<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 1996
POST EFFECTIVE AMENDMENT NO. 1 (NO. 33-54049)
REGISTRATION STATEMENT NO. 333-2297
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1 TO
FORM S-3/A
REGISTRATION STATEMENT AND
POST-EFFECTIVE AMENDMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
CORESTATES CAPITAL CORP CORESTATES FINANCIAL CORP
(EXACT NAMES OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
PENNSYLVANIA PENNSYLVANIA
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
23-1946384 23-1899716
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
PHILADELPHIA NATIONAL BANK BUILDING PHILADELPHIA NATIONAL BANK BUILDING
1345 CHESTNUT STREET 1345 CHESTNUT STREET
PHILADELPHIA, PENNSYLVANIA 19107 PHILADELPHIA, PENNSYLVANIA 19107
215-973-3827 215-973-3827
(ADDRESS INCLUDING ZIP CODE, AND (ADDRESS INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL CODE, OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICE) EXECUTIVE OFFICE)
DAVID T. WALKER, ESQ.
COUNSEL
CORESTATES FINANCIAL CORP
BROAD AND CHESTNUT STREETS
PHILADELPHIA, PENNSYLVANIA 19107
(215) 973-5680
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
JAMES W. MCKENZIE, JR., ESQ. NORMAN D. SLONAKER, ESQ.
MORGAN, LEWIS & BOCKIUS LLP BROWN & WOOD
2000 ONE LOGAN SQUARE ONE WORLD TRADE CENTER
PHILADELPHIA, PENNSYLVANIA 19103 NEW YORK, NEW YORK 10048
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At such
time after the effective date of this Registration Statement as the
registrants shall determine.
--------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X].
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act of 1933 registration number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1993, please check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED(1) REGISTERED(2) PER SECURITY OFFERING PRICE FEE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities and War-
rants of CoreStates
Capital Corp..........
Guarantees constituting
guarantees of the Debt
Securities of
CoreStates Capital Corp
by CoreStates Financial
Corp(3)...............
Preferred Stock(6)..... $1,739,000,000 100%(4) $1,739,000,000(3) $599,655.18(5)
Depositary
Shares(3)(7)..........
Common Stock(3)(8)(9)..
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) This Registration Statement also covers contracts which may be issued by
the Registrants under which the counterparty may be required to purchase
Debt Securities, Preferred Stock, Depositary Shares or Securities
Warrants. Such contracts would be issued with the Debt Securities,
Preferred Stock, Depositary Shares and/or Securities Warrants. In
addition, any other securities registered hereunder may be sold separately
or as units with other securities registered hereunder.
(2) Or, if any Debt Securities are issued at an Original Issue Discount, such
greater amount as shall result. Any offering of Debt Securities and
Guarantees denominated other than in U.S. dollars will be treated as the
equivalent in U.S. dollars based on the official exchange rate applicable
to the purchase of Debt Securities and Guarantees from the Registrants.
(3) Estimated solely for the purpose of calculating the registration fee. Does
not include an aggregate of $11,000,000 registered and not sold on Form S-
3 Registration Statement No. 33-54049 under the Securities Act of 1933
effective September 15, 1994. The aggregate public offering price of
Securities sold will not exceed $1,750,000,000.
(4) No additional consideration will be received for the Guarantees, the
Depositary Shares or the Common Stock.
(5) This filing fee was calculated under Rule 457(o) based on the proposed
maximum offering price of all the securities included in the table above.
This filing fee was previously paid with the filing of the Form S-3
Registration Statement No. 333-2297 on April 5, 1996.
(6) Such indeterminate number of shares of Preferred Stock of CoreStates
Financial Corp as may from time to time be issued at indeterminable
prices, but with an aggregate initial offering price not to exceed
$1,750,000,000, plus such indeterminate number of shares of Preferred
Stock as may be issued in exchange for, or upon conversion of, other
Preferred Stock registered hereunder for which no separate consideration
will be received.
(7) Such indeterminate number of Depositary Shares as may be issued in the
event CoreStates Financial Corp elects to offer fractional interests in
shares of Preferred Stock registered hereunder.
(8) Such indeterminate number of shares of Common Stock of CoreStates
Financial Corp as may be issued from time to time at indeterminable prices
plus such indeterminate number of shares of Common Stock as may be issued
upon conversion of Preferred Stock registered hereunder.
(9) This Registration Statement also relates to an indeterminate number of
shares of common stock that may be issued to prevent dilution resulting
from stock splits, stock dividends or similar transactions in accordance
with Rule 416.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUSES
INCLUDED IN THIS REGISTRATION STATEMENT ARE COMBINED PROSPECTUSES AND RELATE
TO THIS REGISTRATION STATEMENT, WHICH IS A NEW REGISTRATION STATEMENT, AND
REGISTRATION STATEMENT NO. 33-54049 (EFFECTIVE SEPTEMBER 15, 1994). EACH SUCH
POST-EFFECTIVE AMENDMENT SHALL HEREAFTER BECOME EFFECTIVE CONCURRENTLY WITH
THE EFFECTIVENESS OF THIS REGISTRATION STATEMENT IN ACCORDANCE WITH SECTION
8(C) OF THE SECURITIES ACT OF 1933.
--------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 10, 1996)
U.S. $1,550,000,000 [LOGO OF CORESTATES
CORESTATES CAPITAL CORP APPEARS HERE]
SENIOR/SUBORDINATED MEDIUM-TERM NOTES
WITH MATURITIES OF NINE MONTHS OR MORE FROM DATE OF ISSUE
PAYMENT OF THE PRINCIPAL, PREMIUM, IF ANY, AND
INTEREST ON THE NOTES IS UNCONDITIONALLY GUARANTEED BY
CORESTATES FINANCIAL CORP
-----------------
CoreStates Capital Corp, a Pennsylvania corporation (the "Issuer"), may
offer from time to time up to $1,550,000,000 aggregate initial offering price
of its Senior Medium-Term Notes (the "Senior Notes") and Subordinated Medium-
Term Notes (the "Subordinated Notes" and, together with the Senior Notes, the
"Notes"). The Senior Notes will be unconditionally guaranteed as to payment of
principal, premium, if any, and interest (the "Senior Guarantees") by
CoreStates Financial Corp (the "Guarantor"). The Subordinated Notes will be
fully and unconditionally guaranteed, on a subordinated basis, as to payment
of principal, premium, if any, and interest (the "Subordinated Guarantees"
and, together with the Senior Guarantees, the "Guarantees") by the Guarantor.
Each Note will mature nine months or more from its date of issue, as selected
by the purchaser and agreed to by the Issuer. Unless otherwise indicated in
the applicable Pricing Supplement to this Prospectus Supplement, (a "Pricing
Supplement"), a Note may not be redeemed at the option of the Issuer or be
repaid at the option of the registered holder thereof prior to maturity and
will be issued in denominations of $1,000 and integral multiples thereof.
The interest rate, if any, or interest rate formula on each Note will be
established by the Issuer at the time of issuance of such Note and will be set
forth therein and specified in a Pricing Supplement. Interest rates and
interest rate formulae are subject to change by the Issuer, but no change will
affect any Note already issued or as to which an offer to purchase has been
accepted by the Issuer. Unless otherwise indicated in the applicable Pricing
Supplement, the Notes will bear interest at a fixed rate ("Fixed Rate Notes")
or at floating rates ("Floating Rate Notes") determined by reference to the
Certificate of Deposit Rate, Commercial Paper Rate, CMT Rate, Federal Funds
Rate, LIBOR, Prime Rate, 11th District Cost of Funds Rate, Treasury Rate or
any other interest rate basis or formula as may be set forth in the applicable
Pricing Supplement, as adjusted by any Spread and/or Spread Multiplier
applicable to such Notes. See "Description of Notes" in this Prospectus
Supplement and "Description of Debt Securities" in the accompanying
Prospectus. Interest on Fixed Rate Notes will accrue from their date of issue
and, unless otherwise provided in the applicable Pricing Supplement, will be
payable semi-annually on each March 15 and September 15 and at maturity or
upon earlier redemption or repayment, as the case may be. Interest on Floating
Rate Notes will accrue from their date of issue and will be payable on the
dates indicated therein and in the applicable Pricing Supplement and at
maturity or upon earlier redemption or repayment, as the case may be.
The Notes will be issued in fully registered certificated or book-entry
form. Ownership interests in Notes in book-entry form will be shown on, and
transfers thereof will be effected only through, records maintained by The
Depository Trust Company, as Depository, and its participants. Owners of
beneficial interests in Notes issued in book-entry form will be entitled to
physical delivery of Notes in certificated form equal in principal amount to
their respective beneficial interests only under the limited circumstances
described herein. See "Description of Notes--Book-Entry Notes" in this
Prospectus Supplement.
THE SECURITIES BEING OFFERED WILL BE UNSECURED OBLIGATIONS OF THE ISSUER AND
WILL NOT BE SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR
SUBSIDIARY OF THE ISSUER AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT, THE PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Agents' Commission Proceeds to
Public(1) or Discount(2) Issuer(2)(3)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.......... 100.000% .125% - .750% 99.875% - 99.250%
- ------------------------------------------------------------------------------
$1,937,500 - $1,548,062,500 -
Total(4).......... $1,550,000,000 $11,625,000 $1,538,375,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Unless otherwise specified in the applicable Pricing Supplement relating
thereto, each Note will be issued at 100% of the principal amount thereof.
(2) The Issuer will pay Lehman Brothers, Bear, Stearns & Co. Inc., Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Merrill Lynch & Co., J.P. Morgan & Co., Salomon Brothers Inc, Smith Barney
Inc., UBS Securities LLC, CoreStates Bank, N.A. (each an "Agent", and
collectively, the "Agents") a commission, in the form of a discount,
ranging from .125% to .750% (or, with respect to Notes for which the
stated maturity is in excess of 30 years, such commission as shall be
agreed between the Issuer and the related Agent at the time of sale) of
the principal amount of any Note, depending upon its stated maturity, sold
through such Agent. Any Agent, acting as principal, may also purchase
Notes at a discount for resale to investors or other purchasers at varying
prices related to prevailing market prices at the time of resale or, if so
agreed, at a fixed public offering price. No commission will be payable on
any Note sold directly by the Issuer. The Issuer has agreed to indemnify
each Agent against certain liabilities, including liabilities under the
Securities Act of 1933.
(3) Before deducting expenses payable by the Issuer estimated at $1,000,000.
(4) Or the equivalent thereof in foreign currencies or foreign currency units.
-----------------
The Notes are being offered on a continuing basis by the Issuer through the
Agents, each of which has agreed to use its reasonable best efforts to solicit
offers to purchase the Notes. The Issuer also may sell Notes to any Agent,
acting as principal, for resale to one or more investors or to one or more
broker-dealers (acting as a principal for purposes of resale) at varying
prices related to prevailing market prices at the time of resale, as
determined by such Agent or, if so agreed, at a fixed public offering price.
The Issuer has reserved the right to sell Notes directly to investors on its
own behalf. The Notes will not be listed on any securities exchange, and there
can be no assurance that the Notes will be sold or that there will be a
secondary market for the Notes. The Issuer reserves the right to withdraw,
cancel or modify the offer made hereby without notice. The Issuer or the Agent
that solicits any offer to purchase Notes may reject any offer in whole or in
part. See "Plan of Distribution".
-----------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
SMITH BARNEY INC.
UBS SECURITIES LLC
CORESTATES BANK, N.A.
The date of the Prospectus Supplement is May 10, 1996.
<PAGE>
CORESTATES FINANCIAL CORP
RECENT DEVELOPMENTS
ACQUISITION OF MERIDIAN BANCORP, INC.--On October 10, 1995, CoreStates
Financial Corp ("CoreStates") and Meridian Bancorp, Inc. ("Meridian") announced
a definitive agreement to merge. Meridian is a bank holding company with
approximately $14.8 billion in assets and $11.2 billion in deposits with its
executive offices located at 35 North Sixth Street, Reading, Pennsylvania
19603. The closing took place on April 9, 1996. For each share of Meridian
outstanding, 1.225 shares of CoreStates common stock were issued. Based on
closing share prices at December 31, 1995, the transaction would be valued at
approximately $3.1 billion. The transaction was accounted for under the pooling
of interests method of accounting.
Strategically, this acquisition will: combine two strongly performing banking
companies, create a leading market position in eastern Pennsylvania, northern
Delaware, and central New Jersey, extend the combined company's market and
create a company with the resources and capital to support investments in
growth and improved services to customers.
In June 1995, Meridian completed an internal review of operations and
businesses and announced a company-wide plan designed to improve its operating
performance and competitive position. Implementation of the Meridian plan began
at the end of the second quarter of 1995 and will continue over a period of
approximately 12 months from that date. The process implementation is expected
to reduce operating expenses on an annualized basis and provide recurring
revenue enhancements of $13 million on an annualized basis.
On February 23, 1996, Meridian acquired United Counties Bancorporation
("United Counties"), a $1.6 billion asset New Jersey bank holding company, in a
transaction accounted for as a pooling of interests. For each of United
Counties' 2,150,000 common shares outstanding, 5.0 shares of Meridian's common
stock were issued.
Pending approvals from various regulatory authorities, consolidations of bank
subsidiaries and operations are expected to begin in the third quarter of 1996
with the consolidation of Meridian's Pennsylvania bank subsidiary into
CoreStates' lead Pennsylvania bank, CoreStates Bank, N.A. ("CoreStates Bank").
Other consolidations also scheduled for the third quarter of 1996 include the
combination of Meridian Bank NJ and United Counties Trust Bank into New Jersey
National Bank ("NJNB") and the consolidation of Meridian's Delaware Trust
Company into CoreStates Bank. The interstate consolidation of CoreStates Bank
and NJNB, previously scheduled for January 1996, has been postponed until the
fourth quarter of 1996 in order to accommodate the consolidations of the
Meridian bank subsidiaries.
S-2
<PAGE>
DESCRIPTION OF NOTES
The following description encompasses all the material terms and provisions
of the Notes offered hereby and supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and provisions of the
Debt Securities (as defined in the accompanying Prospectus) set forth under the
heading "Description of Debt Securities" in the Prospectus, to which
description reference is hereby made. The following description will apply to
each Note unless otherwise specified in the applicable Pricing Supplement.
GENERAL
The Notes are to be issued as one or more series of Debt Securities, and will
be either Senior Debt Securities or Subordinated Debt Securities of the Issuer
(each as defined in the accompanying Prospectus). At the date hereof, the
maximum amount of Debt Securities authorized for issuance is $1,550,000,000.
Whether an offering of Notes will constitute Senior Debt Securities ("Senior
Notes") or Subordinated Debt Securities ("Subordinated Notes") will be set
forth in a Pricing Supplement hereto. The Senior Notes will be issued under an
Indenture between the Issuer, the Guarantor and The Bank of New York, as senior
trustee and successor to NationsBank of Georgia, National Association,
successor to Wachovia Bank of Georgia, N.A. (formerly the First National Bank
of Atlanta, N.A.) (the "Senior Trustee"), dated as of December 1, 1990 (the
"Senior Indenture"), and the Subordinated Notes will be issued under an
Indenture between the Issuer, the Guarantor and Bank One, Columbus, N.A. dated
as of December 1, 1990, as amended by a First Supplemental Indenture dated as
of March 1, 1993 and as further amended by a Second Supplemental Indenture
dated as of August 1, 1994 (together the "Subordinated Indenture"), between the
Issuer, the Guarantor, Bank One, Columbus, N.A. and Citibank, N.A., as
subordinated trustee with respect to all securities issued thereafter (the
"Subordinated Trustee" and, together with the Senior Trustee, the "Trustees").
The Senior Indenture and the Subordinated Indenture are collectively referred
to herein as "Indentures" and are more fully described in the accompanying
Prospectus. The following summaries of certain provisions of the Indentures
encompass all their material terms and provisions but are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Indentures, including the definitions therein of certain terms. The terms and
conditions set forth below will apply to each Note unless otherwise specified
in the applicable Pricing Supplement.
The Indentures do not limit the aggregate principal amount of Senior Debt
Securities or Subordinated Debt Securities that may be issued thereunder and
provide that such Debt Securities may be issued in one or more series up to the
aggregate principal amount that may be authorized from time to time by the
Issuer.
All Senior Debt Securities, including the Senior Notes, will be unsecured
obligations and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Issuer. At December 31, 1995, $1,036,035,000
of senior debt securities of the Issuer was outstanding. All outstanding senior
debt securities were unsecured and ranked pari passu with all other unsecured
and unsubordinated indebtedness of the Issuer.
All Subordinated Debt Securities, including the Subordinated Notes, will be
unsecured, subordinated and subject to Senior CoreStates Capital Indebtedness
as set forth under "Certain Terms Relating to Subordinated Debt Securities" in
the accompanying Prospectus. Prior to the execution of the First Supplemental
Indenture, the Issuer issued indebtedness subordinated to a more narrowly
defined category of senior indebtedness. At December 31, 1995, $625,000,000 of
such indebtedness was outstanding.
The Indentures do not contain provisions which would provide protection to
noteholders against a sudden and dramatic decline in credit quality resulting
from takeovers, recapitalizations or similar restructurings. See "Description
of Debt Securities--Restrictive Covenants" in the accompanying Prospectus.
The Notes will be offered on a continuous basis and will mature on any day
nine months or more from the date of issue, as selected by the purchaser and
agreed to by the Issuer. Floating Rate Notes will mature
S-3
<PAGE>
on an Interest Payment Date (as hereinafter defined). Unless otherwise
indicated in the Pricing Supplement, the Notes will bear interest at a fixed
rate or at floating rates determined by reference to one or more of the Base
Rates described below, which may be adjusted by a Spread and/or Spread
Multiplier (as hereinafter defined) applicable to such Floating Rate Notes,
until the principal thereof is paid or made available for payment.
Unless otherwise indicated in an accompanying Prospectus Supplement, the
Notes will be issued only in fully-registered certificated or book-entry form
without coupons and, except as may otherwise be provided in the applicable
Pricing Supplement, in denominations of $1,000 and integral multiples thereof.
Notes issued in certificated form may be transferred or exchanged at the
offices described in the immediately following paragraph. In the event Notes
are issued in book-entry form through the facilities of The Depository Trust
Company, New York, New York (the "Depository"), transfers or exchanges may be
similarly effected through a participating member of the Depository. See
"Description of Notes--Book-Entry Notes." No service charge will be made for
any registration of transfer or exchange of Notes issued in certificated form,
but the Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith.
Payments on Notes issued in book-entry form will be made to the Depository or
its nominee in accordance with the arrangements then in effect between the
applicable Trustee and the Depository. See "Description of Notes--Book-Entry
Notes." In the case of Notes issued in certificated form, principal, premium,
if any, and interest will be payable, the transfer of such Notes will be
registrable, and such Notes will be exchangeable for Notes bearing identical
terms and provisions at the office or agency of the Issuer in The City of New
York designated for such purpose; provided, however, that payment of interest,
other than interest payable on the stated maturity date (or on the date of
redemption or repayment if a Note is redeemed or repaid prior to maturity)
(such stated maturity date or date of redemption or repayment, as the case may
be, being collectively referred to hereinafter as the "Maturity Date" with
respect to the principal amount payable on such date) may be made at the option
of the Issuer by check mailed to the address of the person in whose name the
applicable Note is registered at the close of business on the relevant Regular
Record Date (as hereinafter defined) as shown on the security register
maintained by CoreStates Bank, N.A. as Security Registrar. Interest will be
payable on each date specified in the Note on which an installment of interest
is due and payable (each, an "Interest Payment Date") and on the Maturity Date.
If the original issue date of a Note is between a Regular Record Date and an
Interest Payment Date, the initial interest payment will be made on the
Interest Payment Date following the next succeeding Regular Record Date to the
registered holder on such next succeeding Regular Record Date. Notwithstanding
the foregoing, a registered holder of $10,000,000 or more in aggregate
principal amount of Notes issued in certificated form (whether having identical
or different terms and provisions) shall be entitled to receive payments of
interest by the transfer of immediately available funds to an account at a bank
located in The City of New York (or other bank consented to by the Issuer)
designated by such holder (provided that such bank has appropriate facilities
therefor), but only if appropriate instructions have been received by
CoreStates Bank, N.A. (the "Paying Agent") at its office in the City of
Philadelphia on or before the Regular Record Date immediately preceding the
applicable Interest Payment Date.
Interest payments will be in the amount of interest accrued from and
including the next preceding Interest Payment Date in respect of which interest
has been paid or duly provided for (or from and including the original issue
date if no interest has been paid with respect to such Note) to but excluding
the Interest Payment Date or the Maturity Date, as the case may be (each, an
"Interest Period").
In the case of Notes issued in certificated form, payment of principal,
premium, if any, and interest payable on the Maturity Date for each such Note
will be paid on such date in immediately available funds against presentation
of the Note in The City of New York at the office or agency of the Issuer
designated for such purpose. Interest payable on the Maturity Date will be
payable to the person to whom the principal of the Note shall be paid.
S-4
<PAGE>
All references herein to registered holders will be, with respect to Book-
Entry Notes, to the Depository or its nominees. See "Description of Notes--
Book-Entry Notes."
Interest rates offered by the Issuer with respect to the Notes may differ
depending upon the aggregate principal amount of Notes purchased in any
transaction, and, the Issuer expects generally to distinguish, with respect to
such offered rates, between purchases which are for less than, and purchases
which are equal to or greater than, $200,000.
REDEMPTION
If set forth in the applicable Pricing Supplement, the Notes will be subject
to redemption by the Issuer on and after the initial redemption date fixed at
the time of sale (the "Initial Redemption Date"). If no Initial Redemption Date
is indicated with respect to a Note, such Note will not be redeemable prior to
the stated maturity date. On and after the Initial Redemption Date with respect
to any Note, such Note will be redeemable in whole or in part in increments of
$1,000 at the option of the Issuer at a redemption price (the "Redemption
Price") determined in accordance with the following paragraph, together with
interest thereon payable to the date of redemption, on notice given no more
than 60 nor less than 30 days prior to the date of redemption.
The Redemption Price for each Note subject to redemption will initially be
equal to a certain percentage (the "Initial Redemption Percentage") of the
principal amount of such Note to be redeemed and will decline at each
anniversary of the Initial Redemption Date with respect to such Note by a
percentage (the "Annual Redemption Percentage Reduction") of the principal
amount to be redeemed until the Redemption Price is 100% of such principal
amount. The Initial Redemption Percentage and any Annual Redemption Percentage
Reduction with respect to each Note subject to redemption prior to the stated
maturity date will be fixed at the time of sale and set forth in the applicable
Pricing Supplement and in the applicable Note.
REPAYMENT
If set forth in the applicable Pricing Supplement, the Notes will be subject
to repayment at the option of the registered holders thereof in accordance with
the terms of the Notes on their respective optional repayment dates fixed at
the time of sale (each, an "Optional Repayment Date"). If no Optional Repayment
Date is indicated with respect to a Note, such Note will not be repayable at
the option of the registered holder thereof prior to the stated maturity date.
On any Optional Repayment Date with respect to any Note, such Note will be
repayable in whole or in part in increments of $1,000 at the option of such
registered holder at a price equal to 100% of the principal amount to be
repaid, together with interest thereon payable to the date of repayment, on
notice given not more than 60 nor less than 30 days prior to the Optional
Repayment Date.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issue at the rate
per annum stated on the face thereof until the principal amount thereof is paid
or duly made available for payment. Interest on Fixed Rate Notes will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable semi-annually on each March 15 and September
15 (each, an "Interest Payment Date") and on the Maturity Date. The "Regular
Record Date" for Fixed Rate Notes will be the March 1 or September 1
immediately preceding an Interest Payment Date. If any Interest Payment Date or
the Maturity Date on a Fixed Rate Note falls on a day that is not a Business
Day (as hereinafter defined), the payment shall be made on the next Business
Day as if it were made on the date such payment was due and no interest will
accrue on the amount so payable for the period from and after such Interest
Payment Date or the Maturity Date, as the case may be.
FLOATING RATE NOTES
Interest on Floating Rates Notes will be determined by reference to a "Base
Rate," which may be one or more of the following: (a) the "Certificate of
Deposit Rate" ("Certificate of Deposit Rate Notes"), (b) the
S-5
<PAGE>
"Commercial Paper Rate" ("Commercial Paper Rate Notes"), (c) the "CMT Rate"
("CMT Rate Notes"), (d) the "Federal Funds Rate" ("Federal Funds Rate Notes"),
(e) "LIBOR" ("LIBOR Notes"), (f) the "Prime Rate" ("Prime Rate Notes"), (g) the
"Treasury Rate" ("Treasury Rate Notes"), (h) the "11th District Cost of Funds
Rate" ("11th District Cost of Funds Rate Notes"), or (i) such other interest
rate basis or formula as may be set forth in an applicable Pricing Supplement.
The Base Rate will be based upon the Index Maturity and adjusted by a Spread
and/or Spread Multiplier, if any, as specified in the applicable Pricing
Supplement. The interest rate on each Floating Rate Note will be calculated by
reference to the specified Base Rate, plus or minus the Spread and/or
multiplied by the Spread Multiplier, if any. The "Index Maturity" is the period
to maturity of the instrument or obligation with respect to which the Base Rate
is calculated. The "Spread" is the number of basis points above or below the
Base Rate applicable to such Floating Rate Note, and the "Spread Multiplier" is
the percentage of the Base Rate applicable to the interest rate for such
Floating Rate Note. The Spread, Spread Multiplier, Index Maturity and other
variable terms of the Floating Rate Notes are subject to change by the Issuer
from time to time, but no such change will affect any Floating Rate Note
theretofore issued or as to which an offer has been accepted by the Issuer.
The applicable Pricing Supplement will specify for each Floating Rate Note
the following terms: the Base Rate, Initial Interest Rate, Initial Interest
Rate Reset Date, Interest Rate Reset Dates, Interest Rate Reset Periods,
Interest Payment Dates, Index Maturity, Stated Maturity Date, Maximum Interest
Rate and Minimum Interest Rate, if any, Spread and/or Spread Multiplier, if
any, Initial Redemption Date, if any, Initial Redemption Percentage, if any,
Annual Redemption Percentage Reduction, if any, and Optional Repayment Date, if
any.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (each, an "Interest Rate Reset
Period") as specified in the applicable Pricing Supplement. The "Interest Rate
Reset Date" will be, in the case of Floating Rate Notes which reset (a) daily,
each Business Day; (b) weekly, the Wednesday of each week (with the exception
of weekly reset Treasury Rate Notes, which reset Tuesday of each week except as
provided below); (c) monthly, the third Wednesday of each month; (d) quarterly,
the third Wednesday of March, June, September and December of each year; (e)
semi-annually, the third Wednesday of the two months specified in the
applicable Pricing Supplement; and (f) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement. If any Interest Rate
Reset Date for any Floating Rate Note would otherwise be a day that is not a
Business Day, such Interest Rate Reset Date will be postponed to the next
succeeding day that is a Business Day, except that in the case of a LIBOR Note,
if such Business Day is in the next succeeding calendar month, such Interest
Rate Reset Date shall be the next preceding Business Day. Unless otherwise
specified in the applicable Pricing Supplement, "Business Day" means any day
other than a Saturday, Sunday, legal holiday or other day on which banks in The
City of New York are required or authorized by law or executive order to close
and with respect to LIBOR Notes, is also a London Banking Day. "London Banking
Day" means any day on which dealings in deposits in U.S. dollars are transacted
in the London interbank market.
A Floating Rate Note may also have either or both of the following: (i) a
maximum limit, or ceiling (the "Maximum Interest Rate"), on the rate of
interest that may accrue during any Interest Period; and (ii) a minimum limit,
or floor (the "Minimum Interest Rate"), on the rate of interest which may
accrue during any Interest Period. Notwithstanding any Maximum Interest Rate
which may be applicable to any Floating Rate Note pursuant to the above
provisions, the interest rate on Floating Rate Notes will in no event be higher
than the maximum rate permitted by New York law as the same may be modified by
United States law of general application. Under present New York law, the
maximum rate of interest is 25% per annum on a simple interest basis. The limit
may apply to Floating Rate Notes in which $2,500,000 or more has been invested.
The interest rate in effect with respect to a Floating Rate Note during any
interest period commencing as of an Interest Rate Reset Date will be the rate
determined as of the "Interest Determination Date." The Interest Determination
Date pertaining to an Interest Rate Reset Date for Certificate of Deposit Rate
Notes,
S-6
<PAGE>
Commercial Paper Rate Notes, CMT Rate Notes, Federal Funds Rate Notes and Prime
Rate Notes will be the second Business Day preceding such Interest Rate Reset
Date. The Interest Determination Date with respect to an Interest Rate Reset
Date for LIBOR Notes will be the second London Banking Day preceding such
Interest Rate Reset Date. The Interest Determination Date with respect to the
11th District Cost of Funds Rate will be the last working day of the month of
the Federal Home Loan Bank of San Francisco (the "FHLB of San Francisco")
preceding the Interest Rate Reset Date on which the FHLB of San Francisco
publishes the Index (as hereinafter defined). With respect to Treasury Rate
Notes, the Interest Determination Date with respect to an Interest Rate Reset
Date will be the day of the week in which the Interest Rate Reset Date falls on
which Treasury bills (as hereinafter defined) are auctioned (Treasury bills are
normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday); provided,
however, that if as a result of a legal holiday an auction is held on the
Friday of the week preceding an Interest Rate Reset Date, the related Interest
Determination Date will be such preceding Friday; and provided further, that if
an auction shall fall on any Interest Rate Reset Date, then the Interest Rate
Reset Date will instead be the first Business Day following such auction.
The interest rate in effect with respect to a Floating Rate Note on each day
that is not an Interest Rate Reset Date will be the interest rate determined as
of the Interest Determination Date pertaining to the immediately preceding
Interest Rate Reset Date, and the interest rate in effect on any day that is an
Interest Rate Reset Date will be the interest rate determined as of the
Interest Determination Date pertaining to such Interest Rate Reset Date,
subject in either case to any maximum or minimum interest rate limitation
referred to above, provided, however, that the interest rate in effect with
respect to a Floating Rate Note for the period from the date of issue to the
Initial Interest Reset Date will be the "Initial Interest Rate".
Each Floating Rate Note will bear interest from the date of issue at the
rates determined as described below until the principal thereof is paid or
otherwise made available for payment. Except as provided below or in the
applicable Pricing Supplement, interest will be payable, in the case of
Floating Rate Notes which reset (a) daily, weekly or monthly, on the third
Wednesday of each month or on the third Wednesday of March, June, September and
December of each year, as specified in the applicable Pricing Supplement; (b)
quarterly, on the third Wednesday of March, June, September and December of
each year; (c) semi-annually, on the third Wednesday of the two months of each
year specified in the applicable Pricing Supplement; and (d) annually, on the
third Wednesday of the month specified in the applicable Pricing Supplement
(each, an "Interest Payment Date") and, in each case, on the Maturity Date.
If any Interest Payment Date for any Floating Rate Note would otherwise fall
on a day that is not a Business Day with respect to such Note, such Interest
Payment Date shall be postponed to the next day that is a Business Day, except
that in the case of a LIBOR Note, if such Business Day falls in the next
succeeding calendar month, such Interest Payment Date will be advanced to the
immediately preceding Business Day. If the Maturity Date of any Floating Rate
Note would fall on a day that is not a Business Day, the payment of principal,
premium, if any, and interest may be made on the next succeeding Business Day,
and no interest on such payment shall accrue for the period from and after the
Maturity Date.
The "Regular Record Date" for Floating Rate Notes with respect to any
Interest Payment Date will be the fifteenth calendar day, whether or not such
date is a Business Day, prior to such Interest Payment Date.
With respect to a Floating Rate Note, accrued interest will be calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Such accrued interest factor will be computed by adding the interest
factor calculated for each day from and including the date of issue, or from
but excluding the last date to which interest has been paid to and including
the date for which accrued interest is being calculated. The interest factor
for each such day will be computed by dividing the interest rate applicable to
such day by 360 (or, in the case of CMT Rate Notes or Treasury Rate Notes, by
the actual number of days in the year).
S-7
<PAGE>
Unless otherwise provided for in the applicable Pricing Supplement,
CoreStates Bank, N.A. will be the "Calculation Agent" for the Floating Rate
Notes. Upon the request of the registered holder of a Floating Rate Note, the
applicable Calculation Agent will provide the interest rate then in effect and,
if determined, the interest rate that will become effective as a result of a
determination made for the next Interest Rate Reset Date with respect to such
Floating Rate Note. The "Calculation Date," where applicable, pertaining to any
Interest Determination Date will be the earlier of (i) the tenth calendar day
after such Interest Determination Date or, if any such day is not a Business
Day, the next succeeding Business Day or (ii) the Business Day preceding the
applicable Interest Payment Date or Maturity Date, as the case may be.
All percentages resulting from any calculation on Floating Rate Notes will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) will be rounded upward to 9.87655% (or .0987655)), and
all dollar amounts used in or resulting from such calculation of Floating Rate
Notes will be rounded to the nearest cent (with one-half cent being rounded
upward).
As mentioned above, the Initial Interest Rate will be specified in the
applicable Pricing Supplement. The interest rate that will become effective on
each subsequent Interest Rate Reset Date will be determined by the applicable
Calculation Agent (calculated with reference to the Base Rate and the Spread
and/or Spread Multiplier, if any, specified in the applicable Pricing
Supplement) as follows:
CERTIFICATE OF DEPOSIT RATE: Unless otherwise indicated in the applicable
Pricing Supplement, "Certificate of Deposit Rate" means, with respect to any
Interest Determination Date relating to a Certificate of Deposit Rate Note (a
"Certificate of Deposit Rate Interest Determination Date"), the rate on such
day for negotiable United States certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)"),
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such
Certificate of Deposit Rate Interest Determination Date for negotiable United
States certificates of deposit of the Index Maturity specified in the
applicable Pricing Supplement as published by the Federal Reserve Bank of New
York in its daily statistical release "Composite 3:30 P.M. quotations for U.S.
Government Securities" ("Composite Quotations") under the heading "Certificates
of Deposit." If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the related Calculation Date,
then the Certificate of Deposit Rate on such Certificate of Deposit Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be the arithmetic mean of the secondary market offered rates as of 10:00
A.M., New York City time, on such Certificate of Deposit Rate Interest
Determination Date, of three leading nonbank dealers in negotiable United
States dollar certificates of deposit in The City of New York (which may
include the Agents) selected by the Calculation Agent for negotiable
certificates of deposit of major United States money center banks for
negotiable certificates of deposit with a remaining maturity closest to the
Index Maturity specified in the applicable Pricing Supplement in an amount that
is representative for a single transaction in that market at that time;
provided, however, that if the dealers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Certificate of Deposit Rate will
be the Certificate of Deposit Rate in effect on such Certificate of Deposit
Rate Interest Determination Date.
COMMERCIAL PAPER RATE: Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Commercial Paper Rate Note (the "Commercial
Paper Rate Interest Determination Date"), the Money Market Yield (as
hereinafter defined) on such date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published by
the Board of Governors of the Federal Reserve System in H.15(519) under the
heading "Commercial Paper." In the event that such rate is not published by
3:00 P.M., New York City time, on the related Calculation Date, then the
Commercial Paper Rate on such Commercial Paper Rate Interest Determination Date
will be the Money Market Yield of the rate for commercial paper of
S-8
<PAGE>
the specified Index Maturity as published in Composite Quotations under the
heading "Commercial Paper" (with an Index Maturity of one month or three months
being deemed to be equivalent to an Index Maturity of 30 days or 90 days,
respectively). If such rate is not published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the related Calculation Date,
then the Commercial Paper Rate on such Commercial Paper Rate Interest
Determination Date will be calculated by the Calculation Agent and will be the
Money Market Yield of the arithmetic mean of the offered rates, as of 11:00
A.M., New York City time, on such Commercial Paper Rate Interest Determination
Date, of three leading dealers in commercial paper in The City of New York
(which may include the Agent or its affiliates) selected by the Calculation
Agent for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement placed for an industrial issuer whose bond rating
is "AA," or the equivalent, from a nationally recognized statistical rating
agency; provided, however, that if the dealers so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the Commercial Paper Rate
determined as of such Commercial Paper Rate Interest Determination Date will be
the Commercial Paper Rate in effect on such Commercial Paper Rate Interest
Determination Date.
"Money Market Yield" shall be the yield (expressed as a percentage)
calculated in accordance with the following formula:
D X 360
Money Market Yield =
------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
CMT RATE NOTES: Unless otherwise specified in the applicable Pricing
Supplement, "CMT Rate" means, with respect to any Interest Determination Date
relating to a CMT Rate Note or any Floating Rate Note for which the interest
rate is determined with reference to the CMT Rate (a "CMT Rate Interest
Determination Date"), the rate displayed on the Designated CMT Telerate Page
under the caption " . . . Treasury Constant Maturities . . . Federal Reserve
Board Release H.15 . . . Mondays Approximately 3:45 P.M.," under the column for
the Designated CMT Maturity Index for (i) if the Designated CMT Telerate Page
is 7055, the rate on such CMT Rate Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the weekly or monthly average, as
specified in the applicable Pricing Supplement the week or the month, as
applicable, ended immediately preceding the week or the month, as applicable,
in which the related CMT Rate Interest Determination Date occurs. If such rate
is no longer displayed on the relevant page is, or is not displayed by 3:00
P.M., New York City time, on the related Calculation Date, then the CMT Rate
for such CMT Rate Interest Determination Date will be such treasury constant
maturity rate for the Designated CMT Maturity Index as published in H.15(519).
If such rate is no longer published or is not published by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate for such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for
the Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date
with respect to such Interest Reset Date as may then be published by either the
Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in H.15(519). If such information is not provided by 3:00 P.M.,
New York City time, on the related Calculation Date, then the CMT Rate for the
CMT Rate Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity, based on the arithmetic mean of the
secondary market closing offer side prices as of approximately 3:30 P.M., New
York City time, on such CMT Rate Interest Determination Date reported,
according to their written records, by three leading primary United States
government securities dealers (each, a "Reference Dealer") in The City of New
York (which may include the Agent or its affiliates) selected by the
Calculation Agent (from five such Reference Dealers selected by the Calculation
Agent and eliminating the highest quotation (or, in the
S-9
<PAGE>
event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury Notes") with
an original maturity of approximately the Designated CMT Maturity Index minus
one year. If the Calculation Agent is unable to obtain three such Treasury Note
quotations, the CMT Rate for such CMT Rate Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M., New York City time, on the CMT Rate Interest
Determination Date of three Reference Dealers in The City of New York (from
five such Reference Dealers selected by the Calculation Agent and eliminating
the highest quotation (or, in the event of equality, one of the highest) and
the lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the
next highest to the Designated CMT Maturity Index and a remaining term to
maturity closest to the Designated CMT Maturity Index and in an amount of at
least $100 million. If three or four (and not five) of such Reference Dealers
are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer than
three Reference Dealers selected by the Calculation Agent are quoting as
mentioned herein, the CMT Rate determined as of such CMT Rate Interest
Determination Date will be the CMT Rate in effect on such CMT Rate Interest
Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the Calculation Agent will
obtain quotations for the Treasury Note with the shorter remaining term to
maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service (or any successor service) on the page designated in the applicable
Pricing Supplement (or any other page as may replace such page on such service)
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519). If no such page is specified in the applicable Pricing Supplement,
the Designated CMT Telerate Page shall be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
FEDERAL FUNDS RATE: Unless otherwise indicated in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Federal Funds Rate Note (a "Federal Funds Rate
Interest Determination Date"), the rate on that day for Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)" or, if not
so published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Federal Funds Rate Interest Determination Date, the Federal
Funds Rate will be the rate on such Federal Funds Rate Interest Determination
Date as published in Composite Quotations under the heading "Federal
Funds/Effective Rate." If such rate is not published by 3:00 P.M., New York
City time, on such Calculation Date, the Federal Funds Rate will be calculated
by the applicable Calculation Agent and will be the arithmetic mean of the
rates for the last transaction in overnight Federal Funds arranged by three
leading brokers of Federal Funds transactions in The City of New York selected
by the applicable Calculation Agent as of 9:00 A.M., New York City time, on
such Federal Funds Rate Interest Determination Date; provided, however, that if
the brokers selected as aforesaid by the applicable Calculation Agent are not
quoting as described above, the Federal Funds Rate in effect for the applicable
period will be the Federal Funds Rate in effect on such Federal Funds Rate
Interest Determination Date.
LIBOR: Unless otherwise indicated in the applicable Pricing Supplement, LIBOR
will be determined by the applicable Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note (a "LIBOR Interest Determination Date"), LIBOR will be, as specified
in the applicable Pricing Supplement, either (a) the
S-10
<PAGE>
arithmetic mean of the offered rates for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following such
LIBOR Interest Determination Date, that appear on the Reuters Screen LIBO
Page as of 11:00 A.M., London time, on such LIBOR Interest Determination
Date, if at least two such offered rates appear on the Reuters Screen LIBO
Page ("LIBOR Reuters"), or (b) the rate for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following such
LIBOR Interest Determination Date, that appears on Telerate Page 3750 as of
11:00 A.M., London time, on such LIBOR Interest Determination Date ("LIBOR
Telerate"). "Reuters Screen LIBO Page" means the display designated as page
"LIBO" on the Reuters Monitor Money Rates Service (or such other page as
may replace page LIBO on that service for the purpose of displaying London
interbank offered rates of major banks). "Telerate Page 3750" means the
display designated as page "3750" on the Telerate Service (or such other
page as may replace the 3750 page on that service or such other service or
services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified in the
applicable Pricing Supplement, LIBOR will be determined as if LIBOR
Telerate had been specified. If fewer than two offered rates appear on the
Reuters Screen LIBO Page, or if no rate appears on Telerate Page 3750, as
applicable, LIBOR in respect of such LIBOR Interest Determination Date will
be determined as if the parties had specified the rate described in (ii)
below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear on the Reuters Screen LIBO Page, as specified
in (i)(a) above, or on which no rate appears on Telerate Page 3750, as
specified in (i)(b) above, as applicable, LIBOR will be determined on the
basis of the rates at which deposits in U.S. dollars having the Index
Maturity designated in the applicable Pricing Supplement are offered at
approximately 11:00 A.M., London time, on such LIBOR Interest Determination
Date by four major banks in the London interbank market selected by the
applicable Calculation Agent (the "Reference Banks") to prime banks in the
London interbank market, commencing on the second London Banking Day
immediately following such LIBOR Interest Determination Date and in a
principal amount equal to an amount of not less than U.S. $1 million that
is representative for a single transaction in such market at such time. The
applicable Calculation Agent will request the principal London office of
each of the Reference Banks to provide a quotation of its rates. If at
least two such quotations are provided, LIBOR for such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two quotations are provided, LIBOR for such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted by 11:00
A.M., New York City time, on such LIBOR Interest Determination Date by
three major banks in The City of New York selected by the applicable
Calculation Agent for loans in U.S. dollars to leading European banks,
having the Index Maturity specified in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following such
LIBOR Interest Determination Date and in a principal amount equal to an
amount of not less than U.S. $1 million that is representative for a single
transaction in such market at such time; provided, however, that if the
banks selected as aforesaid by the applicable Calculation Agent are not
quoting as mentioned in this sentence, LIBOR will be LIBOR in effect on
such LIBOR Interest Determination Date.
PRIME RATE: Unless otherwise indicated in the applicable Pricing Supplement,
"Prime Rate" means, with respect to any Interest Determination Date relating to
a Prime Rate Note (a "Prime Rate Interest Determination Date"), the rate set
forth in H.15(519) for such date opposite the caption "Bank Prime Loan." If
such rate is not yet published by 3:00 P.M., New York City time, on the
Calculation Date, the Prime Rate for such Prime Rate Interest Determination
Date will be the arithmetic mean of the rates of interest publicly announced by
each bank named on the Reuters Screen USPRIME1 Page as such bank's prime rate
or base lending rate as in effect for such Prime Rate Interest Determination
Date as quoted on the Reuters Screen USPRIME1 Page on such Prime Rate Interest
Determination Date, or, if fewer than four such rates appear on the Reuters
Screen USPRIME1 Page for such Prime Rate Interest Determination Date, the rate
shall be
S-11
<PAGE>
the arithmetic mean of the prime rates quoted on the basis of the actual number
of days in the year divided by 360 as of the close of business on such Prime
Rate Interest Determination Date by at least two of the three major money
center banks in The City of New York selected by the applicable Calculation
Agent from which quotations are requested. If fewer than two quotations are
provided, the Prime Rate shall be calculated by the applicable Calculation
Agent and shall be determined as the arithmetic mean of the prime rates quoted
in The City of New York on such date by the approximate number of banks or
trust companies organized and doing business under the laws of the United
States, or any State thereof, each having total equity capital of at least $500
million and being subject to supervision or examination by a Federal or State
authority, selected by the applicable Calculation Agent to quote such rate or
rates; provided, however, that if the Prime Rate is not published in H.15(519)
and the banks or trust companies selected as aforesaid are not quoting as
mentioned in this sentence, the Prime Rate with respect to such Prime Rate
Interest Determination Date will be the interest rate otherwise in effect on
such Prime Rate Interest Determination Date. "Reuters Screen USPRIME1 Page"
means the display designated as page "USPRIME1" on the Reuters Monitor Money
Rates Service (or such other page as may replace page USPRIME1 on that service
for the purpose of displaying prime rates or base lending rates of major United
States banks).
TREASURY RATE: Unless otherwise indicated in the applicable Pricing
Supplement, the "Treasury Rate" means, with respect to any Interest
Determination Date relating to a Treasury Rate Note (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury bills") having the Index Maturity
specified in the applicable Pricing Supplement as such rate is published in
H.15(519) under the heading "Treasury bills--auction average (investment)" or,
if not so published by 3:00 P.M., New York City time, on or prior to the
Calculation Date pertaining to such Treasury Rate Interest Determination Date,
the auction average rate (expressed as a bond equivalent on the basis of a year
of 365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury. Treasury bills are
usually sold at auction on Monday of each week unless that day is a legal
holiday, in which case the auction is usually held on the following Tuesday,
except that such auction may be held on the preceding Friday. In the event that
the results of the auction of Treasury bills having the specified Index
Maturity are not reported as provided by 3:00 P.M., New York City time, on such
Calculation Date, or if no such auction is held in a particular week, then the
Treasury Rate shall be a yield to maturity (expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 P.M., New York City time, on such Treasury Rate Interest
Determination Date, of three leading primary United States government
securities dealers, selected by the applicable Calculation Agent, for the issue
of Treasury bills with a remaining maturity closest to the applicable Index
Maturity; provided, however, that if the dealers selected as aforesaid by the
applicable Calculation Agent are not quoting as mentioned in this sentence, the
rate of interest in effect for the applicable period will be the rate of
interest in effect on such Treasury Rate Interest Determination Date.
11TH DISTRICT COST OF FUNDS RATE: Unless otherwise indicated in the
applicable Pricing Supplement, the "11th District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to an 11th District
Cost of Funds Rate Note (an "11th District Cost of Funds Interest Determination
Date"), the rate equal to the monthly weighted average cost of funds for the
calendar month preceding such 11th District Cost of Funds Rate Interest
Determination Date as set forth under the caption "11th District" on Telerate
Page 7058 as of 11:00 A.M., San Francisco time, on such 11th District Cost of
Funds Rate Interest Determination Date. If such rate does not appear on
Telerate Page 7058 on any related 11th District Cost of Funds Rate Interest
Determination Date, the 11th District Cost of Funds Rate for such 11th District
Cost of Funds Rate Interest Determination Date shall be the monthly weighted
average cost of funds paid by member institutions of the Eleventh Federal Home
Loan Bank District that was most recently announced (the "Index") by the FHLB
of San Francisco as such cost of funds for the calendar month preceding the
date of such announcement. If the FHLB of San Francisco fails to announce such
rate for the calendar month next preceding such 11th District Cost of Funds
Rate Interest Determination Date, then the 11th District Cost of Funds Rate for
such 11th District Cost of Funds Rate Interest Determination Date will be the
11th District Cost of Funds Rate in effect on such 11th District Cost of Funds
Rate Interest Determination Date.
S-12
<PAGE>
BOOK-ENTRY NOTES
The Notes may be issued in whole or in part in the form of one or more fully-
registered Notes (each, a "Book-Entry Note") which will be deposited with, or
on behalf of, the Depository and registered in the name of the Depository's
nominee. Except as set forth below, a Book-Entry Note may not be transferred
except as a whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any nominee to a successor of the Depository
or a nominee of such successor.
The Depository has advised the Issuer and the Agents as follows: it is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. The Depository holds securities that its participants ("Participants")
deposit with the Depository. The Depository also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants" include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. The Depository is owned by a number of its Direct Participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the Depository's
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The Rules applicable to the Depository and its
participants are on file with the Securities and Exchange Commission.
Purchase of interests in the Book-Entry Notes under the Depository's system
must be made by or through Direct Participants, which will receive a credit for
such interests on the Depository's records. The ownership interest of each
actual purchaser of interests in the Book-Entry Notes ("Beneficial Owner") is
in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Depository of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Book-Entry Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in the
Book-Entry Notes, except as described below.
To facilitate subsequent transfers, all Book-Entry Notes deposited by
Participants with the Depository are registered in the name of the Depository's
partnership nominee, Cede & Co. The deposit of Book-Entry Notes with the
Depository and their registration in the name of Cede & Co. affect no change in
beneficial ownership. The Depository has no knowledge of the actual Beneficial
Owners of the interests in the Book-Entry Notes; the Depository's records
reflect only the identity of the Direct Participants to whose accounts
interests in the Book-Entry Notes are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depository to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangement among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all the interests
in the Book-Entry Notes are being redeemed, the Depository's practice is to
determine by lot the amount of the interest of each Direct Participant in such
Book-Entry Note to be redeemed.
S-13
<PAGE>
Neither the Depository nor Cede & Co. will consent or vote with respect to
the Book-Entry Notes. Under its usual procedures, the Depository mails an
Omnibus Proxy to the issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts interests in the Book-Entry Notes are credited
on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Book-Entry Notes will be made in same-
day funds to the Depository. The Depository's practice is to credit Direct
Participants' accounts on the payment date in accordance with their respective
holdings shown on the Depository's records unless the Depository has reason to
believe that it will not receive payment on the payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of the Depository, the related
Trustee, the Issuer or any paying agent or the Securities Registrar, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to the Depository is the responsibility of
the Issuer or its paying agent, disbursement of such payments to Direct and
Indirect Participants shall be the responsibility of the Depository, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
The Depository may discontinue providing its services as depository with
respect to the Notes at any time by giving reasonable notice to the Issuer or
its paying agent. The Issuer may decide to discontinue use of the system of
book-entry transfers through the Depository (or a successor depository).
Book-Entry Notes are exchangeable for certificated Notes in definitive form
of like tenor as such Book-Entry Notes if (i) the Depository for such Book-
Entry Notes notifies the Issuer that it is unwilling or unable to continue as
Depository for such Book-Entry Notes or if at any time such Depository ceases
to be a clearing agency registered under the Securities Exchange Act of 1934,
as amended, and, in either case, a successor depository is not appointed by the
Issuer within 90 days, (ii) the Issuer in its discretion at any time determines
not to have all of the Notes of such series represented by one or more Book-
Entry Notes and notifies the applicable Trustee thereof, or (iii) an Event of
Default has occurred and is continuing with respect to the Notes of such
series. Any Book-Entry Note that is exchangeable pursuant to the preceding
sentence is exchangeable for certificated Notes issuable in authorized
denominations and registered in such names as the Depository holding such Book-
Entry Notes shall direct. Subject to the foregoing, a Book-Entry Note is not
exchangeable, except for a Book-Entry Note or Book-Entry Notes of the same
aggregate denominations to be registered in the name of such Depository or its
nominee or in the name of a successor of such Depository or a nominee of such
successor.
GUARANTEES
The Senior Notes will be fully and unconditionally guaranteed (the "Senior
Guarantees") by CoreStates Financial Corp (previously defined as the Guarantor)
as to payment of principal, premium, if any, and interest when and as the same
shall become due and payable, whether at maturity or upon redemption, repayment
or otherwise. The Senior Guarantees will rank pari passu with all other
unsecured and unsubordinated obligations of the Guarantor. At December 31,
1995, $1,036,035,000 of Senior Guarantees were outstanding. All outstanding
Senior Guarantees ranked pari passu with all other unsecured and unsubordinated
obligations of the Guarantor.
The Subordinated Notes will be fully and unconditionally guaranteed (the
"Subordinated Guarantees" and, together with the Senior Guarantees, the
"Guarantees") by the Guarantor, on a subordinated basis, as to payment of
principal, premium, if any, and interest when and as the same shall become due
and payable, whether at maturity or upon redemption, repayment or otherwise.
The Subordinated Guarantees will be unsecured and will be subordinated as set
forth under "Guarantees" in the accompanying Prospectus. Prior to the execution
of the First Supplemental Indenture, the Guarantor issued guarantees
subordinated to a more
S-14
<PAGE>
narrowly defined category of Senior Guarantees. At December 31, 1995,
$625,000,000 of such obligations were outstanding.
The obligations of the Guarantor under the Guarantees will be full and
unconditional regardless of the enforceability of the applicable Notes or the
related Indenture and will not be discharged until all obligations contained in
such Notes and the related Indenture are satisfied. Holders of the Notes may
proceed directly against the Guarantor in the event of a default under the
applicable Notes without first proceeding against the Issuer.
MULTI-CURRENCY NOTES AND INDEXED NOTES
If any Note is not to be denominated in U.S. dollars, certain provisions with
respect thereto will be set forth in the applicable Pricing Supplement which
will specify the currency or currencies, including composite currencies such as
the European Currency Unit, in which the principal, premium, if any, and
interest with respect to such Note are to be paid (the "Specified Currency"),
along with any other terms relating to the non-U.S. dollar denomination.
The Notes also may be issued with the principal amount payable at maturity to
be determined with reference to the exchange rate of a Specified Currency
relative to an indexed currency (the "Indexed Currency") or other index, each
as set forth in the applicable Pricing Supplement. Holders of such Notes may
receive a principal amount on the Maturity Date that is greater than or less
than the face amount of the Note depending upon the relative value at maturity
of the Specified Currency compared to the Indexed Currency or as otherwise set
forth in the applicable Pricing Supplement. Information as to the method for
determining the principal amount payable on the Maturity Date and certain
additional risks and tax considerations associated with investment in such
Notes will be set forth in the applicable Pricing Supplement.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the determination of a Base Rate, the
specification of Base Rates, calculation of the interest rate applicable to a
Floating Rate Note, its Interest Payment Dates or any other matter relating
thereto may be modified by the terms as specified under "Other Provisions" on
the face thereof or in an Addendum relating thereto, if so specified on the
face thereof and in the applicable Pricing Supplement.
BEARER NOTES
The Issuer also may offer from time to time Notes in bearer form ("Bearer
Notes") outside the United States at varying prices and terms. Such offerings
of Bearer Notes may be separate from, or simultaneous with, offerings of Notes
in the United States. The Bearer Notes are not offered by this Prospectus
Supplement and the accompanying Prospectus and may not be purchased by U.S.
persons other than foreign branches of certain U.S. financial institutions.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does
S-15
<PAGE>
not deal with holders other than original purchasers (except where otherwise
specifically noted). Persons considering the purchase of the Notes should
consult their own tax advisors concerning the application of United States
Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the Notes arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any
other person whose income or gain in respect of a Note is effectively connected
with the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest
Payments of interest on a Note generally will be taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or are received
(in accordance with the U.S. Holder's regular method of tax accounting).
Original Issue Discount
The following summary is a general discussion of the United States Federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of Notes issued with original issue discount ("Discount Notes").
The following summary is based upon final Treasury regulations (the "OID
Regulations") released by the Internal Revenue Service ("IRS") on January 27,
1994 under the original issue discount provisions of the Code.
For United States Federal income tax purposes, original issue discount is the
excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as hereinafter defined) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in an issue of Notes
equals the first price at which a substantial amount of such Notes has been
sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note other than "qualified stated interest"
payments. The term "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate. In
addition, under the OID Regulations, if a Note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such Note (e.g., Notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on such Note or any "true"
discount on such Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
stated interest on the Note would be treated as original issue discount rather
than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by
S-16
<PAGE>
the initial U.S. Holder of a Discount Note is the sum of the daily portions of
original issue discount with respect to such Discount Note for each day during
the taxable year (or portion of the taxable year) on which such U.S. Holder
held such Discount Note. The "daily portion" of original issue discount on any
Discount Note is determined by allocating to each day in any accrual period a
ratable portion of the original issue discount allocable to that accrual
period. An "accrual period" may be of any length and the accrual periods may
vary in length over the term of the Discount Note, provided that each accrual
period is no longer than one year and each scheduled payment of principal or
interest occurs either on the final day of an accrual period or on the first
day of an accrual period. The amount of original issue discount allocable to
each accrual period is generally equal to the difference between (i) the
product of the Discount Note's adjusted issue price at the beginning of such
accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and appropriately adjusted to
take into account the length of the particular accrual period) and (ii) the
amount of any qualified stated interest payments allocable to such accrual
period. The "adjusted issue price" of a Discount Note at the beginning of any
accrual period is the sum of the issue price of the Discount Note plus the
amount of original issue discount allocable to all prior accrual periods minus
the amount of any prior payments on the Discount Note that were not qualified
stated interest payments. Under these rules, U.S. Holders generally will have
to include in income increasingly greater amounts of original issue discount in
successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder
must include in its gross income with respect to such Discount Note for any
taxable year (or portion thereof in which the U.S. Holder holds the Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the
total noncontingent principal payments due under the Variable Note by more than
a specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than zero but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions such
as a maximum numerical limitation (i.e., a cap) or a minimum numerical
limitation (i.e., a floor) may, under certain circumstances, fail to be treated
as a qualified floating rate under the OID Regulations unless such cap or floor
is fixed throughout the term of the Note. An "objective rate" is a rate that is
not itself a qualified floating rate but which is determined using a single
fixed formula and which is based upon (i) one or more qualified floating rates,
(ii) one or more rates where each rate would be a qualified floating rate for a
debt instrument denominated in a currency other than the currency in which the
Variable Note is denominated,
S-17
<PAGE>
(iii) either the yield or changes in the price of one or more items of actively
traded personal property (other than stock or debt of the issuer or a related
party) or (iv) a combination of objective rates. The OID Regulations also
provide that other variable interest rates may be treated as objective rates if
so designated by the IRS in the future. Despite the foregoing, a variable rate
of interest on a Variable Note will not constitute an objective rate if it is
reasonably expected that the average value of such rate during the first half
of the Variable Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Variable Note's term. A "qualified inverse floating rate" is any
objective rate where such rate is equal to a fixed rate minus a qualified
floating rate, as long as variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly borrowed
funds. The OID Regulations also provide that if a Variable Note provides for
stated interest at a fixed rate for an initial period of less than one year
followed by a variable rate that is either a qualified floating rate or an
objective rate and if the variable rate on the Variable Note's issue date is
intended to approximate the fixed rate (e.g., the value of the variable rate on
the issue date does not differ from the value of the fixed rate by more than 25
basis points), then the fixed rate and the variable rate together will
constitute either a single qualified floating rate or objective rate, as the
case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single qualified
floating rate or a single objective rate throughout the term thereof and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (i.e., at a price below
the Note's stated principal amount) in excess of a specified de minimis amount.
Original issue discount on such a Variable Note arising from "true" discount is
allocated to an accrual period using the constant yield method described above
by assuming that the variable rate is a fixed rate equal to (i) in the case of
a qualified floating rate or qualified inverse floating rate, the value as of
the issue date, of the qualified floating rate or qualified inverse floating
rate, or (ii) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Variable Note.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed
rate that reflects the yield that is reasonably expected for the Variable Note.
In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Variable Note as of the Variable
Note's issue date is approximately the same as the fair market value of an
otherwise identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed rate.
Subsequent to converting the fixed rate into either a qualified floating rate
or a qualified inverse floating rate, the Variable Note is then converted into
an "equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for
S-18
<PAGE>
the "equivalent" fixed rate debt instrument by applying the general original
issue discount rules to the "equivalent" fixed rate debt instrument and a U.S.
Holder of the Variable Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. Each accrual period appropriate adjustments will be made
to the amount of qualified stated interest or original issue discount assumed
to have been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Variable Note during the accrual period.
U.S. Holders should be aware that on December 15, 1994, the IRS released
proposed amendments to the OID Regulations which would broaden the definition
of an objective rate and would further clarify certain other provisions
contained in the OID Regulations. If ultimately adopted, these amendments to
the OID Regulations would be effective for debt instruments issued 60 days or
more after the date on which such proposed amendments are finalized.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if such Note were treated as a contingent
payment debt obligation. The proper United States Federal income tax treatment
of Variable Notes that are treated as contingent payment debt obligations will
be more fully described in the applicable Pricing Supplement. Furthermore, any
other special United States Federal income tax considerations, not otherwise
discussed herein, which are applicable to any particular issue of Notes will be
discussed in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company prior
to their stated maturity (a "call option") and/or (ii) may be repayable at the
option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
will be treated as having been issued with original issue discount. In general,
an individual or other cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the Short-
Term Note will be deferred until a corresponding amount of income is realized.
U.S. Holders who report income for United States Federal income tax purposes
under the accrual method, and certain other holders including banks and dealers
in securities, are required to accrue original issue discount on a Short-Term
Note on a straight-line basis unless an election is made to accrue the original
issue discount under a constant yield method (based on daily compounding).
Market Discount
If a U.S. Holder purchases a Note, other than a Discount Note, for an amount
that is less than its issue price (or, in the case of a subsequent purchaser,
its stated redemption price at maturity) or, in the case of a
S-19
<PAGE>
Discount Note, for an amount that is less than its adjusted issue price as of
the purchase date, such U.S. Holder will be treated as having purchased such
Note at a "market discount," unless such market discount is less than a
specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Note, any payment that
does not constitute qualified stated interest) on, or any gain realized on the
sale, exchange, retirement or other disposition of, a Note as ordinary income
to the extent of the lesser of (i) the amount of such payment or realized gain
or (ii) the market discount which has not previously been included in income
and is treated as having accrued on such Note at the time of such payment or
disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless
the U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to
the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the taxable year to which such election applies and may be revoked only
with the consent of the IRS.
Premium
If a U.S. Holder purchases a Note for an amount that is greater than the sum
of all amounts payable on the Note after the purchase date other than payments
of qualified stated interest, such U.S. Holder will be considered to have
purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess
of its stated redemption price at maturity, special rules would apply which
could result in a deferral of the amortization of some bond premium until later
in the term of the Note. Any election to amortize bond premium applies to all
taxable debt obligations then owned and thereafter acquired by the U.S. Holder
and may be revoked only with the consent of the IRS.
Disposition of a Note
Except as discussed above, upon the sale, exchange or retirement of a Note, a
U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and accrued market
discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to such Note. Such gain or loss generally will be long-term capital
gain or loss if the Note were held for more than one year.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
S-20
<PAGE>
Payments of Interest in a Foreign Currency
CASH METHOD. A U.S. Holder who uses the cash method of accounting for United
States Federal income tax purposes and who receives a payment of interest on a
Note (other than original issue discount or market discount) will be required
to include in income the U.S. dollar value of the Foreign Currency payment
(determined on the date such payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S. dollar
value will be the U.S. Holder's tax basis in such Foreign Currency.
ACCRUAL METHOD. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the
U.S. dollar value of the amount of interest income (including original issue
discount or market discount and reduced by amortizable bond premium to the
extent applicable) that has accrued and is otherwise required to be taken into
account with respect to a Note during an accrual period. The U.S. dollar value
of such accrued income will be determined by translating such income at the
average rate of exchange for the accrual period or, with respect to an accrual
period that spans two taxable years, at the average rate for the partial period
within the taxable year. A U.S. Holder may elect, however, to translate such
accrued interest income using the rate of exchange on the last day of the
accrual period or, with respect to an accrual period that spans two taxable
years, using the rate of exchange on the last day of the taxable year. If the
last day of an accrual period is within five business days of the date of
receipt of the accrued interest, a U.S. Holder may translate such interest
using the rate of exchange on the date of receipt. The above election will
apply to other debt obligations held by the U.S. Holder and may not be changed
without the consent of the IRS. A U.S. Holder should consult a tax advisor
before making the above election. A U.S. Holder will recognize exchange gain or
loss (which will be treated as ordinary income or loss) with respect to accrued
interest income on the date such income is received. The amount of ordinary
income or loss recognized will equal the difference, if any, between the U.S.
dollar value of the Foreign Currency payment received (determined on the date
such payment is received) in respect of such accrual period and the U.S. dollar
value of interest income that has accrued during such accrual period (as
determined above).
Purchase, Sale and Retirement of Notes
A U.S. Holder who purchases a Note with previously owned Foreign Currency
will recognize ordinary income or loss in an amount equal to the difference, if
any, between such U.S. Holder's tax basis in the Foreign Currency and the U.S.
dollar fair market value of the Foreign Currency used to purchase the Note,
determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income)
and will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year.
To the extent the amount realized represents accrued but unpaid interest,
however, such amounts must be taken into account as interest income, with
exchange gain or loss computed as described in "Payments of Interest in a
Foreign Currency" above. If a U.S. Holder receives Foreign Currency on such a
sale, exchange or retirement the amount realized will be based on the U.S.
dollar value of the Foreign Currency on the date the payment is received or the
Note is disposed of (or deemed disposed of in the case of a taxable exchange of
the Note for a new Note). In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the
U.S. dollar value of the amount realized by translating the Foreign Currency
payment at the spot rate of exchange on the settlement date of the sale. A U.S.
Holder's adjusted tax basis in a Note will equal the cost of the Note to such
holder, increased by the amounts of any market discount or original issue
discount previously included in income by the holder with respect to such Note
and reduced by any amortized acquisition or other
S-21
<PAGE>
premium and any principal payments received by the holder. A U.S. Holder's tax
basis in a Note, and the amount of any subsequent adjustments to such holder's
tax basis, will be the U.S. dollar value of the Foreign Currency amount paid
for such Note, or of the Foreign Currency amount of the adjustment, determined
on the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that is
attributable to fluctuations in currency exchange rates will be ordinary income
or loss which will not be treated as interest income or expense. Gain or loss
attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be recognized only to the extent of the total gain
or loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
Original Issue Discount
In the case of a Discount Note or Short-Term Note, (i) original issue
discount is determined in units of the Foreign Currency, (ii) accrued original
issue discount is translated into U.S. dollars as described in "Payments of
Interest in a Foreign Currency--Accrual Method" above and (iii) the amount of
Foreign Currency gain or loss on the accrued original issue discount is
determined by comparing the amount of income received attributable to the
discount (either upon payment, maturity or an earlier disposition), as
translated into U.S. dollars at the rate of exchange on the date of such
receipt, with the amount of original issue discount accrued, as translated
above.
Premium and Market Discount
In the case of a Note with market discount, (i) market discount is determined
in units of the Foreign Currency, (ii) accrued market discount taken into
account upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note (other than accrued
market discount required to be taken into account currently) is translated into
U.S. dollars at the exchange rate on such disposition date (and no part of such
accrued market discount is treated as exchange gain or loss) and (iii) accrued
market discount currently includible in income by a U.S. Holder for any accrual
period is translated into U.S. dollars on the basis of the average exchange
rate in effect during such accrual period, and the exchange gain or loss is
determined upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note in the manner described
in "Payments of Interest in a Foreign Currency--Accrual Method" above with
respect to computation of exchange gain or loss on accrued interest.
With respect to a Note issued with amortizable bond premium, such premium is
determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder
should recognize exchange gain or loss equal to the difference between the U.S.
dollar value of the bond premium amortized with respect to a period, determined
on the date the interest attributable to such period is received, and the U.S.
dollar value of the bond premium determined on the date of the acquisition of
the Note.
Exchange of Foreign Currencies
A U.S. Holder will have a tax basis in any Foreign Currency received as
interest or on the sale, exchange or retirement of a Note equal to the U.S.
dollar value of such Foreign Currency, determined at the time the interest is
received or at the time of the sale, exchange or retirement. Any gain or loss
realized by a U.S. Holder on a sale or other disposition of Foreign Currency
(including its exchange for U.S. dollars or its use to purchase Notes) will be
ordinary income or loss.
S-22
<PAGE>
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Company, a controlled foreign
corporation related to the Company or a bank receiving interest described in
section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a non-
U.S. Holder (the "Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (i) is signed by the beneficial owner of the
Note under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution. The Treasury
Department is considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is related to
holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
Notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
S-23
<PAGE>
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Issuer through the
Agents, each of which has agreed to use its reasonable best efforts to solicit
purchases of the Notes. The Issuer will pay each Agent a commission of from
.125% to .750% (or, in the case of any transaction in which an Agent is acting
as principal or with respect to Notes for which the stated maturity is in
excess of 30 years, such commission as shall be agreed between the Issuer and
the related Agent at the time of sale) of the principal amount of each Note,
depending upon its stated maturity, sold through such Agent. Each Agent will
have the right, in its discretion reasonably exercised, to reject in whole or
in part any offer to purchase Notes received by such Agent. The Issuer also may
sell to any Agent, acting as principal, at a discount to be agreed upon at the
time of sale, for resale to one or more investors or to one or more broker-
dealers (acting as principal for purposes of resale) at varying prices related
to prevailing market prices at the time of resale, as determined by such Agent,
or, if so agreed, at a fixed public offering price. Unless otherwise indicated
in the applicable Pricing Supplement, if any Note is resold by an Agent to any
broker-dealer at a discount, such discount will not be in excess of the
discount received by such Agent from the Issuer. In addition, unless otherwise
indicated in the applicable Pricing Supplement, any Note purchased by an Agent
as principal will be purchased at 100% of the principal amount thereof less a
percentage equal to the commission applicable to an agency sale of a Note of
identical maturity. After the initial public offering of the Notes, the public
offering price (in the case of Notes to be resold on a fixed public offering
price basis), the concession and the discount may be changed. The Issuer also
reserves the right to sell the Notes directly to investors on its own behalf in
those jurisdictions where it is authorized to do so.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Issuer and the Guarantor
have agreed to indemnify each Agent against certain liabilities, including
liabilities under the Act, or to contribute to payments each Agent may be
required to make in respect thereof. The Issuer and the Guarantor have agreed
to reimburse the Agents for certain of the Agents' expenses, including, but not
limited to, the fees and expenses of counsel to the Agents. The Agents and
certain of their affiliates have engaged and may in the future engage in
investment banking and/or commercial banking with the Issuer or the Guarantor
in the ordinary course of business.
The Issuer has been advised by each Agent that it may from time to time
purchase and sell Notes in the secondary market, but that it is not obligated
to do so. There can be no assurance that there will be a secondary market for
the Notes or liquidity in the secondary market if one develops. From time to
time, each Agent may make a market in the Notes.
S-24
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 10, 1996)
U.S. $200,000,000 [LOGO OF CORE STATES
CORESTATES CAPITAL CORP APPEARS HERE]
RETAIL MEDIUM TERM NOTESM SECURITIES
SENIOR/SUBORDINATED MEDIUM-TERM NOTES
WITH MATURITIES OF NINE MONTHS OR MORE FROM DATE OF ISSUE
PAYMENT OF THE PRINCIPAL, PREMIUM, IF ANY, AND
INTEREST ON THE NOTES IS UNCONDITIONALLY GUARANTEED BY
CORESTATES FINANCIAL CORP
----------
CoreStates Capital Corp, a Pennsylvania corporation (the "Issuer"), may
offer from time to time up to $200,000,000 aggregate initial offering price of
its Retail Medium Term NoteSM securities as a class of its debt securities
entitled Senior Medium-Term Notes (the "Senior Notes") and Subordinated
Medium-Term Notes (the "Subordinated Notes" and, together with the Senior
Notes, the "Notes"). The Senior Notes will be unconditionally guaranteed as to
payment of principal, premium, if any, and interest (the "Senior Guarantees")
by CoreStates Financial Corp (the "Guarantor"). The Subordinated Notes will be
fully, and unconditionally guaranteed, on a subordinated basis, as to payment
of principal, premium, if any, and interest (the "Subordinated Guarantees"
and, together with the Senior Guarantees, the "Guarantees") by the Guarantor.
Each Note will mature nine months or more from its date of issue, as selected
by the purchaser and agreed to by the Issuer. Unless otherwise indicated in
the applicable Pricing Supplement to this Prospectus Supplement, (a "Pricing
Supplement"), a Note may not be redeemed at the option of the Issuer or be
repaid at the option of the registered holder thereof prior to maturity and
will be issued in denominations of $1,000 and integral multiples thereof.
The interest rate, if any, or interest rate formula on each Note will be
established by the Issuer at the time of issuance of such Note and will be set
forth therein and specified in a Pricing Supplement. Interest rates and
interest rate formulae are subject to change by the Issuer, but no change will
affect any Note already issued or as to which an offer to purchase has been
accepted by the Issuer. Interest rates and interest rate formulas are subject
to change by the Issuer, but no change will affect any Note already issued or
as to which an offer to purchase has been accepted by the Issuer. Unless
otherwise indicated in the applicable Pricing Supplement, each Note will bear
interest at a fixed rate ("Fixed Rate Notes"), or at a floating rate
("Floating Rate Notes"). See "Description of Retail Medium Term NoteSM
securities" in this Prospectus Supplement and "Description of Debt Securities"
in the accompanying Prospectus. Interest on Fixed Rate Notes will accrue from
their date of issue and, unless otherwise provided in the applicable Pricing
Supplement, will be payable monthly on the 15th day of each month and at
maturity or upon earlier redemption or repayment, as the case may be. Interest
on Floating Rate Notes will accrue from their date of issue and will be
payable on the dates indicated therein and in the applicable Pricing
Supplement and at maturity or upon earlier redemption or repayment, as the
case may be.
----------
THE NOTES WILL BE ISSUED IN FULLY REGISTERED CERTIFICATED OR BOOK-ENTRY
FORM. OWNERSHIP INTERESTS IN NOTES IN BOOK-ENTRY FORM WILL BE SHOWN ON, AND
TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY THE
DEPOSITORY TRUST COMPANY, AS DEPOSITARY, AND ITS PARTICIPANTS. OWNERS OF
BENEFICIAL INTERESTS IN NOTES ISSUED IN BOOK-ENTRY FORM WILL BE ENTITLED TO
PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM EQUAL IN PRINCIPAL AMOUNT TO
THEIR RESPECTIVE BENEFICIAL INTERESTS ONLY UNDER THE LIMITED CIRCUMSTANCES
DESCRIBED HEREIN. SEE "DESCRIPTION OF RETAIL MEDIUM TERM NOTESM SECURITIES--
BOOK-ENTRY NOTES" IN THIS PROSPECTUS SUPPLEMENT.
----------
THE SECURITIES BEING OFFERED WILL BE UNSECURED OBLIGATIONS OF THE ISSUER
AND WILL NOT BE SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF
ANY BANK OR SUBSIDIARY OF THE ISSUER AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND OR ANY OTHER GOVERNMENTAL AGENCY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY SUPPLEMENT
HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' COMMISSION PROCEEDS TO
PUBLIC(1) OR DISCOUNT(2) ISSUER(2)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............. 100.00% .20%-3.00% 99.80%-97.00%
- -------------------------------------------------------------------------------
$199,600,000-
Total................ $200,000,000 $400,000-$6,000,000 $194,000,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Unless otherwise specified in the applicable Pricing Supplement relating
thereto, each Note will be issued at 100% of the principal amount thereof.
(2) The Issuer will pay Smith Barney Inc. (the "Agent") a commission, in the
form of a discount, ranging from .20% to 3.00% (or, with respect to Notes
for which the stated maturity is in excess of 30 years, such commission as
shall be agreed between the Issuer and the Agent at the time of sale) of
the principal amount of any Note, depending upon its stated maturity, sold
through the Agent. The Agent, acting as principal, may also purchase Notes
at a discount for resale to investors or other purchasers at varying
prices related to prevailing market prices at the time of resale or, if so
agreed, at a fixed public offering price. No commission will be payable on
any Note sold directly by the Issuer. The Issuer has agreed to indemnify
the Agent against certain liabilities, including liabilities under the
Securities Act of 1933.
(3) Before deducting expenses payable by the Issuer estimated at $1,000,000.
----------
In addition to the offering of the Notes made hereby, the Issuer may offer
other series of its Senior Medium-Term Notes, Subordinated Medium-Term Notes
or other Debt Securities, and the sale of such Senior Medium Term Notes,
Subordinated Medium-Term Notes or other Debt Securities may reduce the amount
of Notes that may be sold hereunder.
The Notes are being offered on a continuing basis by the Issuer through the
Agent, each of which has agreed to use its reasonable best efforts to solicit
offers to purchase the Notes. The Issuer also may sell Notes to the Agent,
acting as principal, for resale to one or more investors or to one or more
broker-dealers (acting as a principal for purposes of resale) at varying
prices related to prevailing market prices at the time of resale, as
determined by the Agent or, if so agreed, at a fixed public offering price.
The Issuer has reserved the right to sell Notes directly to investors on its
own behalf. The Notes will not be listed on any securities exchange, and there
can be no assurance that the Notes will be sold or that there will be a
secondary market for the Notes. The Issuer reserves the right to withdraw,
cancel or modify the offer made hereby without notice. The Issuer or the Agent
that solicits any offer to purchase Notes may reject any offer in whole or in
part. See "Plan of Distribution of Retail Medium Term NoteSM securities". The
agent, whether acting as agent or principal, may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933, as amended.
----------
SMITH BARNEY INC.
SMService mark of Smith Barney Inc.
----------
May 10, 1996
<PAGE>
CORESTATES FINANCIAL CORP
RECENT DEVELOPMENTS
ACQUISITION OF MERIDIAN BANCORP, INC.--On October 10, 1995, CoreStates
Financial Corp ("CoreStates") and Meridian Bancorp, Inc. ("Meridian") announced
a definitive agreement to merge. Meridian is a bank holding company with
approximately $14.8 billion in assets and $11.2 billion in deposits with its
executive offices located at 35 North Sixth Street, Reading, Pennsylvania
19603. The closing took place on April 9, 1996. For each share of Meridian
outstanding, 1.225 shares of CoreStates common stock were issued. Based on
closing share prices of December 31, 1995, the transaction would be valued at
approximately $3.1 billion. The transaction was accounted for under the pooling
of interests method of accounting.
Strategically, this acquisition will: combine two strongly performing banking
companies, create a leading market position in eastern Pennsylvania, northern
Delaware, and central New Jersey, extend the combined company's market and
create a company with the resources and capital to support investments in
growth and improved services to customers.
In June 1995, Meridian completed an internal review of operations and
businesses and announced a company-wide plan designed to improve its operating
performance and competitive position. Implementation of the Meridian plan began
at the end of the second quarter of 1995 and will continue over a period of
approximately 12 months from that date. At the end of that period, the process
is expected to reduce operating expenses on an annualized basis and provide
recurring revenue enhancements of $13 million on an annualized basis.
On February 23, 1996, Meridian acquired United Counties Bancorporation
("United Counties"), a $1.6 billion asset New Jersey bank holding company, in a
transaction accounted for as a pooling of interests. For each of United
Counties' 2,150,000 common shares outstanding, 5.0 shares of Meridian's common
stock were issued.
Pending approvals from various regulatory authorities, consolidations of bank
subsidiaries and operations are expected to begin in the third quarter of 1996
with the consolidation of Meridian's Pennsylvania bank subsidiary into
CoreStates' lead Pennsylvania bank, CoreStates Bank, N.A. ("CoreStates Bank").
Other consolidations also scheduled for the third quarter of 1996 include the
combination of Meridian Bank NJ and United Counties Trust Bank into New Jersey
National Bank ("NJNB") and the consolidation of Meridian's Delaware Trust
Company into CoreStates Bank. The interstate consolidation of CoreStates Bank
and NJNB, previously scheduled for January 1996, has been postponed until the
fourth quarter of 1996 in order to accommodate the consolidations of the
Meridian bank subsidiaries.
S-2
<PAGE>
DESCRIPTION OF RETAIL MEDIUM TERM NOTESM SECURITIES
The following description encompasses all the material terms and provisions
of the Notes offered hereby and supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and provisions of the
Debt Securities (as defined in the accompanying Prospectus) set forth under the
heading "Description of Debt Securities" in the Prospectus, to which
description reference is hereby made. The following description will apply to
each Note unless otherwise specified in the applicable Pricing Supplement.
GENERAL
The Notes are to be issued as one or more series of Debt Securities, and will
be either Senior Debt Securities or Subordinated Debt Securities of the Issuer
(each as defined in the accompanying Prospectus). At the date hereof, the
maximum amount of Debt Securities authorized for issuance is $200,000,000,
subject to a reduction as a result of future sales of the Issuer's other
securities. Whether an offering of Notes will constitute Senior Debt Securities
("Senior Notes") or Subordinated Debt Securities ("Subordinated Notes") will be
set forth in a Pricing Supplement hereto. The Senior Notes will be issued under
an Indenture between the Issuer, the Guarantor and The Bank of New York, as
senior trustee and successor to NationsBank of Georgia, National Association,
successor to Wachovia Bank of Georgia, N.A. (formerly the First National Bank
of Atlanta, N.A.) (the "Senior Trustee"), dated as of December 1, 1990 (the
"Senior Indenture"), and the Subordinated Notes will be issued under an
Indenture between the Issuer, the Guarantor and Bank One, Columbus, N.A. dated
as of December 1, 1990, as amended by a First Supplemental Indenture dated as
of March 1, 1993 and as further amended by a Second Supplemental Indenture
dated as of August 1, 1994 (together the "Subordinated Indenture"), between the
Issuer, the Guarantor, Bank One, Columbus, N.A. and Citibank, N.A., as
subordinated trustee with respect to all securities issued thereafter (the
"Subordinated Trustee" and, together with the Senior Trustee, the "Trustees").
The Senior Indenture and the Subordinated Indenture are collectively referred
to herein as "Indentures" and are more fully described in the accompanying
Prospectus. The following summaries of certain provisions of the Indentures
encompass all their material terms and provisions but are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Indentures, including the definitions therein of certain terms. The terms and
conditions set forth below will apply to each Note unless otherwise specified
in the applicable Pricing Supplement.
The Indentures do not limit the aggregate principal amount of Senior Debt
Securities or Subordinated Debt Securities that may be issued thereunder and
provide that such Debt Securities may be issued in one or more series up to the
aggregate principal amount that may be authorized from time to time by the
Issuer.
All Senior Debt Securities, including the Senior Notes, will be unsecured
obligations and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Issuer. At December 31, 1995, $1,036,035,000
of senior debt securities of the Issuer was outstanding. All outstanding senior
debt securities were unsecured and ranked pari passu with all other unsecured
and unsubordinated indebtedness of the Issuer.
All Subordinated Debt Securities, including the Subordinated Notes, will be
unsecured, subordinated and subject to Senior CoreStates Capital Indebtedness
as set forth under "Certain Terms Relating to Subordinated Debt Securities" in
the accompanying Prospectus. Prior to the execution of the First Supplemental
Indenture, the Issuer issued indebtedness subordinated to a more narrowly
defined category of senior indebtedness. At December 31, 1995, $625,000,000 of
such indebtedness was outstanding.
The Indentures do not contain provisions which would provide protection to
noteholders against a sudden and dramatic decline in credit quality resulting
from takeovers, recapitalizations or similar restructurings. See "Description
of Debt Securities--Restrictive Covenants" in the accompanying Prospectus.
The Notes will be offered on a continuous basis and will mature on any day
nine months or more from the date of issue, as selected by the purchaser and
agreed to by the Issuer. Floating Rate Notes will mature
S-3
<PAGE>
on an Interest Payment Date (as hereinafter defined). Unless otherwise
indicated in the Pricing Supplement, the Notes will bear interest at a fixed
rate or at floating rates determined by reference to one or more of the Base
Rates described below, which may be adjusted by a Spread and/or Spread
Multiplier (as hereinafter defined) applicable to such Floating Rate Notes,
until the principal thereof is paid or made available for payment.
Unless otherwise indicated in an accompanying Prospectus Supplement, the
Notes will be issued only in fully-registered certificated or book-entry form
without coupons and, except as may otherwise be provided in the applicable
Pricing Supplement, in denominations of $1,000 and integral multiples thereof.
Notes issued in certificated form may be transferred or exchanged at the
offices described in the immediately following paragraph. In the event Notes
are issued in book-entry form through the facilities of The Depository Trust
Company, New York, New York (the "Depository"), transfers or exchanges may be
similarly effected through a participating member of the Depository. See
"Description of Notes--Book-Entry Notes." No service charge will be made for
any registration of transfer or exchange of Notes issued in certificated form,
but the Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith.
Payments on Notes issued in book-entry form will be made to the Depository or
its nominee in accordance with the arrangements then in effect between the
applicable Trustee and the Depository. See "Description of Notes--Book-Entry
Notes." In the case of Notes issued in certificated form, principal, premium,
if any, and interest will be payable, the transfer of such Notes will be
registrable, and such Notes will be exchangeable for Notes bearing identical
terms and provisions at the office or agency of the Issuer in The City of New
York designated for such purpose; provided, however, that payment of interest,
other than interest payable on the stated maturity date (or on the date of
redemption or repayment if a Note is redeemed or repaid prior to maturity)
(such stated maturity date or date of redemption or repayment, as the case may
be, being collectively referred to hereinafter as the "Maturity Date" with
respect to the principal amount payable on such date) may be made at the option
of the Issuer by check mailed to the address of the person in whose name the
applicable Note is registered at the close of business on the relevant Regular
Record Date (as hereinafter defined) as shown on the security register
maintained by CoreStates Bank, N.A. as Security Registrar. Interest will be
payable on each date specified in the Note on which an installment of interest
is due and payable (each, an "Interest Payment Date") and on the Maturity Date.
If the original issue date of a Note is between a Regular Record Date and an
Interest Payment Date, the initial interest payment will be made on the
Interest Payment Date following the next succeeding Regular Record Date to the
registered holder on such next succeeding Regular Record Date. Notwithstanding
the foregoing, a registered holder of $10,000,000 or more in aggregate
principal amount of Notes issued in certificated form (whether having identical
or different terms and provisions) shall be entitled to receive payments of
interest by the transfer of immediately available funds to an account at a bank
located in The City of New York (or other bank consented to by the Issuer)
designated by such holder (provided that such bank has appropriate facilities
therefor), but only if appropriate instructions have been received by
CoreStates Bank, N.A. (the "Paying Agent") at its office in the City of
Philadelphia on or before the Regular Record Date immediately preceding the
applicable Interest Payment Date.
Interest payments will be in the amount of interest accrued from and
including the next preceding Interest Payment Date in respect of which interest
has been paid or duly provided for (or from and including the original issue
date if no interest has been paid with respect to such Note) to but excluding
the Interest Payment Date or the Maturity Date, as the case may be (each, an
"Interest Period").
In the case of Notes issued in certificated form, payment of principal,
premium, if any, and interest payable on the Maturity Date for each such Note
will be paid on such date in immediately available funds against presentation
of the Note in The City of New York at the office or agency of the Issuer
designated for such purpose. Interest payable on the Maturity Date will be
payable to the person to whom the principal of the Note shall be paid.
S-4
<PAGE>
All references herein to registered holders will be, with respect to Book-
Entry Notes, to the Depository or its nominees. See "Description of Retail
Medium Term Note SM securities--Book-Entry Notes."
Interest rates offered by the Issuer with respect to the Notes may differ
depending upon the aggregate principal amount of Notes purchased in any
transaction, and, the Issuer expects generally to distinguish, with respect to
such offered rates, between purchases which are for less than, and purchases
which are equal to or greater than, $200,000.
REDEMPTION
If set forth in the applicable Pricing Supplement, the Notes will be subject
to redemption by the Issuer on and after the initial redemption date fixed at
the time of sale (the "Initial Redemption Date"). If no Initial Redemption Date
is indicated with respect to a Note, such Note will not be redeemable prior to
the stated maturity date. On and after the Initial Redemption Date with respect
to any Note, such Note will be redeemable in whole or in part in increments of
$1,000 at the option of the Issuer at a redemption price (the "Redemption
Price") determined in accordance with the following paragraph, together with
interest thereon payable to the date of redemption, on notice given no more
than 60 nor less than 30 days prior to the date of redemption.
The Redemption Price for each Note subject to redemption will initially be
equal to a certain percentage (the "Initial Redemption Percentage") of the
principal amount of such Note to be redeemed and will decline at each
anniversary of the Initial Redemption Date with respect to such Note by a
percentage (the "Annual Redemption Percentage Reduction") of the principal
amount to be redeemed until the Redemption Price is 100% of such principal
amount. The Initial Redemption Percentage and any Annual Redemption Percentage
Reduction with respect to each Note subject to redemption prior to the stated
maturity date will be fixed at the time of sale and set forth in the applicable
Pricing Supplement and in the applicable Note.
REPAYMENT
If set forth in the applicable Pricing Supplement, the Notes will be subject
to repayment at the option of the registered holders thereof in accordance with
the terms of the Notes on their respective optional repayment dates fixed at
the time of sale (each, an "Optional Repayment Date"). If no Optional Repayment
Date is indicated with respect to a Note, such Note will not be repayable at
the option of the registered holder thereof prior to the stated maturity date.
On any Optional Repayment Date with respect to any Note, such Note will be
repayable in whole or in part in increments of $1,000 at the option of such
registered holder at a price equal to 100% of the principal amount to be
repaid, together with interest thereon payable to the date of repayment, on
notice given not more than 60 nor less than 30 days prior to the Optional
Repayment Date.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issue at the rate
per annum stated on the face thereof until the principal amount thereof is paid
or duly made available for payment. Interest on Fixed Rate Notes will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable monthly on the 15th day of the month (each, an
"Interest Payment Date") and on the Maturity Date. The "Regular Record Date"
for Fixed Rate Notes will be the first day of each month or if the Interest
Payment Dates are other than the 15th day of the month, the calendar day
fifteen days preceding each Interest Payment Date whether or not such day is a
Business Day (as hereinafter defined). If any Interest Payment Date or the
Maturity Date on a Fixed Rate Note falls on a day that is not a Business Day,
the payment shall be made on the next Business Day as if it were made on the
date such payment was due and no interest will accrue on the amount so payable
for the period from and after such Interest Payment Date or the Maturity Date,
as the case may be.
S-5
<PAGE>
FLOATING RATE NOTES
Interest on Floating Rates Notes will be determined by reference to a "Base
Rate," which will be set forth in an applicable Pricing Supplement. The Base
Rate will be based upon the Index Maturity and adjusted by a Spread and/or
Spread Multiplier, if any, as specified in the applicable Pricing Supplement.
The interest rate on each Floating Rate Note will be calculated by reference to
the specified Base Rate, plus or minus the Spread and/or multiplied by the
Spread Multiplier, if any. The "Index Maturity" is the period to maturity of
the instrument or obligation with respect to which the Base Rate is calculated.
The "Spread" is the number of basis points above or below the Base Rate
applicable to such Floating Rate Note, and the "Spread Multiplier" is the
percentage of the Base Rate applicable to the interest rate for such Floating
Rate Note. The Spread, Spread Multiplier, Index Maturity and other variable
terms of the Floating Rate Notes are subject to change by the Issuer from time
to time, but no such change will affect any Floating Rate Note theretofore
issued or as to which an offer has been accepted by the Issuer.
The applicable Pricing Supplement will specify for each Floating Rate Note
the following terms: the Base Rate, Initial Interest Rate, Initial Interest
Rate Reset Date, Interest Rate Reset Dates, Interest Payment Dates, Index
Maturity, Stated Maturity Date, Maximum Interest Rate and Minimum Interest
Rate, if any, Spread and/or Spread Multiplier, if any, Initial Redemption Date,
if any, Initial Redemption Percentage, if any, Annual Redemption Percentage
Reduction, if any, and Optional Repayment Date, if any.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (each, an "Interest Rate Reset
Date") as specified in the applicable Pricing Supplement. If any Interest Rate
Reset Date for any Floating Rate Note would be a day that is not a Business
Day, such Interest Rate Reset Date will be postponed to the next succeeding day
that is a Business Day. Unless otherwise specified in the applicable Pricing
Supplement, "Business Day" means any day other than a Saturday, Sunday, legal
holiday or other day on which banks in The City of New York are required or
authorized by law or executive order to close.
A Floating Rate Note may also have either or both of the following: (i) a
maximum limit, or ceiling (the "Maximum Interest Rate"), on the rate of
interest that may accrue during any Interest Period; and (ii) a minimum limit,
or floor (the "Minimum Interest Rate"), on the rate of interest which may
accrue during any Interest Period. Notwithstanding any Maximum Interest Rate
which may be applicable to any Floating Rate Note pursuant to the above
provisions, the interest rate on Floating Rate Notes will in no event be higher
than the maximum rate permitted by New York law as the same may be modified by
United States law of general application. Under present New York law, the
maximum rate of interest, subject to certain exceptions, for any loan in an
amount less than $250,000, is 16%, and for any loan in an amount more than
$250,000 but less than $2,500,000, is 25% per annum on a simple interest basis.
The limit may apply to Floating Rate Notes in which $2,500,000 or more has been
invested.
Unless otherwise indicated in the applicable Pricing Supplement, the interest
rate in effect with respect to a Floating Rate Note during the period
commencing on an Interest Rate Reset Date will be the rate determined on the
second Business Day preceding such Interest Rate Reset Date (the "Interest
Determination Date").
Unless otherwise indicated in the applicable Pricing Supplement, the interest
rate in effect with respect to a Floating Rate Note on each day that is not an
Interest Rate Reset Date will be the interest rate determined as of the
Interest Determination Date pertaining to the immediately preceding Interest
Rate Reset Date, and the interest rate in effect on any day that is an Interest
Rate Reset Date will be the interest rate determined as of the Interest
Determination Date pertaining to such Interest Rate Reset Date, subject in
either case to any maximum or minimum interest rate limitation referred to
above, provided, however, that the interest rate in effect with respect to a
Floating Rate Note for the period from the date of issue to the Initial
Interest Reset Date will be the "Initial Interest Rate".
S-6
<PAGE>
Each Floating Rate Note will bear interest from the date of issue at the
rates determined as described in the applicable Pricing Supplement until the
principal thereof is paid or otherwise made available for payment.
Unless otherwise indicated in the applicable Pricing Supplement, if any
Interest Payment Date for any Floating Rate Note would otherwise fall on a day
that is not a Business Day with respect to such Note, such Interest Payment
Date shall be postponed to the next day that is a Business Day. If the Maturity
Date of any Floating Rate Note would fall on a day that is not a Business Day,
the payment of principal, premium, if any, and interest may be made on the next
succeeding Business Day, and no interest on such payment shall accrue for the
period from and after the Maturity Date.
Unless otherwise indicated in the applicable Pricing Supplement, the "Regular
Record Date" for Floating Rate Notes with respect to any Interest Payment Date
will be the fifteenth calendar day, whether or not such date is a Business Day,
prior to such Interest Payment Date.
Unless otherwise indicated in the applicable Pricing Supplement, accrued
interest or any Floating Rate Note will be calculated by multiplying the face
amount of such Floating Rate Note by an accrued interest factor. Such accrued
interest factor will be computed by adding the interest factor calculated for
each day from and including the date of issue, or from but excluding the last
date to which interest has been paid to and including the date for which
accrued interest is being calculated. Unless otherwise indicated in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360.
Unless otherwise provided for in the applicable Pricing Supplement,
CoreStates Bank, N.A. will be the "Calculation Agent" for the Floating Rate
Notes. Upon the request of the registered holder of a Floating Rate Note, the
applicable Calculation Agent will provide the interest rate then in effect and,
if determined, the interest rate that will become effective as a result of a
determination made for the next Interest Rate Reset Date with respect to such
Floating Rate Note. The "Calculation Date," where applicable, pertaining to any
Interest Determination Date will be the earlier of (i) the tenth calendar day
after such Interest Determination Date or, if any such day is not a Business
Day, the next succeeding Business Day or (ii) the Business Day preceding the
applicable Interest Payment Date or Maturity Date, as the case may be.
Unless otherwise indicated in the applicable Pricing Supplement, all
percentages resulting from any calculation on Floating Rate Notes will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) will be rounded upward to 9.87655% (or .0987655)), and
all dollar amounts used in or resulting from such calculation of Floating Rate
Notes will be rounded to the nearest cent (with one-half cent being rounded
upward).
BOOK-ENTRY NOTES
The Notes may be issued in whole or in part in the form of one or more fully-
registered Notes (each, a "Book-Entry Note") which will be deposited with, or
on behalf of, the Depository and registered in the name of the Depository's
nominee. Except as set forth below, a Book-Entry Note may not be transferred
except as a whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any nominee to a successor of the Depository
or a nominee of such successor.
The Depository has advised the Issuer and the Agents as follows: it is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. The Depository holds securities that its participants ("Participants")
deposit with the Depository. The Depository also facilitates the settlement
among
S-7
<PAGE>
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants" include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. The Depository is owned by a number of its Direct Participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the Depository's
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The Rules applicable to the Depository and its
participants are on file with the Securities and Exchange Commission.
Purchase of interests in the Book-Entry Notes under the Depository's system
must be made by or through Direct Participants, which will receive a credit for
such interests on the Depository's records. The ownership interest of each
actual purchaser of interests in the Book-Entry Notes ("Beneficial Owner") is
in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Depository of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Book-Entry Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in the
Book-Entry Notes, except as described below.
To facilitate subsequent transfers, all Book-Entry Notes deposited by
Participants with the Depository are registered in the name of the Depository's
partnership nominee, Cede & Co. The deposit of Book-Entry Notes with the
Depository and their registration in the name of Cede & Co. affect no change in
beneficial ownership. The Depository has no knowledge of the actual Beneficial
Owners of the interests in the Book-Entry Notes; the Depository's records
reflect only the identity of the Direct Participants to whose accounts
interests in the Book-Entry Notes are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depository to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangement among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all the interests
in the Book-Entry Notes are being redeemed, the Depository's practice is to
determine by lot the amount of the interest of each Direct Participant in such
Book-Entry Note to be redeemed.
Neither the Depository nor Cede & Co. will consent or vote with respect to
the Book-Entry Notes. Under its usual procedures, the Depository mails an
Omnibus Proxy to the issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts interests in the Book-Entry Notes are credited
on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Book-Entry Notes will be made in same-
day funds to the Depository. The Depository's practice is to credit Direct
Participants' accounts on the payment date in accordance with their respective
holdings shown on the Depository's records unless the Depository has reason to
believe that it will not receive payment on the payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of the Depository, the related
Trustee, the Issuer or any paying agent or the Securities Registrar, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payment
S-8
<PAGE>
of principal and interest to the Depository is the responsibility of the Issuer
or its paying agent, disbursement of such payments to Direct and Indirect
Participants shall be the responsibility of the Depository, and disbursement of
such payments to the Beneficial Owners shall be the responsibility of Direct
and Indirect Participants.
The Depository may discontinue providing its services as depository with
respect to the Notes at any time by giving reasonable notice to the Issuer or
its paying agent. The Issuer may decide to discontinue use of the system of
book-entry transfers through the Depository (or a successor depository).
Book-Entry Notes are exchangeable for certificated Notes in definitive form
of like tenor as such Book-Entry Notes if (i) the Depository for such Book-
Entry Notes notifies the Issuer that it is unwilling or unable to continue as
Depository for such Book-Entry Notes or if at any time such Depository ceases
to be a clearing agency registered under the Securities Exchange Act of 1934,
as amended, and, in either case, a successor depository is not appointed by the
Issuer within 90 days, (ii) the Issuer in its discretion at any time determines
not to have all of the Notes of such series represented by one or more Book-
Entry Notes and notifies the applicable Trustee thereof, or (iii) an Event of
Default has occurred and is continuing with respect to the Notes of such
series. Any Book-Entry Note that is exchangeable pursuant to the preceding
sentence is exchangeable for certificated Notes issuable in authorized
denominations and registered in such names as the Depository holding such Book-
Entry Notes shall direct. Subject to the foregoing, a Book-Entry Note is not
exchangeable, except for a Book-Entry Note or Book-Entry Notes of the same
aggregate denominations to be registered in the name of such Depository or its
nominee or in the name of a successor of such Depository or a nominee of such
successor.
GUARANTEES
The Senior Notes will be fully and unconditionally guaranteed (the "Senior
Guarantees") by CoreStates Financial Corp (previously defined as the Guarantor)
as to payment of principal, premium, if any, and interest when and as the same
shall become due and payable, whether at maturity or upon redemption, repayment
or otherwise. The Senior Guarantees will rank pari passu with all other
unsecured and unsubordinated obligations of the Guarantor. At December 31,
1995, $1,036,035,000 of Senior Guarantees were outstanding. All outstanding
Senior Guarantees ranked pari passu with all other unsecured and unsubordinated
obligations of the Guarantor.
The Subordinated Notes will be fully and unconditionally guaranteed (the
"Subordinated Guarantees" and, together with the Senior Guarantees, the
"Guarantees") by the Guarantor, on a subordinated basis, as to payment of
principal, premium, if any, and interest when and as the same shall become due
and payable, whether at maturity or upon redemption, repayment or otherwise.
The Subordinated Guarantees will be unsecured and will be subordinated as set
forth under "Guarantees" in the accompanying Prospectus. Prior to the execution
of the First Supplemental Indenture, the Guarantor issued guarantees
subordinated to a more narrowly defined category of Senior Guarantees. At
December 31, 1995, $625,000,000 of such obligations were outstanding.
The obligations of the Guarantor under the Guarantees will be fully and
unconditional regardless of the enforceability of the applicable Notes or the
related Indenture and will not be discharged until all obligations contained in
such Notes and the related Indenture are satisfied. Holders of the Notes may
proceed directly against the Guarantor in the event of a default under the
applicable Notes without first proceeding against the Issuer.
MULTI-CURRENCY NOTES AND INDEXED NOTES
If any Note is not to be denominated in U.S. dollars, certain provisions with
respect thereto will be set forth in the applicable Pricing Supplement which
will specify the currency or currencies, including composite currencies such as
the European Currency Unit, in which the principal, premium, if any, and
interest with
S-9
<PAGE>
respect to such Note are to be paid (the "Specified Currency"), along with any
other terms relating to the non-U.S. dollar denomination.
The Notes also may be issued with the principal amount payable at maturity to
be determined with reference to the exchange rate of a Specified Currency
relative to an indexed currency (the "Indexed Currency") or other index, each
as set forth in the applicable Pricing Supplement. Holders of such Notes may
receive a principal amount on the Maturity Date that is greater than or less
than the face amount of the Note depending upon the relative value at maturity
of the Specified Currency compared to the Indexed Currency or as otherwise set
forth in the applicable Pricing Supplement. Information as to the method for
determining the principal amount payable on the Maturity Date and certain
additional risks and tax considerations associated with investment in such
Notes will be set forth in the applicable Pricing Supplement.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the determination of a Base Rate, the
specification of Base Rates, calculation of the interest rate applicable to a
Floating Rate Note, its Interest Payment Dates or any other matter relating
thereto may be modified by the terms as specified under "Other Provisions" on
the face thereof or in an Addendum relating thereto, if so specified on the
face thereof and in the applicable Pricing Supplement.
BEARER NOTES
The Issuer also may offer from time to time Notes in bearer form ("Bearer
Notes") outside the United States at varying prices and terms. Such offerings
of Bearer Notes may be separate from, or simultaneous with, offerings of Notes
in the United States. The Bearer Notes are not offered by this Prospectus
Supplement and the accompanying Prospectus and may not be purchased by U.S.
persons other than foreign branches of certain U.S. financial institutions.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax
laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the Notes arising under the laws of any
other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any
other person whose income or gain in respect of a Note is effectively connected
with the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest
Payments of interest on a Note generally will be taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or are received
(in accordance with the U.S. Holder's regular method of tax accounting).
S-10
<PAGE>
Original Issue Discount
The following summary is a general discussion of the United States Federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of Notes issued with original issue discount ("Discount Notes").
The following summary is based upon final Treasury regulations (the "OID
Regulations") released by the Internal Revenue Service ("IRS") on January 27,
1994 under the original issue discount provisions of the Code.
For United States Federal income tax purposes, original issue discount is the
excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as hereinafter defined) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in an issue of Notes
equals the first price at which a substantial amount of such Notes has been
sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note other than "qualified stated interest"
payments. The term "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate. In
addition, under the OID Regulations, if a Note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such Note (e.g., Notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on such Note or any "true"
discount on such Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
stated interest on the Note would be treated as original issue discount rather
than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is
the sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (i) the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(ii) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note
S-11
<PAGE>
after the purchase date other than payments of qualified stated interest, will
be considered to have purchased the Discount Note at an "acquisition premium."
Under the acquisition premium rules, the amount of original issue discount
which such U.S. Holder must include in its gross income with respect to such
Discount Note for any taxable year (or portion thereof in which the U.S. Holder
holds the Discount Note) will be reduced (but not below zero) by the portion of
the acquisition premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the
total noncontingent principal payments due under the Variable Note by more than
a specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than zero but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions such
as a maximum numerical limitation (i.e., a cap) or a minimum numerical
limitation (i.e., a floor) may, under certain circumstances, fail to be treated
as a qualified floating rate under the OID Regulations unless such cap or floor
is fixed throughout the term of the Note. An "objective rate" is a rate that is
not itself a qualified floating rate but which is determined using a single
fixed formula and which is based upon (i) one or more qualified floating rates,
(ii) one or more rates where each rate would be a qualified floating rate for a
debt instrument denominated in a currency other than the currency in which the
Variable Note is denominated, (iii) either the yield or changes in the price of
one or more items of actively traded personal property (other than stock or
debt of the issuer or a related party) or (iv) a combination of objective
rates. The OID Regulations also provide that other variable interest rates may
be treated as objective rates if so designated by the IRS in the future.
Despite the foregoing, a variable rate of interest on a Variable Note will not
constitute an objective rate if it is reasonably expected that the average
value of such rate during the first half of the Variable Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Variable Note's term. A "qualified
inverse floating rate" is any objective rate where such rate is equal to a
fixed rate minus a qualified floating rate, as long as variations in the rate
can reasonably be expected to inversely reflect contemporaneous variations in
the cost of newly borrowed funds. The OID Regulations also provide that if a
Variable Note provides for stated interest at a fixed rate for an initial
period of less than one year followed by a variable rate that is either a
qualified floating rate or an objective rate and if the variable rate on the
Variable Note's issue date is intended to approximate the fixed rate (e.g., the
value of the variable rate on the issue date does not differ from the value of
the fixed rate by more than 25 basis points), then the fixed rate and the
variable rate together will constitute either a single qualified floating rate
or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed
S-12
<PAGE>
accordingly. Thus, a Variable Note that provides for stated interest at either
a single qualified floating rate or a single objective rate throughout the term
thereof and that qualifies as a "variable rate debt instrument" under the OID
Regulations will generally not be treated as having been issued with original
issue discount unless the Variable Note is issued at a "true" discount (i.e.,
at a price below the Note's stated principal amount) in excess of a specified
de minimis amount. Original issue discount on such a Variable Note arising from
"true" discount is allocated to an accrual period using the constant yield
method described above by assuming that the variable rate is a fixed rate equal
to (i) in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date, of the qualified floating rate or
qualified inverse floating rate, or (ii) in the case of an objective rate
(other than a qualified inverse floating rate), a fixed rate that reflects the
yield that is reasonably expected for the Variable Note.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed
rate that reflects the yield that is reasonably expected for the Variable Note.
In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Variable Note as of the Variable
Note's issue date is approximately the same as the fair market value of an
otherwise identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed rate.
Subsequent to converting the fixed rate into either a qualified floating rate
or a qualified inverse floating rate, the Variable Note is then converted into
an "equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. Each accrual period appropriate adjustments will be made
to the amount of qualified stated interest or original issue discount assumed
to have been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Variable Note during the accrual period.
U.S. Holders should be aware that on December 15, 1994, the IRS released
proposed amendments to the OID Regulations which would broaden the definition
of an objective rate and would further clarify certain other provisions
contained in the OID Regulations. If ultimately adopted, these amendments to
the OID Regulations would be effective for debt instruments issued 60 days or
more after the date on which such proposed amendments are finalized.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if such Note were treated as a contingent
payment debt obligation. The proper United States Federal income tax treatment
of Variable Notes that are treated as contingent payment debt obligations will
be more fully described in the applicable Pricing Supplement. Furthermore, any
other special United States Federal income tax considerations, not otherwise
discussed
S-13
<PAGE>
herein, which are applicable to any particular issue of Notes will be discussed
in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company prior
to their stated maturity (a "call option") and/or (ii) may be repayable at the
option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
will be treated as having been issued with original issue discount. In general,
an individual or other cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the Short-
Term Note will be deferred until a corresponding amount of income is realized.
U.S. Holders who report income for United States Federal income tax purposes
under the accrual method, and certain other holders including banks and dealers
in securities, are required to accrue original issue discount on a Short-Term
Note on a straight-line basis unless an election is made to accrue the original
issue discount under a constant yield method (based on daily compounding).
Market Discount
If a U.S. Holder purchases a Note, other than a Discount Note, for an amount
that is less than its issue price (or, in the case of a subsequent purchaser,
its stated redemption price at maturity) or, in the case of a Discount Note,
for an amount that is less than its adjusted issue price as of the purchase
date, such U.S. Holder will be treated as having purchased such Note at a
"market discount," unless such market discount is less than a specified de
minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Note, any payment that
does not constitute qualified stated interest) on, or any gain realized on the
sale, exchange, retirement or other disposition of, a Note as ordinary income
to the extent of the lesser of (i) the amount of such payment or realized gain
or (ii) the market discount which has not previously been included in income
and is treated as having accrued on such Note at the time of such payment or
disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless
the U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to
the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in
S-14
<PAGE>
which case the rules described above regarding the treatment as ordinary income
of gain upon the disposition of the Note and upon the receipt of certain cash
payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the taxable year to which such election applies and may be revoked only
with the consent of the IRS.
Premium
If a U.S. Holder purchases a Note for an amount that is greater than the sum
of all amounts payable on the Note after the purchase date other than payments
of qualified stated interest, such U.S. Holder will be considered to have
purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess
of its stated redemption price at maturity, special rules would apply which
could result in a deferral of the amortization of some bond premium until later
in the term of the Note. Any election to amortize bond premium applies to all
taxable debt obligations then owned and thereafter acquired by the U.S. Holder
and may be revoked only with the consent of the IRS.
Disposition of a Note
Except as discussed above, upon the sale, exchange or retirement of a Note, a
U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and accrued market
discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to such Note. Such gain or loss generally will be long-term capital
gain or loss if the Note were held for more than one year.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
Payments of Interest in a Foreign Currency
CASH METHOD. A U.S. Holder who uses the cash method of accounting for United
States Federal income tax purposes and who receives a payment of interest on a
Note (other than original issue discount or market discount) will be required
to include in income the U.S. dollar value of the Foreign Currency payment
(determined on the date such payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S. dollar
value will be the U.S. Holder's tax basis in such Foreign Currency.
ACCRUAL METHOD. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the
U.S. dollar value of the amount of interest income (including original issue
discount or market discount and reduced by amortizable bond premium to the
extent applicable) that has accrued and is otherwise required to be taken into
account with respect to a Note during an accrual period. The U.S. dollar value
of such accrued income will be determined by translating such income at the
average rate of exchange for the accrual period or, with respect to an accrual
period that spans two taxable years, at the average rate
S-15
<PAGE>
for the partial period within the taxable year. A U.S. Holder may elect,
however, to translate such accrued interest income using the rate of exchange
on the last day of the accrual period or, with respect to an accrual period
that spans two taxable years, using the rate of exchange on the last day of the
taxable year. If the last day of an accrual period is within five business days
of the date of receipt of the accrued interest, a U.S. Holder may translate
such interest using the rate of exchange on the date of receipt. The above
election will apply to other debt obligations held by the U.S. Holder and may
not be changed without the consent of the IRS. A U.S. Holder should consult a
tax advisor before making the above election. A U.S. Holder will recognize
exchange gain or loss (which will be treated as ordinary income or loss) with
respect to accrued interest income on the date such income is received. The
amount of ordinary income or loss recognized will equal the difference, if any,
between the U.S. dollar value of the Foreign Currency payment received
(determined on the date such payment is received) in respect of such accrual
period and the U.S. dollar value of interest income that has accrued during
such accrual period (as determined above).
Purchase, Sale and Retirement of Notes
A U.S. Holder who purchases a Note with previously owned Foreign Currency
will recognize ordinary income or loss in an amount equal to the difference, if
any, between such U.S. Holder's tax basis in the Foreign Currency and the U.S.
dollar fair market value of the Foreign Currency used to purchase the Note,
determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income)
and will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year.
To the extent the amount realized represents accrued but unpaid interest,
however, such amounts must be taken into account as interest income, with
exchange gain or loss computed as described in "Payments of Interest in a
Foreign Currency" above. If a U.S. Holder receives Foreign Currency on such a
sale, exchange or retirement the amount realized will be based on the U.S.
dollar value of the Foreign Currency on the date the payment is received or the
Note is disposed of (or deemed disposed of in the case of a taxable exchange of
the Note for a new Note). In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the
U.S. dollar value of the amount realized by translating the Foreign Currency
payment at the spot rate of exchange on the settlement date of the sale. A U.S.
Holder's adjusted tax basis in a Note will equal the cost of the Note to such
holder, increased by the amounts of any market discount or original issue
discount previously included in income by the holder with respect to such Note
and reduced by any amortized acquisition or other premium and any principal
payments received by the holder. A U.S. Holder's tax basis in a Note, and the
amount of any subsequent adjustments to such holder's tax basis, will be the
U.S. dollar value of the Foreign Currency amount paid for such Note, or of the
Foreign Currency amount of the adjustment, determined on the date of such
purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that is
attributable to fluctuations in currency exchange rates will be ordinary income
or loss which will not be treated as interest income or expense. Gain or loss
attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be recognized only to the extent of the total gain
or loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
Original Issue Discount
In the case of a Discount Note or Short-Term Note, (i) original issue
discount is determined in units of the Foreign Currency, (ii) accrued original
issue discount is translated into U.S. dollars as described in
S-16
<PAGE>
"Payments of Interest in a Foreign Currency--Accrual Method" above and (iii)
the amount of Foreign Currency gain or loss on the accrued original issue
discount is determined by comparing the amount of income received attributable
to the discount (either upon payment, maturity or an earlier disposition), as
translated into U.S. dollars at the rate of exchange on the date of such
receipt, with the amount of original issue discount accrued, as translated
above.
Premium and Market Discount
In the case of a Note with market discount, (i) market discount is determined
in units of the Foreign Currency, (ii) accrued market discount taken into
account upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note (other than accrued
market discount required to be taken into account currently) is translated into
U.S. dollars at the exchange rate on such disposition date (and no part of such
accrued market discount is treated as exchange gain or loss) and (iii) accrued
market discount currently includible in income by a U.S. Holder for any accrual
period is translated into U.S. dollars on the basis of the average exchange
rate in effect during such accrual period, and the exchange gain or loss is
determined upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note in the manner described
in "Payments of Interest in a Foreign Currency--Accrual Method" above with
respect to computation of exchange gain or loss on accrued interest.
With respect to a Note issued with amortizable bond premium, such premium is
determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder
should recognize exchange gain or loss equal to the difference between the U.S.
dollar value of the bond premium amortized with respect to a period, determined
on the date the interest attributable to such period is received, and the U.S.
dollar value of the bond premium determined on the date of the acquisition of
the Note.
Exchange of Foreign Currencies
A U.S. Holder will have a tax basis in any Foreign Currency received as
interest or on the sale, exchange or retirement of a Note equal to the U.S.
dollar value of such Foreign Currency, determined at the time the interest is
received or at the time of the sale, exchange or retirement. Any gain or loss
realized by a U.S. Holder on a sale or other disposition of Foreign Currency
(including its exchange for U.S. dollars or its use to purchase Notes) will be
ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Company, a controlled foreign
corporation related to the Company or a bank receiving interest described in
section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a non-
U.S. Holder (the "Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (i) is signed by the beneficial owner of the
Note under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution. The Treasury
Department is considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is related to
holders thereof.
S-17
<PAGE>
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
Notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION OF RETAIL MEDIUM TERM NOTE SM SECURITIES
The Notes are being offered on a continuing basis by the Issuer through Smith
Barney Inc. (the "Agent"), which has agreed to use its reasonable best efforts
to solicit purchases of the Notes. The Issuer will pay the Agent a commission
of from .20% to 3.00% (or, in the case of any transaction in which the Agent is
acting as principal or with respect to Notes for which the stated maturity is
in excess of 30 years, such commission as shall be agreed between the Issuer
and the Agent at the time of sale) of the principal amount of each Note,
depending upon its stated maturity, sold through the Agent. The Agent will have
the right, in its discretion reasonably exercised, to reject in whole or in
part any offer to purchase Notes received by the Agent. The Issuer also may
sell to the Agent, acting as principal, at a discount to be agreed upon at the
time of sale, for resale to one or more investors or to one or more broker-
dealers (acting as principal for purposes of resale) at varying prices related
to prevailing market prices at the time of resale, as determined by the Agent,
or, if so agreed, at a fixed public offering price. Unless otherwise indicated
in the applicable Pricing Supplement, if any Note is resold by the Agent to any
broker-dealer at a discount, such discount will not be in excess of the
discount received by the Agent from the Issuer. In addition, unless otherwise
indicated in the applicable Pricing Supplement, any Note purchased by the Agent
as principal will be purchased at 100% of the principal amount thereof less a
percentage equal to the commission applicable to an agency sale of a Note of
identical maturity. After the initial public offering of the Notes, the public
offering price (in the case of
S-18
<PAGE>
Notes to be resold on a fixed public offering price basis), the concession and
the discount may be changed. The Issuer also reserves the right to sell the
Notes directly to investors on its own behalf in those jurisdictions where it
is authorized to do so.
The Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Issuer and the Guarantor
have agreed to indemnify the Agent against certain liabilities, including
liabilities under the Act, or to contribute to payments the Agent may be
required to make in respect thereof. The Issuer and the Guarantor have agreed
to reimburse the Agent for certain of the Agent's expenses, including, but not
limited to, the fees and expenses of counsel to the Agent. The Agent and
certain of its affiliates have engaged and may in the future engage in
investment banking and/or commercial banking with the Issuer or the Guarantor
in the ordinary course of business.
The Issuer has been advised by the Agent that it may from time to time
purchase and sell Notes in the secondary market, but that it is not obligated
to do so. There can be no assurance that there will be a secondary market for
the Notes or liquidity in the secondary market if one develops. From time to
time, the Agent may make a market in the Notes.
In addition to Notes being offered through the Agent as described herein,
other series of notes (including other series of Medium-Term Notes) that may
have terms identical or similar to the terms of the Notes may be concurrently
offered by the Issuer on a continuous basis both inside and outside the United
States pursuant to one or more separate distribution agreements with the Agent
or other agents. Pursuant to such agreements, such agents may also purchase
notes as principal for their own account or for resale, and the Issuer may make
direct sales of notes for its own behalf. Any notes so offered and sold in
excess of certain amounts will reduce correspondingly the maximum aggregate
principal amount of Notes that may be offered by this Prospectus Supplement and
the accompanying Prospectus.
S-19
<PAGE>
[LOGO OF CORESTATES
PROSPECTUS APPEARS HERE]
CORESTATES FINANCIAL CORP
COMMON STOCK, PREFERRED STOCKAND PREFERRED STOCK WARRANTS
CORESTATES CAPITAL CORP
(WHOLLY-OWNED SUBSIDIARY OF CORESTATES FINANCIAL CORP)
DEBT SECURITIES, UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST, IF ANY, BY CORESTATES FINANCIAL CORP AND
DEBT WARRANTS
---------------
CoreStates Financial Corp ("CoreStates") may offer from time to time shares
of its common stock (the "Common Stock"), par value $1.00 per share or shares
of its preferred stock (the "Preferred Stock") including, at its option,
depositary shares ("Depositary Shares") evidenced by depositary receipts
("Depositary Receipts") each representing a fractional interest in such
Preferred Stock and CoreStates Capital Corp ("CoreStates Capital") may offer
from time to time its debt securities (the "Debt Securities") which will be
fully and unconditionally guaranteed as to payment of principal, premium, if
any, and interest, if any, by CoreStates, having an aggregate public offering
price of $1,750,000,000 on terms and conditions to be determined at the time
of sale. CoreStates Capital may issue warrants to purchase Debt Securities
(all such warrants being collectively referred to herein as the "Securities
Warrants"). The Debt Securities, Common Stock, Preferred Stock and Securities
Warrants (collectively, the "Offered Securities") may be offered separately or
together, in separate series, in amounts and at prices and terms to be set
forth in an accompanying Prospectus Supplement ("Prospectus Supplement"). The
issuer, the specific title and, where applicable, the specific designation,
priority, aggregate principal amount, liquidation preference, authorized
denominations, maturity, interest or dividend rate or rates, interest or
dividend payment dates, any sinking fund provisions, any conversion provisions
and any other provisions or terms in connection with the offering and sale of
such Offered Securities will be set forth in any accompanying Prospectus
Supplement. As used herein, the term "Issuer" refers to CoreStates as issuer
of the Common Stock, the Preferred Stock and the guarantees referred to below
and CoreStates Capital as issuer of the Debt Securities and Securities
Warrants. Except as otherwise indicated in the applicable Prospectus
Supplement and except for Offered Securities consisting of Common Stock that
is listed on a securities exchange, no secondary market presently exists for
the Offered Securities.
The Debt Securities may be senior debt securities (the "Senior Debt
Securities") or subordinated debt securities (the "Subordinated Debt
Securities") and, in the case of Subordinated Debt Securities, may be
convertible into or exchangeable for Common Stock of CoreStates (as defined
herein). The Senior Debt Securities will rank equally with all other
unsubordinated and unsecured indebtedness of CoreStates Capital. The
Subordinated Debt Securities will be subordinated to all existing and future
Senior CoreStates Capital Indebtedness, as defined. UNLESS OTHERWISE SPECIFIED
IN THE APPLICABLE PROSPECTUS SUPPLEMENT, THE SUBORDINATED DEBT SECURITIES WILL
BE SUBJECT TO ACCELERATION OF MATURITY ONLY IN THE CASE OF CERTAIN EVENTS OF
BANKRUPTCY, INSOLVENCY OR REORGANIZATION. The Debt Securities will be
unconditionally guaranteed as to payment of principal, premium, if any, and
interest, if any, by CoreStates. The holders of Subordinated Debt Securities
of any series may be obligated at any time or at maturity to exchange such
Subordinated Debt Securities for Common Stock. See "Description of Debt
Securities".
Debt Securities of a series may be issuable in individual registered form
without coupons, in the form of one or more global securities, or in bearer
form with or without coupons. Such bearer securities will be offered only to
non-United States persons and to offices located outside of the United States
of certain United States financial institutions.
---------------
Of the $1,750,000,000 of securities offered hereby, approximately
$11,000,000 have been previously registered by CoreStates and CoreStates
Capital and not offered. The offering of such securities hereunder shall not
exceed the aggregate offering price of securities registered but not offered
under the registration statement to which such securities relate. The Offered
Securities may be sold by CoreStates or CoreStates Capital, as the case may
be, in an offering within the United States ("United States Offering") or
outside the United States ("International Offering"). The Offered Securities
may be offered and sold through one or more underwriters, directly by
CoreStates or CoreStates Capital, as the case may be, or through dealers or
agents. The Prospectus Supplement will also set forth with respect to the sale
of the Offered Securities in respect of which this Prospectus is being
delivered the names of the underwriters, dealers or agents, if any, together
with the terms of offering. Any underwriters, dealers or agents participating
in the offering of Offered Securities may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
CoreStates or CoreStates Capital, as the case may be, may also issue contracts
under which the counterparty may be required to purchase Debt Securities,
Common Stock, Preferred Stock, Depositary Shares or Securities Warrants. Such
contracts would be issued with the Debt Securities, Common Stock, Preferred
Stock, Depositary Shares and/or Securities Warrants in amounts, at prices and
on terms to be set forth in a Prospectus Supplement.
---------------
THE OFFERED SECURITIES WILL BE UNSECURED OBLIGATIONS OF CORESTATES OR
CORESTATES CAPITAL, AS THE CASE MAY BE, AND WILL NOT BE SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF CORESTATES
OR CORESTATES CAPITAL, AS THE CASE MAY BE, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT
AGENCY.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REP-
RESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE OFFERED
SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
---------------
The date of this Prospectus is May 10, 1996.
<PAGE>
AVAILABLE INFORMATION
CoreStates 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"). CoreStates has filed
with the Commission a Registration Statement on Form S-3 (together with any
amendments thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Offered
Securities. The Registration Statement and the exhibits thereto, as well as
the proxy statements, reports and other information concerning CoreStates can
be inspected and copied at the Commission's office at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the Commission's Regional Offices in New York
(Seven World Trade Center, 13th Floor, New York, New York 10048) and Chicago
(500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511) and 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, CoreStates Common Stock is listed for trading on the New
York Stock Exchange ("NYSE"), and such reports, proxy statements and other
information concerning CoreStates also should be available for inspection at
the offices of the NYSE at 20 Broad Street, New York, New York 10005. This
Prospectus does not contain all the information set forth in the Registration
Statement and Exhibits thereto, and to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by CoreStates (File No. 0-6879)
with the Commission pursuant to the Exchange Act are hereby incorporated by
reference.
1. CoreStates Annual Report on Form 10-K for the year ended December 31,
1995 (which includes portions of the 1995 Annual Report to Shareholders);
2. CoreStates Current Reports on Form 8-K dated January 8, 1996, January 17,
1996, April 4, 1996 and April 17, 1996; and
3. The description of CoreStates Common Shares set forth in CoreStates'
Registration Statement filed pursuant to Section 12 of the Exchange Act and
any amendment or report filed for the purpose of updating any such
description.
All documents and reports filed with the Commission by CoreStates pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Offered Securities shall be deemed to be incorporated by reference into this
Prospectus or to be a part hereof from the dates of filing such documents or
reports. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain, without charge,
upon written or oral request, a copy of any of the documents or reports,
incorporated by reference herein, except for the exhibits to such documents
unless such exhibits are specifically incorporated by reference therein.
Written requests should be mailed to the Corporate Secretary, CoreStates
Financial Corp, P.O. Box 7618, F.C. 01-03-16-29, Philadelphia, Pennsylvania
19101-7618. Telephone requests may be directed to (215) 973-3827.
2
<PAGE>
CORESTATES FINANCIAL CORP
CoreStates is a bank holding company registered under the Federal Bank
Holding Company Act of 1956, as amended (the "Act") and incorporated under the
laws of Pennsylvania with executive offices at the Philadelphia National Bank
Building, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107 (telephone
number (215) 973-3827). At December 31, 1995, CoreStates had total consolidated
assets of approximately $29.6 billion and shareholders' equity of approximately
$2.4 billion, and, based on December 31, 1995 rankings of bank holding
companies by total consolidated assets, was believed to be the 29th largest
bank holding company in the United States at such date. On October 10, 1995,
CoreStates entered into a definitive agreement to acquire Meridian Bancorp,
Inc. ("Meridian"), which closed on April 9, 1996. Assuming the consummation of
this transaction, CoreStates will have total consolidated assets of
approximately $46.0 billion and shareholders' equity of approximately $3.9
billion, and based on December 31, 1995 rankings of bank holding companies by
consolidated total assets, would be approximately the 20th largest bank holding
company in the United States had the consummation of the transaction taken
place on such date.
The lead banking subsidiary of CoreStates is CoreStates Bank, N.A.
("CoreStates Bank"), a national banking association with executive offices
located in Philadelphia, Pennsylvania. Other principal banking subsidiaries of
CoreStates are New Jersey National Bank ("NJNB"), a national banking
association with its executive offices located in Ewing Township, New Jersey
and CoreStates Bank of Delaware, N.A. ("CBD"), a national banking association
with its executive office located in New Castle County, Delaware. CoreStates
Bank, NJNB and CBD are sometimes referred to herein as the "Banking
Subsidiaries". Through CoreStates Bank, NJNB and CBD, CoreStates engages in the
business of providing wholesale banking services, consumer financial services
which includes retail banking, and trust & investment management services.
Electronic Payment Services, Inc. ("EPS"), a joint venture in which CoreStates
owns 20%, includes the MAC automated teller machine network and point of sale
processing businesses.
CoreStates has received approval from the Office of the Comptroller of the
Currency ("OCC") to relocate the head office of NJNB from Ewing Township, New
Jersey, to Philadelphia, Pennsylvania, to merge NJNB into CoreStates Bank and
to establish a branch of the resulting bank at the present location of the head
office of NJNB. It is anticipated that the relocation and merger will take
place in 1996. After the merger of NJNB into CoreStates Bank, it is CoreStates'
present intent to conduct all of its Pennsylvania and New Jersey banking
business under the name of CoreStates Bank.
As of December 31, 1995, the Banking Subsidiaries operated from 334 full
service offices located in eastern and central Pennsylvania and New Jersey and
two offices located in Delaware. CoreStates Bank also operates from five
foreign branch offices and twenty foreign representative offices.
ACQUISITION OF MERIDIAN BANCORP, INC.--On October 10, 1995, CoreStates and
Meridian Bancorp, Inc. ("Meridian") announced a definitive agreement to merge.
Meridian is a bank holding company with approximately $14.8 billion in assets
and $11.2 billion in deposits with its executive offices located at 35 North
Sixth Street, Reading, Pennsylvania 19603. The closing took place on April 9,
1996. For each share of Meridian outstanding, 1.225 shares of CoreStates common
stock were issued. Based on closing share prices of December 31, 1995, the
transaction would be valued at approximately $3.1 billion. The transaction was
accounted for under the pooling of interests method of accounting.
Strategically, this acquisition will: combine two strongly performing banking
companies, create a leading market position in eastern Pennsylvania, northern
Delaware, and central New Jersey, extend the combined company's market and
create a company with the resources and capital to support investments in
growth and improved services to customers.
3
<PAGE>
CORESTATES CAPITAL CORP
CoreStates Capital, a wholly-owned subsidiary of CoreStates, functions
primarily as a financing entity for CoreStates and its subsidiaries and
affiliates through the issuance of commercial paper and other debt guaranteed
by CoreStates. Financial data for CoreStates Capital and CoreStates are
combined for purposes of calculating the ratio of earnings to fixed charges
due to this limited function of CoreStates Capital and the unconditional
guarantees of all of CoreStates Capital's obligations by CoreStates. The
principal office of CoreStates Capital is located at the Philadelphia National
Bank Building, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107
(telephone (215) 973-3827).
CERTAIN LEGAL AND REGULATORY CONSIDERATIONS
CoreStates Capital and CoreStates are legal entities separate and distinct
from CoreStates Bank, NJNB and CBD. There are various legal limitations on the
extent to which CoreStates' bank subsidiaries can finance or otherwise supply
funds to CoreStates Capital, CoreStates and certain of its other affiliates.
Provisions of federal banking law restrict the amount of dividends that can
be paid to CoreStates by its nationally chartered bank subsidiaries, while
state banking regulations limit the amount of dividends that can be paid to
CoreStates by its state chartered bank subsidiaries. Under applicable federal
law, no dividends may be paid in an amount greater than "undivided profits
then on hand", after deduction therefrom of certain loan losses. In addition,
for each of CoreStates' banking subsidiaries, prior approval of the
Comptroller is required if dividends declared by a subsidiary bank in any
calendar year will exceed its net profits (as defined) for that year, combined
with its retained net profits for the preceding two calendar years, less any
required transfers to surplus or a fund for the retirement of preferred stock.
Under applicable state law, dividends may be declared and paid only out of
accumulated net earnings, which are the undistributed net profits recorded on
the books of an institution for the last complete calendar or fiscal year.
Based on these regulations, CoreStates' banking subsidiaries, without
regulatory approval, could declare dividends in 1996 in an amount equal to net
retained profits in 1996 plus $28 million.
The Comptroller has authority to prohibit payment of a dividend if such
payment constitutes, what, in the Comptroller's opinion, is an unsafe or
unsound practice. In addition, the ability of CoreStates and its bank
subsidiaries to pay dividends may be affected by the various minimum capital
requirements and the capital and non-capital standards established under the
Federal Deposit Insurance Corporation Improvement Act of 1991, enacted in
December 1991 ("FDICIA"), as described below. The rights of CoreStates, its
shareholders and its creditors to participate in any distribution of the
assets or earnings of its subsidiaries is further subject to the prior claims
of creditors of the respective subsidiaries.
According to Federal Reserve Board policy, CoreStates is expected to act as
a source of financial strength to each subsidiary bank and to commit resources
to support each subsidiary bank in circumstances in which it might not do so
absent such policy. In addition, any capital loans by CoreStates to any
subsidiary bank would be subordinated in right of payment to deposits and
certain other indebtedness of each subsidiary bank.
In addition, CoreStates' bank subsidiaries are subject to certain
restrictions imposed by Federal law on any extension of credit to, and certain
other transactions with CoreStates, CoreStates Capital and certain other non-
bank subsidiaries, on investments in stock or other securities thereof and on
the taking of such securities as collateral for loans. Among other things, the
aggregate of such loans made by each CoreStates bank subsidiary to CoreStates
or to any single non-bank subsidiary generally may not exceed 10% of the sum
of such bank's capital and surplus, as defined, and all loans by each bank
subsidiary to CoreStates and its non-bank subsidiaries are limited to 20% of
such bank's capital and surplus. Such loans must be secured by collateral with
a value between 100% and 130% of the loan amount, depending on the type of
collateral.
4
<PAGE>
The bank subsidiaries may extend credit to CoreStates and its non-bank
subsidiaries without regard to these restrictions to the extent such extensions
of credit are secured by specific kinds of collateral such as obligations of or
guaranteed by the U.S. Government or its agencies and certain bank deposits.
The Federal Reserve Board has adopted minimum risk-based and leverage capital
guidelines for bank holding companies. The minimum required ratio of qualifying
total capital to risk-weighted assets (including certain off-balance sheet
items, such as standby letters of credit) is 8.0%, of which at least 4.0% must
consist of common equity, retained earnings and qualifying perpetual preferred
stock, less certain intangibles ("Tier 1 Capital"). The remainder may consist
of subordinated debt, qualifying preferred stock and a limited amount of loan
loss reserves. As of December 31, 1995, CoreStates' total risk-based capital
ratio was 12.1%, including 8.4% of Tier 1 capital (as defined in the guidelines
as fully phased-in on December 31, 1992). The minimum required leverage capital
ratio (Tier 1 capital to average total assets) is 3% for banking organizations
that meet certain specified criteria, including that they have the highest
regulatory rating. All other banking organizations are required to maintain a
leverage ratio of 3% plus an additional cushion of at least 100 to 200 basis
points. The requirements also provide that bank holding companies 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. As of December 31, 1995, CoreStates'
leverage capital ratio was 7.6%.
Each of CoreStates' subsidiary banks is subject to similar capital
requirements adopted by the Comptroller. As of December 31, 1995, the capital
ratios of CoreStates' subsidiary banks were as follows:
<TABLE>
<CAPTION>
REGULATORY CAPITAL
RATIOS
----------------------
TIER 1 TOTAL LEVERAGE
------ ----- --------
<S> <C> <C> <C>
CoreStates Bank, N.A..................................... 7.6% 10.6% 6.8%
New Jersey National Bank................................. 12.1 15.3 7.6
CoreStates Bank of Delaware, N.A......................... 6.6 11.2 6.3
</TABLE>
The federal banking agencies continue to indicate their desire to raise
capital requirements applicable to banking organizations, and recently proposed
amendments to their risk-based capital regulations to provide for the
consideration of interest rate risk in the determination of a bank's minimum
capital requirements. The proposed amendments are intended to require that
banks effectively measure and monitor their interest rate risk and that they
maintain capital adequate for that risk. Under the proposed amendments, banks
with interest rate risk in excess of a defined supervisory threshold would be
required to maintain additional capital beyond that generally required. In
addition, the federal banking agencies recently proposed amendments to their
risk-based capital standards to provide for the consideration of credit risk
and certain risks arising from nontraditional activities, as well as a bank's
ability to manage these risks, as important factors in assessing a bank's
overall capital adequacy.
FDICIA modifies certain provisions of the Federal Deposit Insurance Act and
makes revisions to several other banking statutes. In general, FDICIA subjects
banks to significantly increased regulation and supervision, and requires the
federal banking agencies to take "prompt corrective action" with respect to
banks which do not meet minimum capital requirements. Among other things,
FDICIA requires a bank which is "undercapitalized" (as defined in the
applicable regulations) to submit a capital restoration plan for improving its
capital. A holding company of a bank must guarantee that the bank will meet its
capital plan, subject to certain limitations. If such a guarantee were deemed
to be a commitment to maintain capital under the U.S. federal Bankruptcy Code,
a claim under such guarantee in a bankruptcy proceeding involving the holding
company would be entitled to a priority over third party creditors of the
holding company. In addition, FDICIA prohibits a bank from making a capital
distribution (including payment of a dividend) to its holding company or
otherwise if it would thereafter be undercapitalization. Furthermore, under
certain
5
<PAGE>
circumstances, a holding company of a bank which fails to meet certain of its
capital requirements may be prohibited from making any capital distributions to
its shareholders or otherwise. Critically undercapitalized banks (which are
defined to include banks which still have a positive net worth) are generally
subject to the mandatory appointment of a receiver or conservator. All of
CoreStates' subsidiaries meet current regulatory capital requirements.
The Financial Institution Reform, Recovery, and Enforcement Act ("FIRREA")
enacted in August 1989 provides among other things for cross-guarantees of the
liabilities of insured depository institutions pursuant to which any bank or
savings association subsidiary of a holding company may be required to
reimburse the FDIC for any loss or anticipated loss to the FDIC that arises
from a default of any of such holding company's other subsidiary banks or
savings associations or assistance provided to such an institution in danger of
default. The banking subsidiaries of CoreStates are subject to such cross-
guarantee.
The deposits of each of the subsidiary banks are insured up to applicable
limits by the FDIC. Accordingly, the subsidiary banks are subject to deposit
insurance assessments to maintain the Bank Insurance Fund (the "BIF") of the
FDIC. The FDIC established a risk related premium assessment system, with
assessment rates for the semiannual period beginning January 1, 1996 ranging
from 0% of domestic deposits for those banks deemed to pose the least risk to
the insurance fund, to .27% for those banks deemed to pose the greatest risk
(with intermediate rates of .03%, .10%, .17% and .24%). All CoreStates'
subsidiary banks have been notified by the FDIC that, for the semiannual
assessment period beginning January 1, 1996, each is subject to a BIF
assessment rate of 0%. Deposits in CoreStates' subsidiary banks subject to the
.23% assessment rate of the Savings Association Insurance Fund were less than
$200 million at December 31, 1995.
Effective August 10, 1993, the Federal Deposit Insurance Act was amended to
provide that, in the liquidation or other resolution by any receiver of a bank
insured by the FDIC, the claims of depositors have preference over the general
claims of other creditors. Accordingly, in the event of the liquidation or
other resolution of a banking subsidiary of CoreStates, the claims of
CoreStates as a creditor of such banking subsidiary would be subordinate to the
claims of depositors of such banking subsidiary, even if the claims of
CoreStates were not by their terms so subordinated.
USE OF PROCEEDS
Unless otherwise provided in the Prospectus Supplement, the net proceeds from
the sale of the Offered Securities will be used for general corporate purposes,
including extensions of credit to subsidiaries and affiliates of CoreStates,
including its bank subsidiaries, which will use the proceeds for general
corporate purposes, possibly including acquisitions, and repayment at maturity
of commercial paper, medium-term notes or other existing debt. The precise
amounts and timing of the application of proceeds will depend upon funding
requirements of CoreStates and its subsidiaries and affiliates and the amount
of Offered Securities offered from time to time pursuant to this Prospectus. If
CoreStates elects at the time of issuance of Offered Securities to make
different or more specific use of proceeds other than as set forth herein, such
use will be described in the Prospectus Supplement.
In view of its anticipated requirements, CoreStates and CoreStates Capital
expect to engage, on a recurring basis, in additional private or public
financings of a character and amount to be determined as the need arises.
CoreStates is continually evaluating acquisition opportunities and frequently
conducts due diligence activities in connection with possible acquisitions both
on an assisted and unassisted basis. Acquisitions that may be under
consideration at any time include, without limitation, acquisitions of banking
organizations and thrift or savings-type associations or their assets or
liabilities, acquisitions of other financial service companies or their assets
or liabilities or acquisition of other business or businesses closely related
to banking or their assets or liabilities.
6
<PAGE>
CORESTATES FINANCIAL CORP
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited selected historical consolidated financial
information for each of the five years in the period ended December 31, 1995,
is derived from financial statements previously filed with the Securities and
Exchange Commission and incorporated by reference in this Prospectus. The
unaudited selected historical consolidated financial information is qualified
in its entirety by and should be read in conjunction with those consolidated
financial statements and related footnotes thereto.
CoreStates Capital is a wholly-owned subsidiary of CoreStates and
essentially has no independent operations. CoreStates Capital functions
primarily as a financing entity for CoreStates and its subsidiaries and
affiliates through the issuance of commercial paper and other debt fully and
unconditionally guaranteed by CoreStates.
7
<PAGE>
CORESTATES FINANCIAL CORP
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF
INCOME:
Interest income........ $2,262,305 $1,929,527 $1,841,864 $1,961,838 $2,485,277
Interest expense....... 773,771 540,158 516,593 709,360 1,212,367
Net interest income.... 1,488,534 1,389,369 1,325,271 1,252,478 1,272,910
Provision for losses on
loans(1).............. 105,000 246,900 121,201 160,250 291,261
Securities gains (loss-
es)................... 9,388 18,753 16,110 13,805 (13,868)
Income before
cumulative effect of a
change in accounting
principle(2)(9)....... 452,237 248,792 362,429 268,134 180,317
Cumulative effect of a
change in accounting
principle(3)(4)(5).... -- (3,430) (13,010) (84,946) --
Net income(2).......... 452,237 245,362 349,419 183,188 180,317
PER COMMON SHARE:
Income before
cumulative effect of a
change in accounting
principle(2)(9)(10)... $ 3.22 $ 1.75 $ 2.49 $ 1.97 $ 1.35
Net income(2)(10)...... 3.22 1.73 2.40 1.35 1.35
Cash dividends de-
clared(6)............. 1.44 1.24 1.14 1.02 0.97
Book value............. 17.24 16.22 16.29 14.48 14.40
<CAPTION>
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET
(AVERAGE BALANCES):
Total assets(7)........ $ 28,446 $ 27,667 $ 27,700 $ 27,554 $ 28,643
Loans.................. 20,770 19,601 19,035 18,868 20,574
Allowance for possible
loan losses........... 501 506 457 463 512
Deposits............... 20,715 20,352 20,629 21,267 21,617
Long-term debt......... 1,814 1,657 1,455 1,312 1,168
Shareholders' equi-
ty(7)................. 2,309 2,270 2,198 1,950 1,862
AVERAGE COMMON SHARES
OUTSTANDING
(in thousands)......... 140,600 142,498 145,398 135,813 133,237
PERIOD-END COMMON SHARES
OUTSTANDING
(in thousands)......... 138,051 144,854 145,388 144,695 133,872
SELECTED RATIOS:
Return on average total
assets(2)(8)(9)....... 1.59% 0.90% 1.31% 0.97% 0.63%
Return on average
shareholders'
equity(2)(8)(9)....... 19.59% 10.96% 16.49% 13.75% 9.68%
Average shareholders'
equity to average
assets................ 8.12% 8.20% 7.94% 7.08% 6.50%
Allowance for possible
loan losses to loans
(period-end).......... 2.35% 2.44% 2.28% 2.34% 2.44%
Non-performing assets
to total loans plus
other real estate
owned (period-end).... 0.81% 1.51% 2.20% 3.51% 4.09%
Ratio of earnings from
continuing operations
before income taxes to
fixed charges of
continuing operations:
Combined CoreStates
(parent company) and
CoreStates Capi-
tal(11)............... 2.75 2.81 3.19 2.70 2.65
Consolidated:
Excluding interest on
deposits(12)......... 3.72 3.01 4.39 3.48 1.98
Including interest on
deposits(12)......... 1.90 1.70 2.00 1.54 1.23
</TABLE>
See footnotes to selected financial information on pages 9 and 10.
8
<PAGE>
FOOTNOTES TO SELECTED FINANCIAL INFORMATION
(UNAUDITED)
(1) CoreStates' provision for losses on loans in 1994 included $145 million of
merger-related provisions in connection with changes in strategy related to
problem assets, and to conform the consumer lending charge-off policies of
Constellation Bancorp ("Constellation") and Independence Bancorp, Inc.
("Independence") to those of CoreStates.
(2) In March 1995, CoreStates completed an intensive review of its operations
and businesses and announced a corporate-wide process redesign plan, which
restructures its banking services around customers and enhances employees'
authority to make decisions to benefit customers. As a result of this
process redesign, CoreStates recorded a $110 million pre-tax restructuring
charge, $70.0 million after-tax or $0.49 per share, in March 1995. In
subsequent quarters, CoreStates recorded restructuring credits of $11.8
million, $7.5 million after-tax or $0.05 per share, primarily related to
gains on the curtailment of vested pension benefits associated with
employees displaced during 1995 and gains on the sale of branches which
were sold as a result of the process redesign. By mid 1996, the process
redesign is expected to generate cost reductions of approximately $180
million and revenue enhancements which will yield additional revenue of
approximately $30 million, combining to improve net income at an annual
rate of $0.90 per share.
(3) Effective January 1, 1992, CoreStates adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("FAS 106"). FAS 106 requires that employers
accrue the costs associated with providing postretirement benefits during
the active service periods of employees, rather than the previously
accepted accounting practice of recognizing these costs on a pay-as-you-go
basis. As permitted under FAS 106, CoreStates elected to recognize
immediately a one-time, non-cash charge equal to the January 1, 1992
transitional liability of $128.7 million, $84.9 million after-tax, as the
cumulative effect of a change in accounting principle.
(4) Effective January 1, 1993, CoreStates adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("FAS 112"). FAS 112 established the accounting requirements for
benefits provided to former or inactive employees after employment but
before retirement. FAS 112 requires that employers accrue the costs
associated with providing benefits, such as salary and benefit continuation
under disability plans, when payment of the benefits is probable and the
amount of the obligation can be reasonably estimated. CoreStates recognized
the January 1, 1993 FAS 112 transitional liability of $20.0 million, $13.0
million after-tax, as the cumulative effect of a change in accounting
principle.
(5) During the first quarter of 1994, CoreStates recognized a $3.4 million
after-tax impairment loss on certain mortgage securities. The loss was the
result of a write-down to fair value of these securities, which were deemed
to be impaired. This accounting treatment resulted from a Financial
Accounting Standards Board ("FASB") interpretation of a 1993 accounting
change, Statement of Financial Accounting Standards No. 115. The
interpretation, reached by a consensus of the FASB Emerging Issues Task
Force in March 1994, provides more definitive criteria for recognition of
impairment losses on these types of securities.
(6) Cash dividends declared per share for the respective periods prior to
CoreStates' acquisition of First Peoples Corporation (on September 3,
1992), Constellation (on March 16, 1994) and Independence (on June 27,
1994) assume that CoreStates would have declared cash dividends per share
equal to the cash dividends per share actually declared by CoreStates.
(7) Effective December 31, 1993, CoreStates adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" ("FAS 115"). FAS 115 established the accounting and
reporting requirements for investments in equity securities that have
readily determinable fair values and for all investments in debt
securities. As a result of adopting FAS 115,
9
<PAGE>
securities with an original carrying value of $1,272 million were classified
as available-for-sale at December 31, 1993 and were written up to their
aggregate fair value of $1,371 million. After the related tax effects,
shareholders' equity at December 31, 1993 was increased by $64 million to
reflect the write-up of these securities to fair value.
(8) Return on average total assets and return on average shareholders' equity
are calculated based on income before cumulative effect of a change in
accounting principle, net of income taxes.
(9) Excluding significant non-recurring items as detailed below, selected
financial results for the years ended December 31, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Income before cumulative effect of a change in
accounting principle.................................. $502,951 $416,239
Per common share....................................... 3.58 2.92
Return on average total assets......................... 1.77% 1.50%
Return on average shareholders' equity................. 21.78 18.34
</TABLE>
The following significant items are excluded from the above selected
financial results:
<TABLE>
<CAPTION>
PRE-TAX
INCOME STATEMENT PER
IMPACT SHARE IMPACT
---------------- ------------
(IN THOUSANDS) (AFTER-TAX)
<S> <C> <C>
Year ended December 31, 1995:
Net restructuring charge (see note 2 above). $(98,175) $(0.44)
Gain on change in ownership interests in
joint venture.............................. 19,000 0.08
Year ended December 31, 1994:
Merger-related provisions for losses on
loans and other charges.................... (253,700) (1.17)
</TABLE>
(10) CoreStates earnings per common share for the five years ended December 31,
1995, were based on weighted average common shares outstanding as dilution
from potentially dilutive common stock equivalents was less than 3% for
each period.
(11) For purposes of computing this ratio for CoreStates (parent only),
earnings represent income from continuing operations before extraordinary
items, income taxes and undistributed income of subsidiaries, plus fixed
charges. Fixed charges represent interest expense, one-third (the
proportion deemed representative of the interest factor) of rental
expense, net of income from subleases, and amortization of debt issuance
costs. Because the ratio excludes from earnings the undistributed net
income of subsidiaries, the ratio varies with the payments of dividends by
such subsidiaries.
(12) For purposes of computing these ratios, earnings represent consolidated
income from continuing operations before extraordinary items and income
taxes, plus consolidated fixed charges. Fixed charges represent interest
(excluding interest on deposits in the first ratio and including interest
and deposits in the second ratio), one-third (the proportion deemed
representative of the interest factor) of rental expense, net of income
from subleases, and amortization of debt issuance costs.
10
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description encompasses all the material terms and provisions
of the Debt Securities.
The Debt Securities will constitute either Senior Debt Securities or
Subordinated Debt Securities of CoreStates Capital which will be
unconditionally guaranteed as to payment of principal, premium, if any, and
interest, if any, by CoreStates. The Senior Debt Securities will be issued
under an indenture dated as of December 1, 1990 (the "Senior Indenture"),
between CoreStates, CoreStates Capital and The Bank of New York, as senior
trustee and successor to NationsBank of Georgia, National Association,
successor to Wachovia Bank of Georgia, N.A. (formerly the First National Bank
of Atlanta, N.A.) (the "Senior Trustee"). The Subordinated Debt Securities will
be issued under an indenture between CoreStates, CoreStates Capital and Bank
One, Columbus, N.A., dated as of December 1, 1990, as amended by a First
Supplemental Indenture dated as of March 1, 1993 and as further amended by a
Second Supplemental Indenture dated as of August 1, 1994 (together the
"Subordinated Indenture"), between CoreStates, CoreStates Capital, Bank One,
Columbus, N.A. and Citibank, N.A., as subordinated trustee (the "Subordinated
Trustee"). The Senior Indenture and Subordinated Indenture are collectively
referred to herein as the "Indentures". A copy of each of the Indentures has
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The following description of Debt Securities relates to Debt
Securities to be issued in connection with either a United States Offering or
an International Offering, unless otherwise specified in the Prospectus
Supplement relating thereto. At December 31, 1995, approximately $1,036,035,000
principal amount ranked pari passu with, and $625,000,000 principal amount
ranked subordinate to the outstanding Senior Debt Securities. At December 31,
1995, approximately $1,036,035,000 principal amount ranked senior to, and
$625,000,000 ranked pari passu with the outstanding Subordinated Debt
Securities. To the extent that CoreStates Capital issues Senior Debt, there is
no intention to issue debt which would rank more senior to such debt. To the
extent that CoreStates Capital issues Subordinated Debt, the Senior Debt would
rank senior to such debt.
The Trustee for a particular series of Debt Securities will be identified in
the Prospectus Supplement for such series, and all references to "Trustee"
shall be deemed to mean the Trustee so identified in such Prospectus
Supplement. No Trustee shall be responsible for the acts, obligations,
liabilities or responsibilities of any other Trustee. The following summaries
of certain provisions of the Indentures do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Indentures, including the definitions therein of certain
terms. Wherever particular Sections or defined terms of the Indentures are
referred to, it is intended that such Sections or definitions shall be
incorporated herein by reference. The following summaries set forth certain
general terms and provisions of the Debt Securities to which any Prospectus
Supplement may relate. The particular terms of the Debt Securities offered by
any Prospectus Supplement, and the extent, if any, to which such general
provisions may apply to the Debt Securities so offered, will be described in
the Prospectus Supplement relating to such Offered Securities. Unless otherwise
indicated, Section references contained herein refer to both the Senior
Indenture and the Subordinated Indenture.
Because CoreStates is a holding company, its rights and the rights of its
creditors, including the Holders of the Debt Securities offered hereby, to
participate in the assets of any subsidiary upon the latter's liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors except to the extent that CoreStates may itself be a creditor with
recognized claims against the subsidiary.
GENERAL
The Debt Securities to be offered by this Prospectus are limited to the
amounts described on the cover of this Prospectus. The Indentures, however, do
not limit the aggregate principal amount of Debt Securities which may issued
thereunder and provide that Debt Securities may be issued from time to time in
one or more series. The Debt Securities will be unsecured obligations of the
Issuer. Neither the Indentures nor the Debt Securities will limit or otherwise
restrict the amount of other indebtedness which may be incurred or
11
<PAGE>
other securities which may be issued by the Issuer or any of its subsidiaries.
The Senior Debt Securities and the related Guarantees will rank on a parity
with all other unsecured unsubordinated indebtedness of the Issuer while the
indebtedness represented by the Subordinated Debt Securities and the related
Guarantees will be subordinated as described below under "Certain Terms
Relating to Subordinated Debt Securities".
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for the following terms, where
applicable, of the Debt Securities in respect of which this Prospectus is being
delivered: (1) the title of the Debt Securities; (2) the limit, if any, on the
aggregate principal amount or initial public offering price of the Debt
Securities; (3) the priority of payment of such Debt Securities; (4) the price
or prices (which may be expressed as a percentage of the aggregate principal
amount thereof) at which the Debt Securities will be issued; (5) the date or
dates on which the Debt Securities will mature; (6) the rate or rates (which
may be fixed or variable) per annum at which the Debt Securities will bear
interest, if any, and the method of determining the same; (7) the date from
which such interest, if any, on the Debt Securities will accrue, the date or
dates on which such interest, if any, will be payable, the dates on which
payment of such interest, if any, will commence and the Regular Record Dates
for such Interest Payment Dates, if any; (8) the extent to which any of the
Debt Securities will be issuable in temporary or permanent global form and, if
so, the identity of the depositary for such global Offered Security, or the
manner in which any interest payable on a temporary or permanent global Debt
Security will be paid; (9) the dates, if any, on which, and the price or prices
at which, the Debt Securities will, pursuant to any mandatory sinking fund
provisions, or may, pursuant to any optional sinking fund or to any purchase
fund provisions, be redeemed by the Issuer, and the other detailed terms and
provisions of such sinking and/or purchase funds; (10) the date, if any, after
which, and the price or prices at which, the Debt Securities may, pursuant to
any optional redemption provisions, be redeemed at the option of the Issuer or
the Holder thereof and the other detailed terms and provisions of such optional
redemption; (11) the denomination or denominations in which such Debt
Securities are authorized to be issued; (12) whether any of the Debt Securities
will be issued in bearer form and, if so, any limitations on issuance of such
bearer Debt Securities (including exchange for registered Debt Securities of
the same series); (13) information with respect to book-entry procedures;
(14) whether any of the Debt Securities will be issued as Original Issue
Discount Securities; (15) each office or agency where, subject to the terms of
the applicable Indenture, such Debt Securities may be presented for
registration of transfer or exchange; (16) any other terms of the series (which
will not be inconsistent with the provisions of the applicable Indenture); (17)
the currencies or currency units in which such Debt Securities are issued and
in which the principal of, interest on and additional amounts, if any, in
respect of such Debt Securities will be payable; (18) whether the amount of
payments of principal of or interest on such Debt Securities may be determined
with reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit or
units or composite currency or currencies) and the manner in which such amounts
shall be determined; (19) whether the Issuer or a Holder may elect payment of
the principal of or interest on such Debt Securities in a currency, currencies,
currency unit or units or composite currency or currencies other than that in
which such Debt Securities are denominated or stated to be payable, the period
or periods within which, and the terms and conditions upon which, such election
may be made, and the time and manner of determining the exchange rate between
the coin or currency, currencies, currency unit or units or composite currency
or currencies in which such Debt Securities are denominated or stated to be
payable and the coin or currency, currencies, currency unit or units or
composite currency or currencies in which such Debt Securities are to be so
payable; (20) if other than the Trustee, the identity of the Security Registrar
and/or Paying Agent and the designation of the initial Exchange Rate Agent;
(21) if applicable, the defeasance of certain obligations by the Issuer
pertaining to Debt Securities of the series; (22) the Person to whom any
interest on any Registered Security of the series shall be payable, if other
than the Person in whose name that Debt Security (or one or more predecessor
Debt Securities) is registered at the close of business on the Regular Record
Date for such interest, the manner in which, or the Person to whom, any
interest on any Bearer Security of the series shall be payable, if otherwise
than upon presentation and surrender of the coupons appertaining thereto as
they severally mature, and the extent to which, or the manner in which, any
interest payable on a temporary global Debt Security on an Interest Payment
Date will be paid if other than in the manner provided in the related
Indenture;
12
<PAGE>
(23) if such Debt Securities are to be issued upon the exercise of warrants,
the time, manner and place for the Debt Securities to be authenticated and
delivered; (24) whether and under what circumstances the Issuer will pay
additional amounts as contemplated by Section 1104 of the related Indenture
(the term "interest", as used in this Prospectus, shall include such additional
amounts) on such Debt Securities to any Holder who is not a United States
person (including any modification to the definition of such term as contained
in the Indenture as originally executed) in respect of any tax, assessment or
governmental charge and, if so, whether the Issuer will have the option to
redeem such Debt Securities rather than pay such additional amounts (and the
terms of any such option); (25) any terms upon which any Subordinated Debt
Securities will be convertible into or exchangeable for Common Stock (as
defined below) of CoreStates; (26) any other terms of such Debt Securities.
Neither Indenture limits the aggregate principal amount of Debt Securities
that may be issued thereunder or of any particular series of such Debt
Securities and both Indentures provide that, in addition to the Debt
Securities, additional Debt Securities may be issued thereunder from time to
time in one or more series (Section 301). All Debt Securities issued under each
Indenture will rank equally and ratably with any additional Debt Securities
issued under such Indenture.
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 their face amount. 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. Special federal
income tax and other considerations relating thereto will be described in the
applicable Prospectus Supplement.
The provisions of the Indentures described below under "Restrictive
Covenants" are the only provisions which would provide protection to Holders in
the event of a highly leveraged transaction involving the Issuer. There are no
other covenants in any of the Issuer's other senior or subordinated
indebtedness which would afford holders thereof protection in the event of a
change in control of the Issuer.
ACCELERATION OF MATURITY
If any Event of Default with respect to Debt Securities of the Issuer 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 CoreStates and CoreStates Capital
(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, except, in the case of Senior Debt
Securities, the non-payment of acceleration of principal, of that series have
been cured or waived as provided in the Indentures (Section 602). 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.
REGISTRATION, TRANSFER, PAYMENT AND PAYING AGENT
Unless otherwise indicated in the applicable Prospectus Supplement, each
series of Debt Securities will be issued in registered form only, without
coupons. The Indentures, however, provide that the Issuer may also issue Debt
Securities in bearer form only, or in both registered and bearer form. Debt
Securities issued
13
<PAGE>
in bearer form shall have interest coupons attached, unless issued as zero
coupon securities. Debt Securities in bearer form shall not be offered, sold,
resold or delivered in connection with their original issuance in the United
States or to any United States person (as defined below) other than offices
located outside the United States of certain United States financial
institutions. As used herein, "United States person" means any citizen or
resident of the United States, any corporation, partnership or other entity
created or organized in or under the laws of the United States, or any estate
or trust, the income of which is subject to United States federal income
taxation regardless of its source, and "United States" means the United States
of America (including the States and the District of Columbia), its
territories, its possessions and other areas subject to its jurisdiction.
Purchasers of Debt Securities in bearer form will be subject to certification
procedures and may be affected by certain limitations under United States tax
laws. Such procedures and limitations will be described in the Prospectus
Supplement relating to the offering of the Debt Securities in bearer form.
Unless otherwise indicated in the applicable Prospectus Supplement, Debt
Securities will be issued in denominations of $1,000 or any integral multiple
thereof. No service charge will be made for any transfer or exchange of the
Debt Securities but the Issuer may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Presently, the Issuer is not aware of any taxes or other governmental charges
that would be payable in connection with any transfer or exchange of a Debt
Security. However, such taxes or charges may be imposed in the future.
Unless otherwise described in the Prospectus Supplement relating thereto, the
principal, premium, if any, and interest, if any, of or on the Debt Securities
will be payable, and transfer of the Debt Securities will be registrable, at
the office of Citibank, N.A., as Paying Agent and Security Registrar under the
Indenture, in New York, New York, provided that payments of interest may be
made at the option of the Issuer by check mailed to the address appearing in
the Security Register of the person in whose name such Registered Security is
registered at the close of business on the Regular Record Date (Sections 305
and 307).
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of, premium, if any, and interest, if any, on Debt Securities in
bearer form will be made payable, subject to any applicable laws and
regulations, at such office outside the United States as specified in the
Prospectus Supplement and as the Issuer may designate from time to time, at the
option of the Holder, by check or by transfer to an account maintained by the
payee with a bank located outside the United States. Unless otherwise indicated
in the applicable Prospectus Supplement, payment of interest and certain
additional amounts on Debt Securities in bearer form will be made only against
surrender of the coupon relating to such Interest Payment Date. No payment with
respect to any Debt Security in bearer form will be made at any office or
agency of the Issuer in the United States or by check mailed to any address in
the United States or by transfer to an account maintained with a bank located
in the United States.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the form
of one or more global securities ("Global Securities") that will be deposited
with, or on behalf of, a depository (the "Depository") identified in the
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for individual
certificates evidencing Debt Securities in definitive form represented thereby,
a Global Security may not be transferred except as a whole by the Depository
for such Global Security to a nominee of such Depository or by a nominee of
such Depository to such Depository or another nominee of such Depository or by
such Depository or any such nominee to a successor of such Depository or a
nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities and certain limitations and restrictions relating to a series
of Bearer Securities, will be described in the Prospectus Supplement relating
to such series.
14
<PAGE>
RESTRICTIVE COVENANTS
The Senior Indenture contains a covenant by CoreStates limiting its ability
to dispose of the Voting Stock of CoreStates Capital or any Major Constituent
Bank. A "Major Constituent Bank" is defined to mean any Banking Subsidiary of
CoreStates whose Consolidated Banking Assets constitute 20% or more of
CoreStates' Consolidated Banking Assets. Currently, CoreStates Bank and NJNB
each qualify as a Major Constituent Bank. Such covenant provides that, subject
to certain exceptions, so long as any of the Senior Debt Securities are
outstanding, CoreStates: (a) will not, nor will it permit any Subsidiary to,
sell, assign, transfer 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 Major Constituent Banks or CoreStates Capital,
nor will CoreStates permit the Major Constituent Banks or CoreStates Capital
to issue any shares of, or securities convertible into, or options, warrants
or rights to subscribe for or purchase shares of, Voting Stock of the Major
Constituent Banks or CoreStates Capital, unless CoreStates will own, directly
or indirectly, at least 80% of the issued and outstanding Voting Stock of such
Major Constituent Bank or CoreStates Capital, as the case may be, after giving
effect to such transaction; or (b) will not permit CoreStates Capital or a
Major Constituent Bank to either (i) merge or consolidate with or into any
corporation (other than CoreStates), unless at least 80% of the surviving
corporation's Voting Stock is, or upon consummation of the merger or
consolidation will be, owned, directly or indirectly, by CoreStates and the
Consolidated Banking Assets of CoreStates are at least equal to what they were
prior to such transaction or (ii) lease, sell or transfer all or substantially
all of its properties or assets to any corporation or other person (other than
CoreStates), unless 80% of the Voting Stock of such corporation or other
person is owned, or will be owned upon such lease, sale or transfer, directly
or indirectly, by CoreStates (Section 1107).
MODIFICATION AND WAIVER
Each Indenture provides that modifications and amendments may be made by the
Issuer and the applicable Trustee with the consent of the Holders of a
majority 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, (a) change the stated maturity date of the principal of, or
any installment of principal of or interest on, any Debt Security, (b) reduce
the principal amount of, or the premium (if any) or interest (if any) on, or
additional amounts, if any, in respect of, any Debt Security, (c) change the
place or currency of payment of principal of, or premium (if any) or interest
(if any) on, any Debt Security, (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, (e) reduce
the above-stated percentage of Outstanding Debt Securities of any series the
consent of the Holders of which is required to modify or amend the related
Indenture, (f) reduce the percentage in principal amount of Outstanding Debt
Securities of any series the consent of the Holders of which is required for
waiver of compliance with certain provisions of the related Indenture or for
waiver of certain defaults, (g) modify (with certain exceptions) any provision
of the Indentures relating to modification and amendment of such Indenture or
waiver of compliance with conditions and defaults thereunder, (h) modify or
affect in any manner adverse to a Holder the terms and conditions of the
Guarantees, (i) with respect to the Subordinated Indenture, alter in any
respect the provisions regarding subordination of the Debt Securities issued
thereunder, or (j) reduce the principal amount of Original Issue Discount
Securities which could be declared due and payable upon acceleration of
maturity thereof (Section 1002).
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, insofar as that series is concerned, compliance by
CoreStates Capital or CoreStates, as the case may be, with certain restrictive
provisions of the Indentures (Section 1110). 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 applicable Indenture with respect to that series, except a
default in the payment of the principal of (or premium, if any) or interest,
if any, on any Debt Security of that series or in respect of a provision which
15
<PAGE>
under the applicable Indenture cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of that series affected
(Section 613).
Modification and amendment of either of the Indentures may be made by the
Issuer and the Trustee without the consent of any Holder for any of the
following purposes: (i) to evidence the succession of another corporation to
the Issuer; (ii) to add to the covenants of the Issuer for the benefit of the
Holders of all or any series of Debt Securities; (iii) to add Events of
Default; (iv) to add or change any provisions of either of the Indentures to
facilitate the issuance of Bearer Securities; (v) to add to, delete from or
revise the conditions, limitations and restrictions on the authorized amount,
terms or purposes of issue, authentication and delivery of Securities; (vi) to
establish the form or terms of Debt Securities of any series and any related
coupons; (vii) to provide for the acceptance of appointment by a successor
Trustee; (viii) to cure any ambiguity, defect or inconsistency in the
Indenture, provided such action does not adversely affect the interests of
Holders of Debt Securities of any series or any related coupons in any material
respect; (ix) to modify, eliminate or add to the provisions of either of the
Indentures to such extent as is necessary to effect qualification under the
Trust Indenture Act of 1939, as amended, or (x) to effect the assumption by
CoreStates of the obligations under either of such Indentures (Section 1001).
Consents of Holders for modifications and amendments to the Indenture must be
solicited by the Company, and waivers by Holders of compliance with provisions
under the Indenture must be obtained in accordance with, the terms of the
applicable Indenture (Section 104). Any such modifications, amendments or
waivers will be binding upon all future Holders of Debt Securities. To the
extent that consents are properly obtained and all requirements for any
changes, amendments or waivers are otherwise satisfied, there are no provisions
in either Indenture which allow remedies to Holders who do not consent to
changes or amendments to, or waivers of past defaults under, the applicable
Indenture.
OUTSTANDING DEBT SECURITIES
In determining whether the Holders of the requisite principal amount of
Outstanding Debt Securities have given any request, demand, authorization,
direction, notice, consent or waiver under each Indenture, (i) the portion of
the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding for such purposes shall be that portion of the
principal amount thereof that could be declared to be due and payable pursuant
to the terms of such Original Issue Discount Security as of the date of such
determination, and (ii) the principal amount of a Debt Security denominated in
a foreign currency or currencies shall be the U.S. dollar equivalent,
determined on the settlement date therefor, of the principal amount of such
Debt Security (Section 101).
ADDITIONAL PROVISIONS
The Indentures provide that the Senior Trustee or the Subordinated Trustee,
as the case may be, will be under no obligation, subject to the duty of such
Trustee during a default thereunder to act with the required standard of care,
to exercise any of its rights or powers under the related Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered such Trustee reasonable indemnity (Section 701). Subject to such
provisions for indemnification of the related Trustee, the Holders of a
majority in principal amount of the 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 related Trustee, or exercising any
trust or power conferred on such 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 Indenture under which such Holder's Debt
Securities were issued for any remedy thereunder, unless: (a) such Holder shall
have previously given to the related Trustee written notice of a continuing
Event of Default with respect to the Debt Securities of that series; (b) the
Holders of no less than 25% in principal amount of the Outstanding Senior Debt
Securities or Subordinated Debt Securities, as the case may be, of that series
shall have made written request, and offered reasonable indemnity, to the
related Trustee to
16
<PAGE>
institute such proceeding as Trustee; (c) the related Trustee shall not have
received from the Holders of a majority in principal amount of the Outstanding
Senior Debt Securities or Subordinated Debt Securities, as the case may be, of
that series a direction inconsistent with such request and (d) the related
Trustee shall have failed to institute such proceeding within 60 days after
its receipt of such notice, request and offer of indemnity (Section 607).
However, the Holder of any Debt Security will have an absolute and
unconditional 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 Issuer is required to furnish to the applicable Trustee annually a
statement as to performance or fulfillment of certain of its obligations under
the applicable Indenture and as to any default in such performance or
fulfillment (Sections 1105 and 1106).
The Issuer may consolidate with, merge into, or transfer substantially all
of its properties to, any other corporation provided that the successor
corporation assumes all obligations of the Issuer under the Debt Securities
and the Guarantees, as the case may be, and provided that certain other
conditions are met (Sections 901, 902, 903 and 904). In addition, CoreStates
may, by supplemental indenture, assume all of the obligations of CoreStates
Capital under either Indenture to pay principal of (and premium, if any) and
interest on and additional amounts in respect of Debt Securities issued
thereunder and to perform every covenant of such Indenture on the part of
CoreStates Capital to be performed (Section 905).
REGARDING THE TRUSTEES
CoreStates Bank maintains deposit accounts and conducts other banking
transactions with both the Senior and Subordinated Trustees. In addition, the
Senior Trustee has made available to CoreStates a line of credit for
borrowings up to $50 million.
CERTAIN TERMS RELATING TO SENIOR DEBT SECURITIES
The following description encompasses all the material terms and provisions
of the Senior Debt Securities.
The Senior Debt Securities will be direct, unsecured obligations of
CoreStates Capital and will rank pari passu with all outstanding and future
senior indebtedness of CoreStates Capital.
EVENTS OF DEFAULT
The following will be Events of Default under the Senior Indenture with
respect to Debt Securities of any series issued thereunder: (a) failure to pay
principal of or premium, if any, on any Senior Debt Security of that series
when due; (b) failure to pay any interest, if any, or any additional amounts,
if any, on any Senior Debt Security of that series when due, and continuance
of such default for 30 days; (c) failure to deposit any sinking fund payment,
when due, in respect of any Senior Debt Security of that series; (d) failure
to perform any other covenant of CoreStates Capital or CoreStates in such
Indenture and the related Guarantees, (other than a covenant included in the
Indenture solely for the benefit of a series of Senior Debt Securities other
than that series), continued for 60 days after written notice as provided in
the Indenture; (e) acceleration of indebtedness in principal amount in excess
of $5,000,000 for money borrowed by CoreStates Capital, CoreStates or any
Major Constituent Bank under the terms of the instrument under which such
indebtedness is issued or secured, if such acceleration is not annulled, or
such indebtedness is not discharged, within 30 days after written notice as
provide in the Indenture; (f) certain events in bankruptcy, insolvency or
reorganization of CoreStates Capital, CoreStates, CoreStates Bank or any Major
Constituent Bank; and (g) any other Event of Default provided with respect to
Senior Debt Securities of that series (Senior Indenture, Section 601).
17
<PAGE>
CERTAIN TERMS RELATING TO SUBORDINATED DEBT SECURITIES
The following description encompasses all the material terms and provisions
of the Subordinated Debt Securities.
The Subordinated Debt Securities will be direct, unsecured obligations of
CoreStates Capital and will rank in priority of payment with outstanding and
future indebtedness of CoreStates Capital as set forth below.
SUBORDINATION
During the continuance beyond any applicable grace period of any default
with respect to Senior CoreStates Capital Indebtedness, no payment of
principal of and interest on the Subordinated Debt Securities shall be made by
CoreStates Capital until payment in full of all principal of and premium and
interest on such Senior CoreStates Capital Indebtedness. In addition, upon any
distribution of assets of CoreStates Capital, upon any dissolution, winding
up, liquidation or reorganization, the payment of the principal of and
interest on the Subordinated Debt Securities is to be subordinated to the
extent provided in the Subordinated Indenture in right of payment to the prior
payment in full of principal, premium and interest on all Senior CoreStates
Capital Indebtedness. By reason of such subordination, in the event of the
dissolution of CoreStates Capital, holders of Senior CoreStates Capital
Indebtedness may receive more, ratably, and holders of the Subordinated Debt
Securities may receive less, ratably, then the other creditors of CoreStates
Capital. Such subordination will not prevent the occurrence of any Event of
Default under the Subordinated Indenture (Subordinated Indenture, Article
Sixteen).
For purposes of the preceding paragraph, the term "Senior CoreStates Capital
Indebtedness" means any indebtedness or other obligation of CoreStates
Capital, whether outstanding at the date of execution of the First
Supplemental Indenture or thereafter incurred, except indebtedness or
obligations expressly subordinated in right of payment to the Subordinated
Debt Securities or ranking on a parity with the Subordinated Debt Securities
(Subordinated Indenture, Section 101). As of December 31, 1995, CoreStates
Capital had approximately $1,036,035,000 of principal amount of Senior
CoreStates Capital Indebtedness outstanding, excluding trade payables,
guarantees and other contingent obligations of CoreStates Capital. Prior to
the execution of the First Supplemental Indenture, CoreStates Capital issued
indebtedness subordinated to a more narrowly defined category of senior
indebtedness. As of December 31, 1995, $625,000,000 of such indebtedness was
outstanding, subordinated to approximately $1,036,035,000 of senior
indebtedness.
EVENT OF DEFAULT
An Event of Default will be defined under the Subordinated Indenture with
respect to Subordinated Debt Securities of any series issued thereunder as
certain events in bankruptcy, insolvency or reorganization of CoreStates
Capital, CoreStates or any Major Constituent Bank.
The Subordinated Indenture does not provide for any right of acceleration of
the payment of the principal of a series of Subordinated Debt Securities upon
a default in the payment of principal or interest or a default in the
performance of any covenant or agreement in the Subordinated Debt Securities
of a particular series or in the Subordinated Indenture. In the event of a
default in the payment of interest or principal, the Holder of a Subordinated
Debt Security (or the Subordinated Trustee on behalf of the Holders of all of
the series of Subordinated Debt Securities so affected) may, subject to
certain limitations and conditions, seek to enforce payment of such interest
or principal.
CONVERSION
The holders of Subordinated Debt Securities of a specified series that are
convertible into Common Stock of CoreStates ("Subordinated Convertible Debt
Securities") will be entitled at certain times specified in the Prospectus
Supplement relating to such Subordinated Convertible Debt Securities, subject
to prior redemption, exchange, repayment or repurchase, to convert any
Subordinated Convertible Debt Securities of such series into Common Stock, at
the conversion price set forth in such Prospectus Supplement, subject to
adjustment and to such other terms as are set forth in such Prospectus
Supplement.
18
<PAGE>
EXCHANGEABILITY
The holders of Subordinated Debt Securities of any series may be obligated at
any time or at maturity to exchange them for Common Stock of CoreStates. The
terms of any such exchange will be described in the Prospectus Supplement
relating to such series of Subordinated Debt Securities. The Common Stock of
CoreStates is described below under "Description of Common Stock."
GUARANTEES
The Senior Debt Securities will be fully and unconditionally guaranteed (the
"Senior Guarantees") by CoreStates as to payment of principal, premium, if any,
and interest when and as the same shall become due and payable, whether at
maturity or upon redemption, repayment or otherwise. The Senior Guarantees will
rank pari passu with all other unsecured and unsubordinated obligations of
CoreStates.
The Subordinated Debt Securities will be fully and unconditionally guaranteed
(the "Subordinated Guarantees" and, together with the Senior Guarantees, the
"Guarantees") by CoreStates, on a subordinated basis, as to payment of
principal, premium, if any, and interest when and as the same shall become due
and payable, whether at maturity or upon redemption, repayment or otherwise.
The Subordinated Guarantees will be unsecured and will be subordinated to all
outstanding and future Senior CoreStates Indebtedness to the same extent that
Subordinated Debt Securities issued by CoreStates Capital are subordinated to
all outstanding and future Senior CoreStates Capital Indebtedness.
For purposes of the preceding paragraph, the term "Senior CoreStates
Indebtedness" will be defined to mean any indebtedness or other obligation of
CoreStates, whether outstanding at the date of execution of the First
Supplemental Indenture or thereafter incurred, except indebtedness or
obligations expressly subordinated in right of payment to the Subordinated
Guarantees or ranking on a parity with the Subordinated Guarantees
(Subordinated Indenture, Section 101). As of December 31, 1995, CoreStates had
approximately $1,036,035,000 principal amount of Senior CoreStates Indebtedness
outstanding, excluding trade payables, guarantees and other contingent
obligations of CoreStates.
The obligations of CoreStates under the Guarantees will be full and
unconditional regardless of the enforceability of the applicable Debt
Securities or the related Indenture and will not be discharged until all
obligations contained in such Debt Securities and the related Indenture are
satisfied. Holders of the Debt Securities may proceed directly against
CoreStates in the event of a default under the applicable Debt Securities
without first proceeding against CoreStates Capital.
DESCRIPTION OF PREFERRED STOCK
The following description encompasses all the material terms and provisions
of the Preferred Stock. Certain other terms of any series of the Preferred
Stock offered by any Prospectus Supplement will be described in the Prospectus
Supplement relating to such series of the Preferred Stock. If so indicated in
the Prospectus Supplement, the terms of any such series may differ from the
terms set forth below. The description of certain provisions of the Preferred
Stock in any Prospectus Supplement does not purport to be complete and is
subject to and qualified in its entirety by reference to the Certificate of
Designation relating to each series of the Preferred Stock.
GENERAL
Under CoreStates' Articles of Incorporation, as amended (the "Articles"), the
Board of Directors of CoreStates is authorized without further stockholder
action to provide for the issuance of up to 10,000,000 shares of Preferred
Stock in one or more series, with such voting rights, designations,
preferences, qualifications, privileges, limitations, options, conversion
rights and other special rights, as shall be set forth
19
<PAGE>
in resolutions providing for the issue thereof adopted by the Board of
Directors. CoreStates does not currently have outstanding any shares of
preferred Stock.
As described under "Description of Depositary Shares," CoreStates may, at its
option, elect to offer depositary shares ("Depositary Shares") evidenced by
depositary receipts ("Depositary Receipts") each representing a fractional
interest (to be specified in the Prospectus Supplement relating to the
particular series of the Preferred Stock) in a share of the particular series
of the Preferred Stock issued and deposited with a Securities Depositary (as
defined below).
The Preferred Stock will, when issued, be fully paid and non-assessable.
Unless otherwise specified in the Prospectus Supplement relating to a
particular series of the Preferred Stock, each series of the Preferred Stock
will rank on a parity in all respects with each other series of the Preferred
Stock.
The transfer agent, registrar, dividend disbursing agent and redemption agent
for shares of the Preferred Stock will be First Chicago Trust Company of New
York, New York, New York.
The following statements are brief summaries of certain provisions that will
be contained in the Certificate of Designation authorizing the issuance of a
series of Preferred Stock. These statements do not purport to be complete and
are qualified in their entirety by reference to such Certificate of
Designation, the form of which will be filed with the Commission at or prior to
the time of sale of such series of Preferred Stock, and to the Articles. The
resolutions set forth in the Certificate of Designation will be adopted by the
Board of Directors or a duly authorized committee thereof prior to the issuance
of a series of Preferred Stock and such Certificate of Designation will be
filed with the Secretary of State of the Commonwealth of Pennsylvania as soon
thereafter as reasonably practicable.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when and as declared by the Board of Directors of CoreStates, out of assets of
CoreStates legally available for payment, cash dividends at such rates and on
such dates as set forth in the Prospectus Supplement relating to such series of
the Preferred Stock. Dividends may or may not be cumulative as set forth in the
Prospectus Supplement. Each dividend will be payable to holders of record as
they appear on the stock register of CoreStates on the record dates fixed by
the Board of Directors of CoreStates.
If there shall be outstanding shares of any other series of preferred stock
ranking junior to or on a parity with any series of the Preferred Stock as to
dividends, no dividends shall be declared or paid or set apart for payment on
any such other series for any period unless full cumulative (if applicable)
dividends have been paid or declared and a sum sufficient for the payment
thereof set apart for such payment on such series of the Preferred Stock for
all dividend payment periods terminating on or prior to the date of payment of
such dividends. If dividends on any series of the Preferred Stock and on any
other series of preferred stock ranking on a parity as to dividends with such
series of the Preferred Stock are not paid in full, in making any dividend
payment on account of such arrears, CoreStates shall make payments ratably upon
all outstanding shares of such series of the Preferred Stock and shares of such
other series of preferred stock in proportion to the respective amounts of
dividends, including accumulations, in arrears on such series of the Preferred
Stock and on such other series of preferred stock to the date of such dividend
payment. Holders of shares of any series of the Preferred Stock shall not be
entitled to any dividend, whether payable in cash, property or stock, in excess
of full cumulative (if applicable) dividends on such series. No interest, or
sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments which may be in arrears.
Unless full cumulative (if applicable) dividends on all outstanding shares of
any series of the Preferred Stock to the last preceding quarterly dividend
period shall have been paid or declared and set aside for payment, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
such series of the Preferred Stock as to dividends and upon liquidation) shall
be declared upon the Common Stock
20
<PAGE>
or upon any other stock ranking junior to such series of Preferred Stock as to
dividends and upon liquidation, nor shall any Common Stock or any other stock
of CoreStates ranking junior to or on a parity with such series of the
Preferred Stock as to dividends or upon liquidation be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such
stock) by CoreStates (except by conversion into or exchange for the stock of
CoreStates ranking junior to such series of the Preferred Stock as to dividends
and upon liquidation).
CONVERSION
The Prospectus Supplement for any series of the Preferred Stock will state
the terms, if any, on which shares of that series are convertible into shares
of another series of Preferred Stock or Common Stock.
For any series of Preferred Stock which is convertible, CoreStates shall at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Preferred Stock or Common Stock or
shares held in its treasury or both, for the purpose of effecting the
conversion of the shares of such series of Preferred Stock, the full number of
shares of Preferred Stock or Common Stock then deliverable upon the conversion
of all outstanding shares of such series.
No fractional shares of scrip representing fractional shares of Preferred
Stock or Common Stock will be issued upon the conversion of shares of any
series of convertible Preferred Stock. Each holder to whom fractional shares
would otherwise be issued will instead be entitled to receive, at CoreStates'
election, either (a) a cash payment equal to the current market price of such
holder's fractional interest or (b) a cash payment equal to such holder's
proportionate interest in the net proceeds (following the deduction of
applicable transaction costs) from the sale promptly by an agent, on behalf of
such holders, of shares of Preferred Stock or Common Stock representing the
aggregate of such fractional shares.
The holders of any series of shares of Preferred Stock at the close of
business on a dividend payment record date will be entitled to receive the
dividend payable on such shares (except that holders of shares called for
redemption on a redemption date occurring between such record date and the
dividend payment date shall not be entitled to receive such dividend on such
dividend payment date but instead will receive accrued and unpaid dividends to
such redemption date) on the corresponding dividend payment date
notwithstanding the conversion thereof or CoreStates' default in payment of the
dividend due. Except as provided above, CoreStates will make no payment or
allowance for unpaid dividends, whether or not in arrears, on converted shares
or for dividends on the shares of Preferred Stock or Common Stock issued upon
conversion.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary dissolution, liquidation or
winding-up of CoreStates, the holders of each series of the Preferred Stock
will be entitled to receive out of the assets of CoreStates available for
distribution to its stockholders, before any distribution of assets is made to
holders of Common Stock or any other class of stock ranking junior to such
series of the Preferred Stock upon liquidation, a liquidating distribution in
an amount per share as set forth in the Prospectus Supplement relating to such
series of the Preferred Stock plus accrued and unpaid dividends. After payment
of the full amount of the liquidating distributions to which they are entitled,
the holders of such series of the Preferred Stock will have no right or claim
to any of the remaining assets of CoreStates. If, upon any voluntary or
involuntary dissolution, liquidation or winding-up of CoreStates, the amounts
payable with respect to the Preferred Stock of any series and any other shares
of stock of CoreStates ranking as to any such distribution on a parity with the
Preferred Stock of such series are not paid in full, the holders of the
Preferred Stock of such series and of such other shares will share ratably in
any such distribution of assets in proportion to the respective amounts which
would be payable in respect to the shares held by them upon such distribution
if all amounts payable on or with respect to such shares were paid in full.
Neither the sale of all or substantially all of the property or business of
CoreStates, nor the merger or consolidation of CoreStates into or with any
other corporation, shall be deemed to be a dissolution, liquidation or winding
up, voluntary or involuntary, of CoreStates.
21
<PAGE>
REDEMPTION
Any series of the Preferred Stock may be redeemable, in whole or in part, at
the option of CoreStates, and may be subject to mandatory redemption pursuant
to a sinking fund, in each case upon the terms, at the times and at the
redemption prices set forth in the Prospectus Supplement relating to such
series.
In the event that full cumulative (if applicable) dividends on any series of
the Preferred Stock have not been paid or declared and set apart for payment,
such series of the Preferred Stock may not be redeemed in whole or in part and
CoreStates may not purchase or acquire any shares of such series otherwise than
pursuant to a purchase or exchange offer made on the same terms to all holders
of such series of the Preferred Stock.
VOTING RIGHTS
The Preferred Stock of a series shall have no voting rights except as shall
be provided in the Prospectus Supplement relating thereto. As more fully
described under "Description of Depositary Shares", if CoreStates elects to
provide for the issuance of Depositary Shares representing fractional interests
in a share of such series of the Preferred Stock, the holders of each such
Depositary Share will, in effect, be entitled through the Securities Depositary
to such fraction of a vote rather than a full vote.
DESCRIPTION OF DEPOSITARY SHARES
The following description encompasses all the material terms and provisions
of the Depositary Shares. The description in any Prospectus Supplement of
certain provisions of the Deposit Agreement (as defined below) and of the
Depositary Shares and Depositary Receipts does not purport to be complete and
is subject to and qualified in its entirety by reference to the Deposit
Agreement and Depositary Receipts relating to each series of the Preferred
Stock which will be filed with the Commission at or prior to the time of the
sale of such series of the Preferred Stock.
GENERAL
CoreStates may, at its option, elect to offer fractional interests in shares
of Preferred Stock, rather than full shares of Preferred Stock. In the event
such option is exercised, CoreStates will provide for the issuance by a
Securities Depositary to the public of Depositary Receipts evidencing
Depositary Shares, each of which will represent a fractional interest (to be
set forth in the Prospectus Supplement relating to a particular series of the
Preferred Stock) in a share of a particular series of the Preferred Stock as
described below.
The shares of any series of the Preferred Stock underlying the Depositary
Shares will be deposited under a separate Deposit Agreement (the "Deposit
Agreement") between CoreStates and a bank or trust company selected by
CoreStates having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000 (the "Securities
Depositary"). The Prospectus Supplement relating to a series of Depositary
Shares will set forth the name and address of the Securities Depositary.
Subject to the terms of the Deposit Agreement, each owner of a Depositary Share
will be entitled, in proportion to the applicable fractional interest in a
share of Preferred Stock underlying such Depositary Share, to all the rights
and preferences of the Preferred Stock underlying such Depositary Share
(including dividend, voting, redemption, conversion and liquidation rights).
Pending the preparation of definitive engraved Depositary Receipts, the
Securities Depositary may, upon the written order of CoreStates, issue
temporary Depositary Receipts substantially identical to (and entitling the
holders thereof to all the rights pertaining to) the definitive Depositary
Receipts but not in definitive form. Definitive Depositary Receipts will be
prepared thereafter without unreasonable delay, and temporary Depositary
Receipts will be exchangeable for definitive Depositary Receipts at CoreStates'
expense.
22
<PAGE>
Upon surrender of the Depositary Receipts at the principal office of the
Securities Depositary (unless the related Depositary Shares have previously
been called for redemption), the owner of the Depositary Shares evidenced
thereby will be entitled to delivery at such office, to or upon his order, of
the number of whole shares of Preferred Stock and any money or other property
represented by such Depositary Shares. Partial shares of Preferred Stock will
not be issued. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the number of Depositary Shares
representing the number of whole shares of Preferred Stock to be withdrawn, the
Securities Depositary will deliver to such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares. Holders
of shares of Preferred Stock thus withdrawn will not thereafter be entitled to
deposit such shares under the Deposit Agreement or to receive Depositary Shares
therefor.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Securities Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Shares relating to such Preferred Stock in proportion to the
numbers of such Depositary Shares owned by such holders on the relevant record
date. The Securities Depositary shall distribute only such amount, however, as
can be distributed without attributing to any holder of Depositary Shares a
fraction of one cent, and any balance not so distributed shall be added to and
treated as part of the next sum received by the Securities Depositary for
distribution to record holders of Depositary Shares.
In the event of a distribution other than in cash, the Securities Depositary
will distribute property received by it to the record holders of Depositary
Shares entitled thereto, unless the Securities Depositary determines that it is
not feasible to make such distribution, in which case the Securities Depositary
may, with the approval of CoreStates, sell such property and distribute the net
proceeds from such sale to such holders.
The Deposit Agreement will also contain provisions relating to the manner in
which any subscription or similar rights offered by CoreStates to holders of
the Preferred Stock shall be made available to holders of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Preferred Stock underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Securities Depositary resulting from the redemption, in whole
or in part, of such series of the Preferred Stock held by the Securities
Depositary. The Securities Depositary shall mail notice of redemption not less
than 30 and not more than 60 days prior to the date fixed for redemption to the
record holders of the Depositary Shares to be so redeemed at their respective
addresses appearing in the Securities Depositary's books. The redemption price
per Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to such series of the Preferred Stock.
Whenever CoreStates redeems shares of Preferred Stock held by the Securities
Depositary, the Securities Depositary will redeem as of the same redemption
date the number of Depositary Shares relating to shares of Preferred Stock so
redeemed. If less than all the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by lot or pro rata as may be
determined by the Securities Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
moneys payable upon such redemption and any money or the property to which the
holders of such Depositary Shares were entitled upon such redemption upon
surrender to the Securities Depositary of the Depositary Receipts evidencing
such Depositary Shares.
CONVERSION
With respect to a series of the Preferred Stock underlying the Depositary
Shares that is convertible into other Preferred Stock or Common Stock (as the
case may be, in accordance with the terms of such series of
23
<PAGE>
Preferred Stock), a holder of Depositary Receipts may participate in the
conversion in the manner specified in the pertinent Certificate of Designation
for holders of the underlying Preferred Stock. If the Depositary Shares
represented by a Depositary Receipt are to be converted in part only, a new
Depositary Receipt or Depositary Receipts will be issued by the Securities
Depositary for the Depositary Shares not to be converted. No fractional shares
of other Preferred Stock or Common Stock will be issued upon such conversion,
and if such conversion would result in a fractional share being issued, an
amount will be paid in cash by CoreStates equal to the value of the fractional
interest as set forth in the Prospectus Supplement.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Securities Depositary will mail the information
contained in such notice of meeting to the record holders of the Depositary
Shares relating to such Preferred Stock. Each record holder of such Depositary
Shares on the record date (which will be the same date as the record date for
the Preferred Stock) will be entitled to instruct the Securities Depositary as
to the exercise of the voting rights pertaining to the number of shares of
Preferred Stock underlying such holder's Depositary Shares. The Securities
Depositary will endeavor, insofar as practicable, to vote the number of shares
of Preferred Stock underlying such Depositary Shares in accordance with such
instructions, and CoreStates will agree to take all action which may be deemed
necessary by the Depositary in order to enable the Securities Depositary to do
so. The Securities Depositary will abstain from voting shares of Preferred
Stock to the extent it does not receive specified instructions from the holders
of Depositary Shares relating to such Preferred Stock.
TAXATION
Owners of Depositary Shares will be treated for federal income tax purposes
as if they were owners of the Preferred Stock represented by such Depositary
Shares and, accordingly, will be entitled to take into account for federal
income tax purposes income and deductions to which they would be entitled if
they were holders of such Preferred Stock. In addition, (i) no gain or loss
will be recognized for federal income tax purposes upon the withdrawal of
Preferred Stock in exchange for Depositary Shares as provided in the Deposit
Agreement, (ii) the tax basis of each share of Preferred Stock to an exchanging
owner of Depositary Shares will, upon such exchange, be the same as the
aggregate tax basis of the Depositary Shares exchanged therefor and (iii) the
holding period of shares of the Preferred Stock in the hands of an exchanging
owner of Depositary Shares who held such Depositary Shares as a capital asset
at the time of the exchange thereof for Preferred Stock will include the period
during which such person owned such Depositary Shares.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between CoreStates and the Securities Depositary. However, any amendment which
materially and adversely alters the rights of the existing holders of
Depositary Shares will not be effective unless such amendment has been approved
by the record holders of at least a majority of the Depositary Shares then
outstanding. A Deposit Agreement may be terminated by CoreStates or the
Securities Depositary only if (i) all outstanding Depositary Shares relating
thereto have been redeemed or, if applicable, converted into other Preferred
Stock or Common Stock or (ii) there has been a final distribution in respect of
the Preferred Stock of the relevant series in connection with any liquidation,
dissolution or winding-up of CoreStates and such distribution has been
distributed to the holders of the related Depositary Shares.
CHANGES OF SECURITIES DEPOSITARY
CoreStates will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary agreements. CoreStates will
pay charges of the Securities Depositary in connection with the initial deposit
of the Preferred Stock and any redemption of the Preferred Stock. Holders of
24
<PAGE>
Depositary Shares will pay other transfer and other taxes and governmental
charges and such other charges as are expressly provided in the Deposit
Agreement to be for their accounts.
MISCELLANEOUS
The Securities Depositary will forward to the holders of Depositary Shares
all reports and communications from CoreStates which are delivered to the
Securities Depositary and which CoreStates is required to furnish to the
holders of the Preferred Stock.
Neither the Securities Depositary nor CoreStates will be liable if it is
prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The obligations of
CoreStates and the Securities Depositary under the Deposit Agreement will be
limited to performance in good faith of their duties thereunder and they will
not be obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is
furnished. They may rely upon written advice of counsel or accountants, holders
of Depositary Shares or other persons believed to be competent and on documents
believed to be genuine.
RESIGNATION AND REMOVAL OF SECURITIES DEPOSITARY
The Securities Depositary may resign at any time by delivering to CoreStates
notice of its election to do so, and CoreStates may at any time remove the
Securities Depositary, any such resignation or removal to take effect upon the
appointment of a successor Securities Depositary and its acceptance of such
appointment. Such successor Securities Depositary must be appointed within 60
days after delivery of the notice of resignation or removal and must be a bank
or trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
DESCRIPTION OF COMMON STOCK
The following description encompasses all the material terms and provisions
of CoreStates Common Stock. These and certain other terms of the Common Stock
will be described more fully in a Prospectus Supplement at the time such Common
Stock is issued.
GENERAL
Under CoreStates' Articles of Incorporation, as amended (the "Articles"), the
Board of Directors of CoreStates is authorized to issue up to 350,000,000
shares of Common Stock, par value $1.00 per share. As of December 31, 1995,
138,050,962 shares of Common Stock were outstanding.
The transfer agent, registrar, and dividend disbursing agent for shares of
Common Stock is First Chicago Trust Company of New York, New York.
Dividend Rights. The holders of CoreStates Common Stock are entitled to share
ratably in dividends out of funds legally available therefor, when and as
declared by CoreStates' Board of Directors, after full cumulative dividends on
all shares of Preferred Stock, and any other class or series of preferred stock
ranking superior as to dividends to CoreStates Common Stock, have been paid or
declared and funds sufficient for the payment thereof set apart. (See
"Description of Preferred Stock--Dividends").
Voting Rights. Each holder of CoreStates Common Stock has one vote on matters
presented for consideration by the shareholders for each share held. There are
no cumulative voting rights in the election of directors. All issued and
outstanding shares of CoreStates Common Stock are fully paid and non-
assessable. In certain circumstances, issued and outstanding Preferred Stock or
any other class or series of preferred stock issued by CoreStates may affect
voting rights of CoreStates Common Stock. At the date hereof, there are no
shares of Preferred Stock or any other class or series of preferred stock
issued by CoreStates outstanding.
25
<PAGE>
Size and Classification of Board of Directors. CoreStates' Articles of
Incorporation provide for a classified Board of Directors, consisting of three
substantially equal classes of directors, each serving for a three-year term,
with the term of each class of directors ending in successive years. The Board
of Directors currently consists of 17 members. Classification of the Board of
Directors may have the effect of decreasing the number of directors that could
otherwise be elected at a given annual meeting by anyone who obtains a
controlling interest in CoreStates Common Stock and thereby could impede a
change in control of CoreStates.
Preemptive Rights. The holders of CoreStates Common Stock have no preemptive
rights to acquire any new or additional unissued shares or treasury shares of
CoreStates capital stock.
Liquidation Rights. In the event of a liquidation, dissolution or winding up
of CoreStates, whether voluntary or involuntary, the holders of CoreStates
Common Stock will be entitled to share ratably in any of CoreStates' assets or
funds that are available for distribution to its shareholders after the
satisfaction of its liabilities (or after adequate provision is made therefor)
and after preferences on any outstanding preferred stock.
Assessment and Redemption. CoreStates Common Stock will be, when issued,
fully paid and nonassessable. CoreStates Common Stock does not have any
redemption provisions.
DESCRIPTION OF SECURITIES WARRANTS
The following description encompasses all the material terms and provisions
of the Securities Warrants.
CoreStates Capital may issue Securities Warrants for the purchase of Debt
Securities. Securities Warrants may be issued independently or together with
Debt Securities offered by any Prospectus Supplement and may be attached to or
separate from such Debt Securities.
The Securities Warrants are to be issued under Warrant Agreements to be
entered into between CoreStates Capital and a bank or trust company, as Warrant
Agent, all as set forth in the Prospectus Supplement relating to the particular
issue of Warrants. The Warrant Agent will act solely as an agent of CoreStates
Capital in connection with the Warrant Certificates and will not assume any
obligation or relationship of agency or trust for or with any holders of
Warrant Certificates or beneficial owners of Warrants. Copies of the forms of
Warrant Agreements, including the forms of Warrant Certificates representing
the Securities Warrants, will be filed as exhibits to the Registration
Statement to which this Prospectus pertains. The following summaries of certain
provisions of the forms of Warrant Agreement and Warrant Certificates do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Warrant Agreements and the Warrant
Certificates.
GENERAL
If Securities Warrants are offered, the applicable Prospectus Supplement will
describe the terms of the Securities Warrants, including the following: (1) the
offering price; (2) the designation, aggregate principal amount, priority of
payment and terms of the Debt Securities purchasable upon exercise of the
Securities Warrants; (3) if applicable, the designation and terms of the Debt
Securities with which the Securities Warrants are issued and the number of
Securities Warrants issued with each such Debt Security; (4) if applicable, the
date on and after which the Securities Warrants and the related Debt Securities
will be separately transferable; (5) the principal amount of Debt Securities
purchasable upon exercise of one Securities Warrant and the price at which such
principal amount of Debt Securities may be purchased upon such exercise; (6)
the date on which the right to exercise the Securities Warrants shall commence
and the date on which such right shall expire (the "Expiration Date"); (7) a
discussion of certain federal income tax consequences of holding or exercising
Securities Warrants; (8) whether the Securities Warrants represented by the
Warrant Certificates will be issued in registered or bearer form and, if
registered, where they may be
26
<PAGE>
registered and transferred; and (9) any other terms of the Securities Warrants
(which shall not be inconsistent with the provisions of the applicable Warrant
Agreement).
Warrant Certificates may be exchanged for new Warrant Certificates of
different denominations, may (if in registered form) be presented for
registration of transfer, and may be exercised at the corporate trust office of
the Warrant Agent or any other office indicated in the applicable Prospectus
Supplement. Prior to the exercise of their Securities Warrants, holders of
Securities Warrants will not have any of the rights of holders of the Debt
Securities purchasable upon such exercise, including the right to receive
payments of principal of, premium, if any, or interest, if any, on the Debt
Securities purchasable upon such exercise.
EXERCISE OF SECURITIES WARRANTS
Each Securities Warrant will entitle the holder to purchase such principal
amount of Debt Securities at such exercise price as shall in each case be set
forth in, or calculated from, the Prospectus Supplement relating to the
Securities Warrants. Securities Warrants may be exercised at any time up to
5:00 P.M. Philadelphia time on the Expiration Date set forth in the Prospectus
Supplement relating to such Securities Warrants. After the close of business on
the Expiration Date (or such later date to which such Expiration Date may be
extended by the Issuer), unexercised Securities Warrants will become void.
Securities Warrants may be exercised by delivery of payment to the Warrant
Agent as provided in the applicable Prospectus Supplement of the amount
required to purchase the Debt Securities purchasable upon such exercise
together with certain information set forth on the reverse side of the Warrant
Certificate. Securities Warrants will be deemed to have been exercised upon
receipt of the exercise price, subject to the receipt, within five business
days, of the Warrant Certificate evidencing such Warrants. Upon receipt of such
payment and the Warrant Certificate properly completed and duly executed at the
corporate trust office of the Warrant Agent or any other office indicated in
the applicable Prospectus Supplement, CoreStates Capital will, as soon as
practicable, issue and deliver the Debt Securities purchasable upon such
exercise. If fewer than all of the Warrants represented by such Warrant
Certificates are exercised, a new Warrant Certificate will be issued for the
remaining amount of Warrants.
PLAN OF DISTRIBUTION
The Issuer may sell Offered Securities to or through underwriters, dealers
and also may sell Offered Securities directly to other purchasers or through
agents or dealers which may be affiliates.
The distribution of Offered Securities may be effected from time to time in
one or more transactions at a fixed price or prices (which may be changed from
time to time), at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Each
Prospectus Supplement will describe the method of distribution of the Offered
Securities. Certain restrictions relating to distribution of Offered Securities
in connection with an International Offering will be set forth in the
applicable Prospectus Supplement.
In connection with the sale of Offered Securities, underwriters or agents
acting on the Issuer's behalf may receive compensation from the Issuer or from
purchasers of Offered Securities for whom they may act as agents, in the form
of discounts, concessions or commissions. The underwriters, dealers and agents
that participate in the distribution of Offered Securities may be deemed to be
underwriters under the Act and any discounts or commissions received by them
and any profit on the resale of Offered Securities by them may be deemed to be
underwriting discounts and commissions under the Act. Any such underwriter will
be identified and any such compensation will be described in the applicable
Prospectus Supplement.
Under agreements which may be entered into by the Issuer, underwriters,
dealers and agents who participate in the distribution of Offered Securities
may be entitled to indemnification by the Issuer against certain liabilities,
including liabilities under the Act.
27
<PAGE>
If so indicated in the applicable Prospectus Supplement, the Issuer will
authorize underwriters or other persons acting as the Issuer's agents to
solicit offers by certain institutions to purchase Debt Securities, Preferred
Stock, Depository Shares or Securities Warrants from the Issuer pursuant to
delayed delivery contracts providing for payment and delivery on a future date
or dates stated in the applicable Prospectus Supplement. Each such contract
will be for an amount not less than, and the aggregate amount of such
securities sold pursuant to such contracts shall not be less nor more than, the
respective amounts stated in the applicable 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 Issuer. The obligations of any purchaser under any such
contract will not be subject to any condition except that (1) the purchase of
the Debt Securities, Preferred Stock, Depository Shares or Securities Warrants
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject, and (2) if the Debt
Securities, Preferred Stock, Depository Shares or Securities Warrants are also
being sold to underwriters acting as principals for their own account, the
underwriters shall have purchased such Debt Securities, Preferred Stock,
Depository Shares or Securities Warrants 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
Issuer or one or more of its affiliates in the ordinary course of business.
Except as otherwise indicated in the applicable Prospectus Supplement and
except for Offered Securities consisting of Common Stock that is listed on a
securities exchange, no secondary market presently exists for the Offered
Securities. Underwriters, dealers or agents may make a market in the Offered
Securities, but are under no obligation to do so. Therefore, no assurance can
be given that a secondary market for the Offered Securities will develop.
LEGAL OPINIONS
The validity of the Offered Securities will be passed upon for CoreStates by
David T. Walker, Esq., Counsel of CoreStates and CoreStates Capital. At April
3, 1996, Mr. Walker was the beneficial owner of 5,355 shares of Common Stock
and of options covering an additional 17,000 shares of such Common Stock.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
certain legal matters with respect to the Offered Securities will be passed
upon for the underwriters, dealers or agents by Brown & Wood, who will rely
upon the opinion of Mr. Walker as to matters of Pennsylvania law.
EXPERTS
The consolidated financial statements of CoreStates Financial Corp at
December 31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995 incorporated by reference in CoreStates Financial Corp's
Annual Report (Form 10-K) for the year ended December 31, 1995 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference therein and incorporated herein by
reference. As to 1993, Ernst & Young LLP's report is based in part on the
reports of KPMG Peat Marwick LLP and Coopers & Lybrand L.L.P., independent
auditors. The report of KPMG Peat Marwick LLP covering the December 31, 1993
financial statements of Constellation Bancorporation and subsidiaries refers to
a restatement of the 1993 financial statements to remove certain merger-related
charges and to a change in accounting for certain investments in debt and
equity securities in 1993. Such consolidated financial statements are
incorporated herein by reference in reliance upon the reports of Ernst & Young
LLP, KPMG Peat Marwick LLP, and Coopers & Lybrand L.L.P. given upon the
authority of such firms as experts in accounting and auditing.
28
<PAGE>
The consolidated financial statements of Meridian Bancorp, Inc. and
subsidiaries as of December 31, 1995 and 1994, and for each of the years in the
three year period ended December 31, 1995, have been included in CoreStates
Financial Corp's Form 8-K dated April 3, 1996, which has been incorporated by
reference herein and in the Registration Statement 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 aforementioned financial statements contains an explanatory
paragraph which discusses that Meridian adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
115, Accounting for Certain Investments in Debt and Equity Securities, and No.
112, Employers' Accounting for Postemployment Benefits, in 1994, and No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, and No.
109, Accounting for Income Taxes, in 1993.
The consolidated financial statements of United Counties Bancorporation and
subsidiaries as of December 31, 1995 and 1994, and for each of the years in the
three-year period ended December 31, 1995, have been incorporated by reference
herein and in the Registration Statement 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 aforementioned
financial statements refers to a change in accounting for certain investments
in debt and equity securities in 1994 and income taxes in 1993.
29
<PAGE>
================================================================================
NO DEALER, SALESMAN OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT (INCLUDING
THE PRICING SUPPLEMENT) AND THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUER OR THE AGENT. THIS PROSPECTUS SUPPLEMENT (INCLUDING THE PRICING
SUPPLEMENT) AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT (INCLUDING
THE PRICING SUPPLEMENT) AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY
CHANGE IN THE FACTS CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT (INCLUDING THE PRICING SUPPLEMENT) OR THE PROSPECTUS OR IN THE
AFFAIRS OF THE ISSUER OR THE GUARANTOR SINCE THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Description of Retail Medium Term Note/SM/ securities .................... S-3
Certain United States Federal Income Tax Consequences..................... S-10
Plan of Distribution of Retail Medium Term Note/SM/ securities............ S-18
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
CoreStates Financial Corp................................................. 3
CoreStates Capital Corp................................................... 4
Certain Legal and Regulatory Considerations............................... 4
Use of Proceeds........................................................... 6
CoreStates Financial Corp Selected Consolidated Historical Financial
Information.............................................................. 7
Description of Debt Securities............................................ 11
Certain Terms Relating to Senior Debt Securities.......................... 17
Certain Terms Relating to Subordinated Debt Securities.................... 18
Guarantees................................................................ 19
Description of Preferred Stock............................................ 19
Description of Depositary Shares.......................................... 22
Description of Common Stock............................................... 25
Description of Securities Warrants........................................ 26
Plan of Distribution...................................................... 27
Legal Opinions............................................................ 28
Experts................................................................... 28
</TABLE>
================================================================================
================================================================================
$200,000,000
[LOGO OF CORESTATES APPEARS HERE]
CORESTATES
CAPITAL CORP
RETAIL MEDIUM TERM NOTE/SM/
SECURITIES
SENIOR/SUBORDINATED
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
UNCONDITIONALLY GUARANTEED
AS TO PAYMENT OF PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST BY
CORESTATES
FINANCIAL CORP
--------
PROSPECTUS SUPPLEMENT
MAY 10, 1996
--------
SMITH BARNEY INC.
/SM/Service mark of Smith Barney Inc.
================================================================================
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN, OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN CON-
NECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT (INCLUDING THE
PRICING SUPPLEMENT) AND THE ACCOMPANYING PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE ISSUER OR THE AGENTS. THIS PROSPECTUS SUPPLEMENT (INCLUDING THE
PRICING SUPPLEMENT) AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUP-
PLEMENT (INCLUDING THE PRICING SUPPLEMENT) AND THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT (INCLUDING THE PRICING SUPPLEMENT) OR
THE ACCOMPANYING PROSPECTUS OR IN THE AFFAIRS OF THE ISSUER OR THE GUARANTOR
SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
Prospectus Supplement
<S> <C>
Recent Developments....................................................... S-2
Description of Notes...................................................... S-3
Certain United States Federal Income Tax Considerations................... S-15
Plan of Distribution...................................................... S-24
Prospectus
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
CoreStates Financial Corp................................................. 3
CoreStates Capital Corp................................................... 4
Certain Legal and Regulatory Considerations............................... 4
Use of Proceeds........................................................... 6
CoreStates Financial Corp Selected Historical Consolidated Financial
Information.............................................................. 7
Description of Debt Securities............................................ 11
Certain Terms Relating to Senior Debt Securities.......................... 17
Certain Terms Relating to Subordinated Debt Securities.................... 18
Guarantees................................................................ 19
Description of Preferred Stock............................................ 19
Description of Depositary Shares.......................................... 22
Description of Common Stock............................................... 25
Description of Securities Warrants........................................ 26
Plan of Distribution...................................................... 27
Legal Opinions............................................................ 28
Experts................................................................... 28
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$1,550,000,000
[LOGO OF CORESTATES APPEARS HERE]
CORESTATES CAPITAL CORP
SENIOR/SUBORDINATED
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
UNCONDITIONALLY GUARANTEED
AS TO PAYMENT OF PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST BY
CORESTATES FINANCIAL CORP
-------------------------------
PROSPECTUS SUPPLEMENT
Dated May 10, 1996
-------------------------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
SMITH BARNEY INC.
UBS SECURITIES LLC
CORESTATES BANK, N.A.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an estimate of the expenses which will be incurred in
connection with the issuance and distribution of the securities, being
registered:
<TABLE>
<S> <C>
Registration Fee............................................ $599,655.18
Printing and Engraving...................................... 30,000.00
Rating Agency Fees.......................................... 275,000.00
Accounting Fees............................................. 75,000.00
Blue Sky and Legal Investment Fees and Expenses............. 20,000.00
Miscellaneous............................................... 344.82
-------------
Total................................................... $1,000,000.00
=============
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1741 et seq. of the Pennsylvania Business Corporation Law provide
that a business corporation may indemnify directors and officers against
liabilities they may incur in such capacities provided certain standards are
met, including good faith and the reasonable belief that the particular action
is in, or not opposed to, the best interest of the corporation. In general,
this power to indemnify does not exist in the case of actions against a
director or officer by or in the right of the corporation if the person
entitled to indemnification shall have been adjudged to be liable for
negligence or misconduct in the performance of the person's duties. However,
Section 1746 provides that the other sections of the law are not exclusive and
that further indemnification may be provided by by-law, agreement or otherwise
except where the act or failure to act giving rise to a claim for
indemnification is determined by a court to have constituted willful misconduct
or recklessness. The corporation is required to indemnify directors and
officers against expenses they may incur in defending action against them in
such capacities if they are successful on the merits or otherwise in the
defense of such action.
The by-laws of CoreStates Financial Corp provide for the mandatory
indemnification of directors and officers to the full extent permitted by law.
CoreStates has purchased director's and officers' liability insurance covering
certain liabilities which may be incurred by its officers and directors in
connection with the performance of their duties.
See Item 17 herein for the undertaking with respect to indemnification.
ITEM 16. LIST OF EXHIBITS
The following exhibits are filed herewith as part of this Registration
Statement:
<TABLE>
<C> <S>
1(a)(5) Form of Underwriting Agreement.
1(b) Form of Distribution Agreement.
1(c) Form of Distribution Agreement for Retail Medium Term Note SM securities.
2(a) (1) Agreement and Plan of Merger dated as of October 10, 1995 by and between Meridian
Bancorp, Inc. and CoreStates Financial Corp.
3(a) (2) Articles of Incorporation of CoreStates Financial Corp as amended through May 3,
1993
3(b) (2) By-laws of CoreStates Financial Corp as amended through April 20, 1993
4(a) (3) Trust Indenture dated as of December 1, 1990 among CoreStates, CoreStates Capital
and The Bank of New York, as successor to NationsBank of Georgia, National
Association, as successor to Wachovia Bank of Georgia, N.A. (formerly the First
National Bank of Atlanta, N.A.)
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
4(b) (3) Trust Indenture dated as of December 1, 1990 among CoreStates, CoreStates Capital
and Bank One, Columbus, N.A.
4(c) (4) First Supplemental Indenture dated as of March 1, 1993, among CoreStates,
CoreStates Capital, and Bank One, Columbus, N.A.
4(d) (5) Form of Medium-Term Note (Senior Fixed Rate)
4(e) (5) Form of Medium-Term Note (Senior Floating Rate)
4(f) (5) Form of Medium-Term Note (Subordinated Fixed Rate)
4(g) (5) Form of Medium-Term Note (Subordinated Floating Rate)
4(h) Form of Warrant.*
4(i) Form of Warrant Agreement.*
4(j) Form of Certificate of Designation of $ Preferred Stock.*
4(k) Form of $ Preferred Stock.*
4(l) Form of Common Stock.*
4(m) Deposit Agreement.*
4(n) Form of Depositary Receipt.*
4(o) (6) Form of Second Supplemental Indenture dated as of August 1, 1994 between
CoreStates, CoreStates Capital, Bank One, Columbus, N.A. and Citibank, N.A.
5(a) Opinion and consent of David T. Walker, Esq. as to the validity of the Common
Stock, Preferred Stock, Capital Securities, Debt Securities, the related
Guarantees and the Warrants being registered.
12(a) Computation of Ratio of Earnings to Fixed Charges (Combined CoreStates and
CoreStates Capital).
12(b) Computation of Ratio of Earnings from Continuing Operations to Fixed Charges of
Continuing Operations (Consolidated).
23(a) Consent of Ernst & Young LLP
23(b) Consent of KPMG Peat Marwick LLP
23(c) Consent of Coopers & Lybrand L.L.P.
23(d) Consent of KPMG Peat Marwick LLP
23(e) Consent of KPMG Peat Marwick LLP
23(f) Consent of David T. Walker, Esq. (included in Exhibit 5(a)).
24(a) Powers of Attorney for CoreStates Financial Corp
24(b) Powers of Attorney for CoreStates Capital Corp
25(b)(5) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
Citibank, N.A.
25(c) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The
Bank of New York
</TABLE>
- --------
(1) Incorporated by reference from Appendix I to the Proxy Statement included
in Part I of Registration Statement on Form S-4 (File No. 333-00067) as
filed with the Securities and Exchange Commission under the Securities Act
of 1933 on January 5, 1996.
(2) Exhibits 3(a) and 3(b) are incorporated by reference from Exhibits 3(a)
and 3(b), respectively, to CoreStates Financial Corp Current Report on
Form 8-K dated October 21, 1993.
(3) Exhibits 4(a) and 4(b) are incorporated by reference from Exhibits 4.1 and
4.2, respectively, to CoreStates Financial Corp Current Report on Form 8-K
dated January 29, 1991.
(4) Incorporated by reference from Exhibit 4 to CoreStates Financial Corp
Current Report on Form 8-K dated April 20, 1993, as amended.
II-2
<PAGE>
(5) Exhibits 1(a), 4(d), 4(e), 4(f), 4(g) and 25(b) are incorporated by
reference from Exhibits 1(a), 4(d), 4(e), 4(f), 4(g) and 26(b),
respectively, to CoreStates Financial Corp Form S-3 (File No. 33-54049) as
filed with the Securities and Exchange Commission on June 9, 1994.
(6) Exhibit 4(o) is incorporated by reference from Exhibit 4.5 to CoreStates
Financial Corp Annual Report on Form 10-K for the ended December 31, 1994.
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
Provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Issuer pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That for purposes of determining any liability under the Securities
Act of 1933, each filing of CoreStates' Annual Report pursuant to Section
13(a) or 15(d) of the Securities Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Issuer pursuant to the foregoing provisions or
otherwise, the Issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Issuer of expenses incurred or paid by a director,
officer or controlling person of the Issuer in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Issuer will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by them is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(6)(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or
II-3
<PAGE>
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THESE REGISTRATION
STATEMENTS TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED IN THE CITY OF PHILADELPHIA, AND COMMONWEALTH OF PENNSYLVANIA, ON
THIS 10TH DAY OF MAY, 1996.
CoreStates Capital Corp
/s/ Terrence A. Larsen
By: __________________________________
TERRENCE A. LARSEN
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THESE
REGISTRATION STATEMENTS HAVE BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES CAPACITY DATE
/s/ Terrence A. Larsen Director, Chairman
- ------------------------------------ of the Board, and May 10, 1996
TERRENCE A. LARSEN Chief Executive
Officer (principal
executive officer)
/s/ Charles P. Connolly, Jr. Director and
- ------------------------------------ President May 10, 1996
CHARLES P. CONNOLLY, JR.
* Director, Vice
- ------------------------------------ President and May 10, 1996
JOSEPH M. VAYDA Treasurer
(principal
accounting
officer)
* Director and Vice
- ------------------------------------ President May 10, 1996
JAMES J. CALLA
/s/ Charles P. Connolly, Jr.
*By: _______________________________ May 10, 1996
CHARLES P. CONNOLLY, JR. ATTORNEY-
IN-FACT
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THESE REGISTRATION
STATEMENTS TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED IN THE CITY OF PHILADELPHIA, AND COMMONWEALTH OF PENNSYLVANIA, ON
THIS 10TH DAY OF MAY, 1996.
CoreStates Financial Corp
/s/ Terrence A. Larsen
By____________________________________
TERRENCE A. LARSEN
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THESE
REGISTRATION STATEMENTS HAVE BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES CAPACITY DATE
/s/ Terrence A. Larsen Director, Chairman
- ------------------------------------ of the Board, May 10, 1996
TERRENCE A. LARSEN Chief Executive
Officer (principal
executive officer)
/s/ Albert W. Mandia Executive Vice
- ------------------------------------ President May 10, 1996
ALBERT W. MANDIA (principal
financial officer)
/s/ Christopher J. Carey Senior Vice
- ------------------------------------ President May 10, 1996
CHRISTOPHER J. CAREY (principal
accounting
officer)
* Director
- ------------------------------------ May 10, 1996
GEORGE A. BUTLER
* Director
- ------------------------------------ May 10, 1996
NELSON G. HARRIS
II-6
<PAGE>
SIGNATURES CAPACITY DATE
* Director
- ------------------------------------ May 10, 1996
CARLTON E. HUGHES
* Director
- ------------------------------------ May 10, 1996
ERNEST E. JONES
* Director
- ------------------------------------ May 10, 1996
HERBERT LOTMAN
* Director
- ------------------------------------ May 10, 1996
PATRICIA A. MCFATE
* Director
- ------------------------------------ May 10, 1996
JOHN A. MILLER
* Director
- ------------------------------------ May 10, 1996
MARLIN MILLER, JR.
* Director
- ------------------------------------ May 10, 1996
STEPHANIE W. NAIDOFF
* Director
- ------------------------------------ May 10, 1996
SEYMOUR S. PRESTON, III
* Director
- ------------------------------------ May 10, 1996
JAMES M. SEABROOK
* Director
- ------------------------------------ May 10, 1996
J. LAWRENCE SHANE
* Director
- ------------------------------------ May 10, 1996
HAROLD A. SORGENTI
* Director
- ------------------------------------ May 10, 1996
PETER S. STRAWBRIDGE
/s/ Charles P. Connolly, Jr.
*By: _______________________________ May 10, 1996
- ------------------------------------
CHARLES P. CONNOLLY, JR.
ATTORNEY-IN-FACT
II-7
