<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-17993
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 20, 1996)
$500,000,000
[LOGO OF MELLON BANK]
MELLON CAPITAL II
7.995% CAPITAL SECURITIES, SERIES B
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED HEREIN, BY
MELLON BANK CORPORATION
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The 7.995% Capital Securities, Series B (the "Series B Capital Securities"),
offered hereby represent beneficial interests in Mellon Capital II, a statutory
business trust formed under the laws of the State of Delaware (the "Series B
Issuer"). Mellon Bank Corporation, a Pennsylvania corporation (the
"Corporation"), will be the owner of all the beneficial ownership interests
represented by common securities of the Series B Issuer ("Series B Common
Securities" and, collectively with the Series B Capital Securities, the "Series
B Securities"). The Chase Manhattan Bank is the Property Trustee of the Series
B Issuer. The Series B Issuer exists for the sole purpose of issuing the Series
B Securities and investing
(Continued on next page)
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SEE "RISK FACTORS" BEGINNING ON PAGE S-4 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE SERIES B CAPITAL SECURITIES.
----------
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING THE SERIES B
OFFERING PRICE(1) COMMISSION(2) ISSUER(1)(3)(4)
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<S> <C> <C> <C>
Per Series B Capital Security... $1,000.00 (3) $1,000.00
- --------------------------------------------------------------------------------
Total........................... $500,000,000 (3) $500,000,000
</TABLE>
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(1) Plus accrued distributions, if any, from the date of original issuance.
(2) The Series B Issuer and the Corporation have each agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Series B Capital
Securities will be invested in the Series B Subordinated Debentures, the
Corporation has agreed to pay to the Underwriters as compensation for their
arranging the investment therein of such proceeds $10.00 per Series B
Capital Security (or $5,000,000 in the aggregate). See "Underwriting."
(4) Expenses of the offering, which are payable by the Corporation, are
estimated to be $650,000, a portion of which will be reimbursed by the
Underwriters. See "Underwriting."
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The Series B Capital Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that the Series B Capital Securities will be ready for delivery in
book-entry form only through the facilities of The Depository Trust Company in
New York, New York, on or about December 30, 1996, against payment therefor in
immediately available funds.
----------
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
----------
The date of this Prospectus Supplement is December 20, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES B
CAPITAL SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER THE COUNTER MARKET
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
(cover page continued)
the proceeds thereof in $515,464,000 aggregate principal of the 7.995% Junior
Subordinated Deferrable Interest Debentures, Series B (the "Series B
Subordinated Debentures"), to be issued by the Corporation. The Series B
Subordinated Debentures will mature on January 15, 2027 (the "Stated
Maturity"). The Series B Capital Securities will have a preference under
certain circumstances with respect to cash distributions and amounts payable
on liquidation or redemption over the Series B Common Securities. See
"Description of Preferred Securities--Subordination of Common Securities" in
the accompanying Prospectus.
Holders of the Series B Capital Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable semi-annually in arrears on January 15 and July 15 of
each year, commencing July 15, 1997, at the annual rate of 7.995% of the
Liquidation Amount (as defined in the accompanying Prospectus) of $1,000 per
Series B Capital Security ("Distributions"). Subject to certain exceptions, as
described herein, the Corporation has the right to defer payment of interest
on the Series B Subordinated Debentures at any time or from time to time for a
period not exceeding 10 consecutive semi-annual periods with respect to each
deferral period (each, an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity of the Series B Subordinated
Debentures. Upon the termination of any such Extension Period and the payment
of all interest then accrued and unpaid (together with interest thereon at the
rate of 7.995%, compounded semi-annually, to the extent permitted by
applicable law), the Corporation may elect to begin a new Extension Period
subject to the requirements set forth herein. If interest payments on the
Series B Subordinated Debentures are so deferred, Distributions on the Series
B Capital Securities will also be deferred and the Corporation will not be
permitted, subject to certain exceptions described herein, to declare or pay
any cash distributions with respect to the Corporation's capital stock or debt
securities that rank pari passu with or junior to the Series B Subordinated
Debentures. During an Extension Period, interest on the Series B Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Series B Capital Securities are entitled will accumulate) at
the rate of 7.995% per annum, compounded semi-annually from the relevant
payment date for such interest, and holders of Series B Capital Securities
will be required to accrue interest income for United States federal income
tax purposes. See "Certain Terms of Series B Subordinated Debentures--Option
to Defer Interest Payments" and "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
The Series B Subordinated Debentures are unsecured and subordinated to all
Senior Debt (as defined in the accompanying Prospectus). Most of the
Corporation's existing indebtedness constitutes Senior Debt. Because the
Corporation is a holding company, the right of the Corporation to participate
in any distribution of assets of any subsidiary, including Mellon Bank, N.A.,
The Dreyfus Corporation and The Boston Company, Inc., upon such subsidiary's
liquidation or reorganization or otherwise is subject to the prior claims of
creditors of that subsidiary except to the extent that the Corporation may
itself be recognized as a creditor of that subsidiary. Accordingly, the Series
B Subordinated Debentures (and therefore the Series B Capital Securities) will
be effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders thereof should only look to the assets
of the Corporation for payments on the Series B Subordinated Debentures. See
"Description of Junior Subordinated Debentures--Subordination" in the
accompanying Prospectus.
The Corporation has, through the Series B Guarantee, the Trust Agreement,
the Series B Subordinated Debentures, the Indenture and the Expense Agreement
(each as defined herein), taken together, fully, irrevocably
S-2
<PAGE>
(cover page continued)
and unconditionally guaranteed all of the Series B Issuer's obligations under
the Series B Capital Securities. See "Relationship Among the Preferred
Securities, the Corresponding Junior Subordinated Debentures, the Expense
Agreement and the Guarantees--Full and Unconditional Guarantee" in the
accompanying Prospectus. The Series B Guarantee of the Corporation guarantees
the payment of Distributions and payments on liquidation of the Series B
Issuer or redemption of the Series B Capital Securities, but only in each case
to the extent of funds held by the Series B Issuer, as described herein (the
"Series B Guarantee"). See "Description of Guarantees" in the accompanying
Prospectus. If the Corporation does not make interest payments on the Series B
Subordinated Debentures held by the Series B Issuer, the Series B Issuer will
have insufficient funds to pay Distributions on the Series B Capital
Securities. The Series B Guarantee does not cover payment of Distributions
when the Series B Issuer has insufficient funds to pay such Distributions. In
such event, a holder of Series B Capital Securities may institute a legal
proceeding directly against the Corporation pursuant to the terms of the
Indenture to enforce payment of amounts equal to such Distributions to such
holder. See "Description of Junior Subordinated Debentures--Enforcement of
Certain Rights By Holders of Preferred Securities" in the accompanying
Prospectus. The obligations of the Corporation under the Series B Guarantee
and the Series B Capital Securities are subordinate and junior in right of
payment to all Senior Debt of the Corporation.
The Series B Capital Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Series B Subordinated Debentures at
their Stated Maturity or earlier redemption. Subject to the Corporation having
received prior approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve") to do so if then required under applicable
capital guidelines or policies, the Series B Subordinated Debentures are
redeemable prior to their stated maturity at the option of the Corporation (i)
on or after January 15, 2007, in whole at any time or in part from time to
time, or (ii) prior to January 15, 2007, in whole (but not in part) within 90
days following the occurrence of a Tax Event or a Capital Treatment Event
(each as defined herein). For a description of redemption prices for the
Series B Capital Securities pursuant to clause (i) or (ii) above, see "Certain
Terms of Series B Capital Securities--Redemption" and "Certain Terms of the
Series B Subordinated Debentures--Redemption."
The Corporation will have the right at any time to terminate the Series B
Issuer, subject to the Corporation having received prior approval of the
Federal Reserve to do so if then required under applicable capital guidelines
or policies. See "Certain Terms of Series B Capital Securities--Liquidation of
Series B Issuer and Distribution of Series B Subordinated Debentures to
Holders." In the event of the termination of the Series B Issuer, after
satisfaction of liabilities to creditors of the Series B Issuer as required by
applicable law, the holders of the Series B Capital Securities will be
entitled to receive a Liquidation Amount of $1,000 per Series B Capital
Security plus accumulated and unpaid Distributions thereon to the date of
payment, which may be in the form of a distribution of such amount in Series B
Subordinated Debentures in exchange therefor, subject to certain exceptions.
See "Description of Preferred Securities--Liquidation Distribution Upon
Termination" in the accompanying Prospectus.
The Series B Capital Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Series B Capital Securities will be shown on, and
transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described in the accompanying Prospectus,
Series B Capital Securities in certificated form will not be issued in
exchange for the global certificates. See "Certain Terms of Series B Capital
Securities--Registration of Series B Capital Securities."
S-3
<PAGE>
The information in this Prospectus Supplement supplements and should be read
in conjunction with the information contained in the accompanying Prospectus.
As used herein, (i) the "Indenture" means the Junior Subordinated Indenture,
as amended and supplemented from time to time, between the Corporation and The
Chase Manhattan Bank, as trustee (the "Debenture Trustee"), and (ii) the
"Trust Agreement" means the Amended and Restated Trust Agreement relating to
the Series B Issuer among the Corporation, as Depositor, The Chase Manhattan
Bank, as Property Trustee (the "Property Trustee"), Chase Manhattan Bank
Delaware, as Delaware Trustee (the "Delaware Trustee"), and the Administrative
Trustees named therein (collectively, with the Property Trustee and Delaware
Trustee, the "Issuer Trustees"). Each of the other capitalized terms used in
this Prospectus Supplement and not otherwise defined in this Prospectus
Supplement has the meaning set forth in the accompanying Prospectus.
RISK FACTORS
Prospective purchasers of the Series B Capital Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and
in the accompanying Prospectus and should particularly consider the following
matters. In addition, because holders of Series B Capital Securities may
receive Series B Subordinated Debentures in exchange therefor upon liquidation
of the Series B Issuer, prospective purchasers of Series B Capital Securities
are also making an investment decision with regard to the Series B
Subordinated Debentures and should carefully review all the information
regarding the Series B Subordinated Debentures contained herein.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES B GUARANTEE AND THE
SERIES B SUBORDINATED DEBENTURES
The obligations of the Corporation under the Series B Guarantee issued by
the Corporation for the benefit of the holders of Series B Securities and
under the Series B Subordinated Debentures are unsecured and rank subordinate
and junior in right of payment to all Senior Debt of the Corporation. Most of
the Corporation's existing indebtedness constitutes Senior Debt. Because the
Corporation is a holding company, the right of the Corporation to participate
in any distribution of the assets of any subsidiary, including Mellon Bank,
N.A., The Dreyfus Corporation and The Boston Company, Inc., upon such
subsidiary's liquidation or reorganization or otherwise, is subject to the
prior claims of creditors of that subsidiary, except to the extent that the
Corporation may itself be recognized as a creditor of that subsidiary. There
are various legal limitations on the extent to which certain of the
Corporation's subsidiaries may extend credit, pay dividends or otherwise
supply funds to, or engage in transactions with, the Corporation of certain of
its other subsidiaries. Accordingly, the Series B Subordinated Debentures will
be effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Series B Subordinated Debentures
should look only to the assets of the Corporation for payments on the Series B
Subordinated Debentures. See "Mellon Bank Corporation." None of the Indenture,
the Series B Guarantee, the Trust Agreement or the Expense Agreement places
any limitation on the amount of secured or unsecured debt, including Senior
Debt, that may be incurred by the Corporation. See "Description of
Guarantees--Status of the Guarantees" and "Description of Junior Subordinated
Debentures--Subordination" in the accompanying Prospectus.
The ability of the Series B Issuer to pay amounts due on the Series B
Capital Securities is solely dependent upon the Corporation making payments on
the Series B Subordinated Debentures as and when required.
OPTION TO DEFER INTEREST PAYMENT; TAX CONSEQUENCES; MARKET PRICE CONSEQUENCES
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Series B Subordinated Debentures at any time or from time
to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity of the Series B Subordinated Debentures. As a
consequence of any such deferral, semi-annual Distributions on the Series B
Capital Securities
S-4
<PAGE>
by the Series B Issuer will also be deferred (and the amount of Distributions
to which holders of the Series B Capital Securities are entitled will
accumulate additional Distributions thereon at the rate of 7.995% per annum,
compounded semi-annually from the relevant payment date for such
Distributions) during any such Extension Period. During any such Extension
Period, the Corporation may not, and may not permit any subsidiary of the
Corporation to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Corporation's capital stock, or (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including other Series of Junior Subordinated
Debentures) that rank pari passu with or junior in interest to the Series B
Subordinated Debentures or (iii) make any guarantee payments with respect to
any guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation if such guarantee ranks pari passu with or junior in interest
to the Series B Subordinated Debentures (other than (a) dividends or
distributions in capital stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Series B Guarantee and (d) purchases of common stock
related to the issuance of common stock or rights under any of the
Corporation's benefit plans for its directors, officers or employees, related
to the issuance of common stock or rights under a dividend reinvestment and
stock purchase plan, or related to the issuance of common stock (or securities
convertible into or exchangeable for common stock) as consideration in an
acquisition transaction that was entered into prior to the commencement of
such Extension Period). Prior to the termination of any such Extension Period,
the Corporation may further defer the payment of interest, provided that no
Extension Period may exceed 10 consecutive semi-annual periods or extend
beyond the Stated Maturity of the Series B Subordinated Debentures. Upon the
termination of any Extension Period and the payment of all interest then
accrued and unpaid (together with interest thereon at the annual rate of
7.995%, compounded semi-annually from the interest payment date for such
interest, to the extent permitted by applicable law), the Corporation may
elect to begin a new Extension Period subject to the above requirements. There
is no limitation on the number of times that the Corporation may elect to
begin an Extension Period. See "Certain Terms of Series B Capital Securities--
Distributions" and "Certain Terms of Series B Subordinated Debentures--Option
to Defer Interest Payments."
Should an Extension Period occur, a holder of Series B Capital Securities
will be required to accrue income (in the form of original issue discount) in
respect of its pro rata share of the Series B Subordinated Debentures held by
the Series B Issuer for United States federal income tax purposes. As a
result, a holder of Series B Capital Securities will be required to include
such income in gross income for United States federal income tax purposes in
advance of the receipt of cash attributable to such income, and will not
receive the cash related to such income from the Series B Issuer if the holder
disposes of the Series B Capital Securities prior to the record date for the
payment of Distributions. See "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount" and "--Sale or Redemption of
Series B Capital Securities."
The Corporation has no current intention of exercising its right to defer
payments of interest on the Series B Subordinated Debentures. However, should
the Corporation elect to exercise such right in the future, the market price
of the Series B Capital Securities is likely to be affected. A holder that
disposes of its Series B Capital Securities during an Extension Period,
therefore, might not receive the same return on its investment as a holder
that continues to hold its Series B Capital Securities.
TAX EVENT OR CAPITAL TREATMENT EVENT--REDEMPTION
Upon the occurrence and continuation of a Tax Event or Capital Treatment
Event prior to January 15, 2007, the Corporation has the right to redeem the
Series B Subordinated Debentures in whole (but not in part) within 90 days
following the occurrence of such Tax Event or Capital Treatment Event and
thereby cause a mandatory redemption of the Series B Capital Securities. Any
such redemption shall be at a price equal to the Make-Whole Amount (as defined
in "Certain Terms of Series B Capital Securities--Redemption") together with
accrued interest to but excluding the date fixed for redemption. The exercise
of such right is subject to the Corporation having received prior approval of
the Federal Reserve to do so if then required under applicable guidelines or
policies.
S-5
<PAGE>
A "Tax Event" means the receipt by the Series B Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced proposed change) in, the laws
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such proposed change, pronouncement or decision is announced on or after the
date of issuance of the Series B Capital Securities under the Trust Agreement,
there is more than an insubstantial risk that (i) the Series B Issuer is, or
will be within 90 days of the date of such opinion, subject to United States
federal income tax with respect to income received or accrued on the Series B
Subordinated Debentures, (ii) interest payable by the Corporation on the
Series B Subordinated Debentures is not, or within 90 days of the date of such
opinion, will not be, deductible by the Corporation, in whole or in part, for
United States federal income tax purposes or (iii) the Series B Issuer is, or
will be within 90 days of the date of the opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
See "Risk Factors--Possible Tax Law Changes Affecting the Series B Preferred
Securities" for a discussion of certain legislative proposals that, if
adopted, could give rise to a Tax Event, which may permit the Corporation to
cause a redemption of the Series B Capital Securities prior to January 15,
2007.
A "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of any amendment to, or change (including any
proposed change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change
is effective or which proposed change, pronouncement, action or decision is
announced on or after the date of issuance of the Series B Capital Securities
under the Trust Agreement, there is more than an insubstantial risk that the
Corporation will not be entitled to treat an amount equal to the Liquidation
Amount of the Series B Capital Securities as "Tier I Capital" (or the then
equivalent thereof) for purposes of the capital adequacy guidelines of the
Federal Reserve, as then in effect and applicable to the Corporation.
EXCHANGE OF SERIES B CAPITAL SECURITIES FOR SERIES B SUBORDINATED DEBENTURES
The Corporation will have the right at any time to terminate the Series B
Issuer and, after satisfaction of liabilities to creditors of the Series B
Issuer as required by applicable law, cause the Series B Subordinated
Debentures to be distributed to the holders of the Series B Capital Securities
in exchange therefor upon liquidation of the Series B Issuer. The exercise of
such right is subject to the Corporation having received prior approval of the
Federal Reserve if then required under applicable capital guidelines or
policies. See "Certain Terms of Series B Capital Securities--Liquidation of
Series B Issuer and Distribution of Series B Subordinated Debentures to
Holders."
Under current United States federal income tax law and interpretations, a
distribution of the Series B Subordinated Debentures upon a liquidation of the
Series B Issuer should not be a taxable event to holders of the Series B
Capital Securities. However, if a Tax Event were to occur which would cause
the Series B Issuer to be subject to United States federal income tax with
respect to income received or accrued on the Series B Subordinated Debentures,
a distribution of the Series B Subordinated Debentures by the Series B Issuer
could be a taxable event to the Series B Issuer and the holders of the Series
B Capital Securities. See "Certain Federal Income Tax Consequences--
Distribution of the Series B Subordinated Debentures to Holders of Series B
Capital Securities."
MARKET PRICES
There can be no assurance as to the market prices for Series B Capital
Securities or Series B Subordinated Debentures that may be distributed in
exchange for Series B Capital Securities upon liquidation of the Series B
Issuer. Accordingly, the Series B Capital Securities that an investor may
purchase, whether pursuant to the offer
S-6
<PAGE>
made hereby or in the secondary market, or the Series B Subordinated
Debentures that a holder of Series B Capital Securities may receive on
liquidation of the Series B Issuer, may trade at a discount to the price that
the investor paid to purchase the Series B Capital Securities offered hereby.
As a result of the existence of the Corporation's right to defer interest
payments, the market price of the Series B Capital Securities (which represent
beneficial ownership interest in the Series B Issuer) may be more volatile
than the market prices of other securities that are not subject to such
optional deferrals. See "Certain Terms of the Series B Subordinated
Debentures" and "Description of Junior Subordinated Debentures--Corresponding
Junior Subordinated Debentures" in the accompanying Prospectus.
RIGHTS UNDER THE SERIES B GUARANTEE
The Series B Guarantee guarantees to the holders of the Series B Securities
the following payments, to the extent not paid by the Series B Issuer: (i) any
accumulated and unpaid Distributions required to be paid on the Series B
Securities, to the extent that the Series B Issuer has funds on hand available
therefor at such time, (ii) the redemption price with respect to any Series B
Securities called for redemption, to the extent that the Series B Issuer has
funds on hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of the Series B Issuer
(unless the Series B Subordinated Debentures are distributed to holders of the
Series B Securities), the lesser of (a) the aggregate of the Liquidation
Amount and all accumulated and unpaid Distributions to the date of payment to
the extent that the Series B Issuer has funds on hand available therefor at
such time, and (b) the amount of assets of the Series B Issuer remaining
available for distribution to holders of the Series B Securities after payment
of creditors of the Series B Issuer as required by applicable law. The Series
B Guarantee will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Chase Manhattan Bank will
act as the indenture trustee under the Series B Guarantee (the "Guarantee
Trustee") for the purpose of compliance with the Trust Indenture Act and will
hold the Series B Guarantee for the benefit of the holders of the Series B
Securities. The Chase Manhattan Bank will also act as Debenture Trustee for
the Series B Subordinated Debentures and as Property Trustee and Chase
Manhattan Bank Delaware will act as Delaware Trustee under the Trust
Agreement.
The Series B Guarantee is subordinate as described under "--Ranking of
Subordinated Obligations Under the Series B Guarantee and the Series B
Subordinated Debentures".
The holders of not less than a majority in aggregate Liquidation Amount of
the Series B Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Series B Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Series B Guarantee. Any holder
of the Series B Securities may institute a legal proceeding directly against
the Corporation to enforce its rights under the Series B Guarantee without
first instituting a legal proceeding against the Series B Issuer, the
Guarantee Trustee or any other person or entity. If the Corporation were to
default on its obligation to pay amounts payable under the Series B
Subordinated Debentures, the Series B Issuer would lack funds for the payment
of Distributions or amounts payable on redemption of the Series B Securities
or otherwise, and, in such event, holders of the Series B Securities would not
be able to rely upon the Series B Guarantee for payment of such amounts.
Instead, if an event of default under the Indenture shall have occurred and be
continuing and such event is attributable to the failure of the Corporation to
pay interest or premium, if any, on or principal of the Series B Subordinated
Debentures on the applicable payment date, then a holder of Series B Capital
Securities may institute a legal proceeding directly against the Corporation
pursuant to the terms of the Indenture for enforcement of payment to such
holder of the principal of or interest or premium, if any, on such Series B
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Series B Capital Securities of such holder (a
"Direct Action"). In connection with such Direct Action, the Corporation will
have a right of set-off under the Indenture to the extent of any payment made
by the Corporation to such holder of Series B Capital Securities in the Direct
Action. Except as described herein, holders of Series B Capital Securities
will not be able to exercise directly any other remedy available to the
holders of the Series B Subordinated Debentures or assert directly any other
rights in respect of the Series B Subordinated Debentures. See "Description of
Junior Subordinated Debentures--
S-7
<PAGE>
Enforcement of Certain Rights of Holders of Preferred Securities," "Debenture
Events of Default" and "Description of Guarantees" in the accompanying
Prospectus. The Trust Agreement provides that each holder of Series B
Securities by acceptance thereof agrees to the provisions of the Series B
Guarantee, the Expense Agreement and the Indenture.
LIMITED VOTING RIGHTS
Holders of Series B Capital Securities generally will have limited voting
rights relating only to the modification of the Series B Capital Securities
and the Series B Guarantee and the exercise of the Series B Issuer's rights as
holder of Series B Subordinated Debentures and the Series B Guarantee. Holders
of Series B Capital Securities will not be entitled to vote to appoint, remove
or replace the Property Trustee, or the Delaware Trustee or any Administrative
Trustee, and such voting rights are vested exclusively in the holder of the
Series B Common Securities except, with respect to the Property Trustee and
the Delaware Trustee, upon the occurrence of certain events described in the
accompanying Prospectus. The Property Trustee, the Administrative Trustees and
the Corporation may amend the Trust Agreement without the consent of holders
of Series B Capital Securities to ensure that the Series B Issuer will be
classified for United States federal income tax purposes as a grantor trust
unless such action materially and adversely affects the interests of such
holders. See "Description of Preferred Securities--Voting Rights; Amendment of
Each Trust Agreement" and "--Removal of Issuer Trustees" in the accompanying
Prospectus.
TRADING CHARACTERISTICS OF SERIES B CAPITAL SECURITIES
The Corporation and the Series B Issuer do not intend to have the Series B
Capital Securities listed on any securities exchange. If the underwriters do
not make a market for the Series B Capital Securities, the liquidity of the
Series B Capital Securities could be adversely affected. The Series B Capital
Securities may trade at prices that do not fully reflect the value of accrued
and unpaid interest with respect to the underlying Series B Subordinated
Debentures. See "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount" and "Sale or Redemption of Series B Preferred
Securities" for a discussion of the United States federal income tax
consequences that may result from a taxable disposition of the Series B
Securities.
POSSIBLE TAX LAW CHANGES AFFECTING THE SERIES B CAPITAL SECURITIES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill") was
released which would have, among other things, generally denied interest
deductions for interest on an instrument issued by a corporation that has a
maximum weighted average maturity of more than 40 years. The Bill would also
have generally denied interest deductions for interest on an instrument issued
by a corporation that has a maximum term of more than 20 years and that is not
shown as indebtedness on the separate balance sheet of the issuer or, where
the instrument is issued to a related party (other than a corporation), where
the holder or some other related party issues a related instrument that is not
shown as indebtedness on the issuer's consolidated balance sheet. For purposes
of determining the weighted average maturity or the term of an instrument, any
right to extend would be treated as exercised. The above-described provisions
of the Bill were proposed to be effective generally for instruments issued on
or after December 7, 1995. If either provision were to apply to the Series B
Subordinated Debentures, the Corporation would not be able to deduct interest
on the Series B Subordinated Debentures. However, on March 29, 1996, the
Chairmen of the Senate Finance and House Ways and Means Committees issued a
joint statement (the "Joint Statement") to the effect that it was their
intention that the effective date of the President's legislative proposals, if
adopted, would be no earlier than the date of appropriate Congressional
action. In addition, subsequent to the publication of the Joint Statement,
Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles
B. Rangel wrote letters to Treasury Department officials concurring with the
view expressed in the Joint Statement (the "Democrat Letters"). If the
principles contained in the Joint Statement and the Democrat Letters were
enacted, such legislation would not apply to the Series B Subordinated
Debentures. Under current law, the Corporation will be able to deduct interest
on the Series B Subordinated Debentures. There can be no assurance, however,
that current or future legislative proposals or final legislation will not
adversely affect the ability of the Corporation to deduct interest on the
Series B Subordinated
S-8
<PAGE>
Debentures. Such a change could give rise to a Tax Event, which would permit
the Corporation, upon approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve, to cause a
redemption of the Series B Capital Securities before January 15, 2007. See
"Certain Terms of Series B Subordinated Debentures--Redemption" in this
Prospectus Supplement and "Description of Preferred Securities--Redemption or
Exchange--Tax Event Redemption" in the accompanying Prospectus. See also
"Certain Federal Income Tax Consequences--Possible Tax Law Changes."
MELLON CAPITAL II
Mellon Capital II (the "Series B Issuer") is a statutory business trust
created under Delaware law pursuant to (i) the Trust Agreement executed by the
Corporation, as Depositor, The Chase Manhattan Bank, as Property Trustee,
Chase Manhattan Bank Delaware, as Delaware Trustee, and the Administrative
Trustees named therein, and (ii) the filing of a certificate of trust with the
Delaware Secretary of State on December 3, 1996. The Series B Issuer's
business and affairs are conducted by the Issuer Trustees: The Chase Manhattan
Bank, as Property Trustee, and Chase Manhattan Bank Delaware, as Delaware
Trustee, and two individual Administrative Trustees who are employees or
officers of or affiliated with the Corporation. The Series B Issuer exists for
the exclusive purposes of (i) issuing and selling the Series B Capital
Securities and Series B Common Securities, (ii) using the proceeds from the
sale of such Securities to acquire Series B Subordinated Debentures issued by
the Corporation and (iii) engaging in only those other activities necessary or
incidental thereto (such as registering the transfer of the Series B Capital
Securities). Accordingly, the Series B Subordinated Debentures and the right
to reimbursement under the Expense Agreement will be the sole assets of the
Series B Issuer, and payments under the Series B Subordinated Debentures and
the Expense Agreement will be the sole revenue of the Series B Issuer. All of
the Series B Common Securities will be owned by the Corporation. The Series B
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Series B Capital Securities, except that upon the occurrence
and continuance of an event of default under the Trust Agreement resulting
from an event of default under the Indenture, the rights of the Corporation as
holder of the Series B Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Series B Capital Securities.
See "Description of Preferred Securities--Subordination of Common Securities"
in the accompanying Prospectus. The Corporation will acquire Series B Common
Securities in an aggregate Liquidation Amount equal to 3% of the total capital
of the Series B Issuer. The Series B Issuer has a term of 55 years, but may
terminate earlier as provided in the Trust Agreement. The principal executive
office of the Series B Issuer is c/o Mellon Bank Corporation, One Mellon Bank
Center, 500 Grant Street, Pittsburgh, Pennsylvania 15258, Attention:
Secretary, and its telephone number is (412) 234-5000. See "The Issuers" in
the accompanying Prospectus.
It is anticipated that the Series B Issuer will not be subject to the
reporting requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
MELLON BANK CORPORATION
Mellon Bank Corporation (the "Corporation") is a multibank holding company
incorporated under the laws of Pennsylvania in August 1971 and registered
under the Federal Bank Holding Company Act of 1956, as amended. The
Corporation provides a comprehensive range of financial products and services
in domestic and selected international markets. The Corporation's banking
subsidiaries are located in Pennsylvania, Massachusetts, Delaware, Maryland,
and New Jersey. Other subsidiaries are located in key business centers
throughout the United States and abroad. At September 30, 1996, the
Corporation was the 22nd largest bank holding company in the United States in
terms of assets.
The Corporation's principal direct subsidiaries are Mellon Bank, N.A.
("Mellon Bank"), The Boston Company, Inc. ("TBC"), Mellon Bank (DE) National
Association, Mellon Bank (MD) and a number of companies known as Mellon
Financial Services Corporations. The Corporation also owns a federal savings
bank
S-9
<PAGE>
headquartered in New Jersey, Mellon Bank, F.S.B. The Dreyfus Corporation
("Dreyfus"), one of the nation's largest mutual fund companies, is a wholly
owned subsidiary of Mellon Bank. The Corporation's banking subsidiaries engage
in retail financial services, commercial banking, trust and investment
management services, residential real estate loan financing, mortgage
servicing, mutual fund activities, equipment leasing and various securities-
related activities.
Mellon Bank, which has its executive offices in Pittsburgh, Pennsylvania,
became a subsidiary of the Corporation in November 1972. With its
predecessors, Mellon Bank has been in business since 1869. Mellon Bank is
comprised of six operating regions throughout Pennsylvania and in southern New
Jersey. Dreyfus, headquartered in New York, New York, serves primarily as an
investment adviser, manager and administrator of mutual funds. TBC, through
Boston Safe Deposit and Trust Company ("BSDT") and other subsidiaries, engages
in the business of institutional trust and custody, institutional asset
management, private asset management and banking services. TBC is
headquartered in Boston, Massachusetts. Mellon Bank (DE) National Association,
headquartered in Wilmington, Delaware, serves consumer and small to midsize
commercial markets throughout Delaware and provides nationwide cardholder
processing services. Mellon Bank (MD) is headquartered in Rockville, Maryland,
and serves consumer and small to midsize commercial markets throughout
Maryland. Mellon Bank (MD) has a Maryland state charter and is a member of the
Federal Reserve System. Mellon Bank, F.S.B., headquartered in Paramus, New
Jersey, provides corporate trust and personal trust services and serves
consumer and small to midsize commercial markets.
The Corporation's banking subsidiaries operate 1,104 domestic retail banking
locations, including 428 retail offices. The deposits of the national banking
subsidiaries, BSDT, Mellon Bank (MD) and Mellon Bank, F.S.B. are insured by
the Federal Deposit Insurance Corporation ("FDIC") to the extent provided by
law.
Other subsidiaries of the Corporation provide a broad range of bank-related
services, including equipment leasing, commercial loan financing, stock
transfer services, cash management and numerous trust and investment
management services. The types of financial products and services offered by
the Corporation's subsidiaries are subject to change.
For analytical purposes, management has focused the Corporation into four
core business sectors: Consumer Investment Services, Consumer Banking
Services, Corporate/Institutional Investment Services and
Corporate/Institutional Banking Services. There is considerable
interrelationship among these sectors.
CONSUMER INVESTMENT SERVICES
The Corporation provides a broad array of personal trust services,
investment services and retail mutual funds to consumers. These products and
services are offered principally through the private asset management trust
group of Mellon Bank and BSDT, through Dreyfus and throughout the
Corporation's retail banking network.
CONSUMER BANKING SERVICES
The Consumer Banking Services sector includes consumer lending and deposit
products, business banking, credit card, mortgage loan origination and
servicing, and jumbo residential mortgage lending. The consumer lending and
deposit products and small business banking services primarily are offered
through the Corporation's retail banking network, which is composed of 356
retail branches, 71 supermarket facilities, 676 ATM's, 7 loan sales offices
and a telephone banking center. This network is primarily located in the
Central Atlantic region of the United States. This banking network provides a
full range of products to individuals including short- and long-term credit
facilities, credit cards, mortgages, safe deposit facilities and access to
ATM's. Jumbo residential mortgage lending is offered nationally through the
private asset management representative offices. This sector also includes the
core servicing function of the Corporation's mortgage banking operations
located in Kansas City, Houston, Denver, Cleveland and Paramus, through which
the Corporation originates and services residential and commercial mortgages
for institutional investors and makes residential loans nationwide.
S-10
<PAGE>
CORPORATE/INSTITUTIONAL INVESTMENT SERVICES
The Corporate/Institutional Investment Services sector serves the
institutional markets (including employee benefit plans) by providing
institutional trust and custody, institutional asset and institutional mutual
fund management and administration, securities lending, foreign exchange, cash
management, stock transfer and corporate trust services. The Corporation's
subsidiaries provide trust and investment management services while operating
under the umbrella name "Mellon Trust". In addition, the subsidiaries provide
institutional mutual fund management through Dreyfus. The Corporation also
owns a number of subsidiaries that provide a variety of active and passive
equity and fixed income investment management services, including management
of international securities. Through the Global Cash Management department,
the Corporation offers a broad range of cash management services, including
remittance processing, collections and disbursements, check processing and
electronic services. The Corporation's subsidiaries also provide services
relating primarily to defined contribution employee benefit plans under the
umbrella name "Dreyfus Retirement Services." Stock transfer services are
provided in the United States through its joint venture operating under the
name of Chase Mellon Shareholder Services and in Canada through The R-M Trust
Company.
CORPORATE/INSTITUTIONAL BANKING SERVICES
Corporate/Institutional Banking Services includes large corporate and
middle-market lending, asset-based lending, lease financing, commercial real
estate lending, insurance premium financing and securities underwriting and
trading. The Corporation provides lending and other institutional banking
services to domestic and selected international markets through its Corporate
Banking, Institutional Banking, Capital Markets and Leasing departments. These
markets generally include large domestic commercial and industrial customers,
U.S. operations of foreign companies, multinational corporations, state and
local governments and various financial institutions (including banks,
securities broker/dealers, insurance companies, finance companies and mutual
funds). The Corporation also offers corporate finance and rate risk management
products; syndicates, participates out and sells loans; offers a variety of
capital markets products and services, including private placement and money
market transactions; and provides equipment leasing, financing and lease
advisory services. The Corporation maintains foreign offices in London, Tokyo,
Hong Kong, Toronto, and Grand Cayman, British West Indies. Through these
offices, the Corporation conducts trade finance activities, engages in
correspondent banking and provides corporate banking and capital markets
services. Included in this sector is a nationwide asset-based lending division
which provides secured lending, principally through accounts receivable and
inventory financing. As part of this sector, Middle Market Banking serves
companies with annual sales between $10 million and $250 million and the
health care industry on a national basis.
Real Estate lending consists of the Corporation's commercial real estate
lending activities, through which it originates financing for residential,
commercial, multi-family and other products. The Corporation provides property
and casualty insurance premium financing to small, midsize and large companies
in the United States through the AFCO Credit Corporation and in Canada through
CAFO.
On December 10, 1996, Mellon Capital I, a trust created by the Corporation,
publicly issued $500,000,000 of its 7.72% Capital Securities, Series A. In
connection with such issuance, the Corporation issued to Mellon Capital I
$515,464,000 in aggregate principal amount of its 7.72% Junior Subordinated
Deferrable Interest Debentures, Series A, due December 1, 2026. Such
debentures were issued pursuant to the Indenture and rank pari passu with the
Series B Subordinated Debentures.
On December 19, 1996, Mellon Bank effected the securitization of insurance
premium finance loans originated by subsidiaries of Mellon Bank, which
involved the public issuance by Mellon Bank Premium Finance Loan Master Trust,
a trust created by Mellon Bank, of $465,000,000 of asset-backed certificates.
S- 11
<PAGE>
MELLON BANK CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF THE CORPORATION
The following table presents summary consolidated financial data derived
from the consolidated financial statements of the Corporation. This summary is
qualified in its entirety by the detailed information and financial statements
included in the documents incorporated herein by reference. See "Incorporation
of Certain Documents by Reference."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------- ------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- -------- -------- -------- -------- --------
(DOLLAR AMOUNTS IN
MILLIONS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Net Interest revenue.... $ 1,107 $ 1,166 $ 1,548 $ 1,508 $ 1,329 $ 1,182 $ 1,012
Provision for credit
losses................. 75 70 105 70 125 185 250
Net interest revenue
after provision for
losses................. 1,032 1,096 1,443 1,438 1,204 997 762
Fee revenue............. 1,453 1,226 1,670 1,652 1,538 1,154 1,007
Gains (losses) on sales
of securities.......... 1 -- 6 (5) 100 129 81
Operating expense....... 1,636 1,501 2,027 2,374 2,084 1,648 1,440
Provision for income
taxes.................. 311 304 401 278 298 104 62
------- ------- -------- -------- -------- -------- --------
Net income.............. $ 539 $ 517 $ 691 $ 433 $ 460 $ 528 $ 348
Net income applicable to
common stock........... 510 488 652 358 397 477 299
CONSOLIDATED PER COMMON
SHARE DATA:
Primary net income...... $ 3.81 $ 3.32 $ 4.50 $ 2.42 $ 2.73 $ 3.56 $ 2.39
Fully diluted net
income................. 3.81 3.30 4.46 2.42 2.73 3.53 2.37
Dividends............... 1.75 1.45 2.00 1.57 1.01 0.93 0.93
Book value at period-
end.................... 26.26 26.13 26.17 25.06 24.28 21.37 18.44
Average common shares
and equivalents
outstanding--
Primary (in thousands). 133,769 146,916 145,074 149,069 147,083 134,858 126,554
Average common shares
and equivalents
outstanding--
Fully diluted (in
thousands)............. 134,122 147,935 146,182 149,230 147,293 137,338 127,403
RESULTS EXCLUDING
CERTAIN ITEMS (A):
Net income.............. $ 539 $ 517 $ 691 $ 652 $ 519 $ 398 $ 259
Net income per common
share--Primary......... 3.81 3.32 4.50 4.00 3.14 2.60 1.69
Return on average common
shareholders'
equity(B).............. 20.2% 17.7% 17.8% 16.0% 13.7% 13.1% 9.0%
Return on average
assets(B).............. 1.72 1.74 1.72 1.71 1.46 1.29 0.87
CONSOLIDATED BALANCE
SHEET--AVERAGE BALANCES
(B):
Money market
investments............ $ 1,417 $ 1,228 $ 1,222 $ 1,656 $ 3,821 $ 1,905 $ 1,566
Securities.............. 6,180 4,836 4,922 5,149 4,804 6,500 5,778
Loans................... 27,009 27,177 27,321 25,097 21,763 18,235 18,514
Total interest-earning
assets................. 34,769 33,541 33,761 32,282 30,657 26,948 26,167
Total assets............ 41,804 39,745 40,097 38,106 35,635 30,758 29,878
Deposits................ 30,592 27,615 27,951 27,248 26,541 22,684 21,438
Notes and debentures
(with original
maturities over one
year).................. 1,877 1,678 1,670 1,768 1,991 1,365 1,448
Redeemable preferred
stock.................. -- -- -- -- -- -- 51
Common shareholders'
equity................. 3,371 3,691 3,671 3,691 3,323 2,603 2,190
Total shareholders'
equity................. 3,806 4,126 4,106 4,277 3,964 3,112 2,614
CONSOLIDATED
PERCENTAGES:
Return on average common
shareholders'
equity(B).............. 20.2% 17.7% 17.8% 9.8% 12.1% 18.5% 13.8%
Return on average
assets(B).............. 1.72 1.74 1.72 1.14 1.29 1.72 1.16
Net interest margin(B):
Taxable equivalent
basis(C)............... 4.28 4.68 4.62 4.71 4.39 4.46 3.99
Without taxable
equivalent increments.. 4.25 4.65 4.58 4.67 4.34 4.39 3.86
Dividends per common
share as a percentage
of primary net income
per common share....... 45.44 43.19 44.18 54.66 31.28 21.11 29.52
CAPITAL RATIOS:
Common shareholders'
equity to assets(D).... 7.78% 8.81% 8.83% 9.54% 9.57% 8.85% 7.91%
Average common
shareholders' equity to
average assets(B)...... 8.06 9.29 9.15 9.68 9.32 8.46 7.33
Tier I capital ratio(D). 6.74 8.77 8.14 9.48 9.70 10.20 9.05
Total (Tier I plus Tier
II) capital ratio(D)... 11.26 12.00 11.29 12.90 13.22 13.83 13.16
Leverage capital
ratio(D)............... 6.68 8.20 7.80 8.67 9.00 9.45 8.62
ASSET QUALITY RATIOS(E):
Reserve for credit
losses as a percentage
of:
Total loans(D)......... 1.69% 2.04% 1.70% 2.27% 2.45% 2.54% 3.12%
Nonperforming loans(D). 364 313 282 403 297 152 113
Net credit losses as a
percentage of average
loans(B)............... 0.44 0.55 0.91 0.27 0.64 1.52 1.24
Nonperforming assets as
a percentage of total
loans and net acquired
property(D)............ 0.74 0.93 0.85 0.89 1.39 2.94 4.78
</TABLE>
Footnotes on following page.
S-12
<PAGE>
- --------
Note: The comparability of the information on the prior page has been affected
by the Corporation's September 30, 1996 acquisition of the business
equipment financing unit of USL Capital Corporation, the December 1993
acquisition of AFCO Credit Corporation and CAFO, Inc., the May 1993
acquisition of TBC, the December 1992 acquisition of certain assets and
deposit liabilities of Meritor Savings Bank and the December 1991
acquisition of United Penn Bank. These acquisitions, as well as other
less material acquisitions and divestitures, are described in detail in
the Corporation's Annual Reports on Form 10-K for the years ended
December 31, 1991 through 1995, or other documents incorporated by
reference herein.
(A) Results for 1994 exclude a $130 million after tax securities lending
charge, $79 million after tax of Dreyfus merger-related expenses, $10
million after tax of one-time losses on the disposition of securities
available for sale previously owned by Dreyfus and $16 million of
preferred stock dividends recorded in connection with the redemption of
the Series H preferred stock. Results for 1993 exclude $112 million after
tax of merger expenses and $53 million after tax of gains on the sale of
securities related to the acquisition of TBC. Results for periods prior to
1993 were calculated by applying a normalized effective tax rate of
approximately 38% to pretax income. The unrecorded tax benefit that
existed at the beginning of the periods prior to 1993 was included in the
determination of the return on common shareholders' equity.
(B) Computed on a daily average basis.
(C) Calculated on a taxable equivalent basis, at tax rates approximating 35%
for the nine months ended September 30, 1996 and 1995, and the full years
ended 1995, 1994 and 1993 and 34% in all other years presented. Loan fees,
nonaccrual loans and the related effect on income have been included in
the calculation of the net interest margin.
(D) Period-end ratio.
(E) Segregated assets acquired in the 1992 Meritor acquisition are not
reported as loans and therefore are not included in nonperforming loans.
The reserve for segregated assets is not included in the reserve for
credit losses. In December 1995, the Corporation segregated certain
CornerStoneSM credit card loans, which had a history of delinquency, into
an accelerated resolution portfolio, which is included in Other Assets on
the balance sheet. Interest and principal receipts, fees and loan loss
recoveries on loans in this portfolio are applied to reduce the carrying
value of this portfolio.
S-13
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Corporation's ratios of earnings to fixed
charges and ratio of earnings to combined fixed charges and preferred stock
dividend requirements for each of the periods indicated:
MELLON BANK CORPORATION
AND ITS SUBSIDIARIES(A)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income.................. $ 539,703 $ 517,227 $ 691,534 $ 433,365 $ 460,213 $ 527,955 $ 347,451
Provision for income
taxes.................. 310,223 303,768 400,058 278,040 298,034 104,099 62,199
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before provision
for income taxes....... $ 849,926 $ 820,995 $1,091,592 $ 711,405 $ 758,247 $ 632,054 $ 409,650
---------- ---------- ---------- ---------- ---------- ---------- ----------
Fixed charges:
Interest expense
(excluding interest on
deposits)............. $ 270,141 $ 300,362 $ 401,700 $ 263,054 $ 200,915 $ 211,998 $ 326,437
One-third of rental
expense
(net of income from
subleases)
and amortization of
debt
issuance costs........ 33,085 32,763 44,303 40,140 38,190 29,446 30,300
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total fixed charges
(excluding interest on
deposits)............. 303,226 333,125 446,003 303,194 239,105 241,444 356,737
Interest on deposits... 662,711 652,074 888,580 538,715 454,458 636,719 1,006,566
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total fixed charges.... $ 965,937 $ 985,199 $1,334,583 $ 841,909 $ 693,563 $ 878,163 $1,363,303
---------- ---------- ---------- ---------- ---------- ---------- ----------
Preferred stock dividend
requirements (b)....... $ 46,417 $ 46,786 $ 62,035 $ 124,260 $ 103,792 $ 61,197 $ 57,618
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before provision
for income taxes, plus
total fixed charges:
Excluding interest on
deposits.............. $1,153,152 $1,154,120 $1,537,595 $1,014,599 $ 997,352 $ 873,498 $ 766,387
---------- ---------- ---------- ---------- ---------- ---------- ----------
Including interest on
deposits.............. $1,815,863 $1,806,194 $2,426,175 $1,553,314 $1,451,810 $1,510,217 $1,772,953
---------- ---------- ---------- ---------- ---------- ---------- ----------
Ratio of earnings (as
defined) to fixed
charges:
Excluding interest on
deposits.............. 3.80 3.46 3.45 3.35 4.17 3.62 2.15
Including interest on
deposits.............. 1.88 1.83 1.82 1.84 2.09 1.72 1.30
Ratio of earnings (as
defined) to combined
fixed charges and
preferred stock
dividends:
Excluding interest on
deposits.............. 3.30 3.04 3.03 2.37 2.91 2.89 1.85
Including interest on
deposits.............. 1.79 1.75 1.74 1.61 1.82 1.61 1.25
</TABLE>
- --------
(a) For purposes of computing these ratios, earnings represent consolidated
income before income taxes plus consolidated fixed charges. Fixed charges,
excluding interest on deposits, include interest expense (other than on
deposits), one-third (the proportion deemed representative of the interest
factor) of rental expense net of income from subleases, and amortization
of debt issuance costs. Fixed charges, including interest on deposits,
include all interest expense, one-third (the proportion deemed
representative of the interest factor) of rental expense net of income
from subleases, and amortization of debt issuance costs.
(b) Preferred stock dividend requirements for all years presented represent
the pretax amount required to cover preferred stock dividends.
S-14
<PAGE>
MELLON BANK CORPORATION
(PARENT CORPORATION) (A)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLAR AMOUNTS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income
taxes and equity in
undistributed net
income (loss) of
subsidiaries........... $266,816 $279,942 $473,554 $434,035 $224,869 $137,594 $145,777
Fixed charges: interest
expense, one-third of
rental expense net of
income from subleases,
and amortization of
debt issuance costs.... 75,510 73,295 96,971 95,193 110,739 79,709 103,001
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes and equity in
undistributed net
income (loss) of
subsidiaries, plus
fixed charges.......... $342,326 $353,237 $570,525 $529,228 $335,608 $217,303 $248,778
-------- -------- -------- -------- -------- -------- --------
Capital stock dividend
requirements (b)....... $ 46,417 $ 46,786 $ 62,035 $124,260 $103,792 $ 61,197 $ 57,618
-------- -------- -------- -------- -------- -------- --------
Ratio of earnings (as
defined) to fixed
charges................ 4.53 4.82 5.88 5.56 3.03 2.73 2.42
Ratio of earnings (as
defined) to combined
fixed charges and
preferred stock
dividends.............. 2.81 2.94 3.59 2.41 1.56 1.54 1.55
</TABLE>
- --------
(a) The parent Corporation ratios include the accounts of the Corporation and
Mellon Financial Company, a wholly owned subsidiary of the Corporation
that functions as a financing entity for the Corporation and its
subsidiaries by issuing commercial paper and other debt guaranteed by the
Corporation. For purposes of computing these ratios, earnings represent
parent Corporation income before taxes and equity in undistributed net
income (loss) of subsidiaries, plus the fixed charges of the parent
Corporation. Fixed charges represent interest expense, one-third (the
proportion deemed representative of the interest factor) of rental expense
net of income from subleases, and amortization of debt issuance costs.
Because the ratio excludes from earnings the equity in undistributed net
income (loss) of subsidiaries, the ratio varies with the payment of
dividends by such subsidiaries.
(b) Preferred stock dividend requirements for all years presented represent
the pretax amount required to cover preferred stock dividends.
USE OF PROCEEDS
All of the proceeds from the sale of the Series B Capital Securities will be
invested by the Series B Issuer in Series B Subordinated Debentures. The
Corporation intends that the proceeds from the sale of the Series B
Subordinated Debentures will be added to its general corporate funds and will
be used for general corporate purposes.
The Corporation is required by the Federal Reserve to maintain certain
levels of capital for bank regulatory purposes. On October 21, 1996, the
Federal Reserve announced that cumulative preferred securities having the
characteristics of the Series B Capital Securities could be included as Tier I
capital for bank holding companies. Such Tier I capital treatment, together
with the Corporation's ability to deduct, for income tax purposes, interest
payable on the Series B Subordinated Debentures, will provide the Corporation
with a more cost-effective means of obtaining capital for regulatory purposes
than if the Corporation were to issue preferred stock.
S-15
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation and its subsidiaries as of September 30, 1996 and as adjusted to
give effect to the consummation of the offering of the Series B Capital
Securities and the consummation of the offering of the Series A Capital
Securities on December 10, 1996. The following data should be read in
conjunction with the consolidated financial statements and notes thereto of
the Corporation and its subsidiaries incorporated herein by reference.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
SEPTEMBER 30, SEPTEMBER 30,
1996 1996(A)
(DOLLAR AMOUNTS IN MILLIONS) ------------- -------------
<S> <C> <C>
Commercial paper....................................... $ 170 $ 170
Notes and debentures:
Parent Corporation (B):
6.70% Subordinated Debentures due 2008.............. 249 249
6.30% Senior Notes due 2000......................... 200 200
7 5/8% Senior Notes due 1999........................ 200 200
6 1/2% Senior Notes due 1997........................ 200 200
6 7/8% Subordinated Debentures due 2003............. 150 150
9 1/4% Subordinated Debentures due 2001............. 100 100
9 3/4% Subordinated Debentures due 2001............. 100 100
Medium Term Notes, Series A, due 1997-2001
(10.00% to 10.50% at September 30, 1996)........... 27 27
7 1/4% Convertible Subordinated Capital Notes due
1999............................................... 3 3
Subsidiaries:
7% Subordinated Notes due 2006...................... 300 300
7 5/8% Subordinated Notes due 2007.................. 250 250
6 1/2% Subordinated Notes due 2005.................. 249 249
6 3/4% Subordinated Notes due 2003.................. 149 149
Medium Term Bank Notes due 1997-2007
(6.10% to 8.55% at September 30, 1996)............. 337 337
Various notes and obligations under capital leases
due 1996-2001 (3.92% to 10.50% at September 30,
1996).............................................. 5 5
------ ------
Total notes and debentures......................... 2,519 2,519
------ ------
Total commercial paper, notes and debentures....... 2,689 2,689
------ ------
Guaranteed Preferred Beneficial Interests in
Corporation's Junior Subordinated Deferrable Interest
Debentures, Series A.................................. -- 500
Guaranteed Preferred Beneficial Interests in
Corporation's Junior Subordinated Deferrable Interest
Debentures, Series B.................................. -- 500
Shareholders' equity:
9.60% Preferred Stock--$1.00 par value and $25.00
liquidation value Authorized and issued--6,000,000
shares (Series I).................................. 145 -- (C)
8.50% Preferred Stock--$1.00 par value and $25.00
liquidation value Authorized and issued--4,000,000
shares (Series J).................................. 97 97
8.20% Preferred Stock--$1.00 par value and $25.00
liquidation value Authorized and issued--8,000,000
shares (Series K).................................. 193 193
Common Stock--$.50 par value
Authorized--200,000,000 shares; Issued--147,165,480
shares............................................ 74 74
Additional paid-in capital.......................... 1,858 1,858
Retained earnings................................... 2,390 2,385(C)
Net unrealized loss on assets available for sale,
net of tax......................................... (20) (20)
Treasury stock of 17,750,459 shares at cost......... (903) (903)
------ ------
Total shareholders' equity......................... 3,834 3,684
------ ------
Total capitalization............................... $6,523 $7,373
====== ======
</TABLE>
- --------
(A) Reflects the proceeds of approximately $500 million from the issuance of
500,000 Series A Capital Securities on December 10, 1996 and the
anticipated proceeds of approximately $500 million from the issuance of
500,000 Series B Capital Securities offered hereby. The Series A
Subordinated Debentures bear interest at the rate of 7.72% per annum and
will mature on December 1, 2026. The Series B Subordinated Debentures will
bear interest at the rate of 7.995% per annum and will mature on January
15, 2027. The Corporation owns all of the Series A Common Securities of
the Series A Issuer and will own all of the Series B Common Securities of
the Series B Issuer.
(B) Parent Corporation includes the accounts of the Corporation and Mellon
Financial Company, a wholly owned subsidiary of the Corporation that
functions as a financing entity for the Corporation and its subsidiaries
by issuing commercial paper and other debt guaranteed by the Corporation.
(C) On December 16, 1996, the Corporation redeemed its Series I Preferred
Stock. The $145 million of Series I Preferred Stock was recorded net of $5
million of issuance costs.
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<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Series B Issuer will be treated as a
subsidiary of the Corporation and, accordingly, the accounts of the Series B
Issuer will be included in the consolidated financial statements of the
Corporation. The Series B Capital Securities will be presented as a separate
line item in the consolidated balance sheets of the Corporation, under the
caption "Guaranteed Preferred Beneficial Interests in Corporation's Junior
Subordinated Deferrable Interest Debentures" and appropriate disclosures about
the Series B Capital Securities, the Series B Guarantee and the Series B
Subordinated Debentures and the Expense Agreement will be included in the
notes to the consolidated financial statements. For financial reporting
purposes, the Corporation will record Distributions payable on the Series B
Capital Securities as an expense in the consolidated statement of income.
The Corporation has agreed that future financial reports of the Corporation
will: (i) present the Preferred Securities issued by other trusts created by
the Corporation on the Corporation's balance sheet as a separate line item
entitled "Guaranteed Preferred Beneficial Interests in Corporation's Junior
Subordinated Deferrable Interest Debentures"; (ii) include in a footnote to
the financial statements disclosure that the sole assets of the trusts are the
Junior Subordinated Debentures (specifying as to each trust the principal
amount, interest rate and maturity date of Junior Subordinated Debentures
held) and (iii) disclose, in an audited footnote to the financial statements,
that (a) the trusts are wholly owned, (b) the sole assets of the trusts are
the Junior Subordinated Debentures (specifying as to each trust the principal
amount, interest rate and maturity date of the Junior Subordinated Debentures
held), and (c) the obligations of the Corporation under the Junior
Subordinated Debentures, the Indenture, the relevant Trust Agreement, Expense
Agreement, and the Guarantee, in the aggregate, constitute a full and
unconditional guarantee by the Corporation of such trust's obligations under
the Preferred Securities issued by such trust.
CERTAIN TERMS OF SERIES B CAPITAL SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series B
Capital Securities supplements the description of the terms and provisions of
the Preferred Securities set forth in the accompanying Prospectus under the
heading "Description of Preferred Securities," to which description reference
is hereby made. This summary of certain terms and provisions of the Series B
Capital Securities which describes the material provisions thereof, does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Agreement to which reference is hereby made. The form
of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and accompanying Prospectus form
a part.
DISTRIBUTIONS
The Series B Capital Securities represent beneficial ownership interests in
the Series B Issuer, and distributions on each Series B Capital Securities
will be payable at the annual rate of 7.995% of the stated Liquidation Amount
of $1,000, payable semi-annually in arrears on January 15 and July 15 of each
year, to the holders of the Series B Capital Securities on the relevant record
dates. The record dates for the Series B Capital Securities will be, for so
long as the Series B Capital Securities remain in book-entry form, one
Business Day (as defined in the accompanying Prospectus) prior to the relevant
Distribution payment date and, in the event the Series B Capital Securities
are not in book-entry form, the first day of the month in which the relevant
Distribution payment date occurs. Distributions will accumulate from the date
of original issuance. The first Distribution payment date for the Series B
Capital Securities will be July 15, 1997. The amount of Distributions payable
for any period less than a full Distribution period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which Distributions are payable on the Series B Capital Securities is not a
Business Day, then payment of the Distributions payable on such date will be
made on the next succeeding day that is a Business Day (and without any
additional Distributions or other payment in respect
S-17
<PAGE>
of any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on the date such
payment was originally payable. See "Description of Preferred Securities--
Distributions" in the accompanying Prospectus.
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Series B Subordinated Debentures at any time or from time to
time for a period not exceeding 10 consecutive semi-annual periods with respect
to each Extension Period, provided that no Extension Period may extend beyond
the Stated Maturity of the Series B Subordinated Debentures. As a consequence
of any such deferral of interest payments by the Corporation, semi-annual
Distributions on the Series B Capital Securities by the Series B Issuer will
also be deferred during any such Extension Period. Distributions to which
holders of the Series B Capital Securities are entitled will accumulate
additional Distributions thereon at the rate per annum of 7.995% thereof,
compounded semi-annually from the relevant payment date for such Distributions.
The term "Distributions" as used herein shall include any such additional
Distributions. During any such Extension Period, the Corporation may not, and
may not permit any subsidiary of the Corporation to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock,
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Corporation (including other
series of Junior Subordinated Debentures) that rank pari passu with or junior
in interest to the Series B Subordinated Debentures or (iii) make any guarantee
payments with respect to any guarantee by the Corporation of the debt
securities of any subsidiary of the Corporation if such guarantee ranks pari
passu with or junior in interest to the Series B Subordinated Debentures (other
than (a) dividends or distributions in capital stock of the Corporation, (b)
any declaration of a dividend in connection with the implementation of a
stockholders' rights plan or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Series B Guarantee and (d) purchases
of common stock related to the issuance of common stock or rights under any of
the Corporation's benefit plans for its directors, officers or employees,
related to the issuance of common stock or rights under a dividend reinvestment
and stock purchase plan, or related to the issuance of common stock (or
securities convertible into or exchangeable for common stock) as consideration
in an acquisition transaction that was entered into prior to the commencement
of such Extension Period). Prior to the termination of any such Extension
Period, the Corporation may further defer the payment of interest on the Series
B Subordinated Debentures, provided that no Extension Period may exceed 10
consecutive semi-annual or extend beyond the Stated Maturity of the Series B
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all interest then accrued and unpaid (together with interest
thereon at the rate of 7.995% compounded semi-annually, to the extent permitted
by applicable law), the Corporation may elect to begin a new Extension Period.
There is no limitation on the number of times that the Corporation may elect to
begin an Extension Period. See "Certain Terms of Series B Subordinated
Debentures--Option to Defer Interest Payments" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series B
Subordinated Debentures.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series B
Subordinated Debentures, whether at Stated Maturity or upon earlier redemption
as provided in the Indenture, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount (as defined in
the accompanying Prospectus) of the Series B Securities, upon not less than 30
nor more than 60 days notice prior to the date fixed for redemption, at a
redemption price, with respect to the Series B Capital Securities (the
"Redemption Price"), equal to the aggregate Liquidation Amount of such Series B
Capital Securities plus accumulated and unpaid Distributions thereon to the
date of redemption (the "Redemption Date"), and the related amount of the
premium, if any, paid by the Corporation upon the concurrent redemption of such
Series B Subordinated Debentures. See "Certain Terms of Series B Subordinated
Debentures--Redemption." If less than all of the
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<PAGE>
Series B Subordinated Debentures are to be repaid or redeemed on a Redemption
Date, then the proceeds from such repayment or redemption shall be allocated
to the redemption pro rata of the Series B Capital Securities and the Series B
Common Securities. The amount of premium, if any, paid by the Corporation upon
the redemption of all or any part of Series B Subordinated Debentures to be
repaid or redeemed on a Redemption Date shall be allocated to the redemption
pro rata of the Series B Capital Securities and the Series B Common
Securities.
The Corporation has the right to redeem the Series B Subordinated Debentures
(i) on or after January 15, 2007, in whole at any time or in part from time to
time, or (ii) prior to January 15, 2007, in whole (but not in part) within 90
days following the occurrence of a Tax Event or Capital Treatment Event. A
redemption of the Series B Subordinated Debentures would cause a mandatory
redemption of Series B Capital Securities and Series B Common Securities.
The Redemption Price, in the case of a redemption under (i) above, shall
equal the following prices expressed in percentages of the Liquidation Amount
together with accrued Distributions to but excluding the Redemption Date. If
redeemed during the 12-month period beginning January 15:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2007.............................................................. 103.9975%
2008.............................................................. 103.5978
2009.............................................................. 103.1980
2010.............................................................. 102.7983
2011.............................................................. 102.3985
2012.............................................................. 101.9988
2013.............................................................. 101.5990
2014.............................................................. 101.1993
2015.............................................................. 100.7995
2016.............................................................. 100.3998
</TABLE>
and at 100% on or after January 15, 2017.
The Redemption Price, in the case of a redemption following a Tax Event or
Capital Treatment Event as described under (ii) above, shall equal for each
Series B Capital Security the Make-Whole Amount for a corresponding $1,000
principal amount of Series B Subordinated Debentures together with accrued
Distributions to but excluding the Redemption Date. The "Make-Whole Amount"
shall be equal to the greater of (i) 100% of the principal amount of such
Series B Subordinated Debentures or (ii) as determined by a Quotation Agent
(as defined below), the sum of the present values of the principal amount and
premium payable as part of the Redemption Price with respect to an optional
redemption of such Series B Subordinated Debentures on January 15, 2007,
together with scheduled payments of interest from the Redemption Date to
January 15, 2007 (the "Remaining Life"), in each case discounted to the
Redemption Date on a semi-annual basis (assuming a 360-day year consisting of
30-day months) at the Adjusted Treasury Rate (as defined below).
"Adjusted Treasury Rate" means, with respect to any Redemption Date, the
Treasury Rate (as defined below) plus (i) 1.125% if such Redemption Date
occurs on or before January 15, 1998 or (ii) 0.50% if such Redemption Date
occurs after January 15, 1998.
"Treasury Rate" means (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Remaining Life (if no
maturity is within three months before or after the Remaining Life, yields for
the two published maturities most closely corresponding to the Remaining
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<PAGE>
Life shall be determined and the Treasury Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding to the nearest
month) or (ii) if such release (or any successor release) is not published
during the week preceding the calculation date or does not contain such yields,
the rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date. The Treasury Rate shall be
calculated on the third Business Day preceding the Redemption Date.
"Comparable Treasury Issue" means, with respect to any Redemption Date, the
United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the Remaining Life that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing
new issues of corporate debt securities of comparable maturity to the Remaining
Life. If no United States Treasury security has a maturity which is within a
period from three months before to three months after January 15, 2007, the two
most closely corresponding United States Treasury securities shall be used as
the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.
"Quotation Agent" means Merrill Lynch, Pierce, Fenner & Smith Incorporated
and its successors; provided, however, that if the foregoing shall cease to be
a primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), the Corporation shall substitute therefor another Primary
Treasury Dealer.
"Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any other
Primary Treasury Dealer selected by the Debenture Trustee after consultation
with the Corporation.
"Comparable Treasury Price" means (i) the average of five Reference Treasury
Dealer Quotations for such Redemption Date, after excluding the highest and
lowest such Reference Treasury Dealer Quotations, or (ii) if the Debenture
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any Redemption Date, the average, as determined by the
Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00
p.m., New York City time, on the third Business Day preceding such Redemption
Date.
LIQUIDATION OF SERIES B ISSUER AND DISTRIBUTION OF SERIES B SUBORDINATED
DEBENTURES TO HOLDERS
The Corporation will have the right at any time to terminate the Series B
Issuer and cause the Series B Subordinated Debentures to be distributed to the
holders of the Series B Capital Securities in exchange therefor upon
liquidation of the Series B Issuer. Such right is subject to the Corporation
having received prior approval of the Federal Reserve if then required under
applicable capital guidelines or policies.
Under current United States federal income tax law, a distribution of Series
B Subordinated Debentures in exchange for the Series B Capital Securities
should not be a taxable event to holders of the Series B Capital Securities.
Should there be a change in law, a change in legal interpretation, a Tax Event
or other circumstances, however, the distribution could be a taxable event to
holders of the Series B Capital Securities. See "Certain Federal Income Tax
Consequences--Distribution of Series B Subordinated Debentures to Holders of
Series B Capital Securities." If the Corporation elects neither to redeem the
Series B Subordinated Debentures prior to maturity nor to liquidate the Series
B Issuer and distribute the Series B Subordinated Debentures to holders of the
Series B Capital Securities in exchange therefor, the Series B Capital
Securities will remain outstanding until the Stated Maturity of the Series B
Subordinated Debentures.
S-20
<PAGE>
LIQUIDATION VALUE
The amount payable on the Series B Capital Securities in the event of any
liquidation of the Series B Issuer is $1,000 per Series B Capital Securities
plus accumulated and unpaid Distributions, which amount may be paid in the
form of a distribution of a Like Amount in Series B Subordinated Debentures,
subject to certain exceptions. See "Description of Preferred Securities--
Liquidation Distribution Upon Termination" in the accompanying Prospectus.
REGISTRATION OF SERIES B CAPITAL SECURITIES
The Series B Capital Securities will be represented by global certificates
registered in the name of DTC or its nominee. Beneficial interests in the
Series B Capital Securities will be shown on, and transfers thereof will be
effected only through, records maintained by participants in DTC. Except as
described below and in the accompanying Prospectus, Series B Preferred
Securities in certificated form will not be issued in exchange for the global
certificates. See "Book-Entry Issuance" in the accompanying Prospectus.
A global security shall be exchangeable for Series B Capital Securities
registered in the names of persons other than DTC or its nominee only if (i)
DTC notifies the Series B Issuer that it is unwilling or unable to continue as
a depositary for such global security and no successor depositary shall have
been appointed, or if at any time DTC ceases to be a clearing agency
registered under the Exchange Act at a time when DTC is required to be so
registered to act as such depositary, (ii) the Series B Issuer in its sole
discretion determines that such global security shall be so exchangeable or
(iii) there shall have occurred and be continuing an event of default under
the Indenture with respect to the Series B Subordinated Debentures. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants (as defined in the accompanying
Prospectus) with respect to ownership of beneficial interests in such global
security. In the event that Series B Capital Securities are issued in
definitive form, such Series B Capital Securities will be in denominations of
$1,000 and integral multiples thereof and may be transferred or exchanged at
the offices described below.
Payments on Series B Capital Securities represented by a global security
will be made to DTC, as the depositary for the Series B Capital Securities. In
the event Series B Capital Securities are issued in certificated form, the
Liquidation Amount and Distributions will be payable, the transfer of the
Series B Capital Securities will be registrable, and Series B Capital
Securities will be exchangeable for Series B Capital Securities of other
denominations of a like aggregate Liquidation Amount, at the corporate office
of the Property Trustee in New York, New York, or at the offices of any paying
agent or transfer agent appointed by the Administrative Trustees, provided
that payment of any Distribution may be made at the option of the
Administrative Trustees by check mailed to the address of the persons entitled
thereto or by wire transfer. In addition, if the Series B Capital Securities
are issued in certificated form, the record dates for payment of Distributions
will be the first day of the month in which the relevant Distribution payment
is scheduled to be paid. For a description of DTC and the terms of the
depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance" in
the accompanying Prospectus.
CERTAIN TERMS OF SERIES B SUBORDINATED DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Series B
Subordinated Debentures supplements the description of the terms and
provisions of the Corresponding Junior Subordinated Debentures (as defined in
the accompanying Prospectus) set forth in the accompanying Prospectus under
the heading "Description of Junior Subordinated Debentures", to which
description reference is hereby made. The summary of certain terms and
provisions of the Series B Subordinated Debentures set forth below, which
describes the material provisions thereof, does not purport to be complete and
is subject to, and qualified in its entirety by
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<PAGE>
reference to, the Indenture to which reference is hereby made. The form of
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus Supplement and accompanying Prospectus form a part.
Concurrently with the issuance of the Series B Capital Securities, the
Series B Issuer will invest the proceeds thereof, together with the
consideration paid by the Corporation for the Series B Common Securities, in
the Series B Subordinated Debentures issued by the Corporation. The Series B
Subordinated Debentures will bear interest at the annual rate of 7.995% of the
principal amount thereof, payable semi-annually in arrears on January 15 and
July 15 of each year (each, an "Interest Payment Date"), commencing July 15,
1997, to the person in whose name each Series B Subordinated Debenture is
registered at the close of business on the Business Day next preceding such
Interest Payment Date. It is anticipated that, until the liquidation, if any,
of the Series B Issuer, each of the Series B Subordinated Debentures will be
held by the Property Trustee in trust for the benefit of the holders of the
Series B Capital Securities. The amount of interest payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months. In
the event that any date on which interest is payable on the Series B
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment
was originally payable. Accrued interest that is not paid on the applicable
Interest Payment Date will bear additional interest on the amount thereof (to
the extent permitted by law) at the rate per annum of 7.995% thereof,
compounded semi-annually from the relevant Interest Payment Date. The term
"interest" as used herein shall include semi-annual interest payments,
interest on semi-annual interest payments not paid on the applicable Interest
Payment Date and Additional Sums (as defined below), as applicable.
The Series B Subordinated Debentures will be issued as a series of junior
subordinated deferrable interest debentures under the Indenture.
The Series B Subordinated Debentures will mature on January 15, 2027.
The Series B Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt of the Corporation.
See "Description of Junior Subordinated Debentures--Subordination." Most of
the Corporation's existing indebtedness constitutes Senior Debt. Because the
Corporation is a holding company, the right of the Corporation to participate
in any distribution of assets of any subsidiary, including Mellon Bank,
Dreyfus and TBC, upon such subsidiary's liquidation or reorganization or
otherwise subject to the prior claims of creditors of that subsidiary, except
to the extent that the Corporation may itself be recognized as a creditor of
that subsidiary. Accordingly, the Series B Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Series B Subordinated Debentures
should look only to the assets of the Corporation for payments on the Series B
Subordinated Debentures. The Indenture does not limit the incurrence or
issuance of other secured or unsecured debt of the Corporation, including
Senior Debt, whether under the Indenture, any existing indenture or any other
indenture that the Corporation may enter into in the future or otherwise. See
"Description of Junior Subordinated Debentures--Subordination" in the
accompanying Prospectus.
OPTION TO DEFER INTEREST PAYMENTS
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture at any time or
from time to time during the term of the Series B Subordinated Debentures to
defer payment of interest on the Series B Subordinated Debentures for a period
not exceeding 10 consecutive semi-annual periods with respect to each
Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Series B Subordinated Debentures. At the end of such
Extension Period, the Corporation must pay all interest then accrued and
unpaid on the Series B Subordinated Debentures (together
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<PAGE>
with interest on such unpaid interest at the annual rate of 7.995%, compounded
semi-annually from the relevant Interest Payment Date, to the extent permitted
by applicable law). During an Extension Period, interest will accrue and
holders of Series B Subordinated Debentures (or holders of Series B Capital
Securities while such series is outstanding) will be required to accrue
interest income for United States federal income tax purposes. See "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount."
During any such Extension Period, the Corporation may not, and may not
permit any subsidiary of the Corporation to, (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of the Corporation's capital stock, (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Corporation (including other series of
Junior Subordinated Debentures) that rank pari passu with or junior in
interest to the Series B Subordinated Debentures or (iii) make any guarantee
payments with respect to any guarantee by the Corporation of the debt
securities of any subsidiary of the Corporation if such guarantee ranks pari
passu with or junior in interest to the Series B Subordinated Debentures
(other than (a) dividends or distributions in capital stock of the
Corporation, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan or the redemption or repurchase
of any such rights pursuant thereto, (c) payments under the Series B Guarantee
and (d) purchases of common stock related to the issuance of common stock or
rights under any of the Corporation's benefit plans for its directors,
officers or employees, related to the issuance of common stock or rights under
a dividend reinvestment and stock purchase plan or related to the issuance of
common stock (or securities convertible into or exchangeable for common stock)
as consideration in an acquisition transaction that was entered into prior to
the commencement of such Extension Period). Prior to the termination of any
such Extension Period, the Corporation may further defer the payment of
interest on the Series B Subordinated Debentures, provided that no Extension
Period may exceed 10 consecutive semi-annual periods or extend beyond the
Stated Maturity of the Series B Subordinated Debentures. Upon the termination
of any such Extension Period and the payment of all interest then accrued and
unpaid (together with interest thereon at the rate of 7.995%, compounded semi-
annually, to the extent permitted by applicable law), the Corporation may
elect to begin a new Extension Period subject to the above requirements. No
interest shall be due and payable during an Extension Period, except at the
end thereof. The Corporation must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election to
begin such Extension Period at least one Business Day prior to the earlier of
(i) the date Distributions on the Series B Capital Securities would have been
payable except for the election to begin such Extension Period, (ii) the date
the Administrative Trustees are required to give notice to the New York Stock
Exchange, the Nasdaq National Market or other applicable stock exchange or
automated quotation system on which the Series B Capital Securities are then
listed or quoted or to holders of Series B Subordinated Debentures of the
record date for such Distributions or (iii) the date such Distributions are
payable, but in any event not less than one Business Day prior to such record
date. The Debenture Trustee shall give notice of the Corporation's election to
begin a new Extension Period to the holders of the Series B Subordinated
Debentures. There is no limitation on the number of times that the Corporation
may elect to begin an Extension Period. See "Description of Junior
Subordinated Debentures--Option to Defer Interest Payments" in the
accompanying Prospectus.
ADDITIONAL SUMS
If the Series B Issuer is required to pay any additional taxes, duties or
other governmental charges as a result of a Tax Event, the Corporation will
pay as additional amounts on the Series B Subordinated Debentures such amounts
as shall be required so that the Distributions payable by the Series B Issuer
shall not be reduced as a result of any such additional taxes, duties or other
governmental charges.
In the Expense Agreement, the Corporation, as the holder of the Common
Securities of the Series B Issuer, has agreed to pay all debts and other
obligations (other than with respect to the Series B Capital Securities) and
all costs and expenses of the Series B Issuer (including costs and expenses
relating to the organization of the Series B Issuer, the fees and expenses of
the Trustees and the costs and expenses relating to the operation of the
Series B Issuer).
S-23
<PAGE>
REDEMPTION
Subject to the Corporation having received prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies, the
Series B Subordinated Debentures are redeemable prior to maturity at the option
of the Corporation (i) on or after January 15, 2007, in whole at any time or in
part from time to time, or (ii) prior to January 15, 2007, in whole (but not in
part) and within 90 days following the occurrence of a Tax Event or Capital
Treatment Event (each as defined under "Risk Factors--Tax Event or Capital
Treatment Event--Redemption"), in each case at the Redemption Price described
below. The proceeds of any such redemption will be used by the Series B Issuer
to redeem the Series B Securities.
The Redemption Price in the case of a redemption under (i) above shall equal
the following prices, expressed in percentages of the principal amount,
together with accrued interest to but excluding the Redemption Date. If
redeemed during the 12-month period beginning January 15:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2007.............................................................. 103.9975%
2008.............................................................. 103.5978
2009.............................................................. 103.1980
2010.............................................................. 102.7983
2011.............................................................. 102.3985
2012.............................................................. 101.9988
2013.............................................................. 101.5990
2014.............................................................. 101.1993
2015.............................................................. 100.7995
2016.............................................................. 100.3998
</TABLE>
and at 100% on or after January 15, 2017.
The Redemption Price, in the case of a redemption following a Tax Event or
Capital Treatment Event as described under (ii) above, shall equal the Make-
Whole Amount (as defined under "Certain Times of Series B Capital Securities--
Redemption"), together with accrued interest to but excluding the Redemption
Date.
DISTRIBUTION OF SERIES B SUBORDINATED DEBENTURES
As described under "Certain Terms of Series B Capital Securities--Liquidation
of Issuer and Distribution of Series B Subordinated Debentures to Holders",
under certain circumstances involving the termination of the Series B Issuer,
Series B Subordinated Debentures may be distributed to the holders of the
Series B Capital Securities in exchange therefor upon liquidation of the Series
B Issuer after satisfaction of liabilities to creditors of the Series B Issuer
as provided by applicable law. If distributed to holders of Series B Capital
Securities, the Series B Subordinated Debentures will initially be issued in
the form of one or more global securities and DTC, or any successor depositary
for the Series B Capital Securities, will act as depositary for the Series B
Subordinated Debentures. There can be no assurance as to the market price of
any Series B Subordinated Debentures that may be distributed to the holders of
Series B Capital Securities.
REGISTRATION OF SERIES B SUBORDINATED DEBENTURES
The Series B Subordinated Debentures will be registered in the name of the
Property Trustee on behalf of the Series B Issuer. In the event that the Series
B Debentures are distributed to holders of Series B Capital Securities, it is
anticipated that the depositary and other arrangements for the Series B
Subordinated Debentures will be substantially identical to those in effect for
the Series B Capital Securities. See "Certain Terms of Series B Capital
Securities--Registration of Series B Capital Securities."
S-24
<PAGE>
CERTAIN TERMS OF SERIES B GUARANTEE
The Series B Guarantee guarantees to the holders of the Series B Securities
the following payments, to the extent not paid by the Series B Issuer: (i) any
accumulated and unpaid Distributions required to be paid on the Series B
Securities, to the extent that the Series B Issuer has funds on hand available
therefor at such time, (ii) the Redemption Price with respect to any Series B
Securities called for redemption, to the extent that the Series B Issuer has
funds on hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding-up or liquidation of the Series B Issuer
(unless the Series B Subordinated Debentures are distributed to holders of the
Series B Securities), the lesser of (a) the aggregate of the Liquidation
Amount and all accumulated and unpaid Distributions to the date of payment, to
the extent that the Series B Issuer has funds on hand available therefor at
such time, and (b) the amount of assets of the Series B Issuer remaining
available for distribution to holders of the Series B Securities after payment
of creditors of the Series B Issuer as required by applicable law. The Series
B Guarantee will be qualified as an indenture under the Trust Indenture Act.
The Chase Manhattan Bank will act as the Guarantee Trustee for the purposes of
compliance with the Trust Indenture Act and will hold the Series B Guarantee
for the benefit of the holders of the Series B Securities. The Chase Manhattan
Bank will also act as Debenture Trustee for the Series B Subordinated
Debentures and as Property Trustee.
The holders of not less than a majority in aggregate Liquidation Amount of
the Series B Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect to the Series B Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Series B Guarantee. Any holder
of the Series B Securities may institute a legal proceeding directly against
the Corporation to enforce its rights under the Series B Guarantee without
first instituting a legal proceeding against the Series B Issuer, the
Guarantee Trustee or any other person or entity. If the Corporation were to
default on its obligation to pay amounts payable under the Series B
Subordinated Debentures, the Series B Issuer would lack funds for the payment
of Distributions or amounts payable on redemption of the Series B Securities
or otherwise, and, in such event, holders of the Series B Securities would not
be able to rely upon the Series B Guarantee for payment of such amounts.
Instead, if any event of default under the Indenture shall have occurred and
be continuing and such event is attributable to the failure of the Corporation
to pay interest or premium, if any, on or principal of the Series B
Subordinated Debentures on the applicable payment date, then a holder of
Series B Securities may institute a Direct Action against the Corporation
pursuant to the terms of the Indenture for enforcement of payment to such
holder of the principal of or interest or premium, if any, on such Series B
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Series B Securities of such holder. In connection
with such Direct Action, the Corporation will have a right of set-off under
the Indenture to the extent of any payment made by the Corporation to such
holder of Series B Securities in the Direct Action. Except as described
herein, holders of Series B Securities will not be able to exercise directly
any other remedy available to the holders of the Series B Subordinated
Debentures or assert directly any other rights in respect of the Series B
Subordinated Debentures. See "Description of Guarantees" in the accompanying
Prospectus. The Trust Agreement provides that each holder of Series B
Securities by acceptance thereof agrees to the provisions of the Series B
Guarantee, the Expense Agreement and the Indenture.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income tax
consequences of the purchase, ownership and disposition of Series B Capital
Securities. This summary only addresses the tax consequences to a person that
acquires Series B Capital Securities on their original issue at their original
offering price and that is (i) an individual citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any state thereof or the District of Columbia or (iii) an
estate or trust the income of which is subject to United States federal income
tax regardless of source (a "United States Person"). This summary does not
address all tax consequences that may be applicable to a United States Person
that is a beneficial owner of Series B Capital Securities, nor does it address
the tax consequences to (i) persons that are not United States Persons, (ii)
persons that may be subject to special treatment under United States federal
S-25
<PAGE>
income tax law, such as banks, insurance companies, thrift institutions,
regulated investment companies, real estate investment trusts, tax-exempt
organizations and dealers in securities or currencies, (iii) persons that will
hold Series B Capital Securities as part of a position in a "straddle" or as
part of a "hedging," "conversion" or other integrated investment transaction
for federal income tax purposes, (iv) persons whose functional currency is not
the United States dollar or (v) persons that do not hold Series B Capital
Securities as capital assets.
The statements of law or legal conclusion set forth in this summary
constitute the opinion of Sullivan & Cromwell, special tax counsel to the
Corporation and the Series B Issuer. This summary is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal
Revenue Service rulings and pronouncements and judicial decisions now in
effect, all of which are subject to change at any time. Such changes may be
applied retroactively in a manner that could cause the tax consequences to
vary substantially from the consequences described below, possibly adversely
affecting a beneficial owner of Series B Capital Securities. In particular,
legislation has been proposed that could adversely affect the Corporation's
ability to deduct interest on the Series B Subordinated Debentures, which may
in turn permit the Corporation to cause a redemption of the Series B Capital
Securities. See "--Possible Tax Law Changes." The authorities on which this
summary is based are subject to various interpretations, and it is therefore
possible that the federal income tax treatment of the purchase, ownership and
disposition of Series B Capital Securities may differ from the treatment
described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SERIES B CAPITAL SECURITIES, AS
WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE SERIES B ISSUER
Under current law and assuming compliance with the terms of the Trust
Agreement and certain similar factual matters, the Series B Issuer will not be
classified as an association taxable as a corporation for United States
federal income tax purposes. As a result, each beneficial owner of Series B
Capital Securities (a "Securityholder") will be required to include in its
gross income its pro rata share of the interest income, including original
issue discount, paid or accrued with respect to the Series B Subordinated
Debentures whether or not cash is actually distributed to the Securityholders.
See "Interest Income and Original Issue Discount."
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations applicable to debt instruments
issued on or after August 13, 1996 (the "Regulations"), a "remote" contingency
that stated interest will not be timely paid will be ignored in determining
whether a debt instrument is issued with original issue discount ("OID"). The
Corporation believes that the likelihood of its exercising its option to defer
payments is remote. Based on the foregoing, the Corporation believes that the
Series B Subordinated Debentures will not be considered to be issued with OID
at the time of their original issuance and, accordingly, a Securityholder
should include in gross income such Securityholder's allocable share of
interest on the Series B Subordinated Debentures.
Under the Regulations, if the Corporation exercised its option to defer any
payment of interest, the Series B Subordinated Debentures would at that time
be treated as issued with OID, and all stated interest on the Series B
Subordinated Debentures would thereafter be treated as OID as long as the
Series B Subordinated Debentures remained outstanding. In such event, all of a
holder's taxable interest income with respect to the Series B Subordinated
Debentures would be accounted for as OID on an economic accrual basis
regardless of such Securityholder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
Consequently, a Securityholder would be required to include in gross income
OID even though the Corporation would not make any actual cash payments during
an Extension Period.
S-26
<PAGE>
The Regulations have not been addressed in any rulings or other
interpretations by the Internal Revenue Service (the "IRS"), and it is
possible that the IRS could take a position contrary to the interpretation
herein.
Because income on the Series B Capital Securities will constitute interest
or OID, corporate Securityholders will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Series B
Capital Securities.
Subsequent uses of the term "interest" in this summary include income in the
form of OID.
DISTRIBUTION OF SERIES B SUBORDINATED DEBENTURES TO HOLDERS OF SERIES B
CAPITAL SECURITIES
Under current law, a distribution by the Series B Issuer of the Series B
Subordinated Debentures as described under the caption "Certain Terms of
Series B Capital Securities--Liquidation of Series B Issuer and Distribution
of Series B Subordinated Debentures to Holders" will be non-taxable and will
result in the Securityholder receiving directly its pro rata share of the
Series B Subordinated Debentures previously held indirectly through the Series
B Issuer, with a holding period and aggregate tax basis equal to the holding
period and aggregate tax basis such Securityholder had in its Series B Capital
Securities before such distribution. If, however, the liquidation of the
Series B Issuer were to occur because the Series B Issuer is subject to United
States federal income tax with respect to income accrued or received on the
Series B Subordinated Debentures, the distribution of Series B Subordinated
Debentures to Securityholders by the Series B Issuer would be a taxable event
to the Series B Issuer and each Securityholder, and the Securityholder would
recognize gain or loss as if the Securityholder had exchanged its Series B
Capital Securities for the Series B Subordinated Debentures it received upon
the liquidation of the Series B Issuer. A Securityholder will include interest
in income in respect of Series B Subordinated Debentures received from the
Series B Issuer in the manner described above under "Interest Income and
Original Issue Discount."
SALES OR REDEMPTION OF SERIES B CAPITAL SECURITIES
A Securityholder that sells (including a redemption for cash) Series B
Capital Securities will recognize gain or loss equal to the difference between
its adjusted tax basis in the Series B Capital Securities and the amount
realized on the sale of such Series B Capital Securities. Assuming that the
Corporation does not exercise its option to defer payment of interest on the
Series B Subordinated Debentures, and the Series B Capital Securities are not
considered issued with OID, a Securityholder's adjusted tax basis in the
Series B Capital Securities generally will be its initial purchase price. If
the Series B Subordinated Debentures are deemed to be issued with OID as a
result of the Corporation's deferral of any interest payment or otherwise, a
Securityholder's tax basis in the Series B Capital Securities generally will
be its initial purchase price, increased by OID previously includible in such
Securityholder's gross income to the date of disposition and decreased by
distributions or other payments received on the Series B Capital Securities
since and including the date of the first Extension Period. Such gain or loss
generally will be a capital gain or loss (except to the extent any amount
realized is treated as a payment of accrued interest with respect to such
holder's pro rata share of the Series B Subordinated Debentures required to be
included in income) and generally will be a long-term capital gain or loss if
the Series B Capital Securities have been held for more than one year.
Should the Corporation exercise its option to defer any payment of interest
on the Series B Subordinated Debentures, the Series B Capital Securities may
trade at a price that does not accurately reflect the value of accrued but
unpaid interest with respect to the underlying Series B Subordinated
Debentures. In the event of such a deferral, a Securityholder who disposes of
its Series B Capital Securities between record dates for payments of
distributions thereon will be required to include in income as ordinary income
accrued but unpaid interest on the Series B Subordinated Debentures to the
date of disposition as OID and to add such amount to its adjusted tax basis in
its pro rata share of the underlying Series B Subordinated Debentures deemed
disposed of. To the extent the selling price is less than the holder's
adjusted tax basis, such Securityholder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
S-27
<PAGE>
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest income paid or accrued on the Series B Capital
Securities held of record by United States Persons (other than corporations
and other exempt Securityholders) will be reported to the IRS. "Backup"
withholding at a rate of 31% will apply to payments of interest to non-exempt
United States Persons unless the Securityholder furnishes its taxpayer
identification number in the manner prescribed in applicable Treasury
Regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions.
Payment of the proceeds from the disposition of Series B Capital Securities
to or through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information
is furnished to the IRS.
It is anticipated that income on the Series B Capital Securities will be
reported to holders on Form 1099 and mailed to holders of the Series B Capital
Securities by January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, President Clinton proposed legislation (the "Proposed
Legislation") that would have, among other things, generally denied corporate
issuers a deduction for interest in respect of certain debt obligations, such
as the Series B Subordinated Debentures, issued on or after December 7, 1995.
On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and
House Ways and Means Committee Chairman Bill Archer issued a joint statement
(the "Joint Statement") indicating their intent that the Proposed Legislation,
if adopted by either of the tax-writing committees of Congress, would have an
effective date that is no earlier than the date of "appropriate Congressional
action." Based upon the Joint Statement, it is expected that if the Proposed
Legislation were to be enacted, such legislation would not apply to the Series
B Subordinated Debentures. There can be no assurances, however, that the
effective date guidance contained in the Joint Statement will be incorporated
into the Proposed Legislation, if enacted, or that other legislation enacted
after the date hereof will not otherwise adversely affect the ability of the
Corporation to deduct the interest payable on the Series B Subordinated
Debentures. Accordingly, there can be no assurance that a Tax Event will not
occur. See "Description of Preferred Securities--Redemption or Exchange--Tax
Event Redemption" in the accompanying Prospectus.
PENNSYLVANIA CORPORATE LOANS TAX
The Corporation will be required to withhold the Pennsylvania Corporate
Loans Tax from interest payments on the portion of Series B Subordinated
Debentures which are held by the Series B Issuer for the benefit of holders of
Series B Capital Securities who are subject to the tax, principally
individuals resident in Pennsylvania. Any amounts so withheld will reduce, to
the extent of such withholding, distributions payable to such holders of
Series B Capital Securities. The tax, at the current rate of four mills on
each dollar of nominal value ($4.00 per $1,000), will be withheld from any
such interest payment at the annual rate of $4.00 per $1,000 principal amount
of Series B Subordinated Debentures. The Series B Subordinated Debentures and
the Series B Capital Securities will be exempt, under current law, from
personal property taxes imposed by political subdivisions in Pennsylvania.
S-28
<PAGE>
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an
investment in the Series B Capital Securities. Accordingly, among other
factors, the fiduciary should consider whether the investment would satisfy
the prudence and diversification requirements of ERISA and would be consistent
with the documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as
individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or
"disqualified persons" under the Code ("Parties in Interest") with respect to
such Plan. A violation of these "prohibited transaction" rules may result in
an excise tax or other liabilities under ERISA and/or Section 4975 of the Code
for such persons, unless exemptive relief is available under an applicable
statutory or administrative exemption. Employee benefit plans that are
governmental plans (as defined in Section 3(32) of ERISA), certain church
plans (as defined in Section 3(33) of ERISA) and foreign plans (as described
in Section 4(b)(5) of ERISA) are not subject to the requirements of ERISA or
Section 4975 of the Code.
Under a regulation (the "Plan Assets Regulation") issued by U.S. Department
of Labor (the "DOL"), the assets of the Series B Issuer would be deemed to be
"plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire an equity interest in the
Series B Issuer and no exception were applicable under the Plan Assets
Regulation. An "equity interest" is defined under the Plan Assets Regulation
as any interest in an equity other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features and specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the assets
of the Series B Issuer would not be deemed to be "plan assets" of investing
Plans if, immediately after the most recent acquisition of any equity interest
in the Series B Issuer, less than 25% of the value of each class of equity
interests in the Series B Issuer were held by Plans, other employee benefit
plans not subject to ERISA or Section 4975 of the Code (such as governmental,
church and foreign plans), and entities holding assets deemed to be "plan
assets" of any Plan (collectively, "Benefit Plan Investors"), or if the Series
B Capital Securities were "publicly-offered securities" for purposes of the
Plan Assets Regulation. No assurance can be given that the value of the Series
B Capital Securities held by Benefit Plan Investors will be less than 25% of
the total value of such Series B Capital Securities at the completion of the
initial offering or thereafter, and no monitoring or other measures will be
taken with respect to the satisfaction of the conditions to this exception. In
addition, no assurance can be given that the Series B Capital Securities would
be considered to be "publicly-offered securities" under the Plan Assets
Regulation. All of the Common Securities will be purchased and initially held
by the Corporation.
Certain transactions involving the Series B Issuer could be deemed to
constitute direct or indirect prohibited transactions under ERISA and Section
4975 of the Code with respect to a Plan if the Series B Capital Securities
were acquired with "plan assets" of such Plan and the assets of the Series B
Issuer were deemed to be "plan assets" of Plans investing in the Series B
Issuer. For example, if the Corporation is a Party in Interest with respect to
an investing Plan (either directly or by reason of its ownership of Mellon
Bank, BSDT or other subsidiaries), extensions of credit between the
Corporation and the Series B Issuer (as represented by the Series B
Subordinated Debentures and the Guarantee) would likely be prohibited by
Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(b) of the Code, unless
exemptive relief were available under an applicable administrative exemption
(see below). In addition, if the Corporation were considered to be a fiduciary
with respect to the Series B Issuer as a result of certain powers it holds
(such as the powers to remove and replace the Property Trustee and the
Administrative Trustees), the optional redemption or acceleration of the
Series B Subordinated Debentures could be considered to be prohibited
transactions under Section 406(b) of ERISA and Section 4975(c)(1)(E) of the
Code. IN ORDER TO AVOID SUCH PROHIBITED TRANSACTIONS, EACH INVESTING PLAN, BY
S-29
<PAGE>
PURCHASING THE SERIES B CAPITAL SECURITIES, WILL BE DEEMED TO HAVE DIRECTED
THE SERIES B ISSUER TO INVEST IN THE SERIES B SUBORDINATED DEBENTURES AND TO
HAVE APPOINTED THE PROPERTY TRUSTEE.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief if required for direct or indirect
prohibited transactions that may arise from the purchase or holding of the
Series B Capital Securities if assets of the Series B Issuer were deemed to be
"plan assets" of Plans investing in the Series B Issuer as described above.
Those class exemptions are PTCE 96-23 (for certain transactions determined by
in-house asset managers), PTCE 95-60 (for certain transactions involving
insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain
transactions involving insurance company separate accounts), and PTCE 84-14
(for certain transactions determined by independent qualified asset managers).
Because the Series B Capital Securities may be deemed to be equity interests
in the Series B Issuer for purposes of applying ERISA and Section 4975 of the
Code, the Series B Capital Securities may be not purchased or held by any Plan
or any entity whose underlying assets include "plan assets" by reason of any
Plan's investment in the entity (a "Plan Asset Entity") or any person
investing "plan assets" of any Plan, unless such purchaser or holder is
eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38,
90-1 or 84-14, or another applicable exemption. Any purchaser or holder of the
Series B Capital Securities or any interest therein will be deemed to have
represented by its purchase and holding thereof that it either (a) is not a
Plan or a Plan Asset Entity and is not purchasing such securities on behalf of
or with "plan assets" of any Plan or (b) is eligible for the exemptive relief
available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable
exemption with respect to such purchase or holding. If a purchaser or holder
of the Series B Capital Securities that is a Plan or a Plan Asset Entity
elects to rely on an exemption other than PTCE 96-23, 95-60, 91-38, 90-1 or
84-14, the Corporation and the Series B Issuer may require a satisfactory
opinion of counsel or other evidence with respect to the availability of such
exemption for such purchase and holding.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries or other persons considering
purchasing the Series B Capital Securities on behalf of or with "plan assets"
of any Plan consult with their counsel regarding the potential consequences if
the assets of the Series B Issuer were deemed to be "plan assets" and the
availability of exemptive relief under PTCE 96-23, 95-60, 91-38 or 84-14 or
any other applicable exemption.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Corporation and the Series B Issuer have agreed that the Series B Issuer will
sell to each of the Underwriters named below, and each of such Underwriters
has severally agreed to purchase from the Series B Issuer, the respective
number of Series B Capital Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SERIES B
CAPITAL
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................. 250,000
Goldman, Sachs & Co............................................... 250,000
-------
Total......................................................... 500,000
=======
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the Series B Capital
Securities offered hereby, if any are taken.
S-30
<PAGE>
The Underwriters propose to offer the Series B Capital Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement and in part to certain dealers at
such price less a concession of $6.00 per Series B Capital Security. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $3.00 per Series B Capital Security to certain brokers and dealers.
After the Series B Capital Securities are released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
Underwriters.
In view of the fact that the proceeds from the sale of the Series B Capital
Securities will be used to purchase the Series B Subordinated Debentures
issued by the Corporation, the Underwriting Agreement provides that the
Corporation will pay as Underwriters' compensation for the Underwriters'
arranging the investment therein of such proceeds an amount of $10.00 per
Series B Capital Security for the accounts of the several Underwriters.
The Corporation and the Series B Issuer have agreed that, during the period
beginning from the date of the Underwriting Agreement and continuing to and
including the earlier of (i) the termination of trading restrictions on the
Series B Capital Securities, as determined by the Underwriters, and (ii) 30
days after the closing date, they will not offer, sell, contract to sell or
otherwise dispose of any Series B Capital Securities, any other beneficial
interests in the assets of any Issuer, or any preferred securities or any
other securities of any Issuer or the Corporation which are substantially
similar to the Series B Capital Securities, including any guarantee of such
securities, or any securities convertible into or exchangeable for or
representing the right to receive preferred securities or any such
substantially similar securities of either any Issuer or the Corporation,
without the prior written consent of the Underwriters, except for the Series B
Capital Securities offered in connection with this offering.
Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the Series B Capital Securities offered hereby as interests
in a direct participation program, the offering is being made in compliance
with Rule 2810 of the NASD's Conduct Rules. Offers and sales of Series B
Capital Securities will be made only to (i) "qualified institutional buyers",
as defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"), (ii) institutional "accredited investors", as defined in
Rule 501(a)(1) - (3) of Regulation D under the Securities Act or (iii)
sophisticated individual investors who understand the structure of the Series
B Capital Securities and the merits and risks of investment in the Series B
Capital Securities. The Underwriters may not confirm sales to any accounts
over which they exercise discretionary authority without the prior written
approval of the transaction by the customer.
Prior to this offering, there has been no public market for the Series B
Capital Securities. The Underwriters have advised the Corporation that they
intend to make a market in the Series B Capital Securities, but are not
obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for the Series B Capital Securities.
The Corporation and the Series B Issuer have agreed to indemnify the several
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities
under the Securities Act.
The Underwriters have agreed to reimburse the Corporation for certain
expenses incurred in connection with the issuance and sale of the Series B
Capital Securities offered hereby.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to the Corporation and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
S-31
<PAGE>
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series B
Capital Securities, the enforceability of the Trust Agreement and the formation
of the Series B Issuer will be passed upon by Richards, Layton & Finger, One
Rodney Square, Wilmington, Delaware 19801, special Delaware counsel to the
Corporation and the Series B Issuer. The validity of the Series B Guarantee and
the Series B Subordinated Debentures will be passed upon for the Corporation by
Carl Krasik, Esq., Associate General Counsel and Secretary of the Corporation,
One Mellon Bank Center, Pittsburgh, Pennsylvania 15258, and for the
Underwriters by Sullivan & Cromwell, 125 Broad Street, New York, New York
10004. Mr. Krasik will rely on the opinion of Richards, Layton & Finger as to
matters of Delaware law and on the opinion of Sullivan & Cromwell as to matters
of New York law. Sullivan & Cromwell will rely on the opinion of Mr. Krasik as
to matters of Pennsylvania law. Certain matters relating to United States
federal income tax considerations described in this Prospectus Supplement will
be passed upon for the Corporation by Sullivan & Cromwell, as special tax
counsel for the Corporation. Sullivan & Cromwell from time to time performs
legal services for the Corporation. At September 30, 1996, Mr. Krasik held
options covering 5,950 shares of the Corporation's Common Stock.
S-32
<PAGE>
$500,000,000
MELLON BANK CORPORATION
JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES
MELLON CAPITAL II
MELLON CAPITAL III
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN,
BY
MELLON BANK CORPORATION
Mellon Bank Corporation, a Pennsylvania corporation (the "Corporation"), may
from time to time offer in one or more series or issuances its junior
subordinated deferrable interest debentures (the "Junior Subordinated
Debentures"). The Junior Subordinated Debentures will be unsecured and
subordinate and junior in right of payment to all Senior Debt (as defined in
"Description of Junior Subordinated Debentures--Subordination") of the
Corporation. If provided in an accompanying Prospectus Supplement, the
Corporation will have the right to defer payments of interest on any series of
Junior Subordinated Debentures by extending the interest payment period thereon
at any time or from time to time for up to such number of consecutive interest
payment periods (which shall not extend beyond the Stated Maturity (as defined
herein) of the Junior Subordinated Debentures) with respect to each deferral
period as may be specified in such Prospectus Supplement (each, an "Extension
Period"). In such circumstances, however, the Corporation would not be
permitted, subject to certain exceptions set forth herein, to declare or pay
any dividends, distributions or other payments with respect to, or repay,
repurchase, redeem or otherwise acquire, the Corporation's capital stock or
debt securities that rank pari passu with or junior to such series or Junior
Subordinated Debentures. See "Description of Junior Subordinated Debentures--
Option to Defer Interest Payments" and "--Restrictions on Certain Payments.".
Mellon Capital II and Mellon Capital III, each a trust created under the laws
of the State of Delaware (each, an "Issuer," and collectively, the "Issuers"),
may severally offer, from time to time, preferred securities (the "Preferred
Securities") representing beneficial ownership interests in such Issuer. The
Corporation will be the owner of the common securities (the "Common Securities"
and, together with the Preferred Securities, the "Trust Securities")
representing common beneficial ownership interests in such Issuer. Holders of
the Preferred Securities will be entitled to receive preferential cumulative
cash distributions ("Distributions") accumulating from the date of original
issuance and payable periodically as specified in an accompanying Prospectus
Supplement. Concurrently with the issuance by an Issuer of its Preferred
Securities, such Issuer will invest the proceeds thereof and of contributions
received in respect of the Common Securities in a corresponding series of the
Corporation's Junior Subordinated Debentures (the "Corresponding Junior
Subordinated Debentures") with terms corresponding to the terms of that
Issuer's Preferred Securities (the "Related Preferred Securities").
(continued on next page)
-----------
THESE SECURITIES ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF A BANK AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is December 20, 1996.
<PAGE>
(cover page continued)
Accordingly, if as provided in an accompanying Prospectus Supplement, the
Corporation has the right to defer the payment of interest on a series of
Corresponding Junior Subordinated Debentures, then, if interest payments are
so deferred, Distributions on the Related Preferred Securities would also be
deferred, but would continue to accumulate at the rate per annum set forth in
the related Prospectus Supplement. See "Description of Preferred Securities--
Distributions".
Taken together, the Corporation's obligations under each series of
Corresponding Junior Subordinated Debentures, the Indenture, the related Trust
Agreement, the related Expense Agreement and the related Guarantee (each, as
defined herein), in the aggregate, provide a full, irrevocable and
unconditional guarantee of payments of Distributions and other amounts due on
the Related Preferred Securities. See "Relationship Among the Preferred
Securities, the Corresponding Junior Subordinated Debentures, the Expense
Agreement and the Guarantees--Full and Unconditional Guarantee". The payment
of Distributions with respect to the Preferred Securities of each Issuer and
payments on liquidation of such Issuer or redemption of such Preferred
Securities, in each case out of funds held by such Issuer, are each
irrevocably guaranteed by the Corporation to the extent described herein
(each, a "Guarantee"). See "Description of Guarantees." The obligations of the
Corporation under each Guarantee will be unsecured and subordinated and junior
in right of payment to all Senior Debt of the Corporation.
The Corresponding Junior Subordinated Debentures and the right to
reimbursement of expenses under the related Expense Agreement (as defined
herein) will be the sole assets of each Issuer, and payments under the
Corresponding Junior Subordinated Debentures and the related Expense Agreement
will be the only revenue of each Issuer. If so provided in an accompanying
Prospectus Supplement, the Corporation may, upon receipt of approval of the
Federal Reserve (if such approval is then required under the applicable
capital guidelines or policies), redeem the Corresponding Junior Subordinated
Debentures (and thereby cause the redemption of the Trust Securities) or may
terminate each Issuer and, after satisfaction of liabilities to the creditors
of such Issuer as required by applicable law, cause the Corresponding Junior
Subordinated Debentures to be distributed to the holders of Preferred
Securities in exchange therefor upon liquidation of their interests in such
Issuer. See "Description of Preferred Securities--Liquidation Distribution
Upon Termination."
The Junior Subordinated Debentures and Preferred Securities may be offered
in amounts, at prices and on terms to be determined at the time of offering;
provided, however, the aggregate initial public offering price of all Junior
Subordinated Debentures (other than Corresponding Junior Subordinated
Debentures) and Preferred Securities (including the Corresponding Junior
Subordinated Debentures) issued pursuant to the Registration Statement of
which this Prospectus forms a part shall not exceed $500,000,000. Certain
specific terms of the Junior Subordinated Debentures or Preferred Securities
in respect of which this Prospectus is being delivered will be described in an
accompanying Prospectus Supplement, including without limitation and where
applicable and to the extent not set forth herein, (a) in the case of Junior
Subordinated Debentures, the specific designation, aggregate principal amount,
denominations, Stated Maturity (including any provisions for the shortening or
extension thereof), interest payment dates, interest rate (which may be fixed
or variable) or method of calculating interest, if any, applicable Extension
Period or interest deferral terms, if any, place or places where principal,
premium, if any, and interest, if any, will be payable, any terms of
redemption, any sinking fund provisions, terms for any conversion or exchange
into other securities, initial offering or purchase price, methods of
distribution and any other special terms, and (b) in the case of Preferred
Securities, the identity of the Issuer, specific title, aggregate stated
liquidation amount, number of securities, Distribution rate or method of
calculating such rate, Distribution payment dates, applicable Distribution
deferral terms, if any, place or places where Distributions will be payable,
any terms of redemption, exchange, initial offering or purchase price, methods
of distribution and any other special terms.
The Prospectus Supplement also will contain information, as applicable,
about certain United States federal income tax consequences relating to the
Junior Subordinated Debentures or Preferred Securities.
2
<PAGE>
(cover page continued)
The Junior Subordinated Debentures and Preferred Securities may be sold to
or through underwriters, through dealers, remarketing firms or agents or
directly to purchasers. See "Plan of Distribution." The names of any
underwriters, dealers, remarketing firms or agents involved in the sale of
Junior Subordinated Debentures or Preferred Securities in respect of which
this Prospectus is being delivered and any applicable fee, commission or
discount arrangements with them will be set forth in a Prospectus Supplement.
The Prospectus Supplement will state whether the Junior Subordinated
Debentures or Preferred Securities will be listed on any national securities
exchange or automated quotation system. If the Junior Subordinated Debentures
or Preferred Securities are not listed on any national securities exchange or
automated quotation system, there can be no assurance that there will be a
secondary market for the Junior Subordinated Debentures or Preferred
Securities.
This Prospectus may not be used to consummate sales of Junior Subordinated
Debentures or Preferred Securities unless accompanied by a Prospectus
Supplement.
3
<PAGE>
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York
10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be
accessed electronically by means of the Commission's home page on the Internet
at http://www.sec.gov. In addition, such reports, proxy statements and other
information concerning the Corporation can be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Corporation and the Issuers have filed with the Commission a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Corporation and the securities offered hereby,
reference is made to the Registration Statement and the exhibits and the
financial statements, notes and schedules filed as a part thereof or
incorporated by reference therein, which may be inspected at the public
reference facilities of the Commission at the addresses set forth above or
through the Commission's home page on the Internet. Statements made in this
Prospectus concerning the contents of any documents referred to herein are not
necessarily complete, and in each instance are qualified in all respects by
reference to the copy of such document filed as an exhibit to the Registration
Statement.
No separate financial statements of either Issuer have been included herein.
The Corporation and the Issuers do not consider that such financial statements
would be material to holders of the Preferred Securities because each Issuer
is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Corresponding Junior
Subordinated Debentures of the Corporation and issuing the Trust Securities.
Furthermore, taken together, the Corporation's obligations under each series
of Corresponding Junior Subordinated Debentures, the Indenture, the related
Trust Agreement, the related Expense Agreement and the related Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the Related Preferred
Securities of an Issuer. See "The Issuers," "Description of Preferred
Securities," "Description of Junior Subordinated Debentures--Corresponding
Junior Subordinated Debentures" and "Description of Guarantees." In addition,
the Corporation does not expect that any of the Issuers will be filing reports
under the Exchange Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated into this Prospectus by reference:
(1) The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1995, filed pursuant to Section 13 of the Exchange Act.
(2) The Corporation's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996, filed pursuant to
Section 13 of the Exchange Act.
4
<PAGE>
(3) The Corporation's Current Reports on Form 8-K dated January 10, 1996,
February 27, 1996, February 29, 1996, April 16, 1996, May 21, 1996,
July 16, 1996, August 6, 1996, August 26, 1996, September 30, 1996,
October 15, 1996, October 29, 1996 and December 3, 1996, each filed
pursuant to Section 13 of the Exchange Act.
Each document or report filed by the Corporation pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of any offering of securities made by this Prospectus shall be
deemed to be incorporated by reference into this Prospectus and to be a part
of this Prospectus from the date of filing of such document. Any statement
contained herein, or in a document all or a portion of which is incorporated
or deemed to be incorporated by reference herein, shall be deemed to be
modified or superseded for purposes of the Registration Statement and this
Prospectus to the extent that a statement contained herein 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 such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Corporation will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein
(other than exhibits not specifically incorporated by reference into the texts
of such documents). Requests for such documents should be directed to:
Secretary, Mellon Bank Corporation, One Mellon Bank Center, 500 Grant Street,
Pittsburgh, Pennsylvania 15258, telephone number (412) 234-5000.
MELLON BANK CORPORATION
The Corporation is a multibank holding company incorporated under the laws
of Pennsylvania in August 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Its principal, wholly owned subsidiaries are
Mellon Bank, N.A. (the "Bank"), The Boston Company, Inc., Mellon Bank (DE)
National Association, Mellon Bank (MD) and a number of companies known as the
Mellon Financial Services Corporations. The Corporation also owns Mellon Bank,
F.S.B., a federal savings bank headquartered in New Jersey. The Dreyfus
Corporation ("Dreyfus"), one of the nation's largest mutual fund companies, is
a wholly-owned subsidiary of the Bank.
The Corporation's banking subsidiaries engage in retail financial services,
commercial banking, trust and investment management services, residential real
estate loan financing, mortgage servicing, mutual fund activities, equipment
leasing and various securities-related activities. The Mellon Financial
Services Corporations, through their subsidiaries and joint ventures, provide
a broad range of bank-related services, including equipment leasing,
commercial loan financing, stock transfer services, cash management and
numerous trust and investment management services.
The Corporation's principal executive office is located at One Mellon Bank
Center, 500 Grant Street, Pittsburgh, Pennsylvania 15258 (telephone (412) 234-
5000).
THE ISSUERS
Each Issuer is a statutory business trust formed under Delaware law pursuant
to (i) a trust agreement executed by the Corporation, as Depositor of the
Issuer, and the Delaware Trustee (as defined herein) of such Issuer and (ii)
the filing of a certificate of trust with the Delaware Secretary of State.
Each trust agreement will be amended and restated in its entirety (each, as so
amended and restated, a "Trust Agreement") substantially in the form filed as
an exhibit to the Registration Statement of which this Prospectus forms a
part. Each Trust Agreement will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust
5
<PAGE>
Indenture Act"). Each Issuer exists for the exclusive purposes of (i) issuing
and selling its Trust Securities, (ii) using the proceeds from the sale of
such Trust Securities to acquire a series of Corresponding Junior Subordinated
Debentures issued by the Corporation, and (iii) engaging in only those other
activities necessary or incidental thereto (such as registering the transfer
of the Trust Securities). Accordingly, the Corresponding Junior Subordinated
Debentures and the right to reimbursement of expenses under the related
Expense Agreement will be the sole assets of each Issuer, and payments under
the Corresponding Junior Subordinated Debentures and the related Expense
Agreement will be the sole revenue of each Issuer.
All of the Common Securities of each Issuer will be owned by the
Corporation. The Common Securities of an Issuer will rank pari passu, and
payments will be made thereon pro rata, with the Preferred Securities of such
Issuer, except that upon the occurrence and continuance of an event of default
under a Trust Agreement resulting from an event of default under the
Indenture, the rights of the Corporation as holder of the Common Securities to
payment in respect of Distributions and payments upon liquidation or
redemption will be subordinated to the rights of the holders of the Preferred
Securities of such Issuer. See "Description of Preferred Securities--
Subordination of Common Securities." The Corporation will acquire Common
Securities in an aggregate Liquidation Amount equal to not less than 3% of the
total capital of each Issuer.
Unless otherwise specified in the applicable Prospectus Supplement, each
Issuer has a term of approximately 55 years, but may terminate earlier as
provided in the applicable Trust Agreement. Each Issuer's business and affairs
are conducted by its trustees, each appointed by the Corporation as holder of
the Common Securities. The trustees for each Issuer will be The Chase
Manhattan Bank, as the Property Trustee (the "Property Trustee"), Chase
Manhattan Bank Delaware, as the Delaware Trustee (the "Delaware Trustee"), and
two individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with the Corporation (collectively, the "Issuer
Trustees"). The Chase Manhattan Bank, as Property Trustee, will act as sole
trustee under each Trust Agreement for purposes of compliance with the Trust
Indenture Act. The Chase Manhattan Bank will also act as trustee under the
Guarantees and the Indenture. See "Description of Guarantees" and "Description
of Junior Subordinated Debentures." The holder of the Common Securities of an
Issuer, or the holders of a majority in Liquidation Amount of the Related
Preferred Securities if an event of default under the Trust Agreement for such
Issuer has occurred and is continuing, will be entitled to appoint, remove or
replace the Property Trustee and/or the Delaware Trustee for such Issuer. In
no event will the holders of the Preferred Securities have the right to vote
to appoint, remove or replace the Administrative Trustees; such voting rights
are vested exclusively in the holder of the Common Securities. The duties and
obligations of each Issuer Trustee are governed by the applicable Trust
Agreement. The Corporation will pay all fees and expenses related to each
Issuer and the offering of the Preferred Securities and will pay, directly or
indirectly, all ongoing costs, expenses and liabilities of each Issuer.
The principal executive office of each Issuer is One Mellon Bank Center, 500
Grant Street, Pittsburgh, Pennsylvania 15258, Attention: Secretary and its
telephone number is (412) 234-5000.
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Corporation intends to use the proceeds from the sale of its Junior
Subordinated Debentures (including Corresponding Junior Subordinated
Debentures issued to the Issuers in connection with the investment by the
Issuers of all of the proceeds from the sale of Trust Securities) for general
corporate purposes, including investments in or loans to subsidiaries,
refinancing of debt, including outstanding commercial paper and other short-
term indebtedness, redemption or repurchase of shares of its outstanding
common and preferred stock, the satisfaction of other obligations or for such
other purposes as may be specified in the applicable Prospectus Supplement.
6
<PAGE>
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
The Corporation (sometimes referred to herein as the "parent Corporation")
is a legal entity separate and distinct from its bank subsidiaries, although
the principal source of the parent Corporation's cash revenues are payments of
interest and dividends from such subsidiaries. There are various legal and
regulatory limitations on the extent to which the Corporation's bank
subsidiaries can finance or otherwise supply funds to the Corporation and
certain of its other affiliates.
The prior approval of the Comptroller of the Currency (the "Comptroller") is
required if the total of all dividends declared by any such national bank
subsidiary in any calendar year exceeds its net profits (as defined by the
Comptroller) for that year combined with its retained net profits for the
preceding two calendar years. Additionally, national bank subsidiaries may not
declare dividends in excess of net profits on hand (as defined), after
deducting the amount by which the principal amount of all loans on which
interest is past due for a period of six months or more exceeds the reserve
for credit losses. Under the first and currently more restrictive of the
foregoing dividend limitations, the Corporation's national bank subsidiaries
can, without prior regulatory approval, declare dividends for the remainder of
1996, subsequent to September 30, 1996 of up to approximately $317 million of
their retained earnings of approximately $2.264 billion at September 30, 1996,
less any dividends declared and plus or minus net profits or losses, as
defined, between October 1, 1996, and the date of any such dividend
declaration. The payment of dividends is also limited by minimum capital
requirements imposed on all national bank subsidiaries by the Comptroller. The
capital of the Corporation's national bank subsidiaries exceed these minimum
requirements. The national bank subsidiaries declared dividends to the parent
Corporation of $300 million in the first nine months of 1996, $501 million in
1995, $366 million in 1994 and $185 million in 1993. Dividends paid to the
parent Corporation by nonbank subsidiaries totaled $16 million in the first
nine months of 1996, $30 million in 1995, $122 million in 1994 and $116
million in 1993. In addition, Mellon Bank, N.A. returned $200 million and $300
million of capital to the parent Corporation in the first nine months of 1996
and full year 1995, respectively, and The Boston Company returned $150 million
of capital to the parent Corporation in the first nine months of 1996 and $100
million and $300 million in 1994 and 1993, respectively.
The Federal Reserve Board and the Comptroller also have issued guidelines
that require bank holding companies and national banks to continuously
evaluate the level of cash dividends in relation to the organization's
operating income, capital needs, asset quality and overall financial
condition. The Comptroller also has authority under the Financial Institutions
Supervisory Act to prohibit national banks from engaging in any activity
which, in the Comptroller's opinion, constitutes an unsafe or unsound practice
in conducting their businesses. The payment of a dividend by a bank could,
depending upon the financial condition of such bank and other factors, be
construed by the Comptroller to be such an unsafe or unsound practice. The
Comptroller has stated that a dividend by a national bank should bear a direct
correlation to the level of the bank's current and expected earnings stream,
the bank's need to maintain an adequate capital base and the marketplace's
perception of the bank and should not be governed by the financing needs of
the bank's parent corporation. If the ability of such subsidiaries to pay
dividends to the Corporation were to become restricted, the Corporation would
need to rely on alternative means of raising funds to satisfy its cash
requirements, which might include, but would not be restricted to, nonbank
subsidiary dividends, asset sales or other capital market transactions.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
contains a "cross-guarantee" provision that could result in any insured
depository institution owned by the Corporation (i.e., any bank subsidiary)
being assessed for losses incurred by the Federal Deposit Insurance
Corporation (the "FDIC") in connection with assistance provided to, or the
failure of, any other depository institution owned by the Corporation. Under
Federal Reserve Board policy, the Corporation may be expected to act as a
source of financial strength to each of its bank subsidiaries and to commit
resources to support each such bank in circumstances where such bank might not
be in a financial position to do so.
7
<PAGE>
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
substantially revised the bank regulatory and funding provisions of the
Federal Deposit Insurance Act and made revisions to several other federal
banking statutes. Among other things, FDICIA requires the federal banking
agencies to take "prompt corrective action" in respect of depository
institutions that do not meet minimum capital requirements. FDICIA establishes
five capital tiers: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized."
Rules adopted by the federal banking agencies under FDICIA provide that an
institution is deemed to be: "well capitalized" if the institution has a total
(Tier I plus Tier II) risk-based capital ratio of 10.0% or greater, a Tier I
risk-based ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater,
and the institution is not subject to an order, written agreement, capital
directive or prompt corrective action directive to meet and maintain a
specific level for any capital measure; "adequately capitalized" if the
institution has a total risk-based capital ratio of 8.0% or greater, a Tier I
risk-based capital ratio of 4.0% or greater, and a leverage ratio of 4.0% or
greater (or a leverage ratio of 3.0% or greater if the institution is rated
composite 1 in its most recent report of examination, subject to appropriate
federal banking agency guidelines), and the institution does not meet the
definition of a well-capitalized institution; "undercapitalized" if the
institution has a total risk-based capital ratio that is less than 8.0%, a
Tier I risk-based capital ratio that is less than 4.0% or a leverage ratio
that is less than 4.0% (or a leverage ratio that is less than 3.0% if the
institution is rated composite 1 in its most recent report of examination,
subject to appropriate federal banking agency guidelines) and the institution
does not meet the definition of a significantly undercapitalized or critically
undercapitalized institution; "significantly undercapitalized" if the
institution has a total risk-based capital ratio that is less than 6.0%, a
Tier I risk-based capital ratio that is less than 3.0%, or a leverage ratio
that is less than 3.0% and the institution does not meet the definition of a
critically undercapitalized institution; and "critically undercapitalized" if
the institution has a ratio of tangible equity to total assets that is equal
to or less than 2.0%. FDICIA imposes progressively more restrictive
constraints on operations, management and capital distributions, depending on
the capital category in which an institution is classified.
At September 30, 1996, all of the Corporation's banking subsidiaries
qualified as well capitalized based on the ratios and guidelines noted above.
A bank's capital category, however, is determined solely for the purpose of
applying the prompt corrective action rules and may not constitute an accurate
representation of the bank's overall financial condition or prospects.
The appropriate federal banking agency may, under certain circumstances,
reclassify a well capitalized insured depository institution as adequately
capitalized. The appropriate agency is also permitted to require an adequately
capitalized or undercapitalized institution to comply with the supervisory
provisions as if the institution were in the next lower category (but not
treat a significantly undercapitalized institution as critically
undercapitalized) based on supervisory information other than the capital
levels of the institution.
The statute provides that an institution may be reclassified if the
appropriate federal banking agency determines (after notice and opportunity
for hearing) that the institution is in an unsafe or unsound condition or
deems the institution to be engaging in an unsafe or unsound practice.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
growth limitations and are required to submit a capital restoration plan. The
federal banking agencies may not accept a capital restoration 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. In addition, for a capital restoration plan to be acceptable, the
depository institution's parent holding company must guarantee that the
institution will comply with such capital restoration plan. T~he aggregate
liability of the parent holding company is limited to the lesser of (i) an
amount equal to 5.0% of the depository institution's total assets at the time
it became undercapitalized, and (ii) the
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amount which is necessary (or would have been necessary) to bring the
institution into compliance with all capital standards applicable with respect
to such institution as of the time it fails to comply with the plan. 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 institutions are subject to the appointment of a
receiver or conservator.
FDICIA also contains a variety of other provisions that may affect the
operation of the Corporation, and its subsidiaries and affiliates, including
new reporting requirements, regulatory standards for real estate lending,
"truth in savings" provisions, and the requirement that a depository
institution give 90 days prior notice to customers and regulatory authorities
before closing any branch.
CAPITAL
The risk-based capital guidelines for bank holding companies and banks
adopted by the federal banking agencies were fully phased in at the end of
1992. The minimum ratio of qualifying total capital to risk-weighted assets
(including certain off-balance sheet items, such as standby letters of credit)
under the fully phased in guidelines is 8.0%. At least half of the total
capital is to be comprised of common stock, retained earnings, noncumulative
perpetual preferred stock, minority interests and, for bank holding companies,
a limited amount of qualifying cumulative perpetual preferred stock, less
goodwill and certain other intangibles ("Tier I capital"). The remainder
("Tier II capital") may consist of other preferred stock, certain other
instruments, and limited amounts of subordinated debt and the reserve for
credit losses.
In addition, the federal banking agencies have established minimum leverage
ratio (Tier I capital to total average assets less goodwill and certain other
intangibles) guidelines for bank holding companies and banks. These guidelines
provide for a minimum leverage ratio of 3.0% for bank holding companies and
banks that meet certain specified criteria, including that they have the
highest regulatory rating. All other banking organizations are required to
maintain a leverage ratio of 3.0% plus an additional cushion of at least 100
to 200 basis points. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels, without significant reliance on intangible assets. Furthermore, the
guidelines indicate that the Federal Reserve Board will continue to consider a
"tangible Tier I leverage ratio" in evaluating proposals for expansion or new
activities. The tangible Tier I leverage ratio is the ratio of Tier I capital,
less intangibles not deducted from Tier I capital, to total assets, less all
intangibles. Neither the Corporation nor any of its banking subsidiaries has
been advised of any specific minimum leverage ratio applicable to it.
The federal banking agencies have revised their risk-based capital standards
to ensure that such standards take adequate account of concentrations of
credit risk and the risks of nontraditional activities. Institutions with high
or moderate levels of risks are expected to operate above minimum capital
standards.
In November 1994, the federal banking agencies announced that they
determined not to amend regulatory capital regulations to incorporate the
change in generally accepted accounting principles made by Statement of
Financial Accounting Standards No. 115, which requires that unrealized gains
and losses, net of the related tax effect, on securities classified as
available for sale be reported as a separate component of stockholders'
equity.
The federal banking agencies have adopted rules to incorporate market and
interest rate risk components into their risk-based capital standards.
Certain consolidated ratios of the Corporation are included herein under
"Mellon Bank Corporation--Consolidated Summary Financial Data."
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FDIC INSURANCE ASSESSMENTS; DIFA
The FDIC significantly reduced the insurance premiums it charges on bank
deposits insured by the Bank Insurance Fund ("BIF") to the statutory minimum
of $2,000.00 annually for "well capitalized" banks, effective January 1, 1996.
Premiums related to savings association deposits acquired by banks continued
to be assessed at the rate of 23 cents to 31 cents per $100.00 of deposits. On
September 30, 1996, the Deposit Insurance Funds Act of 1996 ("DIFA") was
enacted and signed into law. DIFA is expected to reduce the amount of semi-
annual FDIC insurance premiums for savings association deposits acquired by
banks to the same levels assessed for deposits insured by BIF.
DIFA also provides for a special one-time assessment imposed on deposits
insured by the Savings Association Insurance Fund ("SAIF"), including such
deposits held by banks, to recapitalize the SAIF to bring the SAIF up to
statutory required levels. The Corporation's one time assessment, was minimal.
DIFA further provides for assessments to be imposed on insured depository
institutions with respect to deposits insured by the BIF (in addition to
assessments currently imposed on depository institutions with respect to SAIF-
insured deposits) to pay for the cost of Financing Corporation funding. Based
on September 30, 1996 deposit levels, the Corporation currently estimates
assessments will amount to approximately $3 million pre-tax in 1997.
INTERSTATE BANKING AND BRANCHING LEGISLATION
On September 29, 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") was enacted into Federal law.
Under the Interstate Act, commencing on September 29, 1995, bank holding
companies are permitted to acquire banks located in any state regardless of
the state law in effect at the time. The Interstate Act also provides for the
nationwide interstate branching of banks. Under the Interstate Act, both
national and state-chartered banks will be permitted to merge across state
lines (and thereby create interstate branches) commencing June 1, 1997. States
are permitted to "opt-out" of the interstate branching authority by taking
action prior to the commencement date. States may also "opt-in" early (i.e.,
prior to June 1, 1997) to the interstate branching provisions. Pennsylvania
has chosen to "opt-in" early, effective July 6, 1995, thereby enabling
Pennsylvania banks, including national banks having their main office in
Pennsylvania, to merge with out-of-state banks to create interstate branches
inside or outside Pennsylvania. In addition, Pennsylvania has permitted de
novo branching into and out of Pennsylvania as long as the law of the other
state involved is reciprocal in this regard.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more series
under a Junior Subordinated Indenture, as supplemented from time to time (as
so supplemented, the "Indenture"), between the Corporation and The Chase
Manhattan Bank, as trustee (the "Debenture Trustee"). This summary of certain
terms and provisions of the Junior Subordinated Debentures, Corresponding
Junior Subordinated Debentures and the Indenture, which summarizes the
material provisions thereof, does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the Indenture, the form
of which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, and to the Trust Indenture Act, to each of which
reference is hereby made. The Indenture is qualified under the Trust Indenture
Act. Whenever particular defined terms of the Indenture (as supplemented or
amended from time to time) are referred to herein or in a Prospectus
Supplement, such defined terms are incorporated herein or therein by
reference.
GENERAL
Each series of Junior Subordinated Debentures will rank pari passu with all
other series of Junior Subordinated Debentures and will be unsecured and
subordinate and junior in right of payment to the extent and
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in the manner set forth in the Indenture to all Senior Debt (as defined below)
of the Corporation. See "--Subordination". Because the Corporation is a
holding company, the right of the Corporation to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of
the subsidiary, except to the extent the Corporation may itself be recognized
as a creditor of that subsidiary. Accordingly, the Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, and holders of Junior
Subordinated Debentures should look only to the assets of the Corporation for
payments on the Junior Subordinated Debentures. Except as otherwise provided
in the applicable Prospectus Supplement, the Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the Corporation,
including Senior Debt, whether under the Indenture, any other existing
indenture or any other indenture that the Corporation may enter into in the
future or otherwise. See "--Subordination" and the applicable Prospectus
Supplement relating to any offering of Preferred Securities or Junior
Subordinated Debentures.
The Junior Subordinated Debentures will be issuable in one or more series
pursuant to an indenture supplemental to the Indenture or a resolution of the
Corporation's Board of Directors or a committee thereof.
The applicable Prospectus Supplement will describe the following terms of
the Junior Subordinated Debentures: (1) the title of the Junior Subordinated
Debentures; (2) any limit upon the aggregate principal amount of the Junior
Subordinated Debentures; (3) the date or dates on which the principal of the
Junior Subordinated Debentures is payable (the "Stated Maturity") or the
method of determination thereof; (4) the rate or rates, if any, at which the
Junior Subordinated Debentures shall bear interest, the dates on which any
such interest shall be payable (the "Interest Payment Dates"), the right, if
any, of the Corporation to defer or extend an Interest Payment Date, and the
record dates for any interest payable on any Interest Payment Date (the
"Regular Record Dates") or the method by which any of the foregoing shall be
determined; (5) the place or places where, subject to the terms of the
Indenture as described below under "--Payment and Paying Agents", the
principal of and premium, if any, and interest on the Junior Subordinated
Debentures will be payable and where, subject to the terms of the Indenture as
described below under "--Denominations, Registration and Transfer," the Junior
Subordinated Debentures may be presented for registration of transfer or
exchange and the place or places where notices and demands to or upon the
Corporation in respect of the Junior Subordinated Debentures and the
Indentures may be made ("Place of Payment"); (6) any period or periods within
which, or date or dates on which, the price or prices at which and the terms
and conditions upon which Junior Subordinated Debentures may be redeemed, in
whole or in part, at the option of the Corporation or a holder thereof; (7)
the obligation or the right, if any, of the Corporation or a holder thereof to
redeem, purchase or repay the Junior Subordinated Debentures and the period or
periods within which, the price or prices at which, the currency or currencies
(including currency unit or units) in which and the other terms and conditions
upon which the Junior Subordinated Debentures shall be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation; (8) the
denominations in which any Junior Subordinated Debentures shall be issuable if
other than denominations of $25 and any integral multiple thereof; (9) if
other than in U.S. Dollars, the currency or currencies (including currency
unit or units) in which the principal of (and premium, if any) and interest,
if any, on the Junior Subordinated Debentures shall be payable, or in which
the Junior Subordinated Debentures shall be denominated; (10) any additions,
modifications or deletions in the events of default under the Indenture or
covenants of the Corporation specified in the Indenture with respect to the
Junior Subordinated Debentures; (11) if other than the principal amount
thereof, the portion of the principal amount of Junior Subordinated Debentures
that shall be payable upon declaration of acceleration of the maturity
thereof; (12) any additions or changes to the Indenture with respect to a
series of Junior Subordinated Debentures as shall be necessary to permit or
facilitate the issuance of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons; (13) any
index or indices used to determine the amount of payments of principal of and
premium, if any, on the Junior Subordinated Debentures and the manner in which
such amounts will be determined; (14) the terms and conditions relating to the
issuance of a temporary Global Security representing all of the Junior
Subordinated Debentures of such series and the exchange of such temporary
Global Security for definitive Junior Subordinated Debentures of such series;
(15) subject to the terms described herein under "--Global Junior Subordinated
Debentures", whether the Junior Subordinated Debentures of the series shall be
issued in whole or
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in part in the form of one or more Global Securities and, in such case, the
depositary for such Global Securities, which depositary shall be a clearing
agency registered under the Exchange Act; (16) the appointment of any paying
agent or agents; (17) the terms and conditions of any obligation or right of
the Corporation or a holder to convert or exchange the Junior Subordinated
Debentures into Preferred Securities; (18) the form of Trust Agreement,
Guarantee Agreement and Expense Agreement, if applicable; (19) the relative
degree, if any, to which such Junior Subordinated Debentures of the series
shall be senior to or be subordinated to other series of such Junior
Subordinated Debentures or other indebtedness of the Corporation in right of
payment, whether such other series of Junior Subordinated Debentures or other
indebtedness are outstanding or not; and (20) any other terms of the Junior
Subordinated Debentures not inconsistent with the provisions of the Indenture.
Junior Subordinated Debentures may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. Certain United States federal
income tax consequences and special considerations applicable to any such
Junior Subordinated Debentures will be described in the applicable Prospectus
Supplement.
If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest on any
Junior Subordinated Debentures is payable in one or more foreign currencies or
currency units, the restrictions, elections, certain United States federal
income tax consequences, specific terms and other information with respect to
such series of Junior Subordinated Debentures and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of Junior Subordinated Debentures,
special United States federal income tax, accounting and other considerations
applicable thereto will be described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof.
Junior Subordinated Debentures of any series will be exchangeable for other
Junior Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same original
issue date and stated maturity and bearing the same interest rate.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate securities registrar or at
the office of any transfer agent designated by the Corporation for such
purpose with respect to any series of Junior Subordinated Debentures and
referred to in the applicable Prospectus Supplement, without service charge
and upon payment of any taxes and other governmental charges as described in
the Indenture. The Corporation will appoint the Trustee as securities
registrar under the Indenture. If the applicable Prospectus Supplement refers
to any transfer agents (in addition to the securities registrar) initially
designated by the Corporation with respect to any series of Junior
Subordinated Debentures, the Corporation may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, provided that the Corporation
maintains a transfer agent in each place of payment for such series. The
Corporation may at any time designate additional transfer agents with respect
to any series of Junior Subordinated Debentures.
In the event of any redemption, neither the Corporation nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during a period beginning at the
opening of business 15 days before the day of selection for redemption of
Junior Subordinated Debentures of that series and ending at the close of
business on the day of mailing of the relevant notice of redemption or (ii)
transfer or exchange any Junior Subordinated Debentures so selected for
redemption, except, in the case of any Junior Subordinated Debentures being
redeemed in part, any portion thereof not to be redeemed.
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GLOBAL JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole or in
part in the form of one or more Global Junior Subordinated Debentures that
will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the Prospectus Supplement relating to such series. Global Junior
Subordinated Debentures may be issued only in fully registered form and in
either temporary or permanent form. Unless and until it is exchanged in whole
or in part for the individual Junior Subordinated Debentures represented
thereby, a Global Junior Subordinated Debenture may not be transferred except
as a whole by the Depositary for such Global Junior Subordinated Debenture to
a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by the Depositary or any
nominee to a successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Junior Subordinated Debentures will be described in the Prospectus Supplement
relating to such series. The Corporation anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the deposit
of such Global Junior Subordinated Debenture with or on behalf of the
Depositary, the Depositary for such Global Junior Subordinated Debenture or
its nominee will credit, on its book-entry registration and transfer system,
the respective principal amounts of the individual Junior Subordinated
Debentures represented by such Global Junior Subordinated Debenture to the
accounts of persons that have accounts with such Depositary ("Participants").
Such accounts shall be designated by the dealers, underwriters or agents with
respect to such Junior Subordinated Debentures or by the Corporation if such
Junior Subordinated Debentures are offered and sold directly by the
Corporation. Ownership of beneficial interests in a Global Junior Subordinated
Debenture will be limited to Participants or persons that may hold interests
through Participants. Ownership of beneficial interests in such Global Junior
Subordinated Debenture will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the applicable Depositary
or its nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests
in a Global Junior Subordinated Debenture.
So long as the Depositary for a Global Junior Subordinated Debenture, or its
nominee, is the registered owner of such Global Junior Subordinated Debenture,
such Depositary or such nominee, as the case may be, will be considered the
sole owner or holder of the Junior Subordinated Debentures represented by such
Global Junior Subordinated Debenture for all purposes under the Indenture
governing such Junior Subordinated Debentures. Except as provided below,
owners of beneficial interests in a Global Junior Subordinated Debenture will
not be entitled to have any of the individual Junior Subordinated Debentures
of the series represented by such Global Junior Subordinated Debenture
registered in their names, will not receive or be entitled to receive physical
delivery of any such Junior Subordinated Debentures of such series in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Junior Subordinated Debentures represented by a Global Junior Subordinated
Debenture registered in the name of a Depositary or its nominee will be made
to the Depositary or its nominee, as the case may be, as the registered owner
of the Global Junior Subordinated Debenture representing such Junior
Subordinated Debentures. None of the Corporation, the Debenture Trustee, any
Paying Agent, or the Securities Registrar for such Junior Subordinated
Debentures will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Junior Subordinated Debenture representing such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
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The Corporation expects that the Depositary for a series of Junior
Subordinated Debentures or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of a permanent Global
Junior Subordinated Debenture representing any of such Junior Subordinated
Debentures, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of such Global Junior Subordinated Debenture for such Junior
Subordinated Debentures as shown on the records of such Depositary or its
nominee. The Corporation also expects that payments by Participants to owners
of beneficial interests in such Global Junior Subordinated Debenture held
through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name." Such payments will
be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by the Corporation within 90 days, the Corporation
will issue individual Junior Subordinated Debentures of such series in
exchange for the Global Junior Subordinated Debenture representing such series
of Junior Subordinated Debentures. In addition, the Corporation may at any
time and in its sole discretion, subject to any limitations described in the
Prospectus Supplement relating to such Junior Subordinated Debentures,
determine not to have any Junior Subordinated Debentures of such series
represented by one or more Global Junior Subordinated Debentures and, in such
event, will issue certificated Junior Subordinated Debentures of such series
in exchange for the Global Junior Subordinated Debenture. Further, if the
Corporation so specifies with respect to the Junior Subordinated Debentures of
a series, an owner of a beneficial interest in a Global Junior Subordinated
Debenture representing Junior Subordinated Debentures of such series may, on
terms acceptable to the Corporation, the Debenture Trustee and the Depositary
for such Global Junior Subordinated Debenture, receive certificated Junior
Subordinated Debentures of such series in exchange for such beneficial
interests, subject to any limitations described in the Prospectus Supplement
relating to such Junior Subordinated Debentures. In any such instance, an
owner of a beneficial interest in a Global Junior Subordinated Debenture will
be entitled to physical delivery of certificated Junior Subordinated
Debentures of the series represented by such Global Junior Subordinated
Debenture equal in principal amount to such beneficial interest and to have
such Junior Subordinated Debentures registered in its name. Individual Junior
Subordinated Debentures of such series so issued will be issued in
denominations, unless otherwise specified by the Corporation, of $25 and
integral multiples thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in the City of
New York or at the office of such paying agent or paying agents as the
Corporation may designate from time to time in the applicable Prospectus
Supplement, except that at the option of the Corporation payment of any
interest may be made (i) except in the case of Global Junior Subordinated
Debentures, by check mailed to the address of the person entitled thereto as
such address shall appear in the securities register or (ii) by transfer to an
account maintained by the person entitled thereto as specified in the
securities register, provided that proper transfer instructions have been
received by the Regular Record Date. Unless otherwise indicated in the
applicable Prospectus Supplement, payment of any interest on Junior
Subordinated Debentures will be made to the person in whose name such Junior
Subordinated Debenture is registered at the close of business on the Regular
Record Date for such interest, except in the case of defaulted interest. The
Corporation may at any time designate additional paying agents or rescind the
designation of any paying agent; however the Corporation will at all times be
required to maintain a paying agent in each place of payment for each series
of Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent, or then
held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture
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and remaining unclaimed for two years after such principal (and premium, if
any) or interest has become due and payable shall, at the request of the
Corporation, be repaid to the Corporation and the holder of such Junior
Subordinated Debenture shall thereafter look, as a general unsecured creditor,
only to the Corporation for payment thereof.
OPTION TO DEFER INTEREST PAYMENTS
If provided in the applicable Prospectus Supplement, the Corporation will
have the right at any time and from time to time during the term of any series
of Junior Subordinated Debentures to defer payment of interest for up to such
number of consecutive interest payment periods as may be specified in the
applicable Prospectus Supplement (each, an "Extension Period"), subject to the
terms, conditions and covenants, if any, specified in such Prospectus
Supplement, provided that such Extension Period may not extend beyond the
Stated Maturity of such series of Junior Subordinated Debentures. Certain
United States federal income tax consequences and special considerations
applicable to any such Junior Subordinated Debentures will be described in the
applicable Prospectus Supplement.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, Junior
Subordinated Debentures will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation may, at its option and subject to receipt of prior approval by the
Board of Governors of the Federal Reserve System (the "Federal Reserve") if
then required under applicable capital guidelines or policies, redeem the
Junior Subordinated Debentures of any series in whole at any time or in part
from time to time. If the Junior Subordinated Debentures of any series are so
redeemable only on or after a specified date or upon the satisfaction of
additional conditions, the applicable Prospectus Supplement will specify such
date or describe such conditions. Junior Subordinated Debentures in
denominations larger than $25 may be redeemed in part but only in integral
multiples of $25. Except as otherwise specified in the applicable Prospectus
Supplement, the redemption price for any Junior Subordinated Debenture so
redeemed shall equal any accrued and unpaid interest thereon to the redemption
date, plus 100% of the principal amount thereof.
Except as otherwise specified in the applicable Prospectus Supplement, if a
Tax Event (as defined below) in respect of a series of Junior Subordinated
Debentures or a Capital Treatment Event (as defined herein) shall occur and be
continuing, the Corporation may, at its option and subject to receipt of prior
approval by the Federal Reserve if then required under applicable capital
guidelines or policies, redeem such series of Junior Subordinated Debentures
in whole (but not in part) at any time within 90 days following the occurrence
of such Tax Event or Capital Treatment Event at a redemption price equal to
100% of the principal amount of such Junior Subordinated Debentures then
outstanding plus accrued and unpaid interest to the date fixed for redemption,
except as otherwise specified in the applicable Prospectus Supplement.
"Tax Event" with respect to an Issuer means the receipt by the Issuer of a
series of Preferred Securities of an opinion of counsel experienced in such
matters to the effect that, as a result of any amendment to, or change
(including any announced proposed change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which proposed change,
pronouncement or decision is announced on or after the date of issuance of
such Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) such Issuer is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the corresponding series of Corresponding
Junior Subordinated Debentures, (ii) interest payable by the Corporation on
such series of Corresponding Junior Subordinated Debentures is not, or within
90 days of the date of such opinion, will not be, deductible by the
Corporation, in whole or in part, for United States federal income tax
purposes, or (iii) such Issuer is, or will be within 90 days of the date of
such opinion, subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
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A "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of any amendment to, or change (including any
proposed change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change
is effective or such proposed change, pronouncement or decision is announced
on or after the date of issuance of the applicable Preferred Securities under
the applicable Trust Agreement, there is more than an insubstantial risk that
the Corporation will not be entitled to treat an amount equal to the
Liquidation Amount of the applicable Preferred Securities as "Tier I Capital"
(or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Corporation.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Corporation
defaults in payment of the redemption price, on and after the redemption date
interest ceases to accrue on such Junior Subordinated Debentures or portions
thereof called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
The Corporation will also covenant, as to each series of Junior Subordinated
Debentures, that it will not, and will not permit any subsidiary of the
Corporation to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Corporation's capital stock, (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Corporation (including other series of Junior Subordinated
Debentures) that rank pari passu with or junior in interest to the Junior
Subordinated Debentures or (iii) make any guarantee payments with respect to
any guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation if such guarantee ranks pari passu with or junior in interest
to the Junior Subordinated Debentures (other than (a) dividends or
distributions in capital stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under any Guarantee with respect to the series of Related Preferred
Securities and (d) purchases of common stock related to the issuance of common
stock or rights under any of the Corporation's benefit plans for its
directors, officers or employees, related to the issuance of common stock or
rights under a dividend reinvestment and stock purchase plan, or related to
the issuance of common stock (or securities convertible into or exchangeable
for common stock) as consideration in an acquisition transaction that was
entered into prior to the commencement of the event referred to below) if at
such time (i) there shall have occurred any event of which the Corporation has
actual knowledge (a) that with the giving of notice or the lapse of time, or
both, would constitute an "Event of Default" under the Indenture with respect
to the Junior Subordinated Debentures of such series and (b) in respect of
which the Corporation shall not have taken reasonable steps to cure, (ii) if
such Junior Subordinated Debentures are held by an Issuer of a series of
Related Preferred Securities, the Corporation shall be in default with respect
to its payment of any obligations under the Guarantee relating to such Related
Preferred Securities or (iii) the Corporation shall have given notice of its
selection of an Extension Period as provided in the Indenture with respect to
the Junior Subordinated Debentures of such series and shall not have rescinded
such notice, or such Extension Period, or any extension thereof, shall be
continuing.
MODIFICATION OF INDENTURE
From time to time the Corporation and the Debenture Trustee may, without the
consent of the holders of any series of Junior Subordinated Debentures, amend,
waive or supplement the Indenture for specified purposes, including, among
other things, curing ambiguities, defects or inconsistencies (provided that
any such action does not materially adversely affect the interest of the
holders of any series of Junior Subordinated Debentures or, in the case of
Corresponding Junior Subordinated Debentures, the holders of the Related
Preferred Securities so long as they remain outstanding) and qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act.
The Indenture contains provisions permitting the Corporation and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of each outstanding series of Junior
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Subordinated Debentures affected, to modify the Indenture in a manner
adversely affecting the rights of the holders of such series of the Junior
Subordinated Debentures in any material respect; provided, that no such
modification may, without the consent of the holder of each outstanding Junior
Subordinated Debenture so affected, (i) change the Stated Maturity of any
series of Junior Subordinated Debentures (except as otherwise specified in the
applicable Prospectus Supplement), or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon or (ii)
reduce the percentage of principal amount of Junior Subordinated Debentures of
any series, the holders of which are required to consent to any such
modification of the Indenture, provided further that, in the case of
Corresponding Junior Subordinated Debentures, so long as any Related Preferred
Securities remain outstanding, (a) no such modification may be made that
adversely affects the holders of such Preferred Securities in any material
respect, and no termination of the Indenture may occur, and no waiver of any
event of default or compliance with any covenant under the Indenture may be
effective, without the prior consent of the holders of at least a majority of
the aggregate Liquidation Amount of all outstanding Related Preferred
Securities affected unless and until the principal of the Corresponding Junior
Subordinated Debentures and all accrued and unpaid interest thereon have been
paid in full and certain other conditions have been satisfied, and (b) where a
consent under the Indenture would require the consent of each holder of
Corresponding Junior Subordinated Debentures, no such consent shall be given
by the Property Trustee without the prior consent of each holder of Related
Preferred Securities.
In addition, the Corporation and the Debenture Trustee may execute, without
the consent of any holder of Junior Subordinated Debentures, any supplemental
Indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default" with
respect to such series of Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on such series of Junior
Subordinated Debentures when due (subject to the deferral of any
interest payment in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series of
Junior Subordinated Debentures when due whether at maturity or upon
redemption; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice
to the Corporation from the Debenture Trustee or the holders of at
least 25% in aggregate outstanding principal amount of such affected
series of outstanding Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Corporation.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures of each series affected have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Debenture Trustee. The Debenture Trustee or the holders of
not less than 25% in aggregate outstanding principal amount of Junior
Subordinated Debentures of each series affected may declare the principal due
and payable immediately upon a Debenture Event of Default, and, in the case of
Corresponding Junior Subordinated Debentures, should the Debenture Trustee or
such holders of such Corresponding Junior Subordinated Debentures fail to make
such declaration, the holders of at least 25% in aggregate Liquidation Amount
of the Related Preferred Securities shall have such right. The holders of a
majority in aggregate outstanding principal amount of Junior Subordinated
Debentures of each series affected may annul such declaration. In the case of
Corresponding Junior Subordinated Debentures, should the holders of such
Corresponding Junior Subordinated Debentures fail to annul such declaration
and waive such default, the holders of a majority in aggregate Liquidation
Amount of the Related Preferred Securities affected shall have such right.
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The holders of a majority in aggregate outstanding principal amount of each
series of the Junior Subordinated Debentures affected thereby may, on behalf
of the holders of all the Junior Subordinated Debentures, waive any default,
except a default in the payment of principal or interest (unless such default
has been cured and a sum sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration has been deposited
with the Debenture Trustee) or a default in respect of a covenant or provision
which under the Indenture cannot be modified or amended without the consent of
the holder of each outstanding Junior Subordinated Debenture. In the case of
Corresponding Junior Subordinated Debentures, should the holders of such
Corresponding Junior Subordinated Debentures fail to waive such default, the
holders of a majority in aggregate Liquidation Amount of the Related Preferred
Securities affected shall have such right. The Corporation is required to file
annually with the Debenture Trustee a certificate as to whether or not the
Corporation is in compliance with all the conditions and covenants applicable
to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as to a
series of Corresponding Junior Subordinated Debentures, the Property Trustee
will have the right to declare the principal of and the interest on such
Corresponding Junior Subordinated Debentures, and any other amounts payable
under the Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Corresponding Junior Subordinated
Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default with respect to a series of Corresponding
Junior Subordinated Debentures has occurred and is continuing and such event
is attributable to the failure of the Corporation to pay interest or principal
on such Corresponding Junior Subordinated Debentures on the date such interest
or principal is due and payable, a holder of Preferred Securities may
institute a legal proceeding directly against the Corporation for enforcement
of payment to such holder of the principal of or interest on such
Corresponding Junior Subordinated Debentures having a principal amount equal
to the aggregate Liquidation Amount of the Related Preferred Securities of
such holder (a "Direct Action"). The Corporation may not amend the Indenture
to remove the foregoing right to bring a Direct Action without the prior
written consent of the holders of all of the Preferred Securities outstanding.
If the right to bring a Direct Action is removed, the applicable Issuer may
become subject to the reporting obligations under the Exchange Act. The
Corporation shall have the right under the Indenture to set-off any payment
made to such holder of Preferred Securities by the Corporation in connection
with a Direct Action.
The holders of the Preferred Securities will not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an event of default under the Trust Agreement. See
"Description of Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Corporation shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Corporation or convey, transfer or lease
its properties and assets substantially as an entirety to the Corporation,
unless (i) in case the Corporation consolidates with or merges into another
Person or conveys or transfers its properties and assets substantially as an
entirety to any Person, the successor Person is organized under the laws of
the United States or any state or the District of Columbia, and such successor
Person expressly assumes the Corporation's obligations on the Junior
Subordinated Debentures issued under the Indenture; (ii) immediately after
giving effect thereto, no Debenture Event of Default, and no event which,
after notice or lapse of time or both, would become a Debenture Event of
Default, shall have occurred and be continuing; (iii) in the case of
Corresponding Junior Subordinated Debentures, such transaction is permitted
under the related Trust Agreement and Guarantee and does not give rise to any
breach or violation of the related Trust Agreement or Guarantee, and (iv)
certain other conditions as prescribed by the Indenture are met.
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The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Corporation that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at their Stated Maturity within one year, and the Corporation deposits
or causes to be deposited with the Debenture Trustee funds, in trust, for the
purpose and in an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal (and premium, if
any) and interest to the date of the deposit or to the Stated Maturity, as the
case may be, then the Indenture will cease to be of further effect (except as
to the Corporation's obligations to pay all other sums due pursuant to the
Indenture and to provide the officers' certificates and opinions of counsel
described therein), and the Corporation will be deemed to have satisfied and
discharged the Indenture.
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures of any series may be convertible or
exchangeable into Junior Subordinated Debentures of another series or into
Preferred Securities of another series. The specific terms on which Junior
Subordinated Debentures of any series may be so converted or exchanged will be
set forth in the applicable Prospectus Supplement. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at the option of the Corporation, in which case the number of
shares of Preferred Securities or other securities to be received by the
holders of Junior Subordinated Debentures would be calculated as of a time and
in the manner stated in the applicable Prospectus Supplement.
SUBORDINATION
In the Indenture, the Corporation has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Debt to the extent provided in the Indenture.
Upon any payment or distribution of assets of the Corporation to creditors
upon any liquidation, dissolution, winding up, reorganization, assignment for
the benefit of creditors, marshaling of assets or any bankruptcy, insolvency,
debt restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Debt will
first be entitled to receive payment in full of principal of (and premium, if
any) and interest, if any, on such Senior Debt before the holders of Junior
Subordinated Debentures or, in the case of Corresponding Junior Subordinated
Debentures, the Property Trustee, on behalf of the holders of Trust
Securities, will be entitled to receive or retain any payment in respect of
the principal of (and premium, if any) or interest, if any, on the Junior
Subordinated Debentures; provided, however, that holders of Senior Debt shall
not be entitled to receive payment of any such amount to the extent that such
holders would be required by the subordination provisions of such Senior Debt
to pay such amounts over to the obligees on trade accounts payable or other
liabilities arising in the ordinary course of the Corporation's business.
In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders
of Junior Subordinated Debentures will be entitled to receive or retain any
payment in respect of the principal of (or premium, if any) or interest, if
any, on the Junior Subordinated Debentures; provided, however, that holders of
Senior Debt shall not be entitled to receive payment of any such amounts to
the extent that such holders would be required by the subordination provisions
of such Senior Debt to pay such amounts over to the obligees on trade accounts
payable or other liabilities arising in the ordinary course of the
Corporation's business.
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No payments on account of principal (or premium, if any) or interest in
respect of the Junior Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Debt or an event of default with respect to any Senior Debt resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
"Debt" means with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of such Person; (iv) every obligation of such Person
issued or assumed as the deferred purchase price of property or services (but
excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business); (v) every capital lease obligation of such
Person; (vi) every obligation of such Person for claims in respect of
derivative products such as interest and foreign exchange rate contracts,
commodity contracts and similar arrangements; and (vii) every obligation of
the type referred to in clauses (i) through (vi) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has guaranteed or is responsible or liable, directly or indirectly, as obligor
or otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Corporation whether or not
such claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated
Debentures or to other Debt which is pari passu with, or subordinated to, the
Junior Subordinated Debentures; provided, however, that Senior Debt shall not
be deemed to include (i) any Debt of the Corporation which when incurred and
without respect to any election under Section 1111(b) of the United States
Bankruptcy Code of 1978, as amended, was without recourse to the Corporation;
(ii) any Debt of the Corporation to any of its subsidiaries; (iii) Debt to any
employee of the Corporation; (iv) Debt by its terms is subordinated to trade
accounts payable or accrued liabilities arising in the ordinary course of
business to the extent that payments made to the holders of such Debt by the
holders of the Junior Subordinated Debentures as a result of the subordination
provisions of the Indenture would be greater than such payments otherwise
would have been as a result of any obligation of such holders of such Debt to
pay amounts over to the obligees on such trade accounts payable or accrued
liabilities arising in the ordinary course of business as a result of
subordination provisions to which such Debt is subject; and (v) any other debt
securities issued pursuant to the Indenture.
The Indenture places no limitation on the amount of Senior Debt that may be
incurred by the Corporation. The Corporation expects from time to time to
incur additional indebtedness and other obligations constituting Senior Debt.
The Indenture provides that the foregoing subordination provisions, insofar
as they relate to any particular issue of Junior Subordinated Debentures, may
be changed prior to such issuance. Any such change would be described in the
applicable Prospectus Supplement.
TRUST EXPENSES
Pursuant to the Expense Agreement, the Corporation, as holder of the Common
Securities, will irrevocably and unconditionally agree with each Issuer that
holds Junior Subordinated Debentures that the Corporation will pay to such
Issuer, and reimburse such Issuer for, the full amount of any costs, expenses
or liabilities of the Issuer, other than obligations of the Issuer to pay to
the holders of any Preferred Securities or other similar interests in the
Issuer the amounts due such holders pursuant to the terms of the Preferred
Securities or such other similar interests, as the case may be. Such payment
obligation will include any such costs, expenses or liabilities of the Issuer
that are required by applicable law to be satsified in connection with a
termination of such Issuer.
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GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Debenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Junior Subordinated Debentures,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
The Corresponding Junior Subordinated Debentures may be issued in one or
more series of Junior Subordinated Debentures under the Indenture with terms
corresponding to the terms of a series of Related Preferred Securities. In
that event, concurrently with the issuance of each Issuer's Preferred
Securities, such Issuer will invest the proceeds thereof and the consideration
paid by the Corporation for the Common Securities of such Issuer in such
series of Corresponding Junior Subordinated Debentures issued by the
Corporation to such Issuer. Each series of Corresponding Junior Subordinated
Debentures will be in the principal amount equal to the aggregate stated
Liquidation Amount of the Related Preferred Securities and the Common
Securities of such Issuer and will rank pari passu with all other series of
Junior Subordinated Debentures. Holders of the Related Preferred Securities
for a series of Corresponding Junior Subordinated Debentures will have the
rights in connection with modifications to the Indenture or upon occurrence of
Debenture Events of Default, as described under "--Modification of Indenture"
and "--Debenture Events of Default," unless provided otherwise in the
Prospectus Supplement for such Related Preferred Securities.
Unless otherwise specified in the applicable Prospectus Supplement, if a Tax
Event or Capital Treatment Event in respect of an Issuer shall occur and be
continuing, the Corporation may, at its option and subject to prior approval
of the Federal Reserve if then so required under applicable capital guidelines
or policies, redeem the Corresponding Junior Subordinated Debentures at any
time within 90 days of the occurrence of such Tax Event or Capital Treatment
Event, in whole but not in part, subject to the provisions of the Indenture
and whether or not such Corresponding Junior Subordinated Debentures are then
otherwise redeemable at the option of the Corporation. Unless otherwise
specified in the applicable Prospectus Supplement, the redemption price for
any Corresponding Junior Subordinated Debentures shall be equal to 100% of the
principal amount of such Corresponding Junior Subordinated Debentures then
outstanding plus accrued and unpaid interest to the date fixed for redemption.
For so long as the applicable Issuer is the holder of all the outstanding
Corresponding Junior Subordinated Debentures of such series, the proceeds of
any such redemption will be used by the Issuer to redeem the corresponding
Trust Securities in accordance with their terms. The Corporation may not
redeem a series of Corresponding Junior Subordinated Debentures in part unless
all accrued and unpaid interest has been paid in full on all outstanding
Corresponding Junior Subordinated Debentures of such series for all interest
periods terminating on or prior to the Redemption Date.
The Corporation will covenant in the Indenture, as to each series of
Corresponding Junior Subordinated Debentures, that if and so long as (i) the
Issuer of the related series of Trust Securities is the holder of all such
Corresponding Junior Subordinated Debentures, (ii) a Tax Event or Capital
Treatment Event in respect of such Issuer has occurred and is continuing and
(iii) the Corporation has elected, and has not revoked such election, to pay
Additional Sums (as defined under "Description of Preferred Securities--
Redemption or Exchange") in respect of such Trust Securities, the Corporation
will pay to such Issuer such Additional Sums. The Corporation will also
covenant, as to each series of Corresponding Junior Subordinated Debentures,
(i) to maintain directly or indirectly 100% ownership of the Common Securities
of the Issuer to which such Corresponding Junior
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Subordinated Debentures have been issued, provided that certain successors
which are permitted pursuant to the Indenture may succeed to the Corporation's
ownership of the Common Securities, (ii) not to voluntarily terminate, wind-up
or liquidate any Issuer, except (a) in connection with a distribution of
Corresponding Junior Subordinated Debentures to the holders of the Preferred
Securities in exchange therefor upon liquidation of such Issuer, or (b) in
connection with certain mergers, consolidations or amalgamations permitted by
the related Trust Agreement, in either such case, if so specified in the
applicable Prospectus Supplement upon prior approval of the Federal Reserve if
then so required under applicable capital guidelines or policies, and (iii) to
use its reasonable efforts, consistent with the terms and provisions of the
related Trust Agreement, to cause such Issuer to remain classified as a
grantor trust and not as an association taxable as a corporation for United
States federal income tax purposes.
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement for each Issuer, the Issuer
Trustees on behalf of such Issuer will issue the Preferred Securities and the
Common Securities. The Preferred Securities of a particular issue will
represent beneficial ownership interests in the Issuer and the holders thereof
will be entitled to a preference in certain circumstances with respect to
Distributions and amounts payable on redemption or liquidation over the Common
Securities of such Issuer, as well as other benefits as described in the
corresponding Trust Agreement. This summary of certain provisions of the
Preferred Securities and each Trust Agreement, which summarizes the material
terms thereof, does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of each Trust
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act, to each of which reference is hereby made. Wherever particular
defined terms of a Trust Agreement (as amended or supplemented from time to
time) are referred to herein or in a Prospectus Supplement, such defined terms
are incorporated herein or therein by reference. The form of the Trust
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Each of the Issuers is a legally separate entity
and the assets of one are not available to satisfy the obligations of any of
the others.
GENERAL
The Preferred Securities of an Issuer will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of that Issuer
except as described under "--Subordination of Common Securities." Legal title
to the Corresponding Junior Subordinated Debentures will be held by the
Property Trustee in trust for the benefit of the holders of the related
Preferred Securities and Common Securities. Each Guarantee Agreement executed
by the Corporation for the benefit of the holders of an Issuer's Trust
Securities (the "Guarantee") will be a guarantee on a subordinated basis with
respect to the related Trust Securities but will not guarantee payment of
Distributions or amounts payable on redemption or liquidation of such Trust
Securities when the related Issuer does not have funds on hand available to
make such payments. See "Description of Guarantees."
DISTRIBUTIONS
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such
dates as specified in the applicable Prospectus Supplement. In the event that
any date on which Distributions are payable on the Preferred Securities is not
a Business Day (as defined below), payment of the Distribution payable on such
date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect to any such delay) except
that, if such Business Day is in the next succeeding calendar year, payment of
such Distribution shall be made on the immediately preceding Business Day, in
either case with the same force and effect as if made on such date (each date
on which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). A "Business Day" shall mean any day other than a
Saturday or a Sunday, or a day on which banking institutions in The City of
New York are authorized or required by law or executive order to remain closed
or a day on which the corporate trust office of the Property Trustee or the
Debenture Trustee is closed for business.
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Each Issuer's Preferred Securities represent beneficial ownership interests
in the applicable Issuer, and the Distributions on each Preferred Security
will be payable at a rate specified in the applicable Prospectus Supplement
for such Preferred Securities. The amount of Distributions payable for any
period will be computed on the basis of a 360-day year of twelve 30-day months
unless otherwise specified in the applicable Prospectus Supplement.
Distributions to which holders of Preferred Securities are entitled will
accumulate additional Distributions at the rate per annum if and as specified
in the applicable Prospectus Supplement. The term "Distributions" as used
herein includes any such additional Distributions unless otherwise stated.
If provided in the applicable Prospectus Supplement, the Corporation has the
right under the Indenture, pursuant to which it will issue the Corresponding
Junior Subordinated Debentures, to defer the payment of interest at any time
or from time to time on any series of the Corresponding Junior Subordinated
Debentures for up to such number of consecutive interest payment periods which
will be specified in such Prospectus Supplement relating to such series (each,
an "Extension Period"), provided that no Extension Period may extend beyond
the Stated Maturity of the Corresponding Junior Subordinated Debentures. As a
consequence of any such deferral, Distributions on the Related Preferred
Securities would be deferred (but would continue to accumulate additional
Distributions thereon at the rate per annum set forth in the Prospectus
Supplement for such Preferred Securities) by the Issuer of such Preferred
Securities during any such Extension Period. During such Extension Period, the
Corporation may not, and may not permit any subsidiary of the Corporation to,
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the
Corporation's capital stock, (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Corporation that rank pari passu with or junior in interest to the
Corresponding Junior Subordinated Debentures or (iii) make any guarantee
payments with respect to any guarantee by the Corporation of debt securities
of any subsidiary of the Corporation if such guarantee ranks pari passu with
or junior in interest to the Corresponding Junior Subordinated Debentures
(other than (a) dividends or distributions in capital stock of the
Corporation, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the redemption or repurchase
of any such rights pursuant thereto, (c) payments under the Guarantee with
respect to such Preferred Securities and (d) purchases of common stock related
to the issuance of common stock or rights under any of the Corporation's
benefit plans for its directors, officers or employees, related to the
issuance of common stock or rights under a dividend reinvestment and stock
purchase plan, or related to the issuance of common stock (or securities
convertible into or exchangeable for common stock) as consideration in an
acquisition transaction that was entered into prior to the commencement of
such Extension Period).
The revenue of each Issuer available for distribution to holders of its
Preferred Securities will be limited to payments under the Corresponding
Junior Subordinated Debentures in which the Issuer will invest the proceeds
from the issuance and sale of its Trust Securities and the related Expense
Agreement. See "Description of Junior Subordinated Debentures--Corresponding
Junior Subordinated Debentures." If the Corporation does not make interest
payments on such Corresponding Junior Subordinated Debentures, the Property
Trustee will not have funds available to pay Distributions on the Related
Preferred Securities. The payment of Distributions (if and to the extent the
Issuer has funds legally available for the payment of such Distributions and
cash sufficient to make such payments) is guaranteed by the Corporation on the
basis set forth herein under "Description of Guarantees."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of such Issuer on the relevant record
dates, which, as long as the Preferred Securities remain in book-entry form,
will be one Business Day prior to the relevant Distribution Date. Subject to
any applicable laws and regulations and the provisions of the applicable Trust
Agreement, each such payment will be made as described under "Book-Entry
Issuance." In the event any Preferred Securities are not in book-entry form,
the relevant record date for such Preferred Securities shall be the date at
least 15 days prior to the relevant Distribution Date, as specified in the
applicable Prospectus Supplement.
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REDEMPTION OR EXCHANGE
Mandatory Redemption. Upon the repayment or redemption, in whole or in part,
of any Corresponding Junior Subordinated Debentures, whether at maturity or
upon earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days notice, at a redemption price (the "Redemption Price")
equal to the aggregate Liquidation Amount of such Trust Securities plus
accumulated but unpaid Distributions thereon to the date of redemption (the
"Redemption Date") and the related amount of the premium, if any, paid by the
Corporation upon the concurrent redemption of such Corresponding Junior
Subordinated Debentures. See "Description of Junior Subordinated Debentures--
Redemption". If less than all of any series of Corresponding Junior
Subordinated Debentures are to be repaid or redeemed on a Redemption Date,
then the proceeds from such repayment or redemption shall be allocated to the
redemption pro rata of the related Preferred Securities and the Common
Securities. The amount of premium, if any, paid by the Corporation upon the
redemption of all or any part of any series of any Corresponding Junior
Subordinated Debentures to be repaid or redeemed on a Redemption Date shall be
allocated to the redemption pro rata of the related Preferred Securities and
the Common Securities.
The Corporation will have the right to redeem any series of Corresponding
Junior Subordinated Debentures (i) on or after such date as may be specified
in the applicable Prospectus Supplement, in whole at any time or in part from
time to time, (ii) at any time, in whole (but not in part), upon the
occurrence of a Tax Event or Capital Treatment Event, in either case subject
to receipt of prior approval by the Federal Reserve if then required under
applicable capital guidelines or policies.
Tax Event or Capital Treatment Event Redemption. If a Tax Event or Capital
Treatment Event in respect of a series of Preferred Securities and Common
Securities shall occur and be continuing, the Corporation has the right to
redeem the Corresponding Junior Subordinated Debentures in whole (but not in
part) and thereby cause a mandatory redemption of such Preferred Securities
and Common Securities in whole (but not in part) at the Redemption Price
within 90 days following the occurrence of such Tax Event or Capital Treatment
Event. In the event a Tax Event or Capital Treatment Event in respect of a
series of Preferred Securities and Common Securities has occurred and is
continuing and the Corporation does not elect to redeem the Corresponding
Junior Subordinated Debentures and thereby cause a mandatory redemption of
such Preferred Securities and Common Securities or to liquidate the related
Issuer and cause the Corresponding Junior Subordinated Debentures to be
distributed to holders of such Preferred Securities and Common Securities in
exchange therefor upon liquidation of the Issuer as described above, such
Preferred Securities will remain outstanding and Additional Sums (as defined
below) may be payable on the Corresponding Junior Subordinated Debentures.
Possible Tax Law Changes. On March 19, 1996, the Revenue Reconciliation Bill
of 1996 (the "Bill"), the revenue portion of President Clinton's budget
proposal, was released. The Bill would have among other things, generally
denied interest deductions for interest on an instrument issued by a
corporation that has a maximum weighted average maturity of more than 40
years. The Bill would also have generally denied interest deductions for
interest on an instrument issued by a corporation that has a maximum term of
more than 20 years and that is not shown as indebtedness on the separate
balance sheet of the issuer or, where the instrument is issued to a related
party (other than a corporation), where the holder or some other related party
issues a related instrument that is not shown as indebtedness on the issuer's
consolidated balance sheet. For purposes of determining the weighted average
maturity or the term of an instrument, any right to extend would be treated as
exercised. The above-described provisions of the Bill were proposed to be
effective generally for instruments issued on or after December 7, 1995. If
either provision were to apply to the Junior Subordinated Debentures, the
Corporation would not be able to deduct interest on the Junior Subordinated
Debentures. However, on March 29, 1996, the Chairmen of the Senate Finance and
House Ways and Means Committees issued a joint statement (the "Joint
Statement") to the effect that it was their intention that the effective date
of the President's legislative proposals, if adopted, would be no earlier than
the date of appropriate Congressional action. In addition, subsequent to the
publication of the Joint Statement, Senator Daniel Patrick Moynihan and
Representatives Sam M. Gibbons and Charles B. Rangel wrote letters to Treasury
Department officials concurring with the view
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expressed in the Joint Statement (the "Democrat Letters"). If the principles
contained in the Joint Statement and the Democrat Letters were followed and
the Bill was enacted, such legislation would not apply to the Junior
Subordinated Debentures. There can be no assurance, however, that current or
future legislative proposals or final legislation will not adversely affect
the ability of the Corporation to deduct interest on the Junior Subordinated
Debentures. Moreover, such a change could give rise to a Tax Event, which may
permit the Corporation to cause a redemption of the Related Preferred
Securities.
Distribution of Corresponding Junior Subordinated Debentures. Subject to the
Corporation having received prior approval on the Federal Reserve to do so if
then required under applicable capital guidelines or policies, the Corporation
has the right at any time, to liquidate the related Issuer and, after
satisfaction of the liabilities of creditors of such Issuer as provided by
applicable law, cause such Corresponding Junior Subordinated Debentures in
respect of the Preferred Securities and Common Securities issued by such
Issuer to be distributed to the holders of such Preferred Securities and
Common Securities in exchange therefor upon liquidation of the Issuer.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by an Issuer on the
outstanding Preferred Securities and Common Securities of the Issuer shall not
be reduced as a result of any additional taxes, duties and other governmental
charges to which such Issuer has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of any series of Trust
Securities, Trust Securities of such series having a Liquidation Amount (as
defined below) equal to that portion of the principal amount of Corresponding
Junior Subordinated Debentures to be contemporaneously redeemed in accordance
with the Indenture, allocated to the Common Securities and to the Preferred
Securities pro rata based upon the relative Liquidation Amounts of such
classes and the proceeds of which will be used to pay the Redemption Price of
such Trust Securities, and (ii) with respect to a distribution of
Corresponding Junior Subordinated Debentures to holders of any series of Trust
Securities in exchange therefor in connection with a dissolution or
liquidation of the related Issuer, Corresponding Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Corresponding Junior Subordinated
Debentures would be distributed.
"Liquidation Amount" means the stated amount of $1,000 per Trust Security.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debentures for any series of Preferred Securities (i) such
series of Preferred Securities will no longer be deemed to be outstanding,
(ii) the depositary or its nominee, as the record holder of such series of
Preferred Securities, will receive a registered global certificate or
certificates representing the Corresponding Junior Subordinated Debentures to
be delivered upon such distribution and (iii) any certificates representing
such series of Preferred Securities not held by DTC or its nominee will be
deemed to represent the Corresponding Junior Subordinated Debentures having a
principal amount equal to the stated Liquidation Amount of such series of
Preferred Securities, and bearing accrued and unpaid interest in an amount
equal to the accrued and unpaid Distributions on such series of Preferred
Securities until such certificates are presented to the Administrative
Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Corresponding Junior Subordinated Debentures that may be
distributed in exchange for Preferred Securities if a dissolution and
liquidation of an Issuer were to occur. Accordingly, the Preferred Securities
that an investor may purchase, or the Corresponding Junior Subordinated
Debentures that the investor may receive on dissolution and liquidation of an
Issuer, may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby.
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REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated Debentures. Redemptions of
the Preferred Securities shall be made and the Redemption Price shall be
payable on each Redemption Date only to the extent that the related Issuer has
funds on hand available for the payment of such Redemption Price. See also "--
Subordination of Common Securities."
If an Issuer gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are available, the Property Trustee will deposit irrevocably
with DTC funds sufficient to pay the applicable Redemption Price and will give
DTC irrevocable instructions and authority to pay the Redemption Price to the
holders of such Preferred Securities. See "Book-Entry Issuance." If such
Preferred Securities are no longer in book-entry form, the Property Trustee, to
the extent funds are available, will irrevocably deposit with the paying agent
for such Preferred Securities funds sufficient to pay the applicable Redemption
Price and will give such paying agent irrevocable instructions and authority to
pay the Redemption Price to the holders thereof upon surrender of their
certificates evidencing such Preferred Securities. Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date for any
Preferred Securities called for redemption shall be payable to the holders of
such Preferred Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price, and such
Preferred Securities will cease to be outstanding. In the event that any date
fixed for redemption of Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the Redemption Price in
respect of Preferred Securities called for redemption is improperly withheld or
refused and not paid either by the Issuer or by the Corporation pursuant to the
Guarantee as described under "Description of Guarantees," Distributions on such
Preferred Securities will continue to accrue at the then applicable rate, from
the Redemption Date originally established by the Issuer for such Preferred
Securities to the date such Redemption Price is actually paid, in which case
the actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time
and from time to time purchase outstanding Preferred Securities by tender, in
the open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Corresponding Junior Subordinated Debentures to holders of
Preferred Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Preferred Securities on the relevant
record date, which shall be one Business Day prior to the relevant Redemption
Date or liquidation date, as applicable; provided, however, that in the event
that any Preferred Securities are not in book-entry form, the relevant record
date for such Preferred Securities shall be a date at least 15 days prior to
the Redemption Date or liquidation date, as applicable, as specified in the
applicable Prospectus Supplement.
If less than all of the Preferred Securities and Common Securities issued by
an Issuer are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata to the Preferred Securities and the Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Preferred Securities to be redeemed shall be selected on a pro rata
basis not more than 60 days prior to the Redemption Date by the Property
Trustee from the outstanding Preferred Securities not previously called for
redemption, by such method as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $25 or an integral multiple of $25 in excess thereof) of the
Liquidation Amount of Preferred Securities
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of a denomination larger than $25. The Property Trustee shall promptly notify
the trust registrar in writing of the Preferred Securities selected for
redemption and, in the case of any Preferred Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
each Trust Agreement, unless the context otherwise requires, all provisions
relating to the redemption of Preferred Securities shall relate, in the case of
any Preferred Securities redeemed or to be redeemed only in part, to the
portion of the aggregate Liquidation Amount of Preferred Securities which has
been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Issuer's
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of such Preferred Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date a Debenture Event of Default shall have occurred and be continuing, no
payment of any Distribution on, or Redemption Price of, any of the Issuer's
Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions on
all of the Issuer's outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all of the
Issuer's outstanding Preferred Securities then called for redemption, shall
have been made or provided for, and all funds available to the Property Trustee
shall first be applied to the payment in full in cash of all Distributions on,
or Redemption Price of, the Issuer's Preferred Securities then due and payable.
In the case of any event of default under the applicable Trust Agreement
resulting from a Debenture Event of Default, the Corporation as holder of such
Issuer's Common Securities will be deemed to have waived any right to act with
respect to any such event of default under the applicable Trust Agreement until
the effect of all such events of default with respect to such Preferred
Securities have been cured, waived or otherwise eliminated. Until all events of
default under the applicable Trust Agreement with respect to the Preferred
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the holders of such Preferred Securities
and not on behalf of the Corporation as holder of the Issuer's Common
Securities, and only the holders of such Preferred Securities will have the
right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Issuer shall automatically terminate
upon expiration of its term and shall terminate on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the holder of the
Common Securities; (ii) the distribution of a Like Amount of the Corresponding
Junior Subordinated Debentures to the holders of its Trust Securities, if the
Corporation, as Depositor, has given written direction to the Property Trustee
to terminate such Issuer (subject to the Corporation having received prior
approval of the Federal Reserve if so required under applicable capital
guidelines or policies); (iii) redemption of all of the Issuer's Preferred
Securities as described under "--Redemption or Exchange--Mandatory Redemption";
and (iv) the entry of an order for the dissolution of the Issuer by a court of
competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv)
above, the Issuer shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of such Issuer as provided by
applicable law, to the holders of such Trust Securities in exchange therefor a
Like Amount of the Corresponding Junior Subordinated Debentures, unless such
distribution is determined by the Property Trustee not to be practical, in
which event such holders will be entitled to receive out of the assets of the
Issuer available for distribution to holders, after satisfaction of liabilities
to creditors of such Issuer as provided by applicable law, an amount equal to,
in the case of holders of Preferred
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Securities, the aggregate of the Liquidation Amount plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because such Issuer has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by
such Issuer on its Preferred Securities shall be paid on a pro rata basis. The
holder(s) of such Issuer's Common Securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of its
Preferred Securities, except that if a Debenture Event of Default has occurred
and is continuing, the Preferred Securities shall have a priority over the
Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under each
Trust Agreement with respect to the Preferred Securities issued thereunder
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the Indenture
(see "Description of Junior Subordinated Debentures--Debenture
Events of Default"); or
(ii) default in the payment of any Distribution when it becomes due and
payable, and continuation of such default for a period of 30 days;
or
(iii) default in the payment of any Redemption Price of any Trust
Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in such Trust
Agreement (other than a covenant or warranty a default in the
performance of which or the breach of which is dealt with in
clause (ii) or (iii) above), and continuation of such default or
breach for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Issuer Trustee or
Trustees by the holders of at least 25% in aggregate Liquidation
Amount of the outstanding Preferred Securities of the applicable
Issuer, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a
"Notice of Default" under such Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Corporation
to appoint a successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer's Preferred
Securities, the Administrative Trustees and the Corporation, as Depositor,
unless such Event of Default shall have been cured or waived. The Corporation,
as Depositor, and the Administrative Trustees are required to file annually
with the Property Trustee a certificate as to whether or not they are in
compliance with all the conditions and covenants applicable to them under each
Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities as described
above. See "Subordination of Common Securities" and "--Liquidation Distribution
Upon Termination." The existence of an Event of Default does not entitle the
holders of Preferred Securities to accelerate the maturity thereof.
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a
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majority in Liquidation Amount of the outstanding Preferred Securities. In no
event will the holders of the Preferred Securities have the right to vote to
appoint, remove or replace the Administrative Trustees, which voting rights are
vested exclusively in the Corporation as the holder of the Common Securities.
No resignation or removal of an Issuer Trustee and no appointment of a
successor trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the applicable Trust
Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any time
or from time to time, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the Corporation, as the holder of the
Common Securities, and the Administrative Trustees shall have power to appoint
one or more persons either to act as a co-trustee, jointly with the Property
Trustee, of all or any part of such Trust Property, or to act as separate
trustee of any such property, in either case with such powers as may be
provided in the instrument of appointment, and to vest in such person or
persons in such capacity any property, title, right or power deemed necessary
or desirable, subject to the provisions of the applicable Trust Agreement. In
case a Debenture Event of Default has occurred and is continuing, the Property
Trustee alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under each Trust
Agreement, provided such Person shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUERS
An Issuer may not merge with or into, consolidate, amalgamate, or be replaced
by, or convey, transfer or lease its properties and assets substantially as an
entirety to any corporation or other Person, except as described below. An
Issuer may, at the request of the Corporation, with the consent of the
Administrative Trustees and without the consent of the holders of the Preferred
Securities, merge with or into, consolidate, amalgamate, or be replaced by, or
convey, transfer or lease its properties and assets substantially as an
entirety to, a trust organized as such under the laws of any State; provided,
that (i) such successor entity either (a) expressly assumes all of the
obligations of such Issuer with respect to the Preferred Securities or (b)
substitutes for the Preferred Securities other securities having substantially
the same terms as the Preferred Securities (the "Successor Securities") so long
as the Successor Securities rank the same as the Preferred Securities in
priority with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) the Corporation expressly appoints a trustee of
such successor entity possessing the same powers and duties as the Property
Trustee as the holder of the Corresponding Junior Subordinated Debentures,
(iii) the Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
other organization on which the Preferred Securities are then listed, if any,
(iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Preferred Securities to be downgraded by
any nationally recognized statistical rating organization which gives ratings
on the Preferred Securities, (v) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the Preferred Securities
(including any Successor Securities) in any material respect, (vi) such
successor entity has a purpose identical to that of the Issuer, (vii) prior to
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Corporation has received an opinion from independent counsel to the
Issuer experienced in such matters to the effect that (a) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Preferred Securities (including any Successor Securities) in any material
respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer
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or lease, neither the Issuer nor such successor entity will be required to
register as an investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and (viii) the Corporation or any
permitted successor or assignee owns all of the Common Securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, an Issuer shall not, except with the consent of
holders of 100% in Liquidation Amount of the Preferred Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any other entity or
permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Issuer or the successor entity to
be classified as an association taxable as a corporation or as other than a
grantor trust for United States Federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
Except as provided below and under "Description of Guarantees--Amendments and
Assignment" and as otherwise required by law and the applicable Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
Each Trust Agreement may be amended from time to time by the Corporation, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under such Trust Agreement, which shall not be inconsistent
with the other provisions of such Trust Agreement, or (ii) to modify, eliminate
or add to any provisions of such Trust Agreement to such extent as shall be
necessary to ensure that the Issuer will be classified for United States
federal income tax purposes as other than an association taxable as a
corporation or as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Issuer will not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
in the case of either clause (i) or clause (ii), such action shall not
adversely affect in any material respect the interests of any holder of
Preferred Securities, and any amendments of such Trust Agreement shall become
effective when notice thereof is given to the holders of Trust Securities. Each
Trust Agreement may be amended by the Issuer Trustees and the Corporation with
(i) the consent of holders representing not less than a majority (based upon
Liquidation Amounts) of the outstanding Trust Securities, and (ii) receipt by
the Issuer Trustees of an opinion of counsel to the effect that such amendment
or the exercise of any power granted to the Issuer Trustees in accordance with
such amendment will not affect the Issuer's status as a grantor trust for
United States federal income tax purposes or the Issuer's exemption from status
as an "investment company" under the Investment Company Act, provided that
without the consent of each holder of Trust Securities, such Trust Agreement
may not be amended to (i) change the amount or timing of any Distribution on
the Trust Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any Corresponding Junior Subordinated Debentures are held by the
Property Trustee, the Issuer Trustees shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing any trust or power conferred on the Property Trustee with
respect to such Corresponding Junior Subordinated Debentures, (ii) waive any
past default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Junior
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or such Corresponding
Junior Subordinated Debentures, where such consent shall be required, without,
in each case, obtaining the prior approval of the holders of a majority in
aggregate Liquidation Amount of all outstanding Preferred Securities; provided,
however, that where a consent under the Indenture would require the consent of
each holder of Corresponding Junior Subordinated Debentures affected thereby,
no such consent shall be given by the Property Trustee without the prior
consent of each holder of the corresponding Preferred
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Securities. The Issuer Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Preferred Securities
except by subsequent vote of the holders of the Preferred Securities. The
Property Trustee shall notify each holder of Preferred Securities of any notice
of default with respect to the Corresponding Junior Subordinated Debentures. In
addition to obtaining the foregoing approvals of the holders of the Preferred
Securities, prior to taking any of the foregoing actions, the Issuer Trustees
shall obtain an opinion of counsel experienced in such matters to the effect
that the Issuer will not be classified as an association taxable as a
corporation for United States Federal income tax purposes on account of such
action and such action would not cause the Issuer to be classified as other
than a grantor trust for United States federal income tax purposes.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be given to each holder of record of Preferred Securities in the manner set
forth in each Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for an Issuer to redeem and cancel its Preferred Securities in accordance with
the applicable Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Corporation, the Issuer Trustees or any
affiliate of the Corporation or any Issuer Trustees, shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of a series may be issued in whole or in part in the
form of one or more Global Preferred Securities that will be deposited with, or
on behalf of, the Depositary identified in the Prospectus Supplement relating
to such series. Unless otherwise indicated in the applicable Prospectus
Supplement for such series, the Depositary will be DTC. Global Preferred
Securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Preferred Securities represented thereby, a Global Preferred
Security may not be transferred except as a whole by the Depositary for such
Global Preferred Security to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
the Depositary or any nominee to a successor Depositary or any nominee of such
successor.
The specific terms of the depositary arrangement with respect to a series of
Preferred Securities will be described in the Prospectus Supplement relating to
such series. The Corporation anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Preferred Security, and the deposit of such
Global Preferred Security with or on behalf of the Depositary, the Depositary
for such Global Preferred Security or its nominee will credit, on its book-
entry registration and transfer system, the respective aggregate Liquidation
Amounts of the individual Preferred Securities represented by such Global
Preferred Securities to the accounts of Participants. Such accounts shall be
designated by the dealers, underwriters or agents with respect to such
Preferred Securities or by the Corporation if such Preferred Securities are
offered and sold directly by the Corporation. Ownership of beneficial interests
in a Global Preferred Security will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global Preferred Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the applicable
Depositary or its nominee (with respect to interests of Participants) and the
records of Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Preferred Security.
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So long as the Depositary for a Global Preferred Security, or its nominee, is
the registered owner of such Global Preferred Security, such Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Preferred Securities represented by such Global Preferred Security for all
purposes under the Indenture governing such Preferred Securities. Except as
provided below, owners of beneficial interests in a Global Preferred Security
will not be entitled to have any of the individual Preferred Securities of the
series represented by such Global Preferred Security registered in their names,
will not receive or be entitled to receive physical delivery of any such
Preferred Securities of such series in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Preferred Securities represented by a Global Preferred Security registered in
the name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Preferred
Security representing such Preferred Securities. None of the Corporation, the
Property Trustee, any Paying Agent, or the Securities Registrar for such
Preferred Securities will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Corporation expects that the Depositary for a series of Preferred
Securities or its nominee, upon receipt of any payment of Liquidation Amount,
Redemption Price, premium or Distributions in respect of a permanent Global
Preferred Security representing any of such Preferred Securities, immediately
will credit Participants' accounts with payments in amounts proportionate to
their respective beneficial interest in the aggregate Liquidation Amount of
such Global Preferred Security for such Preferred Securities as shown on the
records of such Depositary or its nominee. The Corporation also expects that
payments by Participants to owners of beneficial interests in such Global
Preferred Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Preferred Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is
not appointed by the Issuer within 90 days, the Issuer will issue individual
Preferred Securities of such series in exchange for the Global Preferred
Security representing such series of Preferred Securities. In addition, the
Issuer may at any time and in its sole discretion, subject to any limitations
described in the Prospectus Supplement relating to such Preferred Securities,
determine not to have any Preferred Securities of such series represented by
one or more Global Preferred Securities and, in such event, will issue
individual Preferred Securities of such series in exchange for the Global
Preferred Security or Securities representing such series of Preferred
Securities. Further, if the Issuer so specifies with respect to the Preferred
Securities of a series, an owner of a beneficial interest in a Global Preferred
Security representing Preferred Securities of such series may, on terms
acceptable to the Issuer, the Property Trustee and the Depositary for such
Global Preferred Security, receive individual Preferred Securities of such
series in exchange for such beneficial interests, subject to any limitations
described in the Prospectus Supplement relating to such Preferred Securities.
In any such instance, an owner of a beneficial interest in a Global Preferred
Security will be entitled to physical delivery of individual Preferred
Securities of the series represented by such Global Preferred Security equal in
principal amount to such beneficial interest and to have such Preferred
Securities registered in its name. Individual Preferred Securities of such
series so issued will be issued in denominations, unless otherwise specified by
the Issuer, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any Issuer's Preferred Securities are not
held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. Unless otherwise specified in the applicable Prospectus Supplement,
the paying agent (the "Paying Agent") shall initially be the Property Trustee
and any co-paying
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agent chosen by the Property Trustee and acceptable to the Administrative
Trustees and the Corporation. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Property Trustee and the
Corporation. In the event that the Property Trustee shall no longer be the
Paying Agent, the Administrative Trustees shall appoint a successor (which
shall be a bank or trust company acceptable to the Administrative Trustees and
the Corporation) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of each Issuer, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Issuers will not be required to register or cause to be
registered the transfer of their Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically
set forth in each Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision, the
Property Trustee is under no obligation to exercise any of the powers vested in
it by the applicable Trust Agreement at the request of any holder of Preferred
Securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby. If no Event of Default
has occurred and is continuing and the Property Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the
applicable Trust Agreement or is unsure of the application of any provision of
the applicable Trust Agreement, and the matter is not one on which holders of
Preferred Securities are entitled under such Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by the Corporation and
if not so directed, shall take such action as it deems advisable and in the
best interests of the holders of the Trust Securities and will have no
liability except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuers in such a way that no Issuer will be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
or as other than a grantor trust for United States federal income tax purposes
and so that the Corresponding Junior Subordinated Debentures will be treated as
indebtedness of the Corporation for United States federal income tax purposes.
In this connection, the Corporation and the Administrative Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of each Issuer or each Trust Agreement, that the
Corporation and the Administrative Trustees determine in their discretion to be
necessary or desirable for such purposes, as long as such action does not
materially adversely affect the interests of the holders of the related
Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Issuer may borrow money or issue debt or mortgage or pledge any of its
assets.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Preferred Securities and
the Junior Subordinated Debentures, unless otherwise referred to in the
Prospectus Supplement relating to an offering of Preferred
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Securities or Junior Subordinated Debentures. The Preferred Securities and the
Junior Subordinated Debentures will be issued only as fully-registered
securities registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global certificates will be issued for the Preferred
Securities of each Issuer and the Junior Subordinated Debentures, representing
in the aggregate the total number of such Issuer's Preferred Securities or
aggregate principal balance of Junior Subordinated Debentures, respectively,
and will be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain custodial relationships with
Direct Participants, either directly or indirectly ("Indirect Participants").
The rules applicable to DTC and its Participants are on file with the
Commission.
Purchases of Preferred Securities or Junior Subordinated Debentures within
the DTC system must be made by or through Direct Participants, which will
receive a credit for the Preferred Securities or Junior Subordinated Debentures
on DTC's records. The ownership interest of each actual purchaser of each
Preferred Security and each Junior Subordinated Debenture ("Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased Preferred Securities or Junior Subordinated Debentures.
Transfers of ownership interests in the Preferred Securities or Junior
Subordinated Debentures are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Preferred
Securities or Junior Subordinated Debentures, except in the event that use of
the book-entry system for the Preferred Securities of such Issuer or Junior
Subordinated Debentures is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities or Junior Subordinated Debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Preferred Securities
or Junior Subordinated Debentures are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners and the voting rights of Direct
Participants, Indirect Participants and 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.
Redemption notices will be sent to Cede & Co. as the registered holder of the
Preferred Securities or Junior Subordinated Debentures. If less than all of an
Issuer's Preferred Securities or the Junior Subordinated Debentures are being
redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Preferred
Securities or Junior Subordinated Debentures, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities or Junior Subordinated Debentures. Under its
usual procedures, DTC would mail an omnibus proxy (the "Omnibus
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Proxy") to the relevant Trustee as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts such Preferred Securities or Junior Subordinated
Debentures are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Distribution payments on the Preferred Securities or the Junior Subordinated
Debentures will be made by the relevant Trustee to DTC. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices and will be the responsibility of such Participant and not
of DTC, the relevant Trustee, the Issuer thereof or the Corporation, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payment of Distributions to DTC is the responsibility of the relevant Trustee,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursements of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Preferred Securities or the Junior Subordinated
Debentures at any time by giving reasonable notice to the relevant Trustee and
the Corporation. In the event that a successor securities depositary is not
obtained, definitive Preferred Security or Junior Subordinated Debenture
certificates representing such Preferred Securities or Junior Subordinated
Debentures are required to be printed and delivered. The Corporation, at its
option, may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary). After a Debenture Event of Default,
the holders of a majority in liquidation preference of Preferred Securities or
aggregate principal amount of Junior Subordinated Debentures may determine to
discontinue the system of book-entry transfers through DTC. In any such event,
definitive certificates for such Preferred Securities or Junior Subordinated
Debentures will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and the Corporation believe to
be accurate, but the Issuers and the Corporation assume no responsibility for
the accuracy thereof. Neither the Issuers nor the Corporation has any
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Corporation concurrently
with the issuance by each Issuer of its Preferred Securities for the benefit of
the holders from time to time of such Preferred Securities and the Common
Securities. The Chase Manhattan Bank will act as indenture trustee ("Guarantee
Trustee") under each Guarantee for the purposes of compliance with the Trust
Indenture Act and each Guarantee will be qualified as an indenture under the
Trust Indenture Act. This summary of certain provisions of the Guarantees,
which summarizes the material terms thereof, does not purport to be complete
and is subject to, and qualified in its entirety by reference to, all of the
provisions of each Guarantee, including the definitions therein of certain
terms, and the Trust Indenture Act, to each of which reference is hereby made.
The form of the Guarantee has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Reference in this summary to
Preferred Securities means that Issuer's Preferred Securities to which a
Guarantee relates. The Guarantee Trustee will hold each Guarantee for the
benefit of the holders of the related Issuer's Preferred Securities and Common
Securities.
GENERAL
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
below) to the holders of the Trust Securities, as and when due, regardless of
any defense, right of set-off or counterclaim that such Issuer may have or
assert other than the defense of
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payment. The following payments with respect to the Preferred Securities, to
the extent not paid by or on behalf of the related Issuer (the "Guarantee
Payments"), will be subject to the Guarantee: (i) any accumulated and unpaid
Distributions required to be paid on such Trust Securities, to the extent that
such Issuer has funds on hand available therefor at such time, (ii) the
Redemption Price with respect to any Preferred Securities called for
redemption, to the extent that such Issuer has funds on hand available therefor
at such time, or (iii) upon a voluntary or involuntary dissolution, winding up
or liquidation of such Issuer (unless the Corresponding Junior Subordinated
Debentures are distributed to holders of such Preferred Securities in exchange
therefor), the lesser of (a) the Liquidation Distribution and (b) the amount of
assets of such Issuer remaining available for distribution to holders of Trust
Securities after satisfaction of liabilities to creditors of such Issuer as
required by applicable law. The Corporation's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Corporation to the holders of the applicable Trust Securities or by causing the
Issuer to pay such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Issuer's obligations under the Preferred Securities, but will apply
only to the extent that such related Issuer has funds sufficient to make such
payments, and is not a guarantee of collection.
If the Corporation does not make interest payments on the Corresponding
Junior Subordinated Debentures held by the Issuer, the Issuer will not be able
to pay Distributions on the Preferred Securities and will not have funds
legally available therefor. Each Guarantee will rank subordinate and junior in
right of payment to all Senior Debt of the Corporation. See "--Status of the
Guarantees." Because the Corporation is a holding company, the right of the
Corporation to participate in any distribution of assets of any subsidiary upon
such subsidiary's liquidation or reorganization or otherwise, is subject to the
prior claims of creditors of that subsidiary, except to the extent the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Corporation's obligations under the Guarantees will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and claimants should look only to the assets of the
Corporation for payments thereunder. See "Mellon Bank Corporation." Except as
otherwise provided in the applicable Prospectus Supplement, the Guarantees do
not limit the incurrence or issuance of other secured or unsecured debt of the
Corporation, including Senior Debt, whether under the Indenture, any other
existing indenture or any other indenture that the Corporation may enter into
in the future or otherwise. See the applicable Prospectus Supplement relating
to any offering of Preferred Securities.
The Corporation has, through the applicable Guarantee, the applicable Trust
Agreement, the applicable series of Corresponding Junior Subordinated
Debentures, the Indenture and the applicable Expense Agreement, taken together,
fully, irrevocably and unconditionally guaranteed all of the Issuer's
obligations under the Preferred Securities. No single document standing alone
or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer's obligations under the Preferred
Securities. See "Relationship Among the Preferred Securities, the Corresponding
Junior Subordinated Debentures and the Guarantees."
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STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Corporation
and will rank subordinate and junior in right of payment to all Senior Debt of
the Corporation in the same manner as Junior Subordinated Debentures.
Each Guarantee will rank pari passu with all other Guarantees issued by the
Corporation. Each Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Guarantor to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). Each Guarantee will be held for the benefit of the holders of the
related Preferred Securities. Each Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Issuer
or upon distribution to the holders of the Preferred Securities of the
Corresponding Junior Subordinated Debentures. None of the Guarantees places a
limitation on the amount of additional Senior Debt that may be incurred by the
Corporation. The Corporation expects from time to time to incur additional
indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related Preferred Securities (in which case no
vote will be required), no Guarantee may be amended without the prior approval
of the holders of not less than a majority of the aggregate Liquidation Amount
of such outstanding Preferred Securities. The manner of obtaining any such
approval will be as set forth under "Description of Preferred Securities--
Voting Rights; Amendment of Each Trust Agreement." All guarantees and
agreements contained in each Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Corporation and shall inure to
the benefit of the holders of the related Preferred Securities then
outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of the
Corporation to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
related Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of such Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under such Guarantee.
Any holder of the Preferred Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under such Guarantee
without first instituting a legal proceeding against the Issuer, the Guarantee
Trustee or any other person or entity.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Corporation in performance of any Guarantee, undertakes to
perform only such duties as are specifically set forth in each Guarantee and,
after default with respect to any Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by any Guarantee at
the request of any holder of any Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
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TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Preferred Securities, upon
full payment of the amounts payable upon liquidation of the related Issuer or
upon distribution of Corresponding Junior Subordinated Debentures to the
holders of the related Preferred Securities in exchange therefor. Each
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the related Preferred Securities must restore
payment of any sums paid under such Preferred Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by the Corporation under each
Trust Agreement (the "Expense Agreement"), the Corporation will, as holder of
the Common Securities, irrevocably and unconditionally guarantee to each
Person to whom the Issuer becomes indebted or liable, the full payment of any
costs, expenses or liabilities of the Issuer, other than obligations of the
Issuer to pay to the holders of any Preferred Securities or other similar
interests in the Issuer of the amounts due such holders pursuant to the terms
of the Preferred Securities or such other similar interests, as the case may
be. The Expense Agreement will be enforceable by third parties.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE CORRESPONDING JUNIOR SUBORDINATED DEBENTURES,
THE EXPENSE AGREEMENT AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Corporation as and to the
extent set forth under "Description of Guarantees." Taken together, the
Corporation's obligations under each series of Corresponding Junior
Subordinated Debentures, the Indenture, the related Trust Agreement, the
related Expense Agreement, and the related Guarantee provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
distributions and other amounts due on the Related Preferred Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under the
Related Preferred Securities. If and to the extent that the Corporation does
not make payments on any series of Corresponding Junior Subordinated
Debentures, such Issuer will not pay Distributions or other amounts due on the
Related Preferred Securities. The Guarantees do not cover payment of
Distributions when the related Issuer does not have sufficient funds to pay
such Distributions. In such event, the remedy of a holder of a series of
Preferred Securities is to institute a legal proceeding directly against the
Corporation pursuant to the terms of the Indenture for enforcement of payment
of amounts equal to such Distributions to such holder. The obligations of the
Corporation under each Guarantee are subordinate and junior in right of
payment to all Senior Debt of the Corporation.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on each
series of Corresponding Junior Subordinated Debentures, such payments will be
sufficient to cover Distributions and other payments due on the Related
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to
the sum of the aggregate stated Liquidation
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Amount of the Related Preferred Securities and related Common Securities; (ii)
the interest rate and interest and other payment dates on each series of
Corresponding Junior Subordinated Debentures will match the Distribution rate
and Distribution and other payment dates for the Related Preferred Securities;
(iii) the Corporation shall pay for all and any costs, expenses and
liabilities of such Issuer except the Issuer's obligations to holders of its
Preferred Securities under such Preferred Securities; and (iv) each Trust
Agreement further provides that the Issuer will not engage in any activity
that is not consistent with the limited purposes of such Issuer.
Notwithstanding anything to the contrary in the Indenture, the Corporation
has the right to set-off any payment it is otherwise required to make
thereunder with and to the extent the Corporation has theretofore made, or is
concurrently on the date of such payment making, a payment under the related
Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any related Preferred Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the related
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the related Issuer or any other person or entity.
A default or event of default under any Senior Debt of the Corporation would
not constitute a default or Event of Default under the Indenture. However, in
the event of payment defaults under, or acceleration of, Senior Debt of the
Corporation, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Corresponding Junior Subordinated
Debentures until such Senior Debt has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on any
series of Corresponding Junior Subordinated Debentures would constitute an
Event of Default under the Indenture.
LIMITED PURPOSE OF ISSUERS
Each Issuer's Preferred Securities evidence a beneficial interest in such
Issuer, and each Issuer exists for the sole purpose of issuing its Preferred
Securities and Common Securities and investing the proceeds thereof in
Corresponding Junior Subordinated Debentures. A principal difference between
the rights of a holder of a Preferred Security and a holder of a Corresponding
Junior Subordinated Debenture is that a holder of a Corresponding Junior
Subordinated Debenture is entitled to receive from the Corporation the
principal amount of and interest accrued on Corresponding Junior Subordinated
Debentures held, while a holder of Preferred Securities is entitled to receive
Distributions from such Issuer (or from the Corporation under the applicable
Guarantee) if and to the extent such Issuer has funds available for the
payment of such Distributions. However, taken together, the Corporation's
obligations under each series of Corresponding Junior Subordinated Debentures,
the Indenture, the related Trust Agreement, the related Expense Agreement, and
the related Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of distributions and other amounts due on
the Related Preferred Securities. See "--Full and Unconditional Guarantee".
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Issuer involving the liquidation of the Corresponding Junior Subordinated
Debentures, the holders of the related Preferred Securities will be entitled
to receive, out of the assets held by such Issuer, the Liquidation
Distribution in cash. See "Description of Preferred Securities--Liquidation
Distribution Upon Termination." Upon any voluntary or involuntary liquidation
or bankruptcy of the Corporation, the Property Trustee, as holder of the
Corresponding Junior Subordinated Debentures, would be a subordinated creditor
of the Corporation, subordinated in right of payment to all Senior Debt as set
forth in the Indenture, but entitled to receive payment in full of principal
and interest, before any stockholders of the Corporation receive payments or
distributions. Since the Corporation is the guarantor under each Guarantee and
has agreed to pay for all costs, expenses and liabilities of each Issuer
(other than the Issuer's obligations to the holders of its Preferred
Securities), the positions of a holder of such Preferred Securities and a
holder of such Corresponding Junior Subordinated Debentures relative to other
39
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creditors and to stockholders of the Corporation in the event of liquidation
or bankruptcy of the Corporation are expected to be substantially the same.
PLAN OF DISTRIBUTION
The Junior Subordinated Debentures or the Preferred Securities may be sold
in a public offering to or through underwriters or dealers designated from
time to time. The Corporation and each Issuer may sell its Junior Subordinated
Debentures or Preferred Securities as soon as practicable after effectiveness
of the Registration Statement of which this Prospectus forms a part. The names
of any underwriters or dealers involved in the sale of the Junior Subordinated
Debentures or Preferred Securities in respect of which this Prospectus is
delivered, the amount or number of Junior Subordinated Debentures and
Preferred Securities to be purchased by any such underwriters and any
applicable commissions or discounts will be set forth in the applicable
Prospectus Supplement.
Underwriters may offer and sell Junior Subordinated Debentures or Preferred
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. In connection with the
sale of Preferred Securities, underwriters may be deemed to have received
compensation from the Corporation and/or the applicable Issuer in the form of
underwriting discounts or commissions and may also receive commissions.
Underwriters may sell Junior Subordinated Debentures or Preferred Securities
to or through dealers, and such dealers may receive compensation in the form
of discounts, concessions or commissions from the underwriters.
Any underwriting compensation paid by the Corporation and/or the applicable
Issuer to underwriters in connection with the offering of Junior Subordinated
Debentures or Preferred Securities, and any discounts, concessions or
commissions allowed by such underwriters to participating dealers, will be
described in an accompanying Prospectus Supplement. Underwriters and dealers
participating in the distribution of Junior Subordinated Debentures or
Preferred Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of such
Junior Subordinated Debentures or Preferred Securities may be deemed to be
underwriting discounts and commissions, under the Securities Act. Underwriters
and dealers may be entitled, under agreement with the Corporation and the
applicable Issuer, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act, and to
reimbursement by the Corporation for certain expenses.
In connection with the offering of the Preferred Securities of any Issuer,
such Issuer may grant to the underwriters an option to purchase additional
Preferred Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set
forth in the accompanying Prospectus Supplement. If such Issuer grants any
over-allotment option, the terms of such over-allotment option will be set
forth in the Prospectus Supplement for such Preferred Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, the Corporation and/or the applicable Issuer and/or any of their
affiliates in the ordinary course of business.
The Junior Subordinated Debentures and the Preferred Securities will be new
issues of securities and will have no established trading market. Any
underwriters to whom Junior Subordinated Debentures or Preferred Securities
are sold for public offering and sale may make a market in such Junior
Subordinated Debentures and Preferred Securities, but such underwriters will
not be obligated to do so and may discontinue any market making at any time
without notice. Such Junior Subordinated Debentures or Preferred Securities
may or may not be listed on a national securities exchange or the Nasdaq
National Market. No assurance can be given as to the liquidity of or the
existence of trading markets for any Junior Subordinated Debentures or
Preferred Securities.
40
<PAGE>
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, certain
matters of Delaware law relating to the validity of the Preferred Securities,
the enforceability of the Trust Agreements and the formation of the Issuers
will be passed upon by Richards, Layton & Finger, One Rodney Square,
Wilmington, Delaware 19801, special Delaware counsel to the Corporation and
the Issuers. Unless otherwise indicated in the applicable Prospectus
Supplement, the validity of the Guarantees and the Junior Subordinated
Debentures will be passed upon for the Corporation by Carl Krasik, Esq.,
Associate General Counsel and Secretary of the Corporation, One Mellon Bank
Center, Pittsburgh, Pennsylvania 15258, and for the Underwriters by Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004. Mr. Krasik will rely on
the opinion of Richards, Layton & Finger as to matters of Delaware law and on
the opinion of Sullivan & Cromwell as to matters of New York law. Sullivan &
Cromwell will rely on the opinion of Mr. Krasik as to matters of Pennsylvania
law. Certain matters relating to United States federal income tax
considerations will be passed upon for the Corporation by Sullivan & Cromwell,
as special tax counsel for the Corporation. Sullivan & Cromwell from time to
time performs legal services for the Corporation. At September 30, 1996, Mr.
Krasik held options covering 5,950 shares of the Corporation's Common Stock.
EXPERTS
The consolidated financial statements of the Corporation and subsidiaries
appearing in the Corporation's Annual Report (Form 10-K) for the year ended
December 31, 1995 have been audited by KPMG Peat Marwick LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
41
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PRO-
SPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CRE-
ATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPO-
RATION SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Risk Factors............................................................... S-4
Mellon Capital II.......................................................... S-9
Mellon Bank Corporation.................................................... S-9
Selected Consolidated Financial Information
of the Corporation........................................................ S-12
Ratio of Earnings to Fixed Charges......................................... S-14
Use of Proceeds............................................................ S-15
Capitalization............................................................. S-16
Accounting Treatment....................................................... S-17
Certain Terms of Series B Capital Securities............................... S-17
Certain Terms of Series B Subordinated Debentures.......................... S-21
Certain Terms of Series B Guarantee........................................ S-25
Certain Federal Income Tax Consequences.................................... S-25
Pennsylvania Corporate Loans Tax........................................... S-28
Certain ERISA Considerations............................................... S-29
Underwriting............................................................... S-30
Validity of Securities..................................................... S-32
<CAPTION>
PROSPECTUS
<S> <C>
Available Information...................................................... 4
Incorporation of Certain Documents by Reference............................ 4
Mellon Bank Corporation.................................................... 5
The Issuers................................................................ 5
Use of Proceeds............................................................ 6
Certain Regulatory Considerations.......................................... 7
Description of Junior Subordinated Debentures.............................. 10
Description of Preferred Securities........................................ 22
Book-Entry Issuance........................................................ 34
Description of Guarantees.................................................. 35
Relationship Among the Preferred Securities,
the Corresponding Junior Subordinated Debentures, the Expense Agreement
and the Guarantees........................................................ 38
Plan of Distribution....................................................... 40
Validity of Securities..................................................... 41
Experts.................................................................... 41
</TABLE>
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$500,000,000
[LOGO OF MELLON BANK CORPORATION]
MELLON CAPITAL II
7.995% CAPITAL SECURITIES, SERIES B
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
MELLON BANK CORPORATION
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
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