<PAGE> 1
Filed pursuant to Rule 424(b)(2)
Registration Nos. 333-565787 and 333-565787-01
[CHASE LOGO]
$350,000,000
CHASE CAPITAL VII
7.00% CAPITAL SECURITIES, SERIES G
(LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED BELOW, BY
THE CHASE MANHATTAN CORPORATION
DISTRIBUTIONS
- - Quarterly, beginning July 31, 1999.
- - Distributions may be postponed for up to five years, but not beyond the
maturity date.
ISSUER AND GUARANTOR
- - Chase Capital VII, a subsidiary of The Chase Manhattan Corporation, will
issue the Capital Securities.
- - Chase Capital VII's only assets will be the Prospectus Supplement (To
Prospectus Dated July 17, 1998) Subordinated Debentures to be issued by The
Chase Manhattan Corporation and having essentially the same payment terms
as the Capital Securities. Chase Capital VII can make distributions on the
Capital Securities only if The Chase Manhattan Corporation makes interest
payments on the Subordinated Debentures.
- - The Chase Manhattan Corporation will guarantee the Capital Securities as
described in this document.
MATURITY DATE
- - May 15, 2029.
REDEMPTION
- - The Capital Securities may be redeemed at any time on or after May 28, 2004
or earlier upon certain events involving taxation or capital treatment.
SUBORDINATION
- - The Subordinated Debentures will be subordinated to all existing and future
senior debt of The Chase Manhattan Corporation and all liabilities of its
subsidiaries. As a result, the Capital Securities also will be effectively
subordinated to the same debt and liabilities.
LISTING
- - The Capital Securities have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance.
----------------------------------------------------------------------
INVESTING IN THE CAPITAL SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE S-7.
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK. THEY ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE ATTACHED
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------------------------------------------------
<TABLE>
<CAPTION>
Per Capital Security Total
<S> <C> <C>
Initial Public Offering Price $25.00(1) $350,000,000(1)
Underwriting Commissions (2) (2)
Proceeds to Issuer $25.00 $350,000,000
</TABLE>
(1) Your purchase price will also include any distributions accrued on the
Capital Securities since May 28, 1999.
(2) The Chase Manhattan Corporation will pay underwriting commissions of $0.7875
per Capital Security ($11,025,000 in total).
----------------------------------------------------------------------
- - The Capital Securities will be delivered to you through the book-entry
facilities of The Depository Trust Company on or about May 28, 1999.
- - The underwriters named herein will purchase the Capital Securities on a firm
commitment basis and offer them to you, subject to certain conditions.
- - Certain of our affiliates, including Chase Securities Inc., may use this
Prospectus Supplement and the attached Prospectus in connection with offers
and sales of the Capital Securities in the secondary market. These
affiliates may act as principal or agent in those transactions. Secondary
market sales will be made at prices related to market prices at the time of
sale.
CHASE SECURITIES INC. SALOMON SMITH BARNEY
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
BEAR, STEARNS & CO. INC. GOLDMAN, SACHS & CO. LEHMAN BROTHERS
----------------------------------------------------------------------
The date of this Prospectus Supplement is May 21, 1999.
<PAGE> 2
In making your investment decision, you should rely only on the information
contained or incorporated by reference in this Prospectus Supplement and the
attached Prospectus. We have not authorized anyone to provide you with any other
information. If you receive any information not authorized by us, you should not
rely on it.
We are offering the Capital Securities for sale only in places where sales
are permitted.
You should not assume that the information contained or incorporated by
reference in this Prospectus Supplement or the attached Prospectus is accurate
as of any date other than its respective date.
------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
Summary............................... S-3
Risk Factors.......................... S-7
Chase Capital VII..................... S-9
The Chase Manhattan Corporation....... S-9
Capitalization........................ S-10
Accounting Treatment.................. S-11
Summary of Terms of Capital
Securities.......................... S-11
Summary of Terms of Subordinated
Debentures.......................... S-16
Guarantee of Capital Securities....... S-19
Certain Federal Income Tax
Consequences........................ S-19
ERISA Considerations.................. S-23
Underwriting.......................... S-25
Validity of Securities................ S-27
PROSPECTUS
Available Information................. 3
Incorporation of Certain Documents by
Reference........................... 3
The Chase Manhattan Corporation....... 5
The Issuers........................... 5
Use of Proceeds....................... 6
Description of Junior Subordinated
Debentures.......................... 6
Description of Preferred Securities... 17
Book-Entry Issuance................... 28
Description of Guarantees............. 31
Relationship Among the Preferred
Securities, the Corresponding Junior
Subordinated Debentures and the
Guarantees.......................... 33
Plan of Distribution.................. 34
Validity of Securities................ 35
Experts............................... 35
</TABLE>
S-2
<PAGE> 3
SUMMARY
In this summary, we have highlighted certain information in this Prospectus
Supplement and the attached Prospectus. This summary may not contain all of the
information that is important to you. To understand the terms of the Capital
Securities and the related Guarantees and Subordinated Debentures, as well as
the considerations that are important to you in making your investment decision,
you should carefully read this entire Prospectus Supplement and the attached
Prospectus. You should also read the documents we have referred you to in
"Available Information" and "Incorporation of Certain Documents by Reference" on
pages 3 and 4 of the attached Prospectus.
ABOUT THIS PROSPECTUS SUPPLEMENT
This Prospectus Supplement summarizes the specific terms of the securities
being offered and supplements the general descriptions set forth in the attached
Prospectus. This Prospectus Supplement may also update or supersede information
in the attached Prospectus. In the case of inconsistencies, this Prospectus
Supplement will apply. Capitalized terms used but not defined in this Prospectus
Supplement have the meanings indicated in the attached Prospectus.
THE ISSUER AND CHASE
Chase Capital VII, which we refer to as the "Issuer", is a Delaware
business trust. It was created for the sole purpose of issuing the 7.00% Capital
Securities, Series G, which we refer to as the "Capital Securities", and
engaging in the other transactions described in this Prospectus Supplement and
the attached Prospectus. The Issuer Trustees referred to on page 5 of the
attached Prospectus will conduct the business affairs of the Issuer.
The Chase Manhattan Corporation, which we refer to as "Chase", is a bank
holding company. Through its subsidiaries, Chase conducts domestic and
international financial services businesses. Chase is one of the largest banking
institutions in the United States, with $361 billion in assets and $23 billion
in stockholders' equity as of March 31, 1999.
Chase's principal executive office is located at 270 Park Avenue, New York,
New York 10017. Its telephone number is (212) 270-6000.
THE CAPITAL SECURITIES
Each Capital Security will represent an undivided beneficial ownership
interest in the assets of the Issuer.
The Issuer will sell the Capital Securities to the public and its Common
Securities to Chase. The Issuer will use the proceeds from those sales to
purchase $360,824,750 aggregate principal amount of 7.00% Junior Subordinated
Deferrable Interest Debentures, Series G, which we refer to as the "Subordinated
Debentures". Chase will pay interest on the Subordinated Debentures at the same
rates and on the same dates as the Issuer makes payments on the Capital
Securities. The Issuer will use payments it receives on the Subordinated
Debentures to make the corresponding payments on the Capital Securities.
DISTRIBUTIONS
If you purchase Capital Securities, you will be entitled to receive
cumulative cash distributions at the annual rate of 7.00% of the stated
liquidation amount of $25 per Capital Security (the "Liquidation Amount").
Distributions will accumulate from May 28, 1999. The Issuer will make
distribution payments on the Capital Securities quarterly in arrears, on each
January 31, April 30, July 31 and October 31, beginning July 31, 1999, unless
those payments are deferred as described below.
DEFERRAL OF DISTRIBUTIONS
Chase may elect, on one or more occasions, to defer the quarterly interest
payments on the Subordinated Debentures for a period of up to 20 consecutive
quarterly periods. In other words, Chase can declare one or more interest
payment moratoriums on the Subordinated Debentures, each of which may last for
up to five years. However, no interest deferral may (1) extend beyond the stated
maturity date of the Subordinated Debentures or (2) begin during the existence
of an event of default with respect to the Subordinated Debentures.
S-3
<PAGE> 4
If Chase exercises its right to defer interest payments on the Subordinated
Debentures, the Issuer will also defer distribution payments on the Capital
Securities.
Although you will not receive distribution payments on the Capital
Securities if interest payments are deferred, interest will continue to accrue,
compounded quarterly, on the Subordinated Debentures, and deferred interest
payments will accrue additional interest. As a result, additional distributions
will continue to accumulate on the deferred distributions at the annual rate of
7.00%, compounded quarterly.
If Chase defers payments of interest on the Subordinated Debentures, the
Subordinated Debentures will be treated as being issued with original issue
discount for United States federal income tax purposes. This means that you must
include interest income with respect to the deferred distributions on your
Capital Securities in gross income for United States federal income tax
purposes, prior to receiving any cash distributions.
REDEMPTION
The Issuer will redeem the Capital Securities and its Common Securities on
May 15, 2029, the stated maturity date of the Subordinated Debentures. In
addition, if Chase redeems or repays any Subordinated Debentures prior to their
stated maturity date, the Issuer will use the cash it receives to redeem, on a
proportionate basis, an equal amount of Capital Securities and Common
Securities.
The redemption terms of the Subordinated Debentures are summarized below
under "Summary -- The Subordinated Debentures -- Redemption."
Upon any redemption of the Capital Securities, you will be entitled to
receive a redemption price equal to the Liquidation Amount of the Capital
Securities redeemed, plus any accumulated and unpaid distributions to the date
of redemption.
LIQUIDATION OF THE ISSUER AND DISTRIBUTION OF SUBORDINATED DEBENTURES TO HOLDERS
Chase may dissolve the Issuer at any time, subject to its receipt of any
required prior approval by the Board of Governors of the Federal Reserve System
(the "Federal Reserve").
If Chase dissolves the Issuer, after the Issuer satisfies all of its
liabilities as required by law, the Issuer Trustees will:
- distribute the Subordinated Debentures to the holders of the Capital
Securities; or
- if the Property Trustee determines that a distribution of the
Subordinated Debentures is not practical, pay the Liquidation Amount of
the Capital Securities, plus any accumulated and unpaid distributions to
the payment date, in cash.
BOOK-ENTRY
The Capital Securities will be represented by one or more global securities
registered in the name of and deposited with The Depository Trust Company
("DTC") or its nominee. This means that you will not receive a certificate for
your Capital Securities and Capital Securities will not be registered in your
name, except under certain limited circumstances described in the attached
Prospectus under the caption "Description of Preferred Securities -- Global
Preferred Securities".
LISTING OF THE CAPITAL SECURITIES
The Capital Securities have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance.
THE SUBORDINATED DEBENTURES
MATURITY AND INTEREST
The Subordinated Debentures will mature on May 15, 2029. They will bear
interest at the annual rate of 7.00% of their principal amount. Interest on the
Subordinated Debentures will accrue from May 28, 1999. Chase will pay that
interest quarterly in arrears on each January 31, April 30, July 31 and October
31, beginning July 31, 1999.
RANKING
The Subordinated Debentures will constitute one series of the Junior
Subordinated Debentures referred to in the attached Prospectus and will be
issued by Chase under the Indenture referred to in the attached Prospectus. The
Subordinated Debentures will be unsecured and will rank junior to
S-4
<PAGE> 5
all of Chase's Senior Debt. For a definition of "Senior Debt", see page 15 of
the attached Prospectus. Substantially all of Chase's debt, other than other
series of Junior Subordinated Debentures previously issued or that may be issued
in the future, constitutes Senior Debt.
CERTAIN PAYMENT RESTRICTIONS APPLICABLE TO CHASE
During any period in which Chase has elected to defer interest payments on
the Subordinated Debentures, Chase generally may not make payments on its
capital stock, debt securities or guarantees, subject to certain limited
exceptions.
REDEMPTION
Chase may elect to redeem any or all of the Subordinated Debentures at one
or more times on or after May 28, 2004. In addition, if certain changes occur
relating to the tax or capital treatment of the Capital Securities, Chase may
elect to redeem all, but not less than all, of the Subordinated Debentures. For
a description of the changes that would permit such a redemption, see "Summary
of Terms of Subordinated Debentures -- Conditional Right to Redeem Upon a Tax
Event or Capital Treatment Event" below.
If required under the Federal Reserve's capital rules, Chase will obtain
the approval of the Federal Reserve prior to exercising the redemption rights
described above.
EVENTS OF DEFAULT
The following events, which are referred to as "Debenture Events of
Default" in the attached Prospectus, are events of default with respect to the
Subordinated Debentures:
- Chase fails to pay interest within 30 days after the due date; or
- Chase fails to pay principal or premium when due; or
- Chase materially breaches a covenant in the Indenture and the breach
continues for 90 days after notice by the trustee under the Indenture or
holders of at least 25% of the principal amount of the Subordinated
Debentures; or
- certain events occur involving the bankruptcy, insolvency or
reorganization of Chase.
Upon an event of default, the trustee under the Indenture may declare all
principal and interest on the Subordinated Debentures immediately due and
payable. Under certain limited circumstances, the holders of a majority of the
aggregate Liquidation Amount of Capital Securities may make that declaration or
directly exercise certain rights and remedies under the Indenture.
LISTING OF SUBORDINATED DEBENTURES UPON DISTRIBUTION TO HOLDERS
If the Issuer Trustees distribute the Subordinated Debentures to holders of
the Capital Securities upon liquidation of the Issuer, Chase will use its best
efforts to have the Subordinated Debentures listed or quoted on any stock
exchange or quotation system on which the Capital Securities were listed at the
time of the Issuer's termination.
GUARANTEE BY CHASE
Chase will fully and unconditionally guarantee payment of amounts due under
the Capital Securities on a subordinated basis and to the extent the Issuer has
funds available for payment of those amounts. We refer to this obligation as the
"Guarantee". However, the Guarantee does not cover payments if the Issuer does
not have sufficient funds to make the distribution payments, including, for
example, if Chase has failed to pay to the Issuer amounts due under the
Subordinated Debentures.
Chase, as issuer of the Subordinated Debentures, is also obligated to pay
the expenses and other obligations of the Issuer, other than its obligations to
make payments on the Capital Securities.
S-5
<PAGE> 6
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth Chase's consolidated ratios of earnings to
fixed charges and ratios of earnings to combined fixed charges and preferred
stock dividend requirements for each of the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ------------------------------------
1999 1998 1997 1996 1995 1994
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on Deposits.......... 2.42 1.84 1.82 1.66 1.90 1.86
Including Interest on Deposits.......... 1.63 1.43 1.43 1.32 1.41 1.42
Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements:
Excluding Interest on Deposits.......... 2.39 1.82 1.77 1.60 1.82 1.76
Including Interest on Deposits.......... 1.62 1.42 1.41 1.30 1.38 1.38
</TABLE>
For purposes of the above ratios, earnings consist of 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 portion 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
portion deemed representative of the interest factor) of rents, net of income
from subleases, and capitalized interest.
S-6
<PAGE> 7
RISK FACTORS
Before deciding whether to purchase any Capital Securities, you should pay
special attention to the following risk factors.
SUBORDINATION OF THE SUBORDINATED DEBENTURES AND THE GUARANTEE
Chase's obligations under the Subordinated Debentures and the Guarantee are
unsecured and rank junior in right of payment to all of Chase's existing and
future Senior Debt. This means that Chase cannot make any payments on the
Subordinated Debentures or under the Guarantee if Chase is in default on its
Senior Debt. In addition, in the event of the bankruptcy, insolvency or
liquidation of Chase, Chase's assets must be used to pay off its Senior Debt in
full before any payments may be made on the Subordinated Debentures or under the
Guarantee. Substantially all of Chase's existing debt, other than the Junior
Subordinated Debentures, is Senior Debt.
The Indenture, the Guarantee and the trust agreement with respect to the
Issuer and the Capital Securities (the "Trust Agreement") do not limit Chase's
ability to incur additional secured or unsecured debt, including Senior Debt.
See "Description of Guarantees -- Status of the Guarantees" and "Description of
Junior Subordinated Debentures -- Subordination" in the attached Prospectus.
STATUS OF CHASE AS A HOLDING COMPANY
Chase is a holding company that conducts substantially all of its
operations through subsidiaries. As a result, its ability to make payments on
the Subordinated Debentures and the Guarantee will depend primarily upon the
receipt of dividends and other distributions from its subsidiaries. Various
legal limitations restrict the extent to which Chase's subsidiaries may extend
credit, pay dividends or other funds or otherwise engage in transactions with
Chase or certain of its other subsidiaries.
In addition, Chase's right to participate in any distribution of assets
from any subsidiary, upon the subsidiary's liquidation or otherwise, is subject
to the prior claims of creditors of that subsidiary, except to the extent that
Chase is recognized as a creditor of that subsidiary. As a result, the
Subordinated Debentures and the Guarantee will be effectively subordinated to
all existing and future liabilities of Chase's subsidiaries. You should look
only to the assets of Chase as the source of payment for the Subordinated
Debentures and the Guarantee.
DEPENDENCE ON CHASE'S PAYMENTS ON SUBORDINATED DEBENTURES; LIMITATIONS UNDER THE
GUARANTEE
The Issuer's ability to make timely distribution and redemption payments on
the Capital Securities is solely dependent on Chase's making the corresponding
payments on the Subordinated Debentures. In addition, the Guarantee only
guarantees that Chase will make distribution and redemption payments if the
Issuer had funds available to make the payments but failed to do so.
If the Issuer defaults on its payment obligations under the Capital
Securities because Chase has failed to make the corresponding payments under the
Subordinated Debentures, you will not be able to rely upon the Guarantee for
payment. Instead, you may institute a legal proceeding directly against Chase
for enforcement of its payment obligations under the Indenture and the
Subordinated Debentures.
POTENTIAL ADVERSE MARKET PRICE AND TAX CONSEQUENCES OF DEFERRAL OF INTEREST
PAYMENTS
Chase currently does not intend to exercise its right to defer payments of
interest on the Subordinated Debentures. However, if it exercises that right in
the future, the market price of the Capital Securities is likely to be affected.
As a result of the existence of Chase's deferral right, the market price of the
Capital Securities, payments on which depend solely on payments being made on
the Subordinated Debentures, may be more volatile than the market prices of
other securities that are not subject to optional deferrals.
If Chase does defer interest on the Subordinated Debentures and you elect
to sell Capital Securities during the period of that deferral, you may not
receive the same return on your investment as a holder that continues to hold
its Capital Securities until the payment of interest at the end of the deferral
period.
If Chase does defer interest payments on the Subordinated Debentures, you
will be required to accrue income, in the form of original issue discount, for
United States federal income tax purposes during the period of the deferral in
S-7
<PAGE> 8
respect of your proportionate share of the Subordinated Debentures, even if you
normally report income when received and even though you will not receive the
cash attributable to that income until after the end of the period of deferral.
See "Certain Federal Income Tax Consequences -- Interest Income and Original
Issue Discount" and "-- Sales of Capital Securities."
CAPITAL SECURITIES MAY BE REDEEMED AT ANY TIME UPON A TAX EVENT OR CAPITAL
TREATMENT EVENT
Under certain circumstances, within 90 days after the occurrence of a Tax
Event or a Capital Treatment Event, each of which terms is defined beginning at
page S-18 below, Chase may elect to redeem the Subordinated Debentures in whole,
but not in part. That redemption would cause a mandatory redemption of the
Capital Securities at a redemption price equal to their Liquidation Amount plus
accumulated and unpaid distributions. See "Summary of Terms of Subordinated
Debentures -- Conditional Right to Redeem upon a Tax Event or Capital Treatment
Event" below and "Description of Preferred Securities -- Redemption or Exchange"
in the attached Prospectus.
LIMITED VOTING RIGHTS
As a holder of Capital Securities, you will have limited voting rights. You
generally will not be entitled to vote to appoint, remove or replace the
Property Trustee, the Delaware Trustee or any Administrative Trustee, all of
whom will be appointed, removed or replaced by Chase. However, if an event of
default occurs with respect to the Subordinated Debentures, you would be
entitled to vote to remove, replace or appoint the Property Trustee and the
Delaware Trustee.
UNCERTAIN LIQUIDITY OF TRADING MARKET
The Capital Securities have been approved for listing on The New York Stock
Exchange, subject to official notice of issuance. We expect trading of the
Capital Securities on the New York Stock Exchange to begin within 30 days after
initial issuance of the Capital Securities. The underwriters for this offering
have advised us that they intend to make a market in the Capital Securities
prior to the date the Capital Securities begin trading on the New York Stock
Exchange. However, the Underwriters may discontinue market making at any time.
Therefore, we cannot assure you as to the liquidity of the trading markets for
the Capital Securities.
S-8
<PAGE> 9
CHASE CAPITAL VII
The Issuer is a statutory business trust created under Delaware law in
1998. It is one of the Issuers formed for the purposes and having the
characteristics described under the caption "The Issuers" in the attached
Prospectus. The Issuer will be governed by the Trust Agreement to be signed by
Chase, as Depositor, The Bank of New York, as Property Trustee, The Bank of New
York (Delaware), as Delaware Trustee, and the Administrative Trustees named in
the Trust Agreement.
The Issuer will not be subject to the reporting requirements of the
Securities Exchange Act. As further described under the caption "Accounting
Treatment" below, Chase has agreed that it will provide certain information
regarding the Issuer and the Capital Securities in the financial statements
included in Chase's periodic reports to the SEC.
THE CHASE MANHATTAN CORPORATION
Through its subsidiaries, Chase conducts domestic and international
financial services businesses. It is one of the largest banking institutions in
the United States, with $361 billion in assets and $23 billion in stockholders'
equity as of March 31, 1999.
Chase's principal bank subsidiaries are The Chase Manhattan Bank (the
"Bank"), headquartered in New York, Chase Manhattan Bank USA, National
Association ("Chase USA"), headquartered in Delaware, and Chase Bank of Texas,
National Association ("Chase Texas"), headquartered in Texas. Its principal
non-bank subsidiary is Chase Securities Inc. ("CSI"), which is engaged in
securities underwriting and dealing.
Chase's activities are internally organized, for operating purposes, into
three major business franchises. A brief description of these business
franchises is presented below.
GLOBAL BANK
Global Bank combines the strengths of a leading commercial bank and a
leading investment bank to meet the needs of corporations, institutions,
governments and wealthy individuals around the world. With operations in
approximately 50 countries, including major operations in all key international
financial centers, Global Bank integrates a broad range of leading product
capabilities, industry knowledge and geographic reach to produce superior
customer solutions.
Global Bank businesses included, as of March 31, 1999:
- Global Markets, which conducts trading and sales of foreign exchange,
derivatives, fixed income securities and commodities and which includes
Chase's domestic and international treasury units;
- Global Investment Banking, which provides financing and advisory services
to corporations, financial institutions, financial sponsors and
governments;
- Corporate Lending, which provides credit and lending services to clients
globally;
- Chase Capital Partners, which provides equity and mezzanine financing in
the United States and, to a lesser extent, abroad;
- Global Private Bank, which serves a global client base of high net worth
individuals and families; and
- Middle Market, which provides financial services to companies with annual
sales ranging from $10 million to $500 million.
NATIONAL CONSUMER SERVICES
National Consumer Services serves more than 30 million customers nationwide
offering a wide variety of financial products and services through a diverse
array of channels. It combines a nationwide presence with a leading consumer and
small business banking franchise in the New York metropolitan tri-state region
and in key Texas markets.
National Consumer Services included, as of March 31, 1999:
- Chase Cardmember Services, which includes the fourth-largest bank credit
card issuer in the U.S., as well as Chase's international consumer
business;
- Regional Consumer Banking, which has a leading share of primary bank
relationships among consumers and small businesses in the New York
metropolitan tri-state area
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<PAGE> 10
and which also includes a leading retail institution in key Texas
markets;
- Chase Home Finance, which is the third largest originator and servicer of
residential mortgage loans in the U.S. and a leading provider of
home-equity secured lending and manufactured housing finance; and
- Diversified Consumer Services, which is the largest bank originator of
auto loans and leases in the U.S. and a leading provider of student loans
and unsecured consumer lending and which also provides brokerage
services, investment products and insurance.
CHASE TECHNOLOGY SOLUTIONS
Chase Technology solutions combines Chase's Global Services businesses,
Information Technology and Operations and Electronic Commerce initiatives.
Global Services is a leading provider of information and transaction services
globally and includes custody and other investor services, treasury and cash
management, trade finance, debt, agency and other fiduciary services.
CAPITALIZATION
The following table sets forth the consolidated capitalization of Chase as
of March 31, 1999 and as adjusted to give effect to the issuance of the Capital
Securities and the Subordinated Debentures. You should also read Chase's
consolidated financial statements and the related notes, which are incorporated
by reference.
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------------
ACTUAL AS ADJUSTED
----------- -----------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Total long-term debt........................................ $16,178 $16,178
------- -------
Guaranteed Preferred Beneficial Interests in Chase's Junior
Subordinated Deferrable Interest Debentures(a)............ 2,188 2,538
Preferred Stock of Subsidiary(b)............................ 550 550
------- -------
Stockholders' Equity
Preferred Stock........................................... 1,028 1,028
Common Stock.............................................. 882 882
Capital Surplus........................................... 9,542 9,542
Retained Earnings......................................... 14,351 14,351
Accumulated Other Comprehensive Income.................... (99) (99)
Treasury Stock, At Cost................................... (2,436) (2,436)
------- -------
Total Stockholders' Equity........................ $23,268 $23,268
------- -------
TOTAL CAPITALIZATION........................................ $42,184 $42,534
======= =======
</TABLE>
- ---------------
(a) Includes the net proceeds from the issuance of the following guaranteed
preferred securities having the following total liquidation amounts:
(1) $600 million issued by Chase Capital I; (2) $500 million issued by
Chase Capital II; (3) $300 million issued by Chase Capital III; (4)
$350 million issued by Chase Capital IV; (5) $200 million issued by
Chase Capital V; (6) $250 million issued by Chase Capital VI; and (7)
in the "as adjusted" column only, the Capital Securities being offered.
The net proceeds from each above issuance, together with the amounts paid by
Chase for the related common securities, were invested:
(1) by Chase Capital I in approximately $618.6 million principal
amount of Series A Junior Subordinated Debentures, which bear
interest at the annual rate of 7.67% and which will mature on
December 1, 2026;
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<PAGE> 11
(2) by Chase Capital II in approximately $515.5 million principal
amount of Series B Junior Subordinated Debentures, which bear
interest at the annual floating rate of LIBOR plus .50% and which
will mature on February 1, 2027;
(3) by Chase Capital III in approximately $309.3 million principal
amount of Series C Junior Subordinated Debentures, which bear
interest at the annual floating rate of LIBOR plus .55% and which
will mature on March 1, 2027;
(4) by Chase Capital IV in approximately $360.8 million principal
amount of Series D Junior Subordinated Debentures, which bear
interest at the annual rate of 7.34% and which will mature on
December 6, 2027;
(5) by Chase Capital V in approximately $206.2 million principal
amount of Series E Junior Subordinated Debentures, which bear
interest at the annual rate of 7.03% and which will mature on
March 31, 2028; and
(6) by Chase Capital VI in approximately $257.7 million principal
amount of Series F Junior Subordinated Debentures, which bear
interest at the annual floating rate of LIBOR plus .625% and which
will mature on August 1, 2028.
The Issuer will invest the proceeds of the offering of the Capital
Securities in approximately $360.8 million of Subordinated
Debentures, which will bear interest at the annual rate of 7.00%
and will mature on May 15, 2029. Chase owns all of the common
securities of each of Chase Capital I, Chase Capital II, Chase
Capital III, Chase Capital IV, Chase Capital V and Chase Capital
VI and will own all of the common securities of the Issuer. The
sole assets of each of the trusts are (or, in the case of the
Issuer, will be) the respective Junior Subordinated Debentures
referred to above.
(b) Reflects the issuance of preferred stock in September 1996 by Chase
Preferred Capital Corporation, a wholly owned subsidiary of the Bank, which
has elected to be treated for federal income tax purposes as a real estate
investment trust.
ACCOUNTING TREATMENT
The Issuer will be treated as a subsidiary of Chase for financial reporting
purposes, and the Issuer's accounts will be included in Chase's consolidated
financial statements. In its future financial reports, Chase will
- present the Capital Securities as part of a separate line item in Chase's
consolidated balance sheets;
- include appropriate disclosures about the Capital Securities, the
Guarantee and the Subordinated Debentures in the notes to Chase's
consolidated financial statements; and
- record distributions payable on the Capital Securities as an expense.
SUMMARY OF TERMS OF
CAPITAL SECURITIES
The Capital Securities represent undivided beneficial ownership interests
in the assets of the Issuer and are a series of "Preferred Securities", as
described in the attached Prospectus.
We have summarized below certain terms of the Capital Securities. This
summary supplements the general description of the Preferred Securities
contained in the attached Prospectus. Any information regarding the Capital
Securities contained in this Prospectus Supplement that is inconsistent with
information in the Prospectus will apply and will supersede the inconsistent
information in the Prospectus.
This summary is not complete. You should also refer to the Trust Agreement,
a form of which has been filed as an exhibit to the registration statement (No.
333-56587) of which this Prospectus Supplement and the attached Prospectus are a
part (the "Registration Statement").
DISTRIBUTIONS
You will be entitled to receive quarterly distributions on the Capital
Securities at the annual rate of 7.00% of the stated Liquidation
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Amount of each Capital Security ($25), which is the same as the rate payable on
the Subordinated Debentures. The Issuer will pay distributions quarterly in
arrears on each January 31, April 30, July 31 and October 31, beginning July 31,
1999. Distributions will be cumulative and will accumulate from May 28, 1999.
On each distribution date, the Issuer will pay the applicable distribution
to the holders of the Capital Securities on the record date for that
distribution date. As long as the Capital Securities remain in book-entry form,
the record dates for the Capital Securities will be one Business Day prior to
the relevant distribution date. For the definition of "Business Day", see page
18 of the attached Prospectus. If Capital Securities are not in book-entry form,
the record date will be the 15th day of the month in which the relevant
distribution date occurs.
The period beginning on and including May 28, 1999 and ending on but
excluding the first distribution date and each period after that period
beginning on and including a distribution date and ending on but excluding the
next distribution date is called a "distribution period". The amount of
distributions payable for any distribution period will be computed on the basis
of a 360-day year of twelve 30-day months.
In the event that any distribution date would fall on a day that is not a
Business Day, that distribution date will be postponed until the next day that
is a Business Day and no additional distribution or other payment will accrue as
a result of that postponement. However, if the postponement would cause the
distribution date to fall in the next calendar year, the distribution date will
instead be brought forward to the preceding Business Day. See "Description of
Preferred Securities -- Distributions" in the attached Prospectus.
Distributions that are not paid on the applicable distribution date will
accumulate additional distributions, to the extent permitted by law, at the
annual rate of 7.00%, compounded quarterly, from the relevant distribution date.
References to "distributions" in this Prospectus Supplement and the attached
Prospectus include these additional distributions.
DEFERRAL OF DISTRIBUTIONS
If the Subordinated Debentures are not in default, Chase has the right, on
one or more occasions, to defer payment of interest on the Subordinated
Debentures for up to 20 consecutive distribution periods, but not beyond the
stated maturity of the Subordinated Debentures. If Chase exercises this right,
the Issuer will also defer paying quarterly distributions on the Capital
Securities during that period of deferral.
Although no interest or distribution payments will be made during a period
of deferral, interest on the Subordinated Debentures will continue to accrue
and, as a result, distributions on the Capital Securities will continue to
accumulate at the annual rate of 7.00%, compounded quarterly. References to
"distributions" in this Prospectus Supplement and the attached Prospectus
include these additional distributions.
Once Chase makes all deferred interest payments on the Subordinated
Debentures, it can once again defer interest payments subject to the limitations
discussed above. As a result, there could be multiple periods of varying length
during which you would not receive cash distributions on your Capital
Securities.
See "Summary of Terms of Subordinated Debentures -- Option to Defer
Interest Payments" below.
REDEMPTION
If Chase repays or redeems the Subordinated Debentures, in whole or in
part, whether at stated maturity or earlier, the Property Trustee will use the
proceeds of that repayment or redemption to redeem a total amount of Capital
Securities and Common Securities equal to the amount of Subordinated Debentures
redeemed. The redemption price will be equal to the aggregate Liquidation Amount
of the Capital Securities and Common Securities, plus accumulated and unpaid
distributions to the redemption date.
If less than all Capital Securities and Common Securities are redeemed, the
amount of each to be redeemed will be allocated proportionately based upon the
total amount of Capital Securities and Common Securities outstanding.
The Property Trustee will give holders of Capital Securities not less than
30 nor more than
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60 days' notice prior to the date of any redemption of Capital Securities.
See "Summary of Terms of Subordinated Debentures -- Redemption" for a
description of the redemption terms of the Subordinated Debentures.
OPTIONAL LIQUIDATION OF THE ISSUER
AND DISTRIBUTION OF SUBORDINATED
DEBENTURES TO HOLDERS
Chase may elect to dissolve the Issuer at any time and, after satisfaction
of the Issuer's liabilities, to cause the Property Trustee to distribute the
Subordinated Debentures to the holders of the Capital Securities. However, if
then required under the Federal Reserve's capital rules, Chase will receive the
prior approval of the Federal Reserve prior to making that election.
Chase anticipates that any distribution of Subordinated Debentures would be
through book-entry distribution of interests in one or more global securities
under depositary arrangements similar to those applicable to the Capital
Securities. See "-- Book-Entry Issuance; Issuance of Certificated Capital
Securities" and "-- Global Clearance and Settlement Procedures" below and
"Book-Entry Issuance" in the attached Prospectus.
Under current United States federal income tax law, and assuming, as
expected, the Issuer is treated as a grantor trust, a distribution of
Subordinated Debentures in exchange for the Capital Securities would not be a
taxable event to you. If, however, the Issuer were subject to United States
federal income tax with respect to income accrued or received on the
Subordinated Debentures, the distribution of the Subordinated Debentures by the
Issuer would be a taxable event to the Issuer and to you. See "Certain Federal
Income Tax Consequences -- Distribution of Subordinated Debentures to Holders of
Capital Securities" below.
LIQUIDATION VALUE
Upon liquidation of the Issuer, you would be entitled to receive $25 per
Capital Security, plus accumulated and unpaid distributions to the date of
payment. That amount would be paid to you in the form of a distribution of
Subordinated Debentures, subject to certain exceptions. See "Description of
Preferred Securities -- Liquidation Distribution Upon Termination" in the
attached Prospectus.
SUBORDINATION OF COMMON SECURITIES
The Issuer will pay distributions on its Common Securities at the same rate
and on the same distribution dates as the Capital Securities. However, if there
is an event of default under the Indenture, the Issuer will not pay
distributions on the Common Securities until all distributions on the Capital
Securities have been paid in full. For a more detailed description of
circumstances in which the Capital Securities will have a preference over the
Common Securities, see "Description of Preferred Securities -- Subordination of
Common Securities" in the attached Prospectus.
EVENTS OF DEFAULT UNDER TRUST AGREEMENT
For a description of the events of default under the Trust Agreement, as
well as a summary of the remedies available as a result of those events of
default, see "Description of Preferred Securities -- Events of Default; Notice"
in the attached Prospectus.
An event of default with respect to the Subordinated Debentures also
constitutes an event of default under the Trust Agreement and entitles the
Property Trustee, as sole holder of the Subordinated Debentures, to declare the
Subordinated Debentures due and payable under the Indenture. For a more complete
description of remedies available upon the occurrence of an event of default
with respect to the Subordinated Debentures, see "Description of Junior
Subordinated Debentures -- Debenture Events of Default" and "-- Enforcement of
Certain Rights by Holders of Preferred Securities" in the attached Prospectus.
VOTING RIGHTS
Except as described under "Description of Guarantees -- Amendments and
Assignment" in the attached Prospectus, or as otherwise required by law or the
Trust Agreement, as an owner of Capital Securities, you will not have any voting
rights.
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BOOK-ENTRY ISSUANCE; ISSUANCE OF CERTIFICATED CAPITAL SECURITIES
The Capital Securities will be issued in the form of one or more global
securities registered in the name of DTC or its nominee. Ownership and transfers
of beneficial interests in the Capital Securities will be shown only on records
maintained by DTC and its participants. Investors may elect to hold interests in
the global securities through either DTC (in the United States) or Cedelbank,
societe anonyme ("Cedelbank"), and Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of the Euroclear System ("Euroclear"), if they are
participants in those systems, or indirectly through organizations that are
participants in those systems. Cedelbank and Euroclear will hold interests on
behalf of their participants through customers' securities accounts in
Cedelbank's and Euroclear's names on the books of their respective depositaries.
Those depositaries in turn hold those interests in customers' securities
accounts in the depositaries' names on the books of DTC. The Chase Manhattan
Bank will act as depositary for Cedelbank and Euroclear (the "U.S. Depositary").
Except as described below and in the attached Prospectus, you will not be
entitled to receive Capital Securities certificates. See "Description of
Preferred Securities -- Global Preferred Securities" and "Book-Entry Issuance"
in the attached Prospectus.
Cedelbank has advised us that it is incorporated under the laws of
Luxembourg as a professional depositary. Cedelbank holds securities for its
participants and facilitates the clearance and settlement of securities
transactions between Cedelbank participants through electronic book-entry
changes in accounts of Cedelbank participants, thereby eliminating the need for
physical movement of certificates. Cedelbank provides to Cedelbank participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Cedelbank interfaces with domestic markets in several countries. As a
professional depositary, Cedelbank is subject to regulation by the Luxembourg
Monetary Institute. Cedelbank participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations and may
include the underwriters for this offering. Indirect access to Cedelbank is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Cedelbank participant
either directly or indirectly.
Distributions with respect to interests in Capital Securities held
beneficially through Cedelbank will be credited to cash accounts of Cedelbank
participants in accordance with its rules and procedures, to the extent received
by the U.S. Depositary.
Euroclear has advised us that it was created in 1968 to hold securities for
participants of Euroclear and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash. Euroclear
includes various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries. Euroclear is operated by
the Brussels, Belgium office of Morgan Guaranty Trust Company of New York (the
"Euroclear Operator"), under contract with Euroclear Clearance Systems S.C., a
Belgian cooperative corporation (the "Cooperative"). The Euroclear Operator
conducts all Euroclear operations and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Cooperative establishes policy for Euroclear on behalf
of Euroclear participants. Euroclear participants include banks (including
central banks), securities brokers and dealers and other professional financial
intermediaries and may include the underwriters for this offering. Indirect
access to Euroclear is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Federal Reserve and the New York State Banking
Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of
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the Euroclear System, and applicable Belgian law (collectively, the "Terms and
Conditions"). The Terms and Conditions govern transfers of securities and cash
within Euroclear, withdrawals of securities and cash from Euroclear, and
receipts of payments with respect to securities in Euroclear. The Euroclear
Operator holds all securities in Euroclear on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
Distributions with respect to interests in Capital Securities held
beneficially through Euroclear will be credited to the cash accounts of
Euroclear participants in accordance with the Terms and Conditions, to the
extent received by the U.S. Depositary.
A global security will be exchangeable for Capital Securities registered in
the names of persons other than DTC or its nominee only if:
- DTC notifies the Issuer that it is unwilling or unable to continue as
depositary or DTC ceases to be a clearing agency registered as legally
required and no successor depositary is appointed;
- The Issuer elects to exchange the global securities for certificated
Capital Securities; or
- An event of default with respect to the Subordinated Debentures occurs
and is continuing.
Any global security that is exchangeable as described above will be
exchangeable for definitive certificates registered in the names directed by
DTC. Any Capital Securities in certificated form will be in denominations of $25
and integral multiples of $25 in excess of $25.
If the Capital Securities are issued in certificated form, the record dates
for payment of distributions will be the 15th day of the month in which the
relevant distribution date occurs. If the Capital Securities are issued in
certificated form, distributions on the Capital Securities will be paid,
transfers and exchanges of Capital Securities will be registered, and
Subordinated Debentures will be distributed in exchange for Capital Securities,
at the corporate office of the Property Trustee in New York, New York, or at the
offices of any paying agent or transfer agent appointed by the Administrative
Trustees. However, payment of any distribution on the Capital Securities may be
made at the option of the Administrative Trustees by check or by wire transfer.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for the Capital Securities will be made in immediately
available funds. DTC participants will conduct secondary market trading with
other DTC participants in the ordinary way in accordance with DTC's rules, and
those secondary market trades will settle in immediately available funds.
Cedelbank and/or Euroclear participants will conduct secondary market trading
with other Cedelbank and/or Euroclear participants in the ordinary way in
accordance with the applicable rules and operating procedures of Cedelbank and
Euroclear, and those secondary market trades will settle in immediately
available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC on the one hand, and directly or indirectly through Cedelbank or
Euroclear participants, on the other, will be effected in DTC in accordance with
DTC's rules on behalf of the relevant European international clearing system by
the U.S. Depositary; however, those cross-market transactions will require
delivery of instructions to the relevant European international clearing system
by the counterparty in that system in accordance with its rules and procedures
and within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to the U.S. Depositary to take action to
effect final settlement on its behalf by delivering or receiving Capital
Securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedelbank
participants and Euroclear participants may not deliver instructions directly to
DTC.
Because of time-zone differences, credits of Capital Securities received in
Cedelbank or Euroclear as a result of a transaction with a DTC participant will
be made during subsequent securities settlement processing and will be credited
the
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business day following the DTC settlement date. Those credits or any
transactions in Capital Securities settled during that processing will be
reported to the relevant Euroclear or Cedelbank participants on that business
day. Cash received in Cedelbank or Euroclear as a result of sales of Capital
Securities by or through a Cedelbank participant or a Euroclear participant to a
DTC participant will be received with value on the DTC settlement date but will
be available in the relevant Cedelbank or Euroclear cash account only as of the
business day following settlement in DTC.
Although DTC, Cedelbank and Euroclear have agreed to the above procedures
in order to facilitate transfers of Capital Securities among participants of
DTC, Cedelbank and Euroclear, they are under no obligation to perform or
continue to perform those procedures and those procedures may be discontinued at
any time.
SUMMARY OF TERMS OF SUBORDINATED DEBENTURES
We have summarized below certain terms of the Subordinated Debentures. This
summary supplements the general description of the Junior Subordinated
Debentures contained in the attached Prospectus. Any information regarding the
Subordinated Debentures contained in this Prospectus Supplement that is
inconsistent with information in the Prospectus will apply and will supersede
the inconsistent information in the Prospectus.
This summary is not complete. You should refer to the Indenture, which has
been filed as an exhibit to the Registration Statement. We anticipate that until
the liquidation, if any, of the Issuer, each Subordinated Debenture will be held
by the Property Trustee in trust for the benefit of the holders of the Capital
Securities and the Common Securities.
The Subordinated Debentures will be a series of "Corresponding Junior
Subordinated Debentures" under the Indenture, as described in the attached
Prospectus. They will be unsecured and junior in right of payment to all of
Chase's Senior Debt, as described under "Description of Junior Subordinated
Debentures -- Subordination" in the attached Prospectus.
INTEREST RATE AND MATURITY
The Subordinated Debentures will bear interest at the annual rate of 7.00%
of their principal amount. Interest will be payable quarterly in arrears on
January 31, April 30, July 31 and October 31 of each year, beginning July 31,
1999, and at maturity.
The amount of interest payable for any interest period will be computed on
the basis of a 360-day year of twelve 30-day months. An interest period for the
Subordinated Notes will be (1) the period beginning on and including May 28,
1999 and ending on but excluding the first interest payment date and (2) each
subsequent period beginning on and including an interest payment date and ending
on but excluding the next interest payment date. In the event that any interest
payment date would fall on a day that is not a Business Day, that interest
payment date will be postponed until the next day that is a Business Day and no
interest or other payment will accrue as a result of that postponement. However,
if the postponement would cause the interest payment date to fall in the next
calendar year, the interest payment date will instead be brought forward to the
preceding Business Day.
To the extent permitted by law, accrued interest that is not paid on the
applicable interest payment date will bear additional interest from that date on
the unpaid amount at the annual rate of 7.00%, compounded quarterly. References
to "interest" in this Prospectus Supplement and the attached Prospectus include
quarterly interest payments and interest on unpaid amounts.
The Subordinated Debentures will mature on May 15, 2029. If the maturity
date of the Subordinated Debentures falls on a day that is not a Business Day,
the amount due at maturity will be paid on the following Business Day, and no
interest on that amount will accrue after the stated maturity date.
OPTION TO DEFER INTEREST PAYMENTS
Chase may elect at one or more times to defer payment of interest on the
Subordinated Debentures for up to 20 consecutive quarterly periods if the
Subordinated Debentures are not in default. However, no deferral period may
extend beyond the stated maturity date of the Subordinated Debentures.
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During each deferral period, interest will continue to accrue on the
Subordinated Debentures, and, to the extent permitted by law, additional
interest will accrue on the unpaid interest at the annual rate of 7.00%,
compounded quarterly. At the end of each deferral period, or, if earlier, upon
redemption of the Subordinated Debentures, Chase will pay all accrued and unpaid
interest on the Subordinated Debentures.
Chase at any time may pay all or any portion of the interest accrued to
that point during a deferral period.
Once Chase pays all accrued and unpaid interest on the Subordinated
Debentures, it can again defer interest payments on the Subordinated Debentures
as described above.
During any deferral period, neither Chase nor its subsidiaries will be
permitted to:
- declare or pay any dividends or distributions on any of Chase's capital
stock;
- redeem, purchase, acquire or make a liquidation payment on any of Chase's
capital stock;
- repay, repurchase or redeem, or make any principal, interest or premium
payment on, any of Chase's debt securities that have the same rank as or
rank junior to the Subordinated Debentures (including other series of
Junior Subordinated Debentures); or
- make any guarantee payment with respect to debt securities of any of
Chase's subsidiaries if the guarantee has the same rank as or ranks
junior to the Subordinated Debentures.
However, the following will not be prohibited:
- dividends or distributions paid in Chase's capital stock;
- any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the redemption or repurchase of any rights
under the plan;
- payments under the Guarantee;
- purchases of Chase's common stock in connection with any of its benefit
plans for directors, officers or employees; and
- purchases of common stock related to issuances under a dividend
reinvestment and stock purchase plan or issuances as consideration in an
acquisition transaction entered into prior to the beginning of the
deferral period.
Chase must notify the Property Trustee, the Administrative Trustees, the
Debenture Trustee and, if the Property Trustee is not the sole holder of the
Subordinated Debentures, the holders of the Subordinated Debentures, of its
election to begin to defer interest payments. That notice must be given at least
one Business Day prior to the earliest of:
- the next date distributions on the Capital Securities and Common
Securities would be payable in absence of the deferral election;
- the date the Administrative Trustees are required to specify the record
date for those distributions to the applicable stock exchange or
quotation system on which the Capital Securities are then listed or
quoted or to the holders of the Subordinated Debentures; and
- one Business Day prior to that record date.
See "Description of Junior Subordinated Debentures -- Option to Defer
Interest Payments" in the attached Prospectus.
TRUST COSTS AND EXPENSES
Chase has agreed in the Indenture to pay:
- all debts and other obligations of the Issuer, other than with respect to
the Capital Securities and Common Securities;
- all costs and expenses of the Issuer, including costs and expenses
relating to the organization of the Issuer, the fees and expenses of the
Issuer Trustees and the costs and expenses relating to the operation of
the Issuer; and
- all taxes and related costs and expenses to which the Issuer might become
subject, other than United States withholding taxes.
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REDEMPTION
At one or more times on or after May 28, 2004, Chase may, at its option,
redeem some or all of the Subordinated Debentures.
In addition, Chase may, subject to certain conditions, redeem all, but not
less than all, of the Subordinated Debentures within 90 days after the
occurrence of a Tax Event or Capital Treatment Event. See "Conditional Right to
Redeem Upon a Tax Event or a Capital Treatment Event" below.
If required under applicable capital guidelines or policies, Chase will
obtain the prior approval of the Federal Reserve before effecting any
redemption.
The Issuer will use the proceeds of any redemption of the Subordinated
Debentures to redeem the Capital Securities and Common Securities. The
redemption price for any redemption of the Subordinated Debentures will be equal
to the principal amount of the Subordinated Debentures being redeemed, plus
accrued and unpaid interest on those Subordinated Debentures to the date of
redemption.
DISTRIBUTION OF SUBORDINATED DEBENTURES
As described above, the Subordinated Debentures may be distributed in
exchange for the Capital Securities upon termination and liquidation of the
Issuer, after satisfaction of the Issuer's liabilities to its creditors. See
"Summary of Terms of Capital Securities -- Optional Liquidation of Issuer and
Distribution of Subordinated Debentures to Holders" above.
If the Subordinated Debentures are distributed to the holders of Capital
Securities, we anticipate that the depositary arrangements for the Subordinated
Debentures will be substantially identical to those in effect for the Capital
Securities. See "Summary of Terms of Capital Securities -- Book-Entry Issuance;
Issuance of Certificated Capital Securities" above and "Book-Entry Issuance" in
the attached Prospectus.
If the Subordinated Debentures are distributed to the holders of Capital
Securities, Chase will use its best efforts to list the Subordinated Debentures
on the New York Stock Exchange or any other stock exchange or quotation system
on which the Capital Securities are then listed or quoted.
CONDITIONAL RIGHT TO REDEEM UPON A TAX EVENT OR CAPITAL TREATMENT EVENT
Certain Definitions
At any time within 90 days after a Tax Event or a Capital Treatment Event,
Chase will have the right to redeem all, but not less than all, of the
Subordinated Debentures at a redemption price equal to their principal amount
plus accrued and unpaid interest to the redemption date.
For purposes of the above:
A "Tax Event" means the receipt by the Issuer or Chase of an opinion of
counsel experienced in such matters to the effect that, as a result of:
- any amendment to or change in the laws or regulations of the United
States or any political subdivision or taxing authority thereof or
therein that becomes effective after the initial issuance of the Capital
Securities;
- any proposed change in those laws or regulations that is announced after
the initial issuance of the Capital Securities; or
- any official administrative decision or judicial decision or
administrative action or other official pronouncement interpreting or
applying those laws or regulations that is announced after the initial
issuance of the Capital Securities;
there is more than an insubstantial risk that:
- the Issuer is, or within 90 days of the date of that opinion will be,
subject to United States federal income tax with respect to income
received or accrued on the Subordinated Debentures;
- interest payable by Chase on the Subordinated Debentures is not, or
within 90 days of the date of that opinion, will not be, deductible by
Chase, in whole or in part, for United States federal income tax
purposes; or
- the Issuer is, or within 90 days of the date of that opinion will be,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
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"Capital Treatment Event" means the reasonable determination by Chase that,
as a result of:
- any amendment to, or change in, the laws or regulations of the United
States or any political subdivision thereof or therein that becomes
effective after the initial issuance of the Capital Securities;
- any proposed change in those laws or regulations that is announced after
the initial issuance of the Capital Securities; or
- any official administrative decision or judicial decision or
administrative action or other official pronouncement interpreting or
applying those laws or regulations that is announced after the initial
issuance of the Capital Securities;
there is more than an insubstantial risk that Chase will not be entitled to
treat an amount equal to the Liquidation Amount of the Capital Securities as
"Tier 1 Capital" (or its equivalent) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable.
GUARANTEE OF CAPITAL SECURITIES
Under the Guarantee, Chase will guarantee certain payment obligations of
the Issuer. For a description of the terms of Chase's guarantee, see
"Description of Guarantees" in the attached Prospectus. The Trust Agreement
provides that, by your acceptance of Capital Securities, you agree to the
provisions of the Guarantee and the Indenture.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, special tax counsel to Chase
and the Issuer, the following summary accurately describes the material United
States federal income tax consequences that may be relevant to the purchase,
ownership and disposition of Capital Securities. Unless otherwise stated, this
summary deals only with Capital Securities held as capital assets by United
States Persons who purchase the Capital Securities upon original issuance at
their original issue price.
As used in this summary, a "United States Person" means a person 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 of its political subdivisions;
- an estate the income of which is subject to United States federal income
taxation regardless of its source; or
- a trust that (1) is subject to the supervision of a court within the
United States and the control of one or more United States persons or (2)
has a valid election in effect under applicable United States Treasury
regulations to be treated as a United States person.
Your tax treatment may vary depending on your particular situation. This
summary does not address all the tax consequences that may be relevant to
holders who may be subject to special tax treatment, such as:
- banks;
- real estate investment trusts;
- regulated investment companies;
- insurance companies;
- dealers in securities or currencies;
- tax-exempt investors;
- persons holding Capital Securities as part of a hedging, conversion or
constructive sale transaction or a straddle; or
- foreign investors.
In addition, this summary does not include any description of the
following, either of which may be applicable to you:
- alternative minimum tax consequences; or
- the tax laws of any state, local or foreign government.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury regulations enacted under the Code and administrative and
judicial interpretations of the Code and those regulations, as of the date of
this Prospectus Supplement. All of the
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authorities on which this summary is based are subject to change at any time,
possibly on a retroactive basis.
In addition, the authorities on which this summary is based are subject to
various interpretations. The opinions of Simpson Thacher & Bartlett are not
binding on the Internal Revenue Service ("IRS") or the courts, either of which
could disagree with the explanations or conclusions contained in this summary.
No rulings have been or will be sought from the IRS with respect to the
transactions described in this Prospectus Supplement and the attached
Prospectus. Accordingly, there can be no assurance that the IRS will not
challenge the opinions expressed in this summary or that a court would not
sustain such a challenge. Nevertheless, Simpson Thacher & Bartlett has advised
us that they believe that, if challenged, the opinions expressed in this summary
would be sustained by a court with jurisdiction in a properly presented case.
YOU SHOULD CONSULT YOUR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CAPITAL SECURITIES, AS WELL AS THE CONSEQUENCES TO YOU UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS.
CLASSIFICATION OF THE ISSUER
In connection with the issuance of the Capital Securities, Simpson Thacher
& Bartlett is of the opinion that, under current law and assuming compliance
with the terms of the Trust Agreement, and based on certain facts and
assumptions contained in its opinion, the Issuer will be classified as a grantor
trust and not as an association taxable as a corporation for United States
federal income tax purposes. As a result, for United States federal income tax
purposes, you generally will be treated as owning an undivided beneficial
interest in the Subordinated Debentures and required to include in your gross
income your pro rata share of the interest income or original issue discount
that is paid or accrued on the Subordinated Debentures. See "-- Interest Income
and Original Issue Discount" below.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
Chase, the Issuer and you, by your acceptance of a beneficial ownership
interest in a Capital Security, agree to treat the Subordinated Debentures as
indebtedness for all United States tax purposes. In connection with the issuance
of the Subordinated Debentures, Simpson Thacher & Bartlett is of the opinion
that, under current law, and based on certain representations, facts and
assumptions set forth in its opinion, the Subordinated Debentures will be
classified as indebtedness for United States federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
You will generally be taxed on the stated interest on the Subordinated
Debentures as ordinary income at the time it is paid or accrued in accordance
with your regular method of tax accounting. We anticipate that the Subordinated
Debentures will not be issued with an issue price that is less than their stated
redemption price at maturity. Thus, the Subordinated Debentures will not be
subject to the special original issue discount ("OID") rules, at least upon
initial issuance.
If, however, Chase exercises its right to defer payments of interest on the
Subordinated Debentures, the Subordinated Debentures will become OID instruments
at that time. In that case, you will be subject to special OID rules described
below. Once the Subordinated Debentures become OID instruments, they will be
taxed as OID instruments for as long as they remain outstanding.
Under the OID economic accrual rules, the following occurs:
- you would accrue an amount of interest income each year that approximates
the stated interest payments called for under the terms of the
Subordinated Debentures using the constant-yield-to-maturity method of
accrual described in Section 1272 of the Code;
- the actual cash payments of interest you receive on the Subordinated
Debentures would not be reported separately as taxable income;
- any amount of OID included in your gross income, whether or not during a
deferral period, with respect to the Capital Securities will increase
your tax basis in those Capital Securities; and
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- the amount of distributions that you receive in respect of that accrued
OID will reduce your tax basis in those Capital Securities.
The Treasury regulations dealing with OID and the deferral of interest
payments have not yet been addressed in any rulings or other interpretations by
the IRS. It is possible that the IRS could assert that the Subordinated
Debentures were issued initially with OID. If the IRS were successful,
regardless of whether Chase exercises its option to defer payments of interest
on the Subordinated Debentures, you would be subject to the special OID rules
described above.
If you are a corporate holder of Capital Securities, you will not be
entitled to a dividends-received deduction with respect to any income you
recognize with respect to the Capital Securities.
DISTRIBUTION OF SUBORDINATED DEBENTURES OR CASH TO HOLDERS OF CAPITAL SECURITIES
As described under the caption "Summary of Terms of Capital
Securities -- Optional Liquidation of the Issuer and Distribution of
Subordinated Debentures to Holders" above, the Subordinated Debentures held by
the Issuer may be distributed to you in exchange for your Capital Securities
when the Issuer is liquidated. Under current law, this type of distribution
would not be taxable. Upon a distribution, you will receive your pro rata share
of the Subordinated Debentures previously held indirectly through the Issuer.
Your holding period and aggregate tax basis in the Subordinated Debentures will
equal the holding period and aggregate tax basis that you had in your Capital
Securities before the distribution.
If the Issuer is being treated as an association taxable as a corporation,
a Tax Event will occur. If Chase elects to distribute the Subordinated
Debentures to you at this time, the distribution would likely be taxable to the
Issuer and to you. Chase also has the option to redeem the Subordinated
Debentures and distribute the resulting cash in liquidation of the Issuer. This
distribution would be taxable as described below in "-- Sales of Capital
Securities". Further, in other circumstances described under "Summary of Terms
of the Subordinated Debentures -- Redemption" and "-- Conditional Right to
Redeem Upon a Tax Event or Capital Treatment Event", Chase may redeem the
Subordinated Debentures and distribute cash in liquidation of the Issuer. This
distribution of cash would also be taxable as described below in "-- Sales of
Capital Securities".
If you receive Subordinated Debentures in exchange for your Capital
Securities, you would accrue interest in respect of the Subordinated Debentures
received from the Issuer in the manner described above under "-- Interest Income
and Original Issue Discount".
SALES OF CAPITAL SECURITIES
If you sell or redeem your Capital Securities, you will recognize gain or
loss equal to the difference between:
- your amount realized on the sale or redemption; and
- your adjusted tax basis in the Capital Securities sold or redeemed.
Your gain or loss will be a capital gain or loss except to the extent any
amount realized is treated as payment of accrued but unpaid interest (other than
OID) with respect to your pro rata share of the Subordinated Debentures required
to be included in income. The gain or loss will generally be a long-term capital
gain or loss if you have held your Capital Securities for more than one year.
Long-term capital gains of individuals derived with respect to capital assets
held for more than one year are taxed a maximum rate of 20%. The deductibility
of capital losses is subject to limitations.
NON-UNITED STATES HOLDERS
The following discussion only applies to you if you are not a United States
Person. As discussed above, the Capital Securities will be treated as evidence
of an indirect beneficial ownership interest in the Subordinated Debentures. See
"-- Classification of the Issuer." As a result, under present United States
federal income tax law, and subject to the discussion below concerning backup
withholding:
(1) no withholding of United States federal income tax will be
required with respect to the payment by Chase or any paying agent of
principal or interest (which for purposes of this discussion includes any
OID) to you on the Capital Securities (or
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the Subordinated Debentures) if you meet all of the following requirements:
- you do not actually or constructively own 10% or more of the total
combined voting power of all classes of Chase's voting stock within
the meaning of Section 871(h)(3) of the Code and the regulations
under that Section;
- you are not a controlled foreign corporation related to Chase
through stock ownership;
- you are not a bank whose receipt of interest on the Subordinated
Debentures is described in Section 881(c)(3)(A) of the Code; and
- you satisfy the statement requirement, described generally below,
set forth in Section 871(h) and Section 881(c) of the Code and the
regulations under those sections; and
(2) no withholding of United States federal income tax generally will
be required with respect to any gain you realize upon the sale or other
disposition of the Capital Securities (or the Subordinated Debentures).
To satisfy the requirements referred to in (1) above, you, or a financial
institution holding the Capital Securities on your behalf, must provide to the
Issuer or its paying agent, in accordance with specified procedures, a statement
to the effect that you are not a United States Person. Currently you can meet
this requirement if one of the following is performed:
- you provide your name and address, and certify, under penalties of
perjury, that you are not a United States Person; this certification may
be made on an IRS Form W-8 or a successor form; or
- a financial institution holding the Capital Securities on your behalf
certifies, under penalties of perjury, that:
- you provided it with a statement described above; and
- the financial institution furnishes a paying agent with a copy of
the statement.
Under final Treasury regulations (the "Final Regulations"), the statement
requirement referred to in clause (1) above may also be satisfied with other
documentary evidence for interest paid after December 31, 2000 with respect to
an offshore account or through certain foreign intermediaries.
If you cannot satisfy the requirements of the "portfolio interest"
exception described in (1) above, payments of premium, if any, and interest
(including OID) made to you will be subject to a 30% United States withholding
tax unless you provide Chase or its paying agent, as the case may be, with one
of the following properly executed forms:
- IRS Form 1001 or a successor form claiming an exemption from or reduction
of withholding tax under the benefit of a tax treaty; or
- IRS Form 4224 or a successor form stating that interest paid on the
Capital Securities (or the Subordinated Debentures) is not subject to
this withholding tax because it is effectively connected with your
conduct of a trade or business in the United States.
Under the Final Regulations, you will generally be required to provide IRS
Form W-8 in lieu of IRS Form 1001 and IRS Form 4224, although alternative
documentation may be applicable in certain situations.
If you are engaged in a trade or business in the United States and interest
on the Capital Securities (or the Subordinated Debentures) is effectively
connected with the conduct of your trade or business, you will be subject to
United States federal income tax on that interest on a net income basis in the
same manner as if you were a United States Person. However, you will not be
subject to the withholding described above.
In addition, if you are a foreign corporation, you may be subject to a
branch profits tax equal to 30% (or lesser rate under an applicable tax treaty)
of your effectively-connected earnings and profits for the taxable year, subject
to adjustments. For this purpose, that interest would be included in your
earnings and profits.
You will generally not be subject to United States federal income tax on
any gain you realized upon a sale or other disposition of the Capital
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Securities (or the Subordinated Debentures ) unless:
- the gain is effectively connected with your trade or business in the
United States,
- you are an individual and are present in the United States for 183 days
or more in the taxable year of that sale, exchange or retirement, and
certain other conditions are met, or
- the gain represents accrued interest on the Subordinated Debentures and
you did not satisfy the requirements for the "portfolio interest"
exception described above.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Income on the Capital Securities held of record by United States Persons
(other than corporations and other exempt holders) will be reported annually to
those holders and to the IRS. That income will be reported to you on Form 1099,
which should be mailed to the holders of record prior to January 31 following
each calendar year.
"Backup withholding" at a rate of 31% will apply to payments of interest to
non-exempt United States Persons unless you:
- furnish your taxpayer identification number in the manner prescribed in
applicable Treasury regulations;
- certify that the number is correct;
- certify as to no loss of exemption from backup withholding; and
- meet certain other conditions.
In general, no information reporting or backup withholding will be required
with respect to payments made by the Issuer to non-United States Persons if a
statement described in (1) under "Non-United States Holders" has been received
and the payor does not have actual knowledge that you are a United States
Person.
In addition, backup withholding may apply to the payment of proceeds from
the disposition of Capital Securities (or Subordinated Debentures) within the
United States or conducted through certain United States-related financial
intermediaries unless the statement described in (1) under "Non-United States
Holders" has been received and the payor does not have actual knowledge that
your are a United States Person or you otherwise establish an exemption.
Any amounts withheld from you under the backup withholding rules generally
will be allowed as a refund or a credit against your United States federal
income tax liability, provided that the required information is furnished to the
IRS.
ERISA CONSIDERATIONS
Each fiduciary of any of the following, which we collectively refer to as
"Plans":
- an employee benefit plan subject to Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"),
- a plan described in Section 4975 of the Code, including an individual
retirement arrangement or a Keogh plan, and
- any entity whose underlying assets include "plan assets" by reason of any
such plan's investment in that entity,
should consider the fiduciary standards of ERISA in the context of the Plan's
particular circumstances before authorizing an investment in the Capital
Securities. Among other factors, the fiduciary should consider whether the
investment would satisfy the prudence and diversification requirements of ERISA
and would be consistent with the documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans from
engaging in certain transactions involving "plan assets" with persons who are
"parties in interest" under ERISA or "disqualified persons" under the Code
(collectively, "Parties in Interest"). A violation of these "prohibited
transaction" rules may result in an excise tax, penalty or other liability under
ERISA and/or Section 4975 of the Code, unless exemptive relief is available
under an applicable statutory or administrative exemption. In the case of an
individual retirement account, the occurrence of a prohibited transaction
involving the individual who established the individual retirement account, or
his or her beneficiaries, would cause the individual retirement account to lose
its tax exempt status, unless exemptive relief is available. Employee benefit
plans that are governmental plans, as defined in Section 3(32) of ERISA, certain
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<PAGE> 24
church plans, as defined in Section 3(33) of ERISA, and foreign plans, as
described in Section 4(b)(4) of ERISA, are not subject to the requirements of
ERISA or Section 4975 of the Code; however, governmental plans may be subject to
similar provisions under applicable state laws.
Under a regulation issued by the U.S. Department of Labor (the "DOL"),
which we refer to as the "Plan Assets Regulation", the assets of the Issuer
would be deemed to be "plan assets" of a Plan for purposes of ERISA and Section
4975 of the Code if "plan assets" of the Plan were used to acquire an equity
interest in the Issuer and no exception were applicable under the Plan Assets
Regulation. The Plan Assets Regulation defines an "equity interest" as any
interest in an entity, other than an instrument that is treated as indebtedness
under applicable local law and has no substantial equity features, and
specifically includes a beneficial interest in a trust.
Under an exception contained in the Plan Assets Regulation, the assets of
the Issuer would not be deemed to be "plan assets" of investing Plans if:
- immediately after the most recent acquisition of an equity interest in
the Issuer, less than 25% of the value of each class of equity interests
in the Issuer were held by "Benefit Plan Investors", which we define as
Plans, other employee benefit plans not subject to ERISA or Section 4975
of the Code (such as governmental, church and foreign plans), and
entities holding assets deemed to be "plan assets"; or
- the Capital Securities were "publicly-offered securities" for purposes of
the Plan Assets Regulation.
No assurance can be given that Benefit Plan Investors will hold less than
25% of the total value of the Capital Securities at the completion of the
initial offering or thereafter, and we do not intend to monitor or take any
other measures to assure satisfaction of the conditions to this exception. In
addition, no assurance can be given that the Capital Securities would be
considered to be publicly-offered securities under the Plan Assets Regulation.
Certain transactions involving the Issuer could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the Capital Securities were acquired with "plan
assets" of the Plan and the assets of the Issuer were deemed to be "plan assets"
of Plans investing in the Issuer. For example, if Chase were a Party in Interest
with respect to a Plan (either directly or by reason of its ownership of the
Bank or other subsidiaries), extensions of credit between Chase and the Issuer
(including the Subordinated Debentures and the Guarantee) would likely be
prohibited by Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the
Code, unless exemptive relief were available under an applicable administrative
exemption (see below). In addition, if Chase were considered to be a fiduciary
with respect to the Issuer as a result of certain powers it holds (such as its
powers to remove and replace the Property Trustee and the Administrative
Trustees), it is possible that the optional redemption or acceleration of the
Subordinated Debentures would be considered to be a prohibited transaction under
Section 406(b) of ERISA and Section 4975(c)(1)(E) of the Code. In order to avoid
these prohibited transactions, each Benefit Plan Investor, by purchasing Capital
Securities, will be deemed to have directed the Issuer to invest in the
Subordinated Debentures and to have appointed the Property Trustee.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief for direct or indirect prohibited transactions
that may arise from the purchase or holding of the Capital Securities if assets
of the Issuer were deemed to be "plan assets" of Plans investing in the Issuer
as described above. Those class exemptions are:
- PTCE 96-23 (for certain transactions determined by in-house asset
managers);
- PTCE 95-60 (for certain transactions involving insurance company general
accounts);
- PTCE 91-38 (for certain transactions involving bank collective investment
funds);
- PTCE 90-1 (for certain transactions involving insurance company separate
accounts); and
- PTCE 84-14 (for certain transactions determined by independent qualified
asset managers).
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Because the Capital Securities may be deemed to be equity interests in the
Issuer for purposes of applying ERISA and Section 4975 of the Code, the Capital
Securities may not be purchased or held by any Plan, any entity whose underlying
assets include "plan assets" by reason of any Plan's investment in the entity (a
"Plan Asset Entity") or any person investing "plan assets" of any Plan, unless
the purchaser or holder is eligible for the exemptive relief available under
PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption.
By purchasing or holding Capital Securities or any interest in them you
will be deemed to have represented that either:
- you are not a Plan or a Plan Asset Entity and are not purchasing the
securities on behalf of or with "plan assets" of any Plan; or
- you are eligible for the exemptive relief available under PTCE 96-23,
95-60, 91-38, 90-1 or 84-14 or another applicable exemption.
If a purchaser or holder of the Capital Securities that is a Plan or a Plan
Asset Entity elects to rely on an exemption other than PTCE 96-23, 95-60, 91-38,
90-1 or 84-14, Chase and the Issuer may require a satisfactory opinion of
counsel or other evidence of the availability of that exemption.
Due to the complexity of the above rules and the penalties that may be
imposed upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries or other persons considering purchasing
the Capital Securities on behalf of or with "plan assets" of any Plan consult
with their counsel regarding the potential consequences if the assets of the
Issuer were deemed to be "plan assets" and regarding the availability of
exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or any other
applicable exemption.
UNDERWRITING
Chase, the Issuer and the underwriters named below (the "Underwriters")
have entered into an underwriting agreement relating to the offer and sale of
the Capital Securities (the "Underwriting Agreement"). In the Underwriting
Agreement, the Issuer has agreed to sell to each Underwriter, and each
Underwriter has agreed to purchase from the Issuer, the number of Capital
Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
NAME CAPITAL SECURITIES
- ---- ------------------
<S> <C>
Chase Securities Inc. ...................................... 1,660,000
Salomon Smith Barney Inc. .................................. 1,660,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 1,650,000
Morgan Stanley & Co. Incorporated........................... 1,650,000
PaineWebber Incorporated.................................... 1,650,000
Prudential Securities Incorporated.......................... 1,650,000
Bear, Stearns & Co. Inc..................................... 585,000
Goldman, Sachs & Co. ....................................... 585,000
Lehman Brothers Inc. ....................................... 585,000
ABN Amro Incorporated....................................... 87,500
A.G. Edwards & Sons, Inc. .................................. 87,500
BBV Securities, Inc......................................... 87,500
BT Alex. Brown Incorporated................................. 87,500
CIBC Oppenheimer Corp. ..................................... 87,500
Dain Rauscher Incorporated.................................. 87,500
Donaldson, Lufkin & Jenrette Securities Corporation......... 87,500
EVEREN Securities, Inc...................................... 87,500
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF
NAME CAPITAL SECURITIES
- ---- ------------------
<S> <C>
Fidelity Capital Markets, a Division of National Financial Services Corporation . 87,500
J.C. Bradford & Co. ........................................ 87,500
McDonald Investments Inc., a Keycorp Company................ 87,500
U.S. Bancorp Piper Jaffray Inc. ............................ 87,500
Raymond James & Associates, Inc. ........................... 87,500
Robert W. Baird & Co. Incorporated.......................... 87,500
The Robinson-Humphrey Company, LLC.......................... 87,500
Warburg Dillon Read LLC..................................... 87,500
SG Cowen Securities Corporation............................. 87,500
First Union Capital Markets Corp. .......................... 87,500
BB&T Investment Services, Inc., a Division of Scott &
Stringfellow.............................................. 30,000
Davenport & Company LLC..................................... 30,000
Doley Securities, Inc. ..................................... 30,000
Fahnestock & Co. Inc. ...................................... 30,000
Fifth Third Securities, Inc. ............................... 30,000
First Albany Corporation.................................... 30,000
Gibraltar Securities Co. ................................... 30,000
Gruntal & Co., L.L.C. ...................................... 30,000
Wachovia Securities, Inc. .................................. 30,000
J.J.B. Hilliard, W.L. Lyons, Inc. .......................... 30,000
Janney Montgomery Scott Inc. ............................... 30,000
Legg Mason Wood Walker, Incorporated........................ 30,000
McGinn, Smith & Co., Inc. .................................. 30,000
Mesirow Financial, Inc. .................................... 30,000
Morgan Keegan & Company, Inc. .............................. 30,000
Olde Discount Corporation................................... 30,000
Roney Capital Markets, a Division of First Chicago.......... 30,000
Charles Schwab & Co., Inc. ................................. 30,000
Stephens Inc. .............................................. 30,000
Stifel, Nicolaus & Company, Incorporated.................... 30,000
Sutro & Co. Incorporated.................................... 30,000
TD Securities (USA) Inc. ................................... 30,000
Tucker Anthony Incorporated................................. 30,000
Utendahl Capital Partners, L.P. ............................ 30,000
Wedbush Morgan Securities................................... 30,000
------------
Total............................................. 14,000,000
</TABLE>
The obligations of the Underwriters under the Underwriting Agreement,
including their agreement to purchase the Capital Securities from the Issuer,
are several and not joint. Those obligations are also subject to the
satisfaction of certain conditions in the Underwriting Agreement. The
Underwriters have agreed to purchase all of the Capital Securities if any are
purchased.
The Underwriters have advised us that they propose to offer the Capital
Securities to the public at the public offering price that appears on the cover
page of this Prospectus Supplement. The Underwriters may offer the Capital
Securities to selected dealers at the public offering price minus a selling
concession of up to $0.50 per Capital Security. In addition, the Underwriters
may allow, and those selected dealers may reallow, a selling concession of up to
$0.35 per Capital Security to certain other dealers. After the initial public
offering, the Underwriters may change the public offering price and any other
selling terms.
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<PAGE> 27
In view of the fact that the Issuer is using the proceeds from the sale of
the Capital Securities to purchase the Subordinated Debentures, Chase has agreed
that:
- Chase will pay the Underwriters compensation for their arrangement of
that investment in an amount equal to $0.7875 per Capital Security; and
- Chase will pay the expenses of Chase and the Issuer related to this
offering, which Chase estimates will be $100,000.
In addition, Chase and the Issuer have agreed:
- to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933; and
- that until the closing of the sale of the Capital Securities, Chase will
not, without the consent of the Underwriters, offer or sell any
securities of the Issuer or Chase that are substantially similar to the
Capital Securities.
The Capital Securities are a new issue of securities, and there is
currently no established trading market for the Capital Securities. The Capital
Securities have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance. We expect trading of the Capital
Securities on the New York Stock Exchange to begin within a 30-day period after
the initial issuance of the Capital Securities. The Underwriters have advised us
that they intend to make a market in the Capital Securities prior to the date
trading on the New York Stock Exchange begins. However, they are not obligated
to do so and may discontinue any market making in the Capital Securities at any
time in their sole discretion. Therefore, we cannot assure you as to the
liquidity of the trading markets for the Capital Securities.
In order to meet one of the requirements for listing the Capital Securities
on the New York Stock Exchange, the Underwriters have undertaken to sell lots of
100 or more of the Capital Securities to a minimum of 400 beneficial holders.
Chase's affiliates, including CSI, may use this Prospectus Supplement and
the attached Prospectus in connection with offers and sales of the Capital
Securities in the secondary market. These affiliates may act as principal or
agent in those transactions. Secondary market sales will be made at prices
related to prevailing market prices at the time of sale.
In connection with this offering, CSI, on behalf of the Underwriters, may
engage in overallotment, stabilizing transactions, syndicate covering
transactions and penalty bids in accordance with Regulation M under the
Securities Exchange Act of 1934 (the "Exchange Act"). Overallotment involves
sales in excess of the offering size, which create a short position for the
Underwriters. Stabilizing transactions involve bids to purchase the Capital
Securities in the open market for the purpose of pegging, fixing or maintaining
the price of the Capital Securities. Syndicate covering transactions involve
purchases of the Capital Securities in the open market after the distribution
has been completed in order to cover syndicate short positions. Penalty bids
permit the managing underwriter to reclaim a selling concession from a syndicate
member when the Capital Securities originally sold by that syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. Stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the Capital Securities to be higher than it would
otherwise be in the absence of those transactions. If CSI engages in
stabilizing, syndicate covering transactions or penalty bids it may discontinue
them at any time.
Certain of the Underwriters engage in transactions with and perform
services for Chase and its affiliates in the ordinary course of business.
The Issuer will deliver the Capital Securities to the Underwriters at the
closing of this offering when the Underwriters pay the Issuer the purchase price
of the Capital Securities. The Underwriting Agreement provides that the closing
will occur on May 28, 1999, which is five business days after the date of this
Prospectus Supplement. Rule 15c6-1 under the Exchange Act generally requires
that securities trades in the secondary market settle in three business days,
unless the parties to a trade expressly agree otherwise.
VALIDITY OF SECURITIES
Richards, Layton & Finger, special Delaware counsel to Chase and the
Issuer, will opine on certain matters of Delaware law relating to the
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<PAGE> 28
validity of the Capital Securities, the enforceability of the Trust Agreement
and the formation of the Issuer. Simpson Thacher & Bartlett, New York, New York,
will opine on the validity of the Guarantee and the Subordinated Debentures for
Chase, and Cravath, Swaine & Moore, New York, New York, will opine on those
matters for the Underwriters. Simpson Thacher & Bartlett and Cravath, Swaine &
Moore will rely on the opinion of Richards, Layton & Finger as to matters of
Delaware law. Cravath, Swaine & Moore has represented and continues to represent
Chase and its subsidiaries in a substantial number of matters on a regular
basis. Simpson Thacher & Bartlett, as tax counsel, will opine on certain matters
relating to the United States federal income tax considerations described in
this Prospectus Supplement.
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[CHASE LOGO]
