AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE , 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMERICAN EXPRESS COMPANY AMERICAN EXPRESS COMPANY CAPITAL TRUST I
(EXACT NAME OF REGISTRANT AS AMERICAN EXPRESS COMPANY CAPITAL TRUST II
SPECIFIED IN ITS CHARTER) (EXACT NAME OF EACH REGISTRANT AS SPECIFIED
IN ITS CHARTER)
NEW YORK DELAWARE
(STATE OR OTHER JURISDICTION) (STATE OR OTHER JURISDICTION)
13-4922250 51-6508487
51-6508488
(I.R.S. EMPLOYER (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
IDENTIFICATION NUMBER)
200 VESEY STREET 200 VESEY STREET
NEW YORK, NEW YORK 10285 NEW YORK, NEW YORK 10285
(212) 640-2000 (212) 640-2000
(ADDRESS, INCLUDING ZIP CODE, (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
AND TELEPHONE NUMBER, INCLUDING AREA CODE
NUMBER, INCLUDING AREA CODE OF OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S PRINCIPAL -------------
EXECUTIVE OFFICES)
LOUISE M. PARENT, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
AMERICAN EXPRESS COMPANY
200 VESEY STREET
NEW YORK, NEW YORK 10285
(212) 640-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, AREA CODE, OF AGENT FOR SERVICE
WITH COPIES TO:
KENNETH L. BACHMAN MARK J. WELSHIMER
CLEARY, GOTTLIEB, STEEN & SULLIVAN & CROMWELL
HAMILTON 125 BROAD STREET
2000 PENNSYLVANIA AVENUE, N.W. NEW YORK, NY 10004
WASHINGTON, D.C. 20006 (212) 558-4000
(202) 974-1500 -------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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(1) Estimated solely for the purpose of computing the registration fee.
(2) The Junior Subordinated Deferrable Interest Debentures will be purchased
by American Express Company Capital Trust I and American Express Company
Capital Trust II with the proceeds of the sale of the Capital Securities.
(3) No separate consideration will be received for American Express Company
Guarantees.
(4) This Registration Statement is deemed to cover the Junior Subordinated
Deferrable Interest Debentures of American Express Company, the rights of
holders of Junior Subordinated Deferrable Interest Debentures of American
Express Company under the Indenture, the rights of holders of Capital
Securities of American Express Company Capital Trust I and American
Express Company Capital Trust II under each Trust Agreement, the rights of
holders of the Capital Securities under the Guarantees and the Expense
Agreements, which taken together, fully irrevocably and unconditionally
guarantee all of the respective obligations of American Express Company
Capital Trust I and American Express Company Capital Trust II under the
Capital Securities.
(5) Such amount represents the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at their principal amount and the
issue price rather than the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at an original issue discount. Such
amount also represents the initial public offering price of the American
Express Company Capital Trust I and American Express Company Capital Trust
II Capital Securities.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE +
+ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1998
$
AMERICAN EXPRESS COMPANY CAPITAL TRUST I
% CAPITAL SECURITIES, SERIES I
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
AMERICAN EXPRESS COMPANY
LOGO
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The % Capital Securities, Series I (the "Capital Securities"), offered
hereby represent beneficial interests in American Express Company Capital Trust
I, a statutory business trust created under the laws of the State of Delaware
(the "Issuer"). American Express Company, a New York corporation (the
"Corporation"), will be the owner of all of the beneficial interests
represented by common securities of the Issuer (the "Common Securities" and,
collectively with the Capital Securities, the "Trust Securities"). Bankers
Trust Company is the Property Trustee of the Issuer. The Issuer exists for the
sole purpose of issuing the Trust Securities and investing the proceeds thereof
in $ initial principal amount of % Junior Subordinated Deferrable Interest
Debentures (the "Junior Subordinated Debentures"), to be issued by the
Corporation and engaging in only those other activities necessary or incidental
thereto. The Subordinated Debentures will mature on , 2028, which date may
be shortened to a date not earlier than , 2013.
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-5 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE CAPITAL SECURITIES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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(1) Plus accrued Distributions, if any, from the date of original issuance.
(2) The Issuer and the Corporation have each agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(3) In view of the fact that the proceeds of the sale of the Capital Securities
will be invested in the Junior Subordinated Debentures, the Corporation has
agreed to pay to the Underwriters as compensation ("Underwriters'
Compensation") for their arranging the investment therein of such proceeds
$ per Capital Security (or $ in the aggregate). See "Underwriting".
(4) Expenses of the offering which are payable by the Corporation are estimated
to be $ .
-----------
The Capital Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that the Capital Securities will be ready for delivery in book-entry
form only through the facilities of The Depository Trust Company in New York,
New York, on or about , 1998, against payment therefor in immediately
available funds. See "Underwriting".
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The date of this Prospectus Supplement is , 1998
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CAPITAL
SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING
AND AFTER THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
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(cover page continued)
The Capital Securities will have a preference under certain circumstances with
respect to cash distributions and amounts payable on liquidation, redemption
or otherwise over the Common Securities. See "Description of Capital
Securities--Subordination of Common Securities" in the accompanying
Prospectus.
Holders of the Capital Securities will be entitled to receive preferential
cumulative cash distributions accruing from the date of original issuance and
payable semi-annually in arrears on the first day of and of each
year, commencing on , 1998, at the annual rate of % of the Liquidation
Amount of $1,000 per Capital Security ("Distributions"). Subject to certain
exceptions, as described herein, the Corporation has the right to defer
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods
with respect to each deferral period (each, an "Extension Period"), provided
that no Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all interest then accrued and unpaid (together with interest
thereon at the rate of % per annum, compounded semi-annually, to the extent
permitted by applicable law), the Corporation may elect to begin a new
Extension Period subject to the requirements set forth herein. If interest
payments on the Junior Subordinated Debentures are so deferred, Distributions
on the Capital Securities will also be deferred and the Corporation will not
be permitted, subject to certain exceptions described herein, to declare or
pay any cash distributions with respect to the Corporation's capital stock or
debt securities that rank pari passu with or junior to the Junior Subordinated
Debentures. During an Extension Period, interest on the Junior Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Capital Securities are entitled will accumulate) at the rate of
% per annum, compounded semi-annually from the relevant payment date for such
interest, and holders of Capital Securities will be required to accrue
interest income for United States federal income tax purposes. See "Certain
Terms of Junior Subordinated Debentures--Option to Defer Interest Payments"
and "U.S. Federal Income Tax Consequences--Interest Income and Original Issue
Discount".
The Junior Subordinated Debentures are unsecured and subordinated to all
Senior Debt (as defined in the accompanying Prospectus). Substantially all of
the Corporation's existing indebtedness constitutes Senior Debt. Because the
Corporation is a holding company, the right of the Corporation to participate
in any distribution of assets of any subsidiary, including American Express
Travel Related Services Company, Inc., American Express Financial Corporation
and American Express Bank Ltd., upon such subsidiary's liquidation or
reorganization or otherwise (and, thus, the ability of holders of 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
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Junior Subordinated Debentures (and therefore the Capital
Securities) will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, and holders thereof should look
only to the assets of the Corporation for payments on the Junior Subordinated
Debentures. See "Description of Junior Subordinated Debentures--Subordination"
in the accompanying Prospectus.
S-2
(cover page continued)
The Corporation has, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures, the Indenture and the Expense Agreement (each as
defined herein), taken together, fully, irrevocably and unconditionally
guaranteed all of the Issuer's obligations under the Capital Securities. See
"Relationship Among the Capital Securities, the Corresponding Junior
Subordinated Debentures, the Expense Agreement and the Guarantees--Full and
Unconditional Guarantee" in the accompanying Prospectus. The Guarantee of the
Corporation guarantees the payment of Distributions and payments on
liquidation or redemption of the Capital Securities, but only in each case to
the extent of funds held by the Issuer, as described herein (the "Guarantee").
See "Description of Guarantees" in the accompanying Prospectus. If the
Corporation does not make interest payments on the Junior Subordinated
Debentures held by the Issuer, the Issuer will have insufficient funds to pay
Distributions on the Capital Securities. The Guarantee does not cover payment
of Distributions when the Issuer has insufficient funds to pay such
Distributions. In such event, a holder of Capital Securities may institute a
legal proceeding directly against the Corporation pursuant to the terms of the
Indenture to enforce payment of amounts equal to such Distributions to such
holder. See "Description of Junior Subordinated Debentures--Enforcement of
Certain Rights By Holders of Capital Securities" in the accompanying
Prospectus. The obligations of the Corporation under the Guarantee and the
Capital Securities are subordinate and junior in right of payment to all
Senior Debt of the Corporation.
The Capital Securities are subject to mandatory redemption, in whole or in
part, upon repayment of the Junior Subordinated Debentures at maturity or
their earlier redemption. The Junior Subordinated Debentures are redeemable
prior to maturity at the option of the Corporation (i) on or after ,
2008, in whole at any time or in part from time to time or (ii) at any time
prior to , 2008 in whole (but not in part) at any time within 90 days
following the occurrence and continuation of a Tax Event or an Investment
Company Event (each as defined herein), in each case at the redemption price
set forth herein, which includes the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption.
The Corporation will have the right at any time to terminate the Issuer and
cause the Junior Subordinated Debentures to be distributed to the holders of
the Capital Securities in liquidation of the Issuer.
In the event of the termination of the Issuer, after satisfaction of
liabilities to creditors of the Issuer as required 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 Junior Subordinated Debentures, subject to
certain exceptions. See "Description of Capital Securities--Liquidation
Distribution Upon Termination" in the accompanying Prospectus.
The Capital Securities will be represented by global certificates registered
in the name of The Depository Trust Company ("DTC") or its nominee. Beneficial
interests in the Capital Securities will be shown on, and transfers thereof
will be effected only through, records maintained by participants in DTC.
Except as described in the accompanying Prospectus, Capital Securities in
certificated form will not be issued in exchange for the global certificates.
See "Book-Entry Issuance" in the accompanying Prospectus.
The information in this Prospectus Supplement supplements and should be read
in conjunction with the information contained in the accompanying Prospectus.
As used herein, (i) the "Indenture" means the Junior Subordinated Indenture,
as amended and supplemented from time to time, between the Corporation and
Bankers Trust Company, as trustee (the "Debenture Trustee"), (ii) the "Trust
Agreement" means the Amended and Restated Trust Agreement relating to the
Issuer among the Corporation, as Depositor, Bankers Trust Company, as Property
Trustee (the "Property Trustee") and
S-3
Bankers Trust (Delaware), as Delaware Trustee (the "Delaware Trustee")
(collectively, the "Issuer Trustees") and (iii) the "Guarantee" means the
Guarantee Agreement relating to the Capital Securities, as amended and
supplemented from time to time, between the Corporation and Bankers Trust
Company, as Guarantee Trustee. Each of the other capitalized terms used in
this Prospectus Supplement and not otherwise defined in this Prospectus
Supplement has the meaning set forth in the accompanying Prospectus.
S-4
RISK FACTORS
Prospective purchasers of the Capital Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following
matters. In addition, because holders of Capital Securities may receive Junior
Subordinated Debentures in exchange therefor upon liquidation of the Issuer,
prospective purchasers of Capital Securities are also making an investment
decision with regard to the Junior Subordinated Debentures and should
carefully review all the information regarding the Junior Subordinated
Debentures contained herein.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Corporation under the Guarantee issued by the
Corporation for the benefit of the holders of Capital Securities and under the
Junior Subordinated Debentures are unsecured and rank subordinate and junior
in right of payment to all Senior Debt of the Corporation. Substantially all
of the Corporation's existing indebtedness constitutes Senior Debt. Because
the Corporation is a holding company, the right of the Corporation to
participate in any distribution of assets of any subsidiary, including
American Express Travel Related Services Company, Inc., American Express
Financial Corporation and American Express Bank Ltd., 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 Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Junior Subordinated Debentures (and, therefore,
the Capital Securities) will be effectively subordinated to all existing and
future liabilities of the Corporation's subsidiaries, and holders thereof
should look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. See "The Corporation". None of the Indenture, the
Guarantee, the Trust Agreement or the Expense Agreement places any limitation
on the amount of secured or unsecured debt, including Senior Debt, that may be
incurred by the Corporation. See "Description of Guarantees--Status of the
Guarantees" and "Description of Junior Subordinated Debentures--Subordination"
in the accompanying Prospectus.
The ability of the Issuer to pay amounts due on the Capital Securities is
solely dependent upon the Corporation making payments on the Junior
Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no event of default under the Indenture has occurred or is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Junior Subordinated Debentures at any time or from time to
time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity of the Junior Subordinated Debentures. As a
consequence of any such deferral, semi-annual Distributions on the Capital
Securities by the Issuer will also be deferred (and the amount of
Distributions to which holders of the Capital Securities are entitled will
accumulate additional Distributions thereon at the rate of % per annum,
compounded semi-annually from the relevant payment date for such
Distributions) during any such Extension Period. During any Extension Period,
the Corporation may not (i) declare or pay any dividends or distributions on,
or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Corporation's capital stock or (ii) make any payment of principal
of or interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank pari passu in all respects with or
junior in interest to the Junior Subordinated Debentures (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of
the Corporation in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of one or more employees,
officers, directors or
S-5
consultants, in connection with a dividend reinvestment or stockholder stock
purchase plan or in connection with the issuance of capital stock of the
Corporation (or securities convertible into or exercisable for such capital
stock) as consideration in an acquisition transaction entered into prior to
the applicable Extension Period, (b) as a result of any exchange or conversion
of any class or series of the Corporation's capital stock (or any capital
stock of a subsidiary of the Corporation) for any class or series of the
Corporation's capital stock or of any class or series of the Corporation's
indebtedness for any class or series of the Corporation's capital stock, (c)
the purchase of fractional interests in shares of the Corporation's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in
the form of stock, warrants, options or other rights where the dividend stock
or the stock issuable upon exercise of such warrants, options or other rights
is the same stock as that on which the dividend is being paid or ranks pari
passu with or junior to such stock). Prior to the termination of any such
Extension Period, the Corporation may further defer the payment of interest,
provided that no Extension Period may exceed 10 consecutive semi-annual
periods or extend beyond the Stated Maturity of the Junior Subordinated
Debentures. Upon the termination of any Extension Period and the payment of
all interest then accrued and unpaid (together with interest thereon at the
annual rate of %, compounded semi-annually from the relevant Interest Payment
Date (as defined herein) for such interest, to the extent permitted by
applicable law), the Corporation may elect to begin a new Extension Period
subject to the above requirements. There is no limitation on the number of
times that the Corporation may elect to begin an Extension Period. See
"Certain Terms of Capital Securities--Distributions" and "Certain Terms of
Junior Subordinated Debentures--Option to Defer Interest Payments".
Should an Extension Period occur, a holder of Capital Securities will be
required to recognize income (in the form of original issue discount on a
constant yield method) in respect of its pro rata share of the Junior
Subordinated Debentures held by the Issuer for United States federal income
tax purposes. As a result, a holder of Capital Securities will be required to
include such income in gross income for United States federal income tax
purposes in advance of the receipt of cash attributable to such income, and
will not receive the cash related to such income from the Issuer if the holder
disposes of the Capital Securities prior to the record date for the payment of
Distributions. See "U.S. Federal Income Tax Consequences--Interest Income and
Original Issue Discount" and "--Sale or Redemption of Capital Securities".
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. However, should the Corporation elect to exercise
such right in the future, the market price of the Capital Securities is likely
to be affected. A holder that disposes of its Capital Securities during an
Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Capital Securities.
TAX EVENT OR INVESTMENT COMPANY EVENT--REDEMPTION
Upon the occurrence and continuation of a Tax Event or an Investment Company
Event, the Corporation has the right to redeem the Junior Subordinated
Debentures in whole (but not in part) within 90 days following the occurrence
and continuation of such Tax Event or Investment Company Event and thereby
cause a mandatory redemption of the Capital Securities. See "U.S. Federal
Income Tax Consequences--Possible Tax Law Changes".
A "Tax Event" means the receipt by the Issuer of an opinion of 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
S-6
political subdivision or taxing authority thereof or therein, or (b) any
judicial decision or any official administrative pronouncement (including any
private letter ruling, technical advice memorandum or field service advice) or
regulatory procedure (an "Administrative Action"), regardless of whether such
judicial decision or Administrative Action is issued to or in connection with
a proceeding involving the Corporation or the Issuer and whether or not
subject to review or appeal, which amendment, clarification, change,
Administrative Action or decision is enacted, promulgated or announced, in
each case, on or after the date of this Prospectus Supplement, there is more
than an insubstantial risk that (i) the Issuer is, or will be within 90 days
of the date of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Junior Subordinated Debentures,
(ii) interest payable by the Corporation on the Junior Subordinated Debentures
is not, or within 90 days of such opinion, will not be, deductible by the
Corporation, in whole or in part, for United States federal income tax
purposes, or (iii) the Issuer is, or will be within 90 days of the date of the
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Investment Company Event" means the receipt by the Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a written change (including any
announced prospective change) in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the Issuer is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the
Capital Securities.
EXCHANGE OF CAPITAL SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES
The holders of all of the outstanding Common Securities have the right at
any time to terminate the Issuer and, after satisfaction of liabilities to
creditors of the Issuer as required by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of the Capital
Securities and Common Securities in exchange therefor upon liquidation of the
Issuer. See "Certain Terms of Capital Securities--Liquidation of Issuer and
Distribution of Junior Subordinated Debentures to Holders".
Under current United States federal income tax law and interpretations, a
distribution of the Junior Subordinated Debentures upon liquidation of the
Issuer would not be a taxable event to holders of the Capital Securities.
However, if any event described in clause (a) or (b) of the definition of "Tax
Event" above were to occur which would cause the Issuer to be subject to
United States federal income tax with respect to income received or accrued on
the Junior Subordinated Debentures, as the case would be if, for example, the
Issuer were treated as an association taxable as a corporation, a distribution
of the Junior Subordinated Debentures by the Issuer could be a taxable event
to the Issuer and the holders of the Capital Securities. See "U.S. Federal
Income Tax Consequences--Distribution of the Junior Subordinated Debentures to
Holders of Capital Securities Upon Liquidation of the Issuer".
SHORTENING OF STATED MATURITY OF JUNIOR SUBORDINATED DEBENTURES
The Corporation will have the right at any time to shorten the maturity of
the Junior Subordinated Debentures to a date not earlier than , 2013 and
thereby cause the Capital Securities to be redeemed on such earlier date.
MARKET PRICES
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures that may be distributed in exchange for Capital
Securities upon liquidation of the Issuer. Accordingly, the Capital Securities
that an investor may purchase, whether pursuant to the offer made hereby or in
the secondary market, or the Junior Subordinated Debentures that a holder of
Capital
S-7
Securities may receive on liquidation of the Issuer, may trade at a discount
to the price that the investor paid to purchase the Capital Securities offered
hereby. As a result of the existence of the Corporation's right to defer
interest payments, the market price of the Capital Securities (which represent
preferred beneficial interests in the Issuer) may be more volatile than the
market prices of other securities on which original issue discount accrues
that are not subject to such deferrals. In addition, because the Corporation
has the right to shorten the Stated Maturity of the Junior Subordinated
Debentures, there can be no assurance that the Corporation will not exercise
its option to change the maturity of the Junior Subordinated Debentures as
permitted by the terms thereof and of the Indenture. If the Corporation does
exercise such option, there can be no assurance that the shortening of the
maturity of the Junior Subordinated Debentures will not have an effect on the
market price of the Capital Securities. See "Certain Terms of the Junior
Subordinated Debentures" and "Description of Junior Subordinated Debentures--
Corresponding Junior Subordinated Debentures" in the accompanying Prospectus.
RIGHTS UNDER THE GUARANTEE; DIRECT ACTION
The Guarantee guarantees to the holders of the Capital Securities the
following payments, to the extent not paid by the Issuer: (i) any accumulated
and unpaid Distributions required to be paid on the Capital Securities, to the
extent that the Issuer has funds on hand available therefor at such time, (ii)
the redemption price with respect to any Trust Securities called for
redemption, to the extent that the Issuer has funds on hand available therefor
at such time, and (iii) upon a voluntary or involuntary dissolution, winding-
up or liquidation of the Issuer (unless the Junior Subordinated Debentures are
distributed to holders of the Trust Securities), the lesser of (a) the
aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions to the date of payment to the extent that the Issuer has funds
on hand available therefor at such time and (b) the amount of assets of the
Issuer remaining available for distribution to holders of the Capital
Securities. The Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Bankers Trust
Company will act as the indenture trustee under the Guarantee (the "Guarantee
Trustee") for the purposes of compliance with the Trust Indenture Act and will
hold the Guarantee for the benefit of the holders of the Capital Securities.
Bankers Trust Company will also act as Debenture Trustee for the Junior
Subordinated Debentures and as Property Trustee under the Trust Agreement and
Bankers Trust (Delaware) will act as Delaware Trustee under the Trust
Agreement.
The holders of not less than a majority in aggregate liquidation amount of
the outstanding 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 power conferred upon the Guarantee Trustee under the Guarantee. Any
holder of the Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Issuer, the Guarantee Trustee
or any other person or entity. If the Corporation were to default on its
obligation to pay amounts payable under the Junior Subordinated Debentures,
the Issuer 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. Instead, in the event a Debenture Event
of Default shall have occurred and be continuing and such event is
attributable to the failure of the Corporation to pay interest on or principal
of the Junior Subordinated Debentures on the payment date on which such
payment is due and payable, then a holder of Capital Securities may institute
a legal proceeding directly against the Corporation for enforcement of payment
to such holder of the principal of or interest on such Junior 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 Corporation will have a right of set-off under
the Indenture to the extent of any payment made by the Corporation to such
holder of Capital Securities in the Direct Action. Except as described herein,
holders of Capital Securities will not be able to exercise directly any other
remedy available to the
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holders of the Junior Subordinated Debentures or assert directly any other
rights in respect of the Junior Subordinated Debentures. See "Description of
Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of
Capital Securities" and "--Debenture Events of Default" and "Description of
Guarantees" in the accompanying Prospectus. The Trust Agreement provides that
each holder of Capital Securities by acceptance thereof agrees to the
provisions of the Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities generally will have limited voting rights
relating generally to the modification of the Capital Securities and the
Guarantee and the exercise of the Issuer's rights as holder of Junior
Subordinated Debentures. Holders of Capital Securities will not be entitled to
vote to appoint, remove or replace the Property Trustee or the Delaware
Trustee except upon the occurrence of certain events described in the
accompanying Prospectus. The Property Trustee and the holders of all of the
Common Securities may, subject to certain conditions, amend the Trust
Agreement without the consent of holders of Capital Securities to ensure that
(i) the Issuer will be classified for United States federal income tax
purposes as a grantor trust or as other than as an association taxable as a
corporation, (ii) the Junior Subordinated Debentures will be treated as
indebtedness of the Corporation or (iii) the Issuer will not be required to
register as an "investment company" under the Investment Company Act. See
"Description of Capital Securities--Voting Rights; Amendment of Each Trust
Agreement" and "--Removal of Issuer Trustees; Appointment of Successors" in
the accompanying Prospectus.
TRADING CHARACTERISTICS OF CAPITAL SECURITIES
The Capital Securities may trade at prices that do not fully reflect the
value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder of Capital Securities that disposes of its
Capital Securities between record dates for payments of Distributions (and
consequently does not receive a Distribution from the Issuer for the period
prior to such disposition) will nevertheless be required to include accrued
but unpaid interest on the Junior Subordinated Debentures through the date of
disposition in income as ordinary income for U.S. federal income tax purposes.
Such holder will recognize a capital loss to the extent the selling price
(which may not fully reflect the value of accrued but unpaid interest) is less
than its adjusted tax basis. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for United States federal
income tax purposes. See "U.S. Federal Income Tax Consequences--Sale or
Redemption of Capital Securities".
AMERICAN EXPRESS COMPANY CAPITAL TRUST I
American Express Company Capital Trust I is a statutory business trust
created under Delaware law pursuant to (i) the Trust Agreement executed by the
Corporation, as Depositor and Bankers Trust (Delaware), as Delaware Trustee
and (ii) the filing of a certificate of trust with the Delaware Secretary of
State on May 29, 1998. The Issuer's business and affairs are conducted by its
trustees: initially Bankers Trust Company, as Property Trustee and Bankers
Trust (Delaware), as Delaware Trustee. In addition, two individuals who are
employees or officers of or affiliated with the holder of a majority of the
Common Securities will act as administrators with respect to the Issuer (the
"Administrators"). The Administrators will be selected by the holders of the
Common Securities. See "Description of Capital Securities--Miscellaneous" in
the accompanying Prospectus. The Issuer exists for the exclusive purposes of
(i) issuing and selling the Trust Securities, (ii) using the proceeds from the
sale of Trust Securities to acquire Junior Subordinated Debentures issued by
the Corporation and (iii) engaging in only those other activities necessary or
incidental thereto (such as registering the transfer of the Capital
Securities). Accordingly, the Junior Subordinated Debentures will be the sole
assets of the Issuer, and payments under the Junior Subordinated Debentures
will be the sole revenue of the Issuer.
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All of the Common Securities will be initially owned by the Corporation. The
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Capital Securities, except that upon the occurrence and
continuance of an event of default under the Trust Agreement resulting from an
event of default under the Indenture, the rights of the Corporation, as holder
of the Common Securities, to payment in respect of Distributions and payments
upon liquidation, redemption or otherwise will be subordinated to the rights
of the holders of the Capital Securities. See "Description of Capital
Securities--Subordination of Common Securities" in the accompanying
Prospectus. The Corporation will acquire Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of the Issuer. The Issuer
has a term of 55 years, but may terminate earlier as provided in the Trust
Agreement. The principal executive office of the Issuer is at World Financial
Center, 200 Vesey Street, New York, New York 10285, and its telephone number
is (212) 640-2000. See "The Issuers" in the accompanying Prospectus.
It is anticipated that the Issuer will not be subject to the reporting
requirements under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
THE CORPORATION
Through its subsidiaries, the Corporation is primarily engaged in the
business of providing travel related services, financial advisory services and
international banking services throughout the world.
Travel related services are offered principally through American Express
Travel Related Services Company, Inc. and its subsidiaries ("TRS") and include
a variety of products and services, including the American Express(R) Card,
the Optima Card(R) and other consumer and corporate lending products (the
"Cards"), the American Express(R) Travelers Cheque (the "Travelers Cheque")
and other stored value products, business expense management products and
services, tax preparation and bookkeeping services, corporate and consumer
travel products and services, magazine publishing, and management and merchant
transaction processing, point of sale and back office products and services.
At December 31, 1997, there were 42.7 million Cards in force worldwide, and
worldwide Card billed business for the year ended December 31, 1997 was $209.2
billion. U.S. consumer lending operations are conducted by American Express
Centurion Bank, a wholly-owned subsidiary of TRS whose deposits are insured by
the Federal Deposit Insurance Corporation. Travelers Cheque sales for the year
ended December 31, 1997 were $25 billion.
American Express Financial Corporation ("AEFC") and its subsidiaries are
engaged in providing a variety of financial products and services to help
individuals, businesses and institutions establish and achieve their financial
goals. AEFC's products and services include financial planning and advice,
insurance and annuities, a variety of investment products, including
investment certificates, mutual funds and limited partnerships, investment
advisory services, trust and employee plan administration services, personal
auto and homeowner's insurance and retail securities brokerage services. At
December 31, 1997, American Express Financial Advisors Inc. ("AEFA"), AEFC's
principal marketing subsidiary, maintained a nationwide financial planning
field force of 8,776 persons. At December 31, 1997, AEFA's assets owned and/or
managed totaled approximately $173.4 billion.
American Express Bank Ltd., together with its subsidiaries ("AEBL") offers
products that meet the financial services needs of four client groups:
corporations, financial institutions, affluent individuals and retail
customers. AEBL's five primary business lines are corporate banking and
finance, correspondent banking, private banking, personal financial services
and global trading. AEBL does not do business in the United States except as
an incident to its activities outside the United States.
The Corporation has its principal executive offices at World Financial
Center, 200 Vesey Street, New York, New York 10285, and its telephone number
is (212) 640-2000.
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CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Corporation's ratios of earnings to fixed
charges for the years and periods indicated:
In computing the ratio of earnings to fixed charges, "earnings" consist of
pretax income from continuing operations plus interest expense and other
adjustments. For purposes of computing "earnings", other adjustments included
adding the amortization of capitalized interest, the net loss of affiliates
accounted for under the equity method whose debt is not guaranteed by the
Corporation, the minority interest in the earnings of majority-owned
subsidiaries with fixed charges, and the interest component of rental expense
and subtracting undistributed net income of affiliates accounted for under the
equity method.
"Fixed charges" consist of interest expense and other adjustments, including
capitalized interest costs and the interest component of rental expense.
Interest expense includes interest expense related primarily to the
international banking operations of the Corporation and TRS's Cardmember
lending activities, which is netted against interest and dividends and
Cardmember lending net finance charge revenue, respectively, in the
Corporation's Consolidated Statements of Income.
On May 31, 1994, the Corporation completed the spin-off of Lehman Brothers
Holdings, Inc. ("Lehman Brothers") through a dividend to common shareholders
of the Corporation. Accordingly, Lehman Brothers' results are reported as a
discontinued operation and are excluded from the above computation for all
periods presented. In March 1993, the Corporation reduced its ownership in
First Data Corporation ("FDC") to approximately 22 percent through a public
offering. As a result, beginning in 1993, FDC was reported as an equity
investment in the above computation. In the fourth quarter of 1995, the
Corporation's ownership was further reduced to approximately 10 percent as a
result of shares issued by FDC in connection with a merger transaction.
Accordingly, as of December 31, 1995, the Corporation's investment in FDC is
accounted for as Investments--Available for sale.
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USE OF PROCEEDS
All of the proceeds from the sale of Capital Securities will be invested by
the Issuer in Junior Subordinated Debentures. The Corporation intends that the
proceeds from the sale of such Junior Subordinated Debentures will be used for
general corporate purposes.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation and its subsidiaries (in millions) as of December 31, 1997 and as
adjusted to give effect to the consummation of the offering of the Capital
Securities. The following data should be read in conjunction with the
consolidated financial statements and notes thereto included in the documents
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
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(1) As described herein, the sole assets of the Issuer will be $ of %
Junior Subordinated Debentures, issued by the Corporation to the Issuer.
The Junior Subordinated Debentures will mature on , 2028 which
date may be shortened to a date not earlier than , 2013. The
Corporation owns all of the Common Securities of the Issuer, which accrue
distributions at the rate of % per annum.
Except as set forth herein, there has been no material change in the
consolidated capitalization of the Corporation and its subsidiaries since
December 31, 1997 to the date of this Prospectus Supplement.
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SELECTED FINANCIAL DATA
The following table presents summary consolidated financial data derived
from the consolidated financial statements of the Corporation. This summary is
qualified in its entirety by the financial statements and the notes thereto
included in the documents incorporated herein by reference. See "Incorporation
of Certain Documents by Reference" in the accompanying Prospectus.
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(1) Adjusted to exclude: in 1996--a $300 million gain on the exchange of the
Corporation's DECS and a $138 million restructuring charge; 1993--a $433
million gain on the sale of FDC shares.
(2) Return on average shareholders' equity is based on adjusted income from
continuing operations before accounting changes and excludes the effect of
SFAS No. 115 beginning in 1994.
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ACCOUNTING TREATMENT
For financial reporting purposes, the Issuer will be treated as a subsidiary
of the Corporation and, accordingly, the accounts of the Issuer will be
included in the consolidated financial statements of the Corporation. The
Capital Securities will be presented as a separate line item in the
consolidated balance sheets of the Corporation, entitled "Guaranteed Preferred
Beneficial Interests in the Company's Junior Subordinated Deferrable Interest
Debentures" and appropriate disclosures about the Capital Securities, the
Guarantee and the Junior Subordinated Debentures will be included in the notes
to the consolidated financial statements. For financial reporting purposes,
the Corporation will record Distributions payable on the Capital Securities as
an expense in the consolidated statements of income.
The Corporation has determined that future financial reports of the
Corporation will: (i) include in a footnote to the financial statements
disclosure that the sole assets of the Issuer are the Junior Subordinated
Debentures; and (ii) if Staff Accounting Bulletin 53 treatment is sought,
include, in an audited footnote to the financial statements, disclosure that
(a) the trust is wholly owned, (b) the sole assets of the Issuer are the
Junior Subordinated Debentures and (c) the obligations of the Corporation
under the Junior Subordinated Debentures, the Indenture, Trust Agreement,
Guarantee and Expense Agreement, in the aggregate, constitute a full and
unconditional guarantee by the Corporation of the Issuer's obligations under
the Capital Securities.
CERTAIN TERMS OF CAPITAL SECURITIES
GENERAL
The following summary of certain terms and provisions of the Capital
Securities supplements the description of the terms and provisions of the
Capital Securities set forth in the accompanying Prospectus under the heading
"Description of Capital Securities", to which description reference is hereby
made. This summary of certain terms and provisions of the Capital Securities,
which summarizes the material provisions thereof, does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
Trust Agreement to which reference is hereby made. The form of Trust Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and accompanying Prospectus form a part.
DISTRIBUTIONS
The Capital Securities represent beneficial interests in the Issuer, and
Distributions on the Capital Securities will be payable at the annual rate of
% of the stated Liquidation Amount of $1,000, payable semi-annually in
arrears on and of each year (each a "Distribution Date"), to
the holders of the Capital Securities at the close of business on the
fifteenth day (whether or not a Business Day (as defined below)) next
preceding the relevant Distribution Date. Distributions will accumulate from
the date of original issuance. The first Distribution payment date for the
Capital Securities will be , 1998. The amount of Distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-
day months. In the event that any date on which Distributions are payable on
the Capital Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day
that is a Business Day (and without any additional Distributions or other
payment in respect of any such delay) with the same force and effect as if
made on the date such payment was originally payable. The Paying Agent for the
Capital Securities shall be Bankers Trust Company. See "Description of Capital
Securities--Distributions" in the accompanying Prospectus.
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Junior Subordinated Debentures
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at any time or from time to time for a period not exceeding 10 consecutive
semi-annual periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. As a consequence of any such deferral of interest
payments by the Corporation, semi-annual Distributions on the Capital
Securities will also be deferred by the Issuer during any such Extension
Period. Distributions to which holders of the Capital Securities are entitled
will accumulate additional Distributions thereon at the rate per annum of [ ]%
thereof, compounded semi-annually from the relevant payment date for such
Distributions. The term "Distributions" as used herein shall include any such
additional Distributions. During any such Extension Period, the Corporation
may not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Corporation's capital stock or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank pari passu in all respects with or
junior in interest to the Junior Subordinated Debentures (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of
the Corporation in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of one or more employees,
officers, directors or consultants, in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of
capital stock of the Corporation (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series
of the Corporation's capital stock, (c) the purchase of fractional interests
in shares of the Corporation's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise
of such warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks pari passu with or junior to such stock).
Prior to the termination of any such Extension Period, the Corporation may
further defer the payment of interest on the Junior Subordinated Debentures,
provided that no Extension Period may exceed 10 consecutive semi-annual
periods or extend beyond the Stated Maturity of the Junior Subordinated
Debentures. Upon the termination of any such Extension Period and the payment
of all interest then accrued and unpaid (together with interest thereon at the
rate of % per annum, compounded semi-annually, to the extent permitted by
applicable law), the Corporation may elect to begin a new Extension Period.
There is no limitation on the number of times that the Corporation may elect
to begin an Extension Period. See "Certain Terms of Junior Subordinated
Debentures--Option to Defer Interest Payments" and "U.S. Federal Income Tax
Consequences--Interest Income and Original Issue Discount".
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Junior
Subordinated Debentures, whether at Stated Maturity or upon earlier redemption
as provided in the Indenture, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount (as defined
below) of Trust Securities, upon not less than 30 nor more than 60 days notice
prior to the date fixed for repayment or redemption, at a redemption price
(the "Redemption Price"), equal to the aggregate Liquidation Amount of such
Trust Securities plus accumulated and unpaid Distributions thereon to the date
of redemption (the "Redemption Date") and the related amount of the premium,
if
S-15
any, paid by the Corporation upon the concurrent redemption of such Junior
Subordinated Debentures. See "Description of Capital Securities--Redemption or
Exchange" in the accompanying Prospectus. For a description of the Stated
Maturity and redemption provisions of the Junior Subordinated Debentures, see
"Certain Terms of Junior Subordinated Debentures--General" and "--Redemption".
The Corporation has the right to redeem the Junior Subordinated Debentures
(i) on or after , 2008, in whole at any time or in part from time to
time, or (ii) in whole (but not in part) at any time within 90 days following
the occurrence and during the continuation of a Tax Event or Investment
Company Event. A redemption of the Junior Subordinated Debentures would cause
a mandatory redemption of a Like Amount of the Capital Securities and Common
Securities.
The Redemption Price, in the case of a redemption under (i) above, shall
equal the following prices, expressed in percentages of the Liquidation Amount
(as defined below), together with accumulated Distributions to but excluding
the date fixed for redemption, if redeemed during the 12-month period
beginning of the year indicated below:
and at 100% on or after , 2018.
The Redemption Price, in the case of a redemption prior to , 2008
following a Tax Event or Investment Company Event as described under (ii)
above, will equal for each Capital Security the Make-Whole Amount for a
corresponding $1,000 principal amount of Junior Subordinated Debentures
together with accumulated Distributions to but excluding the date fixed for
redemption. The "Make-Whole Amount" will be equal to the greater of (i) 100%
of the principal amount of such Junior Subordinated Debentures or (ii) as
determined by a Quotation Agent (as defined below), the sum of the present
values of the principal amount and premium payable as part of the Redemption
Price with respect to an optional redemption of such Junior Subordinated
Debentures on , 2008 together with the present values of scheduled
payments of interest from the Redemption Date to , 2008 (the "Remaining
Life"), in each case discounted to the Redemption Date on a semi-annual basis
(assuming a 360-day year consisting of 30-day months) at the Adjusted Treasury
Rate.
"Adjusted Treasury Rate" means, with respect to any Redemption Date, the
Treasury Rate plus (i) % if such Redemption Date occurs on or before
or (ii) % if such Redemption Date occurs after .
"Treasury Rate" means (i) the yield, under the heading which represents the
average for the week immediately prior to the calculation date, appearing in
the most recently published statistical release designated "H.15(519)" or any
successor publication which is published weekly by the Federal Reserve and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities", for the maturity corresponding to
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the Remaining Life (if no maturity is within three months before or after the
Remaining Life, yields for the two published maturities most closely
corresponding to the Remaining Life shall be determined and the Treasury Rate
shall be interpolated or extrapolated from such yields on a straight-line
basis, rounding to the nearest month) or (ii) if such release (or any
successor release) is not published during the week preceding the calculation
date or does not contain such yields, the rate per annum equal to the semi-
annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date. The Treasury Rate shall be calculated on the third
Business Day preceding the Redemption Date.
"Business Day" means a day other than (i) a Saturday or Sunday, (ii) a day
on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or (iii) a day on which
the Property Trustee's Corporate Trust Office or the Corporate Trust Office of
the Debenture Trustee is closed for business.
"Comparable Treasury Issue" means with respect to any Redemption Date the
United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the Remaining Life that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing
new issues of corporate debt securities of comparable maturity to the
Remaining Life. If no United States Treasury security has a maturity which is
within a period from three months before to three months after , 2008 the
two most closely corresponding United States Treasury securities shall be used
as the Comparable Treasury Issue, and the Treasury Rate shall be interpolated
or extrapolated on a straight-line basis, rounding to the nearest month using
such securities.
"Quotation Agent" means and its successors; provided, however,
that if the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), the Corporation shall
substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any other
Primary Treasury Dealer selected by the Debenture Trustee after consultation
with the Corporation.
"Comparable Treasury Price" means (i) the average of five Reference Treasury
Dealer Quotations for such Redemption Date, after excluding the highest and
lowest such Reference Treasury Dealer Quotations, or (ii) if the Debenture
Trustee obtains fewer than five such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any Redemption Date, the average, as determined by the
Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00
p.m., New York City time, on the third Business Day preceding such Redemption
Date.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount (as defined below) equal to the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture, allocated to the Common Securities
and to the Capital Securities based upon the relative Liquidation Amounts of
such classes and (ii) with respect to a distribution of Junior Subordinated
Debentures to holders of Trust Securities in connection with a dissolution or
liquidation of the Issuer, Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of the Trust Securities of the holder
to whom such Junior Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $1,000 per Trust Security.
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A "Tax Event" means the receipt by the Issuer of an opinion of 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 political
subdivision or taxing authority thereof or therein, or (b) any judicial
decision or any official administrative pronouncement (including any private
letter ruling, technical advice memorandum or field service advice) or
regulatory procedure (an "Administrative Action"), regardless of whether such
judicial decision or Administrative Action is issued to or in connection with
a proceeding involving the Corporation or the Issuer and whether or not
subject to review or appeal, which amendment, clarification, change,
Administrative Action or decision is enacted, promulgated or announced, in
each case, on or after the date of this Prospectus Supplement, there is more
than an insubstantial risk that (i) the Issuer is, or will be within 90 days
of the date of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Junior Subordinated Debentures,
(ii) interest payable by the Corporation on the Junior Subordinated Debentures
is not, or within 90 days of such opinion, will not be, deductible by the
Corporation, in whole or in part, for United States federal income tax
purposes, or (iii) the Issuer is, or will be within 90 days of the date of the
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Investment Company Event" means the receipt by the Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a written change (including any
announced prospective change) in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the Issuer is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the
Capital Securities.
Payment of Additional Sums. If a Tax Event described in clause (i) or (iii)
of the definition of Tax Event above has occurred and is continuing and the
Issuer is the holder of all of the Junior Subordinated Debentures, the
Corporation will pay Additional Sums (as defined below), if any, on the Junior
Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by the Issuer on the
outstanding Capital Securities and Common Securities will not be reduced as a
result of certain additional taxes, duties and other governmental charges to
which the Issuer has become subject as a result of a Tax Event.
LIQUIDATION OF ISSUER AND DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO
HOLDERS
The amount payable on the Capital Securities in the event of any liquidation
of the Issuer is $1,000 per Capital Security plus accumulated and unpaid
Distributions, subject to certain exceptions, which may be in the form of a
distribution of such amount in Junior Subordinated Debentures.
The holders of all of the outstanding Common Securities will have the right
at any time to liquidate the Issuer and cause the Junior Subordinated
Debentures to be distributed to the holders of the Capital Securities and
Common Securities in exchange therefor upon liquidation of the Issuer.
Under current United States federal income tax law, a distribution of Junior
Subordinated Debentures in exchange for Capital Securities would not be a
taxable event to holders of the Capital Securities. However, should any event
described in clause (a) or (b) of the definition of "Tax Event" above occur,
the distribution of the Junior Subordinated Debentures could be a taxable
event to holders of the Capital Securities. See "U.S. Federal Income Tax
Consequences--Distribution of Junior Subordinated Debentures to Holders of
Capital Securities Upon Liquidation of the Issuer". If the Corporation elects
neither to redeem the Junior Subordinated Debentures prior to maturity nor to
liquidate the Issuer and distribute the Junior Subordinated Debentures to
holders of the Capital
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Securities in exchange therefor, the Capital Securities will remain
outstanding until the Stated Maturity of the Junior Subordinated Debentures.
If the Corporation elects to liquidate the Issuer and thereby causes the
Junior Subordinated Debentures to be distributed to holders of the Capital
Securities in exchange therefor upon liquidation of the Issuer, the
Corporation shall continue to have the right to shorten the maturity of the
Junior Subordinated Debentures, subject to certain conditions as described
under "Certain Terms of Junior Subordinated Debentures--General".
REGISTRATION OF CAPITAL SECURITIES
The Capital Securities will be represented by global certificates registered
in the name of DTC or its nominee. Beneficial interests in the Capital
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by Participants in DTC (as defined in the
accompanying Prospectus). Except as described below and in the accompanying
Prospectus, Capital Securities in certificated form will not be issued in
exchange for the global certificates. See "Book-Entry Issuance" in the
accompanying Prospectus.
A global security shall be exchangeable for Capital Securities registered in
the names of persons other than DTC or its nominee only if (i) DTC notifies
the Issuer that it is unwilling or unable to continue as a depository for such
global security and no successor depository shall have been appointed, or if
at any time DTC ceases to be a clearing agency registered under the Exchange
Act, at a time when DTC is required to be so registered to act as such
depository, (ii) the Issuer in its sole discretion determines that such global
security shall be so exchangeable or (iii) there shall have occurred and be
continuing an event of default under the Indenture with respect to the Junior
Subordinated Debentures. Any global security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for definitive certificates
registered in such names as DTC shall direct. It is expected that such
instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such global
security. In the event that Capital Securities are issued in definitive form,
such Capital Securities will be in denominations of $1,000 and integral
multiples thereof and may be transferred or exchanged at the offices described
below.
Payments on Capital Securities represented by a global security will be made
to DTC, as depository for the Capital Securities. In the event Capital
Securities are issued in certificated form, the Liquidation Amount and
Distributions will be payable, the transfer of the Capital Securities will be
registrable, and Capital Securities will be exchangeable for Capital
Securities of other denominations of a like aggregate Liquidation Amount, at
the corporate office of the Property Trustee in New York, New York, or at the
offices of any paying agent or transfer agent chosen by the Property Trustee
and acceptable to the Administrators, provided that payment of any
Distribution may be made by check mailed to the address of the persons
entitled thereto or by wire transfer. In addition, if the Capital Securities
are issued in certificated form, the record dates for payment of Distributions
will be the 15th day of the month in which the relevant Distribution payment
is scheduled to be made. For a description of DTC and the terms of DTC
arrangements relating to payments, transfers, voting rights, redemptions, and
other notices and other matters, see "Book-Entry Issuance" in the accompanying
Prospectus.
CERTAIN TERMS OF JUNIOR SUBORDINATED DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Junior
Subordinated Debentures supplements the description of the terms and
provisions of the Corresponding Junior Subordinated Debentures set forth in
the accompanying Prospectus under the headings "Description of Junior
Subordinated Debentures", to which description reference is hereby made. The
summary of certain
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terms and provisions of the Junior Subordinated Debentures set forth below,
which describes the material provisions thereof, does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Indenture to which reference is hereby made. The form of Indenture has
been filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and accompanying Prospectus form a part.
Concurrently with the issuance of the Capital Securities, the Issuer will
invest the proceeds thereof, together with the consideration paid by the
Corporation for the Common Securities, in the Junior Subordinated Debentures
issued by the Corporation. The Junior Subordinated Debentures will bear
interest at the annual rate of % of the principal amount thereof, payable
semi-annually in arrears on and of each year (each, an "Interest
Payment Date"), commencing , 1998, to the person in whose name each
Junior Subordinated Debenture is registered, subject to certain exceptions, at
the close of business on the Business Day next preceding such Interest Payment
Date. It is anticipated that, until the liquidation, if any, of the Issuer,
the Junior Subordinated Debentures will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Junior Subordinated Debentures is not a Business
Day, then payment of the interest payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on the date such payment was originally payable. Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
the rate per annum of % thereof, compounded semi-annually from the relevant
Interest Payment Date. The term "interest" as used herein shall include semi-
annual interest payments, interest on semi-annual interest payments not paid
on the applicable Interest Payment Date and Additional Sums, as applicable.
The Junior Subordinated Debentures will be issued under the Indenture. The
Junior Subordinated Debentures will mature on , 2028 (such date, as it
may be shortened as hereinafter described, the "Stated Maturity"). Such date
may be shortened to a date not earlier than , 2013. In the event the
Corporation elects to shorten the Stated Maturity of the Junior Subordinated
Debentures, it shall give notice to the Debenture Trustee, and the Debenture
Trustee shall give notice of such shortening to the holders of the Junior
Subordinated Debentures no more than 30 and no less than 60 days prior to the
effectiveness thereof.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt of the Corporation.
See "Description of Junior Subordinated Debentures--Subordination" in the
accompanying Prospectus. Substantially all of the Corporation's existing
indebtedness constitutes Senior Debt. Because the Corporation is a holding
company, the right of the Corporation to participate in any distribution of
assets of any subsidiary, including TRS, AEFC and AEBL, 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 Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Junior Subordinated Debentures
should look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. The Indenture does not limit the incurrence or
issuance of other secured or unsecured debt of the Corporation, including
Senior Debt, whether under the Indenture or any existing or other indenture
that the Corporation may enter into in the future or otherwise. See
"Description of Junior Subordinated Debentures--Subordination" in the
accompanying Prospectus.
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OPTION TO DEFER INTEREST PAYMENTS
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture at any time or
from time to time during the term of the Junior Subordinated Debentures to
defer payment of interest on the Junior Subordinated Debentures for a period
not exceeding 10 consecutive semi-annual periods with respect to each
Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. At the end of such
Extension Period, the Corporation must pay all interest then accrued and
unpaid on the Junior Subordinated Debentures (together with interest on such
unpaid interest at the annual rate of %, compounded semi-annually from the
relevant Interest Payment Date, to the extent permitted by applicable law).
During an Extension Period, interest will continue to accrue and holders of
Junior Subordinated Debentures (or holders of Capital Securities while they
are outstanding) will be required to accrue interest income for United States
federal income tax purposes. See "U.S. Federal Income Tax Consequences--
Interest Income and Original Issue Discount".
During any such Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock or
(ii) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Corporation that rank
pari passu in all respects with or junior in interest to the Junior
Subordinated Debentures (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Corporation in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or
in connection with the issuance of capital stock of the Corporation (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the
applicable Extension Period, (b) as a result of any exchange or conversion of
any class or series of the Corporation's capital stock (or any capital stock
of a subsidiary of the Corporation) for any class or series of the
Corporation's capital stock or of any class or series of the Corporation's
indebtedness for any class or series of the Corporation's capital stock, (c)
the purchase of fractional interests in shares of the Corporation's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in
the form of stock, warrants, options or other rights where the dividend stock
or the stock issuable upon exercise of such warrants, options or other rights
is the same stock as that on which the dividend is being paid or ranks pari
passu with or junior to such stock). Prior to the termination of any such
Extension Period, the Corporation may further defer the payment of interest on
the Junior Subordinated Debentures, provided that no Extension Period may
exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity
of the Junior Subordinated Debentures. Upon the termination of any such
Extension Period and the payment of all interest then accrued and unpaid
(together with interest thereon at the rate of % per annum compounded semi-
annually, to the extent permitted by applicable law), the Corporation may
elect to begin a new Extension Period subject to the above requirements. No
interest shall be due and payable during an Extension Period, except at the
end thereof. The Corporation must give the Issuer Trustees notice of its
election to begin such Extension Period at least one Business Day prior to the
earlier of (i) the date interest on the Junior Subordinated Debentures would
have been payable except for the election to begin such Extension Period or
(ii) the date such interest is payable, but in any event not less than one
Business Day prior to such record date. The Debenture Trustee shall give
notice of the Corporation's election to begin a new Extension Period to the
holders of the Junior Subordinated Debentures. There is no limitation on the
number of times that the Corporation may elect to begin an Extension Period.
See "Description of Junior Subordinated Debentures--Option to Defer Interest
Payments" in the accompanying Prospectus.
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ADDITIONAL SUMS
The Corporation has covenanted in the Indenture that, if and for so long as
(i) the Issuer is the holder of all the Junior Subordinated Debentures and
(ii) the Issuer is required to pay certain additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Junior Subordinated Debentures such amounts as shall
be required so that the Distributions payable by the Issuer shall not be
reduced as a result of any such additional taxes, duties or other governmental
charges. See "Description of Capital Securities--Redemption".
Pursuant to the Agreement as to Expenses and Liabilities, the Corporation
will agree to pay all debts and other obligations (other than with respect to
the Capital Securities) and all costs and expenses of the Issuer (including
costs and expenses relating to the organization of the Issuer, the fees and
expenses of the Issuer Trustees and the costs and expenses relating to the
operation of the Issuer). The form of Agreement as to Expenses and Liabilities
is included as Exhibit D in the form of Trust Agreement, which has been filed
as an exhibit to the Registration Statement of which this Prospectus
Supplement and accompanying Prospectus form a part.
REDEMPTION
The Junior Subordinated Debentures are redeemable prior to maturity at the
option of the Corporation (i) on or after , 2008 in whole at any time or
in part from time to time, or (ii) in whole (but not in part) at any time
within 90 days following the occurrence and during the continuation of a Tax
Event or Investment Company Event in each case at the redemption price
described below. The proceeds of any such redemption will be used by the
Issuer to redeem the Capital Securities.
The redemption price for Junior Subordinated Debentures in the case of a
redemption under (i) above shall equal the following prices, expressed in
percentages of the principal amount, together with accrued interest to but
excluding the date fixed for redemption, if redeemed during the 12-month
period beginning of the years indicated below:
and at 100% on or after , 2018.
The redemption price for Junior Subordinated Debentures, in the case of a
redemption prior to , 2008 following a Tax Event or Investment Company
Event, as described under (ii) above, will equal the Make-Whole Amount (as
defined under "Certain Terms of Capital Securities--Redemption"), together
with accrued interest to but excluding the date fixed for redemption.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
As described under "Certain Terms of Capital Securities--Liquidation of
Issuer and Distribution of Junior Subordinated Debentures to Holders", under
certain circumstances involving the termination of
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the Issuer, Junior Subordinated Debentures may be distributed to the holders
of the Capital Securities in exchange therefor upon liquidation of the Issuer
after satisfaction of liabilities to creditors of the Issuer as provided by
applicable law. If distributed to holders of Capital Securities, the Junior
Subordinated Debentures will initially be issued in the form of one or more
global securities and DTC, or any successor depositary for the Capital
Securities, will act as depositary for the Junior Subordinated Debentures. It
is anticipated that DTC arrangements for the Junior Subordinated Debentures
would be substantially identical to those in effect for the Capital
Securities. There can be no assurance as to the market price of any Junior
Subordinated Debentures that may be distributed to the holders of Capital
Securities.
REGISTRATION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures will be represented by global
certificates registered in the name of DTC or its nominee. Beneficial
interests in the Junior Subordinated Debentures will be shown on, and
transfers thereof will be effected only through, records maintained by
Participants in DTC. Except as described below and in the accompanying
Prospectus, Junior Subordinated Debentures in certificated form will not be
issued in exchange for the global certificates. See "Book-Entry Issuance" in
the accompanying Prospectus.
A global security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than DTC or its nominee only if (i)
DTC notifies the Corporation that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have
been appointed, or if at any time DTC ceases to be a clearing agency
registered under the Exchange Act, at a time when DTC is required to be so
registered to act as such depositary, (ii) the Corporation in its sole
discretion determines that such global security shall be so exchangeable, or
(iii) there shall have occurred and be continuing an event of default under
the Indenture with respect to the Junior Subordinated Debentures. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants with respect to ownership of beneficial
interests in such global security. In the event that Junior Subordinated
Debentures are issued in definitive form, such Junior Subordinated Debentures
will be in denominations of $1,000 and integral multiples thereof and may be
transferred or exchanged at the offices described below.
Payments on Junior Subordinated Debentures represented by a global security
will be made to DTC, as depositary for the Junior Subordinated Debentures. In
the event Junior Subordinated Debentures are issued in certificated form,
principal and interest will be payable, the transfer of the Junior
Subordinated Debentures will be registrable, and Junior Subordinated
Debentures will be exchangeable for Junior Subordinated Debentures of other
denominations of a like aggregate principal amount, at the corporate office of
the Debenture Trustee in New York, New York, or at the offices of any paying
agent or transfer agent appointed by the Corporation, provided that payment of
interest may be made at the option of the Corporation by check mailed to the
address of the persons entitled thereto or by wire transfer. For a description
of DTC and the terms of the depositary arrangements relating to payments,
transfers, voting rights, redemptions and other notices and other matters, see
"Book-Entry Issuance" in the accompanying Prospectus.
S-23
CERTAIN TERMS OF GUARANTEE
The Guarantee guarantees to the holders of the Capital Securities the
following payments, to the extent not paid by the Issuer: (i) any accumulated
and unpaid Distributions required to be paid on the Capital Securities, to the
extent that the Issuer has funds on hand available therefor at such time, (ii)
the Redemption Price with respect to any Capital Securities called for
redemption, to the extent that the Issuer has funds on hand available therefor
at such time, and (iii) upon a voluntary or involuntary dissolution, winding-
up or liquidation of the Issuer (unless the Junior Subordinated Debentures are
distributed to holders of the Capital Securities), the lesser of (a) the
aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions to the date of payment, to the extent that the Issuer has funds
on hand available therefor at such time, and (b) the amount of assets of the
Issuer remaining available for distribution to holders of the Capital
Securities after payment of creditors of the Issuer as required by applicable
law. The Guarantee will be qualified as an indenture under the Trust Indenture
Act. Bankers Trust Company will act as the Guarantee Trustee for the purposes
of compliance with the Trust Indenture Act and will hold the Guarantee for the
benefit of the holders of the Capital Securities. Bankers Trust Company will
also act as Debenture Trustee for the Junior Subordinated Debentures and as
Property Trustee.
The holders of not less than 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 to the Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Guarantee. Any holder of the
Capital Securities may institute a legal proceeding directly against the
Corporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Issuer, the Guarantee Trustee or
any other person or entity. If the Corporation were to default on its
obligation to pay amounts payable under the Junior Subordinated Debentures,
the Issuer 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. Instead, if any event of default under
the Indenture shall have occurred and be continuing and such event is
attributable to the failure of the Corporation to pay interest or premium, if
any, on or principal of the Junior Subordinated Debentures on the applicable
payment date, then a holder of Capital Securities may institute a Direct
Action against the Corporation pursuant to the terms of the Indenture for
enforcement of payment to such holder of the principal of or interest or
premium, if any, on such Junior Subordinated Debentures having a principal
amount equal to the aggregate Liquidation Amount of the Capital Securities of
such holder. In connection with such Direct Action, the Corporation will have
a right to set-off under the Indenture to the extent of any payment made by
the Corporation to such holder of Capital Securities in the Direct Action.
Except as described herein, holders of Capital Securities will not be able to
exercise directly any other remedy available to the holders of the Junior
Subordinated Debentures or assert directly any other rights in respect of the
Junior Subordinated Debentures. See "Description of Guarantee" in the
accompanying Prospectus. The Trust Agreement provides that each holder of
Capital Securities by acceptance thereof agrees to the provisions of the
Guarantee, the Expense Agreement and the Indenture.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of U.S. federal income tax consequences material
to the purchase, ownership and disposition of Capital Securities. This summary
does not purport to be a comprehensive description of all of the tax
consequences that may be relevant to a decision to purchase Capital Securities
by any particular investor, including tax consequences that arise from rules
of general application to all taxpayers or to certain classes of taxpayers or
that are generally assumed to be known by investors. This summary addresses
the tax consequences only to a person that acquires Capital Securities on
their original issue at their original offering price and that is (i) an
individual citizen
S-24
or resident of the United States, (ii) a corporation or partnership organized
in or under the laws of the United States or any state thereof or the District
of Columbia or (iii) otherwise subject to U.S. federal income taxation on a
net income basis in respect of the Capital Securities (a "United States
Holder"). This summary also does not address the tax consequences to (i)
persons that are not United States Holders, except as described below under
"--United States Alien Holders" (ii) persons that may be subject to special
treatment under United States federal income tax law, such as banks, insurance
companies, thrift institutions, regulated investment companies, real estate
investment trusts, tax-exempt organizations, traders in securities that elect
to mark to market and dealers in securities or currencies, (iii) persons that
will hold Capital Securities as part of a position in a "straddle" or as part
of a "hedging," "conversion" or other integrated investment transaction for
federal income tax purposes, (iv) persons whose functional currency is not the
United States dollar or (v) persons that do not hold Capital Securities as
capital assets.
This summary is based upon the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations, Internal Revenue Service rulings
and pronouncements and judicial decisions now in effect, all of which are
subject to change at any time. Such changes may be applied retroactively in a
manner that could cause the tax consequences to vary substantially from the
consequences described below, possibly adversely affecting a beneficial owner
of Capital Securities. For example, a judicial decision could be issued or
legislation could be enacted that would adversely affect the Corporation's
ability to deduct interest on the Junior Subordinated Debentures, either of
which might in turn permit the Corporation to cause a redemption of the
Capital Securities. See "--Possible Tax Law Changes". The authorities on which
this summary is based are subject to various interpretations, and it is
therefore possible that the federal income tax treatment of the purchase,
ownership and disposition of Capital Securities may differ from the treatment
described below. All references herein to federal tax refer to United States
federal tax.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE UNITED STATES FEDERAL
TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF CAPITAL
SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES AND THE ISSUER
In connection with the issuance of the Junior Subordinated Debentures,
Cleary, Gottlieb, Steen & Hamilton will render its opinion that, under then
current law and assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Junior Subordinated Debentures will be classified for
United States federal income tax purposes as indebtedness of the Corporation.
By acceptance of a Capital Security, each United States Holder covenants to
treat the Junior Subordinated Debentures as indebtedness of the Corporation
and the Capital Securities as an undivided beneficial ownership interest in
the Junior Subordinated Debentures.
In connection with the issuance of the Capital Securities, Cleary, Gottlieb,
Steen & Hamilton will render its opinion that, under current law and assuming
full compliance with the terms of the Trust Agreement and the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Issuer will be classified for United States federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation. Accordingly, for United States federal income tax purposes, each
United States Holder of Capital Securities will be considered the owner of an
undivided beneficial ownership interest in the Junior Subordinated Debentures,
and each United States Holder will be required to include in its gross income
any interest (or original issue discount accrued) with respect to its
allocable share of those Junior Subordinated Debentures. See "--Interest
Income and Original Issue Discount".
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An opinion of Cleary, Gottlieb, Steen & Hamilton is not binding on the
Internal Revenue Service (the "IRS") or the courts. Prospective investors
should note that no rulings have been or are expected to be sought from the
IRS with respect to any of these issues and no assurance can be given that the
IRS will not take contrary positions. Moreover, no assurance can be given that
any of the opinions expressed herein will not be challenged by the IRS or, if
challenged, that such challenge will not be successful. See "--Possible Tax
Law Changes".
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under Treasury regulations applicable to debt instruments issued on or after
August 13, 1996 (the "Regulations"), a contingency that stated interest will
not be timely paid that is "remote", because of the terms of the relevant debt
instrument, will be ignored in determining whether such debt instrument is
issued with original issue discount ("OID"). As a result of terms and
conditions of the Junior Subordinated Debentures that prohibit certain
payments with respect to the Corporation's capital stock and indebtedness if
the Corporation elects to extend interest payment periods, the Corporation
believes that the likelihood of its exercising its option to defer payments is
remote. See "Certain Terms of Junior Subordinated Debentures--Option to Defer
Interest Payments". Based on the foregoing, the Corporation believes that the
Junior Subordinated Debentures will not be considered to be issued with OID at
the time of their original issuance and, accordingly, a United States Holder
should include in gross income such holder's allocable share of interest on
the Junior Subordinated Debentures in accordance with such holder's normal
method of accounting for tax purposes.
If the option to defer any payment of interest was determined not to be
"remote" or if the Corporation exercises its option to defer any payment of
interest, the Junior Subordinated Debentures would be treated as issued with
OID at the time of issuance or at the time of such exercise, as the case may
be, and all stated interest on the Junior Subordinated Debentures would
thereafter be treated as OID as long as the Junior Subordinated Debentures
remained outstanding. In such event, all of a United States Holder's taxable
interest income with respect to the Junior Subordinated Debentures would be
accounted for as OID on a constant yield method regardless of such holder's
method of tax accounting, and actual distributions of stated interest would
not be reported as taxable income. Consequently, a United States Holder would
be required to include OID in gross income even though the Corporation would
not make any actual cash payments during an Extension Period.
The Regulations have not been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation herein.
Because income on the Capital Securities will constitute interest or OID,
corporate United States Holders of the Capital Securities will not be entitled
to a dividends-received deduction with respect to any income recognized with
respect to the Capital Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF CAPITAL
SECURITIES UPON LIQUIDATION OF THE ISSUER
Under current law, a distribution by the Issuer of the Junior Subordinated
Debentures as described under the caption "Certain Terms of Capital
Securities--Liquidation of Issuer and Distribution of Junior Subordinated
Debentures to Holders" will be non-taxable and will result in the United
States Holder receiving directly its pro rata share of the Junior Subordinated
Debentures previously held indirectly through the Issuer, with a holding
period and aggregate tax basis equal to the holding period and aggregate tax
basis such United States Holder had in its Capital Securities before such
distribution. If, however, the liquidation of the Issuer were to occur because
the Issuer is subject to United States federal income tax with respect to
income accrued or received on the Junior Subordinated Debentures, as would be
the case if, for example, the Issuer were treated as an association taxable as
a corporation, the distribution of Junior Subordinated Debentures to a United
States Holder by the
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Issuer would be a taxable event to the Issuer and each United States Holder,
and each United States Holder would recognize gain or loss as if the United
States Holder had exchanged its Capital Securities for the Junior Subordinated
Debentures it received upon the liquidation of the Issuer. A United States
Holder will include interest in income in respect of Junior Subordinated
Debentures received from the Issuer in the manner described above under "--
Interest Income and Original Issue Discount".
SALE OR REDEMPTION OF CAPITAL SECURITIES
A United States Holder that sells (including a redemption for cash of its
Capital Securities) Capital Securities will recognize gain or loss equal to
the difference between its adjusted tax basis in the Capital Securities and
the amount realized on the sale of such Capital Securities. Assuming that the
Corporation does not exercise its option to defer payment of interest on the
Junior Subordinated Debentures and the Junior Subordinated Debentures are not
considered issued with OID, a United States Holder's adjusted tax basis in the
Capital Securities generally will be its initial purchase price. If the Junior
Subordinated Debentures are deemed to be issued with OID, as a result of the
Corporation's deferral of interest payments, a United States Holder's adjusted
tax basis in the Capital Securities generally will be its initial purchase
price, increased by OID previously includible in such United States Holder's
gross income to the date of disposition and decreased by Distributions or
other payments received on the Capital Securities since and including the date
of the first Extension Period. Such gain or loss generally will be a capital
gain or loss (except to the extent any amount realized is treated as a payment
of accrued interest with respect to such United States Holder's pro rata share
of the Junior Subordinated Debentures required to be included in income).
Capital gain derived by non-corporate United States Holders on the sale of
Capital Securities that have been held for more than eighteen months will be
subject to a 20% maximum tax rate and capital gain derived by non-corporate
United States Holders on the sale of Capital Securities that have been held
for more than one year but less than eighteen months will be subject to a 28%
maximum tax rate. To the extent the selling price is less than the United
States Holder's adjusted tax basis, such holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A United States Holder who uses the accrual method of
accounting for tax purposes (and a cash method holder, if the Junior
Subordinated Debentures are deemed to have been issued with OID) who disposes
of its Capital Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income (i.e., interest or, possibly, OID), and to add such amount to the
United States Holder's adjusted tax basis in the pro rata share of the
underlying Junior Subordinated Debentures deemed disposed of. To the extent
the selling price is less than the United States Holder's adjusted tax basis
(which will include all accrued but unpaid interest) a United States Holder
will recognize a capital loss. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for U.S. federal income tax
purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest income paid and OID accrued on the Capital Securities
held of record by United States Holders (other than corporations and other
exempt United States Holders) will be reported to the IRS. "Backup"
withholding at a rate of 31% will apply to payments of interest to a nonexempt
United States Holder unless the United States Holder furnishes its taxpayer
identification number in the manner prescribed in applicable Treasury
regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions.
S-27
Payment of the proceeds from the disposition of Capital Securities to or
through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
Any amounts withheld from a United States Holder under the backup
withholding rules will be allowed as a refund or a credit against such United
States Holder's United States federal income tax liability, provided the
required information is furnished to the IRS.
It is anticipated that income on the Capital Securities will be reported to
holders on Form 1099-INT or, if the Corporation exercises its option to defer
any payment of interest, on Form 1099-OID, and mailed to holders of the
Capital Securities by January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
Prospective investors should be aware that Enron Corporation has filed a
petition in U.S. Tax Court challenging the proposed disallowance by the IRS of
the deduction of interest expense on securities issued by Enron Corporation in
1993 and 1994 that are similar to, although different in a number of respects
from, the Junior Subordinated Debentures. It is possible that a decision in
that case could give rise to a Tax Event, which would permit the Corporation
to cause a redemption of the Capital Securities, as described more fully under
"Description of Capital Securities--Redemption or Exchange" in the
accompanying Prospectus. Prospective investors also should be aware that
legislation has been proposed by the Clinton Administration in the past that,
if enacted, would have denied an interest deduction to issuers of instruments
such as the Junior Subordinated Debentures. No such legislation is currently
pending. There can be no assurance, however, that similar legislation will not
ultimately be enacted into law, or that other developments will not occur on
or after the date hereof that would adversely affect the tax treatment of the
Junior Subordinated Debentures or the Issuer. Such changes also could give
rise to a Tax Event.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is a holder
of Capital Securities that is a nonresident alien individual or a foreign
corporation. Under present United States federal income tax laws: (i) payments
by the Issuer or any of its paying agents to any holder of a Capital Security
who or which is a United States Alien Holder will not be subject to
withholding of United States federal income tax; provided that, (a) the
beneficial owner of the Capital Security does not actually or constructively
own 10 percent or more of the total combined voting power of all classes of
stock of the Corporation entitled to vote, (b) the beneficial owner of the
Capital Security is not a controlled foreign corporation that is related to
the Corporation through stock ownership, and (c) either (A) the beneficial
owner of the Capital Security certifies to the Issuer or its agent, under
penalty of perjury, that it is not a United States Holder and provides its
name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business (a "Financial Institution"), and holds the Capital
Security in such capacity, certifies to the Issuer or its agent, under penalty
of perjury, that such statement has been received from the beneficial owner by
it or by a Financial Institution between it and the beneficial owner and
furnishes the Issuer or its agent with a copy thereof; and (ii) a United
States Alien Holder of a Capital Security will generally not be subject to
withholding of United States federal income tax on any gain realized upon the
sale or other disposition of a Capital Security provided the gain is not
effectively connected with the conduct of a trade or business in the United
States by the United States Alien Holder.
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which may make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments made
after December 31, 1999, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
S-28
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an
investment in the Capital Securities. Accordingly, among other factors, the
fiduciary should consider whether the investment would satisfy the prudence
and diversification requirements of ERISA and would be consistent with the
documents and instruments governing the Plan.
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 engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or
"disqualified persons" under the Code ("Parties in Interest") 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 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) (5) of ERISA) are not subject to the requirements of ERISA or
Section 4975 of the Code.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor ("DOL"), the assets of the Issuer would be deemed to be
"plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire Capital Securities issued by
the Issuer and no exception were applicable under the Plan Assets Regulation.
Pursuant to an exception contained in the Plan Assets Regulation, the assets
of the Issuer would not be deemed to be "plan assets" of investing Plans if,
immediately after the most recent acquisition of any Capital Securities issued
by the Issuer, less than 25% of the value of each class of Capital Securities
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 of the Issuer held by Benefit Plan investors will be less
than 25% of the total value of such Capital Securities of the Issuer at the
completion of the initial offering or thereafter, 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 by the
Corporation.
Certain transactions involving the Issuer could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the Capital Securities of the Issuer were
acquired with "plan assets" of such Plan and assets of the Issuer were deemed
to be "plan assets" of Plans investing in the Issuer. For example, if the
Corporation is a Party in Interest with respect to an investing Plan (either
directly or by reason of its ownership of its subsidiaries), extensions of
credit between the Corporation and the Issuer (as represented by the Junior
Subordinated Debentures and the Guarantee) would likely be prohibited by
Section 406(a) (1) (B) of ERISA and Section 4975(c) (1) (B) of the Code,
unless exemptive relief were available under an applicable administrative
exemption (see below).
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 Issuer were deemed to be "plan assets" of Plans
investing in the Issuer (see above). Those class exemptions are PTCE 96-23
(for certain transactions determined by in-house asset managers), PTCE 95-60
(for certain transactions involving insurance company general accounts), PTCE
91-38 (for certain transactions involving bank collective investment
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funds), PTCE 90-1 (for certain transactions involving insurance company
separate accounts), and PTCE 84-14 (for certain transactions determined by
independent qualified asset managers).
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 investing "plan
assets" of any Plan, unless such purchaser or holder is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1, or 84-14. Any
purchaser or holder of the Capital Securities or any interest therein will be
deemed to have represented by its purchase and holding thereof that it either
(a) is not a Plan or a Plan Asset Entity and is not purchasing such securities
on behalf of or with "plan assets" of any Plan or (b) is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 with
respect to such purchase or holding.
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 considering
purchasing the Capital Securities on behalf of or with "plan assets" of any
Plan consult with their counsel regarding the potential consequences if the
assets of the Issuer are deemed to be "plan assets" and the availability of
exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
S-30
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Corporation and the Issuer have agreed that the Issuer will sell to each
of the Underwriters named below, and each of such Underwriters have severally
agreed to purchase from the Issuer, the respective number of Capital
Securities set forth opposite their names below.
Under the terms and conditions of the Underwriting Agreement and the Pricing
Agreement, the Underwriters are committed to take and pay for all of the
Capital Securities, if any are taken.
The Underwriters have advised the Corporation that they propose initially to
offer the Capital Securities to the public at the initial public offering
price set forth on the cover page of this Prospectus Supplement and in part to
certain dealers at such price less a concession not in excess of $ per
Capital Security. The Underwriters may allow, and such dealers may re-allow, a
discount not in excess of $ per Capital Security to certain other dealers.
After the Capital Securities are released for sale to the public, the public
offering price, and other selling terms may from time to time be varied by the
Underwriters.
In view of the fact that the proceeds from the sale of the Capital
Securities will be used to purchase the Junior Subordinated Debentures issued
by the Corporation, the Underwriting Agreement provides that the Corporation
will pay as Underwriters' compensation for the Underwriters' arranging the
investment therein of such proceeds an amount of $ per Capital Security for
the accounts of the several Underwriters.
The Corporation and the Issuer have agreed that, during the period beginning
from the date of the Underwriting Agreement and continuing to and including
the earlier of (i) the termination of trading restrictions on the Capital
Securities, as determined by the Underwriters, and (ii) 30 days after the
closing date, they will not offer, sell, contract to sell or otherwise dispose
of any Capital Securities, any other beneficial interests in the assets of the
Issuer, or any preferred securities or any other securities of the Issuer or
the Corporation which are substantially similar to the Capital Securities,
including any guarantee of such securities, or any securities convertible into
or exchangeable for or representing the right to receive securities, preferred
securities or any such substantially similar securities of either the Issuer
or the Corporation, without the prior written consent of the Underwriters,
except for the Capital Securities offered in connection with this offering.
Prior to this offering, there has been no public market for the Capital
Securities. The representatives of the Underwriters have advised the
Corporation that they intend to make a market in the Capital Securities but
are not obligated to do so and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the Capital Securities.
In connection with the offering, the Underwriters may purchase and sell the
Capital Securities in the open market. These transactions may include over-
allotment and stabilizing transactions and purchases to cover syndicate short
positions created in connection with the offering. Stabilizing transactions
consist of certain bids or purchases for the purpose of preventing or
retarding a decline in the market price of the Capital Securities, and
syndicate short positions involve the sale by the Underwriters of a greater
number of Capital Securities than they are required to purchase from the
S-31
Issuer in the offering. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-
dealers in respect of the Capital Securities sold in the offering for their
account may be reclaimed by the syndicate if such Capital Securities are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Capital Securities, which may be higher than the price that might otherwise
prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on a national
securities exchange, in the over-the-counter market or otherwise.
The Corporation and the Issuer have agreed to indemnify the several
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to the Corporation and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Capital
Securities, the enforceability of the Trust Agreement and the formation of the
Issuer will be passed upon by Richards, Layton & Finger, P.A., special
Delaware Counsel to the Corporation and the Issuer. The validity of the
Guarantee and the Junior Subordinated Debentures will be passed upon for the
Corporation by Louise M. Parent, Executive Vice President and General Counsel
of the Corporation and for the Underwriters by Sullivan & Cromwell. Sullivan &
Cromwell will rely on the opinion of Richards, Layton & Finger, P.A. as to
matters of Delaware law. Certain matters relating to United States federal
income tax considerations will be passed upon for the Corporation by Cleary,
Gottlieb, Steen & Hamilton.
S-32
$500,000,000
AMERICAN EXPRESS COMPANY
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
AMERICAN EXPRESS COMPANY CAPITAL TRUST I
AMERICAN EXPRESS COMPANY CAPITAL TRUST II
CAPITAL SECURITIES FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED HEREIN, BY
AMERICAN EXPRESS COMPANY
----------------
American Express Company, a New York corporation (the "Corporation"), may
from time to time offer in one or more series or issuances its junior
subordinated deferrable interest debentures (the "Junior Subordinated
Debentures"). The Junior Subordinated Debentures will be unsecured and
subordinate and junior in right of payment to all Senior Debt (as defined in
"Description of Junior Subordinated Debentures--Subordination") of the
Corporation. The Corporation will have the right to defer payments of interest
on any series of Junior Subordinated Debentures by extending the interest
payment period thereon at any time or from time to time for up to such number
of consecutive interest payment periods (which shall not extend beyond the
Stated Maturity (as defined herein) of the Junior Subordinated Debentures)
with respect to each deferral period as may be specified in the applicable
Prospectus Supplement (each, an "Extension Period"). In such circumstances,
however, the Corporation would not be permitted, subject to certain exceptions
set forth herein, to declare or pay any dividends, distributions or other
payments with respect to, or repay, repurchase, redeem or otherwise acquire,
the Corporation's capital stock or debt securities that rank pari passu in all
respects with or junior to the Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures--Option to Defer Interest
Payments" and "--Restrictions on Certain Payments".
American Express Company Capital Trust I and American Express Company
Capital Trust II, each a statutory business trust created under the laws of
the State of Delaware (each, an Issuer and collectively, the "Issuers"), may
severally offer, from time to time, capital securities (the "Capital
Securities") representing beneficial interests in such Issuer. The Corporation
will be the owner of the common securities representing common ownership
interests in such Issuer (the "Common Securities" and, together with the
Capital Securities, the "Trust Securities"). Holders of the Capital Securities
will be entitled to receive preferential cumulative cash distributions
("Distributions") accumulating from the date of original issuance and payable
periodically as provided in an accompanying Prospectus Supplement.
Concurrently with the issuance by an Issuer of its Capital Securities, such
Issuer will invest the proceeds thereof and of any contributions received in
respect of the Common Securities in a corresponding series of the
Corporation's Junior Subordinated Debentures (the "Corresponding Junior
Subordinated Debentures") with terms corresponding to the terms of that
Issuer's Capital Securities (the "Related Capital Securities"). The
Corresponding Junior Subordinated Debentures will be the sole assets of each
Issuer, and payments under the Corresponding Junior Subordinated Debentures
will be the only revenue of each Issuer. If provided in an accompanying
Prospectus Supplement, the Corporation may redeem the Corresponding Junior
Subordinated Debentures (and cause the redemption of the related Trust
Securities) or may terminate each Issuer and cause the Corresponding Junior
Subordinated Debentures to be distributed to the holders of the Related
Capital Securities in liquidation of their interests in such Issuer. See
"Description of Capital Securities--Liquidation Distribution Upon
Termination".
(continued on next page)
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is , 1998
(cover page continued)
If provided in the accompanying Prospectus Supplement, the Corporation will
have the right to defer payments of interest on any series of Corresponding
Junior Subordinated Debentures. If interest payments are so deferred,
Distributions on the Related Capital Securities will also be deferred and the
Corporation will not be permitted, subject to certain exceptions set forth
herein, to declare or pay any cash distributions with respect to the
Corporation's capital stock or debt securities that rank pari passu with or
junior to the Corresponding Junior Subordinated Debentures. During an
Extension Period, Distributions will continue to accumulate (and the Capital
Securities will accumulate additional Distributions thereon at the rate set
forth in the Prospectus Supplement). See "Description of Capital Securities--
Distributions".
Taken together, the Corporation's obligations under each series of Junior
Subordinated Debentures, the Indenture, the related Trust Agreement, the
related Expense Agreement and the related Guarantee (each, as defined herein),
in the aggregate, provide a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the related series of
Capital Securities. See "Relationship Among the Capital Securities, the
Corresponding Junior Subordinated Debentures, the Expense Agreements and the
Guarantees--Full and Unconditional Guarantee". The payment of Distributions
with respect to the Capital Securities of each Issuer and payments on
liquidation or redemption with respect to such Capital Securities, in each
case out of funds held by such Issuer, are each irrevocably guaranteed by the
Corporation to the extent described herein (each, a "Guarantee"). See
"Description of Guarantees". The obligations of the Corporation under each
Guarantee will be subordinate and junior in right of payment to all Senior
Debt of the Corporation.
The Junior Subordinated Debentures and the Capital Securities may be offered
at prices and on terms to be determined at the time of offering; provided,
however, that the aggregate initial offering price of all Junior Subordinated
Debentures (other than Corresponding Junior Subordinated Debentures) and
Capital Securities (including the Corresponding Junior Debentures) issued
pursuant to the Registration Statement of which this Prospectus forms a part
shall not exceed $500,000,000. Certain specific terms of the Junior
Subordinated Debentures or Capital Securities in respect of which this
Prospectus is being delivered will be described in an accompanying Prospectus
Supplement, including without limitation and where applicable and to the
extent not set forth herein, (a) in the case of Junior Subordinated
Debentures, the specific designation, aggregate principal amount,
denominations, Stated Maturity (including any provisions for the shortening or
extension thereof), interest payment dates, interest rate (which may be fixed
or variable) or method of calculating interest, if any, applicable Extension
Period or interest deferral terms, if any, place or places where principal,
premium, if any, and interest, if any, will be payable, any terms of
redemption, initial offering or purchase price, methods of distribution and
any other special terms, and (b) in the case of Capital Securities, the
identity of the Issuer, specific title, aggregate amount, stated liquidation
amount, number of securities, Distribution rate or method of calculating such
rate, Distribution payment dates, applicable Distribution deferral terms, if
any, place or places where Distributions will be payable, any terms of
redemption or, exchange, initial offering or purchase price, methods of
distribution and any other special terms.
The Prospectus Supplement also will contain information, as applicable,
about certain United States federal income tax consequences relating to the
Junior Subordinated Debentures and the Capital Securities.
The Junior Subordinated Debentures and the Capital Securities may be sold to
or through underwriters, through dealers, remarketing firms or agents or
directly to purchasers. See "Plan of Distribution". The names of any
underwriters, dealers, remarketing firms or agents involved in the sale of
Junior Subordinated Debentures or the Capital Securities in respect of which
this Prospectus is being delivered and any applicable fee, commission or
discount arrangements with them will be set forth in a Prospectus Supplement.
The Prospectus Supplement will state whether the Junior Subordinated
Debentures or Capital Securities will be listed on any national securities
exchange or automated quotation system. If the Junior Subordinated Debentures
or Capital Securities are not listed on any national securities exchange or
automated quotation system, there can be no assurance that there will be a
secondary market for the Junior Subordinated Debentures or Capital Securities.
This Prospectus may not be used to consummate sales of Junior Subordinated
Debentures or the Capital Securities unless accompanied by a Prospectus
Supplement.
2
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York
10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be
accessed electronically by means of the Commission's home page on the Internet
at http://www.sec.gov. In addition, such reports, proxy statements and other
information concerning the Corporation can be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, at
the offices of the Pacific Stock Exchange, Inc., 301 Pine Street, San
Francisco, California 94104, at the offices of the Chicago Stock Exchange,
Inc., 440 South LaSalle Street, Chicago, Illinois 60605, and at the offices of
the Boston Stock Exchange, Inc., One Boston Place, Boston, Massachusetts
02108.
The Corporation and the Issuers have filed with the Commission a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Corporation and the securities offered hereby,
reference is made to the Registration Statement and the exhibits and the
financial statements, notes and schedules filed as a part thereof or
incorporated by reference therein, which may be inspected at the public
reference facilities of the Commission at the addresses set forth above or
through the Commission's home page on the Internet. Statements made in this
Prospectus concerning the contents of any documents referred to herein are not
necessarily complete, and in each instance are qualified in all respects by
reference to the copy of such document filed as an exhibit to the Registration
Statement.
No separate financial statements of any Issuer have been included herein.
The Corporation and the Issuers do not consider that such financial statements
would be material to holders of the Capital Securities because each Issuer is
a newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any
activity other than holding as trust assets the Corresponding Junior
Subordinated Debentures of the Corporation and issuing the Trust Securities.
Furthermore, taken together, the Corporation's obligations under each series
of Corresponding Junior Subordinated Debentures, the Indenture, the related
Trust Agreement, the related Expense Agreement and the related Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of Distributions and other amounts due on the Capital Securities of
an Issuer. See "The Issuers", "Description of Capital Securities",
"Description of Junior Subordinated Debentures--Corresponding Junior
Subordinated Debentures" and "Description of Guarantees". In addition, the
Corporation does not expect that any of the Issuers will be filing reports
under the Exchange Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated into this Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997 dated March 30, 1998;
3
2. The Corporation's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998; and
3. The Corporation's Current Reports on Form 8-K dated January 26, 1998,
February 4, 1998, February 10, 1998, April 16, 1998, April 23, 1998 and
April 29, 1998.
Each document or report filed by the Corporation pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of any offering of securities made by this Prospectus shall be
deemed to be incorporated by reference into this Prospectus and to be a part
of this Prospectus from the date of filing of such document. Any statement
contained herein, or in a document all or a portion of which is incorporated
or deemed to be incorporated by reference herein, shall be deemed to be
modified or superseded for purposes of the Registration Statement and this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Corporation will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein
(other than exhibits not specifically incorporated by reference into the texts
of such documents). Requests for such documents should be directed to Mr.
Stephen P. Norman, Secretary, American Express Company, World Financial
Center, 200 Vesey Street, New York, New York 10285, telephone number (212)
640-2000.
4
THE CORPORATION
Through its subsidiaries, the Company is primarily engaged in the business
of providing travel related services, financial advisory services and
international banking services throughout the world.
Travel related services are offered principally through American Express
Travel Related Services Company, Inc. and its subsidiaries ("TRS") and include
a variety of products and services, including the American Express(R) Card,
the Optima(R) Card and other consumer and corporate lending products (the
"Cards"), the American Express(R) Travelers Cheque (the "Travelers Cheque")
and other stored value products, business expense management products and
services, tax preparation and bookkeeping services, corporate and consumer
travel products and services, magazine publishing, and management and merchant
transaction processing, point of sale and back office products and services.
At December 31, 1997, there were 42.7 million Cards in force worldwide, and
worldwide Card billed business for the year ended December 31, 1997 was $209.2
billion. U.S. consumer lending operations are conducted by American Express
Centurion Bank, a wholly-owned subsidiary of TRS whose deposits are insured by
the Federal Deposit Insurance Corporation. Travelers Cheque sales for the year
ended December 31, 1997 were $25 billion.
American Express Financial Corporation ("AEFC") and its subsidiaries are
engaged in providing a variety of financial products and services to help
individuals, businesses and institutions establish and achieve their financial
goals. AEFC's products and services include financial planning and advice,
insurance and annuities, a variety of investment products, including
investment certificates, mutual funds and limited partnerships, investment
advisory services, trust and employee plan administration services, personal
auto and homeowner's insurance and retail securities brokerage services. At
December 31, 1997, American Express Financial Advisors Inc. ("AEFA"), AEFC's
principal marketing subsidiary, maintained a nationwide financial planning
field force of 8,776 persons. At December 31, 1997, AEFA's assets owned and/or
managed totaled approximately $173.4 billion.
American Express Bank Ltd., together with its subsidiaries ("AEBL") offers
products that meet the financial service needs of four client groups:
corporations, financial institutions, affluent individuals and retail
customers. AEBL's five primary business lines are corporate banking and
finance, correspondent banking, private banking, personal financial services
and global trading. AEBL does not do business in the United States except as
an incident to its activities outside the United States.
The Corporation has its principal executive offices at World Financial
Center, 200 Vesey Street, New York, New York 10285, telephone number (212)
640-2000.
5
THE ISSUERS
Each Issuer is a statutory business trust created under Delaware law
pursuant to (i) a trust agreement executed by the Corporation, as Depositor of
the Issuer and the Delaware Trustee of the Issuer (each as defined herein) and
(ii) the filing of a certificate of trust with the Delaware Secretary of
State. Each trust agreement will be amended and restated in its entirety
(each, as so amended and restated, a "Trust Agreement") substantially in the
form filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each Trust Agreement will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Each Issuer exists for the exclusive purposes of (i) issuing
and selling the Trust Securities, (ii) using the proceeds from the sale of
such Trust Securities to acquire a series of Corresponding Junior Subordinated
Debentures issued by the Corporation and (iii) engaging in only those other
activities necessary or incidental thereto (such as registering the transfer
of the Trust Securities). Accordingly, the Corresponding Junior Subordinated
Debentures and the right to reimbursement of expenses under the related
Expense Agreement will be the sole assets of each Issuer, and payments under
the Corresponding Junior Subordinated Debentures and the related Expense
Agreement will be the sole revenue of each Issuer.
All of the Common Securities of each Issuer will be owned by the
Corporation. The Common Securities of an Issuer will rank pari passu, and
payments will be made thereon pro rata, with the Capital Securities of such
Issuer, except that upon the occurrence and continuance of an event of default
under the Trust Agreement resulting from an event of default under the
Indenture, the rights of the Corporation, as holder of the Common Securities,
to payment in respect of Distributions and payments upon liquidation or
redemption will be subordinated to the rights of the holders of the Capital
Securities of such Issuer. See "Description of Capital Securities--
Subordination of Common Securities." The Corporation will acquire Common
Securities in an aggregate Liquidation Amount equal to not less than 3% of the
total capital of each Issuer.
Unless otherwise specified in the Prospectus Supplement, each Issuer has a
term of approximately 55 years, but may terminate earlier as provided in the
Trust Agreement. Each Issuer's business and affairs are conducted by its
trustees. The trustees of each Issuer will be Bankers Trust Company, as the
Property Trustee (the "Property Trustee"), and Bankers Trust (Delaware), as
the Delaware Trustee (the "Delaware Trustee") (collectively, "Issuer
Trustees"). In addition, two individuals who are employees or officers of or
affiliated with the holder of a majority of the Common Securities will act as
administrators with respect to each Issuer (the "Administrators"). The
Administrators will be selected by the holder of the Common Securities.
Bankers Trust Company will act as sole indenture trustee under each Trust
Agreement for purposes of compliance with the Trust Indenture Act. Bankers
Trust Company will also act as trustee under the Guarantees and the Indenture.
See "Description of Guarantees" and "Description of Junior Subordinated
Debentures." The duties and obligations of each Issuer are governed by the
applicable Trust Agreement. The Corporation will pay all fees and expenses
related to each Issuer and the offering of the Capital Securities and will
pay, directly or indirectly, all ongoing costs, expenses and liabilities of
each Issuer.
Bankers Trust Company has extended lines of credit to the Corporation and,
as either principal or fiduciary, may own debt of the Corporation. The
Corporation and its subsidiaries have other customary banking relationships
with Bankers Trust Company in the ordinary course of business.
The principal executive office of each Issuer is at World Financial Center,
200 Vesey Street, New York, New York 10285, and its telephone number is (212)
640-2000.
6
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Corporation intends to use the proceeds from the sale of its Junior
Subordinated Debentures (including Corresponding Junior Subordinated
Debentures issued to Issuers in connection with the investment by the Issuers
of all the proceeds from the sale of Capital Securities) for general corporate
purposes.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more series
under a Junior Subordinated Indenture, as supplemented from time to time (as
so supplemented, the "Indenture"), between the Corporation and Bankers Trust
Company, as trustee (the "Debenture Trustee"). This summary of certain terms
and provisions of the Junior Subordinated Debentures and the Indenture, which
summarizes the material provisions thereof, does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Indenture, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and to the Trust Indenture
Act, to each of which reference is hereby made. The Indenture is qualified
under the Trust Indenture Act. Whenever particular defined terms of the
Indenture (as supplemented or amended from time to time) are referred to
herein or in a Prospectus Supplement, such defined terms are incorporated
herein or therein by reference.
GENERAL
Each series of Junior Subordinated Debentures will rank pari passu with all
other series of Junior Subordinated Debentures and will be unsecured and
subordinate and junior in right of payment to the extent and in the manner set
forth in the Indenture to all Senior Debt (as defined below) of the
Corporation. See "--Subordination". The Corporation is a non-operating holding
company and almost all of the operating assets of the Corporation and its
consolidated subsidiaries are owned by such subsidiaries. The Corporation
relies primarily on dividends from such subsidiaries to meet its obligations.
Because the Corporation is a holding company, the right of the Corporation to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise, is subject to the
prior claims of creditors of the subsidiary, except to the extent the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Junior Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and holders of Junior Subordinated Debentures should look only
to the assets of the Corporation for payments on the Junior Subordinated
Debentures. Except as otherwise provided in the applicable Prospectus
Supplement, the Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Corporation, including Senior Debt, whether
under the Indenture, any other existing indenture or any other indenture that
the Corporation may enter into in the future or otherwise. See "--
Subordination" and the Prospectus Supplement relating to any offering of
Capital Securities or Junior Subordinated Debentures.
The Junior Subordinated Debentures will be issuable in one or more series
pursuant to an indenture supplemental to the Indenture or a resolution of the
Corporation's Board of Directors or a committee thereof.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the Junior Subordinated Debentures: (i) the title of
the Junior Subordinated Debentures; (ii) any limit upon the aggregate
principal amount of the Junior Subordinated Debentures; (iii) the date or
dates on which the principal of the Junior Subordinated Debentures is payable
(the "Stated Maturity") or the method of determination thereof; (iv) the rate
or rates, if any, at which the Junior Subordinated Debentures shall bear
interest, the dates on which any such interest shall be payable (the "Interest
7
Payment Dates"), the right, if any, of the Corporation to defer or extend an
Interest Payment Date, and the record dates for any interest payable on any
Interest Payment Date or the method by which any of the foregoing shall be
determined; (v) the place or places where, subject to the terms of the
Indenture as described below under "--Payment and Paying Agents," the
principal of and premium, if any, and interest on the Junior Subordinated
Debentures will be payable and where, subject to the terms of the Indenture as
described below under "--Denominations, Registration and Transfer," the Junior
Subordinated Debentures may be presented for registration of transfer or
exchange and the place or places where notices and demands to or upon the
Corporation in respect of the Junior Subordinated Debentures and the
Indentures may be made ("Place of Payment"); (vi) any period or periods within
which or date or dates on which, the price or prices at which and the terms
and conditions upon which Junior Subordinated Debentures may be redeemed, in
whole or in part, at the option of the Corporation or a holder thereof; (vii)
the obligation or the right, if any, of the Corporation or a holder thereof to
redeem, purchase or repay the Junior Subordinated Debentures and the period or
periods within which, the price or prices at which and the other terms and
conditions upon which the Junior Subordinated Debentures shall be redeemed,
repaid or purchased, in whole or in part, pursuant to such obligation; (viii)
the denominations in which any Junior Subordinated Debentures shall be
issuable; (ix) if other than in U.S. Dollars, the currency or currencies
(including currency unit or units) in which the principal of (and premium, if
any) and interest and Additional Interest, if any, on the Junior Subordinated
Debentures shall be payable, or in which the Junior Subordinated Debentures
shall be denominated; (x) any additions, modifications or deletions in the
events of default under the Indenture or covenants of the Corporation
specified in the Indenture with respect to the Junior Subordinated Debentures;
(xi) if other than the principal amount thereof, the portion of the principal
amount of Junior Subordinated Debentures that shall be payable upon
declaration or acceleration of the maturity thereof; (xii) any additions or
changes to the Indenture with respect to a series of Junior Subordinated
Debentures as shall be necessary to permit or facilitate the issuance of such
series in bearer form, registrable or not registrable as to principal, and
with or without interest coupons; (xiii) any index or indices used to
determine the amount of payments of principal of and premium, if any, on the
Junior Subordinated Debentures and the manner in which such amounts will be
determined; (xiv) the terms and conditions relating to the issuance of a
temporary Global Security representing all of the Junior Subordinated
Debentures of such series and the exchange of such temporary Global Security
for definitive Junior Subordinated Debentures of such series; (xv) subject to
the terms described herein under "--Global Junior Subordinated Debentures,"
whether the Junior Subordinated Debentures of the series shall be issued in
whole or part in the form of one or more Global Securities and, in such case,
the Depositary for such Global Securities, which Depositary shall be a
clearing agency registered under the Exchange Act; (xvi) the appointment of
any paying agent or agents; (xvii) the terms and conditions of any obligation
or right of the Corporation or a holder to convert or exchange the Junior
Subordinated Debentures into Capital Securities; (xviii) the form of Trust
Agreement, Guarantee Agreement and Expense Agreement, if applicable; (xix) the
relative degree, if any, to which such Junior Subordinated Debentures of the
series shall be senior to or be subordinated to other series of such Junior
Subordinated Debentures or other Indebtedness of the Corporation in right of
payment, whether such other series of Junior Subordinated Debentures or other
indebtedness are outstanding or not; and (xx) any other terms of the Junior
Subordinated Debentures not inconsistent with the provisions of the Indenture.
The Junior Subordinated Debentures may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. Certain United States
federal income tax consequences and special considerations applicable to
Junior Subordinated Debentures will be described in the applicable Prospectus
Supplement.
If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest, if any,
on
8
any Junior Subordinated Debentures is payable in one or more foreign
currencies or currency units, the restrictions, elections, certain United
States federal income tax consequences, specific terms and other information
with respect to such series of Junior Subordinated Debentures and such foreign
currency or currency units will be set forth in the applicable Prospectus
Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of Junior Subordinated Debentures,
special United States federal income tax, accounting and other considerations
applicable thereto will be described in the applicable Prospectus Supplement.
REGISTRATION AND TRANSFER
Junior Subordinated Debentures of any series will be exchangeable for other
Junior Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same original
issue date and stated maturity and bearing the same interest rate.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate securities registrar or at
the office of any transfer agent designated by the Corporation for such
purpose with respect to any series of Junior Subordinated Debentures and
referred to in the applicable Prospectus Supplement without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. The Corporation will appoint the Debenture Trustee as securities
registrar under the Indenture. The Corporation may at any time designate
additional transfer agents with respect to any series of Junior Subordinated
Debentures.
In the event of any redemption, neither the Corporation nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during the period beginning at
the opening of business 15 days before the day of selection for redemption of
Junior Subordinated Debentures of that series and ending at the close of
business on the day of mailing of the relevant notice of redemption or (ii)
transfer or exchange any Junior Subordinated Debentures so selected for
redemption, except, in the case of any Junior Subordinated Debentures being
redeemed in part, any portion thereof not to be redeemed.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole or in
part in the form of one or more Global Junior Subordinated Debentures that
will be deposited with, or on behalf of, The Depository Trust Company ("DTC"),
as depositary. Global Junior Subordinated Debentures may be issued only in
fully registered form and in either temporary or permanent form. Unless and
until it is exchanged in whole or in part for the individual Junior
Subordinated Debentures represented thereby, a Global Junior Subordinated
Debenture may not be transferred except as a whole by DTC to a nominee of DTC
or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any
nominee to a successor depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Junior Subordinated Debentures will be described in the Prospectus Supplement
relating to such series. The Corporation anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the deposit
of such Global Junior Subordinated Debenture with or on behalf of DTC, DTC or
its nominee will credit, on its book-entry registration and transfer system,
the respective principal amounts of the individual Junior Subordinated
Debentures represented by such Global Junior Subordinated Debenture to the
accounts
9
of persons that have accounts with DTC ("Participants"), including Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear") and Cedel Bank societe anonyme ("Cedel Bank").
Such accounts shall be designated by the dealers, underwriters or agents with
respect to such Junior Subordinated Debentures or by the Corporation if such
Junior Subordinated Debentures are offered and sold directly by the
Corporation. Ownership of beneficial interests in a Global Junior Subordinated
Debenture will be limited to Participants or persons that may hold interests
through Participants. Ownership of beneficial interests in a Global Junior
Subordinated Debenture will be shown on, and the transfer of that ownership
will be effected only through, records maintained by DTC or its nominee (with
respect to interests of Participants), and the records of Participants (with
respect to interests of persons who hold through Participants).
So long as DTC, or its nominee, is the registered owner of such Global
Junior Subordinated Debenture, DTC or such nominee, as the case may be, will
be considered the sole owner or holder of the Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture for all purposes
under the Indenture governing such Junior Subordinated Debentures. Except as
provided below, owners of beneficial interests in a Global Junior Subordinated
Debenture will not be entitled to have any of the individual Junior
Subordinated Debentures of the series represented by such Global Junior
Subordinated Debenture registered in their names, will not receive or be
entitled to receive physical delivery of any such Junior Subordinated
Debentures of such series in definitive form and will not be considered the
owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Junior Subordinated Debentures represented by a Global Junior Subordinated
Debenture registered in the name of DTC or its nominee will be made to DTC or
its nominee, as the case may be, as the registered owner of the Global Junior
Subordinated Debenture representing such Junior Subordinated Debentures. None
of the Corporation, the Debenture Trustee, any Paying Agent or the Securities
Registrar for such Junior Subordinated Debentures will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Global Junior Subordinated
Debenture representing such Junior Subordinated Debentures or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Corporation expects that DTC or its nominee, upon receipt of any payment
of principal, premium, if any, or interest in respect of a permanent Global
Junior Subordinated Debenture representing any of such Junior Subordinated
Debentures, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of such Global Junior Subordinated Debenture for such Junior
Subordinated Debentures as shown on the records of DTC or its nominee. The
Corporation also expects that payments by Participants to owners of beneficial
interests in such Global Junior Subordinated Debenture held through such
Participants, including Euroclear and Cedel Bank, will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if DTC
is at any time unwilling, unable or ineligible to continue as depositary and
the Corporation is unable to locate a qualified successor, the Corporation
will issue individual Junior Subordinated Debentures of such series in
exchange for the Global Junior Subordinated Debenture representing such series
of Junior Subordinated Debentures. In addition, the Corporation may at any
time and in its sole discretion determine not to have any Junior Subordinated
Debentures of such series represented by one or more Global Junior
Subordinated Debentures and, in such event, will issue certificated Junior
Subordinated Debentures of such series in exchange for the Global Junior
Subordinated Debenture or securities representing such series of Junior
Subordinated Debentures. Further, if the Corporation so specifies with respect
to the Junior Subordinated Debentures of a series , an owner of a beneficial
interest in a
10
Global Junior Subordinated Debenture representing Junior Subordinated
Debentures of such series may, on terms acceptable to the Corporation and the
Debenture Trustee, receive certificated Junior Subordinated Debentures of such
series in exchange for such beneficial interests. In any such instance, an
owner of a beneficial interest in a Global Junior Subordinated Debenture will
be entitled to physical delivery of certificated Junior Subordinated Debentures
of the series represented by such Global Junior Subordinated Debenture equal in
principal amount to such beneficial interest and to have such Junior
Subordinated Debentures registered in its name. Individual Junior Subordinated
Debentures of such series so issued will be issued in denominations specified
in the Prospectus Supplement.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in the City of
New York or at the office of such paying agent or paying agents as the
Corporation may designate from time to time, except, at the option of the
Corporation, payment of any interest may be made (i) except in the case of
Global Junior Subordinated Debentures, by check mailed to the address of the
Person entitled thereto as such address shall appear in the securities register
or (ii) by transfer to an account maintained by the person entitled thereto as
specified in the securities register, provided that proper transfer
instructions have been received by the Regular Record Date. Unless otherwise
indicated in the applicable Prospectus Supplement, payment of any interest on
Junior Subordinated Debentures will be made to the person in whose name such
Junior Subordinated Debenture is registered at the close of business on the
Regular Record Date for such interest, except in the case of Defaulted
Interest. The Corporation may at any time designate additional Paying Agents or
rescind the designation of any paying agent; however, the Corporation will at
all times be required to maintain a paying agent in each place of payment for
each series of Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent, or then
held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall, at the request of the Corporation, be repaid
to the Corporation and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Corporation for
payment thereof.
OPTION TO DEFER INTEREST PAYMENTS
If provided in the applicable Prospectus Supplement, the Corporation will
have the right at any time and from time to time during the term of any series
of Junior Subordinated Debentures to defer payment of interest for up to such
number of consecutive interest payment periods as may be specified in the
applicable Prospectus Supplement (each, an "Extension Period"), subject to the
terms, conditions and covenants, if any, specified in such Prospectus
Supplement, provided that such Extension Period may not extend beyond the
Stated Maturity of such series of Junior Subordinated Debentures. Certain
United States federal income tax consequences and special considerations
applicable to any such Junior Subordinated Debentures will be described in the
applicable Prospectus Supplement.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation may, at its option redeem the Junior Subordinated Debentures of any
series in whole at any time or in part from time to time on or after a date and
upon the satisfaction of such additional conditions as may be specified in the
applicable Prospectus Supplement. The applicable Prospectus Supplement will
also specify the minimum denominations of Junior Subordinated Debentures which
may be redeemed and the redemption price.
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Except as otherwise specified in the applicable Prospectus Supplement, if a
Tax Event (as defined below) in respect of a series of Junior Subordinated
Debentures or an Investment Company Event (as defined below) shall occur and
be continuing, the Corporation may, at its option, redeem such series of
Junior Subordinated Debentures in whole (but not in part) at any time within
90 days following the occurrence of such Tax Event or Investment Company
Event, at a redemption price specified in the applicable Prospectus
Supplement.
"Tax Event" means with respect to an Issuer of a series of Capital
Securities, the receipt by such Issuer of an opinion of 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 political subdivision or taxing
authority thereof or therein, or (b) any judicial decision or any official
administrative pronouncement (including any private letter ruling, technical
advice memorandum or field service advice) or regulatory procedure (an
"Administrative Action"), regardless of whether such judicial decision or
Administrative Action is issued to or in connection with a proceeding
involving the Corporation or such Issuer and whether or not subject to review
or appeal, which amendment, clarification, change, Administrative Action or
decision is enacted, promulgated or announced, in each case, on or after the
date of the applicable Prospectus Supplement, there is more than an
insubstantial risk that (i) such Issuer is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on such series Junior Subordinated Debentures,
(ii) interest payable by the Corporation on such series of Corresponding
Junior Subordinated Debentures is not, or within 90 days of such opinion, will
not be, deductible by the Corporation, in whole or in part, for United States
federal income tax purposes, or (iii) such Issuer is, or will be within 90
days of the date of the opinion, subject to more than a de minimis amount of
other taxes, duties or other governmental charges. See "Description of Capital
Securities--Redemption or Exchange--Possible Tax Law Changes".
"Investment Company Event" means the receipt by an Issuer of a series of
Capital Securities of an opinion of counsel to the Corporation experienced in
such matters to the effect that, as a result of the occurrence of a change in
law or regulation or a written change (including any announced prospective
change) in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority, there is
more than an insubstantial risk that such Issuer is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which change
or prospective change becomes effective or would become effective, as the case
may be, on or after the date of the issuance of such Capital Securities.
Notice of any redemption will be mailed at least 45 days but not more than
75 days before the redemption date to each Holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Corporation
defaults in payment of the redemption price, on and after the redemption date
interest shall cease to accrue on such Junior Subordinated Debentures or
portions thereof called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
The Corporation will also covenant, as to each series of Junior Subordinated
Debentures, that it will not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect
to, any of the Corporation's capital stock or (ii) make any payment of
principal of or interest or premium, if any, on, or repay, repurchase or
redeem any debt securities of the Corporation (including other Junior
Subordinated Debentures) that rank pari passu in all respects with or junior
in interest to the Junior Subordinated Debentures (other than (a) repurchases,
redemptions or other acquisitions of shares of capital stock of the
Corporation in connection with any
12
employment contract, benefit plan or other similar arrangement with or for the
benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or
in connection with the issuance of capital stock of the Corporation (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the
applicable Extension Period, (b) as a result of any exchange or conversion of
any class or series of the Corporation's capital stock (or any capital stock
of a subsidiary of the Corporation) for any class or series of the
Corporation's capital stock or of any class or series of the Corporation's
indebtedness for any class or series of the Corporation's capital stock, (c)
the purchase of fractional interests in shares of the Corporation's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in
the form of stock, warrants, options or other rights where the dividend stock
or the stock issuable upon exercise of such warrants, options or other rights
is the same stock as that on which the dividend is being paid or ranks pari
passu with or junior to such stock), if at such time (i) there shall have
occurred any event of which the Corporation has actual knowledge that (a) with
the giving of notice or the lapse of time, or both, would constitute an "Event
of Default" under the Indenture with respect to the Junior Subordinated
Debentures of such series and (b) in respect of which the Corporation shall
not have taken reasonable steps to cure, (ii) if such Junior Subordinated
Debentures are held by an Issuer of a series of Related Capital Securities,
the Corporation shall be in default with respect to its payment of any
obligations under the Guarantee relating to such related Capital Securities or
(iii) the Corporation shall have given notice of its selection of an Extension
Period as provided in the Indenture with respect to the Junior Subordinated
Debentures of such series and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
MODIFICATION OF INDENTURE
From time to time the Corporation and the Debenture Trustee may, without the
consent of the holders of any series of Junior Subordinated Debentures, amend,
waive or supplement the Indenture for specified purposes, including, among
other things, curing ambiguities, defects or inconsistencies (provided that
any such action does not materially adversely affect the interest of the
holders of any series of Junior Subordinated Debentures or, in the case of
Corresponding Junior Subordinated Debentures, the holders of Related Capital
Securities so long as they remain outstanding) and qualifying, or maintaining
the qualification of, the Indenture under the Trust Indenture Act. The
Indenture contains provisions permitting the Corporation and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of each outstanding series of Junior Subordinated Debentures
affected, to modify the Indenture in a manner affecting adversely the rights
of the holders of such series of Junior Subordinated Debentures in any
material respect, provided that no such modification may, without the consent
of the holder of each outstanding Junior Subordinated Debenture so affected,
(i) change the Stated Maturity of any series of Junior Subordinated Debentures
(except as otherwise specified in the applicable Prospectus Supplement),
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon or (ii) reduce the percentage of principal amount
of Junior Subordinated Debentures of any series, the holders of which are
required to consent to any such modification of the Indenture. Furthermore, in
the case of Corresponding Junior Subordinated Debentures, so long as any of
the Related 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 event of default or compliance with any covenant under the Indenture
may be effective, without the prior consent of the holders of at least a
majority of the aggregate Liquidation Amount of all outstanding Related
Capital Securities affected unless and until the principal of the
Corresponding Junior Subordinated Debentures and all accrued and unpaid
interest thereon have been paid in full and certain other conditions have been
satisfied.
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In addition, the Corporation and the Debenture Trustee may execute, without
the consent of any holder of Junior Subordinated Debentures, any supplemental
Indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default" with
respect to such series of Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on such series of Junior
Subordinated Debentures, including any Additional Interest in respect
thereof, when due (subject to the deferral of any interest payment in the
case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series of
Junior Subordinated Debentures when due whether at maturity or upon
redemption; or
(iii) failure to observe or perform any other covenants contained in the
Indenture for 90 days after written notice to the Corporation from the
Debenture Trustee or the holders of at least 25% in aggregate outstanding
principal amount of such affected series of Junior Subordinated Debentures;
or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Corporation.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures of each series affected have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Debenture Trustee. The Debenture Trustee or the holders of
not less than 25% in aggregate outstanding principal amount of the Junior
Subordinated Debentures of each series affected may declare the principal due
and payable immediately upon a Debenture Event of Default, and, in the case of
Corresponding Junior Subordinated Debentures, should the Debenture Trustee or
such holders of such Corresponding Junior Subordinated Debentures fail to make
such declaration, the holders of at least 25% in aggregate Liquidation Amount
of the outstanding Related Capital Securities shall have such right. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures of each series affected may annul such declaration. In
the case of Corresponding Junior Subordinated Debentures, should the holders
of such Corresponding Junior Subordinated Debentures fail to annul such
declaration and waive such default, the holders of a majority in aggregate
Liquidation Amount of the outstanding Related Capital Securities shall have
such right.
The holders of a majority in aggregate outstanding principal amount of each
series of outstanding Junior Subordinated Debentures affected thereby may, on
behalf of the holders of all the Junior Subordinated Debentures of such
series, waive any default, except a default in the payment of principal (or
premium if any) or interest (including any Additional Interest) (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration has been deposited
with the Debenture Trustee) or a default in respect of a covenant or provision
which under the Indenture cannot be modified or amended without the consent of
the holder of each outstanding Junior Subordinated Debenture of such series.
In the case of Corresponding Junior Subordinated Debentures, should the
holders of such Corresponding Junior Subordinated Debentures fail to waive
such default, the holders of a majority in aggregate Liquidation Amount of the
outstanding Related Capital Securities shall have such right. The Corporation
is required to file annually with the Debenture Trustee a certificate as to
whether or not the Corporation is in compliance with all the conditions and
covenants applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as to a
series of Corresponding Junior Subordinated Debentures, the Property Trustee
will have the right to declare the
14
principal of and the interest on such Corresponding Junior Subordinated
Debentures, and any other amounts payable under the Indenture, to be forthwith
due and payable and to enforce its other rights as a creditor with respect to
such Corresponding Junior Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Debenture Event of Default with respect to a series of Corresponding
Junior Subordinated Debentures has occurred and is continuing and such event
is attributable to the failure of the Corporation to pay any interest or
principal on such Corresponding Junior Subordinated Debentures on the date
interest or principal is due and payable, a holder of Related Capital
Securities may institute a legal proceeding directly against the Corporation
for enforcement of payment to such holder of the principal of or interest
(including any Additional Interest) on such Corresponding Junior Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Related Capital Securities of such holder (a "Direct Action"). The
Corporation may not amend the Indenture to remove the foregoing right to bring
a Direct Action without the prior written consent of the holders of all of the
Capital Securities outstanding. If the right to bring a Direct Action is
removed, the Issuer may become subject to the reporting obligations under the
Exchange Act. The Corporation shall have the right under the Indenture to set-
off any payment made to such holder of Capital Securities by the Corporation
in connection with a Direct Action.
The holders of the Capital Securities will not be able to exercise directly
any remedies other than those set forth in the preceding paragraph available
to the holders of the Junior Subordinated Debentures unless there shall have
been an event of default under the Trust Agreement. See "Description of
Capital Securities--Events of Default; Notice".
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Corporation shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and that no Person shall
consolidate with or merge into the Corporation or convey, transfer or lease
its properties and assets substantially as an entirety to the Corporation,
unless (i) in case the Corporation consolidates with or merges into another
Person or conveys or transfers its properties and assets substantially as an
entirety to any Person, the successor Person is organized under the laws of
the United States or any state or the District of Columbia, and such successor
Person expressly assumes the Corporation's obligations on the Junior
Subordinated Debentures issued under the Indenture; (ii) immediately after
giving effect thereto, no Debenture Event of Default, and no event which,
after notice or lapse of time or both, would become a Debenture Event of
Default, shall have occurred and be continuing; and (iii) certain other
conditions as prescribed by the Indenture are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Corporation that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at their Stated Maturity within one year, and the Corporation deposits
or causes to be deposited with the Debenture Trustee funds, in trust, for the
purpose and in an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal (and premium, if
any) and interest (including any Additional Interest) to the date of the
deposit or to the Stated Maturity, as the case may
15
be, then the Indenture will cease to be of further effect (except as to the
Corporation's obligations to pay all other sums due pursuant to the Indenture
and to provide the officers' certificates and opinions of counsel described
therein), and the Corporation will be deemed to have satisfied and discharged
the Indenture.
SUBORDINATION
The Junior Subordinated Debentures will be subordinate in right of payment,
to the extent set forth in the Indenture, to all Senior Debt (as defined
below) of the Corporation. If the Corporation defaults in the payment of any
principal, premium, if any, or interest, if any, or any other amount payable
on any Senior Debt when the same becomes due and payable, whether at maturity
or at a date fixed for redemption or by declaration of acceleration or
otherwise, then, unless and until such default has been cured or waived or has
ceased to exist or all Senior Debt has been paid, no direct or indirect
payment (in cash, property, securities, by set-off or otherwise) may be made
or agreed to be made on the Junior Subordinated Debentures, or in respect of
any redemption, repayment, retirement, purchase or other acquisition of the
Junior Subordinated Debentures.
As used herein, "Senior Debt" means any obligation of the Corporation to its
creditors, whether now outstanding or subsequently incurred, other than any
obligation as to which, in the instrument creating or evidencing the
obligation or pursuant to which the obligation is outstanding, it is provided
that such obligation is not Senior Debt, but does not include trade accounts
payable and accrued liabilities arising in the ordinary course of business.
Senior Debt includes any subordinated debt securities issued in the future
with substantially similar subordination terms, but does not include the
Junior Subordinated Debentures of any series or any junior subordinated debt
securities issued in the future with subordination terms substantially similar
to those of the Junior Subordinated Debentures. Substantially all of the
existing indebtedness of the Corporation constitutes Senior Debt.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Corporation, its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding up of the Corporation, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by the Corporation for the benefit of creditors or (iv)
any other marshalling of the assets of the Corporation, all Senior Debt
(including any interest thereon accruing after the commencement of any such
proceedings) shall first be paid in full before any payment or distribution,
whether in cash, securities or other property, shall be made on account of the
Junior Subordinated Debentures. In such event, any payment or distribution on
account of the Junior Subordinated Debentures, whether in cash, securities or
other property, that would otherwise (but for the subordination provisions) be
payable or deliverable in respect of the Junior Subordinated Debentures will
be paid or delivered directly to the holders of Senior Debt in accordance with
the priorities then existing among such holders until all Senior Debt
(including any interest thereon accruing after the commencement of any such
proceedings) has been paid in full.
In the event of any such proceeding, after payment in full of all sums owing
with respect to Senior Debt, the holders of Junior Subordinated Debentures,
together with the holders of any obligations of the Corporation ranking on a
parity with the Junior Subordinated Debentures, will be entitled to be paid
from the remaining assets of the Corporation the amounts at the time due and
owing on the Junior Subordinated Debentures and such other obligations before
any payment or other distribution, whether in cash, property or otherwise,
will be made on account of any capital stock or obligations of the Corporation
ranking junior to the Junior Subordinated Debentures. If any payment or
distribution on account of the Junior Subordinated Debentures of any character
or any security, whether in cash, securities or other property is received by
any holder of any Junior Subordinated Debentures in contravention of any of
the terms hereof and before all the Senior Debt has been paid in full, such
payment or distribution or security will be received in trust for the benefit
of, and must be paid over or
16
delivered and transferred to, the holders of the Senior Debt at the time
outstanding in accordance with the priorities then existing among such holders
for application to the payment of all Senior Debt remaining unpaid to the
extent necessary to pay all such Senior Debt in full. By reason of such
subordination, in the event of the insolvency of the Corporation, holders of
Senior Debt may receive more, ratably, and holders of the Junior Subordinated
Debentures may receive less, ratably, than the other creditors of the
Corporation. Such subordination will not prevent the occurrence of any Event
of Default under the Indenture.
The Junior Subordinated Indenture places no limitation on the amount of
additional Senior Debt that may be incurred by the Corporation. The
Corporation expects from time to time to incur additional indebtedness
constituting Senior Debt.
TRUST EXPENSES
Pursuant to the Expense Agreement for each series of Corresponding Junior
Subordinated Debentures the Corporation will irrevocably and unconditionally
agree with any Issuer that holds such Junior Subordinated Debentures that the
Corporation will pay to such Issuer, and reimburse such Issuer for, the full
amounts of any costs, expenses or liabilities of such Issuer, other than
obligations of such Issuer to pay to the holders of any Capital Securities or
other similar interests in such Issuer the amounts due such holders pursuant
to the terms of the Capital Securities or such other similar interests, as the
case may be. Such payment obligation will include any such costs, expenses or
liabilities of each Issuer that are required by applicable law to be satisfied
in connection with a termination of such Issuer.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Debenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Junior Subordinated Debentures,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
The Corresponding Junior Subordinated Debentures may be issued in one or
more series of Junior Subordinated Debentures under the Indenture with terms
corresponding to the terms of a series of Related Capital Securities. In that
event, concurrently with the issuance of each Issuer's Capital Securities,
such Issuer will invest the proceeds thereof and the consideration paid by the
Corporation for the Common Securities of such Issuer in such series of
Corresponding Junior Subordinated Debentures issued by the Corporation to such
Issuer. Each series of Corresponding Junior Subordinated Debentures will be in
the principal amount equal to the aggregate stated Liquidation Amount of the
Related Capital Securities and the Common Securities of such Issuer and will
rank pari passu with all other series of Junior Subordinated Debentures.
Holders of the Related Capital Securities for a series of Corresponding Junior
Subordinated Debentures will have the rights in connection with modifications
to the Indenture or upon occurrence of Debenture Events of Default, as
described under "--Modification of Indenture" and "--Debenture Events of
Default", unless provided otherwise in the Prospectus Supplement for such
Related Capital Securities.
17
Unless otherwise specified in the applicable Prospectus Supplement, if a Tax
Event or Investment Company Event in respect of an Issuer shall occur and be
continuing, the Corporation may, at its option, redeem the Corresponding
Junior Subordinated Debentures at any time within 90 days of the occurrence of
such Tax Event, or Investment Company Event, in whole but not in part, subject
to the provisions of the Indenture and whether or not such Corresponding
Junior Subordinated Debentures are then otherwise redeemable at the option of
the Corporation at a redemption price specified in the applicable Prospectus
Supplement. For so long as the applicable Issuer is the holder of all the
outstanding Corresponding Junior Subordinated Debentures of such Issuer, the
proceeds of any such redemption will be used by the Issuer to redeem the
corresponding Trust Securities in accordance with their terms. The Corporation
may not redeem a series of Corresponding Junior Subordinated Debentures in
part unless all accrued and unpaid interest has been paid in full on all
outstanding Corresponding Junior Subordinated Debentures of such series for
all interest periods terminating on or prior to the Redemption Date.
The Corporation will covenant in the Indenture, as to each series of
Corresponding Junior Subordinated Debentures, that if and so long as (i) the
Issuer of the related series of Trust Securities is the holder of all such
Corresponding Junior Subordinated Debentures, (ii) a Tax Event described in
clause (i) or (iii) of the definition of Tax Event has occurred and is
continuing in respect of such Issuer and (iii) the Corporation has elected,
and has not revoked such election, to pay Additional Sums (as defined under
"Description of Capital Securities--Redemption or Exchange") in respect of
such Trust Securities, the Corporation will pay to such Issuer such Additional
Sums. The Corporation will also covenant, as to each series of Corresponding
Junior Subordinated Debentures, (i) to maintain directly or indirectly 100%
ownership of the Common Securities of the Issuer to which such Corresponding
Junior Subordinated Debentures have been issued, provided that certain
successors which are permitted pursuant to the Indenture may succeed to the
Corporation's ownership of the Common Securities, (ii) not to voluntarily
terminate, wind-up or liquidate any Issuer, except (a) in connection with a
distribution of Corresponding Junior Subordinated Debentures to the holders of
the Capital Securities in exchange therefor upon liquidation of such Issuer or
(b) in connection with certain mergers, consolidations or amalgamations
permitted by the related Trust Agreement, and (iii) to use its reasonable
efforts, consistent with the terms and provisions of the related Trust
Agreement, to cause such Issuer not to be taxable as a corporation for United
States federal income tax purposes.
18
DESCRIPTION OF CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement for each Issuer, the Property
Trustee on behalf of such Issuer will issue the Capital Securities and the
Common Securities. The Capital Securities of a particular Issuer will
represent preferred beneficial interests in the Issuer and the holders thereof
will be entitled to a preference in certain circumstances with respect to
Distributions and amounts payable on redemption or liquidation over the Common
Securities of such Issuer, as well as other benefits as described in the
corresponding Trust Agreement. This summary of certain provisions of the
Capital Securities and each Trust Agreement, which summarizes the material
terms thereof, does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of each Trust
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act, to which reference is hereby made. Wherever particular defined
terms of a Trust Agreement (as amended or supplemented from time to time) are
referred to herein or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference. The form of the Trust Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each of the Issuers is a legally separate entity and
the assets of one are not available to satisfy the obligations of the other.
GENERAL
The Capital Securities of an Issuer will rank pari passu, and payments will
be made thereon pro rata, with the Common Securities of that Issuer except as
described under "--Subordination of Common Securities". Legal title to the
Corresponding Junior Subordinated Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the related Capital
Securities and Common Securities. Each Guarantee Agreement executed by the
Corporation for the benefit of the holders of an Issuer's Capital Securities
(the "Guarantee" for such Capital Securities) will be a guarantee on a
subordinated basis with respect to the related Capital Securities but will not
guarantee payment of Distributions or amounts payable on redemption or
liquidation of such Capital Securities when the related Issuer does not have
funds on hand available to make such payments. See "Description of
Guarantees".
DISTRIBUTIONS
Distributions on the Capital Securities will be cumulative, will accumulate
from the date of original issuance and will be payable on such dates as
specified in the applicable Prospectus Supplement. In the event that any date
on which Distributions are payable on the Capital Securities is not a Business
Day (as defined below), payment of the Distribution payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect to any such delay) except that, if such
Business Day is in the next succeeding calendar year, payment of such
Distribution shall be made on the immediately preceding Business Day, in
either case with the same force and effect as if made on such date (each date
on which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). A "Business Day" shall mean any day other than a
Saturday or a Sunday, or a day on which banking institutions in The City of
New York are authorized or required by law or executive order to remain closed
or a day on which the corporate trust office of the Property Trustee or the
Debenture Trustee is closed for business.
Each Issuer's Capital Securities represent preferred beneficial interests in
the applicable Issuer, and the Distributions on each Capital Security will be
payable at a rate specified in the applicable Prospectus Supplement for such
Capital Securities. The amount of Distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months unless
otherwise specified in the applicable Prospectus Supplement. Distributions to
which holders of Capital Securities are entitled will accumulate additional
Distributions at the rate per annum if and as specified in the applicable
Prospectus Supplement. The term "Distributions" as used herein includes any
such additional Distributions unless otherwise stated.
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If provided in the applicable Prospectus Supplement, the Corporation has the
right under the Indenture pursuant to which it will issue the Corresponding
Junior Scheduled Debentures, to defer the payment of interest at any time or
from time to time on any series of the Corresponding Junior Subordinated
Debentures for up to such number of consecutive interest payment periods which
will be specified in the applicable Prospectus Supplement (each, an "Extension
Period"), provided that no Extension Period may extend beyond the Stated
Maturity of the Corresponding Junior Subordinated Debentures. As a consequence
of any such deferral, Distributions on the Related Capital Securities would be
deferred (but would continue to accumulate additional Distributions thereon at
the rate set forth in the applicable Prospectus Supplement) by the Issuer of
such Capital Securities during any such Extension Period. During any such
Extension Period, the Corporation may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Corporation's capital stock or (ii) make any
payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Corporation that rank pari
passu in all respects with or junior in interest to the Corresponding Junior
Subordinated Debentures (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Corporation in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or
in connection with the issuance of capital stock of the Corporation (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the
applicable Extension Period, (b) as a result of any exchange or conversion of
any class or series of the Corporation's capital stock (or any capital stock
of a subsidiary of the Corporation) for any class or series of the
Corporation's capital stock or of any class or series of the Corporation's
indebtedness for any class or series of the Corporation's capital stock, (c)
the purchase of fractional interests in shares of the Corporation's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in
the form of stock, warrants, options or other rights where the dividend stock
or the stock issuable upon exercise of such warrants, options or other rights
is the same stock as that on which the dividend is being paid or ranks pari
passu with or junior to such stock).
The revenue of each Issuer available for distribution to holders of its
Capital Securities will be limited to payments under the Corresponding Junior
Subordinated Debentures in which the Issuer will invest the proceeds from the
issuance and sale of the Trust Securities. See "Description of Junior
Subordinated Debentures--Corresponding Junior Subordinated Debentures." If the
Corporation does not make interest payments on such Corresponding Junior
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Related Capital Securities. The payment of
Distributions (if and to the extent the Issuer has funds legally available for
the payment of such Distributions and cash sufficient to make such payments)
is guaranteed by the Corporation on a limited basis as set forth herein under
"Description of Guarantees."
Distributions on the Capital Securities will be payable to the holders
thereof as they appear on the register of such Issuer on the relevant record
date, which, as long as the Capital Securities remain in book-entry form, will
be one Business Day prior to the relevant Distribution Date. Subject to any
applicable laws and regulations and the provisions of the applicable Trust
Agreement, each such payment will be made as described under "Book-Entry
Issuance." In the event any Capital Securities are not in book-entry form, the
relevant record date for such Capital Securities shall be the date at least 15
days prior to the relevant Distribution Date, as specified in the applicable
Prospectus Supplement.
REDEMPTION OR EXCHANGE
Mandatory Redemption. Upon the repayment or redemption, in whole or in part,
of any Corresponding Junior Subordinated Debentures, whether at maturity or
upon earlier redemption as
20
provided in the Indenture, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount (as defined
below) of the Trust Securities, upon not less than 30 nor more than 60 days
notice, at a redemption price (the "Redemption Price") specified in the
applicable Prospectus Supplement. If less than all of any series of
Corresponding Junior Subordinated Debentures are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or redemption shall be
allocated to the redemption pro rata of the Related Capital Securities and the
Common Securities. The amount of premium, if any, paid by the Corporation upon
the redemption of all or any part of any series of any Corresponding Junior
Subordinated Debentures to be repaid or redeemed on a Redemption Date shall be
allocated to the redemption pro rata of the Related Capital Securities and the
Common Securities.
The Corporation will have the right to redeem any series of Corresponding
Junior Subordinated Debentures (i) on or after such date as may be specified
in the applicable Prospectus Supplement, in whole at any time or in part from
time to time, (ii) at any time, in whole (but not in part), upon the
occurrence of a Tax Event or Investment Company Event or (iii) as may be
otherwise specified in the applicable Prospectus Supplement.
Distribution of Corresponding Junior Subordinated Debentures. The
Corporation has the right at any time to terminate any Issuer and, after
satisfaction of the liabilities of creditors of such Issuer as provided by
applicable law, cause such Corresponding Junior Subordinated Debentures in
respect of the Related Capital Securities and Common Securities issued by such
Issuer to be distributed to the holders of such Capital Securities and Common
Securities in liquidation of the Issuer.
Tax Event or Investment Company Event Redemption. If a Tax Event or
Investment Company Event in respect of a series of Capital Securities and
Common Securities shall occur and be continuing, the Corporation has the right
to redeem the Corresponding Junior Subordinated Debentures in whole (but not
in part) and thereby cause a mandatory redemption of such Capital Securities
and Common Securities in whole (but not in part) at the Redemption Price
within 90 days following the occurrence of such Tax Event or Investment
Company Event. In the event a Tax Event or Investment Company Event in respect
of the Capital Securities and Common Securities has occurred and is continuing
and the Corporation does not elect to redeem the Corresponding Junior
Subordinated Debentures and thereby cause a mandatory redemption of such
Capital Securities or to liquidate the related Issuer and cause the
Corresponding Junior Subordinated Debentures to be distributed to the holders
of such Capital Securities and Common Securities in exchange therefor upon
liquidation of the Issuer as described above, such Capital Securities will
remain outstanding and, as specified in the applicable Prospectus Supplement,
Additional Sums (as defined below) may be payable on the Corresponding Junior
Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by an Issuer on the
outstanding Capital Securities and Common Securities of the Issuer shall not
be reduced as a result of certain additional taxes, duties and other
governmental charges to which the Issuer has become subject as a result of a
Tax Event.
"Like Amount" means (i) with respect to a redemption of any series of Trust
Securities, the Trust Securities of such series having a Liquidation Amount
(as defined below) equal to the principal amount of Corresponding Junior
Subordinated Debentures to be contemporaneously redeemed in accordance with
the Indenture, the proceeds of which will be used to pay the Redemption Price
of such Trust Securities, and (ii) with respect to a distribution of
Corresponding Junior Subordinated Debentures to holders of any series of Trust
Securities in connection with a dissolution or liquidation of the related
Issuer, Corresponding Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of the Trust Securities in respect of which
such distribution is made.
"Liquidation Amount" means the stated amount per Trust Security specified in
the applicable Prospectus Supplement.
21
"Tax Event" means, with respect to an Issuer of a series of Capital
Securities, the receipt by such Issuer of an opinion of 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 political subdivision or taxing
authority thereof or therein, or (b) any judicial decision or any official
administrative pronouncement (including any private letter ruling, technical
advice memorandum or field service advice) or regulatory procedure (an
"Administrative Action"), regardless of whether such judicial decision or
Administrative Action is issued to or in connection with a proceeding
involving the Corporation or such Issuer and whether or not subject to review
or appeal, which amendment, clarification, change, Administrative Action or
decision is enacted, promulgated or announced, in each case, on or after the
date of the applicable Prospectus Supplement, there is more than an
insubstantial risk that (i) such Issuer is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on such series of Corresponding Junior
Subordinated Debentures, (ii) interest payable by the Corporation on such
series of Corresponding Junior Subordinated Debentures is not, or within 90
days of such opinion, will not be, deductible by the Corporation, in whole or
in part, for United States federal income tax purposes, or (iii) such Issuer
is, or will be within 90 days of the date of the opinion, subject to more than
a de minimis amount of other taxes, duties or other governmental charges.
Possible Tax Law Changes. Prospective investors should be aware that Enron
Corporation has filed a petition in Tax Court challenging the proposed
disallowance by the Internal Revenue Service of the deduction of interest
expense on securities issued by Enron Corporation in 1993 and 1994 that are
similar to, although different in a number of respects from, the Junior
Subordinated Debentures. It is possible that a decision in that case could
give rise to a Tax Event, which would permit the Corporation to cause a
redemption of Capital Securities. Prospective investors also should be aware
that legislation has been proposed by the Clinton Administration in the past
that, if enacted, would have denied an interest expense deduction to issuers
of instruments such as the Junior Subordinated Debentures. No such legislation
is currently pending. There can be no assurance, however, that similar
legislation will not ultimately be enacted into law, or that other
developments will not occur on or after the date hereof that would adversely
affect the tax treatment of the Junior Subordinated Debentures. Such changes
also could give rise to a Tax Event.
"Investment Company Event" means, with respect to an Issuer, the receipt by
such Issuer of a series of Capital Securities of an opinion of counsel to the
Corporation experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a written change (including any
announced prospective change) in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that such Issuer is or
will be considered an "investment company" that is required to be registered
under the Investment Company Act, which change or prospective change becomes
effective or would become effective, as the case may be, on or after the date
of the issuance of such Capital Securities.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debentures for any series of Capital Securities (i) such
series of Capital Securities will no longer be deemed to be outstanding, (ii)
the depositary or its nominee, as the record holder of such series of Capital
Securities, will receive a registered global certificate or certificates
representing the Corresponding Junior Subordinated Debentures to be delivered
upon such distribution and (iii) any certificates representing such series of
Capital Securities not held by DTC or its nominee will be deemed to represent
the Corresponding Junior Subordinated Debentures having a principal amount
equal to the stated Liquidation Amount of such series of Capital Securities,
and bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid Distributions on such series of Capital Securities until such
certificates are presented to the agent for transfer or reissuance.
There can be no assurance as to the market prices for the Capital Securities
or the Corresponding Junior Subordinated Debentures that may be distributed in
exchange for Capital Securities if a
22
dissolution and liquidation of an Issuer were to occur. Accordingly, the
Capital Securities that an investor may purchase, or the Corresponding Junior
Subordinated Debentures that the investor may receive on dissolution and
liquidation of an Issuer, may trade at a discount to the price that the
investor paid to purchase the Capital Securities offered hereby.
REDEMPTION PROCEDURES
Capital Securities redeemed on each Redemption Date shall be redeemed at the
Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated Debentures. Redemptions of
the Capital Securities shall be made and the Redemption Price shall be payable
on each Redemption Date only to the extent that the related Issuer has funds
on hand available for the payment of such Redemption Price. See also "--
Subordination of Common Securities".
If an Issuer gives a notice of redemption in respect of its Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
to the extent funds are available, the Property Trustee will deposit
irrevocably with DTC funds sufficient to pay the applicable Redemption Price
and will give DTC irrevocable instructions and authority to pay the Redemption
Price to the holders of such Capital Securities. See "Book-Entry Issuance". If
such Capital Securities are no longer in book-entry form, the Property
Trustee, to the extent funds are available, will irrevocably deposit with the
paying agent for such Capital Securities funds sufficient to pay the
applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing such Capital Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Capital Securities called for redemption shall be
payable to the holders of such Capital Securities on the relevant record dates
for the related Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then upon the date of such deposit, all
rights of the holders of such Capital Securities so called for redemption will
cease, except the right of the holders of such Capital Securities to receive
the Redemption Price and any Distribution payable in respect of the Capital
Securities on or prior to the Redemption Date, 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 such date. In the event that payment of the Redemption
Price in respect of Capital Securities called for redemption is improperly
withheld or refused and not paid either by the Issuer or by the Corporation
pursuant to the Guarantee as described under "Description of Guarantees",
Distributions on such Capital Securities will continue to accrue at the then
applicable rate from the Redemption Date originally established by the Issuer
for such Capital Securities to the date such Redemption Price is actually
paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities laws), the Corporation or its subsidiaries may at any time
and from time to time purchase outstanding Capital Securities by tender, in
the open market or by private agreement.
Payment of the Redemption Price on the Capital Securities and any
distribution of Corresponding Junior Subordinated Debentures to holders of
Capital Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Capital Securities on the relevant record
date, which shall be one Business Day prior to the relevant Redemption Date or
liquidation date, as applicable; provided, however, that in the event that any
Capital Securities are not in book-entry form,
23
the relevant record date for such Capital Securities shall be a date at least
15 days prior to the Redemption Date or liquidation date, as applicable, as
specified in the Prospectus Supplement.
If less than all of the Capital Securities and Common Securities issued by
an Issuer are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Capital Securities and Common Securities to be
redeemed shall be allocated pro rata to the Capital Securities and the Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Capital Securities to be redeemed shall be selected on a pro rata
basis not more than 60 days prior to the Redemption Date by the Property
Trustee from the outstanding Capital Securities not previously called for
redemption, by such method as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the Liquidation Amount of Capital Securities as specified in the applicable
Prospectus Supplement. The Property Trustee shall promptly notify the
securities registrar in writing of the Capital Securities selected for
redemption and, in the case of any Capital Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
each Trust Agreement, unless the context otherwise requires, all provisions
relating to the redemption of Capital Securities shall relate, in the case of
any Capital Securities redeemed or to be redeemed only in part, to the portion
of the aggregate Liquidation Amount of Capital Securities which has been or is
to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless the Corporation defaults in payment
of the Redemption Price on the Corresponding Junior Subordinated Debentures,
on and after the Redemption Date interest will cease to accrue on such Junior
Subordinated Debentures or portions thereof (and Distributions will cease to
accrue on the Related Capital Securities or portions thereof) called for
redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Issuer's
Capital Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of such Capital Securities and Common
Securities, provided, however, that if on any Distribution Date, Redemption
Date or Liquidation Date a Debenture Event of Default shall have occurred and
be continuing, no payment of any Distribution on, or Redemption Price of, or
Liquidation Distribution in respect of, any of the Issuer's Common Securities,
and no other payment on account of the redemption, liquidation or other
acquisition of such Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all of the Issuer's
outstanding Capital Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price the full
amount of such Redemption Price on all of the Issuer's outstanding Capital
Securities then called for redemption, or in the case of payment of the
Liquidation Distribution the full amount of such Liquidation Distribution on
all outstanding Capital Securities, shall have been made or provided for, and
all funds available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions on, or Redemption Price of, the
Issuer's Capital Securities then due and payable.
In the case of any event of default under the applicable Trust Agreement
resulting from a Debenture Event of Default, the Corporation as holder of such
Issuer's Common Securities will be deemed to have waived any right to act with
respect to any such Event of Default under the applicable Trust Agreement
until the effect of all such Events of Default with respect to such Capital
Securities have been cured, waived or otherwise eliminated. Until any such
Events of Default under the applicable Trust Agreement with respect to the
Capital Securities have been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the holders of such Capital
Securities and not on behalf of the holders of the Common Securities, and only
the holders of such Capital Securities will have the right to direct the
Property Trustee to act on their behalf.
24
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Issuer shall automatically terminate
upon expiration of its term and shall terminate on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the holder of the
Common Securities; (ii) the distribution of a Like Amount of the Corresponding
Junior Subordinated Debentures to the holders of its Trust Securities, if the
holders of Common Securities have given written direction to the Property
Trustee to terminate such Issuer (which direction is optional and wholly
within the discretion of the holders of Common Securities); (iii) redemption
of all of the Issuer's Trust Securities as described under "Description of
Capital Securities--Redemption or Exchange--Mandatory Redemption"; and (iv)
the entry of an order for the dissolution of the Issuer by a court of
competent jurisdiction.
If early termination of an Issuer occurs as described in clause (i), (ii) or
(iv) above, the Issuer shall be liquidated by the Property Trustee as
expeditiously as the Property Trustee determines to be possible by
distributing, after satisfaction of liabilities to creditors of such Issuer as
provided by applicable law, to the holders of such Trust Securities in
exchange therefor a Like Amount of the Corresponding Junior Subordinated
Debentures, unless such distribution is determined by the Property Trustee not
to be practical, in which event such holders will be entitled to receive out
of the assets of such Issuer available for distribution to holders, after
satisfaction of liabilities to creditors of such Issuer as provided by
applicable law, an amount equal to, in the case of holders of 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 such Issuer has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by
such Issuer on its Capital Securities shall be paid on a pro rata basis. The
holder(s) of such Issuer's Common Securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of its
Capital Securities, except that if a Debenture Event of Default has occurred
and is continuing, the Capital Securities shall have a priority over the
Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under each
Trust Agreement with respect to the Capital Securities issued thereunder
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the Indenture
(see "Description of Junior Subordinated Debentures--Debenture Events of
Default"); or
(ii) default by the Issuer in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of
30 days; or
(iii) default by the Issuer in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustees and the Corporation by the holders of at least 25% in aggregate
Liquidation Amount of the outstanding Capital Securities of the applicable
Issuer, a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default" under
such Trust Agreement; or
25
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee if a successor Property Trustee has not
been appointed within 90 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer's Trust
Securities and the Administrators unless such Event of Default shall have been
cured or waived. The Corporation, as Depositor, and the Administrators are
required to file annually with the Property Trustee a certificate as to
whether or not they are in compliance with all the conditions and covenants
applicable to them under each Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described
above. See "--Liquidation Distribution Upon Termination". The existence of an
Event of Default does not entitle the holders of Capital Securities to
accelerate the maturity thereof.
REMOVAL OF ISSUER TRUSTEES; APPOINTMENT OF SUCCESSORS
The holders of at least a majority in aggregate Liquidation Amount of the
outstanding Capital Securities may remove the related Issuer Trustees for
cause or, if a Debenture Event of Default has occurred and is continuing, with
or without cause. If an Issuer Trustee is removed by the holders of the
outstanding Capital Securities, the successor may be appointed by the holders
of at least 25% in Liquidation Amount of Capital Securities. If an Issuer
Trustee resigns, such Trustee will appoint its successor. If an Issuer Trustee
fails to appoint a successor, the holders of at least 25% in Liquidation
Amount of the outstanding Capital Securities may appoint a successor. If a
successor has not been appointed by the holders, any holder of Capital
Securities or Common Securities or the other Issuer Trustee may petition a
court in the State of Delaware to appoint a successor. Any Delaware Trustee
must meet the applicable requirements of Delaware law. Any Property Trustee
must be a national or state-chartered bank, and at the time of appointment
have securities rated in one of the three highest rating categories by a
nationally recognized statistical rating organization and have capital and
surplus of at least $50,000,000. No resignation or removal of an Issuer
Trustee and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor trustee in accordance with the
provisions of the applicable Trust Agreement.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any Person into which the Property Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Trustee
shall be a party, or any Person succeeding to all or substantially all the
corporate trust business of such Trustee, shall be the successor of such
Issuer Trustee under each Trust Agreement, provided such Entity shall be
otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUERS
An Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. An Issuer may, at the request of the holders of the Common
Securities and 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, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as
such under the laws of any state, provided, that (i) such successor entity
either (a) expressly assumes all of the obligations of the Issuer 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
26
in priority with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) a trustee of such successor entity possessing
the same powers and duties as the Property Trustee is appointed to hold the
Corresponding Junior Subordinated Debentures, (iii) the Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or other organization on which
the Capital Securities are then listed, if any, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not cause the Capital Securities to be downgraded by any nationally recognized
statistical rating organization which assigns ratings to the Capital
Securities, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the material rights,
preferences and privileges of the holders of the Capital Securities (including
any Successor Securities) in any material respect, (vi) such successor entity
has a purpose identical to that of the Issuer, (vii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Corporation has received an opinion from independent counsel to the Issuer
experienced in such matters to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the material rights, preferences and privileges of the holders of the
Capital Securities (including any Successor Securities) in any material
respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Issuer nor such
successor entity will be required to register as an investment company under
the Investment Company Act; and (viii) the Corporation or any permitted
successor or assignee owns all of the Common Securities of such successor
entity and guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, an Issuer shall not, except with the consent of
holders of 100% in aggregate Liquidation Amount of the Capital Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to
any other entity or permit any other entity to consolidate, amalgamate, merge
with or into, or replace it if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Issuer or the
successor entity to be classified as an association taxable as a corporation
or as other than a grantor trust for United States federal income tax purposes
or cause the Junior Subordinated Debentures to be treated as other than
indebtedness of the Corporation for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
Except as provided below and under "Description of Guarantees--Amendments
and Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Capital Securities will have no voting rights.
Each Trust Agreement may be amended from time to time by the holders of a
majority of the Common Securities and the Property Trustee, without the
consent of the holders of the Capital Securities (i) to cure any ambiguity,
correct or supplement any provisions in such Trust Agreement that may be
inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under such Trust Agreement, which are
not inconsistent with the other provisions of such Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of such Trust Agreement to such
extent as may be necessary to ensure that the Issuer will not be taxable as a
corporation or be classified as other than a grantor trust for United States
federal income tax purposes at any time that any Trust Securities are
outstanding, or to ensure that the Junior Subordinated Debentures are treated
as indebtedness of the Corporation for United States federal income tax
purposes or to ensure that the related Issuer will not be required to register
as an "investment company" under the Investment Company Act, provided,
however, that in the case of either clause (i) or (ii) such action shall not
adversely affect in any material respect the interests of any holder and any
amendments of such Trust Agreement will become effective when notice of such
amendment is given to the holders of Trust Securities. Each Trust Agreement
may be amended by the holders of a majority of the Common Securities and the
Property Trustee with (i) the consent of holders representing not less than a
majority in aggregate Liquidation Amount of the outstanding Capital Securities
and (ii) receipt by the Issuer
27
Trustees of an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the Issuer Trustees in accordance with such
amendment will not affect the Issuer's not being taxable as a corporation for
United States federal income tax purposes or the Issuer's exemption from
status as an "investment company" under the Investment Company Act, except
that without the consent of each holder of Trust Securities, such Trust
Agreement may not be amended to (a) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount
of any Distribution required to be made in respect of the Trust Securities as
of a specified date or (b) restrict the right of a holder of Trust Securities
to institute suit for the enforcement of any such payment on or after such
date.
So long as any Corresponding Junior Subordinated Debentures are held by the
Property Trustee, the Property Trustee shall not (i) direct the time, method
and place of conducting any proceeding for any remedy available to the
Debenture Trustee, or executing any trust or power conferred on the Property
Trustee with respect to the Corresponding Junior Subordinated Debentures, (ii)
waive any past default that is waivable under the Indenture, (iii) exercise
any right to rescind or annul a declaration that the principal of all the
Corresponding Junior Subordinated Debentures shall be due and payable or (iv)
consent to any amendment, modification or termination of the Indenture or the
Corresponding Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders
of a majority in aggregate Liquidation Amount of all outstanding Capital
Securities, provided, however, that where a consent under the Indenture would
require the consent of each holder of Corresponding Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of the corresponding Capital
Securities. The Property Trustee shall not revoke any action previously
authorized or approved by a vote of the holders of the Capital Securities
except by subsequent vote of the holders of the Capital Securities. The
Property Trustee shall notify each holder of Capital Securities of any notice
of default with respect to the Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of the holders of the Capital Securities,
prior to taking any of the foregoing actions, the Property Trustee shall
obtain an opinion of counsel experienced in such matters to the effect that
the Issuer will not be classified as an association taxable as a corporation
for United States federal income tax purposes on account of such action and
such action would not cause the Issuer to be classified as other than a
grantor trust for United States federal income tax purposes and would not
cause the Junior Subordinated Debentures to be treated as other than
indebtedness of the Corporation for United States federal income tax purposes.
Any required approval of holders of Capital Securities may be given at a
meeting of holders of Capital Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
given to each holder of record of Capital Securities in the manner set forth
in each Trust Agreement.
No vote or consent of the holders of Capital Securities will be required for
an Issuer to redeem and cancel its Capital Securities in accordance with the
applicable Trust Agreement.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Corporation, the Issuer Trustees or any
affiliate of the Corporation or any Issuer Trustees, shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
GLOBAL CAPITAL SECURITIES
The Capital Securities of any series may be issued in whole or in part in
the form of one or more Global Capital Securities that will be deposited with,
or on behalf of, DTC and registered in the name of a nominee of DTC. Global
Capital Securities may be issued only in fully registered form and in either
temporary or permanent form. Unless and until it is exchanged in whole or in
part for the individual Capital Securities represented thereby, a Global
Capital Security may not be transferred except as a
28
whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or by DTC or any nominee to a successor depositary or any
nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Capital Securities will be described in the Prospectus Supplement relating to
such series. The Corporation anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Capital Security, and the deposit of such
Global Capital Security with or on behalf of DTC, DTC or its nominee will
credit, on its book-entry registration and transfer system, the respective
aggregate Liquidation Amounts of the individual Capital Securities represented
by such Global Capital Securities to the accounts of Participants. Such
accounts shall initially be designated by the dealers, underwriters or agents
with respect to such Capital Securities or by the Corporation if such Capital
Securities are offered and sold directly by the Corporation. Ownership of
beneficial interests in a Global Capital Security will be limited to
Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Capital Security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (with respect to interests of
Participants) and the records of Participants (with respect to interests of
persons who hold through Participants).
So long as DTC, or its nominee, is the registered owner of such Global
Capital Security, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Capital Securities represented by such Global
Capital Security for all purposes under the Indenture governing such Capital
Securities. Except as provided below, owners of beneficial interests in a
Global Capital Security will not be entitled to have any of the individual
Capital Securities of the series registered in their names, will not receive
or be entitled to receive physical delivery of any such Capital Securities of
such series in definitive form and will not be considered the owners or
holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Capital Securities represented by a Global Capital Security registered in the
name of DTC or its nominee will be made to DTC or its nominee, as the case may
be, as the registered owner of the Global Capital Security representing such
Capital Securities. None of the Corporation, the Property Trustee, any Paying
Agent, or the Securities Registrar for such Capital Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global
Capital Security representing such Capital Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Corporation expects that DTC or its nominee, upon receipt of any payment
of Liquidation Amount, premium or Distributions, including any payment of
Redemption Price, in respect of a Global Capital Security representing Capital
Securities of a series immediately will credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interest in
the aggregate Liquidation Amount of such Global Capital Security for such
Capital Securities as shown on the records of DTC or its nominee. The
Corporation also expects that payments by Participants, including Euroclear
and Cedel Bank, to owners of beneficial interests in such Global Capital
Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if DTC
is at any time unwilling, unable or ineligible to continue as depositary and a
successor depositary is not appointed by the Issuer within 90 days, or if
there shall have occurred and be continuing an event of default under the
Indenture with respect to the Junior Subordinated Debentures of such series,
the Issuer will issue individual Capital Securities of such series in exchange
for the Global Capital Security representing such series of Capital
Securities. In addition, the Issuer may at any time, in its sole discretion,
29
determine not to have any Capital Securities of such series represented by one
or more Global Capital Securities and, in such event, will issue certificated
Capital Securities of such series in exchange for the Global Capital Security
or Securities representing such series of Capital Securities. Further, if the
Issuer so specifies with respect to the Capital Securities of a series, an
owner of a beneficial interest in a Global Capital Security representing
Capital Securities of such series may, on terms acceptable to the Issuer, the
Property Trustee and DTC, receive individual Capital Securities of such series
in exchange for such beneficial interests, subject to any limitations
described in the Prospectus Supplement relating to such Capital Securities. In
any such instance, an owner of a beneficial interest in a Global Capital
Security will be entitled to physical delivery of individual Capital
Securities of the series equal in principal amount to such beneficial interest
and to have such Capital Securities registered in its name. Individual Capital
Securities of such series so issued will be issued in denominations, unless
otherwise specified by the Issuer, and integral multiples thereof that are the
same as the denominations and multiples in which the Capital Securities are
issued.
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital Securities shall be made to DTC, which
shall credit the relevant accounts at DTC on the applicable Distribution Dates
or, if any Issuer's Capital Securities are not held by DTC, such payments
shall be made by check mailed to the address of the holder entitled thereto as
such address shall appear on the Register. Unless otherwise specified in the
applicable Prospectus Supplement, the paying agent (the "Paying Agent") shall
initially be the Property Trustee and any co-paying agent chosen by the
Property Trustee and acceptable to the Administrators. The Paying Agent shall
be permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee and the Corporation. In the event that the Property Trustee
shall no longer be the Paying Agent, the Property Trustee shall appoint a
successor (which shall be a bank or trust company acceptable to the
Administrators) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Capital
Securities.
Registration of transfers of Capital Securities will be effected without
charge by or on behalf of each Issuer, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Issuer will not be required to register or cause to be
registered the transfer of their Capital Securities after such Capital
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically
set forth in each Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision,
the Property Trustee is under no obligation to exercise any of the powers
vested in it by the applicable Trust Agreement at the request of any holder of
Capital Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the applicable Trust Agreement or is unsure of the application of any
provision of the applicable Trust Agreement, and the matter is not one on
which holders of Trust Securities are entitled under such Trust Agreement to
vote, then the Property Trustee shall take such action as it deems advisable
and in the best interests of the holders of the Trust Securities and will have
no liability except for its own bad faith, negligence or willful misconduct.
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MISCELLANEOUS
The Administrators and the Property Trustee are authorized and directed to
conduct the affairs of and to operate the Issuers in such a way that no Issuer
will be deemed to be an "investment company" required to be registered under
the Investment Company Act or classified as an association taxable as a
corporation or as other than a grantor trust for United States federal income
tax purposes and so that the Corresponding Junior Subordinated Debentures will
be treated as indebtedness of the Corporation for United States federal income
tax purposes. In this connection, the Property Trustee and the holders of
Common Securities are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of each Issuer or each Trust
Agreement, that the Property Trustee and the holders of Common Securities
determine in their discretion to be necessary or desirable for such purposes,
as long as such action does not materially adversely affect the interests of
the holders of the related Capital Securities.
Holders of the Capital Securities have no preemptive or similar rights.
The Issuer may not borrow money or issue debt or mortgage or pledge any of
its assets.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Capital Securities and
the Junior Subordinated Debentures. The Capital Securities and the Junior
Subordinated Debentures will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee) for credit to the
respective accounts of the purchasers at DTC, Euroclear and Cedel Bank. One or
more fully-registered global certificates will be issued for the Capital
Securities and the Junior Subordinated Debentures of each Issuer, representing
in the aggregate the total number of such Issuer's Capital Securities or
aggregate principal balance of the Junior Subordinated Debentures,
respectively, and will be deposited with DTC.
The Corporation and each Issuer understand that: DTC is a limited purpose
trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC holds securities that
its Participants deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants" include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain custodial relationships with
Direct Participants, either directly or indirectly ("Indirect Participants").
The rules applicable to DTC and its Participants are on file with the
Commission.
Purchases of Capital Securities or Junior Subordinated Debentures within the
DTC system must be made by or through Direct Participants, which will receive
a credit for the Capital Securities or Junior Subordinated Debentures on DTC's
records. The ownership interest of each actual purchaser of each Capital
Security and each Junior Subordinated Debenture ("Beneficial Owner") is in
turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the
Beneficial Owners purchased Capital Securities or Junior Subordinated
Debentures. Transfers of ownership interests in the Capital
31
Securities or Junior Subordinated Debentures are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Capital Securities or Junior Subordinated Debentures, except in
the event that use of the book-entry system for the Capital Securities of such
Issuer or Junior Subordinated Debentures is discontinued.
Transfers between Participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. The laws
of some states require that certain persons take physical delivery of
securities in definitive form. Consequently, the ability to transfer
beneficial interests in a Global Capital Security to such persons may be
limited. Because DTC can only act on behalf of Direct Participants, who in
turn act on behalf of Indirect Participants and certain banks, the ability of
a person having a beneficial interest in a Global Capital Security to pledge
such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interest, may be affected
by the lack of a physical certificate of such interest. Transfers between
Participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules an operating procedures.
Cross-market transfers between DTC participants, on the one hand, and
directly or indirectly through Euroclear or Cedel Bank participants, on the
other, will be effected in DTC in accordance with DTC rules on behalf of
Euroclear or Cedel Bank, as the case may be, by its respective depositary;
however, such cross-market transactions will require delivery of instructions
to Euroclear or Cedel Bank, as the case may be, by the counterparty in such
system in accordance with its rules and procedures and within its established
deadlines (Brussels time). Euroclear or Cedel Bank, 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 a Global Capital Security in
DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC, Cedel Bank participants and
Euroclear participants may not deliver instructions directly to the
depositaries for Cedel Bank or Euroclear.
Because of time zone differences, the securities account of a Euroclear or
Cedel Bank participant purchasing an interest in a Global Capital Security
from a DTC participant will be credited during the securities settlement
processing day (which must be a business day for Euroclear and Cedel Bank)
immediately following the DTC settlement date, and such credit will be
reported to the relevant Euroclear or Cedel Bank participant on such
processing day. Cash received in Euroclear or Cedel Bank as a result of sales
of interests in a Global Capital Security by or through a Euroclear or Cedel
Bank participant to a DTC participant will be received with value on the DTC
settlement date but will be available in the relevant Euroclear or Cedel Bank
cash account only as of the business day following settlement in DTC.
DTC has no knowledge of the actual Beneficial Owners of the Capital
Securities or Junior Subordinated Debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Capital Securities
or Junior Subordinated Debentures are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Capital Securities or Junior Subordinated Debentures. If less than all of
an Issuer's Capital Securities or the Junior
32
Subordinated Debentures are being redeemed, DTC's current practice is to
determine by lot the amount of the interest of each Direct Participant to be
redeemed.
Although voting with respect to the Capital Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Capital
Securities or Junior Subordinated Debentures, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Capital Securities or Junior Subordinated Debentures. Under its
usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
Property Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts such Capital Securities or Junior Subordinated Debentures
are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
The Corporation expects that DTC or its nominee, upon receipt of payments in
respect of each Global Capital Security, will immediately credit Participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of each Global Capital Security as shown on
the records of DTC or its nominee. The Corporation also expects that payments
by Participants to owners of beneficial interests in each Global Capital
Security held through such Participants, including Cedel Bank and Euroclear,
will be governed by standing instructions and customary practices, and, in the
case of Cedel Bank and Euroclear, in accordance with the relevant system's
rules and procedures. Such payments will be the responsibility of such
Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Capital Securities or the Junior Subordinated Debentures
at any time by giving reasonable notice to the Property Trustee and the
Corporation. In the event that a successor securities depositary is not
obtained, definitive Capital Security or Junior Subordinated Debenture
certificates representing such Capital Securities or Junior Subordinated
Debentures are required to be printed and delivered. The Corporation, at its
option, may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary). After a Debenture Event of Default,
the holders of a majority in liquidation preference of Capital Securities or
aggregate principal amount of Junior Subordinated Debentures may determine to
discontinue the system of book-entry transfers through DTC. In any such event,
definitive certificates for such Capital Securities or Junior Subordinated
Debentures will be printed and delivered.
Although DTC, Cedel Bank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of interests in the Global Capital
Securities among participants of DTC, Cedel Bank and Euroclear, they are under
no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the
Issuers will have any responsibility for the performance by DTC, Cedel Bank,
or Euroclear or their respective participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
33
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Corporation concurrently
with the issuance by each Issuer of its Capital Securities for the benefit of
the holders from time to time of such Capital Securities. Bankers Trust
Company will act as indenture trustee ("Guarantee Trustee") under each
Guarantee for the purposes of compliance with the Trust Indenture Act and each
Guarantee will be qualified as an indenture under the Trust Indenture Act.
This summary of certain provisions of the Guarantees, which summarizes the
material terms thereof, does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of each
Guarantee, including the definitions therein of certain terms, and the Trust
Indenture Act, to each of which reference is hereby made. The form of the
Guarantee has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Reference in this summary to Capital Securities
means that Issuer's Capital Securities to which a Guarantee relates. The
Guarantee Trustee will hold each Guarantee for the benefit of the holders of
the related Issuer's Capital Securities.
GENERAL
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
below) to the holders of the Capital Securities, as and when due, regardless
of any defense, right of set-off or counterclaim that such Issuer may have or
assert other than the defense of payment. The following payments with respect
to the Capital Securities, to the extent not paid by or on behalf of the
related Issuer (the "Guarantee Payments"), will be subject to the Guarantee:
(i) any accumulated and unpaid Distributions required to be paid on such
Capital Securities, to the extent that such Issuer has funds on hand available
therefor at such time, (ii) the Redemption Price with respect to any Capital
Securities called for redemption, to the extent that such Issuer has funds on
hand available therefor at such time, or (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of such Issuer (unless the
Corresponding Junior Subordinated Debentures are distributed to holders of
such Capital Securities in exchange therefor), the lesser of (a) the
Liquidation Distribution and (b) the amount of assets of such Issuer remaining
available for distribution to holders of Capital Securities after satisfaction
of liabilities to creditors of such Issuer as required by applicable law. The
Corporation's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Corporation to the holders of
the applicable Capital Securities or by causing the Issuer to pay such amounts
to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Issuer's obligations under the Capital Securities, but will apply
only to the extent that such related Issuer has funds sufficient to make such
payments, and is not a guarantee of collection.
If the Corporation does not make interest payments on the Corresponding
Junior Subordinated Debentures held by the Issuer, the Issuer will not be able
to pay Distributions on the Related Capital Securities and will not have funds
legally available therefor. Each Guarantee will rank subordinate and junior in
right of payment to all Senior Debt of the Corporation. See "--Status of the
Guarantee". Because the Corporation is a holding company, the right of the
Corporation to participate in any distribution of assets of any subsidiary
upon such subsidiary's liquidation or reorganization or otherwise, is subject
to the prior claims of creditors of that subsidiary, except to the extent the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Corporation's obligations under the Guarantees will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and claimants should look only to the assets of
the Corporation for payments thereunder. See "The Corporation". Except as
otherwise provided in the applicable Prospectus Supplement, the Guarantees do
not limit the incurrence or issuance of other secured or unsecured debt of the
Corporation, including Senior Debt, whether under the Indenture, any other
existing indenture or any other indenture that the Corporation may enter into
in the future or otherwise.
34
The Corporation has, through the applicable Guarantee, the applicable Trust
Agreement, the applicable series of Corresponding Junior Subordinated
Debentures, the Indenture and the applicable Expense Agreement, taken
together, fully, irrevocably and unconditionally guaranteed all of the
Issuer's obligations under the Capital Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer's obligations under the Capital
Securities. See "Relationship Among the Capital Securities, the Corresponding
Junior Subordinated Debentures and the Guarantees".
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Corporation
and will rank subordinate and junior in right of payment to all Senior Debt of
the Corporation in the same manner as Junior Subordinated Debentures.
Each Guarantee will rank pari passu with all other Guarantees issued by the
Corporation. Each Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Corporation to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). Each Guarantee will be held for the benefit of the holders of the
related Capital Securities. Each Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Issuer
or upon distribution to the holders of the Capital Securities of the
Corresponding Junior Subordinated Debentures. None of the Guarantees places a
limitation on the amount of additional Senior Debt that may be incurred by the
Corporation. The Corporation expects from time to time to incur additional
indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the material rights of holders of the related Capital Securities (in which
case no vote will be required), no Guarantee may be amended without the prior
approval of the holders of not less than a majority of the aggregate
Liquidation Amount of such outstanding Capital Securities. The manner of
obtaining any such approval will be as set forth under "Description of Capital
Securities--Voting Rights; Amendment of the Trust Agreement". All guarantees
and agreements contained in each Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Corporation and shall inure to
the benefit of the holders of the related Capital Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of the
Corporation to perform any of its payment obligations thereunder or to perform
any non-payment obligations if such non-payment default remains unremedied for
30 days. The holders of not less than a majority in aggregate Liquidation
Amount of the related 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 such Guarantee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under such Guarantee.
Any holder of the Capital Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under such Guarantee
without first instituting a legal proceeding against the Issuer, the Guarantee
Trustee or any other person or entity.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
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INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Corporation in performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by the Guarantee at
the request of any holder of any Capital Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Capital Securities, upon
full payment of the amounts payable upon liquidation of the Issuer or upon
distribution of Corresponding Junior Subordinated Debentures to the holders of
the related Capital Securities in exchange therefor. Each Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of the related Capital Securities must restore payment of any
sums paid under such Capital Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
THE EXPENSE AGREEMENTS
Pursuant to the Expense Agreements entered into by the Corporation under
each Trust Agreement (each, an "Expense Agreement"), the Corporation will
irrevocably and unconditionally guarantee to each Person or entity to whom
each Issuer becomes indebted or liable, the full payment of any costs,
expenses or liabilities of such Issuer, other than obligations of such Issuer
to pay to the holders of any Capital Securities or other similar interests in
such Issuer the amounts due such holders pursuant to the terms of the Capital
Securities or such other similar interests, as the case may be. The Expense
Agreements will be enforceable by third parties.
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RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE CORRESPONDING JUNIOR
SUBORDINATED DEBENTURES, THE EXPENSE AGREEMENTS AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Capital Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Corporation as and to the
extent set forth under "Description of Guarantees". Taken together, the
Corporation's obligations under each series of Corresponding Junior
Subordinated Debentures, the Indenture, the related Trust Agreement, the
related Expense Agreement, and the related Guarantee provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the Related Capital Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under the
Related Capital Securities. If and to the extent that the Corporation does not
make payments on any series of Corresponding Junior Subordinated Debentures,
such Issuer will not pay Distributions or other amounts due on its Related
Capital Securities. The Guarantees do not cover payment of Distributions when
the related Issuer does not have sufficient funds to pay such Distributions.
In such event, the remedy of a holder of a series of Capital Securities is to
institute a legal proceeding directly against the Corporation pursuant to the
terms of the Indenture for enforcement of payment of amounts of such
Distributions to such holder. The obligations of the Corporation under each
Guarantee are subordinate and junior in right of payment to all Senior Debt of
the Corporation.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on each
series of Corresponding Junior Subordinated Debentures, such payments will be
sufficient to cover Distributions and other payments due on the Related
Capital Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to
the sum of the aggregate stated Liquidation Amount of the Related Capital
Securities and the Common Securities; (ii) the interest rate and interest and
other payment dates on each series of Corresponding Junior Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Related Capital Securities; (iii) the Corporation shall pay for
all and any costs, expenses and liabilities of such Issuer except such
Issuer's obligations to holders of its Capital Securities under such Capital
Securities; and (iv) each Trust Agreement provides that the Issuer will not
engage in any activity that is not consistent with the limited purposes of
such Issuer.
Notwithstanding anything to the contrary in the Indenture, the Corporation
has the right to set-off any payment it is otherwise required to make
thereunder with and to the extent the Corporation has theretofore made, or is
concurrently on the date of such payment making, a payment under the related
Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of any Related Capital Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the related
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the related Issuer or any other person or entity.
A default or event of default under any Senior Debt of the Corporation would
not constitute a default or Event of Default under the Indenture. However, in
the event of payment defaults under, or acceleration of, Senior Debt of the
Corporation, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Corresponding Junior Subordinated
Debentures until such Senior Debt has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on any
series of Corresponding Junior Subordinated Debentures would constitute an
Event of Default under the Indenture.
37
LIMITED PURPOSE OF THE ISSUERS
Each Issuer's Capital Securities evidence a beneficial interest in such
Issuer, and each Issuer exists for the sole purpose of issuing its Capital
Securities and Common Securities and investing the proceeds thereof in the
Corresponding Junior Subordinated Debentures and engaging in only those other
activities necessary or incidental thereto. A principal difference between the
rights of a holder of a Capital Security and a holder of a Corresponding
Junior Subordinated Debenture is that a holder of a Corresponding Junior
Subordinated Debenture is entitled to receive from the Corporation the
principal amount of and interest accrued on Corresponding Junior Subordinated
Debentures held, while a holder of Capital Securities is entitled to receive
Distributions from the Issuer (or from the Corporation under the Guarantee) if
and to the extent such Issuer has funds available for the payment of such
Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Issuer involving the liquidation of the Corresponding Junior Subordinated
Debentures, the holders of the Related Capital Securities will be entitled to
receive, out of the assets held by such Issuer, the Liquidation Distribution
in cash. See "Description of Capital Securities--Liquidation Distribution Upon
Termination". Upon any voluntary or involuntary liquidation or bankruptcy of
the Corporation, the Property Trustee, as registered holder of the
Corresponding Junior Subordinated Debentures, would be a subordinated creditor
of the Corporation, subordinated in right of payment to all Senior Debt as set
forth in the Indenture, but entitled to receive payment in full of principal
and interest, before any stockholders of the Corporation receive payments or
distributions. Since the Corporation is the guarantor under the Guarantee and
has agreed to pay for all costs, expenses and liabilities of each Issuer
(other than the Issuer's obligations to the holders of its Capital
Securities), the positions of a holder of such Capital Securities and a holder
of such Corresponding Junior Subordinated Debentures relative to other
creditors and to stockholders of the Corporation in the event of liquidation
or bankruptcy of the Corporation are expected to be substantially the same.
PLAN OF DISTRIBUTION
The Junior Subordinated Debentures or the Capital Securities may be sold in
a public offering to or through underwriters or dealers designated from time
to time. The Corporation and each Issuer may sell its Junior Subordinated
Debentures or Capital Securities as soon as practicable after effectiveness of
the Registration Statement of which this Prospectus forms a part. The names of
any underwriters or dealers involved in the sale of the Junior Subordinated
Debentures or Capital Securities in respect of which this Prospectus is
delivered, the amount or number of Junior Subordinated Debentures and Capital
Securities to be purchased by any such underwriters and any applicable
commissions or discounts will be set forth in the applicable Prospectus
Supplement.
Underwriters may offer and sell Junior Subordinated Debentures or Capital
Securities at a fixed price or prices, which may be changed, or from time to
time at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. In connection with the
sale of Capital Securities, underwriters may be deemed to have received
compensation from the Corporation and/or the applicable Issuer in the form of
underwriting discounts or commissions and may also receive commissions.
Underwriters may sell Junior Subordinated Debentures or Capital Securities to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters.
Any underwriting compensation paid by the Corporation and/or the applicable
Issuer to underwriters in connection with the offering of Junior Subordinated
Debentures or Capital Securities, and any discounts, concessions or
commissions allowed by such underwriters to participating dealers, will be
described in an accompanying Prospectus Supplement. Underwriters and dealers
participating
38
in the distribution of Junior Subordinated Debentures or Capital Securities
may be deemed to be underwriters, and any discounts and commissions received
by them and any profit realized by them on resale of such Junior Subordinated
Debentures or Capital Securities may be deemed to be underwriting discounts
and commissions, under the Securities Act.
Underwriters and dealers may be entitled, under agreement with the
Corporation and the applicable Issuer to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act, and to reimbursement by the Corporation for certain expenses.
In connection with the offering of the Capital Securities of any Issuer,
such Issuer may grant to the underwriters an option to purchase additional
Capital Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set
forth in the accompanying Prospectus Supplement. If such Issuer grants any
over-allotment option, the terms of such over-allotment option will be set
forth in the Prospectus Supplement for such Capital Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, the Corporation and/or the applicable Issuer and/or any of their
affiliates in the ordinary course of business.
The Junior Subordinated Debentures and the Capital Securities will be new
issues of securities and will have no established trading market. Any
underwriters to whom Junior Subordinated Debentures or Capital Securities are
sold for public offering and sale may make a market in such Junior
Subordinated Debentures and Capital Securities, but such underwriters will not
be obligated to do so and may discontinue any market making at any time
without notice. Such Junior Subordinated Debentures or Capital Securities may
or may not be listed on a national securities exchange or the Nasdaq National
Market. No assurance can be given as to the liquidity of or the existence of
trading markets for any Junior Subordinated Debentures or Capital Securities.
VALIDITY OF SECURITIES
Unless otherwise indicated in the Prospectus Supplement, certain matters of
Delaware law relating to the validity of the Capital Securities, the
enforceability of the Trust Agreements and the formation of the Issuers will
be passed upon by Richards, Layton & Finger, P.A., special Delaware counsel to
the Corporation and the Issuer. Unless otherwise indicated in the Prospectus
Supplement, the validity of the Guarantees and the Junior Subordinated
Debentures will be passed upon for the Corporation by Louise M. Parent,
Executive Vice President and General Counsel of the Corporation, and for the
underwriters by Sullivan & Cromwell. Certain matters relating to United States
Federal income tax considerations will be passed upon for the Corporation by
Cleary, Gottlieb, Steen & Hamilton, as special tax counsel for the
Corporation.
EXPERTS
The consolidated financial statements of the Corporation as of December 31,
1997 and December 31, 1996, and for each of the years ended December 31, 1997,
1996 and 1995 appearing in its Annual Report on Form 10-K dated March 30,
1998, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their respective reports thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firms as experts in accounting and auditing.
With respect to the unaudited consolidated interim financial information for
the three month periods ended March 31, 1998 and 1997, incorporated by
reference in the Prospectus and Registration Statement, Ernst & Young LLP,
independent auditors, have reported that they have applied limited
39
procedures in accordance with professional standards for a review of such
information. However, their separate report, included in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, and
incorporated herein by reference, states that they did not audit and they do
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on their report on such information should be restricted
considering the limited nature of the review procedures applied. The
independent auditors are not subject to the liability provisions of Section 11
of the Securities Act of 1933 for their report on the unaudited interim
financial information because that report is not a "report" or a "part" of the
Registration Statement prepared or certified by the auditors within the
meaning of Sections 7 and 11 of the Securities Act of 1933.
40
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY AMERICAN EXPRESS COMPANY CAPITAL
TRUST I, AMERICAN EXPRESS COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLE-
MENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICIATION OF
AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AMERICAN EXPRESS
COMPANY CAPITAL TRUST I OR AMERICAN EXPRESS COMPANY SINCE SUCH DATE.
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$
AMERICAN EXPRESS COMPANY CAPITAL TRUST I
% CAPITAL SECURITIES, SERIES I
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
AMERICAN EXPRESS COMPANY
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an estimate of the expenses which will be incurred in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts and commissions:
To be borne by the Corporation:
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VI of the Corporation's By-laws, as amended, provides as follows:
Section 6.1--The corporation shall, to the fullest extent permitted by
applicable law as the same exists or may hereafter be in effect, indemnify any
person who is or was or has agreed to become a director or officer of the
corporation and who is or was made or threatened to be made a party to, and
may, in its discretion, indemnify, any person who is or was or has agreed to
become a director or officer and is otherwise involved in, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, legislative or investigative, including an action by or in the
right of the corporation to procure a judgment in its favor and an action by
or in the right of any other corporation of any type of kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which such person is serving or has served or has agreed to
serve in any capacity at the request of the corporation, by reason of the fact
that he is or was serving or has agreed to serve such other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
in any capacity, against judgments, fines, amounts paid or to be paid in
settlement, penalties, costs, charges and expenses, including attorneys' fees,
incurred in connection with such action or proceeding or any appeal thereof;
provided, however, that no indemnification shall be provided to any such
person if a judgment or other final adjudication adverse to the director or
officer establishes (i) that his acts were committed in bad faith or were the
result of active and deliberate dishonesty and, in either case, were material
to the cause of action so adjudicated, or (ii) he personally gained in fact a
financial profit or other advantage to which he was not legally entitled. The
benefits of this Section 6.1 shall extend to the heirs, executors,
administrators and legal representatives of any person entitled to
indemnification under this Section.
Section 6.2--The Board in its discretion may authorize the corporation to
indemnify any person, other than a director or officer, for expenses incurred
or other amounts paid in any civil or criminal action, suit or proceeding, to
which such person was, or was threatened to be made a party by reason of the
fact that he, his testator or intestate is or was an employee of the
corporation.
II-1
Section 6.3--The corporation may indemnify any person to whom the
corporation is permitted by applicable law or these by-laws to provide
indemnification or the advancement of expenses, whether pursuant to rights
granted pursuant to, or provided by, the New York Business Corporation Law or
any other law or these by-laws or other rights created by (i) a resolution of
shareholders, (ii) a resolution of directors, or (iii) an agreement providing
for such indemnification, it being expressly intended that these by-laws
authorize the creation of other rights in any such manner. The right to be
indemnified and to the reimbursement or advancement of expenses incurred in
defending a proceeding in advance of its final disposition authorized by the
Section 6.3, shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the certificate of
incorporation, by-laws, agreement, vote of shareholders or disinterested
directors or otherwise.
Section 6.4--The right to indemnification conferred by Section 6.1, and any
indemnification extended under Section 6.3, (i) is a contract right pursuant
to which the person entitled thereto may bring suit as if the provisions
thereof were set forth in a separate written contract between the corporation
and such person, (ii) is intended to be retroactive to events occurring prior
to the adoption of this Article VI, to the fullest extent permitted by
applicable law, and (iii) shall continue to exist after the rescission or
restrictive modification thereof with respect to events occurring prior
thereto.
With certain limitations, a director or officer of a corporation organized
under the New York Business Corporation Law is entitled to indemnification by
the corporation against reasonable expenses, including attorneys fees,
incurred by him in connection with the defense of a civil or criminal
proceeding to which he has been made, or has threatened to be made, a party by
reason of the fact that he was such director or officer. In certain
circumstances, indemnity is provided against judgments, fines and amounts paid
in settlement. Specific court approval is required in some cases. The
foregoing is subject to the detailed provisions of the New York Business
Corporation Law.
In addition, the Corporation has purchased insurance policies which provide
coverage for its directors and officers in certain situations where the
Corporation cannot directly indemnify such directors or officers.
For the undertaking with respect to indemnification, see Item 17 below.
Reference is made to the Underwriting Agreement, which is filed as Exhibit
1.1 to this Registration Statement.
Under the Trust Agreement, the Corporation will agree to indemnify each of
the Trustees of the Issuers or any predecessor Trustee for the Issuers, and to
hold the Trustees harmless against, any loss, damage, claims, liability or
expense incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of the Trust Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties under the Trust Agreement.
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference
herein as part of this Registration Statement:
II-2
II-3
ITEM 17. UNDERTAKING
The undersigned hereby undertake:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent post-
effective amendment thereto) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in post-effective amendment by those
paragraphs is contained in periodic reports filed by a registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) that, for the purpose 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.
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) to provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
Each of the undersigned registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of a
registrant's Annual Report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of
each registrant pursuant to the provisions described in Item 15 above, or
otherwise, each registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by each registrant of expenses incurred or paid by a director, officer
or controlling person of each registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, each
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
II-4
The undersigned hereby undertake that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CORPORATION
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK ON THE 1ST DAY OF JUNE,
1998.
American Express Company
/s/ Stephen P. Norman
By: _________________________________
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
NAME TITLE
* Chairman, Chief Executive Officer
------------------------------------- and Director
HARVEY GOLUB
* President, Chief Operating Officer
------------------------------------- and Director
KENNETH I. CHENAULT
* Vice Chairman and Chief Financial
------------------------------------- Officer
RICHARD KARL GOELTZ
* Senior Vice President and
------------------------------------- Comptroller
DANIEL T. HENRY
* Director
-------------------------------------
DANIEL F. AKERSON
* Director
-------------------------------------
ANNE L. ARMSTRONG
Director
-------------------------------------
EDWIN L. ARTZT
II-6
NAME TITLE
* Director
-------------------------------------
WILLIAM G. BOWEN
* Director
-------------------------------------
CHARLES W. DUNCAN, JR.
* Director
-------------------------------------
BEVERLY SILLS GREENOUGH
* Director
-------------------------------------
F. ROSS JOHNSON
* Director
-------------------------------------
VERNON E. JORDAN, JR.
* Director
-------------------------------------
JAN LESCHLY
* Director
-------------------------------------
DREW LEWIS
* Director
-------------------------------------
ALDO PAPONE
* Director
-------------------------------------
FRANK P. POPOFF
/s/ Stephen P. Norman
By: _________________________________
STEPHEN P. NORMAN
(AS ATTORNEY-IN-FACT)
II-7
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AMERICAN EXPRESS
COMPANY CAPITAL TRUST I CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE
THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK ON THE 1ST DAY OF JUNE, 1998.
American Express Company Capital
Trust I
By American Express Company, as
Depositor
/s/ Kim Rosenberg
By: _________________________________
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AMERICAN EXPRESS
COMPANY CAPITAL TRUST II CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE
THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK ON THE 1ST DAY OF JUNE, 1998.
American Express Company Capital
Trust II
By American Express Company, as
Depositor
/s/ Kim Rosenberg
By: _________________________________
II-8
EXHIBIT INDEX