<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
File No. 33-39480
PROSPECTUS SUPPLEMENT
(To Prospectus Dated February 23, 1994)
$250,000,000
NATIONAL CITY CORPORATION
6 5/8% SUBORDINATED NOTES DUE 2004
The 6 5/8% Subordinated Notes due 2004 (the "Notes") offered hereby will mature
on March 1, 2004. Interest on the Notes is payable semiannually on March 1 and
September 1, beginning September 1, 1994. The Notes are direct, unsecured
obligations of National City Corporation (the "Company"), and are subordinated
in right of payment to all present and future Senior Indebtedness of the
Company. Payment of principal of the Notes may be accelerated only in the case
of certain events involving bankruptcy, insolvency or reorganization of the
Company or any Principal Constituent Bank. There is no right of acceleration of
the Notes in the case of a failure to pay principal or interest on the Notes or
in the performance of any other obligation of the Company. The Notes will not be
redeemable prior to maturity, and no sinking fund is provided for the Notes.
The Notes will be issued only in fully registered form and will be represented
by one or more Global Securities registered in the name of The Depository Trust
Company (the "Depositary"). Beneficial interests in the Notes will be shown on,
and transfers thereof will be effected only through, the records maintained by
the Depositary's participants. Except as described herein, owners of beneficial
interests in the Notes will not be entitled to receive the Notes in definitive
form and will not be deemed to be holders thereof. The Notes will trade in the
Depositary's Same-Day Funds Settlement System until maturity, and secondary
market trading activity for the Notes will therefore settle in immediately
available funds. See "Description of the Notes -- Same-Day Settlement and
Payment."
THE NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR
NONBANK SUBSIDIARY OF THE COMPANY AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(1)(2)
<S> <C> <C> <C>
Per Note..................................... 99.482% .650% 98.832%
Total........................................ $248,705,000 $1,625,000 $247,080,000
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from March 2, 1994 to date of delivery.
(2) Before deduction of expenses payable by the Company estimated to be
$200,000.
The Notes are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Global Securities will be made through the facilities of
The Depository Trust Company on or about March 2, 1994.
SALOMON BROTHERS INC
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
MCDONALD & COMPANY
SECURITIES, INC.
MERRILL LYNCH & CO.
SMITH BARNEY SHEARSON INC.
The date of this Prospectus Supplement is February 23, 1994.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1993 and the Company's 1993 Annual Report to Stockholders (but only to the
extent such Annual Report to Stockholders is expressly incorporated by reference
into the referenced Form 10-K) as filed by the Company with the Securities and
Exchange Commission (the "Commission"), are incorporated in and made a part of
this Prospectus Supplement by reference.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subsequent to the date of this Prospectus Supplement and
prior to the termination of the offering of the Notes offered hereby shall be
deemed to be incorporated by reference in this Prospectus Supplement and to be a
part hereof from the date of filing of such documents. 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
Supplement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus Supplement.
The Company will provide without charge to each person to whom this
Prospectus Supplement is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by reference
(other than exhibits, unless such exhibits are specifically incorporated by
reference in such documents). Written requests for such copies should be
directed to National City Corporation, National City Center, 1900 East Ninth
Street, Cleveland, Ohio 44114-3484 Attention: Thomas A. Richlovsky, Senior Vice
President and Treasurer. Telephone requests may be directed to 216/575-2126.
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<PAGE> 3
THE COMPANY
The Company is a multibank holding company which owns substantially all of
the outstanding capital stock of 19 commercial banks, having a total of 617
banking offices in Ohio, Kentucky and Indiana. At December 31, 1993, the Company
had consolidated total assets of $31.1 billion and total stockholders' equity of
$2.8 billion. Based on consolidated total assets at December 31, 1993, the
Company was the second largest bank holding company headquartered in the State
of Ohio and approximately the 26th largest commercial banking organization in
the United States. The Company's principal banking subsidiaries are National
City Bank (Cleveland); National City Bank, Columbus; National City Bank,
Kentucky; and National City Bank, Indiana.
The Company's subsidiaries and divisions offer a wide range of other
financial services, such as credit card, retail payment and airline ticket
processing, brokerage services, trust and investment management, leasing,
merchant and mortgage banking, public finance, venture capital, small business
and community investment, and credit life insurance.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Notes
offered hereby will be added to the general funds of the Company and will be
available for general corporate purposes, including investments in or advances
to existing or future subsidiaries.
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<PAGE> 4
SELECTED FINANCIAL DATA
The following table sets forth, in summary form, certain consolidated
financial data for the Company and its subsidiaries for each of the five years
in the period ended December 31, 1993 and is qualified in its entirety by the
detailed information and financial statements included in the documents
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income........................... $ 1,200 $ 1,152 $ 1,131 $ 1,094 $ 1,053
Provision for loan losses..................... 93 129 251 231 157
Net income after provision for loan losses.... 1,107 1,023 880 863 896
Noninterest income............................ 812 752 676 583 496
Noninterest expense........................... 1,348 1,311 1,242 1,115 981
Income before income taxes.................... 571 464 314 331 411
Income taxes.................................. 167 117 77 82 106
Net income.................................... 404 347 237 249 305
Net income applicable to common stock......... 388 331 226 249 305
STOCKHOLDER DATA (A):
Average common shares outstanding............. 161,163,816 158,011,980 154,430,222 153,839,484 154,039,076
Net income per common share (primary)......... $2.41 $2.09 $1.46 $1.62 $1.98
Dividends paid per common share............... 1.06 .94 .94 .94 .84
Book value per common share (period-end)
(b)......................................... 16.15 14.54 13.31 12.71 12.17
ENDING BALANCE SHEET DATA:
Loans......................................... $21,286 $18,738 $19,171 $19,587 $18,741
Total earning assets (net of allowance)....... 27,314 25,463 26,160 25,534 24,943
Total assets.................................. 31,068 28,963 29,976 29,561 28,549
Deposits...................................... 23,063 22,585 22,758 22,730 21,386
Corporate long-term debt...................... 510 328 330 308 310
Stockholders' equity.......................... 2,763 2,500 2,258 1,946 1,877
SELECTED RATIOS:
Net interest margin........................... 4.80% 4.65% 4.51% 4.50% 4.69%
Return on average assets...................... 1.40 1.21 .81 .87 1.16
Return on average common equity............... 16.12 15.31 11.20 12.97 17.18
Equity to assets (period-end)................. 8.89 8.63 7.53 6.58 6.57
Net charge-offs to average loans.............. .43 .72 1.07 1.16 .96
Allowance for loan losses to loans
(period-end)................................ 2.08 2.05 2.01 1.67 1.66
Allowance for loan losses to nonperforming
loans (period-end).......................... 292.90 171.60 112.70 101.20 117.20
Nonperforming assets to loans and other real
estate owned (period-end)................... .98 1.94 2.78 2.44 1.61
REGULATORY CAPITAL RATIOS (PERIOD-END):
Tier 1 capital................................ 8.94% 9.90% 8.64% 7.19% 7.53%
Total capital................................. 11.62 12.23 11.00 9.58 10.03
Tier 1 leverage............................... 8.18 8.22 7.26 6.34 6.26
EARNINGS TO FIXED CHARGES (C):
Excluding interest on deposits................ 4.51x 3.72x 2.18x 1.91x 2.13x
Including interest on deposits................ 1.81 1.52 1.23 1.20 1.26
</TABLE>
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(a) Common stock and per share data have been adjusted for the two-for-one stock
split declared and paid in July 1993.
(b) The Company adopted SFAS No. 115 "Accounting for Certain Investments in Debt
and Equity Securities" on December 31, 1993. As a result, book value per
share at December 31, 1993 included $.22 per share related to the market
value appreciation of securities available for sale.
(c) For purposes of computing the ratios of earnings to fixed charges, income
before income taxes plus fixed charges is divided by fixed charges. Fixed
charges, excluding interest on deposits, consist of interest on Federal
funds purchased, security repurchase agreements, other borrowed funds,
corporate long-term debt, and that portion of rental expense which is deemed
representative of the interest factor. Fixed charges, including interest on
deposits, consist of the same items plus interest on deposits.
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<PAGE> 5
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1993, and as adjusted to give effect to the sale of the Notes
offered hereby. The table should be read in conjunction with the financial
information incorporated herein by reference or appearing elsewhere herein.
<TABLE>
<CAPTION>
OUTSTANDING AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT
Senior Debt:
8 3/8% Notes due 1996....................................... $ 99,826 $ 99,826
Floating Rate Notes due 1997................................ 49,920 49,920
Medium-term Notes........................................... 5,991 5,991
Floating Rate Notes due 1994................................ 5,000 5,000
Other....................................................... 6,714 6,714
Borrowings under revolving credit facility.................. -- --
----------- -----------
Total Senior Debt......................................... 167,451 167,451
Subordinated Debt:
Notes offered hereby........................................ -- 250,000
6 1/2% Subordinated Notes due 2003 (a)...................... 199,301 199,301
Floating Rate Subordinated Notes due 1997................... 74,942 74,942
9 7/8% Subordinated Notes due 1999.......................... 64,732 64,732
Other....................................................... 3,747 3,747
----------- -----------
Total Subordinated Debt................................... 342,722 592,722
----------- -----------
Total Long-Term Debt...................................... 510,173 760,173
STOCKHOLDERS' EQUITY
Preferred Stock, without par value, 8% Cumulative Convertible,
$250 liquidation preference per share, 5,000,000 shares
authorized, 793,240 shares outstanding (3,966,200 depositary
shares)..................................................... 198,310 198,310
Common Stock, par value $4 per share, 350,000,000 shares
authorized, 158,779,611 shares outstanding.................. 635,119 635,119
Capital Surplus................................................ 105,140 105,140
Retained Earnings (b).......................................... 1,841,144 1,841,144
Unallocated Shares held by Employee Stock Ownership Plan (ESOP)
Trust....................................................... (16,446 ) (16,446 )
----------- -----------
Total Stockholders' Equity..................................... 2,763,267 2,763,267
----------- -----------
Total Long-Term Debt and Stockholders' Equity.................. $3,273,440 $3,523,440
----------- -----------
----------- -----------
</TABLE>
(a) The 6 1/2% Subordinated Notes are direct obligations of the Company's
Cleveland and Columbus banking subsidiaries. As such, these obligations
constitute claims against such subsidiaries prior to the Company's equity
interest therein.
(b) Includes $35.0 million related to the market value appreciation of
securities available for sale.
At December 31, 1993, the Company also had commercial paper outstanding of
$398.8 million. During 1993, the amount of commercial paper outstanding averaged
$291.2 million. At December 31, 1993, the Company's commercial paper had an
average maturity of 18 days and an average interest rate of 3.08%.
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<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS
EARNINGS SUMMARY
The Company's consolidated net income was $404.0 million in 1993, compared
with $346.9 million in 1992. Net income per common share, after dividend
requirements on preferred stock, increased 15.3% in 1993 to $2.41, compared with
$2.09 in 1992.
Prior period per share data have been restated to reflect the two-for-one
stock split declared and paid in July 1993.
Return on average common equity, a key performance measure, was 16.12% in
1993, compared with 15.31% in 1992. Return on average assets was 1.40% in 1993
compared with 1.21% in 1992.
The following table reconciles the major changes in net income per share:
<TABLE>
<S> <C>
Net income per common share, 1992............................ $2.09
Increase (decrease) from changes in:
Net interest income........................................ .30
Provision for loan losses.................................. .23
Fee income................................................. .47
Noninterest expense........................................ (.23)
Income taxes............................................... (.34)
After-tax security gains................................... (.06)
Average shares outstanding................................. (.05)
-----
Net income per common share, 1993............................ $2.41
-----
-----
</TABLE>
UNIT PROFITABILITY
The contribution of the Company's major units to consolidated results for
the past two years is summarized in the following table:
<TABLE>
<CAPTION>
1993 1992
NET INCOME NET INCOME
---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Corporate and retail banking:
Akron(1)................................................. $ 22.0 $ 18.9
Cleveland................................................ 86.7 84.1
Columbus................................................. 55.5 51.8
Dayton................................................... 21.8 12.8
Indiana.................................................. 38.1 30.8
Kentucky................................................. 55.0 26.0
Toledo................................................... 12.8 11.7
Ashland.................................................. 2.3 2.2
---------- ----------
Total................................................. 294.2 283.3
National credit card....................................... 19.1 16.5
Investment/funding......................................... 40.8 64.9
---------- ----------
Total banking and funding................................ 354.1 319.7
Trust...................................................... 34.1 36.9
Item processing............................................ 17.2 16.6
Mortgage servicing......................................... (13.4) 8.4
---------- ----------
Total fee-based businesses............................... 37.9 61.9
Corporate.................................................. 12.0 (34.7)
---------- ----------
Consolidated total....................................... $404.0 $346.9
---------- ----------
---------- ----------
</TABLE>
- ---------------
(1) Includes results of Ohio Bancorp in 1993.
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<PAGE> 7
The corporate and retail banking businesses and national credit card
earnings improved in 1993 from 1992 due to lower provisions for loan losses,
improved net interest margins, and reduced noninterest expense.
The decline in the investment/funding group's earnings in 1993 was due
primarily to lower gains on the sale of securities and a lower yield on
investment assets.
Trust net income declined in 1993 due to higher than anticipated expenses,
including the settlement of litigation.
Item processing net income at National City Processing Company (NPC)
increased in 1993 primarily due to growth in merchant credit card processing and
acquisitions.
The loss in mortgage servicing was due to more rapid amortization of
deferred mortgage servicing rights and capitalized excess service fees in 1993.
The accelerated amortization was in response to mortgage refinancing activity
fueled by low interest rates. Year-to-date write-downs of deferred mortgage
servicing assets exceeded the 1992 level by approximately $28 million. Future
amortization rates are expected to decline as mortgage refinancing activity
subsides.
The improvement in the corporate contribution, which includes the parent
company, was due to lower costs associated with the cost redesign program and
nonrecurring 1992 expenses associated with the acquisition of Merchants National
Corporation, as well as gains on miscellaneous asset sales in 1993.
EARNING ASSETS
Average earning assets for 1993 were $25,745 million compared with $25,681
million in 1992. Average earning assets in 1993 were fairly stable compared with
a year ago due to a combination of growth in loans and securities, offset by a
decline in short-term money market assets.
LOANS: At year-end 1993, loans were $21,286 million, representing an
increase of 13.6% from year-end 1992. Ending loan balances are summarized in the
table below.
<TABLE>
<CAPTION>
1993 1992
------- -------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Commercial and industrial.................................. $ 8,168 $ 7,801
Nontaxable................................................. 262 310
International.............................................. 70 50
Real estate construction................................... 439.... 533
Leasing.................................................... 228 225
Commercial mortgage........................................ 2,328 1,928
Residential mortgage....................................... 4,033 2,699
Consumer................................................... 4,241 3,727
Home equity................................................ 798 739
Credit card................................................ 719 726
------- -------
Total loans.............................................. $21,286 $18,738
------- -------
------- -------
</TABLE>
The acquisition of Ohio Bancorp in 1993 added $809 million to year-end loan
balances, including $254 million to commercial, $320 million to residential
mortgage and $200 million to consumer.
The commercial loan portfolio remained fairly stable in 1993, but improving
economic conditions led to increases in the second half of the year.
Commercial mortgages included $1,777 million of loans secured by
income-producing real estate in 1993, compared with $1,643 million in 1992. The
remainder consists of owner-occupied loans and loans to mortgage bankers which
experienced significant growth in 1993.
Residential mortgage loans increased in 1993 due to greater demand from a
favorable interest rate environment and the retention of approximately $675
million of 15-year fixed rate residential mortgages for asset/liability
management purposes. Loan originations totaled approximately $5.0 billion in
1993, compared with $3.6 billion in 1992. Of the 1993 originations, $4.0 billion
were sold in the secondary market.
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<PAGE> 8
During 1993, consumer spending patterns improved, leading to growth in the
consumer loan portfolio. More than 75% of consumer loans are installment loans.
Of the installment portfolio, more than 70% are indirect, with the majority
being fixed rate. The remainder of the consumer portfolio is largely student
loans.
COMMERCIAL REAL ESTATE: Commercial real estate lending includes real
estate construction and permanent loans secured by income-producing investment
real estate. The following table shows outstanding balances and unfunded
commitments at year-end:
<TABLE>
<CAPTION>
TOTAL
COMMERCIAL
CONSTRUCTION PERMANENT REAL ESTATE
------------- ---------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Outstanding:
1993.................................... $ 439 $1,777 $2,216
1992.................................... 533 1,643 2,176
Unfunded commitments:
1993.................................... $ 206 $ 137 $ 343
1992.................................... 198 90 288
</TABLE>
The Company's activities in commercial real estate are based primarily on
relationships with developers who are active in local markets. More than 85% of
outstandings are in the Company's primary markets of Ohio, Kentucky and Indiana.
The portfolio consists predominantly of relatively small-scale office, retail
and apartment buildings.
Total commercial real estate loans made up 10.4% of the total loan
portfolio at December 31, 1993, compared with 11.6% at year-end 1992. At
year-end 1993, there were no concentrations of real estate loans in any
deteriorating economic areas.
SECURITIES: On December 31, 1993, the Company adopted SFAS 115 "Accounting
For Certain Investments in Debt and Equity Securities." Accordingly, securities
available for sale are recorded at market value and the net unrecognized gain of
$35 million (net of tax) is included in stockholders' equity.
The portfolio decreased from $5.5 billion (cost basis) in 1992 to $5.1
billion (cost basis) at December 31, 1993, influenced significantly by
unprecedented paydowns experienced in the year's latter half. In particular,
mortgage-backed security prepayments increased over 30%, with the majority
attributed to fixed rate collateralized mortgage obligations. The majority of
these cash flows were reinvested in adjustable rate mortgages, U.S. Treasuries
and Federal agency obligations. These securities provide enhanced liquidity and
call protection, and should perform well in a flattening yield curve
environment, particularly one led by increases in short-term rates. The book
yield on the portfolio decreased by 90 basis points from a year ago to 5.82% due
primarily to the prepayments, calls and maturities of higher rate securities
purchased in prior years, and an increase in the percentage of floating rate
assets.
INTEREST-BEARING LIABILITIES
Transaction accounts increased by 7.5% in 1993, while time deposits of
individuals declined by 13.3%. Overall, average core deposits remained fairly
stable and continued to fund more than 100% of average loans. The Company's
reliance on purchased funds declined slightly in 1993.
CAPITAL
The Company's tier 1, total risk-based capital and leverage ratios of
8.94%, 11.62% and 8.18%, respectively, are well above the required minimum
levels of 4.00%, 8.00% and 4.00%, respectively.
At December 31, 1993, all of the Company's member banks were
"well-capitalized" under the capital definitions prescribed in the FDIC
Improvement Act of 1991.
During 1993, the Board of Directors authorized two stock repurchase
programs. The first program was announced in the first quarter and completed in
November, and six million common shares were purchased. The second program,
announced December 21, 1993, authorized the purchase of up to five million
shares of common stock and up to four million depositary shares of preferred
stock, subject to a combined total
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<PAGE> 9
purchase limit of $200 million. Through December 31, 1993, 724,600 shares of
common stock and 33,800 depositary shares of preferred stock had been purchased
in the open market.
LIQUIDITY MANAGEMENT
Effective liquidity management ensures that the cash flow requirements of
depositors and borrowers, as well as the operating cash needs of the Company,
are met.
Funds are available from a number of sources, including the securities
portfolio, the extensive core deposit base, the ability to acquire large
deposits in the local and national markets, and the capability to securitize or
package loans for sale.
The Company has four major sources of funding to meet its liquidity
requirements: dividends from its subsidiaries, the commercial paper market, a
revolving credit agreement, and access to the capital markets.
The main source for the Company's cash requirements has been dividends from
its subsidiaries. At January 1, 1994, $96 million was available within the bank
subsidiaries to pay the Company in dividends without prior regulatory approval,
compared with $402 million at January 1, 1993. During 1993, subsidiary banks
declared $699.6 million and paid $543.4 million in dividends to the Company.
NET INTEREST INCOME
On a fully taxable equivalent basis, net interest income was $1,235.8
million in 1993 compared with $1,195.3 million in 1992. The net interest margin
improved to 4.80% in 1993, compared to 4.65% in 1992, due to a wider spread
between interest-earning assets and interest-bearing liabilities.
FEES AND OTHER INCOME
Fees and other income increased 10.2% in 1993 from 1992 due primarily to
higher item processing fees and service charges on deposits.
Item processing revenues at NPC grew 38% in 1993 due to growth in the
existing bankcard processing business as well as acquisitions.
Trust fee income increased 3.6% in 1993.
Credit card fees declined during 1993 due mainly to reduced annual charge
fee income on national credit cards and loss of fee income on the credit card
balances that were related to the credit card securitization. This trend will
continue as a $350 million credit card securitization unwinds through October
1994. These fees will be replaced by interest income on the credit card loans
that have been added to the balance sheet. Fees will likely be under additional
pressure in 1994 due to the loss of a large private label credit card customer
in the fourth quarter 1993.
Mortgage servicing revenues declined as a result of the accelerated
amortization of capitalized excess service fees, which is recorded as a
reduction of revenue. These charges totaled $13.3 million in 1993 compared with
$7.7 million in 1992. The servicing portfolio was $11.7 billion at year-end 1993
compared with $10.4 billion at year-end 1992.
NONINTEREST EXPENSE
Noninterest expenses rose 2.8% in 1993, compared with 1992, primarily due
to acquisitions at NPC and the acquisition of Ohio Bancorp during the fourth
quarter of 1993. Total 1993 expenses related to companies acquired in 1993 were
$60.8 million. Excluding the impact of these acquisitions, total expenses
declined almost 2% from 1992 levels. Amortization of intangibles included the
amortization of purchased mortgage servicing rights, which totaled $34.5 million
in 1993 and $11.7 million in 1992.
The full-time equivalent (FTE) staff for the Company increased in 1993, due
to acquisitions of Ohio Bancorp (926 FTE) and at NPC (420 FTE). Excluding the
acquisitions, total FTE declined by 152 positions.
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<PAGE> 10
The overhead ratio (noninterest expenses less fee income as a percentage of
fully taxable net interest income) was 44.34% in 1993 compared with 48.93% in
1992.
The efficiency ratio (noninterest expense as a percentage of fee income
plus fully taxable net interest income) was 66.21% in 1993 versus 68.22% in
1992. The fee-based businesses have lower gross margins than traditional
banking, and, therefore, growth in these businesses penalizes the efficiency
ratio. In contrast, strong fee income benefits the overhead ratio.
SECURITY GAINS AND LOSSES
The security gains contributions to net income were $7.7 million and $16.9
million in 1993 and 1992, respectively.
INCOME TAXES
The consolidated income tax provision was $167.0 million in 1993, compared
with $117.4 million in 1992. The effective tax rate of the Company was 29.2% in
1993 and 25.3% in 1992. The increase in the effective rate was due to the higher
Federal statutory rate and lower levels of tax-exempt income in 1993.
ASSET QUALITY
NONPERFORMING ASSETS: A summary of nonaccrual, reduced rate and
renegotiated loans and other nonperforming assets at December 31 follows:
<TABLE>
<CAPTION>
1993 1992
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Commercial:
Nonaccrual............................................... $ 79.4 $135.4
Restructured............................................. 1.1 2.5
------ ------
Total commercial...................................... 80.5 137.9
Real estate related:
Nonaccrual............................................... 64.4 81.5
Restructured............................................. 6.5 4.3
------ ------
Total real estate related........................... 70.9 85.8
------ ------
Total nonperforming loans........................... 151.4 223.7
Other real estate owned (OREO)............................. 57.8 143.7
------ ------
Total nonperforming assets............................... $209.2 $367.4
------ ------
------ ------
Loans 90 days past due accruing interest................... $ 42.2 $ 41.5
------ ------
------ ------
Nonperforming loans and OREO as a percent of:
Loans and OREO........................................... 1.0% 1.9%
Assets................................................... .7 1.3
Equity................................................... 7.6 14.7
Loan loss allowance to nonperforming loans................. 292.9% 171.6%
</TABLE>
Nonperforming assets declined in 1993 due to payoffs and recoveries in
nonaccrual commercial and real estate loans, as well as the disposal of
foreclosed real estate.
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<PAGE> 11
ALLOWANCE FOR LOAN LOSSES: The following table presents the reconciliation
of the allowance for loan losses:
<TABLE>
<CAPTION>
1993 1992
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Balance at beginning of year.................................... $383.9 $385.9
Provision....................................................... 93.1 129.4
Net acquired allowance.......................................... 50.7 2.5
Loans charged off:
Commercial.................................................... 55.0 78.4
International................................................. 1.9 --
Real estate mortgage.......................................... 14.9 18.7
Consumer...................................................... 35.0 45.6
Revolving credit.............................................. 37.7 43.8
------ ------
Total charge-offs............................................. 144.5 186.5
Recoveries:
Commercial.................................................... 26.1 14.9
International................................................. -- .2
Real estate mortgage.......................................... 2.3 3.8
Consumer...................................................... 21.6 23.0
Revolving credit.............................................. 10.2 10.7
------ ------
Total recoveries.............................................. 60.2 52.6
------ ------
Net charged-off loans......................................... 84.3 133.9
------ ------
Balance at end of year.......................................... $443.4 $383.9
------ ------
------ ------
Ratio of ending allowance to ending loans....................... 2.08% 2.05%
</TABLE>
The commercial category included real estate construction net charge-offs
of $4.9 million in 1993 and $12.3 million in 1992. Real estate mortgage loans
included commercial real estate net charge-offs of
$10.3 million in 1993 and $11.7 million in 1992.
Both the provision and the allowance are based on an analysis of individual
credits, prior and current loss experience, overall growth in the portfolio,
current economic conditions, and other factors. Consumer and credit card loans
are charged off within industry norms, while commercial loans are evaluated
individually.
DESCRIPTION OF THE NOTES
GENERAL
The following is a brief description of the terms of the Notes. This
description does not purport to be complete, should be read in conjunction with
the statements under "Description of Debt Securities" in the accompanying
Prospectus and is subject to, and qualified in its entirety by, such description
and the Subordinated Indenture dated as of February 1, 1994 (the "Indenture"),
between the Company and NBD Bank, National Association, as Trustee (the
"Trustee"). The form of the Indenture is an exhibit to the Registration
Statement of which the accompanying Prospectus and this Prospectus Supplement
form a part.
The Notes offered hereby will mature on March 1, 2004, and are limited to
$250,000,000 aggregate principal amount. The Notes will bear interest at the
rate of 6 5/8% per annum, commencing on March 2, 1994. Interest will be payable
semiannually on March 1 and September 1 of each year, commencing September 1,
1994, to the persons in whose names the Notes are registered on the February 15
and August 15 next preceding such March 1 and September 1, respectively, and at
maturity to the persons to whom principal is payable upon proper presentment.
The Notes are not subject to redemption prior to maturity. No sinking fund is
provided for the Notes.
S-11
<PAGE> 12
The Notes will be unsecured and subordinated in right of payment to the
prior payment in full of all present and future Senior Indebtedness of the
Company as described under the caption "Description of Debt
Securities -- Subordinated Securities" in the accompanying Prospectus. As of
December 31, 1993, the Company had approximately $781.2 million principal amount
of Senior Indebtedness outstanding.
Payment of principal of the Notes may be accelerated only in the case of
certain events of bankruptcy, insolvency or reorganization of the Company or any
of its Principal Constituent Banks. There will be no right of acceleration of
the payment of principal of the Notes upon a default in the payment of interest
on the Notes or in the performance of any covenant or agreement of the Company
contained in the Notes or the Indenture.
BOOK-ENTRY SYSTEM
The Notes will be issued only in fully registered form and will be
represented by one or more global securities ("Global Securities") registered in
the name of The Depository Trust Company, New York, New York, or a successor
thereof (which successor shall be a clearing agency registered under the
Exchange Act if so required by applicable law) (The Depository Trust Company or
such successor being herein referred to as the "Depositary") or the Depositary's
nominee.
Upon the issuance of a Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amount of
the Notes represented by such Global Security to the accounts of institutions
that have accounts with the Depositary ("participants"). Ownership of beneficial
interests in the Global Security will be limited to participants or persons that
may hold interests through participants. Ownership of beneficial interests in
the Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary or its nominee (with
respect to interests of participants) or by participants or persons that hold
through participants (with respect to interests of persons other than
participants). The laws of certain states require that certain purchasers of
securities take physical delivery of such securities as certificates issued in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
Principal, premium, if any, and interest payments on the Global Security
will be made to the Depositary or its nominee, as the case may be, as the
registered holder thereof. The Company has been advised that the Depositary or
its nominee, upon receipt of any payment of principal, premium, if any, or
interest in respect of a Global Security, will immediately credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Security as shown on the
records of the Depositary or its nominee. Payments by participants (or by
persons that hold interests for customers through participants) to owners of
beneficial interests in such Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name",
and will be the responsibility of such participants (or of such persons that
hold interests for customers through participants).
Each owner of a beneficial interest in a Global Security must ensure that
the person through whom its interest is held (i.e., either a participant or
other person that holds interests through a participant) maintains accurate
records of such owner's beneficial interest in the Global Security. The
interests of participants (which may be in the form of a custodial relationship)
will be shown on records maintained by the Depositary for such Global Security.
The designation of the Depositary or its nominee as custodian for participants
and persons that hold interests through participants (either as principal,
nominee or custodian) will be shown on the register maintained by the Trustee.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to, or for payments made on
account of beneficial ownership interests in, a Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
If the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for the Global Securities or if at any time the
Depositary ceases to be a clearing agency registered under the Exchange Act if
so required by applicable law or regulation, and, in either case, a successor
depositary is not appointed by the Company within 90 days, the Company will
issue Notes in certificated form ("Certificated
S-12
<PAGE> 13
Notes") in exchange for such Global Securities. In addition, the Company may at
any time and in its sole discretion determine not to have any Notes represented
by Global Securities and, in such event, will issue Certificated Notes in
exchange for such Global Securities. Furthermore, after the occurrence of an
Event of Default, the Company will issue Certificated Notes in exchange for such
Global Securities. The Certificated Notes so issued in exchange for such Global
Securities shall be in the same minimum denominations and be of like aggregate
principal amount and tenor as the portion of each such Global Security to be
exchanged. Except as provided above, owners of beneficial interests in a Global
Security will not be entitled to receive physical delivery of Certificated Notes
and will not be considered the registered holders of such Notes for any purpose
(including receiving payments of principal, premium, if any, and interest).
The Depositary has advised the Company that it is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. The Depositary was created to
hold securities of its participants and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations, some of whom
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made in immediately available funds. The
Notes will trade in the Depositary's Same-Day Funds Settlement System until
maturity, unless otherwise exchanged for Certificated Notes as described above,
and therefore the Depositary will require secondary trading activity in the
Notes to be settled in immediately available funds. Secondary trading in
long-term notes and debentures of corporate issuers is generally settled in
clearing-house or next-day funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on secondary trading activity
in the Notes.
S-13
<PAGE> 14
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to Salomon
Brothers Inc, Donaldson, Lufkin & Jenrette Securities Corporation, Lehman
Brothers Inc., McDonald & Company Securities, Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Smith Barney Shearson Inc. (the "Underwriters"),
and the Underwriters have severally agreed to purchase, the respective principal
amounts of the Notes set forth opposite their names below. In the Underwriting
Agreement, the Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all of the Notes offered hereby if any Notes are
purchased.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- --------------------------------------------------------------------- ------------
<S> <C>
Salomon Brothers Inc................................................. $ 41,750,000
Donaldson, Lufkin & Jenrette Securities Corporation.................. 41,650,000
Lehman Brothers Inc.................................................. 41,650,000
McDonald & Company Securities, Inc................................... 41,650,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated................... 41,650,000
Smith Barney Shearson Inc............................................ 41,650,000
------------
Total...................................................... $250,000,000
------------
------------
</TABLE>
The Company has been advised by the Underwriters that they propose
initially to offer the Notes to the public at the public offering price set
forth on the cover page of this Prospectus Supplement, and to certain dealers at
such price less a concession not in excess of .40% of the principal amount of
the Notes. The Underwriters may allow and such dealers may reallow a concession
not in excess of .25% of such principal amount. After the initial public
offering, the public offering price and such concessions may be changed.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that they intend to make a
market in the Notes, but are not obligated to do so, and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Notes.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or contribute to payments the Underwriters may be
required to make in respect thereof.
S-14
<PAGE> 15
PROSPECTUS
NATIONAL CITY CORPORATION
SENIOR/SUBORDINATED DEBT SECURITIES
National City Corporation (the "Company") from time to time may offer up to
$500,000,000 of its debt securities which may be either senior unsecured debt
securities (the "Senior Securities") or subordinated unsecured debt securities
(the "Subordinated Securities") in separate series (the Senior Securities and
the Subordinated Securities being herein referred to collectively as the "Debt
Securities") in amounts, at prices and on terms to be determined at the time of
sale and to be set forth in supplements to this Prospectus (the "Prospectus
Supplement").
The Debt Securities may be sold directly or through agents designated from
time to time, or through underwriters or dealers. Such underwriters may include
either or both of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Brothers Inc. The Company may sell Debt Securities in
an offering within the United States ("United States Offering") or outside the
United States ("International Offering").
The specific designation, priority, aggregate principal amount and
denominations for which Debt Securities may be purchased, maturity, rate (which
may be fixed or variable) and time of payment of interest, if any, terms of
conversion, if any, terms for redemption, if any, at the option of the Company
or the holder, terms for sinking or purchase fund payments, if any, the initial
public offering price, if any, of the Debt Securities, terms relating to
temporary or permanent global securities, special provisions relating to Debt
Securities in bearer form, the duration, offering price, provisions regarding
registration of transfer or exchange, provisions relating to the payment of any
additional amounts, provisions relating to original issue discount securities,
and the names of, and the principal amounts, if any, to be purchased by,
underwriters, the compensation of such underwriters and the other terms in
connection with the offering and sale of the Debt Securities in respect of which
this Prospectus is being delivered, will be set forth in the applicable
Prospectus Supplement. 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.
------------------
THE DEBT SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
GOVERNMENTAL AGENCY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
------------------
The date of this Prospectus is February 23, 1994
<PAGE> 16
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1993 and the Company's 1993 Annual Report to Stockholders (but only to the
extent such Annual Report to Stockholders is expressly incorporated by reference
into the referenced Form 10-K), as filed by the Company with the Securities and
Exchange Commission (the "Commission"), are incorporated in and made a part of
this Prospectus by reference.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subsequent to the date of this Prospectus and prior to the
termination of the offering of the Debt Securities offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. 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 is deemed to be incorporated by reference herein or in
the accompanying Prospectus Supplement modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits, unless such exhibits are specifically incorporated by reference in
such documents). Written requests for such copies should be directed to National
City Corporation, National City Center, 1900 East Ninth Street, Cleveland, Ohio
44114-3484 Attention: Thomas A. Richlovsky, Senior Vice President and Treasurer.
Telephone requests may be directed to 216/575-2126.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission, Room 1024, 450 Fifth Street N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at Seven World Trade Center, New
York, New York 10048, and 500 West Madison Street, Chicago, Illinois 60601, and
copies of such materials can be obtained from the public reference section of
the Commission at 450 Fifth Street N.W., Washington, D.C. 20549, at prescribed
rates. Reports, proxy statements and other information concerning the Company
can also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
Additional information regarding the Company and the Debt Securities
offered hereby is contained in the Registration Statement and the exhibits
relating thereto, filed with the Commission under the Securities Act of 1933, as
amended (the "Act"). For further information pertaining to the Company and the
Debt Securities offered hereby, reference is made to the Registration Statement
and the exhibits thereto, which may be inspected without charge at the office of
the Commission at 450 Fifth Street N.W., Washington, D.C. 20549, and copies
thereof may be obtained from the Commission at prescribed rates.
------------------
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$", "dollars", "U.S.
dollars" or "U.S.$").
2
<PAGE> 17
THE COMPANY
The Company is a multibank holding company which owns substantially all of
the outstanding capital stock of 19 commercial banks, having a total of 617
banking offices in Ohio, Kentucky and Indiana. At December 31, 1993, the Company
had consolidated total assets of $31.1 billion and total stockholders' equity of
$2.8 billion. Based on consolidated total assets at December 31, 1993, the
Company was the second largest bank holding company headquartered in the State
of Ohio and approximately the 26th largest commercial banking organization in
the United States. The Company's principal banking subsidiaries are National
City Bank (Cleveland); National City Bank, Columbus; National City Bank,
Kentucky; and National City Bank, Indiana.
The Company's subsidiaries and divisions offer a wide range of other
financial services, such as credit card, retail payment and airline ticket
processing, brokerage services, trust and investment management, leasing,
merchant and mortgage banking, public finance, venture capital, small business
and community investment, and credit life insurance.
The Company is a legal entity separate and distinct from its subsidiary
banks and other subsidiaries. There are legal limitations on the extent to which
the Company's subsidiary banks can lend or otherwise supply funds to the Company
or certain of its affiliates. Federal law limits the ability of the Company to
borrow from its subsidiary banks unless the loans are secured by specified
collateral and, with respect to the Company and any non-bank affiliate, such
loans and extensions of credit by any subsidiary bank are generally limited to
10% of the subsidiary bank's capital and surplus and, with respect to the
Company and all of its non-bank affiliates, to an aggregate of 20% of the
subsidiary bank's capital and surplus. In addition, payment of dividends to the
Company by subsidiary banks is subject to various state and federal regulatory
limitations. In general, subsidiary banks which are state banks must obtain
regulatory approval before payment of dividends. Under federal law a national
bank must obtain the approval of the Comptroller of the Currency if the total of
all dividends declared by a national bank in any calendar year exceeds the
bank's net profits (as defined) for that year combined with its retained net
profits for the preceding two calendar years. Under applicable rules, the
subsidiary banks could have declared up to $96.0 million of aggregate dividends
at December 31, 1993 without prior regulatory approval. The Comptroller of the
Currency also has statutory authority to prohibit a national bank from engaging
in what the Comptroller determines to be an unsafe or unsound practice in
conducting its business. The ability of a subsidiary bank to pay dividends could
be affected by its financial condition, including the maintenance of adequate
capital for such bank and other factors.
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
contains a "cross-guarantee" provision which could result in insured depositary
institutions owned by the Company being assessed for losses incurred by the
Federal Deposit Insurance Corporation in connection with assistance provided to,
or the failure of, any other insured depositary institution owned by the
Company. Under Federal Reserve Board policy, the Company is expected to act as a
source of financial strength to each subsidiary bank and to commit resources to
support such subsidiary bank in circumstances where it might not be in a
financial position to do so.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDIC Improvement Act") covers a wide expanse of banking regulatory issues. The
FDIC Improvement Act deals with the recapitalization of the Bank Insurance Fund,
with deposit insurance reform, including requiring the FDIC to establish a
risk-based premium assessment system, and with a number of other regulatory and
supervisory matters. Regulations have been proposed to implement this Act, but
the full effects of the FDIC Improvement Act generally on the financial services
industry, and specifically on the Company, cannot now be measured.
The Company is a Delaware corporation, with its executive offices located
at National City Center, 1900 East Ninth Street, Cleveland, Ohio 44114-3484
(telephone 216/575-2000).
USE OF PROCEEDS
Unless otherwise specified in an applicable Prospectus Supplement, the net
proceeds to be received by the Company from the sale of the Debt Securities
offered hereby will be added to the general funds of the
3
<PAGE> 18
Company and will be available for general corporate purposes, including
investments in or advances to existing or future subsidiaries. Financial
institutions having businesses within the Company's geographic markets and
offering opportunities for the Company to expand its financial services and
products would, in management's estimation, be attractive to the Company as
potential future subsidiaries. Financial institutions in other geographic
locations which, in management's estimation, constitute particularly attractive
situations for the Company's expansion would also be favorably considered as
potential future subsidiaries, as would corporate-to-corporate or
consumer-to-corporate payment processing businesses generally. There are no
agreements in principle or understandings regarding any future subsidiary.
RATIO OF EARNINGS TO FIXED CHARGES
The following are the consolidated ratios of earnings to fixed charges for
each of the years in the five-year period ended December 31, 1993.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding Interest on Deposits................. 4.51x 3.72x 2.18x 1.91x 2.13x
Including Interest on Deposits................. 1.81 1.52 1.23 1.20 1.26
</TABLE>
For purposes of computing the ratios of earnings to fixed charges, income
before income taxes plus fixed charges has been divided by fixed charges. Fixed
charges, excluding interest on deposits, consist of interest on Federal funds
purchased, security repurchase agreements, other borrowed funds, corporate
long-term debt, and that portion of rental expense which is deemed
representative of the interest factor. Fixed charges, including interest on
deposits, consist of the same items plus interest on deposits.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either Senior Securities or
Subordinated Securities of the Company. The Senior Securities and the
Subordinated Securities will be issued under separate indentures (respectively,
the "Senior Indenture" and the "Subordinated Indenture and, collectively, the
Indentures"), between the Company and NBD Bank, National Association, as trustee
(the "Trustee"). Pursuant to the Trust Indenture Act of 1939, as amended, the
Trustee will have a "conflicting interest" if the Debt Securities issued under
either Indenture are in default. In such event, the Trustee may be required to
resign its trusteeship under the defaulted Indenture and the Company would
thereupon endeavor to appoint a successor trustee under such Indenture. A copy
of the form 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.
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 (the "Offered Securities") 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 collectively to the Senior Indenture and the Subordinated Indenture.
Since the Company is a holding company, the right of the Company, and hence
the right of creditors and stockholders of the Company, including the Holders of
the Debt Securities offered hereby, to participate in any distribution of assets
of any subsidiary upon its liquidation, reorganization or otherwise is
necessarily
4
<PAGE> 19
subject to the prior claims of creditors of the subsidiary, except to the extent
that the claims of the Company itself as a creditor of the subsidiary may be
recognized.
GENERAL
The Debt Securities will be unsecured obligations of the Company. Neither
the Indentures nor the Debt Securities will limit or otherwise restrict the
amounts of other indebtedness which may be incurred or other securities which
may be issued by the Company. The Senior Securities will rank on a parity with
all other unsecured unsubordinated indebtedness of the Company while the
indebtedness represented by the Subordinated Securities will be subordinated as
described below under "Subordinated 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 Offered Securities in respect of which this Prospectus is
being delivered: (1) the title of the Offered Securities; (2) the limit, if any,
on the aggregate principal amount or initial public offering price of the
Offered Securities; (3) the priority of payment of such Offered Securities; (4)
the price or prices (which may be expressed as a percentage of the aggregate
principal amount thereof) at which the Offered Securities will be issued; (5)
the date or dates on which the Offered Securities will mature; (6) the rate or
rates (which may be fixed or variable) per annum at which the Offered Securities
will bear interest, if any, and the method of determining the same; (7) the date
from which such interest, if any, on the Offered 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 Offered 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
Offered Security will be paid; (9) the dates, if any, on which, and the price or
prices at which, the Offered 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 Company, 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 Offered Securities may,
pursuant to any optional redemption provisions, be redeemed at the option of the
Company or the Holder thereof and the other detailed terms and provisions of
such optional redemption; (11) if applicable with respect to Subordinated
Securities, terms relating to the conversion of such Subordinated Securities
into Common Stock of the Company including, without limitation, the time and
place at which such Subordinated Securities may be converted into Common Stock,
the conversion price and any adjustments to such conversion price and any other
such provisions as may at the time be applicable thereto; (12) the denomination
or denominations in which such Offered Securities are authorized to be issued;
(13) whether any of the Offered Securities will be issued in bearer form and, if
so, any limitations on issuance of such bearer Offered Securities (including
exchange for registered Offered Securities of the same series); (14) information
with respect to book-entry procedures; (15) whether any of the Offered
Securities will be issued as Original Issue Discount Securities; (16) each
office or agency where, subject to the terms of the applicable Indenture, such
Offered Securities may be presented for registration of transfer, exchange or,
if applicable, conversion; (17) any other terms of the series (which will not be
inconsistent with the provisions of the applicable Indenture); (18) 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; (19) 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; (20) whether the Company 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 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 currency,
currencies, currency unit or units or composite currency in which such Debt
Securities are denominated or stated to be payable and the currency, currencies,
currency unit or units or composite currency in which such Debt Securities are
to be so payable; (21) if other than the Trustee, the identity of the Security
Registrar and/or Paying Agent; (22) if applicable,
5
<PAGE> 20
the defeasance of certain obligations by the Company pertaining to Debt
Securities of the series; (23) 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; (24) whether and under what circumstances the
Company will pay additional amounts as contemplated by Section 1004 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 (as defined below) (including any modification in 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
Company will have the option to redeem such Debt Securities rather than pay such
additional amounts (and the terms of any such option); and (25) any other terms
of such Debt Securities.
The Indentures do not limit the aggregate principal amount of Debt
Securities that may be issued thereunder or of any particular series of such
Debt Securities and the 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
of the Indentures 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 for 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.
ACCELERATION OF MATURITY
If any Event of Default with respect to Debt Securities of any series at
the time Outstanding shall occur and be continuing, then and in every such case
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of that series may declare 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 to be due and payable immediately
by a notice in writing to the Company (and to the Trustee if given by Holders).
However, at any time after such a declaration of acceleration with respect to
Debt Securities of any series has been made and before a judgment or decree
based on such acceleration has been obtained by the Trustee, the Holders of not
less than 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 Securities, the non-payment
of principal of that series which has become due solely by such declaration of
effectiveness, have been cured or waived as provided in the Indentures (Section
502). Reference is made to the Prospectus Supplement relating to each series of
Offered 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 Company may also issue Debt
Securities in bearer form only, or in both registered and bearer form. Debt
Securities issued in bearer form shall have interest coupons attached, unless
issued as zero coupon securities. Debt Securities in
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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
other than offices located outside the United States of certain United States
financial institutions. As used in this "Description of Debt Securities",
"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 Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Unless otherwise described in the Prospectus Supplement relating thereto,
the principal, premium, if any, and interest, if any, of or on the Offered Debt
Securities will be payable, and the transfer of the Offered Debt Securities will
be registrable, at the corporate trust office of the Trustee, provided that
payment of interest may be made at the option of the Company 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).
The Indentures do not contain any terms which would afford protection to
Holders of Debt Securities issued thereunder in the event of a recapitalization,
a change of control, a highly leveraged transaction or a restructuring involving
the Company that results in a downgrade of the Company's public debt rating.
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, subject to any applicable laws and regulations, at
such office outside the United States as specified in the Prospectus Supplement
and as the Company 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 Company 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 depositary (the "Depositary") 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 Depositary for
such Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor of such Depositary or a nominee of
such successor.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series.
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RESTRICTIVE COVENANTS
The Senior Indenture contains a covenant by the Company that, except as
otherwise provided below, the Company will not sell, assign, pledge, transfer or
otherwise dispose of, or permit the issuance of, or permit a Subsidiary to sell,
assign, pledge, transfer or otherwise dispose of, any shares of Capital Stock of
any Subsidiary or any securities convertible into Capital Stock of any
Subsidiary which is: (a) a Principal Constituent Bank; or (b) a Subsidiary which
owns shares of Capital Stock or any securities convertible into Capital Stock of
a Principal Constituent Bank; provided, however, that such covenant does not
prohibit (i) any dispositions made by the Company or any Subsidiary (A) acting
in a fiduciary capacity for any Person other than the Company or any Subsidiary
or (B) to the Company or any of its wholly owned (except for directors'
qualifying shares and except for approximately 0.5% of the Voting Stock of the
First National Bank of Ashland owned by persons other than the Company)
Subsidiaries or (ii) the merger or consolidation of a Principal Constituent Bank
with and into a Constituent Bank or the merger or consolidation of any Principal
Constituent Bank with and into any other Principal Constituent Bank. Such
covenant also does not prohibit sales, assignments, pledges, transfers,
issuances or other dispositions of shares of Capital Stock of a corporation
referred to in (a) or (b) above where: (i) the sales, assignments, pledges,
transfers, issuances or other dispositions are made, in the minimum amount
required by law, to any Person for the purpose of the qualification of such
Person to serve as a director ; or (ii) the sales, assignments, pledges,
transfers, issuances or other dispositions are made in compliance with an order
of a court or a regulatory authority of competent jurisdiction or as a condition
imposed by any such court or authority to the acquisition by the Company,
directly or indirectly, of any other corporation or entity; or (iii) in the case
of a disposition or issuance of shares of Capital Stock or any securities
convertible into Capital Stock of a Principal Constituent Bank, or sales of
Capital Stock or any securities convertible into Capital Stock of any Subsidiary
included in (b) above, the sales, assignments, pledges, transfers, issuances or
other dispositions are for fair market value (as determined by the Board of
Directors of the Company and the Subsidiary disposing of such shares or
securities, such determination being evidenced by a Board Resolution) and, after
giving effect to such disposition and to any potential dilution (if the shares
or securities are convertible into Capital Stock), the Company and its directly
or indirectly wholly owned (except for directors' qualifying shares)
Subsidiaries, will own directly not less than 80% of the Voting Stock of such
Principal Constituent Bank or Subsidiary; or (iv) a Principal Constituent Bank
sells additional shares of Capital Stock to its stockholders at any price, so
long as immediately after such sale the Company owns, directly or indirectly, at
least as great a percentage of the Voting Stock of such Principal Constituent
Bank as it owned prior to such sale of additional shares. A Constituent Bank is
a Subsidiary which is a Bank. A Principal Constituent Bank is a Constituent Bank
the consolidated assets of which constitute 15% or more of the Company's
consolidated assets. At the date of this Prospectus, National City Bank
(Cleveland); National City Bank, Columbus; National City Bank, Kentucky; and
National City Bank, Indiana are the only Principal Constituent Banks (Senior
Indenture, Section 1006).
The Senior Indenture contains a covenant prohibiting the Company from
acquiring Capital Stock of any corporation or acquiring substantially all the
assets and liabilities of any corporation, unless, immediately after such
acquisition, the Company would be in full compliance with such Indenture (Senior
Indenture, Section 1008). In addition, the Senior Indenture contains a covenant
prohibiting the Company from creating or permitting any liens upon any shares of
Capital Stock of any Constituent Bank to secure any indebtedness without
securing the Senior Securities equally and ratably with all indebtedness secured
thereby (Senior Indenture, Section 1007).
MODIFICATION AND WAIVER
Each Indenture provides that modifications and amendments may be made by
the Company and the Trustee with the consent of the Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of each series
affected thereby; provided, however, that no such modifications or amendments
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 interest on, any Debt Security, (b) reduce the principal
amount thereof, or the rate of interest (if any) on, or additional amounts, if
any, in respect of, or any premium payable upon the redemption of any Debt
Security, (c) change the place of payment, coin or
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currency in which any Debt Security or any premium or interest thereon is
payable, (d) impair the right to institute suit for the enforcement of any
payment on or after the stated maturity date thereof or, in the case of
redemption, on or after the redemption date, (e) reduce the above-stated
percentage in principal amount of Outstanding Debt Securities of any series, the
consent of the Holders of which is required to modify or amend the 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 such
Indenture relating to modification and amendment of such Indenture or waiver of
compliance with conditions and defaults thereunder, (h) with respect to the
Subordinated Indenture, alter in any respect the provisions regarding
subordination of the Debt Securities issued thereunder in a manner adverse to
the Holders thereof (i) with respect to the Subordinated Securities convertible
into Common Stock, adversely affect the right of conversion, (j) reduce the
principal amount of Original Issue Discount Securities which could be declared
due and payable upon acceleration of maturity thereof, or (k) change the
obligation of the Company to pay additional amounts (Section 902).
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 the
Company and the Trustee, with certain restrictive provisions of the Indentures
(Senior Indenture, Section 1011; Subordinated Indenture, Section 1008). 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 (and premium, if
any) or interest on or additional amounts payable in respect of any Debt
Security of such series or in respect of a covenant or provision which under the
terms of the applicable Indenture cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of such series affected
(Section 513).
Modification and amendment of the Indentures may be made by the Company and
the Trustee without the consent of any Holder for any of the following purposes:
(i) to evidence the succession of another Person to the Company; (ii) to add to
the covenants of the Company 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 any 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 Debt Securities, as set forth in the applicable
Indenture; (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
applicable Indenture, provided such action is not inconsistent with the
provisions of the applicable Indenture and does not adversely affect the
interests of Holders of Debt Securities of any series in any material respect
under such Indenture; (ix) to modify, eliminate or add to the provisions of any
of the Indentures to such extent as is necessary to conform to the obligations
of the Company and the Trustee under the applicable Indenture to the Trust
Indenture Act of 1939, as amended (Section 901); or (x) to make provision for
the conversion rights of the Holders of the Debt Securities in certain events
(Subordinated Indenture, Section 901(10)).
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 of the Indentures, (i) the
principal amount of an Original Issue Discount Security that may be counted in
making such determination and that shall be deemed to be Outstanding for such
purposes shall be the amount of the principal thereof that would be declared to
be due and payable upon a declaration of acceleration 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 by the Company as
of the date such Debt Security is originally issued, of the principal amount
(or, in the case of an Original Issue Discount Security, the U.S. dollar
equivalent as of such date of original issuance of the amount determined as
provided in clause (i) above) of such Debt Security; and (iii) Debt
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Securities owned by the Company, or any other obligor upon the Debt Securities
or any Affiliate of the Company or other such obligor, shall be disregarded and
deemed not to be outstanding (Section 101).
ADDITIONAL PROVISIONS
Each of the Indentures provides that the Trustee 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 602). Subject to such provisions for indemnification of the 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 Trustee, or exercising
any trust or power conferred on such Trustee, with respect to the Debt
Securities of such series (Section 512).
No holder of any Debt Security of any series will have the right to
institute any proceeding, judicial or otherwise, 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 Trustee written
notice of a continuing Event of Default with respect to the Debt Securities of
such series; (b) the Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of that series shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
Trustee; (c) the Trustee shall not have received from the Holders of a majority
in principal amount of the Outstanding Debt Securities of that series a
direction inconsistent with such request; and (d) the Trustee shall have failed
to institute such proceeding within 60 days after its receipt of such notice,
request and offer of indemnity (Section 507). 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), interest, if any, or any additional amounts
in respect of 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 508).
The Company is required to furnish to the 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 (Section
1005).
REGARDING THE TRUSTEE
The Company and its subsidiaries maintain deposit accounts and conduct
various banking transactions with the Trustee.
SENIOR SECURITIES
The Senior Securities will be direct, unsecured obligations of the Company
and will rank pari passu with all outstanding and future senior indebtedness of
the Company.
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 Security of that series when due;
(b) failure to pay any interest or any additional amounts on any Senior 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
Security of that series; (d) failure to perform any other covenant or warranty
of the Company in such Indenture or Senior Securities (other than a covenant or
warranty included in the Indenture solely for the benefit of a series of Senior
Securities other than that series), continued for 90 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 the Company or any
Principal 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 provided
in the Indenture; (f)
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certain events in bankruptcy, insolvency or reorganization of the Company or any
Principal Constituent Bank; and (g) any other Event of Default provided with
respect to Senior Securities of that series (Section 501).
SUBORDINATED SECURITIES
The Subordinated Securities will be direct, unsecured obligations of the
Company and will rank in priority of payment with outstanding and future
indebtedness of the Company as set forth below.
SUBORDINATION
During the continuance beyond any applicable grace period of any default
with respect to Senior Indebtedness (as defined below), no payment of principal
of and interest on the Subordinated Securities shall be made by the Company
until payment in full of all principal of and premium and interest on such
Senior Indebtedness. In addition, upon any distribution of assets of the Company
upon any dissolution, winding up, liquidation or reorganization, the payment of
the principal of and interest on the Subordinated Securities is to be
subordinated to the extent provided in the Subordinated Indenture (Subordinated
Indenture, Article Fifteen).
For purposes of the preceding paragraph, the term "Senior Indebtedness"
will be defined to mean the principal of, and premium, if any, and interest on,
all indebtedness of the Company, whether outstanding on the date of execution of
the Subordinated Indenture or thereafter incurred or created, except such
indebtedness as is by its terms expressly stated to be not superior in right of
payment to the Subordinated Securities or to rank pari passu or is identified in
a Board Resolution of the Company or any indenture supplemental to the
Subordinated Indenture as not superior in right of payment or to rank pari passu
with the Subordinated Securities (Section 101). As of December 31, 1993, the
Company had approximately $781.2 million principal amount of debt which would
constitute Senior Indebtedness.
EVENT OF DEFAULT
An Event of Default will be defined under the Subordinated Indenture with
respect to Debt Securities of any series issued thereunder as certain events in
bankruptcy, insolvency or reorganization of the Company or any Principal
Constituent Bank.
The Subordinated Indenture does not provide for any right of acceleration
of the payment of the principal of a series of Subordinated 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 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 Security (or the
Trustee under the Subordinated Indenture on behalf of the Holders of all of the
series of Subordinated Securities so affected) may, subject to certain
limitations and conditions, seek to enforce payment of such interest or
principal.
CONVERSION
If any Subordinated Security is to be convertible into Common Stock
("Convertible Subordinated Securities"), certain terms and provisions with
respect thereto will be set forth in a Convertible Subordinated Security
Prospectus Supplement (a "Convertible Prospectus Supplement"). To the extent
that the description set forth herein is inconsistent with such terms and
provisions, such terms and provisions shall govern with respect to any
Convertible Subordinated Security.
Except as set forth in the applicable Convertible Prospectus Supplement,
the holders of Convertible Subordinated Securities will be entitled at any time
on or prior to the close of business on the date set forth in the applicable
Convertible Prospectus Supplement, subject to prior redemption, to convert such
Convertible Subordinated Securities or portions thereof (which are $1,000 or
integral multiples thereof) into Common Stock of the Company at the conversion
price set forth on the cover page of such Convertible Prospectus Supplement. No
adjustment will be made on conversion of any Convertible Subordinated Security
for interest accrued thereon or for dividends on any Common Stock issued. If any
Convertible Subordinated Security is
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converted between a record date for the payment of interest and the next
succeeding interest payment date, such Convertible Subordinated Security must be
accompanied by funds equal to the interest payable to the registered holder on
such interest payment date on the principal amount so converted. The Company is
not required to issue fractional interests in Common Stock upon conversion of
Convertible Subordinated Securities and, in lieu thereof, will pay a cash
adjustment based upon the market price of the Common Stock on the last business
day prior to the date of conversion. In the case of Convertible Subordinated
Securities called for redemption, conversion rights will expire at the close of
business on the redemption date.
Except as set forth in the applicable Convertible Prospectus Supplement,
the conversion price is subject to adjustment as set forth in the Subordinated
Indenture in certain events, including the issuance of dividends on the
Company's Common Stock payable in its Common Stock; subdivisions, combinations
and certain reclassifications of the Common Stock; certain consolidations,
mergers and sales of the property of the Company; the issuance to all holders of
Common Stock of certain rights or warrants entitling them to subscribe for
Common Stock at less than the then current market price (as defined in the
Subordinated Indenture) per share of the Common Stock; and the distribution to
all holders of Common Stock of evidences of indebtedness or of securities of the
Company or of assets (other than cash dividends or cash distributions payable
out of consolidated net earnings or retained earnings). No adjustment in the
conversion price will be required unless such adjustment would require a change
of at least 1% in the price then in effect; provided however, that any
adjustment that would otherwise be required to be made shall be carried forward
and taken into account in any subsequent adjustment. Except as stated above, the
conversion price will not be adjusted for the issuance of Common Stock or any
securities convertible into or exchangeable for Common Stock, or carrying the
right to purchase any of the foregoing, in exchange for cash, property or
services. In case of the reclassification or change in the outstanding shares of
Common Stock, or the consolidation or merger of the Company with or into another
corporation which is effected in such a way that holders of Common Stock are
entitled to receive stock, securities or property (including cash) with respect
to or in exchange for Common Stock, or the sale or conveyance of its property as
an entirety or substantially as an entirety to another corporation, a
supplemental indenture shall be executed providing that the holder of a
Convertible Subordinated Security shall have the right to convert such
Convertible Subordinated Security into the kind and amount of shares of stock or
other securities or property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock which would have been issuable upon
conversion of such Convertible Subordinated Security immediately prior thereto.
Except as set forth in the applicable Convertible Prospectus Supplement,
any Convertible Subordinated Securities called for redemption, unless
surrendered for conversion on or before the close of business on the redemption
date, are subject to being purchased from the holder of such Convertible
Subordinated Securities at the redemption price by one or more broker-dealers or
other purchasers who may agree with the Company to purchase such Convertible
Subordinated Securities and convert them into Common Stock of the Company.
In the event of a taxable distribution to holders of Common Stock which
results in any adjustment of the conversion price, the holders of the
Convertible Subordinated Securities may, in certain circumstances, be deemed to
have received a distribution subject to federal income tax as a dividend. See
the Prospectus Supplement or Supplements relating to such Securities.
DESCRIPTION OF COMMON STOCK
The Board of Directors of the Company is authorized to issue a maximum of
350,000,000 shares of Common Stock. As of December 31, 1993, 158,779,611 shares
of Common Stock were outstanding. Subject to any prior rights of any preferred
stock of the Company then outstanding, holders of the Common Stock are entitled
to receive such dividends as are declared by the Board of Directors of the
Company out of funds legally available therefor. For information concerning
legal limitations on the ability of the Company's banking subsidiaries to supply
funds to the Company, see "The Company". Subject to the rights, if any, of any
preferred stock of the Company then outstanding, all voting rights are vested in
the holders of Common Stock, each share being entitled to one vote. Subject to
any prior rights of any such preferred stock, in the event of
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liquidation, dissolution or winding up of the Company, holders of shares of
Common Stock are entitled to receive pro rata any assets distributable to
stockholders in respect of shares held by them. Holders of shares of Common
Stock do not have any preemptive rights to subscribe for any additional
securities which may be issued by the Company. The outstanding shares of Common
Stock are fully paid and non-assessable. The transfer agent and registrar for
the Common Stock is National City Bank.
UNITED STATES TAXATION
The following summary of the principal United States federal income tax
consequences of the ownership of Debt Securities is based on the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury
Regulations, and existing administrative and judicial precedent as in effect as
of the date hereof. The legal conclusions in this discussion under the caption
"United States Taxation" constitute the opinion of Jones, Day, Reavis & Pogue,
special tax counsel to the Company.
The tax summary deals only with Debt Securities held as capital assets by
initial purchasers thereof, and does not deal with purchasers which do not
acquire Debt Securities as part of the initial distribution or with special
classes of holders, such as dealers in securities or currencies, financial
institutions, tax-exempt organizations, life insurance companies, controlled
foreign corporations, or persons holding Debt Securities as a hedge or hedged
against currency risks. It also does not address Debt Securities with a maturity
at issue of 183 days or less that are held by United States Alien Holders (as
defined below) and United States Holders (as defined below) whose functional
currency is not the U.S. dollar.
Prospective purchasers of Debt Securities should consult their own tax
advisors concerning the application of the United States federal income tax laws
to their particular situations, as well as any tax consequences under the laws
of any other taxing jurisdiction.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a Holder of a Note
who or that is (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, or (iii) an
estate or trust the income of which is subject to United States federal income
taxation regardless of its source.
PAYMENTS OF INTEREST
Interest (including qualified stated interest, as defined under "Original
Issue Discount Securities" below) paid on a Debt Security, whether in U.S.
dollars or a foreign currency (as used in this section "foreign currency"
includes a composite currency), will generally be taxable to a United States
Holder as ordinary interest income at the time it accrues or is received
(whether actually or constructively), in accordance with the United States
Holder's method of accounting for federal tax purposes. Special rules governing
the treatment of interest paid with respect to Original Issue Discount
Securities (as defined below) are described under "Original Issue Discount
Securities" below. If payment is made in a foreign currency, the amount
includible in income will be the U.S. dollar value of the interest payment based
on the exchange rate in effect on the date of receipt or, in the case of an
accrual basis United States Holder, based on the average exchange rate in effect
during the interest accrual period, in either case regardless of whether the
payment is in fact converted into U.S. dollars. In addition, upon receipt of an
interest payment in a foreign currency (including a payment attributable to
accrued but unpaid interest upon the sale, exchange or retirement of a Debt
Security), an accrual basis United States Holder will recognize ordinary income
or loss measured by the difference between such average exchange rate and the
exchange rate in effect on the date of receipt.
ORIGINAL ISSUE DISCOUNT SECURITIES
General. A Debt Security with an issue price that is less than its stated
redemption price at maturity will generally be considered to have been issued at
an original issue discount for federal income tax purposes (an "Original Issue
Discount Security"). The "issue price" of an issue of Debt Securities will be
the first price at
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<PAGE> 28
which a substantial amount of such Debt Securities is sold to the public. The
"stated redemption price at maturity" of a Debt Security will equal the sum of
all payments to be made thereunder, other than payments of qualified stated
interest (as defined below). As a result, a Debt Security generally will have
original issue discount if it does not provide for payments of qualified stated
interest. "Qualified stated interest" is stated interest that is unconditionally
payable in cash or in property (other than debt instruments of the issuer) at
least annually at a single fixed rate that appropriately takes into account the
length of the interval between payments. Applicable Treasury Regulations contain
special rules that, in certain circumstances, may deem some or all of the
interest payable on variable rate debt instruments or debt instruments subject
to certain contingencies as constituting qualified stated interest. If the
difference between a Debt Security's stated redemption price at maturity and its
issue price is less than 1/4 of 1 percent of the stated redemption price at
maturity multiplied by the number of complete years to maturity, then the Debt
Security will not be considered to have original issue discount.
United States Holders of Original Issue Discount Securities having a
maturity of more than one year from their date of issue are required to include
original issue discount in income as it accrues without regard to when the cash
payments attributable to such income are received. The amount of original issue
discount includible in income by a United States Holder of an Original Issue
Discount Security is the sum of the daily portions of original issue discount
for each day during the taxable year or portion of the taxable year in which it
holds such Original Issue Discount Security. The daily portion is determined by
allocating to each day in any accrual period a pro rata portion of the original
issue discount allocable to that accrual period. An "accrual period" is each
period between payment dates (including, if shorter, the period from the issue
date to the first interest payment date and the period from the last interest
payment date to the maturity date), although an accrual period may be of any
length and the accrual periods may vary in length over the term of an Original
Issue Discount Security, 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 an accrual period is the excess
of (a) the product of the Original Issue Discount Security's adjusted issue
price at the beginning of such accrual period and its yield to maturity
(determined on the basis of a constant interest rate and compounded at the end
of each accrual period and properly adjusted for the length of the accrual
period) over (b) the amount of qualified stated interest allocable to the
accrual period. The "adjusted issue price" of the Original Issue Discount
Security at the beginning of any accrual period is the sum of the issue price of
such Original Issue Discount Security, plus the accrued original issue discount
for all prior accrual periods minus any prior payments on the Original Issue
Discount Security that were not qualified stated interest payments.
Under the foregoing rules, United States Holders will generally have to
include in income increasingly greater amounts of original issue discount in
successive accrual periods.
It is possible that Debt Securities that (i) bear interest initially at a
fixed rate followed by a variable rate that is not the same as the initial fixed
rate on the date of issue or (ii) bear interest at a variable rate that is not a
single qualified floating rate or objective rate would be subject to the
original issue discount rules regardless of the price at which such Debt
Securities are issued. Accordingly, United States Holders (including cash basis
holders) may be required to report income in respect of such Debt Securities
before the receipt of cash payments attributable thereto under the rules
described above.
Optional Redemption. For purposes of determining original issue discount,
if the Company has an option to redeem a Debt Security prior to its stated
maturity, such option will be presumed to be exercised if and on such dates
that, by utilizing any date on which such Debt Security may be redeemed as the
maturity date and the amount payable on such date in accordance with the terms
of such Debt Security (the "redemption price") as the stated redemption price at
maturity, the yield on the Debt Security would be minimized. If such option is
not in fact exercised when presumed to be exercised, the Debt Security would be
treated as if it were redeemed, and a new Debt Security were issued, on the
presumed exercise date for an amount equal to the redemption price.
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<PAGE> 29
Acceleration of Maturity. The applicable Prospectus Supplement will contain
a discussion of any additional relevant United States federal income tax
consequences relating to an acceleration of the maturity of an Original Issue
Discount Security.
Short-Term Debt Securities. In general, an individual or other cash method
United States Holder of a Debt Security that matures one year or less from its
date of issuance (a "Short-Term Discount Security") is not required to accrue
original issue discount for United States federal income tax purposes unless it
elects to do so. Accrual method United States Holders and certain other United
States Holders, including banks, regulated investment companies and dealers in
securities, are required to accrue original discount on Short-Term Discount
Securities on a straight-line basis unless an election is made to accrue the
original issue discount under the constant yield method (based on daily
compounding). In the case of a United States Holder not required and not
electing to include original issue discount in income currently, any gain
realized on the sale, exchange or retirement of the Short-Term Discount Security
will be ordinary income to the extent of the original issue discount accrued on
a straight-line basis through the date of sale, exchange or retirement. United
States Holders who are not required to and do not elect to accrue original issue
discount on Short-Term Discount Securities will be required to defer deductions
for interest on borrowings allocable to Short-Term Discount Securities in an
amount not exceeding the deferred income until the deferred income is realized.
Foreign Currency Denominated Original Issue Discount Securities. Original
issue discount for any accrual period on an Original Issue Discount Security
that is denominated in a foreign currency will be determined in the foreign
currency and then translated into U.S. dollars based on the average exchange
rate in effect during the interest accrual period. Upon the receipt of an amount
attributable to original issue discount (whether in connection with a payment of
interest or the sale or retirement of an Original Issue Discount Security), a
United States Holder will recognize ordinary income or loss measured by the
difference between such average exchange rate and the exchange rate in effect on
the date of receipt.
Reporting. The Company is required to report to the Internal Revenue
Service the amount of original issue discount accrued on Original Issue Discount
Securities held of record by United States Holders other than certain exempt
holders, such as corporations and tax-exempt organizations. The amount required
to be reported by the Company may not be equal to the amount of original issue
discount required to be reported as taxable income by a United States Holder of
such Original Issue Discount Securities.
DEBT SECURITIES PURCHASED AT A PREMIUM
A United States Holder that purchases a Debt Security for an amount in
excess of the amount payable at maturity will be considered to have purchased
such Debt Security at a premium equal to such excess and may elect to amortize
such premium using a constant yield method over the term of the Debt Security.
Any such election will apply to all bonds (other than bonds the interest on
which is excludible from gross income) held by the United States Holder at the
beginning of the first taxable year to which the election applies or thereafter
acquired by the United States Holder, and is irrevocable without the consent of
the Internal Revenue Service.
PURCHASE, SALE, EXCHANGE AND RETIREMENT OF THE DEBT SECURITIES
A United States Holder's adjusted tax basis in a Debt Security will be its
U.S. dollar cost (which, in the case of a Debt Security purchased with a foreign
currency, will be the U.S. dollar value of the purchase price on the date of
purchase), increased by the amount of any original issue discount included in
the United States Holder's income with respect to the Debt Security and reduced
by the amount of any amortizable bond premium, by principal payments received by
the United States Holder and, in the case of Original Issue Discount Securities,
by the amount of any interest payments on the Debt Security that are not
qualified stated interest payments. A United States Holder will recognize gain
or loss on the sale, exchange or retirement of a Debt Security equal to the
difference between the amount realized on the sale, exchange or retirement and
the United States Holder's adjusted tax basis in the Debt Security. The amount
realized on a sale, exchange or
15
<PAGE> 30
retirement for an amount in foreign currency will be the U.S. dollar value of
such amount on the date of sale, exchange or retirement. Except to the extent
described in the next paragraph and under "Short-Term Debt Securities" above,
gain or loss recognized on the sale, exchange or retirement of a Debt Security
will be capital gain or loss and will be long-term capital gain or loss if the
Debt Security was held for more than one year.
Gain or loss recognized by a United States Holder on the sale, exchange or
retirement of a Debt Security denominated in a foreign currency that is
attributable to fluctuations in exchange rates will be treated as ordinary
income or loss.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
Foreign currency received as interest on, or on the sale, exchange or
retirement of, a Debt Security will have a tax basis equal to the U.S. dollar
value of such foreign currency, determined at the time such interest is received
or at the time of such sale, exchange or retirement. Foreign currency that is
purchased will generally have a tax basis equal to its U.S. dollar cost. Any
gain or loss recognized on a sale or other disposition of a foreign currency
(including its subsequent use to purchase Debt Securities or upon exchange for
U.S. dollars) will be ordinary income or loss. However, a United States Holder
who converts U.S. dollars to a foreign currency and immediately thereafter uses
that currency to purchase a Debt Security denominated in the same foreign
currency will not recognize gain or loss in connection with such conversion and
purchase.
CONVERSION OF CONVERTIBLE SUBORDINATED SECURITIES
Except to the extent of cash received in lieu of fractional shares, no gain
or loss will be recognized upon the conversion of a Convertible Subordinated
Security into Common Stock. A United States Holder of a Convertible Subordinated
Security converted into Common Stock will generally have a carryover basis in
such shares and the holding period for the Common Stock will include the holding
period of the Convertible Subordinated Security.
The conversion price of a Convertible Subordinated Security may be adjusted
if, among other things, the Company makes certain distributions to its
shareholders. If the Company adjusts the conversion price of the Convertible
Subordinated Securities, holders of the Convertible Subordinated Securities may
be viewed as receiving a deemed distribution; in certain other circumstances,
the absence of such an adjustment may result in a deemed distribution to the
holders of the Common Stock. All or a portion of any such deemed distribution
may be taxable as ordinary dividend income. The applicable Convertible
Prospectus Supplement will contain a discussion of any additional relevant
United States federal income tax consequences with respect to Convertible
Subordinated Securities.
INDEXED DEBT SECURITIES
The applicable Prospectus Supplement will contain a discussion of the
additional relevant United States federal income tax consequences, if any, with
respect to Debt Securities, payments on which (whether interest or principal)
are determined by reference to any index.
DEBT SECURITIES WITH CONTINGENT PAYMENTS
The applicable Prospectus Supplement will contain a discussion of the
additional relevant United States federal income tax consequences, if any, with
respect to Debt Securities that provide for one or more contingent payments
(whether of interest or principal).
BEARER SECURITIES
A United States Holder generally will not be entitled to deduct any loss
sustained on the sale or other disposition (including the receipt of principal)
of Bearer Securities (other than Bearer Securities having a maturity of one year
or less from the date of issue), and must treat as ordinary income any gain
realized on the sale or other disposition (including the receipt of principal)
of Bearer Securities (other than Bearer Securities having a maturity of one year
or less from the date of issue).
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<PAGE> 31
BACKUP WITHHOLDING AND INFORMATION REPORTING
A United States Holder may be subject to backup withholding at a rate of
31% on payments of principal, premium or interest (including original issue
discount, if any) on, dividends on, and the proceeds of disposition of, a Debt
Security or Common Stock. Backup withholding will apply only if the United
States Holder (i) fails to furnish its Taxpayer Identification Number ("TIN")
which, for an individual, would be his Social Security Number, (ii) furnishes an
incorrect TIN, (iii) is notified by the Internal Revenue Service that it has
failed to properly report payments of interest and dividends, or (iv) under
certain circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and that it has not been notified by the Internal
Revenue Service that it is subject to backup withholding for failure to report
interest and dividend payments. Backup withholding will not apply with respect
to payments made to certain exempt recipients, such as corporations and
tax-exempt organizations. United States Holders should consult their tax
advisers regarding their qualification for exemption from backup withholding and
the procedure for obtaining such an exemption.
The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such Holder's United States federal
income tax liability and may entitle such Holder to a refund of federal income
tax, provided that the required information is furnished to the Internal Revenue
Service.
UNITED STATES ALIEN HOLDERS
As used herein, the term "United States Alien Holder" means any holder that
is not a United States Holder.
INCOME AND ESTATE TAX CONSEQUENCES
Under present United States federal income and estate tax law and subject
to the discussion of backup withholding below:
(a) If the Debt Securities are offered, sold and delivered, and
principal and interest thereon is paid, in accordance with the terms of the
Indenture, and, in the case of Bearer Securities, in accordance with the
procedures described under "Limitations on Issuance of Bearer Securities",
payments of principal and any premium and interest (including any original
issue discount) on the Debt Securities by the Company or any of its paying
agents to any United States Alien Holder will not be subject to United
States federal tax payable by withholding, provided that, in the case of
interest or original issue discount, (1) the United States Alien Holder
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote, (2)
the United States Alien Holder is not a controlled foreign corporation that
is related to the Company through stock ownership, (3) the United States
Alien Holder is not a bank receiving interest described in Code Section
881(c)(3)(A), and (4) if the Debt Security is a Registered Security
(including such Debt Securities that were received in exchange for Bearer
Securities), either (i) the beneficial owner of the Debt Securities
certifies to the Company or its paying agent, under penalties of perjury,
that it is not a United States Holder and provides its name and address, or
(ii) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "financial institution") and holds the Debt Securities
on behalf of the beneficial owner certifies to the Company or its paying
agent, under penalties of perjury, that such statement has been received
from the beneficial owner by it or by a financial institution between it
and the beneficial owner and furnishes the payor with a copy thereof;
(b) A United States Alien Holder will not be subject to United States
federal tax payable by withholding on gain realized on the sale or exchange
of a Debt Security or a share of Common Stock (including the receipt of
cash in lieu of fractional shares upon conversion of a Convertible
Subordinated Security) unless (1)(i) such holder is an individual who is
present in the United States for 183 days or more in the taxable year of
disposition and either such individual has a "tax home" (as defined in Code
Section 911(d)(3)) in the United States or the gain is attributable to an
office or other fixed place of business maintained by such individual in
the United States or (ii) such gain is effectively connected with
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<PAGE> 32
the conduct by such holder of a trade or business in the United States, and
(2) with respect to a United States Alien Holder of Convertible
Subordinated Securities or Common Stock, the Company is a United States
real property holding corporation within the meaning of Code Section
897(c)(2) and such holder owns, or owned during an applicable five-year
period, actually or constructively, Convertible Subordinated Securities or
Common Stock with a value exceeding 5% of the fair market value of the
Company's Common Stock;
(c) A United States Alien Holder will not be subject to United States
federal income tax upon the conversion of a Convertible Subordinated
Security into shares of Common Stock except with respect to the receipt of
cash in lieu of fractional shares by certain holders described in clause
(b)(1) and (2) above;
(d) Dividends paid or constructively paid on shares of Common Stock to
a United States Alien Holder will be subject to (i) United States federal
tax payable by withholding at a rate of 30% (or lower rate pursuant to an
applicable income tax treaty between the United States and the United
States Alien Holder's country of residence), but will not be subject to any
additional information reporting or backup withholding if paid to a foreign
address, if the dividends are not effectively connected with a United
States trade or business of the United States Alien Holder, or (ii) net
United States federal income taxation at progressive rates of tax if the
dividends are effectively connected with the conduct by the United States
Alien Holder of a trade or business in the United States. In addition, an
adjustment in the conversion price of the Convertible Subordinated
Securities may be viewed as a deemed distribution, all or a portion of
which may be taxable as a dividend that is subject to the appropriate U.S.
federal tax regime described in the previous sentence;
(e) A Debt Security or coupon held by an individual who at the time of
his death is not a citizen or resident of the United States will not be
subject to United States federal estate tax as a result of such
individual's death if the individual does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of the Company entitled to vote and the income on the Debt Securities or
coupon would not have been effectively connected with the conduct of a
trade or business by the individual in the United States; and
(f) Shares of Common Stock held by an individual at the time of his
death (or theretofore transferred subject to certain retained rights or
powers) will be subject to United States federal estate tax unless
otherwise provided by an applicable estate tax treaty.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting and backup withholding do not apply to payments of
principal, to any premium and interest (including any original issue discount)
made outside the United States by the Company or a paying agent on a Bearer
Security or coupon, to dividend payments made on Common Stock or to payments
made on a Registered Security (including such Debt Securities that were received
in exchange for Bearer Securities) if the certification described in clause
(a)(4) under "Income and Estate Tax Consequences" above is received, provided,
in each case, that the payor does not have actual knowledge that the holder is a
United States person.
In addition, if payments are collected outside the United States by a
foreign office of a custodian, nominee or other agent acting on behalf of a
beneficial owner of a Bearer Security or coupon, such custodian, nominee or
other agent will not be required to deduct backup withholding from payments made
to such owner. However, if the custodian, nominee or other agent is a United
States person, a controlled foreign corporation for United States tax purposes
or a foreign person 50% or more of whose gross income is effectively connected
with the conduct of a trade or business within the United States for a specified
three-year period, information reporting will be required with respect to
payments made to such owner unless such custodian, nominee or other agent has
documentary evidence in its files of the owner's foreign status and has no
actual knowledge to the contrary, or the owner otherwise establishes an
exemption. The United States Treasury Department has indicated that it is
studying the possible application of backup withholding in the case of United
States and United States-related custodians, nominees and agents.
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<PAGE> 33
Payment of the proceeds from the sale of a Debt Security or shares of
Common Stock to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation or a foreign person 50%
or more of whose gross income is effectively connected with the conduct of a
trade or business within the United States for a specified three-year period,
information reporting will apply to such payments unless such custodian, nominee
or other agent has documentary evidence in its files of the owner's foreign
status and has no actual knowledge to the contrary, or the owner otherwise
establishes an exemption. Payment of the proceeds from a sale of a Debt Security
to or through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner certifies
as to its non-United States status or otherwise establishes an exemption from
information reporting and backup withholding. The United States Treasury
Department has indicated that it is studying the possible application of backup
withholding in the case of foreign offices of United States and United
States-related brokers.
Any amounts withheld from a payment to a United States Alien Holder under
the backup withholding rules will be allowed as a credit against such holder's
United States federal income tax liability and may entitle such holder to a
refund of federal income tax, provided that the required information is
furnished to the United States Internal Revenue Service.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
To avoid potential adverse United States federal tax consequences to
holders of Debt Securities, Bearer Securities (including Securities in permanent
global form that are either Bearer Securities or exchangeable for Bearer
Securities) may not be offered or sold during the restricted period (as defined
in United States Treasury Regulations Section 1.163-5(c)(2)(i) (D)(7)) within
the United States or to United States persons (each as defined below) other than
to an office located outside the United States of a United States financial
institution (as defined in Section 1.165-12(c)(1)(v) of the United States
Treasury Regulations), purchasing for its own account or for resale or for the
account of certain customers, that provides a certificate stating that it agrees
to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Code
and the United States Treasury Regulations thereunder, or to certain other
persons described in Section 1.163-5(c)(2)(i) (D)(1)(iii)(B) of the United
States Treasury Regulations. Moreover, such Bearer Securities may not be
delivered in connection with their sale during the restricted period within the
United States. Any distributor (as defined in Section 1.163-5(c)(2)(i)(D)(4) of
the United States Treasury Regulations) participating in the offering or sale of
Bearer Securities must covenant that it will not offer or sell during the
restricted period any Bearer Securities within the United States or to United
States persons (other than the persons described above), it will not deliver in
connection with the sale of Bearer Securities during the restricted period any
Bearer Securities within the United States and it has in effect procedures
reasonably designed to ensure that its employees and agents who are directly
engaged in selling the Bearer Securities are aware of the restrictions on offers
and sales described above. No Bearer Security (other than a temporary global
Security) may be delivered, nor may interest be paid on any Bearer Security
until receipt by the Company of (i) a Depository Tax Certification in the case
of temporary global Securities or (ii) an Owner Tax Certification in all other
cases as described above under "Description of Debt Securities -- Temporary
Global Securities." Bearer Securities will bear a legend to the following
effect: "Any United States person who holds this obligation will be subject to
limitations under the United States income tax laws, including the limitations
provided in Sections 165(j) and 1287(a) of the Internal Revenue Code."
Purchasers of Bearer Securities may be affected by certain United States
tax laws. See "United States Taxation -- United States Holders -- Bearer
Securities."
As used in this section "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 and 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 thereof and the District of Columbia) and its possessions.
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<PAGE> 34
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities to or through underwriting
syndicates represented by managing underwriters, which may include either or
both of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Salomon Brothers Inc, or to or through underwriters without a syndicate;
through agents or dealers; or directly to other purchasers. Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc may
act as agents as well as underwriters. Only underwriters named in the Prospectus
Supplement are deemed to be underwriters in connection with the Debt Securities
covered thereunder.
The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices (which may be changed
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 Debt
Securities to which such Prospectus Supplement relates. Certain restrictions
relating to distribution of Debt Securities in connection with an International
Offering will be set forth in the applicable Prospectus Supplement.
In connection with the sale of Debt Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Debt 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 Debt 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 Debt 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 Company, underwriters,
dealers and agents who participate in the distribution of Debt Securities may be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Act.
Certain of the underwriters, dealers or agents may be customers of
(including borrowers from), engage in transactions with and perform services
for, the Company or one or more of its affiliates in the ordinary course of
business.
LEGAL OPINIONS
The validity of the Debt Securities will be passed upon for the Company by
Jones, Day, Reavis & Pogue, North Point, 901 Lakeside Avenue, Cleveland, Ohio
44114, and for any underwriters or agents by Brown & Wood, One World Trade
Center, New York, New York 10048. Jones, Day and certain members of the firm are
indebted to and have other banking and trust relationships with certain
affiliated banks of the Company. Members of Jones, Day and members of their
families own shares of Common Stock of the Company.
EXPERTS
The consolidated financial statements of the Company included in the
Company's Annual Report (Form 10-K) for the year ended December 31, 1993, have
been audited by Ernst & Young, independent auditors, as set forth in their
report thereon appearing therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
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<PAGE> 35
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED
IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THERE HAS BEEN NO CHANGE IN THE FACTS SET
FORTH IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Incorporation of Certain Documents by
Reference.......................... S-2
The Company.......................... S-3
Use of Proceeds...................... S-3
Selected Financial Data.............. S-4
Capitalization....................... S-5
Management's Discussion and Analysis
of Financial Results............... S-6
Description of the Notes............. S-11
Underwriting......................... S-14
PROSPECTUS
Incorporation of Certain Documents by
Reference.......................... 2
Available Information................ 2
The Company.......................... 3
Use of Proceeds...................... 3
Ratio of Earnings to Fixed Charges... 4
Description of Debt Securities....... 4
Senior Securities.................... 10
Subordinated Securities.............. 11
Description of Common Stock.......... 12
United States Taxation............... 13
Limitations on Issuance of Bearer
Securities......................... 19
Plan of Distribution................. 20
Legal Opinions....................... 20
Experts.............................. 20
</TABLE>
$250,000,000
NATIONAL CITY
CORPORATION
6 5/8% SUBORDINATED NOTES
DUE 2004
SALOMON BROTHERS INC
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
MCDONALD & COMPANY
SECURITIES, INC.
MERRILL LYNCH & CO.
SMITH BARNEY SHEARSON INC.
PROSPECTUS SUPPLEMENT
DATED FEBRUARY 23, 1994
