Filed pursuant to Rule 424(b)(5)
Reg. No. 333-33814
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 12, 2000
$500,000,000
[LOGO] M&I(R)
Marshall & Ilsley Corporation
MiNotes/SM /
With Maturities of 9 Months or More from Date of Issue
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We plan to offer and sell, from time to time, notes with various terms,
which may include the following:
. maturity of 9 months or more from the date of issue,
. interest at a fixed rate,
. interest payment dates at monthly, quarterly, semi-annual or annual
intervals,
. book-entry form (through The Depository Trust Company),
. redemption and/or repayment provisions, if applicable, whether
mandatory, at our option or the option of the holder, and
. minimum denominations of $1,000 or integral multiples of $1,000.
We will specify the final terms of each note, which may be different from
the terms described in this prospectus supplement, in the applicable pricing
supplement. You should read this prospectus supplement, the accompanying
prospectus and the pricing supplement carefully before you invest.
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We may sell notes to the agents who may purchase the notes as principal for
resale at varying or fixed offering prices or through the agents as agent using
their reasonable best efforts on our behalf. If we sell all of the notes, we
expect to receive aggregate proceeds of between $498,000,000 and $487,500,000,
after paying the agents' discounts and commissions of between $2,000,000 and
$12,500,000. The agents' discounts and commissions may exceed these amounts
with respect to sales of notes with stated maturities in excess of 30 years. We
may also sell notes directly on our own behalf without the assistance of the
agents.
You must pay for the notes by delivering the purchase price to an agent,
unless you make other payment arrangements.
The agents have advised us that from time to time they may purchase and sell
notes in the secondary market, but they are not obligated to make a market in
the notes and may suspend or completely stop that activity at any time. We do
not intend to list the notes on any stock exchange or have the notes quoted on
NASDAQ.
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Our notes are unsecured and are not savings accounts, deposits or other
obligations of a bank. Our notes are not guaranteed by M&I Marshall & Ilsley
Bank or any other bank, are not insured by the Federal Deposit Insurance
Corporation or any other governmental agency and involve risks, including the
possible loss of all or a portion of their principal. Potential purchasers of
the notes should also consider the information set forth in "Risk Factors" on
page S-5.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
Purchasing Agent and Lead Manager
A.G. Edwards & Sons, Inc.
Agents
Robert W. Baird & Co.
Prudential Securities
UBS PaineWebber Inc.
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May 3, 2002
SUMMARY OF PROSPECTUS SUPPLEMENT
You should read the more detailed information appearing elsewhere in this
prospectus supplement, the accompanying prospectus and the applicable pricing
supplement. Unless the context requires otherwise, references in the prospectus
supplement to "M&I," "we," "us" and "our" refer to Marshall & Ilsley
Corporation.
Issuer...................... Marshall & Ilsley Corporation
Title....................... MiNotes/SM/, which we refer to as the notes or
our notes.
Amount...................... We may issue up to $500,000,000 aggregate
principal amount of our notes in connection with
this prospectus supplement. There are no
limitations on our ability to issue additional
indebtedness in the form of MiNotes/SM/ or other
indebtedness.
Denomination................ We will issue and sell our notes in denominations
of $1,000 and integral multiples of $1,000.
Status...................... The notes will be our direct unsecured
obligations. Each pricing supplement will state
whether the notes are senior or subordinated
debt. Senior notes rank equally with our other
unsecured senior debt and subordinated notes rank
equally with our other unsecured subordinated
debt and rank junior in right of payment to our
senior debt.
Although we are a bank holding company, the notes
are not savings accounts or deposits in our
banking subsidiaries and are not insured or
guaranteed by the FDIC or any other government
agency.
Holders of Subordinated
Notes Have Limited Rights. Payment of principal of our subordinated notes
may not be accelerated if there is a default in
the payment of principal or any premium or
interest or the performance of any of our other
subordinated indenture covenants.
Maturities.................. The notes will mature nine months or more from
the date of issue, as specified in the applicable
pricing supplement.
Interest.................... . Each note will bear interest from the issue
date at a fixed rate.
. We will pay interest on each note on either
monthly, quarterly, semi-annual or annual
interest payment dates and at maturity.
Interest will also be paid on the date of
redemption or repayment if a note is redeemed
or repurchased prior to maturity.
. Unless otherwise specified in the applicable
pricing supplement, interest on the notes will
be computed on the basis of a 360-day year of
twelve 30-day months.
Principal................... The principal amount of the notes will be payable
on the maturity date of such notes at the
corporate trust office of the trustee or at any
other place we may designate.
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Redemption and Repayment.... Unless otherwise provided in the applicable
pricing supplement:
. the notes may not be redeemed by us or repaid
at the option of the holder prior to maturity;
and
. the notes are unsecured and will not be subject
to any sinking fund.
Survivor's Option........... Some notes may contain a provision permitting the
optional redemption of those notes prior to
maturity upon the death of the holder provided
the notes have been outstanding for at least 12
months. Your notes may not be redeemed unless
that right is specified in the pricing supplement
for your notes. We call this right the
"survivor's option." The right to exercise the
survivor's option is subject to limits set by us
on the permitted dollar amount of total exercises
by holders, individually and in the aggregate, of
notes in any calendar year. Additional details of
this right are described under "Description of
Notes --Repayment Upon Death."
Form of Notes............... The notes will be represented by global
securities deposited with or on behalf of the
depositary, The Depository Trust Company, and
registered in the name of the depositary's
nominee. The notes will be issued in book-entry
form only, and notes represented by global
securities will be exchangeable for certificated
notes only in limited circumstances. See
"Description of Notes -- Book-Entry System."
Trustee..................... The trustee for the senior and subordinated notes
is JPMorgan Chase Bank.
Purchasing Agent and Lead
Manager................... A.G. Edwards & Sons, Inc.
Other Agents................ Robert W. Baird & Co. Incorporated
Prudential Securities Incorporated
UBS PaineWebber Inc.
We may appoint additional agents that are
reasonably acceptable to the purchasing agent.
Selling Group............... The agents and dealers comprising the selling
group are broker-dealers and securities firms.
The agents, including the purchasing agent, have
entered into a selling agent agreement with us
dated May 3, 2002. Dealers who are members of the
selling group have executed a selected dealer
agreement with the purchasing agent. The agents
and dealers have agreed to market and sell the
notes in accordance with the terms of those
respective agreements and all other applicable
laws and regulations.
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ABOUT THIS PROSPECTUS SUPPLEMENT AND PRICING SUPPLEMENTS
This prospectus supplement sets forth certain terms of the notes that we may
offer and supplements the prospectus which is part of a registration statement
(Registration No. 333-33814) filed with the Securities and Exchange Commission,
or the SEC. The prospectus contained in that registration statement is attached
to the back of this prospectus supplement. This prospectus supplement
supersedes the accompanying prospectus to the extent it contains information
that is different from the information in that prospectus.
The SEC allows us to "incorporate by reference" information we file with the
registration statement, which means that:
. we can disclose important information to you by referring to those
documents;
. the information incorporated by reference is considered to be part of
this prospectus supplement and the accompanying prospectus; and
. information that we file later with the SEC will automatically update
and supercede the information in this prospectus supplement, the
prospectus and any information that was previously incorporated in this
supplement and the prospectus.
We incorporate by reference our annual report on Form 10-K for the year
ended December 31, 2001. We also incorporate by reference each of the following
future filings that we will make with the SEC until we terminate our offering
of the notes:
. annual, quarterly and special reports filed under Sections 13(a), 13(c)
and 15(d) of the Securities Exchange Act of 1934, as amended, which we
refer to as the Exchange Act; and
. proxy materials filed under Section 14 of the Exchange Act in connection
with subsequent shareholders' meetings.
We file annual, quarterly and special reports and proxy statements and other
information with the SEC. Our SEC filings are available to the public on the
SEC website at http://www.sec.gov or on our website at http://www.micorp.com.
Information contained on our website shall not be deemed to be a part of this
prospectus supplement and the accompanying prospectus. You may also read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please
call the SEC at (800) SEC-0330 for further information on the operation of the
public reference rooms. You may also inspect our SEC filings at the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
As a recipient of this prospectus supplement, you may request a copy of any
document we incorporate by reference, except exhibits to the documents (unless
the exhibits are specifically incorporated by reference), at no cost, by
writing to or calling us at:
Secretary
Marshall & Ilsley Corporation
770 North Water Street
Milwaukee, Wisconsin 53202
(414) 765-7801
Each time we offer notes, we will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the notes we are offering and the terms of the offering. The
pricing supplement will supersede this prospectus supplement and the
accompanying prospectus to the extent it contains information that is different
from the information contained in this prospectus supplement and the
accompanying prospectus.
It is important for you to read and consider all information contained in
this prospectus supplement and the accompanying prospectus and pricing
supplement, including the information in documents incorporated by reference,
in making your investment decision.
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You should rely only on the information provided in this prospectus
supplement, the accompanying prospectus and the pricing supplement, including
the information incorporated by reference. Neither we, nor any dealers or
agents, have authorized anyone to provide you with different information. We
are not offering the notes in any state where the offer is not permitted. You
should not assume that the information in this prospectus supplement, the
accompanying prospectus or any pricing supplement is accurate at any date other
than the date indicated on their cover pages.
RISK FACTORS
Your investment in the notes will involve a number of risks. This prospectus
supplement and the accompanying prospectus do not describe all of these risks.
In consultation with your own financial and legal advisors, you should
carefully consider, among other matters, the following discussion of risks
before deciding whether an investment in the notes is suitable for you.
Redemption--If your notes are redeemable, we may choose to redeem them when
prevailing interest rates are relatively low.
If your notes are redeemable, we may choose to redeem your notes from time
to time. Prevailing interest rates at the time we redeem your notes would
likely be lower than the rate borne by the notes as of their original issue
date. In the event that prevailing interest rates are relatively low when we
elect to redeem notes, you may not be able to reinvest the redemption proceeds
in a comparable security at an effective interest rate as high as the interest
rate on the notes being redeemed. Our redemption right also may adversely
impact your ability to sell your notes as the redemption date approaches.
Uncertain Trading Market--We cannot assure you that a trading market for your
notes will ever develop or be maintained.
We cannot assure you that a trading market for your notes will ever develop
or be maintained. Many factors independent of our creditworthiness affect the
trading market and market value of your notes. These factors include, among
others:
. the method of calculating the principal and interest for the notes;
. the time remaining to the maturity of the notes;
. the outstanding amount of the notes;
. market rates of interest higher than the rates borne by the notes;
. the redemption or repayment features of the notes; and
. the level, direction and volatility of interest rates generally.
There may be a limited number of buyers when you decide to sell your notes,
which may affect the price you receive for your notes or your ability to sell
your notes at all.
Subordinated notes have limited acceleration rights.
The holders of senior notes may declare those notes in default and
accelerate the due date of those notes if an event of default shall occur and
be continuing. Acceleration of the senior notes may adversely impact the
ability of M&I to pay obligations on subordinated notes.
Holders of subordinated notes do not have the right to declare those notes
in default and may accelerate payment of indebtedness only upon our bankruptcy.
MARSHALL & ILSLEY CORPORATION
We are a bank holding company. Our principal assets are the stock of our
bank and nonbank subsidiaries. Our subsidiaries include four commercial banks,
one federal savings bank and a number of companies engaged in businesses
closely-related or incidental to banking. Our bank subsidiaries provide a
full-range of banking services to individuals, businesses and governments
throughout Wisconsin, and in the Phoenix and Tucson, Arizona metropolitan
areas, Las Vegas, Nevada, Naples, Florida and the Minneapolis/St. Paul,
Minnesota metropolitan
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area. These subsidiaries offer retail, institutional, international, business
and correspondent banking, investment and trust services through the operation
of 215 offices in Wisconsin, 25 offices in Arizona, 12 offices in Minnesota,
one office in Florida and one office in Nevada. Our nonbank subsidiary
Metavante Corporation is a major supplier of financial and data processing
services and software to banking, financial and related organizations.
As of December 31, 2001, we had consolidated total assets of approximately
$27.3 billion and consolidated total deposits of approximately $16.5 billion,
making us the largest bank holding company headquartered in Wisconsin. Our
principal executive offices are located at 770 North Water Street, Milwaukee,
Wisconsin 53202. Our telephone number is (414) 765-7801.
RATIO OF EARNINGS TO FIXED CHARGES
Our consolidated ratio of earnings to fixed charges for each of the years in
the five year period ended December 31, 2001 and for the three months ended
March 31, 2002 are as follows:
Year Ended December 31,
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2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Excluding interest on deposits
2.56 2.46 3.38 3.25 3.21
Including interest on deposits
1.56 1.43 1.65 1.60 1.61
Fixed charges, excluding interest on deposits, consist of interest expense
and one-third of rental expense for all operating leases (the amount deemed
representative of the interest factor). Fixed charges, including interest on
deposits, consist of interest expense, one-third of rental expense and interest
on deposits.
DESCRIPTION OF NOTES
The senior notes will be issued under an indenture for senior securities
dated as of November 15, 1985, as supplemented by the First Supplemental
Indenture dated as of May 31, 1990, the Second Supplemental Indenture dated as
of July 15, 1993, and as further supplemented from time to time, which we refer
to as the senior indenture. The subordinated notes will be issued under an
indenture for subordinated securities dated as of July 15, 1993, and as further
supplemented from time to time, which we refer to as the subordinated
indenture. We refer to the senior indenture and subordinated indenture together
as the indentures. JPMorgan Chase Bank is currently the trustee for both
indentures. JPMorgan Chase Bank also serves as authenticating, issuing and
paying agent.
The notes we are offering by this prospectus supplement constitute a series
of debt securities for purposes of the indentures. The senior notes will rank
equally in all respects with all debt securities issued under the senior
indenture. The subordinated notes will rank equally in all respects with all
debt securities issued under the subordinated indenture and junior to all debt
securities issued under the senior indenture. For a further description of the
indentures and the rights of the holders of debt securities under the
indentures, including the notes, see "Description of Debt Securities" in the
accompanying prospectus.
The following description of the terms and conditions of the notes
supplements, and to the extent inconsistent with replaces, the description of
the general terms of the debt securities described in the accompanying
prospectus. The terms and conditions described in this section will apply to
each note unless the applicable pricing supplement states otherwise. These
summaries do not purport to be complete and are qualified in their entirety by
reference to the indenture, including the definition of certain terms.
General
The notes will be unsecured obligations of M&I. The notes will either be
senior notes, ranking equally with all of our other unsecured senior debt, or
subordinated notes, ranking equally with all of our other unsecured
subordinated debt and junior in right of payment to all of
S-6
our senior debt. We will issue the notes only in the form of one or more global
securities registered in the name of a nominee of The Depository Trust Company,
or DTC, as depositary, except as specified in "Book-Entry System." DTC will
hold the global securities through its nominee, Cede & Co., and DTC (through
Cede) will be considered the holder of the notes. When you buy a note, you will
be the beneficial owner of an interest in a global security held for you
through your broker as a direct or indirect participant in DTC. When we refer
in this prospectus supplement to a "beneficial owner," we are referring to you.
For more information on global securities, DTC and how your ownership interest
in the notes you purchase is reflected, see "--Book-Entry System."
We may offer from time to time up to $500,000,000 aggregate principal amount
of notes on terms determined at the time of sale. The minimum denomination of
the notes will be $1,000 and integral multiples of $1,000. The notes will be
offered on a continuous basis and the notes will mature nine months or more
from the date of issue, as recommended by the purchasing agent and agreed to by
us.
The notes may be issued as original issue discount notes. An original issue
discount note is a note that is issued at more than a minimal discount from the
principal amount payable at maturity. Upon redemption, repayment or
acceleration of the maturity of an original issue discount note, normally an
amount less than its principal amount will be payable. For additional
information regarding payments upon acceleration of the maturity of an original
issue discount note and the United States federal income tax consequences of
original issue discount notes, see "--Payment of Principal and Interest" and
"Certain United States Federal Income Tax Consequences--United States
Holders--Original Issue Discount." Original issue discount notes will be
treated as original issue discount securities for purposes of the indentures.
The notes may be registered for transfer or exchange at the principal office
of the Corporate Trust Department of JPMorgan Chase Bank, the trustee under the
indenture, in The City of New York. The transfer or exchange of global
securities will be effected as specified in "--Book-Entry System."
The indentures do not limit our ability to incur debt. In addition, the
indentures do not contain any provision that would protect holders of the notes
in the event of a highly leveraged or other transaction that may adversely
affect our creditworthiness.
As used in this prospectus supplement, business day means, with respect to
any note, any day, other than a Saturday or Sunday, that is not a day on which
banks and trust companies are authorized or obligated by law to close in The
City of New York or such other place where the notes are payable.
Payment of Principal and Interest
We will pay principal, premium, if any, and interest on the notes in
immediately available funds to DTC. Beneficial owners will receive payment as
described under "--Book-Entry System."
Unless the applicable pricing supplement states otherwise, if we:
. redeem any original issue discount note as described under "Redemption
and Repurchase,"
. repay any original issue discount note at the option of the holder as
described under "Repayment at Option of Holder" and "Repayment Upon
Death," or
. if the principal of any original issue discount note is declared to be
due and payable immediately as described in the accompanying prospectus
under "Description of Debt Securities--Events of Default,"
the amount of principal due and payable with respect to the original issue
discount note shall be limited to the sum of:
. the aggregate principal amount of such note multiplied by the issue
price, expressed as a percentage of the aggregate principal amount, plus
. the original issue discount accrued from the date of issue to the date
of redemption, repayment or declaration, as applicable.
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This accrual will be calculated using the "interest method," computed in
accordance with generally accepted accounting principles in effect on the date
of redemption, repayment or declaration, as applicable.
Each note will bear interest from and including the date of issue, or in the
case of notes issued upon registration of transfer or exchange from and
including the most recent interest payment date to which interest on such note
has been paid or duly provided for. Interest will be payable at the fixed rate
per year stated in such note and in the applicable pricing supplement until the
principal of such note is paid or made available for payment. Interest will be
payable on each interest payment date and at maturity. Interest will be payable
to the person in whose name a note is registered at the close of business on
the regular record date next preceding each interest payment date; provided,
however, that interest payable at maturity or upon redemption, repayment or
declaration will be payable to the person to whom principal is payable. The
first payment of interest on any note originally issued between a regular
record date and an interest payment date will be made on the interest payment
date following the next succeeding regular record date to the registered owner
of such note on such next succeeding regular record date. If the interest
payment date or the maturity for any note falls on a day that is not a business
day, the payment of principal and interest may be made on the next succeeding
business day, and no interest on such payment shall accrue for the period from
such interest payment date or maturity, as the case may be. Unless the
applicable pricing supplement states otherwise, interest on the notes will be
computed on the basis of a 360-day year of twelve 30-day months.
The interest payment dates for a note will be as follows:
Interest Payments Interest Payment Dates
Monthly........... Fifteenth day of each calendar month, commencing in the
first succeeding calendar month following the month in
which the note is issued.
Quarterly......... Fifteenth day of every third month, commencing in the third
succeeding calendar month following the month in which the
note is issued.
Semi-annual
Fifteenth day of every sixth month, commencing in the sixth
succeeding calendar month following the month in which the
note is issued.
Annual
Fifteenth day of every twelfth month, commencing in the
twelfth succeeding calendar month following the month in
which the note is issued.
The regular record date with respect to any interest payment date will be
the date 15 calendar days prior to such interest payment date, whether or not
such date is a business day. If interest is payable on a day which is not a
business day, payment will be postponed to the next business day and no
additional interest will accrue as a result of such delayed payment.
Redemption and Repurchase
Unless the applicable pricing supplement states otherwise, we may not redeem
the notes prior to maturity. The notes will not be subject to any sinking fund.
If, however, the applicable pricing supplement provides that we may redeem the
notes prior to maturity, it will also specify the redemption dates and prices.
If applicable, notes may be redeemed in whole or in part from time to time upon
not less than 30 nor more than 60 days' notice to DTC as the holder of the
notes on such date or dates specified in the pricing supplement.
We may at any time purchase notes at any price in the open market or
otherwise. Notes we purchase may, at our discretion, be held, resold or
surrendered to the trustee for cancellation.
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Repayment at Option of Holder
Unless the applicable pricing supplement states otherwise, notes will not be
repayable at the option of the holder. If the applicable pricing supplement
provides that the notes will be repayable at the option of the holder, it will
also specify the repayment dates and prices.
In order for a note to be repaid, the trustee must receive, at the principal
office of the Corporate Trust Department of the trustee at least 30 but not
more than 60 days' notice of the holder's exercise of its repayment option.
Once this notice is delivered, the holder may not revoke its exercise of the
repayment option. A holder may exercise the repayment option for less than the
entire principal amount of the note provided that the principal amount of the
note remaining outstanding after repayment is an authorized denomination.
DTC or its nominee will be the holder of global securities and therefore
will be the only entity that can exercise a right to repayment, if any. To
ensure that DTC or its nominee will timely exercise such right to repayment,
you must instruct the broker or other direct or indirect participant through
which you hold your beneficial interest in a global security to notify DTC of
your desire to exercise a right to repayment. Because different firms have
different cut-off times for accepting instructions from their customers, you
should consult the broker or other direct or indirect participant through which
you hold your interest in a global security to determine the cut-off time by
which an instruction must be given in order for timely notice to be delivered
to DTC.
Repayment Upon Death
If the pricing supplement relating to a note so states, the holder of the
note will have the right to require us to repay a note prior to its maturity
date upon the death of the beneficial owner of the note as described below. We
call this right the "survivor's option."
Upon exercise of the survivor's option, we will, at our option, either repay
or purchase any note properly delivered for repayment by or on behalf of the
person that has authority to act on behalf of the deceased beneficial owner of
the note at a price equal to the sum of:
. 100% of the principal amount of such note, and
. accrued and unpaid interest, if any, to the date of such repayment,
subject to the following limitations.
The survivor's option may not be exercised until at least 12 months
following the date of original issue of the applicable notes. In addition, we
may limit the aggregate principal amount of notes as to which the survivor's
option may be exercised as follows:
. In any calendar year, we may limit the aggregate principal amount to the
greater of 1% of the outstanding aggregate principal amount of the notes
as of December 31 of the most recently completed year or $1,000,000. We
call this limitation the "annual limitation."
. For any individual deceased beneficial owner of notes, we may limit the
aggregate principal amount to $200,000 for any calendar year. We call
this limitation the "individual limitation."
We will not make principal repayments pursuant to the exercise of the
survivor's option in amounts that are less than $1,000. If the limitations
described above would result in the partial repayment of any note, the
principal amount of the note remaining outstanding after repayment must be at
least $1,000.
Each note delivered pursuant to a valid exercise of the survivor's option
will be accepted promptly in the order all such notes are delivered, unless the
acceptance of that note would contravene the annual limitation or the
individual limitation. If, as of the end of any calendar year, the aggregate
principal amount of notes that have been accepted pursuant to exercise of the
survivor's option during that year has not exceeded the annual limitation for
that year, any notes not accepted during that calendar year because of the
individual limitation will be
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accepted in the order all such notes were delivered, to the extent that any
such acceptance would not trigger the annual limitation for such calendar year.
Any note accepted for repayment pursuant to exercise of the survivor's
option will be repaid no later than the first January 15 or July 15 to occur at
least 20 calendar days after the date of acceptance. If that date is not a
business day, payment will be made on the next succeeding business day. For
example, if the acceptance date for notes delivered pursuant to the survivor's
option was April 1, 2003, we would be obligated to repay those notes by July
15, 2003. Each note delivered for repayment that is not accepted in any
calendar year due to the application of the annual limitation will be deemed to
be delivered in the following calendar year in the order in which all such
notes were originally delivered, unless any such note is withdrawn by the
representative for the deceased beneficial owner prior to its repayment. Other
than as described in the immediately preceding sentence, notes delivered upon
exercise of the survivor's option may not be withdrawn. In the event that a
note delivered for repayment pursuant to valid exercise of the survivor's
option is not accepted, the trustee will deliver a notice by first-class mail
to the registered holder that states the reason that the note has not been
accepted for repayment. Following receipt of such notice from the trustee, the
representative for the deceased beneficial owner may withdraw any such note and
the exercise of the survivor's option.
Because DTC or its nominee will be the holder of the notes, DTC or its
nominee, as the case may be, will be the only entity that can exercise the
survivor's option for such notes. To obtain repayment pursuant to exercise of
the survivor's option with respect to a note the representative of the deceased
beneficial owner must provide to the broker or other entity through which the
beneficial interest in the note is held by the deceased owner:
. a written request for repayment signed by the representative of the
decedent with the signature guaranteed by a member firm of a registered
national securities exchange or of the NASD or a commercial bank or
trust company having an office or correspondent in the United States;
. appropriate evidence satisfactory to the trustee and us that (a) the
representative has authority to act on behalf of the deceased beneficial
owner, (b) the death of such beneficial owner has occurred and (c) the
deceased was the beneficial owner of the note at the time of death;
. if the beneficial interest in the note is held by a nominee of the
deceased beneficial owner, a certificate satisfactory to the applicable
trustee from the nominee attesting to the deceased's ownership of a
beneficial interest in such note;
. if applicable, a properly executed assignment or endorsement;
. tax waivers and any other instruments or documents that the trustee or
we reasonably require in order to establish the validity of the
ownership of the notes and the claimant's entitlement to payment; and
. any additional information the trustee or we require to document
ownership or authority to make the election and to cause the redemption
of the notes.
In turn, the broker or other entity will deliver each of these items to the
trustee, together with evidence satisfactory to the trustee and us from the
broker or other entity stating that it represents the deceased beneficial owner.
The broker or other entity will be responsible for disbursing any payments
it receives pursuant to exercise of the survivor's option to the appropriate
representative. See "--Book-Entry System."
Subject to the annual limitation and the individual limitation, all
questions as to the eligibility or validity of any exercise of the survivor's
option will be determined
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by us in our sole discretion. Our determination will be final and binding on
all parties.
The death of a person owning a note in joint tenancy or tenancy by the
entirety will be deemed the death of the beneficial owner of the note, and the
entire principal amount of the note so held will be subject to the survivor's
option.
The death of a person owning a note by tenancy in common will be deemed the
death of the beneficial owner of a note only with respect to the deceased
holder's interest in the note so held by tenancy in common. However, if a note
is held by husband and wife as tenants in common, the death of either will be
deemed the death of the beneficial owner of the note, and the entire principal
amount of the note so held will be subject to the survivor's option.
The death of a person who, during his or her lifetime, was entitled to
substantially all of the beneficial interests of ownership of a note will be
deemed the death of the beneficial owner for purposes of the survivor's option,
regardless of the registered holder, if such beneficial interest can be
established to the satisfaction of the trustee and us. Such beneficial interest
will be deemed to exist in typical cases of nominee ownership, ownership under
the Uniform Transfers to Minors Act, community property or other joint
ownership arrangements between a husband and wife and trust arrangements where
one person has substantially all of the beneficial ownership interest in the
note during his or her lifetime.
Forms to be used by a representative to exercise the survivor's option on
behalf of a deceased beneficial owner of a note may be obtained from the
trustee.
Book-Entry System
All of the notes we offer will be issued in book-entry only form. This means
that we will not issue individual physical certificated notes to beneficial
owners. Instead, we will issue global securities in registered form
representing the notes that may be issued pursuant to this prospectus
supplement. Each global security will be held through DTC, as depositary, and
will be registered in the name of Cede & Co., as nominee of DTC. Accordingly,
Cede & Co. will be the holder of record of the notes. The purchaser of a note
is purchasing an interest in that global security.
Beneficial interests in a global security are shown on, and transfers are
effected through, records maintained by DTC or its direct and indirect
participants. A participant in DTC is an institution that has an account with
DTC, and an indirect participant is an institution that has, directly or
indirectly, an account with a DTC participant. Under DTC's rules, only a
participant can be reflected on DTC's records as owner of an interest. This
means that your ownership interest in a note is not reflected on the records of
DTC but is reflected on the books and records of the broker which, as a direct
or indirect participant in DTC, holds the interest on your behalf.
So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee, as the case may be, will be the sole holder of the notes
represented by the global security for all purposes, including payment of
principal and interest, under the applicable indenture. Except as otherwise
provided below, you are not entitled to receive physical delivery of
certificated notes and will not be considered the holders for any purpose under
the applicable indenture. Accordingly, you must rely on the procedures of DTC
and the actions of your broker (or any other direct or indirect participant in
DTC through which you hold your interest) in order to exercise any rights of a
holder of a note under the applicable indenture. The laws of some jurisdictions
require that certain purchasers of notes take physical delivery of such notes
in certificated form. Purchases of the notes may not be appropriate for these
purchasers.
The following is based on information furnished to us and the agents by DTC:
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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 Securities Exchange
Act of 1934. DTC holds securities that its participants deposit with the
depositary. 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,
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 NASD. Access to DTC's system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly, which we refer to as "indirect
participants."
Purchases of the notes under DTC's system must be made by or through direct
participants, which will receive a credit for such interests on DTC's records.
The ownership interest of each beneficial owner is in turn to be recorded on
the direct and indirect participants' records. Beneficial owners will not
receive written confirmation from the depositary of their purchase, but
beneficial owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the direct or indirect participant through which the beneficial owner
entered into the transaction. Transfers of ownership interests in the global
securities are to be accomplished by entries made on the books of direct and
indirect participants acting on behalf of beneficial owners. Beneficial owners
will not receive certificates representing their ownership interests in the
global securities, except in the limited circumstances described below.
To facilitate subsequent transfers, all global securities deposited by
direct participants with the depositary are registered in the name of the
depositary's partnership nominee, Cede & Co. or such other name as may be
requested by an authorized representative of DTC. The deposit of global
securities with DTC and their registration in the name of Cede & Co. or such
other nominee do not effect any change in beneficial ownership. DTC has no
knowledge of the actual beneficial owners of the interests in the global
securities; DTC's records reflect only the identity of the direct participants
to whose accounts interests in the global securities are credited, which may or
may not be the beneficial owners. The participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
We will send any redemption notices to Cede & Co. If less than all of the
interests in a global security are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each direct participant in such
global security to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the global
securities. Under its usual procedures, DTC mails an omnibus proxy to the
issuer 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 interests in the global securities are credited on the record date
(identified in a listing attached to the omnibus proxy).
We will pay principal and any premium and interest payments on the notes in
immediately available funds directly to DTC. DTC will then credit direct
participants'
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accounts on the payment date in accordance with their respective holdings shown
on DTC's records unless DTC has reason to believe that it will not receive
payment on the payment date. Payments by participants to beneficial owners will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such participant and not of
DTC, the trustee or us, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal and interest to DTC is
the responsibility of us or the trustee. Disbursement of such payments to
direct participants is the responsibility of DTC. Disbursement of such payments
to the beneficial owners is the responsibility of direct and indirect
participants.
The notes represented by one or more global securities are exchangeable for
certificated notes of like tenor as such notes if:
. DTC for the global securities notifies us that it is unwilling or unable
to continue as depositary for the global securities or if at any time
the depositary ceases to be a clearing agency registered under the
Securities Exchange Act of 1934,
. we in our discretion at any time determine not to have all of the notes
of the series represented by one or more global security or notes and
notify the trustee of this determination, or
. an event of default, as described in the accompanying prospectus, has
occurred and is continuing with respect to the notes of a series.
Any note that is exchangeable pursuant to the preceding sentence is
exchangeable for certificated notes issuable in authorized denominations and
registered in the names as the depositary holding such global securities
directs. The authorized denominations of the notes will be $1,000 or any
greater amount that is an integral multiple of $1,000. Subject to the
foregoing, a global security is not exchangeable, except for a global security
or global securities of the same aggregate denominations to be registered in
the name of DTC or its nominee.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but we take no
responsibility for its accuracy.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain United States federal
income tax consequences of the purchase, ownership and disposition of the
notes. This discussion is based upon laws, regulations, rulings and decisions
now in effect, all of which are subject to change or differing interpretations.
It deals only with notes held as capital assets and does not purport to deal
with investors that may be subject to special tax rules, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, traders in securities who elect to use a
mark-to-market method of accounting for their securities holdings, persons
holding notes as a hedge against currency risks or as a position in a
"straddle" for tax purposes, or persons whose functional currency is not the
United States dollar. It also does not deal with holders other than original
purchasers (except where otherwise specifically noted). Persons considering the
purchase of the notes should consult their own tax advisors concerning the
application of United States federal income tax laws to their particular
situations as well as any consequences of the purchase, ownership and
disposition of the notes arising under the laws of any state, local or foreign
taxing jurisdiction.
Because the exact pricing and other terms of the notes will vary, no
assurance can be given that the considerations described below will apply to a
particular issuance of the notes.
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As used herein, the term "U.S. holder" means a beneficial owner of a note
that is for United States federal income tax purposes:
. a citizen or resident of the United States,
. a corporation or partnership, including an entity treated as a
corporation or partnership for United States federal income tax
purposes, created or organized in or under the laws of the United
States, any state thereof or the District of Columbia (other than a
partnership that is not treated as a United States person under any
applicable Treasury regulations),
. an estate whose income is subject to United States federal income tax
regardless of its source,
. a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions
of the trust, or
. a person otherwise subject to United States federal income taxation on a
net income basis in respect of a note.
Notwithstanding the last bullet above, to the extent provided in
regulations, certain trusts in existence on August 20, 1996 and treated as
United States persons prior to such date that elect to continue to be so
treated also shall be considered U.S. holders.
As used herein, the term "non-U.S. holder" means a beneficial owner of a
note that is not a U.S. holder.
United States Holders
Payments of Interest. Payments of interest on a note, other than interest on
an "original issue discount note" that is not "qualified stated interest," each
as defined below, generally will be taxable to a U.S. holder as ordinary
interest income at the time such payments are accrued or are received, in
accordance with the U.S. holder's regular method of tax accounting.
Original Issue Discount. The following summary is a general discussion of
the United States federal income tax consequences to U.S. holders of the
purchase, ownership and disposition of notes issued with original issue
discount. We refer to these notes as "original issue discount notes." The
following summary is based upon final Treasury regulations, which we refer to
as the "OID regulations," released by the Internal Revenue Service under the
original issue discount provisions of the Internal Revenue Code of 1986, as
amended, which we refer to as the "Code."
For United States federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a note over its issue
price, if such excess equals or exceeds a de minimis amount. This de minimis
amount is generally 1/4 of 1% of the note's stated redemption price at maturity
multiplied by the number of complete years to its maturity from its issue date
or, in the case of a note providing for the payment of any amount other than
qualified stated interest, as defined below, prior to maturity, multiplied by
the weighted average maturity of such note. The issue price of each note in an
issue of notes equals the first price at which a substantial amount of such
notes has been sold, ignoring sales to bond houses, brokers or similar persons
or organizations acting in the capacity of underwriters, placement agents or
wholesalers. The stated redemption price at maturity of a note is the sum of
all payments provided by the note other than "qualified stated interest"
payments. The term "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or property, other than debt
instruments of the issuer, at least annually during the entire term of a note
at a single fixed rate or in certain cases, one or more floating rates that
appropriately take into account the length of the interval between stated
interest payments. In addition, under the OID regulations, if a note bears
interest for one or more accrual periods at a rate below the rate applicable
for the remaining term of such note (e.g., notes with low initial rates or
periods where no interest accrues), and if the greater of either the resulting
foregone interest on such note or any "true"
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discount on such note (i.e., the excess of the note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
note would be treated as having original issue discount, and the stated
interest would not be treated as qualified stated interest.
Payments of qualified stated interest on a note are taxable to a U.S. holder
as ordinary interest income at the time such payments are accrued or are
received, in accordance with the U.S. holder's regular method of tax
accounting. A U.S. holder of an original issue discount note having a maturity
of more than one year from its date of issue must include original issue
discount in income as ordinary interest income for United States federal income
tax purposes as it accrues under a constant yield method in advance of receipt
of the cash payments attributable to such income, regardless of such U.S.
holder's regular method of tax accounting. In general, the amount of original
issue discount included in income by the initial U.S. holder of an original
issue discount note is the sum of the daily portions of original issue discount
with respect to such original issue discount note for each day during the
taxable year (or portion of the taxable year) on which such U.S. holder held
such original issue discount note. The "daily portion" of original issue
discount on any original issue discount note is determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the original issue
discount note, provided that each accrual period is no longer than one year and
each scheduled payment of principal or interest occurs either on the final day
of an accrual period or on the first day of an accrual period. The OID
regulations contain certain rules that generally allow any reasonable method to
be used in determining the amount of original issue discount allocable to a
short initial accrual period (if all other accrual periods are of equal length)
and require that the amount of original issue discount allocable to the final
accrual period equal the excess of the amount payable at the maturity of the
original issue discount note (other than any payment of qualified stated
interest) over the original issue discount note's adjusted issue price as of
the beginning of such final accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between:
. the product of the original issue discount note's adjusted issue price
at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual
period and appropriately adjusted to take into account the length of the
particular accrual period) and
. the amount of any qualified stated interest payments allocable to such
accrual period.
The "adjusted issue price" of an original issue discount note at the
beginning of any accrual period is the sum of the issue price of the original
issue discount note plus the amount of original issue discount allocable to all
prior accrual periods (determined without regard to any premium paid to acquire
the note) minus the amount of any prior payments on the original issue discount
note that were not qualified stated interest payments. Under these rules, U.S.
holders generally will have to include in income increasingly greater amounts
of original issue discount in successive accrual periods.
If (1) a portion of the initial purchase price of a note is attributable to
interest that accrued prior to the note's issue date ("pre-issuance accrued
interest"), (2) the first stated interest payment on the note is to be made
within one year of the note's issue date and (3) such payment will equal or
exceed the amount of pre-issuance accrued interest, then the U.S. holder may
elect to decrease the issue price of the note by the amount of pre-issuance
accrued interest, in which case a portion of the first stated interest payment
will be treated as a return of the excluded pre-issuance accrued interest and
not as an amount payable on the note.
Acquisition Premium. A U.S. holder who purchases an original issue discount
note for an amount that is greater than its adjusted issue price as of the
purchase
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date and less than or equal to the sum of all amounts payable on the original
issue discount note after the purchase date, other than payments of qualified
stated interest, will be considered to have purchased the original issue
discount note at an "acquisition premium." Under the acquisition premium rules,
the amount of original issue discount which such U.S. holder must include in
its gross income with respect to such original issue discount note for any
taxable year or portion thereof in which the U.S. holder holds the original
issue discount note, will be reduced, but not below zero, by the portion of the
acquisition premium properly allocable to the period.
Optional Redemption. In the case of certain notes, we may have a "call
option" to redeem the notes prior to their stated maturity, or the holders of
the notes may have a "put option" to receive repayment prior to maturity. Notes
containing such features may be subject to rules that differ from the general
rules discussed above. For purposes of accruing original issue discount, a call
option exercisable by a holder will be presumed to be exercised if, by
utilizing any day on which the note may be redeemed or repaid as its maturity
date and the amount payable on that date in accordance with the terms of the
note (the "redemption price") as its stated redemption price at maturity, the
yield on the note is:
. in the case of a call option exercisable by us, lower than its yield to
maturity, or
. in the case of a put option exercisable by a holder, greater than its
yield to maturity.
If such an option is not in fact exercised when presumed to be, the note
will be treated, solely for purposes of accruing original issue discount, as if
it were redeemed, and a new note issued, on the presumed exercise date for an
amount equal to its adjusted issue price on that date. Investors intending to
purchase notes with such features should consult their own tax advisors, since
the original issue discount consequences will depend, in part, on the
particular terms and features of the purchased notes.
Election to Treat All Interest as Original Issue Discount. U.S. holders
utilizing the accrual method of accounting may generally, upon election,
include in income all interest, including stated interest, acquisition
discount, original issue discount, de minimis original issue discount, market
discount, de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium (discussed below) or acquisition premium, that accrues
on a debt instrument by using the constant yield method applicable to original
issue discount, subject to certain limitations and exceptions. This election
applies only to the note for which it is made and cannot be revoked without the
consent of the IRS. A U.S. holder considering such an election should consult a
tax advisor.
Information Recording. Because the notes will constitute "publicly offered
debt instruments" as defined by the OID regulations, we are required to report
to the IRS on Form 8281, within 30 days after the issue date, certain
information relating to original issue discount with respect to each such
issue. We will report annually to the IRS and to each holder of record the
amount of original issue discount includable in the gross income of a holder of
notes for each calendar year determined without regard to any acquisition
premium paid by any holder, except certain exempt holders, including
corporations.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("short-term notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. holder is not
required to accrue such original issue discount unless the U.S. holder elects
to do so. If such an election is made, it will apply to all short-term
obligations acquired by the U.S. holder on or after the first day of the first
taxable year in which the election is made, and such election may be revoked
only with the consent of the IRS. If such an election is not made, (i) any gain
recognized by the U.S. holder on the sale, exchange or retirement of the
short-term note will be ordinary income to the extent of the original issue
discount accrued on a straight-line basis, or if elected, under the constant
yield method based
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on daily compounding, through the date of sale, exchange or retirement, and
(ii) a portion of the deductions otherwise allowable to the U.S. holder for
interest on borrowings allocable to the short-term note will be deferred until
a corresponding amount of income is realized. U.S. holders who report income
for United States federal income tax purposes under the accrual method, and
certain other holders including banks and dealers in securities, are required
to accrue original issue discount on a short-term note on a straight-line basis
unless an election is made to accrue the original issue discount under a
constant yield method, based on daily compounding.
Market Discount. If a U.S. holder purchases a note, other than an original
issue discount note, at original issue for an amount that is less than its
issue price or, in the case of a subsequent purchaser, its stated redemption
price at maturity or, in the case of an original issue discount note, for an
amount that is less than its adjusted issue price as of the purchase date, such
U.S. holder will be treated as having purchased such note at a "market
discount," unless such market discount is less than a specified de minimis
amount.
Under the market discount rules, a U.S. holder will be required to treat any
partial principal payment or, in the case of an original issue discount note,
any payment that does not constitute qualified stated interest on, or any gain
realized on the sale, exchange, retirement or other disposition of, a note as
ordinary income to the extent of the lesser of:
. the amount of such payment or realized gain, or
. the market discount which has not previously been included in income and
which is treated as having accrued on such note at the time of such
payment or disposition.
Market discount will be considered to accrue ratably during the period from
the date of acquisition to the maturity date of the note, unless the U.S.
holder elects (as described below) to accrue market discount on the basis of
semiannual compounding.
A U.S. holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a note with market discount until the maturity of the note or
certain earlier dispositions, because a current deduction is only allowed to
the extent the interest expense exceeds an allocable portion of market
discount. A U.S. holder may elect to include market discount in income
currently as it accrues on either a ratable or constant yield basis, in which
case the rules described above regarding the treatment as ordinary income of
gain realized upon the disposition of the note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. holder on or after the first
day of the first taxable year to which such election applies and may be revoked
only with the consent of the IRS.
Premium. If a U.S. holder purchases a note for an amount that is greater
than the sum of all amounts payable on the note after the purchase date, other
than payments of qualified stated interest, such U.S. holder will be considered
to have purchased the note with "amortizable bond premium" equal in amount to
such excess. A U.S. holder may elect to amortize bond premium on a debt
instrument. Once made, the election applies to all taxable debt instruments
then owned and thereafter acquired by the U.S. holder on or after the first day
of the taxable year to which such election applies, and may be revoked only
with the consent of the IRS. In general, a holder amortizes bond premium by
offsetting the qualified stated interest allocable to an accrual period with
the bond premium allocable to the accrual period, which is determined under a
constant yield method. If the bond premium allocable to an accrual period
exceeds the qualified stated interest allocable to such period, the excess is
treated by the holder as a bond premium deduction. The bond premium deduction
for each accrual period is limited to the amount by which the holder's total
interest inclusions on the debt instrument in prior accrual
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periods exceed the total amount treated by such holder as a bond premium
deduction on the debt instrument in prior accrual periods. Any amounts not
deductible in an accrual period may be carried forward to the next accrual
period and treated as bond premium allocable to that period. However, in the
case of a note that may be optionally redeemed prior to maturity, the amount of
amortizable bond premium is determined by substituting the first date on which
the debt instrument may be redeemed (the "redemption date") for the maturity
date and the applicable redemption price on the redemption date for the amount
payable at maturity if the result would increase the holder's yield to maturity
(i.e., result in a smaller amount of amortizable bond premium properly
allocable to the period before the redemption date). If the issuer does not in
fact exercise its right to redeem the note on the applicable redemption date,
the note will be treated (for purposes of the amortizable bond premium rules)
as having matured and then as having been reissued for the holder's "adjusted
acquisition price," which is an amount equal to the holder's basis in the debt
instrument (as determined under Treasury regulations governing amortizable bond
premium), less the sum of:
. any amortizable bond premium allocable to prior accrual periods and
. any payments previously made on the note other than payments of
qualified stated interest.
The note deemed to have been reissued will again be subject to the
amortizable bond premium rules with respect to the remaining dates on which it
is redeemable.
Disposition of a Note. Except as discussed above, upon the sale, exchange or
retirement of a note, a U.S. holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement, other than amounts representing accrued and unpaid interest, and
such U.S. holder's adjusted tax basis in the note. A U.S. holder's adjusted tax
basis in a note generally will equal such U.S. holder's initial investment in
the note increased by any original issue discount included in income and
accrued market discount, if any, if the U.S. holder has included such market
discount in income and decreased by the amount of any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such note. Such gain or loss generally will be long-term
capital gain or loss if the note is held for more than one year. Non-corporate
taxpayers are subject to reduced maximum rates on long-term capital gains and
are generally subject to tax at ordinary income rates on short-term capital
gains. The deductibility of capital losses is subject to certain limitations.
Prospective investors should consult their own tax advisors concerning these
tax law provisions.
Integration of Notes with Hedges. The OID regulations generally provide
that, if a Holder of a note hedges the note with a financial instrument and the
combined cash flows under the note and the financial instrument are
substantially equivalent to the cash flows on a fixed or variable rate debt
instrument, the note and the financial instrument may be taxed as an integrated
transaction by treating the positions as a synthetic debt instrument. Such
treatment applies if the taxpayer identifies the positions as part of an
integrated transaction on its books and records and certain other requirements
are satisfied. In addition, the IRS can require the positions to be taxed as an
integrated transaction under certain circumstances. U.S. holders should consult
their tax advisors regarding the possible application of these rules to the
notes.
Non-U.S. Holders
A non-U.S. holder generally will not be subject to United States federal
income taxes on payments of principal, premium, if any, or interest, including
original issue discount, if any, on a note, unless such non-U.S. holder
actually or constructively owns 10% or more of the total combined voting power
of all classes of our stock entitled to vote, is a controlled foreign
corporation related to us through stock ownership or is a bank receiving
interest described in section 881(c)(3)(A) of the Code. To qualify for the
exemption from taxation, the last U.S.
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payor in the chain of payment prior to a non-U.S. holder (referred to as a
"withholding agent") must have received in the year in which a payment of
interest or principal occurs, or in either of the two preceding calendar years,
a statement that:
. is signed by the beneficial owner of the note under penalties of perjury,
. certifies that such owner is not a U.S. holder, and
. provides the name and address of the beneficial owner.
The statement may be made on an IRS Form W-8BEN or a substantially similar
form, and the beneficial owner must inform the withholding agent of any change
in the information on the statement within 30 days of such change. If a note is
held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the withholding agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8BEN or the substitute form provided by
the beneficial owner to the organization or institution.
Notwithstanding the foregoing, a non-U.S. holder generally will be taxed in
the same manner as a U.S. holder with respect to interest income that is
effectively connected with a U.S. trade or business of the non-U.S. holder,
except to the extent that an applicable tax treaty provides otherwise. Under
certain circumstances, effectively connected interest income of a corporate
non-U.S. holder may be subject to an additional "branch profits" tax at a 30%
rate (or, if applicable, a lower treaty rate). Even though effectively
connected interest income is subject to U.S. federal income tax, and may be
subject to the branch profits tax, it is not subject to withholding tax if the
non-U.S. holder properly delivers IRS Form W-8ECI to the payor.
Generally, a non-U.S. holder will not be subject to United States federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a note, provided (i) the gain is not effectively connected with
the conduct of a trade or business in the United States by the non-U.S. holder
and (ii) the non-U.S. holder is not an individual who is present in the United
States for 183 days or more in the taxable year of such retirement or
disposition, and certain other conditions are met. Certain other exceptions may
be applicable, and a non-U.S. holder should consult its tax advisor in this
regard.
The notes will not be includable in the estate of a non-U.S. holder unless
at the time of death such individual actually or constructively owned 10% or
more of the total combined voting power of all classes of our stock entitled to
vote, or payments in respect of the notes would have been effectively connected
with the conduct by such individual of a trade or business in the United States.
Information Reporting and Backup Withholding
Information reporting and backup withholding of United States federal income
tax at a rate of 30% for payments made in 2002 may apply to payments made in
respect of the notes to registered owners who are not "exempt recipients" and
who fail to provide certain identifying information, such as the registered
owner's taxpayer identification number, in the required manner. The rate of
backup withholding is scheduled to be reduced periodically to 28% in 2006.
Generally, individuals are not exempt recipients, whereas corporations and
certain other entities generally are exempt recipients. Payments made in
respect of the notes to a U.S. holder must be reported to the IRS, unless the
U.S. holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. holders who
are not exempt recipients.
In addition, upon the sale of a note to or through a broker, the broker must
backup withhold on the entire purchase price, unless either:
. the broker determines that the seller is a corporation or other exempt
recipient or
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. the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. holder, certifies that such
seller is a non-U.S. holder and certain other conditions are met.
Such a sale must also be reported by the broker to the IRS, unless either:
. the broker determines that the seller is an exempt recipient or
. the seller certifies its non-U.S. status and certain other conditions
are met.
Certification of the registered owner's non-U.S. status would be normally on
an IRS Form W-8BEN under penalties of perjury, although in certain cases it may
be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
ERISA CONSIDERATIONS
The discussion herein of ERISA is general in nature and is not intended to
be all inclusive. Any fiduciary of an ERISA plan, governmental plan or church
plan considering an investment in the notes should consult with its legal
advisors regarding the consequences of such investment.
General
A fiduciary of an employee benefit plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended, which we refer to as
"ERISA," should consider fiduciary standards under ERISA in the context of the
particular circumstances of such plan before authorizing an investment in the
notes. Such fiduciary should consider ERISA's diversification and prudence
requirements and whether the investment is in accordance with the documents and
instruments governing the plan and the fiduciary. In addition, ERISA and the
Code prohibit a wide range of transactions, which we refer to as "prohibited
transactions," involving the assets of a plan subject to ERISA or the assets of
an individual retirement account or plan subject to Section 4975 of the Code or
any entity in which such plan invests whose assets are deemed "plan assets"
(referred to as an "ERISA plan") and persons who have certain specified
relationships to the ERISA plan ("parties in interest," within the meaning of
ERISA, and "disqualified persons," within the meaning of the Code). Such
transactions, if not covered by a statutory or administrative exemption, may
require "correction" and may cause the ERISA plan fiduciary to incur certain
liabilities and the parties in interest or disqualified persons to be subject
to civil penalties and excise taxes.
Governmental plans and certain church plans (each as defined under ERISA)
are not subject to the prohibited transaction rules. Such plans may, however,
be subject to federal, state or local laws or regulations which may affect
their investment in the notes. Any fiduciary of such a governmental or church
plan considering an investment in the notes should determine the need for, and
the availability, if necessary, of any exemptive relief under such laws or
regulations.
Prohibited Transactions
We may be a party in interest or a disqualified person with respect to an
ERISA plan investing in the notes as a result of various financial services our
affiliates may provide to ERISA plans. Therefore, such investment by an ERISA
plan may give rise to a prohibited transaction in the form of a sale of
property by us to the investing ERISA plan or an extension of credit by the
investing ERISA plan to us. Consequently, before investing in the notes, any
person who is, or who is acquiring the notes for, or on behalf of, an ERISA
plan must determine that the investment in, or acquisition of,
S-20
the notes will not result in a prohibited transaction or that a statutory or
administrative exemption from the prohibited transaction rules is applicable to
the investment in the notes.
The statutory or administrative exemptions from the prohibited transaction
rules under ERISA and the Code which may be available to an ERISA plan which is
investing in the notes include:
. Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts;
. PTCE 91-38, regarding investments by bank collective investment funds;
. PTCE 84-14, regarding transactions effected by qualified professional
asset managers;
. PTCE 96-23, regarding transactions effected by in-house managers; and
. PTCE 95-60, regarding investments by insurance company general accounts
(collectively referred to as the "ERISA investor exemptions").
The notes may not be acquired by any person who is, or who in acquiring such
notes is using the assets of, an ERISA plan unless one of the ERISA investor
exemptions or another applicable exemption is available to the ERISA plan. The
acquisition of the notes by any person or entity who is, or who in acquiring
such notes is using the assets of, an ERISA plan shall be deemed to constitute
a representation by such person or entity to us that the investment in the
notes will not result in a prohibited transaction or that the investment in the
notes is afforded exemptive relief pursuant to the ERISA investor exemptions or
another applicable exemption with respect to the acquisition and holding of
such notes. The acquisition of the notes by any person or entity who is, or who
is acquiring such notes is using the assets of, a governmental or church plan
shall be deemed to constitute a representation by such person or entity to us
that the acquisition and holding of such notes is not prohibited by any
federal, state or local laws or regulations applicable to such plan.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Under the terms of the selling agent agreement, dated as of May 3, 2002, the
notes are offered from time to time by us to A.G. Edwards & Sons, Inc., as
purchasing agent, for subsequent resale to the agents and other dealers who are
broker-dealers and securities firms. The agents, including the purchasing
agent, are parties to that agreement. The notes will be offered for sale in the
United States only. Dealers who are members of the selling group have executed
a selected dealer agreement with the purchasing agent. The agents have agreed
to use their reasonable best efforts to solicit offers from investors to
purchase the notes. We also may appoint additional agents to solicit offers to
purchase the notes. Any solicitation and sale of the notes through those
additional agents, however, will be on substantially the same terms and
conditions to which the original agents have agreed. We will pay the purchasing
agent a gross selling concession to be divided among the purchasing agent and
the other agents as they agree. The concession is payable to the purchasing
agent in the form of a discount ranging from 0.4% to 2.5% of the non-discounted
price for each note sold, unless we and the purchasing agent agree otherwise.
The purchasing agent also may sell notes to dealers at a discount not in excess
of the concession it received from us.
Following the solicitation of orders, each of the agents, severally and not
jointly, may purchase notes as principal for its own account from the
purchasing agent. Unless otherwise set forth in the applicable supplement,
these notes will be purchased by the agents and resold by them to one or more
investors at a fixed public offering price. After the initial public offering
of notes to be resold by an agent to investors, the public offering price (in
the case of notes to be resold at a fixed public offering price), concession
and discount may be changed.
S-21
We have the sole right to accept offers to purchase notes and may reject any
proposed offer to purchase notes in whole or in part. Each agent also has the
right, in its discretion reasonably exercised, to reject any proposed offer to
purchase notes in whole or in part. We reserve the right to withdraw, cancel or
modify any offer without notice. We also may change the terms, including the
interest rate we will pay on the notes, at any time prior to our acceptance of
an offer to purchase.
In addition, we may sell notes directly on our own behalf to investors
without the assistance of agents. The agents will not be entitled to any
discounts or commissions for sales we make directly to investors without their
assistance.
Each agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933. We have agreed to indemnify the agents against certain
liabilities, including liabilities under the Securities Act of 1933. We have
also agreed to reimburse the agents for certain expenses.
No note will have an established trading market when issued. We do not
intend to apply for the listing of the notes on any securities exchange, but we
have been advised by the agents that the agents may purchase and sell notes in
the secondary market as permitted by applicable laws and regulations. The
agents are not obligated to do so, however, and the agents may discontinue
making a market at any time without notice. Neither we nor the agents can
provide any assurance regarding the liquidity of any trading market for the
notes. All secondary trading in the notes will settle in immediately available
funds.
In connection with an offering of notes, the rules of the SEC permit the
purchasing agent to engage in certain transactions that may stabilize the price
of the notes. The purchasing agent will conduct these activities for the
agents. Such transactions may consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the notes. If the purchasing agent
creates a short position in the notes in connection with an offering of the
notes (i.e., if it sells a larger principal amount of notes than is set forth
on the cover page of the applicable pricing supplement), the purchasing agent
may reduce that short position by purchasing notes in the open market. In
general, these bids for or purchases of notes for the purpose of stabilization
or to reduce a syndicate short position could cause the price of the notes to
be higher than it might otherwise be in the absence of such bids or purchases.
The purchasing agent makes no representation or prediction as to the direction
or magnitude of any effect that the transactions described above may have on
the price of the notes. In addition, the purchasing agent makes no
representation that, once commenced, such transactions will not be discontinued
without notice. The purchasing agent is not required to engage in these
activities and may terminate any of these activities at any time.
The agents or dealers to or through which we may sell notes may engage in
transactions with us and perform services for us in the ordinary course of
business.
LEGAL MATTERS
The validity of the notes will be passed upon for us by Godfrey & Kahn,
S.C., Milwaukee, Wisconsin, and for the agents by Seward & Kissel LLP, New
York, New York.
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PROSPECTUS
Marshall & Ilsley Corporation
$1,500,000,000
[LOGO] M&I(R)
Debt Securities
-----------------
We may offer from time to time debt securities that may consist of:
. senior debentures, notes, bonds and/or other evidences of
indebtedness, or
. subordinated debentures, notes, bonds and/or other evidences of
indebtedness.
The debt securities issued pursuant to this prospectus will have an
aggregate principal amount or aggregate proceeds up to $1,500,000,000 (or the
equivalent thereof in foreign denominated currencies). The specific terms of
the debt securities will be described in an accompanying prospectus supplement.
We may offer the debt securities directly, to or through agents,
underwriters or dealers which we may designate from time to time, or through a
combination of such methods. If any agents, underwriters or dealers are
involved in the sale of the securities, their names, and any applicable
principal amounts to be purchased, commissions or discounts will be included in
an accompanying prospectus supplement.
This prospectus may not be used to consummate sales of securities unless
accompanied by a prospectus supplement.
-----------------
Unless otherwise indicated, currency amounts in this prospectus and any
prospectus supplement hereto are stated in United States dollars.
-----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
-----------------
The securities are not savings accounts, deposits or other obligations of
any bank and are not insured by the Federal Deposit Insurance Corporation, the
Bank Insurance Fund or any other governmental agency.
-----------------
The date of this Prospectus is April 12, 2000.
Table of Contents
Page
----
About This Prospectus................................ 1
Where You Can Find More Information.................. 1
Forward-Looking Statements........................... 2
Marshall & Ilsley Corporation........................ 2
Use of Proceeds...................................... 2
Ratio of Earnings to Fixed Charges................... 3
Description of Debt Securities....................... 3
Book-Entry Securities................................ 11
Certain United States Federal Income Tax Consequences 13
Plan of Distribution................................. 21
Legal Matters........................................ 22
Experts.............................................. 23
About This Prospectus
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission using the "shelf" registration process.
Under this shelf process, we may, from time to time, sell the debt securities
described in this prospectus in one or more offerings with a total offering
price not to exceed $1,500,000,000. This prospectus provides you with a general
description of the debt securities. Each time we sell securities under this
prospectus, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. Each prospectus supplement may
also add, update or change information in this prospectus. Please carefully
read both this prospectus and any prospectus supplement together with the
additional information described below under "Where You Can Find More
Information."
You should not assume that the information in this prospectus or in any
prospectus supplement is accurate as of any date other than the date on the
front page of each of these documents, respectively.
Where You Can Find More Information
We file annual, quarterly and special reports and proxy statements and
other information with the SEC. Our SEC filings are available over the Internet
at our website at http://www.micorp.com or at the SEC's website at
http://www.sec.gov. You may also read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for more information on the public
reference room. You may also inspect our reports at the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
For further information about our company and the debt securities, you
should refer to our registration statement and its exhibits. This prospectus
summarizes material provisions of contracts and other documents that we refer
you to. Since the prospectus may not contain all the information that you may
find important, you should review the full text of these documents. We have
included copies of these documents as exhibits to our registration statement.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that:
. incorporated documents are considered part of the prospectus,
. we can disclose important information to you by referring you to
those documents, and
. information that we file with the SEC will automatically update
and supersede this prospectus.
We incorporate by reference our Annual Report on Form 10-K for the year
ended December 31, 1999 which was filed with the SEC.
We also incorporate by reference each of the following future filings
that we will make with the SEC until we sell all the debt securities:
. Reports filed under Sections 13(a), 13(c) and 15(d) of the
Securities Exchange Act of 1934, as amended, and
. Definitive proxy or information statements filed under Section 14
of the Exchange Act in connection with any subsequent
shareholders' meeting.
You may request a copy of any of the documents referred to above at no
cost, by contacting us in writing or by telephone at:
Secretary
Marshall & Ilsley Corporation
770 North Water Street
Milwaukee, Wisconsin 53202
(414) 765-7801
1
Forward-Looking Statements
This prospectus, the applicable prospectus supplement and documents
incorporated by reference in this prospectus and the prospectus supplement
contain certain forward-looking statements regarding our operations and
business. The words "estimate," "project," "intend," "expect" and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Exchange Act. We intend that these forward-looking statements be
subject to the safe harbors created by those provisions. These "forward-looking
statements" are found at various places throughout this prospectus, the
applicable prospectus supplement and documents incorporated by reference in
this prospectus and the prospectus supplement. Wherever they occur in this
prospectus or in other statements attributable to us, forward-looking
statements are necessarily estimates reflecting our best judgment. However,
these statements still involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by the
forward-looking statements. These forward-looking statements should be
considered in light of various important factors, including those set forth in
this prospectus and the applicable prospectus supplement and other factors set
forth from time to time in our reports and registration statements filed with
the SEC. You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus or the
applicable prospectus supplement. We disclaim any intent or obligation to
update forward-looking statements. Moreover, through senior management, we may
from time to time make forward-looking statements about the matters described
in this prospectus or the applicable prospectus supplement or other matters
concerning our business.
Marshall & Ilsley Corporation
We are a bank holding company. Our principal assets are the stock of our
bank and non-bank subsidiaries and the assets of our M&I Data Services
Division. Our subsidiaries include 27 commercial banks and one federal savings
bank with a total of over 230 offices in Wisconsin, 13 offices in Arizona, four
offices in Illinois, one office in Florida and one office in Nevada. Our
subsidiaries also include a number of companies engaged in businesses
closely-related or incidental to banking. We provide financial and managerial
assistance and services to our subsidiaries. As of December 31, 1999, we had
consolidated total assets of approximately $24.4 billion and consolidated total
deposits of approximately $16.4 billion, making us the second largest bank
holding company headquartered in Wisconsin. Our principal executive offices are
located at 770 North Water Street, Milwaukee, Wisconsin 53202. Our telephone
number is (414) 765-7801.
Use of Proceeds
Unless we indicate a different use in an accompanying prospectus
supplement, the net proceeds from the sale of the debt securities will be added
to our general funds and may be used for:
. debt reduction or debt refinancing (including the refinancing of
our outstanding commercial paper),
. investments in or advances to subsidiaries,
. acquisitions of bank and non-bank subsidiaries,
. repurchase of shares of our common stock or other securities, and
. other general corporate purposes.
2
Ratio of Earnings to Fixed Charges
Our ratios of earnings to fixed charges are as follows for each of the
periods indicated:
Years Ended December 31,
Ratio of Earnings to -----------------------------
Fixed Charges: 1999 1998 1997 1996 1995
-------------------- ----- ----- ----- ----- -----
Excluding Interest on Deposits 3.38x 3.25x 3.21x 3.52x 3.62x
Including Interest on Deposits 1.65x 1.60x 1.61x 1.61x 1.65x
Fixed charges, excluding interest on deposits, consist of interest on
indebtedness and one-third of rental expense (which represents interest). Fixed
charges, including interest on deposits, consists of interest on indebtedness,
one-third of rental expense and interest on deposits.
Description of Debt Securities
The debt securities we may offer will be senior securities or
subordinated securities. The senior securities will be issued under an
indenture between us and The Chase Manhattan Bank, as trustee, dated as of
November 15, 1985, as supplemented by a first supplemental indenture dated as
of May 31, 1990, and a second supplemental indenture dated as of July 15, 1993.
The subordinated securities will be issued under an indenture dated July 15,
1993 between us and The Chase Manhattan Bank, as trustee. Copies of the
indentures have been filed as exhibits to the registration statement of which
this prospectus forms a part.
We have summarized selected provisions of the indentures. The summary is
not complete. The summary does not describe certain exceptions and
qualifications contained in the indentures. You should read the indentures for
provisions that may be important to you.
Marshall & Ilsley Corporation is a legal entity separate and distinct
from its subsidiaries. Our subsidiaries are not obligated to make required
payments on the debt securities. Accordingly, Marshall & Ilsley Corporation's
rights and the rights of holders of the debt securities to participate in any
distribution of the assets or income from any subsidiary is necessarily subject
to the prior claims of creditors of the subsidiary. In addition, our bank and
savings association subsidiaries hold a significant portion of their mortgage
and investment portfolios indirectly through their ownership interest in direct
and indirect subsidiaries. The ability of our bank and savings association
subsidiaries to participate in any distribution of the assets or income of the
direct or indirect subsidiaries is likewise subject to the prior claims of
creditors of those direct and indirect subsidiaries. The indentures under which
the debt securities will be issued do not limit the amount of debt which we or
our subsidiaries may incur.
Terms of the Securities
The debt securities will not be secured by any of our assets. The
indentures do not limit the amount of debt securities that we may issue and
provide that we may issue debt securities from time to time in one or more
series. The indentures do not limit the principal amount of any particular
series of debt securities. The senior securities will rank equally with all of
our other unsecured and non-subordinated indebtedness. The subordinated
securities will be subordinate to the prior payment in full of any of our
senior indebtedness.
Each prospectus supplement will specify the particular terms of the
securities offered. These terms may include:
. the title of the securities,
. any limit on the aggregate principal amount of the securities,
3
. the date or dates on which the securities will mature,
. the interest rate or rates of the securities, if any, and the date
or dates from which interest will accrue,
. the interest payment dates, the dates on which payment of any
interest will begin and the regular record dates,
. any mandatory or optional redemption provisions applicable to the
securities,
. any mandatory or optional sinking fund or similar provisions
applicable to the securities,
. the terms on which the securities may be repayable prior to final
maturity,
. the portion of the principal amount payable upon acceleration of
maturity,
. certain events of default,
. if other than U.S. dollars, the currency or currencies in which
payments on the securities will be payable,
. whether the securities will be issuable only in global form, which
is known as a global security, and, if so, the name of the
depositary for the global security and the circumstances under
which the global security may be registered for transfer or
exchange in the name of the person other than the depositary, and
. any other specific terms of the securities.
Some of the securities may be issued as original issue discount
securities. Original issue discount securities bear no interest or bear
interest at below-market rates and will be sold at a discount below their
stated principal amount. Any applicable prospectus supplement will also contain
any special tax or other information relating to original issue discount
securities.
Subordination of Subordinated Securities
The subordinated securities will be subordinate to all of our senior
indebtedness. Senior indebtedness includes any of our obligations to our
creditors, other than:
. our trust capital securities,
. any of our obligations that expressly provide that they are not
senior indebtedness, and
. any subordinated securities issued under the subordinated
indenture.
If we fail to pay principal, premium or interest on any of our senior
indebtedness when the payment is due and payable, then, unless and until the
default is cured or waived or ceases to exist, no direct or indirect payment of
principal, premium or interest on the subordinated securities will be made or
agreed to be made. We will pay all senior indebtedness, including any interest
which accrues after the commencement of any of the following proceedings, in
full before we make any payment or distribution to any holder of any of the
subordinated securities in the event of:
. any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar
proceeding relating to us, our creditors or our property,
4
. any voluntary or involuntary proceeding relating to our
liquidation, dissolution or other winding-up,
. any assignment we make for the benefit of creditors, or
. any other marshalling of our assets.
If any of the above events occur, we will pay any payment or distribution
which would otherwise, not taking into account the subordination provisions, be
payable or deliverable in respect of the subordinated securities directly to
the holders of senior indebtedness in accordance with the priorities then
existing among those holders until all senior indebtedness, including any
interest which accrues after the commencement of any such proceedings, has been
paid in full. If the trustee or any holder of any subordinated security
receives any payment or distribution under the subordinated securities in
contravention of any of the terms of the subordination provisions, the payment
or distribution will be received in trust for the benefit of, and will be paid
to the holders of, the senior indebtedness at the time outstanding in
accordance with the priorities then existing among those holders for
application to the payment of all senior indebtedness remaining unpaid, to the
extent necessary to pay all of the senior indebtedness in full.
The subordinated indenture does not limit the issuance of additional
senior indebtedness. Our obligations with respect to the subordinated
securities of any series will be equal to our obligations with respect to
subordinated securities of each other series.
Limitations on Disposition or Issuance of Stock of Certain Subsidiaries
Under the senior indenture we may not, and may not permit a subsidiary
to, sell, assign, transfer or otherwise dispose of or issue any shares of stock
of any subsidiary or any securities convertible into stock of any subsidiary
which is:
. a subsidiary bank whose assets constitute 10% or more of the total
assets of all subsidiary banks, which is referred to below as a
principal constituent bank, or
. a subsidiary that owns shares of stock or any securities
convertible into stock of a principal constituent bank.
However, we or any of our subsidiaries may dispose of or issue stock of
any subsidiary or any securities convertible into stock of any security under
the following circumstances:
. when acting in a fiduciary capacity for any other person,
. to us or any of our wholly-owned subsidiaries, or
. the merger or consolidation of a principal constituent with and
into a subsidiary bank.
In addition, we may sell, assign, transfer, otherwise dispose of or issue
shares of stock of a principal constituent bank or a subsidiary that owns
shares of stock or any securities convertible into stock of a principal
constituent bank under the following circumstances:
. to qualify a person as a director, or
. to comply with a court or regulatory authority order or as a
condition imposed by a court or regulatory authority in order for
us to acquire any other corporation or entity.
5
We may also dispose of or issue shares of stock or any securities
convertible into stock of a principal constituent bank or sell stock or any
securities convertible into stock of any subsidiary that owns shares of stock
or any securities convertible into stock of a principal constituent bank under
the following circumstances:
. the sale, assignment, transfer, other disposition or issuance is
for fair market value and, after giving effect to such disposition
and to any potential dilution, if applicable, we and our
wholly-owned subsidiaries, will own directly not less than 80% of
the stock of such principal constituent bank or subsidiary, or
. a principal constituent bank sells or issues additional shares of
stock to its shareholders at any price, so long as immediately
after the sale we own at least as great a percentage of the
principal constituent bank's stock as we owned prior to the sale
or issuance of additional shares.
The senior indenture does not restrict the sale or other disposition of
non-bank subsidiaries.
Limitations on Liens
Under the senior indenture, we may not, and may not permit any subsidiary
bank to, incur any lien upon any shares of stock of any subsidiary bank without
securing the senior securities then outstanding under the senior indenture
equally and ratably with the lien. The subordinated indenture does not contain
this limitation.
Limitations on Acquisitions
Under the senior indenture, we may not acquire stock of any corporation
and we may not acquire substantially all of the assets and liabilities of any
corporation, unless, immediately after the acquisition, we would be in full
compliance with the senior indenture. The subordinated indenture does not
contain this limitation.
Certain Regulatory Matters Affecting Subordinated Securities
On August 28, 1992, the Board of Governors of the Federal Reserve System
issued an interpretation, effective September 4, 1992, with respect to the
circumstances under which mandatory convertible debt and subordinated debt
issued by bank holding companies will be eligible for inclusion as
supplementary or "Tier 2" capital for regulatory capital purposes. The
interpretation provides that mandatory convertible debt and subordinated debt
issued after September 4, 1992 will not be included in Tier 2 capital for
purposes of calculating an institution's capital ratios if, among other things,
the payment of the principal amount of such debt securities can be accelerated
upon the occurrence of certain events not involving the bankruptcy of the
issuer or such debt securities are subject to certain other covenants. Unless
we specify otherwise in the applicable prospectus supplement, the subordinated
securities are intended to qualify as Tier 2 capital under this interpretation.
Events of Default
Senior Securities. The following will be events of default under the
senior indenture with respect to securities of a series:
. our failure to pay principal of, or any premium on, any security
of that series when the payment is due,
. our failure to pay any interest on any security of that series
when the interest payment is due, and continuance of this default
for 30 days,
6
. our failure to deposit any sinking fund payment for security of
that series when the deposit is due,
. our failure to perform any other covenants in the indenture, other
than a covenant included in the indenture solely for the benefit
of a different series of securities, which has continued for 90
days after we have been given written notice of the default as
provided in the indenture,
. the occurrence of certain events in bankruptcy, insolvency or
reorganization involving M&I or a principal constituent bank, and
. any other event of default regarding that series of securities.
If an event of default in connection with any outstanding series of
securities occurs and is continuing, the trustee or the holders of at least 25%
in principal amount of the outstanding securities of that series may declare
the principal amount due and payable immediately. Subject to certain
conditions, the declaration of acceleration may be rescinded and annulled by
the holders of a majority of the principal amount of securities of that series.
Subordinated Securities. An event of default under the subordinated
indenture with respect to securities of any series is the occurrence of certain
events in bankruptcy, insolvency or reorganization involving M&I and any other
event of default regarding that series of securities. If an event of default in
connection with any outstanding series of securities occurs and is continuing,
the trustee or the holders of at least 25% in principal amount of the
outstanding securities of that series may declare the principal amount due and
payable immediately. Subject to certain conditions, the declaration of
acceleration may be rescinded and annulled by the holders of a majority of the
principal amount of securities of that series.
The following will be a default under the subordinated indenture with
respect to securities of a series:
. our failure to pay principal of, or any premium on, any security
of that series when the payment is due,
. our failure to pay any interest on any security of that series
when the interest payment is due, and continuance of this default
for 30 days,
. our default in the performance, or breach, of any of our covenants
or warranties in the indenture, other than a covenant or warranty
included in the indenture solely for the benefit of a different
series of securities, which has continued for 90 days after we
have been given written notice of the default as provided in the
indenture,
. any event of default under the subordinated indenture, and
. any other event of default regarding that series of securities.
If there is a default that is not also an event of default, the indenture
does not provide for any right of acceleration of the payment of principal. If
there is a default in payment of principal or interest (not cured within 30
days) in connection with any outstanding series of securities and upon demand
of the trustee, we will pay the whole principal amount (and premium, if any)
and interest, if any, then due and payable on the securities of that series to
the trustee for the benefit of the holders of the outstanding securities of
that series.
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Modification and Waiver
Each indenture provides that, subject to certain exceptions,
modifications and amendments to that indenture may be made by us and the
trustee with the consent of the holders of 66 2/3% of the principal amount of
the outstanding securities of each series affected by the modification or
amendment. However, no modification or amendment may, without the consent of
each holder affected:
. change the stated maturity of the principal of or any installment
of principal or interest on, any debt security,
. reduce the principal amount, the premium or interest on any debt
security,
. change the place of payment or currency in which any security or
any principal, premium or interest thereon is payable,
. impair the right to institute suit for the enforcement of any
payment on any debt security, or
. reduce the percentage of the principal amount of securities of any
series necessary for waiver of compliance with certain provisions
of the applicable indenture or for waiver of certain defaults
under the indenture, or
. in the case of the subordinated indenture, modify the provisions
of the indenture with respect to the subordination provisions in a
manner adverse to the holders of the subordinated securities.
In certain circumstances, we may enter into supplemental indentures with
respect to each indenture without the consent of holders of any outstanding
securities to evidence a merger, the replacement of the trustee or for other
specified purposes.
The holders of at least 50% of the principal amount of the outstanding
securities of any series may waive compliance by us with certain provisions of
the indentures. The holders of a majority of the principal amount of the
outstanding securities of any series may waive any past default under the
applicable indenture with respect to that series, except a default in the
payment of principal, or any premium or interest payable on any security of
that series or of a provision which under the applicable indenture cannot be
modified or amended, without the consent of each affected holder.
Consolidation, Merger and Sale of Assets
We may not consolidate with or merge into, and we may not transfer
substantially all of our assets as an entirety to, any entity, unless:
. the successor corporation assumes our obligations on the debt
securities and under the indentures,
. there is no event of default (or, in the case of the subordinated
indenture, no default),
. after notice or lapse of time, there is no event that occurred and
is continuing that would become an event of default (or default),
and
. certain other conditions are met.
8
Registration and Transfer
Each series of the offered securities will be issued in registered form
only, without coupons.
Unless otherwise indicated in the applicable prospectus supplement, the
securities issued in certificated form will be issued in integral multiples of
$1,000. No service charge will be made for any transfer or exchange of the
securities, but we may require payment of an amount sufficient to cover any tax
or other governmental charge payable in connection with a transfer or exchange.
Payment and Paying Agent
Unless otherwise indicated in the applicable prospectus supplement, we
will pay the principal, interest and premiums, if any, on fully registered
securities at the office of the trustee in New York, New York. At our option,
payment of interest on fully registered securities may also be made by check
mailed to the persons in whose names the securities are registered.
No Protection in the Event of a Highly Leveraged Transaction
The indentures do not protect holders from a sudden and dramatic decline
in our credit quality resulting from takeovers, recapitalizations, or similar
restructurings or other highly leveraged transactions.
Global Securities
The securities of a series may be issued in whole or in part in the form
of one or more global securities that will be deposited with a depositary that
we will identify in a prospectus supplement. Unless and until a global security
is exchanged in whole or in part for individual certificates in definitive form
which evidence the securities represented by a global security, a global
security may not be transferred except as a whole by the depositary to a
nominee of that depositary or by a nominee of that depositary to a depositary
or another nominee of that depositary.
The specific terms of the depositary arrangements for each series of
securities will be described in the applicable prospectus supplement.
Additional Provisions
Subject to certain limitations, we may in certain circumstances set any
day as the record date for the purpose of determining the holders of
outstanding securities of any series entitled to give or take any request,
demand, authorization, direction, notice, waiver or other action as provided or
permitted by the indentures.
The trustee has the duty to act with the required standard of care during
default. The trustee is not otherwise obligated to exercise any of its rights
or powers under either indenture at the request or direction of any of the
holders of the securities, unless the holders have offered the trustee
reasonable indemnification. The indentures provide that the holders of a
majority of the principal amount of outstanding securities of any series may,
in certain circumstances, direct the time, method and place of conducting any
proceedings for any remedy available to the trustee, or exercising any trust or
other power conferred on the trustee.
9
No holder of a security of any series will have any right to institute
any proceeding for any remedy under the applicable indenture, unless:
. the holder has provided the trustee with written notice of a
continuing event of default or default regarding the holder's
series of securities,
. the holders of at least 25% in principal amount of the outstanding
securities of a series have made a written request, and offered
reasonable indemnification to the trustee, to institute a
proceeding for remedy,
. the trustee has not received a direction during such 60-day period
inconsistent with such request from the holders of a majority in
principal amount of the outstanding securities, and
. the trustee has failed to institute the proceeding within 60 days
after receipt of such request.
However, the holder of any security will have an absolute right to
receive payment of principal, premium and any interest on such security on the
due dates expressed in such security and to institute suit for the enforcement
of any such payment.
Satisfaction and Discharge
Each indenture provides that we will be discharged from certain of our
obligations under that indenture relating to the outstanding securities of a
series if we deposit with the trustee funds sufficient for payment of all
principal, premium, interest and additional amounts, if any, on those
securities when due. In that event, holders of those securities will only be
able to look to the trust fund for payment of the principal, premium and
interest on their securities until maturity.
Governing Law
Each indenture and the securities will be governed by and construed in
accordance with the laws of the State of New York.
Reports to the Trustee
We are required to furnish the trustee an annual statement regarding
whether we are in default under the indentures.
The Trustee
The trustee currently serves as the trustee for our Medium-Term Series C
Notes and Series D Notes. In addition, some of our subsidiary banks have
deposit accounts and related banking relations with the trustee. Since debt
securities issued under the subordinated indenture do not rank equally with
debt securities issued under the senior indenture, upon a default under one of
the indentures, the trustee would have a conflicting interest if debt
securities were outstanding under the other indenture. As a result, the trustee
may be required to resign as trustee of one of the indentures and we may be
required to appoint a successor trustee.
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Book-Entry Securities
Unless we specify otherwise in the applicable prospectus supplement, we
will issue debt securities in the form of one or more book-entry certificates,
which is referred to below as the book-entry security, registered in the name
of a depositary or a nominee of a depositary. Unless we specify otherwise in
the applicable prospectus supplement, the depositary will be The Depository
Trust Company, or DTC. We have been informed by DTC that its nominee will be
Cede & Co. Accordingly, Cede is expected to be the initial registered holder of
all securities that we issue in book-entry form.
No person that acquires a beneficial interest in a book-entry security,
known as a beneficial owner, will be entitled to receive a certificate, except
as set forth in this prospectus or in the applicable prospectus supplement.
Unless and until definitive securities are issued under the limited
circumstances described below, all references to actions by beneficial owners
of securities issued in book-entry form will refer to actions taken by DTC upon
instructions from its participants, and all references to payments and notices
to beneficial owners will refer to payments and notices to DTC or Cede, as the
registered holder of a book-entry security.
DTC has informed us that it is:
. A limited purpose trust company organized under New York banking
laws,
. A "banking organization" within the meaning of the New York
banking laws,
. A member of the Federal Reserve System, and
. A "clearing agency" registered under the Exchange Act.
DTC has also informed us that it was created to:
. Hold securities for its participating clients, known as
participants, and
. Facilitate the clearance and settlement of securities transactions
among participants through electronic book-entry, thereby
eliminating the need for the physical movement of securities
certificates.
Participants include securities brokers and dealers, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly, which are referred to as indirect participants.
Persons that are not participants or indirect participants but that
desire to buy, sell or otherwise transfer ownership of or interest in
securities may do so only through participants and indirect participants. Under
the book-entry system, beneficial owners may experience some delay in receiving
payments, as such payments will be forwarded by our agent to Cede, as nominee
for DTC. DTC will forward such payments to its participants, which thereafter
will forward them to indirect participants or beneficial owners. Beneficial
owners will not be recognized by the applicable registrar, transfer agent or
trustee as registered holders of the securities entitled to the benefits of the
certificate or the applicable indenture. Beneficial owners that are not
participants will be permitted to exercise their rights as an owner only
indirectly through participants and, if applicable, indirect participants.
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Under the current rules and regulations affecting DTC, DTC will be
required to make book-entry transfers of securities among participants and to
receive and transmit payments to participants. Participants and indirect
participants with which beneficial owners of securities have accounts are also
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective account holders.
Because DTC can act only on behalf of participants, who in turn act only
on behalf of other participants or indirect participants, and on behalf of
certain banks, trust companies and other persons approved by it, the ability of
a beneficial owner of securities issued in book-entry form to pledge such
securities to persons or entities that do not participate in the DTC system may
be limited due to the unavailability of physical certificates for such
securities.
DTC has advised us that DTC will take any action permitted to be taken by
a registered holder of any securities under the certificate or the applicable
indenture, only at the direction of one or more participants to whose accounts
with DTC such securities are credited.
Unless otherwise specified in the applicable prospectus supplement, a
book-entry security will be exchangeable for definitive securities registered
in the names of persons other than DTC or its nominee only if:
. DTC notifies us that it is unwilling or unable to continue as
depositary for such book-entry security or DTC ceases to be a
clearing agency registered under the Exchange Act at a time when
DTC is required to be so registered,
. We execute and deliver to the applicable registrar, transfer agent
and/or trustee an order complying with the requirements of the
certificate or the applicable indenture that such book-entry
security will be so exchangeable, or
. There is a default in the payment of any amount due in respect of
the securities or an event of default.
Any book-entry security that is exchangeable pursuant to the preceding sentence
will be exchangeable forsecurities registered in such names as DTC directs.
If one of the events described in the immediately preceding paragraph
occurs, DTC is generally required to notify all participants of the
availability through DTC of definitive securities. Upon surrender by DTC of the
book-entry security representing the securities and delivery of instructions
for reregistration, the registrar, transfer agent or trustee, as the case may
be, will reissue the securities as definitive securities. After reissuance of
the securities, such persons will recognize the beneficial owners of such
definitive securities as registered holders of securities.
Except as described above:
. A book-entry security may not be transferred except as a whole
book-entry security by or among DTC, a nominee of DTC and/or a
successor depositary appointed by us, and
. DTC may not sell, assign or otherwise transfer any beneficial
interest in a book-entry security unless such beneficial interest
is in an amount equal to an authorized denomination for the
securities evidenced by the book-entry security.
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We, the trustees, any registrar and transfer agent, or any agent of any
of them, will not have any responsibility or liability for any aspect of DTC's
or any participant's records relating to, or for payments made on account of,
beneficial interests in a book-entry security.
Certain United States Federal Tax Consequences
This section describes the principal United States federal income tax
consequences of the ownership and disposition of the debt securities. This
summary assumes that the securities are held as capital assets by initial
purchasers. This summary is for general information only and is based upon the
Internal Revenue Code of 1986, as amended, which is referred to below as the
Code, and regulations, rulings, administrative pronouncements and court
decisions, all as in effect on the date hereof and all of which are subject to
change or differing interpretations at any time and in some circumstances with
retroactive effect.
This section does not discuss all of the tax consequences that may be
relevant to a purchaser in light of its particular circumstances or to
purchasers subject to special tax rules (including pension plans and other
tax-exempt investors, banks, thrifts, real estate investment trusts, regulated
investment companies, persons who hold securities as part of a straddle,
hedging or conversion transaction, insurance companies and dealers in
securities or foreign currencies). Persons considering the purchase of
securities should consult their tax advisors with regard to the application of
the United States federal income tax laws to their particular situation as well
as any tax consequences to them arising under the laws of any state, local or
foreign taxing jurisdiction.
The United States federal income tax consequences of the ownership and
disposition of securities containing special features, such as securities
denominated in a foreign currency, securities with multiple interest rates or
securities with extendible maturities, will be discussed in the applicable
prospectus supplement.
United States Holders
As used below, the term "U.S. Holder" means a beneficial owner of a
security that is for United States federal income tax purposes,
. a citizen or individual resident of the United States,
. a corporation or partnership created or organized in or under the
laws of the United States or of any political subdivision thereof,
other than a partnership that is not treated as a U.S. person
under any applicable Treasury regulations,
. an estate the income of which is subject to United States federal
income taxation regardless of its source, or
. a trust if, in general, a court within the United States is able
to exercise primary supervision over the administration of the
trust and one or more United States persons have the authority to
control all substantial decisions of the trust.
Payments of Stated Interest. Generally and except as described below, an
interest payment on a security will be taxable to a U.S. Holder as ordinary
income when it is accrued or paid in accordance with the U.S. Holder's method
of accounting for federal income tax purposes.
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Original Issue Discount. If a U.S. Holder holds a security which has
original issue discount, which is referred to below as OID, and a maturity of
more than one year from its date of issue, such U.S. Holder will generally be
required to recognize such OID as ordinary interest income on a constant yield
basis in advance of the receipt of cash payments to which such income is
attributable, regardless of the U.S. Holder's method of tax accounting. A
security referred to in the preceding sentence is referred to below as a
discount security.
A security has OID, if the excess of its "stated redemption price at
maturity" over its "issue price" equals or exceeds a de minimis amount (0.25%
of the stated redemption price at maturity multiplied by the number of complete
years to maturity). The stated redemption price at maturity of a security is
the sum of all payments provided by the security other than "qualified stated
interest" payments. The term "qualified stated interest" generally means stated
interest that is unconditionally payable at least annually at a single fixed
rate or at certain floating rates. The issue price of a security is the first
price at which a substantial amount of such issue of securities are sold to the
public.
In general, if the excess of a security's stated redemption price at
maturity over its issue price is de minimis, then such excess constitutes de
minimis OID. Unless a U.S. Holder elects to treat all interest as OID, as
described below, the security will not be treated as issued with OID and the
U.S. Holder of the security will recognize capital gain with respect to the de
minimis OID as stated principal payments on the security are made. The amount
of the gain with respect to each payment will equal the product of the total
amount of the security's de minimis OID and a fraction, the numerator of which
is the amount of the principal payment and the denominator of which is the
stated principal amount of the security.
Except as described below with respect to short-term securities, the
amount of OID that a U.S. Holder will be required to include in gross income in
a taxable year equals the sum of the daily portions of OID, determined by
allocating to each day of the taxable year during which the U.S. Holder holds
the security a pro rata portion of OID allocable to each accrual period in the
taxable year. An accrual period may be of any length selected by the U.S.
Holder and the accrual periods may vary in length over the term of the security
as long as each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of OID allocable to
each accrual period generally will equal the product of the security's
"adjusted issue price" at the beginning of such accrual period and its "yield
to maturity" determined on the basis of compounding at the close of each
accrual period and appropriately adjusted to take into account the length of
the particular accrual period, less the amount of any qualified stated interest
payments allocable to such accrual period. The "adjusted issue price" of a
security at the beginning of the first accrual period is simply the issue
price. Thereafter, the "adjusted issue price" of a security generally is the
sum of the issue price plus the amount of OID previously includible in the
gross income of the U.S. Holder reduced by the amount of any payments
previously made on the security, other than payments of qualified stated
interest. A discount security's "yield to maturity" is the discount rate that
causes the present value on the issue date of the payments provided for in such
security to equal the security's issue price. Thus, under these rules, a U.S.
Holder generally will have to include in gross income increasingly greater
amounts of OID during the life of the security. Special rules apply for
calculating OID in short initial or final accrual periods.
Optional Redemption. Generally, special rules apply for determining the
yield to maturity of discount securities which are subject to certain options.
If we have an unconditional option to redeem a discount security, or the U.S.
Holder has an unconditional option to cause a discount security to be
repurchased, in any case prior to the discount security's stated maturity, such
option will be presumed to be exercised if, by utilizing any date on which such
discount security may be redeemed or repurchased as the maturity date and the
amount payable on such date in accordance with the terms of the
14
discount security as the stated redemption price at maturity, the yield on the
discount security would be (a) in the case of an option of ours, lower than its
yield to stated maturity or (b) in the case of an option of the U.S. Holder,
higher than its yield to stated maturity. If such option is not in fact
exercised when presumed to be exercised, the discount security would be treated
solely for OID purposes as if it were retired and then reissued on the presumed
exercise date for an amount equal to the discount security's adjusted issue
price on that date.
Acquisition Premium. A U.S. Holder that purchases a discount security for
an amount that is greater than its adjusted issue price and less than or equal
to the sum of all amounts payable on the discount security after the purchase
date, other than payments of qualified stated interest, will be considered to
have purchased such discount security at an "acquisition premium." Under the
acquisition premium rules, the daily portion of OID which such U.S. Holder must
otherwise include in its gross income with respect to such discount security
for any day will be reduced by an amount which would be the daily portion of
OID for such day multiplied by a fraction, the numerator of which is the excess
of the U.S. Holder's adjusted basis in the discount security immediately after
its purchase over the adjusted issue price of the discount security, and the
denominator of which is the sum of the daily portions for such discount
security for all days after the date of purchase and ending on the stated
maturity date, i.e., the total OID remaining on the discount security.
Alternatively, rather than applying the acquisition premium fraction to
reduce the daily portion of accrued OID, a U.S. Holder of a discount security
may, as discussed below, elect to treat all interest on the discount security
as OID, adjusted for acquisition premium, and thus compute OID by treating the
purchase of the discount security as a purchase at original issuance and
applying the mechanics of the constant yield method. Prior to making this
election, a U.S. Holder of a discount security should consult its own tax
advisor concerning the potential United States federal income tax consequences
of such election in its particular situation.
Variable Securities. Floating rate securities and indexed securities
("variable securities") will be subject to special rules. Generally, provided
the variable security qualifies as a "variable rate debt instrument" (as
defined in the applicable income tax regulations) and provides for stated
interest at a single "qualified floating rate" or "objective rate" (each as
defined in the applicable income tax regulations) that is unconditionally
payable in cash or in property, other than debt instruments of ours, at least
annually, then all stated interest with respect to such variable security is
qualified stated interest, and the amount of OID, if any, is determined under
the general OID rules by assuming that the variable rate is a fixed rate equal
to in the case of a qualified floating rate or inverse floating rate, the
value, as of the issue date, of such qualified floating rate or inverse
floating rate, or in the case of an objective rate other than an inverse
floating rate, a rate that reflects the yield that is reasonably expected for
such variable security. Additional rules will apply, as set forth in the
applicable pricing supplement, if a variable security does not provide for
stated interest at a single qualified floating rate or objective rate, or if a
variable security provides for stated interest either at one or more qualified
floating rates or at an inverse floating rate and in addition provides for
stated interest at a single fixed rate.
Short-Term Securities. A security that has a fixed maturity date of not
more than one year from the date of issue (a "short-term security") will be
treated as issued with OID equal to the excess of the total principal and
interest payments thereon over its issue price. Generally, an individual or
other cash basis U.S. Holder of a short-term security is not required to
include OID in gross income currently for United States federal income tax
purposes unless it elects to do so. Such an election by a cash basis U.S.
Holder will apply to all short-term obligations acquired on or after the
beginning of the first taxable year to which the election applies and in all
subsequent taxable years unless the IRS consents to the revocation of the
election. Accrual basis U.S. Holders and certain other U.S. Holders, including
banks, regulated
15
investment companies, dealers in securities, common trust funds, U.S. Holders
that hold short-term securities as part of certain identified hedging
transactions, certain pass-through entities and cash basis U.S. Holders that so
elect, are required to include currently in gross income the OID on a
short-term security on either a straight-line basis or, at the irrevocable
election of the U.S. Holder, under the constant yield method based on daily
compounding. In the case of a U.S. Holder not required and not electing to
include OID in gross income currently, any gain realized on the sale or
retirement of the short-term security will be ordinary income to the extent of
the OID accrued on a straight-line basis (unless an irrevocable election is
made to accrue the OID under the constant yield method) through the date of
sale or retirement. U.S. Holders that are not required and do not elect to
include OID on short-term securities in gross income currently will be required
to defer deductions for all or a portion of interest expense on indebtedness
incurred or maintained to purchase or carry the short-term securities.
Any U.S. Holder of a short-term security can elect to apply the rules in
the preceding paragraph taking into account the amount of "acquisition
discount," if any, with respect to the security, rather than the OID with
respect to such security. Such election will apply to all short-term debt
obligations acquired by the U.S. Holder on or after the first day of the first
taxable year to which the election applies and in all subsequent taxable years,
and may not be revoked without the consent of the IRS. Acquisition discount is
the excess of the stated redemption price at maturity of the short-term
security over the U.S. Holder's purchase price therefor. Acquisition discount
will be treated as accruing on a ratable basis or, at the irrevocable election
of the holder, on a constant yield basis (with daily compounding).
For purposes of determining the amount of OID or acquisition discount
subject to these rules, the OID rules provide that no interest payments on a
short-term security are qualified stated interest and, therefore, such interest
payments are included in the short-term security's stated redemption price at
maturity.
Market Discount. The market discount rules in the Code generally provide
that if a person acquires a security, other than a short-term security, with
more than a de minimis amount of "market discount" (the amount by which the
stated redemption price at maturity or, in the case of a discount security, the
"revised issue price" of the security exceeds the U.S. Holder's tax basis for
the security immediately following its acquisition) (a "market discount
security"), any gain realized upon a disposition, including redemption or
retirement, of the security (other than in connection with certain
nonrecognition transactions), or any partial principal payment on the security,
will be treated as ordinary income (generally, interest income) to the extent
of the market discount which accrued while such U.S. Holder held the security.
The "revised issue price" of a market discount security is equal to the issue
price of the security plus the amount of OID includible in the income of all
holders for periods prior to the acquisition of the security by the U.S.
Holder, determined without regard to the acquisition premium rules discussed
above. Market discount is de minimis if it is less than 0.25% of the security's
stated redemption price at maturity multiplied by the number of complete years
remaining from the time the taxpayer acquired the security until its maturity.
The amount of market discount treated as having accrued will be determined
either on a ratable basis by multiplying the market discount and a fraction,
the numerator of which is the number of days the security was held by the U.S.
Holder and the denominator of which is the total number of days after the date
such U.S. Holder acquired the security up to and including its maturity date,
or if the U.S. Holder so elects on an irrevocable basis with respect to the
security, on a constant yield basis. The market discount rules also provide
that a U.S. Holder that acquires a market discount security may be required to
defer the deduction of all or a portion of interest expense that may otherwise
be deductible on any indebtedness incurred or maintained to purchase or carry
the security until the holder disposes of the security in a taxable transaction.
16
Instead of recognizing market discount, if any, upon the disposition of,
or partial principal payment on, a market discount security, a U.S. Holder may
elect to include market discount in gross income currently as it accrues,
either on a ratable basis or on a constant yield basis, as described above. The
current inclusion election, once made, applies to all market discount
obligations of the holder acquired on or after the first day of the taxable
year in which the election applies and in all subsequent taxable years and may
not be revoked without the consent of the IRS. If a U.S. Holder elects to
include market discount in gross income in accordance with these rules or makes
the election to treat all interest as OID, the foregoing discussion regarding
the deferral of interest deductions on indebtedness incurred or maintained to
purchase or carry the security would not apply. Further, if a U.S. Holder makes
the election, discussed below, to treat as OID all interest on a market
discount security, the U.S. Holder is deemed to have made the election to
include market discount in gross income currently using a constant yield method
on all other market discount obligations. Finally, if a U.S. Holder has
previously made the election to include market discount currently, the
conformity requirements of that election are satisfied for market discount
securities with respect to which the U.S. Holder elects to treat all interest
as OID.
The Treasury Department is authorized to issue regulations implementing
the market discount provisions of the Code. The Treasury Department has not
issued or proposed any such regulations. It is impossible to anticipate what
effect, if any, such regulations would have on purchasers of the securities.
Amortizable Bond Premium. Generally, if the tax basis of a security
immediately after its purchase by a U.S. Holder exceeds the sum of all amounts
payable on the security after the purchase date, other than payments of
qualified stated interest, such excess will constitute "bond premium" which a
U.S. Holder may elect to amortize over the period from the security's
acquisition date to its maturity date (or, in certain circumstances, until an
earlier redemption date). A U.S. Holder that purchases a security with bond
premium is not required to include in gross income any OID on the security. A
U.S. Holder that makes the election to amortize bond premium is required to
allocate the bond premium to each accrual period under the constant yield
method, using a yield computed based on the U.S. Holder's initial tax basis for
the security and all payments to be made thereon after the security's
acquisition date, in a manner similar to the application of such method in the
accrual of OID, as discussed above. The amount of the amortized bond premium
allocated to an accrual period generally will be treated first as a reduction
of the qualified stated interest on the security included by the U.S. Holder in
that accrual period to the extent thereof, then as a deduction allowed in that
accrual period to the extent of the U.S. Holder's prior interest inclusions on
the security, and finally as a carryforward allowable against the U.S. Holder's
future interest inclusions on the security. A U.S. Holder that elects to
amortize bond premium must reduce its tax basis in the security by the amount
of the bond premium used to reduce qualified stated interest on the security
and the amount allowed as a deduction against the U.S. Holder's prior interest
inclusions on the security. The election to amortize bond premium will apply to
all debt instruments held by the U.S. Holder at the beginning of the first
taxable year to which the election applies or thereafter acquired, and is
irrevocable without the consent of the IRS. The election to treat all interest,
including for this purpose, amortizable bond premium, as OID is deemed to be an
election to amortize bond premium for purposes of the conformity requirements
of the latter election. In addition, if a U.S. Holder has already made an
election to amortize bond premium, the conformity requirements will be deemed
satisfied with respect to a security for which the U.S. Holder makes an
election to treat all interest as OID.
In the case of a security that may be redeemed prior to maturity, an
earlier redemption date of the security is treated as the maturity date of the
security and the amount of bond premium is determined by treating the amount
payable on such redemption date as the amount payable at maturity if such a
calculation increases a U.S. Holder's yield. If the
17
security is not redeemed on such call date, the remaining bond premium may be
amortized to a later call date or to maturity under the rules set forth above.
In general terms, if a security purchased with bond premium is redeemed prior
to its maturity, a U.S. Holder that has elected to amortize the bond premium
may deduct any remaining unamortized bond premium as an ordinary loss in the
taxable year of the redemption.
If an election to amortize bond premium is not made by a U.S. Holder, the
U.S. Holder must include in gross income the full amount of each interest
payment on the security and will include the bond premium in its tax basis for
the security for purposes of computing its gain or loss on the disposition of
the security.
Special rules apply to certain variable securities, and U.S. Holders
should consult their tax advisors regarding these rules.
Possible Election to Treat All Interest as OID. A U.S. Holder of a debt
instrument is entitled to elect to treat all interest that accrues on the
instrument as OID. Interest for this purpose includes stated interest, OID
(including any de minimis OID), acquisition discount, market discount
(including any de minimis market discount), and unstated interest, adjusted for
amortizable bond premium and acquisition premium. Special rules and limitations
apply to taxpayers that make this election and, as discussed herein, this
election may affect the tax treatment of other debt instruments held by a U.S.
Holder. The election is made for the year in which the U.S. Holder acquired the
security, and may not be revoked without the consent of the IRS. Prior to
making such an election, U.S. Holders should consult their own tax advisors
regarding the decision of whether to make this election.
Disposition of a Security. Except as discussed above, upon the sale,
exchange, retirement or other taxable disposition of a security, a U.S. Holder
generally will recognize taxable gain or loss equal to the difference between
the amount realized on the disposition, other than amounts representing
qualified stated interest, which will be taxable as such, and such U.S.
Holder's adjusted tax basis in such security. A U.S. Holder's adjusted tax
basis in a security generally will equal such U.S. Holder's initial investment
in such security, increased by any OID or acquisition discount and any accrued
market discount includible in gross income, and decreased by the amount of any
payments that are not qualified stated interest payments and amortizable bond
premium applied to reduce, or allowed as a deduction against, interest with
respect to such security. Except as discussed above with respect to short-term
securities, market discount securities and contingent securities, such gain or
loss generally will be long-term capital gain or loss if the security was held
for more than one year at the time of the disposition.
Information Reporting and Backup Withholding. In general, information
reporting requirements will apply to payments of principal, any premium and
interest on a security, including accrual of OID on a discount security, and
the proceeds of the sale of a security before maturity within the United States
to non-corporate U.S. Holders. In addition, "backup withholding" at a rate of
31% will apply to such payments and to payments of OID if the U.S. Holder fails
to provide an accurate taxpayer identification number or is notified by the IRS
that it has failed to report all interest and dividends required to be shown on
its federal income tax returns.
Any amounts withheld under the backup withholding rules from payment to a
beneficial owner would be allowed as a refund or credit against such beneficial
owner's United States federal income tax provided the required information is
furnished to the IRS.
18
Non-U.S. Holders
As used herein, a "Non-U.S. Holder" means a beneficial owner of a
security other than a U.S. Holder. Under present U.S. federal income and estate
tax law and subject to the discussion of backup withholding below:
(1) payments of principal, premium, if any, interest and OID on a
security by us or any of our agents to any Non-U.S. Holder will not be subject
to withholding of U.S. federal income tax, provided that in the case of
interest and OID:
. the Non-U.S. Holder does not directly or indirectly, actually or
constructively, own ten percent or more of the total combined
voting power of all classes of our stock entitled to vote;
. the Non-U.S. Holder is not a controlled foreign corporation that
is related to us through sufficient stock ownership, or a bank
receiving interest described in Section 881(c)(3)(A) of the Code;
and
. either the beneficial owner of the security certifies to us or our
agent, under penalties of perjury, that it is not a "United States
person" under the meaning of the Code and provides its name and
address, or a securities clearing organization, bank or other
financial institution that holds customers' securities in the
ordinary course of its trade or business that holds the security
on behalf of the beneficial owner certifies to us or our agent
under penalties of perjury that it, or the financial institution
between it and the beneficial owner, has received from the
beneficial owner a statement, under penalties of perjury, that it
is not a "United States person" and provides the payor with a copy
of this statement;
(2) a Non-U.S. Holder will not be subject to U.S. federal income tax on
any gain realized on the sale, exchange, redemption, retirement at maturity or
other disposition of a security, unless:
. the Non-U.S. Holder is an individual who is present in the United
States for 183 days or more during the taxable year and some other
conditions are met; or
. the gain is effectively connected with the conduct of a U.S. trade
or business by the Non-U.S. Holder, or if an income tax treaty
applies, is generally attributable to a U.S. "permanent
establishment" maintained by the Non-U.S. Holder; and
(3) a security held by an individual who at the time of death is not a
citizen or resident of the United States will not be subject to U.S. federal
estate tax as a result of the individual's death if, at the time of the
individual's death:
. the individual did not directly or indirectly, actually or
constructively, own ten percent or more of the total combined
voting power of all classes of our stock entitled to vote; and
. the income on the security would not have been effectively
connected with the conduct of a trade or business by the
individual in the United States.
If a Non-U.S. Holder is engaged in a trade or business in the United
States and interest, including OID, on the security is effectively connected
with the conduct of this trade or business or if an income tax treaty applies
and the Non-U.S. Holder maintains a U.S. "permanent establishment" to which the
interest, including OID, is generally attributable, although the Non-U.S.
Holder is exempt from the withholding tax discussed in the preceding paragraph
(1) provided that the holder furnishes a properly executed United States
Internal Revenue Service Form W-8ECI or successor form on or before any payment
date to claim the exemption, the holder may be subject to U.S. federal income
tax on such interest, including OID, on a net basis in the same manner as if it
were a U.S. Holder.
19
In addition, a foreign corporation that is a holder of a security may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits for the taxable year, subject to some adjustments, unless
it qualifies for a lower rate under an applicable income tax treaty. For this
purpose, interest on a security or gain recognized on the disposition of a
security will be included in earnings and profits if the interest or gain is
effectively connected with the conduct by the foreign corporation of a trade or
business in the United States.
Recently finalized Treasury Regulations generally effective for payments
made after December 31, 2000 will provide alternative methods for satisfying
the certification requirement described in the third bullet point of paragraph
(1) above. The finalized Treasury Regulation generally also will require, in
the case of a security held by a foreign partnership, that the certification
described in the third bullet point of paragraph (1) above be provided by the
partners and that the partnership provide certain information, including a U.S.
taxpayer identification number. A look-through rule will apply in the case of
tiered partnerships.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by us or any of our agents, in their
capacities as agents, to a Non-U.S. Holder of a security if the holder has
provided the required certification that it is not a United States person as
set forth in paragraph (1) above, provided that neither we nor our agent has
actual knowledge that the holder is a United States person. We or our agent
may, however, report payments of interest on the securities. Payments of the
proceeds from a disposition by a Non-U.S. Holder of a security made to or
through a foreign office of a broker will not be subject to information
reporting or backup withholding, except that information reporting may apply to
those payments if the broker is
. a United States person,
. a controlled foreign corporation for U.S. federal income tax
purposes,
. a foreign person 50% or more of whose gross income is effectively
connected with a U.S. trade or business for a specified three-year
period, or
. with respect to payments made after December 31, 2000, (i) a
United States branch of a foreign bank or foreign insurance
company or (ii) a foreign partnership, if at any time during its
tax year, one or more of its partners are U.S. persons, as defined
in Treasury Regulations, who in the aggregate hold more than 50%
of the income or capital interest in the partnership or if, at any
time during its tax year, the foreign partnership is engaged in a
U.S. trade or business.
Payments of the proceeds from a disposition by a Non-U.S. Holder of a
security made to or through the U.S. office of a broker are subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its taxpayer identification number or otherwise
establishes an exemption from information reporting and backup withholding.
Any amounts withheld under the backup withholding rules from a payment to
a Non-U.S. Holder would be allowed as a refund or a credit against the holder's
U.S. federal income tax liability, provided the required information is
furnished to the U.S. Internal Revenue Service.
20
Plan of Distribution
General
We may sell debt securities to or through underwriters, directly to
institutional investors or other purchasers, through agents or through a
combination of methods. The distribution of the securities may be effected from
time to time in one or more transactions at a fixed price or prices, which may
be changed, or at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices.
Sales May be Underwritten
If underwriters or dealers are used in the sale, the securities will be
acquired by the underwriters or dealers for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The securities may be offered to the public either through
underwriting syndicates represented by one or more managing underwriters, or
directly by one or more of such firms.
Unless we specify otherwise in the prospectus supplement, the obligations
of the underwriters to purchase securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all of
the securities offered by the prospectus supplement if any are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Sales by Agents
We may also sell the securities directly or through agents (which may
also act as principals) which we may designate from time to time. Any agent
involved in the offer or sale of securities with regard to which this
prospectus is delivered will be named in the applicable prospectus supplement.
Unless otherwise indicated in the applicable prospectus supplement, these
agents will be acting on a best efforts basis for the period of their
appointment.
Underwriting Compensation
In connection with the sale of debt securities, underwriters or agents
may receive compensation from us or from purchasers of debt securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell debt securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of debt securities may be deemed to be underwriters, and any
discounts or commissions received by them from us and any profit on the resale
of debt securities by them may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from us will be described in the
related prospectus supplement.
21
Listing
The debt securities may or may not be listed on a national securities
exchange. If the debt securities are not listed on a national securities
exchange, certain broker-dealers may make a market in the debt securities, but
are not obligated to do so and may discontinue any market-making at any time
without notice. There can be no assurance of an active trading market for the
debt securities.
Indemnification
We may agree to indemnify underwriters and agents who participate in the
distribution of debt securities against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments which the
underwriters or agents may be required to make in respect thereof. Such
underwriters and agents may be customers of, engage in transactions with, or
perform services for, us in the ordinary course of business.
Other Relationships
Certain of our underwriters or agents and their associates may engage in
transactions with and perform services for us or our affiliates in the ordinary
course of their respective businesses.
Delayed Delivery Contracts
If indicated in the related prospectus supplement, we will authorize
underwriters, dealers or other persons acting as our agents to solicit offers
by certain institutions to purchase debt securities from us pursuant to
contracts providing for payment and delivery on a future date. These
institutions may include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions
and such other institutions as we may approve. A purchaser under any such
contract will be obligated to purchase the debt securities unless such purchase
at the time of delivery is prohibited under the laws of the jurisdiction to
which such purchaser is subject. The underwriters and such other agents will
not have any responsibility in respect of the validity or performance of such
contracts.
Price Stabilization
If underwriters or dealers are used in the sale, until the distribution
of the securities is completed, rules of the SEC may limit the ability of any
of the underwriters and selling group members to bid for and purchase the
securities. As an exception to these rules, representatives of any underwriters
are permitted to engage in transactions that stabilize the price of the
securities. These transactions may consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the securities. We make no
representation or prediction as to the direction or magnitude of any effect
that these transactions may have on the price of the securities. In addition,
we make no representation that the representatives of any underwriters will
engage in these transactions or that these transactions, once commenced, will
not be discontinued without notice.
Legal Matters
The validity of the debt securities offered hereby will be passed upon
for us by Godfrey & Kahn, S.C., Milwaukee, Wisconsin 53202.
22
Experts
Our financial statements for the year ended December 31, 1999
incorporated into this prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, which is incorporated herein by reference, and is included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
23
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TABLE OF CONTENTS
Prospectus Supplement
Page
----
Summary of Prospectus Supplement............ S-2
About This Prospectus Supplement and Pricing
Supplements............................... S-4
Risk Factors................................ S-5
Marshall & Ilsley Corporation............... S-5
Ratio of Earnings to Fixed Charges.......... S-6
Description of Notes........................ S-6
General.................................. S-6
Payment of Principal and Interest........ S-7
Redemption and Repurchase................ S-8
Repayment at Option of Holder............ S-9
Repayment Upon Death..................... S-9
Book-Entry System........................ S-11
Certain United States Federal Income Tax
Consequences.............................. S-13
United States Holders.................... S-14
Non-U.S. Holders......................... S-18
Information Reporting and Backup
Withholding............................ S-19
ERISA Considerations........................ S-20
General.................................. S-20
Prohibited Transactions.................. S-20
Supplemental Plan of Distribution........... S-21
Legal Matters............................... S-22
Prospectus
About This Prospectus................... 1
Where You Can Find More Information..... 1
Forward-Looking Statements.............. 2
Marshall & Ilsley Corporation........... 2
Use of Proceeds......................... 2
Ratio of Earnings to Fixed Charges...... 3
Description of Debt Securities.......... 3
Book-Entry Securities................... 11
Certain United States Federal Income Tax
Consequences.......................... 13
Plan of Distribution.................... 21
Legal Matters........................... 22
Experts................................. 23
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$500,000,000
[LOGO] M&I(R)
Marshall & Ilsley Corporation
MiNotes/SM/
-----------------
PROSPECTUS SUPPLEMENT
-----------------
Purchasing Agent and Lead Manager
A.G. Edwards & Sons, Inc.
Agents
Robert W. Baird & Co.
Prudential Securities
UBS PaineWebber Inc.
May 3, 2002
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