<PAGE> 1
Pursuant to Rule 424(b)(5)
File No. 33-49965
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 15, 1994)
(LOGO) $3,000,000,000
Chemical Banking Corporation
Senior Medium-Term Notes, Series C
Subordinated Medium-Term Notes, Series A
Due from 9 Months to 30 Years from Date of Issue
Chemical Banking Corporation (the "Company") may offer from time to time its
Senior Medium-Term Notes, Series C (the "Senior Notes") and its Subordinated
Medium-Term Notes, Series A (the "Subordinated Notes" and, together with the
Senior Notes, the "Notes"), having an aggregate initial public offering price
not to exceed $3,000,000,000 (or the equivalent thereof in foreign currencies or
composite currencies, including European Currency Units), subject to reduction
as a result of the sale of other Debt Securities or Offered Securities (as each
such term is defined in the accompanying Prospectus). Unless otherwise specified
in the applicable Pricing Supplement, each Note will bear interest at a fixed
rate (a "Fixed Rate Note"), which may be zero in the case of certain Notes
issued at a price representing a discount from the principal amount payable at
maturity, or at a floating rate (a "Floating Rate Note") determined by reference
to the CD Rate, the Commercial Paper Rate, the Federal Funds Effective Rate,
LIBOR, the Treasury Rate or the Prime Rate, as adjusted by the Spread or Spread
Multiplier (as each such term is defined in this Prospectus Supplement), if any,
applicable to such Note. Interest rates and interest rate formulas are subject
to change by the Company but no such change will affect any Note already issued
or which the Company has agreed to issue. Each Note will mature on a date from 9
months to 30 years from its date of issue, as mutually agreed between the
purchaser and the Company. If the Notes are to be denominated in a foreign
currency or composite currency, then certain provisions with respect thereto
will be set forth in a foreign currency supplement hereto ("Multi-Currency
Prospectus Supplement") and the applicable pricing supplement hereto ("Pricing
Supplement"). Unless otherwise indicated in the applicable Pricing Supplement,
the Notes may not be redeemed prior to maturity by the Company, or repaid at the
option of the holder, and will be issued in fully registered form in
denominations of $1,000 and any integral multiple of $1,000 in excess thereof.
The Notes will not be subject to any sinking fund. See "Description of the
Medium-Term Notes" in this Prospectus Supplement.
The Notes may be issued as Senior Securities or Subordinated Securities.
Subordinated Securities will be subordinated to all Senior Indebtedness and,
under certain circumstances, to Additional Senior Obligations of the Company,
and are subject to acceleration only upon certain events of bankruptcy or
reorganization of the Company. There will be no right of acceleration of the
payment of the principal of the Subordinated Notes upon a default in the payment
of interest or a default in the performance of any covenant or agreement in the
Subordinated Notes or the Subordinated Indenture (as defined in this Prospectus
Supplement). See "Description of Debt Securities -- Subordinated Securities" in
the accompanying Prospectus.
Each Note will be represented either by a certificate issued in definitive form
(a "Certificated Note"), or by a global Note (a "Global Note") registered in the
name of a nominee of The Depository Trust Company, as Depositary, or other
depositary (each such Note represented by a Global Note being referred to herein
as a "Book-Entry Note"). Beneficial interests in Book-Entry Notes will be shown
on, and transfers thereof will be effected only through, records maintained by
the Depositary or its participants. A beneficial interest in a Book-Entry Note
will be exchanged for Notes in definitive form only under the limited
circumstances described in this Prospectus Supplement. See "Description of the
Medium-Term Notes -- Book-Entry Notes" in this Prospectus Supplement.
The series designation of the Notes, the interest rate or interest rate formula,
if any, issue price, stated maturity, any interest payment dates, any redemption
provisions, and any repayment provisions for each Note and whether such Note
will be a Book-Entry Note or a Certificated Note will be established by the
Company prior to the date of issuance of such Note and will be indicated in the
applicable Pricing Supplement.
THE NOTES ARE UNSECURED DEBT OBLIGATIONS OF THE COMPANY, ARE NOT DEPOSITS OR
OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY
SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Agents' Discounts and Commissions
Price to Public (1) (2) Proceeds to Company (2)(3)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note 100% .125% - .750% 99.250% - 99.875%
- ----------------------------------------------------------------------------------------------------------
Total $3,000,000,000(4) $3,750,000 - 22,500,000(4) $2,977,500,000 - 2,996,250,000(4)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, each Note
will be issued at 100% of its principal amount.
(2) The Company will pay to one or more Agents (as defined herein) a commission,
which may range from .125% to .750% of the principal amount of any Note,
depending upon its maturity, sold through such Agent, unless otherwise
specified in the applicable Pricing Supplement. The Company may also sell
Notes to any Agent, acting as principal, at a discount for resale at a fixed
offering price or at varying prices related to market prices at the time of
resale. The commission on or discount with respect to such sales will be
negotiated at the time of such sale. The Company may also sell Notes
directly to investors, and no commission will be payable on any such sales
made by the Company. The Company will agree to indemnify each Agent against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended.
(3) Assuming Notes are issued at 100% of principal amount and before deducting
expenses payable by the Company estimated at $200,000.
(4) Or the equivalent thereof denominated in foreign currencies or composite
currencies at the date of issue.
------------------
The Notes are being offered on a continuing basis by the Company in those
jurisdictions where such offering by the Company is authorized. The Company may
also offer the Notes through one or more Agents, who may include affiliates of
the Company, who have separately agreed to use their reasonable efforts to
solicit offers to purchase the Notes (each, an "Agent"). The Company may also
sell the Notes to any Agent, acting as principal, for its own account or for
resale to one or more investors or to another broker-dealer (acting as principal
for purposes of resale) at a fixed offering price or at varying prices related
to prevailing market prices at the time of resale. The Company may also accept
(but not solicit) offers to purchase Notes through additional agents on
substantially the same terms and conditions as would apply to sales through
Agents. The Notes will not be listed on any securities exchange, and there can
be no assurance that the Notes will be sold or that there will be a secondary
market for the Notes. The Company reserves the right to withdraw, cancel or
modify the offer or solicitation of offers made hereby without notice. The
Company or any Agent, if it solicits such offer, may reject any offer in whole
or in part. See "Plan of Distribution" in this Prospectus Supplement.
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is February 15, 1994.
<PAGE> 2
DESCRIPTION OF THE MEDIUM-TERM NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Debt Securities" and
the "Senior Securities" or the "Subordinated Securities", as applicable)
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities, Senior Securities
and Subordinated Securities, as the case may be, set forth in the Prospectus, to
which description reference is hereby made. The following description will apply
to the Notes unless otherwise specified in the applicable Pricing Supplement.
Reference is also made to the Glossary in this Prospectus Supplement for
the definition of some of the terms used herein.
GENERAL
The Notes are limited initially to an aggregate initial public offering
price not to exceed U.S. $3,000,000,000 (or the equivalent thereof in foreign
currencies or composite currencies, including European Currency Units), subject
to reduction as a result of the sale of other Debt Securities or Offered
Securities. Such limit may be increased by action of the Company's Board of
Directors or, subject to certain limitations, its Borrowings Committee. The
aggregate principal amount of Senior Notes issued prior to the date of this
Prospectus Supplement and outstanding as of the date of this Prospectus
Supplement is $1,849,300,000. There are no Subordinated Notes outstanding as of
the date of this Prospectus Supplement.
The Notes offered hereby may be Senior Securities or Subordinated
Securities. The Notes constituting Senior Securities will be issued under the
Indenture, dated as of December 1, 1989, as amended, between the Company and The
Chase Manhattan Bank (National Association), as Trustee (the "Senior
Indenture"), will constitute one series of Senior Securities established by the
Company pursuant to such Senior Indenture and will rank pari passu with all
other Senior Securities of the Company. The Notes constituting Subordinated
Securities will be issued under the Indenture, dated as of April 1, 1987, as
amended and restated as of December 15, 1992, between the Company and Morgan
Guaranty Trust Company of New York, as Trustee (the "Subordinated Indenture"
and, together with the Senior Indenture, the "Indentures"), will constitute one
series of Subordinated Securities established by the Company pursuant to such
Subordinated Indenture, will rank pari passu with all other subordinated debt of
the Company and, together with such other subordinated debt, will be
subordinated in right of payment to the prior payment in full of the Senior
Indebtedness (as defined in the Subordinated Indenture) of the Company and,
under the circumstances described in the Subordinated Indenture, to Additional
Senior Obligations of the Company. See "Description of Debt
Securities -- Subordinated Securities -- Subordination" in the accompanying
Prospectus. As of December 31, 1993, the aggregate principal amount of Senior
Indebtedness and Additional Senior Obligations (as each such term is defined in
the Subordinated Indenture) outstanding was approximately $5.8 billion. The
statements in this Prospectus Supplement concerning the Notes do not purport to
be complete and are subject to, and qualified in their entirety by reference to,
the Senior Indenture and the Subordinated Indenture, including definitions
therein of certain terms.
Payment of principal of the Notes constituting Subordinated Securities may
be accelerated only upon certain events of bankruptcy or reorganization of the
Company. There is no right of acceleration of the payment of principal of the
Notes constituting Subordinated Securities upon a default in the payment of
interest on such Notes or in the performance of any covenant of the Company
contained in the Subordinated Indenture. See "Description of Debt
Securities -- Subordinated Securities -- Defaults and Waiver Thereof " in the
accompanying Prospectus. Except as may be set forth in a supplement to this
Prospectus Supplement, the Notes constituting Subordinated Securities are not
convertible into any other securities and are not exchangeable for Capital
Securities (as defined in the Subordinated Indenture) of the Company. See
"Description of Debt Securities -- Subordinated Securities" in the accompanying
Prospectus.
The Notes are being offered on a continuing basis. Each Note will mature on
a Business Day from 9 months to 30 years from its date of issue, as mutually
agreed between the purchaser and the Company. Except as provided in the
applicable Pricing Supplement, the Notes will not be subject to redemption or
repayment prior to maturity and will not be subject to any sinking fund.
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The Notes may bear interest at (i) a fixed rate (a "Fixed Rate Note") or
(ii) a floating rate (a "Floating Rate Note") on which rates are determined, and
adjusted periodically, by reference to an interest rate basis or formula,
adjusted by a Spread or Spread Multiplier, if any. See "Interest and Interest
Rates" below. Fixed Rate Notes may be issued in the form of Original Issue
Discount Notes (as defined in "Taxation" below) which will be offered at a
discount from the principal amount thereof due at the stated maturity of such
Notes. There may not be any periodic payments of interest on Original Issue
Discount Notes. In the event of an acceleration of maturity of any Original
Issue Discount Note, the amount payable to the holder of such Original Issue
Discount Note upon such acceleration will be determined in accordance with the
applicable Pricing Supplement and the terms of such security, but will be an
amount less than the amount payable at the maturity of the principal of such
Original Issue Discount Note. For a discussion of the United States federal
income tax consequences with respect to Original Issue Discount Notes, see
"Taxation" below.
The Notes will be denominated in U.S. dollars and payments of principal of
and interest on the Notes will be made in U.S. dollars, except as may otherwise
be provided in an applicable Pricing Supplement and Multi-Currency Prospectus
Supplement. Except as provided in the applicable Pricing Supplement, the
authorized denominations of the Notes denominated in U.S. dollars will be U.S.
$1,000 and integral multiples of U.S. $1,000 in excess thereof.
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note in fully registered form without coupons. All Notes issued on
the same day and having the same terms (including, but not limited to, the same
series designation, Interest Payment Dates, rate of interest, date of maturity
and redemption or repayment provisions) will be represented by a single
Book-Entry Note. A beneficial interest in a Book-Entry Note will be shown on,
and transfers thereof will be effected only through, records maintained by the
Depositary or its participants and, except under the limited circumstances
described below, Book-Entry Notes will not be issuable in certificated form. See
"Book-Entry Notes" below. Certificated Notes may be presented for registration
of transfer or exchange at the corporate trust office of Chemical Bank in the
Borough of Manhattan, The City of New York.
Except as provided in the applicable Pricing Supplement, (i) interest
(other than interest payable upon maturity, or upon earlier redemption or
repayment, of principal) will be payable by check to the person in whose name a
Note is registered at the close of business on the applicable Record Date before
each Interest Payment Date, provided that a holder of $10,000,000 or more in
aggregate principal amount of Certificated Notes of like tenor and terms shall
be entitled to receive such payments in U.S. dollars by wire transfer of
immediately available funds (but only if appropriate payment instructions have
been received in writing by the Paying Agent (as defined below) not less than 15
calendar days prior to the applicable Interest Payment Date), (ii) interest
payable upon maturity, or upon earlier redemption or repayment, of principal
will be payable to the person to whom principal is payable and (iii) at
maturity, or upon earlier redemption or repayment of principal, payments of
principal and interest will be made upon presentment of the Note to the paying
agent for the Notes, which will initially be Chemical Bank, located at 55 Water
Street, New York, New York 10041. In the case of Book-Entry Notes, payments of
principal and interest will be made to the Depositary or its nominee. Payments
to beneficial owners of Book-Entry Notes will be made through the Depositary and
its participants. See "Book-Entry Notes" below.
Each Multi-Currency Prospectus Supplement relating to Notes denominated in
other than U.S. dollars will describe certain terms that relate to such Notes.
INTEREST AND INTEREST RATES
Each Note will accrue interest from and including its date of issue and
will be either a Fixed Rate Note or a Floating Rate Note. The applicable Pricing
Supplement will designate whether a particular Note is a Fixed Rate Note or a
Floating Rate Note and, in the case of a Floating Rate Note, whether such Note
is a CD Rate Note, a Commercial Paper Rate Note, a Federal Funds Effective Rate
Note, a LIBOR Note, a Treasury Rate Note, a Prime Rate Note or a Note based on
such other interest rate formula as is set forth in such Pricing Supplement.
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Effective Rate
Notes, LIBOR Notes, Treasury Rate Notes, Prime Rate Notes or Notes based on
other interest rate formulas will have daily, weekly,
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<PAGE> 4
monthly, quarterly, semi-annual or annual resets of the rate of interest, and
the Reset Dates will be specified in the applicable Pricing Supplement and on
the face of each Note. In addition, the applicable Pricing Supplement will
specify the Spread or Spread Multiplier, if any, and the Maximum Interest Rate
or Minimum Interest Rate limitation, if any, applicable to each Floating Rate
Note. The Pricing Supplement may also contain particulars as to the Calculation
Agent, Calculation Date, Index Maturity, Initial Interest Rate, Interest
Determination Date, Interest Payment Date and Record Dates with respect to each
Note. The interest rate on the Notes will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States laws
of general application. Under current New York law, the maximum rate of interest
is 25% per annum on a simple interest basis. This limit will not apply to Notes
in a principal amount of $2,500,000 or more.
Unless otherwise indicated in the applicable Pricing Supplement, each
interest payment on any Interest Payment Date in respect of Floating Rate Notes
(other than Floating Rate Notes that reset daily or weekly) will include
interest accrued from and including the date of issue or the last date to which
interest has been paid, as the case may be, to but excluding the applicable
Interest Payment Date or the date of maturity, as the case may be. In the case
of Floating Rate Notes that reset daily or weekly, unless otherwise indicated in
the applicable Pricing Supplement, each interest payment on any Interest Payment
Date will include interest accrued from and including the date of issue or from
but excluding the last date in respect of which interest has been paid, as the
case may be, to and including the Record Date preceding the applicable Interest
Payment Date or to but excluding the date of maturity, as the case may be.
With respect to a Floating Rate Note, accrued interest will be calculated
by multiplying the principal amount of such Note by an accrued interest factor.
Such accrued interest factor will be computed by adding the interest factors
calculated for each day in the period for which accrued interest is being
calculated. Unless otherwise specified in the applicable Pricing Supplement, the
interest factor (expressed as a decimal rounded to the nearest ten-thousandth,
with five hundred-thousandths rounded upwards) for each such day is computed by
dividing the interest rate in effect on such day (expressed as a decimal rounded
to the nearest ten-thousandth, with five hundredth-thousandths rounded upwards)
by (i) the actual number of days in the year, in the case of Treasury Rate
Notes, and (ii) 360, in the case of all other Floating Rate Notes. The interest
rate in effect on each day with respect to a Floating Rate Note will be (i) if
such day is a Reset Date, the interest rate with respect to the Interest
Determination Date pertaining to such Reset Date, or (ii) if such day is not a
Reset Date, the interest rate with respect to the Interest Determination Date
pertaining to the preceding Reset Date, subject in either case to any adjustment
by a Spread or a Spread Multiplier and to any Maximum Interest Rate or Minimum
Interest Rate limitation. In all such cases, however, (i) the interest rate in
effect for the period from and including the date of issue to the initial Reset
Date set forth in the Pricing Supplement with respect to such Note will be the
Initial Interest Rate specified in the applicable Pricing Supplement and (ii)
the interest rate in effect for the ten calendar days prior to the date of
maturity will be that in effect on the tenth calendar day preceding such date of
maturity.
Interest on a Note will be payable on the first Interest Payment Date
following its date of issue, unless the date of its issue is on or after the
Record Date for such Interest Payment Date, in which event interest will be
payable commencing on the next following Interest Payment Date. If any Interest
Payment Date other than the date of maturity for any Floating Rate Note falls on
a day that is not a Business Day (or, in the case of a LIBOR Note, a day that is
not a London Business Day), such Interest Payment Date shall be postponed to the
next day that is a Business Day or London Business Day, as the case may be
(except that in the case of a LIBOR Note, if such London Business Day is in the
next succeeding calendar month, such Interest Payment Date on such LIBOR Note
shall be the immediately preceding London Business Day). If the date of maturity
for any Fixed Rate Note or Floating Rate Note or the Interest Payment Date for
any Fixed Rate Note falls on a day that is not a Business Day or London Business
Day, as the case may be, payment of principal, premium, if any, and interest
with respect to such Note will be paid on the next succeeding Business Day or
London Business Day, as the case may be, with the same force and effect as if
made on such date of maturity or Interest Payment Date and no interest on such
payment will accrue from and after such date of maturity or Interest Payment
Date.
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FIXED RATE NOTES
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Note (which may be
zero). Fixed Rate Notes may bear one or more annual rates of interest during the
periods or under the circumstances specified therein and in the applicable
Pricing Supplement. Interest payments, if any, on Fixed Rate Notes will be made
on March 1 or September 1 of each year, unless otherwise specified in the
applicable Pricing Supplement. Interest, if any, on Fixed Rate Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
FLOATING RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, Chemical
Bank will be the "Calculation Agent" with respect to calculating the rate of
interest payable on Floating Rate Notes. Upon the request of a registered holder
of a Floating Rate Note, the Calculation Agent will provide the interest rate
then in effect and, if different, the interest rate which will become effective
as a result of a determination made on the most recent Interest Determination
Date with respect to such Floating Rate Note. With respect to any Floating Rate
Note as to which Chemical Bank is the Calculation Agent, a holder may call
212-971-3481 for such information.
CD Rate Notes
A CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any) specified
in such Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published in H.15(519) under the heading
"CDs (Secondary Market)" or, if not so published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the CD Rate will be the rate on such Interest Determination Date for negotiable
certificates of deposit of the Index Maturity designated in the applicable
Pricing Supplement as published in Composite Quotations under the heading
"Certificates of Deposit". If such rate is not yet published by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean (rounded to
the nearest one-hundredth of a percent, with five one-thousandths of a percent
rounded upwards) of the secondary market offered rates as of 10:00 A.M., New
York City time, on such Interest Determination Date, quoted by three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in New York
City selected by the Calculation Agent for negotiable certificates of deposit in
a denomination of $5,000,000 of major United States money market banks of the
highest credit standing (in the market for negotiable certificates of deposit)
with a remaining maturity closest to the Index Maturity designated in the
Pricing Supplement; provided, however, that if fewer than three dealers selected
as aforesaid by the Calculation Agent are quoting as mentioned in this sentence,
the CD Rate will be the CD Rate in effect on such Interest Determination Date.
CD Rate Notes, like all other Notes, are not deposits or other obligations
of a bank and are not insured by the Federal Deposit Insurance Corporation or by
any other governmental agency.
Commercial Paper Rate Notes
A Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any) specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) of the rate on such date for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement as published in H.15(519) under the heading "Commercial Paper" or, if
not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Commercial
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Paper Rate will be the Money Market Yield of the rate on such Interest
Determination Date for commercial paper having the Index Maturity designated in
the applicable Pricing Supplement as published in Composite Quotations under the
heading "Commercial Paper". If such rate is not yet published by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be the
Money Market Yield of the arithmetic mean (rounded to the nearest one-hundredth
of a percent, with five one-thousandths of a percent rounded upwards) of the
offered rates of three leading dealers of commercial paper in New York City
selected by the Calculation Agent as of 11:00 A.M., New York City time, on such
Interest Determination Date for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement placed for an industrial issuer
whose bond rating is "Aa", or the equivalent, from a nationally recognized
statistical rating organization; provided, however, that if fewer than three
dealers selected as aforesaid by the Calculation Agent are quoting as mentioned
in this sentence, the Commercial Paper Rate will be the Commercial Paper Rate in
effect on such Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage rounded to
the nearest one-hundredth of a percent, with five one-thousandths of a percent
rounded upwards) calculated in accordance with the following formula:
<TABLE>
<S> <C> <C>
D X 360
Money Market Yield = 360 - (D X M) X 100
</TABLE>
where "D" refers to the per annum rate for the commercial paper, quoted on a
bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Federal Funds Effective Rate Notes
A Federal Funds Effective Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Effective Rate and the Spread or
Spread Multiplier, if any) specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Effective Rate" means, with respect to any Interest Determination Date,
the rate on such date for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)" or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Effective Rate will be the rate on such
Interest Determination Date as published in Composite Quotations under the
heading "Federal Funds/Effective Rate". If such rate is not yet published by
3:00 P.M., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the Federal Funds Effective Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean (rounded to the nearest one-hundredth of a percent, with five
one-thousandths of a percent rounded upwards) of the rates for the last
transaction in overnight Federal funds arranged by three leading brokers of
Federal funds transactions in New York City selected by the Calculation Agent as
of 9:00 A.M., New York City time, on such Interest Determination Date; provided,
however, that if fewer than three brokers selected as aforesaid by the
Calculation Agent are quoting as mentioned in this sentence, the Federal Funds
Effective Rate will be the Federal Funds Effective Rate in effect on such
Interest Determination Date.
LIBOR Notes
A LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR (London interbank offered rate) and the Spread or Spread
Multiplier, if any) specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent in accordance with the following
provisions:
(i) On each Interest Determination Date, LIBOR will be either, (a) if
"LIBOR Reuters" is specified in the related LIBOR Note and any applicable
Pricing Supplement, the arithmetic mean of the offered rates (unless the
specified Designated LIBOR Page (as defined below) by its terms provides
only
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for a single rate, in which case such single rate shall be used) for
deposits in the Index Currency (as defined below) having the Index Maturity
designated in the related LIBOR Note and any applicable Pricing Supplement
commencing on the second London Business Day immediately following the
applicable Interest Determination Date that appears on the Designated LIBOR
Page specified in the related LIBOR Note and any applicable Pricing
Supplement as of 11:00 a.m., London time, on that Interest Determination
Date, if at least two such offered rates appear (unless, as aforesaid, only
a single rate is required) on such Designated LIBOR Page, or (b) if "LIBOR
Telerate" is specified in the related LIBOR Note and any applicable Pricing
Supplement, the rate for deposits in the Index Currency having the Index
Maturity designated in the related LIBOR Note and any applicable Pricing
Supplement commencing on the second London Business Day immediately
following the applicable Interest Determination Date that appears on the
Designated LIBOR Page specified in the related LIBOR Note and any
applicable Pricing Supplement as of 11:00 a.m., London time, on that
Interest Determination Date. If fewer than two offered rates appear
(unless, as aforesaid, only a single rate is required), or no rate appears,
as applicable, LIBOR in respect of the related Interest Determination Date
will be determined as if the parties had specified the rate described in
clause (ii) below.
(ii) On any Interest Determination Date on which fewer than two
offered rates for the applicable Index Maturity appear on the applicable
Designated LIBOR Page as specified in (i) above (unless the specified
Designated LIBOR Page by its terms provides only for a single rate), or no
rate appears, as applicable, LIBOR will be determined on the basis of the
rates at which deposits in the Index Currency having the Index Maturity
designated in the related LIBOR Note and any applicable Pricing Supplement
commencing on the second London Business Day immediately following such
Interest Determination Date and in a principal amount that is
representative for a single transaction in such market at such time are
offered by four major banks in the London interbank market selected by the
Calculation Agent at approximately 11:00 A.M., London time, on such
Interest Determination Date to prime banks in the London interbank market.
The Calculation Agent will request the principal London office of each of
such banks to provide a quotation of its rate. If at least two such
quotations are provided, LIBOR in respect of such Interest Determination
Date will be the arithmetic mean (rounded to the nearest one-hundredth of a
percent, with five one-thousandths of a percent rounded upwards) of such
quotations. If fewer than two quotations are provided, LIBOR in respect of
such Interest Determination Date will be the arithmetic mean (rounded to
the nearest one-hundredth of a percent, with five one-thousandths of a
percent rounded upwards), of the rates quoted by three major banks in New
York City selected by the Calculation Agent at approximately 11:00 A.M.,
New York City time, on such Interest Determination Date for loans in the
Index Currency to leading European banks having the Index Maturity
designated in the related LIBOR Note and any applicable Pricing Supplement
commencing on the second London Business Day immediately following such
Interest Determination Date and in a principal amount that is
representative for a single transaction in such market at such time;
provided, however, that if fewer than three banks selected as aforesaid by
the Calculation Agent are quoting as mentioned in this sentence, LIBOR will
be LIBOR in effect on such Interest Determination Date.
Treasury Rate Notes
A Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any)
specified in such Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date, the rate for the
most recent auction of direct obligations of the United States ("Treasury
bills") having the Index Maturity designated in the applicable Pricing
Supplement as published in H.15(519) under the heading "U.S. Government
Securities -- auction average (investment)" or, if not so published by 9:00
A.M., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Treasury Rate will be the auction average rate
(expressed as a bond equivalent, rounded to the nearest one-hundredth of a
percent, with five one-thousandths of a percent rounded upwards, on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced
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by the United States Department of the Treasury. Treasury bills are usually sold
at auction on Monday of each week, unless that day is a legal holiday, in which
case the auction is usually held on the following Tuesday, except that such
auction may be held on the preceding Friday. If the results of the auction of
Treasury bills having the Index Maturity designated in the applicable Pricing
Supplement are not published or announced as provided above by 3:00 P.M., New
York City time, on such Calculation Date or if no such auction is held in a
particular week, then the Treasury Rate will be calculated by the Calculation
Agent and will be a yield to maturity (expressed as a bond equivalent, rounded
to the nearest one-hundredth of a percent, with five one-thousandths of a
percent rounded upwards, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 P.M., New York City time,
on such Interest Determination Date of three leading primary United States
government securities dealers selected by the Calculation Agent for the issue of
Treasury bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if
fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the Treasury Rate with respect to such
Interest Determination Date will be the Treasury Rate in effect on such Interest
Determination Date.
Prime Rate Notes
A Prime Rate Note will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified in such Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the prime rate or
base lending rate on that date as such rate is published in H.15(519) under the
heading "Bank Prime Loan". In the event that such rate is not published by 9:00
a.m., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Prime Rate for such Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean
(rounded to the nearest one-hundredth of a percent, with five one-thousandths of
a percent rounded upwards) of the rates of interest publicly announced by each
bank that appears on the Reuters Screen NYMF Page as such bank's prime rate or
base lending rate as in effect for such Interest Determination Date. If fewer
than four such rates appear on the Reuters Screen NYMF Page on such Interest
Determination Date, then the Prime Rate shall be the arithmetic mean (rounded to
the nearest one-hundredth of a percent, with five one-thousandths of a percent
rounded upwards) of the prime rates or base lending rates (quoted on the basis
of the actual number of days in the year divided by a 360-day year) as of the
close of business on such Interest Determination Date by three major banks in
The City of New York selected by the Calculation Agent; provided, however, that
if fewer than three banks selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the Prime Rate shall be the Prime Rate in
effect on such Interest Determination Date.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes issued the same day and having the same
terms (including, but not limited to, the same series designation, Interest
Payment Dates, rate of interest, date of maturity, and redemption or repayment
provisions) will be represented by one or more permanent Global Notes. Each
permanent Global Note representing Book-Entry Notes will be deposited with, or
on behalf of, The Depository Trust Company, as Depositary (the "Depositary"),
and will be registered in the name of a nominee of the Depositary, or other
depositary. No permanent Global Note may be transferred except as a whole by the
Depositary for such permanent Global Note to a nominee of the Depositary or by a
nominee of the Depositary to another nominee of the Depositary.
Ownership of Book-Entry Notes will be limited to institutions that have
accounts with the Depositary or its nominee ("participants") or persons that may
hold interests through participants. In addition, ownership of Book-Entry Notes
by participants will only be evidenced by, and the transfer of that ownership
interest will be effected only through, records maintained by the Depositary or
its nominee, as the case may be. Ownership of Book-Entry Notes by persons that
hold through participants will only be evidenced by, and the transfer of that
ownership interest within such participant will be effected only through,
records maintained by such
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participant. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer Book-Entry Notes.
The Company has been advised by the Depositary that upon the issuance of a
permanent Global Note representing Book-Entry Notes, and the deposit of such
permanent Global Note with the Depositary, the Depositary will immediately
credit, on its book-entry registration and transfer system, the respective
principal amounts of the Book-Entry Notes represented by such permanent Global
Note to the accounts of participants. The accounts to be credited shall be
designated by the soliciting Agent (as defined in "Plan of Distribution" below),
or by the Company if such Notes are offered and sold directly by the Company.
Payments of principal, premium, if any, and interest on Book-Entry Notes
represented by any permanent Global Note registered in the name of or held by
the Depositary or its nominee will be made to the Depositary or its nominee, as
the case may be, as the registered owner and the holder of the permanent Global
Note representing such Book-Entry Notes. The Company expects that the
Depositary, upon receipt of any payment of principal, premium, if any, or
interest in respect of a permanent Global Note, will immediately credit, on its
book-entry registration and transfer system, accounts of participants with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such permanent Global Note as shown on the records of
the Depositary. Payments by participants to owners of Book-Entry Notes held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in "street name", and will be the responsibility of such
participants. None of the Company, either Trustee or the Paying Agent or any
other agent of the Company, will have any responsibility or liability for any
aspect of the Depositary's records or any participant's records relating to or
payments made on account of Book-Entry Notes or for maintaining, supervising or
reviewing any of the Depositary's records or any participant's records relating
to such Book-Entry Notes.
Book-Entry Notes represented by a permanent Global Note are exchangeable
for definitive Notes, in registered form, of like tenor and of an equal
aggregate principal amount, only if (i) the Depositary notifies the Company that
it is unwilling or unable to continue as Depositary for such permanent Global
Note or if at any time the Depositary ceases to be a clearing agency registered
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
a successor depositary is not appointed by the Company within 90 days, (ii) the
Company in its sole discretion determines that such Book-Entry Notes shall be
exchangeable for definitive Notes in registered form or (iii) there shall have
occurred and be continuing an Event of Default or an event which, with the
giving of notice or lapse of time or both, would constitute an Event of Default
with respect to the Notes. Any permanent Global Note representing Book-Entry
Notes that is exchangeable pursuant to the preceding sentence shall be
exchangeable in whole for definitive Notes in registered form, of like tenor and
of an equal aggregate principal amount, in denominations of U.S. $1,000 and
integral multiples of U.S. $1,000 in excess thereof. Such definitive Notes shall
be registered in the name or names of such person or persons as the Depositary
shall instruct the relevant Trustee or registrar. It is expected that such
instructions may be based upon directions received by the Depositary from its
participants with respect to ownership of Book-Entry Notes.
Except as provided above, owners of Book-Entry Notes will not be entitled
to receive physical delivery of Notes in definitive form and will not be
considered the holders thereof for any purpose under the relevant Indenture, and
no permanent Global Note representing Book-Entry Notes shall be exchangeable,
except for another permanent Global Note of like denomination and tenor to be
registered in the name of the Depositary or its nominee. Accordingly, each
person owning a Book-Entry Note must rely on the procedures of the Depositary
and, if such person is not a participant, on the procedures of the participant
through which such person owns its interest, to exercise any rights of a holder
under the relevant Indenture. The Company understands that under existing
industry practices, in the event that the Company requests any action of holders
or an owner of a Book-Entry Note desires to give or take any action a holder is
entitled to give or take under the relevant Indenture, the Depositary would
authorize the participants owning the relevant Book-Entry Notes to give or take
such action, and such participants would authorize beneficial owners owning
through such participants to give or take such action or would otherwise act
upon the instructions of beneficial owners owning through them.
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The Depositary has advised the Company that the Depositary is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. The Depositary was
created to hold securities of its participants and to facilitate the clearance
and settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also 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.
Persons who are not participants may beneficially own securities held by the
Depositary only through participants.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the calculation of the interest rate
applicable to a Floating Rate Note, its Interest Payment Dates or any other
matter relating thereto or to any Fixed Rate Note may be modified by the terms
specified under "Other Provisions" on the face of such Note or in an Addendum
thereto, as so specified on the face of such Note and in the applicable Pricing
Supplement.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the ownership of Notes as of the date hereof. Except where
noted, it deals only with Notes held by initial purchasers as capital assets and
does not deal with special situations, such as those of dealers in securities or
financial institutions, life insurance companies, persons holding Notes as a
hedge (or Notes that are hedged) against foreign currency risks or United States
Holders (as defined below) whose "functional currency" is not the U.S. dollar.
Furthermore, the discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in federal income tax consequences
different from those discussed below. PERSONS CONSIDERING THE PURCHASE,
OWNERSHIP OR DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR
SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER
TAXING JURISDICTION.
As used herein, a "United States Holder" of a Note means a holder that is a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. A
"Non-United States Holder" is a holder that is not a United States Holder.
UNITED STATES HOLDERS
Payments of Interest. Except as set forth below, interest on a Note will
generally be taxable to a United States Holder as ordinary income from domestic
sources at the time it is received or accrued in accordance with the United
States Holder's method of accounting for tax purposes.
Original Issue Discount. The following is a summary of the principal
United States federal income tax consequences of the ownership of Original Issue
Discount Notes (as defined below) by United States Holders. This summary is
based upon Treasury regulations which were issued on January 27, 1994 (the "OID
Regulations") and are to be effective on April 4, 1994. The OID Regulations
provide, however, that taxpayers generally may rely on them before their
effective date in determining the federal income tax consequences of owning debt
instruments issued after December 22, 1992.
A Note may be issued for an amount that is less than its stated redemption
price at maturity (the sum of all payments to be made on the Note other than
"qualified stated interest"). The difference between the
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stated redemption price at maturity of the Note and its "issue price", if such
difference is at least 0.25 percent of the stated redemption price at maturity
multiplied by the number of complete years to maturity, will be "original issue
discount" ("OID"). (Notes issued with OID shall be referred to as "Original
Issue Discount Notes.") If such difference is less than 0.25 percent of the
stated redemption price at maturity multiplied by the number of complete years
to maturity (referred to as "de minimis OID"), the holder of such Note includes
the de minimis OID in income as each principal payment is received, in
proportion to the amount that each principal payment bears to the stated
principal amount of the Note, and such de minimis OID is treated as an amount
received on retirement of the Note. The "issue price" of each Note in a
particular offering will be the first price at which a substantial amount of
that particular offering is sold. "Qualified stated interest" is stated interest
that is unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually and, with respect to a Fixed Rate
Note, at a single fixed rate. Interest is payable at a single fixed rate only if
the rate appropriately takes into account the length of the interval between
payments. The OID Regulations provide that Notes that may be redeemed prior to
their stated maturity at the option of the issuer, or that may be prepaid prior
to their stated maturity at the option of the holder, shall be treated from the
time of issuance as having a maturity date for federal income tax purposes on
such redemption or prepayment date if (i) in the case of a redemption at the
option of the issuer, such redemption would result in a lower yield to maturity
or (ii) in the case of a prepayment at the option of the holder, such prepayment
would result in a higher yield to maturity. Notice will be given in the
applicable Pricing Supplement when the Company determines that a particular Note
will be deemed to have a maturity date for federal income tax purposes prior to
its stated maturity.
In certain cases, Notes that bear stated interest and are issued at par may
be deemed to bear OID for federal income tax purposes, with the result that the
inclusion of interest in income for federal income tax purposes may vary from
the actual cash payments of interest made on such Notes, generally accelerating
income for cash method taxpayers. Under the OID Regulations, a Note may be an
Original Issue Discount Note where (i) a Floating Rate Note provides for a
Maximum Interest Rate or a Minimum Interest Rate that is reasonably expected as
of the issue date to cause the yield on the debt instrument to be significantly
less, in the case of a maximum rate, or more, in the case of a minimum rate,
than the expected yield determined without the Maximum or Minimum Interest Rate
as the case may be; (ii) a Floating Rate Note provides for significant
front-loading or back-loading of interest; or (iii) a Note bears interest at a
floating rate in combination with one or more floating or fixed rates. Notice
will be given in the applicable Pricing Supplement when the Company determines
that a particular Note will be an Original Issue Discount Note. Unless specified
in the applicable Pricing Supplement, Floating Rate Notes will not be Original
Issue Discount Notes.
United States Holders of Original Issue Discount Notes with a maturity upon
issuance of more than one year must, in general, include OID in income in
advance of the receipt of some or all of the related cash payments. The amount
of OID includible in income by the initial United States Holder of an Original
Issue Discount Note is the sum of the "daily portions" of OID with respect to
the Note for each day during the taxable year or portion of the taxable year in
which such United States Holder held such Note ("accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. The "accrual period"
for an Original Issue Discount Note may be of any length and may vary in length
over the term of a Note, provided that each accrual period is no longer than one
year and each scheduled payment of principal or interest occurs on the first day
or the final day of an accrual period. In general, the computation of OID is
simplest if accrual periods correspond to the intervals between payment dates
provided by the terms of a Note. The amount of OID allocable to any accrual
period is an amount equal to the excess (if any) of (i) the product of the
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 properly adjusted for the length of the accrual period) over
(ii) the sum of any qualified stated interest allocable to the accrual period.
In determining OID allocable to an accrual period, if an interval between
payments of qualified stated interest contains more than one accrual period the
amount of qualified stated interest payable at the end of the interval
(including any qualified stated interest that is payable on the first day of the
accrual period immediately following the interval) is allocated on a pro rata
basis to each accrual period in the interval and the adjusted issue price must
be increased by the amount
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of any qualified stated interest that has accrued prior to the beginning of the
accrual period but is not payable until the end of the interval. OID allocable
to a final accrual period is the difference between the amount payable at
maturity (other than a payment of qualified stated interest) and the adjusted
issue price at the beginning of the final accrual period. If all accrual periods
are of equal length, except for either an initial shorter accrual period or an
initial and a final shorter accrual period, the amount of OID allocable to the
initial accrual period may be computed under any reasonable method. The adjusted
issue price of a Note at the beginning of any accrual period is equal to its
issue price increased by the amount of OID previously includible in the gross
income of any holder (determined without regard to the amortization of any
acquisition or bond premium, as described below) and reduced by any prior
payments, or any payments made on the first day of the accrual period, with
respect to such Note that were not qualified stated interest. Under these rules,
a United States Holder will have to include in income increasingly greater
amounts of OID in successive accrual periods. The Company is required to report
the amount of OID accrued on Notes held of record by persons other than
corporations and other exempt holders.
In the case of Original Issue Discount Notes having a term of one year or
less ("Short-Term Original Issue Discount Notes"), under the OID Regulations,
all payments (including all stated interest) will be included in the stated
redemption price at maturity and, thus, United States Holders will generally be
taxable on the discount in lieu of stated interest. The discount will be equal
to the excess of the stated redemption price at maturity over the issue price of
a Short-Term Original Issue Discount Note, unless the United States Holder
elects to compute this discount using tax basis instead of issue price. In
general, an individual and certain other cash method United States Holders of a
Short-Term Original Issue Discount Note are not required to include accrued
discount in their income currently unless they elect to do so. United States
Holders who report income for federal income tax purposes on the accrual method
and certain other United States Holders are required to accrue (on a current
basis) discount on such Short-Term Original Issue Discount Notes as ordinary
income under a straight-line method, unless an election is made to accrue the
discount according to a constant yield method based on daily compounding. In the
case of a United States Holder who is not required, and does not elect, to
include discount in income currently, any gain realized on the sale, exchange or
retirement of the Short-Term Original Issue Discount Note will be ordinary
income to the extent of the discount accrued through the date of sale, exchange
or retirement. In addition, United States Holders who do not elect to currently
include accrued discount in income may be required to defer deductions for a
portion of the United States Holder's interest expense with respect to any
indebtedness incurred or continued to purchase or carry such Notes.
Market Discount. If a United States Holder purchases a Note for an amount
that is less than its "revised issue price" (defined as the sum of the issue
price of the Note and the aggregate amount of the OID includible, if any,
without regard to the rules for acquisition premium discussed below, in the
gross income of all previous holders of the Note), the amount of the difference
will be treated as "market discount" for federal income tax purposes, unless
such difference is less than a specified de minimis amount. Under the market
discount rules, a United States Holder will be required to treat any principal
payment on, or any gain on the sale, exchange, retirement or other disposition
of, a Note as ordinary income to the extent of the market discount which has not
previously been included in income and is treated as having accrued on such Note
at the time of such payment or disposition. In addition, the United States
Holder may be required to defer, until the maturity of the Note or its earlier
disposition in a taxable transaction, the deduction of all or a portion of the
interest expense on any indebtedness incurred or continued to purchase or carry
such Note.
Any 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 United
States Holder elects to accrue on a constant yield method. A United States
Holder of a Note may elect to include market discount in income currently as it
accrues (on either a ratable or constant yield basis), in which case neither the
ordinary income upon sale rule nor the rule regarding deferral of interest
deductions described above will apply. This election to include market discount
in income currently, once made, applies to all market discount obligations
acquired on or after the first taxable year to which the election applies, and
may not be revoked without the consent of the Internal Revenue Service (the
"IRS").
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Acquisition Premium; Amortizable Bond Premium. A United States Holder who
purchases a Note for an amount that is greater than its adjusted issue price but
equal to or less than the sum of all amounts payable on the Note after the
purchase date other than payments of qualified stated interest will be
considered to have purchased such Note at an "acquisition premium". Under the
acquisition premium rules the amount of OID which such holder must include in
its gross income with respect to such Note for any taxable year will be reduced
by the portion of such acquisition premium properly allocable to such year.
Alternatively, the OID Regulations allow the holder of a Note purchased at an
acquisition premium to compute OID accruals by treating the purchase as a
purchase at original issue and applying the constant yield method.
A United States Holder who purchases a Note for an amount in excess of the
sum of all amounts payable on the Note after the purchase date other than
qualified stated interest will be considered to have purchased the Note at a
"premium" and will not be required to include any OID in income. A United States
Holder generally may elect to amortize the premium over the remaining term of
the Note on a constant yield method. The amount amortized in any year will be
treated as a reduction of the United States Holder's interest income from the
Note. Bond premium on a Note held by a United States Holder that does not make
such an election will decrease the gain or increase the loss otherwise
recognized on disposition of the Note. The election to amortize premium on a
constant yield method once made applies to all debt obligations held or
subsequently acquired by the electing Holder on or after the first day of the
first taxable year to which the election applies and may not be revoked without
the consent of the IRS. If such Note may be optionally redeemed after the U.S.
holder acquires it at a price in excess of the sum of all amounts payable on the
Note after the purchase date other than qualified stated interest, special rules
would apply that could result in the deferral of the amortization of some bond
premium until later in the term of the Note.
Election to Treat All Interest as OID. Under the OID Regulations, a United
States Holder may elect to treat all interest on any Note as OID and calculate
the amount includible in gross income under the constant yield method described
above but treating the Note as issued on the holder's acquisition date at a
price equal to the holder's initial adjusted basis with no interest payments
being qualified stated interest. For the purposes of this election, interest
includes stated interest, acquisition discount, OID, de minimis OID, market
discount, de minimis market discount and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium. If a United States Holder makes
this election for a Note with market discount or amortizable bond premium, the
election is treated as an election under the market discount or amortizable bond
premium provisions, described above, and the electing United States Holder will
be required to amortize bond premium or include market discount in income
currently for all of the Holder's other debt instruments with market discount or
amortizable bond premium. The election is to be made for the taxable year in
which the United States Holder acquired the Note, and may not be revoked without
the consent of the IRS. UNITED STATES HOLDERS SHOULD CONSULT WITH THEIR OWN TAX
ADVISORS ABOUT THIS ELECTION.
Sale, Exchange and Retirement of Notes. A United States Holder's tax basis
in a Note will, in general, be the United States Holder's U.S. dollar cost
therefor, increased by any OID, market discount or any discount with respect to
a Short-Term Original Issue Discount Note, previously included in income by the
United States Holder with respect to such Note and reduced by any amortized
premium and any cash payments on the Note other than qualified stated interest.
Upon the sale, exchange, retirement or other disposition of a Note, a United
States Holder will recognize gain or loss equal to the difference between the
amount realized upon the sale, exchange, retirement or other disposition (less
any accrued but unpaid qualified stated interest, which will be taxable as such)
and the adjusted tax basis of the Note. Except as described above with respect
to certain Short-Term Original Issue Discount Notes or with respect to market
discount, such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if at the time of sale, exchange or retirement the Note has
been held for more than one year. Under current law, net capital gains of
individuals are, under certain circumstances, taxed at lower rates than ordinary
income. The deductability of capital losses is subject to limitations.
NON-UNITED STATES HOLDERS
Under current United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Company or any Paying Agent of
principal or interest (which for purposes of this discussion
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includes OID) on a Note owned by a Non-United States Holder, provided (i)
that the beneficial owner does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Company entitled to vote within the meaning of section 871(h)(3) of the
Code and the regulations thereunder, (ii) the beneficial owner is not a
controlled foreign corporation that is related to the Company (directly or
indirectly) through stock ownership, (iii) the beneficial owner is not a
bank whose receipt of interest on a Note is described in section
881(c)(3)(A) of the Code and (iv) the beneficial owner satisfies the
statement requirement (described generally below) set forth in section
871(h)(4) and section 881(c)(2)(B)(ii) of the Code and the regulations
thereunder;
(b) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-United States
Holder upon the sale, exchange or retirement of a Note; and
(c) a Note beneficially owned by an individual who at the time of
death is a Non-United States Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that
such individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote within the meaning of section 871(h)(3) of the Code and the
regulations thereunder and provided that the interest payments with respect
to such Note would not have been, if received at the time of such
individual's death, effectively connected with the conduct of a United
States trade or business by such individual.
To satisfy the statement requirement set forth in (a)(iv) above, the
beneficial owner of such Note, or a financial institution holding the Note on
behalf of such owner, must provide, in accordance with specified procedures, the
Paying Agent of the Company with a statement to the effect that the beneficial
owner is not a United States person, citizen or resident. Pursuant to current
temporary Treasury regulations, these requirements will be met if (i) the
beneficial owner provides his or her name and address, and certifies, under
penalties of perjury, that he or she is not a United States person, citizen or
resident (which certification may be made on an IRS Form W-8 (or successor
form)) or (ii) a financial institution holding the Note on behalf of the
beneficial owner certifies, under penalties of perjury, that such statement has
been received by it and furnishes the Paying Agent with a copy thereof.
Payments to Non-United States Holders not meeting the requirements of
paragraph (a) above and thus subject to withholding of United States federal
income tax may nevertheless be exempt from such withholding if the beneficial
owner of the Note provides the Company with a properly executed (i) IRS Form
1001 (or successor form) claiming an exemption from withholding under the
benefit of a tax treaty or (ii) IRS Form 4224 (or successor form) stating that
interest paid on the Note is not subject to withholding tax because it is
effectively connected with the owner's conduct of a trade or business in the
United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
United States Holders. In general, information reporting requirements will
apply to certain payments of principal, interest, OID and premium paid on Notes
and to the proceeds of sale of a Note made to United States Holders other than
certain exempt recipients (such as corporations). A 31% backup withholding tax
will apply to such payments if the United States Holder fails to provide a
taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income.
Non-United States Holders. No information reporting or backup withholding
will be required with respect to payments made by the Company or any Paying
Agent to Non-United States Holders if a statement described in (a)(iv) under
"Non-United States Holders" has been received and the payer does not have actual
knowledge that the beneficial owner is a United States person or if a holder has
otherwise established an exemption and the payer has no actual knowledge that
the conditions of any exemption are not in fact satisfied.
In addition, backup withholding and information reporting will not apply if
payments of the principal, interest, OID or premium on a Note is paid or
collected by a foreign office of a custodian, nominee or other foreign agent on
behalf of the beneficial owner of such Note, or if a foreign office of a broker
(as defined in applicable Treasury Regulations) pays the proceeds of the sale of
a Note to the owner thereof. If, however, such nominee, custodian, agent or
broker is, for United States federal income tax purposes, a United States
person, a controlled foreign corporation or a foreign person that derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (i) such
custodian, nominee, agent
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or broker has documentary evidence in its records that the beneficial owner is
not a United States person and certain other conditions are met or (ii) the
beneficial owner otherwise establishes an exception. Temporary Treasury
Regulations provide that the Treasury is considering whether backup withholding
will apply with respect to such payments of principal, interest or the proceeds
of a sale that are not subject to backup withholding under the current
regulations. Under proposed Treasury Regulations not currently in effect, backup
withholding will not apply to such payments absent actual knowledge that the
payee is a United States person.
Payments of principal, interest, OID and premium on a Note paid to the
beneficial owner of a Note by a United States office of a custodian, nominee or
agent, or the payment by the United States office of a broker of the proceeds of
sale of a Note, will be subject to both backup withholding and information
reporting unless the beneficial owner provides a statement described in (a)(iv)
under "Non-United States Holders" and the payer does not have actual knowledge
that the beneficial owner is a United States person or otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
NON-DOLLAR DENOMINATED NOTES
A discussion of the United States federal income tax consequences with
respect to Notes denominated in other than U.S. dollars will be contained in the
applicable Multi-Currency Prospectus Supplement and Pricing Supplement.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company in those
jurisdictions where such offering by the Company is authorized. No commission or
underwriting discount will be payable on any sale made directly to an investor
by the Company.
The Company may also sell the Notes to or through agents that become
parties to a Master Agency Agreement (each an "Agent"), the form of which is
filed as exhibit to the Registration Statement referred to in the accompanying
Prospectus (the "Master Agency Agreement"). Each Agent's obligations are
separate and several from that of any other Agent. Each Agent will use
reasonable efforts when requested by the Company to solicit purchases of the
Notes. The Company will pay each Agent a commission to be negotiated at the time
of sale, which may range from .125% to .750% of the principal amount of each
Note, depending on its stated maturity, sold through such Agent, unless
otherwise specified in the applicable Pricing Supplement. As of the date of this
Prospectus Supplement, Agents include Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co. Inc., CS First Boston
Corporation, Goldman, Sachs & Co., Lehman Brothers, Lehman Brothers Inc.
(including its affiliate, Lehman Special Securities Inc.), Morgan Stanley & Co.
Incorporated, Salomon Brothers Inc and Chemical Securities Inc., a wholly-owned
subsidiary of the Company.
The Company also may sell Notes to any Agent, acting as principal, for its
own account or for resale to one or more investors or other purchasers,
including other broker-dealers. The Company may also accept (but not solicit)
offers to purchase Notes through additional agents on substantially the same
terms and conditions (including commissions) as would apply to purchases under
the Master Agency Agreement.
The Agents may sell any Notes they have purchased as principal to any
dealer at a discount and, unless otherwise specified in the applicable Pricing
Supplement, such discount allowed to any dealer will not be in excess of the
discount to be received by such Agent from the Company. Unless otherwise
specified in the applicable Pricing Supplement, any Note sold to an Agent as
principal will be purchased by such Agent at a price equal to 100% of the
principal amount thereof less a percentage ranging from .125% to .750% of the
principal amount of such Note, depending upon its stated maturity, and may be
resold by the Agent to investors and other purchasers 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, or may be
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<PAGE> 16
resold to certain dealers as described above. After the initial public offering
of any Notes, the public offering price, concession and discount may be changed.
The name of any Agent or other person through which Notes are sold by the
Company or to which Notes are sold for resale to investors, as well as any
commissions or discounts payable to such Agents or other persons in respect
thereof, will be set forth in the applicable Pricing Supplement.
The Company will have the sole right to accept offers to purchase Notes and
may, in its absolute discretion, reject any proposed purchase of Notes in whole
or in part. Each Agent will have the right, in its discretion reasonably
exercised, to reject in whole or in part any proposed purchase of Notes through
it.
Any agent, including any Agent, may be deemed to be an "underwriter" within
the meaning of the Securities Act of 1933, as amended (the "Act"). The Company
will agree to indemnify each Agent and certain other persons against certain
liabilities, including liabilities under the Act.
The Subordinated Notes are a new issue of securities with no established
trading market. The Subordinated Notes will not be, and the Senior Notes are not
and will not be, listed on any securities exchange. The Company has been advised
by the Agents that each of the Agents may from time to time purchase and sell
Notes in the secondary market, but is not obligated to do so and may discontinue
making a market in such Notes at any time without notice. No assurance can be
given as to the existence or liquidity of any secondary market for the Notes.
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Bear, Stearns & Co. Inc., CS First Boston Corporation, Goldman, Sachs & Co.,
Lehman Brothers, Lehman Brothers Inc. (including its affiliate, Lehman Special
Securities Inc.), Morgan Stanley & Co. Incorporated, Salomon Brothers Inc, and
Chemical Securities Inc., as well as other agents to or through which Notes may
be sold from time to time, engage or may engage in transactions with and perform
services for the Company in the ordinary course of business.
The offer and sale of any Notes by Chemical Securities Inc. will comply
with the requirements of Schedule E to the By-laws of the National Association
of Securities Dealers, Inc. See "Plan of Distribution" in the accompanying
Prospectus.
LEGAL OPINIONS
The validity of the Notes being offered hereby will be passed upon for the
Company by Simpson Thacher & Bartlett (a partnership which includes professional
corporations), New York, New York, counsel for the Company, and for the Agents,
by Cravath, Swaine & Moore, New York, New York. Cravath, Swaine & Moore has
represented and continues to represent the Company and its subsidiaries in a
substantial number of matters on a regular basis.
All such opinions will be conditioned upon, and subject to, certain
assumptions regarding future action required to be taken by the Company and the
appropriate Trustee in connection with the issuance and sale of any particular
Note offered hereby, the specific terms of Notes offered hereby and other
matters which may affect the validity of Notes offered hereby but which cannot
be ascertained on the date of such opinions.
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GLOSSARY
Set forth below are definitions, or the locations elsewhere of definitions,
of some of the terms used in this Prospectus Supplement and not defined in the
accompanying Prospectus.
"Book Entry Note" means a Note represented by a Global Note.
"Business Day" means any day that is not a Saturday or Sunday and that, in
New York City, is not a day on which banking institutions generally are
authorized or required by law or executive order to close.
"Calculation Agent" means the agent appointed by the Company to calculate
interest rates for Floating Rate Notes. Unless otherwise provided in a Pricing
Supplement, the Calculation Agent will be Chemical Bank.
"Calculation Date" means the date on which the Calculation Agent is to
calculate an interest rate for a Floating Rate Note. Unless otherwise specified
in such Note and the applicable Pricing Supplement, the Calculation Date, where
applicable, pertaining to an Interest Determination Date for a Floating Rate
Note will be the first to occur of (a) the tenth calendar day after such
Interest Determination Date or, if such day is not a Business Day, the next
succeeding Business Day or (b) the Business Day preceding the applicable
Interest Payment Date or date of maturity (or the date of redemption or
repayment, if any) of such Note, as the case may be.
"CD Rate" means the rate calculated as set forth under the heading "CD Rate
Notes".
"Certificated Note" means a Note represented by a certificate in definitive
form without coupons.
"Commercial Paper Rate" means the rate calculated as set forth under the
heading "Commercial Paper Rate Notes".
"Composite Quotations" means the daily statistical release entitled
"Composite 3:30 P.M. Quotations for U.S. Government Securities", or any
successor publication, published by the Federal Reserve Bank of New York.
"Designated LIBOR Page" means either, (a) if "LIBOR Reuters" is designated
in the related LIBOR Note and any applicable Pricing Supplement, the display on
the Reuters Monitor Money Rates Service for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency, or (b) if
"LIBOR Telerate" is designated in the related LIBOR Note and any applicable
Pricing Supplement, the display on the Dow Jones Telerate Service for the
purpose of displaying the London interbank rates of major banks for the
applicable Index Currency. If neither LIBOR Reuters nor LIBOR Telerate is so
specified, LIBOR for the applicable Index Currency will be determined as if
LIBOR Telerate had been specified.
"Federal Funds Effective Rate" means the rate calculated as set forth under
the heading "Federal Funds Effective Rate Notes".
"Fixed Rate Note" means a Note that bears interest at a fixed rate or
rates.
"Floating Rate Note" means a Note on which interest rates are determined,
and adjusted periodically, by reference to an interest rate basis or formula
(which may include the CD Rate, the Commercial Paper Rate, the Federal Funds
Effective Rate, LIBOR, the Treasury Rate or the Prime Rate), adjusted by a
Spread or Spread Multiplier, if any.
"Global Security" means a Note registered in the name of a nominee of The
Depository Trust Company, as Depositary, or other depositary, beneficial
interests in which are represented by Book-Entry Notes.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication, published by the Board
of Governors of the Federal Reserve System.
"Index Currency" means the currency (including composite currencies)
specified in the related LIBOR Note and any applicable Pricing Supplement as the
currency for which LIBOR shall be calculated. If no currency is so specified,
the Index Currency shall be U.S. dollars.
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<PAGE> 18
"Index Maturity" means the period of time designated as the representative
maturity of the certificates of deposit, the commercial paper, the Index
Currency or the Treasury bills, respectively, by reference to transactions in
which the CD Rate, the Commercial Paper Rate, LIBOR and the Treasury Rate,
respectively, are to be calculated, as set forth in a Note bearing interest at
one of those rates and the applicable Pricing Supplement.
"Initial Interest Rate" means the rate at which a Floating Rate Note will
bear interest from and including the date of issue to but excluding the first
Reset Date, as set forth in the Note and the applicable Pricing Supplement.
"Interest Determination Date" means the date as of which the interest rate
for a Floating Rate Note is to be calculated, to be effective as of the
following Reset Date and calculated on the related Calculation Date (except in
the case of LIBOR, which is calculated on the Interest Determination Date).
Unless otherwise specified in such Note and the applicable Pricing Supplement,
(i) the Interest Determination Date pertaining to a Reset Date for a CD Rate
Note, Commercial Paper Rate Note, Federal Funds Effective Rate Note or Prime
Rate Note will be the second Business Day preceding such Reset Date, (ii) the
Interest Determination Date pertaining to a Reset Date for a LIBOR Note will be
the second London Business Day preceding such Reset Date and (iii) the Interest
Determination Date pertaining to a Reset Date for a Treasury Rate Note will be
the day of the week during which such Reset Date falls on which Treasury bills
of the Index Maturity designated in the applicable Pricing Supplement are
auctioned. Treasury bills are usually sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is usually held on
the following Tuesday, except that such auction may be held on the preceding
Friday. If, as the result of a legal holiday, an auction is so held on the
preceding Friday, such Friday will be the Interest Determination Date pertaining
to the Reset Date occurring in the next succeeding week.
"Interest Payment Date" means the date on which payments of interest on a
Note (other than payments on maturity) are to be made.
"LIBOR" means the rate calculated as set forth under the heading "LIBOR
Notes".
"London Business Day" means a Business Day on which dealings in deposits in
U.S. Dollars are transacted in the London interbank market.
"Maximum Interest Rate" means, with respect to any Floating Rate Note, a
maximum numerical interest rate limitation, or ceiling, on the rate at which
interest may accrue on such Note during any interest period.
"Minimum Interest Rate" means, with respect to any Floating Rate Note, a
minimum numerical interest rate limitation, or floor, on the rate at which
interest may accrue on such Note during any interest period.
"Paying Agent" means the agent appointed by the Company to make payment of
principal, premium, if any, and interest on the Notes. Unless otherwise provided
in a Pricing Supplement, the Paying Agent will be Chemical Bank.
"Pricing Supplement" means a supplement to this Prospectus Supplement
relating to any particular Note or Notes.
"Prime Rate" means the rate calculated as set forth under the heading
"Prime Rate Notes".
"Record Date" means the date on which a Note must be held in order for the
holder to receive an interest payment on the next Interest Payment Date. Unless
otherwise specified in a Note and the applicable Pricing Supplement, the Record
Date for any Interest Payment Date will be the fifteenth day (whether or not a
Business Day or a London Business Day) next preceding such Interest Payment
Date.
"Reset Date" means the date on which a Floating Rate Note will begin to
bear interest at the interest rate determined as of any Interest Determination
Date. Unless otherwise specified in such Note and the applicable Pricing
Supplement, the Reset Dates will be: (i) in the case of Floating Rate Notes that
reset daily, each Business Day; (ii) in the case of Floating Rate Notes (other
than Treasury Rate Notes) that reset weekly, Wednesday of each week; (iii) in
the case of Treasury Rate Notes that reset weekly, Tuesday of each week;
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<PAGE> 19
(iv) in the case of Floating Rate Notes that reset monthly, the third Wednesday
of each month; (v) in the case of Floating Rate Notes that reset quarterly, the
third Wednesday of March, June, September and December of each year; (vi) in the
case of Floating Rates Notes that reset semi-annually, the third Wednesday of
each of two months of each year specified in the applicable Pricing Supplement;
and (vii) in the case of Floating Rate Notes that reset annually, the third
Wednesday of one month of each year specified in the applicable Pricing
Supplement. If a Reset Date for any Floating Rate Note would otherwise be a day
that is not a Business Day (or, in the case of a LIBOR Note, a day that is not a
London Business Day), such Reset Date shall be postponed to the succeeding
Business Day or London Business Day, as the case may be, (except that, in the
case of a LIBOR Note, if such London Business Day is in the next succeeding
calendar month, such Reset Date shall be the preceding London Business Day). If
a Treasury bill auction (as described in the definition of "Interest
Determination Date") will be held on any day that would otherwise be a Reset
Date for a Treasury Rate Note, then such Reset Date will instead be the Business
Day following such auction date.
"Reuters Screen NYMF Page" means the display page designated as page "NYMF"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the NYMF page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
"Spread" means the constant amount, if any, to be added to the CD Rate, the
Commercial Paper Rate, the Federal Funds Effective Rate, LIBOR, the Treasury
Rate, the Prime Rate or any other interest rate index in effect from time to
time with respect to a Note, which amount will be set forth in such Note and the
applicable Pricing Supplement.
"Spread Multiplier" means the percentage by which the CD Rate, the
Commercial Paper Rate, the Federal Funds Effective Rate, LIBOR, the Treasury
Rate, the Prime Rate or any other interest rate index in effect from time to
time with respect to a Note is to be multiplied, which percentage will be set
forth in such Note and the applicable Pricing Supplement.
"Treasury Rate" means the interest rate calculated as set forth under the
heading "Treasury Rate Notes".
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PROSPECTUS
(LOGO)
Chemical Banking Corporation
Debt Securities
Preferred Stock
Common Stock
Warrants
Chemical Banking Corporation (the "Company") intends to issue from time to
time in one or more series its (i) unsecured debt securities, which may either
be senior (the "Senior Securities") or subordinated (the "Subordinated
Securities"; the Senior Securities and the Subordinated Securities being
referred to collectively as the "Debt Securities"), (ii) warrants to purchase
the Debt Securities (the "Debt Warrants"), (iii) shares of preferred stock, par
value $1 per share (the "Preferred Stock"), which may be issued in the form of
depositary shares evidenced by depositary receipts (the "Depositary Shares"),
(iv) warrants to purchase the Preferred Stock or Depositary Shares ("Preferred
Stock Warrants"), (v) shares of common stock, par value $1 per share (the
"Common Stock"), (vi) warrants to purchase shares of Common Stock ("Common Stock
Warrants"; the Debt Warrants, Preferred Stock Warrants and Common Stock Warrants
being referred to herein collectively as the "Securities Warrants"); and (vii)
currency warrants entitling the holder to receive the cash value in U.S. dollars
of the right to purchase or the right to sell foreign currencies or composite
currencies, including European Currency Units ("ECU") (the "Currency Warrants"),
having an aggregate initial public offering price not to exceed $3,593,200,000
or the equivalent thereof in one or more foreign currencies or composite
currencies, including ECU, on terms to be determined at the time of sale. The
Debt Securities, Preferred Stock, Depositary Shares, Common Stock, Securities
Warrants and Currency Warrants offered hereby (collectively, the "Offered
Securities") may be offered, separately or as units with other Offered
Securities, in separate series in amounts, at prices and on terms to be
determined at the time of sale and to be set forth in a supplement to this
Prospectus (a "Prospectus Supplement").
The Senior Securities will rank equally with all other unsubordinated and
unsecured indebtedness of the Company. The Subordinated Securities will be
subordinate to all existing and future Senior Indebtedness and, under certain
circumstances, Additional Senior Obligations, each as defined herein. The
holders of Subordinated Securities of any series may be obligated at maturity to
exchange such Subordinated Securities for Capital Securities of the Company.
Unless otherwise indicated in the applicable Prospectus Supplement, the maturity
of the Subordinated Securities will be subject to acceleration only in the event
of certain events of bankruptcy or reorganization of the Company. See
"Description of Debt Securities".
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered, such as, where applicable (i) in the case of Debt
Securities, the specific designation, aggregate principal amount, currency,
denomination, maturity, priority, interest rate (which may be variable or
fixed), time of payment of interest, terms for optional redemption or repayment
or for sinking fund payments, terms for conversion into or exchange for Capital
Securities or other Offered Securities, the designation of the Trustee acting
under the applicable Indenture and the initial public offering price; (ii) in
the case of Preferred Stock, the specific title and stated value, number of
shares or fractional interests therein, and the dividend, liquidation,
redemption, conversion, voting and other rights, the initial public offering
price, and whether interests in the Preferred Stock will be represented by
Depositary Shares; (iii) in the case of Common Stock, the initial offering
price; (iv) in the case of Securities Warrants, the duration, offering price,
exercise price and detachability thereof; (v) in the case of Currency Warrants,
whether the Currency Warrants are call warrants or put warrants, the currency to
which U.S. dollars will be compared, the method of determining the cash value
payable upon exercise of such Currency Warrants, the aggregate amount, offering
price and exercise period of such Currency Warrants, the risks associated with
such Currency Warrants and the manner of and any restrictions on the exercise of
such Currency Warrants (see "Risk Factors Relating to Currency Warrants"); and
(vi) in the case of all Offered Securities, whether such Offered Security will
be offered separately or as a unit with other Offered Securities, will be set
forth in the accompanying Prospectus Supplement. The Prospectus Supplement will
also contain information, where applicable, about certain United States Federal
income tax considerations relating to, and any listing on a securities exchange
of, the Offered Securities covered by the Prospectus Supplement.
The Offered Securities may be sold for public offering to underwriters or
dealers, which may be a group of underwriters represented by one or more
managing underwriters. In addition, the Offered Securities may be sold directly
by the Company or through agents designated from time to time. See "Plan of
Distribution". The names of any such agents, dealers or managing underwriters,
and of any underwriters, involved in the sale of the Offered Securities in
respect of which this Prospectus is being delivered and the applicable agent's
commission, dealer's purchase price or underwriter's discount will be set forth
in the Prospectus Supplement. The net proceeds to the Company from such sale
will also be set forth in the Prospectus Supplement. Any underwriters, dealers
or agents participating in the offering of Offered Securities may be deemed
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). The Company may also issue the Offered Securities to one or
more persons in exchange for outstanding securities of the Company acquired by
such persons from third parties in open market transactions or in privately
negotiated transactions. The newly issued Offered Securities in such cases may
be offered pursuant to this Prospectus and the applicable Prospectus Supplement
by such persons acting as principal for their own accounts, at market prices
prevailing at the time of sale, at prices otherwise negotiated or at fixed
prices. Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will only receive outstanding securities and will not receive cash
proceeds in connection with such exchanges or sales. See "Plan of Distribution".
This Prospectus and the related Prospectus Supplement may be used by direct
or indirect wholly-owned subsidiaries of the Company in connection with offers
and sales related to secondary market transactions in Offered Securities. Such
subsidiaries may act as principal or agent in such transactions. Such sales will
be made at prices related to prevailing market prices at the time of sale.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. THE DEBT SECURITIES WILL BE
UNSECURED OBLIGATIONS OF THE COMPANY, WILL NOT BE OBLIGATIONS OF A DEPOSITORY
INSTITUTION AND WILL NOT BE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 15, 1994.
<PAGE> 21
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the offices of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the following regional offices of the
Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, and Seven World Trade Center, New York, New York
10048. Copies of such material can also be obtained from the Commission's Public
Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549, at prescribed rates. Certain of the Company's securities
are listed on the New York Stock Exchange, and reports, proxy material and other
information concerning the Company may be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company are
incorporated by reference in this Prospectus:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1992;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1993, June 30, 1993 and September 30, 1993;
(c) The Company's Current Reports on Form 8-K dated January 21, 1993,
January 29, 1993, April 22, 1993, May 25, 1993, June 22, 1993, July 6,
1993, July 23, 1993, October 21, 1993, November 19, 1993 and January 21,
1994; and
(d) The descriptions of the Common Stock, the Preferred Stock and the
purchase rights for units of Junior Participating Preferred Stock set forth
in the Company's Registration Statements filed pursuant to Section 12 of
the Exchange Act and any amendment or report filed for the purpose of
updating those descriptions.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Offered Securities offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in the accompanying Prospectus
Supplement, or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO SUCH DOCUMENTS). REQUESTS SHOULD BE DIRECTED TO: CHEMICAL
BANKING CORPORATION, 270 PARK AVENUE, NEW YORK, NEW YORK 10017, ATTENTION:
OFFICE OF THE SECRETARY, TELEPHONE (212) 270-4040.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$", "dollars", "U.S.
dollars" or "U.S.$").
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<PAGE> 22
CHEMICAL BANKING CORPORATION
GENERAL
The Company is a bank holding company organized under the laws of Delaware
in 1968 and registered under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). The Company conducts domestic and international financial services
businesses through various bank and non-bank subsidiaries. The principal bank
subsidiaries of the Company are Chemical Bank, a New York banking corporation
("Chemical Bank"), and Texas Commerce Bank National Association, a subsidiary of
Texas Commerce Bancshares, Inc., a bank holding company subsidiary of the
Company headquartered in Texas ("Texas Commerce").
At December 31, 1993, the Company had total assets of approximately $149.9
billion and stockholders' equity of approximately $11.2 billion. The Company is
the fourth largest bank holding company in the United States in terms of total
assets. Chemical Bank is the third largest bank in the United States in terms of
deposits. At December 31, 1993, Chemical Bank had total assets of approximately
$113.0 billion, total loans of approximately $59.3 billion and total deposits of
approximately $76.5 billion. Texas Commerce is the second largest bank holding
company in Texas in terms of total deposits and, as of December 31, 1993, had
total assets of approximately $21.8 billion. The Company owns a 40% interest in
The CIT Group Holdings, Inc., which engages in diversified financial services
activities, including asset-based financing and leasing, sales financing and
factoring.
BUSINESS
The activities of the Company and its subsidiaries are internally
organized, for management information purposes, into three principal lines of
business. A brief description of each principal line of business is presented
below.
Global Bank
The Global Bank is organized into three principal management entities: (i)
Banking and Corporate Finance (domestic wholesale banking, corporate finance and
venture capital activities); (ii) Asia, Europe and Capital Markets
(international wholesale banking and corporate finance and the Company's trading
and treasury functions); and (iii) Developing Markets (trade finance, corporate
finance and advisory services in emerging markets).
Regional Bank
The Regional Bank includes Retail Banking (consumer banking, commercial and
professional banking, retail card services and national consumer business);
Regional Relationship Banking (middle market, private banking and Chemical New
Jersey Holdings, Inc.); and Geoserve (cash management, funds transfer, trade,
corporate trust and securities services worldwide). The Company's Technology and
Operations Group is also managed within this organizational structure.
Texas Commerce
Texas Commerce is one of Texas' leading commercial banking institutions,
with over 120 locations statewide. At December 31, 1993, Texas Commerce ranked,
in terms of total deposits, first in the Houston and third in the Dallas/Fort
Worth banking markets and had total assets of approximately $21.8 billion.
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CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following are the consolidated ratios of earnings to fixed charges and
the ratios of earnings to combined fixed charges and preferred stock dividend
requirements for each of the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on Deposits................ 2.2 1.7 1.1 1.1 0.8
Including Interest on Deposits................ 1.5 1.3 1.0 1.1 0.9
Earnings to Combined Fixed Charges and Preferred
Stock Dividend Requirements:
Excluding Interest on Deposits................ 2.0 1.6 1.0 1.1 0.8
Including Interest on Deposits................ 1.5 1.2 1.0 1.0 0.9
</TABLE>
For the year ended December 31, 1989, earnings were insufficient to cover
fixed charges, both excluding interest on deposits and including interest on
deposits, by $832 million. For such year, earnings were insufficient to cover
combined fixed charges and preferred stock dividend requirements, both excluding
interest on deposits and including interest on deposits, by $971 million.
For purposes of computing the ratios of earnings to fixed charges and of
earnings to combined fixed charges and preferred stock dividend requirements,
earnings represent net income from continuing operations plus total taxes based
on income and fixed charges. Fixed charges, excluding interest on deposits,
include interest expense (other than on deposits), one-third (the proportion
deemed representative of the interest factor) of rents, net of income from
subleases, and capitalized interest. Fixed charges, including interest on
deposits, include all interest expense, one-third (the proportion deemed
representative of the interest factor) of rents, net of income from subleases,
and capitalized interest.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Offered
Securities offered hereby will be added to the general funds of the Company and
will be available for general corporate purposes, which may include the
reduction of short-term indebtedness, equity investments in or extensions of
credit to its bank and non-bank subsidiaries, the reduction of outstanding
long-term indebtedness of the Company, the redemption of certain of the
Company's outstanding preferred stock, or the financing of possible business
expansion. Pending specific application, the net proceeds will be invested
temporarily or applied to the reduction of short-term indebtedness. Except as
otherwise described in a Prospectus Supplement, specific application of the
proceeds to such purposes will not have been made at the date of the applicable
Prospectus Supplement, although the management of the Company will have
determined that funds should be raised at that time in anticipation of the
future funding requirements of the Company or its subsidiaries or in
anticipation of repayments of borrowings or redemptions of preferred stock.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of any Debt Securities
and the extent, if any, to which such general provisions may apply to such Debt
Securities will be described in the Prospectus Supplement relating to such Debt
Securities.
The Senior Securities will be issued from time to time in series under an
Indenture dated as of December 1, 1989 between the Company and The Chase
Manhattan Bank (National Association), as Trustee (the "Senior Indenture"). The
Subordinated Securities will be issued from time to time in series under an
Indenture dated as of April 1, 1987, as amended and restated as of December 15,
1992, between the Company
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<PAGE> 24
and Morgan Guaranty Trust Company of New York, as Trustee (the "Subordinated
Indenture"). The Senior Indenture and the Subordinated Indenture are herein
referred to collectively as the "Indentures".
The statements under this caption are brief summaries of certain provisions
contained in the Indentures, do not purport to be complete and are qualified in
their entirety by reference to the Indentures, copies of which are exhibits to
the Registration Statement of which this Prospectus is a part. Numerical
references in parentheses below are to sections of the applicable Indenture.
Wherever capitalized terms are used but not defined herein, such terms shall
have the meanings assigned to them in the applicable Indenture, it being
intended that such referenced sections of the Indentures and such defined terms
shall be incorporated herein by reference.
Neither Indenture limits the amount of Debt Securities which may be issued
thereunder and Debt Securities may be issued under either of the Indentures up
to the aggregate principal amount which may be authorized from time to time by
the Company. The Senior Securities will be unsecured and will rank on a parity
with all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Securities will be unsecured and will be subordinated and junior to
all Senior Indebtedness (as defined below under "Subordinated
Securities -- Subordination") and, in certain circumstances relating to the
dissolution, winding-up, liquidation or reorganization of the Company, to all
Additional Senior Obligations (as defined below under "Subordinated
Securities -- Subordination") to the extent set forth below under "Subordinated
Securities". Since the Company is a holding company, the right of the Company to
participate in any distribution of assets of any subsidiary, including Chemical
Bank and Texas Commerce, upon such subsidiary's liquidation or reorganization or
otherwise (and thus the ability of holders of the Debt Securities to benefit
indirectly from such distribution), is subject to the prior claims of creditors
of that subsidiary, except to the extent that the Company may itself be
recognized as a creditor of that subsidiary. Claims on the Company's
subsidiaries by creditors other than the Company include long-term debt and
substantial obligations with respect to deposit liabilities, Federal funds
purchased, securities sold under repurchase agreements, commercial paper and
other short-term borrowings.
The Debt Securities may be issued in one or more separate series of Senior
Securities and/or one or more separate series of Subordinated Securities.
Reference is made to the Prospectus Supplement relating to the particular series
of Debt Securities offered thereby for the terms of such Debt Securities,
including, where applicable: (i) the specific title of such Debt Securities;
(ii) any limit on the aggregate principal amount or aggregate initial offering
price of such Debt Securities; (iii) the purchase price of such Debt Securities
(expressed as a percentage of the principal amount thereof); (iv) the date or
dates on which the principal of such Debt Securities will be payable and the
provisions, if any, for extension of such payment date or dates; (v) the rate or
rates per annum at which such Debt Securities will bear interest, if any,
including the rate of interest, if any, applicable to overdue payments of
principal, or the method by which any such rate or rates will be determined and
the dates on which such interest, if any, will be payable, the record dates for
such interest payment dates and the date from which such interest, if any, will
accrue; (vi) the place or places where the principal of (and premium, if any)
and interest, if any, with respect to the Debt Securities will be payable; (vii)
the terms of any mandatory or optional redemption provisions applicable to the
Debt Securities; (viii) the terms of any sinking fund and analogous provisions
with respect to the Debt Securities; (ix) authorized denominations of the Debt
Securities (if other than denominations of $1,000 and integral multiples
thereof); (x) if other than the currency of the United States, the currency or
currencies, including ECU and other composite currencies, in which payment of
the principal of (and premium, if any) and interest, if any, on the Debt
Securities will be payable (which may be different for principal, premium and
interest); (xi) if the principal of (and premium, if any) or interest, if any,
on such Debt Securities are to be payable at the election of the Company or a
holder thereof in one or more currencies or composite currencies, the currencies
or composite currencies in which payment may be made and the manner of making
such election; (xii) any provisions relating to the conversion or exchange of
such Debt Securities; (xiii) the index, if any, with reference to which the
amount of payments of principal of (and premium, if any) or interest, if any, on
such Debt Securities will be determined; (xiv) whether such Debt Securities are
Senior Securities or Subordinated Securities, or include both; (xv) the portion
of the principal amount of such Debt Securities which will be payable upon
declaration of acceleration of the maturity thereof, if other than the principal
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<PAGE> 25
amount thereof; (xvi) any Events of Default applicable to such Debt Securities
(if not set forth in the applicable Indenture); (xvii) if such Debt Securities
are Senior Securities, whether the provisions of the Senior Indenture relating
to "Defeasance and Covenant Defeasance" will be applicable to such series of
Debt Securities; (xviii) whether any of such Debt Securities are to be issuable
in permanent global form; (xix) the terms of any Currency Warrants or Securities
Warrants being offered with such Debt Securities; and (xx) any other specific
terms of such Debt Securities (including any covenants applicable to the Debt
Securities if not set forth in the applicable Indenture).
The Debt Securities offered hereby will be issued only in fully registered
form without coupons. The Indentures also provide that Debt Securities of a
series may be issued as permanent global Debt Securities. See "Permanent Global
Debt Securities" below. No service charge will be made for any transfer or
exchange of the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Unless otherwise provided in the applicable Prospectus Supplement,
principal of (and premium, if any) and interest, if any, on the Debt Securities
will be payable, and the Debt Securities offered hereby will be transferable or
exchangeable, at the corporate trust office of Chemical Bank in New York City,
provided that payment of interest on any Debt Securities may be made at the
option of the Company by check mailed to the registered holders of the Debt
Securities at their registered addresses. The Company will have the right to
require a holder of any Debt Security, in connection with the payment of the
principal of (and premium, if any) and interest, if any, on such Debt Security,
to certify information to the Company or, in the absence of such certification,
the Company will be entitled to rely on any legal presumption to enable the
Company to determine its duties and liabilities, if any, to deduct or withhold
taxes, assessments or governmental charges from such payment.
If the principal of (and premium, if any) or interest, if any, on any Debt
Securities are to be payable in any currency other than U.S. dollars or, at the
election of the Company or a holder thereof, in one or more currencies or
composite currencies, or if any index is used to determine the amount of
payments of principal of (and premium, if any) or interest, if any, on any
series of Debt Securities, any special Federal income tax, accounting and other
considerations applicable thereto will be described in the Prospectus Supplement
relating thereto.
Some of the Debt Securities may be issued as original issue discount Debt
Securities (bearing no interest or interest at a rate which at the time of
issuance is below market rates), to be sold at a discount below their stated
principal amount. Federal income tax, accounting and other special
considerations applicable to any such original issue discount Debt Securities
will be described in the Prospectus Supplement relating thereto.
Neither Indenture contains any restriction on the Company's ability to
enter into a highly leveraged transaction or any provision affording special
protection to holders of Debt Securities in the event the Company engages in a
highly leveraged transaction. Further, neither Indenture contains any provisions
that would provide protection to holders of Debt Securities upon a sudden and
dramatic decline in the credit quality of the Company resulting from a takeover,
recapitalization or similar restructuring of the Company.
The Debt Securities of certain series may be issued under the Indentures
upon the exercise of Securities Warrants issued with other Debt Securities or
upon exchange or conversion of exchangeable or convertible Debt Securities. The
specific terms of any such Securities Warrants, the specific terms of exchange
or conversion of any such Debt Securities and the specific terms of the Debt
Securities issuable upon the exercise of any such Securities Warrants or upon
any such exchange or conversion will be described in the Prospectus Supplement
relating to any Debt Securities issued with Securities Warrants or any such
exchangeable or convertible Debt Securities.
SENIOR SECURITIES
The Senior Securities will be direct, unsecured obligations of the Company
and will constitute Senior Indebtedness issued on a parity with the other Senior
Indebtedness of the Company. As of December 31,
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<PAGE> 26
1993, Senior Indebtedness and Additional Senior Obligations of the Company
aggregated approximately $5.8 billion. See "Subordinated
Securities -- Subordination" below.
Limitation on Disposition of Stock of Chemical Bank. The Senior Indenture
contains a covenant by the Company that, so long as any of the Senior Securities
are outstanding, but subject to the rights of the Company in connection with its
consolidation with or merger into another person or a sale of the Company's
assets, neither the Company nor any Intermediate Subsidiary will sell, assign,
transfer, grant a security interest in or otherwise dispose of any shares of, or
securities convertible into, or options, warrants or rights to subscribe for or
purchase shares of, Voting Stock of Chemical Bank (except to the Company or an
Intermediate Subsidiary), nor will the Company or any Intermediate Subsidiary
permit Chemical Bank to issue any shares of, or securities convertible into, or
options, warrants or rights to subscribe for or purchase shares of, Voting Stock
of Chemical Bank, nor will the Company permit any Intermediate Subsidiary that
owns any shares of, or securities convertible into, or options, warrants or
rights to subscribe for or purchase shares of, Voting Stock of Chemical Bank to
cease to be an Intermediate Subsidiary, unless (i) any such sale, assignment,
transfer, grant of a security interest or other disposition is made for fair
market value, as determined by the Board of Directors of the Company (the "Board
of Directors") or such Intermediate Subsidiary, and (ii) the Company and any one
or more Intermediate Subsidiaries will collectively own at least 80% of the
issued and outstanding Voting Stock of Chemical Bank (or any successor to
Chemical Bank) free and clear of any security interest after giving effect to
such transaction. The foregoing, however, shall not preclude Chemical Bank from
being consolidated with or merged into another domestic banking corporation, if
after such merger or consolidation the Company, or any successor thereto in a
permissible merger, and any one or more Intermediate Subsidiaries own or owns at
least 80% of the Voting Stock of the resulting bank and, giving effect to the
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have happened and be
continuing. An Intermediate Subsidiary is defined in the Senior Indenture as a
Subsidiary (i) that is organized under the laws of any domestic jurisdiction and
(ii) of which all the shares of each class of capital stock issued and
outstanding, and all securities convertible into, and options, warrants and
rights to subscribe for or purchase shares of, such capital stock, are owned
directly by the Company, free and clear of any security interest. The limitation
on the disposition of the Voting Stock of Chemical Bank does not prevent
Chemical Bank from engaging in a sale of assets to the extent otherwise
permitted by the Senior Indenture. (Section 1006).
Events of Default. The Senior Indenture defines an Event of Default with
respect to any series of Senior Securities as any one of the following events:
(i) default in payment of interest on any Senior Security of that series and
continuance of such default for 30 days; (ii) default in payment of principal of
(or premium, if any, on) any Senior Security of that series at Maturity; (iii)
default in the deposit of any sinking fund payment, when and as due by the terms
of a Senior Security of that series, and continuance of such default for 5 days;
(iv) failure by the Company for 60 days after due notice in performance of any
other of the covenants or warranties in the Senior Indenture (other than a
covenant or warranty included in the Senior Indenture solely for the benefit of
a series of Senior Securities other than that series); (v)(A) failure by the
Company to pay indebtedness for money borrowed, including Senior Securities of
other series, in an aggregate principal amount exceeding $25,000,000, at the
later of final maturity or upon the expiration of any applicable period of grace
with respect to such principal amount or (B) acceleration of the maturity of any
of the Company's indebtedness for money borrowed, including Senior Securities of
other series, in an aggregate principal amount exceeding $25,000,000, if such
failure to pay or acceleration results from a default under the instrument
giving rise to, or securing, such indebtedness for money borrowed and is not
rescinded or annulled within 30 days after due notice, unless such default is
contested in good faith by appropriate proceedings; (vi) certain events of
bankruptcy, insolvency or reorganization of the Company or Chemical Bank; and
(vii) any other Event of Default provided with respect to Senior Securities of
that series. (Section 501).
If any Event of Default with respect to Senior Securities of any series at
the time Outstanding occurs and is continuing, either the Trustee or the holders
of not less than 25% in principal amount of the Outstanding Senior Securities of
that series may declare the principal amount (or, if the Senior Securities of
that series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all Senior
Securities of that series to be due and payable immediately (provided that no
such
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<PAGE> 27
declaration is required upon certain events of bankruptcy); but upon certain
conditions such declaration may be annulled and past defaults (except, unless
theretofore cured, a default in payment of principal of (or premium, if any) or
interest on the Senior Securities of that series and certain other specified
defaults) may be waived by the holders of a majority in principal amount of the
Outstanding Senior Securities of that series on behalf of the holders of all
Senior Securities of that series. (Sections 502 and 513).
Reference is made to the Prospectus Supplement relating to each series of
Senior Securities which are Original Issue Discount Securities for the
particular provisions relating to acceleration of the Maturity of a portion of
the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
The Senior Indenture provides that the Trustee will, within 90 days after
the occurrence of a default known to it with respect to Senior Securities of any
series at the time Outstanding with respect to which it is trustee, give to the
holders of the Outstanding Senior Securities of that series notice of such
default if uncured or not waived, provided that, except in the case of default
in the payment of principal of (or premium, if any) or interest, if any, on any
Senior Security of that series, or in the payment of any sinking fund
installment which is provided for such series, such Trustee will be protected in
withholding such notice if such Trustee in good faith determines that the
withholding of such notice is in the interest of the holders of the Outstanding
Senior Securities of such series and, provided further, that such notice shall
not be given until 60 days after the occurrence of a default with respect to
Outstanding Senior Securities of any series in the performance of a covenant in
the Senior Indenture other than for the payment of the principal of (or premium,
if any) or interest, if any, on any Senior Security of such series or the
deposit of any sinking fund payment with respect to the Senior Securities of
such series. The term "default" with respect to any series of Outstanding Senior
Securities for the purpose only of this provision means any event which is, or
after notice or lapse of time or both would become, an Event of Default with
respect to Senior Securities of such series. (Section 602).
The Senior Indenture provides that, subject to the duty of the Trustee
during default to act with the required standard of care, the Trustee will not
be under any obligation to exercise any of its rights or powers under the Senior
Indenture at the request or direction of any of the holders, unless such holders
shall have offered to the Trustee reasonable security or indemnity. (Section
603). The Senior Indenture provides that the holders of a majority in principal
amount of Outstanding Senior Securities of any series may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee for that series, or exercising any trust or other power conferred on
such Trustee, provided that such Trustee may decline to act if such direction is
contrary to law or the Senior Indenture. (Section 512).
The Senior Indenture includes a covenant that the Company will file
annually with the Trustee a certificate of no default, or specifying any default
that exists. (Section 1007).
Defeasance and Covenant Defeasance. The Senior Indenture provides, if such
provision is made applicable to the Senior Securities of any series pursuant to
Section 301 of the Senior Indenture (which will be indicated in the Prospectus
Supplement applicable thereto), that the Company may elect (i) to defease and be
discharged from all of its obligations with respect to such Senior Securities
then outstanding (except for the obligations to register the transfer or
exchange of such Senior Securities, to replace temporary or mutilated,
destroyed, lost or stolen Senior Securities, to maintain an office or agency in
respect of the Senior Securities and to hold moneys for payment in trust)
("defeasance") and/or (ii) to be released from its obligations with respect to
such Senior Securities then outstanding under Section 1005 and Section 1006 (and
any other sections applicable to such Senior Securities that are determined
pursuant to Section 301 to be subject to covenant defeasance) and the
consequences of the occurrence of an event of default specified in Section
501(4) (insofar as it is with respect to Section 1005, Section 1006 or any other
section applicable to such Senior Securities that is determined pursuant to
Section 301 to be subject to covenant defeasance) or Section 501(5) of the
Senior Indenture (Section 1005 containing the covenant to pay taxes and other
claims, Section 1006 containing the restrictions described above under
"Limitation on Disposition of Stock of Chemical Bank" and Sections 501(4) and
501(5) containing the provisions described above under "Events of Default"
relating to covenant defaults and cross-defaults, respectively) ("covenant
defeasance"), in either case upon the deposit with the Trustee (or other
qualifying trustee), in trust for such purpose, of money,
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<PAGE> 28
and/or U.S. Government Obligations which through the payment of principal and
interest in accordance with their terms will provide money in an amount
sufficient, without reinvestment, to pay the principal of (and premium, if any)
and interest, if any, on such Senior Securities to maturity or redemption, as
the case may be, and any mandatory sinking fund or analogous payments thereon.
As a condition to defeasance or covenant defeasance, the Company must deliver to
the Trustee an Opinion of Counsel (as specified in the Senior Indenture) to the
effect that the holders of such Senior Securities will not recognize income,
gain or loss for Federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance or covenant defeasance had not occurred. Such opinion, in the
case of defeasance under clause (i) above, must refer to and be based upon a
ruling of the Internal Revenue Service issued to the Company or published as a
revenue ruling or upon a change in applicable Federal income tax law, in any
such case after the date of the Senior Indenture.
Under current Federal income tax law, defeasance would likely be treated as
a taxable exchange of such Senior Securities for interests in the defeasance
trust. As a consequence, a holder would recognize gain or loss equal to the
difference between the holder's cost or other tax basis for such Senior
Securities and the value of the holder's proportionate interest in the
defeasance trust, and thereafter would be required to include in income a
proportionate share of the income, gain or loss, as the case may be, of the
defeasance trust. Under current Federal income tax law, covenant defeasance
would ordinarily not be treated as a taxable exchange of such Senior Securities.
Purchasers of such Senior Securities should consult their own advisors with
respect to the tax consequences to them of such defeasance and covenant
defeasance, including the applicability and effect of tax laws other than the
Federal income tax law.
If the Company exercises its covenant defeasance option with respect to any
series of Senior Securities, payment of such Senior Securities may not be
accelerated by reference to the covenants relating to covenant defeasance
described above. The Company may exercise its defeasance option with respect to
such Senior Securities notwithstanding its prior exercise of its covenant
defeasance option. If the Company exercises its defeasance option, payment of
such Senior Securities may not be accelerated because of any Event of Default.
If the Company exercises its defeasance option or covenant defeasance option and
an acceleration were to occur, the realizable value at the acceleration date of
the money and U.S. Government Obligations in the defeasance trust could be less
than the principal and interest then due on such Senior Securities, in that the
required deposit in the defeasance trust is based upon scheduled cash flows
rather than market value, which will vary depending upon interest rates and
other factors.
The Prospectus Supplement may further describe the provisions, if any,
applicable to defeasance or covenant defeasance with respect to the Senior
Securities of a particular series.
Modification of the Indenture. Modification and amendments of the Senior
Indenture may be made by the Company and the Trustee with the consent of the
holders of not less than a majority in principal amount of each series of
Outstanding Senior Securities affected thereby, by executing supplemental
indentures adding any provisions to or changing or eliminating any of the
provisions of the Senior Indenture or modifying the rights of the holders of
Outstanding Senior Securities of such series, except that no such supplemental
indenture may (i) change the Stated Maturity of any Senior Security of any
series, or reduce the principal amount thereof (or premium, if any, thereon), or
reduce the rate of payment of interest thereon, or change certain other
provisions relating to the yield of the Senior Securities or change the currency
or currencies in which the same is payable; (ii) reduce the aforesaid percentage
of Outstanding Senior Securities of any series, the consent of the holders of
which is required for any supplemental indenture, or reduce the percentage of
principal amount of Outstanding Senior Securities necessary for waiver of
compliance with certain provisions of the Senior Indenture or for waiver of
certain covenants and defaults; or (iii) modify the provisions of the Senior
Indenture relating to modification and amendment of the Senior Indenture. The
Senior Indenture provides, however, that each of the amendments and
modifications listed in clauses (i) through (iii) above may be made with the
consent of the holder of each Outstanding Senior Security affected thereby.
(Section 902).
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<PAGE> 29
Consolidation, Merger and Sale of Assets. The Company, without the consent
of the holders of any of the Senior Securities under the Senior Indenture, may
consolidate with or merge into any other person or transfer or lease its assets
substantially as an entirety to any person or may permit any corporation to
merge into the Company, provided that: (i) the successor is a person organized
under the laws of any domestic jurisdiction; (ii) the successor person, if other
than the Company, assumes the Company's obligations on the Senior Securities and
under the Senior Indenture; (iii) after giving effect to the transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing; and
(iv) certain other conditions are met. (Section 801).
Outstanding Senior Securities. The Senior Indenture provides that, in
determining whether the holders of the requisite principal amount of Outstanding
Senior Securities have given any request, demand, authorization, direction,
notice, consent or waiver, (i) the portion of the principal amount of an
Original Issue Discount Security that shall be deemed to be Outstanding for such
purpose shall be that portion of the principal amount thereof that would be due
and payable as of the date of such determination upon acceleration of the
Maturity thereof; (ii) the portion of the principal amount of a Senior Security
denominated in a foreign or composite currency or currencies that shall be
deemed to be Outstanding for such purpose shall be the U.S. dollar equivalent,
determined on the date of original issuance of such Senior Security, of the
principal amount (or, in the case of an Original Issue Discount Security, the
U.S. dollar equivalent on the date of original issuance of such Senior Security
of the amount determined as provided in (i) above) of such Senior Security;
(iii) the portion of the principal amount of a Senior Security for which the
amount of payments of principal of and any premium or interest on such Senior
Security may be determined with reference to an index that shall be deemed to be
Outstanding for such purpose shall be determined as of the date of original
issuance of such Senior Security; and (iv) Senior Securities owned by the
Company, any of its Affiliates or any other obligor upon the Senior Securities
shall not be deemed to be Outstanding. (Section 101).
SUBORDINATED SECURITIES
The Subordinated Securities will be direct, unsecured obligations of the
Company. The obligations of the Company pursuant to the Subordinated Securities
will be subordinate in right of payment to all Senior Indebtedness and, in
certain circumstances relating to the dissolution, winding-up, liquidation or
reorganization of the Company, to all Additional Senior Obligations, whether
outstanding as of the date hereof or hereafter created, assumed or incurred, as
discussed below under "Subordination". The Subordinated Indenture does not
contain any restriction on the amount of Senior Indebtedness or Additional
Senior Obligations which the Company may incur.
Unless otherwise indicated in the applicable Prospectus Supplement, the
maturity of the Subordinated Securities will be subject to acceleration only in
the event of certain events of bankruptcy or reorganization of the Company. See
"Defaults and Waiver Thereof" below.
The holders of Subordinated Securities of a specified series that are
convertible into Common Stock ("Subordinated Convertible Securities") will be
entitled at certain times specified in the Prospectus Supplement relating to
such Subordinated Convertible Securities, subject to prior redemption, repayment
or repurchase, to convert any Subordinated Convertible Securities of such series
into Common Stock, at the conversion price set forth in such Prospectus
Supplement, subject to adjustment and to such other terms as are set forth in
such Prospectus Supplement.
The holders of Subordinated Securities of any series may be obligated at
maturity, or at any earlier time as set forth in the Prospectus Supplement
relating to such series, to exchange them for Capital Securities of the Company.
The terms of any such exchange and the Capital Securities issuable upon such
exchange will be described in the Prospectus Supplement relating to such series
of Subordinated Securities. (Article Seventeen). "Capital Securities" may
consist of Common Stock, perpetual preferred stock or other capital securities
of the Company acceptable to its primary Federal banking regulator. Currently,
the Company's primary Federal banking regulator is the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). Whenever Subordinated
Securities are exchangeable for Capital Securities, the Company will be
obligated to deliver Capital Securities with a market value equal to the
principal amount of such
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Subordinated Securities. In addition, the Company will unconditionally
undertake, at the expense of the Company, to sell the Capital Securities in a
sale (the "Secondary Offering") on behalf of any holders who elect to receive
cash for the Capital Securities. The Common Stock is described below under
"Description of Common Stock." A general description of the preferred stock of
the Company is set forth below under "Description of Preferred Stock".
The staff of the Commission has advised the Company that Rule 13e-4 of the
Commission's rules and regulations relating to tender offers by issuers, as
currently in effect and interpreted, would be applicable to the exchange of
Subordinated Securities of any series for Capital Securities and to any
Secondary Offering. If, at the time of the exchange of Subordinated Securities
of any series for Capital Securities and the Secondary Offering, Rule 13e-4 (or
any successor rule or rules) applies to such transactions, the Company will
comply with such rule (or any successor rule or rules) and will afford holders
of such Subordinated Securities all rights and will make all filings required by
such rule (or successor rule or rules). If fewer than all of the Subordinated
Securities of a series may be exchanged for Capital Securities pursuant to the
terms of such Subordinated Securities, the particular Subordinated Securities to
be exchanged shall be selected by the Trustee utilizing a method the Trustee
deems fair and equitable, provided that such method shall comply with the
requirements of applicable law, including Federal securities law.
Subordination. The Subordinated Securities will be subordinate in right of
payment as provided in the Subordinated Indenture to all Senior Indebtedness
and, under certain circumstances, to all Additional Senior Obligations.
The Subordinated Indenture provides that "Senior Indebtedness" shall mean
the principal of (and premium, if any) and interest on (i) all indebtedness of
the Company for money borrowed, whether outstanding on the date of execution of
the Subordinated Indenture or thereafter created, assumed or incurred, except
(A) Subordinated Securities issued under the Subordinated Indenture, (B)
Antecedent CBC Subordinated Indebtedness (as hereinafter defined), (C) Assumed
MHC Subordinated Indebtedness (as hereinafter defined) and (D) such other
indebtedness of the Company which by its terms is expressly stated to be not
superior in right of payment to the Subordinated Securities or to rank pari
passu in right of payment with the Subordinated Securities (such other
indebtedness hereinafter referred to as "Other Subordinated Indebtedness") and
(ii) any deferrals, renewals or extensions of any such Senior Indebtedness. The
term "indebtedness of the Company for money borrowed" shall mean any obligation
of, or any obligation guaranteed by, the Company for the repayment of money
borrowed, whether or not evidenced by bonds, debentures, notes or other written
instruments, and any deferred obligation for payment of the purchase price of
property or assets.
The Subordinated Indenture also provides that "Additional Senior
Obligations" shall mean all indebtedness of the Company, whether outstanding on
December 15, 1992 or thereafter created, assumed or incurred, for claims in
respect of derivative products such as interest and foreign exchange rate
contracts, commodity contracts and similar arrangements; provided, however, that
Additional Senior Obligations do not include claims in respect of Senior
Indebtedness or obligations which, by their terms, are expressly stated to be
not superior in right of payment to the Subordinated Securities or to rank pari
passu in right of payment with the Subordinated Securities. For purposes of this
definition, "claim" shall have the meaning assigned thereto in Section 101(4) of
the United States Bankruptcy Code of 1978, as amended and in effect on December
15, 1992.
At December 31, 1993, an aggregate principal amount of approximately $400
million of Subordinated Securities and an aggregate principal amount of
approximately $100 million of Other Subordinated Indebtedness was outstanding.
Antecedent CBC Subordinated Indebtedness includes the following outstanding
subordinated indebtedness of the Company issued prior to December 15, 1992: (i)
the 10 1/8% Subordinated Capital Notes Due 2000; (ii) the 9 3/4% Subordinated
Capital Notes Due 1999; (iii) the Floating Rate Subordinated Capital Note Due
1999; (iv) the 8 1/2% Subordinated Notes Due 2002; (v) the 8 5/8% Subordinated
Debentures Due 2002; (vi) the 8 1/8% Subordinated Notes Due 2002; (vii) the
10 3/8% Subordinated Notes Due 1999; and (viii) the Floating
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Rate Subordinated Capital Note Due 1998. At December 31, 1993, an aggregate
principal amount of approximately $1.19 billion of Antecedent CBC Subordinated
Indebtedness was outstanding.
Assumed MHC Subordinated Indebtedness includes the following outstanding
subordinated indebtedness of the Company which was assumed by the Company as a
result of the Merger: (i) the Floating Rate Subordinated Notes Due 1997; (ii)
the 8 1/2% Subordinated Capital Notes Due February 15, 1999; and (iii) the
Subordinated Note Due 1996. At December 31, 1993, an aggregate principal amount
of approximately $272 million of Assumed MHC Subordinated Indebtedness was
outstanding.
The Subordinated Securities will be subordinate in right of payment as
provided in the Subordinated Indenture to all Senior Indebtedness. No payment
pursuant to the Subordinated Securities or exchange for Capital Securities may
be made, and no holder of the Subordinated Securities shall be entitled to
demand or receive any such payment or exchange, unless all amounts of principal
(and premium, if any) and interest, if any, then due with respect to all Senior
Indebtedness shall have been paid in full or duly provided for, and unless at
the time of such payment or exchange and immediately after giving effect
thereto, there shall not exist with respect to any such Senior Indebtedness any
event of default permitting the holders thereof to accelerate the maturity
thereof or any event which, with notice or lapse of time or both, would become
such an event of default. Such subordination will not prevent the occurrence of
any default in respect of the Subordinated Securities. See "Defaults and Waivers
Thereof " below for limitations on the rights of acceleration. (Article
Sixteen).
Upon any distribution of the assets of the Company upon dissolution,
winding-up, liquidation or reorganization, (i) the holders of Senior
Indebtedness will be entitled to receive payment in full of principal (and
premium, if any) and interest, if any, before any payment or distribution is
made on the Subordinated Securities, and (ii) if, after giving effect to the
operation of clause (i) above, (A) amounts remain available for payment or
distribution in respect of the Subordinated Securities and (B) creditors in
respect of Additional Senior Obligations have not received payment in full of
amounts due or to become due thereon or payment of such amounts has not been
duly provided for, then such amounts available for payment or distribution in
respect of the Subordinated Securities shall first be applied to pay or provide
for the payment in full of all such Additional Senior Obligations before any
payment may be made on the Subordinated Securities.
The Subordinated Securities will not be subordinated to indebtedness of the
Company which is not Senior Indebtedness or Additional Senior Obligations, and
the creditors of the Company who do not hold Senior Indebtedness or Additional
Senior Obligations will not benefit from the subordination provisions described
herein. In the event of the bankruptcy or reorganization of the Company before
or after maturity of the Subordinated Securities (and prior to any exchange or
conversion thereof), such other creditors would rank pari passu in right of
payment with holders of the Subordinated Securities, subject, however, to the
broad equity powers of a Federal bankruptcy court pursuant to which such court
may, among other things, reclassify the claims of holders of any series of
Subordinated Securities into a class of claims having a different relative
priority with respect to the claims of such other creditors or any other claims
against the Company.
No series of subordinated debt securities of the Company (including,
without limitation, the Subordinated Securities, the Antecedent CBC Subordinated
Indebtedness, the Assumed MHC Subordinated Indebtedness and the Other
Subordinated Indebtedness), is subordinated to any other series of subordinated
debt securities of the Company. However, Antecedent CBC Subordinated
Indebtedness is subordinated, by its terms, only to Senior Indebtedness;
Subordinated Securities and Other Subordinated Indebtedness will be
subordinated, by their terms, to Senior Indebtedness and, in certain
circumstances relating to the dissolution, winding-up, liquidation or
reorganization of the Company, to Additional Senior Obligations; and Assumed MHC
Subordinated Indebtedness is subordinated, by its terms, to Senior Indebtedness,
Additional Senior Obligations and all other obligations of the Company to its
creditors other than any obligation of the Company as is by its terms expressly
stated to be not superior in right of payment to or to rank pari passu in right
of payment with such Assumed MHC Subordinated Indebtedness. As a result of the
differences between the subordination provisions applicable to the Subordinated
Securities, the Antecedent CBC Subordinated
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Indebtedness, the Assumed MHC Subordinated Indebtedness and the Other
Subordinated Indebtedness, in the event of a dissolution, winding-up,
liquidation or reorganization of the Company, the holders of Subordinated
Securities and Other Subordinated Indebtedness may receive less, ratably, than
the holders of Antecedent CBC Subordinated Indebtedness, but more, ratably, than
the holders of Assumed MHC Subordinated Indebtedness.
Limitation on Disposition of Voting Stock of Chemical Bank. With respect
to Subordinated Securities, the Subordinated Indenture contains no covenant that
the Company will not sell, transfer or otherwise dispose of any shares of, or
securities convertible into, or options, warrants or rights to subscribe for or
purchase shares of, voting stock of Chemical Bank, nor does it prohibit Chemical
Bank from issuing any shares of, securities convertible into, or options,
warrants or rights to subscribe for or purchase shares of, voting stock of
Chemical Bank. However, the Subordinated Indenture does contain a covenant by
the Company, for the exclusive benefit of the Antecedent CBC Subordinated
Indebtedness and subject to the provisions described below under "Consolidation,
Merger and Sale of Assets," that the Company will not sell, transfer or
otherwise dispose of any shares of, or securities convertible into, or options,
warrants or rights to subscribe for or purchase shares of, voting stock of
Chemical Bank, nor will it permit Chemical Bank to issue any shares of,
securities convertible into, or options, warrants or rights to subscribe for or
purchase shares of, voting stock of Chemical Bank, with the following
exceptions: (i) issuances or sales of directors' qualifying shares; (ii)
issuances or sales of shares to the Company; (iii) sales or other dispositions
or issuances for fair market value, as determined by the Board of Directors, if
after giving effect to such sales, dispositions or issuances and to the issuance
of any shares issuable upon conversion of convertible securities or upon the
exercise of options, warrants or rights, the Company would own directly or
indirectly through subsidiaries not less than 80% of the issued and outstanding
shares of voting stock of Chemical Bank; (iv) sales or other dispositions or
issuances made in compliance with an order or direction of a court or regulatory
authority of competent jurisdiction; and (v) sales of voting stock by Chemical
Bank to its shareholders if such sales do not reduce the percentage of shares of
voting stock owned by the Company. (Section 5.07).
Defaults and Waiver Thereof. The Subordinated Indenture defines an Event
of Default with respect to any series of Subordinated Securities as (i) any one
of certain events of bankruptcy or reorganization affecting the Company and (ii)
any other Event of Default specifically provided for by the terms of such series
of Subordinated Securities, as described in the Prospectus Supplement relating
thereto. (Section 7.01). In case an Event of Default shall have occurred and be
continuing with respect to any series of Subordinated Securities then
outstanding under the Subordinated Indenture, the Trustee or the holders of at
least 25% in aggregate principal amount of the Subordinated Securities of that
series which are then outstanding may declare the principal (or, in the case of
original issue discount Subordinated Securities, such lesser amount of principal
as may be provided therein) of all Subordinated Securities of that series to be
due and payable immediately in cash, but such declaration may be annulled, and
certain past defaults may be waived, by the holders of not less than a majority
in aggregate principal amount of the Subordinated Securities of that series,
upon the conditions provided in the Subordinated Indenture. (Section 7.01). The
right of the holders of Subordinated Securities of a series to demand payment in
cash would exist upon the occurrence and continuance of an Event of Default
before or after the stated maturity of the Subordinated Securities of such
series, so long as the Subordinated Securities of such series have not been
exchanged or converted as provided in the Subordinated Indenture. Any such right
to payment in cash would, in the event of the bankruptcy or reorganization of
the Company, be subject as to enforcement to the broad equity powers of a
Federal bankruptcy court and to the determination by that court of the nature
and status of the payment claims of the holders of the Subordinated Securities.
Prior to any declaration accelerating the maturity of the Subordinated
Securities of any series, the holders of a majority in aggregate principal
amount of the Subordinated Securities of that series at the time outstanding may
on behalf of the holders of all Subordinated Securities of that series waive any
past default or Event of Default and its consequences, except a default in the
payment of the principal of (or premium, if any) or interest, if any, on the
Subordinated Securities of that series. (Section 7.07).
Unless otherwise provided in the terms of a series of Subordinated
Securities, there will be no right of acceleration of the payment of principal
of the Subordinated Securities of such series upon a default in the
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<PAGE> 33
payment of principal or interest or a default in the performance of any covenant
or agreement in the Subordinated Securities or the Subordinated Indenture. In
the event of a default in the payment of interest or principal (including the
delivery of any Capital Securities in exchange for Subordinated Securities) or
the performance of any covenant or agreement in the Subordinated Securities or
the Subordinated Indenture, the Trustee may, subject to certain limitations and
conditions, seek to enforce payment of such interest or principal (including the
delivery of any Capital Securities in exchange for Subordinated Securities) or
the performance of such covenant or agreement.
The Subordinated Indenture provides that the Trustee shall, within 90 days
after the occurrence of a default with respect to the Subordinated Securities of
any series, give to the holders of the Subordinated Securities of that series
notice of all uncured defaults known to it (the term "default" being defined to
include the events specified above without grace periods or notice), provided,
that except in the case of an Event of Default that relates to the bankruptcy or
reorganization of the Company or a default in payment of principal (or premium,
if any) or interest, if any, in respect of the Subordinated Securities of that
series, or the obligation to deliver Capital Securities in exchange for such
Subordinated Securities, the Trustee shall be protected in withholding such
notice if and so long as the board of directors or trustees, the executive
committee or a trust committee of directors or responsible officers or both, of
the Trustee, in good faith determines that the withholding of such notice is in
the interest of such holders. (Section 7.08). The Company will be required to
furnish to the Trustee annually an officers' certificate as to the absence of
defaults under the Subordinated Indenture. (Section 5.06).
Subject to the provisions of the Subordinated Indenture relating to the
duties of the Trustee, the Trustee will be under no obligation to exercise any
of its rights or powers under the Subordinated Indenture at the request, order
or direction of any of the holders of the Subordinated Securities, unless such
holders shall have offered to the Trustee reasonable security or indemnity.
Subject to such provision for security or indemnification, the holders of a
majority in principal amount of the Subordinated Securities of any series then
outstanding under the Subordinated Indenture will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to,
or exercising any trust or power conferred on, the Trustee with respect to the
Subordinated Securities of such series. (Sections 7.07 and 8.02).
Modification of the Indenture. The Subordinated Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
holders of not less than a majority in principal amount of the Subordinated
Securities at the time outstanding of each series affected by such modification,
to modify the Subordinated Indenture or any supplemental indenture or the rights
of the holders of the Subordinated Securities, provided that no such
modification shall, without the consent of the holder of each Subordinated
Security affected thereby: (i) change the stated maturity date of the principal
of, or any installment of principal of or interest on, any such Subordinated
Security; (ii) reduce the principal amount of (or premium, if any) or interest,
if any, on any such Subordinated Security; (iii) reduce the portion of the
principal amount of an original issue discount Subordinated Security payable
upon acceleration of the maturity thereof; (iv) reduce any amount payable upon
redemption of any Subordinated Security; (v) change the place or places where,
or the coin or currency in which, any Subordinated Security or any premium or
the interest thereon is payable; (vi) change the definition of "Market Value";
(vii) impair the right of any holders of Subordinated Securities of any series
to receive on any Exchange Date for Subordinated Securities of such series
Capital Securities with a Market Value equal to that required by the terms of
the Subordinated Securities; (viii) impair the conversion rights of any holders
of Subordinated Securities of a series entitled to the conversion rights set
forth in Article Nineteen of the Subordinated Indenture; (ix) impair the right
of a holder to institute suit for the enforcement of any payment on or with
respect to any such Subordinated Security (including any right of redemption at
the option of the holder of such Subordinated Security) or impair any rights to
the delivery of Capital Securities in exchange for any Subordinated Security or
to require the Company to sell Capital Securities in a Secondary Offering or to
require the delivery of Common Stock, Debt Securities or other property upon
conversion of Subordinated Securities; (x) reduce the above-stated percentage of
Subordinated Securities of any series the consent of the holders of which is
necessary to modify or amend the Subordinated Indenture or reduce the percentage
of Subordinated Securities of any series the
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<PAGE> 34
holders of which are required to waive any past default or Event of Default; or
(xi) modify the foregoing requirements. (Section 11.02).
The Subordinated Indenture permits the Company and the Trustee to amend the
Subordinated Indenture in certain circumstances without the consent of the
holders of Subordinated Securities to evidence the merger of the Company or the
replacement of the Trustee, to effect modifications which do not affect any
series of Subordinated Securities already outstanding and for certain other
purposes. (Section 11.01).
Consolidation, Merger and Sale of Assets. The Company may not merge or
consolidate with any other corporation or sell or convey all or substantially
all of its assets as an entirety to any other corporation, unless (i) either the
Company shall be the continuing corporation or the successor corporation shall
expressly assume the payment of the principal of (including issuance and
delivery of Capital Securities) (and premium, if any) and interest, if any, on
the Subordinated Securities and the performance and observance of all the
covenants and conditions of the Subordinated Indenture binding upon the Company,
and (ii) the Company or such successor corporation shall not, immediately after
such merger or consolidation or such sale or conveyance, be in default in the
performance of any such covenant or condition. (Article Twelve).
PERMANENT GLOBAL DEBT SECURITIES
If any Debt Securities are to be issued in permanent global form, the
Prospectus Supplement relating thereto will describe the circumstances, if any,
under which beneficial owners of interests in any such permanent global Debt
Security may exchange such interests for Debt Securities of such series and like
tenor of any authorized form and denomination. Principal of (and premium, if
any) and interest, if any, on a permanent global Debt Security will be payable
in the manner described in the Prospectus Supplement relating thereto. Persons
holding beneficial interests in such a permanent global Debt Security will,
pursuant to arrangements between such persons and the depository (the record
holder of the global Debt Security), be treated as holders of the Debt Security
for other purposes to the extent specified in writing by such depository.
INFORMATION CONCERNING THE TRUSTEES
The Company, Chemical Bank and certain other subsidiaries of the Company
maintain deposits with, and conduct other banking transactions with, the
Trustees under each of the Indentures in the ordinary course of business. Morgan
Guaranty Trust Company of New York is trustee under indentures of the Company
pursuant to which certain Senior Indebtedness is outstanding.
DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain terms of any series of the Preferred
Stock offered by any Prospectus Supplement will be described in the Prospectus
Supplement relating to such series of the Preferred Stock. If so indicated in
the Prospectus Supplement, the terms of any such series may differ from the
terms set forth below. The description of certain provisions of the Preferred
Stock set forth below and in any Prospectus Supplement does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Certificate of Designations relating to such series of the Preferred Stock which
will be filed with the Commission promptly after the offering of such series of
Preferred Stock. A form of Certificate of Designations is filed as an exhibit to
the Registration Statement to which this Prospectus relates.
GENERAL
Under the Company's Certificate of Incorporation, the Board of Directors of
the Company (the "Board of Directors") is authorized, without further
stockholder action, to provide for the issuance of up to 200,000,000 shares of
preferred stock, $1 par value per share, in one or more series, with such voting
powers and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions, as shall be set forth in resolutions providing for the issue
thereof
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adopted by the Board of Directors or a duly authorized committee thereof. The
Company may amend from time to time its Certificate of Incorporation to increase
the number of authorized shares of preferred stock. Any such amendment would
require the approval of the holders of a majority of the outstanding shares of
Common Stock, and the approval of the holders of a majority of the outstanding
shares of all series of preferred stock voting together as a single class
without regard to series. As of the date of this Prospectus, the Company has
seven series of preferred stock outstanding, which are described below under
"Outstanding Preferred Stock".
Under regulations adopted by the Federal Reserve Board, if the holders of
any series of Preferred Stock become entitled to vote for the election of
directors because dividends on such series are in arrears as described below
under "Voting Rights", such series may then be deemed a "class of voting
securities" and a holder of 25% or more of such series (or a holder of 5% or
more if it otherwise exercises a "controlling influence" over the Company) may
then be subject to regulation as a bank holding company in accordance with the
BHCA. In addition, at such time as such series is deemed a class of voting
securities, (i) any other bank holding company may be required to obtain the
prior approval of the Federal Reserve Board under the BHCA to acquire or retain
5% or more of such series, and (ii) any person other than a bank holding company
may be required to obtain the approval of the Federal Reserve Board under the
Change in Bank Control Act to acquire or retain 10% or more of such series.
The Preferred Stock shall have the dividend, liquidation, redemption,
voting and conversion rights set forth below unless otherwise provided in the
Prospectus Supplement relating to a particular series of the Preferred Stock.
Reference is made to the Prospectus Supplement relating to the particular series
of the Preferred Stock offered thereby for specific terms, including: (i) the
title and liquidation preference per share of such Preferred Stock and the
number of shares offered; (ii) the price at which such Preferred Stock will be
issued; (iii) the dividend rate (or method of calculation), the dates on which
dividends shall be payable, whether such dividends shall be cumulative or
noncumulative and, if cumulative, the dates from which dividends shall commence
to accumulate; (iv) any redemption or sinking fund provisions of such Preferred
Stock; (v) any conversion provisions of such Preferred Stock; (vi) whether the
Company has elected to offer Depositary Shares with respect to such Preferred
Stock as described below under "Depositary Shares"; and (vii) any additional
dividend, liquidation, redemption, sinking fund and other rights, preferences,
privileges, limitations and restrictions of such Preferred Stock.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of the Preferred Stock, each series of the Preferred Stock will rank on a
parity as to dividends and distributions in the event of a liquidation with the
outstanding preferred stock of the Company and each other series of the
Preferred Stock. See "Outstanding Preferred Stock" below.
DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors, out of assets of the Company
legally available therefor, cash dividends at such rates and on such dates as
are set forth in the Prospectus Supplement relating to such series of the
Preferred Stock. Such rate may be fixed or variable or both. Each such dividend
will be payable to the holders of record as they appear on the stock books of
the Company (or, if applicable, the records of the Depositary referred to below
under "Depositary Shares") on such record dates as will be fixed by the Board of
Directors or a duly authorized committee thereof. Dividends on any series of the
Preferred Stock may be cumulative or noncumulative, as provided in the
Prospectus Supplement relating thereto. If the Board of Directors fails to
declare a dividend payable on a dividend payment date on any series of Preferred
Stock for which dividends are noncumulative, then the right to receive a
dividend in respect of the dividend period ending on such dividend payment date
will be lost, and the Company shall have no obligation to pay the dividend
accrued for that period, whether or not dividends are declared for any future
period.
No full dividends will be declared or paid or set apart for payment on the
Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to any other series of preferred stock for any period unless
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full dividends have been or contemporaneously are declared and paid, or declared
and a sum sufficient for the payment thereof set apart for such payment, on such
other series of preferred stock for the then-current dividend payment period
and, if such other preferred stock is cumulative, all other dividend payment
periods terminating on or before the date of payment of such full dividends.
When dividends are not paid in full upon any series of the Preferred Stock and
any other preferred stock ranking on a parity as to dividends with such series
of the Preferred Stock, all dividends declared upon such series of the Preferred
Stock and any other preferred stock ranking on a parity as to dividends will be
declared pro rata so that the amount of dividends declared per share on such
series of the Preferred Stock and such other preferred stock will in all cases
bear to each other the same ratio that accrued dividends per share on such
series of the Preferred Stock and such other preferred stock bear to each other.
Except as provided in the preceding sentence, unless full dividends, including,
in the case of cumulative Preferred Stock, accumulations, if any, in respect of
prior dividend payment periods, on all outstanding shares of any series of the
Preferred Stock have been paid, no dividends (other than in shares of Common
Stock or another stock ranking junior to such series of the Preferred Stock as
to dividends and upon liquidation) will be declared or paid or set aside for
payment or other distributions made upon the Common Stock or any other stock of
the Company ranking junior to or on a parity with the Preferred Stock as to
dividends or upon liquidation, nor will any Common Stock or any other stock of
the Company ranking junior to or on a parity with such series of the Preferred
Stock as to dividends or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by the Company
(except by conversion into or exchange for stock of the Company ranking junior
to such series of the Preferred Stock as to dividends and upon liquidation). No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments which may be in arrears.
The amount of dividends payable for each dividend period will be computed
by annualizing the applicable dividend rate and dividing by the number of
dividend periods in a year, except that the amount of dividends payable for the
initial dividend period or any period shorter than a full dividend period shall
be computed on the basis of 30-day months, a 360-day year and the actual number
of days elapsed in the period.
Each series of Preferred Stock will be entitled to dividends as described
in the Prospectus Supplement relating to such series, which may be based upon
one or more methods of determination. Different series of the Preferred Stock
may be entitled to dividends at different dividend rates or based upon different
methods of determination.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Stock will be
entitled to receive out of assets of the Company available for distribution to
stockholders, before any distribution of assets is made to holders of Common
Stock or any other class of stock ranking junior to such series of the Preferred
Stock upon liquidation, liquidating distributions in the amount set forth in the
Prospectus Supplement relating to such series of the Preferred Stock plus an
amount equal to accrued and unpaid dividends for the then-current dividend
period and, if such series of the Preferred Stock is cumulative, for all
dividend periods prior thereto. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the amounts payable with
respect to the Preferred Stock of any series and any other shares of stock of
the Company ranking as to any such distribution on a parity with such series of
the Preferred Stock are not paid in full, the holders of the Preferred Stock of
such series and of such other shares will share ratably in any such distribution
of assets of the Company in proportion to the full respective preferential
amounts to which they are entitled. After payment of the full amount of the
liquidating distribution to which they are entitled, the holders of such series
of Preferred Stock will have no right or claim to any of the remaining assets of
the Company. Neither the sale of all or substantially all the property or
business of the Company nor the merger or consolidation of the Company into or
with any other corporation shall be deemed to be a dissolution, liquidation or
winding up, voluntary or involuntary, of the Company.
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REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or in part, at
the option of the Company, and may be subject to mandatory redemption pursuant
to a sinking fund, in each case upon terms, at the times and at the redemption
prices set forth in the Prospectus Supplement relating to such series.
The Prospectus Supplement relating to a series of Preferred Stock which is
subject to mandatory redemption shall specify the number of shares of such
series of Preferred Stock which shall be redeemed by the Company in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to any accrued and unpaid dividends
thereon to the date of redemption. The redemption price may be payable in cash,
capital stock or in cash received from the net proceeds of the issuance of
capital stock of the Company, as specified in the Prospectus Supplement relating
to such series of Preferred Stock. If the redemption price is payable only from
the net proceeds of the issuance of capital stock of the Company, the terms of
such series may provide that, if no such capital stock shall have been issued or
to the extent the net proceeds from any issuances are insufficient to pay in
full the aggregate redemption price then due, the applicable shares of such
series of Preferred Stock shall automatically and mandatorily be converted into
shares of the applicable capital stock of the Company pursuant to conversion
provisions specified in the Prospectus Supplement relating to such series of
Preferred Stock.
If fewer than all the outstanding shares of any series of the Preferred
Stock are to be redeemed, whether by mandatory or optional redemption, the
selection of the shares to be redeemed shall be determined by lot or pro rata as
may be determined by the Board of Directors or a duly authorized committee
thereof, or by any other method which may be determined by the Board of
Directors or such committee to be equitable. From and after the date of
redemption (unless default shall be made by the Company in providing for the
payment of the redemption price), dividends shall cease to accrue on the shares
of Preferred Stock called for redemption and all rights of the holders thereof
(except the right to receive the redemption price) shall cease.
In the event that full dividends, including accumulations in the case of
cumulative Preferred Stock, on any series of the Preferred Stock have not been
paid, such series of the Preferred Stock may not be redeemed in part and the
Company may not purchase or acquire any shares of such series of the Preferred
Stock otherwise than pursuant to a purchase or exchange offer made on the same
terms to all holders of such series of the Preferred Stock.
CONVERSION RIGHTS
The Prospectus Supplement for any series of the Preferred Stock will state
the terms, if any, on which shares of that series are convertible into shares of
Common Stock or another series of preferred stock of the Company. As described
under "Redemption" above, under certain circumstances, the Preferred Stock may
be mandatorily converted into Common Stock or another series of preferred stock
of the Company. The Preferred Stock will have no preemptive rights.
VOTING RIGHTS
Except as indicated below or in the Prospectus Supplement relating to a
particular series of Preferred Stock, or except as expressly required by
applicable law, the holders of the Preferred Stock will not be entitled to vote.
Except as indicated in the Prospectus Supplement relating to a particular series
of Preferred Stock, in the event the Company issues full shares of any series of
Preferred Stock, each such share will be entitled to one vote on matters on
which holders of such series of the Preferred Stock are entitled to vote.
However, as more fully described below under "Depositary Shares", if the Company
elects to issue Depositary Shares representing a fraction of a share of a series
of Preferred Stock, each such Depositary Share will, in effect, be entitled to
such fraction of a vote, rather than a full vote. Since each full share of any
series of Preferred Stock shall be entitled to one vote, the voting power of
such series, on matters on which holders of such series and holders of other
series of preferred stock are entitled to vote as a single class, shall depend
on the number of shares in such series, not the aggregate liquidation preference
or initial offering price of the shares of such series of Preferred Stock.
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If at the time of any annual meeting of the Company's stockholders the
equivalent of six quarterly dividends payable on any series of the Preferred
Stock or any other series of preferred stock are in default, the number of
directors of the Company will be increased by two and the holders of all
outstanding series of preferred stock, voting as a single class without regard
to series, will be entitled to elect those additional two directors at each such
annual meeting. Each director elected by the holders of shares of the Preferred
Stock shall continue to serve as such director for the full term for which he or
she shall have been elected, notwithstanding that prior to the end of such term
such default shall cease to exist.
The affirmative vote or consent of the holders of at least two-thirds of
the outstanding shares of any series of Preferred Stock, voting as a separate
class, will be required for any amendment of the Company's Certificate of
Incorporation (or any certificate amendatory thereof or supplemental thereto
relating to any series of the Preferred Stock) which will adversely affect the
powers, preferences, privileges or rights of such series of the Preferred Stock.
The affirmative vote or consent of the holders of shares representing at least
two-thirds of the voting power of the outstanding shares of any series of
Preferred Stock and any other series of preferred stock of the Company ranking
on a parity with such series of the Preferred Stock as to dividends or upon
liquidation, voting as a single class without regard to series, will be required
to authorize, effect or validate (i) the creation, authorization or issuance of,
(ii) the reclassification of any authorized stock of the Company into, or (iii)
the creation, authorization or issuance of any obligation or security
convertible into or evidencing the right to purchase, any additional class or
series of stock ranking prior to such series of the Preferred Stock as to
dividends or upon liquidation.
In addition to the foregoing voting rights, under the Delaware General
Corporation Law as now in effect, the holders of the Preferred Stock will have
the voting rights set forth under "General" above with respect to amendments to
the Company's Certificate of Incorporation which would increase the number of
authorized shares of preferred stock of the Company.
OUTSTANDING PREFERRED STOCK
As of January 1, 1994, there were issued and outstanding (i) 33,647,591
shares of Adjustable Rate Cumulative Preferred Stock, Series C (the "Series C
Preferred"); (ii) 4,000,000 shares of 10.96% Preferred Stock (the "10.96%
Preferred"); (iii) 4,000,000 shares of 10% Convertible Preferred Stock (the "10%
Preferred"); (iv) 14,000,000 shares of 8 3/8% Preferred Stock (the "8 3/8%
Preferred"); (v) 2,000,000 shares of 7.92% Cumulative Preferred Stock (the
"7.92% Preferred"); (vi) 2,000,000 shares of 7.58% Cumulative Preferred Stock
(the "7.58% Preferred") and (vii) 2,000,000 shares of 7 1/2% Cumulative
Preferred Stock (the "7 1/2% Preferred"). In addition, as of January 1, 1994,
4,000,000 shares of preferred stock, designated as Junior Participating
Preferred Stock, were reserved for issuance pursuant to the Shareholders' Rights
Agreement described below under "Description of Common Stock -- Shareholders'
Rights Plan".
All series of outstanding preferred stock rank on a parity with each other
series and all have preference over the Common Stock with respect to the payment
of dividends and the distribution of assets in the event of the liquidation or
dissolution of the Company. Unless otherwise specified in the Prospectus
Supplement relating to a particular series of the Preferred Stock, all such
series of outstanding preferred stock will rank on a parity with the Preferred
Stock as to dividends and liquidation.
Dividends on all outstanding series of preferred stock are cumulative. The
amounts of the cumulative dividends on the Series C Preferred vary with the
interest rates on certain U.S. Government obligations. Dividends on the 10.96%
Preferred, 10% Preferred, 8 3/8% Preferred, 7.92% Preferred, 7.58% Preferred and
7 1/2% Preferred are fixed at their respective rates.
In the event of a liquidation or dissolution of the Company, the holders of
(i) 10% Preferred are entitled to receive a distribution of $50 per share; (ii)
Series C Preferred are entitled to receive a distribution of $12 per share;
(iii) 7.92% Preferred, 7.58% Preferred and 7 1/2% Preferred are each entitled to
receive a distribution of $100 per share; and (iv) 10.96% Preferred and 8 3/8%
Preferred are each entitled to receive a distribution of $25 per share plus, in
each case, accrued and unpaid dividends, if any.
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Shares of Series C Preferred are redeemable at the option of the Company at
a redemption price per share of $12.36 prior to May 2, 1997 and $12 per share
thereafter. Shares of 10.96% Preferred are redeemable at the option of the
Company at any time on or after June 30, 2000 at a redemption price per share of
$25. Shares of 10% Preferred are redeemable at the option of the Company at any
time on or after May 1, 1995 at an initial redemption price per share of $53 and
thereafter at prices declining to $50 per share on and after May 1, 2001. Shares
of 8 3/8% Preferred are redeemable at the option of the Company at any time on
or after June 1, 1997 at a redemption price per share of $25. Shares of 7.92%
Preferred are redeemable at the option of the Company at any time on or after
October 1, 1997 at a redemption price per share of $100. Shares of 7.58%
Preferred are redeemable at the option of the Company at any time on or after
April 1, 1998 at a redemption price per share of $100. Shares of 7 1/2%
Preferred are redeemable at the option of the Company at any time on or after
June 1, 1998 at a redemption price per share of $100. The redemption prices set
forth above with respect to each outstanding series of preferred stock will be
increased, in each case, by the amount of accrued and unpaid dividends thereon,
if any, to the date fixed for redemption.
The shares of the 10% Preferred are convertible into shares of the Common
Stock at a conversion price of $26.20 per share of Common Stock, subject to
adjustment in certain events.
TRANSFER AGENT AND REGISTRAR
Chemical Bank will be the transfer agent, registrar and dividend
disbursement agent for the Preferred Stock and any Depositary Shares
representing an interest therein. The registrar for shares of Preferred Stock
will send notices to shareholders of any meetings at which holders of the
Preferred Stock have the right to elect directors of the Company or to vote on
any other matter.
DEPOSITARY SHARES
General. The Company may, at its option, elect to offer fractional shares
of Preferred Stock, rather than full shares of Preferred Stock. In the event
such option is exercised, the Company will issue to the public receipts for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock) of
a share of a particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and a bank or trust company selected by the Company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary"). Subject to the terms of the
Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of the Preferred
Stock represented thereby (including dividend, voting, redemption and
liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. Copies of the
forms of Deposit Agreement and Depositary Receipt are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and the following
summary is qualified in its entirety by reference to such exhibits.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Company's expense.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the Preferred Stock
to the record holders of Depositary Shares relating to such Preferred Stock in
proportion to the number of such Depositary Shares owned by such holders.
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In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
Redemption of Depositary Shares. If a series of Preferred Stock
represented by Depositary Shares is subject to redemption, the Depositary Shares
will be redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred Stock. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing the shares of
Preferred Stock so redeemed. If fewer than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata as may be determined by the Depositary.
Voting the Preferred Stock. Upon receipt of notice of any meeting at which
the holders of the Preferred Stock are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such Preferred Stock. Each record holder of
such Depositary Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Depositary
as to the exercise of the voting rights pertaining to the amount of the
Preferred Stock represented by such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the amount of the Preferred Stock
represented by such Depositary Shares in accordance with such instructions, and
the Company will agree to take all action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of the Preferred Stock to the extent it does not
receive specific instructions from the holders of Depositary Shares representing
such Preferred Stock.
Amendment and Termination of the Depositary Agreement. The form of
Depositary Receipt evidencing the Depositary Shares and any provision of the
Deposit Agreement may at any time be amended by agreement between the Company
and the Depositary. However, any amendment which materially and adversely alters
the rights of the holders of Depositary Shares will not be effective unless such
amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement may be terminated by
the Company or the Depositary only if (i) all outstanding Depositary Shares have
been redeemed or (ii) there has been a final distribution in respect of the
Preferred Stock in connection with any liquidation, dissolution or winding up of
the Company and such distribution has been distributed to the holders of
Depositary Receipts.
Charges of Depositary. The Company will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. The Company will pay charges of the Depositary in connection with
the initial deposit of the Preferred Stock and any redemption of the Preferred
Stock. Holders of Depositary Receipts will pay other transfer and other taxes
and governmental charges and such other charges, including a fee for the
withdrawal of shares of Preferred Stock upon surrender of Depositary Receipts,
as are expressly provided in the Deposit Agreement to be for their accounts.
Miscellaneous. The Depositary will forward to holders of Depository
Receipts all reports and communications from the Company which are delivered to
the Depositary and which the Company is required to furnish to the holders of
the Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Shares or Preferred
Stock unless satisfactory indemnity is furnished. They may rely upon written
advice of counsel or accountants, or upon information provided by persons
presenting Preferred Stock for deposit, holders of Depositary Receipts or other
persons believed to be competent and on documents believed to be genuine.
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Resignation and Removal of Depositary. The Depositary may resign at any
time by delivering to the Company notice of its election to do so, and the
Company may at any time remove the Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its acceptance
of such appointment. Such successor Depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
DESCRIPTION OF COMMON STOCK
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the General Corporation Law of the
State of Delaware, the Company's Certificate of Incorporation, including
Certificates of Designations pursuant to which the outstanding series of
preferred stock were issued and the terms of the Rights Agreement dated as of
April 13, 1989, as amended (the "Rights Agreement"), described below.
GENERAL
The Company is authorized to issue up to 400,000,000 shares of Common
Stock. At January 1, 1994, the Company had outstanding 253,397,864 shares of
Common Stock (including 515,782 shares held in its treasury). As of January 1,
1994, approximately 18,500,000 shares of Common Stock were reserved for issuance
under various employee incentive and stock purchase plans and under the
Company's dividend reinvestment plan. In addition, as of such date, the Company
had also reserved 7,700,000 shares of Common Stock for issuance upon the
conversion of the 10% Preferred.
Holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor,
provided that, so long as any shares of preferred stock are outstanding, no
dividends (other than dividends payable in Common Stock) or other distributions
(including redemptions and purchases) may be made with respect to the Common
Stock unless full dividends on the shares of preferred stock, including
accumulations in the case of cumulative preferred stock, have been paid.
Subject to the rights, if any, of the holders of any series of preferred
stock, all voting rights are vested in the holders of shares of Common Stock,
each share being entitled to one vote on all matters presented for a vote,
including the election of directors. Holders of shares of Common Stock have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of directors can elect 100% of the directors,
and, in such event, the holders of the remaining shares voting for the election
of directors will not be able to elect any directors.
In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, after there have been paid or set aside for
the holders of all series of preferred stock the full preferential amounts to
which such holders are entitled, the holders of Common Stock will be entitled to
share equally and ratably in any assets remaining after the payment of all debts
and liabilities.
The issued and outstanding shares of Common Stock are fully paid and
nonassessable. Holders of shares of Common Stock are not entitled to preemptive
rights. Shares of Common Stock are not convertible into shares of any other
class of capital stock.
Chemical Bank is the transfer agent, registrar and dividend disbursement
agent for the Common Stock.
SHAREHOLDERS' RIGHTS PLAN
The Company has adopted a Shareholders' Rights Plan which is intended to
protect stockholders in the event of unsolicited offers or attempts to acquire
the Company, including offers that do not treat all stockholders equally,
acquisitions in the open market of shares constituting control without offering
fair value to all stockholders and other coercive or unfair takeover tactics
that could impair the Board of Directors' ability to represent stockholders'
interests fully. Pursuant to the Shareholders' Rights Plan, the Board of
Directors declared a dividend distribution of one right (a "Right") for each
outstanding share of Common
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Stock to stockholders of record at the close of business on April 24, 1989 (the
"Record Date"), and authorized the issuance of one Right (as adjusted pursuant
to the Rights Agreement, as described below) for each share of Common Stock
issued between the Record Date and the Chemical Distribution Date (as described
below). Each Right entitles the registered holder to purchase from the Company a
unit consisting of one one-hundredth of a share (a "Unit") of Junior
Participating Preferred Stock at a price of $150 per Unit, subject to
adjustment. The description and terms of the Rights are set forth in the Rights
Agreement between the Company and Chemical Bank, as Rights Agent. One Right will
be distributed with each share of Common Stock issued by the Company, including
shares of Common Stock issued (i) upon the conversion of any Subordinated
Convertible Securities into shares of Common Stock, (ii) in exchange for
Subordinated Securities that are exchangeable for Common Stock, (iii) upon
conversion of any shares of Preferred Stock that are convertible into Common
Stock or (iv) upon exercise of Common Stock Warrants.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person that attempts to acquire the Company without
the approval of the Board of Directors unless the offer is conditioned on a
substantial number of Rights being acquired. The Rights, however, should not
affect offers for all outstanding shares of Common Stock at a fair price and
otherwise in the best interests of the Company and its stockholders as
determined by the Board of Directors, since the Board of Directors may, at its
option, redeem all, but not fewer than all, the then outstanding Rights.
Initially, the Rights are and will be attached to all certificates
representing Common Stock at the time outstanding. The Rights will separate from
the Common Stock on the Chemical Distribution Date, which is defined as (i) 10
days after a person acquires 20% or more of the Common Stock or voting power of
the Company, (ii) 10 business days following commencement of a tender offer for
25% or more of the Common Stock or voting power of the Company or (iii) 10
business days after an owner of 10% or more of the Common Stock or voting power
of the Company is determined by the unaffiliated "Continuing Directors" (as
defined in the Rights Agreement) to be an "Adverse Person". An Adverse Person is
one who intends to have the Company repurchase such person's ownership interest,
who intends to pressure the Company into action for the financial gain of such
person or whose ownership is likely to cause a material adverse impact on the
Company (including, but not limited to, impairment of the Company's (i)
relationships with customers, (ii) ability to maintain its capital position,
(iii) ability to meet the convenience and needs of the communities it serves,
(iv) business reputation or (v) ability to deal with governmental agencies) to
the detriment of the Company's stockholders.
If a "Flip-in Event" occurs, the holder of a Right is entitled to receive
Common Stock or other property of the Company valued at two times the exercise
price of the Right. A Flip-in Event occurs if a person acquires 20% or more of
the Common Stock or voting power of the Company (except certain offers to
acquire all of the Common Stock deemed by the Continuing Directors to be fair
and in the best interests of the Company) or if a person is determined to be an
Adverse Person.
If a "Triggering Event" occurs, the holder of a Right is entitled to
receive common stock of a company that has acquired the Company valued at two
times the exercise price of the Right. A Triggering Event occurs if the Company
is acquired in a merger or other business combination in which the Company is
not the survivor or if 50% or more of the Company's assets or earning power is
sold or transferred.
Following the occurrence of a Flip-in Event or a Triggering Event, all
Rights that are beneficially owned by an acquiring person or an Adverse Person
will be null and void.
To avoid the consequences of a Flip-in Event, the Company may redeem the
Rights in whole, but not in part, at a redemption price of $0.01 per Right.
DESCRIPTION OF SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Debt
Securities, Preferred Stock or Common Stock. Securities Warrants may be issued
independently or together with Debt Securities, Preferred Stock or Common Stock
offered by any Prospectus Supplement and may be attached to or separate from any
such Offered Securities. Each series of Securities Warrants will be issued under
a separate warrant agreement
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(a "Securities Warrant Agreement") to be entered into between the Company and
Chemical Bank or another bank or trust company, as warrant agent (the
"Securities Warrant Agent"), all as set forth in the Prospectus Supplement
relating to the particular issue of offered Securities Warrants. The Securities
Warrant Agent will act solely as an agent of the Company in connection with the
Securities Warrants and will not assume any obligation or relationship of agency
or trust for or with any holders of Securities Warrants or beneficial owners of
Securities Warrants. Copies of the forms of Securities Warrant Agreements,
including the forms of Securities Warrant Certificates representing the
Securities Warrants, are filed as exhibits to the Registration Statement of
which this Prospectus is a part. The following summary of certain provisions of
the Securities Warrants does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the
Securities Warrant Agreements.
Reference is made to the Prospectus Supplement relating to the particular
issue of Securities Warrants offered thereby for the terms of such Securities
Warrants, including, where applicable: (i) the designation, aggregate principal
amount, currencies, denominations and terms of the series of Debt Securities
purchasable upon exercise of Securities Warrants to purchase Debt Securities and
the price at which such Debt Securities may be purchased upon such exercise;
(ii) the designation, number of shares, stated value and terms (including,
without limitation, liquidation, dividend, conversion and voting rights) of the
series of Preferred Stock purchasable upon exercise of Securities Warrants to
purchase Preferred Stock and the price at which such number of shares of
Preferred Stock of such series may be purchased upon such exercise; (iii) the
number of shares of Common Stock purchasable upon the exercise of Securities
Warrants to purchase Common Stock and the price at which such number of shares
of Common Stock may be purchased upon such exercise; (iv) the date on which the
right to exercise such Securities Warrants shall commence and the date (the
"Expiration Date") on which such right shall expire; (v) United States Federal
income tax consequences applicable to such Securities Warrants; and (vi) any
other terms of such Securities Warrants. Securities Warrants for the purchase of
Preferred Stock and Common Stock will be offered and exercisable for U.S.
dollars only. Securities Warrants will be issued in registered form only. The
exercise price for Securities Warrants will be subject to adjustment in
accordance with the applicable Prospectus Supplement.
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Debt Securities or such number of shares of Preferred Stock
or Common Stock at such exercise price as shall in each case be set forth in, or
calculable from, the Prospectus Supplement relating to the offered Securities
Warrants, which exercise price may be subject to adjustment upon the occurrence
of certain events as set forth in such Prospectus Supplement. After the close of
business on the Expiration Date (or such later date to which such Expiration
Date may be extended by the Company), unexercised Securities Warrants will
become void. The place or places where, and the manner in which, Securities
Warrants may be exercised shall be specified in the Prospectus Supplement
relating to such Securities Warrants.
Prior to the exercise of any Securities Warrants to purchase Debt
Securities, Preferred Stock or Common Stock, holders of such Securities Warrants
will not have any of the rights of holders of the Debt Securities, Preferred
Stock or Common Stock, as the case may be, purchasable upon such exercise,
including the right to receive payments of principal of (and premium, if any) or
interest, if any, on the Debt Securities purchasable upon such exercise or to
enforce covenants in the applicable Indenture, or to receive payments of
dividends, if any, on the Preferred Stock or Common Stock purchasable upon such
exercise or to exercise any applicable right to vote.
RISK FACTORS RELATING TO CURRENCY WARRANTS
THE CURRENCY WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING RISKS
ARISING FROM FLUCTUATIONS IN THE PRICE OF THE UNDERLYING CURRENCY, FOREIGN
EXCHANGE RISKS AND THE RISK OF EXPIRING WORTHLESS. FURTHER, THE CASH SETTLEMENT
VALUE OF THE CURRENCY WARRANTS AT ANY TIME PRIOR TO EXERCISE OR EXPIRATION MAY
BE LESS THAN THE TRADING VALUE OF THE CURRENCY WARRANTS. THE TRADING VALUE OF
THE CURRENCY WARRANTS WILL FLUCTUATE BECAUSE SUCH VALUE IS DEPENDENT, AT ANY
TIME, ON A NUMBER OF FACTORS, INCLUDING THE TIME REMAINING TO EXERCISE THE
CURRENCY WARRANTS, THE RELATIONSHIP BETWEEN THE EXERCISE PRICE OF THE CURRENCY
WARRANTS AND THE PRICE AT SUCH TIME OF THE DESIGNATED CURRENCY AND THE EXCHANGE
RATE ASSOCIATED WITH THE DESIGNATED CURRENCY.
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BECAUSE THE CURRENCY WARRANTS ARE UNSECURED OBLIGATIONS OF THE COMPANY, CHANGES
IN THE PERCEIVED CREDITWORTHINESS OF THE COMPANY MAY ALSO BE EXPECTED TO AFFECT
THE TRADING PRICES OF THE CURRENCY WARRANTS. FINALLY, THE AMOUNT OF ACTUAL CASH
SETTLEMENT OF A CURRENCY WARRANT MAY VARY AS A RESULT OF FLUCTUATIONS IN THE
PRICE OF THE DESIGNATED CURRENCY BETWEEN THE TIME INSTRUCTIONS ARE GIVEN TO
EXERCISE THE CURRENCY WARRANT AND THE TIME SUCH EXERCISE IS ACTUALLY EFFECTED.
PURCHASERS SHOULD BE PREPARED TO SUSTAIN A LOSS OF SOME OR ALL OF THE
PURCHASE PRICE OF THEIR CURRENCY WARRANTS. PROSPECTIVE PURCHASERS OF CURRENCY
WARRANTS SHOULD BE EXPERIENCED WITH RESPECT TO OPTIONS AND OPTION TRANSACTIONS
AND SHOULD REACH AN INVESTMENT DECISION ONLY AFTER CAREFUL CONSIDERATION WITH
THEIR ADVISERS OF THE SUITABILITY OF THE CURRENCY WARRANTS IN LIGHT OF THEIR
PARTICULAR FINANCIAL CIRCUMSTANCES, THE INFORMATION SET FORTH UNDER "DESCRIPTION
OF CURRENCY WARRANTS" HEREIN, THE INFORMATION SET FORTH UNDER "RISK FACTORS" IN
THE PROSPECTUS SUPPLEMENT RELATING TO THE PARTICULAR ISSUE OF CURRENCY WARRANTS
AND TO THE OTHER INFORMATION REGARDING THE CURRENCY WARRANTS AND THE DESIGNATED
CURRENCY SET FORTH IN SUCH PROSPECTUS SUPPLEMENT.
DESCRIPTION OF CURRENCY WARRANTS
The following description of the terms of the Currency Warrants sets forth
certain general terms and provisions of the Currency Warrants to which any
Prospectus Supplement may relate. The particular terms of the Currency Warrants
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions do not apply to the Currency Warrants so offered will be
described in the Prospectus Supplement relating to such Currency Warrants.
Each issue of Currency Warrants will be issued under a warrant agreement
(each, a "Currency Warrant Agreement") to be entered into between the Company
and Chemical Bank or another bank or trust company, as warrant agent (the
"Currency Warrant Agent"), all as described in the Prospectus Supplement
relating to such Currency Warrants. The Currency Warrant Agent will act solely
as the agent of the Company under the applicable Currency Warrant Agreement and
will not assume any obligation or relationship of agency or trust for or with
any holders of such Currency Warrants. A copy of the form of Currency Warrant
Agreement, including the form of warrant certificate, is filed as an exhibit to
the Registration Statement of which this Prospectus is a part. The following
summary of certain provisions of the Currency Warrants does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the particular Currency Warrants and Currency Warrant
Agreement.
The Company may issue Currency Warrants either in the form of currency put
warrants entitling the holders thereof to receive from the Company the cash
settlement value in U.S. dollars of the right to sell a specified amount of a
specified foreign currency or composite currency (the "Designated Currency") for
a specified amount of U.S. dollars (each, a "Currency Put Warrant"), or in the
form of currency call warrants entitling the holders thereof to receive from the
Company the cash settlement value in U.S. dollars of the right to purchase a
specified amount of a Designated Currency for a specified amount of U.S. dollars
(each, a "Currency Call Warrant").
Reference is hereby made to the Prospectus Supplement relating to the
particular issue of Currency Warrants offered thereby for the terms of such
Currency Warrants, including, where applicable: (i) whether such Currency
Warrants shall be Currency Put Warrants, Currency Call Warrants or both; (ii)
the aggregate amount of such Currency Warrants; (iii) the offering price of such
Currency Warrants; (iv) the Designated Currency, which currency may be a foreign
currency or a composite currency, including ECU, and information regarding such
currency or composite currency; (v) the date on which the right to exercise such
Currency Warrants commences and the date on which such right expires; (vi) the
manner in which such Currency Warrants may be exercised; (vii) the circumstances
which will cause the Currency Warrants to be deemed automatically exercised;
(viii) the minimum number, if any, of such Currency Warrants exercisable at any
one time and any other restrictions on exercise; (ix) the method of determining
the amount payable in connection with the exercise of such Currency Warrants;
(x) the national securities exchange on which such Currency Warrants will be
listed; (xi) whether such Currency Warrants will be represented by certificates
or issued in book-entry form; (xii) the place or places at which payment of the
cash settlement value of such
25
<PAGE> 45
Currency Warrants is to be made by the Company, if applicable; (xiii)
information with respect to book-entry procedures, if any; (xiv) the plan of
distribution of such Currency Warrants; and (xv) any other terms of such
Currency Warrants.
Prospective purchasers of Currency Warrants should be aware of special
United States Federal income tax considerations applicable to instruments such
as the Currency Warrants. The Prospectus Supplement relating to each issue of
Currency Warrants will describe such tax considerations.
Except as may otherwise be provided in the applicable Prospectus
Supplement, the Currency Warrants will be issued in the form of global Currency
Warrant Certificates, registered in the name of a depository or its nominee.
Holders will not be entitled to receive definitive certificates representing
Currency Warrants. A holder's ownership of a Currency Warrant will be recorded
on or through the records of the brokerage firm or other entity that maintains
such holder's account. In turn, the total number of Currency Warrants held by an
individual brokerage firm for its clients will be maintained on the records of
the depository in the name of such brokerage firm or its agent. Transfer of
ownership of any Currency Warrant will be effected only through the selling
holder's brokerage firm.
Each issue of Currency Warrants will be listed on a national securities
exchange, subject only to official notice of issuance, as a condition of sale of
such issue of Currency Warrants. In the event that the Currency Warrants are
delisted from, or permanently suspended from trading on, such exchange, the
expiration date for such Currency Warrants will be the date such delisting or
trading suspension becomes effective, and Currency Warrants not previously
exercised will be deemed automatically exercised on such expiration date. The
applicable Currency Warrant Agreement will contain a covenant of the Company not
to seek delisting of the Currency Warrants, or suspension of their trading, on
such exchange unless the Company has concurrently arranged for listing on
another national securities exchange.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities being offered hereby (i)
through underwriters, (ii) through dealers, (iii) through agents and (iv)
directly to purchasers. The applicable Prospectus Supplements will set forth the
terms of the offerings of any Offered Securities, including the name or names of
the underwriters, dealers or agents, the purchase price of the Offered
Securities and the proceeds to the Company from the sale, any underwriting
discounts and other items constituting underwriters' compensation and any
discounts and commissions allowed or paid to dealers or agents. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
The Company may also issue the Offered Securities to one or more persons in
exchange for outstanding securities of the Company acquired by such persons in
privately negotiated transactions or from third parties in open market
transactions. The newly issued Offered Securities in such cases may be offered
pursuant to this Prospectus and the applicable Prospectus Supplement by such
persons, acting as principal for their own accounts, at market prices prevailing
at the time of sale, at prices otherwise negotiated or at fixed prices. Unless
otherwise indicated in the applicable Prospectus Supplement, the Company will
only receive outstanding securities and will not receive cash proceeds in such
exchanges or resales. Dealer trading may take place in certain of the Offered
Securities, including Offered Securities not listed on any securities exchange.
If an underwriter or underwriters are utilized in the sale of the Offered
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached.
The underwriter or underwriters with respect to an underwritten offering of
Offered Securities will be set forth in the Prospectus Supplement relating to
such offering and, if an underwriting syndicate is used, the managing
underwriter or underwriters will be set forth on the cover of such Prospectus
Supplement. If any underwriter or underwriters are utilized in the sale of the
Offered Securities, the underwriting agreement will provide that the obligations
of the underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of Offered Securities will be obligated to
purchase all such Offered Securities if any are purchased. In connection with
the sale of Offered Securities, underwriters may be deemed to have received
compensation from the Company in the form of underwriting discounts or
commissions and
26
<PAGE> 46
may also receive commissions from purchasers of Offered Securities for whom they
may act as agent. Underwriters may sell Offered 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 agent.
If an underwriter or underwriters are utilized in the sale of any Offered
Securities, the applicable Prospectus Supplement will contain a statement as to
the intention, if any, of such underwriters at the date of such Prospectus
Supplement to make a market in the Offered Securities.
If a dealer is utilized directly by the Company in the sale of the Offered
Securities in respect of which this Prospectus is delivered, the Company will
sell such Offered Securities to the dealer, as principal. The dealer may then
resell such Offered Securities to the public at varying prices to be determined
by such dealer at the time of resale. Any such dealer and the terms of any such
sale will be set forth in the Prospectus Supplement relating thereto.
Offered Securities may be offered and sold through agents designated by the
Company from time to time. Any such agent involved in the offer or sale of the
Offered Securities in respect of which this Prospectus is delivered will be
named in, and any commissions payable by the Company to such agent will be set
forth in, the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment.
Underwriters, dealers or agents participating in the distribution of
Offered Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Offered Securities may be deemed to be underwriting discounts and commissions,
under the Securities Act.
Underwriters, dealers or agents who participate in the distribution of
Offered Securities may be entitled, under agreements which may be entered into
with the Company, to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to contribution by the
Company to payments such underwriters, dealers or agents may be required to make
in respect thereof.
The Offered Securities may be sold either at a fixed price or prices which
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices.
Underwriters, dealers or agents may be customers of, engage in transactions
with, or perform services for the Company, Chemical Bank, Texas Commerce or
certain other subsidiaries of the Company in the ordinary course of business.
Offers to purchase Offered Securities may be solicited directly by the
Company and sales thereof may be made by the Company directly to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
sales will be described in the Prospectus Supplement relating thereto. Except as
set forth in the applicable Prospectus Supplement, no director, officer or
employee of the Company or its bank subsidiaries will solicit or receive a
commission in connection with direct sales by the Company of the Offered
Securities, although such persons may respond to inquiries by potential
purchasers and perform ministerial and clerical work in connection with any such
direct sales.
Under Schedule E to the By-Laws ("Schedule E") of the National Association
of Securities Dealers, Inc. (the "NASD"), when an NASD member, such as Chemical
Securities Inc. ("CSI"), participates in the distribution of an affiliated
company's securities, the offering must be conducted in accordance with the
applicable provisions of Schedule E. CSI is considered to be an "affiliate" (as
such term is defined in Schedule E) of the Company by virtue of the fact that
the Company is the parent of CSI. The offer and sale of any Offered Securities
by CSI or any other qualified affiliate of the Company will comply with the
requirements of Schedule E regarding the underwriting of securities of
affiliates and with any restrictions as may be imposed on CSI or such other
affiliate of the Company by the Federal Reserve Board.
This Prospectus and the related Prospectus Supplement may be used by direct
or indirect wholly-owned subsidiaries of the Company, including CSI, in
connection with offers and sales related to secondary market
27
<PAGE> 47
transactions in the Offered Securities. Such subsidiaries may act as principal
or agent in such transactions. Such sales will be made at prices related to
prevailing market prices at the time of sale.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers and agents to solicit offers by certain institutions to
purchase Offered Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to Delayed Delivery Contracts (each
a "Contract") providing for payment and delivery on the date stated in the
Prospectus Supplement. Each Contract will be for an amount not less than, and
unless the Company otherwise agrees the aggregate principal amount of Debt
Securities or number of shares of Preferred Stock or Common Stock sold pursuant
to Contracts shall be neither less nor more than, the respective amounts stated
in the Prospectus Supplement. Institutions with which Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, educational and charitable institutions and other institutions, but
shall in all cases be subject to the approval of the Company. The obligations of
any purchaser under any Contract will not be subject to any conditions except
that any related sale of Offered Securities to underwriters shall have occurred
and the purchase by an institution of the Offered Securities covered by its
Contract shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject. A
commission indicated in the Prospectus Supplement will be paid to underwriters,
dealers and agents soliciting purchases of Offered Securities pursuant to
Contracts accepted by the Company.
The expected time of delivery of the Offered Securities in respect of which
this Prospectus is delivered will be set forth in the accompanying Prospectus
Supplement.
CERTAIN REGULATORY MATTERS
CAPITAL RATIOS
The Federal Reserve Board has issued risk-based capital guidelines, which
require banking organizations to maintain certain ratios of "qualifying capital"
to "risk-weighted assets". "Qualifying capital" is classified in two tiers,
referred to as Tier 1 capital and Tier 2 capital. Tier 1 capital consists of
common equity, qualifying perpetual preferred equity and minority interests in
the equity accounts of unconsolidated subsidiaries, less goodwill and certain
intangible assets. Tier 2 capital consists of perpetual preferred equity not
qualifying as Tier 1 capital, a portion of the allowance for losses, mandatory
convertible debt and subordinated and other qualifying securities. The amount of
Tier 2 capital may not exceed the amount of Tier 1 capital. In calculating
"risk-weighted assets", certain risk percentages specified by the Federal
Reserve Board are applied to particular categories of on-balance sheet assets
and off-balance sheet items. The guidelines require that banking organizations
maintain a minimum ratio of Tier 1 capital to risk-weighted assets of 4% and a
minimum ratio of total capital (Tier 1 capital plus Tier 2 capital) to
risk-weighted assets of 8%.
Another capital measure, the Tier 1 leverage ratio, is defined as Tier 1
capital (as defined under the risk-based capital guidelines) divided by average
total assets (net of allowance for losses, goodwill and certain intangible
assets). The minimum leverage ratio is 3% for banking organizations that do not
anticipate significant growth and that have well-diversified risk (including no
undue interest rate risk), excellent asset quality, high liquidity and good
earnings. Other banking organizations are expected to have ratios of at least
4%-5%, depending upon their particular condition and growth plans. Higher
capital ratios could be required if warranted by the particular circumstances or
risk profile of a given banking organization. The Federal Reserve Board has not
advised the Company of any specific minimum Tier 1 leverage ratio applicable to
it.
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<PAGE> 48
The following table sets forth at December 31, 1993 a summary of certain
capital ratio information for the Company.
<TABLE>
<CAPTION>
AT DECEMBER 31,
1993
-----------------
<S> <C>
Total Equity to Assets........................................ 7.45%
Common Equity to Assets....................................... 6.34%
Tier 1 Leverage Ratio......................................... 6.77%(est.)
Tier 1 Risk-Based Capital Ratio............................... 8.05%(est.)
Total Risk-Based Capital Ratio................................ 12.12%(est.)
</TABLE>
DIVIDENDS
Federal law imposes limitations on the payment of dividends by the
subsidiaries of the Company that are state member banks of the Federal Reserve
System (a "state member bank") or are national banks. Two different calculations
are performed to measure the amount of dividends that may be paid: a "recent
earnings" test and an "undivided profits" test. Non-bank subsidiaries of the
Company are not subject to such limitations.
Under the recent earnings test, a dividend may not be paid if the total of
all dividends declared by a bank in any calendar year is in excess of the
current year's net profits combined with the retained net profits of the two
preceding years unless the bank obtains the approval of its appropriate Federal
banking regulator (which, in the case of a state member bank, is the Federal
Reserve Board and, in the case of a national bank, is the Office of the
Comptroller of the Currency (the "Comptroller of the Currency")). Pursuant to
regulations (the "Regulations") adopted in December 1990 by the Federal Reserve
Board and the Comptroller of the Currency, "net profits" is defined as the net
income figure reported by a bank in its Reports of Condition and Income and
"retained net profits" is "net profits" less any common or preferred dividends
declared for that reporting period. The New York Banking Department also adopted
regulations in December 1990 that require net profits of New York
State-chartered banks, like Chemical Bank, to be calculated in a manner similar
to the method set forth in the Regulations.
Under the undivided profits test, a dividend may not be paid in excess of a
bank's "undivided profits then on hand", after deducting therefrom losses and
bad debts in excess of the allowance for loan and lease losses. Under the
Regulations, "allowance for loan and lease losses" and "undivided profits" are
defined as the amounts reported as such by a bank in its Reports of Condition
and Income, and "bad debts" is defined to include matured obligations due a bank
on which the interest is past due and unpaid for six months, unless the debts
are well-secured and in the process of collection. Generally, a debt is
considered "matured" when all or a part of the principal is due and payable as a
result of demand, arrival of the stated maturity date or acceleration by
contract or by operation of law. The Regulations provide that a bank may seek
the approval of its appropriate Federal banking regulator to pay a dividend
which would otherwise violate the undivided profits test. In addition, the
Regulations specify that only that portion of a bank's surplus account that is
"earned surplus surplus" (that is, surplus derived from earnings of prior
periods that is in excess of the minimum amount of surplus required under
Federal or state law to be maintained by the bank) may be transferred to
undivided profits for the purpose of paying dividends, provided that the
transfer is approved by the bank's board of directors and the appropriate
Federal banking regulator.
In accordance with the foregoing restrictions, Chemical Bank could, during
1994, without the approval of its banking regulators, pay dividends estimated at
approximately $1,473 million plus an additional amount equal to its net profits
from January 1, 1994 through the date in 1994 of any such dividend payment.
In addition to the dividend restrictions described above, the Federal
Reserve Board, the Comptroller of the Currency and the FDIC have authority under
the Financial Institutions Supervisory Act to prohibit or to limit the payment
of dividends by the banking organizations they supervise, including the Company
and its subsidiaries that are banks or bank holding companies, if, in the
banking regulator's opinion, payment of a dividend would constitute an unsafe or
unsound practice in light of the financial condition of the banking
organization.
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<PAGE> 49
FDICIA
On December 19, 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") was enacted. In general, FDICIA provides for expanded
regulation of depository institutions and their affiliates, including parent
holding companies, by such institutions' appropriate Federal banking regulator,
and requires the appropriate Federal banking regulator to take "prompt
corrective action" with respect to a depository institution if such institution
does not meet certain capital adequacy standards.
Pursuant to FDICIA, the Federal Reserve Board, the FDIC and the Comptroller
of the Currency (collectively, the "Regulators") have adopted regulations
setting forth a five-tier scheme for measuring the capital adequacy of the
financial institutions they supervise. Under the regulations (commonly referred
to as the "prompt corrective action" rules), an institution would be placed in
one of the following capital categories: (i) well capitalized (an institution
that has a total risk-based capital ratio of at least 10%, a Tier 1 risk-based
capital ratio of at least 6% and a Tier 1 leverage ratio of at least 5%); (ii)
adequately capitalized (an institution that has a total risk-based capital ratio
of at least 8%, a Tier 1 risk-based capital ratio of at least 4% and a Tier 1
leverage ratio of at least 4%); (iii) undercapitalized (an institution that has
a total risk-based capital ratio of under 8% or a Tier 1 risk-based capital
ratio under 4% or a Tier 1 leverage ratio under 4%); (iv) significantly
undercapitalized (an institution that has a total risk-based capital ratio of
under 6% or a Tier 1 risk-based capital ratio under 3% or a Tier 1 leverage
ratio under 3%); and (v) critically undercapitalized (an institution that has a
ratio of tangible equity to total assets of 2% or less). The regulations would
permit the appropriate Federal banking regulator to downgrade an institution to
the next lower category if the regulator determines (i) after notice and
opportunity for hearing or response, that the institution is in an unsafe or
unsound condition or (ii) that the institution has received (and not corrected)
a less-than-satisfactory rating for any of the categories of asset quality,
management, earnings or liquidity in its most recent exam. Supervisory actions
by the appropriate Federal banking regulator will depend upon an institution's
classification within the five categories. All institutions are generally
prohibited from declaring any dividends, making any other capital distribution,
or paying a management fee to any controlling person, if such payment would
cause the institution to become undercapitalized. Additional supervisory actions
are mandated for an institution falling into one of the three "undercapitalized"
categories, with the severity of supervisory action increasing at greater levels
of capital deficiency. For example, critically undercapitalized institutions
are, among other things, restricted from making any principal or interest
payments on subordinated debt without prior approval of their appropriate
Federal banking regulator. The regulations apply only to banks and not to bank
holding companies, such as the Company; however, the Federal Reserve Board is
authorized to take appropriate action at the holding company level based on the
undercapitalized status of such holding company's subsidiary banking
institution. In certain instances relating to an undercapitalized banking
institution, the bank holding company is required to guarantee the performance
of the undercapitalized subsidiary and may be liable for civil money damages for
failure to fulfill its commitments on such guarantee.
At December 31, 1993, Chemical Bank was "well-capitalized", based on the
"prompt corrective action" ratios and guidelines described above.
The FDIC has issued a rule, effective June 16, 1992, regarding the ability
of depository institutions to accept brokered deposits. Under the rule, the term
"brokered deposits" is defined to include deposits that are solicited by a
bank's affiliates on its behalf. A significant portion of Chemical Bank's
wholesale deposits are solicited on its behalf by a broker-dealer affiliate of
Chemical Bank and, therefore, such deposits could be considered brokered
deposits. The rule provides that (i) an "undercapitalized" institution is
prohibited from accepting, renewing or rolling over brokered deposits, (ii) an
"adequately capitalized" institution must obtain a waiver from the FDIC before
accepting, renewing or rolling over brokered deposits and is not permitted to
pay interest on brokered deposits accepted in such institution's normal market
area at rates that "significantly exceed" rates paid on deposits of similar
maturity in such area, and (iii) a "well capitalized" institution may accept,
renew or roll over brokered deposits without restriction. The definitions of
"well capitalized", "adequately capitalized", and "undercapitalized" are similar
to, although not exactly the same as, the definitions utilized in the "prompt
corrective action" rules described above.
30
<PAGE> 50
At December 31, 1993, Chemical Bank was "well capitalized" under these
regulations and the Company does not presently anticipate that the brokered
deposit regulation will have an adverse effect on its operations.
The FDIC has also issued a regulation implementing risk-based FDIC
insurance premiums. Under the assessment system, each depository institution
will be assigned to one of nine risk classifications based upon certain capital
and supervisory measures and, depending upon its classification, will be
assessed premiums ranging from 23 basis points to 31 basis points. The Company
believes that risk-based FDIC insurance premiums will not have a material effect
on the Company's expenses during 1994.
Other rules that have been adopted pursuant to FDICIA include: (i) real
estate lending standards for banks to provide guidelines concerning
loan-to-value ratios for various types of real estate loans; (ii) rules relating
to consumer lending, including regulations governing advertising and disclosures
required for consumer deposit accounts; (iii) rules requiring depository
institutions to develop and implement internal procedures to evaluate and
control credit and settlement exposure to their correspondent banks; (iv) rules
implementing the FDICIA provision prohibiting, with certain exceptions,
FDIC-insured banks from making equity investments of the types and amount not
permissible for national banks; and (v) rules mandating enhanced financial
reporting and audit requirements.
OTHER
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") imposes liability on an institution the deposits of which are insured
by the FDIC for costs incurred by the FDIC in connection with the insolvency of
other FDIC-insured institutions under common control with such institution. Such
an FDIC claim against a depository institution is superior in right of payment
to claims of the holding company of such institution.
Under Federal Reserve Board policy, the Company is expected to act as a
source of financial strength to each bank subsidiary and to commit resources to
support such bank subsidiary in circumstances where it might not do so absent
such policy. Any loans by a bank holding company to any of its subsidiary banks
that qualify as capital are subordinate in right of payment to deposits and to
certain other indebtedness of the subsidiary banks. In the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to a
Federal banking regulator to maintain the capital of a subsidiary bank at a
certain level will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
The bank subsidiaries of the Company are subject to certain restrictions
imposed by Federal law on extensions of credit to, and certain other
transactions with, the Company and certain other affiliates and on investments
in stock or securities thereof. Such restrictions prevent the Company and such
other affiliates from borrowing from a bank subsidiary unless the loans are
secured in specified amounts. Without the prior approval of the Federal Reserve
Board, such secured loans, other transactions and investments by any bank
subsidiary are generally limited in amount as to the Company and as to each of
such other affiliates to 10% of such bank's capital and surplus and as to the
Company and all such other affiliates to an aggregate of 20% of such bank's
capital and surplus. Federal law also requires that transactions between a bank
subsidiary and the Company or certain non-bank affiliates, including extensions
of credit, sales of securities or assets and the provision of services, be
conducted on terms at least as favorable to the bank subsidiary as those that
apply or that would apply to comparable transactions with unaffiliated parties.
EXPERTS
The financial statements of the Company incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31, 1992
have been so incorporated in reliance on the report of Price Waterhouse,
independent accountants, given the authority of said firm as experts in auditing
and accounting.
31
<PAGE> 51
LEGAL OPINIONS
The validity of the Offered Securities being offered hereby will be passed
upon for the Company by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York, and for any underwriters by
Cravath, Swaine & Moore, New York, New York. Cravath, Swaine & Moore has
represented and continues to represent the Company and its subsidiaries in a
substantial number of matters on a regular basis.
32
<PAGE> 52
- ---------------------------------------------------------
- ---------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT. THIS PROSPECTUS SUPPLEMENT,
ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
-----
<S> <C>
Description of the Medium-Term Notes......... S-2
General.................................. S-2
Interest and Interest Rates.............. S-3
Fixed Rate Notes......................... S-5
Floating Rate Notes...................... S-5
Book-Entry Notes......................... S-8
Other Provisions; Addenda................ S-10
Certain United States Federal Income Tax
Consequences............................... S-10
United States Holders.................... S-10
Non-United States Holders................ S-13
Backup Withholding and Information
Reporting.............................. S-14
Non-Dollar Denominated Notes............. S-15
Plan of Distribution......................... S-15
Legal Opinions............................... S-16
Glossary..................................... S-17
PROSPECTUS
Available Information........................ 2
Incorporation of Certain Documents by
Reference.................................. 2
Chemical Banking Corporation................. 3
Consolidated Ratios of Earnings to Fixed
Charges.................................... 4
Use of Proceeds.............................. 4
Description of Debt Securities............... 4
Description of Preferred Stock............... 15
Description of Common Stock.................. 22
Description of Securities Warrants........... 23
Risk Factors Relating to Currency Warrants... 24
Description of Currency Warrants............. 25
Plan of Distribution......................... 26
Certain Regulatory Matters................... 28
Experts...................................... 31
Legal Opinions............................... 32
</TABLE>
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$3,000,000,000
(LOGO)
Chemical Banking
Corporation
Senior Medium-Term Notes, Series C
Subordinated Medium-Term
Notes, Series A
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PROSPECTUS SUPPLEMENT
February 15, 1994
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