<PAGE>
PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 33-62151
PROSPECTUS SUPPLEMENT
(To Prospectus Dated September 6, 1995)
MELLON FINANCIAL COMPANY
(A WHOLLY OWNED SUBSIDIARY OF MELLON BANK CORPORATION)
$350,000,000
6 3/8% Subordinated Debentures due February 15, 2010
Unconditionally Guaranteed on a Subordinated Basis as to Payment of Principal
and Interest by
MELLON BANK CORPORATION
Interest payable February 15 and August 15
ISSUE PRICE: 99.420%
The 6 3/8% Subordinated Debentures due February 15, 2010 (the "Subordinated
Debentures") of Mellon Financial Company (the "Company") are unconditionally
guaranteed on a subordinated basis as to payment of principal and interest (the
"Guarantees") by Mellon Bank Corporation (the "Corporation"). Interest on the
Subordinated Debentures is payable semi-annually on February 15 and August 15
of each year, commencing August 15, 1998. The Subordinated Debentures will not
be redeemable prior to maturity and will not be subject to any sinking fund.
The Subordinated Debentures will be issued only in registered form in
denominations of $1,000 and integral multiples thereof.
The Subordinated Debentures will be subordinated to Senior Indebtedness of the
Company and the Guarantees will be subordinated to Senior Indebtedness of the
Corporation, as described in the accompanying Prospectus under "Subordinated
Securities--Subordination." The Subordinated Indenture does not provide for any
right of acceleration of the payment of principal of the Subordinated
Debentures upon a default in the payment of principal or interest or in the
performance of any covenant or agreement in the Subordinated Debentures or the
Subordinated Indenture. See "Subordinated Securities--Events of Default and
Limited Rights of Acceleration" in the accompanying Prospectus.
The Subordinated Debentures will initially be represented by one or more global
debentures (the "Global Debentures") registered in the name of The Depository
Trust Company, as Depositary, or its nominee ("Book-Entry Debentures"), but
may, under certain limited circumstances, be exchangeable for certificates
issued in definitive form ("Certificated Debentures"). Beneficial interests in
Book-Entry Debentures will be shown on, and transfers thereof will be effected
only through, records maintained by the Depositary (with respect to its
participants' interests) and its participants. See "Book-Entry System."
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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (1) (3)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Per Subordinated Debenture 99.420% .386% 99.034%
- ------------------------------------------------------------------------
Total $347,970,000 $1,351,000 $346,619,000
- ------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from February 12, 1998.
(2) The Company and the Corporation have agreed to indemnify the Underwriter
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company, estimated at $250,000.
The Subordinated Debentures are offered by the Underwriter, as specified
herein, subject to receipt and acceptance by the Underwriter and subject to its
right to reject any order in whole or in part. It is expected that delivery of
the Global Debentures will be made in book entry form on or about February 12,
1998, through the facilities of the Depositary, against payment therefor in
immediately available funds.
J.P. MORGAN & CO.
February 9, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABLILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SUBORDINATED
DEBENTURES. SPECIFICALLY, THE UNDERWRITER MAY OVERALLOT IN CONNECTION WITH THE
OFFERING AND MAY BID FOR, AND PURCHASE, THE SUBORDINATED DEBENTURES IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference 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 Prospectus 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, create any implication that there
has been no change in the affairs of the Company or the Corporation since the
date hereof or that the information contained or incorporated by reference
herein or therein is correct as of any time subsequent to the date of such
information.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Mellon Bank Corporation................................................... S-3
Mellon Financial Company.................................................. S-3
Use of Proceeds........................................................... S-3
Certain Regulatory Considerations......................................... S-4
Mellon Bank Corporation Capitalization.................................... S-5
Mellon Bank Corporation and Subsidiaries Consolidated Selected Historical
Financial Data........................................................... S-6
Description of Subordinated Debentures and Guarantees..................... S-8
Book-Entry System......................................................... S-9
Underwriting.............................................................. S-11
Validity of the Subordinated Debentures and Guarantees.................... S-12
PROSPECTUS
Statement of Available Information........................................ 2
Incorporation of Certain Documents by Reference........................... 2
Mellon Bank Corporation................................................... 3
Mellon Financial Company.................................................. 3
Use of Proceeds........................................................... 4
Certain Regulatory Considerations......................................... 4
Mellon Bank Corporation Consolidated Summary Financial Data............... 8
Description of Debt Securities and Guarantees............................. 11
Senior Securities......................................................... 17
Subordinated Securities................................................... 18
Certain Tax Considerations................................................ 20
Plan of Distribution...................................................... 20
Validity of Debt Securities and Guarantees................................ 21
Experts................................................................... 22
</TABLE>
S-2
<PAGE>
MELLON BANK CORPORATION
The Corporation is a multibank holding company incorporated under the laws of
Pennsylvania and registered under the Federal Bank Holding Company Act of 1956,
as amended. Its principal, wholly owned subsidiaries are Mellon Bank, N.A., The
Boston Company, Inc., Mellon Bank (DE) National Association, Mellon Bank (MD)
National Association, Buck Consultants, Inc. and the companies known as the
Mellon Financial Services Corporations. The Corporation also owns a Federal
savings bank headquartered in Pennsylvania, 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, N.A.
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).
MELLON FINANCIAL COMPANY
The Company is a wholly owned subsidiary of the Corporation incorporated
under the laws of Pennsylvania to function as a financing entity for the
Corporation and its subsidiaries and affiliates through the issuance of
commercial paper and other debt guaranteed by the Corporation. Financial data
for the Company is combined with the Corporation and with Mellon Capital I and
Mellon Capital II (special purpose business trusts formed by the Corporation
for the sole purpose of issuing capital securities) for financial reporting
purposes due to the limited function of the Company and the unconditional
guarantees by the Corporation of all of the obligations of the Company, Mellon
Capital I and Mellon Capital II. The registered office of the Company is
located at One Mellon Bank Center, 500 Grant Street, Pittsburgh, Pennsylvania
15258 (telephone (412) 234-5000).
USE OF PROCEEDS
The Company will apply the net proceeds from the sale of the Subordinated
Debentures offered hereby to its general funds to be used for its corporate
financing purposes, including extensions of credit to the Corporation and to
subsidiaries and affiliates of the Corporation, including its bank
subsidiaries, which will use the proceeds of such extensions of credit for
general corporate purposes, possibly including acquisitions, and repayments and
redemptions of outstanding indebtedness. The precise amounts and time of the
application of proceeds will depend upon funding requirements of the
Corporation and its subsidiaries and affiliates.
S-3
<PAGE>
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
The Company and the Corporation (together sometimes referred to herein as the
"parent Corporation") are legal entities separate and distinct from the
Corporation's 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") or
the Board of Governors of the Federal Reserve System, as applicable, is
required if the total of all dividends declared by any such national or state
member bank subsidiary in any calendar year exceeds its net profits (as
defined) for that year combined with its retained net profits for the preceding
two calendar years. Additionally, such 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 federal dividend
limitations, the Corporation's bank subsidiaries can, without prior regulatory
approval, declare dividends subsequent to December 31, 1997 of up to
approximately $535 million of their retained earnings of approximately $2.702
billion at December 31, 1997, less any dividends declared and plus or minus net
profits or losses (as defined) between January 1, 1998 and the date of any such
dividend declaration. The payment of dividends is also limited by minimum
capital requirements imposed on all such bank subsidiaries. The Corporation's
bank subsidiaries exceed these minimum requirements. The ability of state
member banks to pay dividends is also limited by state banking regulations. The
Corporation's bank subsidiaries declared dividends to the parent Corporation of
$450 million in 1997, $400 million in 1996 and $501 million in 1995. Dividends
paid to the parent Corporation by non-bank subsidiaries totaled $34 million in
1997, $21 million in 1996 and $30 million in 1995. In addition, Mellon Bank,
N.A. returned $200 million and $300 million of capital to the parent
Corporation in 1996 and 1995, respectively, and The Boston Company returned
$100 million and $150 million of capital to the parent Corporation in 1997 and
1996, respectively.
FDIC INSURANCE ASSESSMENTS
Substantially all of the deposits of the banking subsidiaries of the
Corporation are insured up to applicable limits by the Bank Insurance Fund
("BIF") of the Federal Deposit Insurance Corporation ("FDIC") and are subject
to deposit insurance assessments to maintain the BIF. The FDIC utilizes a risk-
based assessment system which imposes insurance premiums based upon a matrix
that takes into account a bank's capital level and supervisory rating. Such
premiums now range from 0 cents for each $100 of domestic deposits for the
healthiest institutions to 27 cents for each $100 of domestic deposits for the
weakest institutions. In addition, the Deposit Insurance Fund Act of 1996
authorizes the Financing Corporation ("FICO") to impose assessments on BIF
assessable deposits in order to service the interest on FICO's bond
obligations. The FICO assessment on these deposits is approximately 1.3 cents
for each $100 of domestic deposits.
INTERSTATE BANKING AND BRANCHING LEGISLATION
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, States were given the option to "opt-out" of the interstate branching
authority by taking action prior to June 1, 1997. Pennsylvania did not "opt-
out", thereby enabling Pennsylvania banks 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. See
"Certain Regulatory Considerations--Interstate Banking and Branching
Legislation" in the accompanying Prospectus.
S-4
<PAGE>
MELLON BANK CORPORATION
CAPITALIZATION
Set forth below is a table showing the consolidated capitalization of the
Corporation and its subsidiaries at December 31, 1997 and as adjusted to give
effect to the issuance of the Subordinated Debentures offered hereby. The
capitalization table should be read in conjunction with the information and
financial statements of the Corporation available as described under
"Incorporation of Certain Documents by Reference" in the Prospectus.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
DECEMBER 31, DECEMBER 31,
1997 1997 (A)
(DOLLAR AMOUNTS IN MILLIONS) ------------ ------------
<S> <C> <C>
Commercial paper.................................... $ 67 $ 67
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 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 1998-2001
(10.10% to 10.50% at December 31, 1997).......... 22 22
7 1/4% Convertible Subordinated Capital Notes due
1999............................................. 2 2
6 3/8% Subordinated Debentures due 2010........... -- 350
Subsidiaries:
7 3/8% Subordinated Notes due 2007................ 298 298
7% Subordinated Notes due 2006.................... 300 300
7 5/8% Subordinated Notes due 2007................ 249 249
6 1/2% Subordinated Notes due 2005................ 249 249
6 3/4% Subordinated Notes due 2003................ 149 149
Medium Term Bank Notes due 1998-2007 (5.64% to
8.55% at December 31, 1997)...................... 303 303
Various notes and obligations under capital
leases due 1998-2001 (5.03% to 10.50% at
December 31, 1997)................................ 2 2
------- -------
Total notes and debentures....................... 2,573 2,923
------- -------
Total commercial paper, notes and debentures..... 2,640 2,990
------- -------
Guaranteed Preferred Beneficial Interests in
Corporation's Junior Subordinated Deferrable
Interest Debentures, Series A...................... 495 495
Guaranteed Preferred Beneficial Interests in
Corporation's Junior Subordinated Deferrable
Interest Debentures, Series B...................... 496 496
Shareholders' equity:
8.20% Preferred Stock--$1.00 par value and $25.00
liquidation value
Authorized and issued--8,000,000 shares
(Series K)....................................... 193 193(C)
Common Stock--$.50 par value
Authorized--400,000,000 shares
Issued--294,330,960 shares....................... 147 147
Additional paid-in capital......................... 1,818 1,818
Retained earnings.................................. 2,872 2,872
Net unrealized gain on assets available for sale,
net of tax....................................... 33 33
Treasury stock of 40,545,114 shares at cost........ (1,218) (1,218)
------- -------
Total shareholders' equity...................... 3,845 3,845
------- -------
Total capitalization............................ $ 7,476 $ 7,826
======= =======
</TABLE>
- --------
(A) Reflects the issuance of $350 million of Subordinated Debentures offered
hereby.
(B) Parent Corporation includes the accounts of the Corporation as well as of
the Company and of Mellon Capital I and Mellon Capital II (special purpose
business trusts formed by the Corporation that exist solely to issue
capital securities).
(C) On January 8, 1998, the Corporation announced that it will redeem its
Series K Preferred Stock on February 17, 1998. The $193 million of Series K
Preferred Stock was recorded net of $7 million of issuance costs.
S-5
<PAGE>
MELLON BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED SELECTED HISTORICAL FINANCIAL DATA
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" in the
Prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE
YEAR ENDED
DECEMBER 31,
------------------
1997 1996
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) ------- -------
<S> <C> <C>
Income Statement Data:
Net interest revenue...................................... $ 1,467 $ 1,478
Provision for credit losses............................... 148 155
------- -------
Net interest revenue after provision for credit losses.... 1,319 1,323
Fee revenue............................................... 2,418 2,019
Gains on sale of securities............................... -- 4
Operating expense......................................... 2,568 2,195
Provision for income taxes................................ 398 418
------- -------
Net income................................................ $ 771 $ 733
Net income applicable to common stock..................... 750 689
Consolidated Per Common Share Data(A):
Basic net income.......................................... $ 2.94 $ 2.63
Diluted net income........................................ 2.88 2.58
Dividends................................................. 1.29 1.18
Book value at period end.................................. 14.39 13.43
Average common shares and equivalents outstanding:
Basic (in thousands)..................................... 255,356 262,411
Diluted (in thousands)................................... 260,829 266,591
Key Ratios:
Return on assets(B)....................................... 1.80% 1.74%
Return on common shareholders' equity(B).................. 21.5 20.4
Net interest margin(B)(C)................................. 4.24 4.26
Dividends per common share as a percentage of:
Basic net income per share............................... 44.01 44.96
Diluted net income per share............................. 44.00 44.95
Consolidated Balance Sheet Data--Average Balances(B):
Money market investments.................................. $ 1,186 $ 1,381
Securities................................................ 5,593 6,184
Loans..................................................... 27,823 27,233
Total interest-earning assets............................. 34,777 34,944
Total assets.............................................. 42,942 42,013
Deposits.................................................. 30,459 30,838
Notes and debentures (with original maturities over one
year).................................................... 2,712 2,038
Capital securities........................................ 990 32
Common shareholders' equity............................... 3,494 3,381
Capital Ratios:
Common shareholders' equity to assets(D).................. 8.13% 8.11%
Average common shareholders' equity to average assets(B).. 8.14 8.05
Tier I capital ratio(D)................................... 7.78(E) 8.38
Total (Tier I plus Tier II) capital ratio(D).............. 12.74(E) 13.58
Leverage capital ratio(D)................................. 8.02(E) 8.31
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR
ENDED DECEMBER 31,
------------------
1997 1996
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) ------- -------
<S> <C> <C>
Asset Quality Ratios(F):
Reserve for credit losses as a percentage of:
Total loans(D)......................................... 1.63% 1.92%
Nonperforming loans(D)................................. 356 556
Net credit losses as a percentage of average loans(B)... 0.72 0.46
Nonperforming assets as a percentage of total loans and
net acquired property(D)............................... 0.62 0.63
Ratio of Earnings to Fixed Charges:
Mellon Bank Corporation (parent Corporation)(G)......... 3.01 4.46
Mellon Bank Corporation and its subsidiaries(H):
Excluding interest on deposits......................... 3.35 3.86
Including interest on deposits......................... 1.85 1.88
</TABLE>
- --------
(Note:) The comparability of this information has been affected by Mellon's
November 14, 1997, acquisition of Pacific Brokerage Services, Inc., the
July 1, 1997 acquisition of Buck Consultants, Inc., the October 1,
1996, acquisition of First United Leasing Corporation and the September
30, 1996 acquisition of the business equipment financing unit of USL
Capital Corporation.
(A) Basic and diluted earnings per common share are presented in accordance
with the requirements of Financial Accounting Standards No. 128, "Earnings
per Share," which was adopted by the Corporation at year-end 1997. Prior
period amounts are restated. In addition, prior period amounts were
restated to reflect the two-for-one common stock split distributed on June
2, 1997.
(B) Computed on a daily average basis.
(C) Calculated on a taxable equivalent basis, at a tax rate approximating 35%.
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) Estimated.
(F) Segregated assets acquired in the 1992 Meritor acquisition are not reported
as loans and therefore are not included in nonperforming loans. At December
31, 1996, the reserve for segregated assets of $4 million is not included
in the reserve for credit losses. There was no reserve for segregated
assets at December 31, 1997.
(G) The parent Corporation ratios include the accounts of the Corporation and
the Company, and Mellon Capital I and Mellon Capital II, special purpose
business trusts formed by the Corporation, that exist solely to issue
capital securities. 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, amortization of debt issuance costs
and capital securities expense. Because the ratios exclude from earnings
the equity in undistributed net income (loss) of subsidiaries, the ratios
vary with the payment of dividends by such subsidiaries.
(H) 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, amortization of
debt issuance costs and capital securities expense. 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, amortization of debt issuance costs
and capital securities expense.
S-7
<PAGE>
DESCRIPTION OF SUBORDINATED DEBENTURES AND GUARANTEES
The Subordinated Debentures will be issued under an Indenture, dated as of
August 25, 1995 (the "Subordinated Indenture"), among the Company, the
Corporation and The Bank of New York (as successor trustee to First Interstate
Bank of California), as Trustee (the "Trustee"). A copy of the Subordinated
Indenture is filed as an exhibit to the Registration Statement and its terms
are more fully described in the Prospectus. The following description of the
particular terms of the Subordinated Debentures offered hereby (referred to in
the accompanying Prospectus as the "Offered Debt Securities" or "Subordinated
Securities") and of the Subordinated Indenture supplements, and to the extent
inconsistent therewith replaces, the descriptions of the general terms and
provisions of the Debt Securities and of the Subordinated Indenture as set
forth in the Prospectus, to which descriptions reference is hereby made.
The Subordinated Debentures will be unsecured, will rank pari passu with all
subordinated indebtedness of the Company and will be subordinated in right of
payment to all Senior Indebtedness of the Company. The Guarantees will be
unsecured and will rank pari passu with all subordinated indebtedness of the
Corporation and will be subordinated in right of payment to all Senior
Indebtedness of the Corporation. There is no limitation on the issuance of
additional Senior Indebtedness of the Company or the Corporation. The Company
and the Corporation expect from time to time to incur additional indebtedness
constituting Senior Indebtedness. As of December 31, 1997, the aggregate
principal amount of Senior Indebtedness of the Corporation (including
indebtedness of the Company guaranteed by the Corporation on a senior basis)
outstanding was approximately $489 million.
The Subordinated Indenture does not contain covenants specifically designed
to protect Holders in the event of a highly leveraged transaction or provide
for any right of acceleration of the payment of principal of the Subordinated
Debentures upon a default in the payment of principal of, or interest on, or in
the performance of any covenant or agreement in, the Subordinated Debentures or
the Subordinated Indenture. Currently, neither the Company nor the Corporation
is in default in the payment of principal, premium or interest on any
outstanding subordinated indebtedness. See, generally, "Subordinated
Securities" in the Prospectus.
The Subordinated Debentures offered hereby will be limited to $350,000,000
aggregate principal amount. The Subordinated Debentures will be denominated in
U.S. dollars and payments of principal of and interest on the Subordinated
Debentures will be in U.S. dollars. The Subordinated Debentures will be issued
only in fully registered form, without coupons, in denominations of $1,000 and
integral multiples thereof. Upon issuance, the Subordinated Debentures will be
Book-Entry Debentures represented by one or more Global Debentures registered
in the name of the nominee of the Depositary. See "Book-Entry System" below.
The Subordinated Debentures will mature on February 15, 2010, and will bear
interest at the rate per annum shown on the front cover of this Prospectus
Supplement from February 12, 1998 or from the most recent Interest Payment Date
to which interest has been paid or provided for, payable semi-annually on
February 15 and August 15 of each year, commencing August 15, 1998, to the
Person in whose name the Subordinated Debenture (or any predecessor
Subordinated Debenture) is registered at the close of business on the preceding
February 1 or August 1, as the case may be. Interest payments will be computed
and paid on the basis of a 360-day year of twelve 30-day months. The Trustee
will serve as Security Registrar and Paying Agent for the Subordinated
Debentures.
Payment of the principal of and interest on each Global Debenture
representing Book-Entry Debentures will be made on each Interest Payment Date
or at maturity by the Trustee as Paying Agent by wire transfer of immediately
available funds to a separate account of the Depositary or its nominee at the
Federal Reserve Bank of New York, provided that, in the case of payments made
at maturity of such Global Debenture, the Global Debenture is presented to the
Trustee in time for the Trustee to make such payments in accordance with its
normal procedures. Payments to beneficial owners of Book-Entry
S-8
<PAGE>
Debentures will be made through the Depositary and its participants. See "Book-
Entry System." For a description of the payment of principal of and interest on
Certificated Debentures, see "Description of Debt Securities and Guarantees--
Payment and Paying Agents" in the accompanying Prospectus.
The Subordinated Debentures will not be redeemable by the Company prior to
their Stated Maturity and will not be entitled to the benefit of a sinking
fund. The Company may at any time repurchase Subordinated Debentures at any
price in the open market or otherwise. Subordinated Debentures so purchased by
the Company may be held or resold or, at the discretion of the Company, may be
surrendered to the Trustee for cancellation.
REGARDING THE BANK OF NEW YORK
The Corporation's bank subsidiaries maintain deposit accounts and conduct
other banking transactions with The Bank of New York in the ordinary course of
business. The Bank of New York is a participant in the $300 million revolving
credit facility created to provide back-up support for the Corporation's
commercial paper borrowings.
BOOK-ENTRY SYSTEM
Upon issuance, all Subordinated Debentures will be represented by one or more
Global Debentures issued in registered form. Such Global Debentures
representing Book-Entry Debentures will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York (the "Depositary") and registered
in the name of a nominee of the Depositary. Except under the circumstances
described below, Book-Entry Debentures will not be exchangeable for
Certificated Debentures.
Ownership of Book-Entry Debentures will be limited to institutions that have
accounts with such Depositary or its nominee ("participants") or persons that
may hold interests through such participants. In addition, ownership of Book-
Entry Debentures by participants will only be evidenced by, and the transfer of
that ownership interest will be effected only through, records maintained by
the Depositary or its nominee, as the case may be. Ownership of Book-Entry
Debentures by persons that hold through participants will only be evidenced by,
and the transfer of that ownership interest within such participant will be
effected only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the
ability to transfer Book-Entry Debentures.
The Company has been advised by the Depositary that upon the issuance of a
permanent Global Debenture or Debentures representing Book-Entry Debentures,
and the deposit of such permanent Global Debenture or Debentures with, or on
behalf of, the Depositary, the Depositary will immediately credit, on its book-
entry registration and transfer system, the respective principal amounts of the
Book-Entry Debentures represented by such permanent Global Debenture or
Debentures to the accounts of participants. The accounts to be credited shall
be designated by the Underwriter.
Payments of principal of and interest on Book-Entry Debentures represented by
any permanent Global Debenture or Debentures registered in the name of or held
by the Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owner and the Holder of the permanent
Global Debenture or Debentures representing such Book-Entry Debentures. Such
payments to the Depositary or its nominee, as the case may be, will be made by
the Trustee by wire transfer of immediately available funds to a separate
account of the Depositary or its nominee at the Federal Reserve Bank of New
York, provided that, in the case of payments made at maturity of such Global
Debenture or Debentures, the Global Debenture or Debentures are presented to
the Trustee in time for the Trustee to make such payments in accordance with
its normal procedures. None of the Company, the Corporation or the Trustee or
any agent of the Company, the Corporation or the Trustee will have any
responsibility or liability for any aspect of the Depositary's records or any
participant's
S-9
<PAGE>
records relating to, or payments made on account of, Book-Entry Debentures or
for maintaining, supervising or reviewing any of the Depositary's records or
any participant's records relating to such Book-Entry Debentures.
The Company has been advised by the Depositary that upon receipt of any
payment of principal of or interest on a permanent Global Debenture, the
Depositary will immediately credit, on its book-entry registration and transfer
system, accounts of participants with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such permanent
Global Debenture or Debentures as shown on the records of the Depositary.
Payments by participants to owners of Book-Entry Debentures held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers
registered in "street name," and will be the responsibility of such
participants.
No permanent Global Debenture or Debentures described above may be
transferred except as a whole by the Depositary for such permanent Global
Debenture or Debentures to a nominee of the Depositary or to a successor
depositary or by a nominee of the Depositary to the Depositary, another nominee
of the Depositary or to a successor depositary.
Book-Entry Debentures represented by a permanent Global Debenture are
exchangeable for definitive Subordinated Debentures in registered form, of like
tenor and of an equal aggregate principal amount, only if (a) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for such permanent Global Debenture or if at any time the Depositary ceases to
be a clearing agency registered under the Securities Exchange Act of 1934, (b)
the Company in its sole discretion determines that such Book-Entry Debentures
shall be exchangeable for definitive Subordinated Debentures in registered
form, or (c) any event shall have happened and be continuing which, after
notice or lapse of time, or both, would become an Event of Default with respect
to the Subordinated Debentures. Any permanent Global Debenture representing
Book-Entry Debentures that is exchangeable pursuant to the preceding sentence
shall be exchangeable in whole for Certificated Debentures in registered form,
of like tenor and of an equal aggregate principal amount, in denominations of
$1,000 and integral multiples thereof. Such definitive Subordinated Debentures
shall be registered in the name or names of such person or persons as the
Depositary shall instruct the Security Registrar. It is expected that such
instructions will be based upon directions received by the Depositary from its
participants with respect to ownership of Book-Entry Debentures.
Except as provided above, owners of Book-Entry Debentures will not be
entitled to receive physical delivery of Subordinated Debentures in definitive
form and will not be considered the Holders thereof for any purpose under the
Subordinated Indenture, and no permanent Global Debenture representing Book-
Entry Debentures shall be exchangeable, except for another permanent Global
Debenture of like denomination and tenor to be registered in the name of the
Depositary or its nominee. Accordingly, each person owning a Book-Entry
Debenture must rely on the procedures of the Depositary and, if such person is
not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a Holder under the
Subordinated Indenture. The Subordinated Indenture provides that the
Depositary, as a Holder, may appoint agents and otherwise authorize
participants to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action which a Holder is entitled to give or
take under the Subordinated Indenture. The Company understands that under
existing industry practices, in the event that the Company requests any action
of Holders or an owner of a Book-Entry Debenture desires to give or take any
action a Holder is entitled to give or take under the Subordinated Indenture,
the Depositary would authorize the participants owning the relevant Book-Entry
Debentures to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning
through them.
The Depositary has advised the Company and the Underwriter as follows: The
Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization"
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within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Securities Exchange Act of 1934. The Depositary holds
securities of its participants and facilitates the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (including the
Underwriter), banks, trust companies, clearing corporations, and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies, that clear through or maintain
a custodial relationship with a participant, either directly or indirectly.
UNDERWRITING
Under the terms and subject to the conditions set forth in the Underwriting
Agreement dated the date hereof, J.P. Morgan Securities Inc. (the
"Underwriter") has agreed to purchase, and the Company has agreed to sell to
the Underwriter, the entire principal amount of the Subordinated Debentures.
The Underwriting Agreement provides that the obligation of the Underwriter to
pay for and accept delivery of the Subordinated Debentures is subject to the
approval of certain legal matters by its counsel and to certain other
conditions. The Underwriter is committed to take and pay for all of the
Subordinated Debentures if any are taken.
The Underwriter proposes to offer part of the Subordinated Debentures
directly to the public at the initial public offering price set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of .25% of the principal amount of the Subordinated
Debentures. The Underwriter may allow, and such dealers may reallow, a
concession not in excess of .15% of the principal amount of the Subordinated
Debentures to certain other dealers. After the initial offering of the
Subordinated Debentures, the offering price and other selling terms may from
time to time be varied by the Underwriter.
The Company and the Corporation have agreed to indemnify the Underwriter
against certain liabilities, including liabilities under the Securities Act of
1933.
The Company does not intend to apply for listing of the Subordinated
Debentures on a national securities exchange but has been advised by the
Underwriter that it presently intends to make a market in the Subordinated
Debentures, as permitted by applicable laws and regulations. The Underwriter is
not obligated, however, to make a market in the Subordinated Debentures, and
any such market making may be discontinued at any time at the sole discretion
of the Underwriter. Accordingly, no assurance can be given as to the liquidity
of, or trading market for, the Subordinated Debentures.
In connection with the offering of the Subordinated Debentures, the
Underwriter may engage in transactions that stabilize, maintain or otherwise
affect the price of the Subordinated Debentures. Specifically, the Underwriter
may overallot in connection with the offering of the Subordinated Debentures,
creating a syndicate short position. In addition, the Underwriter may bid for,
and purchase, Subordinated Debentures in the open market to cover syndicate
shorts or to stabilize the price of the Subordinated Debentures. Finally, the
underwriting syndicate may reclaim selling concessions allowed for distributing
the Subordinated Debentures in the offering of the Subordinated Debentures, if
the syndicate repurchases previously distributed Subordinated Debentures in
syndicate covering transactions, stabilization transactions or otherwise. Any
of these activities may stabilize or maintain the market price of the
Subordinated Debentures above independent market levels. The Underwriter is not
required to engage in any of these activities and may end any of them at any
time.
S-11
<PAGE>
The Underwriter and its affiliates may engage in transactions with and
perform services for the Corporation and its subsidiaries in the ordinary
course of business.
VALIDITY OF THE SUBORDINATED DEBENTURES AND GUARANTEES
The validity of the Subordinated Debentures and related Guarantees will be
passed upon for the Company and the Corporation by Carl Krasik, Associate
General Counsel and Secretary of the Corporation, One Mellon Bank Center, 500
Grant Street, Pittsburgh, Pennsylvania 15258, and for the Underwriter by
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004. At January 31,
1998, Mr. Krasik owned approximately 500 shares of the Corporation's Common
Stock and held options covering an additional 8,250 shares of the Corporation's
Common Stock. Sullivan & Cromwell will rely as to all matters of Pennsylvania
law upon the opinion of Mr. Krasik. Sullivan & Cromwell from time to time
performs legal services for the Corporation.
S-12
<PAGE>
PROSPECTUS
MELLON FINANCIAL COMPANY
(A WHOLLY OWNED SUBSIDIARY OF MELLON BANK CORPORATION)
$1,500,000,000
DEBT SECURITIES
UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND
INTEREST, IF ANY, BY
MELLON BANK CORPORATION
Mellon Financial Company (the "Company") may issue from time to time in one
or more series up to $1,500,000,000 (or the equivalent thereof in foreign
currencies or currency units) aggregate principal amount of its unsecured debt
securities consisting of debentures, notes and/or other unsecured evidences of
indebtedness (the "Debt Securities"), which may be either senior (the "Senior
Securities") or subordinated (the "Subordinated Securities") in priority of
payment. All Senior Securities will be unconditionally guaranteed on a senior
basis as to payment of principal, premium, if any, and interest, if any, by
Mellon Bank Corporation (the "Corporation"). All Subordinated Securities will
be unconditionally guaranteed on a subordinated basis as to payment of
principal, premium, if any, and interest, if any, by the Corporation. The Debt
Securities may be offered as separate series in amounts, at prices and on
terms to be determined at the time of sale and to be set forth in supplements
to this Prospectus (the "Prospectus Supplement").
The terms of each series of Debt Securities, including, where applicable,
the specific designation, priority, aggregate principal amount, denominations,
maturity, premium, if any, rate or rates and time or times of payment of
interest, if any, terms for redemption at the option of the Company or the
holder, if any, terms for sinking or purchase fund payments, if any, the
initial public offering price, the proceeds to the Company, and any other
specific terms in connection with the offering and sale of the Debt Securities
in respect of which this Prospectus is being delivered, are set forth in the
accompanying Prospectus Supplement. The Subordinated Indenture does not
provide for any right of acceleration of the payment of principal of the
Subordinated Securities upon a default in the payment of principal or interest
or in the performance of any covenant or agreement in the Subordinated
Securities or the Subordinated Indenture. See "Subordinated Securities--Events
of Default and Limited Rights of Acceleration". As used herein, Debt
Securities shall include securities denominated in United States dollars or,
at the option of the Company if so specified in the Prospectus Supplement, in
any other currency or in composite currencies or in amounts determined by
reference to an index.
Debt Securities of a series will be issued in registered form without
coupons and may be issued, at the option of the Company, in the form of a
certificate in definite form (a "Certificated Security") or in the form of one
or more global securities in registered form (each a "Global Security").
The Debt Securities may be sold by the Company directly to purchasers,
through agents designated from time to time, through underwriting syndicates
led by one or more managing underwriters or through one or more underwriters
acting alone. If the Company, directly or through agents, solicits offers to
purchase the Debt Securities, the Company reserves the sole right to accept
and, together with its agents, to reject, in whole or in part, any such offer.
See "Plan of Distribution."
If any agent of the Company, or any underwriter, is involved in the sale of
the Debt Securities, the name of such agent or underwriter, the principal
amount to be purchased by it, any applicable commissions or discounts and the
net proceeds to the Company from such sale are set forth in, or may be
calculated from, the Prospectus Supplement. The aggregate net proceeds to the
Company from the sale of all the Debt Securities will be the public offering
or purchase price of the Debt Securities sold less the aggregate of such
commissions and discounts and other expenses of issuance and distribution. See
"Plan of Distribution" for possible indemnification and contribution
arrangements with agents or underwriters.
------------
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 COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE
NOT INSURED BY THE BANK INSURANCE FUND OR SAVINGS ASSOCIATION INSURANCE
FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION.
------------
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF DEBT SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT AND/OR AN ABBREVIATED TERM SHEET
UNDER RULE 434 OF THE SECURITIES ACT OF 1933.
------------
The date of this Prospectus is September 6, 1995
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE CORPORATION OR ANY UNDERWRITER OR AGENT. THIS
PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY DEBT SECURITIES IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN
OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION
OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE
CORPORATION SINCE SUCH DATE.
STATEMENT OF 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 Commission's regional offices at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. 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 Company and the Corporation have filed with the Commission a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Debt Securities and the related guarantees. 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
Company and the Corporation and the Debt Securities and related guarantees,
reference is made to the Registration Statement, including the exhibits
thereto. The Registration Statement may be inspected by anyone without charge
at the principal office of the Commission in Washington, D.C., and copies of
all or part of it may be obtained from the Commission upon payment of the
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission by the
Corporation are incorporated in this Prospectus by reference and made a part
hereof:
(1) The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994, 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, 1995 and June 30, 1995, each filed pursuant to Section
13 of the Exchange Act.
(3) The Corporation's Current Reports on Form 8-K dated January 13, 1995,
April 18, 1995, June 12, 1995, June 14, 1995, and July 18, 1995, each
filed pursuant to Section 13 of the Exchange Act.
2
<PAGE>
Each document or report subsequently filed by the Corporation with the
Commission 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 the offering of the Debt
Securities 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, other than
certain exhibits to such documents. Written requests should be directed to:
Secretary, Mellon Bank Corporation, Room 1820, One Mellon Bank Center, 500
Grant Street, Pittsburgh, Pennsylvania 15258. Telephone requests may be
directed to the Corporation at (412) 234-5222.
------------
MELLON BANK CORPORATION
The Corporation is a multibank holding company incorporated under the laws of
Pennsylvania and registered under the Bank Holding Company Act of 1956, as
amended. At December 31, 1994, the Corporation was the twenty-fourth largest
bank holding company in the United States in terms of assets. Its principal
wholly owned subsidiaries are Mellon Bank, N.A. ("Mellon Bank"), The Boston
Company, Inc. ("The Boston Company"), Mellon Bank (DE) National Association,
Mellon Bank (MD), Mellon PSFS (NJ) National Association and the companies known
as the Mellon Financial Services Corporations. The Corporation also owns a
federal savings bank located 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 banking, commercial
banking, trust and investment management services, residential real estate loan
financing, mortgage servicing, mutual fund and various securities-related
activities. Through various non-bank subsidiaries, the Corporation provides a
broad range of bank-related services, including commercial financial services,
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).
MELLON FINANCIAL COMPANY
The Company is a wholly owned subsidiary of the Corporation incorporated
under the laws of Pennsylvania to function as a financing entity for the
Corporation and its subsidiaries and affiliates through the issuance of
commercial paper and other debt guaranteed by the Corporation. Financial data
for the Company and the Corporation are combined for financial reporting
purposes due to the limited function of the Company and the unconditional
guarantees of all of the Company's obligations by the Corporation. The
registered office of the Company is located at One Mellon Bank Center, 500
Grant Street, Pittsburgh, Pennsylvania 15258 (telephone (412) 234-5000).
3
<PAGE>
USE OF PROCEEDS
The Company will apply the net proceeds from the sale of the Debt Securities
offered hereby to its general funds to be used for its corporate financing
purposes, including extensions of credit to the Corporation and to subsidiaries
and affiliates of the Corporation, including its bank subsidiaries, which will
use the proceeds of such extensions of credit for general corporate purposes,
possibly including acquisitions, and repayment at maturity of commercial paper
and other outstanding indebtedness. The precise amounts and timing of the
application of proceeds will depend upon funding requirements of the
Corporation and its subsidiaries and affiliates and the amount of Debt
Securities offered from time to time pursuant to this Prospectus. For a more
precise description regarding the application of the proceeds, see "Use of
Proceeds" in the Prospectus Supplement.
In view of its anticipated funding requirements, the Company expects that it
may, on a recurring basis, engage in additional private or public financings of
a character and amount to be determined as the need arises.
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
The Company and the Corporation (together sometimes referred to herein as the
"parent Corporation") are legal entities separate and distinct from the
Corporation's 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 1995
subsequent to June 30, 1995 of up to approximately $490 million of their
retained earnings of approximately $2.103 billion at June 30, 1995, less any
dividends declared and plus or minus net profits or losses, as defined, between
July 1, 1995, 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 Corporation's national bank
subsidiaries exceed these minimum requirements. The national bank subsidiaries
declared dividends to the parent Corporation of $201 million in the first six
months of 1995, $366 million in 1994, $185 million in 1993 and $154 million in
1992. Dividends paid to the parent Corporation by non-bank subsidiaries totaled
$13 million in the first six months of 1995, $122 million in 1994, $116 million
in 1993 and $26 million in 1992. In addition, Mellon Bank returned $300 million
of paid-in surplus to the parent Corporation in the second quarter of 1995, and
The Boston Company returned $100 million and $300 million of capital to the
parent Corporation 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
4
<PAGE>
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. As a result,
notwithstanding the level of dividends that could be declared without
regulatory approval by the Corporation's national bank subsidiaries as set
forth in the preceding paragraph, the level of dividends from such bank
subsidiaries to the Corporation in 1995 generally is not expected to exceed the
earnings for those subsidiaries. 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, non-bank
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.
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.
5
<PAGE>
At June 30, 1995, 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. The 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 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, 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 stocks, 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.
6
<PAGE>
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 will be 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 of 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 adopt a proposed rule to amend regulatory capital
regulations to incorporate the recent 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 an interest
rate risk component into their risk-based capital standards.
Certain consolidated ratios of the Corporation are included herein under
"Mellon Bank Corporation--Consolidated Summary Financial Data."
FDIC INSURANCE ASSESSMENTS
Substantially all of the deposits of the banking subsidiaries of the
Corporation are insured up to applicable limits by the Bank Insurance Fund
("BIF") of the FDIC and are subject to deposit insurance assessments to
maintain the BIF. The FDIC has adopted a risk-based assessment system to
replace the previous flat-rate system. The risk-based system imposes insurance
premiums based upon a matrix that takes into account a bank's capital level
and supervisory rating. In August 1995, the FDIC approved a reduction in the
assessment rates imposed on banks for BIF deposit insurance. As a result of
such reduction, such rates now range from 4 cents for each $100 of domestic
deposits for the healthiest institutions to 31 cents for each $100 of domestic
deposits for the weakest institutions.
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 will be 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.
7
<PAGE>
MELLON BANK CORPORATION CONSOLIDATED SUMMARY FINANCIAL DATA
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>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1993 1992 1991 1990
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Net interest revenue.......................... $ 1,508 $ 1,329 $ 1,182 $ 1,012 $ 912
Provision for credit losses................... 70 125 185 250 315
Net interest revenue after provision for
losses....................................... 1,438 1,204 997 762 597
Fee revenue................................... 1,652 1,538 1,154 1,007 933
Gains (losses) on sale of securities.......... (5) 100 129 81 28
Gain on sale of consumer finance subsidiary... -- -- -- -- 74
Operating expense............................. 2,374 2,084 1,648 1,440 1,355
Provision for income taxes.................... 278 298 104 62 41
------- ------- ------- ------- -------
Net income.................................... $ 433 $ 460 $ 528 $ 348 $ 236
Net income applicable to common stock......... 358 397 477 299 186
Consolidated Per Common Share Data:
Primary net income............................ $ 2.42 $ 2.73 $ 3.56 $ 2.39 $ 1.57
Dividends..................................... 1.57 1.01 0.93 0.93 0.93
Book value at period-end...................... 25.06 24.28 21.37 18.44 16.60
Average common shares and equivalents
outstanding (in thousands)................... 149,069 147,083 134,858 126,554 120,981
Results Excluding Certain Items(A):
Net income.................................... $ 652 $ 519 $ 398 $ 259 $ 182
Net income per common share................... 4.00 3.14 2.60 1.69 1.12
Return on average common shareholders' equity. 16.02% 13.71% 13.13% 8.97% 5.85%
Return on average assets...................... 1.71 1.46 1.29 0.87 0.59
Consolidated Balance Sheet--Average
Balances(B):
Money market investments...................... $ 1,656 $ 3,821 $ 1,905 $ 1,566 $ 2,927
Securities.................................... 5,149 4,804 6,500 5,778 5,238
Loans......................................... 25,097 21,763 18,235 18,514 18,845
Total interest-earning assets................. 32,282 30,657 26,948 26,167 27,288
Total assets.................................. 38,106 35,635 30,758 29,878 31,078
Deposits...................................... 27,248 26,541 22,684 21,438 22,084
Notes and debentures (with original maturities
over one year)............................... 1,768 1,991 1,365 1,448 1,722
Redeemable preferred stock.................... -- -- -- 51 94
Common shareholders' equity................... 3,691 3,323 2,603 2,190 2,042
Total shareholders' equity.................... 4,277 3,964 3,112 2,614 2,437
Consolidated Percentages:
Return on average common shareholders'
equity(B).................................... 9.79% 12.08% 18.45% 13.78% 9.30%
Return on average assets(B)................... 1.14 1.29 1.72 1.16 0.76
Net interest margin(B):
Taxable equivalent basis(C).................. 4.71 4.39 4.46 3.99 3.49
Without taxable equivalent increments........ 4.67 4.34 4.39 3.86 3.34
Dividends per common share as a percentage of
primary net income per common share.......... 54.66 31.28 21.11 29.52 43.95
Capital Ratios:
Common shareholders' equity to assets(D)...... 9.54% 9.57% 8.85% 7.91% 6.67%
Average common shareholders' equity to average
assets....................................... 9.68 9.32 8.46 7.33 6.57
Tier I capital ratio(D)....................... 9.48 9.70 10.20 9.05 7.42
Total (Tier I plus Tier II) capital ratio(D).. 12.90 13.22 13.83 13.16 11.28
Leverage capital ratio(D)..................... 8.67 9.00 9.45 8.62 6.91
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1993 1992 1991 1990
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Asset Quality Ratios(e):
Reserve for credit losses as a
percentage of:
Total loans(D)...................... 2.27% 2.45% 2.54% 3.12% 2.80%
Nonperforming loans(D).............. 403 297 152 113 100
Net credit losses as a percentage of
average loans....................... 0.27 0.64 1.52 1.24 2.15
Total nonperforming assets as a
percentage of total loans and net
acquired property(D)................ 0.89 1.39 2.94 4.78 4.11
Ratio of Earnings to Fixed Charges:
Mellon Bank Corporation (parent
Corporation)(F)..................... 5.56 3.03 2.73 2.42 1.75(H)
Mellon Bank Corporation and its
Subsidiaries:(G)
Excluding interest on deposits...... 3.35 4.17 3.62 2.15 1.41(H)
Including interest on deposits...... 1.84 2.09 1.72 1.30 1.11(H)
</TABLE>
- --------
Note: The August 1994 merger with Dreyfus was accounted for as a pooling of
interests. Therefore, all amounts, except for dividends per share, prior
to August 1994 have been restated to reflect the merger. Per share
amounts have also been restated to reflect the three-for-two common
stock split that occurred in November 1994. The comparability of the
information set forth above and on the prior page has been affected by
the Corporation's December 1993 acquisition of AFCO Credit Corporation
and CAFO, Inc., the May 1993 acquisition of The Boston Company, the
December 1992 acquisition of certain assets and deposit liabilities of
Meritor Savings Bank ("Meritor"), the December 1991 acquisition of
United Penn Bank and by the May 1990 acquisition of 54 branch offices of
PSFS from Meritor. These are described in detail in the Corporation's
Annual Reports on Form 10-K for the years ended December 31, 1990
through 1994.
Footnotes on following page.
9
<PAGE>
(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 The Boston Company. 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 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.
(F) The parent Corporation ratios include the accounts of the Corporation and
the 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 income taxes, and before 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 these ratios
exclude from earnings the equity in undistributed net income (loss) of
subsidiaries, these ratios vary with the payment of dividends by such
subsidiaries.
(G) 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.
(H) Excludes the $74 million gain on the sale of the Corporation's consumer
finance subsidiary. Including this gain, the ratio of earnings to fixed
charges would have been 2.25 for the parent Corporation. Including this
gain, the ratio of earnings to fixed charges would have been 1.56 excluding
interest on deposits, and 1.15 including interest on deposits for the
Corporation and its subsidiaries.
10
<PAGE>
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities and the guarantees
thereof by the Corporation (the "Guarantees") to which any Prospectus
Supplement may relate (the "Offered Debt Securities"). The particular terms of
the Offered Debt Securities and the extent, if any, to which such general
provisions may apply to the Debt Securities and the Guarantees so offered will
be described in the Prospectus Supplement relating to such Offered Debt
Securities. Except where specifically noted, the following description applies
to both Senior Securities and Subordinated Securities.
DEBT SECURITIES
The Debt Securities will be unsecured obligations of the Company and are not
insured by the Savings Association Insurance Fund or the Bank Insurance Fund of
the Federal Deposit Insurance Corporation.
The Debt Securities will constitute either senior debt of the Company (the
"Senior Securities") or subordinated debt of the Company (the "Subordinated
Securities"). The Senior Securities will be issued under an Indenture dated as
of May 2, 1988, as supplemented by the First Supplemental Indenture, dated as
of November 29, 1990 (the "Senior Indenture"), among the Company, the
Corporation and The Chase Manhattan Bank (National Association), as Trustee
("Chase"). The Subordinated Securities will be issued under an Indenture, dated
as of August 25, 1995 (the "Subordinated Indenture"), among the Company, the
Corporation and First Interstate Bank of California, as Trustee ("First
Interstate"). The Senior Indenture and the Subordinated Indenture are
collectively referred to herein as the "Indentures." References to the
"Trustee" shall mean Chase or First Interstate, as applicable.
The statements which follow under this caption are brief summaries of certain
provisions contained in the Indentures, do not purport to be complete and are
qualified in their entirety by reference to all the provisions of the
applicable Indenture, copies of which have been filed with the Commission as
exhibits to the Registration Statement or incorporated by reference therein.
Whenever defined terms are used but not defined herein, such terms shall have
the meanings ascribed to them in the applicable Indenture, it being intended
that such defined terms shall be incorporated herein by reference. References
to Sections are references to Sections in the applicable Indenture or, where
appropriate, to both Indentures.
Neither Indenture limits the aggregate principal amount of Debt Securities
which may be issued thereunder and each Indenture provides that Debt Securities
of any series may be issued thereunder up to the aggregate principal amount
which may be authorized from time to time by the Company. Neither the
Indentures nor the Debt Securities will limit or otherwise restrict the amount
of other indebtedness which may be incurred or the other securities which may
be issued by the Company or any of its affiliates.
Reference is made to the Prospectus Supplement for a description of the
following terms, where applicable, of each series of the Offered Debt
Securities in respect of which this Prospectus is being delivered: (1) the
title of the Offered Debt Securities; (2) any limit upon the aggregate
principal amount or aggregate initial public offering price of the Offered Debt
Securities; (3) the Person to whom any interest on an Offered Debt Security
shall be payable, if other than the Person in whose name the Offered Debt
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest; (4) the date or dates on
which the principal of the Offered Debt Securities is payable; (5) the rate or
rates at which the Offered Debt Securities shall bear interest, if any, or the
Floating or Adjustable Rate Provision pursuant to which such rates are
determined, the date or dates from which such interest shall accrue, the
Interest Payment Dates on
11
<PAGE>
which such interest shall be payable and the Regular Record Date for the
interest payable on any Interest Payment Date; (6) the place or places where
the principal of (and premium, if any) and interest on, or the principal (and
premium, if any) only of, Offered Debt Securities shall be payable; (7) the
period or periods within which, the price or prices at which and the terms and
conditions upon which Offered Debt Securities may be redeemed, in whole or in
part, at the option of the Company; (8) the obligation, if any, of the Company
to redeem or purchase Offered Debt Securities pursuant to any sinking fund or
analogous provisions or at the option of a Holder thereof and the period or
periods within which, the price or prices at which and the terms and conditions
upon which Offered Debt Securities shall be redeemed or purchased, in whole or
in part, pursuant to such obligations; (9) if other than denominations of
$100,000 and any integral multiple of $1,000 in excess thereof, the
denominations in which Offered Debt Securities shall be issuable; (10) any
other Event or Events of Default applicable with respect to Offered Debt
Securities in addition to those provided in Section 601 of the applicable
Indenture; (11) if other than the principal amount thereof, the portion of the
principal amount of Offered Debt Securities which shall be payable upon
declaration of acceleration of the Maturity thereof; (12) any other covenant or
warranty included for the benefit of Offered Debt Securities in addition to
(and not inconsistent with) those included in the applicable Indenture for the
benefit of all Debt Securities; (13) whether the Offered Debt Securities shall
be Certificated Securities or shall be issued in whole or in part in the form
of one or more Global Securities and, in such case, the Depositary for such
Global Security or Securities; (14) the currency or currencies, including
composite currencies, in which payment of the principal of and any premium and
interest on the Offered Debt Securities shall be payable if other than the
currency of the United States of America; (15) if the amount of payments of
principal of and any premium or interest on the Offered Debt Securities may be
determined with reference to an index, the manner in which such amounts shall
be determined; (16) if the principal of (and premium, if any) or interest on
the Offered Debt Securities are to be payable, at the election of the Company
or a Holder thereof, in a coin or currency other than that in which the Offered
Debt Securities are stated to be payable, the coin or currency in which payment
of the principal of (and premium, if any) or interest on Offered Debt
Securities as to which such election is made shall be payable, the period or
periods within which, and the terms and conditions upon which, such election
may be made; (17) whether the Offered Debt Securities are Senior Securities or
Subordinated Securities; (18) the price or prices (which may be expressed as a
percentage of the aggregate principal amount thereof) at which the Offered Debt
Securities will be issued; (19) any other terms of the Offered Debt Securities
(which terms shall not be inconsistent with the provisions of the applicable
Indenture). (Section 301)
If any of the Offered Debt Securities are sold for one or more foreign
currencies or foreign currency units or if the principal or premium, if any, or
interest, if any, on any series of Offered Debt Securities is payable in one or
more foreign currencies or foreign currency units, the restrictions, elections,
tax consequences, specific terms and other information with respect to such
issue of Offered Debt Securities and such currencies or currency units will be
set forth in the Prospectus Supplement relating thereto.
Debt Securities may be issued as Original Issue Discount Securities (bearing
no interest or interest at a rate which at the time of issuance is below market
rates), to be sold at a substantial discount below the stated principal amount
thereof due at the Stated Maturity of such Original Issue Discount Securities.
In the event of an acceleration of the Maturity of any Original Issue Discount
Security, the amount payable to the holder of such Original Issue Discount
Security upon such acceleration will be determined in accordance with the
applicable Prospectus Supplement, the terms of such security and the applicable
Indenture, but will be an amount less than the amount payable at the Maturity
of the principal of such Original Issue Discount Security. (Section 101)
Special Federal income tax, accounting and other considerations applicable to
Original Issue Discount Securities will be described in the Prospectus
Supplement relating thereto.
12
<PAGE>
GUARANTEES
The Corporation will unconditionally guarantee the due and punctual payment
of the principal of, and premium, if any, and interest, if any, and sinking
fund payments, if any, on the Debt Securities, when and as the same shall
become due and payable, whether at maturity, by acceleration or redemption or
otherwise. The Guarantees of the Senior Securities rank pari passu with all
other general credit obligations of the Corporation. The Guarantees of the
Subordinated Securities are subordinate in right of payment to all Senior
Indebtedness of the Corporation. (Section 401)
Because the Corporation is a holding company, the rights of its creditors,
including the Holders of the Debt Securities in the event the Guarantees are
enforced, to share in the distribution of the assets of any subsidiary upon the
subsidiary's liquidation or recapitalization will be subject to the prior
claims of the subsidiary's creditors (including in the case of the
Corporation's bank subsidiaries, their depositors), except to the extent that
the Corporation may itself be a creditor with recognized claims against the
subsidiary. In addition, there are certain regulatory limitations on the
payment of dividends and on loans and other transfers of funds to the
Corporation by its bank subsidiaries. See "Certain Regulatory Considerations."
REGISTRATION AND TRANSFER
Unless otherwise indicated in the Prospectus Supplement relating thereto, the
Offered Debt Securities will be issued only in fully registered form without
coupons in denominations of U.S. $100,000 and any integral multiple of $1,000
in excess thereof, or in the case of foreign currency notes, in the
denominations indicated in the applicable Prospectus Supplement, and no service
charge will be made for any transfer or exchange of such Offered Debt
Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. (Sections
302 and 305)
Certificated Securities may be presented for transfer (with the form of
transfer endorsed thereon duly executed) or exchange for other Debt Securities
of the same series at the office of the Security Registrar specified according
to the terms of the applicable Indenture. (Section 305) The Company has agreed
in each of the Indentures that, with respect to Debt Securities having The City
of New York as a place of payment, the Company will appoint an office or agency
located in The City of New York where Debt Securities of that series may be
surrendered for such transfer or exchange. (Section 1102) Such transfer or
exchange shall be made without service charge, but the Company may require
payment of any taxes or other governmental charges as described in the
applicable Indenture.
GLOBAL SECURITIES
Debt Securities of like tenor and having the same date of issue may be issued
in whole or in part in the form of one or more Global Securities that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the Prospectus Supplement relating thereto. Global Securities will be issued in
registered form. Unless and until it is exchanged in whole or in part for the
individual Debt Securities represented thereby, a Global Security may not be
transferred except as a whole by the Depositary for such Global 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
such nominee to a successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to any offered
Debt Securities will be described in the Prospectus Supplement relating
thereto. The Company anticipates that the following provisions will generally
apply to depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit, on its book-entry registration and
transfer system, the respective principal amounts of the
13
<PAGE>
individual Debt Securities represented by such Global Security to the accounts
of persons that have accounts with such Depositary ("participants"). Such
accounts will be designated by the underwriters or agents with respect to such
Debt Securities or by the Company if such Debt Securities are offered and sold
directly by the Company. Ownership of beneficial interests in a Global Security
will be limited to participants of the applicable Depositary or persons that
may hold interests through such participants. Ownership of beneficial interests
in such Global 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 other than 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
Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner and Holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture governing such Debt Securities. Except as provided below, owners of
beneficial interests in a Global Security will not be entitled to have any of
the individual Debt Securities represented by such Global Security registered
in their names, will not receive or be entitled to receive physical delivery of
any such Debt Securities in definitive form and will not be considered the
owners or Holders thereof under the Indenture governing such Debt Securities.
Accordingly, each person owning a beneficial interest in the Global Security
must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person
owns its interest, to exercise any rights of a Holder under the Indenture. The
Indenture provides that the Depositary may grant proxies and otherwise
authorize participants to take any action which a Holder is entitled to take
under the Indenture. The Company understands that under existing industry
practice, in the event that the Company requests any action of Holders or a
beneficial owner desires to take any action a Holder is entitled to take, the
Depositary would authorize the participants to take such action and that the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Payments of principal of, premium, if any, and interest, if any, on
individual Debt Securities represented by a Global 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 Security
representing such Debt Securities. None of the Company, the Corporation, the
Trustee for such Debt Securities, any Paying Agent, the Security Registrar for
such Debt Securities or any agent for such persons 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 Security for such Debt
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company and the Corporation expect that the Depositary for Debt
Securities or its nominee, upon receipt of any payment of principal, premium or
interest in respect of a Global Security representing any of such Debt
Securities immediately will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security for such Debt Securities as shown on the records
of such Depositary or its nominee. The Company and the Corporation also expect
that payments by participants to owners of beneficial interests in such Global
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.
If (i) the Depositary for any series of Offered Debt Securities is at any
time unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by the Company within
14
<PAGE>
90 days or (ii) an Event of Default shall occur and be continuing with respect
to such series, the Company will issue individual Debt Securities of such
series in definitive form in exchange for the Global Security representing such
Debt Securities. In addition, the Company may at any time and in its sole
discretion, subject to any limitations described in the Prospectus Supplement
relating to such Offered Debt Securities, determine not to have any Debt
Securities of a series represented by one or more Global Securities and, in
such event, will issue individual Debt Securities of such series in definitive
form in exchange for the Global Security or Securities representing such series
of Debt Securities. (Section 305) Further, if the Company so specifies with
respect to the Debt Securities of a series, an owner of a beneficial interest
in a Global Security representing Debt Securities of such series may, on terms
acceptable to the Company, the applicable Trustee and the Depositary for such
Global Security, receive Debt Securities of such series in definitive form in
exchange for such beneficial interest, subject to any limitations described in
the Prospectus Supplement relating to such Debt Securities. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of Debt Securities of the
series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name.
Debt Securities of such series so issued in definitive form will be issued in
denominations, unless otherwise specified by the Company, of $100,000 and any
integral multiple of $1,000 in excess thereof, or, in the case of foreign
currency notes, in the denominations indicated in the applicable Prospectus
Supplement.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of, premium, if any, and interest, if any, on Offered Debt
Securities will be made at the office of such Paying Agent or Paying Agents as
the Company may designate from time to time, except that, at the option of the
Company, payment of any interest may be made (i) by check mailed to the address
of the person entitled thereto as such address shall appear in the applicable
Security Register or (ii) by wire transfer to an account maintained by the
person entitled thereto as specified in the applicable Security Register.
(Section 1102) Unless otherwise indicated in an applicable Prospectus
Supplement, payment of any instalment of interest on Debt Securities will be
made to the person in whose name such Debt Security is registered at the close
of business on the Regular Record Date for such payment. (Section 307)
CONSOLIDATION, MERGER OR SALE OF ASSETS
Each Indenture provides that each of the Company and the Corporation may,
without the consent of the holders of any of the Debt Securities outstanding
under the applicable Indenture, consolidate with, merge into or transfer its
assets substantially as an entirety to any person, provided that (i) any such
successor assumes the Company's or the Corporation's obligations on the
applicable Debt Securities and under the applicable Indenture, (ii) after
giving effect thereto, no Event of Default (as defined in the Senior Indenture)
in the case of the Senior Securities, or Event of Default or Default (each as
defined in the Subordinated Indenture) in the case of the Subordinated
Securities, shall have happened and be continuing and (iii) certain other
conditions under the applicable Indenture are met. (Sections 901 and 903)
MODIFICATION AND WAIVER
Modifications and amendments of each Indenture may be made by the Company,
the Corporation and the applicable Trustee with the consent of the Holders of
66 2/3% in principal amount of the Outstanding Debt Securities of each series
affected thereby; provided, however, that no such modification or amendment
may, without the consent of the Holder of each Outstanding Debt Security
affected thereby, (1) change the Stated Maturity of the principal of, or any
instalment of principal of or interest on, any Debt Security; (2) reduce the
principal amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof; (3) reduce the amount of the Principal of an
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Original Issue Discount Security that would be due and payable upon
acceleration of the Maturity thereof; (4) change any Place of Payment where, or
the coin or currency in which, the principal of any Debt Security or any
premium, or interest thereon is payable; (5) impair the right to institute suit
for the enforcement of any such payment on or with respect to a Debt Security;
(6) in the case of Subordinated Securities, modify the provisions of the
Subordinated Indenture with respect to the subordination of such Debt
Securities and the Guarantees thereof in a manner adverse to the Holders
thereof; (7) reduce the percentage in principal amount of the Outstanding Debt
Securities of any series, the consent of whose Holders is required for any such
modification or amendment or for waiver of certain defaults; (8) change certain
provisions relating to modification of the terms of each Indenture and waiver
of defaults thereunder; or (9) modify or affect in any manner adverse to the
Holders the terms and conditions of the Guarantees. (Section 1002)
Each Indenture provides that the Holders of 66 2/3% in principal amount of
the Outstanding Debt Securities of any series may on behalf of the Holders of
all Debt Securities of that series waive, insofar as that series is concerned,
compliance by the Company or the Corporation with certain restrictive
provisions of such Indenture. (Section 1108) Also, the Holders of a majority in
principal amount of the Outstanding Debt Securities of any series may on behalf
of the Holders of all Debt Securities of that series waive any past default
under the Indenture with respect to that series, except a default (i) in the
payment of the principal of, or premium, if any, or interest, if any, on any
Debt Security of that series or (ii) in respect of a provision which under the
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Debt Security of that series affected. (Section 613)
EVENTS OF DEFAULT
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding shall occur and be continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of that series may declare to be due and payable
immediately by a notice in writing to the Company and to the Corporation (and
to the Trustee if given by Holders) the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of that series) of all
Debt Securities of that series. However, at any time after such a declaration
of acceleration with respect to Debt Securities of any series has been made,
but before a judgment or decree based on such acceleration has been obtained,
the Holders of a majority in principal amount of Outstanding Debt Securities of
that series may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, and, in the case of Subordinated
Securities, all Defaults, with respect to Debt Securities of that series have
been cured or waived as provided in the applicable Indenture. (Section 602) For
information as to waiver of defaults, see "Modification and Waiver." The term
"Event of Default" is defined differently in the Senior Indenture than in the
Subordinated Indenture. (Section 601) For information as to what constitutes
Events of Default, see "Senior Securities--Events of Default" and "Subordinated
Securities--Events of Default and Limited Rights of Acceleration."
Reference is made to the Prospectus Supplement relating to each series of
Debt Securities which are Original Issue Discount Securities for the particular
provisions relating to acceleration of the Maturity of a portion of the
principal amount of such Original Issue Discount Securities upon the occurrence
of an Event of Default and the continuation thereof.
Each Indenture provides that the Trustee thereunder will be under no
obligation, subject to the duty of the Trustee during a default to act with the
required standard of care, to exercise any of its rights or powers under such
Indenture at the request or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable indemnity. (Section 703)
Subject to such provisions for indemnification of the Trustee, the Holders of a
majority in principal amount of the
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Outstanding Debt Securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series. (Section 612)
No Holder of any Debt Security of any series will have the right to institute
any proceeding with respect to the applicable Indenture or for any remedy
thereunder unless such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default or, in the case of Subordinated
Securities, a Default, with respect to Debt Securities of that series and
unless also the Holders of at least 25% in principal amount of the Outstanding
Debt Securities of that series shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as Trustee,
and the Trustee shall not have received from the Holders of a majority in
principal amount of the Outstanding Debt Securities of that series a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. (Section 607) However, the Holders of any Debt
Security will have an absolute right to receive payment of the principal of,
and premium, if any, and interest, if any, on such Debt Security on or after
the due dates expressed in such Debt Security and to institute suit for the
enforcement of any such payment. (Section 608)
The Company and the Corporation are required to file annually with each
Trustee a written statement of officers as to performance or fulfillment of
certain of their obligations under each Indenture and as to the existence or
non-existence of defaults under each Indenture or the Debt Securities issued
thereunder. (Sections 1105 and 1106)
SENIOR SECURITIES
PRIORITY
The Senior Securities will rank pari passu with all outstanding senior
indebtedness of the Company. The Guarantees of the Senior Securities will rank
pari passu with all outstanding senior indebtedness of the Corporation.
LIMITATION UPON DISPOSITION OF VOTING STOCK AND CERTAIN TRANSACTIONS
The Senior Indenture contains a covenant by the Corporation that, so long as
any of the Senior Securities are outstanding, it will not sell, assign,
transfer, grant a security interest in or otherwise dispose of any shares of,
or securities convertible into, or options, warrants or rights to subscribe for
or purchase shares of, Voting Stock of the Bank or the Company, nor will it
permit the Bank or the Company to issue, except to the Corporation and except
for directors' qualifying shares, any shares of, or securities convertible
into, or options, warrants or rights to subscribe for or purchase shares of,
Voting Stock of the Bank or the Company, unless, in the case of Voting Stock of
the Bank (i) any such sale, assignment, transfer, grant of a security interest
or other disposition by the Corporation, or any such issuance by the Bank, is
made for fair market value, and (ii) the Corporation will own at least 80% of
the issued and outstanding Voting Stock of the Bank free and clear of any
security interest after giving effect to such transaction. The covenant also
provides that so long as any of the Senior Securities are outstanding, but
subject to the provisions of Article Nine (Consolidation, Merger and Sale), the
Corporation will not permit the Bank or the Company (a) to merge or consolidate
with another corporation or (b) to sell, assign, transfer, grant a security
interest in or otherwise dispose of ("Transfer") or lease all or substantially
all of the assets of the Bank or the Company unless, in the case of the Bank,
(i) any such Transfer or lease by the Bank or any such merger or consolidation
with the Bank is made for fair market value (provided, however, that
satisfaction of this fair market value provision will not be required in the
event the Transfer, lease, merger or consolidation is to or with a corporation
at least 80% of the issued and outstanding Voting Stock of which is owned,
directly or indirectly, by the Corporation), and (ii) after giving effect to
such transaction, the Corporation will own,
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directly or indirectly, at least 80% of the issued and outstanding shares of
Voting Stock of the Bank free and clear of any security interest. As used in
this paragraph, the terms "the Bank" and "the Company" include any successor
corporation. (Section 1107)
Unless otherwise indicated in the applicable Pricing Supplement, neither the
Senior Indenture nor the Senior Securities contains covenants specifically
designed to protect Holders in the event of a highly leveraged transaction
involving the Company, the Corporation or the Bank.
EVENTS OF DEFAULT
The following will be Events of Default under the Senior Indenture with
respect to Senior Securities of any series: (1) failure to pay any interest on
any Senior Security of that series when due, continued for 30 days; (2) failure
to pay principal of, or premium, if any, on any Senior Security of that series
when due; (3) failure to deposit any sinking fund payment, when due, in respect
of any Senior Security of that series; (4) failure to perform or breach of any
other covenant of the Company or the Corporation in the Senior Indenture (other
than a covenant included in the Senior Indenture solely for the benefit of a
series of Senior Securities other than that series), continued for 60 days
after written notice; (5) certain events of bankruptcy, insolvency or
reorganization of the Company, the Corporation or the Bank; and (6) any other
Event of Default provided in the applicable Prospectus Supplement with respect
to Senior Securities of that series. (Section 601)
REGARDING CHASE
The Corporation's bank subsidiaries maintain deposit accounts and conduct
other banking transactions with Chase in the ordinary course of their banking
businesses. Chase is the Agent Bank and a participant in the $300 million
revolving credit facility created to provide back-up support for the
Corporation's commercial paper borrowings.
SUBORDINATED SECURITIES
SUBORDINATION
The Subordinated Securities will be subordinate in right of payment to all
Senior Indebtedness of the Company. The Guarantees of the Subordinated
Securities will be subordinate in right of payment to all Senior Indebtedness
of the Corporation.
Upon any distribution of assets of the Company and/or the Corporation upon
dissolution, winding up, liquidation or reorganization of the Company or the
Corporation, as the case may be, the payment of the principal of, premium, if
any, and interest, if any, on the Subordinated Securities, in the case of the
Company, and on the Guarantees thereof, in the case of the Corporation, is to
be subordinated in right of payment to the extent provided in the Subordinated
Indenture to the prior payment in full of all Senior Indebtedness of the
Company or the Corporation, as the case may be. In addition, no payment may be
made of the principal of, premium, if any, and interest on the Subordinated
Securities or the Guarantees thereof, or in respect of any redemption,
retirement, purchase or other acquisition thereof, at any time when there is a
default in the payment of the principal of, premium, if any, interest, if any,
on or otherwise in respect of any Senior Indebtedness of the Company or the
Corporation, as the case may be. (Section 1401, Section 1402) Except as
described above, the obligation of the Company and the Corporation to make
payment of the principal of, premium, if any, and interest, if any, on the
Subordinated Securities or on the Guarantees thereof, as the case may be, will
not be affected. By reason of such subordination, in the event of a
distribution of assets upon any dissolution, winding up, liquidation or
reorganization of the Company and/or the Corporation, Holders of Senior
Indebtedness of the Company or the Corporation may recover more, ratably, than
Holders of the Subordinated Securities. Subject to payment in full of all
Senior Indebtedness of the Company, the rights of the
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Holders of Subordinated Securities will be subrogated to the rights of the
Holders of Senior Indebtedness of the Company to receive payments or
distribution of cash, property or securities of the Company applicable to
Senior Indebtedness of the Company. Subject to payment in full of all Senior
Indebtedness of the Corporation, the rights of Holders of Subordinated
Securities under the Guarantees endorsed thereon will be subject to the rights
of Holders of Senior Indebtedness of the Corporation to receive payments or
distributions of cash, property or securities of the Corporation applicable to
Senior Indebtedness of the Corporation.
Senior Indebtedness of the Company is defined in the Subordinated Indenture
as any obligation of the Company to its creditors, whether now outstanding or
subsequently incurred, except (i) the 9 3/4% Subordinated Debentures Due 2001,
the 9 1/4% Subordinated Debentures Due 2001 and the 6 7/8% Subordinated
Debentures due March 1, 2003, each issued under the indenture, dated as of
April 15, 1991, among the Guarantor, the Company and Continental Bank, National
Association, as trustee, and all other notes and obligations that may be issued
under such indenture, as the same may be amended from time to time; (ii) any
obligation as to which, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such obligation
is not Senior Indebtedness; and (iii) obligations evidenced by the Subordinated
Securities. Senior Indebtedness of the Guarantor is defined in the Subordinated
Indenture as any obligation of the Guarantor to its creditors, whether now
outstanding or subsequently incurred, except (i) the 7 1/4% Convertible
Subordinated Capital Notes due 1999 issued under the indenture, dated as of
September 10, 1987, between the Guarantor and Bank of New York, as trustee;
(ii) the guarantee of the Guarantor of the 9 3/4% Subordinated Debentures Due
2001, the 9 1/4% Subordinated Debentures Due 2001 and the 6 7/8% Subordinated
Debentures due March 1, 2003, each issued under the indenture, dated as of
April 15, 1991, among the Guarantor, the Company and Continental Bank, National
Association, as trustee, and all guarantees of the Guarantor of any other notes
and obligations which may be issued under such indenture, as the same may be
amended from time to time; (iii) any obligation as to which, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding,
it is provided that such obligation is not Senior Indebtedness; and (iv)
obligations evidenced by the Guarantees of the Subordinated Securities.
(Section 101)
There is no limitation on the issuance of additional Senior Indebtedness of
the Company or the Corporation. The Company and the Corporation expect from
time to time to incur additional indebtedness constituting Senior Indebtedness.
As of June 30, 1995, the aggregate principal amount of Senior Indebtedness of
the Company outstanding was approximately $950 million and the aggregate
principal amount of the Senior Indebtedness of the Corporation (including all
Senior Indebtedness of the Company guaranteed by the Corporation) outstanding
was approximately $950 million.
LIMITATION UPON DISPOSITION OF VOTING STOCK AND CERTAIN TRANSACTIONS
The Subordinated Indenture contains a covenant by the Corporation that, so
long as any of the Subordinated Securities are outstanding, but subject to the
provisions of Article Nine (Consolidation, Merger and Sale), the Corporation
will not sell, assign, transfer, grant a security interest in or otherwise
dispose of any shares of, securities convertible into or options, warrants or
rights to subscribe for or purchase shares of, Voting Stock of the Company, nor
will it permit the Company (or any successor thereto) (a) to issue, except to
the Corporation, any shares of, securities convertible into or options,
warrants or rights to subscribe for or purchase shares of, Voting Stock of the
Company, (b) to merge or consolidate with another Person, other than the
Corporation, or (c) to sell, assign, transfer, grant a security interest in or
otherwise dispose of or lease all or substantially all of the assets of the
Company. (Section 1107)
Unless otherwise indicated in the applicable Pricing Supplement, neither the
Subordinated Indenture nor the Subordinated Securities contains covenants
specifically designed to protect Holders in the event of a highly leveraged
transaction involving the Company, the Corporation or the Bank.
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EVENTS OF DEFAULT AND LIMITED RIGHTS OF ACCELERATION
The Subordinated Indenture defines an Event of Default as being only certain
events involving the bankruptcy, insolvency or reorganization of the
Corporation or the Bank. (Section 601) The rights of First Interstate, as
Trustee, and the Holders upon the occurrence of an Event of Default are
described in "Description of Debt Securities and Guarantees--Events of
Default". The Subordinated Indenture does not define an Event of Default as
including, or provide for any right of acceleration of the payment of principal
of the Subordinated Securities upon, a bankruptcy, insolvency or reorganization
of the Company alone or a default in the payment of principal or interest or in
the performance of any covenant or agreement in the Subordinated Securities or
the Subordinated Indenture. Currently, neither the Company nor the Corporation
are in default in the payment of principal, premium or interest on any
outstanding subordinated indebtedness. The Subordinated Indenture defines a
Default as being (1) the failure to pay interest on any Subordinated Securities
when due, whether or not such payment is prohibited by the subordination
provisions of the Subordinated Indenture, continued for 30 days, (2) the
failure to pay principal on any Subordinated Securities when due, whether or
not such payment is prohibited by the subordination provisions of the
Subordinated Indenture, or (3) the failure to perform any other covenant of the
Corporation, or a breach by the Corporation of a warranty in the Subordinated
Indenture, continued for 60 days after written notice is given as provided in
the Subordinated Indenture. If an Event of Default or a Default shall occur and
be continuing, the Trustee may, subject to certain limitations and conditions,
seek to enforce payment of such principal or accrued interest or the
performance of such covenant or agreement through appropriate judicial
proceedings against the Company or the Corporation. (Section 603)
REGARDING FIRST INTERSTATE
The Corporation's bank subsidiaries maintain deposit accounts and conduct
other banking transactions with First Interstate in the ordinary course of
their banking businesses. First Interstate is a participant in the $300 million
revolving credit facility created to provide back-up support for the
Corporation's commercial paper borrowings.
CERTAIN TAX CONSIDERATIONS
The Company will be required to withhold the Pennsylvania Corporate Loans Tax
from interest payments on Debt Securities held by or for those subject to such
tax, principally individuals and partnerships resident in Pennsylvania and
resident trustees of Pennsylvania trusts. The tax, at the current rate of four
mills on each dollar of nominal value ($4.00 per $1,000), will be withheld, at
any time when it is applicable, from any interest payment to taxable holders at
the annual rate of $4.00 per $1,000 principal amount of the Debt Securities.
The Debt Securities will be exempt, under current law, from personal property
taxes imposed by political subdivisions in Pennsylvania.
See the accompanying Prospectus Supplement for additional information
concerning certain tax considerations relating to specific series of Offered
Debt Securities. Holders of Debt Securities should consult their tax advisors
as to the applicability to the Debt Securities and interest, if any, payable
thereon of Federal, state and local taxes.
PLAN OF DISTRIBUTION
The Company may offer and sell Debt Securities to or through underwriters,
acting as principals for their own accounts or as agents. The Company also may
sell Debt Securities to purchasers directly or through agents. The Prospectus
Supplement sets forth the terms of the offering of the Offered Debt Securities
including the names of any underwriters, agents or dealers, the purchase price
of the Offered Debt Securities and the proceeds to the Company from the sale,
any underwriting discounts
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and other items constituting underwriters' compensation and any discounts and
commissions allowed or reallowed or paid to dealers or agents. Any initial
public offering price and any discounts or commissions allowed or reallowed or
paid to dealers or agents may be changed from time to time.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Company also may offer
and sell Debt Securities in exchange for one or more of its outstanding issues
of debt or convertible debt securities.
In connection with the sale of Debt Securities, underwriters may be deemed to
have received compensation from the Company in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
Debt Securities for whom they may act as agent. Underwriters may sell Debt
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
Underwriters, dealers and agents participating in the distribution of Debt
Securities may be deemed to be underwriters, and any discounts or commissions
received by them and any profit realized by them on resale of the Debt
Securities may be deemed to be underwriting discounts and commissions, under
the Securities Act. Under agreements which may be entered into by the Company
and the Corporation, underwriters, dealers and agents who participate in the
distribution of Debt Securities may be entitled to indemnification by the
Company and the Corporation against certain liabilities, including liabilities
under the Securities Act, or to contribution in respect thereof.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Offered Debt Securities from the Company at
the public offering price set forth in such Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a future date.
Each such contract will be for an amount not less than, and the aggregate
principal amount of Debt Securities sold pursuant to such contracts shall be
for an amount not less nor more than, the respective amounts stated in the
Prospectus Supplement. Institutions with which such contracts may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others, but
in all cases such institutions must be approved by the Company. The obligations
of any purchaser under any such contract will not be subject to any conditions
except that (i) the purchase of the Offered Debt Securities shall not at the
time of delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject and (ii) if the Debt Securities are also being sold to
underwriters, such underwriters shall have purchased the Debt Securities not
sold for delayed delivery. The underwriters and such other persons will not
have any responsibility in respect of the validity or performance of such
contracts.
Certain of the underwriters, dealers or agents may be customers of (including
borrowers from), engage in transactions with, and perform services for, the
Company, the Corporation, the Corporation's bank subsidiaries or one or more of
their affiliates in the ordinary course of business.
VALIDITY OF DEBT SECURITIES AND GUARANTEES
The validity of the Offered Debt Securities and related Guarantees will be
passed upon for the Company and the Corporation by James M. Gockley, Esq.,
Assistant General Counsel and Secretary of the Corporation, One Mellon Bank
Center, Pittsburgh, Pennsylvania 15258. Information set forth under "Certain
Tax Considerations" has been passed upon by Michael K. Hughey, Esq., Senior
Vice President and Director of Taxes of the Bank. As of June 30, 1995, Mr.
Gockley owned approximately
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1,780 shares of the Corporation's Common Stock and options covering an
additional 10,050 shares of Common Stock. As of June 30, 1995, Mr. Hughey was
the beneficial owner of 1,798 shares of Common Stock and options covering an
additional 17,203 shares of Common Stock. Unless otherwise indicated in the
Prospectus Supplement relating thereto, if the Debt Securities are being
distributed in an underwritten offering, the validity of the Debt Securities
and related Guarantees will be passed upon for the underwriters by Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004, who will rely upon the
opinion of Mr. Gockley as to matters of Pennsylvania law. Sullivan & Cromwell
from time to time performs legal services for the Corporation.
EXPERTS
The consolidated financial statements of the Corporation and its subsidiaries
included in the Corporation's 1994 Annual Report to Shareholders, which is
incorporated by reference into the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1994, have been incorporated herein by reference in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick
LLP, covering the December 31, 1994, financial statements refers to a change in
the method of accounting for certain investments in debt and equity securities
pursuant to Statement of Financial Accounting Standards No. 115.
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