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Filed Pursuant to Rule 424(b)(2)
Registration No. 333-90457
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 21, 1999.
$350,000,000
NATIONAL CONSUMER COOPERATIVE BANK
1401 Eye Street, N.W., Suite 700
Washington, D.C. 20005
(202) 336-7700
Medium-Term Senior Notes, Series B
Medium-Term Subordinated Notes, Series B
Due Nine Months or more from Date of Issue
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NCB may offer from time to time up to $350,000,000 of our Medium-Term
Senior Notes, Series B or Medium-Term Subordinated Notes, Series B. Each Note
will mature on a date nine months or more from its date of original issuance.
Unless otherwise indicated in the applicable Pricing Supplement to this
Prospectus Supplement, interest on Fixed Rate Notes will be payable on each May
1 and November 1 and at maturity. Interest on Floating Rate Notes will be
payable on the dates specified in the applicable Pricing Supplement. Notes may
be subject to optional redemption or may obligate NCB to repay at the option of
the holder. Generally, there will not be a sinking fund. The specific terms of
each Note will be established by NCB and will be described in a Pricing
Supplement.
The Notes are being offered on a continuing basis by NCB through the
Agents. Each Agent has agreed to use reasonable efforts to solicit offers to
purchase the Notes. The Notes will not be listed on any securities exchange. You
cannot be assured that the Notes offered by this Prospectus Supplement will be
sold or that there will be a secondary market for the Notes.
<TABLE>
<CAPTION>
AGENTS'
PRICE TO COMMISSIONS OR PROCEEDS
PUBLIC DISCOUNTS(1) TO NCB
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Per Note............. 100% .125% - .875% 99.875% - 99.125%
Total(2)............. $350,000,000 $437,500 - $3,062,500 $349,562,500 - $346,937,500
</TABLE>
(1) Commissions or discounts with respect to Notes with a Stated Maturity more
than thirty years from date of issue will be negotiated at the time of sale.
(2) Or the equivalent in other currencies or currency units.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
These Notes are not guaranteed by the United States and will not constitute
a debt or obligation of the United States or any agency or instrumentality
thereof.
CREDIT SUISSE FIRST BOSTON
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
SPP CAPITAL PARTNERS
The date of this Prospectus Supplement is January 7, 2000.
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TABLE OF CONTENTS
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PAGE
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PROSPECTUS SUPPLEMENT
ABOUT THIS PROSPECTUS SUPPLEMENT;
PRICING SUPPLEMENTS................. S-3
RISK FACTORS.......................... S-3
DESCRIPTION OF THE NOTES.............. S-4
UNITED STATES TAXATION................ S-22
SUPPLEMENTAL PLAN OF DISTRIBUTION OF
THE NOTES........................... S-30
VALIDITY OF THE NOTES................. S-31
GLOSSARY.............................. S-31
PROSPECTUS
SUMMARY............................... 3
NATIONAL CONSUMER COOPERATIVE BANK.... 6
GENERAL............................. 6
LOAN REQUIREMENTS, RESTRICTIONS AND
POLICIES......................... 6
LENDING LIMITS...................... 7
INTEREST RATES...................... 7
COMPETITION......................... 10
TAXES............................... 10
CLASS A NOTES....................... 10
PROPERTIES.......................... 12
REGULATION.......................... 12
SELECTED CONSOLIDATED FINANCIAL DATA
OF NCB.............................. 13
USE OF PROCEEDS....................... 14
DESCRIPTION OF DEBT SECURITIES........ 14
GENERAL............................. 14
DENOMINATIONS....................... 16
SUBORDINATION....................... 16
CONSOLIDATION, MERGER OR SALE....... 18
MODIFICATION OF INDENTURES.......... 18
EVENTS OF DEFAULT................... 18
</TABLE>
<TABLE>
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<S> <C>
COVENANTS........................... 19
PAYMENT AND TRANSFER................ 19
GLOBAL SECURITIES................... 20
DEFEASANCE.......................... 20
THE TRUSTEE......................... 20
DESCRIPTION OF PREFERRED STOCK........ 20
GENERAL............................. 21
RANK................................ 21
DIVIDENDS........................... 21
CONVERSION OR EXCHANGE.............. 22
REDEMPTION.......................... 23
LIQUIDATION PREFERENCE.............. 23
VOTING RIGHTS....................... 24
DESCRIPTION OF CAPITAL STOCK.......... 24
AUTHORIZED CAPITAL.................. 24
OUTSTANDING CLASS B COMMON STOCK.... 24
OUTSTANDING CLASS C COMMON STOCK.... 25
OUTSTANDING CLASS D COMMON STOCK.... 25
VOTING RIGHTS....................... 25
TRADING MARKET...................... 26
PATRONAGE REFUNDS................... 26
PLAN OF DISTRIBUTION.................. 27
BY AGENTS........................... 27
BY UNDERWRITERS..................... 27
DIRECT SALES........................ 28
GENERAL INFORMATION................. 28
WHERE YOU CAN FIND MORE INFORMATION... 28
LEGAL OPINIONS........................ 29
EXPERTS............................... 29
</TABLE>
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
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ABOUT THIS PROSPECTUS SUPPLEMENT;
PRICING SUPPLEMENTS
We may use this Prospectus Supplement, together with the attached
Prospectus and an attached Pricing Supplement, to offer our Medium-Term Senior
Notes, Series B and our Medium-Term Subordinated Notes, Series B, from time to
time. The total initial public offering price of Notes that may be offered by
use of this Prospectus Supplement is $350,000,000 (or the equivalent in foreign
currencies). That amount will be reduced by the amount of any securities issued
under our shelf registration statement (File No. 333-90457) (the "Registration
Statement").
This Prospectus Supplement sets forth certain terms of the Notes that we
may offer. It supplements the description of the Debt Securities contained in
the attached Prospectus. If information in this Prospectus Supplement is
inconsistent with the Prospectus, this Prospectus Supplement will apply and will
supersede that information in the Prospectus.
Each time we issue Notes, we will attach a Pricing Supplement to this
Prospectus Supplement. The Pricing Supplement will contain the specific
description of the Notes being offered and the terms of the offering. The
Pricing Supplement may also add, update or change information in this Prospectus
Supplement or the attached Prospectus. Any information in the Pricing
Supplement, including any changes in the method of calculating interest on any
Note, that is inconsistent with this Prospectus Supplement will apply and will
supersede that information in this Prospectus Supplement.
It is important for you to read and consider all of the information
contained in this Prospectus Supplement and the attached Prospectus and Pricing
Supplement in making your investment decision. You should also read and consider
the information in the documents we have referred you to in "Where You Can Find
More Information" on page 28 of the attached Prospectus.
RISK FACTORS
FOREIGN CURRENCY NOTES
This Prospectus Supplement, the accompanying Prospectus and any Pricing
Supplement do not describe all risks of an investment in Foreign Currency Notes
that result from Foreign Currency Notes being denominated in a foreign currency.
Any additional important foreign currency risks pertaining to a particular
series of Foreign Currency Notes will be included in the Pricing Supplement
regarding those Notes. You should consult your own financial and legal advisors
as to the risks of an investment in Foreign Currency Notes and as to any matters
that may affect the purchase or holding of a Foreign Currency Note or the
receipt of payments of principal of and any premium and interest on a Foreign
Currency Note. Due to the risks associated with an investment in debt securities
denominated in a foreign currency, including, but not limited to, the risk that
depreciation in the payment currency will result in a decrease in the U.S.
dollar equivalent of the value of the debt security, Foreign Currency Notes are
not an appropriate investment for investors who are unsophisticated with respect
to transactions in foreign currencies.
Specific information pertaining to the foreign currency in which a
particular Foreign Currency Note is denominated, including historical exchange
rates and a description of the currency and any exchange controls, will be
described in the applicable Pricing Supplement. The information contained in the
applicable Pricing Supplement will be furnished as a matter of information only
and you should not assume that the information is indicative of the range of, or
trends in, fluctuations in currency exchange rates that may occur in the future.
INDEXED NOTES
This Prospectus Supplement, the accompanying Prospectus and any Pricing
Supplement do not describe all risks of an investment in Indexed Notes,
including risks which may be associated with economic, financial or political
events over which neither NCB nor the Agents have any control.
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An investment in Notes indexed, as to principal (and premium, if any) or
interest, to one or more values of currencies (including exchange rates between
currencies), commodities or interest rate indices entails significant risks that
are not associated with investments in a conventional fixed-rate debt security.
For example, Indexed Notes that are indexed as to interest by reference to the
rate, value or price of one or more specified indices may bear interest at a
rate lower than the prevailing market interest rate for fixed-rate debt
securities or may not bear interest at all, and the principal (and premium, if
any) payable at Maturity with respect to Indexed Notes that are indexed with
respect to principal (and premium, if any) may be less than the face amount or
initial purchase price of the Notes or may be zero. Special considerations
independent of the creditworthiness of NCB and the value of the applicable
currency, commodity or interest rate index, including economic, financial and
political events over which NCB has no control also may affect the secondary
market for Indexed Notes. Additionally, if the formula used to determine the
amount of principal (and premium, if any) or any interest payable with respect
to these Notes contains a multiple or leverage factor, the effect of any change
in the applicable currency, commodity or interest rate index will be increased.
You should not take the historical experience of the relevant currencies,
commodities or interest rate indices as an indication of future performance of
these currencies, commodities or interest rate indices during the term of any
Note. Any credit ratings assigned to NCB's medium-term note program are a
reflection of NCB's credit status and in no way are a reflection of the
potential impact of the factors discussed above, or any other factors, on the
market value of the Notes. You should consult your own financial and legal
advisors as to the risks entailed in an investment in Indexed Notes, the
suitability of an investment in Indexed Notes in light of your particular
circumstances, and all other matters that may affect the purchase or holding of
an Indexed Note.
DESCRIPTION OF THE NOTES
GENERAL
The Medium-Term Senior Notes, Series B will be issued as a series of senior
debt securities under a senior indenture, dated as of January 15, 1997 (the
"Senior Indenture"), between NCB and Bank One Trust Company, N.A. ("Bank One")
(as successor trustee to The First National Bank of Chicago), as the Senior
Trustee. The Medium-Term Subordinated Notes, Series B will be issued as a series
of subordinated debt securities under a subordinated indenture, dated as of
January 7, 1999 (the "Subordinated Indenture"), between NCB and Bank One, as the
Subordinated Trustee. The Senior Indenture and the Subordinated Indenture are
collectively referred to as the Indentures and are individually referred to as
an Indenture and the Senior Trustee and the Subordinated Trustee are
individually referred to as a Trustee. Each of the Medium-Term Senior Notes,
Series B and Medium-Term Subordinated Notes, Series B (together, the "Notes")
constitute a single series for purposes of each Indenture, limited to an
aggregate principal amount not to exceed $350,000,000 (or, if any Notes are to
be Original Issue Discount Notes, Foreign Currency Notes or Indexed Notes, the
principal amount as shall result in an aggregate initial offering price
equivalent to no more than $350,000,000). The foregoing limit may be increased
by NCB if in the future it determines that it may wish to sell additional Notes.
The aggregate principal amount of Notes offered hereby may be reduced by an
amount equal to the aggregate initial offering price of any other debt
securities or preferred stock sold by NCB pursuant to the accompanying
prospectus. For a description of the rights attaching to the Notes as well as to
different series of debt securities under the Indentures, see "Description of
Debt Securities" in the Prospectus.
The Stated Maturity of each Note will be any day nine months or more from
its issue date, as selected by the initial purchaser and agreed to by NCB. The
applicable Pricing Supplement will also indicate whether a Note is subject to an
optional extension beyond its Stated Maturity as described under "-- Extension
of Maturity" and "-- Renewable Notes" below.
The Notes will be issuable only in fully registered form and, unless
otherwise indicated in the applicable Pricing Supplement, only in denominations
of $1,000 and integral multiples of $1,000 or, in the case of Foreign Currency
Notes, in a minimum denomination not less than the equivalent of $1,000 and
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other denomination or denominations in excess of $1,000 as will be set forth in
the applicable Pricing Supplement. See "-- Foreign Currency Notes" below.
Unless specified otherwise in the applicable Pricing Supplement, Notes will
initially be represented by a Book-Entry Note. See "-- Book-Entry Notes" below.
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of and any premium
and interest on the Notes will be made in U.S. dollars in the manner indicated
in the accompanying Prospectus and this Prospectus Supplement. If any of the
Notes are to be denominated in one or more currencies or currency units other
than U.S. dollars, additional information pertaining to the terms of those Notes
and other matters relevant to the holders of Foreign Currency Notes will be
described in the applicable Pricing Supplement. See "-- Foreign Currency Notes"
below and "Risk Factors -- Foreign Currency Notes" and "-- Indexed Notes".
In addition, Notes may be issued as Original Issue Discount Notes
(including Zero Coupon Notes), as Indexed Notes or as Amortizing Notes. See
"-- Original Issue Discount Notes", "-- Indexed Notes" and "-- Amortizing Notes"
below.
Payments of principal of, and any premium and interest on, Book-Entry Notes
(except Zero Coupon Notes) will be made to the Depositary, or its nominee, as
the holder of the Book-Entry Note, in accordance with arrangements then in
effect between the Trustee and the Depositary. Unless otherwise indicated in an
applicable Pricing Supplement, payments of principal of, and any premium and
interest on, certificated Notes denominated and payable in U.S. dollars will be
made in immediately available funds at the Corporate Trust Office of the Trustee
in the Borough of Manhattan, The City of New York, provided that the Note is
presented to the paying agent in time for the paying agent to make these
payments in funds in accordance with its normal procedures. Unless specified
otherwise in the applicable Pricing Supplement, the Trustee will act as the
paying agent in respect of the Notes. With respect to payments on Foreign
Currency Notes, see "-- Foreign Currency Notes" below.
Certificated Notes may be presented for registration of transfer or
exchange at the Corporate Trust Office of the Trustee in the Borough of
Manhattan, The City of New York. No service charge will be made for any
registration of transfer or exchange of certificated Notes, but NCB may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. With respect to registration of transfer
and exchange of Book-Entry Notes, see "-- Book-Entry Notes" below and
"Description of Debt Securities -- Global Securities" in the accompanying
Prospectus.
Interest rates, interest rate bases and various other variable terms of the
Notes described in this Prospectus Supplement are subject to change by NCB from
time to time, but no change will affect any Note already issued or as to which
an offer to purchase has been accepted by NCB.
INTEREST
Each interest-bearing Note will bear interest from and including its issue
date or from and including the most recent interest payment date with respect to
which interest on that Note (or any predecessor Note) has been paid or duly
provided for to, but excluding, the relevant interest payment date (or the
Maturity Date) at the fixed rate per annum, or at the rate per annum determined
pursuant to the interest rate formula, stated in that Note and in the applicable
Pricing Supplement, until the principal of that Note is paid or made available
for payment. Interest payments, if any, will be in the amount of interest
accrued from and including the next preceding interest payment date in respect
of which interest has been paid or duly provided for (or from and including the
date of issue, if no interest has been paid with respect to that Note) to, but
excluding, the applicable interest payment date or Maturity Date, as the case
may be.
The Notes (including any Zero Coupon Note) may be issued with original
issue discount as defined for United States federal income tax purposes. Holders
of Notes issued with original issue discount may be required to include amounts
of accrued interest in gross income for federal income tax purposes in advance
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of the receipt of the cash to which that income is attributable. See "United
States Taxation -- United States Holders -- Original Issue Discount".
Interest, if any, will be payable in arrears on each interest payment date
and at Maturity. Interest will be payable generally to the person (which, in the
case of a Book-Entry Note, shall be the Depositary) in whose name a Note (or any
predecessor Note) is registered at the close of business on the Regular Record
Date next preceding each interest payment date; provided, however, that interest
payable at Maturity will be payable to the person (which, in the case of a
Book-Entry Note, shall be the Depositary) to whom principal shall be payable.
Unless otherwise indicated in the applicable Pricing Supplement, the first
payment of interest on any Note originally issued between a Regular Record Date
and an interest payment date will be made on the second interest payment date
following the issue date of that Note to the holder of record on the Regular
Record Date with respect to such second interest payment date. With respect to
payments of interest on Book-Entry Notes, see "-- Book-Entry Notes" below.
Each interest-bearing Note will bear interest at either a fixed rate or a
variable rate determined by reference to an interest rate formula, which may be
adjusted by adding or subtracting the Spread and/or multiplying by the Spread
Multiplier as indicated in the applicable Pricing Supplement.
FIXED RATE NOTES
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on the Fixed Rate Note.
Unless otherwise indicated in the applicable Pricing Supplement, the interest
payment dates with respect to Fixed Rate Notes (other than Amortizing Notes)
will be May 1 and November 1 of each year and at Maturity and the Regular Record
Dates for the Fixed Rate Notes will be the April 15 and October 15 next
preceding the relevant interest payment dates. Unless otherwise indicated in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed on
the basis of a 360-day year of twelve 30-day months.
If any interest payment date or the Maturity of a Fixed Rate Note falls on
a day that is not a Business Day, the related payment of principal, premium, if
any, or interest will be made on the next succeeding Business Day as if made on
the date the payment was due, and no interest will accrue on the amount so
payable for the period from and after that interest payment date or at Maturity,
as the case may be, to the date of the payment on the next succeeding Business
Day.
FLOATING RATE NOTES
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an Interest Rate Basis for that Floating Rate Note. Interest on
Floating Rate Notes will be determined by reference to the applicable Interest
Rate Basis or Interest Rate Bases, which may, as described below, include:
- the CD Rate,
- the CMT Rate,
- the Commercial Paper Rate,
- the Federal Funds Rate,
- LIBOR,
- the Prime Rate,
- the Treasury Rate, or
- any other Interest Rate Basis or interest rate formula as may be
specified in the applicable Pricing Supplement.
In addition, a Floating Rate Note may bear interest with respect to two or
more Interest Rate Bases, and a Floating Rate Note may bear interest at the
lowest or highest or average of two or more interest rate formulae. The
applicable Pricing Supplement for a Floating Rate Note also will specify the
Spread
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and/or Spread Multiplier, if any, and the maximum or minimum interest rate
limitation, if any, applicable to each Note. In addition, the Pricing Supplement
will define or particularize for each Floating Rate Note the following terms, if
applicable: Calculation Agent (which may be the Trustee or an Agent),
Calculation Date, Initial Interest Rate, interest payment dates, Regular Record
Dates, Index Maturity, Interest Determination Dates and Interest Reset Dates
with respect to that Note. See "Glossary" for definitions of certain of the
foregoing terms. The interest rate with respect to each Interest Rate Basis will
be determined in accordance with the applicable provisions below. Except as set
forth above or in the applicable Pricing Supplement, the interest rate in effect
on each day shall be:
- if that day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date immediately preceding that Interest Reset
Date, or
- if that day is not an Interest Reset Date, the interest rate determined
as of the Interest Determination Date immediately preceding the most
recent Interest Reset Date.
Subject to applicable provisions of law and except as described in this
Prospectus Supplement, the rate of interest on a Floating Rate Note beginning on
any Interest Reset Date with respect to the Floating Rate Note will be the rate
of interest determined by the Calculation Agent as of the Interest Determination
Date pertaining to that Interest Reset Date in accordance with the applicable
provisions described below.
The Interest Reset Date for each Floating Rate Note will be daily, weekly,
monthly, quarterly, semi-annually or annually, as specified in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Reset Date will be, in the case of Floating Rate Notes
which reset daily, each Business Day; in the case of Floating Rate Notes (other
than Treasury Rate Notes) which reset weekly, the Wednesday of each week; in the
case of Treasury Rate Notes which reset weekly, except as provided in this as
well as the following paragraph, the Tuesday of each week; in the case of
Floating Rate Notes which reset monthly, the third Wednesday of each month; in
the case of Floating Rate Notes which reset quarterly, the third Wednesday of
March, June, September and December; in the case of Floating Rate Notes which
reset semi-annually, the third Wednesday of two months of each year, as
indicated in the applicable Pricing Supplement; and in the case of Floating Rate
Notes which reset annually, the third Wednesday of one month of each year, as
indicated in the applicable Pricing Supplement. If any Interest Reset Date for
any Floating Rate Note would otherwise be a day that is not a Business Day with
respect to the Note, the Interest Reset Date shall be the next succeeding
Business Day with respect to the Note, except that if the Note is a LIBOR Note
and the next succeeding London Business Day falls in the next succeeding
calendar month, the Interest Reset Date shall be the immediately preceding
London Business Day. In addition, in the case of a Floating Rate Note for which
the Treasury Rate is an applicable Interest Rate Basis, if the Interest
Determination Date would otherwise fall on an Interest Reset Date, then the
applicable Interest Reset Date will be postponed to the next succeeding Business
Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
CD Rate Note (the "CD Rate Interest Determination Date"), a CMT Rate Note (the
"CMT Rate Interest Determination Date"), a Commercial Paper Rate Note (the
"Commercial Paper Interest Determination Date"), a Federal Funds Rate Note (the
"Federal Funds Interest Determination Date"), or a Prime Rate Note (the "Prime
Rate Interest Determination Date") will be the second Business Day preceding the
Interest Reset Date with respect to that Note. The Interest Determination Date
pertaining to an Interest Reset Date for a LIBOR Note (the "LIBOR Interest
Determination Date") will be the second London Business Day preceding that
Interest Reset Date, unless the Designated LIBOR Currency is British pounds
sterling, in which case the LIBOR Interest Determination Date will be the
applicable Interest Reset Date. The Interest Determination Date pertaining to an
Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day on which Treasury Bills are normally
auctioned for the week in which that Interest Reset Date falls, or if no auction
is held for that week, the Monday of that week (or if Monday is a legal holiday,
the next succeeding Business Day) and the Interest Reset Date will be the
Business Day immediately following that Treasury Interest Determination Date.
Treasury Bills are usually
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sold at auction on Monday of each week, unless that day is a legal holiday, in
which case the auction is usually held on the following Tuesday, except that the
auction may be held on the preceding Friday. If an auction for the week is held
on the preceding Friday, that preceding Friday shall be the Treasury Interest
Determination Date for that week, provided, further, that if the Interest
Determination Date would otherwise fall on an Interest Reset Date, then the
Interest Reset Date will be postponed to the next succeeding Business Day. The
Interest Determination Date pertaining to a Floating Rate Note the interest rate
of which is determined by reference to two or more Interest Rate Bases will be
the most recent Business Day which is at least two Business Days prior to the
applicable Interest Reset Date for the Floating Rate Note on which each Interest
Rate Basis is determinable. Each Interest Rate Basis will be determined as of
such date, and the applicable interest rate will take effect on the applicable
Interest Reset Date.
A Floating Rate Note may have either or both of the following:
- a maximum numerical interest rate limitation, or ceiling, on the rate of
interest which may accrue during any interest period; and
- a minimum numerical interest rate limitation, or floor, on the rate of
interest which may accrue during any interest period.
In addition to any maximum interest rate which may be applicable to any
Floating Rate Note, the interest rate on any Floating Rate Note will in no event
be higher than the maximum rate permitted by New York law, as the same may be
modified by United States law of general application. Under present New York law
the maximum rate of interest, with certain exceptions, for any loan in the
amount of less than $250,000 is 16%, and for any loan in the amount of $250,000
or more but less than $2.5 million, is 25% per annum on a simple interest basis.
These limits do not apply to Notes in which $2,500,000 or more has been
invested.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, the interest payment date will be,
- in the case of Floating Rate Notes which reset daily, weekly or monthly,
the third Wednesday of each month or on the third Wednesday of March,
June, September and December of each year (as indicated in the applicable
Pricing Supplement);
- in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December of each year;
- in the case of Floating Rate Notes which reset semi-annually, the third
Wednesday of the two months of each year specified in the applicable
Pricing Supplement;
- in the case of Floating Rate Notes which reset annually, the third
Wednesday of the month specified in the applicable Pricing Supplement;
and
- at Maturity.
If, pursuant to the above provisions, an interest payment date with respect
to any Floating Rate Note (other than an interest payment date at Maturity)
would otherwise be a day that is not a Business Day with respect to that Note,
the interest payment date shall be the next succeeding Business Day with respect
to that Note, except that if the Note is a LIBOR Note and the next succeeding
London Business Day falls in the next succeeding calendar month, the interest
payment date shall be the immediately preceding London Business Day. If the
Maturity of a Floating Rate Note falls on a day that is not a Business Day, the
payment of principal, premium, if any, and interest will be made on the next
succeeding Business Day, and no interest on the payment shall accrue from and
after the Maturity of that Note. Unless otherwise indicated in the applicable
Pricing Supplement, the Regular Record Date with respect to Floating Rate Notes
shall be the date 15 calendar days prior to each interest payment date, whether
or not that date shall be a Business Day.
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Unless otherwise specified in the applicable Pricing Supplement, the
interest accrued from and including the date of issue, or from and including the
last date to which interest has been paid or duly provided for, is calculated by
multiplying the face amount of the Floating Rate Note by an accrued interest
factor. The accrued interest factor is computed by adding the interest factor
calculated for each day in the period from and including the date of issue, or
from and including the last date to which interest has been paid or duly
provided for, to but excluding the date for which accrued interest is being
calculated. Unless otherwise specified in the Note and the applicable Pricing
Supplement, the interest factor for each day is computed by dividing the
interest rate applicable to that date by 360 (or, in the case of Treasury Rate
Notes or CMT Rate Notes, by the actual number of days in the year).
The interest factor for Floating Rate Notes for which the interest rate is
calculated with reference to two or more Interest Rate Bases will be calculated
in the same manner as if only the Applicable Interest Rate Basis specified in
the applicable Pricing Supplement applied.
Unless otherwise specified in a Pricing Supplement, all percentages
resulting from any calculation on Floating Rate Notes will be rounded, if
necessary, to the nearest one-hundred thousandth of a percentage point, with
five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544)
being rounded to 9.87654% (or .0987654)), and all dollar amounts used in or
resulting from this calculation on Floating Rate Notes will be rounded to the
nearest cent or, in the case of Foreign Currency Notes, the nearest unit (with
one-half cent or five one-thousandths of a unit being rounded upwards).
Upon the request of the holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate which will become effective as of the next Interest Reset Date for
that Floating Rate Note. All determinations and calculations made by the
Calculation Agent will, absent manifest error, be conclusive and binding on the
holders and NCB.
CD Rate Notes. Each CD Rate Note will bear interest at the interest rate
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any) specified on the face of the applicable CD Rate Note and in
the applicable Pricing Supplement.
- Unless otherwise indicated in the applicable Pricing Supplement, "CD
Rate" means, with respect to any CD Rate Interest Determination Date, the
rate on that date for negotiable United States dollar certificates of
deposit having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15(519) under the heading "CDs (secondary
market)".
- In the event that the above rate is not published prior to 3:00 P.M., New
York City time, on the Calculation Date pertaining to that CD Rate
Interest Determination Date, then the CD Rate shall be the rate on that
CD Rate Interest Determination Date set forth in H.15 Daily Update, or
another recognized electronic source used for the purpose of displaying
that rate, for that day in respect of certificates of deposit having the
Index Maturity specified in the applicable Pricing Supplement under the
caption "CDs (secondary market)".
- If by 3:00 P.M., New York City time, on the related Calculation Date the
CD Rate is not yet published in either H.15(519) or H.15 Daily Update or
another recognized electronic source, the CD Rate for that CD Interest
Determination Date shall be calculated by the Calculation Agent and shall
be the arithmetic mean of the secondary market offered rates, as of 10:00
A.M., New York City time, on that CD Rate Interest Determination Date, of
three leading nonbank dealers of negotiable United States dollar
certificates of deposit in The City of New York selected by the
Calculation Agent (which may include one or more of the Agents or their
affiliates) for negotiable United States dollar certificates of deposit
of major United States money market banks for negotiable certificates of
deposit with a remaining maturity closest to the Index Maturity specified
in the applicable Pricing Supplement in an amount that is representative
for a single transaction in that market at that time.
- If fewer than three dealers selected by the Calculation Agent are quoting
as set forth above, the CD Rate will be the CD Rate in effect on that CD
Rate Interest Determination Date.
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CMT Rate Notes. CMT Rate Notes will bear interest at the rates (calculated
with reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
- Unless otherwise indicated in the applicable Pricing Supplement, "CMT
Rate" means, with respect to any CMT Rate Interest Determination Date,
the rate displayed on the Designated CMT Telerate Page under the caption
". . . Treasury Constant Maturities . . . Federal Reserve Board Release
H.15 . . . Mondays Approximately 3:45 P.M.", under the column for the
Designated CMT Maturity Index for (i) if the Designated CMT Telerate Page
is 7051, the rate on the CMT Rate Interest Determination Date and (ii) if
the Designated CMT Telerate Page is 7052, the weekly or monthly average,
as specified in the applicable Pricing Supplement, for the week or the
month, as applicable, ended immediately preceding the week or month, as
applicable, in which the related CMT Rate Interest Determination Date
falls.
- In the event the rate is no longer displayed on the relevant page, or is
not displayed prior to 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for that CMT Rate Interest
Determination Date will be the treasury constant maturity rate for the
Designated CMT Maturity Index, as published in H.15(519).
- If the rate is no longer published, or is not published by 3:00 P.M., New
York City time, on the related Calculation Date, then the CMT Rate for
the CMT Rate Interest Determination Date will be the treasury constant
maturity rate for the Designated CMT Maturity Index (or other United
States Treasury rate for the Designated CMT Maturity Index) for the CMT
Rate Interest Determination Date with respect to the applicable Interest
Reset Date as may then be published by either the Board of Governors of
the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the
rate formerly displayed on the Designated CMT Telerate Page and published
in the relevant H.15(519).
- If the above information is not provided by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent
and will be a yield to maturity, based on the arithmetic mean of the
secondary market offered rates as of approximately 3:30 P.M., New York
City time, on the CMT Rate Interest Determination Date reported,
according to their written records, by three leading primary United
States government securities dealers (each, a "Reference Dealer") in The
City of New York (which may include one or more of the Agents or their
affiliates) selected by the Calculation Agent (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest
quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for
the most recently issued direct noncallable fixed rate obligations of the
United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to
maturity of not less than the Designated CMT Maturity Index minus one
year.
- If the Calculation Agent cannot obtain three applicable Treasury Note
quotations, the CMT Rate for the CMT Rate Interest Determination Date
will be calculated by the Calculation Agent and will be a yield to
maturity based on the arithmetic mean of the secondary market offered
rates as of approximately 3:30 P.M., New York City time, on the CMT Rate
Interest Determination Date of three Reference Dealers in The City of New
York (from five such Reference Dealers selected by the Calculation Agent
and eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality,
one of the lowest)), for Treasury Notes with an original maturity of the
number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least $100 million. If three or
four (and not five) of such Reference Dealers are quoting as described
above, then the CMT Rate will be based on the arithmetic mean of the
offered rates obtained and neither the highest nor the lowest of these
quotes will be eliminated.
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- If fewer than three Reference Dealers selected by the Calculation Agent
are quoting as described above, the CMT Rate will be the CMT Rate in
effect on the CMT Rate Interest Determination Date. If two Treasury Notes
with an original maturity as described in the third preceding sentence
have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the Calculation Agent will obtain quotes for the Treasury
Note with the shorter remaining term to maturity, which will be used.
Commercial Paper Rate Notes. Each Commercial Paper Rate Note will bear
interest at the interest rate (calculated with reference to the Commercial Paper
Rate and the Spread and/or Spread Multiplier, if any) specified on the face of
the Commercial Paper Rate Note and in the applicable Pricing Supplement.
- Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Commercial Paper
Interest Determination Date, the Money Market Yield (calculated as
described below) on the date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as
published in H.15(519) under the heading "Commercial
Paper -- Nonfinancial".
- In the event that that rate is not published prior to 3:00 P.M., New York
City time, on the Calculation Date pertaining to that Commercial Paper
Interest Determination Date, then the Commercial Paper Rate on that
Commercial Paper Rate Interest Determination Date will be the Money
Market Yield of the rate for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15 Daily
Update, or another recognized electronic source used for the purpose of
displaying the rate, under the heading "Commercial Paper --
Nonfinancial".
- If by 3:00 P.M., New York City time, on the related Calculation Date the
rate is not yet published in either H.15(519) or H.15 Daily Update or
another recognized electronic source, the Commercial Paper Rate for that
Commercial Paper Interest Determination Date will be the Money Market
Yield of the arithmetic mean, as calculated by the Calculation Agent on
that Commercial Paper Interest Determination Date, of the offered rates,
as of approximately 11:00 A.M., New York City time, on that Commercial
Paper Interest Determination Date, of three leading dealers of United
States dollar commercial paper in The City of New York selected by the
Calculation Agent (which may include one or more of the Agents or their
affiliates) for commercial paper having the Index Maturity specified in
the applicable Pricing Supplement placed for industrial issuers whose
bond rating is "Aa", or the equivalent, from a nationally recognized
statistical rating agency.
- If fewer than three dealers selected as aforesaid by the Calculation
Agent are quoting as mentioned in this sentence, the Commercial Paper
Rate will be the Commercial Paper Rate in effect on the Commercial Paper
Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
Money Market Yield = D X 360
------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Federal Funds Rate Notes. Each Federal Funds Rate Note will bear interest
at the interest rate (calculated with reference to the Federal Funds Rate and
the Spread and/or Spread Multiplier, if any) specified on the face of the
Federal Funds Rate Note and in the applicable Pricing Supplement.
- Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest
Determination Date, the rate on that date for United States dollar
Federal Funds as published in H.15(519) under the heading "Federal Funds
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(Effective)", as displayed on Bridge Telerate, Inc. (or any successor
service) on page 120 or any other page which may replace the applicable
page on that service.
- In the event that the rate does not appear on Bridge Telerate, Inc. Page
120 or is not published prior to 3:00 P.M., New York City time on the
Calculation Date pertaining to the Federal Funds Interest Determination
Date, then the Federal Funds Rate will be the rate on the Federal Funds
Interest Determination Date for United States dollar federal funds as
published in H.15 Daily Update under the heading "Federal Funds
(Effective)", or other recognized electronic source used for the purpose
of displaying the applicable rate under the caption "Federal Funds
(Effective)".
- If by 3:00 P.M., New York City time, on the Calculation Date that rate is
not yet published in either H.15(519) or H.15 Daily Update or another
recognized electronic source, the Federal Funds Rate for that Federal
Funds Interest Determination Date shall be the arithmetic mean, as
calculated by the Calculation Agent on the Federal Funds Interest
Determination Date of the rates for the last transaction in overnight
United State dollar Federal Funds arranged by three leading brokers of
United States dollar federal funds transactions in The City of New York
(which may include one or more of the Agents or their affiliates)
selected by the Calculation Agent prior to 9:00 a.m., New York City time,
on the Federal Funds Rate Interest Determination Date.
- If fewer than three brokers selected as aforesaid by the Calculation
Agent are quoting as mentioned in this sentence, the Federal Funds Rate
will be the Federal Funds Rate in effect on the Federal Funds Interest
Determination Date.
LIBOR Notes. Each LIBOR Note will bear interest at the interest rate
(calculated with reference to LIBOR and the Spread and/or Spread Multiplier, if
any) specified on the face of the applicable LIBOR Note and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined in accordance with the following provisions:
- With respect to any LIBOR Interest Determination Date, LIBOR will be
either (a) if "LIBOR Telerate" is specified in the applicable Pricing
Supplement, or if neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Pricing Supplement as the method for
calculating LIBOR, the rate for deposits in the Designated LIBOR Currency
having the Index Maturity specified in the applicable Pricing Supplement,
commencing on the Interest Reset Date, that appears on the Designated
LIBOR Page as of 11:00 A.M., London time, on the LIBOR Interest
Determination Date, or (b) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the arithmetic mean of the offered rates
(unless the Designated LIBOR Page by its terms provides only for a single
rate in which case that single rate shall be used) for deposits in the
Designated LIBOR Currency having the Index Maturity specified in the
Pricing Supplement, commencing on the applicable Interest Reset Date,
that appear (or, if only a single rate is required as aforesaid, appears)
on the Designated LIBOR Page as of 11:00 A.M., London time, on the LIBOR
Interest Determination Date. If fewer than two offered rates so appear,
or if no rate so appears, as applicable, LIBOR on such LIBOR Interest
Determination Date will be determined in accordance with the provisions
described below.
- With respect to a LIBOR Interest Determination Date on which fewer than
two offered rates appear, or no rate appears, as the case may be, the
Calculation Agent will request the principal London office of each of
four major reference banks (which may include the Agents or their
affiliates) in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Designated LIBOR Currency for the period of
the Index Maturity specified in the applicable Pricing Supplement,
commencing on the applicable Interest Reset Date, to prime banks in the
London interbank market at approximately 11:00 A.M., London time, on the
LIBOR Interest Determination Date and in a principal amount that is
representative for a single transaction in the Designated LIBOR Currency
in such market at such time. If at least two of the above quotations are
so provided, then LIBOR
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on such LIBOR Interest Determination Date will be the arithmetic mean of
the above quotations. If fewer than two such quotations are so provided,
then LIBOR on the LIBOR Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 A.M., in the
applicable Principal Financial Center, on the LIBOR Interest
Determination Date by three major banks which may include affiliates of
the Agent in the Principal Financial Center selected by the Calculation
Agent for loans in the Designated LIBOR Currency to leading European
banks, having the Index Maturity specified in the applicable Pricing
Supplement and in a principal amount that is representative for a single
transaction in the Designated LIBOR Currency in such market at such time;
provided, however, that if the banks so selected by the Calculation Agent
are not quoting as mentioned in this sentence, LIBOR determined as of the
LIBOR Interest Determination Date will be LIBOR in effect on the LIBOR
Interest Determination Date.
Prime Rate Notes. Each Prime Rate Note will bear interest at the interest
rate (calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified on the face of the applicable Prime Rate Note and
in the applicable Pricing Supplement.
- Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Rate Note as of any Prime Rate
Interest Determination Date, the rate set forth on such date in H.15(519)
under the heading "Bank Prime Loan".
- If the rate is not published prior to 3:00 P.M., New York City time, on
the Calculation Date, then the Prime Rate will be the rate on the Prime
Rate Interest Determination Date as published in H.15 Daily Update or
other recognized electronic source used for the purpose of displaying
this rate, under the caption "Bank Prime Loan" or such other recognized
electronic source used for the purpose of displaying the applicable rate
under the caption "Bank Prime Loan".
- In the event that such rate is not published in either H.15(519) or H.15
Daily Update or another recognized electronic source prior to 3:00 P.M.,
New York City time, on the Calculation Date, then the Prime Rate will be
the arithmetic mean of the rates of interest publicly announced by each
bank that appear on the Reuters Screen US PRIME 1 Page, as that bank's
prime rate or base lending rate as in effect for that Prime Rate Interest
Determination Date at 11:00 A.M. New York City time. If fewer than four
such rates appear on the Reuters Screen US PRIME 1 Page for the Prime
Rate Interest Determination Date, the Prime Rate will be the arithmetic
mean of the announced prime rates or base lending rates quoted on the
basis of the actual number of days in the year divided by 360 as of the
close of business on that Prime Rate Interest Determination Date by three
major banks in The City of New York selected by the Calculation Agent
(which may include the Agents or their affiliates).
- If the banks selected as aforesaid are not quoting as mentioned above,
the Prime Rate will be the Prime Rate then in effect on the Prime Rate
Interest Determination Date.
Treasury Rate Notes. Each Treasury Rate Note will bear interest at the
interest rate (calculated with reference to the Treasury Rate and the Spread
and/or Spread Multiplier, if any) specified on the face of the applicable
Treasury Rate Note and in the applicable Pricing Supplement.
- Unless otherwise indicated in the applicable Pricing Supplement,
"Treasury Rate" means, with respect to any Treasury Interest
Determination Date, the rate from the auction held on such Treasury Rate
Interest Determination Date (the "Auction") of direct obligations of the
United States ("Treasury Bills") having the Index Maturity specified in
the applicable Pricing Supplement under the caption "INVESTMENT RATE" on
the display on Bridge Telerate, Inc. (or any successor service) on page
56 (or any other page as may replace such page on such service)
("Telerate Page 56") or page 57 (or any other page as may replace such
page on such service) ("Telerate Page 57").
- If not so published by 3:00 P.M., New York City time, on the Calculation
Date pertaining to the Treasury Interest Determination Date, the Treasury
Rate will be the Bond Equivalent Yield of the rate for the applicable
Treasury Bills as displayed in H.15 Daily Update, or other recognized
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electronic source used for the purpose of displaying the applicable rate,
under the caption "U.S. Government Securities Treasury Bills/Auction
High".
- In the event that the rate described above is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the Treasury
Rate will be the Bond Equivalent Yield of the auction rate of the
applicable Treasury Bills announced by the United States Department of
the Treasury.
- In the event that the auction rate of Treasury Bills having the Index
Maturity specified in the applicable Pricing Supplement is not so
announced by the United States Department of the Treasury by 3:00 P.M.,
New York City time on the related Calculation Date, or if no Auction is
held, then the Treasury Rate will be the Bond Equivalent Yield of the
rate on the Treasury Rate Interest Determination Date of Treasury Bills
having the Index Maturity specified in the applicable Pricing Supplement
as published in H.15(519) under the caption "U.S. Government Securities/
Treasury Bills/Secondary Market".
- In the event that the rate referred to above is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the Treasury
Rate will be the rate on the applicable Interest Determination Date of
the Treasury Bills having the Index Maturity specified in the applicable
Pricing Supplement as published in H.15 Daily Update, or such other
recognized electronic source used for the purpose of displaying the
applicable rate, under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market".
- In the event that the rates are not yet published in H.15(519), H.15
Daily Update or another recognized electronic source by 3:00 P.M., New
York City time, on the relevant Calculation Date, then the Treasury Rate
shall be calculated by the Calculation Agent and shall be the Bond
Equivalent Yield of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 P.M., New York City time, on the Treasury
Rate Interest Determination Date, of three primary United States
government securities dealers (which may include the Agents or their
affiliates) selected by the Calculation Agent, for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity specified
in the applicable Pricing Supplement.
- If fewer than three of the dealers selected as aforesaid by the
Calculation Agent are quoting as mentioned in the preceding sentence, the
Treasury Rate will be the Treasury Rate in effect on the Treasury
Interest Determination Date.
"Bond Equivalent Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
Bond Equivalent Yield = D X N
------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest is
being calculated.
ORIGINAL ISSUE DISCOUNT NOTES
NCB may from time to time offer Original Issue Discount Notes. Original
Issue Discount Notes may not bear any interest currently or may bear interest at
a rate that is below market rates at the time of issuance. In the event of
redemption, repayment or acceleration of maturity of an Original Issue Discount
Note, the amount payable to the holder of the Original Issue Discount Note will
be equal to the sum of (i) the issue price (increased by any accruals of
Discount) and, in the event of any redemption of the Original Issue Discount
Note (if applicable), multiplied by the initial redemption percentage, as
adjusted by the annual redemption percentage reduction, if applicable, in each
case as defined in the applicable Pricing Supplement, and (ii) any unpaid
interest accrued on the Original Issue Discount Notes to the date of the
redemption, repayment or acceleration of maturity, as the case may be.
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Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for an
Original Issue Discount Note, the Discount will be accrued using a constant
yield method. The constant yield will be calculated using a 30-day month,
360-day year convention, a compounding period that, except for the period from
the date of issue to the initial interest payment date, corresponds to the
shortest period between interest payment dates for the applicable Original Issue
Discount Note (with ratable accruals within a compounding period), a coupon rate
equal to the initial coupon rate applicable to the Original Issue Discount Note
and an assumption that the maturity of the Original Issue Discount Note will not
be accelerated. If the period from the date of issue to the initial interest
payment date for an Original Issue Discount Note is shorter than the compounding
period for the Original Issue Discount Note, a proportionate amount of the yield
for an entire compounding period will be accrued. If the period from the date of
issue to the initial interest payment date for an Original Issue Discount Note
is longer than the compounding period, then that period will be divided into a
regular compounding period and a short period with the short period being
treated as provided in the preceding sentence.
In addition, a Note issued at a discount may, for United States federal
income tax purposes, be considered an Original Issue Discount Note, regardless
of the amount payable upon redemption or acceleration of Maturity of such Note.
See "United States Taxation -- Original Issue Discount".
FOREIGN CURRENCY NOTES
Notes may be issued as Foreign Currency Notes, with the principal and any
premium and interest documented and payable in a foreign currency or currency
unit. Unless otherwise indicated in the applicable Pricing Supplement, a Foreign
Currency Note will not be sold in, or to a resident of, the country of the
Specified Currency in which the Note is denominated.
NCB is obligated to make payments of principal of and any premium and
interest on Foreign Currency Notes in the Specified Currency or, if the
Specified Currency is not at the time of the payment legal tender in the country
which issued such Specified Currency (or, if the Specified Currency is Euro, in
the member states of the European Union that have adopted the single currency),
in such other coin or currency as at the time of such payment is legal tender
for the payment of such debts in such country (or member state, if the Specified
Currency is Euro). Any such amounts paid by NCB will, unless otherwise specified
in the applicable Pricing Supplement, be converted by the Exchange Rate Agent to
U.S. dollars for payment to holders. Principal of, and any premium and interest
on, a Foreign Currency Note paid in U.S. dollars will be paid in the manner
described in this Prospectus Supplement, in the accompanying Prospectus and in
the applicable Pricing Supplement with respect to Notes denominated and payable
in U.S. dollars.
Unless otherwise specified in the applicable Pricing Supplement, any U.S.
dollar amount to be received by a holder of a Foreign Currency Note will be
based on the highest bid quotation in The City of New York received by the
Exchange Rate Agent at approximately 11:00 A.M., New York City time, on the
second Business Day preceding the applicable payment date from three recognized
foreign exchange dealers (one of which may be the Exchange Rate Agent or an
Agent) selected by the Exchange Rate Agent and approved by NCB for the purchase
by the quoting dealer of the Specified Currency for U.S. dollars for settlement
on the payment date in the aggregate amount of the Specified Currency payable to
all holders of Foreign Currency Notes scheduled to receive U.S. dollar payments
and at which the applicable dealer commits to execute a contract. If three such
bid quotations are not available, payments will be made in the Specified
Currency. All currency exchange costs will be borne by the holder of the Foreign
Currency Note by deductions from these payments.
Unless otherwise specified in the applicable Pricing Supplement, a holder
of a Foreign Currency Note may elect to receive payments of principal of and any
premium and interest on the Note in the Specified Currency (a "Specified
Currency Payment Election") by delivery of a written request for the payment
(including, in the case of an election with respect to payments at Maturity,
appropriate wire transfer
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instructions) to the Trustee at its Corporate Trust Office in the Borough of
Manhattan, The City of New York, on or prior to the relevant Regular Record Date
or the fifteenth day prior to Maturity, as the case may be. This request may be
in writing (mailed or hand delivered) or by cable, telex or other form of
facsimile transmission. A holder of a Foreign Currency Note may elect to receive
payment in the Specified Currency for all payments of principal and any premium
and interest and need not file a separate election for each payment. This
election will remain in effect until revoked by written notice to the Trustee,
but written notice of any such revocation must be received by the Trustee on or
prior to the relevant Regular Record Date or the fifteenth day prior to
Maturity, as the case may be.
Interest on a Foreign Currency Note paid in the Specified Currency will be
paid by check mailed to the address of the person entitled thereto as its
address shall appear in the security register. All checks payable in a Specified
Currency will be drawn on a bank located outside the United States. Payments at
Maturity of principal of and any premium and interest on Foreign Currency Notes
in the Specified Currency will be made by wire transfer to an account with a
bank located in the country of the Specified Currency (or, in the case of Euros
(Brussels), as shall have been designated at least fifteen days prior to
Maturity by the holder, provided that the Note is presented at the Corporate
Trust Office of the Trustee in the Borough of Manhattan, The City of New York,
in time for the paying agent to make these payments in such funds in accordance
with its normal procedures.
Holders of Foreign Currency Notes whose Notes are to be held in the name of
a broker or nominee should contact the broker or nominee to determine whether
and how to make a Specified Currency Payment Election. In general, unless
otherwise specified in the applicable Pricing Supplement, a beneficial owner of
Book-Entry Notes denominated in a Specified Currency electing to receive
payments of principal or any premium or interest in the Specified Currency must
notify the participant through which its interest is held on or prior to the
applicable Regular Record Date, in the case of a payment of interest, and on or
prior to the fifteenth day prior to Maturity, in the case of a payment of
principal or premium, of the beneficial owner's election to receive all or a
portion of the payment in a Specified Currency. The participant must notify the
Depositary of this election on or prior to the third Business Day after the
Regular Record Date.
AVAILABILITY OF SPECIFIED CURRENCY
If the Specified Currency for a Foreign Currency Note is not available for
the required payment of principal, premium, if any, and/or interest, if any, in
respect of the Foreign Currency Note due to the imposition of exchange controls
or other circumstances beyond the control of NCB, NCB will be entitled to
satisfy its obligations to the holder of the applicable Foreign Currency Note by
making the payment in United States dollars on the basis of the Market Exchange
Rate, computed by the Exchange Rate Agent, on the second Business Day prior to
the related payment or, if such Market Exchange Rate is not then available, on
the basis of the most recently available Market Exchange Rate, or as otherwise
specified in the applicable Pricing Supplement.
The "Market Exchange Rate" for a Specified Currency other than United
States dollars means the noon dollar buying rate in The City of New York for
cable transfers for the Specified Currency as certified for customs purposes
(or, if not so certified, as otherwise determined) by the Federal Reserve Bank
of New York. Any payment made in United States dollars under these circumstances
where the required payment is in a Specified Currency other than United States
dollars will not constitute an Event of Default under the applicable Indenture
with respect to the Notes.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of the Foreign Currency
Notes.
The authorized denominations of Foreign Currency Notes will be indicated in
the applicable Pricing Supplement.
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Unless otherwise indicated in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the currency specified in the
applicable Pricing Supplement (the "Specified Currency"). At the present time
there are limited facilities in the United States for the conversion of U.S.
dollars into foreign currencies and vice versa, and banks do not generally offer
non-U.S. dollar checking or savings account facilities in the United States. If
requested on or prior to the third Business Day preceding the date of delivery
of the Notes, or by another day as determined by the Agent who presented the
offer to purchase Notes to NCB, the Agent is prepared to arrange for the
conversion of U.S. dollars into the Specified Currency to enable the purchasers
to pay for the Notes. Each conversion will be made by the Agent on the terms and
subject to the conditions, limitations and charges as the Agent may from time to
time establish in accordance with its regular foreign exchange practices. All
costs of exchange will be borne by the purchasers of the Foreign Currency Notes.
JUDGMENTS
Under current New York law, a state court in the State of New York
rendering a judgment in respect of a Foreign Currency Note would be required to
render a judgment in the Specified Currency, and any judgment would be converted
into United States dollars at the exchange rate prevailing on the date of entry
of the judgment. Accordingly, the holder of the applicable Foreign Currency Note
would be subject to exchange rate fluctuations between the date of entry of a
judgment in a foreign currency and the time the amount of the foreign currency
judgment is paid to the holder in United States dollars and converted by the
holder into the Specified Currency. It is not certain, however, whether a
non-New York state court would follow the same rules and procedures with respect
to conversions of foreign currency judgments.
NCB will indemnify the holder of any Note against any loss incurred by the
holder as a result of any judgment or order being given or made for any amount
due under the applicable Note and the judgment or order requiring payment in a
currency (the "Judgment Currency") other than the Specified Currency, and as a
result of any variation between:
- the rate of exchange at which the Specified Currency amount is converted
into the Judgment Currency for the purpose of the judgment or order, and
- the rate of exchange at which the holder of a Note, on the date of
payment of judgment or order, is able to purchase the Specified Currency
with the amount of the Judgment Currency actually received by a holder,
as the case may be.
INDEXED NOTES
Notes may be issued as Indexed Notes, with the amount payable at Maturity,
the amount of interest payable on an interest payment date, or both, to be
determined by reference to currencies, commodity prices, financial or
non-financial indices or other factors, as indicated in the applicable Pricing
Supplement. Holders of Indexed Notes may receive a principal amount at Maturity
that is greater than or less than the face amount of the Notes depending upon
the fluctuation of the relative value, rate or price of the specified index.
Specific information pertaining to the method for determining the principal
amount payable at Maturity, historical information with respect to the specified
indexed item or items and the face amount of the Indexed Note and any additional
tax considerations will be described in the applicable Pricing Supplement.
AMORTIZING NOTES
NCB may from time to time offer Amortizing Notes, with payments of
principal and interest made in equal installments over the life of the Note.
Payments of principal of and interest on Amortizing Notes will be made in equal
installments at periodic intervals as are specified in the applicable Pricing
Supplement and at Maturity. A table setting forth payment information in respect
of each Amortizing Note will be included in the applicable Pricing Supplement
and set forth in the Notes. Unless otherwise specified in the applicable Pricing
Supplement, interest on each Amortizing Note will be computed on the basis of a
360-day year of twelve 30-day months. Payments with respect to Amortizing Notes
will be
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applied first to interest due and payable thereon and then to the reduction of
the unpaid principal amount of the Amortizing Notes. Further information
concerning additional terms and conditions of any issue of Amortizing Notes will
be provided in the applicable Pricing Supplement.
EXTENSION OF MATURITY
An applicable Pricing Supplement will indicate whether NCB has the option
to extend the Stated Maturity of the Note (other than an Amortizing Note) for
one or more periods up to but not beyond a date set forth in the Pricing
Supplement. If NCB has this option with respect to any applicable Note, the
procedures relating thereto will be as set forth in the applicable Pricing
Supplement.
RENEWABLE NOTES
An applicable Pricing Supplement will indicate whether the Notes offered
under it (other than an Amortizing Note) will mature unless the term of all or
any portion of the Note is renewed in accordance with the procedures described
in the applicable Pricing Supplement.
SINKING FUND
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will not be subject to any sinking fund or analogous provisions. If NCB will be
obligated to redeem or repurchase Notes pursuant to any relevant provision, the
applicable Pricing Supplement will indicate the period or periods within which
and the price or prices at which the applicable Notes will be redeemed or
repurchased, in whole or in part, pursuant to that obligation and the other
detailed terms and provisions of the obligation.
REDEMPTION AT NCB'S OPTION
Except in the case of Notes which are redeemable as described under
"Renewable Notes", if one or more redemption dates (or range of redemption
dates) is specified in the applicable Pricing Supplement, the Notes described in
the applicable Pricing Supplement will be subject to redemption, in whole or in
part, as specified in the Pricing Supplement, in increments of $1,000 or other
integral multiple of an authorized denomination, on any of the specified dates
(or during any such range of dates) at the option of NCB on written notice given
to the holders not less than 30 days' nor more than 60 days' prior to the date
of redemption and in accordance with the provisions of the Indenture, at the
applicable Redemption Price, together with unpaid interest accrued on the Notes
to the redemption date. The "Redemption Price" means an amount equal to the
initial redemption percentage specified in the applicable Pricing Supplement (as
adjusted by the annual redemption percentage reduction, if any, specified in the
applicable Pricing Supplement as set forth below) multiplied by the unpaid
principal amount of the Notes to be redeemed. The initial redemption percentage
will decline at each anniversary of the initial redemption date by the annual
redemption percentage reduction, if any, until the Redemption Price is 100% of
unpaid principal amount to be redeemed. In the event of redemption of any Notes
in part only, a new Note of like tenor for the unredeemed portion of the Note
and otherwise having the same terms and provisions of the Note to be redeemed
will be issued by NCB in the name of the holder of the Note upon the
presentation and surrender of the Note. If less than the entire principal amount
of a Note is redeemed, the principal amount of the Note that remains outstanding
after the redemption will be an authorized denomination (which will not be less
than the minimum authorized denomination) for the Notes. If less than all Notes
of like tenor are to be redeemed, the Notes to be redeemed shall be selected by
the Trustee by a method that the Trustee shall deem fair and appropriate. For a
discussion of the redemption of Original Issue Discount Notes, see "-- Original
Issue Discount Notes".
REPAYMENT AT HOLDER'S OPTION
Except in the case of Notes which may be extended by NCB and which shall be
repayable at the option of the holder as described under "Extension of
Maturity", if one or more repayment dates (or range of the specified dates) is
specified in the applicable Pricing Supplement, the Notes described in the
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applicable Pricing Supplement will be subject to repayment, in whole, or from
time to time in part, in increments of $1,000 or any multiple of any authorized
denomination, as specified in the Pricing Supplement, on any specified date (or
during any range of specified dates) or, if that date is not a Business Day, on
the first Business Day following that date, at the election of the holder at the
repayment price determined as set forth in the applicable Pricing Supplement,
together with interest accrued to the repayment date.
Unless otherwise specified in the applicable Pricing Supplement, in order
to exercise an election, a holder must, unless a different notice period is
specified in the applicable Pricing Supplement, give to the Trustee not less
than 30 days' nor more than 60 days' notice. Unless otherwise specified in the
applicable Pricing Supplement, this notice shall consist of either (i) the Note
with the form entitled "Option to Elect Repayment" duly completed, or (ii) a
telegram, facsimile transmission or a letter from a member of a national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company in the United States, setting forth the
name of the holder, the principal amount of the Note, the principal amount of
the Note to be repaid, the certificate number or a description of the tenor and
terms of the Note, a statement that the option to elect repayment is being
exercised thereby and a guarantee that the Note, together with the duly
completed form entitled "Option to Elect Repayment", will be received by the
Trustee not later than the fifth Business Day after the date of telegram,
facsimile transmission or letter; provided, however, that the telegram,
facsimile transmission or letter shall only be effective if the Note and the
form, duly completed, are received by the Trustee by the fifth Business Day.
Unless otherwise specified in the applicable Pricing Supplement, exercise
of a repayment option by a holder will be irrevocable. This option may be
exercised with respect to less than the entire principal amount of a Note,
provided that the portion remaining outstanding after the repayment is an
authorized denomination.
If a Note is represented by a Book-Entry Note, the Depositary's nominee
will be the holder of the Book-Entry Note entitled to exercise a right to
repayment. In order to ensure that the Depositary's nominee will timely exercise
a right to repayment with respect to a particular Note, the beneficial owner of
an interest in the Note must instruct the broker or other direct or indirect
participant through which it holds an interest in the Note to notify the
Depositary of its desire to exercise a right to repayment. Different firms have
different cut-off times for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or other direct or
indirect participant through which it holds an interest in a Book-Entry Note in
order to ascertain the cut-off time by which such an instruction must be given
in order for timely notice to be delivered to the Depositary.
While the Book-Entry Notes are represented by the global securities held by
or on behalf of the Depositary, and registered in the name of the Depositary or
the Depositary's nominee, the option for repayment may be exercised by the
applicable participant that has an account with the Depositary, on behalf of the
beneficial owners of the global security or securities representing the
Book-Entry Notes, by delivering a written notice substantially similar to the
above-mentioned forms to the Trustee at its Corporate Trust Office (or other
address of which NCB shall from time to time notify the holders), not more than
60 days nor less than 30 days prior to the date of repayment. Notices of
elections from participants on behalf of beneficial owners of the global
security or securities representing such Book-Entry Notes to exercise their
option to have the Book-Entry Notes repaid must be received by the Trustee by
5:00 P.M., New York City time, on the last day for giving such notice. In order
to ensure that a notice is received by the Trustee on a particular day, the
beneficial owner of the global security or securities representing such
Book-Entry Notes must so direct the applicable participant before the
participant's deadline for accepting instructions for that day. Different firms
may have different deadlines for accepting instructions from their customers.
Accordingly, beneficial owners of the global security or securities representing
Book-Entry Notes should consult the participants through which they own their
interest therein for the respective deadlines for the participants. All notices
shall be executed by a duly authorized officer of the participant (with
signature guaranteed) and shall be irrevocable. In addition, beneficial owners
of the global security or securities representing Book-Entry Notes shall effect
delivery at the time these notices of election are given to the Depositary by
causing the participant to transfer the beneficial
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owner's interest in the global security or securities representing these
Book-Entry Notes, on the Depositary's records, to the Trustee. See
"-- Book-Entry Notes".
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including without limitation the
determination of an Interest Rate Basis, the calculation of the interest rate
applicable to a Fixed Rate Note or a Floating Rate Note, and the specification
of one or more Interest Rate Bases, the interest payment dates, the Maturity or
any other variable term relating to the Notes, may be modified as specified
under "Other Provisions" on the face of the Notes or in an addendum relating to
the Notes. Those modifications will be specified on the face of those Notes and
in the applicable Pricing Supplement.
REPURCHASE
NCB may at any time purchase Notes at any price in the open market or
otherwise. Notes so purchased by NCB may, at its discretion, be held, resold or
surrendered to the Trustee for cancellation.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of like tenor and having the same issue
date will be represented by one or more fully registered securities in permanent
global form (each a "Global Note"). See "Description of Securities -- Global
Securities" in the accompanying Prospectus. Each Global Note representing
Book-Entry Notes will be deposited with, or on behalf of, the Depositary,
located in the Borough of Manhattan, The City of New York, and will be
registered in the name of the Depositary or a nominee of the Depositary.
Ownership of beneficial interests in a Global Note representing Book-Entry
Notes will be limited to institutions that have accounts with the Depositary or
its nominee ("participants") or persons that may hold interests through
participants. NCB has been advised by the Depositary that upon receipt of any
payment of principal of or any premium or interest in respect of a Global Note,
the Depositary will credit, on its book-entry registration and transfer system,
accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depositary. Ownership of beneficial interests by
participants in the Global Note will be evidenced only by, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depositary or its nominee for the Global Note. Ownership of beneficial interests
in the Global Note by persons that hold through participants will be evidenced
only by, and the transfer of that ownership interest within the participant will
be effected only through, records maintained by the participant. The laws of
some jurisdictions require that certain purchasers of securities take physical
delivery of the securities in definitive form. These laws may impair the ability
to transfer beneficial interests to the Global Note.
Payment of principal of and any premium and interest on Book-Entry Notes
represented by any Global Note registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner and holder of the Global Note representing
the Book-Entry Notes. Payments by participants to owners of beneficial interests
in a Global Note held through participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name", and will be the sole
responsibility of the participants. Neither NCB, the Trustee, nor any agent of
NCB or the Trustee will have any responsibility or liability for any aspect of
the Depositary's records or any participant's records relating to or payments
made on account of beneficial ownership interests in a Global Note representing
the Book-Entry Notes or for maintaining, supervising or reviewing any of the
Depositary's records or any participant's records relating to these beneficial
ownership interests.
No Global Note described above may be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the
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Depositary or by the Depositary or any nominee to a successor of the Depositary
or a nominee of that successor.
No Global Note may be exchanged in whole or in part for Notes registered,
and no transfer of a Global Note in whole or in part may be registered, in the
name of any person other than the Depositary for such Global Note or any nominee
of such Depositary unless (i) the Depositary has notified NCB that it is
unwilling or unable to continue as Depositary for such Global Note or has ceased
to be qualified to act as a depository as required by the applicable Indenture,
and a successor depository is not appointed by NCB within 60 days of the date
NCB is so informed in writing, (ii) there shall have occurred and be continuing
an event of default with respect to the Notes represented by the Global Note or
(iii) there shall exist such circumstances, if any, in addition to or in lieu of
those described above as may be described in the applicable Pricing Supplement.
Any Global Note that is exchangeable pursuant to the preceding sentence
shall be exchangeable in whole for definitive Notes in registered form of any
authorized denomination and of like tenor and aggregate principal amount. The
Notes shall be registered in the name or names of the person or persons as the
Depositary shall instruct the Trustee. It is expected that these instructions
may be based upon directions received by the Depositary from its participants
with respect to ownership of beneficial interests in the Global Note.
As long as the Depositary, or its nominee, is the registered holder of a
Global Note, the Depositary or the nominee, as the case may be, will be
considered the sole owner and holder of the Global Note and the Notes
represented thereby for all purposes under the Notes and the Indentures. Except
in the limited circumstances referred to above, owners of beneficial interests
in a Global Note will not be entitled to have the Global Note or any Notes
represented thereby registered in their names, will not receive or be entitled
to receive physical delivery of certificated Notes in exchange therefor and will
not be considered to be the owners or holders of the Global Note or any Notes
represented thereby for any purpose under the Notes or the Indentures.
Accordingly, each person owning a beneficial interest in the Global Note must
rely on the procedures of the Depositary and, if that person is not a
participant, on the procedures of the participant through which that person owns
its interest, to exercise any rights of a Holder under the Indentures.
The Indentures provide that the Depositary, as a holder, may appoint agents
and otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver, or other action which a
holder is entitled to give or take under the Indentures. NCB understands that,
under existing industry practices, in the event that NCB requests any action of
holders or an owner of a beneficial interest in the Global Note desires to give
or take any action that a holder is entitled to give or take under the
Indentures, the Depositary would authorize the participants holding the relevant
beneficial interests to give or take action, and the participants would
authorize beneficial owners owning through participants to give or take action
or would otherwise act upon the instructions of beneficial owners owning through
them.
The Depositary has advised NCB as follows: the Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions, including transfers and pledges, among its participants in such
securities through electronic computerized book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers (including the Agents), banks, trust companies, clearing corporations,
and certain other organizations, some of whom (and/or their representatives) own
the Depositary. Access to the Depositary's book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly.
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UNITED STATES TAXATION
The following summary of the principal United States federal income tax
consequences of the ownership of Notes is based upon the opinion of Shea &
Gardner, special tax counsel to NCB. It deals only with Notes held as capital
assets by initial purchasers, and not with special classes of holders, such as
dealers in securities or currencies, banks, tax-exempt organizations, life
insurance companies, persons that hold Notes that are a hedge or that are hedged
against currency risks or that are part of a straddle or conversion transaction,
or persons whose functional currency is not the U.S. dollar. Moreover, the
summary deals only with Notes that are due to mature 30 years or less from the
date on which they were issued. The United States federal income tax
consequences of the ownership of Notes that are due to mature more than 30 years
from their date of issue will be discussed in an applicable Pricing Supplement.
The summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), its legislative history, existing and proposed regulations thereunder,
published rulings and court decisions, all as currently in effect and all
subject to change at any time, perhaps with retroactive effect.
Prospective purchasers of Notes should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of the ownership of Notes.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a beneficial owner of
a Note that is for United States federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation or partnership (including an
entity treated as a corporation or partnership for United States federal income
tax purposes) created or organized in or under the laws of the United States,
any state thereof or the District of Columbia (unless, in the case of a
partnership, Treasury regulations are adopted that provide otherwise), (iii) an
estate whose income is subject to United States federal income tax regardless of
its source or (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust. Notwithstanding the preceding sentence, to the extent
provided in Treasury regulations, certain trusts in existence on August 20,
1996, and treated as United States persons under the Code and applicable
Treasury regulations thereunder prior to that date, that elect to continue to be
treated as United States persons under the Code or applicable Treasury
regulations thereunder also will be a United States Holder. Moreover, as used
herein, the term "United States Holder" includes any holder of a Note whose
income or gain in respect to its investment in a Note is effectively connected
with the conduct of a U.S. trade or business. As used herein, the term "non-U.S.
Holder" means a beneficial owner of a Note that is not a United States Holder.
Payments of Interest
Interest on a Note, whether payable in U.S. dollars or a currency other
than U.S. Dollars ("Specified Currency"), other than interest on a "Discount
Note" that is not "qualified stated interest" (each as defined below under
"Original Issue Discount -- General"), will be taxable to a United States Holder
as ordinary income at the time it is received or accrued, depending on the
holder's method of accounting for tax purposes.
If an interest payment is denominated in or determined by reference to a
Specified Currency, the amount of income recognized by a cash basis United
States Holder will be the U.S. dollar value of the interest payment, based on
the exchange rate in effect on the date of receipt. If the interest payment is
converted into U.S. dollars by the Exchange Rate Agent, as discussed under
"Description of the Notes -- Foreign Currency Notes" above, the amount of income
recognized by a cash basis holder will be the U.S. dollar amount into which the
payment is converted.
An accrual basis United States Holder may determine the amount of income
recognized with respect to an interest payment denominated in, or determined by
reference to, a Specified Currency in accordance with either of two methods.
Under the first method, the amount of income accrued will be based on the
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average exchange rate in effect during the interest accrual period (or, with
respect to an accrual period that spans two taxable years, the part of the
period within the taxable year). Upon receipt of the interest payment (including
a payment attributable to accrued but unpaid interest upon the sale or
retirement of a Note) denominated in, or determined by reference to, a Specified
Currency, the United States Holder will recognize ordinary income or loss
measured by the difference between the average exchange rate used to accrue
interest income and the exchange rate on the basis of which the Exchange Rate
Agent converted the interest payment into U.S. dollars, or, if the payment was
not so converted, the exchange rate in effect on the date of receipt.
Under the second method, the United States Holder may elect to determine
the amount of income accrued on the basis of the exchange rate in effect on the
last day of the accrual period or, in the case of an accrual period that spans
two taxable years, the exchange rate in effect on the last day of the part of
the period within the taxable year. Additionally, if a payment of interest is
actually received within five Business Days of the last day of the accrual
period or taxable year, an electing accrual basis United States Holder may
instead translate such accrued interest into U.S. dollars at the exchange rate
in effect on the day of actual receipt. Any such election will apply to all debt
instruments held by the United States Holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the United
States Holder, and will be irrevocable without the consent of the Internal
Revenue Service (the "Service").
Original Issue Discount
General. A Note, other than a Note with a term of one year or less (a
"short-term Note"), will be treated as issued at an original issue discount (a
"Discount Note") if the excess of the Note's "stated redemption price at
maturity" over its issue price is more than a de minimis amount (as defined
below). Generally, the issue price of a Note will be the first price at which a
substantial amount of Notes included in the issue of which the Note is a part is
sold to other than bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers. The
stated redemption price at maturity of a Note is the total of all payments
provided by the Note that are not payments of "qualified stated interest". A
qualified stated interest payment is generally any one of a series of stated
interest payments on a Note that are unconditionally payable at least annually
at a single fixed rate (with certain exceptions for lower rates paid during some
periods) applied to the outstanding principal amount of the Note. Special rules
for "Variable Rate Notes" (as defined below under "Original Issue
Discount -- Variable Rate Notes") are described below under "Original Issue
Discount -- Variable Rate Notes".
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any, constitutes "de
minimis original issue discount" and the Note is not a Discount Note. Unless the
election described below under "Election to Treat All Interest as Original Issue
Discount" is made, a United States Holder of a Note with de minimis original
issue discount must include such de minimis original issue discount in income as
stated principal payments on the Note are made. The includible amount with
respect to each such payment will equal the product of the total amount of the
Note's de minimis original issue discount and a fraction, the numerator of which
is the amount of the principal payment made and the denominator of which is the
stated principal amount of the Note.
United States Holders of Discount Notes having a maturity of more than one
year from their date of issue must include original issue discount ("OID") in
income calculated on a constant-yield method before the receipt of cash
attributable to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the Note. The amount of OID
includible in income by a United States Holder of a Discount Note is the sum of
the daily portions of OID with respect to the Discount Note for each day during
the taxable year or portion of the taxable year on which the United States
Holder holds such Discount Note ("accrued OID"). The daily portion is determined
by allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. Accrual
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periods with respect to a Note may be of any length selected by the United
States Holder and may vary in length over the term of the Note as long as (i) no
accrual period is longer than one year and (ii) each scheduled payment of
interest or principal on the Note occurs on either the final or first day of an
accrual period. The amount of OID allocable to an accrual period equals the
excess of (a) the product of the Discount Note's adjusted issue price at the
beginning of the accrual period and such Note's yield to maturity (determined on
the basis of compounding at the close of each accrual period and properly
adjusted for the length of the accrual period) over (b) the sum of the payments
of qualified stated interest on the Note allocable to the accrual period. The
"adjusted issue price" of a Discount Note at the beginning of any accrual period
is the issue price of the Note increased by (x) the amount of accrued OID for
each prior accrual period and decreased by (y) the amount of any payments
previously made on the Note that were not qualified stated interest payments.
For purposes of determining the amount of OID allocable to an accrual period, if
an interval between payments of qualified stated interest on the Note contains
more than one accrual period, the amount of qualified stated interest payable at
the end of the interval (including any qualified stated interest that is payable
on the first day of the accrual period immediately following the interval) is
allocated pro rata on the basis of relative lengths to each accrual period in
the interval, and the adjusted issue price at the beginning of each accrual
period in the interval must be increased by the amount of any qualified stated
interest that has accrued prior to the first day of the accrual period but that
is not payable until the end of the interval. The amount of OID allocable to an
initial short accrual period may be computed using any reasonable method if all
other accrual periods other than a final short accrual period are of equal
length. The amount of OID allocable to the final accrual period is the
difference between (x) the amount payable at the Maturity of the Note (other
than any payment of qualified stated interest) and (y) the Note's adjusted issue
price as of the beginning of the final accrual period.
Acquisition Premium. A United States Holder that purchases a Note for an
amount less than or equal to the sum of all amounts payable on the Note after
the purchase date other than payments of qualified stated interest but in excess
of its adjusted issue price (any such excess being "acquisition premium") and
that does not make the election described below under "Election to Treat All
Interest as Original Issue Discount" is permitted to reduce the daily portions
of OID by a fraction, the numerator of which is the excess of the United States
Holder's adjusted basis in the Note immediately after its purchase over the
adjusted issue price of the Note, and the denominator of which is the excess of
the sum of all amounts payable on the Note after the purchase date, other than
payments of qualified stated interest, over the Note's adjusted issue price.
Market Discount. A Note, other than a short-term Note, will be treated as
purchased at a market discount (a "Market Discount Note") if (i) the amount for
which a United States Holder purchased the Note is less than the Note's issue
price (as determined above under "Original Issue Discount -- General") and (ii)
the Note's stated redemption price at maturity or, in the case of a Discount
Note, the Note's "revised issue price," exceeds the amount for which the United
States Holder purchased the Note by at least 1/4 of 1 percent of such Note's
stated redemption price at maturity or revised issue price, respectively,
multiplied by the number of complete years to the Note's maturity. If such
excess is not sufficient to cause the Note to be a Market Discount Note, then
such excess constitutes "de minimis market discount". The Code provides that,
for these purposes, the revised issue price of a Note generally equals its issue
price, increased by the amount of any OID that has accrued on the Note.
Any gain recognized on the maturity or disposition of a Market Discount
Note will be treated as ordinary income to the extent that such gain does not
exceed the accrued market discount on such Note. Alternatively, a United States
Holder of a Market Discount Note may elect to include market discount in income
currently over the life of the Note. Such an election shall apply to all debt
instruments with market discount acquired by the electing United States Holder
on or after the first day of the first taxable year to which the election
applies. This election may not be revoked without the consent of the Service.
Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount
using a constant-yield method. Such an election shall apply only to the Note
with respect to which it is made and may not be revoked. A United States Holder
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of a Market Discount Note that does not elect to include market discount in
income currently generally will be required to defer deductions for interest on
borrowings allocable to such Note in an amount not exceeding the accrued market
discount on such Note until the maturity or disposition of such Note.
Pre-Issuance Accrued Interest. If (i) a portion of the initial purchase
price of a Note is attributable to pre-issuance accrued interest, (ii) the first
stated interest payment on the Note is to be made within one year of the Note's
issue date and (iii) the payment will equal or exceed the amount of pre-issuance
accrued interest, then the United States Holder may elect to decrease the issue
price of the Note by the amount of pre-issuance accrued interest. In that event,
a portion of the first stated interest payment will be treated as a return of
the excluded pre-issuance accrued interest and not as an amount payable on the
Note.
Notes Subject to Contingencies Including Optional Redemption. If a Note
provides for an alternative payment schedule or schedules applicable upon the
occurrence of a contingency or contingencies (other than a remote or incidental
contingency), whether such contingency relates to payments of interest or of
principal, if the timing and amount of the payments that comprise each payment
schedule are known as of the issue date and if one of such schedules is
significantly more likely than not to occur, the yield and maturity of the Note
are determined by assuming that the payments will be made according to that
payment schedule. If there is no single payment schedule that is significantly
more likely than not to occur (other than because of a mandatory sinking fund),
the Note will be subject to the general rules that govern contingent payment
obligations. These rules will be discussed in an applicable Pricing Supplement.
Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if NCB has an unconditional option or
options to redeem a Note, or the holder has an unconditional option or options
to cause a Note to be repurchased, prior to the Note's Stated Maturity, then (i)
in the case of an option or options of NCB, NCB will be deemed to exercise or
not exercise an option or combination of options in the manner that minimizes
the yield on the Note and (ii) in the case of an option or options of the
holder, the holder will be deemed to exercise or not exercise an option or
combination of options in the manner that maximizes the yield on the Note. For
purposes of those calculations, the yield on the Note is determined by using any
date on which the Note may be redeemed or repurchased as the Stated Maturity and
the amount payable on such date in accordance with the terms of the Note as the
principal amount payable at maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a portion of the Note
is repaid as a result of a change in circumstances and solely for purposes of
the accrual of OID, the yield and maturity of the Note are redetermined by
treating the Note as reissued on the date of the change in circumstances for an
amount equal to the Note's adjusted issue price on that date.
Election to Treat All Interest as Original Issue Discount. A United States
Holder may elect to include in gross income all interest that accrues on a Note
using the constant-yield method described above under the heading "Original
Issue Discount -- General," with the modifications described below. For purposes
of this election, interest includes stated interest, OID, de minimis original
issue discount, market discount, de minimis market discount and unstated
interest, as adjusted by any amortizable bond premium (described below under
"Notes Purchased at a Premium") or acquisition premium.
In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
United States Holder's adjusted basis in the Note immediately after its
acquisition, the issue date of the Note will be the date of its acquisition by
the electing United States Holder, and no payments on the Note will be treated
as payments of qualified stated interest. This election will generally apply
only to the Note with respect to which it is made and may not be revoked without
the consent of the Service. If this election is made with respect to a Note with
amortizable bond premium, then the electing United States Holder will be deemed
to have elected to apply amortizable bond premium against interest with respect
to all debt instruments with amortizable bond premium (other than debt
instruments the interest on which is excludible from gross income) held
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by the electing United States Holder as of the beginning of the taxable year in
which the Note with respect to which the election is made is acquired or
thereafter acquired. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the Service.
If the election to apply the constant-yield method to all interest on a
Note is made with respect to a Market Discount Note, the electing United States
Holder will be treated as having made the election discussed above under
"Original Issue Discount -- Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such United States Holder.
Variable Rate Notes. A "Variable Rate Note" is a Note that: (i) has an
issue price that does not exceed the total noncontingent principal payments by
more than the lesser of (1) the product of (x) the total noncontingent principal
payments, (y) the number of complete years to maturity from the issue date and
(z) .015, or (2) 15 percent of the total noncontingent principal payments, and
(ii) provides for stated interest compounded or paid at least annually at (1)
one or more "qualified floating rates," (2) a single fixed rate and one or more
qualified floating rates, (3) a single "objective rate" or (4) a single fixed
rate and a single objective rate that is a "qualified inverse floating rate".
A qualified floating rate or objective rate in effect at any time during
the term of the instrument must be set at a "current value" of that rate. A
"current value" of a rate is the value of the rate on any day that is no earlier
than 3 months prior to the first day on which that value is in effect and no
later than 1 year following that first day.
A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the Note
is denominated or (ii) it is equal to the product of such a rate and either (a)
a fixed multiple that is greater than 0.65 but not more than 1.35, or (b) a
fixed multiple greater than 0.65 but not more than 1.35, increased or decreased
by a fixed rate. If a Note provides for two or more qualified floating rates
that (i) are within 0.25 percent of each other on the issue date or (ii) can
reasonably be expected to have approximately the same values throughout the term
of the Note, the qualified floating rates together constitute a single qualified
floating rate. A rate is not a qualified floating rate, however, if the rate is
subject to certain restrictions (including caps, floors, governors, or other
similar restrictions) unless such restrictions are fixed throughout the term of
the Note or are not reasonably expected to affect significantly the yield on the
Note.
An "objective rate" is a rate, other than a qualified floating rate, that
is determined using a single fixed formula and that is based on objective
financial or economic information that is not within the control of or unique to
the circumstances of the issuer or a related party. A variable rate is not an
objective rate, however, if it is reasonably expected that the average value of
the rate during the first half of the Note's term will be either significantly
less than or significantly greater than the average value of the rate during the
final half of the Note's term. An objective rate is a "qualified inverse
floating rate" if (i) the rate is equal to a fixed rate minus a qualified
floating rate, and (ii) the variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly borrowed
funds.
If interest on a Note is stated at a fixed rate for an initial period of
one year or less followed by either a qualified floating rate or an objective
rate for a subsequent period and (i) the fixed rate and the qualified floating
rate or objective have values on the issue date of the Note that do not differ
by more than 0.25 percent or (ii) the value of the qualified floating rate or
objective rate is intended to approximate the fixed rate, the fixed rate and the
qualified floating rate or the objective rate constitute a single qualified
floating rate or objective rate. Under these rules, Commercial Paper Rate Notes,
Prime Rate Notes, CD Rate Notes, CMT Rate Notes, Federal Funds Rate Notes, LIBOR
Notes and Treasury Rate Notes will generally be treated as Variable Rate Notes.
In general, if a Variable Rate Note provides for stated interest at a
single qualified floating rate or objective rate, all stated interest on the
Note is qualified stated interest and the amount of OID, if any, on the Note is
determined by using, in the case of a qualified floating rate or qualified
inverse floating rate,
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the value as of the issue date of the qualified floating rate or qualified
inverse floating rate, or, in the case of any other objective rate, a fixed rate
that reflects the yield reasonably expected for the Note.
If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or objective rate, or at a single fixed rate (other than
at a single fixed rate for an initial period), the amount of interest and OID
accruals on the Note are generally determined by (i) determining a fixed rate
substitute for each variable rate provided under the Variable Rate Note
(generally, the value of each variable rate as of the issue date or, in the case
of an objective rate that is not a qualified inverse floating rate, a rate that
reflects the reasonably expected yield on the Note), (ii) constructing the
equivalent fixed rate debt instrument (using the fixed rate substitute described
above), (iii) determining the amount of qualified stated interest and OID with
respect to the equivalent fixed rate debt instrument, and (iv) making the
appropriate adjustments for actual variable rates during the applicable accrual
period.
If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at a
single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Note is treated, for purposes of the first
three steps of the determination, as if it provided for a qualified floating
rate (or a qualified inverse floating rate, as the case may be) rather than the
fixed rate. The qualified floating rate (or qualified inverse floating rate)
replacing the fixed rate must be such that the fair market value of the Variable
Rate Note as of the issue date would be approximately the same as the fair
market value of an otherwise identical debt instrument that provides for the
qualified floating rate (or qualified inverse floating rate) rather than the
fixed rate.
Short-Term Notes. In general, an individual or other cash basis United
States Holder of a short-term Note is not required to accrue OID (as specially
defined below for the purposes of this paragraph) for United States federal
income tax purposes unless it elects to do so (but may be required to include
any stated interest in income as the interest is received). Accrual basis United
States Holders and certain other United States Holders, including banks,
regulated investment companies, dealers in securities, common trust funds,
United States Holders who hold Notes as part of certain identified hedging
transactions, certain pass-through entities and cash basis United States Holders
who so elect, are required to accrue OID on short-term Notes on either a
straight-line basis or under the constant-yield method (based on daily
compounding), at the election of the United States Holder. In the case of a
United States Holder not required and not electing to include OID in income
currently, any gain realized on the sale or retirement of the short-term Note
will be ordinary income to the extent of the OID accrued on a straight-line
basis (unless an election is made to accrue the OID under the constant-yield
method) through the date of sale or retirement. United States Holders who are
not required and do not elect to accrue OID on short-term Notes will be required
to defer deductions for interest on borrowings allocable to short-term Notes in
an amount not exceeding the deferred income until the deferred income is
realized.
For purposes of determining the amount of OID subject to these rules, all
interest payments on a short-term Note, including stated interest, are included
in the short-term Note's stated redemption price at maturity.
Foreign Currency Discount Notes. OID for any accrual period on a Discount
Note that is a Foreign Currency Note will be determined in the Specified
Currency and then translated into U.S. dollars in the same manner as stated
interest accrued by an accrual basis United States Holder, as described under
"Payments of Interest". Upon receipt of an amount attributable to OID (whether
in connection with a payment of interest or the sale or retirement of a Note), a
United States Holder may recognize ordinary income or loss.
Notes Purchased at a Premium
A United States Holder that purchases a Note for an amount in excess of its
principal amount may elect to treat such excess as "amortizable bond premium,"
in which case the amount required to be included in the United States Holder's
income each year with respect to interest on the Note will be
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reduced by the amount of amortizable bond premium allocable (based on the Note's
yield to maturity) to such year. In the case of a Foreign Currency Note, bond
premium will be computed in units of Specified Currency, and amortizable bond
premium will reduce interest income in units of the Specified Currency. At the
time amortized bond premium offsets interest income, exchange gain or loss
(taxable as ordinary income or loss) is realized measured by the difference
between exchange rates at that time and at the time of the acquisition of the
Notes. Any election to amortize bond premium shall apply to all bonds (other
than bonds the interest on which is excludible from gross income) held by the
United States Holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the United States Holder, and is
irrevocable without the consent of the Service. See also "Original Issue
Discount -- Election to Treat All Interest as Original Issue Discount".
Purchase, Sale and Retirement of the Notes
A United States Holder's tax basis in a Note will generally be its U.S.
dollar cost (as defined below), increased by the amount of any OID or market
discount included in the United States Holder's income with respect to the Note
and the amount, if any, of income attributable to de minimis original issue
discount and de minimis market discount included in the United States Holder's
income with respect to the Note, and reduced by (i) the amount of any payments
that are not qualified stated interest payments, and (ii) the amount of any
amortizable bond premium applied to reduce interest on the Note. The U.S. dollar
cost of a Note purchased with a Specified Currency will generally be the U.S.
dollar value of the purchase price on the date of purchase or, in the case of
Notes traded on an established securities market, as defined in the applicable
Treasury Regulations, that are purchased by a cash basis United States Holder
(or an accrual basis United States Holder that so elects), on the settlement
date for the purchase.
A United States Holder will generally recognize gain or loss on the sale or
retirement of a Note equal to the difference between the amount realized on the
sale or retirement and the tax basis of the Note. The amount realized on a sale
or retirement for an amount in Specified Currency will be the U.S. dollar value
of such amount on (i) the date payment is received in the case of a cash basis
United States Holder, (ii) the date of disposition in the case of an accrual
basis United States Holder or (iii) in the case of Notes traded on an
established securities market, as defined in the applicable Treasury
Regulations, sold by a cash basis United States Holder (or an accrual basis
United States Holder that so elects), on the settlement date for the sale.
Except to the extent described above under "Original Issue Discount --
Short-Term Notes" or "Original Issue Discount -- Market Discount" or described
in the next succeeding paragraph or attributable to accrued but unpaid interest,
gain or loss recognized on the sale or retirement of a Note will be capital gain
or loss and will be long-term capital gain or loss if the Note was held for more
than one year.
Gain or loss recognized by a United States Holder on the sale or retirement
of a Note that is attributable to changes in exchange rates will be treated as
ordinary income or loss. However, exchange gain or loss is taken into account
only to the extent of total gain or loss realized on the transaction.
Exchange of Amounts in Other Than U.S. Dollars
Specified Currency received as interest on a Note or on the sale or
retirement of a Note will have a tax basis equal to its U.S. dollar value at the
time such interest is received or at the time of such sale or retirement.
Specified Currency that is purchased will generally have a tax basis equal to
the U.S. dollar value of the Specified Currency on the date of purchase. Any
gain or loss recognized on a sale or other disposition of a Specified Currency
(including its use to purchase Notes or upon exchange for U.S. dollars) will be
ordinary income or loss.
Indexed, Renewable, Extendible and Amortizing Notes
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Indexed Notes that are
not subject to the rules governing Variable Rate Notes and with respect to any
Renewable, Extendible or Amortizing Notes.
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NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder of NCB, a controlled foreign corporation related to
NCB or a bank receiving interest described in section 881(c)(3)(A) of the Code.
To qualify for the exemption from taxation, the last United States payor in the
chain of payment prior to payment to a non-U.S. Holder (the "Withholding Agent")
must have received in the year in which a payment of interest or principal
occurs, or in either of the two preceding calendar years, a statement that (i)
is signed by the beneficial owner of the Note under penalties of perjury, (ii)
certifies that such owner is not a U.S. Holder and (iii) provides the name and
address of the beneficial owner. The statement may be made on an IRS Form W-8 or
a substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution.
Generally, a non-U.S. Holder will not be subject to federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, unless such non-U.S. Holder is an individual who is present in the United
States for 183 days or more in the taxable year of the disposition and such gain
is derived from sources within the United States. Certain other exceptions may
be applicable, and a non-U.S. Holder should consult its tax advisor in this
regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of NCB or, at
the time of such individual's death, payments in respect of the Notes would have
been effectively connected with the conduct by such individual of a trade or
business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a United States Holder must be reported to the Service,
unless the United States Holder is an exempt recipient or establishes an
exemption. Compliance with the identification procedures described in the
preceding section would establish an exemption from backup withholding for those
non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the Service, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the Service.
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NEW WITHHOLDING REGULATIONS
Final regulations dealing with withholding tax on income paid to foreign
persons, backup withholding and related matters (the "New Withholding
Regulations") were issued by the Treasury Department on October 6, 1997. The New
Withholding Regulations generally attempt to unify certification requirements
and modify reliance standards. The New Withholding Regulations generally will be
effective for payments made after December 31, 2000, subject to certain
transition rules.
Prospective investors are strongly urged to consult their own tax advisors
with respect to the New Withholding Regulations.
SUPPLEMENTAL PLAN OF DISTRIBUTION OF THE NOTES
Under the terms and subject to the conditions contained in a Distribution
Agreement, dated January 7, 2000 (the "Distribution Agreement"), the Notes are
offered on a continuing basis by NCB through the Agents, each of which agreed to
use reasonable efforts to solicit purchases of the Notes. Unless otherwise
disclosed in the applicable Pricing Supplement, NCB will pay a commission, or
grant a discount, to the Agents. NCB will have the sole right to accept offers
to purchase Notes and may reject any offer, in whole or in part. Each Agent
shall have the right, in its discretion reasonably exercised, without notice to
NCB, to reject any offer to purchase Notes received by it, in whole or in part.
NCB also may sell Notes to any Agent, acting as principal, at a discount to
be agreed upon at the time of sale except that, if no other discount is agreed
upon, NCB will pay a commission (or grant a discount) that will be equal to the
commission payable to the Agent for Notes sold on an agency basis. These Notes
may be resold at market prices prevailing at the time of resale, at prices
related to prevailing market prices, at a fixed offering price or at negotiated
prices, as determined by such Agent. NCB also may sell Notes to any Agent or to
a group of underwriters for whom an Agent acts as representative, at a discount
to be agreed at the time of sale for resale to one or more investors or
purchasers at a fixed offering price or at varying prices prevailing at the time
of resale, at prices related to prevailing market prices at the time of such
resale or at negotiated prices. Notes purchased by an Agent or by a group of
underwriters may be resold to certain securities dealers for resale to investors
or to certain other dealers. Dealers may receive compensation in the form of
discounts, concessions or commissions from the Agents and/or commissions from
the purchasers for whom they may act as agents. Unless otherwise specified in
the applicable Pricing Supplement, any concessions allowed by any Agent to any
dealer shall not be in excess of the commission or discount received by the
Agent from NCB. After the initial public offering of Notes to be resold to
investors and other purchasers on a fixed public offering price basis, the
public offering price, concession and discount may be changed.
NCB has reserved the right to sell Notes directly on its own behalf and to
accept (but not solicit) offers to purchase Notes through additional Agents on
substantially the same terms and conditions (including commission rates) as
would apply to purchases of Notes pursuant to the Distribution Agreement. In
addition, NCB has reserved the right to appoint additional agents for the
purpose of soliciting offers to purchase Notes. These additional Agents or
Agents, as the case may be, will be named in the applicable Pricing Supplement.
No commission will be payable on any Notes sold directly by NCB.
NCB will pay each Agent a commission of from .125% to .875% of the
principal amount of each Note, depending on its Stated Maturity, sold through
that Agent, as agent; provided, however, that commissions with respect to Notes
with a Stated Maturity of more than thirty years will be negotiated between NCB
and the applicable Agent at the time of sale.
NCB estimates its out of pocket expenses for this program to be
approximately $427,300.
NCB has agreed to indemnify the Agents against liabilities, under the
Securities Act, or contribute to payments which the Agents may be required to
make in that respect. NCB has agreed to reimburse the Agents for certain
expenses.
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The Agents engage in transactions with and perform services for NCB in the
ordinary course of business. In addition, Banc One Capital Markets, Inc., one of
the Agents, is an affiliate of Bank One Trust Company, N.A., the Trustee under
the Indentures.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of the secondary market for the Notes.
The Agents, may engage in over-allotment, stabilizing transactions, and
syndicate covering transactions in accordance with Regulation M under the
Securities Exchange Act of 1934, as amended. Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Agents to reclaim a selling concession from a syndicate
member when the Notes originally sold by such syndicate member are purchased in
a syndicate covering transaction to cover syndicate short positions. These
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the Notes to be higher than it would otherwise be in the
absence of such transactions. These transactions, if commenced, may be
discontinued at any time.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for NCB by Shea & Gardner,
Washington, D.C. and for the Agents by Brown & Wood LLP, New York, New York. The
opinions of Shea & Gardner and Brown & Wood LLP will be conditioned upon, and
subject to certain assumptions regarding, future action required to be taken by
NCB and the Trustee in connection with the issuance and sale of any particular
Note, the specific terms of Notes and other matters which may affect the
validity of Notes but which cannot be ascertained on the date of these opinions.
GLOSSARY
Set forth below are definitions, or the locations elsewhere of definitions,
of some of the terms used in this Prospectus Supplement.
"Agent" means each of Credit Suisse First Boston Corporation, Bank of
America Securities LLC, Bank One Capital Markets, SPP Capital Partners, LLC and
any other Agent appointed by NCB in accordance with the terms of the
Distribution Agreement.
"Amortizing Notes" means Notes with payments of principal and interest made
in equal installments over the life of the Notes.
"Book-Entry Notes" means Notes issued in book-entry form.
"Business Day" means (a) with respect to any Note (unless otherwise
provided in this definition), any day other than a Saturday, Sunday or other day
on which banking institutions in The City of New York are authorized or
obligated by law, regulation or executive order to close, (b) with respect to
LIBOR Notes only, any Business Day in New York that is also a London Business
Day, (c) with respect to Foreign Currency Notes (other than Foreign Currency
Notes denominated in Euro only) any day that is a Business Day both in New York
and in the Principal Financial Center in the country of the Specified Currency
and (d) with respect to Foreign Currency Notes denominated in Euro, any date on
which the Trans-European Automated Real-Time Gross Settlement Express Transfer
(TARGET) System is open.
"Calculation Agent" means the agent appointed by NCB to calculate interest
rates for Floating Rate Notes. Unless otherwise provided in a Pricing
Supplement, the Calculation Agent will be Bank One, N.A.
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"Calculation Date" pertaining to any Interest Determination Date means,
unless otherwise specified in the applicable Pricing Supplement, the earlier of
(i) the tenth calendar day after the Interest Determination Date or, if that day
is not a Business Day, the next succeeding Business Day or (ii) the Business Day
immediately preceding the applicable interest payment date or the date of
Maturity, as the case may be.
"CD Rate" means the rate calculated as set forth under the heading
"Description of the Notes -- Floating Rate Notes -- CD Rate Notes," unless
otherwise indicated in the applicable Pricing Supplement.
"CMT Rate" means the rate calculated as set forth under the heading
"Description of the Notes -- Floating Rate Notes -- CMT Rate Notes," unless
otherwise indicated in an applicable Pricing Supplement.
"Code" means the United States Internal Revenue Code of 1986, as amended
"Commercial Paper Rate" means the rate calculated as set forth under the
heading "Description of the Notes -- Floating Rate Notes -- Commercial Paper
Rate Notes", unless otherwise indicated in the applicable Pricing Supplement.
"Depositary" means The Depository Trust Company.
"Designated CMT Maturity Index" means the original period to Maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such Maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
"Designated CMT Telerate Page" means the display on Bridge Telerate, Inc.,
or any successor service, on the page designated in the applicable Pricing
Supplement (or any other page as may replace such page on that service for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519)). If
no such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page shall be 7052, for the most recent week.
"Designated LIBOR Currency" means the currency specified in the applicable
Pricing Supplement as to which LIBOR shall be calculated or, if no currency is
specified in the applicable Pricing Supplement, United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in the Pricing
Supplement (or any other page as may replace such page on the service) for the
purpose of displaying the London interbank rates of major banks for the
applicable Designated Libor Currency, or (b) if "LIBOR Telerate" is specified in
the applicable Pricing Supplement, or neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified in the applicable Pricing Supplement as the method for
calculating LIBOR, the display on Bridge Telerate, Inc. (or any successor
service) on the page specified in the Pricing Supplement (or any other page as
may replace that page on the service) for the purpose of displaying the London
interbank rates of major banks for the applicable Designated Libor Currency.
"Discount" has the meaning set forth under "Description of the Notes --
Original Issue Discount Notes".
"Distribution Agreement" has the meaning set forth under "Supplemental Plan
of Distribution".
"Euro" means the lawful currency of the participating member states of the
European Union that adopted a single currency in accordance with the Treaty
establishing the European Community as amended by the Treaty on European Union
signed February 7, 1992.
"Exchange Rate Agent" means the agent appointed by NCB to convert principal
and any premium and interest payments in respect of Foreign Currency Notes into
U.S. dollars, as provided in the applicable Pricing Supplement.
S-32
<PAGE> 33
"Federal Funds Rate" means the rate calculated as set forth under the
heading "Description of the Notes -- Floating Rate Notes -- Federal Funds Rate
Notes", unless otherwise indicated in the applicable Pricing Supplement.
"Fixed Rate Note" means Notes that bear interest as described under the
heading "Description of the Notes -- Interest -- Fixed Rate Notes".
"Floating Rate Notes" means Notes that bear interest as described under the
heading "Description of the Notes -- Interest -- Floating Rate Notes".
"Foreign Currency Note" means a Note that is denominated and/or payable in
a currency other than U.S. dollars.
"Global Note" has the meaning set forth under "Description of the Notes --
Book-Entry Notes".
"H.15(519)" means the weekly statistical release entitled "Statistical
Release H.15(519), Selected Interest Rates", or any successor publication,
published by the Board of Governors of the Federal Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world wide web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/ update, or any successor site or
publication.
"Index Maturity" means, with respect to a Floating Rate Note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as indicated in the applicable Pricing Supplement.
"Indexed Note" means a Note with respect to which the principal or premium
or interest payments are to be determined by reference to the value, rate or
price of one or more specified indices.
"Initial Interest Rate" means the rate at which a Floating Rate Note will
bear interest from and including its issue date (or that of a predecessor Note)
to but excluding the first Interest Reset Date, as indicated in the applicable
Pricing Supplement.
"Interest Determination Date" means the date as of which the interest rate
for a Floating Rate Note is to be calculated, to be effective as of the
following Interest Reset Date and calculated on the related Calculation Date
(except in the case of LIBOR, which is calculated on the related LIBOR Interest
Determination Date).
"Interest Rate Basis (or Bases)" means the basis or bases for the
determination of the rate of interest of a Note.
"Interest Reset Date" means the date on which a Floating Rate Note will
begin to bear interest at the variable interest rate determined as of any
Interest Determination Date. See the fourth paragraph under the heading
"Description of the Notes -- Floating Rate Notes" for the applicable Interest
Reset Dates for the Notes. The Reset Dates with respect to any Floating Rate
Note will also be set forth in the applicable Pricing Supplement and in the
Note.
"LIBOR" means the rate calculated as set forth under the heading
"Description of the Notes -- Floating Rate Notes -- LIBOR Notes", unless
otherwise indicated in the applicable Pricing Supplement.
"London Business Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Market Exchange Rate" for any Specified Currency means the noon buying
rate in The City of New York for cable transfers for the Specified Currency as
certified for customs purposes by (or if not so certified as otherwise
determined by) the Federal Reserve Bank of New York.
"Maturity", when used with respect to any Note, means the date on which the
principal of the Note or an installment of principal becomes due and payable as
provided in the Note or in this Prospectus
S-33
<PAGE> 34
Supplement, whether at the Stated Maturity or by declaration of acceleration,
call for redemption or otherwise.
"Notes" means the Medium-Term Senior Notes, Series B and Medium-Term
Subordinated Notes, Series B.
"Original Issue Discount Note" means a Note that has an issue price that is
less than 100% of the principal amount of the Note (i.e. par) by more than a
percentage equal to the product of 0.25% and the number of full years to the
Stated Maturity, and which provides that upon redemption or acceleration of the
Maturity of the Note an amount less than the principal of the Note shall become
due and payable.
"Prime Rate" means the rate calculated as set forth under the heading
"Description of the Notes -- Floating Rate Notes -- Prime Rate Notes", unless
otherwise indicated in the applicable Pricing Supplement.
"Principal Financial Center" means the capital city of the country issuing
the Specified Currency, except that with respect to United States dollars,
Australian dollars, Deutsche marks, Dutch guilders, Italian lire and Swiss
francs, the Principal Financial Center shall be The City of New York, Sydney
(and, solely in the case of the Specified Currency, Melbourne), Frankfurt,
Amsterdam, Milan and Zurich, respectively.
"Regular Record Date" with respect to a Fixed Rate Note, has the meaning
set forth under "Description of the Notes -- Fixed Rate Notes", and with respect
to a Floating Rate Note, has the meaning set forth under "Description of
Notes -- Floating Rate Notes".
"Reuters Screen US PRIME 1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on that service) for the purpose of
displaying Prime Rates or base lending rates of major United States banks.
"Specified Currency" means the currency which a Note is denominated in, as
specified in the applicable Pricing Supplement.
"Specified Currency Payment Election" has the meaning set forth under
"Description of Notes -- Foreign Currency Notes".
"Spread" means the number of basis points specified in the Note and the
applicable Pricing Supplement as being applicable to the interest rate for a
particular Floating Rate Note.
"Spread Multiplier" means the percentage specified in the Note and the
applicable Pricing Supplement as being applicable to the interest rate for a
particular Floating Rate Note.
"Stated Maturity", when used with respect to any Note or any installment of
principal of a Note or interest on a Note, means the date specified in that Note
as the fixed date on which the principal of the Note or the installment of
principal or interest is due and payable.
"Treasury Rate" means the interest rate calculated as set forth under the
heading "Description of the Notes -- Floating Rate Notes -- Treasury Rate
Notes", unless otherwise indicated in the applicable Pricing Supplement.
"Zero Coupon Note" means a Note with respect to which no periodic payments
of interest are made, and which is sold at a discount to the Note's face value.
S-34
<PAGE> 35
PROSPECTUS
NATIONAL CONSUMER COOPERATIVE BANK
(DOING BUSINESS AS NATIONAL COOPERATIVE BANK)
LOGO
MAY OFFER
$350,000,000
Debt Securities
Preferred Stock
- --------------------------------------------------------------------------------
NCB will provide the specific terms of these securities in supplements to this
prospectus. You should read this prospectus and the accompanying
prospectus supplement carefully before you invest.
- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT GUARANTEED BY THE UNITED STATES AND WILL NOT
CONSTITUTE A DEBT OR OBLIGATION OF THE UNITED STATES OR ANY AGENCY OR
INSTRUMENTALITY THEREOF.
This prospectus is dated December 21, 1999
<PAGE> 36
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................... 3
NATIONAL CONSUMER COOPERATIVE BANK.... 6
General............................... 6
Loan Requirements, Restrictions and
Policies............................ 6
Lending Limits........................ 7
Interest Rates........................ 7
Competition........................... 10
Taxes................................. 10
Class A Notes......................... 10
Properties............................ 12
Regulation............................ 12
SELECTED CONSOLIDATED FINANCIAL DATA
OF NCB.............................. 13
USE OF PROCEEDS....................... 14
DESCRIPTION OF DEBT
SECURITIES.......................... 14
General............................... 14
Denominations......................... 16
Subordination......................... 16
Consolidation, Merger or Sale......... 18
Modification of Indentures............ 18
Events of Default..................... 18
Covenants............................. 19
Payment and Transfer.................. 19
Global Securities..................... 20
Defeasance............................ 20
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Trustee........................... 20
DESCRIPTION OF PREFERRED STOCK........ 20
General............................... 21
Rank.................................. 21
Dividends............................. 21
Conversion or Exchange................ 22
Redemption............................ 23
Liquidation Preference................ 23
Voting Rights......................... 24
DESCRIPTION OF CAPITAL STOCK.......... 24
Authorized Capital.................... 24
Outstanding Class B Common Stock...... 24
Outstanding Class C Common Stock...... 25
Outstanding Class D Common Stock...... 25
Voting Rights......................... 25
Trading Market........................ 26
Patronage Refunds..................... 26
PLAN OF DISTRIBUTION.................. 27
By Agents............................. 27
By Underwriters....................... 27
Direct Sales.......................... 28
General Information................... 28
WHERE YOU CAN FIND MORE INFORMATION... 28
LEGAL OPINIONS........................ 29
EXPERTS............................... 29
</TABLE>
2
<PAGE> 37
SUMMARY
This summary provides a brief overview of NCB and the most significant
terms of the offered securities. For a more complete understanding of the terms
of the offered securities, before making your investment decision, you should
carefully read:
- this prospectus, which explains the general terms of the securities that
NCB may offer;
- the accompanying prospectus supplement, which (1) explains the specific
terms of the securities being offered and (2) updates and changes
information in this prospectus; and
- the documents referred to in "Where You Can Find More Information" on page
28 for information on NCB, including its financial statements.
NCB
NCB, which does business as the National Cooperative Bank, is a financial
institution organized under the laws of the United States. NCB provides
financial and technical assistance to eligible cooperative enterprises or
enterprises controlled by eligible cooperatives. An eligible cooperative
enterprise is an organization which NCB determines is owned by its members and
which is engaged in producing or furnishing goods, services, or facilities for
the benefit of its members or voting stockholders who are the ultimate consumers
or primary producers of such goods, services, or facilities. NCB is structured
as a cooperative institution whose voting stock can be owned only by its patrons
or those eligible to become its patrons.
NCB's principal executive offices are located at 1401 Eye Street N.W.,
Suite 700, Washington, DC 20005, and its telephone number is (202) 336-7700.
THE SECURITIES NCB MAY OFFER
NCB may use this prospectus to offer up to $350,000,000 of:
- debt securities; and
- preferred stock.
A prospectus supplement will describe the specific types, amounts, prices, and
detailed terms of any of these offered securities.
DEBT SECURITIES
The debt securities are unsecured general obligations of NCB in the form
of senior or subordinated debt. The senior debt will have the same rank as all
of NCB's other unsecured and unsubordinated debt. The subordinated debt will be
subordinated to all Senior Indebtedness (as defined below under "Description of
Debt Securities -- Subordination").
The senior and subordinated debt will be issued under separate indentures
between NCB and Bank One Trust Company, N.A., as trustee. Below are summaries of
the general features of the debt securities from these indentures. For a more
detailed description of these features, see "Description of Debt Securities"
below. You are also encouraged to read the indentures, which are filed as
exhibits to the registration statement of which this prospectus is a part. You
can receive copies of these documents by following the directions on page 28.
GENERAL INDENTURE PROVISIONS THAT APPLY TO THE DEBT SECURITIES
- Each indenture allows for different types of debt securities to be issued
in series.
- The indentures allow NCB to merge or to consolidate with another company,
or sell all or substantially all of its assets to another company. If any
of these events occur, the other company would be required to assume NCB's
responsibilities for the debt securities. Unless the transaction results
in an event of default, NCB will be released from all liabilities and
obligations under the debt securities when the successor company assumes
NCB's responsibilities.
- The indentures provide that holders of not less than 66 2/3% of the total
principal amount of the senior debt securities and holders of not less
than 66 2/3% of the
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<PAGE> 38
total principal amount of the subordinated debt securities outstanding in
any series may vote to change NCB's obligations or your rights concerning
those securities. However, some changes to the financial terms of a
security, including changes in the payment of principal or interest on
that security or the currency of payment, cannot be made unless every
holder of that security consents to the change.
- NCB may satisfy its obligations under the debt securities or be released
from its obligation to comply with the limitations discussed above at any
time by depositing sufficient amounts of cash or U.S. or other appropriate
government securities (depending on the currency of payment of the debt
securities) with the trustee to pay NCB's obligations under the particular
debt securities when due.
- The indentures govern the actions of the trustee with regard to the debt
securities, including when the trustee is required to give notices to
holders of the securities and when lost or stolen debt securities may be
replaced.
EVENTS OF DEFAULT THAT APPLY
TO DEBT SECURITIES
The events of default specified in each indenture include:
- failure to pay required interest for 30 days;
- failure to pay principal when due;
- failure to make a required sinking fund payment when due;
- failure to perform other covenants for 60 days after notice;
- failure to make any payment of any amount owing under the Class A Notes
when and as due;
- acceleration of the debt securities of any other series or any
indebtedness for borrowed money of NCB, in each case exceeding $10,000,000
in an aggregate principal amount;
- failure to pay, bond or discharge any uninsured judgment in excess of
$10,000,000 which is not challenged; and
- certain events of insolvency, bankruptcy or reorganization involving NCB,
whether voluntary or not.
See "National Consumer Cooperative Bank -- Class A Notes" on page 10 for a
description of the Class A Notes.
REMEDIES
If there were an event of default, the trustee or holders of 25% of the
principal amount of debt securities outstanding in a series could demand that
the principal be paid immediately. However, holders of a majority in principal
amount of the securities in that series could rescind that acceleration of the
debt securities.
PREFERRED STOCK
NCB may issue preferred stock with various terms to be established by its
board of directors. Each series of preferred stock will be more fully described
in the particular prospectus supplement that will accompany this prospectus,
including redemption provisions, rights in the event of liquidation, dissolution
or winding up of NCB, voting rights, if applicable in connection with any series
of preferred stock, and conversion rights.
Generally, each series of preferred stock will rank on an equal basis with
each other series of preferred stock and will rank prior to NCB's common stock,
including its Class B, Class C, and Class D stock. The prospectus supplement
will also describe how and when dividends will be paid on the series of
preferred stock.
4
<PAGE> 39
As more fully described in this prospectus under "National Consumer
Cooperative Bank -- Class A Notes," without the approval of the Secretary of the
Treasury of the United States, so long as any of NCB's Class A Notes are
outstanding, NCB may not pay a dividend on any class of its stock, including the
preferred stock, at a rate greater than the statutory interest rate payable on
the Class A Notes. Further, without the approval of the Secretary of the
Treasury, NCB may not pay any dividend or distribution on, or make any
repurchase of, any class of stock (including the preferred stock), at any time
when deferred interest payments on the Class A Notes have not been paid in full,
together with any unpaid interest on such notes. Upon any liquidation or
dissolution of NCB, the Class A Notes are entitled to receive out of the assets
of NCB available for distribution to its stockholders, prior to any to holders
of any class of stock (including the preferred stock), an amount not less than
the aggregate face value of all Class A Notes outstanding, plus all accrued and
unpaid interest payments accrued thereon to and including the date of payment
(together with unpaid interest thereon).
Preferred stock issued by NCB will be eligible for the dividends received
deduction to the extent set forth in the prospectus supplement relating to the
preferred stock.
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table shows the ratio of earnings to fixed charges of NCB for
each of the five most recent fiscal years. The ratio of earnings to fixed
charges is a measure of NCB's ability to generate earnings to pay the fixed
expenses of its debt.
These computations include NCB and its subsidiaries. For purposes of
computing these ratios, earnings consist of pre-tax income from continuing
operations plus fixed charges and amortization of capitalized interest, less
interest capitalized. Fixed charges consist of interest expensed and
capitalized, amortization of debt issuance costs, and NCB's estimate of the
interest component of rental expense. Ratios are presented both including and
excluding interest on deposits.
NCB currently has no preferred stock outstanding and therefore pays no
dividends on preferred stock. Accordingly, the data in the following table also
represents NCB's combined ratio of earnings to fixed charges and preferred stock
dividends.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, TWELVE MONTHS ENDED DECEMBER 31,
-------------- ------------------------------------
1999 1998 1998 1997 1996 1995 1994
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges
Including Interest on Deposits.................. 1.41 1.25 1.31 1.33 1.34 1.32 1.45
Excluding Interest on Deposits.................. 1.46 1.28 1.34 1.36 1.38 1.36 1.50
</TABLE>
5
<PAGE> 40
NATIONAL CONSUMER COOPERATIVE BANK
GENERAL
NCB, which does business as the National Cooperative Bank, is a financial
institution organized under the laws of the United States. NCB provides
financial and technical assistance to eligible cooperative enterprises or
enterprises controlled by eligible cooperatives. A cooperative enterprise is an
organization which is owned by its members and which is engaged in producing or
furnishing goods, services, or facilities for the benefit of its members or
voting stockholders who are the ultimate consumers or primary producers of such
goods, services, or facilities. NCB is structured as a cooperative institution
whose voting stock can be owned only by its patrons or those eligible to become
its patrons.
In the legislation chartering NCB, referred to as the National Consumer
Cooperative Bank Act or the NCCBA, Congress stated its finding that cooperatives
have proven to be an effective means of minimizing the impact of inflation and
economic hardship on members/owners by narrowing producer-to-consumer margins
and price spreads, broadening ownership and control of economic organizations to
a larger base of consumers, raising the quality of goods and services available
in the marketplace and strengthening the nation's economy as a whole. To further
the development of cooperative businesses, the Congress specifically directed
NCB
- to encourage the development of new and existing cooperatives eligible
for its assistance by providing specialized credit and technical
assistance;
- to maintain broad-based control of NCB by its voting shareholders;
- to encourage a broad-based ownership, control and active participation by
members in eligible cooperatives;
- to assist in improving the quality and availability of goods and services
to consumers; and
- to encourage ownership of its equity securities by cooperatives and
others.
NCB has attempted to fulfill its statutory obligations in two fashions.
First, NCB makes loans and offers other financing arrangements which afford
cooperative businesses substantially the same financing opportunities currently
available for traditional enterprises. Second, NCB provides financial and other
assistance to the NCB Development Corporation, a non-profit corporation without
capital stock organized in 1982 which makes loans and provides assistance to
developmental and low income cooperatives.
The NCCBA was passed on August 20, 1978, and NCB commenced lending
operations on March 21, 1980. In 1981, Congress amended the NCCBA to convert the
Class A Preferred Stock of NCB previously held by the United States to Class A
Notes of NCB (the "Class A Notes") as of December 31, 1981 (the "Final
Government Equity Redemption Date"). Since the Final Government Equity
Redemption Date, NCB's capital stock, except for three shares of non-voting
Class D stock, has been owned exclusively by cooperatives.
LOAN REQUIREMENTS, RESTRICTIONS AND POLICIES
Eligibility Requirements. Cooperatives and legally chartered entities
primarily owned and controlled by cooperatives are eligible to borrow from NCB
if NCB determines that they are operated on a cooperative basis and are engaged
in producing or furnishing goods, services or facilities primarily for the
benefit of their members or voting stockholders who are the ultimate consumers
of
6
<PAGE> 41
such goods, services or facilities. In addition, to be eligible to borrow from
NCB, the borrower must, among other things
- be controlled by its members or voting stockholders on a democratic
basis;
- agree not to pay dividends on voting stock or membership capital in
excess of such percentage per annum as may be approved by NCB;
- provide that its net savings shall be allocated or distributed to all
members or patrons, in proportion to their patronage, or retain such
savings for the actual or potential expansion of its services or the
reduction of its charges to the patrons; and
- make membership available on a voluntary basis, without any social,
political, racial or religious discrimination and without any
discrimination on the basis of age, sex, or marital status to all persons
who can make use of its services and are willing to accept the
responsibilities of membership.
NCB may also purchase obligations issued by members of eligible
cooperatives, and it maintains member finance programs for retailer members of
wholesaler cooperatives in the food and hardware industries. In addition,
organizations applying for loans must comply with other technical requirements
imposed by NCB.
Lending Authorities. The Board of Directors of NCB established its
policies governing its lending operations in compliance with the NCCBA. The
policies adopted by the Board are carried out by the management of NCB pursuant
to written loan policies adopted by the Board. The management in turn adopts and
implements guidelines and procedures consistent with stated Board directives.
Lending policies and guidelines are reviewed regularly by the Board of Directors
and management to make needed changes and amendments.
The management of NCB may approve individual loan amounts of up to 75% of
the single borrower lending limit which is equal to 15% of NCB's capital (using
the definition of capital for national banks as set forth by the Office of the
Comptroller of the Currency) without prior approval of the Board. The President
of NCB may delegate authorities up to this limit to such committees and
individual officers as he may deem appropriate.
LENDING LIMITS
Single Borrower
The total amount of loans, letters of credit, leases and other financing
that may be made available to any one borrower may not exceed 15% of NCB's
capital. The approval of any loan to a single borrower which has a combined
total of financing from NCB in excess of 75% of the 15% limit is subject to the
prior approval of the Loan and Business Development Committee of the Board.
Cooperatives of Primary Producers
The total dollar value of loans to cooperatives that produce, market and
furnish goods, services and facilities on behalf of their members as primary
producers may not exceed 10% of the gross assets of NCB. The total dollar volume
of loans NCB will allow to be outstanding to any producer cooperative may not
exceed 20% of the amount available for loans to all producer cooperatives.
INTEREST RATES
Generally
NCB charges interest rates approximately equal to the market rates charged
by other lending institutions for comparable types of loans. NCB seeks to price
its loans to yield a reasonable return
7
<PAGE> 42
on its portfolio in order to build and maintain the financial viability of NCB
and to encourage the development of new and existing cooperatives. In addition,
to ensure that NCB will have access to additional sources of capital in order to
sustain its growth, NCB seeks to maintain a portfolio that is competitively
priced and of sound quality.
Interest Rates for Real Estate Loans
Real estate loans are priced under rate guidelines issued by NCB's
Principal Transactions Group for specific types of loans with specific
maturities. NCB takes the following factors into consideration in pricing its
real estate loans: loan-to-value ratios, lien position, cooperative payment
history, reserves, occupancy level and cash flow. NCB fixes rates based on a
basis point spread over U.S. Treasury securities with yields adjusted to
constant maturity of one, three, five or ten years. Interest rate may be fixed
at the time of commitment for a period generally not exceeding 30 days.
Interest Rates on Commercial Loans
NCB makes commercial loans at fixed and variable interest rates. Loan
pricing is based on prevailing market conditions, income and portfolio
diversification objectives and the overall assessment of risk. Typically,
commercial loan repayment schedules are structured by NCB with flat monthly
principal reduction plus interest on the outstanding balance.
Fees
NCB typically assesses fees to cover the costs of NCB of its consideration
of and handling of loan transactions, and to compensate NCB for setting aside
funds for future draws under a commitment. The legal fees paid to outside legal
counsel retained by NCB for loan transactions are charged to the borrower.
Underwriting
When evaluating credit requests, NCB seeks to determine whether a
prospective borrower has and/or will have sound management, sufficient cash flow
to service debt, assets in excess of liabilities and a continuing demand for its
products, services or use of its facilities, so that the request will be repaid
in accordance with its terms.
NCB evaluates repayment ability based upon an analysis of a borrower's
historical cash flow and conservative projections of future cash flows from
operations. This analysis focuses on determining the predictability of future
cash flows as a primary source of repayment.
Security
Loans made by NCB are typically secured by specific collateral. If
collateral security is required, the value of the collateral must be reasonably
sufficient to protect NCB from loss, in the event that the primary sources of
repayment of financing from the normal operation of the cooperative, or
refinancing, prove to be inadequate for debt repayment. Collateral security
alone is not a sufficient basis for NCB to extend credit. Unsecured loans
normally are made only to borrowers with strong financial conditions, operating
results and demonstrated repayment ability.
8
<PAGE> 43
Loans Benefiting Low-Income Persons
Under the NCCBA, the Board of Directors must use its best efforts to insure
that at the end of each NCB fiscal year at least 35% of its outstanding loans
are to
- cooperatives whose members are predominantly low-income persons, as
defined by NCB, and
- other cooperatives that propose to undertake to provide specialized
goods, services, or facilities to serve the needs of predominantly
low-income persons.
NCB defines a "low-income person", for these purposes, as an individual
whose family's income does not exceed 80% of the median family income, adjusted
for family size for the area where the cooperative is located, as determined by
the Department of Housing and Urban Development.
Loans for Residential Purposes
Commencing on October 1, 1985, the NCCBA prohibited NCB from making loans
for financing, construction, ownership, acquisition or improvement of any
structure used primarily for residential purposes if, after giving effect to
such loan, the aggregate amount of all loans outstanding for such purposes will
exceed 30% of the gross assets of NCB.
To the date of this prospectus, the 30% cap on residential real estate
loans has not restricted NCB's ability to provide financial services to
residential borrowers. NCB has been able to maintain its position in the
residential real estate market without increased real estate portfolio exposure
by selling real estate loans to secondary market purchasers of such loans. Since
October 1, 1985, the preponderance of NCB's real estate volume has been
predicated upon sale to secondary market purchasers. There can, however, be no
assurance that NCB's future lending for residential purposes will not be
impaired by the statutory limit. As of September 30, 1999, approximately 8.8% of
NCB's total assets, excluding real estate loans held for sale, consisted of
loans made for residential purposes.
Operations of Subsidiaries
NCB also provides financing opportunities to cooperatives and undertakes
other programs designed to fulfill its statutory mission through several
subsidiaries.
NCB Financial Corporation is a Delaware chartered, wholly-owned, S&L
holding company whose sole subsidiary is NCB Savings Bank, FSB.
NCB Savings Bank, FSB is a federally chartered, federally insured savings
bank located in Hillsboro, Ohio.
NCB Capital Corporation, formerly named NCB Mortgage Corporation, is a
wholly-owned subsidiary of NCB that originates and services loans to
cooperatives. Where incidental to NCB financing programs for cooperatives, and
to the development of cooperatives, NCB Capital Corporation may make loans to
entities that are not operating on a cooperative basis.
NCB Insurance Brokers, Inc. is engaged in the business of brokering
housing-related insurance to cooperatives.
NCB I, Inc. ("NCB I") is a wholly-owned, special purpose corporation that
holds credit enhancement certificates related to the securitization and sale of
cooperative real estate loans. NCB and NCB I are parties to an agreement under
which each agrees not to commingle the assets of NCB I with those of NCB.
NCB Retail Finance Corporation ("NCBRFC") is a wholly-owned special purpose
corporation that participates in the securitization and sale of loans to
customers involved in the grocery business.
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NCBRFC is required by its certificate of incorporation to have at least two
directors independent of NCB and to avoid commingling its assets with those of
NCB.
Because NCB is a holding company with respect to its subsidiaries, the
claims of creditors of NCB's subsidiaries will have priority over NCB's equity
rights and the rights of NCB's creditors, including the holders of debt
securities, and preferred stockholders to participate in the assets of NCB's
subsidiaries upon the subsidiaries' liquidation.
COMPETITION
The Congress created and capitalized NCB because it found that existing
financial institutions were not making adequate financial services available to
cooperative, not-for-profit business enterprises. However, NCB experiences
considerable competition in lending to the most creditworthy cooperative
enterprises.
TAXES
The NCCBA provides that NCB shall be treated as a cooperative within the
meaning of Section 1381(a)(2) of the Internal Revenue Code. As such and pursuant
to the provisions of the NCCBA, NCB, in determining its taxable income for
federal income tax purposes, is allowed a deduction for an amount equal to any
patronage refunds in the form of cash, of Class B or Class C stock, or allocated
surplus that are distributed or set aside by NCB during the applicable tax
period. To date, NCB has followed the policy of distributing or setting aside
such patronage refunds during the applicable tax period, and this has
effectively reduced NCB's federal income tax liability.
Section 109 of the NCCBA, as amended, provides that NCB, including its
franchise, capital, reserves, surplus, mortgages or other security holding and
income, is exempt from taxation by any state, county, municipality or local
taxing authority, except that any real property held by NCB is subject to any
state, county, municipal or local taxation to the same extent according to its
value as other real property is taxed.
In 1995, it was determined that all income generated by NCB and its
subsidiaries, with the exception of the NCB Savings Bank, qualifies as patronage
income under the Internal Revenue Code, as modified only with respect to NCB by
the NCCBA, with the consequence that NCB is able to issue tax deductible
patronage refunds with respect to all such income.
NCB's subsidiaries are subject to state income taxes.
Neither interest income, dividends nor gains realized in respect of the
securities which may be offered by this prospectus and a related prospectus
supplement is exempt from taxation by the United States or any state, county,
municipality or local taxing authority therein.
CLASS A NOTES
The NCCBA, as initially passed in 1978, provided for Class A preferred
stock of NCB to be held by the United States. In 1981, Congress amended the
NCCBA to convert that Class A preferred stock to Class A Notes of NCB. These
original Class A Notes had a principal amount of $184.27 million and a maturity
date of December 31, 2020.
In 1989, following a passage of a technical amendment to the NCCBA, NCB
entered into a Financing Agreement with the U.S. Treasury that provided for
replacement of the original Class A Notes with four new Class A Notes. This
Financing Agreement is in place as of the date of this prospectus, and it
governs the Class A Notes.
Pursuant to the Financing Agreement, NCB issued to the U.S. Treasury four
Class A Notes. After an initial phase-in period through October 1, 1990, each of
the four Class A Notes provides a
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different "Maturity Date" -- Note 1 (3 months), Note 2 (36 months), Note 3 (60
months) and Note 4 (120 months). When each Class A Note matures, NCB has the
right to borrow again from the Treasury the maturing amount under the same terms
and conditions until the "Final Maturity Date" of October 31, 2020. NCB intends
generally to avail itself of this right until the Final Maturity Date (except
for planned retirements in the year 2010 of $25 million and in the year 2015 of
another $25 million as part of a repayment plan discussed below). That means
that until the Final Maturity Date, NCB will likely have outstanding to the U.S.
Treasury four traunches of Class A Notes. At each Maturity Date, the interest
rate to be paid upon that Class A Note for the succeeding period will be
calculated by the U.S. Treasury based upon the then-prevailing interest rates
for Treasury obligations of comparable maturities. Listed below are the
principal amounts and other information about the Class A Notes as of the date
of this prospectus.
<TABLE>
<CAPTION>
CLASS A PRINCIPAL CURRENT
NOTE AMOUNT TERM NEXT MATURITY DATE INTEREST RATE
- ------- ----------- ---------- ------------------ -------------
<S> <C> <C> <C> <C>
1 $53,553,328 3 months 1/1/2000 4.88%
2 $36,854,000 36 months 10/1/2002 5.70%
3 $55,281,000 60 months 10/1/2000 6.01%
4 $36,854,000 120 months 10/1/2000 8.82%
</TABLE>
The Class A Notes and all related payments are subordinated to any secured
and unsecured notes and debentures thereafter issued by NCB, including the
senior debt and subordinated debt securities which may be offered by this
prospectus and any related prospectus supplement. The Class A Notes, however,
have first preference with respect to NCB's assets over all classes of stock
issued by NCB, including the preferred stock which may be offered by this
prospectus and any related prospectus supplement.
The NCCBA provides that NCB may not pay any dividend on any class of stock,
including the preferred stock which may be offered by this prospectus and any
prospectus supplement, at a rate greater than the statutory interest rate
payable on the Class A Notes. Although there has been no court or agency
interpretation of that limitation, NCB has consistently interpreted that
limitation to be the weighted average of the then-current interest rates
applicable to the four outstanding Class A Notes (with the weighting based on
outstanding principal amount). As of the date of this prospectus, the statutory
interest rate payable on the Class A Notes (based on the weighted average) was
an annual rate of 6.18%. NCB is currently seeking an amendment to the NCCBA that
would eliminate this limitation on dividends. There is, of course, no assurance
that the NCCBA will be amended.
In February 1993 and November 1994, NCB adopted plans to maintain a
schedule to ensure accumulation of the funds needed to repay the Class A Notes
on the Final Maturity Date, October 31, 2020. These plans involve the creation
of a reserve fund and the issuance of subordinated debt and preferred stock. If
the subordinated debt or preferred stock being offered by this prospectus is
being offered for the express purpose of funding the reserve fund, we will state
that fact in a prospectus supplement. The plans currently contemplate that
contributions to the reserve fund will total approximately $100 million
($1,000,000 per year for the first 10 years beginning 1994, $2,000,000 in each
of years 11-15, $2,500,000 in each of years 16-20 and $3,000,000 in each of
years 21-26). NCB expects that most of the contributions to the reserve fund
will be funded by borrowings under then-existing NCB credit facilities. The
plans currently contemplate that the remaining $80 million needed to pay off the
Class A Notes will be obtained through the issuance of subordinated debt and
preferred stock. The reserve fund, which was in the amount of $6,950,000 at
September 30, 1999, is maintained as a separate account but will be subject to
claims of senior and subordinated creditors other than the U.S. Treasury in
respect of the Class A Notes, in light of the subordinated status of the Class A
Notes. The plans contemplate the probable retirement of $25 million of Class A
Notes in 2010 and an additional $25 million of Class A Notes in 2015.
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<PAGE> 46
Under the NCCBA, any interest payment on the Class A Notes may be deferred
by the Board of Directors of NCB with the approval of the Secretary of the
Treasury of the United States, except that any interest payment so deferred is
required to bear interest at a prescribed rate. Without the approval of the
Secretary of the Treasury, NCB may not pay any dividend or distribution on, or
make any repurchase of, any class of stock (including the preferred stock which
may be offered by this prospectus and any related prospectus supplement), at any
time when deferred interest payments on the Class A Notes have not been paid in
full, together with any unpaid interest on such notes. Upon any liquidation or
dissolution of NCB, the Class A Notes are entitled to receive out of the assets
of the NCB available for distribution to its stockholders, prior to any to
holders of any class of stock (including the preferred stock which may be
offered by this prospectus or any related prospectus supplement), an amount not
less than the aggregate face value of all Class A Notes outstanding, plus all
accrued and unpaid interest payments accrued thereon to and including the date
of payment (together with unpaid interest thereon).
PROPERTIES
NCB leases space for its Washington, D.C. headquarters and for three
regional offices located in Oakland, New York City, and Anchorage. NCB Financial
Corporation and NCB I maintain offices in Wilmington, Delaware. NCB's
headquarters is 34,464 square feet in size and regional offices average 1500
square feet. The rental expense for the fiscal year ended December 31, 1998 was
$1,318,000 for NCB's headquarters and regional offices. NCB considers the
regional offices suitable for its needs and the facilities are fully utilized in
its operations.
REGULATION
NCB is organized under the laws of the United States. NCB is examined
annually by the Farm Credit Administration but that agency has no regulatory or
enforcement powers over NCB, and the General Accounting Office is authorized to
audit NCB. Reports of such examinations and audits are to be forwarded to the
Congress, which has the sole authority to amend or revoke NCB's charter. NCB
Savings Bank, FSB, is regulated by the federal Office of Thrift Supervision. As
a savings and loan holding company, NCB is subject to limited regulatory and
enforcement powers of and examination by the Office of Thrift Supervision
pursuant to 12 U.S.C. Section 1467a.
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<PAGE> 47
SELECTED CONSOLIDATED FINANCIAL DATA OF NCB
The following table contains selected consolidated financial data for NCB
and its subsidiaries for the five years ended December 31, 1998 and the
nine-month periods ended September 30, 1999 and 1998. The financial data for
each of the years ended December 31, 1994 through 1998 have been derived from
audited financial statements. The financial data for the nine months ended
September 30, 1999 and 1998 have been derived from unaudited financial
statements and reflect, in the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
information for such interim periods. Results for the interim periods are not
necessarily indicative of results to be expected for the full year. The summary
below should be read in conjunction with the Consolidated Financial Statements
of NCB and the related Notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations which are contained in each of
NCB's Annual Reports on Form 10-K for the years ended December 31, 1994 through
1998 and NCB's Quarterly Report on Form 10-Q for the quarters ended September
30, 1998 and 1999. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total interest income...................... $ 58,827 $ 53,626 $ 71,187 $ 68,787 $ 61,265 $ 52,770 $ 41,714
Net interest income........................ 22,678 19,523 25,627 26,843 25,966 22,017 21,105
Net income................................. 13,816 7,644 12,628 12,462 11,199 9,083 8,877
BALANCE SHEET DATA
(at period end)
Loans and leases outstanding............... $1,016,041 $758,172 $795,174 $773,768 $750,094 $ 597,190 $ 501,090
Total assets............................... 1,128,436 898,436 933,415 869,304 839,336 684,532 567,321
Total capital*............................. 331,251 319,265 322,838 314,376 307,714 300,995 295,749
Subordinated Class A Notes**............... 182,542 182,542 182,542 182,542 182,542 182,542 182,542
Long-term borrowings, including
Subordinated Class A Notes............... 438,873 374,177 413,735 387,335 384,679 337,230 287,899
Members' equity............................ 148,709 136,723 140,296 131,833 125,172 118,453 113,207
Other borrowed funds including deposits.... 765,324 544,621 575,265 531,740 515,257 365,288 256,315
OTHER DATA
Capital to assets**........................ 29.4% 35.5% 34.6% 36.2% 36.7% 44.0% 52.3%
Return on average assets................... 1.3% 0.8% 1.4% 1.5% 1.5% 1.5% 1.7%
Return on average members' equity.......... 9.5% 5.6% 9.3% 9.7% 9.2% 7.8% 7.9%
Net yield on interest earning assets....... 3.1% 2.7% 2.9% 3.3% 3.7% 3.7% 4.2%
Average members' equity as a percent of
average total assets..................... 14.1% 14.9% 14.8% 15.3% 16.5% 18.9% 21.5%
Average members' equity as a percent of
total loans and lease financing.......... 16.2% 17.5% 17.5% 17.9% 19.2% 21.9% 25.0%
Net average loans and lease financing to
average total assets..................... 85.0% 83.3% 84.9% 85.5% 84.3% 84.0% 83.4%
Net average earning assets to average total
assets................................... 93.6% 94.7% 96.0% 95.9% 92.4% 92.7% 94.8%
Allowance for loan losses to loans
outstanding.............................. 1.8% 2.3% 2.2% 2.3% 2.1% 2.5% 2.6%
Provision for loan losses to average loans
outstanding.............................. 0.1% 0.1% 0.1% 0.5% 0.3% 0.4% 0.2%
</TABLE>
- ---------------
* Capital includes members' equity and subordinated Class A Notes.
** Net of deferred hedge gains.
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<PAGE> 48
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, the
proceeds from issuances of debt securities and preferred stock will be used for
general corporate purposes of NCB.
DESCRIPTION OF DEBT SECURITIES
The debt securities will be direct unsecured general obligations of NCB and
will be either senior or subordinated debt. The debt securities will be issued
under separate indentures between NCB and Bank One Trust Company, N.A. Senior
debt securities will be issued under a senior debt indenture and subordinated
debt securities will be issued under a subordinated debt indenture. The senior
indenture and the subordinated indenture are sometimes referred to in this
prospectus individually as an "indenture" and collectively as the "indentures."
The forms of the indentures have been filed with the SEC as exhibits to the
registration statement of which this prospectus forms a part.
The following briefly summarizes the material provisions of the indentures
and the debt securities, other than pricing and related terms disclosed in the
accompanying prospectus supplement. The summary is not complete. You should read
the more detailed provisions of the applicable indenture for provisions that may
be important to you. So that you can easily locate these provisions, the numbers
in parenthesis below refer to sections in the applicable indenture or, if no
indenture is specified, to sections in each of the indentures. Whenever
particular sections or defined terms of the applicable indenture are referred
to, such sections or defined terms are incorporated into this prospectus by
reference, and the statement in this prospectus is qualified by that reference.
GENERAL
The senior debt securities will be unsecured and rank equally with all of
NCB's other senior and unsubordinated debt. The subordinated debt securities
will be unsecured and will be subordinated to all of NCB's Senior Indebtedness
(as defined below under "-- Subordination"). As of September 30, 1999, NCB had
approximately $797 million of Senior Indebtedness outstanding.
Pursuant to the NCCBA, the amount of bonds, debentures, notes, and other
evidences of indebtedness of NCB that may be outstanding at any one time may not
exceed ten times the paid-in capital and surplus of NCB. Pursuant to the NCCBA,
for purposes of this limitation, Class A Notes are deemed to be paid-in capital
of NCB.
THE DEBT SECURITIES ARE NOT GUARANTEED BY THE UNITED STATES AND WILL NOT
CONSTITUTE A DEBT OR OBLIGATION OF THE UNITED STATES OR ANY AGENCY OR
INSTRUMENTALITY THEREOF.
A prospectus supplement relating to any series of debt securities being
offered will include specific terms relating to the offering. These terms will
include some or all of the following:
- the title of the debt securities, whether the debt securities will be
senior or subordinated debt and the series in which the debt securities
will be included;
- any limit on the aggregate principal amount of the debt securities;
- the price or prices (expressed as a percentage of their aggregate
principal amount) at which the debt securities will be issued;
- the date or dates, or the method or methods, if any, by which the date or
dates shall be determined, on which the debt securities will mature and,
if other than the principal amount of the debt securities, the portion of
the principal amount of the debt securities payable at maturity;
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<PAGE> 49
- the rate or rates (which may be fixed or variable) at which the debt
securities will bear interest, if any, or the method or methods, if any,
by which the rate or rates are to be determined and the manner upon which
interest will be calculated if other than that of a 360- day year of
twelve 30-day months;
- the date or dates from which interest, if any, on the debt securities
will accrue or the method or methods, if any, by which the date or dates
are to be determined, the date or dates on which the interest, if any,
will be payable, the date on which payment of interest, if any, will
commence and the regular record dates for interest payment dates, if any;
- the date or dates, if any, on or after which, or the period or periods,
if any, within which, and the price or prices at which the debt
securities will, pursuant to any mandatory sinking fund provisions, or
may, pursuant to any optional sinking fund or to any purchase fund
provisions, be redeemed by NCB, and the other terms and provisions of the
sinking and/or purchase fund;
- the date or dates, if any, on or after which, or the period or periods,
if any, within which, and the price or prices at which the debt
securities may, pursuant to any optional redemption provisions, be
redeemed at the option of NCB or of the holder of the debt securities of
a series and the other terms and provisions of any optional redemption;
- the extent to which any of the debt securities will be issuable in
temporary or permanent global form and, if so, the identity of the
depositary for the global debt security, or the manner in which any
interest payable on a temporary or permanent global debt security will be
paid;
- the denomination or denominations in which the debt securities are
authorized to be issued if other than $1,000 (in the case of debt
securities issued in registered form) or $5,000 (in the case of debt
securities issued in bearer form) and integral multiples of the debt
securities;
- whether such debt securities will be issued in registered or bearer form
or both and, if in bearer form, the terms and conditions relating to
those bearer debt securities and any limitations on issuance of the
bearer debt securities (including exchange for registered debt securities
of the same series);
- information with respect to book-entry procedures relating to global debt
securities;
- the terms, if any, upon which debt securities may be convertible into
other securities of NCB and the terms and conditions upon which
conversion may be effected, including the initial conversion price or
rate and any other provision in addition to or in lieu of those described
in this prospectus;
- whether any of the debt securities will be issued as original issue
discount securities;
- each office or agency where, subject to the terms of the indenture, the
principal of, and premium and interest, if any, on, the debt securities
will be payable and where the debt securities may be presented for
registration of transfer or exchange;
- the currencies or currency units in which the debt securities are issued
and in which the principal of, and premium and interest, if any, on, and
additional amounts, if any, in respect of the debt securities will be
payable;
- whether the amount of payments of principal of, and interest on, and
additional amounts, if any, in respect of the debt securities may be
determined with reference to an index, formula or other method or methods
(which index, formula or method or methods may, but need not be, based on
one or more currencies or currency units, commodities, equity indices or
other indices) and the manner in which such amounts shall be determined;
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<PAGE> 50
- whether NCB or a holder may elect payment of the principal of, or premium
or interest, if any, on, or additional amounts in respect of, the debt
securities in a currency, currencies or currency unit or units other than
that in which the debt securities are denominated or stated to be
payable, the period or periods within which, and the terms and conditions
upon which, such election may be made, and the time and manner of
determining the exchange rate between the currency, currencies or
currency unit or units in which the debt securities are denominated or
stated to be payable and the currency, currencies or currency unit or
units in which the debt securities are to be paid;
- if other than the trustee, the identity of each security registrar,
paying agent and authenticating agent;
- the applicability of defeasance provisions to the debt securities;
- the person to whom any interest on any registered debt securities of the
series shall be payable, if other than the person in whose name that debt
security (or one or more predecessor debt securities) is registered at
the close of business on the applicable regular record date for the
payment of interest, the manner in which, or the person to whom, any
interest on any bearer debt security of the series shall be payable, if
otherwise than upon presentation and surrender of coupons as they
severally mature, and the extent to which, or the manner in which, any
interest payable on a temporary global debt security on an interest
payment date will be paid if other than in the manner provided in the
indenture;
- whether and under what circumstances NCB will pay additional amounts as
contemplated by Section 1004 of the indenture (the term "interest", as
used in this prospectus, shall include such additional amounts) on the
debt securities to any holder who is a United States Alien (as defined in
the indenture) (including any modification to that definition as
contained in the indenture as originally executed) in respect of any tax,
assessment or governmental charge and, if so, whether NCB will have the
option to redeem those debt securities rather than pay the additional
amounts (and the terms of that option);
- any deletions from, modifications of or additions to the events of
default or covenants of NCB with respect to any of the debt securities;
- any special federal income tax considerations applicable to the debt
securities; and
- any other terms of the debt securities (which will not be inconsistent
with the provisions of the indenture).
The indentures do not limit the amount of debt securities that may be
issued. Each indenture allows debt securities to be issued up to the principal
amount that may be authorized by NCB and may be in any currency or currency unit
designated by NCB. (Sections 301 and 303)
DENOMINATIONS
Unless otherwise provided in the accompanying prospectus supplement,
registered debt securities will be issued in denominations of $1,000 each and
any multiples thereof and bearer debt securities will be issued in denominations
of $5,000 each and any multiple thereof. (Section 302)
SUBORDINATION
Under the subordinated indenture, payment of the principal, interest and
any premium on the subordinated debt securities will generally be subordinated
and junior in right of payment to the prior payment in full of all Senior
Indebtedness (as defined below). The subordinated indenture provides that no
payment of principal, interest or any premium on the subordinated debt
securities may be made unless NCB pays in full the principal, interest, any
premium or any other amounts on any
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<PAGE> 51
Senior Indebtedness then due. Also, no payment of principal, interest or any
premium on the subordinated debt securities may be made if there shall have
occurred and be continuing an event of default with respect to any Senior
Indebtedness permitting the holders thereof to accelerate the maturity thereof,
or if any judicial proceeding shall be pending with respect to any such default.
If there is any insolvency, bankruptcy, liquidation or other similar
proceeding relating to NCB, then all Senior Indebtedness must be paid in full
before any payment may be made to any holders of subordinated debt securities.
Holders of subordinated debt securities must deliver any payments received by
them to the holders of Senior Indebtedness until all Senior Indebtedness is paid
in full. (Subordinated indenture, Section 1602)
The subordinated indenture will not limit the amount of Senior Indebtedness
that NCB may incur.
"Senior Indebtedness" means any of the following, whether incurred before
or after the execution of the subordinated indenture:
(1) all obligations of NCB for the repayment of borrowed money,
(2) all obligations of NCB for the deferred purchase price of property, but
excluding trade accounts payable in the ordinary course of business,
(3) all capital lease obligations of NCB, and
(4) all obligations of the type referred to in clauses (1) through (3) of
other persons that NCB has guaranteed or that are otherwise its legal
liability;
but Senior Indebtedness does not include:
(a) the subordinated debt securities; and
(b) indebtedness that by its terms is subordinated to, or ranks on an
equal basis with, the subordinated debt securities.
As of the date of this prospectus, NCB does not have outstanding any debt
that ranks equal to the subordinated debt securities and the Class A Notes
constitute the only indebtedness of NCB that by its terms is subordinated with
the subordinated debt securities.
Certain Limitations in Respect of Subordinated Debt Securities
Maturity Dates. The terms of a number of loan agreements to which NCB is a
party restrict NCB from issuing subordinated debt securities with maturity dates
earlier than 91 days after the latest maturity of any of the notes issued under
those agreements or from issuing subordinated debt securities with mandatory
sinking fund or similar provisions for the prepayment thereof prior to that
date. As a result of those provisions, at the date of this prospectus, NCB would
be restricted from issuing subordinated debt securities having a maturity date
or mandatory sinking fund payment date prior to May 5, 2004.
Voluntary Repayment. The loan agreements similarly prohibit NCB from
purchasing, redeeming or otherwise retiring subordinated debt securities prior
to the maturity date of such subordinated debt securities except
- out of proceeds of a substantially concurrent issue or sale of capital
stock or debt ranking equal or junior to the subordinated debt to be
repurchased, redeemed or otherwise retired, or
- out of funds that are at the time available for "restricted payments"
under those agreements.
The term "restricted payments" means all declarations and payments of
dividends, purchases, redemptions or retirements of stock, warrants, rights or
options and such other distributions, together with voluntary repayments in
respect of subordinated debt, which are subject to the restrictions set forth in
the loan agreements.
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<PAGE> 52
The loan agreements permit restricted payments, if those restricted
payments, together with all patronage refunds payable in cash and all cash
dividends on Class B Stock and Class C Stock, declared or made during the period
from and after December 31, 1991 to and including the date of the declaration or
making of the restricted payment do not exceed the sum of
(A) $15,000,000; and
(B) 50% of consolidated adjusted net income (within the meaning of those
agreements) (or minus 100% of consolidated adjusted net income in the
case of a deficit) for the period commencing on January 1, 1992 and
ending on the last day of NCB's fiscal year most recently ended on such
date, all computed on a cumulative basis for that entire period.
CONSOLIDATION, MERGER OR SALE
Each indenture generally permits a consolidation or merger between NCB and
another corporation. They also permit NCB to sell all or substantially all of
its property and assets. If this happens, the remaining or acquiring corporation
shall assume all of NCB's responsibilities and liabilities under the indentures
including the payment of all amounts due on the debt securities and performance
of the covenants in the indentures.
However, NCB will only consolidate or merge with or into any other
corporation or sell all or substantially all of its assets according to the
terms and conditions of the indentures. The remaining or acquiring corporation
will be substituted for NCB in the indentures with the same effect as if it had
been an original party to the indenture. Thereafter, the successor corporation
may exercise NCB's rights and powers under any indenture, in NCB's name or in
its own name. Any act or proceeding required or permitted to be done by NCB's
board of directors or any of its officers may be done by the board or officers
of the successor corporation. If NCB merges with or into any other corporation
or sells all or substantially all of its assets, it shall be released from all
liabilities and obligations under the indentures and under the debt securities.
(Sections 801 and 802)
MODIFICATION OF INDENTURES
Under each indenture, NCB's rights and obligations and the rights of the
holders may be modified with the consent of the holders of 66 2/3% of the
aggregate principal amount of the outstanding Debt Securities of each series
affected by the modification. No modification of the principal or interest
payment terms, and no modification reducing the percentage required for
modifications, is effective against any holder without its consent. (Sections
901 and 902)
EVENTS OF DEFAULT
Each indenture provides that an "event of default" regarding any series of
debt securities will be any of the following:
- failure to pay interest or additional amounts on any debt security of
such series for 30 days;
- failure to pay the principal or any premium on any debt security of such
series when due;
- failure to deposit any sinking fund payment when due by the terms of a
debt security of such series;
- failure to perform any other covenant in the indenture that continues for
60 days after being given written notice;
- failure to make any payment of any amount owing under any of the Class A
Notes when and as due;
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<PAGE> 53
- acceleration of the debt securities of any other series or any other
indebtedness for borrowed money of NCB exceeding $10,000,000 in an
aggregate principal amount and such acceleration shall not have been
rescinded or annulled or such indebtedness shall not have been discharged
within a period of 30 days after being given written notice;
- failure to pay, bond or discharge any uninsured judgment in excess of
$10,000,000 within 60 days which is not stayed, appealed or otherwise
challenged in good faith;
- certain events involving bankruptcy, insolvency or reorganization of NCB;
or
- any other event of default included in any indenture or supplemental
indenture. (Section 501)
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities issued under an indenture. The trustee may withhold notice to the
holders of debt securities of any default (except in the payment of principal,
interest, additional amounts or a sinking fund installment) if it considers such
withholding of notice to be in the best interests of the holders. (Section 602)
If an event of default for any series of debt securities occurs and
continues, the trustee or the holders of at least 25% in aggregate principal
amount of the debt securities of the series may declare the entire principal of
all the debt securities of that series to be due and payable immediately. If
this happens, subject to certain conditions, the holders of a majority of the
aggregate principal amount of the debt securities of that series can void the
declaration. (Section 502)
Other than its duties in case of a default, a trustee is not obligated to
exercise any of its rights or powers under any indenture at the request, order
or direction of any holders, unless the holders offer the trustee reasonable
indemnity. (Section 601) If they provide this reasonable indemnification, the
holders of a majority in principal amount of any series of debt securities may
direct the time, method and place of conducting any proceeding or any remedy
available to the trustee, or exercising any power conferred upon the trustee,
for any series of debt securities. (Section 512)
COVENANTS
Under the indentures, NCB will agree to:
- pay the principal, interest, any premium and any additional amounts on
the debt securities when due;
- maintain a place of payment;
- deliver a report to the trustee within 120 days after the end of each
fiscal year certifying as to the absence of events of default and to
NCB's compliance with the terms of the indentures; and
- deposit sufficient funds with any paying agent on or before the due date
for any principal, interest, any premium or any additional amounts.
PAYMENT AND TRANSFER
Principal, interest and any premium on fully registered securities will be
paid at designated places. Payment will be made by check mailed to the persons
in whose names the debt securities are registered on days specified in the
indentures or any prospectus supplement. Debt securities payments in other forms
will be paid at a place designated by NCB and specified in a prospectus
supplement. (Section 307)
Fully registered securities may be transferred or exchanged at the
corporate trust office of the Trustee or at any other office or agency
maintained by NCB for such purposes, without the payment of any service charge
except for any tax or governmental charge. (Section 305)
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GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global certificates that will be deposited with a depositary
identified in a prospectus supplement. Unless it is exchanged in whole or in
part for debt securities in definitive form, a global certificate may generally
be transferred only as a whole unless it is being transferred to certain
nominees of the depositary. (Section 203)
Unless otherwise stated in any prospectus supplement, The Depository Trust
Company, New York, New York ("DTC") will act as depositary. Beneficial interests
in global certificates will be shown on, and transfers of global certificates
will be effected only through records maintained by DTC and its participants.
DEFEASANCE
NCB will be discharged from its obligations on the debt securities of any
series at any time if it deposits with the trustee sufficient cash or government
securities to pay the principal, interest, any premium and any other sums due to
the stated maturity date or a redemption date of the debt securities of the
series and any sinking fund payments applicable to the debt securities of that
series. NCB must also deliver to the trustee an opinion of counsel to the effect
that the holders of the debt securities of that series will have no federal
income tax consequences as a result of such deposit. If this happens, the
holders of the debt securities of the series will not be entitled to the
benefits of the applicable debt indenture except for the right to receive
additional amounts (if not already deposited with the trustee) and except for
registration of transfer and exchange of debt securities and replacement of
lost, stolen or mutilated debt securities. (Section 402)
THE TRUSTEE
Bank One Trust Company, N.A. will be the trustee under the indentures. The
trustee and its affiliates may have other relations with NCB in the ordinary
course of business.
The occurrence of any default under the senior indenture and the
subordinated indenture could create a conflicting interest for the trustee under
the Trust Indenture Act. If such default has not been cured or waived within 90
days after the trustee has or acquired a conflicting interest, the trustee would
generally be required by the Trust Indenture Act to eliminate such conflicting
interest or resign as trustee with respect to the debt securities issued under
the senior indenture or with respect to the subordinated debt securities issued
under the subordinated indenture. In the event of the trustee's resignation, NCB
shall promptly appoint a successor trustee with respect to the affected
securities.
The Trust Indenture Act also imposes certain limitations on the right of
the trustee, as a creditor of NCB, to obtain payment of claims in certain cases,
or to realize on certain property received in respect to any such claim or
otherwise. The trustee will be permitted to engage in other transactions with
NCB, provided that if it acquires a conflicting interest within the meaning of
Section 310 of the Trust Indenture Act, it must generally either eliminate such
conflict or resign.
DESCRIPTION OF PREFERRED STOCK
The following briefly summarizes the material terms of NCB's preferred
stock, other than pricing and related terms, which will be disclosed in a
prospectus supplement together with any changes in any applicable law relating
to the preferred stock. You should read the particular terms of any series of
preferred stock offered by NCB, which will be described in more detail in any
prospectus supplement relating to such series, together with the NCCBA and the
more detailed provisions of NCB's bylaws and the certificate of designation
relating to each particular series of preferred stock
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for provisions that may be important to you. The NCCBA and NCB's bylaws are
filed as an exhibit to the registration statement of which this prospectus forms
a part. The certificate of designation with respect to any series of preferred
stock will be filed with the SEC as an exhibit to a document incorporated by
reference in this prospectus concurrently with the offering of such preferred
stock. The prospectus supplement will also state whether any of the terms
summarized below do not apply to the series of preferred stock being offered.
GENERAL
Under the NCCBA, NCB is authorized to issue classes of capital stock with
such rights, powers, privileges, and preferences of the separate classes as may
be specified, not inconsistent with law, in the bylaws of NCB. Prior to issuing
any preferred stock, the Board of Directors of NCB will amend NCB's bylaws to
expressly authorize the issuance of preferred stock. That amendment will require
the consent of some of NCB's lenders. After the bylaws are amended, the Board of
Directors of NCB will be authorized, except as otherwise stated in the NCCBA, to
issue shares of preferred stock in one or more series, and to establish from
time to time a series of preferred stock with the following terms specified:
- the number of shares to be included in the series;
- the designation, powers, preferences and rights of the shares of the
series; and
- the qualifications, limitations or restrictions of such series.
Prior to the issuance of any series of preferred stock, the Board of
Directors of NCB will adopt resolutions creating and designating the series as a
series of preferred stock and the resolutions will be filed in a certificate of
designation as an amendment to the bylaws.
The preferred stock will be, when issued, fully paid and nonassessable.
Holders of preferred stock will not have any preemptive or subscription rights
to acquire more stock of NCB.
The transfer agent, registrar, dividend disbursing agent and redemption
agent for shares of each series of preferred stock will be named in the
prospectus supplement relating to such series.
The rights of holders of the offered preferred stock may be adversely
affected by the rights of holders of any shares of preferred stock that may be
issued in the future. The board of directors may cause shares of preferred stock
to be issued in public or private transactions for any proper corporate purpose.
RANK
Unless otherwise specified in the prospectus supplement relating to the
shares of any series of preferred stock, such shares will rank on an equal basis
with each other series of preferred stock and prior to the common stock as to
dividends and distributions of assets.
So long as any Class A Notes are outstanding, the Class A Notes will rank
prior to the preferred stock as to dividends, interest payments and upon
liquidation or dissolution.
DIVIDENDS
Holders of each series of preferred stock will be entitled to receive cash
dividends, when, as and if declared by the board of directors of NCB out of
funds legally available for dividends. The rates and dates of payment of
dividends will be set forth in the prospectus supplement relating to each series
of preferred stock. Dividends will be payable to holders of record of preferred
stock as they appear on the books of NCB on the record dates fixed by the board
of directors. Dividends on any series of preferred stock may be cumulative or
noncumulative.
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Pursuant to certain loan agreements to which NCB is a party, NCB may not
declare or pay any dividends, either in cash or property, on any series of
preferred stock unless those payments are out of funds that are at the time
available for "restricted payments." See "Description of Debt Securities --
Subordination -- Certain Limitations in Respect of Subordinated Debt Securities"
for the definition of "restricted payments" as well as for a discussion relating
to limitations on NCB's ability to make such payments.
NCB may not declare, pay or set apart for payment dividends on the
preferred stock unless full dividends on any other series of preferred stock
that ranks on an equal or senior basis have been paid or sufficient funds have
been set apart for payment for
- all prior dividend periods of the other series of preferred stock that
pay dividends on a cumulative basis; or
- the immediately preceding dividend period of the other series of
preferred stock that pay dividends on a noncumulative basis.
Partial dividends declared on shares of preferred stock and any other
series of preferred stock ranking on an equal basis as to dividends will be
declared pro rata. A pro rata declaration means that the ratio of dividends
declared per share to accrued dividends per share will be the same for both
series of preferred stock.
Similarly, NCB may not declare, pay or set apart for payment non-stock
dividends or make other payments on the common stock or any other stock of NCB
ranking junior to the preferred stock until full dividends on the preferred
stock have been paid or set apart for payment for
- all prior dividend periods if the preferred stock pays dividends on a
cumulative basis; or
- the dividend period established in the certificate of designation for
each series of preferred stock if the preferred stock pays dividends on a
noncumulative basis.
Under the NCCBA, NCB may not pay any dividend on any class of stock,
including the preferred stock which may be offered by this prospectus and any
prospectus supplement, at a rate greater than the statutory interest rate
payable on the Class A Notes. Although there has been no court or agency
interpretation of that limitation, NCB has consistently interpreted that
limitation to be the weighted average of the then-current interest rates
applicable to the four outstanding Class A Notes (with the weighting based on
outstanding principal amount). As of the date of this prospectus, the statutory
interest rate payable on the Class A Notes (based on the weighted average) was
an annual rate of 6.18%. For more information, see "National Consumer
Cooperative Bank -- Class A Notes" on page 10. NCB is currently seeking an
amendment to the NCCBA that would eliminate this limitation on dividends. There
is, of course, no assurance that the NCCBA will be amended.
Pursuant to Section 3014(c) of the NCCBA, without the approval of the
Secretary of the Treasury, NCB may not pay any dividend or distribution on, or
make any redemption or repurchase of, any class of stock, including the
preferred stock, at any time when the deferred interest payments on Class A
Notes have not been paid in full, together with any unpaid interest on such
notes.
CONVERSION OR EXCHANGE
The prospectus supplement for any series of preferred stock will state the
terms, if any, on which shares of that series are convertible into shares of
another series of preferred stock of NCB. The preferred stock will not be
convertible into or exchangeable for shares of NCB's common stock.
If so determined by the board of directors of NCB, the holders of shares of
preferred stock of any series may be obligated at any time or at maturity to
exchange such shares for preferred stock or
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debt securities of NCB. The terms of any such exchange and any such preferred
stock or debt securities will be described in the prospectus supplement relating
to such series of preferred stock.
REDEMPTION
If so specified in the applicable prospectus supplement, a series of
preferred stock may be redeemable at any time, in whole or in part, at the
option of NCB or the holder thereof and may be mandatorily redeemed.
Any partial redemptions of preferred stock will be made in a way that the
Board of Directors decides is equitable.
Unless NCB defaults in the payment of the redemption price, dividends will
cease to accrue after the redemption date on shares of preferred stock called
for redemption and all rights of holders of such shares will terminate except
for the right to receive the redemption price.
Pursuant to certain loan agreements to which NCB is a party, NCB may not
purchase, redeem or retire preferred stock issued pursuant to this prospectus
except:
- in exchange for other capital stock of NCB;
- out of the proceeds of a substantially concurrent issue and sale of
capital stock; or
- out of funds that are at the time available for "restricted payments"
under those agreements.
See "Description of Debt Securities -- Subordination -- Certain Limitations in
Respect of Subordinated Debt Securities" for a definition of "restricted
payments" as well as for a discussion relating to limitations on NCB's ability
to make such payments.
In addition, as discussed above, without the approval of the Secretary of
the Treasury, NCB may not make any redemption or repurchase of, any class of
stock, including the preferred stock, at any time when the deferred interest
payments on Class A Notes shall not have been paid in full, together with any
unpaid interest on such notes.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
NCB, holders of each series of preferred stock will be entitled to receive
distributions upon liquidation in the amount set forth in the prospectus
supplement relating to such series of preferred stock. Such distributions will
be made before any distribution is made on any securities ranking junior
relating to liquidation, including common stock.
If the liquidation amounts payable relating to the preferred stock of any
series and any other securities ranking on a parity regarding liquidation rights
are not paid in full, the holders of the preferred stock of such series and such
other securities will share in any such distribution of available assets of NCB
on a ratable basis in proportion to the full liquidation preferences. Holders of
such series of preferred stock will not be entitled to any other amounts from
NCB after they have received their full liquidation preference.
Pursuant to the NCCBA, upon any liquidation or dissolution of NCB, the
holder of Class A Notes shall be entitled to receive out of the assets of NCB
available for distribution to its stockholders, prior to any payment to the
holders of any class of stock of NCB, including the preferred stock, an amount
not less than the aggregate face value of all Class A Notes outstanding, plus
all accrued and unpaid interest payments accrued thereon to and including the
date of payment (together with all unpaid interest thereon).
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VOTING RIGHTS
The holders of shares of preferred stock will have no voting rights,
except:
- as otherwise stated in the prospectus supplement;
- as otherwise stated in the certificate of designation establishing such
series; or
- as required by applicable law.
NCB is a savings and loan holding company within the meaning of the Home
Owners' Loan Act by virtue of its control of NCB Savings Bank, FSB. The Change
in Bank Control Act and the savings and loan holding company provisions of the
Home Owners' Loan Act, together with the regulations of the Office of Thrift
Supervision under such acts, require that the consent of the Office of Thrift
Supervision be obtained prior to any person or company acquiring control of a
savings association or a savings and loan holding company. Under regulations of
the Office of Thrift Supervision, "control" is conclusively presumed to exist if
an individual or company acquires more than 25% of any class of voting stock of
the savings association or savings and loan holding company. Control is
rebuttably presumed to exist if a person acquires more than 10% of any class of
voting stock (or more than 25% of any class of non-voting stock) and is subject
to any of several "control factors." If the holders of a series of preferred
stock become entitled to vote, the preferred stock of such series could be
deemed to be a class of voting stock. Holders and potential holders of the
preferred stock will be responsible for complying with the applicable provisions
of the Change in Bank Control Act and Home Owners' Loan Act.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL
As of the date of this prospectus, NCB is authorized to issue 1,000,000
shares of Class B common stock, 300,000 shares of Class C common stock and
100,000 shares of Class D common stock, $100 par value, and up to $50 million in
obligations, in addition to the Class A Notes, that would be subordinate to
NCB's senior debt. The Board of Directors of NCB will adopt resolutions
authorizing the issuance and sale of preferred stock prior to issuing any
preferred stock. In addition, in order to issue preferred stock, the Board of
Directors must also amend the bylaws of NCB to expressly authorize the issuance
of preferred stock. The following is a summary of certain rights and privileges
of the common stock. You should read the more detailed provisions of the NCCBA
and NCB's bylaws for provisions that may be important to you.
NCB's voting stock is not traded on any market. NCB is structured as a
cooperative institution whose voting stock can only be owned by its members or
those eligible to become its members.
NCB currently has three classes of stock outstanding whose rights are
summarized below:
OUTSTANDING CLASS B COMMON STOCK
At September 30, 1999, NCB had outstanding 1,000,005 shares of Class B
common stock, $100 par value. All shares of Class B common stock are held by
borrowers or entities eligible to borrow from NCB. A subsidiary of NCB, NCB
Capital Corporation, holds 2.74% of NCB's Class B common stock.
The NCCBA permits Class B stock to be held only by borrowers of NCB and
requires each borrower to hold Class B stock at the time the loan is made whose
par value is equal to 1% of its loan amount. The NCCBA prohibits NCB from paying
dividends on Class B stock. There are two series of Class B stock. Class B-1
stock is Class B stock purchased for cash at par value on or after June 29,
1984, while Class B-2 stock is all other Class B stock. Class B stock is
transferable to another eligible holder only with the approval of NCB. NCB does
not permit any transfers of
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Class B-2 stock and permits only such transfers, at the stock's $100 par value,
of Class B-1 stock as are required to permit new borrowers to obtain their
required holdings of Class B stock. In each instance, NCB specifies which
holder(s) are permitted to transfer their stock to the new borrower, based upon
which Class B stockholders with holdings of such stock beyond that required to
support their loans have held such stock for the longest time. NCB will also
repurchase, at par value, any shares of Class B stock that it is required to
repurchase from holders by the terms of the contracts under which such stock was
originally sold by NCB. At December 31, 1998, the stock required to be
repurchased was approximately $105,000.
OUTSTANDING CLASS C COMMON STOCK
At September 30, 1999, NCB had outstanding 223,807 shares of Class C common
stock, $100 par value. All shares of Class C common stock are held by borrowers
or entities eligible to borrow from NCB. No affiliates of NCB hold any of NCB's
Class C common stock.
The NCCBA permits Class C stock to be held only by cooperatives eligible to
borrow from NCB. The NCCBA allows NCB to pay dividends on Class C stock, but so
long as any Class A Notes are outstanding, limits dividends on Class C stock (or
any other NCB stock) to the interest rate payable on such notes, which was a
weighted average interest rate of 6.18% as of the date of this prospectus. In
1994, NCB adopted a policy under which annual cash dividends on Class C stock of
up to 2 percent of NCB's net income may be declared. The policy does not provide
any specific method to determine the amount, if any, of such dividend. Whether
any such dividends will be declared and if so, in what amount accordingly rests
within the discretion of NCB's Board of Directors. The Board declared an initial
cash dividend of 83 cents per share of Class C stock, payable on June 30, 1996
to holders of record as of March 31, 1996. On April 24, 1997, the Board declared
a cash dividend of $1.02 per share of Class C stock payable on or before June
30, 1997 to holders of record as of March 31, 1997. On April 23, 1998, the Board
declared a cash dividend of $1.13 per share of Class C stock payable on or
before June 30, 1998 to holders of record as of March 31, 1998. In November
1996, the Board approved a dividend de minimus provision which states that Class
C stock dividends shall not be distributed to a stockholder until such time as
the cumulative amount of the dividend payable to the stockholder is equal to, or
exceeds, twenty-five dollars ($25.00) unless specifically requested by the
stockholder. Class C stock is transferable to another eligible holder only with
the approval of NCB.
OUTSTANDING CLASS D COMMON STOCK
At September 30, 1999, NCB had outstanding 3 shares of Class D common
stock, $100 par value, which is non-voting. No affiliates of NCB hold any of
NCB's Class D common stock.
Class D stock is non-voting stock that may be held by any person. Only
three shares are outstanding and NCB has no present intention to issue any
additional shares of such stock. The NCCBA permits NCB to pay dividends on Class
D stock but NCB has no present intention to declare any such dividends. Class D
stock is transferable only with the approval of NCB. No requests for approval of
such transfers have been made to NCB.
VOTING RIGHTS
Only holders of NCB's Class B and Class C stock have voting rights, and
they vote as one class under the terms of the weighted voting system adopted by
NCB to comply with the NCBAA. The NCB bylaws and voting policy provide that (a)
each stockholder of record who is also a borrower from NCB, referred to as a
"borrower-stockholder," is entitled to five votes, (2) each borrower-
stockholder is entitled to additional votes, up to a total of 120, based on a
formula measuring the proportion that such borrower-stockholder's patronage with
NCB bears to the total patronage during a
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period of time fixed by the election rules, and (3) each stockholder who is not
a borrower from NCB shall receive one vote, and non-borrower stockholders as a
class shall receive at least 10% of the votes allocated.
The bylaws and voting policy further provide that, notwithstanding any
allocations of votes which would otherwise result from the foregoing rules (1)
no stockholder shall be entitled to more than 5% of the total voting control
held by all stockholders, (2) the total votes allocated to any class of
cooperatives shall not exceed 45% of the total, and (3) no stockholder which is
a "developing cooperative" shall be entitled to more than five votes. A
developing cooperative is defined as a cooperative that is in a developmental or
fledgling state of operation and that does not have members who are ultimate
consumers or primary producers.
NCB has reserved the right to alter its voting policy at any time to comply
with the requirement of the Act that its voting system should not result in: (1)
voting control of NCB becoming concentrated with larger, more affluent or
smaller, less affluent organizations, (2) a disproportionate concentration of
votes in any housing cooperatives or low-income cooperatives or consumer goods
and services cooperatives, or (3) the concentration of more than 5% of the
voting control in any one Class B or Class C stockholder.
NCB may refuse to honor any stockholder's voting rights, except to the
extent of one vote, if the stockholder is more than 90 days late on any payment
to NCB at the time such rights would otherwise be exercised.
TRADING MARKET
There is no established public trading market for any class of NCB's common
equity, and it is unlikely that any such market will develop in view of the
restrictions on transfer of NCB's stock discussed above. Holders of Class B
stock may use such stock to meet the Class B stock ownership requirements
established in the NCCBA for borrowers from NCB and may be permitted by NCB,
within the limits set forth above, to transfer Class B stock to another borrower
from NCB.
As of September 30, 1999, there were 1,471 holders of Class B stock, 399
holders of Class C stock, and 3 holders of Class D stock.
PATRONAGE REFUNDS
Under the NCCBA, NCB must make annual patronage refunds to its patrons,
which are those cooperatives from whose loans or other business NCB derived
interest or other income during the year with respect to which a patronage
refund is declared. NCB allocates its patronage refunds among its patrons
generally in proportion to the amount of income derived during the year from
each patron. NCB stockholders, as such, are not entitled to any patronage
refunds. They are entitled to patronage refunds only in the years when they have
patronized NCB, and the amount of their patronage does not depend on the amount
of their stockholding. Under the NCCBA, patronage refunds may be paid only from
taxable income and only in the form of cash, Class B or Class C stock, or
allocated surplus.
Under NCB's current patronage refund policy that became effective in 1995
and has been amended from time to time since it became effective, NCB makes the
non-cash portion of the refund in the form of Class B stock until a patron has
holdings of Class B or Class C stock of 16% of its loan amount and thereafter in
Class C stock. Under the current patronage refund policy, NCB intends to pay a
higher percentage of the patronage refund in cash to those patrons who have
greater holdings of Class B and Class C stock in proportion to their loan
amount. NCB generally intends to pay a minimum of 40% of the patronage refund in
cash to those patrons with stock holdings less than 5% of their loan amount and
up to 60% to those patrons with stock holdings of 10% or more of their
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loan amount. There can however, be no assurance that a cash patronage refund of
any amount will be declared for any year.
NCB declared a patronage refund for the year ended December 31, 1998 of
approximately $12.9 million of which approximately $4.9 million was distributed
in cash and $8.0 million in Class B or Class C stock in August 1999. The chart
below sets forth the details of this patronage refund.
<TABLE>
<S> <C>
Total Patronage...................................... $12,896,060.90
Cash:................................................ $ 4,896,285.65
Class B/Class C...................................... $ 7,999,775.25
</TABLE>
PLAN OF DISTRIBUTION
NCB may sell the offered securities (1) through agents; (2) to or through
underwriters or dealers; (3) directly to one or more purchasers; or (4) through
a combination of any of these methods of sale.
The prospectus supplement relating to an offering of offered securities
will set forth the terms of such offering, including:
- the name or names of any underwriters, dealers or agents;
- the purchase price of the offered securities and the proceeds to NCB from
such sale;
- any underwriting discounts and commissions or agency fees and other items
constituting underwriters' or agents' compensation;
- the initial public offering price;
- any discounts or concessions to be allowed or reallowed or paid to
dealers; and
- any securities exchanges on which such offered securities may be listed.
Any initial public offering prices, discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
BY AGENTS
Offered securities may be sold through agents designated by NCB. Any agent
involved in the offer or sale of the offered securities in respect of which this
prospectus is delivered will be named, and any commissions payable by NCB to
such agent will be set forth, in the prospectus supplement relating to that
offering. Unless otherwise indicated in such prospectus supplement, the agents
will agree to use their reasonable best efforts to solicit purchases for the
period of their appointment.
BY UNDERWRITERS
If underwriters are used in the offering, the offered securities will be
acquired by the underwriters for their own account. The underwriters may resell
the securities from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The securities may be either offered to the
public through underwriting syndicates represented by one or more managing
underwriters or by one or more underwriters without a syndicate. The obligations
of the underwriters to purchase the securities will be subject to certain
conditions. The underwriters will be obligated to purchase all the securities of
the series offered if any of the securities are purchased. Any initial public
offering price and any discounts or concessions allowed or re-allowed or paid to
dealers may be changed from time to time.
In connection with underwritten offerings of the offered securities and in
accordance with applicable law and industry practice, underwriters may
over-allot or effect transactions that stabilize, maintain or otherwise affect
the market price of the offered securities at levels above those that might
otherwise prevail in the open market, including by entering stabilizing bids,
effecting syndicate covering transactions or imposing penalty bids, each of
which is described below.
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- A stabilizing bid means the placing of any bid, or the effecting of any
purchase, for the purpose of pegging, fixing or maintaining the price of
a security.
- A syndicate covering transaction means the placing of any bid on behalf
of the underwriting syndicate or the effecting of any purchase to reduce
a short position created in connection with the offering.
- A penalty bid means an arrangement that permits the managing underwriter
to reclaim a selling concession from a syndicate member in connection
with the offering when offered securities originally sold by the
syndicate member are purchased in syndicate covering transactions.
These transactions may be effected in the over-the-counter market, or
otherwise. Underwriters are not required to engage in any of these activities,
or to continue such activities if commenced.
DIRECT SALES
Offered securities may also be sold directly by NCB. In this case, no
underwriters or agents would be involved.
GENERAL INFORMATION
NCB may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act of 1933, as amended, or to contribute with respect to
payments which the underwriters, dealers or agents may be required to make.
Each series of offered securities will be a new issue of securities and
will have no established trading market. Any underwriters to whom offered
securities are sold for public offering and sale may make a market in such
offered securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given that there will be a market for the offered securities.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, NCB or its subsidiaries in the ordinary course of their
businesses.
WHERE YOU CAN FIND MORE INFORMATION
NCB files annual, quarterly and current reports, proxy statements and other
information with the SEC. NCB has also filed with the SEC a registration
statement on Form S-3, to register the securities being offered by this
prospectus. This prospectus, which forms part of the registration statement,
does not contain all of the information included in the registration statement.
For further information about NCB and the securities offered in this prospectus,
you should refer to the registration statement and its exhibits.
You may read and copy any document filed by NCB with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the
Public Reference Room. NCB files its SEC materials electronically with the SEC,
so you can also review NCB's filings by accessing the web site maintained by
the SEC at http://www.sec.gov. This site contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC.
The SEC allows NCB to "incorporate by reference" the information it files
with them, which means that it can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus. Information that NCB files later
with the SEC will automatically update and supersede information in this
prospectus. In all cases, you should rely on the later information over
different information included in this
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prospectus or the prospectus supplement. NCB has previously filed the following
documents with the SEC and is incorporating them by reference into this
prospectus:
- Annual Report on Form 10-K for the year ended December 31, 1998; and
- Quarterly Reports on Form 10-Q, for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999.
NCB also incorporates by reference all documents filed by it with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
after the date of this prospectus and until NCB sells all of the securities
being offered by this prospectus.
You may request a copy of these filings at no cost, by writing or
telephoning NCB at the following address:
National Cooperative Bank
Attn: Richard L. Reed or William E. Seas
1401 Eye Street, N.W.
Suite 700
Washington, DC 20005
(202) 336-7700
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. NCB has not authorized
anyone else to provide you with different information. NCB is not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
LEGAL OPINIONS
Unless otherwise specified in the applicable prospectus supplement, Shea &
Gardner will issue an opinion about the legality of the offered securities for
NCB. Unless otherwise specified in the applicable prospectus supplement, any
underwriters will be advised about certain issues relating to any offering by
Brown & Wood LLP.
EXPERTS
The audited financial statements for the years ended December 31, 1998 and
December 31, 1997 incorporated by reference in this prospectus and elsewhere in
the registration statement, have been audited by Arthur Andersen LLP independent
public accountants, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
The financial statements for the year ended December 31, 1996, incorporated
by reference in this prospectus and elsewhere in the registration statement,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports incorporated by reference herein and elsewhere in the registration
statement, and are included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
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