<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333 53647
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 27, 1998)
$400,000,000
HSBC AMERICAS, INC. LOGO
MEDIUM-TERM SENIOR NOTES
DUE ON A DATE MORE THAN NINE MONTHS FROM DATE OF ISSUE
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HSBC Americas, Inc. ("HSBC Americas" or the "Corporation") may from time to
time offer and sell up to $400,000,000 in aggregate initial offering price of
its Medium-Term Senior Notes (the "Notes"), subject to reduction from time to
time after the date hereof at the option of HSBC Americas, including reduction
as a result of the sale of other Debt Securities or Preferred Stock (each as
defined in the accompanying Prospectus). The Notes will rank equally with all
other unsubordinated and unsecured indebtedness of the Corporation. See
"DESCRIPTION OF DEBT SECURITIES -- General" in the accompanying Prospectus.
Each Note will mature on a day more than nine months from its date of issue
and, as set forth in an applicable pricing supplement to this Prospectus
Supplement (a "Pricing Supplement"), may be subject to redemption at the option
of the Corporation or repaid at the option of the holder thereof prior to its
stated maturity. Except as otherwise provided in the applicable Pricing
Supplement, each Note will bear interest at a fixed rate (a "Fixed Rate Note")
or at a floating rate (a "Floating Rate Note"), as set forth in the applicable
Pricing Supplement. The interest rate or interest rate formula for each Note
will be established by the Corporation at the time of issuance of such Note (the
"Original Issue Date") and will be set forth therein and specified in the
applicable Pricing Supplement. See "DESCRIPTION OF NOTES."
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be issued only in minimum denominations of $1,000 and any integral multiple
in excess thereof, and Notes will be issued in book-entry form only, subject to
certain exceptions listed herein, and will be represented by one or more global
notes registered in the name of The Depository Trust Company ("DTC") or its
nominee. Beneficial interests in Notes issued in book-entry form will be shown
on, and transfer thereof will be effected only through, records maintained by
DTC or its nominee and its participants. See "DESCRIPTION OF NOTES -- Book-Entry
System."
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THE NOTES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS, ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANKING OR NONBANKING AFFILIATE OF HSBC AMERICAS, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
HERETO, OR THE PROSPECTUS TO WHICH THEY RELATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO AGENT'S DISCOUNTS OR PROCEEDS TO THE
PUBLIC(1) COMMISSIONS(2)(3) CORPORATION (2)(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note....................... 100% .125%-.750% 99.250%-99.875%
Total.......................... $400,000,000 $500,000-$3,000,000 $397,000,000-$399,500,000
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, each Note
will be issued at 100% of its principal amount.
(2) The Corporation will pay a commission to HSBC Securities, Inc., Lehman
Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated or Salomon Brothers Inc, (each an "Agent" and together, the
"Agents") which, unless otherwise negotiated, will range from .125% to .750%
of the principal amount of the Note (depending on its stated maturity date),
for any Note sold through an Agent on an agency basis. The Corporation may
also sell Notes at a discount to an Agent, as principal, for resale to
investors and other purchasers. Unless otherwise specified in an applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased
by such Agent at a price equal to 100% of the principal amount thereof less
a percentage of the principal amount equal to the commission applicable to
an agency sale of a Note of identical maturity. See "PLAN OF DISTRIBUTION."
(3) The Corporation has also agreed to indemnify the Agents against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(4) Before deducting expenses payable by the Corporation estimated at $600,000,
including reimbursement of certain expenses of the Agents.
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The Notes are being offered on a continuing basis in series (each series of
Notes to be separately identified in the applicable Pricing Supplement) by the
Corporation through the Agents, each of which has agreed to use its reasonable
efforts to solicit offers to purchase the Notes. The Corporation also may sell
Notes to any Agent acting as principal for resale to investors or other
purchasers. The Notes will not be listed on any securities exchange, and there
can be no assurance that the Notes offered by this Prospectus Supplement will be
sold or that a secondary market for the Notes will develop or that there will be
liquidity in the secondary market if one develops. The Corporation reserves the
right to withdraw, cancel or modify the offer made hereby without notice. The
Corporation or any Agent, if it solicits an offer on an agency basis, may reject
any offer to purchase Notes, whether or not solicited, in whole or in part. See
"PLAN OF DISTRIBUTION." This Prospectus Supplement also is to be used by HSBC
Securities, Inc. ("HSI"), a broker-dealer and an affiliate of the Corporation,
in connection with offers and sales related to secondary market transactions in
the Notes. HSI or its affiliates may act as principal or agent in such
transactions. Any such sales will be made at negotiated prices relating to
prevailing market prices at the time of sale or otherwise.
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HSBC MARKETS
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
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THE DATE OF THIS PROSPECTUS SUPPLEMENT IS AUGUST 21, 1998.
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CERTAIN PERSONS PARTICIPATING IN THE OFFERING MADE HEREBY MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
SUCH NOTES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION".
The Notes are unsecured debt securities which have been registered on Form
S-3 with the Securities and Exchange Commission under Registration No.
333-53647. The issuance of the Notes hereunder will leave $350,000,000 aggregate
initial offering price of unallocated Debt Securities or Preferred Stock which
may be issued under such registration statement.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes supplements,
and to the extent inconsistent therewith, replaces, the description of the
general terms and provisions of the Debt Securities set forth under the heading
"DESCRIPTION OF DEBT SECURITIES" in the accompanying Prospectus. The following
description will apply to all the Notes unless otherwise specified in the
Pricing Supplement with respect to an issue of Notes.
GENERAL
The Notes will be limited to $400,000,000 in aggregate initial offering
price, subject to reduction from time to time after the date hereof at the
option of HSBC Americas, including reduction as a result of the sale of other
Debt Securities or Preferred Stock. The Notes will be "Senior Securities" as
described in the accompanying Prospectus. Notes with identical terms shall
constitute a separate series of Debt Securities issued under the Indenture with
respect to Senior Securities dated as of October 24, 1996 between the
Corporation and Bankers Trust Company, as Trustee (the "Trustee") (such
Indenture, as it may be amended from time to time, is referred to in this
Prospectus Supplement as the "Indenture," and in the accompanying Prospectus as
the "Senior Indenture" and collectively with the Subordinated Indenture (as
defined therein) the "Indentures").
The Notes will be unsecured and unsubordinated obligations of the
Corporation and will rank equally with all unsecured senior debt of the
Corporation. The Corporation had issued and outstanding $4.5 billion of senior
debt instruments and $1.1 billion of subordinated debt instruments at June 30,
1998. The Corporation's subsidiaries had issued and outstanding $3.6 billion of
senior debt instruments and $1.1 billion of subordinated debt instruments at
June 30, 1998. As of June 30, 1998, the Corporation had $4.2 billion of
commercial paper and other short-term notes payable outstanding. During the six
months ended June 30, 1998, the amount of the Corporation's commercial paper and
other short-term notes payable outstanding averaged $3.8 billion and ranged from
a high of $4.4 billion to a low of $3.3 billion. At June 30, 1998, the
Corporation had unused lines of credit aggregating $300 million, principally to
support commercial paper borrowings. There is no limitation in the Indenture on
the amount of Senior Indebtedness, Debt Securities or other obligations which
may be issued by the Corporation.
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will be issuable in denominations of $1,000 and integral multiples in excess
thereof and will be issued in fully registered book-entry form only represented
by one or more global securities registered in the name of DTC or its nominee.
Generally, owners of beneficial interests in Notes issued in book-entry form
will not be entitled to physical delivery of notes in certificated form and will
not be considered the holders thereof. With respect to Notes issued in book-
entry form, all references herein to "registered holders," "Registered Holders,"
"holders" or "Holders" will be to DTC or its nominee and not to owners of
beneficial interests in such Notes. See "DESCRIPTION OF NOTES -- Book-Entry
System."
Interest rates offered by the Corporation with respect to Notes may differ
depending upon, among other things, the aggregate principal amount purchased in
a single transaction.
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The Notes will be offered on a continuing basis and will mature on a day
more than nine months from their date of issue, as selected by the purchaser
thereof and agreed to by the Corporation. In addition, Floating Rate Notes will
mature on an Interest Payment Date (as hereinafter defined). Unless otherwise
specified in the applicable Pricing Supplement, "Business Day" with respect to
any Note means any day, other than a Saturday or Sunday or a legal holiday in
New York, New York, that (i) is not a day on which banking institutions or trust
companies in New York, New York are authorized or obligated by law to be closed
and (ii) if such Note is a LIBOR Note (as hereinafter defined), is a London
Banking Day. "London Banking Day" with respect to any Note means any day on
which dealings in deposits in U.S. dollars are transacted in the London
interbank market.
The Pricing Supplement relating to a Note will describe the following
terms: (i) whether such Note is a Fixed Rate Note or a Floating Rate Note; (ii)
the price (expressed as a percentage of the aggregate principal amount thereof)
at which such Note will be issued; (iii) the Original Issue Date; (iv) the
Stated Maturity Date and, if applicable, whether such Stated Maturity Date may
be renewed at the option of the holder or extended by the Corporation, and if
so, the Final Maturity Date (as hereinafter defined) and other terms with
respect thereto; (v) if such Note is a Fixed Rate Note and bears interest by its
terms prior to the Stated Maturity Date, the rate per annum at which such Note
will bear interest; (vi) if such Note is a Floating Rate Note and bears interest
by its terms prior to the Stated Maturity Date, the Base Rate, the Initial
Interest Rate, the Interest Rate Reset Period, the Interest Rate Reset Dates,
the Interest Payment Dates, the Index Maturities, the Maximum Interest Rate, if
any, the Minimum Interest Rate, if any, the Spread and/or Spread Multiplier, if
any (each as hereinafter defined), and any other terms relating to the
particular method of calculating the interest rate for such Note; (vii) whether
the Note is a Discount Security (defined in the Indenture as a Debt Security
that is issued with "original issue discount" within the meaning of Section
1273(a) of the Internal Revenue Code of 1986 as in effect on the date of the
Indenture and the regulations thereunder and any other Debt Security designated
by the Corporation as issued with original issue discount for United States
Federal income tax purposes), and, if so, the yield to maturity; (viii) whether
such Note may be redeemed by the Corporation or repaid at the option of the
registered holder prior to its stated maturity date and, if so, the provisions
relating to such redemption or repayment; and (ix) any other terms of such Note
not inconsistent with the provisions of the applicable Indenture.
PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement: (i)
payments of principal of (and premium, if any) and any interest on Notes issued
in book-entry form will be made in accordance with the arrangements from time to
time in place between the Paying Agent (as hereinafter defined) and DTC or its
nominee, as holder (see "DESCRIPTION OF NOTES -- Book-Entry System"), and (ii)
payments of interest on Notes in certificated form, if any (other than interest
payable at the Maturity Date (as hereinafter defined)), generally will be made
by check mailed to the holders of such Notes as of the applicable record date at
the address of the holders appearing on the Security Register of the Corporation
with respect to such Notes. Unless otherwise specified in the applicable Pricing
Supplement, principal (and premium, if any) and any interest payable at the
Maturity Date of a Note issued in certificated form will be paid by wire
transfer of immediately available funds upon surrender of such Note at the
corporate trust office of the Paying Agent.
BOOK-ENTRY SYSTEM
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be issued in book-entry form represented by one or more global securities
in registered form (each, a "Global Note"). Unless otherwise specified in such
Pricing Supplement, each such Global Note will be held through DTC, as
depositary, and will be registered in the name of Cede & Co., as nominee of DTC.
The information under this heading concerning DTC and DTC's book-entry system
has been obtained from sources that the Corporation believes to be reliable, but
the Corporation takes no responsibility for the accuracy thereof.
Under the book-entry system of DTC, purchases of Notes represented by a
Global Note must be made by or through persons that have accounts with DTC ("DTC
Participants") or persons that may hold interests through DTC Participants
("Indirect Participants"). Upon the issuance of a Global Note, DTC will credit,
on
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its book-entry registration and transfer system, the respective principal
amounts of the individual Notes represented by such Global Note to the accounts
of DTC Participants as designated by the applicable Agent. The ownership of
beneficial interests in such Global Note will be shown on, and the transfer of
that ownership will be effected only through, records maintained by DTC (with
respect to interests of DTC Participants) and the records of DTC Participants
(with respect to interests of Indirect Participants) and Indirect Participants
(with respect to interests purchased through Indirect Participants). So long as
DTC or its nominee is the registered holder of a Global Note, DTC or its
nominee, as applicable, will be considered the sole owner or holder of the Notes
represented by such Global Note for all purposes under the applicable Indenture.
Except as provided below, owners of beneficial interests in a Global Note will
not be entitled to have Notes registered in their names, will not receive or be
entitled to receive physical delivery of such Notes in certificated form and
will not be considered the owners or holders thereof under the Indenture.
Accordingly, in order to exercise any rights of a holder of Notes under the
Indenture, each person owning a beneficial interest in the Global Note
representing the Notes must rely on the procedures of DTC or, if such person is
not a DTC Participant, on the procedures of the DTC Participant and, if
applicable, the Indirect Participant through which such person owns its
interest. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. Such
limits and laws may impair the ability to own, transfer or pledge beneficial
interests in a Global Note.
So long as DTC or its nominee is the registered holder of a Global Note,
Notes represented by such Global Note will trade in DTC's Same Day Fund
Settlement System, and secondary market trading activity in such Notes will
therefore be required by DTC to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in such Notes.
Except as otherwise provided herein, DTC or its nominee, as applicable, as
the registered holder of a Global Note shall be the only person entitled to
receive payments from the Corporation with respect to Notes represented by such
Global Note. Accordingly, payments of principal of (and premium, if any) and any
interest on individual Notes represented by such a Global Note will be made by
the Corporation only to DTC or its nominee, as applicable. DTC has advised the
Corporation and the Agents that it is DTC's practice to credit DTC Participants'
accounts on the payment date in accordance with their respective holdings with
respect to a Global Note as shown on DTC's records, unless DTC has reason to
believe that it will not receive payment on such date. Payments by DTC
Participants to beneficial owners are governed by standing instructions and
customary practices, as is the case with securities held in "street name." Such
instructions will be the responsibility of such DTC Participant and not of DTC,
the Agents or the Corporation, subject to any statutory or regulatory
requirements as may be in effect from time to time. The Corporation will in
every case be discharged by payment to, or to the order of, DTC or its nominee,
as applicable, as the registered holder of such Global Note, of the amount so
paid. Each of the persons shown in the records of DTC or its nominee as an owner
of a beneficial interest in such Global Note must look solely to DTC or its
nominee, as the case may be, for its share of any such payment so made by the
Corporation. Neither the Corporation, the Trustee, nor any paying agent or
authenticating agent nor the security registrar or transfer agent for such Notes
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of owners of beneficial interests in a Global
Note or for maintaining, supervising or reviewing any records relating to such
beneficial interests.
DTC has advised the Corporation and the Agents as follows: DTC is a
limited-purpose trust company organized under New York law, a "banking
organization" within the meaning of New York law, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code as in effect in the State of New York and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC was created to hold securities deposited by DTC
Participants and to facilitate the clearance and settlement of securities
transactions among DTC Participants in such securities through electronic
computerized book-entry changes in accounts of the DTC Participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
direct DTC Participants include securities brokers and dealers (including one or
more of the Agents), banks (including certain subsidiaries of the Corporation),
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) have ownership interests in DTC. DTC is
owned
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by a number of DTC Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Indirect access to DTC's book-entry system is also available to
Indirect Participants, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a DTC Participant,
either directly or indirectly. The rules applicable to DTC and DTC Participants
are on file with the Securities and Exchange Commission.
To facilitate subsequent transfers, all securities deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
securities with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of securities deposited with it; DTC's records reflect only the identity
of the DTC Participants to whose accounts such securities are credited, which
may or may not be the beneficial owners. The DTC Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC Participants, by
DTC Participants to Indirect Participants, and by DTC Participants and Indirect
Participants to beneficial owners, will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Neither DTC nor Cede & Co. will consent or vote with respect to
securities held by DTC. Under its usual procedures, DTC mails an omnibus proxy
to an issuer as soon as possible after the record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those DTC Participants to
whose accounts the securities are credited on the record date (identified in a
listing attached to the omnibus proxy).
DTC can act only on behalf of DTC Participants, who in turn act on behalf
of Indirect Participants. Owners of beneficial interests in a Global Note that
are not DTC Participants or Indirect Participants but desire to purchase, sell
or otherwise transfer ownership of such interests may do so only through DTC
Participants and Indirect Participants. In addition, the ability of owners of
beneficial interests in a Global Note to pledge such interests to persons or
entities that do not participate in the DTC system may be limited due to the
lack of certificates for the Notes.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial interests in Global Notes among DTC Participants, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time.
If DTC is at any time unwilling, unable or ineligible to continue as a
depositary with respect to the Notes and a successor depositary is not appointed
by the Corporation within 90 days, the Company will issue registered Notes in
certificated form in exchange for beneficial interests in the Global Notes
representing such Notes. In addition, the Corporation may at any time determine
not to have Notes represented by Global Notes and, in such event, will issue
registered Notes in certificated form in exchange for the Global Notes. In any
such instance, an owner of a beneficial interest in a Global Note will be
entitled to physical delivery in certificated form of a Note or Notes equal in
principal amount to such beneficial interest and to have such Note or Notes
registered in its name. Unless otherwise indicated in the applicable Pricing
Supplement, Notes so issued in certificated form will be issued in denominations
of $1,000 or any integral multiple in excess thereof and will be issued in
registered form only, without coupons.
Notes issued in book-entry form through the facilities of DTC may be
transferred or exchanged through a DTC Participant or an Indirect Participant.
No service charge will be made for any registration of transfer or exchange of
Notes issued in certificated form, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
PAYING AGENT, SECURITY REGISTRAR AND TRANSFER AGENT
Until the Notes are paid, the Corporation will at all times maintain a
Paying Agent and an agent for registering Global Notes and other Certificated
Notes and registering transfers and exchanges of such Notes as provided to the
Indenture (the "Security Registrar") which may or may not be the same person,
for the Senior Notes. The Corporation has initially appointed Marine Midland
Bank as Paying Agent and Security Registrar with respect to the Notes. The
Corporation reserves the right at any time to vary or terminate the appointment
of any Paying Agent and Security Registrar, to appoint additional Paying Agents
and Security
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Registrars and to approve any change in the office through which the Paying
Agent or Security Registrar shall act.
INTEREST AND INTEREST RATES
Except as otherwise specified in the applicable Pricing Supplement for
Notes that are Discount Securities, the Notes will bear interest at a fixed
rate, at floating rates determined by reference to one or more of the Base Rates
described below (which may be adjusted by a Spread and/or Spread Multiplier
applicable to such Floating Rate Notes) or at any combination of fixed and
floating rates until the principal thereof is paid or duly provided for.
Interest, if any, will be payable as specified under "DESCRIPTION OF NOTES --
Fixed Rate Notes" and "DESCRIPTION OF NOTES -- Floating Rate Notes" below.
Interest payable and punctually paid or duly provided for on any Interest
Payment Date (as hereinafter defined for Fixed Rate Notes and Floating Rate
Notes) and on the Stated Maturity Date (or New Maturity Date or Extended
Maturity Date, as the case may be (each as hereinafter defined)) or upon earlier
redemption or repayment (such Stated Maturity Date, New Maturity Date or
Extended Maturity Date, or date of redemption or repayment, as the case may be,
being collectively hereinafter referred to as the "Maturity Date"), or on a
later date on which payment may be made hereunder in respect of such Interest
Payment Date, will be paid to the registered holder at the close of business on
the Regular Record Date (as hereinafter defined) preceding such Interest Payment
Date; provided, however, that the first payment of interest on any Note with an
Original Issue Date (as set forth in the applicable Pricing Supplement) between
a Regular Record Date and an Interest Payment Date or on an Interest Payment
Date will be made on the Interest Payment Date following the Regular Record Date
to the registered holder on such succeeding Regular Record Date; and provided,
further, that interest payable at the Maturity Date will be payable to the
person to whom principal shall be payable.
Unless otherwise specified in the applicable Pricing Supplement, the
"Regular Record Date" with respect to any Interest Payment Date for a Note will
be the date (whether or not a Business Day) 15 calendar days preceding such
Interest Payment Date, except that the Regular Record Date for a March 15
Interest Payment Date for a Fixed Rate Note will always be the February 28
(whether or not a Business Day) immediately preceding such Interest Payment
Date.
FIXED RATE NOTES
Each Fixed Rate Note that bears interest will bear interest from its
Original Issue Date at the rate per annum stated on the face thereof, except as
described below under "DESCRIPTION OF NOTES -- Extendible Notes", until the
principal amount thereof is paid. Unless otherwise specified in the applicable
Pricing Supplement, interest on each Fixed Rate Note will be computed on the
basis of a 360-day year of twelve 30-day months and will be payable
semi-annually in arrears on September 1 and March 1 of each year during the term
of the Note (each an "Interest Payment Date") and on the Maturity Date. If any
Interest Payment Date or the Maturity Date of a Fixed Rate Note falls on a day
that is not a Business Day, the payment will be made on the next succeeding
Business Day as if it were made on the date such payment was due, and no
additional interest will accrue on the amount so payable for the period from and
after such Interest Payment Date or the Maturity Date, as the case may be, to
such next succeeding Business Day. Interest payments will be in the amount of
interest accrued from and including the preceding Interest Payment Date in
respect of which interest has been paid or duly provided for (or from and
including the Original Issue Date if no interest has been paid or duly provided
for with respect to such Note) to but excluding the Interest Payment Date or the
Maturity Date, as the case may be.
FLOATING RATE NOTES
Each Floating Rate Note that bears interest will bear interest from its
Original Issue Date at the rates determined as described below, except as
described below under "DESCRIPTION OF NOTES -- Extendible Notes", until the
principal amount thereof is paid. Unless otherwise specified in the applicable
Pricing Supplement, interest on each Floating Rate Note will be determined by
reference to an interest rate basis (the "Base Rate"), which may be (i) the CD
Rate (a "CD Rate Note"), (ii) the Commercial Paper Rate (a
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"Commercial Paper Rate Note"), (iii) the CMT Rate (a "CMT Rate Note"), (iv) the
Federal Funds Rate (a "Federal Funds Rate Note"), (v) LIBOR (a "LIBOR Note"),
(vi) the Prime Rate (a "Prime Rate Note"), (vii) the Treasury Rate (a "Treasury
Rate Note"), or (viii) such other Base Rate as may be set forth in the
applicable Pricing Supplement and in such Note. The Base Rate will be based upon
one or more selected Index Maturities (as hereinafter defined) and adjusted by a
Spread and/or Spread Multiplier (each as hereinafter defined), if any, as
specified in the applicable Pricing Supplement. The interest rate on each
Floating Rate Note will be calculated by reference to the specified Base Rate,
plus or minus the Spread and/or multiplied by the Spread Multiplier, if any. The
"Index Maturity" is the period to maturity of the instrument or obligation with
respect to which the Base Rate is calculated. The "Spread" is the number of
basis points above or below the Base Rate applicable to such Floating Rate Note,
and the "Spread Multiplier" is the percentage of the Base Rate applicable to the
interest rate for such Floating Rate Note. The Spread, Spread Multiplier, Index
Maturity and other variable terms of the Floating Rate Notes are subject to
change by the Corporation from time to time, but, except as described below
under "DESCRIPTION OF NOTES -- Extendible Notes," no such change will affect any
Floating Rate Note previously issued or as to which an offer to purchase has
been accepted by the Corporation.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following (in each case expressed as a rate per
annum on a simple interest basis): (i) a maximum rate at which interest may
accrue during any interest period ("Maximum Interest Rate") and (ii) a minimum
rate at which interest may accrue during any interest period ("Minimum Interest
Rate"). In addition to any such Maximum Interest Rate, the interest rate on a
Floating Rate Note will in no event be higher than the maximum rate permitted by
applicable law, as the same may be modified by United States law of general
application. Under current New York law, the maximum rate of interest (for any
loan in the amount of $250,000 or more) is 25% per annum on a simple interest
basis. This limit may not apply to Notes in which $2,500,000 or more has been
invested.
The Corporation will appoint an agent (a "Calculation Agent") to calculate
interest rates on Floating Rate Notes. Marine Midland Bank will serve as
Calculation Agent with respect to Floating Rate Notes unless otherwise specified
in the applicable Pricing Supplement.
The interest rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (such period being the "Interest
Rate Reset Period" for such Note and the first day of each Interest Rate Reset
Period being an "Interest Rate Reset Date"), as specified in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement and except as provided below, the Interest Rate Reset Dates will be
(i) in the case of Floating Rate Notes that reset daily, each Business Day; (ii)
in the case of Floating Rate Notes (other than Treasury Rate Notes) that reset
weekly, Wednesday of each week; (iii) in the case of Treasury Rate Notes that
reset weekly, Tuesday of each week; (iv) in the case of Floating Rate Notes that
reset monthly, the third Wednesday of each month; (v) in the case of Floating
Rate Notes that reset quarterly, the third Wednesday of March, June, September
and December of each year; (vi) in the case of Floating Rate Notes that reset
semi-annually, the third Wednesday of each of two months of each year specified
in the applicable Pricing Supplement; and (vii) in the case of Floating Rate
Notes that reset annually, the third Wednesday of one month of each year
specified in the applicable Pricing Supplement. If an Interest Rate Reset Date
for any Floating Rate Note would otherwise be a day that is not a Business Day,
such Interest Rate Reset Date will be postponed to the next Business Day, except
that in the case of a LIBOR Note, if the next Business Day is in the next
calendar month, such Interest Rate Reset Date will be the preceding Business
Day. If a Treasury bill auction (as described below) will be held on any day
that would otherwise be an Interest Rate Reset Date for a Treasury Rate Note,
then such Interest Rate Reset Date will instead be the Business Day following
such auction date.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate in effect with respect to a Floating Rate Note during an Interest
Rate Reset Period will be the rate determined on the "Calculation Date" by
reference to the "Interest Determination Date." Unless otherwise provided in the
applicable Pricing Supplement, the Interest Determination Date for a CD Rate
Note, Commercial Paper Rate Note, CMT Rate Note, Federal Funds Rate Note or
Prime Rate Note will be the second Business Day preceding the applicable
Interest Rate Reset Date; the Interest Determination Date for a LIBOR Note will
be the second
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London Banking Day preceding the applicable Interest Rate Reset Date; and the
Interest Determination Date for a Treasury Rate Note will be the day of the week
in which the applicable Interest Rate Reset Date falls on which Treasury bills
of the Index Maturity specified on the face of such Treasury Rate Note are
auctioned. Treasury bills are normally sold at auction on Monday of each week.
If such day is a legal holiday, the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Interest Determination Date with respect to the Interest
Rate Reset Date for a Treasury Rate Note occurring in the succeeding week.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date" pertaining to any Interest Determination Date shall be the
earlier of (i) the tenth calendar day after such Interest Determination Date or,
if such day is not a Business Day, the next Business Day, or (ii) the Business
Day preceding the applicable Interest Payment Date or Maturity Date, as the case
may be.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate in effect with respect to a Floating Rate Note on each day that is
not an Interest Rate Reset Date will be the interest rate determined as of the
Interest Determination Date pertaining to the immediately preceding Interest
Rate Reset Date, and the interest rate in effect on any day that is an Interest
Rate Reset Date will be the interest rate determined as of the Interest
Determination Date pertaining to such Interest Rate Reset Date, subject in
either case to any Maximum or Minimum Interest Rate limitation referred to
above; provided, however, that the interest rate in effect with respect to a
Floating Rate Note for the period from the Original Issue Date to the initial
Interest Rate Reset Date (the "Initial Interest Rate") will be specified, if
available, in the applicable Pricing Supplement. The interest rate on a Floating
Rate Note for the initial Interest Rate Reset Period (as hereinafter defined)
and for the final Interest Rate Reset Period may be based upon a different Index
Maturity and therefore may result in a different interest rate for either or
both of such Interest Rate Reset Periods, as set forth in the applicable Pricing
Supplement.
Interest on each Floating Rate Note will be payable monthly, quarterly,
semi-annually or annually (the "Interest Payment Period"), as specified in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement and except as provided below, the date or dates on which
interest will be payable (each an "Interest Payment Date") will be: (i)
September 1 and March 1 of each year in the case of Floating Rate Notes on which
the interest rate is reset daily or weekly; (ii) in the case of Floating Rate
Notes with a monthly Interest Payment Period, the third Wednesday of each month;
(iii) in the case of Floating Rate Notes with a quarterly Interest Payment
Period, the third Wednesday of March, June, September and December of each year;
(iv) in the case of Floating Rate Notes with a semi-annual Interest Payment
Period, the third Wednesday of each of two months of each year specified in the
applicable Pricing Supplement; (v) in the case of Floating Rate Notes with an
annual Interest Payment Period, the third Wednesday of one month of each year
specified in the applicable Pricing Supplement; and (vi) in each case, on the
Maturity Date.
Interest due on any Interest Payment Date (or on the Maturity Date, as the
case may be) will be the amount of interest accrued from and including the
immediately preceding Interest Payment Date in respect of which interest has
been paid or duly provided for (or from and including the Original Issue Date if
no interest has been paid or duly provided for with respect to such Note) to but
excluding the Interest Payment Date or the Maturity Date, as the case may be.
If any Interest Payment Date for any Floating Rate Note would fall on a day
that is not a Business Day with respect to such Note, such Interest Payment Date
will be the following day that is a Business Day with respect to such Note,
except that, in the case of a LIBOR Note, if such Business Day is in the next
calendar month, such Interest Payment Date will be the immediately preceding day
that is a Business Day with respect to such LIBOR Note. If the Maturity Date of
any Floating Rate Note falls on a day that is not a Business Day, the payment of
principal (and premium, if any) or interest may be made on the next succeeding
Business Day as if it were made on the date such payment was due, and no
additional interest will accrue on the amount so payable for the period from and
after the Maturity Date.
Unless otherwise specified in the applicable Pricing Supplement, accrued
interest on any Floating Rate Note will be calculated by multiplying the
principal amount of such Note by an accrued interest factor. Such
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accrued interest factor will be computed by adding the interest factor
calculated for each day from and including the Original Issue Date, or from but
excluding the last date to which interest has been paid, as the case may be, to
and including the date for which accrued interest is being calculated. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
(expressed as a decimal) for each such day shall be computed by dividing the
interest rate in effect on such day by (i) the actual number of days in the
year, in the case of Treasury Rate Notes or CMT Rate Notes, and (ii) 360, in the
case of other Floating Rate Notes. Unless otherwise specified in the applicable
Pricing Supplement, all percentages resulting from any calculation on Floating
Rate Notes will be rounded to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all
dollar amounts used in or resulting from such calculation on Floating Rate Notes
will be rounded to the nearest cent (with one-half cent being rounded upward).
Upon the request of the beneficial holder of any Floating Rate Note, the
Calculation Agent will provide the interest rate then in effect and, if
determined, the interest rate that will become effective as a result of a
determination made for the next Interest Rate Reset Date with respect to such
Floating Rate Note. The Calculation Agent will also make certain calculations,
specified below, on or prior to the Calculation Date.
The interest rate that will become effective on each subsequent Interest
Rate Reset Date will be determined by the Calculation Agent (calculated with
reference to the Base Rate and the Spread and/or Spread Multiplier, if any,
specified in the applicable Pricing Supplement) as follows (such determination,
in the absence of manifest error, to be binding upon all parties):
CD Rate:
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to an Interest Determination Date relating to a CD Rate Note
(the "CD Rate Interest Determination Date"), the rate on such CD Rate Interest
Determination Date for negotiable certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement, as such rate is
published by the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") in "Statistical Release H.15(519), Selected Interest Rates," or
any successor publication of the Federal Reserve Board ("H.15(519)"), under the
heading "CDs (Secondary Market)." If H.15(519) is not so published by 3:00 p.m.,
New York City time, on the Calculation Date pertaining to such CD Rate Interest
Determination Date, the CD Rate will be the rate on such CD Rate Interest
Determination Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement, as published by the Federal
Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M.
Quotations for U.S. Government Securities" ("Composite Quotations") under the
heading "Certificates of Deposit." If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in Composite Quotations, the CD
Rate for such CD Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 a.m., New York City time, on such CD Rate Interest
Determination Date, of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit in denominations of $5,000,000 of
major United States money center banks with a remaining maturity closest to the
Index Maturity specified in the applicable Pricing Supplement. However, if such
dealers are not so quoting such rates, the CD Rate for such CD Rate Interest
Determination Date will be the CD Rate then in effect on such CD Rate Interest
Determination Date.
Commercial Paper Rate:
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to an Interest Determination Date
relating to a Commercial Paper Note (a "Commercial Paper Rate Interest
Determination Date"), the Money Market Yield (as hereinafter defined) of the
rate on such Commercial Paper Rate Interest Determination Date for commercial
paper having the Index Maturity specified in the applicable Pricing Supplement
as published in H.15(519) under the caption "Commercial Paper -- Non financial."
If such rate is not so published by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Commercial Paper Rate Interest Determination
Date, the Commercial Paper Rate
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will be the Money Market Yield on such Commercial Paper Rate Interest
Determination Date of the rate for commercial paper of the Index Maturity
specified in the applicable Pricing Supplement as published in Composite
Quotations under the heading "Commercial Paper." If by 3:00 p.m., New York City
time, on such Calculation Date such rate is not yet published in Composite
Quotations, the Commercial Paper Rate for such Commercial Paper Rate Interest
Determination Date will be calculated by the Calculation Agent and will be the
Money Market Yield determined on the basis of a rate which is the arithmetic
mean of the offered rates, as of 11:00 a.m., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The City of New York (which may include the Calculation
Agent or its affiliates) selected by the Calculation Agent for commercial paper
of the Index Maturity specified in the applicable Pricing Supplement placed for
an industrial issuer whose bond rating is "AA" or the equivalent by a nationally
recognized securities rating agency. However, if such dealers are not so quoting
such rates, the Commercial Paper Rate for such Commercial Paper Rate Interest
Determination Date will be the Commercial Paper Rate then in effect on such
Commercial Paper Rate Interest Determination Date.
"Money Market Yield" will be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C> <C>
D X 360
Money Market Yield = ------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum commercial paper rate on a bank
discount basis expressed as a decimal, and "M" refers to the actual number of
days in the interest period for which interest is being calculated.
CMT Rate:
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to an Interest Determination Date relating to a CMT Rate
Note or any Floating Rate Note for which the interest rate is determined by
reference to the CMT Rate (a "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 7055, the rate on such CMT Rate
Interest Determination Date and (ii) if the Designated CMT Telerate Page is
7052, the week or the month, as applicable, as specified in the applicable
Pricing Supplement, ended immediately preceding the week in which the related
CMT Rate Interest Determination Date occurs. If such rate is no longer displayed
on the relevant page, or if not displayed by 3:00 p.m., New York City time, on
the Calculation Date pertaining to such CMT Rate Interest Determination Date,
then the CMT Rate for such CMT Rate Interest Determination Date will be such
Treasury Constant Maturity Rate for the Designated CMT Maturity Index as
published in the relevant H.15(519). If such rate is no longer published, or if
not published by 3:00 p.m., New York City time, on such Calculation Date, then
the CMT Rate for such CMT Rate Interest Determination Date will be such 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 such Interest Rate Reset Date as may
then be published by either the Federal Reserve Board 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 such information is not provided by
3:00 p.m., New York City time, on such 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 closing offer side prices as of approximately 3:30 p.m., New
York City time, on the CMT Interest Determination Date reported, according to
their written records, by three leading primary United States government
securities dealers (each, a "Referenced Dealer") in The City of New York
selected by the Calculation Agent (from five such Referenced Dealers selected by
the Calculation Agent by 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, non-callable
fixed rate obligations of the United States ("Treasury Note") with an original
maturity of approximately the Designated CMT Maturity Index and a remaining term
to maturity of
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not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury Note quotations, the CMT
Rate for such 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 offer side prices as of approximately 3:30 p.m., New
York City time, on the CMT Rate Interest Determination Date of three Referenced
Dealers in The City of New York (from five such Referenced Dealers selected by
the Calculation Agent by 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 $100,000,000. If three or four (and not five)
of such Referenced Dealers are quoting as described above, then the CMT Rate
will be based on the arithmetic mean of the offer prices obtained and neither
the highest nor lowest of such quotes will be eliminated; provided, however,
that if fewer than three Referenced Dealers selected by the Calculation Agent
are quoting as described herein, the CMT Rate will be the CMT Rate then in
effect on such 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 quotes
for the Treasury Rate Note with the shorter remaining term to maturity will be
used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service or 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)),
for the purpose of displaying Treasury Constant Maturity 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 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.
Federal Funds Rate:
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to an Interest Determination Date relating to a
Federal Funds Rate Note (a "Federal Funds Rate Interest Determination Date"),
the rate on such Federal Funds Rate Interest Determination Date for Federal
Funds as published in H.15(519) under the heading "Federal Funds (Effective)."
If H.15(519) is not so published by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Federal Funds Rate Interest Determination
Date, the Federal Funds Rate will be the rate on such Federal Funds Rate
Interest Determination Date for Federal Funds as published in Composite
Quotations under the heading "Federal Funds/Effective Rate." If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not yet published in
Composite Quotations, the Federal Funds Rate for such Federal Funds Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean of the rates for the last transaction in overnight
Federal Funds as of 9:00 a.m., New York City time, on such Federal Funds Rate
Interest Determination Date quoted by each of three leading brokers of Federal
Funds transactions in The City of New York selected by the Calculation Agent.
However, if fewer than three such brokers are so quoting such rates, the Federal
Funds Rate for such Federal Funds Rate Interest Determination Date will be the
Federal Funds Rate then in effect on such Federal Funds Rate Interest
Determination Date.
LIBOR:
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note (a "LIBOR Interest Determination Date"), LIBOR will be "LIBOR
Telerate" unless "LIBOR Reuters" is specified in the
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applicable Pricing Supplement. "LIBOR Telerate" is the rate for deposits in
Dollars having a maturity equal to the Index Maturity designated in the
applicable Pricing Supplement that appears on the Designated LIBOR Page (as
defined below) specified in the applicable Pricing Supplement as of 11:00
a.m., London time, on that LIBOR Interest Determination Date. "LIBOR
Reuters" is that rate which is the arithmetic mean of the offered rates
(unless the specified Designated LIBOR Page by its terms provides only for
a single rate, in which case such single rate shall be used) for deposits
in Dollars having a maturity equal to the Index Maturity designated in the
applicable Pricing Supplement that appear on the Designated LIBOR Page
specified in the applicable Pricing Supplement as of 11:00 a.m., London
time, on that LIBOR Interest Determination Date, if at least two such
offered rates appear (unless, as aforesaid, only a single rate is required)
on such Designated LIBOR Page. If LIBOR cannot be determined under this
clause (i), LIBOR in respect of the related LIBOR Interest Determination
Date will be determined as if the parties had specified the rate described
in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which the
applicable LIBOR rate cannot be determined under clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major banks in the London interbank market, as selected by the Calculation
Agent, to provide the Calculation Agent with its offered quotation for
deposits in Dollars for the period equal to the Index Maturity designated
in the applicable Pricing Supplement to prime banks in the London interbank
market commencing on the applicable Interest Rate Reset Date at
approximately 11:00 a.m., London time, on such LIBOR Interest Determination
Date and in a principal amount that is representative for a single
transaction in Dollars in such market at such time. If at least two such
quotations are provided, LIBOR determined on such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two such quotations are provided, LIBOR for such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 a.m. (or such other time specified in the applicable
Pricing Supplement), in The City of New York, on such LIBOR Interest
Determination Date by three major banks in The City of New York selected by
the Calculation Agent for loans in Dollars to leading European banks,
having a maturity equal to the Index Maturity designated in the applicable
Pricing Supplement, commencing on the applicable Interest Rate Reset Date
and in a principal amount that is representative for a single transaction
in Dollars 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 on such LIBOR Interest Determination Date
will be LIBOR then in effect on such LIBOR Interest Determination Date.
"Designated LIBOR Page" means either (a) if "LIBOR Telerate" is designated
in the applicable Pricing Supplement, the display on the Dow Jones Telerate
Service or successor service for the purpose of displaying the London interbank
offered rates of major banks for Dollars, or (b) if "LIBOR Reuters" is
designated in the applicable Pricing Supplement, the display on the Reuters
Monitor Money Rates Service for the purpose of displaying the London interbank
offered rates of major banks for Dollars. If neither LIBOR Telerate nor LIBOR
Reuters is specified in the applicable Pricing Supplement, LIBOR for the
applicable LIBOR Currency will be determined as if LIBOR Telerate (Page 3750)
had been specified.
Prime Rate:
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to an Interest Determination Date relating to a Prime
Rate Note (a "Prime Rate Interest Determination Date"), the rate set forth on
such date in H.15(519) under the heading "Bank Prime Loan," or if not so
published prior to 9:00 a.m., New York City time, on the Calculation Date
pertaining to such Prime Rate Interest Determination Date, then the Prime Rate
will be determined by the Calculation Agent and will be the arithmetic mean of
the rates of interest publicly announced by each bank that appears on the
Reuters Screen US PRIME 1 (as defined below) as such bank's prime rate or base
lending rates as in effect for that Prime Rate Interest Determination Date. If
fewer than four such rates but more than one such rate appear on the Reuters
Screen US PRIME 1 for the Prime Rate Interest Determination Date, the Prime Rate
will be determined by the Calculation Agent and will be the arithmetic mean of
the prime rates, quoted on the basis of the actual number of days in the year
divided by a 360-day year, as of the close of business on such Prime
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Rate Interest Determination Date by four major money center banks in The City of
New York as selected by the Calculation Agent. If fewer than two such rates
appear on the Reuters Screen US PRIME 1, the Prime Rate will be determined by
the Calculation Agent as of the close of business on the Prime Rate Interest
Determination Date, on the basis of the prime rates, as of the close of business
on the Prime Rate Interest Determination Date, furnished in The City of New York
by the appropriate number of substitute banks or trust companies organized and
doing business under the laws of the United States, or any state thereof, having
total equity capital of at least $500,000,000 and being subject to supervision
or examination by federal or state authority, selected by the Calculation Agent.
However, if the banks so selected are not quoting prime rates, the Prime Rate
for such Prime Rate Interest Determination Date will be the Prime Rate then in
effect on such Prime Rate Interest Determination Date.
"Reuters Screen US PRIME 1" means the display designated as page "US PRIME
1" on the Reuters Monitor Money Rates Service (or such other page as may replace
the US PRIME 1 page on that service for the purpose of displaying prime rates or
base lending rates of major United States banks).
Treasury Rate:
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to an Interest Determination Date relating to a
Treasury Rate Note (a "Treasury Rate Interest Determination Date"), the rate for
the auction held on such Treasury Rate Interest Determination Date of direct
obligations of the United States ("Treasury bills") having a maturity equal to
the Index Maturity specified in the applicable Pricing Supplement, as published
in H.15(519) under the heading "U.S. Government Securities -- Treasury bills
auction average (investment)." If such rate is not published by 3:00 p.m., New
York City time, on the Calculation Date pertaining to such Treasury Rate
Interest Determination Date, the Treasury Rate will be the auction average rate
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) on such Treasury Rate Interest
Determination Date as otherwise announced by the United States Department of the
Treasury. If such rate is not published or reported by 3:00 p.m., New York City
time, on such Calculation Date, or if no such auction is held on such Treasury
Rate Interest Determination Date, then the Treasury Rate for such Treasury Rate
Interest Determination Date will be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) of the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 p.m., New York City time, on such Treasury Rate Interest
Determination Date, of three leading primary United States government securities
dealers, selected by the Calculation Agent, for the issue of Treasury bills with
a remaining maturity closest to the Index Maturity specified in the applicable
Pricing Supplement. However, if such dealers are not so quoting such rates, the
Treasury Rate for such Treasury Rate Interest Determination Date will be the
Treasury Rate then in effect on such Treasury Rate Interest Determination Date.
RENEWABLE NOTES
The Corporation may from time to time offer renewable Notes ("Renewable
Notes") that will mature on an Interest Payment Date as specified in an
applicable Pricing Supplement unless the maturity of all (or if so indicated in
such Pricing Supplement, a portion of) the principal amount of such Note is
renewed in accordance with the procedures described below. Renewable Notes will
be issued in book-entry form only. If the Corporation issues any such Renewable
Notes, the following procedures will apply, unless otherwise specified in the
applicable Pricing Supplement.
On the dates in each year specified in the applicable Pricing Supplement
(each such date, a "Renewal Date"), the maturity of such Renewable Note will be
automatically extended to the next maturity date (each, a "New Maturity Date")
specified in such Pricing Supplement, unless the holder of such Renewable Note
elects to terminate the automatic extension of the maturity of such Renewable
Note (or, if specified in the applicable Pricing Supplement, any portion
thereof) by delivering a notice to such effect to the applicable Trustee (or any
duly appointed Paying Agent) not less than 15 nor more than 30 days prior to the
Renewal Date. An election to terminate the automatic extension of the maturity
of a Renewable Note may be exercised with respect to less than the entire
principal amount of such Renewable Note only if so specified in the
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applicable Pricing Supplement and only in such a principal amount, or integral
multiple in excess thereof, as is specified in the applicable Pricing
Supplement. Notwithstanding the foregoing, the maturity of any Renewable Note
may not be extended beyond the final maturity date (the "Final Maturity Date")
specified for such Renewable Notes in the applicable Pricing Supplement. If a
holder elects to terminate the automatic extension of the maturity of any
portion of the principal amount of a Renewable Note on any Renewal Date, such
portion will become due and payable on the stated maturity date or New Maturity
Date then in effect with respect to such Note, as the case may be. An election
to terminate the automatic extension of the maturity of a Renewable Note shall
be irrevocable and shall be binding on each holder of the Note. The renewal of
the maturity of a Renewable Note will not affect the interest rate applicable to
such Renewable Note.
If a Note is represented by a Global Note, DTC or its nominee will be the
holder of such Note and therefore will be the only entity that can exercise a
right to terminate the automatic extension of a Note. In order to ensure that
DTC or its nominee will timely exercise a right to terminate the automatic
extension with respect to a particular Note, the beneficial owner of such Note
must instruct the broker or other DTC Participant or Indirect Participant
through which it holds an interest in such Note to notify DTC of its desire to
terminate the automatic extension of such Note. Different firms have different
cut-off times for accepting instructions from their customers and, accordingly,
each beneficial owner should consult the broker or other DTC Participant or
Indirect Participant through which it holds an interest in a 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 DTC or its nominee.
EXTENDIBLE NOTES
The Corporation may from time to time offer Notes whose Stated Maturity
Date may be extended at the option of the Corporation (an "Extendible Note") for
one or more whole year periods (each an "Extension Period"), up to but not
beyond the final maturity date (the "Final Maturity Date") specified for such
Extendible Note in the applicable Pricing Supplement. If the Corporation issues
any such Extendible Notes, the following procedures will apply, unless otherwise
specified in the applicable Pricing Supplement.
The Corporation may exercise such option with respect to an Extendible Note
by notifying the Trustee (or any duly appointed Paying Agent) of such exercise
specifying the Extension Period and the other information to be set out in the
notice to be given pursuant to the next succeeding sentence at least 45 but not
more than 60 days prior to the stated maturity date originally in effect with
respect to such Note (the "Initial Maturity Date") or, if the Stated Maturity
Date of such Note has already been extended, prior to the Stated Maturity Date
then in effect (an "Extended Maturity Date"). In the event the Corporation gives
such a notice to the Trustee (or any duly appointed Paying Agent), no later than
40 days prior to the Initial Maturity Date or an Extended Maturity Date, as the
case may be (each, a "Maturity Date"), the Trustee (or any duly appointed Paying
Agent) will mail to the registered holder of such Extendible Note a notice (the
"Extension Notice") relating to such Extension Period, first class mail, postage
prepaid, setting forth (i) the election of the Corporation to extend the
maturity of such Extendible Note, (ii) the new Extended Maturity Date, (iii) in
the case of a Fixed Rate Note, the interest rate applicable to the Extension
Period or, in the case of a Floating Rate Note, the Spread and/or Spread
Multiplier applicable to the Extension Period, and (iv) the provisions, if any,
for redemption during the Extension Period, including the date or dates on
which, the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the mailing by the
Trustee (or any duly appointed Paying Agent) of an Extension Notice to the
holder of an Extendible Note, the maturity of such Note shall be extended
automatically as set forth in the Extension Notice, and, except as modified by
the Extension Notice and as described in the next paragraph, such Extendible
Note will have the same terms as prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to the Maturity
Date for an Extendible Note (or, if such date is not a Business Day, on the
immediately succeeding Business Day), the Corporation may, at its option, revoke
the interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, provided for in the Extension
Notice and establish a higher interest rate, in the case of a Fixed Rate Note,
or a higher Spread and/or Spread Multiplier, in the case of a Floating Rate
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Note, for the Extension Period by mailing or causing the applicable Trustee (or
any duly appointed Paying Agent) to mail notice of such higher interest rate or
higher Spread and/or Spread Multiplier, as the case may be, first class mail,
postage prepaid, to the holder of such Note. Such notice shall be irrevocable.
All Extendible Notes with respect to which the Maturity Date is extended will
bear such higher interest rate, in the case of a Fixed Rate Note, or higher
Spread and/or Spread Multiplier, in the case of a Floating Rate Note, for the
Extension Period.
If the Corporation elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to elect repayment of such Note by the
Corporation on the Maturity Date then in effect at a price equal to the
principal amount thereof plus any accrued and unpaid interest to such date. In
order for an Extendible Note to be so repaid on the Maturity Date, the
Corporation must receive, at least 15 days but not more than 30 days prior to
the Maturity Date then in effect with respect to the Note (i) the Note with the
form "Option to Elect Repayment" on the reverse of the Note duly completed or
(ii) a telegram, telex, facsimile transmission or a letter from a member of a
national securities exchange or the National Association of Securities Dealers,
Inc. (the "NASD") or a commercial bank or trust company in the United States
setting forth the name of the holder of the Note, 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 to be
repaid, together with the duly completed form entitled "Option to Elect
Repayment" on the reverse of the Note, will be received by the applicable
Trustee (or any duly appointed Paying Agent) not later than the fifth Business
Day after the date of such telegram, telex, facsimile transmission or letter,
provided, however, that such telegram, telex, facsimile transmission or letter
shall only be effective if such Note and form duly completed are received by the
applicable Trustee (or any duly appointed Paying Agent) by such fifth Business
Day. Such option may be exercised by the holder of an Extendible Note for less
than the aggregate principal amount of the Note then outstanding, provided that
the principal amount of the Note remaining outstanding after repayment is an
authorized denomination.
If a Note is represented by a Global Note, DTC or its nominee will be the
holder of such Note and therefore will be the only entity that can exercise a
right to repayment. In order to ensure that DTC or its nominee will timely
exercise a right to repayment with respect to a particular Note, the beneficial
owner of such Note must instruct the broker or other DTC Participant or Indirect
Participant through which it holds an interest in such Note to notify DTC 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 DTC Participant or Indirect
Participant through which it holds an interest in a 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 DTC or its nominee.
REDEMPTION
The applicable Pricing Supplement relating to a Note will indicate either
that such Note cannot be redeemed prior to its Stated Maturity Date or that such
Note will be redeemable at the option of the Corporation on a date or dates
specified prior to its Stated Maturity Date and at a price or prices as set
forth in the applicable Pricing Supplement, together with accrued interest to
the date of redemption. The Corporation may redeem any of the Notes that are
redeemable and remain outstanding either in whole or from time to time in part,
upon not less than 30 nor more than 60 days' notice. If less than all of the
Notes of the series with like tenor and terms are to be redeemed, the Notes to
be redeemed will be selected by the Corporation pursuant to the terms of the
respective Indentures. If the Note is of a series of Medium-Term Notes that are
Discount Securities (as defined in the accompanying Prospectus), the Redemption
Price of such Notes on any Redemption Date shall be the face amount thereof (the
principal amount due thereon at the Stated Maturity Date thereof) multiplied by
the sum of the Issue Price specified on the face thereof (expressed as a
percentage of the face amount thereof) plus the original issue discount
amortized from the Original Issue Date to the Redemption Date (also expressed as
a percentage of the face amount thereof), which amortization shall be calculated
using the "constant interest rate method" (computed in accordance with generally
accepted accounting principles in effect on the Redemption Date).
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The Notes will not be subject to any sinking fund.
REPAYMENT AND REPURCHASE
The applicable Pricing Supplement relating to a Note will indicate either
that such Note cannot be repaid at the option of the holder prior to its Stated
Maturity Date or that such Note will be repayable at the option of the holder on
a date or dates specified prior to its Stated Maturity Date and at a price or
prices as set forth in the applicable Pricing Supplement, together with accrued
interest to the date of repayment.
The Corporation may at any time purchase Notes at any price in the open
market or otherwise. Notes so purchased by the Corporation may, at its
discretion, be held, resold or surrendered to the applicable Trustee for
cancellation.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the determination of a Base Rate, the
specification of Base Rates, calculation of the interest rate applicable to a
Floating Rate Note, its Interest Payment Dates, calculation of amounts due and
payable on acceleration of Discount Securities or any other matter relating
thereto or to any Fixed Rate Note may be modified by the terms as specified
under "Other Provisions" on the face of such Note or in an Addendum thereto, if
so specified on the face of such Note and in the applicable Pricing Supplement.
UNITED STATES FEDERAL INCOME TAXATION
The following is a summary of certain United States federal income tax
considerations that may be relevant to a holder of a Note that is a citizen or
resident of the United States or that otherwise is subject to United States
federal income taxation on a net income basis in respect of the Note (a "United
States holder"). This summary is based on laws, regulations, rulings and
decisions now in effect, all of which are subject to change, potentially
retroactively. This summary deals only with United States holders that will hold
Notes as capital assets, and does not address tax considerations applicable to
investors that may be subject to special tax rules, such as banks, tax-exempt
entities, insurance companies or dealers in securities or currencies, traders in
securities electing to mark to market, persons that will hold Notes as a
position in a "straddle" or conversion transaction, or as part of a "synthetic
security" or other integrated financial transaction or persons that have a
"functional currency" other than the U.S. dollar. Any special United States
federal income tax considerations relevant to a particular issue of Notes will
be provided in the applicable Pricing Supplement.
Investors should consult their own tax advisors in determining the tax
consequences to them of holding Notes, including the application to their
particular situation of the United States federal income tax considerations
discussed below, as well as the application of state, local, foreign or other
tax laws.
Payments of Interest. Payments of "qualified stated interest" (as defined
below under "Original Issue Discount") on a Note will be taxable to a United
States holder as ordinary interest income at the time that such payments are
accrued or are received (in accordance with the United States holder's method of
tax accounting).
Purchase, Sale and Retirement of Notes. A United States holder's tax basis
in a Note generally will equal the cost of such Note to such holder, increased
by any amounts includible in income by the holder as original issue discount and
market discount and reduced by any amortized premium (each as described below)
and any payments other than payments of qualified stated interest made on such
Note.
Upon the sale, exchange or retirement of a Note, a United States holder
generally will recognize gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (less any accrued qualified stated
interest, which will be taxable as such) and the United States holder's tax
basis in such Note.
A holder's failure to elect to terminate the automatic renewal of a
Renewable Note will not be treated as an exchange of the Renewable Note for a
new debt instrument for federal income tax purposes. An extension of the
maturity of an Extendible Note may, depending on the terms of the Note and the
extension, be treated for federal income tax purposes as an exchange of the
Extendible Note for a new debt instrument, with the
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result that a United States holder may be required to recognize gain or loss
equal to the difference between the fair market value of the Note on the date
the extension took effect and the holder's tax basis in the Note. Holders should
consult their own tax advisors regarding the consequences to them of a
particular proposed extension of an Extendible Note.
Except as discussed below with respect to market discount and Short-Term
Notes (as defined below), gain or loss recognized by a United States holder
generally will be long-term capital gain or loss if the United States holder has
held the Note for more than one year at the time of disposition. Under recently
enacted legislation, long-term capital gains recognized by an individual United
States holder generally will be subject to a maximum tax rate of 20 percent in
respect of Notes held for more than one year, effective for amounts properly
taken into account on or after January 1, 1998.
Original Issue Discount. United States holders of Original Issue Discount
Notes (as defined below) generally will be subject to the special tax accounting
rules for obligations issued with original issue discount ("OID") provided by
the Internal Revenue Code of 1986, as amended, and certain regulations
promulgated thereunder (the "OID Regulations"). United States holders of such
Notes should be aware that, as described in greater detail below, they generally
must include OID in ordinary gross income for United States federal income tax
purposes as it accrues, in advance of the receipt of cash attributable to that
income.
A Note will be an Original Issue Discount Note if its "stated redemption
price at maturity" (generally, the sum of all payments to be made on the Note
other than "qualified stated interest," as defined below) exceeds the Note's
issue price by an amount equal to or greater than 1/4 of 1 percent of the stated
redemption price at maturity, multiplied by the number of complete years to
maturity of the Note. In that case, the Note will have OID equal to the amount
by which the stated redemption price at maturity exceeds the issue price. In
general, each United States holder of an Original Issue Discount Note, whether
such holder uses the cash or the accrual method of tax accounting, will be
required to include in ordinary gross income the sum of the "daily portions" of
OID on the Note for all days during the taxable year that the United States
holder owns the Note. The daily portions of OID on an Original Issue Discount
Note are determined by allocating to each day in any accrual period a ratable
portion of the OID allocable to that accrual period. Accrual periods may be any
length and may vary in length over the term of an Original Issue Discount Note,
provided that no accrual period is longer than one year and each scheduled
payment of principal or interest occurs on either the final day or the first day
of an accrual period. In the case of an initial holder, the amount of OID on an
Original Issue Discount Note allocable to each accrual period is determined by
(a) multiplying the "adjusted issue price" of the Original Issue Discount Note
at the beginning of the accrual period by the yield to maturity of such Original
Issue Discount Note (appropriately adjusted to reflect the length of the accrual
period) and (b) subtracting from that product the amount (if any) of qualified
stated interest (as defined below) allocable to that accrual period. The yield
to maturity of a Note is the discount rate that causes the present value of all
payments on the Note as of its original issue date to equal the issue price of
such Note. The "adjusted issue price" of an Original Issue Discount Note at the
beginning of any accrual period will generally be the sum of its issue price
(generally including accrued interest, if any) and the amount of OID allocable
to all prior accrual periods, reduced by the amount of all payments other than
payments of qualified stated interest (if any) made with respect to such Note in
all prior accrual periods. The term "qualified stated interest" generally means
stated interest that is unconditionally payable in cash or property (other than
debt instruments of the issuer) at least annually during the entire term of an
Original Issue Discount Note at a single fixed rate of interest or, subject to
certain conditions, based on one or more interest indices. In the case of an
Original Issue Discount Note that is a Floating Rate Note, both the "yield to
maturity" and "qualified stated interest" will generally be determined for these
purposes as though the Original Issue Discount Note will bear interest in all
periods at a fixed rate generally equal to the rate that would be applicable to
the interest payments on the Note on its date of issue or, in the case of
certain Floating Rate Notes, the rate that reflects the yield that is reasonably
expected for the Note. (Additional rules may apply if interest on a Floating
Rate Note is based on more than one interest index.) As a result of this
"constant yield" method of including OID in income, the amounts includible in
income by a United States holder in respect of an Original Issue Discount Note
generally are lesser in the early years and greater in the later years than the
amounts that would be includible on a straight-line basis.
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A United States holder generally may make an irrevocable election to
include in its income its entire return on a Note (i.e., the excess of all
remaining payments to be received on the Note, including payments of qualified
stated interest, over the amount paid by such United States holder for such
Note) under the constant-yield method described above. For Notes purchased at a
premium or bearing market discount in the hands of the United States holder, the
United States holder making such election will also be deemed to have made the
election (discussed below in " -- Premium and Market Discount") to amortize
premium or to accrue market discount in income currently on a constant-yield
basis.
A subsequent United States holder of an Original Issue Discount Note that
purchases the Note at a cost less than its remaining redemption amount (as
defined below), or an initial United States holder that purchases an Original
Issue Discount Note at a price other than the Note's issue price, also generally
will be required to include in gross income the daily portions of OID,
calculated as described above. However, if the United States holder acquires the
Original Issue Discount Note at a price greater than its adjusted issue price,
such holder may reduce its periodic inclusions of OID income to reflect the
premium paid over the adjusted issue price. The "remaining redemption amount"
for a Note is the total of all future payments to be made on the Note other than
payments of qualified stated interest.
Certain of the Notes, including Extendible and Renewable Notes, may be
subject to special redemption, repayment or interest rate reset features, as
indicated in the applicable Pricing Supplement. Notes containing such features,
in particular Original Issue Discount Notes, may be subject to special rules
that differ from the general rules discussed above. Purchasers of Notes with
such features should carefully examine the applicable Pricing Supplement and
should consult their own tax advisors with respect to such Notes since the tax
consequences with respect to such features, and especially with respect to OID,
will depend, in part, on the particular terms of the purchased Notes.
Premium and Market Discount. A United States holder of a Note that
purchases the Note at a cost greater than its remaining redemption amount (as
defined in the second preceding paragraph) will be considered to have purchased
the Note at a premium, and may elect to amortize such premium (as an offset to
interest income), using a constant-yield method, over the remaining term of the
Note. Such election, once made, generally applies to all bonds held or
subsequently acquired by the United States holder on or after the first taxable
year to which the election applies and may not be revoked without the consent of
the IRS. A United States holder that elects to amortize such premium must reduce
its tax basis in a Note by the amount of the premium amortized during its
holding period. Original Issue Discount Notes purchased at a premium will not be
subject to the OID rules described above. With respect to a United States holder
that does not elect to amortize bond premium, the amount of bond premium will be
included in the United States holder's tax basis when the Note matures or is
disposed of by the United States holder. Therefore, a United States holder that
does not elect to amortize such premium and that holds the Note to maturity
generally will be required to treat the premium as capital loss when the Note
matures.
If a United States holder of a Note purchases the Note at a price that is
lower than its remaining redemption amount, or in the case of an Original Issue
Discount Note, its adjusted issue price, by at least 0.25% of its remaining
redemption amount multiplied by the number of remaining whole years to maturity,
the Note will be considered to have "market discount" in the hands of such
United States holder. In such case, gain realized by the United States holder on
the disposition of the Note generally will be treated as ordinary income to the
extent of the market discount that accrued on the Note while held by such United
States holder. In addition, the United States holder could be required to defer
the deduction of a portion of the interest paid on any indebtedness incurred or
maintained to purchase or carry the Note. In general terms, market discount on a
Note will be treated as accruing ratably over the term of such Note, or, at the
election of the holder, under a constant yield method.
A United States holder may elect to include market discount in income on a
current basis as it accrues (on either a ratable or constant-yield basis), in
lieu of treating a portion of any gain realized on a sale of a Note as ordinary
income. If a United States holder elects to include market discount on a current
basis, the interest deduction deferral rule described above will not apply. Any
such election, if made, applies to all
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market discount bonds acquired by the taxpayer on or after the first day of the
first taxable year to which such election applies and is revocable only with the
consent of the IRS.
Short-Term Notes. The rules set forth above will also generally apply to
Notes having maturities of not more than one year ("Short-Term Notes"), but with
certain modifications.
First, the OID Regulations treat none of the interest on a Short-Term Note
as qualified stated interest (but instead treat such interest payments as part
of the Short-Term Note's stated redemption price at maturity, thereby giving
rise to OID). Thus, all Short-Term Notes will be Original Issue Discount Notes.
OID will be treated as accruing on a Short-Term Note ratably, or at the election
of a United States holder, under a constant-yield method.
Second, a United States holder of a Short-Term Note that uses the cash
method of tax accounting and is not a bank, securities dealer, regulated
investment company or common trust fund, and does not identify the Short-Term
Note as part of a hedging transaction, will generally not be required to include
OID in income on a current basis. Such a United States holder may not be allowed
to deduct all of the interest paid or accrued on any indebtedness incurred or
maintained to purchase or carry such Note until the Maturity of the Note or its
earlier disposition in a taxable transaction. In addition, such a United States
holder will be required to treat any gain realized on a sale, exchange or
retirement of the Note as ordinary income to the extent such gain does not
exceed the OID accrued with respect to the Note during the period the United
States holder held the Note. Notwithstanding the foregoing, a cash-basis United
States holder of a Short-Term Note may elect to accrue original issue discount
into income on a current basis (in which case the limitation on the
deductibility of interest described above will not apply). A United States
holder using the accrual method of tax accounting and certain cash-basis United
States holders (including banks, securities dealers, regulated investment
companies and common trust funds) generally will be required to include original
issue discount on a Short-Term Note in income on a current basis.
Third, any United States holder (whether cash or accrual basis) of a
Short-Term Note can elect to accrue the "acquisition discount," if any, with
respect to the Note on a current basis. If such an election is made, the OID
rules will not apply to the Note. Acquisition discount is the excess of the
remaining redemption amount of the Note at the time of acquisition over the
purchase price. Acquisition discount will be treated as accruing ratably or, at
the election of the United States holder, under a constant-yield method based on
daily compounding.
Finally, the market discount rules will not apply to a Short-Term Note.
As described above, certain of the Notes may be subject to special
redemption features. These features may affect the determination of whether a
Note has a maturity of not more than one year and thus is a Short-Term Note.
Purchasers of Notes with such features should carefully examine the applicable
Pricing Supplement and should consult their own tax advisors with respect to
such features.
Notes Providing for Contingent Payment. Special rules (the "Contingent
Payment Regulations") govern the tax treatment of debt obligations that provide
for contingent payments ("contingent debt obligations"). The Contingent Payment
Regulations generally require accrual of interest income on a constant-yield
basis in respect of a contingent debt obligation at a yield determined at the
time of issuance of the obligation, and may require adjustments to such accruals
when any contingent payments are made. A detailed description of the tax
considerations relevant to United States holders of any Notes that constitute
contingent debt obligations will be provided in the applicable Pricing
Supplement.
Information Reporting and Backup Withholding. The Paying Agent will be
required to file information returns with the IRS with respect to payments made
to certain United States holders of Notes. In addition, certain United States
holders may be subject to a 31 percent backup withholding tax in respect of such
payments if they do not provide their taxpayer identification numbers to the
Paying Agent. Persons holding Notes who are not United States holders may be
required to comply with applicable certification procedures to establish that
they are not United States holders in order to avoid the application of such
information reporting requirements and backup withholding tax.
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USE OF PROCEEDS
The Corporation intends to use the net proceeds from the sale of the Notes
for general corporate purposes, which may include, without limitation, one or
more of the following: investments in and advances to the Corporation's
subsidiaries (which include the Bank) and affiliates (which include HSI and its
direct and indirect parent companies); financing future acquisitions of
financial institutions, as well as banking and other assets; and the redemption
of certain of the Corporation's outstanding securities. The precise amounts and
timing of the application of proceeds used for such corporate purposes will
depend upon funding requirements and the availability of other funds to the
Corporation and its subsidiaries.
PLAN OF DISTRIBUTION
Under the terms of a Distribution Agreement dated as of August 21, 1998
(the "Distribution Agreement") between the Corporation and the Agents named
therein or to be appointed thereunder, Notes are being offered on a continuing
basis for sale by the Corporation through the Agents. Each Agent has agreed to
utilize its reasonable efforts on an agency basis to solicit offers to purchase
the Notes at 100% of the principal amount thereof, unless otherwise specified in
an applicable Pricing Supplement. For each Note sold through an Agent as agent,
and unless otherwise negotiated, the Corporation will pay a commission in the
form of a discount to such Agent, ranging from .125% to .750% of the principal
amount of the Note. If agreed to by the Corporation and an Agent, an Agent may
purchase a specified amount of the Notes, as principal, from the Corporation.
Unless otherwise specified in an applicable Pricing Supplement, any Note sold to
an Agent as principal will be purchased by such Agent at a price equal to 100%
of the principal amount thereof less a percentage of the principal amount equal
to the commission applicable to an agency sale of a Note of identical maturity.
The Corporation may also sell Notes directly to investors and other purchasers
on its own behalf in those jurisdictions where it is authorized to do so, and,
upon such sale, no Agent will be entitled to any commission as set forth herein.
The Corporation also may appoint, and sell Notes from time to time to or
through, one or more additional agents, acting either as agent or principal, on
substantially the same terms as those applicable to the Agents. Any such
additional agent shall, with respect to any such Notes, be deemed to be included
in all references to an "agent" or "Agents" hereunder. In addition, the
Corporation may sell Notes on an underwritten basis to a group of Agents acting
as a syndicate of underwriters; the terms and conditions of any such syndicated
underwriting will be described in the Pricing Supplement relating to any such
transaction.
Notes purchased by the Agents as principal may be resold to investors and
other purchasers at varying prices relating to prevailing market prices at the
time of resale as determined by the Agent or, if so specified in an applicable
Pricing Supplement, for resale at a fixed public offering price. An Agent may
offer Notes it has purchased from the Corporation as principal to other dealers
for resale to investors, and may allow any portion of the discount received in
connection with such purchases from the Corporation to such dealers. After the
initial public offering of Notes to be resold to investors and other purchasers,
the public offering price (in the case of Notes to be resold on a fixed public
offering price basis), the concession and the discount may be changed.
The applicable Pricing Supplement with respect to the offer and sale of
particular Notes will contain the terms of such Notes, including the names of
any Agents, the method of distribution of such Notes, the price of such Notes,
the net proceeds to the Corporation and any commissions or discounts paid or
allowed with respect to such Notes.
The Corporation reserves the right to withdraw, cancel or modify the offer
made hereby without notice and may reject orders in whole or in part whether
placed directly with the Corporation or through one of the Agents. Each Agent
will have the right, in its discretion reasonably exercised, to reject any offer
to purchase Notes received by it on an agency basis, in whole or in part. The
Corporation may, in its sole discretion, suspend solicitations of purchases of
the Notes through the Agents, acting as agent, for any period of time or
permanently.
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No Note will have an established trading market when issued, and the Notes
will not be listed on any securities exchange. The Agents may from time to time
purchase and sell Notes in the secondary market, but are not obligated to do so,
and there can be no assurance that there will be a secondary market for the
Notes or that there will be liquidity in the secondary market if one develops.
From time to time, the Agents may make a market in the Notes, but no Agent is
obligated to do so and may discontinue any market-making activity at any time.
In connection with the offering made hereby, the Agents may purchase and
sell the Notes in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover short positions created by
the Agents in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Notes, and short positions created by the Agents
involve the sale by the Agents of a greater aggregate principal amount of Notes
than they are required to purchase from the Company. The Agents also may impose
a penalty bid, whereby selling concessions allowed to broker-dealers in respect
of the Notes sold in the offering may be reclaimed by the Agents if such Notes
are repurchased by the Agents in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Notes, which may be higher than the price that might otherwise prevail in the
open market; and these activities, if commenced, may be discontinued at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
The Agents, whether acting as agent or principal, may be deemed to be
"underwriters" within the meaning of the Securities Act. The Corporation has
agreed to indemnify the Agents against and to contribute to payments that the
Agents may be required to make relating to certain liabilities, including
liabilities under the Securities Act. The Corporation has also agreed to
reimburse the Agents for certain expenses.
HSI is an affiliate of HSBC Americas. Under Section 2720 of the Conduct
Rules ("Section 2720") of the NASD, when an NASD member, such as HSI,
participates in the distribution of an affiliated company's securities, the
offering must be conducted in accordance with the applicable provisions of
Section 2720. HSBC Americas is considered to be an "affiliate" (as such term is
defined in Section 2720) of HSI. The offer and sale of any Notes by HSI will
comply with the requirements of Section 2720 regarding the underwriting of
securities of affiliates and with any restrictions as may be imposed on HSI by
the Federal Reserve Board. In addition, under Section 2720, no NASD member
participating in offers and sales of the Notes may execute a transaction in the
Notes in a discretionary account without the specific prior written approval of
the member's customer.
This Prospectus Supplement and related Prospectus also are to be used by
HSI in connection with offers and sales of the Notes in secondary market
transactions at negotiated prices relating to prevailing prices at the time of
sale or otherwise. HSI may act as principal or agent in such transactions. HSI
has no obligation to make a market in the Notes and, if commenced, may
discontinue its market-making activities at any time without notice, at its sole
discretion. Furthermore, HSI may be required to discontinue its market-making
activities during periods when the Corporation is seeking to sell certain of its
securities or when HSI, such as by means of its affiliation with the
Corporation, learns of material non-public information relating to the
Corporation. HSI would not be able to recommence its market-making activities
until such sale has been completed or such information has become publicly
available. It is not possible to forecast the impact, if any, that any such
discontinuance may have on the market for the Notes. Although other
broker-dealers may make a market in the Notes from time to time, there can be no
assurance that any other broker-dealer will do so at any time when HSI
discontinues its market-making activities. In addition, any such broker-dealer
that is engaged in market-making activities may thereafter discontinue such
activities at any time at its sole discretion.
The Agents may from time to time engage in transactions with, or perform
services for, the Corporation in the ordinary course of business. Such
transactions have in the past included, and may in the future include, loans by
the Corporation to HSI and its direct and indirect parent companies having
customary commercial terms no more favorable to HSI and its parent companies
than the terms of comparable loans it has obtained or could obtain from
unrelated parties.
S-20
<PAGE> 23
LEGAL OPINIONS
The validity of the Notes offered hereby will be passed upon for the
Corporation by Cleary, Gottlieb, Steen & Hamilton, special counsel to the
Corporation, and for the Agents by Shaw Pittman Potts & Trowbridge. From time to
time Shaw Pittman Potts & Trowbridge acts as counsel to the Corporation and
certain of its affiliates on various matters.
S-21
<PAGE> 24
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<PAGE> 25
PROSPECTUS
HSBC AMERICAS, INC. LOGO
------------------
DEBT SECURITIES
PREFERRED STOCK
HSBC Americas, Inc. (the "Corporation") intends to issue from time to time
in one or more series up to $750,000,000 in aggregate initial offering price of
(i) debt securities, which may be either senior (the "Senior Securities") or
subordinated (the "Subordinated Securities"; and collectively with the Senior
Securities, the "Debt Securities") and (ii) shares of preferred stock (the
"Preferred Stock"). The Debt Securities and Preferred Stock offered hereby
(collectively, the "Securities") may be offered, separately or as units with
other Securities, in separate series in amounts, at prices and on terms to be
determined at the time of sale and to be set forth in an accompanying supplement
to this Prospectus (a "Prospectus Supplement").
------------------
The Senior Securities will rank equally with all other unsubordinated and
unsecured indebtedness of the Corporation. The Subordinated Securities will be
subordinate to all existing and future Senior Indebtedness of the Corporation
(as defined herein). The maturity of the Subordinated Securities will be subject
to acceleration only in the event of certain events of bankruptcy or insolvency
of the Corporation or receivership of the Corporation's principal subsidiary,
Marine Midland Bank (the "Bank").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in a Prospectus Supplement, together with the
terms of the offering of the Securities and the initial price and net proceeds
to the Corporation from the sale thereof. The Prospectus Supplement will include
the following information with respect to the Securities, where applicable: (i)
in the case of Debt Securities, the specific designation, aggregate principal
amount, ranking, denomination, maturity, priority, rate of interest (which may
be variable or fixed), time of payment of interest, terms for optional
redemption or repayment by the Corporation or any holder, the initial public
offering price, any stock exchange listings, any special provisions related to
Debt Securities issued as medium-term notes, original issue discount securities
or other special terms and the designation of the Trustee, Security Registrar
and Paying Agent, (ii) in the case of Preferred Stock, the specific title and
stated value, number of shares or fractional interests therein, terms of any
dividend, liquidation, redemption, voting and other rights, any stock exchange
listings, and the initial public offering price and (iii) in the case of all
Securities, whether such Securities are being offered separately or as a unit
with other Securities. The Prospectus Supplement will also contain information,
where applicable, about certain United States federal income tax considerations
relating to the Securities covered by the Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES WILL BE UNSECURED OBLIGATIONS OF THE CORPORATION AND WILL NOT BE
SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK
SUBSIDIARY OF THE CORPORATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION (THE "FDIC"), BANK INSURANCE FUND OR ANY OTHER GOVERNMENT
AGENCY.
------------------
The Securities may be sold by the Corporation directly to purchasers,
through agents designated from time to time, through underwriting syndicates led
by one or more managing underwriters or through one or more underwriters. The
Corporation expects that any such agents, managing underwriters or underwriters
in the United States may include HSBC Securities, Inc. or other affiliates of
the Corporation. If underwriters or agents are involved in any offering of the
Securities, the names of the underwriters or agents will be set forth in the
applicable Prospectus Supplement. If an underwriter, agent or dealer is involved
in any offering of the Securities, the underwriter's discount, agent's
commission or dealer's purchase price will be set forth in, or may be calculated
from the information set forth in, the applicable Prospectus Supplement, and the
net proceeds to the Corporation from such offering will be the public offering
price of such Securities less such discount in the case of an offering though an
underwriter or such commission in the case of an offering through an agent, and
less, in each case, the other expenses of the Corporation associated with the
issuance and distribution of such Securities.
The Corporation or one or more of its subsidiaries may from time to time
purchase or acquire a position in the Securities and may at its option, hold,
resell, cancel or exercise, if applicable, such Securities. HSBC Securities,
Inc. expects to offer and sell previously issued Securities in the course of its
business as a broker-dealer and may act as principal or agent in such
transactions. In addition, this Prospectus may be used by HSBC Securities, Inc.
or other affiliates of the Corporation in connection with offers and sales
related to market-making activities. HSBC Securities, Inc. or such affiliates
may act as principal or agent in any such transactions which will be made at
negotiated prices related to the prevailing market prices at the time of sale.
This Prospectus may not be used to consummate sales of the Securities unless
accompanied by a Prospectus Supplement.
The date of this Prospectus is May 27, 1998.
<PAGE> 26
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR THE PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR ANY UNDERWRITER OR
AGENT. THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AT ANY TIME
DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF SUCH INFORMATION. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
UNLESS OTHERWISE INDICATED, CURRENCY AMOUNTS IN THIS PROSPECTUS AND ANY
PROSPECTUS SUPPLEMENT ARE STATED IN U.S. DOLLARS ("$," "DOLLARS," "U.S.
DOLLARS," OR "U.S. $").
AVAILABLE INFORMATION
The Corporation is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports and other information filed
by the Corporation can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained upon written request to the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 at
prescribed rates. The Commission maintains a Web site at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Corporation. Certain securities of the Corporation are listed on the New
York Stock Exchange ("NYSE"), and such reports and other information concerning
the Corporation also may be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Corporation has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the Securities. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement and to the exhibits thereto. Statements contained herein
concerning the provisions of certain documents are not necessarily complete, and
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the following
documents and information heretofore filed with the Commission pursuant to
Sections 12 or 13 of the Exchange Act:
1. The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "1997 10-K").
2. The Corporation's Report on Form 10-Q for the quarter ended March
31, 1998.
2
<PAGE> 27
3. The description of the Corporation's Preferred Stock contained in
the Corporation's registration statements filed under Section 12 of the
Exchange Act, including any amendment or report filed for the purpose of
updating such description.
All documents subsequently filed by the Corporation pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the Securities offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in the accompanying Prospectus Supplement, or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
THE CORPORATION WILL PROVIDE UPON REQUEST AND WITHOUT CHARGE TO EACH PERSON
TO WHOM THIS PROSPECTUS IS DELIVERED A COPY OF ANY OR ALL OF THE FOREGOING
DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED THEREIN BY REFERENCE). WRITTEN
REQUESTS SHOULD BE DIRECTED TO MANAGER, TREASURY TRANSACTIONS, HSBC AMERICAS,
INC., ONE MARINE MIDLAND CENTER, 21ST FLOOR, BUFFALO, NEW YORK 14203. TELEPHONE
REQUESTS MAY BE DIRECTED TO MANAGER, TREASURY TRANSACTIONS AT (716) 841-4175.
THE CORPORATION
HSBC Americas, Inc. (the "Corporation"), formerly Marine Midland Banks,
Inc., is a New York state-based bank holding company registered under the Bank
Holding Company Act of 1956, as amended (the "BHCA"). At March 31,1998, the
Corporation, together with its subsidiaries, had assets of $32.2 billion,
deposits of $24.1 billion, shareholders' equity of $2.0 billion and employed
approximately 9,500 full and part time employees.
The Corporation is an indirect wholly-owned subsidiary of HSBC Holdings plc
("HSBC"). HSBC, with assets of approximately $472 billion at December 31, 1997
and net income of approximately $5.5 billion for the year ended December 31,
1997, is one of the world's largest banking groups. HSBC, the ultimate parent
company of The Hongkong and Shanghai Banking Corporation Limited and Midland
Bank plc, is an international banking and financial services organization with
major commercial and investment banking franchises operating under long
established names in Asia, Europe, the Americas and the Middle East. The
principal executive offices of HSBC are located in London.
The Corporation's principal subsidiary, the Bank, which had assets of $31.9
billion and deposits of $25.1 billion at March 31, 1998, is supervised and
routinely examined by the State of New York Banking Department and the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). The Bank
is a regional bank with 382 branches creating a distinctive geographic franchise
which encompasses the entire state of New York. Selected banking products,
including credit cards and asset based lending, are offered on a national basis.
The Bank is engaged in a general commercial banking business, offering a full
range of banking products and services to individuals, corporations,
institutions and governments. Through its affiliation with HSBC, the Bank offers
its customers access to global markets and services. In turn, the Bank plays a
role in the delivery and processing of other HSBC products.
Effective March 1, 1997, the Corporation acquired CTUS Inc. ("CTUS"), a
unitary thrift holding company, for $676 million in cash. CTUS owned First
Federal Savings and Loan Association of Rochester ("First Federal"), a thrift
institution which had $7.0 billion in assets and deposits of $4.4 billion. On
the date of acquisition, the operations of First Federal were merged with those
of the Bank.
3
<PAGE> 28
On December 31, 1996, the Corporation acquired the institutional U.S.
dollar clearing activity of Morgan Guaranty Trust Company of New York. The Bank
assumed $0.9 billion in deposit liabilities and acquired a like amount of
federal funds sold. In June 1996, the Bank acquired $1.1 billion in selected
assets and assumed $1.2 billion in deposits of East River Savings Bank.
A more complete description of these acquisitions, including pro forma and
other financial information relating thereto, is set out in the 1997 10-K.
COMPETITION AND INDUSTRY CONSOLIDATION
The Corporation and its subsidiaries face competition in all of the markets
they serve, competing with other major financial institutions, including
commercial banks, investment banks, savings and loan associations, credit
unions, consumer finance companies, money market funds and other non-banking
institutions, such as insurance companies, major retailers, brokerage firms, and
investment companies in New York, throughout the United States and
internationally. One of the principal methods of competing effectively in the
financial services industry is to improve customer service through the quality
and range of services available, easing access to facilities and pricing. One
outgrowth of this competitive environment has been a significant number of
consolidations in the banking industry both on a national and regional level,
partially in response to changes in the regulatory framework governing banks'
interstate activities. See "Supervision and Regulation." The Corporation engages
on an ongoing basis in reviewing and discussing possible acquisitions of
financial institutions, as well as banking and other assets in order to expand
its business. The Corporation intends to continue to explore acquisition
opportunities as they arise in order to take advantage of the continuing
consolidation in the banking industry.
4
<PAGE> 29
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
The Corporation's ratios of earnings to fixed charges and earnings to
combined fixed charges and preferred stock dividend requirements are set forth
below for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEARS ENDED DECEMBER 31,
----------------- --------------------------------
3/31/98 3/31/97 1997 1996 1995 1994 1993
------- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on Deposits............ 3.32 3.83 3.05 4.03 3.35 1.48 0.00
Including Interest on Deposits............ 1.68 1.83 1.66 1.83 1.55 1.17 0.58
Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements:
Excluding Interest on Deposits............ 3.32 3.70 3.03 3.84 3.19 1.43 0.00
Including Interest on Deposits............ 1.68 1.81 1.66 1.80 1.53 1.16 0.57
</TABLE>
Fixed charges exceeded earnings by $212 million in 1993, while earnings
exceeded fixed charges in 1994, 1995, 1996 and 1997 by $85 million, $336
million, $549 million and $662 million, respectively. Fixed charges and
Preferred Stock dividends exceeded earnings by $218 million in 1993, while
earnings exceeded fixed charges and Preferred Stock dividends in 1994, 1995,
1996 and 1997 by $79 million, $329 million, $540 million and $660 million,
respectively.
For purposes of computing both the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividend requirements,
earnings represent net income (loss) before the cumulative effect of changes in
accounting principles plus applicable income taxes and fixed charges. Fixed
charges, excluding interest on deposits, include interest expense (other than on
deposits) and the proportion deemed representative of the interest factor of
rent expense, net of income from subleases. Fixed charges, including interest on
deposits, include all interest expense and the proportion deemed representative
of the interest factor of rent expense, net of income from subleases. Pretax
earnings required for preferred stock dividends were computed using tax rates
for the applicable year. No tax adjustments were made in loss years.
SUPERVISION AND REGULATION
GENERAL
The Corporation and the Bank are subject to extensive federal and state
supervision and regulation in the United States. Banking laws and regulations of
the Federal Reserve Board, the Federal Deposit Insurance Corporation (the
"FDIC") and the State of New York Banking Department govern most aspects of
their business, including deposit reserve requirements, investments, loans,
check clearing activities, issuance of securities, payment of dividends,
branching, nonbanking activities and numerous other matters. As a consequence of
the extensive regulation of commercial banking activities in the United States,
the business of the Corporation and the Bank is particularly susceptible to
changes in federal and state legislation and regulations, which changes may have
the effect of increasing the cost of doing business, limiting permissible
activities or increasing competition.
REGULATION OF THE CORPORATION
FEDERAL RESERVE BOARD REGULATION
The Corporation is a bank holding company within the meaning of the BHCA
and, as such, is subject to comprehensive supervision, regulation and
examination by the Federal Reserve Board. The Corporation is required to file
annual reports and other information with the Federal Reserve Board relating to
its activities and the activities of its direct and indirect subsidiaries.
The Federal Reserve Board has significant supervisory and regulatory
authority over the Corporation and its affiliates. The Federal Reserve Board
requires bank holding companies to maintain certain levels of capital,
5
<PAGE> 30
substantially similar to the risk-based capital and leverage ratio requirements
for commercial banks described in "--Regulation of the Bank -- Capital
Standards" below. The Federal Reserve Board also has the authority to take
enforcement action against any bank holding company that commits any unsafe or
unsound practice, or violates certain laws, regulations or conditions imposed in
writing by the Federal Reserve Board.
ACQUISITIONS
The BHCA, the federal Bank Merger Act and applicable state banking laws
generally regulate acquisitions of and investments involving bank holding
companies and commercial banks. Under the BHCA, a company generally must obtain
the prior approval of the Federal Reserve Board before it exercises a
controlling influence over, or acquires directly or indirectly, more than 5% of
the voting shares or substantially all of the assets of any bank or bank holding
company. The Corporation generally would be required to obtain the prior
approval of the Federal Reserve Board and possibly applicable state banking
regulators before it acquired, merged with or consolidated with any bank or bank
holding company. Similarly, any company that sought to acquire, merge or
consolidate with the Corporation would be required to obtain the approval of the
Federal Reserve Board and the State of New York Banking Department.
As a bank holding company, the Corporation is prohibited (with limited
exceptions) from acquiring ownership or control of more than 5% of the voting
shares of any company that is not a bank holding company and from engaging
directly or indirectly in activities other than banking, managing banks, or
providing services to affiliates of the holding company. However, under the BHCA
and Federal Reserve Board regulations, a bank holding company generally may
engage in, or acquire voting shares of companies engaged in, activities that the
Federal Reserve Board has determined to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. To be
permissible, the benefits to the public of such a proposed activity must
outweigh the possible adverse effects associated with such activity.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Riegle-Neal Act") permits a bank holding company, with Federal Reserve
Board approval, to acquire banks located in states other than the bank holding
company's home state without regard to whether the transaction is permitted
under state law, but subject to any state law requirement that the banks to be
acquired have been organized and operating for a minimum period of time, not to
exceed five years, and the requirement that the bank holding company, prior to
or following the acquisition, control no more than 10% of the total amount of
deposits of insured depository institutions in the United States and (if the
acquiring bank holding company has an insured depository institution with any
branch in the same state as the bank to be acquired) no more than 30% of such
deposits in that state (or such lesser or greater amount set by state law). In
addition, the Riegle-Neal Act provides that national banks and state banks with
different home states are permitted to merge across state lines with the
approval of the appropriate federal banking agency, unless the home state of a
participating bank passed legislation between the date of enactment of the
Riegle-Neal Act and May 31, 1997 expressly prohibiting interstate mergers. A
bank also may establish and operate a de novo branch in a state in which the
bank does not maintain a branch if that state expressly permits de novo
branching. Once a bank has established branches in a state through an interstate
merger transaction, the bank may establish and acquire additional branches at
any location in the state where any bank involved in the interstate merger
transaction could have established or acquired branches under applicable federal
or state law. A bank that has established a branch in a state through de novo
branching may establish and acquire additional branches in such state in the
same manner and to the same extent as a bank having a branch in such state as a
result of an interstate merger.
The merger of the Bank with another bank would require the approval of the
Federal Reserve Board or other federal bank regulatory authority and, if the
surviving bank is a New York state-chartered bank, the New York Superintendent
of Banks.
In reviewing bank acquisition and merger applications, the bank regulatory
authorities consider, among other things, the competitive effect of the
transaction, financial and managerial issues including the capital position of
the combined organization, and convenience and needs factors, including the
applicant's record under the Community Reinvestment Act of 1977, as amended (the
"CRA").
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<PAGE> 31
DIVIDENDS AND TRANSACTIONS BETWEEN AFFILIATES
The Federal Reserve Board generally prohibits a bank holding company from
declaring or paying a cash dividend that would impose undue pressure on the
capital of subsidiary banks or would be funded only through borrowing or other
arrangements that might adversely affect the bank holding company's financial
position. The Federal Reserve Board's policy is that a bank holding company
should not pay cash dividends on its common stock unless its net income is
sufficient to fully fund each dividend and its prospective rate of earnings
retention appears consistent with its capital needs, asset quality and overall
financial condition.
Transactions between the Corporation and its subsidiaries are subject to a
number of other restrictions. Federal Reserve Board policies forbid the payment
by bank subsidiaries of management fees which are unreasonable in amount or
exceed the fair market value of the services rendered (or, if no market exists,
actual costs plus a reasonable profit). Additionally, a bank holding company and
its subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with the extension of credit, sale or lease of property, or
furnishing of services. Subject to certain exceptions, subsidiary banks of bank
holding companies may extend credit to, invest in the securities of, purchase
assets from, or issue a guarantee, acceptance or letter of credit on behalf of,
an affiliate only if the aggregate of such a bank's transactions with any one
affiliate do not exceed 10% of the bank's capital stock and surplus and all such
transactions in the aggregate do not exceed 20% of the bank's capital stock and
surplus. Such transactions must be on terms and conditions that are consistent
with safe and sound banking practices. In general, the Corporation may borrow
from a subsidiary bank only if the loan is secured by marketable obligations
with a value of a designated amount in excess of the loan. Further, the
Corporation may not sell a low-quality asset to a subsidiary bank.
SOURCE OF STRENGTH
The Federal Reserve Board has adopted a policy of requiring each bank
holding company to serve as a source of financial strength to its subsidiary
banks. If the Bank were to experience either significant loan losses or rapid
growth in loans or deposits, or some other event resulting in a depletion or
deterioration of capital accounts were to occur, the Corporation might be
compelled by the Federal Reserve Board to invest additional capital in an amount
sufficient to return the Bank's capital accounts to a satisfactory level. Such
additional investment may be required at times when, absent the policy of the
Federal Reserve Board, the Corporation would not be able or willing to provide
such investment.
FAIR LENDING AND OTHER REGULATIONS
Commercial banking organizations, other insured depository institutions and
mortgage bankers are subject to certain fair lending requirements and reporting
obligations involving home mortgage lending operations. In addition to
substantive penalties and corrective measures that may be required for violation
of such laws, the federal banking agencies may take compliance with such laws
into account when regulating and supervising other activities. The Federal
Reserve Board may not approve applications to acquire the voting shares of
another insured depository institution based on incorrect reporting of home
mortgage lending data, and the possibility that applicants may have engaged in
discriminatory treatment of minorities in mortgage lending in violation of the
Equal Credit Opportunity Act.
REGULATION OF THE BANK
REGULATION AND SUPERVISION
As a New York state-chartered bank, the Bank is regulated, supervised and
regularly examined by the State of New York Banking Department. The Bank is also
a member of the Federal Reserve System and, as such, is subject to regulations,
supervision and regular examinations by the Federal Reserve Board. Under New
York and federal banking law, the Bank is subject to various restrictions on and
requirements regarding its operations and administration, including the
establishment and maintenance of branch offices, capital and reserve
requirements, deposits and borrowings, investment and lending activities,
payment of dividends and numerous other matters. The deposits of the Bank are
insured by the FDIC and subject to relevant FDIC regulations.
7
<PAGE> 32
CAPITAL STANDARDS
The Federal Reserve Board and other federal banking agencies have
established risk-based capital adequacy guidelines for commercial banks and
(with certain differences) bank holding companies. These risk-based capital
guidelines are consistent with the Bank for International Settlements' so-called
"Basle Accord" on international bank capital standards. The guidelines are
intended to provide a measure of capital adequacy that reflects the degree of
risk associated with a banking organization's operations both for on-balance
sheet assets and for transactions that are recorded as off-balance sheet items,
such as letters of credit and recourse arrangements. Under the risk-based
capital guidelines, nominal amounts of assets and credit equivalent amounts of
off-balance sheet items are multiplied by one of several risk adjustment
percentages ranging from 0% for assets with low credit risk, such as certain
U.S. government securities, to 100% for assets with relatively higher credit
risk, such as business loans.
A banking organization's risk-based capital ratios are obtained by dividing
its qualifying capital by its total risk-adjusted assets and off-balance sheet
items. The regulators measure risk-adjusted assets and off-balance sheet items
against both Tier 1 capital and total qualifying capital (the sum of Tier 1
capital and limited amounts of Tier 2 capital). Tier 1 capital generally
consists of common stock, retained earnings, noncumulative perpetual preferred
stock (and, in the case of bank holding companies, limited amounts of cumulative
preferred stock) and minority interests in certain subsidiaries, less most other
intangible assets. Tier 2 capital may consist of cumulative preferred stock,
term preferred stock, certain other instruments with some characteristics of
equity, and limited amounts of term subordinated debt and allowance for loan
losses. The inclusion of various elements of Tier 2 capital are subject to
certain requirements and limitations. The Federal Reserve Board and the other
federal banking agencies require a minimum ratio of qualifying total capital to
risk-adjusted assets and off-balance sheet items (a "Total Capital Ratio") of
8%, and a minimum ratio of Tier 1 capital to risk-adjusted assets and
off-balance sheet items (a "Tier 1 Capital Ratio") of 4%.
In addition to risk-based capital requirements, the Federal Reserve Board
and other federal banking regulators require banking organizations to maintain a
minimum amount of Tier 1 capital to total (unweighted) balance sheet assets,
referred to as the "Leverage Ratio." For a banking organization rated in the
highest of the five categories used by regulators to rate banking organizations,
the Leverage Ratio must be at least 3%; all other banking organizations are
expected to maintain minimum ratios at least 100 to 200 basis points above this
(i.e., minimum Leverage Ratios in the range of 4% to 5%). In addition to these
uniform risk-based capital guidelines and leverage ratio requirements that apply
across the industry, the federal banking regulators have the discretion to set
individual minimum capital requirements for specific institutions at rates
significantly above the minimum guidelines and ratios. The Federal Reserve Board
has not imposed any individual capital requirements on the Corporation or the
Bank.
Under a supplement to the international Basle Accord and capital adequacy
guidelines of U.S. federal banking regulators, beginning December 31, 1997,
banks and bank holding companies with significant trading activities also are
required to measure and hold capital for exposure to general market risk arising
from fluctuations in interest rates, equity prices, foreign exchange rates and
commodity prices and exposure to specific risk associated with debt and equity
positions in the organization's trading portfolio. General market risk and
specific risk exposures are to be measured by internal risk models or a
standardized model agreed upon by the Bank for International Settlements.
The Corporation and the Bank are in compliance with current federal capital
adequacy requirements. The following tables present the capital ratios for the
Corporation and the Bank as of March 31, 1998, under Federal Reserve Board
guidelines.
<TABLE>
<CAPTION>
CAPITAL RATIO HSBC AMERICAS, INC. MARINE MIDLAND BANK
------------- ------------------- -------------------
<S> <C> <C>
Total Capital.................................. 13.12% 11.55%
Tier 1......................................... 9.18% 8.33%
Leverage....................................... 6.71% 6.06%
</TABLE>
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<PAGE> 33
PROMPT CORRECTIVE ACTION AND OTHER ENFORCEMENT MECHANISMS
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), substantially revised the depository institution regulatory and
funding provisions of the Federal Deposit Insurance Act ("FDIA") and made
revisions to several other federal banking statutes.
Among other things, FDICIA requires the federal banking regulators to take
prompt corrective action in respect of FDIC-insured depository institutions that
do not meet minimum capital requirements. FDICIA establishes five tiers of
institutions: "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized." Under
applicable regulations, a bank is defined to be well capitalized if it maintains
a Total Capital Ratio of at least 10%, a Tier 1 Capital Ratio of at least 6% and
a Leverage Ratio of at least 5% and is not otherwise in a "troubled condition"
as specified by its appropriate federal regulatory agency. A bank is generally
considered to be adequately capitalized if it is not well capitalized but meets
all of its minimum capital requirements, i.e., if it has a Total Capital Ratio
of 8% or greater, a Tier 1 Capital Ratio of 4% or greater and a Leverage Ratio
of 4% or greater. A bank will be considered undercapitalized if it fails to meet
any minimum required measure, significantly undercapitalized if it is
significantly below any such measure, and critically undercapitalized if it
maintains a level of tangible equity capital equal to or less than 2% of total
assets. A bank may be deemed to be in a capitalization category that is lower
than is indicated by its actual capital position if the appropriate federal
banking agency determines that an unsound condition or an unsafe or unsound
banking practice warrants such treatment (although an institution may not be
treated as "critically undercapitalized" unless its capital ratio actually
warrants such treatment). At each successive lower capital category, a bank is
subject to more restrictions.
FDICIA generally prohibits an FDIC-insured depository institution from
making any capital distribution (including payment of dividends) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions also
are subject to restrictions on borrowing from the Federal Reserve System.
Depository institutions that are not well capitalized are subject to
restrictions on receipt of brokered deposits. In addition, bank regulators can
be expected to restrain acquisitions and new activities by bank holding
companies and banks that are not well capitalized. Undercapitalized depository
institutions are subject to growth limitations and are required to submit
capital restoration plans. For an undercapitalized depository institution's
capital restoration plan to be acceptable, its holding company must guarantee
the capital plan up to an amount equal to the lesser of 5% of the depository
institution's assets at the time it becomes undercapitalized or the amount of
the capital deficiency when the institution fails to comply with the plan. In
the event of the parent holding company's bankruptcy, such guarantee would take
priority over the parent's general unsecured creditors. The federal banking
agencies may not accept a capital plan without determining, among other things,
that the plan is based on realistic assumptions and is likely to succeed in
restoring the depository institution's capital. If a depository institution
fails to submit an acceptable plan, it is treated as if it is significantly
undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks. Critically
undercapitalized depository institutions are subject to appointment of a
receiver or conservator.
As of March 31, 1998, the Bank was categorized as "well capitalized" under
Federal Reserve Board regulations.
In addition to measures taken under the prompt corrective action
provisions, commercial banking organizations may be subject to potential
enforcement actions by the federal banking regulators for unsafe or unsound
practices in conducting their businesses or for violations of any law, rule,
regulation or any condition imposed in writing by a federal banking agency or
any written agreement with the agency. Enforcement actions may include the
imposition of a conservator or receiver, the issuance of a cease-and-desist
order that can be judicially enforced, the termination of insurance of deposits
(in the case of a depository institution), the imposition of civil money
penalties, the issuance of directives to increase capital, the issuance of
formal and informal agreements, the issuance of removal and prohibition orders
against institution-affiliated parties and the enforcement of such actions
through injunctions or restraining orders based upon a judicial determination
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<PAGE> 34
that the agency would be harmed if such equitable relief was not granted.
Additionally, a bank holding company's inability to serve as a source of
strength to its subsidiary banks could serve as an additional basis for a
regulatory action against the bank holding company.
RESTRICTIONS ON DIVIDENDS
The Corporation's funds for cash distributions to shareholders and payments
to debt holders are derived from a variety of sources, including cash and
temporary investments. The primary source of such funds, however, is dividends
received from its banking subsidiaries. The Corporation's primary banking
subsidiary, the Bank, is subject to dividend limitations under the Federal
Reserve Act and New York state banking laws. Under these statutes, prior
regulatory approval is required for dividends in any year that would exceed the
Bank's net profits for such year combined with retained net profits for the
prior two years. The Bank is also prohibited from paying a dividend in an amount
greater than "undivided profits then on hand" less "bad debts" (generally loans
six months or more past due). As noted above, FDICIA also generally prohibits an
FDIC-insured depository institution from making any capital distribution
(including payment of dividends) if the depository institution would thereafter
be undercapitalized.
In addition to these statutory tests, the Bank's primary federal regulator,
the Federal Reserve Board, could prohibit a dividend if it determines that the
payment would constitute an unsafe or unsound banking practice. The Federal
Reserve Board has indicated that, generally, dividends should be paid by a bank
only to the extent of earnings from continuing operations.
DEPOSIT INSURANCE ASSESSMENTS
The Bank is subject to FDIC deposit insurance assessments. As required by
FDICIA, the FDIC adopted a risk-based premium schedule to determine the
assessment rates for most FDIC-insured depository institutions. Effective
January 1, 1997, under the schedule, the premiums range from zero to $0.27 for
every $100 of deposits. Each financial institution is assigned to one of nine
categories based on the institution's capital ratios and supervisory
evaluations, and the premium paid by the institution is based on the category.
Under the present schedule institutions in the highest of the three capital
categories and the highest of three supervisory categories pay no premium and
institutions in the lowest of these categories pay $0.27 per $100 of deposits.
Currently, the Bank pays no FDIC insurance premium under this schedule.
In addition, beginning January 1, 1997, insured depository institutions are
subject to an additional FDIC assessment to pay for the cost of funding for the
Financing Corporation (a governmental entity established to fund past financial
assistance provided to insured savings associations). The assessment is based on
deposit levels and, for insured commercial banks such as the Bank, is currently
approximately 1.26 basis points.
The FDIC is authorized to raise insurance premiums in certain
circumstances. Any increase in premiums would have an adverse effect on the
Bank's and the Corporation's earnings.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order, or condition imposed by a bank's
federal regulatory agency.
CROSS GUARANTEES
Under the FDIA, a financial institution insured by the FDIC that is under
common control with a failed or failing FDIC-insured institution can be required
to indemnify the FDIC for losses resulting from the insolvency of the failed
institution, even if this causes the affiliated institution also to become
insolvent. Any obligation or liability owed by an insured subsidiary depository
institution to its parent company is subordinate to the subsidiary's
cross-guarantee liability with respect to commonly controlled insured depository
institutions and to the rights of depositors.
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<PAGE> 35
COMMUNITY REINVESTMENT ACT AND FAIR LENDING REQUIREMENTS
The Bank is subject to certain fair lending requirements and reporting
obligations involving home mortgage lending operations and CRA activities. The
CRA generally requires the federal banking agencies to evaluate the record of a
financial institution in meeting the credit needs of their local communities,
including low and moderate income neighborhoods. In addition to substantive
penalties and corrective measures that may be required for a violation of
certain fair lending laws, the federal banking agencies may take compliance with
such laws and CRA into account when regulating and supervising other activities.
REGULATION OF HSBC
The Corporation's parent company, HSBC, is an international banking and
financial services organization with major commercial and investment banking
franchises operating in Asia, Europe, the Americas and the Middle East. HSBC and
various of its subsidiaries are subject to extensive regulation, examination and
supervision by banking regulators, securities regulators and other authorities
in various countries.
In the United States, several of HSBC's overseas subsidiary banks operate
branches or representative offices, including in the states of New York,
Illinois, Texas, Oregon and Washington. These branch offices (and, in some
cases, representative offices) are licensed and examined by state banking
authorities in which they are located and are subject to extensive regulation
under state banking laws. In addition, the U.S. branches and representative
offices are subject to supervision and examination by the Federal Reserve Board
under the federal International Banking Act of 1978, as amended. Federal and
state regulations on U.S. branches cover a broad range of issues, including
loans, investments, deposits, reserve requirements, lending limits, asset pledge
and maintenance requirements, reporting requirements and numerous other matters.
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<PAGE> 36
USE OF PROCEEDS
The Corporation intends to use the net proceeds from the sale of the
Securities for general corporate purposes, which may include one or more of the
following: investments in and advances to the Corporation's subsidiaries,
including the Bank; financing future acquisitions of financial institutions, as
well as banking and other assets; and the redemption of certain of the
Corporation's outstanding securities. The precise amounts and timing of the
application of proceeds used for such corporate purposes will depend upon
funding requirements and the availability of other funds to the Corporation and
its subsidiaries.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The following sets forth certain general terms and provisions of the Debt
Securities to which any Prospectus Supplement may relate. The particular terms
of any Debt Securities and the extent, if any, to which such general provisions
may apply to such Debt Securities will be described in the Prospectus Supplement
relating to such Debt Securities.
The Senior Securities offered hereby are to be issued under an Indenture,
dated as of October 24, 1996 between the Corporation and Bankers Trust Company,
("Bankers Trust" or the "Trustee"), as Trustee (the "Senior Indenture") and the
Subordinated Securities offered hereby are to be issued under an Indenture,
dated as of October 24, 1996, as amended on December 12, 1996, between the
Corporation and Bankers Trust, as Trustee (the "Subordinated Indenture" and
collectively with the Senior Indenture, the "Indentures"). Copies of the
Indentures are filed as exhibits to the Registration Statement. The following
summaries of certain provisions of the Indentures do not purport to be complete
and such summaries are qualified in their entirety by reference to all of the
provisions of the Indentures, including the definitions therein of certain
terms. Whenever particular sections, articles or defined terms of the Indentures
are referred to, such provisions or definitions are incorporated herein by
reference.
Because the Corporation is a holding company, its rights and the rights of
its creditors, including the Holders of the Debt Securities, to participate in
the assets of any subsidiary, including the Bank, upon the subsidiary's
liquidation or reorganization or otherwise would be subject to the prior claims
of the subsidiary's creditors, except to the extent that the Corporation may
itself be a creditor with recognized claims against the subsidiary.
The Indentures do not limit the aggregate principal amount of Debt
Securities which may be issued thereunder. Debt Securities may be issued
thereunder in series up to the aggregate principal amount which may be
authorized from time to time by the Corporation (Section 301). The Debt
Securities will be unsecured obligations of the Corporation (Section 113). The
Senior Securities will rank on a parity with all other unsecured and
unsubordinated indebtedness of the Corporation. The Subordinated Securities will
be subordinate in right of payment as described below under "Subordination."
The Debt Securities may be issued in one or more separate series of Senior
Securities and/or one or more separate series of Subordinated Securities.
Reference is made to the Prospectus Supplement relating to the particular series
of Debt Securities offered thereby for the terms of such Debt Securities,
including, where applicable (Section 301):
(1) the title of such Debt Securities (which shall distinguish such
Debt Securities from all other series of Debt Securities), which may
include medium-term notes;
(2) the limit, if any, on the aggregate principal amount or aggregate
initial offering price of the Debt Securities;
(3) the dates on which or periods during which such Debt Securities
will be issued, and the dates on, or the range of dates within, which the
principal of (and premium, if any, on) such Debt Securities will be
payable;
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<PAGE> 37
(4) the rate or rates at which the Debt Securities will bear interest,
if any, which rate may be zero in the case of certain Debt Securities
issued at an issue price representing a discount from the principal amount
payable at maturity, or the method by which such rate or rates will be
determined, and the date or dates from which such interest, if any, will
accrue;
(5) the date or dates on which such interest, if any, on the Debt
Securities will be payable and the regular record date, if any, for such
Interest Payment Dates or the method by which such date or dates will be
determined;
(6) the place or places where (i) the principal of and premium, if
any, and any interest on the Debt Securities will be payable, (ii) Debt
Securities may be surrendered for registration of transfer, (iii) Debt
Securities may be surrendered for exchange, and (iv) notices to or upon the
Corporation in respect of the Debt Securities of the series and any
Indenture may be served;
(7) the period or periods within which, the price or prices at which,
the Debt Securities may, pursuant to any redemption provision, be redeemed,
in whole or in part, and the other detailed terms and provisions of any
such redemption provisions;
(8) if other than denominations of $1,000 and any integral multiples
thereof, the denominations in which any Debt Securities will be issuable;
(9) if other than the Trustee, the identity of each Security Registrar
and/or Paying Agent;
(10) if other than the principal amount, the portion of the principal
amount (or the method by which such portion will be determined) of Debt
Securities that will be payable upon declaration of acceleration of the
Maturity thereof;
(11) any index, formula or other method (including a method based on
changes in the prices of particular securities, currencies, intangibles,
goods, articles or commodities) used to determine the amount of payments of
principal of and premium, if any, and interest, if any, on the Debt
Securities;
(12) whether such Debt Securities are Senior Securities or
Subordinated Securities, or include both;
(13) whether provisions relating to defeasance and covenant defeasance
will be applicable to such series of Debt Securities;
(14) any provisions granting special rights to Holders of Debt
Securities upon the occurrence of specified events;
(15) any modifications, deletions or additions to the Events of
Default or covenants of the Corporation with respect to the Debt
Securities;
(16) whether any Debt Securities are issuable initially in temporary
or permanent global form and, if so (i) whether (and the circumstances
under which) beneficial owners of interests in permanent global Debt
Securities may exchange their interests for Debt Securities of like tenor
of any authorized form and denomination, and (ii) the identity of any
initial depositary for such global Debt Securities;
(17) the date as of which any temporary global Debt Security will be
dated if other than the original issuance date of the first Debt Security
of that series to be issued;
(18) the Person to whom any interest on any registered Debt Securities
will be payable, if other than the Registered Holder, and the extent to
which and manner that any interest payable on a temporary global Debt
Security will be paid if other than as specified in the Indentures;
(19) the form and/or terms of certificates, documents or conditions,
if any, for Debt Securities to be issuable in definitive form (whether upon
original issue or upon exchange of a temporary Debt Security of such
Series); and
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<PAGE> 38
(20) any other terms, conditions, rights and preferences (or
limitations on such rights or preferences) relating to the Debt Securities
(which terms shall not be inconsistent with the provisions of the
applicable Indenture and the Trust Indenture Act).
If the amount of payments of principal of and premium, if any, or any
interest on Debt Securities is determined with reference to any type of index or
formula or changes in prices of particular securities, currencies, intangibles,
goods, articles or commodities, the Federal income tax consequences, specific
terms and other information with respect to such Debt Securities and such index
or formula, securities, currencies, intangibles, goods, articles or commodities
will be described in the Prospectus Supplement relating thereto.
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate that at the time of
issuance is below market rates ("Discount Securities"). Federal income tax
consequences and other special considerations applicable to any such Debt
Securities will be described in the Prospectus Supplement relating thereto.
REGISTRATION AND TRANSFER
Unless otherwise provided in the Prospectus Supplement, each series of Debt
Securities will be issued only in registered form ("Registered Securities")
(Section 302). Unless provided for in the Prospectus Supplement, Marine Midland
Bank will serve as the initial Securities Registrar. Unless otherwise provided
in the Prospectus Supplement, Registered Securities may be presented for
transfer (duly endorsed or accompanied by a written instrument of transfer, if
so required by the Corporation or the Security Registrar) or exchanged for other
Debt Securities of the same series at the Corporate Trust Office of the Trustee
in New York City. Such transfer or exchange shall be made without service
charge, but the Corporation may require payment of any tax or other governmental
charge as described in the applicable Indenture (Sections 301, 305, 1202).
Unless otherwise indicated in the Prospectus Supplement, Registered
Securities, other than Registered Securities issued in global form which may be
of any denomination, will be issued without coupons and in denominations of
$1,000 or integral multiples thereof (Section 302).
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depositary or common depositary (the "Common
Depositary") identified in the applicable Prospectus Supplement. Global
Securities may only be issued in registered form and in either temporary or
permanent form. Unless and until it is exchanged in whole or in part for the
individual Debt Securities represented thereby, a Global Security may not be
transferred except as a whole by the Common Depositary for such Global Security
to its nominee or another nominee or by a nominee to the Common Depositary or
another nominee or by the Common Depositary or any nominee to a successor Common
Depositary or any nominee of such successor (Sections 303, 305).
Principal and interest payments on the Global Securities registered in the
name of the Common Depositary or its nominee will be made to the Common
Depositary or its nominee, as the case may be, as the registered owner of such
Global Securities. Under the terms of the Indentures, the Corporation and the
Paying Agents will treat the persons in whose names the Global Securities are
registered as the owners of such Global Securities for the purpose of receiving
payment of principal and interest on such Global Securities and for all other
purposes whatsoever. Therefore, neither the Corporation nor the Paying Agents
has any direct responsibility or liability for the payment of principal of or
interest on the Global Securities to owners of beneficial interests in the
Global Securities.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the Prospectus Supplement, payment of
principal of and premium, if any, and interest, if any, on the Securities will
be made at the corporate trust office of the Trustee in New York
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<PAGE> 39
City or at the corporate offices of Marine Midland Bank in New York City, except
that, at the option of the Corporation, interest may be paid by mailing a check
to the address of the person entitled thereto as such address appears in the
Security Register. (Sections 301, 307, 1202).
CONSOLIDATION, MERGER AND SALE OF ASSETS
Under each Indenture, the Corporation, without the consent of the Holders
of any of the Debt Securities outstanding under the applicable Indenture, may
consolidate with or merge into any other corporation or convey, transfer or
lease its properties and assets substantially as an entirety to any Person
provided that: (i) the successor is a corporation organized and existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the successor corporation expressly assumes, by an indenture supplemental
to the applicable Indenture, the Corporation's obligation for the due and
punctual payment of the principal of and premium, if any, and interest, if any,
on all of the Debt Securities under the applicable Indenture and the performance
of every covenant of the applicable Indenture; (iii) after giving effect to the
transaction, no Event of Default under the Senior Indenture and no Default under
the Subordinated Indenture, and no event which, after notice or lapse of time,
or both, would become an Event of Default or a Default, as the case may be,
shall have happened and be continuing; and (iv) certain other conditions are met
(Section 1001).
MODIFICATION AND WAIVER
Each Indenture provides that modification or amendments of the Indentures
may be made by the Corporation and the Trustee, with the consent of the Holders
of 66 2/3 percent in principal amount of the outstanding Debt Securities of each
series affected by such modification or amendment; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
outstanding Debt Security affected thereby: (a) change the Stated Maturity of
the principal of, or any installment of principal of or interest on, any Debt
Security; (b) reduce the principal amount of, or rate or amount of interest, if
any, on, or any premium payable upon the redemption of any Debt Security; (c)
reduce the amount of principal of any Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof or the amount
provable in bankruptcy; (e) adversely affect any right of repayment at the
option of any Holder of any Debt Security; (f) change the place or currency of
payment of principal of, or any premium or interest on, any Debt Security; (g)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Debt Security on or after the Stated Maturity thereof (or, in the
case of redemption or repayment at the option of the Holder, on or after the
Redemption Date or Repayment Date); (h) reduce the percentage of principal
amount of outstanding Debt Securities of any series, the consent of whose
Holders is required for modification or amendment of the Indentures, or for
waiver of compliance with certain provisions of the Indentures or for waiver of
certain defaults and their consequences, or reduce the requirements for quorum
or voting by the Holders; or (i) modify certain provisions of the Indentures
except to increase the percentage of Holders required to consent thereon to
amendment or modification thereof or to provide that certain other Indenture
provisions cannot be modified or waived without the consent of the Holder of
each outstanding Debt Security affected thereby (Section 1102).
The Holders of 66 2/3 percent in principal amount of the outstanding Debt
Securities of each series may, on behalf of all Holders of Debt Securities of
that series, waive, insofar as that series is concerned, compliance by the
Corporation with certain terms, conditions, or provisions of the Indentures
(Section 1205). The Holders of not less than a majority in principal amount of
the outstanding Debt Securities of any series may, on behalf of all Holders of
Debt Securities of that series, waive any past default under the applicable
Indentures with respect to Debt Securities of that series and its consequences,
except a default in the payment of principal or premium, if any, or interest, if
any, or in respect of a covenant or provision which under Article XI of each
Indenture cannot be modified or amended without the consent of the Holder of
each outstanding Debt Security of such series affected (Section 513).
Each Indenture provides that, in determining whether the Holders of the
requisite principal amount of the outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or are present at a meeting of Holders for quorum purposes, and for making
calculations required under Section 313 of the Trust Indenture Act: (a) the
principal amount of a Discount Security that
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<PAGE> 40
may be counted in making such determination or calculation and that shall be
deemed to be outstanding shall be the amount of principal thereof that would be
due and payable as of the time of such determination upon acceleration of the
Maturity thereof; and (b) the principal amount of any indexed Debt Security that
may be counted in making such determination or calculation and that shall be
deemed outstanding for such purpose shall be equal to the principal face amount
of such indexed Debt Security at original issuance, unless otherwise provided
with respect to such Debt Security (Section 101).
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide that the Corporation may elect (a) to defease and be
discharged from its obligations with respect to any Debt Securities of or within
a series (except the obligations to register the transfer of or exchange such
Debt Securities; to replace temporary or mutilated, destroyed, lost or stolen
Debt Securities; to maintain an office or agency in respect of such Debt
Securities; and to hold moneys for payment in trust) ("defeasance") or (b) with
respect to the Senior Indenture, to be released from its obligations with
respect to such Debt Securities under Section 1001 of the Senior Indenture or,
if provided pursuant to Section 301 of the Senior Indenture, its obligations
with respect to any other covenant, and any omission to comply with such
obligations shall not constitute a default or an Event of Default under the
Senior Indenture with respect to such Debt Securities ("covenant defeasance"),
in either case by (a) depositing irrevocably with the Trustee as trust funds in
trust (i) money in an amount, or (ii) U.S. Government Obligations (as defined
below) in an amount which through the payment of interest and principal in
respect thereof in accordance with their terms will provide, not later than one
business day before the due date of any payment, money in an amount, or (iii) a
combination of dollars in cash and U.S. Government Obligations sufficient to pay
the principal of and premium, if any, and interest, if any, on the Debt
Securities of such series on the dates such installments of interest or
principal and premium and any similar payments applicable to such Debt
Securities are due and (b) satisfying certain other conditions precedent
specified in the Indentures. Such deposit and termination is conditioned among
other things upon the Corporation's delivery of an Opinion of Counsel that the
Holders of the Debt Securities of such series will have no U.S. federal income
tax consequences as a result of such deposit and termination and an Officer's
Certificate that all conditions precedent to the defeasance have been met
(Article XIV).
Defeasance of the Corporation's obligations with respect to Subordinated
Securities is subject to the prior written approval of the Federal Reserve Board
and the Bank of England (Subordinated Indenture, Section 1402).
If the Corporation exercises its covenant defeasance option with respect to
any series of Senior Securities and such Senior Securities are declared due and
payable because of the occurrence of any Event of Default other than with
respect to a covenant as to which there has been covenant defeasance as
described above, the money and U.S. Government Obligations on deposit with the
Trustee will be sufficient to pay amounts due on such Senior Securities at their
Stated Maturity but may not be sufficient to pay amounts due on such Senior
Securities at the time of acceleration relating to such Event of Default.
However, the Corporation would remain liable to make payment of such amounts due
at the time of acceleration.
The Prospectus Supplement may further describe the provisions, if any,
permitting such defeasance or covenant defeasance, including any modifications
to the provisions described above, with respect to the Debt Securities of or
within any particular series.
Unless otherwise specified in the Prospectus Supplement, "U.S. Government
Obligations" means securities that are (i) direct obligations of the United
States government or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States government, the
timely payment of which is unconditionally guaranteed by such government, which,
in either case, are full faith and credit obligations of such government payable
in dollars and are not callable or redeemable at the option of the issuer
thereof, and also includes a depositary receipt issued by a bank or trust
company as custodian with respect to any such U.S. Government Obligation or a
specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depositary
receipt; provided that (except as required by law) such custodian is not
authorized to make any
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<PAGE> 41
deduction from the amount payable to the holder of such depositary receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of interest or principal of the U.S.
Government Obligation evidenced by such depositary receipt (Section 1402).
REGARDING THE TRUSTEE
Bankers Trust, the Trustee under the Indentures, has its principal
corporate trust office at 4 Albany Street, 4th Floor, New York, New York 10006.
The Corporation and its banking subsidiaries maintain banking relationships with
the Trustee.
SENIOR SECURITIES
The Senior Securities will be direct unsecured obligations of the
Corporation and will constitute Senior Indebtedness (as defined below under
"-- Subordinated Securities -- Subordination") ranking on a parity with the
other Senior Indebtedness of the Corporation.
EVENTS OF DEFAULT
The following will be Events of Default under the Senior Indenture with
respect to Senior Securities of any series: (a) failure to pay principal or
premium, if any, on any Senior Security of that series at Maturity; (b) failure
to pay any interest on any Senior Security of that series when due and payable,
continued for 30 days; (c) failure to perform any covenant or warranty of the
Corporation in the Senior Indenture (other than a covenant or warranty included
in the Senior Indenture solely for the benefit of series of Senior Securities
other than that series), continued for 60 days after written notice as provided
in the Senior Indenture; (d) default under any bond, debenture, note, mortgage,
indenture, other instrument or other evidence of Indebtedness for Money Borrowed
in an aggregate principal amount exceeding $5 million by the Corporation or the
Bank or its successors (including a default with respect to Senior Securities of
another series) under the terms of the instrument or instruments by or under
which such indebtedness is evidenced, issued or secured, which default results
in the acceleration of such indebtedness, if such acceleration is not rescinded
or annulled, or such indebtedness is not discharged, within ten days after
written notice as provided in the Senior Indenture; (e) certain events in
bankruptcy, insolvency or reorganization of the Corporation or receivership of
the Bank and (f) any other Event of Default provided with respect to Senior
Securities of that series (Senior Indenture, Section 501).
If an Event of Default with respect to Senior Securities of any series at
the time outstanding occurs and is continuing, either the Trustee or the Holders
of at least 25 percent in aggregate principal amount of the outstanding Senior
Securities of that series may declare the principal amount (or, if the
Securities of that series are Discount Securities or Indexed Securities, such
portion of the principal amount of such Senior Securities as may be specified in
the terms thereof) of and all accrued but unpaid interest on all the Senior
Securities of that series to be due and payable immediately, by a written notice
to the Corporation (and to the Trustee, if given by Holders), and upon any such
declaration such principal amount (or specified amount) and interest shall
become immediately due and payable. At any time after a declaration of
acceleration with respect to Senior Securities of any series has been made, but
before a judgment or decree for payment of the money due has been obtained, the
Holders of a majority in principal amount of outstanding Senior Securities of
that series may, under certain circumstances, rescind and annul such declaration
and its consequences, if all Events of Default have been cured, or if permitted,
waived, and all payments due (other than those due as a result of acceleration)
have been made or provided for (Senior Indenture, Section 502).
The Senior Indenture provides that, subject to the duty of the Trustee
during default to act with the required standard of care, the Trustee will be
under no obligation to exercise any of its rights or powers under the Senior
Indenture at the request or direction of any of the Holders of Senior Securities
of any series, unless such Holders shall have offered to the Trustee reasonable
indemnity or security against the costs, expenses and liabilities which may be
incurred (Senior Indenture, Sections 601, 603). Subject to certain provisions,
the Holders of a majority in principal amount of the Outstanding Senior
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
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exercising any trust or power conferred on the Trustee, with respect to the
Senior Securities of that series (Senior Indenture, Section 512).
The Corporation is required to deliver to the Trustee annually an Officers'
Certificate as to its performance and observance of any of the terms, provisions
and conditions with respect to certain provisions in the Senior Indenture and as
to the absence of any default (Senior Indenture, Section 1206).
SUBORDINATED SECURITIES
The Subordinated Securities will be direct, unsecured obligations of the
Corporation. The obligations of the Corporation pursuant to the Subordinated
Securities will be subordinate in right of payment to all Senior Indebtedness as
defined below under "-- Subordination."
The maturity of the Subordinated Securities will be subject to acceleration
only in the event of certain events of bankruptcy or insolvency of the
Corporation or the receivership of the Bank. See "-- Events of Default;
Defaults" below.
SUBORDINATION
The obligation of the Corporation to make any payment on account of the
principal of or premium, if any, and interest, if any, on the Subordinated
Securities will be subordinate and junior in right of payment to the
Corporation's obligations to the holders of Senior Indebtedness of the
Corporation to the extent described in the next paragraph. (Subordinated
Indenture, Section 1501). "Senior Indebtedness" of the Corporation is defined in
the Subordinated Indenture to mean "Indebtedness for Money Borrowed" of the
Corporation, whether outstanding on the date of execution of the Subordinated
Indenture or thereafter created, assumed or incurred, except "Indebtedness
Ranking on a Parity with the Debt Securities" or "Indebtedness Ranking Junior to
the Debt Securities" and any deferrals, renewals or extensions of such Senior
Indebtedness (Subordinated Indenture, Section 101). "Indebtedness for Money
Borrowed" of the Corporation is defined in the Subordinated Indenture as (a) any
obligation of, or any obligation guaranteed by, the Corporation for the
repayment of borrowed money, whether or not evidenced by bonds, debentures,
notes or other written instruments, (b) similar obligations arising from
off-balance sheet guarantees and direct credit substitutes, (c) obligations
associated with derivative products, such as interest-rate and
foreign-exchange-rate contracts, commodity contracts and similar arrangements,
and (d) any deferred obligations for the payment of the purchase price of
property or assets (Subordinated Indenture, Section 101). "Indebtedness Ranking
on a Parity with the Debt Securities" is defined in the Subordinated Indenture
to mean Indebtedness for Money Borrowed of the Corporation, whether outstanding
on the date of execution of the Subordinated Indenture or thereafter created,
assumed or incurred, which specifically by its terms ranks equally with and not
prior to the Subordinated Securities in the right of payment upon the happening
of any event of the kind specified in the next paragraph. Indebtedness Ranking
on a Parity with the Debt Securities includes the Corporation's:
(i) Floating Rate Subordinated Capital Notes due March 1999 issued
under an indenture dated as of April 1, 1987 between the Corporation and
The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee;
(ii) Floating Rate Subordinated Notes due December 2000 issued under
an indenture dated December 12, 1985 between the Corporation and The Chase
Manhattan Bank (formerly known as The Chase Manhattan Bank, National
Association), as trustee;
(iii) Floating Rate Subordinated Notes due December 2009 issued under
an indenture dated December 15, 1984 between the Corporation and The Chase
Manhattan Bank (formerly known as The Chase Manhattan Bank, National
Association), as trustee; and
(iv) 7.00% Subordinated Notes due November 1, 2006 issued under an
indenture dated October 24, 1996, as amended on December 12, 1996, between
the Corporation and Bankers Trust, as trustee.
"Indebtedness Ranking Junior to the Debt Securities" is defined in the
Subordinated Indenture to mean any Indebtedness for Money Borrowed of the
Corporation, whether outstanding on the date of execution of the
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Subordinated Indenture or thereafter created, assumed or incurred, which
specifically by its terms ranks junior to and not equally with or prior to the
Subordinated Securities (and any other Indebtedness Ranking on a Parity with the
Subordinated Securities) in right of payment upon the happening of any event of
the kind specified in the first sentence of the next paragraph. Indebtedness
Ranking Junior to the Debt Securities includes in the Corporation's:
(i) 7.808% Junior Subordinated Deferrable Debentures due December 15,
2026 issued under an indenture dated December 15, 1996 between the
Corporation and Bankers Trust, as trustee, in connection with the issuance
of the 7.808% Capital Securities issued by HSBC Americas Capital Trust I
and guaranteed by the Corporation; and
(ii) 8.38% Junior Subordinated Deferrable Debentures due May 15, 2027
issued under an indenture dated May 15, 1997 between the Corporation and
Bankers Trust, as trustee, in connection with the issuance of the 8.38%
Capital Securities issued by HSBC Americas Capital Trust II and guaranteed
by the Corporation.
In the case of any bankruptcy, insolvency, receivership, conservatorship,
reorganization, readjustment of debt, marshaling of assets and liabilities or
similar proceedings or any liquidation or winding up of or relating to the
Corporation as a whole, whether voluntary or involuntary, all obligations of the
Corporation to Holders of Senior Indebtedness of the Corporation shall be
entitled to be paid in full before any payment shall be made on account of the
principal of, or premium, if any, or interest, if any, on the Subordinated
Securities of any series. In the event and during the continuation of any
default in the payment of principal of, or premium, if any, or interest, if any,
on, any Senior Indebtedness beyond any applicable grace period, or in the event
that any event of default with respect to any Senior Indebtedness shall have
occurred and be continuing, or would occur as a result of certain payments,
permitting the holders of such Senior Indebtedness (or a trustee on behalf of
the holders thereof) to accelerate the maturity thereof, then, unless and until
such default or event of default shall have been cured or waived or shall have
ceased to exist, no payment of principal of, or premium, if any, or interest, if
any, on the Subordinated Securities, or in respect of any redemption, exchange,
retirement, purchase or other acquisition of any of the Subordinated Securities,
shall be made by the Corporation (Subordinated Indenture, Sections 1501, 1503).
Any Prospectus Supplement relating to an issuance of Subordinated
Securities will set forth (as of the most recent practicable date) the aggregate
amount of outstanding Senior Indebtedness and any limitation on the issuance of
additional Senior Indebtedness.
Holders of Subordinated Securities, by their acceptance of such
Subordinated Securities, shall be deemed to have irrevocably waived any rights
such Holders may have to counterclaim or set off amounts owed by such Holders to
the Corporation against amounts owed to such Holders by the Corporation under
the Subordinated Indenture or to institute proceedings in respect of such
amounts (Subordinated Indenture, Section 1501).
By reason of such subordination in favor of the holders of Senior
Indebtedness of the Corporation, in the event of the insolvency of the
Corporation, holders of Senior Indebtedness of the Corporation may receive more,
ratably, and Holders of the Subordinated Securities having a claim pursuant to
the Subordinated Securities may receive less, ratably, than the other creditors
of the Corporation.
REDEMPTION
No redemption, defeasance or early repayment of amounts owed under the
Subordinated Securities, including purchases of capital notes by the Corporation
or its subsidiaries or at the option of Holders of Subordinated Securities, may
be made without the prior written consent of the Federal Reserve Board and the
Bank of England (Subordinated Indenture, Section 1302). Such consent by the Bank
of England and the Federal Reserve Board will depend on the Bank of England and
the Federal Reserve Board being satisfied that the Corporation's capital is
adequate and is likely to remain. Ordinarily, the Federal Reserve Board would
permit such a redemption if the Subordinated Securities were redeemed with the
proceeds of a sale of, or
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replaced with a like amount of, a similar or higher quality capital instrument
and the bank holding company's capital position is considered fully adequate.
EVENTS OF DEFAULT; DEFAULTS
The only Events of Default under the Subordinated Indenture with respect to
Subordinated Securities of any series will be certain events in bankruptcy or
insolvency of the Corporation or the receivership of the Bank (Subordinated
Indenture, Section 501).
If an Event of Default with respect to Subordinated Securities of any
series at the time Outstanding occurs and is continuing, the Trustee or the
Holders of at least 25 percent in principal amount of the Outstanding
Subordinated Securities of that series may declare the principal amount of (or,
if any of the Subordinated Securities of that series are Discount Securities or
Indexed Securities, such portion of the principal amount of such Subordinated
Securities as may be specified in the terms thereof) and all accrued but unpaid
interest on all the Subordinated Securities of that series to be due and payable
immediately, by a written notice to the Corporation (and to the Trustee, if
given by Holders), and upon any such declaration such principal amount (or
specified amount) and interest shall become immediately due and payable
(Subordinated Indenture, Section 502). The foregoing provision would, in the
event of the bankruptcy or insolvency of the Corporation, be subject as to
enforcement to the broad equity powers of a federal bankruptcy court and to the
determination by that court of the nature and status of the payment claims of
the Holders of the Subordinated Securities. At any time after a declaration of
acceleration with respect to the Subordinated Securities of any series has been
made, but before a judgment or decree for payment of the money due has been
obtained, the Holders of a majority in principal amount of Outstanding
Subordinated Securities of that series may, under certain circumstances, rescind
and annul such acceleration but only if all Defaults have been remedied, or if
permitted, waived and if certain other conditions have been satisfied
(Subordinated Indenture, Sections 502, 513).
The following events will be Defaults under the Subordinated Indenture with
respect to Subordinated Securities of any series: (a) an Event of Default with
respect to such series of Subordinated Securities; (b) failure to pay principal
or premium, if any, on any Subordinated Security of that series at Maturity,
continued for seven days; and (c) failure to pay any interest, if any, on any
Subordinated Security of that series when due and payable, continued for 30 days
(Subordinated Indenture, Section 503).
If the Corporation does not pay any installment of interest on the
Subordinated Securities of any series on the applicable Interest Payment Date or
all or any part of any installment of principal thereof at the Stated Maturity
with respect to such principal, the obligation to make such payment and such
Interest Payment Date or Stated Maturity, as the case may be, shall be deferred
until (i) in the case of a payment of interest, the date upon which a dividend
is paid on any class of share capital of the Corporation and (ii) in the case of
a payment of principal, the first Business Day after the date that falls six
months after the original Stated Maturity with respect to such principal.
Failure by the Corporation to make any such payment prior to such deferred
Interest Payment Date or Stated Maturity shall not constitute a default by the
Corporation or otherwise allow any holder to sue the Corporation for such
payment or to take any other action. Each payment so deferred will accrue
interest at the rate per annum shown on the front cover of the applicable
Prospectus Supplement. Any payment so deferred shall not be treated as due for
any purpose (including, without limitation, for the purposes of ascertaining
whether or not a Default has occurred until the deferred Interest Payment Date
or Stated Maturity, as the case may be). Any such deferral shall take place only
once with respect to any payment of interest or principal.
The maturity of the Subordinated Securities will be subject to acceleration
only in the event of certain events of bankruptcy or insolvency of the
Corporation or the receivership of the Bank. There will be no right of
acceleration of the payment of principal of the Subordinated Securities of any
series upon a default in the payment of principal of or premium, if any, or
interest, if any, or a default in the performance of any covenant or agreement
in the Subordinated Securities or the Subordinated Indenture or any Default
other than an Event of Default. If a Default with respect to the Subordinated
Securities of any series occurs and is continuing, the Trustee may, subject to
certain limitations and conditions, seek to enforce its rights and the
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rights of the Holders of Subordinated Securities of such series or the
performance of any covenant or agreement in the Subordinated Indenture
(Subordinated Indenture, Section 503).
The Subordinated Indenture provides that, subject to the duty of the
Trustee upon the occurrence of a Default to act with the required standard of
care, the Trustee will be under no obligation to exercise any of its rights or
powers under the Subordinated Indenture at the request or direction of any of
the Holders of Subordinated Securities of any series unless such Holders shall
have offered to the Trustee reasonable indemnity or security against the costs,
expenses and liabilities which may be incurred. (Subordinated Indenture,
Sections 601, 603). Subject to certain provisions, the Holders of a majority in
principal amount of the Outstanding Subordinated Securities of any series will
have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, with respect to the Subordinated Securities of
that series (Subordinated Indenture, Section 507).
The Corporation is required to furnish to the Trustee annually an Officer's
Certificate as to the performance and observance by the Corporation of certain
of the terms, provisions and conditions under the Subordinated Indenture and as
to the absence of default (Subordinated Indenture, Section 1204).
REPLACEMENT DEBT SECURITIES
Unless otherwise provided for in the applicable Prospectus Supplement, if a
Debt Security of any series is mutilated, destroyed, lost or stolen, it may be
replaced at the corporate trust office of the Trustee in the City and State of
New York upon payment by the Holder of such expenses as may be incurred by the
Corporation and the Trustee in connection therewith and the furnishing of such
evidence and indemnity as the Corporation and such Trustee may require.
Mutilated Debt Securities must be surrendered before new Debt Securities will be
issued (Section 306).
NOTICES
Unless otherwise provided in the applicable Prospectus Supplement, any
notice required to be given to a Holder of a Debt Security of any series that is
a Registered Security will be mailed to the last address of such Holder set
forth in the applicable Security Register, and any notice so mailed shall be
deemed to have been received by such Holder, whether or not such Holder actually
receives such notice (Section 105).
DESCRIPTION OF PREFERRED STOCK
The following summary contains a description of certain general terms of
the Preferred Stock to which any Prospectus Supplement may relate. Certain terms
of any series of the Preferred Stock offered by any Prospectus Supplement will
be described in the Prospectus Supplement relating thereto. If so indicated in
the Prospectus Supplement, the terms of any series may differ from the terms set
forth below. The description of certain provisions of the Preferred Stock does
not purport to be complete and is subject to and qualified in its entirety by
reference to the provisions of the Corporation's Restated Certificate of
Incorporation (the "Certificate of Incorporation"), and the Certificate of
Designation, Powers, Preferences and Relative, Participating, Optional or other
Rights and the Qualifications, Limitations or Restrictions (the "Certificate of
Designation") establishing each particular series of the Preferred Stock, a copy
of which will be filed with the Commission at or prior to the time of the sale
of such series of Preferred Stock.
GENERAL
Under the Certificate of Incorporation, the Board of Directors of the
Corporation is authorized, without further stockholder action, to provide for
the issuance of up to (i) 49,158 shares of cumulative preferred stock, without
par value and (ii) up to 10,000,000 shares of preferred stock, par value $1.00
per share, in each case in one or more series, having such designations or
titles; dividend rates; special or relative rights in the event of liquidation,
distribution or sale of assets or dissolution or winding up of the Corporation;
any redemption or purchase account provisions; any conversion provisions; and
any voting rights thereof, as shall be set forth in
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the Certificate of Designation for each such series. The shares of any series of
Preferred Stock will be, when issued, fully paid and non-assessable and holders
thereof shall have no preemptive rights in connection therewith.
In connection with its acquisition of CTUS described under the heading "The
Corporation," the Corporation issued a series of Preferred Stock consisting of
100 shares, par value of $1.00 per share, (the "Series X Preferred Stock") to CT
Financial Services Inc., the parent of CTUS. The Series X Preferred Stock
provides for, and only for, a contingent dividend or redemption equal to the
amount of recovery, net of taxes and costs, if any, by the Bank as successor to
First Federal resulting from the pending action originally brought by First
Federal against the United States government alleging breaches by the government
of contractual obligations to First Federal following passage of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989.
On March 31, 1997, the Corporation redeemed 1,916,950 outstanding shares of
Adjustable Rate Cumulative Preferred Stock and 22,154 outstanding shares of
$5.50 Cumulative Preferred Stock. The shares of Adjustable Rate Cumulative
Preferred Stock were redeemed at $50 per share plus accrued and unpaid dividends
of $0.75 per share. The shares of $5.50 Cumulative Preferred Stock were redeemed
at $100 per share plus accrued and unpaid dividends of $1.375 per share.
The liquidation preference of any series of the Preferred Stock is not
necessarily indicative of the price at which shares of such series of Preferred
Stock will actually trade at or after the time of their issuance. The market
price of any series of Preferred Stock can be expected to fluctuate with changes
in market and economic conditions, the financial condition and prospects of the
Corporation and other factors that generally influence the market prices of
securities.
RANK
Any series of the Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding up and dissolution, rank (i) senior to all
classes of common stock of the Corporation and with all equity securities issued
by the Corporation, the terms of which specifically provide that such equity
securities will rank junior to the Preferred Stock (collectively referred to as
the "Junior Securities"); (ii) on a parity with all equity securities issued by
the Corporation, the terms of which specifically provide that such equity
securities will rank on a parity with the Preferred Stock, (collectively
referred to as the "Parity Securities"); and (iii) junior to all equity
securities issued by the Corporation, the terms of which specifically provide
that such equity securities will rank senior to the Preferred Stock
(collectively referred to as the "Senior Securities"). As used in any
Certificate of Designation for these purposes, the term "equity securities" will
not include debt securities convertible into or exchangeable for equity
securities.
DIVIDENDS
Holders of each series of Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors of the Corporation, out of
funds legally available therefor, cash dividends at such rates and on such dates
as are set forth in the Prospectus Supplement relating to such series of the
Preferred Stock. Dividends will be payable to holders of record of the Preferred
Stock as they appear on the books of the Corporation on such record dates, as
shall be fixed by the Board of Directors. Dividends on any series of Preferred
Stock may be cumulative or non-cumulative.
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Securities unless dividends shall have been
paid or set apart for such payment on the Preferred Stock. If full dividends are
not so paid, the Preferred Stock shall share dividends pro rata with the Parity
Securities. If dividends are cumulative, any accumulated unpaid dividends will
not bear interest.
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REDEMPTION
A series of Preferred Stock may be redeemable at any time, in whole or in
part, at the option of the Corporation or the holder thereof upon terms and at
the redemption prices set forth in the Prospectus Supplement relating to such
series.
In the event of partial redemptions of Preferred Stock, whether by
mandatory or optional redemption, the shares to be redeemed will be determined
by lot or pro rata, as may be determined by the Board of Directors of the
Corporation or by any other method determined to be equitable by the Board of
Directors.
On and after a redemption date, unless the Corporation defaults in the
payment of the redemption price, dividends will cease to accrue 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.
Under current regulations, bank holding companies may not redeem shares of
preferred stock which constitute Tier 1 capital for purposes of the Federal
Reserve Board's risk-based capital requirements without the prior approval of
the Federal Reserve Board. Ordinarily, the Federal Reserve Board would permit
such a redemption if (1) the shares are redeemed with the proceeds of a sale by
the bank holding company of, or replaced by a like amount of, common stock or
perpetual preferred stock and the bank holding company's capital position is
considered fully adequate or (2) the Federal Reserve Board determines that the
bank holding company's capital position after such redemption would clearly be
adequate and that its condition and circumstances warrant the reduction of a
source of permanent capital.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, holders of each series of Preferred Stock that ranks senior to
the Junior Securities will be entitled to receive out of assets of the
Corporation available for distribution to stockholders, before any distribution
is made on any Junior Securities, including common stock, distributions upon
liquidation in the amount set forth in the Prospectus Supplement relating to
such series of Preferred Stock, plus an amount equal to any accrued and unpaid
dividends. If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the amounts payable with respect to the Preferred
Stock of any series and any other Parity Securities are not paid in full, the
holders of the Preferred Stock of such series and the Parity Securities will
share ratably in any such distribution of assets of the Corporation in
proportion to the full liquidation preferences to which each is entitled. After
payment of the full amount of the liquidation preference to which they are
entitled, the holders of such series of Preferred Stock will not be entitled to
any further participation in any distribution of assets of the Corporation.
However, neither (i) the merger or consolidation of the Corporation with or into
one or more corporations pursuant to any statute which provides in effect that
the stockholders of the Corporation shall continue as stockholders of the
continuing or combined corporation nor (ii) the acquisition by the Corporation
of assets or stock of another corporation shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
VOTING RIGHTS
Except as indicated below or in the Prospectus Supplement relating to a
particular series of Preferred Stock, or except as expressly required by
applicable law, the holders of the Preferred Stock will have no voting rights.
Under regulations adopted by the Federal Reserve Board, if the holders of
shares of any series of Preferred Stock of the Corporation became entitled to
vote for the election of directors, such series may then be deemed a "class of
voting securities" and a holder of 25% or more of such series (or a holder of 5%
if it otherwise exercises a "controlling influence" over the Corporation) may
then be subject to regulation as a bank holding company in accordance with the
BHCA, as amended. In addition, at such time as such series is deemed a class of
voting securities, (i) any other bank holding company may be required to obtain
the approval of the Federal Reserve Board to acquire or retain 5% or more of
such series, and (ii) any person other
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than a bank holding company may be required to obtain the approval of the
Federal Reserve Board under the Change in Bank Control Act to acquire or retain
10% or more of such series.
CAPITAL SECURITIES
The following summary relates to securities that have previously been
issued by trust subsidiaries of the Corporation and are not being issued under
this Registration Statement.
As of the date hereof, the Corporation has outstanding, issued through
trust subsidiaries, $200,000,000 of 7.808% guaranteed mandatorily redeemable
preferred securities ("Capital Securities") due 2026 and $200,000,000 of 8.38%
Capital Securities due 2027. These Capital Securities are guaranteed by the
Corporation and represent preferred beneficial ownership interests in the assets
of the trusts, all of whose outstanding common shares are held by the
Corporation. The sole asset of the trusts consist of Junior Subordinated
Deferrable Debentures of the Corporation.
The Capital Securities are redeemable at the option of the Corporation in
the case of a specified tax event or regulatory capital event at a prepayment
price equal to the greater of (i) 100% of the principal amount of the Capital
Securities or (ii) the sum of the present values of a stated percentage of the
principal amount of the Capital Securities plus the remaining scheduled payments
of interest thereon from the prepayment date. In the absence of a regulatory
capital event, the 7.808% Capital Securities are redeemable at the option of the
Corporation on December 15, 2006 and during the first 12 months thereafter at a
premium of 3.904%, at varying lesser amounts thereafter and without premium
after December 15, 2016. Similarly, the 8.38% Capital Securities are redeemable
at the option of the Corporation on May 15, 2007 and during the first 12 months
thereafter at a premium of 4.19%, at varying lesser amounts thereafter and
without premium after May 15, 2017.
PLAN OF DISTRIBUTION
The Corporation may sell Securities to one or more underwriters for public
offering and sale by them or may sell Securities to investors directly or
through agents which solicit to receive offers on behalf of the Corporation or
through dealers or through a combination of any such methods of sale. The
applicable Prospectus Supplement will set forth the terms of the offering of any
Securities, including the names of the underwriters, the purchase price of such
Securities and the proceeds to the Corporation from such sale, any underwriting
discounts and other items constituting underwriters' compensation, any initial
public offering price, any discounts or concessions allowed or reallowed or paid
to dealers, and any securities exchanges on which such Securities may be listed.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. Such Securities may be offered to the public either through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Unless otherwise set forth in the applicable Prospectus
Supplement, the obligations of the underwriters to purchase such Securities will
be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all of such Securities if any of such Securities are
purchased.
The Corporation may, from time to time, authorize agents acting on a best
efforts basis as agents of the Corporation to solicit or receive offers to
purchase the Securities upon the terms and conditions as are set forth in the
applicable Prospectus Supplement. In connection with the sale of Securities,
underwriters or agents may be deemed to have received compensation from the
Corporation in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Securities for whom they may act as
agents. Underwriters may sell Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agent. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
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Underwriters, dealers and agents participating in a distribution of the
Securities (including agents only soliciting or receiving offers to purchase
Securities on behalf of the Corporation) may be deemed to be underwriters, and
any discounts and commissions received by them and any profit realized by them
on resale of the Securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters, dealers and agents may be
entitled, under agreements entered into with the Corporation, to indemnification
against and contribution toward certain civil liabilities, including liabilities
under the Securities Act. The Corporation may agree to reimburse underwriters or
agents for certain expenses incurred in connection with the distribution of the
Securities.
If so indicated in the applicable Prospectus Supplement, the Corporation
will authorize agents or dealers acting as the Corporation's agents to solicit
offers by certain institutions to purchase Securities from the Corporation at
the public offering price set forth in such Prospectus Supplement pursuant to
delayed delivery contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount not less than, and the aggregate principal amount of Securities
sold pursuant to Contracts shall be not less nor more than, the respective
amounts stated in such Prospectus Supplement. Institutions with whom Contracts,
when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to the
approval of the Corporation. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and (ii)
if the Securities are being sold to underwriters, the Corporation shall have
sold to such underwriters the total principal amount of the Securities less the
principal amount thereof covered by Contracts.
Securities may also be offered and sold, if so indicated in the Prospectus
Supplement, in connection with a remarketing upon their purchase, in accordance
with a redemption or repayment pursuant to their terms, by one or more firms
("remarketing firms") acting as principals for their own accounts or as agents
for the Corporation. Any remarketing firm will be identified and the terms of
its agreement, if any, with the Corporation and its compensation will be
described in the Prospectus Supplement. Remarketing firms may be deemed to be
underwriters in connection with the Securities remarketed thereby.
Certain of the underwriters, dealers or agents and their associates may be
customers of, engage in transactions with, and perform services for, the
Corporation in the ordinary course of business.
HSBC Securities, Inc., an affiliate of the Corporation, may be a managing
underwriter, underwriter, market-maker or agent in connection with any offer or
sale of the Securities. Each offering of the Securities will be conducted in
compliance with any applicable requirements of Rule 2720 of the Conduct Rules of
the National Association of Securities Dealers, Inc. regarding the underwriting
by HSBC Securities, Inc. of the securities of an affiliate. In addition, this
Prospectus may be used by HSBC Securities, Inc. in connection with offers and
sales related to market-making activities. HSBC Securities, Inc. may act as
principal or agent in any such transactions. Such sales will be made at
negotiated prices related to the prevailing market prices at the time of sale.
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans ("Plans") that are
subject to ERISA and on persons who are fiduciaries with respect to such Plans.
In accordance with ERISA's general fiduciary requirements, a fiduciary with
respect to any such Plan who is considering the purchase of the Securities on
behalf of such Plan should determine whether such purchase is permitted under
the governing Plan documents and is prudent and appropriate for the Plan in view
of its overall investment policy and the composition and diversification of its
portfolio. Other provisions of ERISA and Section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code"), prohibit certain transactions involving
the assets of a Plan and persons who have certain specified relationships to the
Plan ("parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of Section 4975 of the Code). Thus, a Plan fiduciary
considering the purchase of
25
<PAGE> 50
the Securities should consider whether such a purchase might constitute or
result in a prohibited transaction under ERISA or Section 4975 of the Code.
The Corporation, directly or through its affiliates, may be considered a
"party in interest" or a "disqualified person" with respect to many Plans that
are subject to ERISA. The purchase of Securities by a Plan that is subject to
the fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of Section 4975 of the Code (including individual retirement accounts
and other plans described in Section 4975(e)(1) of the Code) and with respect to
which the Corporation is a party in interest or a disqualified person may
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code, unless such Securities are acquired pursuant to and in accordance with
an applicable exemption, such as Prohibited Transaction Class Exemption ("PTCE")
84-14 (an exemption for certain transactions determined by an independent
qualified professional asset manager), PTCE 91-38 (an exemption for certain
transactions involving bank collective investment funds), PTCE 90-1 (an
exemption for certain transactions involving insurance company pooled separate
accounts), PTCE 95-60 (an exemption for certain transactions involving insurance
company general accounts), or PTCE 96-23 (an exemption for certain transactions
determined by an in-house asset manager). ANY PENSION OR OTHER EMPLOYEE BENEFIT
PLAN PROPOSING TO ACQUIRE ANY SECURITIES SHOULD CONSULT WITH ITS COUNSEL.
LEGAL OPINIONS
The validity of the Securities offered hereby will be passed upon for the
Corporation by Cleary, Gottlieb, Steen & Hamilton, special counsel to the
Corporation, and for the Underwriters by ________.
EXPERTS
The consolidated balance sheets of the Corporation as of December 31, 1996
and 1997, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1997 and the consolidated balance sheets of the Bank
as of December 31, 1996 and 1997 contained in the Corporation's 1997 Form 10-K
have been incorporated herein by reference in reliance upon the report of KPMG
Peat Marwick LLP ("KPMG"), independent certified public accountants,
incorporated herein by reference, and upon the authority of such firm as experts
in accounting and auditing. To the extent that KPMG audits and reports on
consolidated financial statements of the Corporation and the Bank issued on
future dates and consents to the use of such reports in this registration
statement, such consolidated financial statements also will be incorporated by
reference in this registration statement in reliance upon KPMG's reports and
upon such authority.
26
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[This Page Intentionally Left Blank]
<PAGE> 52
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE CORPORATION OR BY THE AGENTS. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Description of Notes................... S-1
United States Federal Income
Taxation............................. S-15
Use of Proceeds........................ S-19
Plan of Distribution................... S-19
Legal Opinions......................... S-21
PROSPECTUS
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
The Corporation........................ 3
Competition and Industry
Consolidation........................ 4
Consolidated Ratios of Earnings to
Fixed Charges and Combined Fixed
Charges and Preferred Stock Dividend
Requirements......................... 5
Supervision and Regulation............. 5
Use of Proceeds........................ 12
Description of Debt Securities......... 12
Description of Preferred Stock......... 21
Capital Securities..................... 24
Plan of Distribution................... 24
ERISA Matters.......................... 25
Legal Opinions......................... 26
Experts................................ 26
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
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$400,000,000
HSBC AMERICAS, INC. LOGO
MEDIUM-TERM SENIOR NOTES
DUE ON A DATE MORE THAN NINE MONTHS
FROM DATE OF ISSUE
------------------------
PROSPECTUS SUPPLEMENT
------------------------
HSBC MARKETS
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
AUGUST 21, 1998
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