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (c) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock, or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any stockholders
rights plan, or the issuance of rights, stock, or other property under any
stockholders' rights plan, or the redemption or repurchase of rights pursuant
thereto, or (e) any dividend in the form of stock, warrants, options, or other
rights where the dividend stock or the stock issuable upon exercise of such
warrants, options, or other rights is the same stock as that on which the
dividend is being paid (or ranks pari passu with or junior to such stock)).
Prior to the termination of any such Extension Period, the Company may further
extend the Extension Period, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Subordinated
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due on any Interest Payment Date, the Company may elect to begin a
new Extension Period subject to the above requirements. See "Description of New
Securities -- Description of Capital Securities -- Distributions" and "--
Description of Subordinated Debentures -- Option to Extend Interest Payment
Period."
Should the Company defer payment of interest on the Subordinated
Debentures, a holder of Capital Securities will be required to accrue income (in
the form of OID) (which will include both stated interest and the de minimis OID
18
on the Subordinated Debentures) for United States federal income tax purposes in
respect of its pro rata share of the Subordinated Debentures held by the Trust.
As a result, a holder of Capital Securities will be required to include such
interest income in gross income for United States federal income tax purposes in
advance of the receipt of cash attributable to such interest income, and will
not receive the cash related to such income from the Trust if the holder
disposes of the Capital Securities prior to the record date for the payment of
Distributions with respect to such Extension Period. See "Certain United States
Federal Income Tax Consequences -- Interest Income and Original Issue Discount"
and "-- Sales of Capital Securities."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures. However, should the Company elect to exercise such
right in the future, the market price of the Capital Securities is likely to be
adversely affected. A holder that disposes of its Capital Securities during an
Extension Period, therefore, might not receive the same return on its investment
as a holder that continues to hold its Capital Securities. In addition, as a
result of the Company's right to defer interest payments, the market price of
the Capital Securities (which represent preferred undivided beneficial interests
in the Subordinated Debentures) may be more volatile than the market prices of
other similar securities where the issuer does not have such right to defer
interest payments.
SPECIAL EVENT REDEMPTION; POSSIBLE TAX LAW CHANGES
Upon the occurrence and continuation of a Special Event, the Company has
the right, subject to any necessary prior approval of the Federal Reserve, to
redeem the Subordinated Debentures in whole (but not in part) within 90 days
following the occurrence of such Special Event and thereby cause a mandatory
redemption of the Capital Securities and Common Securities. A "Special Event"
means a Tax Event, a Regulatory Capital Event, or an Investment Company Event
(each as defined herein).
Prospective investors should be aware a taxpayer recently filed a
petition in the United States Tax Court contesting the proposed disallowance by
the Internal Revenue Service of the deduction of interest expense on securities
issued in 1993 and 1994 that are similar to, although different in a number of
respects from, the Subordinated Debentures. (Enron Corp. v. Commissioner, Docket
No. 6149-98, filed April 1, 1998). It is possible that an adverse decision by
the Tax Court in that case could give rise to a Tax Event, which would permit
the Company to cause a redemption of the Capital Securities, as described more
fully herein under the caption "Description of New Securities -- Description of
Capital Securities -- Redemption -- Special Event Redemption or Substitution of
Subordinated Debentures."
In the past, legislation had been proposed by the United States
Department of Treasury that contained a provision which, if it had been adopted,
would have had the effect of prohibiting the Company from deducting the interest
paid on the Subordinated Debentures which, in turn, would have triggered a Tax
Event. The most recent tax legislation, the Internal Revenue Service
Restructuring and Reform Act of 1998 and President Clinton's Fiscal 1999 Budget
Proposal, do not contain provisions similar to past legislation as described
above.
Even though the most recent Congressional action does not incorporate
legislation concerning the disallowance of interest deductions on long-term debt
obligations not treated as indebtedness on the issuer's balance sheet, there can
be no assurance future legislative proposals or final legislation will not
adversely affect the ability of the Company to deduct interest on the
Subordinated Debentures or otherwise affect the tax treatment of the
transactions described herein. Moreover, such legislation could give rise to a
Tax Event, which would permit the Company to cause a redemption of the Capital
Securities, as described more fully herein under the caption "Description of New
Securities -- Description of Capital Securities -- Redemption -- Special Event
Redemption or Substitution of Subordinated Debentures."
19
LIQUIDATION DISTRIBUTION OF SUBORDINATED DEBENTURES
Upon the occurrence and continuation of a Special Event, the Company
will have the right, subject to any necessary prior approval of the Federal
Reserve, to dissolve the Trust and, after satisfaction of the claims of
creditors of the Trust, if any, as provided by applicable law, cause the
Subordinated Debentures to be distributed to the holders of the Capital
Securities and the Common Securities in liquidation of the Trust. In addition,
upon liquidation of the Trust and certain other events, after satisfaction of
the claims of creditors of the Trust, if any, as provided by applicable law, the
Subordinated Debentures may be distributed to such holders. Under current United
States federal income tax law and interpretations thereof and assuming, as
expected, the Trust is treated as a grantor trust for United States federal
income tax purposes, a distribution by the Trust of the Subordinated Debentures
pursuant to a liquidation of the Trust will not be a taxable event to the Trust
or to holders of the Capital Securities, and will result in a holder of the
Capital Securities receiving directly such holder's pro rata share of the
Subordinated Debentures (previously held indirectly through the Trust). If,
however, the liquidation of the Trust were to occur because the Trust is subject
to United States federal income tax with respect to income accrued or received
on the Subordinated Debentures as a result of the occurrence of a Tax Event or
otherwise, the distribution of Subordinated Debentures to holders of the Capital
Securities by the Trust could be a taxable event to the Trust and each such
holder, and holders of the Capital Securities may be required to recognize gain
or loss as if they had exchanged their Capital Securities for the Subordinated
Debentures they receive upon the liquidation of the Trust. See "Certain United
States Federal Income Tax Consequences -- Distribution of Subordinated
Debentures or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for Capital Securities
or Subordinated Debentures that may be distributed in exchange for Capital
Securities if a liquidation of the Trust occurs. Accordingly, the Capital
Securities or the Subordinated Debentures that a holder of Capital Securities
may receive on liquidation of the Trust may trade at a discount to the price
that the investor paid to purchase the Capital Securities. See "Description of
New Securities -- Description of Capital Securities -- Redemption -- Special
Event Redemption or Distribution of Subordinated Debentures" and "-- Description
of Subordinated Debentures -- General."
LIMITED VOTING RIGHTS
Holders of Capital Securities generally will have limited voting rights
relating only to the modification of the Capital Securities and certain other
matters described herein. Holders of Capital Securities will not be entitled to
vote to appoint, remove, or replace any of the Declaration Trustees, which
voting rights are vested exclusively in the holder of the Common Securities,
unless a Declaration Event of Default shall have occurred and is continuing. The
Declaration Trustees and the Company may amend the Declaration without the
consent of holders of Capital Securities to ensure that the Trust will be
classified as a grantor trust for United States federal income tax purposes even
if such action adversely affects the interests of such holders. See "Description
of New Securities -- Description of Capital Securities -- Voting Rights;
Amendment of the Declaration."
CONSEQUENCES OF FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
The Old Capital Securities have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold, or
otherwise transferred in the United States except in compliance with the
registration requirements of the Securities Act and any other applicable
securities laws, or pursuant to an exemption therefrom or in a transaction not
subject thereto, and in each case in compliance with certain other conditions
and restrictions. Old Capital Securities which remain outstanding after
consummation of the Exchange Offer will continue to bear a legend reflecting
such restrictions on transfer. In addition, upon consummation of the Exchange
Offer, holders of Old Capital Securities which remain outstanding will not be
entitled to any rights to have such Old Capital Securities registered under the
Securities Act or to any similar rights under the Registration Rights Agreement
(subject to certain limited exceptions). The Company and the Trust do not intend
to register under the Securities Act any Old Capital
20
Securities which remain outstanding after consummation of the Exchange Offer
(subject to such limited exceptions, if applicable).
To the extent that Old Capital Securities are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered Old Capital Securities
could be adversely affected. In addition, although the Old Capital Securities
have been designated for trading in the Private Offerings, Resale, and Trading
through Automatic Linkages ("PORTAL") market, to the extent that Old Capital
Securities are tendered and accepted in connection with the Exchange Offer, any
trading market for Old Capital Securities which remain outstanding after the
Exchange Offer could be adversely affected.
All New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will constitute a single
series of Capital Securities under the Declaration and, accordingly, will vote
together as a single class for purposes of determining whether holders of the
requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Declaration. See
"Description of New Securities -- Description of Capital Securities -- General."
MARKET FOR AND LIQUIDITY OF CAPITAL SECURITIES
The Old Capital Securities have not been registered under the Securities
Act and will be subject to restrictions on transferability to the extent that
they are not exchanged for the New Capital Securities. Although the New Capital
Securities will generally be permitted to be resold or otherwise transferred by
the holders (who are not Affiliates) without compliance with the registration
requirements under the Securities Act, they will constitute a separate issue of
securities. Capital Securities may be transferred by the holders thereof only in
blocks having a Liquidation Amount of not less than $100,000 (100 Capital
Securities).
The Company and the Trust were advised by the Initial Purchasers in
connection with the offering of the Old Capital Securities that the Initial
Purchasers intended to make a market in the Old Capital Securities. However, the
Initial Purchasers are not obligated to make a market in the Old Capital
Securities or the New Capital Securities and any such market-making activity
with respect to the Old Capital Securities or the New Capital Securities may be
discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer. Accordingly, no
assurance can be given that an active public or other market will develop or be
maintained for the New Capital Securities or the Old Capital Securities or as to
the liquidity of or the trading market for the New Capital Securities or the Old
Capital Securities. If an active public market does not develop or is not
maintained, the market price and liquidity of the New Capital Securities may be
adversely affected.
If a public trading market is maintained for the New Capital Securities,
future trading prices of such securities will depend on many factors, including,
among other things, prevailing interest rates, results of operations of the
Company, and the market for similar securities. Depending on prevailing interest
rates, the market for similar securities, and other factors, including the
financial condition of the Company, the New Capital Securities may trade at a
discount.
Notwithstanding the registration of the New Capital Securities in the
Exchange Offer, holders who are Affiliates may publicly offer for sale or resell
the New Capital Securities only in compliance with the provisions of Rule 144
under the Securities Act.
Each Participating Broker-Dealer that receives New Capital Securities
for its own account must acknowledge that it will deliver a prospectus in
connection with any resale of such New Capital Securities. See "Plan of
Distribution."
21
EXCHANGE OFFER PROCEDURES
Issuance of the New Capital Securities in exchange for Old Capital
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Exchange Agent of such Old Capital Securities, a properly
completed and duly executed Letter of Transmittal or Agent's Message in lieu
thereof, and all other required documents. Therefore, holders of the Old Capital
Securities desiring to tender such Old Capital Securities in exchange for New
Capital Securities should allow sufficient time to ensure timely delivery. None
of the Company, the Trust, or the Exchange Agent are under any duty to give
notification of defects or irregularities with respect to the tenders of Old
Capital Securities for exchange.
CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Indenture does not contain any provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction, including a change of control, or other similar transactions
involving the Company that may adversely affect such holders. See "Description
of New Securities -- Description of Subordinated Debentures."
THE TRUST
The Trust is a statutory business trust created under the Delaware
Business Trust Act, as amended (the "Trust Act"), pursuant to the Declaration
and the filing of a certificate of trust with the Secretary of State of the
State of Delaware. The Company acquired the Common Securities in an aggregate
Liquidation Amount equal to $6,186,000, which is 3% of the total capital of the
Trust. The Trust used all the proceeds derived from the issuance of the Capital
Securities and the Common Securities to purchase the Subordinated Debentures
and, accordingly, the assets of the Trust consist solely of the Subordinated
Debentures. The Trust exists for the exclusive purpose of (i) issuing the Trust
Securities representing undivided beneficial ownership interests in the assets
of the Trust, (ii) investing the gross proceeds of the Trust Securities in the
Subordinated Debentures, and (iii) engaging in only those other activities
necessary or incidental thereto. The Declaration does not limit the aggregate
liquidation amount of Trust Securities that may be issued thereunder, provided
that prior to issuing any additional Trust Securities, the Declaration Trustees
shall have received an opinion of counsel to the effect that the issuance of
such Trust Securities will not affect the Trust's status as a grantor trust for
United States federal income tax purposes.
The Trust's business and affairs are conducted by the Declaration
Trustees, consisting of three Regular Trustees, who are employees or officers of
or who are affiliated with the Company; The Chase Manhattan Bank, as Property
Trustee; and The Chase Manhattan Bank Delaware, which maintains its principal
place of business in the State of Delaware, as Delaware Trustee. The Chase
Manhattan Bank also acts as the Guarantee Trustee and the Indenture Trustee.
The Property Trustee holds title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities, and the Property Trustee has the
power to exercise all rights, powers, and privileges with respect to the
Subordinated Debentures under the Indenture pursuant to which the Subordinated
Debentures are issued, as the holder of such Subordinated Debentures. In
addition, the Property Trustee maintains exclusive control of a segregated
non-interest bearing bank account (the "Property Account") to hold all payments
made in respect of the Subordinated Debentures for the benefit of the holders of
the Trust Securities. The Guarantee Trustee holds the Guarantee for the benefit
of the holders of the Capital Securities. The Company, as the holder of all the
Common Securities, has the right to appoint, remove, or replace any of the
Declaration Trustees and to increase or decrease the number of Declaration
Trustees, provided there must always be a Delaware Trustee, a Property Trustee,
and a Regular Trustee.
22
Under the Indenture, the Company, as borrower, has agreed to pay all
fees and expenses related to the organization and operations of the Trust
(including any taxes, duties, assessments, or governmental charges of whatever
nature (other than withholding taxes) imposed by the United States or any other
domestic taxing authority upon the Trust) and be responsible for all debts and
obligations of the Trust (other than with respect to the Capital Securities).
See "Description of New Securities -- Description of Capital Securities --
Expenses and Taxes" and "-- Description of Subordinated Debentures -- Certain
Covenants of the Company."
For so long as the Capital Securities remain outstanding, the Company
has covenanted (i) to maintain directly or indirectly 100% ownership of the
Common Securities, (ii) to cause the Trust to remain a statutory business trust
and not to voluntarily dissolve, wind-up, liquidate, or be terminated, except as
permitted by the Declaration, (iii) to use its commercially reasonable efforts
to ensure that the Trust will not be an "investment company" for purposes of the
Investment Company Act of 1940, as amended, and (iv) to take no action that
would be reasonably likely to cause the Trust to be classified as an association
or a publicly traded partnership taxable as a corporation for United States
federal income tax purposes.
The Declaration and the Guarantee Agreement incorporate by reference the
terms of the Trust Indenture Act. The rights of the holders of the Capital
Securities, including economic rights, rights to information, and voting rights,
are set forth in the Declaration and the Trust Indenture Act. See "Description
of New Securities -- Description of Capital Securities."
The location of the principal executive office of the Trust is
Huntington Center, 41 South High Street, Columbus, Ohio 43287.
THE COMPANY
The Company, a multi-state bank holding company incorporated under the
laws of the State of Maryland in 1966, is headquartered in Columbus, Ohio. At
June 30, 1998, the Company had total assets of approximately $28.2 billion and
total deposits of approximately $19.7 billion. The Company, through its
affiliates, conducts a full service commercial and consumer banking business,
engages in mortgage banking, lease financing, trust services, discount brokerage
services, underwriting credit life and disability insurance, and issuing
commercial paper guaranteed by the Company, and provides other financial
products and services. At June 30, 1998, the Company's affiliates had 205
banking offices in Ohio and Northern Kentucky, 44 banking offices in West
Virginia, 135 banking offices in Michigan, 111 banking offices in Florida, 24
banking offices in Indiana, and one foreign office in each of the Cayman Islands
and Hong Kong. In addition, the Company's mortgage company affiliate has loan
origination offices throughout the Midwest and East Coast. The principal
executive offices of the Company are located at Huntington Center, 41 South High
Street, Columbus, Ohio 43287 (telephone number 614-480-8300).
Effective as of June 30, 1997, all but one of the Company's banking
subsidiaries were merged into its wholly owned principal banking subsidiary, The
Huntington National Bank. In September 1997, the Company completed its
acquisition of First Michigan Bank Corporation, a $3.6 billion bank holding
company headquartered in Holland, Michigan, in a pooling of interests
transaction. Also in 1997, the Company completed two acquisitions which were
accounted for as purchases. In February 1997, the Company acquired
Citi-Bancshares, Inc., a $548 million one-bank holding company headquartered in
Leesburg, Florida, and in October 1997, the Company acquired The Bank of Winter
Park, a $90 million Florida state-chartered bank headquartered in Winter Park,
Florida. In June 1998, the Company completed its acquisition of 60 banking
offices, with $2.6 billion in deposits and $1.6 billion in loans, in Florida
from NationsBank Corporation in connection with the merger of NationsBank and
Barnett Banks Inc. Although the Company has no other acquisitions pending, the
Company continues to explore other opportunities to acquire banking and
non-banking companies, both interstate and intrastate.
23
SELECTED FINANCIAL DATA OF THE COMPANY
The following selected financial data of the Company for the five years
ended December 31, 1997, have been derived from the Company's audited
consolidated financial statements. The selected financial data for the six
months ended June 30, 1998 and 1997, have been derived from unaudited
consolidated financial statements and reflect all adjustments (consisting of
normal recurring accruals) that, in the opinion of management, are necessary for
a fair presentation of such data. Operating results for the six months ended
June 30, 1998, are not necessarily indicative of results for the entire year.
This data should be read in conjunction with the consolidated financial
statements, related notes, and other financial information of the Company
incorporated by reference herein.
BALANCE SHEET DATA
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets ................... $28,187,219 $25,257,133 $26,730,540 $24,371,946 $23,495,337 $20,688,505 $20,214,835
Securities available for sale... 4,467,986 5,152,257 5,709,814 5,209,393 5,050,832 3,447,807 3,948,080
Investment securities .......... 29,637 54,972 33,010 345,135 416,831 1,061,385 982,270
Loans(1) ....................... 19,367,580 17,970,867 17,931,196 16,879,577 15,638,319 14,362,670 13,659,624
Allowance for loan losses ...... 286,864 247,867 258,171 230,778 222,487 225,225 233,123
Deposits ....................... 19,666,248 17,637,871 17,983,718 16,402,312 15,450,273 14,453,006 14,285,765
Long-term debt(2) .............. 3,486,842 2,116,898 2,886,039 1,665,531 2,122,202 1,222,114 772,205
Common stock ................... 1,528,768 1,292,477 1,528,768 1,290,968 1,075,057 930,154 914,882
Treasury stock ................. (22,832) (160,557) (36,791) (204,634) (180,632) (16,577) (15,290)
Capital surplus ................ 393,296 455,641 404,235 401,176 382,732 339,695 331,532
Accumulated other
comprehensive income ........... 15,376 (25,080) 14,800 (13,931) 42,790 (66,224) 1,853
Retained earnings .............. 219,241 367,519 114,379 312,079 452,746 448,223 300,073
Total shareholders' equity ..... 2,133,849 1,930,000 2,025,391 1,785,658 1,772,693 1,635,271 1,533,050
INCOME STATEMENT DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
Interest income ................ $ 993,748 $ 978,892 $ 1,981,473 $ 1,775,734 $ 1,709,627 $ 1,418,610 $ 1,410,401
Interest expense ............... 491,471 468,383 954,243 880,648 856,860 546,880 514,812
Net interest income ......... 502,277 510,509 1,027,230 895,086 852,767 871,730 895,589
Provision for loan losses ...... 46,776 53,211 107,797 76,371 36,712 21,954 84,682
Non-interest income ............ 200,631 152,530 334,861 296,443 265,710 242,417 253,884
Securities gains ............... 17,405 5,702 7,978 17,620 9,380 2,297 27,316
Non-interest expenses .......... 406,081 369,666 803,108 675,510 662,061 683,520 689,451
Income before income
taxes ...................... 267,456 245,864 459,164 457,268 429,084 410,970 402,656
Provision for income taxes...... 85,661 85,082 166,501 152,999 147,283 134,650 135,731
Net income .................. 181,795 160,782 292,663 304,269 281,801 276,320 266,925
Per Common Share(3):
Net Income:
Basic ................... $ 0.86 $ 0.77 $ 1.39 $ 1.44 $ 1.29 $ 1.27 $ 1.25
Diluted ................. 0.85 0.76 1.38 1.43 1.28 1.26 1.23
Cash dividends declared .... 0.36 0.32 0.69 0.62 0.56 0.51 0.42
- ----------------------
(1) Includes mortgage loans held for sale.
(2) Includes capital securities.
(3) Adjusted for the 10% stock dividend distributed on July 31, 1998.
24
RATIO OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratios of earnings to fixed charges for each
of the periods indicated are set forth below (unaudited):
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, --------------------------------
1998 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----
Earnings to Fixed Charges:
Excluding Interest on Deposits........... 2.56 2.52 2.48 2.31 3.24 3.98
Including Interest on Deposits........... 1.54 1.48 1.51 1.5 1.74 1.77
For purposes of computing the ratios of earnings to fixed charges,
earnings represent net income plus applicable income taxes and fixed charges.
Fixed charges, excluding interest on deposits, represent interest expense
(except interest on deposits), and one-third of rental expense (which is deemed
representative of the interest factor). Fixed charges, including interest on
deposits, represent the foregoing items plus interest on deposits.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company and its subsidiaries as of June 30, 1998. There has been no material
change in the capitalization of the Company since June 30, 1998. The following
data should be read in conjunction with the consolidated financial statements
and notes thereto of the Company and its subsidiaries incorporated herein by
reference. See "Incorporation of Certain Documents by Reference." Also show
below are certain consolidated regulatory capital ratios of the Company and its
subsidiaries at June 30, 1998. The issuance of the New Capital Securities in the
Exchange Offer will have no effect on the capitalization of the Company.
JUNE 30, 1998
-------------
(DOLLARS IN
THOUSANDS)
Long-term debt:
Direct obligations of Company .................... 279,441
Obligations of Company subsidiaries .............. 2,907,401
Total long-term debt .......................... 3,186,842
Company obligated mandatorily redeemable preferred
capital securities of subsidiary trusts ........ 300,000
Shareholders' equity:
Preferred stock .................................. --
Common stock ..................................... 1,528,768
Treasury stock ................................... (22,832)
Capital surplus .................................. 393,296
Accumulated other comprehensive income ........... 15,376
Retained earnings ................................ 219,241
Total shareholders' equity .................... 2,133,849
Total capitalization .......................... 5,620,691
Capital ratios:
Tier 1 capital to risk-adjusted assets ........... 7.18%
Total capital to risk-adjusted assets ............ 11.01%
Tier 1 Leverage .................................. 6.72%
25
USE OF PROCEEDS
Neither the Company nor the Trust will receive any proceeds from the
issuance of the New Capital Securities offered hereby. The Old Capital
Securities surrendered in exchange for the New Capital Securities will be
retired and canceled.
All of the net proceeds from the initial sale of the Capital Securities
in January 1997, which totaled approximately $197,246,000, were invested by the
Trust in the Old Subordinated Debentures. The net proceeds from the sale of the
Old Subordinated Debentures were or will be used by the Company for general
corporate purposes, including but not limited to the repayment of existing
indebtedness, the repurchase of the Company's stock, investments in, or
extensions of credit to, the Company's subsidiaries, the financing of possible
acquisitions, and general working capital. Although the Company does not intend
to use the proceeds of the Old Capital Securities for any pending acquisition,
the Company continues to explore opportunities to acquire banking and
non-banking companies, both interstate and intrastate. The precise amounts and
timing of the application of proceeds depend upon the funding requirements of
the Company and its subsidiaries and the availability of other funds. The
Company may engage in other financings in the future.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a
subsidiary of the Company and, accordingly, the accounts of the Trust will be
included in the consolidated financial statements of the Company. The Capital
Securities will be presented in the consolidated balance sheet of the Company as
a component of long term debt. The Company will record Distributions payable on
the Capital Securities as interest expense in its consolidated statement of
income.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF EXCHANGE OFFER
In connection with the initial sale of the Capital Securities in
January 1997, the Company and the Trust entered into the Registration Rights
Agreement with the Initial Purchasers, pursuant to which the Company and the
Trust agreed to file and to use their best efforts to cause to be declared
effective by the Commission a registration statement with respect to the
exchange of the Old Capital Securities for the New Capital Securities with terms
identical in all material respects to the terms of the Old Capital Securities,
except that the New Capital Securities (i) would be registered under the
Securities Act and therefore would not be subject to certain restrictions on
transfer applicable to the Old Capital Securities, and (ii) would not provide
for any increase in the distribution rate thereon if the Initial Exchange was
consummated by September 11, 1997. The Initial Exchange was consummated on
September 9, 1997. As a result of the Initial Exchange, all but $15 million
aggregate Liquidation Amount of New Capital Securities were exchanged for Old
Capital Securities. The remaining $15 million aggregate Liquidation Amount of
Old Capital Securities is held by Manufacturers and Traders Trust Company. The
current Exchange Offer is being made to permit Manufacturers and Traders Trust
Company to exchange the Old Capital Securities held by it for New Capital
Securities. Manufacturers and Traders Trust Company has agreed to pay all
expenses related to the current Exchange Offer.
The Exchange Offer is not being made to, nor will the Trust or the
Company accept tenders for exchange from, holders of Old Capital Securities in
any jurisdiction in which the Exchange Offer or the acceptance thereof would not
be in compliance with the securities or blue sky laws of such jurisdiction.
26
Unless the context requires otherwise, the term "holder" with respect
to the Exchange Offer means any person in whose name the Old Capital Securities
are registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Capital Securities are held of record by DTC who desires to deliver such Old
Capital Securities by book-entry transfer at DTC.
The New Guarantee and the New Subordinated Debentures will not be
affected by the current Exchange Offer.
TERMS OF EXCHANGE
The Trust hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $15,000,000 aggregate Liquidation Amount of New Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
properly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with the procedures described below. The Trust will issue,
promptly after the Expiration Date, an aggregate Liquidation Amount of up to
$15,000,000 of New Capital Securities in exchange for a like aggregate
Liquidation Amount of outstanding Old Capital Securities tendered and accepted
in connection with the Exchange Offer. Holders may tender their Old Capital
Securities in whole or in part in a Liquidation Amount of not less than $100,000
or any integral multiple of $1,000 in excess thereof, provided that if any Old
Capital Securities are tendered in exchange for part, the untendered Liquidation
Amount must be $100,000 or any integral multiple of $1,000 in excess thereof.
Each holder of Old Capital Securities who tenders such Old Capital Securities
pursuant to this Exchange Offer will, by participating in the Exchange Offer and
executing the Letter of Transmittal, be deemed to have agreed and consented to
(A) this transfer restriction on the New Capital Securities, and (B) the
placement of a legend to the foregoing effect on each certificate evidencing the
New Capital Securities, which agreement and consent shall be binding upon such
holder and all successors and assigns.
The Exchange Offer is not conditioned upon any minimum Liquidation
Amount of Old Capital Securities being tendered. As of the date of this
Prospectus, $15,000,000 aggregate Liquidation Amount of the Old Capital
Securities is outstanding.
Holders of Old Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Old Capital Securities
which are not tendered for or are tendered but not accepted in connection with
the Exchange Offer will remain outstanding and be entitled to the benefits of
the Declaration. See "Risk Factors -- Consequences of a Failure to Exchange Old
Capital Securities" and "Description of Old Securities."
If any tendered Old Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Capital Securities
will be returned, without expense, to the tendering holder thereof promptly
after the Expiration Date.
Holders who tender Old Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Old Capital Securities in connection with the
Exchange Offer. Manufacturers and Traders Trust Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See " -- Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR ANY DECLARATION
TRUSTEE MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL SECURITIES AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD
CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL SECURITIES
MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER
AND, IF SO, THE AGGREGATE AMOUNT OF OLD CAPITAL SECURITIES TO TENDER AFTER
READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR
ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
27
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Exchange Offer will expire on the Expiration Date which will occur
at 5:00 p.m., New York City time, on ___________, 1998, unless the Exchange
Offer is extended by the Company and the Trust (in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended).
The Company and the Trust expressly reserve the right in their sole
discretion, subject to applicable law, at any time and from time to time, (i) to
delay the acceptance of the Old Capital Securities for exchange, (ii) to
terminate the Exchange Offer (whether or not any Old Capital Securities have
theretofore been accepted for exchange) if the Company and the Trust determine,
in their sole discretion, that any of the events or conditions referred to under
" -- Conditions to the Exchange Offer" have occurred or exist or have not been
satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain
all Old Capital Securities tendered pursuant to the Exchange Offer, subject,
however, to the right of holders of Old Capital Securities to withdraw their
tendered Old Capital Securities as described under "--Withdrawal Rights," and
(iv) to waive any condition or otherwise amend the terms of the Exchange Offer
in any respect. If the Exchange Offer is amended in a manner determined by the
Company and the Trust to constitute a material change, or if the Company and the
Trust waive a material condition of the Exchange Offer, the Company and the
Trust will promptly disclose such amendment by means of an amended or
supplemented Prospectus that will be distributed to the registered holders of
the Old Capital Securities, and the Company and the Trust will extend the
Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination, or amendment will
be followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof. Such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company and the Trust may choose to make any public
announcement and subject to applicable law, the Company and the Trust shall have
no obligation to publish, advertise, or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange New Capital Securities for Old Capital Securities validly
tendered and not withdrawn (pursuant to the withdrawal rights described under "
- -- Withdrawal Rights") promptly after the Expiration Date.
In all cases, delivery of New Capital Securities in exchange for Old
Capital Securities tendered and accepted for exchange pursuant to the Exchange
Offer will be made only after timely receipt (i) by the Exchange Agent of Old
Capital Securities or by the Exchange Agent of a book-entry confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's account
at DTC, including an Agent's Message if the tendering holder has not delivered a
Letter of Transmittal, (ii) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees or
(in the case of a book-entry transfer) an Agent's Message in lieu of the Letter
of Transmittal, and (iii) any other documents required by the Letter of
Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's account
at DTC. The term "Agent's Message" means a message, transmitted by DTC to and
received by the Exchange Agent and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the tendering
participant, which acknowledgment states that such participant has received and
agrees to be bound by the Letter of Transmittal and that the Trust and the
Company may enforce such Letter of Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Company
and the Trust will be deemed to have accepted for exchange, and thereby
exchanged, Old Capital Securities validly tendered and not withdrawn as, if, and
28
when the Trust gives oral or written notice to the Exchange Agent of the
Company's and the Trust's acceptance of such Old Capital Securities for exchange
pursuant to the Exchange Offer. The Exchange Agent will act as agent for the
Company and the Trust for the purpose of receiving tenders of Old Capital
Securities, Letters of Transmittal, and related documents, and as agent for
tendering holders for the purpose of receiving Old Capital Securities, Letters
of Transmittal, and related documents and transmitting New Capital Securities to
validly tendering holders. Such exchange will be made promptly after the
Expiration Date. If for any reason whatsoever, acceptance for exchange or the
exchange of any Old Capital Securities tendered pursuant to the Exchange Offer
is delayed (whether before or after the Company's and the Trust's acceptance for
exchange of Old Capital Securities) or the Company and the Trust extend the
Exchange Offer or are unable to accept for exchange or exchange Old Capital
Securities tendered pursuant to the Exchange Offer, then, without prejudice to
the Company's and the Trust's rights set forth herein, the Exchange Agent may,
nevertheless, on behalf of the Company and the Trust and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Old Capital Securities and such
Old Capital Securities may not be withdrawn except to the extent tendering
holders are entitled to withdrawal rights as described under " -- Withdrawal
Rights."
Pursuant to the Letter of Transmittal or Agent's Message in lieu
thereof, a holder of Old Capital Securities will warrant and agree in the Letter
of Transmittal that it has full power and authority to tender, exchange, sell,
assign, and transfer Old Capital Securities, that the Trust will acquire good,
marketable, and unencumbered title to the tendered Old Capital Securities, free
and clear of all liens, restrictions, charges, and encumbrances, and the Old
Capital Securities tendered for exchange are not subject to any adverse claims
or proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Company, the Trust,
or the Exchange Agent to be necessary or desirable to complete the exchange,
sale, assignment, and transfer of the Old Capital Securities tendered pursuant
to the Exchange Offer.
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
VALID TENDER. Except as set forth below, in order for Old Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees, or (in the case of a book-entry tender) an
Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must be received by the Exchange Agent at its address set forth under
" -- Exchange Agent" and either (i) tendered Old Capital Securities must be
received by the Exchange Agent, or (ii) such Old Capital Securities must be
tendered pursuant to the procedures for book-entry transfer set forth below and
a book-entry confirmation, including an Agent's Message if the tendering holder
has not delivered a Letter of Transmittal, must be received by the Exchange
Agent, in each case on or prior to the Expiration Date, or (iii) the guaranteed
delivery procedures set forth below must be complied with.
If less than all of the Old Capital Securities are tendered, a
tendering holder should fill in the amount of Old Capital Securities being
tendered in the appropriate box on the Letter of Transmittal and the untendered
Liquidation Amount must be $100,000 or any integral multiple of $1,000 in excess
thereof. The entire amount of Old Capital Securities delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated.
If less than all of the Old Capital Securities are tendered, a
tendering holder should fill in the amount of Old Capital Securities being
tendered in the appropriate box on the Letter of Transmittal. The entire amount
of Old Capital Securities delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL, AND
ALL OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. HAND DELIVERY, REGISTERED MAIL, RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OTHER DOCUMENTS SHOULD BE SENT TO THE COMPANY OR THE TRUST.
29
BOOK ENTRY TRANSFER. The Exchange Agent will establish an account with
respect to the Old Capital Securities at DTC for purposes of the Exchange Offer
within two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Old Capital Securities by causing DTC to
transfer such Old Capital Securities into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfers. However, although delivery of
Old Capital Securities may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any
other required documents, must in any case be delivered to and received by the
Exchange Agent at its address set forth under " -- Exchange Agent" on or prior
to the Expiration Date, or the guaranteed delivery procedures set forth below
must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES. Certificates for the Old Capital Securities need
not be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (i) a certificate for the Old Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (ii) such registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (i) or (ii) above, such certificates for Old Capital Securities
must be duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the Letter of Transmittal
guaranteed by a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer, or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association,
or clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association (an "Eligible Institution"), unless surrendered
on behalf of such Eligible Institution. See Instruction 1 to the Letter of
Transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Old Capital
Securities pursuant to the Exchange Offer and the certificates for such Old
Capital Securities are not immediately available or time will not permit all
required documents to reach the Exchange Agent on or before the Expiration Date,
or the procedures for book-entry transfer cannot be completed on a timely basis,
such Old Capital Securities may nevertheless be tendered, provided that all of
the following guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of
Transmittal, is received by the Exchange Agent, as provided
below, on or prior to Expiration Date; and
(iii) the certificates (or a book-entry confirmation) representing
all tendered Old Capital Securities, in proper form for
transfer, together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof or Agent's Message
in lieu thereof), with any required signature guarantees and
any other documents required by the Letter of Transmittal, are
received by the Exchange Agent within three trading days after
the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a
book-entry confirmation with respect to such Old Capital Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile thereof
or Agent's Message in lieu thereof), together with any required signature
guarantees and any other documents required by the Letter of Transmittal.
Accordingly, the delivery of New Capital Securities might not be made to all
tendering holders at the
30
same time, and will depend upon when Old Capital Securities, book-entry
confirmations with respect to Old Capital Securities, and other required
documents are received by the Exchange Agent.
The Company's and the Trust's acceptance for exchange of Old Capital
Securities tendered pursuant to any of the procedures described above will
constitute a binding agreement among the tendering holder, the Company, and the
Trust upon the terms and subject to the conditions of the Exchange Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents,
validity, eligibility (including time of receipt), and acceptance for exchange
of any tendered Old Capital Securities will be determined by the Company and the
Trust, in their sole discretion, whose determination shall be final and binding
on all parties. The Company and the Trust reserve the absolute right, in their
sole discretion, to reject any and all tenders determined by them not to be in
proper form or the acceptance of which, or exchange for, may, in the view of
counsel to the Company or the Trust, be unlawful. The Company and the Trust also
reserve the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer as set forth under " -- Conditions to the
Exchange Offer" or any condition or irregularity in any tender of Old Capital
Securities of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders.
The Company's and the Trust's interpretation of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Old Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. None of the Company, the
Trust, any affiliates or assigns of the Company or the Trust, the Exchange
Agent, nor any other person shall be under any duty to give any notification of
any irregularities in tenders or incur any liability for failure to give any
such notification.
If any Letter of Transmittal, endorsement, bond power, power of
attorney, or any other document required by the Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation, or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Trust,
proper evidence satisfactory to the Company and the Trust, in their sole
discretion, of such person's authority to so act must be submitted.
A beneficial owner of Old Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company, or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
RESALES OF NEW CAPITAL SECURITIES
The Trust is making the Exchange Offer for the Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance of
the Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, neither the Company nor the Trust sought
its own interpretive letter, and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Division of Corporation Finance, and subject to the two immediately following
sentences, the Company and the Trust believe that New Capital Securities issued
pursuant to this Exchange Offer in exchange for Old Capital Securities may be
offered for resale, resold, and otherwise transferred by a holder thereof (other
than a holder who is a broker-dealer) without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such New Capital Securities are acquired in the ordinary course of
such holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such New Capital Securities.
However, any holder of Old Capital Securities who is an Affiliate or who intends
to participate in the Exchange Offer for the purpose of distributing New Capital
Securities, or any broker-dealer who purchased Old Capital Securities from the
Trust to resell pursuant to Rule 144A or any other available exemption under the
Securities Act, (i) will not be able to rely on the interpretations of the staff
of the Division of Corporation Finance of the Commission set forth in the
31
above-mentioned interpretive letters, (ii) will not be permitted or entitled to
tender such Old Capital Securities in the Exchange Offer, and (iii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any sale or other transfer of such Old Capital Securities
unless such sale is made pursuant to an exemption from such requirements. In
addition, as described below, Participating Broker-Dealers must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old
Capital Securities for New Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an Affiliate, (ii) any New Capital
Securities to be received by it are being acquired in the ordinary course of its
business, (iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
New Capital Securities, and (iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such New Capital Securities. The
Letter of Transmittal contains the foregoing representations. In addition, the
Company and the Trust may require such holder, as a condition to such holder's
eligibility to participate in the Exchange Offer, to furnish to the Company and
the Trust (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act) on
behalf of whom such holder holds the Old Capital Securities to be exchanged in
the Exchange Offer. Each Participating Broker-Dealer will be deemed to have
acknowledged by execution of the Letter of Transmittal or delivery of an Agent's
Message that it acquired the Old Capital Securities for its own account as the
result of market-making activities or other trading activities and must agree
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such New Capital Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Based on the position
taken by the staff of the Division of Corporation Finance of the Commission in
the interpretive letters referred to above, the Company and the Trust believe
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the New Capital Securities received upon exchange
of such Old Capital Securities (other than Old Capital Securities which
represent an unsold allotment from the original sale of the Old Capital
Securities) with a prospectus meeting the requirements of the Securities Act,
which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale of
such New Capital Securities.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Capital Securities
may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective, a written, telegraphic,
telex, or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at its address set forth under " -- Exchange
Agent" on or prior to the Expiration Date. Any such notice of withdrawal must
specify the name of the person who tendered the Old Capital Securities to be
withdrawn, the aggregate principal amount of Old Capital Securities to be
withdrawn, and (if certificates for such Old Capital Securities have been
tendered) the name of the registered holder of the Old Capital Securities as set
forth on the Old Capital Securities, if different from that of the person who
tendered such Old Capital Securities. If Old Capital Securities have been
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Old Capital Securities, the tendering holder must
submit the certificate numbers shown on the particular Old Capital Securities to
be withdrawn and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution, except in the case of Old Capital Securities tendered
for the account of an Eligible Institution. If Old Capital Securities have been
tendered pursuant to the procedures for book-entry transfer set forth in
"--Procedures for Tendering Old Capital Securities," the notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawal of Old Capital Securities, in which case a notice of withdrawal will
be effective if delivered to the Exchange Agent by written, telegraphic, telex,
or facsimile transmission. Withdrawals of tenders of Old Capital Securities may
not be rescinded. Old Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described above under " -- Procedures for Tendering Old Capital
Securities."
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All questions as to the validity, form, and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Company and the
Trust, in their sole discretion, whose determination shall be final and binding
on all parties. None of the Company, the Trust, any affiliates or assigns of the
Company or the Trust, the Exchange Agent, or any other person shall be under any
duty to give any notification of any irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification. Any Old
Capital Securities which have been tendered but which are withdrawn will be
returned to the holder thereof promptly after withdrawal.
DISTRIBUTIONS ON NEW CAPITAL SECURITIES
Holders of Old Capital Securities whose Old Capital Securities are
accepted for exchange will not receive accumulated Distributions on such Old
Capital Securities for any period from and after the last Distribution Date with
respect to such Old Capital Securities prior to the original issue date of the
New Capital Securities and will be deemed to have waived the right to receive
any Distributions on such Old Capital Securities accumulated from and after such
Distribution Date.
CONDITIONS TO EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company and the Trust will not be required
to accept for exchange, or to exchange, any Old Capital Securities for any New
Capital Securities, and, as described below, may terminate the Exchange Offer
(whether or not any Old Capital Securities have theretofore been accepted for
exchange) or may waive any conditions to or amend the Exchange Offer, if any of
the following conditions have occurred or exists or have not been satisfied:
(a) there shall occur a change in the current interpretation by
the staff of the Commission which permits the New Capital
Securities issued pursuant to the Exchange Offer in exchange
for Old Capital Securities to be offered for resale, resold,
and otherwise transferred by holders thereof (other than
broker-dealers and any such holder which is an Affiliate)
without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such
New Capital Securities are acquired in the ordinary course of
such holders' business and such holders have no arrangement or
understanding with any person to participate in the
distribution of such New Capital Securities;
(b) any action or proceeding shall have been instituted or
threatened in any court or by or before any governmental
agency or body with respect to the Exchange Offer which, in
the Company's and the Trust's judgment, would reasonably be
expected to impair the ability of the Trust or the Company to
proceed with the Exchange Offer;
(c) any law, statute, rule, or regulation shall have been adopted
or enacted which, in the Company's and the Trust's judgment,
would reasonably be expected to impair the ability of the
Trust or the Company to proceed with the Exchange Offer;
(d) a banking moratorium shall have been declared by United States
federal or Ohio or New York State authorities which, in the
Company's and the Trust's judgment, would reasonably be
expected to impair the ability of the Trust or the Company to
proceed with the Exchange Offer;
(e) trading generally in the United States over-the-counter market
shall have been suspended by order of the Commission or any
other governmental authority which, in the Company's and the
Trust's judgment, would reasonably be expected to impair the
ability of the Trust or the Company to proceed with the
Exchange Offer;
(f) a stop order shall have been issued by the Commission or any
state securities authority suspending the effectiveness of the
Registration Statement or proceedings shall have been
initiated or, to the knowledge of the Company or the Trust,
threatened for that purpose any governmental approval has
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not been obtained, which approval the Company and the Trust
shall deem necessary for the consummation of the Exchange
Offer as contemplated hereby; or
(g) any change, or any development involving a prospective change,
in the business or financial affairs of the Trust or the
Company or any of its subsidiaries has occurred which, in the
judgment of the Company and the Trust, might materially impair
the ability of the Trust or the Company to proceed with the
Exchange Offer.
If the Company and the Trust determine in their sole discretion that
any of the foregoing events or conditions has occurred or exists or has not been
satisfied, the Company and the Trust may, subject to applicable law, terminate
the Exchange Offer (whether or not any Old Capital Securities have theretofore
been accepted for exchange) or may waive any such condition or otherwise amend
the terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Company and the Trust
will promptly disclose such waiver by means of an amended or supplemented
Prospectus that will be distributed to the registered holders of the Old Capital
Securities, and the Company and the Trust will extend the Exchange Offer to the
extent required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent as follows:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Global Trust Services
Telephone: (212) 946-3042
Facsimile: (212) 946-8154
FEES AND EXPENSES
Manufacturers and Traders Trust Company has agreed to pay or reimburse
the Company for any payments made to any third-party for services rendered in
connection with the Exchange Offer.
Holders who tender their Old Capital Securities for exchange will not
be obligated to pay any transfer taxes in connection therewith. If, however, New
Capital Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Capital Securities
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Capital Securities in connection with the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
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DESCRIPTION OF NEW SECURITIES
DESCRIPTION OF CAPITAL SECURITIES
Pursuant to the terms of the Declaration, the Trust has issued the Old
Capital Securities, the New Capital Securities issued in connection with the
Initial Exchange, and the Common Securities and will issue the New Capital
Securities in connection with this Exchange Offer. The New Capital Securities
will represent undivided beneficial ownership interests in the assets of the
Trust and the holders thereof will be entitled to a preference over the Common
Securities in certain circumstances with respect to Distributions and amounts
payable on redemption of the Trust Securities or liquidation of the Trust, as
well as other benefits as described in the Declaration. The Declaration has been
qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). This summary of certain provisions of the Capital Securities,
the Common Securities, and the Declaration does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, all the
provisions of the Declaration, including the definitions therein of certain
terms, and the Trust Indenture Act. Wherever particular defined terms of the
Declaration (as supplemented or amended from time to time) are referred to
herein, the definitions of such defined tenus are incorporated herein by
reference.
GENERAL
The Capital Securities (including the Old Capital Securities and the
New Capital Securities) are limited to $200,000,000 aggregate Liquidation Amount
at any one time outstanding. The Capital Securities rank pari passu, and
payments will be made thereon pro rata, with the Common Securities, except as
described under "-- Subordination of Common Securities." Legal title to the
Subordinated Debentures is held by the Property Trustee in trust for the benefit
of the holders of the Capital Securities and the Common Securities. The
Guarantee Agreement executed by the Company for the benefit of the holders of
the Capital Securities is a guarantee on a subordinated basis with respect to
the Capital Securities but does not guarantee payment of Distributions or
amounts payable on redemption of the Capital Securities or liquidation of the
Trust when the Trust does not have sufficient funds available to make such
payments. See "-- Description of Guarantee." The Company's obligations under the
Guarantee, taken together with its obligations under the Subordinated Debentures
and the Indenture, including its obligation to pay all costs, expenses, and
liabilities of the Trust (other than with respect to the Capital Securities),
constitute a full and unconditional guarantee of all of the Trust's obligations
under the Capital Securities.
Holders of the Capital Securities have no preemptive or similar rights.
DISTRIBUTIONS
Distributions on each Capital Security are payable in U.S. dollars at a
variable annual rate equal to LIBOR plus .70% (which is the same rate payable on
the Subordinated Debentures) on the Liquidation Amount of $1,000, payable
quarterly in arrears on the last day of January, April, July, and October of
each year. See "-- Description of Subordinated Debentures -- Interest." The
first Distribution Date was April 30, 1997. The final Distributions will be
payable on February 1, 2027, and will accumulate from the last Distribution Date
prior to such date up to and including January 31, 2027. The amount of
Distributions payable for any period will be computed on the basis of the actual
number of days elapsed in a year of twelve 30-day months.
Distributions on the Capital Securities must be paid on the dates
payable to the extent that the Trust has funds available for the payment of such
Distributions. The revenue of the Trust available for distribution to holders of
its Capital Securities will be limited to payments under the Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Capital Securities and the Common Securities. See "-- Description of
Subordinated Debentures." If the Company does not make interest payments on the
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Capital Securities.
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The Company will have the right under the Indenture to defer the
payment of interest on the Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters, provided that no
Extension Period may extend beyond the Stated Maturity of the Subordinated
Debentures. Accordingly, there could be multiple Extension Periods of varying
lengths throughout the term of the Subordinated Debentures. As a consequence of
any such extension, quarterly Distributions on the Capital Securities will be
deferred by the Trust during any such Extension Period. Distributions to which
holders of the Capital Securities are entitled will accumulate and compound
quarterly at a variable annual rate equal to LIBOR plus .70% from the relevant
payment date for such Distributions. The term "Distributions" as used herein
shall include any such compounded amounts unless the context otherwise requires.
During any such Extension Period, the Company may not, and may 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, repurchase, or redeem any debt
securities of the Company that rank pari passu with or junior to the
Subordinated Debentures 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 with or junior in interest to the
Subordinated Debentures (other than (a) repurchases, redemptions, or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan, or other similar arrangement with or for the
benefit of any one or more employees, officers, directors, or consultants, or in
connection with a dividend reinvestment or stockholder stock purchase plan, (b)
as a result of an exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
other class or series of the Company's capital stock or of any class or series
of the Company's indebtedness for any class or series of the Company's capital
stock, (c) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholders' rights plan, or the issuance of
rights, stock, or other property under any stockholders' rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options, or other rights where the dividend stock or
the stock issuable upon exercise of such warrants, options, or other rights is
the same stock as that on which the dividend is being paid (or ranks pari passu
with or junior to such stock)). Prior to the termination of any such Extension
Period, the Company may further extend the Extension Period, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Subordinated Debentures. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period subject to the
foregoing requirements. See "-- Description of Subordinated Debentures -- Option
to Extend Interest Payment Period." The Company has no current intention of
exercising its right to defer payments of interest by extending the interest
payment period of the Subordinated Debentures.
The Property Trustee will cause the rate of Distributions, the amount
of Distributions, the payment dates for each Distribution, and the Extension
Period, if any, to be provided to the Luxembourg Stock Exchange and published in
a daily newspaper in Luxembourg (which is expected to be the Luxemburger Wort)
as soon as possible after the determination thereof.
In the event that any date on which Distributions are payable on the
Capital Securities is not a Business Day (as defined below), then payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day (and without any additional Distributions or other payment in
respect of any such delay), with the same force and effect as if made on the
date such payment was originally payable (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 or the City of Columbus 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 Indenture
Trustee is closed for business.
Distributions on the Capital Securities (other than distributions on a
Redemption Date (as defined herein)) are payable to the holders thereof as they
appear on the register of the Trust on the relevant record dates, which is the
fifteenth day of the month of the relevant Distribution Date. Distributions
payable on any Capital Securities that are not punctually paid on any
Distribution Date will cease to be payable to the person in whose name such
Capital Securities are registered on the relevant record date, and such
defaulted Distribution will instead be payable to the person
36
in whose name such Capital Securities are registered on the special record date
or other specified date determined in accordance with the Declaration.
REDEMPTION
Mandatory Redemption. Unless a Special Event has occurred, the Capital
Securities will not be redeemable prior to February 1, 2007. The Capital
Securities and the Common Securities will mature at their stated amount of
$1,000 per Trust Security (the "Liquidation Amount"), unless redeemed prior
thereto, on February 1, 2027. Upon the repayment or redemption, in whole or in
part, of the Subordinated Debentures, whether at Stated Maturity or upon earlier
redemption as provided in the Indenture, the proceeds from such repayment or
redemption shall be applied by the Property Trustee to redeem Capital Securities
and Common Securities upon not less than 30 nor more than 60 days' notice prior
to the date fixed for repayment or redemption. If less than all of the
Subordinated Debentures are to be repaid or redeemed on a Redemption Date, then
the proceeds from such repayment or redemption shall be allocated to the
redemption pro rata of the Capital Securities and the Common Securities.
Special Event Redemption or Distribution of Subordinated Debentures. If
a Special Event shall occur and be continuing, the Company will have the right,
subject to the receipt of any necessary prior approval of the Federal Reserve,
to either (i) redeem within 90 days following the occurrence of such Special
Event the Subordinated Debentures on the date of redemption (the "Redemption
Date") in whole (but not in part) and thereby cause a mandatory redemption of
the Capital Securities in whole (but not in part) at a redemption price with
respect to the Capital Securities equal to the redemption price in respect of
the Subordinated Debentures or (ii) to dissolve the Trust and, after
satisfaction of the claims of creditors of the Trust as provided by applicable
law, cause the Subordinated Debentures to be distributed to the holders of the
Capital Securities in liquidation of the Trust. Under current United States
federal income tax law and interpretations thereof and assuming, as expected,
the Trust is treated as a grantor trust, a distribution of the Subordinated
Debentures should not be a taxable event to holders of the Capital Securities.
Should there be a change in law, a change in legal interpretation, certain Tax
Events, or other circumstances, however, the distribution could be a taxable
event to holders of the Capital Securities. See "Certain United States Federal
Income Tax Consequences -- Distribution of Subordinated Debentures or Cash Upon
Liquidation of the Trust."
If the Company does not elect either option described above, the
Capital Securities will remain outstanding until the repayment of the
Subordinated Debentures, whether at Stated Maturity or their earlier redemption,
and in the event a Tax Event has occurred and is continuing, the Company will be
obligated to pay any additional taxes, duties, assessments, and other
governmental charges (other than withholding taxes) to which the Trust has
become subject as a result of a Tax Event.
A Special Event means a Tax Event, a Regulatory Capital Event, or an
Investment Company Event. A "Tax Event" means the receipt by the Company of an
opinion of counsel, rendered by a law firm experienced in such matters, to the
effect that, as a result of any amendment to, change in, or announced proposed
change in the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
adopted or which proposed change, pronouncement, or action or decision is
announced or which action is taken on or after the date of original issuance of
the Capital Securities, there is more than an insubstantial risk that (i) the
Trust is, or will be within 90 days of the date of such opinion, subject to
United States federal income tax with respect to income received or accrued on
the Subordinated Debentures, (ii) interest payable by the Company on such
Subordinated Debentures 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 Trust is, or will be within 90 days of
the date of such opinion, subject to more than a de minimis amount of other
taxes, duties, or other governmental charges. A "Regulatory Capital Event" means
that the Company shall have received an opinion of independent bank regulatory
counsel experienced in such matters to the effect that, as a result of (a) any
amendment to or change (including any announced prospective change) in the laws
(or any regulations thereunder) of the United States or any rules, guidelines,
or policies of the Federal Reserve or (b) any official or administrative
pronouncement or action or judicial decision interpreting or applying such laws
or regulations, which amendment or change is effective
37
or such pronouncement or action or decision is announced on or after the date of
original issuance of the Capital Securities, the Capital Securities do not
constitute, or within 90 days of the date thereof, will not constitute Tier 1
capital (or its then equivalent); provided, however, that the distribution of
the Subordinated Debentures in connection with the liquidation of the Trust by
the Company shall not in and of itself constitute a Regulatory Capital Event
unless such liquidation shall have occurred in connection with a Tax Event or an
Investment Company Event. "Investment Company Event" means the receipt by the
Trust of an opinion of counsel, rendered by a law firm experienced in such
matters, to the effect that, as a result of the occurrence of a change in law or
regulation or 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 Trust is or will be considered an "investment
company" that is required to be registered under the Investment Company Act of
1940, as amended, which Change in 1940 Act Law becomes effective on or after the
date of original issuance of the Capital Securities.
REDEMPTION PROCEDURES
Capital Securities redeemed on each Redemption Date shall be redeemed
at the redemption price received by the Trust in respect of the Subordinated
Debentures (the "Redemption Price") with the applicable proceeds from the
contemporaneous redemption or payment at Stated Maturity of the Subordinated
Debentures. Redemption of the Capital Securities shall be made and the
Redemption Price shall be payable on each Redemption Date only to the extent
that the Trust has sufficient funds available for the payment of such Redemption
Price. See also "-- Subordination of Common Securities."
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 Capital Securities to
be redeemed at its registered address. If the Trust gives a notice of redemption
in respect of the Capital Securities, then, by 12:00 noon, New York City time,
on the Redemption Date, to the extent funds are available, the Property Trustee
will deposit irrevocably with DTC or its nominee funds sufficient to pay the
applicable Redemption Price for all securities held in DTC and will give DTC
irrevocable instructions and authority to pay the Redemption Price to the
holders of the Capital Securities held through DTC. See "Book-Entry Issuance."
If any Capital Securities are held in certificated form, the Trust, to the
extent funds are available, will irrevocably deposit with the paying agent for
such Capital Securities funds sufficient to pay the applicable Redemption Price
and will give the paying agent irrevocable instructions and authority to pay the
Redemption Price to the holders thereof upon surrender of their certificates
evidencing the Capital Securities. Notwithstanding the foregoing, Distributions
payable on or prior to the Redemption Date for any Capital Security called for
redemption shall be payable to the holders of such Capital Security on the
relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then upon the
date of such deposit, all rights of the holders of such Capital Securities so
called for redemption will cease, except the right of the holders of such
Capital Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such Capital Securities will cease to be outstanding. In
the event that any date fixed for redemption of Capital Securities is not a
Business Day, then payment of the Redemption Price payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date such payment was originally payable. In the event that
payment of the Redemption Price in respect of Capital Securities called for
redemption is improperly withheld or refused and not paid either by the Trust or
by the Company pursuant to the Guarantee Agreement as described under "--
Description of Guarantee," Distributions on such Capital Securities will
continue to accrue at the then applicable rate, from the Redemption Date
originally established by the Trust for the Capital Securities to the date such
Redemption Price is actually paid, in which case the actual payment date will be
the date fixed for redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law) and to the provisions of the Declaration, the Company or
its subsidiaries may at any time and from time to time purchase outstanding
Capital Securities by tender, in the open market, or by private agreement.
38
The Trust may not redeem fewer than all of the outstanding Capital
Securities unless all accrued and unpaid Distributions have been paid on all
Capital Securities for all quarterly distribution periods terminating on or
prior to the date of redemption. If less than all of the Capital Securities and
Common Securities issued by the Trust are to be redeemed on a Redemption Date,
then the aggregate amount of such Capital Securities and Common Securities to be
redeemed shall be allocated pro rata among the Capital Securities and the Common
Securities. If the Capital Securities are in book-entry form, they will be
redeemed as described below under "Book-Entry Issuance." If not, the particular
Capital Securities to be redeemed shall be selected on a pro rata basis not more
than 60 days prior to the Redemption Date by the Property Trustee from the
outstanding Capital Securities not previously called for redemption, by such
method as the Property Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $1,000 or an
integral multiple of $1,000 in excess thereof) of the Liquidation Amount of
Capital Securities of a denomination larger than $1,000. The Property Trustee
shall promptly notify the Trust registrar in writing of the Capital Securities
selected for redemption and, in the case of any Capital Security selected for
partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of the Declaration, unless the context otherwise requires, all
provisions relating to the redemption of Capital Securities shall relate, in the
case of any Capital Security redeemed or to be redeemed only in part, to the
portion of the aggregate Liquidation Amount of Capital Securities which has been
or is to be redeemed.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and the Common Securities, as applicable, shall be made pro rata
based on the Liquidation Amount of such Capital Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date an Indenture Event of Default shall have occurred and be continuing, no
payment of any Distribution on, or Redemption Price of, any of the 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
outstanding Capital Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price, the full
amount of such Redemption Price on all of the outstanding Capital Securities
then called for redemption, shall have been made or provided for, and all funds
available to the Property Trustee shall first be applied to the payment in full
in cash of all Distributions on, or Redemption Price of, the Capital Securities
then due and payable.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Declaration, the Trust shall automatically dissolve
upon expiration of its term and shall dissolve on the first to occur of: (i) any
liquidation, insolvency, or similar proceeding with respect to the Company or
all or substantially all of its property, (ii) the distribution of the
Subordinated Debentures to the holders of the Capital Securities and Common
Securities; (iii) the repayment of all of the Capital Securities in connection
with the maturity or redemption of all of the Subordinated Debentures; and (iv)
the entry by a court of competent jurisdiction of an order for the dissolution
of the Trust. Notice of such liquidation shall be given to the holders of the
Common Securities and Capital Securities by the Declaration Trustees within 30
days of such event.
If an early dissolution occurs as described in clause (i), (ii), or
(iv) above, the Trust shall be liquidated by the Declaration Trustees as
expeditiously as the Declaration Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the holders of the Capital Securities and Common
Securities their pro rata interest in the Subordinated Debentures, unless such
distribution is determined by the Property Trustee not to be practicable, in
which event such holders will be entitled to receive out of the assets of the
Trust available for distribution to holders, after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, an amount equal to, in
the case of holders of Capital 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 the Trust has insufficient assets
available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by the Trust on the
39
Capital Securities shall be paid on a pro rata basis. The holder of the Common
Securities will be entitled to receive distributions upon any such liquidation
pro rata with the holders of the Capital Securities, except that if an Indenture
Event of Default has occurred and is continuing, the Capital Securities shall
have a priority over the Common Securities.
Upon any liquidation in which the Subordinated Debentures are
distributed, if at any time of such liquidation the Capital Securities are (i)
rated by at least one nationally recognized statistical rating organization,
(ii) listed on the Luxembourg Stock Exchange, or (iii) eligible for quotation in
PORTAL, the Company shall use its best efforts to (a) obtain from at least one
nationally recognized statistical rating organization, a rating for the
Subordinated Debentures, (b) list the Subordinated Debentures on the Luxembourg
Stock Exchange, or (c) qualify the Subordinated Debentures for quotation in
PORTAL, as the case may be.
After the liquidation date is fixed for any distribution of
Subordinated Debentures to holders of the Capital Securities (i) the Capital
Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee,
as a record holder of Capital Securities, will receive a registered global
certificate or certificates representing the Subordinated Debentures to be
delivered to it upon such distribution, and (iii) any certificates representing
Capital Securities held in certificated form will be deemed to represent
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of such Capital Securities, and bearing accrued and unpaid interest in an
amount equal to the accrued and unpaid Distributions on such Capital Securities
until such certificates are presented for cancellation whereupon the Company
will issue to such holder, and the Indenture Trustee will authenticate, a
certificate representing such Subordinated Debentures.
TRUST ENFORCEMENT EVENTS
An Indenture Event of Default constitutes a "Trust Enforcement Event"
under the Declaration with respect to the Trust Securities, provided that
pursuant to the Declaration, the holder of the Common Securities will be deemed
to have waived any Trust Enforcement Event with respect to the Common Securities
until all Trust Enforcement Events with respect to the Capital Securities have
been cured, waived, or otherwise eliminated. Until such Trust Enforcement Event
with respect to the Capital Securities has been so cured, waived, or otherwise
eliminated, the Property Trustee will be deemed to be acting solely on behalf of
the holders of the Capital Securities and only the holders of the Capital
Securities will have the right to direct the Property Trustee with respect to
certain matters under the Declaration, and therefore the Indenture.
Upon the occurrence of a Trust Enforcement Event, the Indenture Trustee
or the Property Trustee as the holder of the Subordinated Debentures will have
the right under the Indenture to declare the principal of and interest on the
Subordinated Debentures to be immediately due and payable. Each of the Company
and the Trust is required to file annually with the Property Trustee an
officer's certificate as to its compliance with all conditions and covenants
under the Declaration.
If the Property Trustee fails to enforce its rights with respect to the
Subordinated Debentures held by the Trust, any record holder of Capital
Securities may, to the fullest extent permitted by law, institute legal
proceedings directly against the Company to enforce the Property Trustee's
rights under such Subordinated Debentures without first instituting any legal
proceedings against such Property Trustee or any other person or entity. In
addition, if a Trust Enforcement Event has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest, principal,
or other required payments on the Subordinated Debentures issued to the Trust on
the date such interest, principal, or other payment is otherwise payable, then a
record holder of Capital Securities may, on or after the respective due dates
specified in the Subordinated Debentures, institute a proceeding directly
against the Company under the Indenture for enforcement of payment on
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Capital Securities held by such holder. In connection
with such Direct Action, the Company will be subrogated to the rights of such
record holder of Capital Securities to the extent of any payment made by the
Company to such record holder of Capital Securities.
40
VOTING RIGHTS; AMENDMENT OF THE DECLARATION
Except as provided below and under "-- Description of Guarantee --
Amendments and Assignment" and as otherwise required by law and the Declaration,
the holders of the Capital Securities have no voting rights. The Regular
Trustees are required to call a meeting of the holders of the Capital Securities
if directed to do so by holders of at least 10% in aggregate Liquidation Amount
thereof.
So long as any Subordinated Debentures are held by the Property
Trustee, the Declaration Trustees shall not (i) direct the time, method, and
place of conducting any proceeding for any remedy available to the Indenture
Trustee or executing any trust or power conferred on the Property Trustee with
respect to such Subordinated Debentures, (ii) waive any past default that is
waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Subordinated Debentures shall be due
and payable, or (iv) consent to any amendment, modification, or termination of
the Indenture or such Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
a majority in aggregate Liquidation Amount of all outstanding Capital
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Subordinated Debentures affected thereby,
no such consent shall be given by the Property Trustee without the prior consent
of each holder of Capital Securities. The Declaration Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Capital Securities except pursuant to a subsequent vote of the holders of the
Capital Securities. The Property Trustee shall notify each holder of record of
the Capital Securities of any notice of default which it receives with respect
to the Subordinated Debentures. In addition to obtaining the foregoing approvals
of the holders of the Capital Securities, prior to taking any of the foregoing
actions, the Declaration Trustees shall receive an opinion of counsel
experienced in such matters to the effect that the Trust will not be classified
as other than a grantor trust for United States federal income tax purposes on
account of such action.
The Declaration may be amended from time to time by the holders of a
majority of the Common Securities and the Regular Trustee (and in certain
circumstances the Property Trustee and the Delaware Trustee), without the
consent of the holders of the Capital Securities, (i) to cure any ambiguity,
correct or supplement any provisions in the Declaration that may be inconsistent
with any other provision, or make any other provisions with respect to matters
or questions arising under the Declaration that shall not be inconsistent with
the other provisions of the Declaration, or (ii) to modify, eliminate, or add to
any provisions of the Declaration to such extent as shall be necessary to ensure
that the Trust will be classified as a grantor trust for United States federal
income tax purposes at all times that any Capital Securities and Common
Securities are outstanding or to ensure that the Trust will not be required to
register as an "investment company" under the Investment Company Act, or (iii)
to conform to any change in Rule 3a-7 under the Investment Company Act or
written change in interpretation or application of such Rule 3a-7 by any
legislative body, court, government agency, or regulatory authority which
amendment does not have a material adverse effect on the rights, preferences, or
privileges of the Holders; provided, however, that such action shall not
adversely affect in any material respect the interests of any holder of Capital
Securities or Common Securities, and any amendments of the Declaration shall
become effective when notice thereof is given to the holders of Capital
Securities and Common Securities. The Declaration may also be amended by the
holders of a majority in aggregate Liquidation Amount of the Common Securities
and the Regular Trustee with (i) the consent of holders representing not less
than a majority (based upon Liquidation Amounts) of the outstanding Capital
Securities and (ii) receipt by the Regular Trustees of an opinion of counsel to
the effect that such amendment or the exercise of any power granted to the
Regular Trustees in accordance with such amendment will not affect the Trust's
status as a grantor trust for United States federal income tax purposes or the
Trust's exemption from status as an "investment company" under the Investment
Company Act, provided, that without the consent of each holder of Capital
Securities and Common Securities affected thereby, the Declaration may not be
amended to (i) change the amount or timing of any Distribution on the Capital
Securities and Common Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Capital Securities and Common
Securities as of a specified date, or (ii) restrict the right of a holder of
Capital Securities or Common Securities to institute suit for the enforcement of
any such payment on or after such date.
Any required approval of holders of Capital Securities may be given at
a meeting of holders of Capital Securities convened for such purpose or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter upon
which action by written consent
41
of such holders is to be taken, to be given to each holder of record of Capital
Securities in the manner set forth in the Declaration.
No vote or consent of the holders of Capital Securities will be
required for the Trust to redeem and cancel its Capital Securities in accordance
with the Declaration.
Notwithstanding that holders of Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Declaration Trustees, or any
affiliate of the Company or any Declaration Trustee, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
EXPENSES AND TAXES
In the Indenture, the Company, as borrower, has agreed to pay all debts
and other obligations (other than with respect to the Capital Securities) and
all costs and expenses of the Trust (including costs and expenses relating to
the organization of the Trust, the fees and expenses of the Declaration
Trustees, and the costs and expenses relating to the operation of the Trust) and
to pay any and all taxes and all costs and expenses with respect thereto (other
than United States withholding taxes) to which the Trust might become subject.
The Company has also agreed in the Indenture to execute such additional
agreements as may be necessary or desirable to give full effect to the
foregoing.
NOTICES
All notices to holders of Capital Securities shall be validly given if
in writing and mailed by first class mail to them at their respective addresses
in the register of holders of Capital Securities maintained by the registrar of
the Trust and so long as (i) the Capital Securities are listed on the Luxembourg
Stock Exchange, and (ii) the Luxembourg Stock Exchange and the rules of such
Exchange so require, by publication, in a leading newspaper having general
circulation in Luxembourg (which is expected to be the Luxemburger Wort). Any
such notice shall be deemed to have been given on the later of the date of such
publication and the seventh day after so mailed.
REGISTRAR AND TRANSFER AGENT
The Chase Manhattan Bank is the initial registrar and The Chase
Manhattan Bank and Chase Manhattan Bank Luxembourg S.A. are transfer agents for
the Capital Securities. The Company and the Trust shall at all times maintain a
transfer agent in the City of New York and, so long as the Capital Securities
are listed on the Luxembourg Stock Exchange and the Luxembourg Stock Exchange
and the rules of the Luxembourg Stock Exchange so require, a transfer agent in
Luxembourg. Definitive Capital Securities may be presented to the Luxembourg
transfer agent for transfer.
Registration of transfers of Capital Securities will be effected
without charge by or on behalf of the Trust, but the Trust may require payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. The Trust will not be required (i) to register or
cause to be registered the transfer or exchange of the Capital Securities during
a period beginning at the opening of business 15 days before the day of the
mailing of the relevant notice of redemption and ending at the close of business
on the day of mailing of such notice of redemption or (ii) to register or cause
to be registered the transfer or exchange of any Capital Securities so selected
for redemption, except in the case of any Capital Securities being redeemed in
part, any portion thereof not to be redeemed.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance
of a Trust Enforcement Event, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after such Trust Enforcement
42
Event, 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 Declaration at the request of any holder of Capital
Securities unless it is offered reasonable indemnity against the costs,
expenses, and liabilities that might be incurred thereby. If no Trust
Enforcement Event has occurred and is continuing and the Property Trustee is
required to decide between alternative causes of action, construe ambiguous
provisions in the Declaration, or is unsure of the application of any provision
of the Declaration, and the matter is not one on which holders of Capital
Securities are entitled under the Declaration to vote, then the Property Trustee
may, but shall be under no duty to, 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 Capital Securities and the
Common Securities and will have no liability except for its own bad faith,
negligence, or willful misconduct.
PAYMENT AND PAYING AGENCY
Payments in respect of the Global Capital Securities (as defined
herein) shall be made to DTC, which shall credit the relevant accounts at DTC on
the applicable Distribution Dates or, if the Capital Securities are held in
certificated form, such payments shall be made by check mailed to the address of
the holder entitled thereto as such address shall appear on the register
maintained by the registrar. 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 Regular Trustees and the Company. Initially, Chase
Manhattan Bank Luxembourg S.A. will act as co-paying agent. The Company and the
Trust shall at all times for so long as the Capital Securities are listed on the
Luxembourg Stock Exchange, and the Luxembourg Stock Exchange so requires,
maintain a paying agent in Luxembourg. 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 Regular Trustees shall appoint a successor (which shall be a
bank or trust company acceptable to the Regular Trustees and the Company) to act
as Paying Agent.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS, OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer, or lease its properties and assets
substantially as an entirety to any entity, except as described below or as
otherwise described in the Declaration. The Trust may, at the request of the
Company with the consent of the holders of at least a majority in aggregate
Liquidation Amount of the Capital Securities, merge with or into, consolidate,
amalgamate, 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 (if not the Trust) either
(a) expressly assumes all of the obligations of the Trust with respect to the
Capital Securities or (b) substitutes for the Capital Securities other
securities having substantially the same terms as the Capital Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Capital Securities rank in priority with respect to distributions and payments
upon liquidation, redemption, and otherwise, (ii) if the Trust is not the
successor entity, the Property Trustee expressly appoints a trustee of such
successor entity possessing the same powers and duties as the Property Trustee
as the holder of the Subordinated Debentures, (iii) such merger, consolidation,
amalgamation, replacement, conveyance, transfer, or lease does not cause the
Capital Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer, or lease does
not adversely affect the rights, preferences, and privileges of the holders of
the Capital Securities (including any Successor Securities) in any material
respect, (v) such successor entity has a purpose substantially identical to that
of the Trust, (vi) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer, or lease, the Company has received an opinion
from independent counsel to the Trust experienced in such matters to the effect
that (a) such merger, consolidation, amalgamation, replacement, conveyance,
transfer, or lease does not adversely affect the rights, preferences, and
privileges of the holders of the Capital Securities (including any Successor
Securities) in any material respect and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer, or lease, (1)
neither the Trust nor such successor entity will be required to register as an
investment company under the Investment Company Act and (2) the Trust or the
successor entity will continue to be classified as a grantor trust for United
States federal income tax purposes, (vii) the Company or any permitted successor
or assignee
43
owns all of the Common Securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee Agreement, and (viii) such successor entity
(if not the Trust) expressly assumes all of the obligations of the Trust with
respect to the Declaration Trustees. Notwithstanding the foregoing, the Trust
shall not, except with the consent of holders of 100% in aggregate Liquidation
Amount of the Capital Securities, consolidate, amalgamate, merge with or into,
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 Trust or the successor entity to be classified as other than a
grantor trust for United States federal income tax purposes.
MERGER OR CONSOLIDATION OF DECLARATION TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee,
or any Regular Trustee 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 the Declaration, provided
such corporation shall be otherwise qualified and eligible.
GOVERNING LAW
The Declaration and the Capital Securities are governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to principles of conflict of laws.
MISCELLANEOUS
1. The CUSIP Number for the New Capital Securities is 446283AD5. The
International Securities Identification Number ("ISIN") for the New Capital
Securities is US446283AD57. The New Capital Securities have been accepted for
clearance through Euroclear and CEDEL under the Common Code 7909101.
2. The New Capital Securities have been listed on the Luxembourg Stock
Exchange. The legal notice relating to the issue of the New Capital Securities
and the Articles of Incorporation of the Company was registered with the
Registrar of the District Court in Luxembourg (Greffier en Chef du Tribunal
d'Arrondissement de et a Luxembourg), where such documents are available for
inspection and where copies thereof can be obtained upon request. As long as the
New Capital Securities are listed on the Luxembourg Stock Exchange, the Company
will maintain a paying agent and a transfer agent in Luxembourg.
3. Each of the Company and the Trust has obtained all necessary
contents, approvals, and authorizations in connection with the issue and
performance of the New Capital Securities, except as disclosed in this
Prospectus.
4. Except as disclosed in this Prospectus, there has been no material
adverse change in the financial position or prospects of the Company or any of
its subsidiaries since June 30, 1998.
5. Other than as referred to elsewhere in this Prospectus, neither the
Company nor any of its subsidiaries is involved in any litigation or arbitration
proceedings that may have, or have had during the 12 months preceding the date
of this document, a significant effect on the financial position of the Company
or any of its subsidiaries, nor is the Company or any of its subsidiaries aware
that any such proceedings are pending or threatened.
6. A copy of the Articles of Association of the Company and copies of
the Indenture, the Declaration, and the Guarantee Agreement, will, for so long
as the Capital Securities are listed on the Luxembourg Stock Exchange, be
available for inspection during usual business hours on any weekday (except
public holidays) at the offices of the
44
transfer agent in Luxembourg. As long as any Capital Securities remain
outstanding, copies of the latest Annual Report on Form 10-K of the Company, as
at December 31 in each year, and the Quarterly Reports on Form 10-Q, as at March
31, June 30, and September 30 in each year, may be obtained (free of charge) at
the offices of the Company specified above and at the specified offices of the
paying agents. Other than Quarterly Reports on Form 10-Q, the Company does not
publish interim or other financial statements.
7. Approval for the issuance of the New Capital Securities was granted
by the Board of Directors of the Company on January 22, 1997.
8. The Company has taken all reasonable care to insure that the
information contained in this Prospectus in relation to the Company and the
Capital Securities is true and accurate in all material respects and that in
relation to the Company and the Capital Securities, there are no material facts
the omission of which would make misleading any statement herein. The Company
accepts responsibility for the information contained in this Prospectus.
DESCRIPTION OF SUBORDINATED DEBENTURES
The Subordinated Debentures were issued as a separate series under the
Indenture. The Indenture has been qualified under the Trust Indenture Act. This
summary of certain terms and provisions of the Subordinated Debentures and the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Indenture.
GENERAL
Concurrently with the issuance of the Old Capital Securities, the Trust
invested the proceeds thereof and the consideration paid by the Company for the
Common Securities in the Old Subordinated Debentures issued by the Company. The
Old Subordinated Debentures were issued in an aggregate principal amount equal
to the aggregate Liquidation Amount of the Old Capital Securities and the Common
Securities. In connection with the Initial Exchange, the Company exchanged the
Old Subordinated Debentures for the New Subordinated Debentures. It is
anticipated that, until the liquidation, if any, of the Trust, each Subordinated
Debenture will be held in the name of the Property Trustee in trust for the
benefit of the holders of the Capital Securities and the Common Securities. The
Subordinated Debentures bear interest at a variable annual rate equal to LIBOR
plus .70% on the principal amount thereof, payable quarterly in arrears on the
last day of January, April, July, and October of each year (each, an "Interest
Payment Date"), commencing April 30, 1997, to the person in whose name each
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the fifteenth day of the month of the relevant Interest
Payment Date. The final Interest Payment Date will be February 1, 2027, and
interest will accrue from the last Interest Payment Date prior to such date up
to and including January 31, 2027. The amount of interest payable for any period
will be computed on the basis of the actual number of days elapsed in a year of
twelve 30-day months. In the event that any date on which interest is payable on
the Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
with the same force and effect as if made on the date such payment was
originally payable. Accrued interest that is not paid on the applicable Interest
Payment Date will bear additional interest on the amount thereof (to the extent
permitted by law) at a variable annual rate equal to LIBOR plus .70%, compounded
quarterly. The term "interest" as used herein shall include quarterly interest
payments, interest on quarterly interest payments not paid on the applicable
Interest Payment Date, and any additional interest, as applicable. Interest on
the Subordinated Debentures began accruing from January 31, 1997.
The Subordinated Debentures mature on February 1, 2027.
The Subordinated Debentures are unsecured and rank junior and
subordinate in right of payment to all Indebtedness of the Company to the extent
described herein and are pari passu with the obligations of the Company
45
associated with the Outstanding Capital Securities. The Indenture does not limit
the incurrence or issuance of other secured or unsecured debt of the Company,
whether under the Indenture or any existing or other indenture that the Company
may enter into in the future or otherwise. See "-- Subordination."
The Indenture does not limit the aggregate principal amount of
Subordinated Debentures that may be issued thereunder.
The general provisions of the Indenture do not afford holders of the
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the
Subordinated Debentures.
INTEREST
The Chase Manhattan Bank, as Calculation Agent (the "Calculation
Agent"), will calculate the interest rate for each quarterly interest period
based on LIBOR determined as of two "London Business Days" (defined as any day,
other than a Saturday or Sunday, on which banks are open for business in London)
prior to the first day of such interest period (each, a "Determination Date").
"LIBOR" means, with respect to a quarterly interest period relating to an
Interest Payment Date (in the following order of priority):
(i) the rate (expressed as a percentage per annum) for
Eurodollar deposits having a three-month maturity that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date;
(ii) if such rate does not appear on Telerate Page 3750 as of
11:00 a.m. (London time) on the related Determination Date, LIBOR will
be the arithmetic mean (if necessary rounded upwards to the nearest
whole multiple of .00001%) of the rates (expressed as percentages per
annum) for Eurodollar deposits having a three-month maturity that
appear on Reuters Monitor Money Rates Page LIBO ("Reuters Page LIBO")
as of 11:00 a.m. (London time) on such Determination Date;
(iii) if such rate does not appear on Reuters Page LIBO as of
11:00 a.m. (London time) on the related Determination Date, the
Calculation Agent will request the principal London offices of four
leading banks in the London interbank market to provide such banks'
offered quotations (expressed as percentages per annum) to prime banks
in the London interbank market for Eurodollar deposits having a
three-month maturity as of 11:00 a.m. (London time) on such
Determination Date. If at least two quotations are provided, LIBOR will
be the arithmetic mean (if necessary rounded upwards to the nearest
whole multiple of .00001%) of such quotations;
(iv) if fewer than two such quotations are provided as
requested in clause (iii) above, the Calculation Agent will request
four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European
banks for loans in Eurodollars as of 11:00 a.m. (London time) on such
Determination Date. If at least two such quotations are provided, LIBOR
will be the arithmetic mean (if necessary rounded upwards to the
nearest whole multiple of .00001%) of such quotations; and
(v) if fewer than two such quotations are provided as
requested in clause (iv) above, LIBOR will be LIBOR determined with
respect to the interest period immediately preceding such current
interest period.
If the rate for Eurodollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 or Reuters Page LIBO, as the case may
be, as of 11:00 a.m. (London time) on the related Determination Date is
superseded on Telerate Page 3750 or Reuters Page LIBO, as the case may be, by a
corrected rate before 12:00 noon (London time) on such Determination Date, the
corrected rate as so substituted on the applicable page will be the applicable
LIBOR for such Determination Date.
46
Absent manifest error, the Calculation Agent's determination of LIBOR
and its calculation of the applicable interest rate for each interest period
will be final and binding. Investors may obtain the interest rates for the
current and preceding interest period by writing or calling Corporate Trust
Administration at the Calculation Agent at The Chase Manhattan Bank, 450 West
33rd Street, New York, New York 10001.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Indenture Event of Default has occurred and is
continuing, the Company has the right under the Indenture to defer the payment
of interest at any time or from time to time for a period not exceeding 20
consecutive quarters with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity of the Subordinated
Debentures. At the end of such Extension Period, the Company must pay all
interest then accrued and unpaid (together with interest thereon at a variable
annual rate equal to LIBOR plus .70%, compounded quarterly, to the extent
permitted by applicable law). During an Extension Period, interest will continue
to accrue and holders of Subordinated Debentures (or holders of Capital
Securities while the Capital Securities are outstanding) will be required to
accrue interest income (as OID) for United States federal income tax purposes.
See "Certain United States Federal Income Tax Consequences -- Interest Income
and Original Issue Discount."
During any such Extension Period, the Company may not, and may 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, repurchase, or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Subordinated Debentures 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 with or junior in interest to the
Subordinated Debentures (other than (a) repurchases, redemptions, or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan, or other similar arrangement with or for the
benefit of any one or more employees, officers, directors, or consultants, or in
connection with a dividend reinvestment or stockholder stock purchase plan, (b)
as a result of an exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
other class or series of the Company's capital stock or of any class or series
of the Company's indebtedness for any class or series of the Company's capital
stock, (c) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholders' rights plan, or the issuance of
rights, stock, or other property under any stockholders' rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options, or other rights where the dividend stock or
the stock issuable upon exercise of such warrants, options, or other rights is
the same stock as that on which the dividend is being paid (or ranks pari passu
with or junior to such stock)). Prior to the termination of any such Extension
Period, the Company may further extend the Extension Period, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Subordinated Debentures. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof. The Company must give the Property Trustee, the
Regular Trustees, and the Indenture Trustee notice of its election of such
Extension Period not less than one Business Day prior to such record date. The
Property Trustee shall give notice of the Company's election to begin a new
Extension Period to the holders of the Capital Securities.
REDEMPTION
The Subordinated Debentures are not redeemable prior to February 1,
2007, unless a Special Event has occurred. The Subordinated Debentures are
redeemable prior to maturity at the option of the Company, subject to the
receipt of any necessary prior approval of the Federal Reserve, (i) on or after
February 1, 2007, in whole or in part at any time, at a redemption price equal
to the principal amount of the Subordinated Debentures so redeemed plus accrued
47
and unpaid interest, if any, to the date of redemption, or (ii) at any time in
whole (but not in part), within 90 days of the occurrence of a Special Event, at
such redemption price.
If the Subordinated Debentures are redeemed, the Trust must redeem
Trust Securities having an aggregate Liquidation Amount equal to the aggregate
principal amount of Subordinated Debentures so redeemed. See "-- Description of
Capital Securities -- Redemption -- Mandatory Redemption."
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 Subordinated
Debentures to be redeemed at its registered address. Unless the Company defaults
in payment of the redemption price, on and after the redemption date interest
will cease to accrue on such Subordinated Debentures or portions thereof called
for redemption.
CERTAIN COVENANTS OF THE COMPANY
The Company has covenanted in the Indenture that if and so long as the
Trust is the holder of all Subordinated Debentures, the Company, as borrower,
will pay to the Trust all fees and expenses related to the Trust and the
offering of the Capital Securities and will pay, directly or indirectly, all
ongoing costs, expenses, and liabilities of the Trust (including any taxes,
duties, assessments, or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States or any domestic taxing authority
upon the Trust but excluding obligations under the Capital Securities).
The Company also covenanted 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 that rank pari passu with or junior in interest to the
Subordinated Debentures 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 with or junior in interest to the
Subordinated Debentures (other than (a) repurchases, redemptions, or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan, or other similar arrangement with or for the
benefit of any one or more employees, officers, directors, or consultants, or in
connection with a dividend reinvestment or stockholder stock purchase plan, (b)
as a result of an exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
other class or series of the Company's capital stock or of any class or series
of the Company's indebtedness for any class or series of the Company's capital
stock, (c) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholders' rights plan, or the issuance of
rights, stock, or other property under any stockholders' rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options, or other rights where the dividend stock or
the stock issuable upon exercise of such warrants, options, or other rights is
the same stock as that on which the dividend is being paid (or ranks pari passu
with or junior to such stock)) if at such time (x) there shall have occurred any
event of which the Company has actual knowledge that (i) with the giving of
notice or the lapse of time, or both, would constitute an Indenture Event of
Default with respect to Subordinated Debentures and (ii) in respect of which the
Company shall not have taken reasonable steps to cure, (y) the Company shall be
in default with respect to its payment of any obligations under the Guarantee or
(z) the Company shall have given notice of its election of an Extension Period
as provided in the Indenture and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any
Subordinated Debentures issued thereunder will be subordinated and junior in
right of payment to all Indebtedness to the extent provided in the Indenture.
Upon any payment or distribution of assets of the Company upon any liquidation,
dissolution, winding-up, reorganization,
48
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
Indebtedness will first be entitled to receive payment in full of the principal
of and premium, if any, and interest, if any, on such Indebtedness before the
holders of Subordinated Debentures or the Property Trustee on behalf of the
holders of Capital Securities 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
Subordinated Debentures; provided, however, that holders of Indebtedness shall
not be entitled to receive payment of any such amounts to the extent that such
holders would be required by the subordination provisions of such Indebtedness
to pay such amounts over to the obligees on trade accounts payable or other
liabilities arising in the ordinary course of the Company's business.
In the event of the acceleration of the maturity of any Subordinated
Debentures, the holders of all Indebtedness outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
then due thereon (including any amounts due upon acceleration thereof) before
the holders of Subordinated Debentures will be entitled to receive or retain any
payment in respect of the principal of and premium, if any, or interest, if any,
on the Subordinated Debentures; provided, however, that holders of Indebtedness
shall not be entitled to receive payment of any such amounts to the extent that
such holders would be required by the subordination provisions of such
Indebtedness to pay such amounts over to the obligees on trade accounts payable
or other liabilities arising in the ordinary course of the Company's business.
No payments on account of principal (or premium, if any) or interest,
if any, in respect of the Subordinated Debentures may be made if there shall
have occurred and be continuing a default in any payment with respect to
Indebtedness, or an event of default with respect to any Indebtedness resulting
in the acceleration of the maturity thereof, or if any judicial proceeding shall
be pending with respect to any such default.
"Indebtedness" means, whether recourse is to all or a portion of the
assets of the Company and whether or not contingent, (i) every obligation of the
Company for money borrowed; (ii) every obligation of the Company evidenced by
bonds, debentures, notes, or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets, or businesses;
(iii) every reimbursement obligation of the Company with respect to letters of
credit, bankers' acceptances, or similar facilities issued for the account of
the Company; (iv) every obligation of the Company issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business); (v)
every capital lease obligation of the Company; (vi) every obligation of the
Company for claims (as defined in Section 101(4) of the United States Bankruptcy
Code of 1978, as amended) in respect of derivative products such as interest and
foreign exchange rate contracts, commodity contracts, and similar arrangements;
and (vii) every obligation of the type referred to in clauses (i) through (vi)
of another person and all dividends of another person the payment of which, in
either case, the Company has guaranteed or is responsible or liable for,
directly or indirectly, as obligor or otherwise; provided that "Indebtedness"
shall not include (i) any obligations which, by their terms, are expressly
stated to rank pari passu in right of payment with, or to not be superior in
right of payment to, the Subordinated Debentures, including the obligations
under the Outstanding Capital Securities, (ii) any Indebtedness of the Company
which when incurred was without recourse to the Company, (iii) any Indebtedness
of the Company to any of its subsidiaries, (iv) Indebtedness to any employee of
the Company, or (v) any Indebtedness in respect of debt securities issued to any
trust, or a trustee of such trust, partnership, or other entity affiliated with
the Company that is a financing entity of the Company in connection with the
issuance by such financing entity of securities that are similar to the Capital
Securities.
The Indenture places no limitation on the amount of additional
Indebtedness that may be incurred by the Company or any indebtedness or other
liabilities that may be incurred by the Company's subsidiaries. As of June 30,
1998, Indebtedness of the Company aggregated approximately $279.4 million to
which the Subordinated Debentures would be effectively subordinated.
49
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Subordinated Debentures that has occurred and is
continuing constitutes an "Indenture Event of Default" with respect to the
Subordinated Debentures:
(i) failure for 30 days to pay any interest on the
Subordinated Debentures when due (subject to the deferral of any due
date in the case of an Extension Period); or
(ii) failure to pay any principal on the Subordinated
Debentures when due whether at maturity, upon redemption by declaration
or otherwise; or
(iii) failure to observe or perform in any material respect
any other covenant contained in the Indenture for 90 days after written
notice to the Company from the Indenture Trustee or the holders of at
least 25% in aggregate outstanding principal amount of outstanding
Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency, or
reorganization of the Company.
The holders of a majority in aggregate outstanding principal amount of
Subordinated Debentures have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Indenture Trustee. The
Indenture Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of Subordinated Debentures may declare the principal due and
payable immediately upon an Indenture Event of Default, and, should the
Indenture Trustee or such holders of such Subordinated Debentures fail to make
such declaration, the holders of at least 25% in aggregate Liquidation Amount of
the Capital Securities shall have such right. The holders of a majority in
aggregate outstanding principal amount of Subordinated Debentures may annul such
declaration and waive the default if the default (other than the non-payment of
the principal of Subordinated Debentures which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Indenture Trustee, and should the holders of such
Subordinated Debentures fail to annul such declaration and waive such default,
the holders of a majority in aggregate Liquidation Amount of the Capital
Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of
the Subordinated Debentures affected thereby may, on behalf of the holders of
all the Subordinated Debentures, 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 Indenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Subordinated Debenture, and should the holders of such Subordinated Debentures
fail to waive such default, the holders of a majority in aggregate Liquidation
Amount of the Capital Securities shall have such right. The Company is required
to file annually with the 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 Indenture.
In case an Indenture Event of Default shall occur and be continuing,
the Property Trustee will have the right to declare the principal of and the
interest on such Subordinated Debentures and any other amounts payable under the
Indenture to be forthwith due and payable and to enforce its other rights as a
creditor with respect to such Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If an Indenture 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 Subordinated Debentures on the date such interest or principal
is otherwise payable, a holder of Capital Securities may institute a Direct
Action for payment. The Company may not
50
amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the Capital
Securities. Notwithstanding any payment made to such holder of Capital
Securities by the Company in connection with a Direct Action, the Company shall
remain obligated to pay such principal of or interest on the Subordinated
Debentures held by the Trust or the Property Trustee and the Company shall be
subrogated to the rights of the holder of such Capital Securities with respect
to payments on the Capital Securities to the extent of any payments made by the
Company to such holder in any Direct Action. Except as otherwise described
herein, the holders of Capital Securities will not be able to exercise directly
any other remedy available to the holders of the Subordinated Debentures.
CONSOLIDATION, MERGER, SALE OF ASSETS, AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or
merge into any other Person (as defined in the Indenture) or convey, transfer,
or lease its properties and assets substantially as an entirety to any Person,
unless (i) in case the Company consolidates with or merges into another Person
or conveys, transfers, or leases 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 Subordinated
Debentures issued under the Indenture; (ii) immediately after giving effect
thereto, no Indenture Event of Default, and no event which, after notice or
lapse of time or both, would become an Indenture Event of Default, shall have
happened and be continuing; (iii) if at the time any Capital Securities are
outstanding, such transaction is permitted under the Declaration and Guarantee
Agreement and does not give rise to any breach or violation of the Declaration
or Guarantee Agreement; (iv) any such lease shall provide that it will remain in
effect so long as any Subordinated Debentures are outstanding; and (v) certain
other conditions prescribed in the Indenture are met.
MODIFICATION OF INDENTURE
From time to time the Company and the Indenture Trustee may, without
the consent of the holders of the Subordinated Debentures, amend, waive, or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects, or inconsistencies (provided that any such action
does not materially adversely affect the interest of the holders of Subordinated
Debentures), qualifying, or maintaining the qualification of, the Indenture
under the Trust Indenture Act and adding, deleting, or revising the terms of the
Subordinated Debentures to provide for transfer procedures and restrictions
substantially similar to those applicable to the Capital Securities (for
purposes of assuring that no registration of Subordinated Debentures is required
under the Securities Act). The Indenture contains provisions permitting the
Company and the Indenture Trustee, with the consent of the holders of not less
than a majority in principal amount of outstanding Subordinated Debentures
affected, to modify the Indenture in a manner affecting the rights of the
holders of such Subordinated Debentures; provided that no such modification may,
without the consent of the holder of each outstanding Subordinated Debentures so
affected, (i) change the stated maturity of Subordinated Debentures, 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 Subordinated Debentures the holders
of which are required to consent to any such modification of the Indenture,
provided that, so long as any Capital Securities remain outstanding, no such
modification may be made that adversely affects the holders of such Capital
Securities in any material respect, and no termination of the Indenture may
occur, and no waiver of any Indenture Event of Default or compliance with any
covenant under the Indenture may be effective, without the prior consent of the
holders of at least a majority of the aggregate Liquidation Amount of the
outstanding Capital Securities unless and until the principal of the
Subordinated Debentures and all accrued and unpaid interest thereon have been
paid in full and certain other conditions are satisfied.
DEFEASANCE AND DISCHARGE
The Indenture provides that the Company, at the Company's option: (a)
will be discharged from any and all obligations in respect of the Subordinated
Debentures (except for certain obligations to register the transfer or exchange
51
of Subordinated Debentures, replace stolen, lost, or mutilated Subordinated
Debentures, maintain paying agencies, and hold moneys for payment in trust) or
(b) need not comply with certain restrictive covenants of the Indenture
(including that described in the second paragraph under "-- Certain Covenants of
the Company") (as defined in the Indenture), in each case if the Company
deposits, in trust with the Indenture Trustee, money or U.S. Government
Obligations which through the payment of interest thereon and principal thereof
in accordance with their terms will provide money, in an amount sufficient to
pay all the principal of, and interest and premium, if any, on the Subordinated
Debentures on the dates such payments are due in accordance with the terms of
such Subordinated Debentures. To exercise any such option, the Company is
required to deliver to the Indenture Trustee an opinion of counsel to the effect
that the deposit and related defeasance would not cause the holders of the
Subordinated Debentures to recognize income, gain, or loss for United States
federal income tax purposes and, in the case of a discharge pursuant to clause
(a), such opinion shall be accompanied by a private letter ruling to the effect
received by the Company from the United States Internal Revenue Service or
revenue ruling pertaining to a comparable form of transaction to such effect
published by the United States Internal Revenue Service.
DISTRIBUTIONS OF SUBORDINATED DEBENTURES; BOOK-ENTRY ISSUANCE
Under certain circumstances involving the termination of the Trust,
Subordinated Debentures may be distributed to the holders of the Capital
Securities in liquidation of the Trust after satisfaction of liabilities to
creditors of the Trust as provided by applicable law. If distributed to holders
of Capital Securities in liquidation, the Subordinated Debentures will initially
be issued in the form of global securities and certificated securities. DTC, or
any successor depositary, will act as depositary for such global securities. It
is anticipated that the depositary arrangements for and certain restrictions
with respect to such global securities would be substantially identical to those
in effect for the Capital Securities. For a description of global securities and
certificated securities, see "Book-Entry Issuance."
There can be no assurance as to the market price of any Subordinated
Debentures that may be distributed to the holders of Capital Securities.
PAYMENT AND PAYING AGENTS
The Company initially will act as Paying Agent with respect to the
Subordinated Debentures except that, if the Subordinated Debentures are
distributed to the holders of the Capital Securities in liquidation of such
holders' interests in the Trust, the Indenture Trustee will act as the Paying
Agent. The Company at any time may designate additional Paying Agents or rescind
the designation of any Paying Agent or approve a change in the office through
which any Paying Agent acts, except that the Company will be required to
maintain a Paying Agent at the place of payment.
Any moneys deposited with the 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 Subordinated Debentures and remaining
unclaimed for one year 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 Subordinated Debentures shall thereafter look, as
a general unsecured creditor, only to the Company for payment thereof.
GOVERNING LAW
The Indenture and the Subordinated Debentures are governed by and
construed in accordance with the laws of the State of New York.
52
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee has and is subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Indenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses, and liabilities which
might be incurred thereby. The 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 Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
DESCRIPTION OF GUARANTEE
The Old Guarantee was executed and delivered by the Company
concurrently with the issuance by the Trust of the Old Capital Securities for
the benefit of the holders from time to time of such Old Capital Securities. In
connection with the Initial Exchange, the Old Guarantee was exchanged by the
Company for the New Guarantee. The New Guarantee has been qualified under the
Trust Indenture Act. The Chase Manhattan Bank is the Guarantee Trustee under the
Guarantee Agreement. This summary of certain provisions of the Guarantee
Agreement does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all of the provisions of the Guarantee Agreement,
including the definitions therein of certain terms. The Guarantee Trustee will
hold the Guarantee for the benefit of the holders of the Capital Securities.
GENERAL
The Company has agreed to pay in full on a subordinated basis, to the
extent set forth in the Guarantee Agreement and described herein, the Guarantee
Payments (as defined below) to the holders of the Capital Securities, as and
when due, regardless of any defense, right of set-off, or counterclaim that the
Trust may have or assert other than the defense of payment. The following
payments with respect to the Capital Securities, to the extent not paid by or on
behalf of the Trust (the "Guarantee Payments"), will be subject to the
Guarantee: (i) any accumulated and unpaid Distributions required to be paid on
the Capital Securities, to the extent that the Trust has sufficient funds
available therefor at the time, (ii) the redemption price with respect to any
Capital Securities called for redemption, to the extent that the Trust has
sufficient funds available therefor at such time, or (iii) upon a voluntary or
involuntary dissolution, winding up, or liquidation of the Trust (unless the
Subordinated Debentures are distributed to holders of the Capital Securities),
the lesser of (a) the aggregate Liquidation Amount of the Capital Securities and
all accrued and unpaid Distributions thereon to the date of payment and (b) the
amount of assets of the Trust remaining available for distribution to holders of
Capital 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 Capital Securities or by causing the Trust to pay such
amounts to such holders.
The Guarantee is an irrevocable guarantee on a subordinated basis of
the Trust's obligations under the Capital Securities, but will apply only to the
extent that the Trust has sufficient funds available to make such payments.
If the Company does not make interest payments on the Subordinated
Debentures held by the Trust, the Trust will not be able to pay Distributions on
the Capital Securities and will not have funds legally available therefor. The
Guarantee ranks subordinate and junior in right of payment to all Indebtedness
of the Company and is pari passu with the obligations of the Company associated
with the Outstanding Capital Securities to the same extent as the Subordinated
Debenture. See "--Status of the Guarantee." The Guarantee Agreement does not
limit the incurrence or issuance of other secured or unsecured debt of the
Company, whether under the Indenture or any existing or other indenture that the
Company may enter into in the future or otherwise.
53
The Company has, through the Guarantee, the Subordinated Debentures,
and the Indenture, taken together, fully and unconditionally guaranteed all of
the Trust's obligations under the Capital Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full and unconditional guarantee of
the Trust's obligations under the Capital Securities. See "Relationship Among
the Capital Securities, the Subordinated Debentures, and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee constitutes an unsecured obligation of the Company and
ranks subordinate and junior in right of payment to all Indebtedness of the
Company and is pari passu with the obligations of the Company associated with
the Outstanding Capital Securities to the same extent as the Subordinated
Debenture. The Guarantee Agreement does not place a limitation on the amount of
additional Indebtedness that may be incurred by the Company.
The Guarantee constitutes 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). The
Guarantee Agreement is held by the Guarantee Trustee for the benefit of the
holders of the Capital Securities. The Guarantee will not be discharged except
by payment of the Guarantee Payments in full to the extent not paid by the Trust
or upon distribution of the Subordinated Debentures to the holders of the
Capital Securities in exchange for all of the Capital Securities.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely
affect the rights of holders of the Capital Securities (in which case no vote
will be required), the Guarantee Agreement may not be amended without the prior
approval of the holders of not less than a majority of the aggregate Liquidation
Amount of the outstanding Capital Securities. The manner of obtaining any such
approval is as set forth under "-- Description of Capital Securities -- Voting
Rights; Amendment of the Declaration." All guarantees and agreements contained
in the Guarantee Agreement shall bind the successors, assigns, receivers,
trustees, and representatives of the Company and shall inure to the benefit of
the registered holders of the Capital Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee Agreement will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder. The holders of a majority in aggregate Liquidation Amount of the
Capital Securities have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee Agreement.
Any holder of the Capital Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee Agreement
without first instituting a legal proceeding against the 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 Agreement.
54
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Company in performance of the Guarantee Agreement,
undertakes to perform only such duties as are specifically set forth in the
Guarantee Agreement and, after default with respect to the Guarantee Agreement,
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 the Guarantee Agreement at the request of any holder of
any Capital Security unless it is offered reasonable indemnity against the
costs, expenses, and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee Agreement will terminate and be of no further force and
effect upon full payment of the Redemption Price of all of the Capital
Securities, upon full payment of the amounts payable upon liquidation of the
Trust, or upon distribution of Subordinated Debentures to the holders of the
Capital Securities in exchange for all of the Capital Securities. The Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the Capital Securities must restore payment of
any sums paid under the Capital Securities or the Guarantee.
GOVERNING LAW
The Guarantee Agreement is governed by and construed in accordance with
the laws of the State of New York.
DESCRIPTION OF THE OLD CAPITAL SECURITIES
The terms of the Old Capital Securities are identical in all material
respect to the New Capital Securities, except that the Old Capital Securities
have not been registered under the Securities Act and are subject to certain
restrictions on transfer. Because the Initial Exchange was consummated prior to
September 11, 1997, the Old Securities are not entitled to any additional
Distributions whether or not this Exchange Offer is consummated. Accordingly,
holders of Old Capital Securities should review the information set forth under
"Risk Factors -- Certain Consequences of Failure to Exchange Old Capital
Securities" and "Description of New Securities."
RELATIONSHIP AMONG THE CAPITAL SECURITIES,
THE SUBORDINATED DEBENTURES, AND THE GUARANTEE
Payments of Distributions and other amounts due on the Capital
Securities (to the extent the 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 New Securities -- Description of Guarantee." If
and to the extent that the Company does not make payments under the Subordinated
Debentures, the Trust will not pay Distributions or other amounts due on the
Capital Securities. The Guarantee does not cover payment of Distributions when
the Trust does not have sufficient funds to pay such Distributions. In such
event, a holder of Capital Securities may institute a legal proceeding directly
against the Company under the Indenture to enforce payment of such Distributions
to such holder after the respective due dates. Taken together, the Company's
obligations under the Subordinated Debentures, the Indenture, and the Guarantee
provide, in the aggregate, a full and unconditional guarantee of payments of
distributions and other amounts due on the Capital Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other
55
documents constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full and unconditional guarantee of
the Trust's obligations under the Capital Securities. The obligations of the
Company under the Guarantee and the Subordinated Debentures are subordinate and
junior in right of payment to all Indebtedness of the Company to the extent
described herein and are pari passu with the obligations of the Company
associated with the Outstanding Capital Securities.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
the Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Capital Securities, primarily
because (i) the aggregate principal amount of the Subordinated Debentures is
equal to the sum of the aggregate stated Liquidation Amount of the Capital
Securities and the Common Securities; (ii) the interest rate and interest and
other payment dates on the Subordinated Debentures match the distribution rate
and Distribution Date and other payment dates for the related Capital
Securities; (iii) the Company will pay for all and any costs, expenses, and
liabilities of the Trust except the Trust's obligations under the Capital
Securities; and (iv) the Declaration provides that the Trust will not engage in
any activity that is not consistent with the limited purposes of the Trust.
Notwithstanding anything to the contrary in the 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 related payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of Capital Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Trust,
or any other person or entity.
A default or event of default under any Indebtedness of the Company
will not constitute a default or Indenture Event of Default. In addition, in the
event of payment defaults under, or acceleration of, Indebtedness of the
Company, the subordination provisions of the Indenture provide that, except as
otherwise specified therein, no payments may be made in respect of the
Subordinated Debentures until such Indebtedness has been paid in full or any
payment default thereunder has been cured or waived. Failure to make required
payments on the Subordinated Debentures would constitute an Indenture Event of
Default under the Indenture.
LIMITED PURPOSE OF TRUST
The Capital Securities evidence a beneficial ownership interest in the
assets of the Trust, and the Trust exists for the sole purpose of issuing the
Capital Securities and the Common Securities and investing the proceeds thereof
in Subordinated Debentures. A principal difference between the rights of a
holder of Capital Securities and a holder of Subordinated Debentures is that a
holder of Subordinated Debentures is entitled to receive from the Company the
principal amount of and interest accrued on Subordinated Debentures held, while
a holder of Capital Securities is entitled to receive Distributions from the
Trust (or from the Company under the Guarantee) if and to the extent the Trust
has funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up, or
liquidation of the Trust involving the liquidation of the Subordinated
Debentures, the holders of the Capital Securities will be entitled to receive,
out of assets held by the Trust, the Liquidation Distribution in cash. See
"Description of New Securities -- Description of Capital
56
Securities -- Liquidation Distribution Upon Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Subordinated Debentures, would be a subordinated creditor of the
Company, subordinated in right of payment to all Indebtedness to the extent
described herein, 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 the Guarantee and has
agreed to pay for all costs, expenses, and liabilities of the Trust (other than
the Trust's obligations to the holders of the Capital Securities), the positions
of a holder of Capital Securities and a holder of the Subordinated Debentures
relative to other creditors and to stockholders of the Company in the event of
liquidation or bankruptcy of the Company would be substantially the same.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Porter, Wright, Morris & Arthur, in its capacity as
special tax counsel to the Company and the Trust ("Tax Counsel"), the following
summary accurately describes the material United States federal income tax
consequences of the Exchange Offer and of the ownership and disposition of the
New Capital Securities. Unless otherwise stated, this summary deals only with
Capital Securities held as capital assets by United States Persons (defined
below) who purchase the Capital Securities upon original issuance at their
original offering price. As used herein, a "United States Person" means (i) a
person that is a citizen or resident of the United States for federal income tax
purposes, (ii) a corporation, partnership, or other entity created or organized
in or under the laws of the United States or any political subdivision thereof,
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) any trust if a court within the
United States is able to exercise primary supervision over the administration of
such trust and one or more United States fiduciaries have the authority to
control all the substantial decisions of such trust. The tax treatment of a
holder may vary depending on its particular situation. This summary does not
address all the tax consequences that may be relevant to a particular holder or
to holders that may be subject to special tax treatment, such as banks, thrift
institutions, real estate investment trusts, regulated investment companies,
insurance companies, traders in securities that elect to mark to market, brokers
and dealers in securities or currencies, tax-exempt investors, persons whose
functional currency is not the United States dollar, or persons holding the
Capital Securities as a position in a "straddle," as part of a "hedging,"
"conversion," or other integrated investment. In addition, this summary does not
address any description of any alternative minimum tax consequences, the tax
laws of any state, local, or foreign government that may be applicable to a
holder of Capital Securities, or the income tax consequences to shareholders in,
or partners or beneficiaries of, a holder of the Capital Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
the Treasury regulations promulgated thereunder, and administrative and judicial
interpretations thereof, each as of the date hereof, all of which are subject to
change, possibly on a retroactive basis (see "-- Pending Tax Litigation and
Possible Tax Law Changes," below). The authorities on which this summary is
based are subject to various interpretations, and the opinions of Tax Counsel
are not binding on the Internal Revenue Service ("IRS") or the courts, either of
which could take a contrary position. Moreover, no rulings have been or will be
sought from the IRS with respect to the transactions described herein.
Accordingly, there can be no assurance that the IRS will not challenge the
opinions expressed herein or that a court would not sustain such a challenge.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE EXCHANGE OFFER AND THE OWNERSHIP AND DISPOSITION OF
THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE
CAPITAL SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS, SEE "DESCRIPTION
OF NEW SECURITIES -- DESCRIPTION OF CAPITAL SECURITIES -- REDEMPTION -- SPECIAL
EVENT REDEMPTION OR DISTRIBUTION OF SUBORDINATED DEBENTURES."
57
EXCHANGE OF CAPITAL SECURITIES
Although the matter is not free from doubt, an exchange of Old Capital
Securities for New Capital Securities should not be taxable to the holders.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Old Capital Securities, Tax
Counsel rendered an opinion that under then current law and based upon certain
representations, facts, and assumptions, and assuming full compliance with the
terms of the Declaration and other documents, the Trust should be classified as
a grantor trust and will not be taxable as an association taxable as a
corporation for United States federal income tax purposes. Accordingly, for
United States federal income tax purposes, each holder of Capital Securities
should be treated as owning an undivided beneficial interest in the Subordinated
Debentures and, thus, should be required to include in its gross income its pro
rata share of interest income or original issue discount that is paid or accrued
on the Subordinated Debentures whether or not cash is actually distributed to
the holders of the Capital Securities.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
The Company, the Trust, and the holders of the Capital Securities (by
the acceptance of a beneficial interest in a Capital Security) will agree to
treat the Subordinated Debentures as indebtedness for all United States federal
income tax purposes. In connection with the issuance of the Old Subordinated
Debentures, Tax Counsel rendered an opinion generally to the effect that, under
then current law, and based on the representations, facts, and assumptions set
forth therein, the Subordinated Debentures will be classified as indebtedness
for United States federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the applicable Treasury regulations, the Subordinated Debentures
will not be treated as issued with OID within the meaning of section 1273(a) of
the Code because the Company had concluded, and this discussion assumes, that as
of the date of the original issue of the Old Subordinated Debentures, the
likelihood of its exercising its right to defer payments of interest was remote.
Accordingly, except as set forth below, stated interest on the Subordinated
Debentures generally will be taxable to a holder as ordinary income at the time
it is paid or accrued in accordance with such holder's regular method of tax
accounting.
If, however, the Company exercises its right to defer payments of
interest on the Subordinated Debentures, the Subordinated Debentures would be
treated as redeemed and reissued for OID purposes at such time and all holders
of the Subordinated Debentures and, consequently, holders of the Capital
Securities will be required to accrue their pro rata share of OID (which will
include both the stated interest and the de minimis OID on the Subordinated
Debentures) on a daily economic accrual basis during the Extension Period even
though the Company will not pay such interest until the end of the Extension
Period, and even though some holders may use the cash method of tax accounting.
Moreover, thereafter the Subordinated Debentures will be taxed as OID
instruments for as long as they remain outstanding. Thus, even after the end of
an Extension Period, all holders would be required to continue to include the
stated interest (and the de minimis OID) on the Subordinated Debentures in
income on a daily basis, regardless of their method of tax accounting and in
advance of receipt of the cash attributable to such interest income. Under the
OID economic accrual rules, a holder would accrue an amount of interest income
each year that approximates the stated interest payments called for under the
terms of the Subordinated Debentures, and subsequent actual cash payments of
interest on the Subordinated Debentures would not be reported separately as
taxable income. Any amount of OID included in a holder's gross income (whether
or not during an Extension Period) with respect to a Capital Security will
increase such holder's tax basis in such Capital Security, and the amount of
Distributions received by a holder in respect of such accrued OID will reduce
the tax basis of such Capital Security.
58
In the absence of the Company's election to defer an interest payment
period, de minimis OID would not be subject to income tax until a holder's
Subordinated Debentures were sold, redeemed, or retired, in which event the de
minimis OID would increase any gain or decrease any loss recognized by the
holder. In general, de minimis OID will be present with respect to the
Subordinated Debentures, in an amount equal to the excess of (a) the stated
redemption price at maturity (as defined for income tax purposes) of the
Subordinated Debentures, over (b) the issue price of the Subordinated
Debentures, unless such amount is greater than or equal to the product of (x)
0.25% of the redemption price, and (y) the number of complete calendar years
from the Subordinated Debentures' issue date to its maturity.
If the Company's option to defer payments of interest were not treated
as remote, the Subordinated Debentures would be treated as initially issued with
OID in an amount equal to the aggregate stated interest over the term of the
Subordinated Debentures, plus the amount of de minimis OID on the Subordinated
Debentures. That OID would generally be includible in a United States Person's
taxable income, over the term of the Subordinated Debentures, on an economic
accrual basis.
The Treasury regulations described above have not yet been addressed in
any rulings or other interpretations by the IRS, and it is possible that the IRS
could take a contrary position. If the IRS were to assert successfully that the
stated interest on the Subordinated Debentures was OID regardless of whether the
Company exercises its option to defer payments of interest on such debentures,
all holders of Capital Securities would be required to include such stated
interest in income on a daily economic accrual basis as described above.
Corporate holders of Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized by such
holders with respect to the Capital Securities.
DISTRIBUTION OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
As described under the caption "Description of New Securities --
Description of Capital Securities -- Liquidation Distribution Upon Dissolution,"
Subordinated Debentures may be distributed to holders in exchange for the
Capital Securities and in liquidation of the Trust. Under current law, such a
distribution would be non-taxable for United States federal income tax purposes,
and will result in the holder receiving directly its pro rata share of the
Subordinated Debentures previously held indirectly through the Trust, with a
holding period and aggregate tax basis equal to the holding period and aggregate
tax basis such holder had in its Capital Securities before such distribution.
A holder would accrue interest in respect of the Subordinated Debentures
received from the Trust in the manner described above under "-- Interest Income
and Original Issue Discount." If, however, the liquidation of the Trust were to
occur because the Trust is subject to United States federal income tax with
respect to income accrued or received on the Subordinated Debentures, the
distribution of the Subordinated Debentures to holders would be a taxable event
to the Trust and to each holder and a holder would recognize gain or loss as if
the holder had exchanged its Capital Securities for the Subordinated Debentures
it received upon liquidation of the Trust.
Under certain circumstances described herein (see "Description of New
Securities -- Description of Capital Securities -- Redemption -- Special Event
Redemption or Distribution of Subordinated Debentures"), the Subordinated
Debentures may be redeemed for cash by the Company, with the proceeds of such
redemption distributed to holders in redemption of their Capital Securities.
Under current law, such a redemption would constitute a taxable disposition of
the redeemed Capital Securities for United States federal income tax purposes,
and a holder would recognize gain or loss as if it sold such redeemed Capital
Securities for cash. See "-- Sales of Capital Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities will recognize gain or loss
equal to the difference between the amount realized by such holder on the sale
of the Capital Securities (except to the extent that such amount realized is
characterized as a payment in respect of accrued but unpaid interest on such
holder's allocable share of the Subordinated Debentures that the holder had not
included in gross income previously) and the holder's adjusted tax basis in the
Capital
59
Securities sold. Such gain or loss generally will be a capital gain or loss and
generally will be taxable as a long-term capital gain or loss if the Capital
Securities have been held for more than one year prior to their sale. Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States federal income tax purposes.
PENDING TAX LITIGATION AND POSSIBLE TAX LAW CHANGES
Prospective investors should be aware a taxpayer recently filed a
petition in the United States Tax Court contesting the proposed disallowance by
the Internal Revenue Service of the deduction of interest expense on securities
issued in 1993 and 1994 that are similar to, although different in a number of
respects from, the Subordinated Debentures. (Enron Corp. v. Commissioner, Docket
No. 6149-98, filed April 1, 1998). It is possible that an adverse decision by
the Tax Court in that case could give rise to a Tax Event, which would permit
the Company to cause a redemption of the Capital Securities, as described more
fully herein under the caption "Description of New Securities -- Description of
Capital Securities -- Redemption -- Special Event Redemption or Substitution of
Subordinated Debentures."
In the past, legislation had been proposed by the United States
Department of Treasury that contained a provision which, if it had been adopted,
would have had the effect of prohibiting the Company from deducting the interest
paid on the Subordinated Debentures which, in turn, would have triggered a Tax
Event. The most recent tax legislation, the Internal Revenue Service
Restructuring and Reform Act of 1998 and President Clinton's Fiscal 1999 Budget
Proposal, do not contain provisions similar to past legislation as described
above.
Even though the most recent Congressional action does not incorporate
legislation concerning the disallowance of interest deductions on long-term debt
obligations not treated as indebtedness on the issuer's balance sheet, there can
be no assurance that future legislative proposals or final legislation will not
adversely affect the ability of the Company to deduct interest on the
Subordinated Debentures or otherwise affect the tax treatment of the
transactions described herein. Moreover, such legislation could give rise to a
Tax Event, which would permit the Company to cause a redemption of the Capital
Securities, as described more fully herein under the caption "Description of New
Securities -- Description of Capital Securities -- Redemption -- Special Event
Redemption or Substitution of Subordinated Debentures."
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means any holder
that is not a United States Person (as defined above). As discussed above, the
Capital Securities will be treated as evidence of an indirect beneficial
ownership interest in the Subordinated Debentures. See "-- Classification of the
Trust." Thus, under present United States federal income tax law, and subject to
the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Trust or the Company or any
paying agent of principal or interest (which for purposes of this
discussion includes any OID) with respect to the Capital Securities (or
on the Subordinated Debentures) to a Non-United States Holder, provided
(i) that the beneficial owner of the Capital Securities ("Beneficial
Owner") does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company
entitled to vote within the meaning of section 871(h)(3) of the Code
and the regulations thereunder, (ii) the Beneficial Owner is not a
controlled foreign corporation for United States federal income tax
purposes that is related to the Company through stock ownership, (iii)
the Beneficial Owner is not a bank whose receipt of interest with
respect to the Capital Securities (or on the Subordinated Debentures)
is described in section 881(c)(3)(A) of the Code, and (iv) the
Beneficial Owner satisfies the statement requirement (described
generally below) set forth in section 871(h) and section 881(c) of the
Code and the regulations thereunder, and
60
(b) no withholding of United States federal income tax will be
required with respect to any gain realized by a Non-United States
Holder upon the sale or other disposition of the Capital Securities (or
Subordinated Debentures).
To satisfy the requirement referred to in (a)(iv) above, the Beneficial
Owner, or a financial institution holding the Capital Securities on behalf of
such owner, must provide, in accordance with specified procedures, to the Trust
or its paying agent, a statement to the effect that the Beneficial Owner is not
a United States Person. Pursuant to current temporary Treasury regulations,
these requirements will be met if (1) the Beneficial Owner provides its name and
address, and certifies, under penalties of perjury, that it is not a United
States Person (which certification may be made on an IRS Form W-8 (or successor
form)) or (2) a financial institution holding the Capital Securities (or
Subordinated Debentures) on behalf of the Beneficial Owner certifies, under
penalties of perjury, that such statement has been received by it and furnishes
a paying agent with a copy thereof.
If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of interest
(including any OID) made to such Non-United States Holder will be subject to a
30% withholding tax unless the Beneficial Owner provides the Trust or the
Company or any paying agent, as the case may be, with a properly executed (1)
IRS Form 1001 (or successor form) claiming an exemption from, or a reduction of,
such withholding tax under the benefit of a tax treaty or (2) IRS Form 4224 (or
successor form) stating that interest paid with respect to the Capital
Securities (or on the Subordinated Debentures) is not subject to withholding tax
because it is effectively connected with the Beneficial Owner's conduct of a
trade or business in the United States.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest with respect to the Capital Securities (or on the
Subordinated Debentures) is effectively connected with the conduct of such trade
or business, the Non-United States Holder, although exempt from the withholding
tax discussed above, will be subject to United States federal income tax on such
interest income on a net income basis in the same manner as if it were a United
States Person. In addition, if such Non-United States Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose, such interest income would be included in such
foreign corporation's earnings and profits.
Any gain realized upon the sale or other disposition of the Capital
Securities (or the Subordinated Debentures) generally will not be subject to
United States federal income tax unless (i) such gain is effectively connected
with a trade or business in the United States of the Non-United States Holder,
(ii) in the case of a Non-United States Holder who is an individual, such
individual is present in the United States for 183 days or more in the taxable
year of such sale, exchange, or retirement, and certain other conditions are
met, or (iii) in the case of any gain representing accrued interest on the
Subordinated Debentures, the requirements of the "portfolio interest" exception
described in (a) above are not satisfied.
On October 14, 1997, the IRS published in the Federal Register final
regulations (the "1997 Final Regulations") which affect the Untied States
taxation of Non-United States Holders. The 1997 Final Regulations are effective
for payments made after December 31, 1999, regardless of the issue date of the
instrument with respect to which such payments are made, subject to certain
transition rules. The discussion under this heading and under "-- Information
Reporting and Backup Withholding" is not intended to be a complete discussion of
the provisions of the 1997 Final Regulations, and prospective holders of Capital
Securities are urged to consult their tax advisors concerning the tax
consequences of their investment in light of the 1997 Final Regulations.
The 1997 Final Regulations prescribe revised documentation procedures
designed to unify certification requirements and clarify reliance standards in
an effort to simplify the processing of United States-source payments to foreign
persons. The 1997 Final Regulations generally do not affect the documentation
rules described above, but add other certification options. Under one such
option, a withholding agent will be allowed to rely on an intermediary
withholding certificate furnished by a "qualified intermediary" (as defined
below) on behalf of one or more beneficial owners (or other intermediaries)
without having to obtain the beneficial owner certificate described above.
"Qualified intermediaries" include: (a) foreign financial institutions or
foreign clearing organizations (other than a United States
61
branch or United States office of such institution or organization), (b) foreign
branches or offices of United States financial institutions or foreign branches
or offices of United States clearing organizations, (c) a foreign corporation
for purposes of presenting claims of tax treaty benefits on behalf of its
shareholders, or (d) any other person acceptable to the service which, as to all
(a), (b), (c), and (d) have entered into withholding agreements with the IRS. In
addition to certain other requirements, qualified intermediaries must obtain
withholding certificates, such as revised Internal Revenue Service Form W-8 (see
below), from each beneficial owner. Under other options, an authorized foreign
agent of a United States withholding agent will be permitted to act on behalf of
the United States withholding agent and the United States withholding agent will
be permitted to rely on a statement from a securities clearing organization, a
bank, or other financial institution that holds customers' securities in the
ordinary course of its business if the institution has received a Form W-8 (or
an acceptable substitute) from the beneficial owner.
The 1997 Final Regulations generally define the beneficial owner of
payments on Capital Securities as those persons who must include such payments
in gross income, rather than persons such as nominees or agents legally entitled
to such payments. In the case of payments to an entity classified as a foreign
partnership under United States tax principles, the partners, rather than the
partnership, generally will be required to provide the required certifications
to qualify for the withholding exemption described above. A payment to a United
States partnership, however, is treated for these purposes as payment to a
United States payee, even if the partnership has one or more foreign partners.
The 1997 Final Regulations provide certain presumptions with respect to
withholding for holders not furnishing the required certifications to qualify
for the withholding exemption described above. In addition, the 1997 Final
Regulations will replace a number of current tax certification forms (including
Internal Revenue Service Form W-8) with a single, revised Internal Revenue
Service Form W-8 (which, in certain circumstances, requires information in
addition to that previously required). Under the 1997 Final Regulations, this
Form W-8 will generally remain valid until the last day of the third calendar
year following the year in which the certificate is signed.
Under the 1997 Final Regulations, withholding or United States federal
income tax may apply to payments on a taxable sale or other disposition of
Capital Securities by a Non-United States Holder who does not provide
appropriate certification to the withholding agent with respect to such
transaction.
The 1997 Final Regulations provide transition rules concerning existing
certificates, such as Internal Revenue Service Forms W-8 and 1001.
As discussed above, changes in legislation affecting the income tax
consequences of the Subordinated Debentures are possible that could deny an
interest deduction to the Company for the interest payable on the Subordinated
Debentures. Such legislation also could cause the Subordinated Debentures to be
classified as equity (rather than indebtedness) of the Company for United States
federal income tax purposes and, thus, cause the income derived from the
Subordinated Debentures to be characterized as dividend, rather than interest,
income for such purposes. Dividend income is not eligible for the "portfolio
interest" exception described in (a) above generally causing income derived by a
Non-United States Holder on the Capital Securities to be subject to the 30%
United States federal withholding tax described above, unless a reduction or
elimination of such tax is available under an applicable tax treaty or such
dividend income is effectively connected with a trade or business carried on in
the United States by such Non-United States Holder. See "-- Pending Tax
Litigation and Possible Tax Law Changes."
INFORMATION REPORTING AND BACKUP WITHHOLDING
The amount of interest (or OID, if any) accrued on the Capital
Securities (or the Subordinated Debentures) held of record by United States
Persons (other than corporations and other exempt holders) will be reported
annually to such holders and to the IRS. The Property Trustee currently intends
to deliver such reports to holders of record prior to January 31 following each
calendar year. It is anticipated that persons who hold Capital Securities as
nominees for beneficial holders will report the required tax information to
beneficial holders on Form 1099.
"Backup withholding" at a rate of 31% will apply to payments of
interest (or OID, if any) to non-exempt United States Persons unless the holder
furnishes its taxpayer identification number in the manner prescribed in
applicable
62
Treasury regulations, certifies that such number is correct, certifies as to no
loss of exemption from backup withholding, and meets certain other conditions.
No information reporting or backup withholding will be required with
respect to payments made by the Trust or any paying agent to Non-United States
Holders if a statement described in (a)(iv) under "Non-United States Holders"
has been received and the payor does not have actual knowledge that the
beneficial owner is a United States Person.
In addition, backup withholding and information reporting will not
apply if payments of the principal, interest, OID, or premium with respect to
the Capital Securities (or on the Subordinated Debentures) are paid or collected
by a foreign office of a custodian, nominee, or other foreign agent on behalf of
the Beneficial Owner, or if a foreign office of a broker (as defined in
applicable Treasury regulations) pays the proceeds of the sale of the Capital
Securities (or the Subordinated Debentures) to the owner thereof. If, however,
such nominee, custodian, agent, or broker is, for United States federal income
tax purposes, a United States Person, a controlled foreign corporation or a
foreign person that derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States, such payments will
not be subject to backup withholding but will be subject to information
reporting, unless (1) such custodian, nominee, agent, or broker has documentary
evidence in its records that the Beneficial Owner is not a United States Person
and certain other conditions are met or (2) the Beneficial Owner otherwise
establishes an exemption.
In the case of a Non-United States Holder, under the 1997 Final
Regulations, backup withholding and information reporting will not apply to
payments of principal and interest (including OID) with respect to Capital
Securities if such Non-United States Holder provides the required certification
to establish an exemption from the withholding of the United States federal
income tax or otherwise establishes an exemption, as set out in the 1997 Final
Regulations. In general, payments of principal and interest (including OID) with
respect to Capital Securities made to a custodian, nominee, or broker will not
be subject to backup withholding or information reporting, irrespective of the
place or payment or the location of the office of the custodian, nominee, or
broker.
Payments of interest (including OID) with respect to Capital Securities
paid to a foreign intermediary (whether or not a qualified intermediary) will,
however, be subject to withholding of United States federal income tax at the
rate of 30% unless the beneficial owner (whether or not a United States Person)
establishes an exemption by furnishing a withholding certificate or other
appropriate documentation. Unless the beneficial owner establishes an exemption,
a payment by a custodian, nominee, or broker may be subject to information
reporting and, unless (i) the payment has been subject to withholding of United
States federal income tax at the rate of 30% or (ii) the payment is made outside
the United States to an offshore account in a financial institution that
maintains certain procedures related to account documentation, to backup
withholding as well.
The 1997 Final Regulations provide for certain presumptions under which
a Non-United States Holder may be subject to backup withholding in the absence
of required certifications. For example, payments that a withholding agent
cannot reliably associate with documentation are presumed to be made to a United
States payee who is not an exempt recipient, in which case 31% backup
withholding applies, assuming the payment is reportable under Chapter 61 of the
Code.
Payment of the proceeds from disposition of Capital Securities (or the
Subordinated Debentures) to or through a United States office of a broker is
subject to information reporting and backup withholding unless the holder or
beneficial owner establishes an exemption from information reporting and backup
withholding.
Under the 1997 Final Regulations, payments on the sale, exchange,
redemption, or retirement of Capital Securities to or through a broker may be
subject to information reporting and backup withholding unless (a) the
beneficial owner establishes an exemption or (b) the transaction is effected
outside the Untied States and the broker is not a United States Person, a
controlled foreign corporation for United States tax purposes, a United States
branch of a foreign bank or foreign insurance company, a foreign partnership
(with respect to payments made after December 31, 1999) if at any time during
its tax year, it is controlled by United States Persons or engaged in a United
States trade or business, or a foreign person 50% or more of whose gross income
is effectively connected with the conduct of a United States trade or business
for a specified three-year period.
63
Backup withholding is not an additional tax. Rather, any amounts
withheld from a holder of the Capital Securities under the backup withholding
rules will be allowed as a refund or a credit against such holder's United
States federal income tax liability, provided the required information is
furnished to the IRS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP, AND DISPOSITION OF THE
CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN,
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX
LAWS.
BOOK-ENTRY ISSUANCE
The Capital Securities may be transferred or exchanged only in blocks
having a Liquidation Amount of not less than $100,000 in the manner and at the
offices described below.
The New Capital Securities initially will be represented by one or more
Capital Securities in registered, global form (collectively, the "Global Capital
Securities"). The Global Capital Securities will be deposited upon issuance with
the Property Trustee as custodian for DTC, in New York, New York, and registered
in the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Capital
Securities may not be exchanged for Capital Securities in certificated form
except in the limited circumstances described below. See "-- Exchange of
Book-Entry Capital Securities for Certificated Capital Securities." Transfer of
beneficial interests in the Global Capital Securities will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants
(including, if applicable, those of the Euroclear System ("Euroclear") and
CEDEL, S.A. ("CEDEL")), which may change from time to time.
DEPOSITARY PROCEDURES
DTC has advised the Trust and the Company that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations, and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers, and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to
procedures established by it, the ownership of interests in the Global Capital
Securities will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the Global Capital Securities).
Investors in the Global Capital Securities may hold their interests
therein directly through DTC if they are participants in such system, or
indirectly through organizations (including Euroclear and CEDEL) which are
participants in such system. All interests in a Global Capital Security,
including those held through Euroclear or CEDEL, may be
64
subject to the procedures and requirements of DTC. Those interests held through
Euroclear or CEDEL may also be subject to the procedures and requirements of
such system. The laws of some states require that certain persons take physical
delivery in certificated form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Capital Security to such
persons will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Capital
Security to pledge such interests to persons or entities that do not participate
in the DTC system, or otherwise take actions in respect of such interests, may
be affected by the lack of a physical certificate evidencing such interests. For
certain other restrictions on the transferability of the Capital Securities, see
"-- Exchange of Book-Entry Capital Securities for Certificated Capital
Securities."
Except as described below, owners of interests in the Global Capital
Securities will not have Capital Securities registered in their name, will not
receive physical delivery of Capital Securities in certificated form, and will
not be considered the registered owners or holders thereof for any purpose.
Payments in respect of the Global Capital Security registered in the
name DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder. The Property Trustee will treat the persons
in whose names the Capital Securities, including the Global Capital Securities,
are registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither the
Property Trustee nor any agent thereof has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Capital Securities, or for maintaining,
supervising, or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Capital Securities or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised the Trust and the Company that its current practice, upon receipt of any
payment in respect of securities such as the Capital Securities, is to credit
the accounts of the relevant Participants with the payment on the payment date
unless DTC has reason to believe it will not receive payment on such payment
date. Payments by the Participants and the Indirect Participants to the
beneficial owners of Capital Securities will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility of
DTC, the Property Trustee, the Trust, or the Company. None of the Company, the
Trust, or the Property Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the Capital Securities, and
the Company, the Trust, and the Property Trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee for all
purposes.
Except for trades involving only Euroclear or CEDEL participants,
interests in the Global Capital Securities will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance
with DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Capital Securities described herein, cross-market transfers between the
Participants in DTC, on the one hand, and Euroclear or CEDEL participants, on
the other hand, will be effected through DTC in accordance with DTC's rules on
behalf of Euroclear or CEDEL, as the case may be, by its respective depositary;
however, such cross-market transactions will require delivery of instructions to
Euroclear or CEDEL, as the case may be, by the counter-party in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or CEDEL, as the case may be, will, if
the transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Capital Securities in
DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Euroclear participants and CEDEL
participants may not deliver instructions directly to the depositaries for
Euroclear or CEDEL.
65
Because of time zone differences, the securities account of a Euroclear
or CEDEL participant purchasing an interest in a Global Capital Security from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear of CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the settlement date of DTC. Cash received in Euroclear or
CEDEL as a result of sales of interest in a Global Capital Security by or
through a Euroclear or CEDEL participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or CEDEL cash account only as of the business day for
Euroclear or CEDEL following DTC's settlement date.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of Capital Securities only at the direction of
one or more Participants to whose account with DTC interests in the Global
Capital Securities are credited. However, if there is an Event of Default, DTC
reserves the right to exchange the Global Capital Securities for Capital
Securities in certificated form and to distribute such Capital Securities to its
Participants.
The information in this section concerning DTC, Euroclear, and CEDEL
and their book-entry systems has been obtained from sources that the Trust and
the Company believe to be reliable, but neither the Trust nor the Company takes
responsibility for the accuracy thereof.
Although DTC, Euroclear, and CEDEL have agreed to the foregoing
procedures to facilitate transfers of interest in the Global Capital Securities
among participants in DTC, Euroclear, and CEDEL, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Trust, or the Property
Trustee will have any responsibility for the performance by DTC, Euroclear, or
CEDEL or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL SECURITIES
A Global Capital Security is exchangeable for Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Capital Security
and the Trust thereupon fails to appoint a successor Depositary or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company in its sole discretion elects to cause the issuance of the Capital
Securities in certificated form, or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of time
or both would be an Event of Default under the Declaration.
BENEFIT PLAN CONSIDERATIONS
Before authorizing an investment in the Capital Securities, each
fiduciary of pension, profit sharing, or other employee benefit plan subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")(each,
a "Plan"), should consider, among other matters, (a) ERISA's fiduciary standards
(including its prudence and diversification requirements), (b) whether such
fiduciary has authority to make an investment in the Capital Securities under
the applicable Plan investment policies and governing instruments, and (c) rules
under ERISA and the Code that prohibit a Plan fiduciary from causing a Plan to
engage in a "prohibited transaction."
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as
well as individual retirement accounts and Keogh plans subject to Section 4975
of the Code (also "Plans"), from, among other things, engaging in certain
transactions involving "plan assets" with persons who are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to such Plan.
A violation of these "prohibited transaction" rules may result in an excise tax
or other liabilities under ERISA and/or Section 4975 of the Code for such
persons, unless exemptive relief is available under an applicable statutory or
administrative exemption. Employee benefit plans that are governmental plans (as
66
defined in Section 3(32) of ERISA), certain church plans (as defined in Section
3(33) of ERISA), and foreign plans (as described in Section 4(b)(4) of ERISA)
are not subject to the requirements of ERISA or Section 4975 of the Code.
The Department of Labor ("DOL") has issued a regulation (29 C.F.R. ss.
2510.3-101) (the "Plan Assets Regulation") concerning the definition of what
constitutes the assets of a Plan. The Plan Assets Regulation provides that, as a
general rule, the underlying assets and properties of corporations,
partnerships, trusts, and certain other entities in which a plan makes an
"equity" investment will be deemed for purposes of ERISA to be assets of the
investing plan unless certain exceptions apply.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of the Trust would not be deemed to be "plan assets" of investing Plans
if, immediately after the most recent acquisition of any equity interest in the
Trust, less than 25% of the value of each class of equity interest in the Trust
were held by Plans, other employee benefit plans not subject to ERISA, or
Section 4975 of the Code (such as governmental, church, and foreign plans) and
entities holding assets deemed to be "plan assets" of any Plan (collectively,
"Benefit Plan Investors"). No assurance can be given that the value of the
Capital Securities held by Benefit Plan Investors will be less than 25% of the
total value of such Capital Securities and no monitoring or other measures will
be taken with respect to the satisfaction of the conditions to this exception.
All of the Common Securities will be purchased and held directly by the Company.
Under another exception contained in the Plan Asset Regulation, if the
Capital Securities were to qualify as "publicly offered securities," the assets
of the Trust would not be deemed to be "plan assets" by reason of a Plan's
acquisition or holding of such securities. The Capital Securities would qualify
as "publicly offered securities" if, among other requirements, they are offered
pursuant to an effective registration statement, are owned by 100 or more
investors independent of the Trust and each other, and are subsequently
registered under the Exchange Act. It is expected that the 100 investor
requirement will not be satisfied and that the Capital Securities will not be
registered under the Exchange Act.
There can be no assurance that any of the exceptions set forth in the
Plan Assets Regulation will apply to the purchase of Capital Securities and, as
a result, an investing Plan's assets could be considered to include an undivided
interest in the Subordinated Debentures held by the Trust. In the event that
assets of the Trust are considered assets of an investing Plan, the Declaration
Trustees, the Company, and other persons, in providing services with respect to
the Subordinated Debentures, may be considered fiduciaries to such Plan and
subject to the fiduciary responsibility provisions of Title I of ERISA. In
addition, certain transactions involving the Trust and/or the Capital Securities
could be deemed to constitute direct or indirect prohibited transactions under
ERISA and Section 4975 of the Code with respect to a Plan. For example, if the
Company or any Trustee is a party in interest or a fiduciary with respect to an
investing Plan (either directly or by reason of its ownership of its
subsidiaries), extensions of credit between the Company and the Trust (as
represented by the Subordinated Debentures and the Guarantee Agreement) would
likely be prohibited by Section 406(a)(i)(B) of ERISA and Section 4975(c)(i)(B)
of the Code.
The DOL has issued five Prohibited Transaction Class Exemptions
("PTCEs") that may provide exemptive relief for direct or indirect prohibited
transactions resulting from the purchase or holding of the Capital Securities,
assuming that assets of the Trust were deemed to be "plan assets" of Plans
investing in the Trust (see above). Those class exemptions are PTCE 96-23 (for
certain transactions determined by in-house asset managers), PTCE 91-38 (for
certain transactions involving bank collective investment funds), PTCE 95-60
(for certain transactions involving insurance company general accounts), PTCE
90-1 (for certain transactions involving insurance company pooled separate
accounts), and PTCE 84-14 (for certain transactions determined by independent
qualified professional asset managers).
Because of ERISA's prohibitions and those of Section 4975 of the Code,
the Capital Securities may not be purchased or held by any Plan, any entity
whose underlying assets include "plan assets" by reason of any Plan's investment
in the entity (a "Plan Asset Entity"), or any person having "plan assets" of any
Plan, unless such purchase or holding is covered by the exemptive relief
provided by PTCE 96-23, 95-60, 91-38, 90-1, or 84-14 or another applicable
exemption. If a purchaser or holder of the Capital Securities that is a Plan or
a Plan Asset Entity elects to rely on an exemption other than PTCE 96-23, 95-60,
91-38, 90-1 or 84-14, the Company and the Trust may require a satisfactory
opinion of counsel or other evidence with respect to the availability of such
exemption for such purchase
67
and holding. Any purchaser or holder of the Capital Securities or any interest
therein will be deemed to have represented by its purchase and holding thereof
that either (a) the purchaser and holder is not a Plan or a Plan Asset Entity
and is not purchasing such securities on behalf of or with "plan assets" of any
Plan, or (b) the purchase and holding of the Capital Securities is covered by
the exemptive relief provided by PTCE 96-23, 95-60, 91-38, 90-1, or 84-14 or
another applicable exemption and the Company or the Trustees are not
"fiduciaries" within the meaning of Section 3(21) of ERISA or the regulations
thereunder.
Due to the complexity of these rules and the penalties that may be
imposed upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries or other persons investing in the
Capital Securities on behalf of or with "plan assets" of any Plan consult with
their own counsel regarding the potential consequences if the assets of the
Trust were deemed to be "plan assets" and the availability of exemptive relief
under PTCE 96-23, 95-60, 91-38, 90-1, or 84-14 or another applicable exemption.
Governmental Plans, as defined in Section 3(32) of ERISA, are not
subject to ERISA, and are also not subject to the prohibited transaction
provisions of Section 4975 of the Code. However, state laws or regulations
governing the investment and management of the assets of such plans may contain
fiduciary and prohibited transaction provisions similar to those under ERISA and
the Code discussed above. Accordingly, fiduciaries of government plans, in
consultation with their advisers, should consider the impact of their respective
state laws on investments in the Capital Securities, and the considerations
discussed above, to the extent applicable.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the issuance of the New
Capital Securities offered hereby. New Capital Securities received by
broker-dealers for their own accounts in connection with the Exchange Offer may
be sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the New
Capital Securities, or a combination of such methods of resale, at market prices
prevailing at the time of resale at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such New Capital Securities. Any broker-dealer that resells
New Capital Securities that were received by it for its own account in
connection with the Exchange Offer and any broker or dealer that participates in
a distribution of such New Capital Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New Capital Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. Each broker-dealer that receives New Capital Securities for
its own account in connection with the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such New Capital
Securities. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has not entered into any arrangements or understandings with
any person to distribute the New Capital Securities to be received in the
Exchange Offer. Manufacturers and Traders Trust Company, the holder of all
remaining Old Capital Securities, has agreed to pay all expenses of the Exchange
Offer.
68
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the New
Capital Securities, the enforceability of the Declaration, and the formation of
the Trust have been passed upon on behalf of the Trust by Richards, Layton &
Finger P.A., special Delaware counsel to the Company and the Trust. The validity
of the New Subordinated Debentures and the New Guarantee have been passed upon
for the Company and the Trust by Porter, Wright, Morris & Arthur. Certain United
States federal income tax matters have been passed upon for the Company and the
Trust by Porter, Wright, Morris & Arthur. Porter, Wright, Morris & Arthur relied
as to certain matters of Delaware law on the opinion of Richards Layton &
Finger. As of June 30, 1998, members of Porter, Wright, Morris & Arthur
participating in the representation of the Company and the Trust on this matter
beneficially owned an aggregate of 26,396 shares of Huntington common stock.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, incorporated by reference herein have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report included therein
and incorporated herein by reference, which, as to the years 1996 and 1995, is
based inpart on the reports of BDO Seidman, LLP, independent auditors. Such
financial statements audited by Ernst & Young LLP are incorporated by reference
herein in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
69
PRINCIPAL EXECUTIVE OFFICE OF HUNTINGTON BANCSHARES INCORPORATED
Huntington Bancshares Incorporated
Huntington Center
41 South High Street
Columbus, Ohio 43287
PROPERTY TRUSTEE AND EXCHANGE AGENT
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
PAYING AGENTS AND TRANSFER AGENTS
The Chase Manhattan Bank Chase Manhattan Bank Luxembourg, S.A
450 West 33rd Street 5, Rue Plaetia
New York, New York 10001 L-2338, Luxembourg
LEGAL ADVISORS
As to U.S. law
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215
As to Delaware law
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
INDEPENDENT AUDITORS FOR HUNTINGTON BANCSHARES INCORPORATED
Ernst & Young LLP
One Columbus
10 West Broad Street
Columbus, Ohio 43215
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation of Huntington Bancshares Incorporated
(the "Registrant"), as amended, provide that it shall indemnify its directors to
the full extent of the general laws of the State of Maryland now or hereafter in
force, including the advance of expenses to directors subject to procedures
provided by such laws; its officers to the same extent it shall indemnify its
directors; and its officers who are not directors to such further extent as
shall be authorized by the Board of Directors and be consistent with law.
Section 2-418 of the Maryland general corporation law provides, in
substance, that a corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding, unless it is proved that the act or omission of
the director was material to the cause of action adjudicated in the proceeding
and was committed in bad faith or was the result of active and deliberate
dishonesty; or the director actually received an improper personal benefit in
money, property, or services; or, in the case of any criminal proceeding, the
director had reasonable cause to believe that the act or omission was unlawful.
Notwithstanding the above, a director may not be indemnified in respect of any
proceeding, by or in the right of the corporation, in which such director shall
have been adjudged liable to the corporation or in respect of any proceeding
charging improper receipt of a personal benefit.
Termination of any proceeding by judgment, order, or settlement does
not create a presumption that the director did not meet the requisite standard
of conduct. Termination of any proceeding by conviction, plea of nolo contendere
or its equivalent, or entry of an order of probation prior to judgment, creates
a rebuttable presumption that the director did not meet the requisite standard
of conduct. Indemnification is not permitted unless authorized for a specific
proceeding, after a determination that indemnification is permissible because
the requisite standard of conduct has been met (1) by a majority of a quorum of
directors not at the time parties to the proceeding (or a majority of a
committee of two or more such directors designated by the full board); (2) by
special legal counsel selected by the board of directors; or (3) by the
stockholders.
The reasonable expenses incurred by a director who is a party to a
proceeding may be paid or reimbursed by the corporation in advance of the final
disposition of the proceeding upon receipt by the corporation of both a written
affirmation by the director of his good faith belief that the standard of
conduct necessary for indemnification by the corporation has been met, and a
written undertaking by or on behalf of the director to repay the amount if it
shall be ultimately determined that the standard of conduct has not been met.
The indemnification and advancement of expenses provided or authorized
by Section 2-418 are not exclusive of any other rights to which a director may
be entitled both as to action in his official capacity and as to action in
another capacity while holding such office.
Pursuant to Section 2-418, a corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation, or who, while serving in such capacity, is or was
at the request of the corporation serving as a director, officer, partner,
trustee, employee, or agent of another corporation or legal entity or of an
employee benefit plan, against liability asserted against and incurred by such
person in any such capacity or arising out of such person's position, whether or
not the corporation would have the power to indemnify against liability under
Section 2-418. A corporation may provide similar protection, including a trust
fund, letter of credit, or surety bond, which is not inconsistent with Section
2-418. A subsidiary or an affiliate of the corporation may provide the insurance
or similar protection.
Subject to certain exceptions, the directors and officers of the
Registrant and its affiliates are insured to the extent of 100% of loss up to a
maximum of $35,000,000 (subject to certain deductibles) in each policy year
because of any claim or claims made against them by reason of their wrongful
acts while acting in their capacities as such directors or officers and up to a
maximum of $10,000,000 (subject to certain deductibles) in each policy year
because
of any claim or claims made against them by reason of their wrongful acts while
acting in their capacities as fiduciaries in the administration of certain of
the Registrant's employee benefit programs. The Registrant is insured, subject
to certain retentions and exceptions, to the extent it shall have indemnified
the directors and officers for such loss.
Under the Amended and Restated Declaration of Trust, the Registrant has
agreed to indemnify each of the Trustees, and to hold such Trustees harmless
against any loss, liability or expense incurred without negligence or bad faith
on their part, arising out of or in connection with the acceptance of
administration of such Declaration of Trust, including the costs and expenses of
defense against or investigating any claim or liability in connection with the
exercise or performance of any of their powers or duties under the Declaration
of Trust, which is filed as an exhibit to this Registration Statement.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
EXHIBIT
NO. DESCRIPTION
3(i) Articles of Restatement of Charter, Articles of Amendment to
Articles of Restatement of Charter, and Articles Supplementary
-- previously filed as Exhibit 3(i) to Annual Report on Form
10-K for the year ended December 31, 1993, and incorporated
herein by reference.
3(ii) Bylaws -- previously filed as Exhibit 3(b) to Annual Report
on Form 10-K for the year ended December 31, 1997, and
incorporated herein by reference.
3(iii) Certificate of Trust of Huntington Capital I (previously filed
as Exhibit 4(b) to this Registration Statement).
3(iv) Articles of Amendment to Articles of Restatement of Charter --
previously filed as Exhibit 3(i)(b) to Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1996, and
incorporated herein by reference.
3(v) Articles of Amendment to Articles of Restatement of Charter --
previously filed as Exhibit 3(i)(c) to Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1998, and
incorporated herein by reference.
4(a) Indenture, dated as of January 31, 1997, between the
Registrant and The Chase Manhattan Bank, as Indenture Trustee.
4(b) Certificate of Trust of Huntington Capital I.
4(c) Amended and Restated Declaration of Trust of Huntington
Capital I.
4(d) Form of Unrestricted Certificate of Capital Security for
Huntington Capital I.
4(e) Form of Guarantee Agreement for Huntington Capital I.
4(f) Registration Rights Agreement, dated as of January 31, 1997,
among the Registrant, the Trust, and Morgan Stanley & Co.
Incorporated, Lehman Brothers Inc. and Salomon Brothers Inc.
4(g) All instruments defining the rights or holders of long-term
debt of the Corporation and its subsidiaries (not filed
pursuant to Clause 4(iii) of Item 601(b) of Regulation S-K; to
be furnished upon the request of the Commission).
4(h) Rights Plan, dated February 22, 1990, between Huntington
Bancshares Incorporated and The Huntington Trust Company,
National Association, -- previously filed as Exhibit 1 to
Registration Statement on Form 8-A, filed with the Securities
and Exchange Commission on February 22, 1990, and incorporated
herein by reference.
4(i) Amendment No. 1 To Rights Plan, dated August 16, 1995, between
Huntington Bancshares Incorporated and The Huntington Trust
Company, National Association -- previously filed as Exhibit
4(b) to Current Report on Form 8-K, filed with the Securities
and Exchange Commission on August 28, 1995, and incorporated
herein by reference.
5(a) Opinion of Porter, Wright, Morris & Arthur as to validity of
the New Subordinated Debentures and the New Guarantee to be
issued by the Registrant.
5(b) Opinion of Richards, Layton & Finger as to validity of the New
Capital Securities.
8 * Opinion of Porter, Wright, Morris & Arthur as to certain
federal income tax matters.
10(a) (reserved)
10(b) Employment Agreement, dated April 25, 1996, between Huntington
Bancshares Incorporated and Frank Wobst -- previously filed as
Exhibit 10(a) to Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1996, and incorporated herein
by reference.
10(c) Employment Agreement, dated September 16, 1991, between
Huntington Bancshares Incorporated and Zuheir Sofia --
previously filed as Exhibit 10(b) to Annual Report on Form
10-K for the year ended December 31, 1991, and incorporated
herein by reference.
10(d) Executive Agreement, dated January 22, 1997, between
Huntington Bancshares Incorporated and Frank Wobst --
previously filed as Exhibit 10(d) to Annual Report on Form
10-K for the year ended December 31, 1996, and incorporated
herein by reference.
10(e) Executive Agreement, dated January 22, 1997, between
Huntington Bancshares Incorporated and Zuheir Sofia --
previously filed as Exhibit 10(g) to Annual Report on Form
10-K for the year ended December 31, 1996, and incorporated
herein by reference.
10(f) Form of Executive Agreement for certain executive officers --
previously filed as Exhibit 10(g) to Annual Report on Form
10-K for the year ended December 31, 1996, and incorporated
herein by reference.
10(g) Schedule identifying material details of Executive Agreements,
substantially similar to Exhibit 10(h) -- previously filed as
Exhibit 10(h) to Annual Report on Form 10-K for the year ended
December 31, 1997, and incorporated herein by reference.
10(h) Huntington Bancshares Incorporated Incentive Compensation Plan
-- previously filed as Exhibit 10(i) to Quarterly Report on
Form 10-Q for the Quarter ended March 31, 1995, and
incorporated herein by reference.
10(i) Long-Term Incentive Compensation Plan, as amended and
effective for performance cycles beginning on or after January
1, 1996 -- previously filed as Exhibit 10(j)(2) to Annual
Report on Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference.
10(j)(1) Supplemental Executive Retirement Plan -- previously filed as
Exhibit 10(g) to Annual Report on Form 10-K for the year ended
December 31, 1987, and incorporated herein by reference.
10(j)(2) Third Amendment to Supplemental Executive Retirement Plan --
previously filed as Exhibit 10(k)(2) to Annual Report on Form
10-K for the year ended December 31, 1997, and incorporated
herein by reference.
10(k) Deferred Compensation Plan and Trust for Directors --
reference is made to Exhibit 4(a) of Post-Effective Amendment
No. 2 to Registration Statement on Form S-8, Registration No.
33-10546, filed with the Securities and Exchange Commission on
January 28, 1991, and incorporated herein by reference.
10(l)(1) 1983 Stock Option Plan -- reference is made to Exhibit 4A of
Registration Statement on Form S-8, Registration No. 2-89672,
filed with the Securities and Exchange Commission on February
27, 1984, and incorporated herein by reference.
10(l)(2) 1983 Stock Option Plan -- Second Amendment -- previously
filed as Exhibit 10(j)(2) to Annual Report on Form 10-K for
the year ended December 31, 1987, and incorporated herein by
reference.
10(1)(3) 1983 Stock Option Plan -- Third Amendment -- previously filed
as Exhibit 10(j)(3) to Annual Report on Form 10-K for the year
ended December 31, 1987, and incorporated herein by reference.
10(l)(4) 1983 Stock Option Plan -- Fourth Amendment -- previously
filed as Exhibit 10(m)(4) to Annual Report on Form 10-K for
the year ended December 31, 1993, and incorporated herein by
reference.
10(l)(5) 1983 Stock Option Plan -- Fifth Amendment -- previously filed
as Exhibit 10(m)(5) to Annual Report on Form 10-K for the year
ended December 31, 1996, and incorporated herein by reference.
10(m)(1) 1990 Stock Option Plan -- reference is made to Exhibit 4(a) of
Registration Statement on Form S-8, Registration No. 33-37373,
filed with the Securities and Exchange Commission on October
18, 1990, and incorporated herein by reference.
10(m)(2) First Amendment to the Huntington Bancshares Incorporated
1990 Stock Option Plan -- previously filed as Exhibit 10(q)(2)
to Annual Report on Form 10-K for the year ended December 31,
1991, and incorporated herein by reference.
10(m)(3) Second Amendment to Huntington Bancshares Incorporated 1990
Stock Option Plan -- previously filed as Exhibit 10(n)(3) to
Annual Report on Form 10-K for the year ended December 31,
1996, and incorporated herein by reference.
10(n)(1) The Huntington Supplemental Stock Purchase and Tax Savings
Plan and Trust (as amended and restated as of February 9,
1990) -- previously filed as Exhibit 4(a) to Registration
Statement on Form S-8, Registration No. 33-44208, filed with
the Securities and Exchange Commission on November 26, 1991,
and incorporated herein by reference.
10(n)(2) First Amendment to the Huntington Supplemental Stock Purchase
and Tax Savings Plan and Trust -- previously filed as Exhibit
10(o)(2) to Annual Report on Form 10-K for the year ended
December 31, 1997, and incorporated herein by reference.
10(o) Deferred Compensation Plan and Trust for Huntington Bancshares
Incorporated Directors -- reference is made to Exhibit 4(a) of
Registration Statement on Form S-8, Registration No. 33-41774,
filed with the Securities and Exchange Commission on July 19,
1991, and incorporated herein by reference.
10(p) Huntington Bancshares Incorporated Retirement Plan For Outside
Directors -- previously filed as Exhibit 10(t) to Annual
Report on Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference.
10(q) Amended and Restated 1994 Stock Option Plan -- previously
filed as Exhibit 10(r) to Annual Report on Form 10-K for the
year ended December 31, 1996, and incorporated herein by
reference.
10(r) Huntington Supplemental Retirement Income Plan -- previously
filed as Exhibit 10(s) to Annual Report on Form 10-K for the
year ended December 31, 1994, and incorporated herein by
reference.
12 * Computations of Consolidated Ratios of Earnings to Fixed
Charges.
21 * Subsidiaries of the Registrant.
23(a) * Consent of Ernst & Young LLP.
23(b) Consent of Porter, Wright, Morris & Arthur (included in
Exhibit 5(a) previously filed with this Registration Statement
and Exhibit 8 filed herewith).
23(c) Consent of Richards, Layton & Finger (included in Exhibit 5(b)
previously filed with this Registration Statement).
23(d) * Consent of BDO Seidman, LLP.
24 Powers of Attorney.
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25(a) Form T-1 Statement of Eligibility of The Chase Manhattan Bank
to act as Trustee under the Indenture.
25(b) Form T-1 Statement of Eligibility of The Chase Manhattan Bank
to act as Trustee under the Declaration of Trust.
25(c) Form T-1 Statement of Eligibility of The Chase Manhattan Bank
under the Guarantee for the benefit of the holders of the
Capital Securities.
27 The Registrant's Financial Data Schedule (incorporated by
reference to Exhibit 27 to the Registrant's 1998 Second
Quarter Report on Form 10-Q).
99(a)* Form of Letter of Transmittal and instructions thereto.
99(b)* Form of Notice of Guaranteed Delivery.
- ------------------
* Filed with this Amendment
(b) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of the Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to the immediately preceding paragraph, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such 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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has 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 Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of
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appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Registration Statement, within one business
day of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Post-Effective Amendment No. 1 to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Columbus, State of Ohio, on September 25, 1998.
HUNTINGTON BANCSHARES INCORPORATED
By: /s/ Gerald R. Williams
------------------------------------
Gerald R. Williams
Executive Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
*Frank Wobst Chairman, President, and Chief )
- ------------------------ Executive Officer (principal )
executive officer) )
)
)
*Gerald R. Williams Executive Vice President and )
- ------------------------ Chief Financial Officer )
Gerald R. Williams (principal financial officer and )
accounting officer) )
)
)
*Don M. Casto, III Director ) September 25, 1998
- ------------------------ )
Don M. Casto, III )
)
)
*Don Conrad Director )
- ------------------------ )
Don Conrad )
)
)
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*Patricia T. Hayot Director )
- --------------------------- )
Patricia T. Hayot )
)
)
*Wm. J. Lhota Director )
- --------------------------- )
Wm. J. Lhota )
)
)
Director )
- --------------------------- )
Robert H. Schottenstein )
)
)
*George A. Skestos Director )
- --------------------------- )
George A. Skestos )
)
)
*Lewis R. Smoot, Sr. Director ) September 25, 1998
- --------------------------- )
Lewis R. Smoot, Sr. )
)
)
*Timothy P. Smucker Director )
- --------------------------- )
Timothy P. Smucker )
)
)
*William J. Williams Director )
- --------------------------- )
William J. Williams )
*By: /s/ Gerald R. Williams
----------------------------------
Gerald R. Williams, attorney-in-fact
for each of the persons indicated
Pursuant to the requirements of the Securities Act of 1933, Huntington
Capital I has duly caused this Post-Effective Amendment No. 1 to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Columbus, State of Ohio, on September 25, 1998.
HUNTINGTON CAPITAL I
By: /s/ Paul V. Sebert
------------------
Paul V. Sebert
Regular Trustee
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