<PAGE>
As filed pursuant to Rule 424(b)(3)
Registration Number 33-53643
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST 10, 1994
$750,000,000
[LOGO OF KEYCORP]
Senior Medium-Term Notes, Series B
Subordinated Medium-Term Notes, Series A
Due Nine Months or More From Date of Issue
-----------
KeyCorp (also referred to herein as the "Corporation") may offer from time to
time its senior Medium-Term Notes, Series B (the "Senior Notes") and its
subordinated Medium-Term Notes, Series A (the "Subordinated Notes" and
together with the Senior Notes, the "Notes") with an aggregate principal
amount of up to U.S. $750,000,000, (or, if any Notes are to be Original
Issue Discount Notes, Foreign Currency Notes or Indexed Notes (as
each term is defined under "Description of Notes"), such principal
amount as shall result in an initial aggregate offering price
equivalent to no more than $750,000,000), subject to reduction as
a result of the sale of other Securities of the Corporation.
See "Plan of Distribution." Each Note will mature on any day
nine months or more from its date of issue, as agreed upon
by the Corporation and the purchaser, and may be subject
prior to maturity to redemption at the option of the
Corporation or repayment at the option of the
registered holder. Each Note will bear interest either
at a fixed rate (a "Fixed Rate Note") established by
the Corporation at the date of issue of such Note,
which may be zero in the case of certain Original
Issue Discount Notes, or at a floating rate (a
"Floating Rate Note"), as set forth therein
and specified in the applicable Pricing
Supplement (as defined below). A Fixed Rate
Note may pay a level amount in respect of
both interest and principal amortized over
the life of the Note (an "Amortizing
Note"). The Notes may be issued as Senior
Notes or Subordinated Notes, as set forth
in the applicable Pricing Supplement.
Subordinated Notes will be subordinated to
all existing and future Senior Indebtedness
and, in certain events involving the
insolvency of the Corporation, to Other
Senior Obligations. See "Description of
Debt Securities--Subordination of
Subordinated Debt Securities" in the
accompanying Prospectus.
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Fixed Rate Note will be payable each June 1 and December 1 and at
maturity. Interest on each Floating Rate Note is payable on the dates
set forth herein and in the applicable Pricing Supplement. Unless
otherwise specified in the applicable Pricing Supplement, Amortizing
Notes will pay principal and interest semiannually each June 1 and
December 1, or quarterly each March 1, June 1, September l and
December 1, and at maturity. See "Description of Notes."
Unless otherwise specified in the applicable Pricing
Supplement, the Notes may not be redeemed by the
Corporation or repaid at the option of the holder prior
to maturity. Notes denominated in U.S. dollars will be
issued in denominations of $100,000 or any amount in
excess thereof which is an integral multiple of
$1,000. The authorized denominations of Foreign
Currency Notes will be set forth in the
applicable Pricing Supplement. Any terms
relating to Notes being denominated in one or
more foreign currencies, currency units, or
composite currencies ("Specified Currency") will
be set forth in the applicable Pricing
Supplement.
Each Note will be issued only in fully registered form and will be
represented either by a Global Security registered in the name of The
Depository Trust Company, as Depository or a nominee thereof (a
"Book-Entry Note"), or by a certificate issued in definitive
form (a "Certificated Note"), as set forth in the applicable
Pricing Supplement. Beneficial interests in Global
Securities representing Book-Entry Notes will be
shown on, and transfer thereof will be effected
through, the records maintained by the
Depository (with respect to participants'
interests) and its participants. Book-Entry
Notes will not be issuable as Certificated
Notes except as described under "Description
of Debt Securities--Book-Entry Procedures" in
the accompanying Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT, ANY SUPPLEMENT HERETO OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE NOTES OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS BUT
ARE UNSECURED DEBT OBLIGATIONS OF KEYCORP AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT
AGENCY OR INSTRUMENTALITY.
<TABLE>
<CAPTION>
Agents'
Discounts
Price to and Proceeds to
Public(1) Commissions(2) Corporation(2)(3)
--------- -------------- -----------------
<S> <C> <C> <C>
Per Note.................................... 100% .125%-.750% 99.875%-99.250%
Total(4).................................... $750,000,000 $937,500-5,625,000 $749,062,500-$744,375,000
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount. If the Corporation issues
any Note at a discount from or at a premium over its principal amount, the
Price to Public of such Note will be set forth in the applicable Pricing
Supplement. Notes may be resold by the Agents, acting as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing prices, or at negotiated prices.
(2) Unless otherwise specified in the applicable Pricing Supplement, with
respect to Notes with Maturity Dates from 9 months to 30 years from the
date of issue, the Corporation will pay a commission to the Agents (as
defined below in "Plan of Distribution") ranging from .125% to .750% of
the principal amount of each Note. With respect to Notes with a Maturity
Date that is longer than 30 years from the date of issue sold through any
Agent, the rate of commission will be negotiated at the time of sale and
will be specified in the applicable Pricing Supplement. The Corporation
may also sell Notes to an Agent, as principal, at negotiated discounts,
for resale to investors and other purchasers. The Corporation has agreed
to indemnify each Agent against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
(3) Before deducting expenses payable by the Corporation estimated to be
$535,000.
(4) Or the equivalent thereof, if any of the Notes are denominated other than
in U.S. dollars.
-----------
The Notes are being offered by the Corporation on a continuous basis through
the Agents, each of which has agreed to use its reasonable efforts to solicit
offers to purchase Notes. The Corporation may also sell Notes to an Agent
acting as principal for its own account or for resale to one or more investors
and other purchasers. No termination date for the offering of the Notes has
been established. The Corporation or an Agent may reject any offer in whole or
in part. The Corporation reserves the right to withdraw, cancel or modify the
offer made hereby without notice. The Corporation reserves the right to sell
Notes directly on its own behalf and accept (but not solicit) offers to
purchase Notes through additional agents on substantially the same terms and
conditions (including commission rates) as would apply to purchases of Notes
by or through the Agents. The Notes will not be listed on any securities
exchange, and there can be no assurance that the Notes offered hereby will be
sold or that there will be a secondary market for the Notes. See "Plan of
Distribution."
CS First Boston
Goldman, Sachs & Co.
Kidder, Peabody & Co.
Incorporated
J.P. Morgan Securities Inc.
Salomon Brothers Inc
The date of this Prospectus Supplement is August 10, 1994
<PAGE>
IN CONNECTION WITH THIS OFFERING MADE PURSUANT TO THIS PROSPECTUS SUPPLEMENT
AND THE APPLICABLE PRICING SUPPLEMENT, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-1
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents summary consolidated financial data derived
from the consolidated financial statements of the Corporation and notes
thereto. On March 1, 1994, KeyCorp ("old KeyCorp"), a New York corporation and
financial services holding company headquartered in Albany, New York, merged
with and into Society Corporation ("Society"), an Ohio corporation and a
financial services holding company headquartered in Cleveland, Ohio, pursuant
to an Agreement and Plan of Merger and a related Supplemental Agreement to
Agreement and Plan of Merger, each dated as of October 1, 1993, and each as
amended. In the merger, Society was the surviving corporation, but changed its
name to KeyCorp. The Merger was accounted for as a pooling of interests and,
accordingly, the financial data below is presented as if old KeyCorp and
Society had been combined for all periods presented. This summary is qualified
in its entirety by the detailed information and financial statements included
in the documents incorporated by reference under "Incorporation of Certain
Documents by Reference." The data presented for the six-month periods ended
June 30, 1994 and June 30, 1993 are derived from unaudited financial
statements of the Corporation and include, in the opinion of management, all
adjustments necessary to present fairly the data for such periods.
<TABLE>
<CAPTION>
Six months ended
June 30, Year ended December 31,
---------------------- ----------------------------------------------------------
(unaudited)
1994 1993 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
(dollars in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
For the period
Interest income........ $ 2,147.6 $ 2,112.4 $ 4,213.9 $ 4,198.8 $ 4,652.4 $ 4,528.8 $ 4,410.2
Interest expense....... 799.2 784.1 1,534.9 1,750.1 2,519.4 2,667.7 2,615.8
Net interest income.... 1,348.4 1,328.3 2,679.0 2,448.7 2,133.0 1,861.1 1,794.4
Provision for loan
losses................ 71.8 115.4 211.7 338.4 466.2 517.2 306.2
Noninterest income..... 454.0 475.9 1,001.7 925.2 849.3 744.2 635.1
Noninterest expense.... 1,081.5 1,104.8 2,385.1 2,170.4 2,065.7 1,819.5 1,705.8
Income before income
taxes................. 649.1 584.0 1,083.9 865.1 450.4 268.6 417.5
Net income............. 430.4 386.8 709.9 592.1 313.7 256.1 286.7
Net income applicable
to Common Shares...... 422.4 376.8 691.8 568.1 297.5 249.0 281.3
Per Common Share
Net income............. $1.74 $1.58 $ 2.89 $ 2.42 $ 1.31 $ 1.13 $ 1.26
Cash dividends......... .64 .56 1.12 .98 .92 .88 .80
Weighted average Common
Shares (000).......... 243,382.6 238,733.3 239,775.2 235,004.8 227,116.2 220,078.6 223,901.3
At period-end
Loans.................. $ 43,157.6 $ 38,375.9 $ 40,071.3 $ 36,021.8 $ 35,534.3 $ 34,193.7 $ 31,570.4
Earning assets......... 57,347.0 52,699.9 54,352.7 49,380.8 48,207.9 44,668.2 41,871.4
Total assets........... 63,356.6 57,944.5 59,631.2 55,068.4 53,600.9 49,953.4 47,205.1
Deposits............... 47,796.2 44,400.8 46,499.1 43,433.1 42,835.0 40,935.3 37,375.4
Long-term debt......... 2,123.6 1,957.2 1,763.9 1,790.1 1,224.5 1,145.2 1,177.4
Common shareholders'
equity................ 4,438.8 3,999.5 4,233.6 3,683.3 3,272.4 2,941.7 2,929.1
Total shareholders'
equity................ 4,598.8 4,183.5 4,393.6 3,927.3 3,516.4 3,025.7 2,979.4
Performance ratios
Return on average total
assets................ 1.42% 1.38% 1.24% 1.13% .60% .54% .64%
Return on average
common equity......... 19.49 19.75 17.27 16.33 9.29 8.39 9.56
Efficiency (1)......... 59.27 60.30 60.50 60.96 65.27 66.92 67.09
Overhead (2)........... 46.05 46.49 46.85 47.21 52.63 54.58 56.50
Net interest margin.... 4.97 5.38 5.31 5.31 4.71 4.53 4.64
Capital ratios at
period-end
Tangible equity to
tangible assets......... 6.42% 6.16% 6.51% 6.11% 5.45% 4.79% 5.39%
Tier I risk-adjusted
capital............... 8.77 8.42 8.73 8.56 7.67 6.75 N/A
Total risk-adjusted
capital .............. 12.03 11.98 12.22 11.73 9.80 9.17 N/A
Leverage............... 6.76 6.48 6.72 6.56 5.97 5.23 N/A
Asset quality data
Nonperforming loans.... $ 309.0 $ 409.8 $ 336.3 $ 552.9 $ 729.5 $ 798.9 $ 555.4
Nonperforming assets... 431.9 701.8 500.1 900.2 1,071.9 1,013.2 683.1
Allowance for loan
losses................ 816.4 795.7 802.7 782.6 793.5 677.3 452.7
Nonperforming loans to
period-end loans...... .72% 1.07% .84% 1.53% 2.05% 2.34% 1.76%
Nonperforming assets to
period-end loans plus
OREO and other
nonperforming assets.. 1.00 1.81 1.24 2.47 2.99 2.94 2.16
Allowance for loan
losses to
nonperforming loans... 264.21 194.18 238.69 141.54 108.79 84.78 81.51
Allowance for loan
losses to period-end
loans................. l.89 2.07 2.00 2.17 2.23 1.98 1.43
Net loan charge-offs to
average loans......... .30 .64 .56 1.02 1.11 1.02 .89
Ratio of earnings to
fixed charges (3)
Excluding deposit
interest.............. 4.11x 4.39x 4.15x 3.67x 2.07x 1.57x 1.74x
Including deposit
interest.............. 1.79 1.72 1.69 1.48 1.18 1.10 1.16
</TABLE>
- --------
The comparability of the information presented above is affected by certain
acquisitions and divestitures that KeyCorp has completed in the time periods
presented.
(1) Calculated as noninterest expense (excluding merger and integration
charges and other nonrecurring charges) divided by taxable-equivalent net
interest income plus noninterest income (excluding net securities
transactions and certain gains on asset sales).
(2) Calculated as noninterest expense (excluding merger and integration
charges and other nonrecurring charges) less noninterest income (excluding
net securities transactions and certain gains on assets sales) divided by
taxable-equivalent net interest income.
(3) Earnings represent consolidated income before income taxes plus fixed
charges. Fixed charges include consolidated interest expense (excluding or
including interest on deposits as the case may be) and the proportion
deemed representative of the interest factor of rental expense net of
income from subleases.
N/A = Not Applicable
S-2
<PAGE>
RECENT ACQUISITION ACTIVITY OF KEYCORP
First Citizens Bancorp of Indiana
On June 30, 1994, KeyCorp reached a definitive agreement to acquire First
Citizens Bancorp of Indiana ("First Citizens"), based in Anderson, Indiana, in
a tax-free exchange of stock for a total consideration of $50.8 million.
Following the consummation of the merger, First Citizens' subsidiary, Citizens
Banking Company, an Indiana-chartered commercial bank with nine branches in
central Indiana, and with total assets of $349 million at March 31, 1994, will
be merged with and into Society National Bank, Indiana, a wholly-owned
subsidiary of KeyCorp. The acquisition, which is subject to certain regulatory
and shareholder approvals, is expected to close during the fourth quarter of
1994 and to be accounted for as a purchase.
Casco Northern Bank, National Association and BANKVERMONT Corporation
On June 23, 1994, KeyCorp reached definitive agreements to acquire Casco
Northern Bank, National Association ("Casco Northern"), headquartered in
Portland, Maine, and BANKVERMONT Corporation, headquartered in Burlington,
Vermont, for a total of $198.5 million in cash. Following the consummation of
the acquisition, Casco Northern, with 34 branches in Maine and with total
assets of $1.1 billion at March 31, 1994, will merge with and into Key Bank of
Maine, an indirect wholly-owned subsidiary of KeyCorp. As of the same date,
BANKVERMONT Corporation's subsidiary, Bank of Vermont, had 12 branches and
total assets of $684 million. The acquisitions, which are subject to certain
regulatory approvals, are expected to close during the fourth quarter of 1994
and will be accounted for as purchases.
State Home Savings Bank, FSB
On May 6, 1994, Society National Bank, a wholly-owned subsidiary of KeyCorp,
reached a definitive agreement to acquire State Home Savings Bank, FSB, ("State
Home Savings") based in Bowling Green, Ohio, in a cash purchase. The
transaction, which is subject to certain regulatory approvals, is expected to
close in the fall of 1994. The proposed acquisition will be accounted for as a
purchase. State Home Savings is a closely-held Federal savings bank with total
assets of $338 million at March 31, 1994, and 14 branches in five Northwest
Ohio counties.
The Bank of Greeley
On October 5, 1993, KeyCorp agreed to acquire the Bank of Greeley, a single
branch bank headquartered in Greeley, Colorado ("Greeley Bank"). Under terms of
the agreement, KeyCorp Common Shares will be exchanged for all of the
outstanding shares of Greeley Bank stock (based on an exchange ratio of 1.026
common shares for each share of Greeley Bank). The transaction, which is
subject to certain regulatory approvals is expected to close during the fourth
quarter of 1994 and will be accounted for as a purchase. Greeley Bank had total
assets of approximately $61 million at June 30, 1994.
S-3
<PAGE>
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities set forth under the
heading "Description of Debt Securities" in the accompanying Prospectus, to
which reference is hereby made. The particular terms of the Notes sold pursuant
to any pricing supplement (a "Pricing Supplement") will be described therein.
The terms and conditions set forth in "Description of Notes" will apply to each
Note unless otherwise specified in the applicable Pricing Supplement and in
such Note. Capitalized terms not defined herein shall have the same meanings
assigned to such terms in the Prospectus or the Applicable Indenture. Reference
herein to "U.S. dollars" or "U.S. $" or "$" are to the currency of the United
States of America.
General
The Notes offered hereby, if Senior Debt Securities, will be issued under the
Senior Indenture, as amended or supplemented. Notes issued under the Senior
Indenture will rank equally with all other unsecured and unsubordinated
indebtedness of the Corporation which is not accorded a priority under
applicable law. Notes issued under the Subordinated Indenture will be
subordinated in right of payment to the prior payment in full of the Senior
Indebtedness of the Corporation and, in certain events involving the insolvency
of the Corporation, Other Senior Obligations of the Corporation. See
"Description of Debt Securities--Subordination of Subordinated Debt Securities"
in the accompanying Prospectus. As of June 30, 1994, the Corporation had
outstanding approximately $523.2 million aggregate principal amount of Senior
Indebtedness and $263.0 million of Other Senior Obligations.
The Notes will be offered on a continuous basis. The Notes offered by this
Prospectus Supplement issued under the Applicable Indenture will constitute all
or part of a single series for purposes of such Indenture. The Notes of such
series offered hereby are limited to an aggregate initial offering price of
U.S. $750,000,000 subject to reduction as a result of the sale by the
Corporation of other Securities referred to in the accompanying Prospectus. See
"Plan of Distribution." For purposes of this Prospectus Supplement, (i) the
principal amount of any Original Issue Discount Note means the Issue Price (as
defined below) of such Note and (ii) the principal amount of any Note issued in
the Specified Currency means the U.S. dollar equivalent on the date of issue of
the Issue Price of such Note.
Each Note will mature on any day nine months or more from its date of issue,
as selected by the initial purchaser and agreed to by the Corporation (the
"Stated Maturity") which date may be subject to extension at the option of the
Corporation (subject to applicable regulatory approval in the case of
subordinated Notes) or the holder, and may be subject to redemption at the
option of the Corporation or repayment at the option of the holder prior to its
Stated Maturity as specified in the applicable Pricing Supplement. See
"Optional Redemption" and "Repayment at the Noteholder's Option" below.
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note. Except as set forth under "Description of Debt Securities--
Book-Entry Procedures" in the accompanying Prospectus, Book-Entry Notes will
not be issuable as Certificated Notes. See "Book-Entry System" below.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal and any premium,
and interest on the Notes will be made in U.S. dollars. Except as specified for
Notes not denominated in U.S. dollars or as otherwise provided in the
applicable Pricing Supplement, the Notes will be issued only in fully
registered form in denominations of U.S.$100,000 or any amount in excess thereof
which is an integral multiple of U.S.$1,000. If any of the Notes are to be
denominated in a Specified Currency other than U.S. dollars, additional
information pertaining to the terms of such Notes and other matters relevant to
the holders thereof will be described in the applicable Pricing Supplement.
S-4
<PAGE>
The Notes may be issued as Original Issue Discount Notes (including Zero
Coupon Notes, as defined below) as indicated in the applicable Pricing
Supplement. An "Original Issue Discount Note" means any Note that provides for
an amount less than the entire principal amount thereof to be payable upon
declaration of acceleration of the maturity thereof pursuant to the Applicable
Indenture. See "United States Federal Income Taxation--Discount Notes" below.
The Notes may be issued as Indexed Notes, Amortizing Notes, Renewable Notes
and Extendible Notes, as indicated in the applicable Pricing Supplement. See
"Indexed Notes", "Amortizing Notes", "Renewable Notes" and "Extendible Notes"
below.
The Pricing Supplement relating to each Note will specify the price
(expressed as a percentage of the aggregate principal amount thereof) at which
such Note will be issued if other than 100% (the "Issue Price"), the principal
amount, the interest rate or interest rate formula, ranking, maturity,
currency, (including one or more foreign currencies, currency units or
composite currencies), any redemption or repayment provisions and any other
terms on which each such Note will be issued that are not inconsistent with the
provisions of the Applicable Indenture.
Unless otherwise specified in the applicable Pricing Supplement, the Notes,
except for Amortizing Notes, will not be subject to any sinking fund.
The Notes may be presented for payment of principal and interest, transfer of
the Notes will be registrable, and the Notes will be exchangeable, at Society
National Bank, as paying agent (the "Paying Agent") in The City of Cleveland;
provided that Book-Entry Notes will be exchangeable only in the manner and to
the extent set forth below under "Description of Debt Securities--Book-Entry
Procedures" in the accompanying Prospectus.
As used herein, "Business Day" shall mean any day other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are generally authorized or required by law or regulation to close in The City
of New York and (i) in respect of LIBOR Notes (as defined below), in the city
of London, (ii) with respect to Notes denominated or payable in a Specified
Currency other than ECUs in the financial center of the country issuing the
Specified Currency, (iii) with respect to Notes denominated or payable in ECUs,
in the financial center of each country that issues a component currency of the
ECU, and that is not a non-ECU settlement day. "London Banking Day" shall mean
any day on which dealings in deposits in U.S. dollars are transacted in the
London interbank market.
As used herein, an "Interest Payment Date" with respect to any Note shall be
a date on which, under the terms of such Note, regularly scheduled interest
shall be payable. Unless otherwise specified in the applicable Pricing
Supplement, "Record Date" with respect to any Interest Payment Date shall be
the date fifteen calendar days (whether or not such date is a Business Day)
prior to such Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, Society
National Bank will act as Authenticating Agent for the Notes pursuant to an
appointment by the Trustee. Unless otherwise specified in the applicable
Pricing Supplement, Society National Bank will also act as Registrar for the
Notes pursuant to an appointment by the Trustee.
Payment Currency and Currency Exchange Information
Purchasers are required to pay for Notes denominated in a Specified Currency
in such Specified Currency, and payments of principal, premium, if any, and
interest on such Notes will be made in such Specified Currency, unless
otherwise provided in the applicable Pricing Supplement. Currently, there are
limited facilities in the United States for the conversion of U.S. dollars into
foreign currencies and vice versa. In addition, most banks do not currently
offer non-U.S. dollar denominated checking or savings account facilities in the
United States. Accordingly, unless otherwise specified in the applicable
Pricing Supplement,
S-5
<PAGE>
or unless alternative arrangements are made, payment of principal, premium, if
any, and interest on Notes in a Specified Currency other than U.S. dollars will
be made to an account at a bank outside the United States.
If the applicable Pricing Supplement provides for payments of principal of,
premium, if any, and interest on a non-U.S. dollar denominated Note to be made
in U.S. dollars or for payments of principal of, premium, if any, and interest
on a U.S. dollar denominated Note to be made in a Specified Currency other than
U.S. dollars, the conversion of the Specified Currency into U.S. dollars or
U.S. dollars into the Specified Currency, as the case may be, will be handled
by the Exchange Rate Agent identified in the applicable Pricing Supplement. The
costs of such conversion will be borne by the holder of such Note through
deductions from such payments.
If the applicable Pricing Supplement provides for payments of principal of,
premium, if any, and interest on a non-U.S. dollar denominated Note to be made,
at the option of the holder of such Note, in U.S. dollars, conversion of the
Specified Currency into U.S. dollars will be based on the highest bid quotation
in The City of New York received by the Exchange Rate Agent at approximately
11:00 a.m., New York City time, on the second Business Day preceding the
applicable payment date from three recognized foreign exchange dealers selected
by the Exchange Rate Agent (one of which may be the Exchange Rate Agent unless
the Exchange Rate Agent is the applicable Agent) for the purchase by the
quoting dealer of the Specified Currency for U.S. dollars for settlement on
such payment date in the aggregate amount of the Specified Currency payable to
the holders of Notes and at which the applicable dealer commits to execute a
contract. If none of such bid quotations are available, payments will be made
in the Specified Currency. All currency exchange costs will be borne by the
holders of Notes by deductions from such payments.
Except as set forth below, if the principal of, premium, if any, or interest
on, any Note is payable in a Specified Currency other than U.S. dollars and
such Specified Currency is not available to the Corporation for making payments
thereof due to the imposition of exchange controls or other circumstances
beyond the control of the Corporation or is no longer used by the government of
the country issuing such currency or for the settlement of transactions by
public institutions within the international banking community, then the
Corporation will be entitled to satisfy its obligations to holders of the Notes
by making such payments in U.S. dollars on the basis of the Market Exchange
Rate on the date of such payment or, if the Market Exchange Rate is not
available on such date, as of the most recent practicable date. Any payment
made under such circumstances in U.S. dollars where the required payment is in
a Specified Currency other than U.S. dollars will not constitute an Event of
Default or Default under the Applicable Indenture.
If payment in respect of a Note is required to be made in ECUs and ECUs are
unavailable due to the imposition of exchange controls or other circumstances
beyond the Corporation's control or are no longer used in the European Monetary
System, then all payments in respect of such Note shall be made in U.S. dollars
until ECUs are again available or so used. The amount of each payment in U.S.
dollars shall be computed on the basis of the equivalent of the ECU in U.S.
dollars, determined as described below, as of the second Business Day prior to
the date on which such payment is due.
The equivalent of the ECU in U.S. dollars as of any date shall be determined
by the Corporation or its agent on the following basis. The component
currencies of the ECU for this purpose (the "Components") shall be the currency
amounts that were components of the ECU as of the last date on which the ECU
was used in the European Monetary System. The equivalent of the ECU in U.S.
dollars shall be calculated by aggregating the U.S. dollar equivalents of the
Components. The U.S. dollar equivalent of each of the Components shall be
determined by the Corporation or such agent on the basis of the most recently
available Market Exchange Rates for such Components.
If the official unit of any Component is altered by way of combination or
subdivision, the number of units of that currency as a Component shall be
divided or multiplied in the same proportion. If two or more Components are
consolidated into a single currency, the amounts of those currencies as
Components shall be replaced by an amount in such single currency equal to the
sum of the appropriate amounts of the
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consolidated component currencies expressed in such single currency. If any
Component is divided into two or more currencies, the amount of the original
component currency shall be replaced by the appropriate amounts of such two or
more currencies, the sum of which shall be equal to the amount of the original
component currency.
All determinations referred to above made by the Corporation or its agent
shall be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.
Interest and Principal Payments
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided that the
interest payable upon maturity, redemption or repayment (whether or not the
date of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. Unless otherwise specified
in the applicable Pricing Supplement, the initial interest payment on a Note
will be made on the first Interest Payment Date falling after the date the Note
is issued; provided, however, that payments of interest (or, in the case of an
Amortizing Note, principal and interest) on a Note issued less than 15 calendar
days before an Interest Payment Date will be paid on the next succeeding
Interest Payment Date to the holder of record on the Record Date with respect
to such succeeding Interest Payment Date, unless otherwise specified in the
applicable Pricing Supplement. See "United States Federal Income Taxation--
Payment of Interest" below.
U.S. dollar payments of interest, other than interest payable at maturity (or
on the date of redemption or repayment, if a Note is redeemed or repaid prior
to maturity), will be made by check mailed to the address of the person
entitled thereto as shown on the Note register. U.S. dollar payments of
principal, premium, if any, and interest upon maturity, redemption or repayment
will be made in immediately available funds against presentation and surrender
of the Note. Notwithstanding the foregoing, (a) the Depositary, as holder of
Book-Entry Notes, shall be entitled to receive payments of interest by wire
transfer of immediately available funds and (b) a holder of U.S.$1,000,000 (or
the equivalent) or more in aggregate principal amount of Certificated Notes
(whether having identical or different terms and provisions) shall be entitled
to receive payments of interest by wire transfer of immediately available funds
upon written request to the Paying Agent not later than 15 calendar days prior
to the applicable Interest Payment Date.
Notwithstanding the foregoing, unless otherwise specified in the applicable
Pricing Supplement, a holder of a Foreign Currency Note may elect to receive
payment of the principal of and any premium and interest on such Note in the
Specified Currency by transmitting a written request for such payment to the
Trustee at its Corporate Trust Office in the Borough of Manhattan, The City of
New York, or the Paying Agent on or prior to the Record Date in the case of an
interest payment or at least 15 days prior to the Stated Maturity in the case
of a principal or premium payment. Such request may be in writing with a
signature guarantee, (mailed or hand delivered), or by cable, telex or other
form of facsimile transmission. A holder of a Foreign Currency Note may elect
to receive payment in the Specified Currency for all principal and any premium
and interest payments and need not file a separate election for each payment.
Such election will remain in effect until revoked by written notice to the
Trustee, but written notice of any such revocation must be received by the
Trustee on or prior to the relevant Record Date or at least 15 days prior to
the Stated Maturity, as the case may be. Holders of Foreign Currency Notes
whose Notes are to be held in the name of a broker or nominee should contact
such broker or nominee to determine whether and how an election to receive
payments in the Specified Currency may be made.
Unless otherwise specified in the applicable Pricing Supplement, a beneficial
owner of Book-Entry Notes denominated in a Specified Currency electing to
receive payments of principal or any premium or interest in the Specified
Currency must notify the Participant through which its interest is held on or
prior to the applicable Record Date, in the case of a payment of interest, and
on or prior to the fifteenth day prior to the Stated Maturity, in the case of
payment of principal or premium, of such beneficial owner's election to receive
all or a portion of such payment in a Specified Currency. Such Participant must
notify the Depository of
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such election on or prior to the third Business Day after such Regular Record
Date. The Depository will notify the Paying Agent of such election on or prior
to the fifth Business Day after such Regular Record Date. If complete
instructions are received by the Participant and forwarded by the Participant
to the Depository, and by the Depository to the Paying Agent, on or prior to
such dates, the beneficial owner will receive payments in the Specified
Currency.
Unless otherwise specified in the applicable Pricing Supplement or unless
alternative arrangements are made, payments of principal, premium, if any, and
interest on Notes in a Specified Currency other than U.S. dollars will be made
by wire transfer of immediately available funds to an account maintained by the
payee with a bank located outside the United States if the holder of such Notes
provides the Paying Agent with the appropriate wire transfer instructions not
later than 15 calendar days prior to the applicable payment date. If such wire
transfer instructions are not so provided, payments of principal, premium, if
any, and interest on such Notes will be made by check payable in such Specified
Currency mailed to the address of the Person entitled thereto as such address
shall appear in the Note register.
Certain Notes, including Original Issue Discount Notes, may be considered to
be issued with original issue discount, which must be included in income for
United States federal income tax purposes at a constant rate. See "United
States Federal Income Taxation--Discount Notes" below. Unless otherwise
specified in the applicable Pricing Supplement, if the principal of any
Original Issue Discount Note is declared to be due and payable immediately as
described under "Description of Debt Securities--Events of Default" in the
accompanying Prospectus, the amount of principal due and payable with respect
to such Note shall be limited to the aggregate principal amount of such Note
multiplied by the sum of its Issue Price (expressed as a percentage of the
aggregate principal amount) plus the original issue discount amortized from the
date of issue to the date of declaration, which amortization shall be
calculated using the "interest method" (computed in accordance with generally
accepted accounting principles in effect on the date of declaration). Special
considerations applicable to any such Notes will be set forth in the applicable
Pricing Supplement.
Fixed Rate Notes
Each Fixed Rate Note will bear interest from the date of issuance at the
annual rate stated on the face thereof, except as described below under
"Extension of Maturity," or "Renewal" until the principal thereof is paid or
made available for payment. Unless otherwise specified in the applicable
Pricing Supplement, such interest will be computed on the basis of a 360-day
year of twelve 30-day months. Unless otherwise specified in the applicable
Pricing Supplement, payments of interest on Fixed Rate Notes other than
Amortizing Notes will be made semiannually on each June 1 and December 1 and at
maturity or upon any earlier redemption or repayment.
If any Interest Payment Date for any Fixed Rate Note would fall on a day that
is not a Business Day, the interest payment shall be postponed to the next day
that is a Business Day, and no interest on such payment shall accrue for the
period from and after the Interest Payment Date. If the maturity date (or date
of redemption or repayment) of any Fixed Rate Note would fall on a day that is
not a Business Day, the payment of principal, premium, if any, and interest may
be made on the next succeeding Business Day, and no interest on such payment
shall accrue for the period from and after the maturity date (or date of
redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from the
date of issue or from the last date in respect of which interest has been paid
or duly provided for, as the case may be, to, but excluding, the Interest
Payment Date or the date of maturity or earlier redemption or repayment, as the
case may be.
Amortizing Notes
Unless otherwise specified in the applicable Pricing Supplement, payments of
principal and interest on Amortizing Notes, which are securities on which
payments of principal and interest are made in equal installments over the life
of the security, will be made either quarterly on each March l, June 1,
September 1
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and December 1 or semiannually on each June l and December 1, as set forth in
the applicable Pricing Supplement, and at maturity or upon any earlier
redemption or repayment. Payments with respect to Amortizing Notes will be
applied first to interest due and payable thereon and then to the reduction of
the unpaid principal amount thereof. A table setting forth repayment
information in respect of each Amortizing Note will be provided to the
original purchaser and will be available, upon request, to subsequent holders.
Floating Rate Notes
Each Floating Rate Note will bear interest from the date of issuance until
the principal thereof is paid or made available for payment at a rate
determined by reference to an interest rate basis (the "Base Rate"), which may
be adjusted by a Spread and/or Spread Multiplier (each as defined below). The
applicable Pricing Supplement will designate one or more of the following Base
Rates as applicable to each Floating Rate Note: (a) the CD Rate (a "CD Rate
Note"), (b) the Commercial Paper Rate (a "Commercial Paper Rate Note"), (c)
the Federal Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR
Note"), (e) the Prime Rate (a "Prime Rate Note"), (f) the Treasury Rate (a
"Treasury Rate Note"), (g) the CMT Rate (a "CMT Rate Note"), (h) the 11th
District Cost of Funds Rate (an "11th District Cost of Funds Rate Note") or
(i) such other Base Rate as is set forth in such Pricing Supplement and in
such Floating Rate Note. The "Index Maturity" for any Floating Rate Note is
the period of maturity of the instrument or obligation from which the Base
Rate is calculated and will be specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to
the specified Base Rate (i) plus or minus the Spread, if any, and/or (ii)
multiplied by the Spread Multiplier, if any. The "Spread" is the number of
basis points (one one-hundredth of a percentage point) specified in the
applicable Pricing Supplement to be added to or subtracted from the Base Rate
for such Floating Rate Note, and the "Spread Multiplier" is the percentage
specified in the applicable Pricing Supplement to be applied to the Base Rate
for such Floating Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or
ceiling, on the rate of interest which may accrue during any interest period
("Maximum Interest Rate"); and (ii) a minimum limitation, or floor, on the
rate of interest which may accrue during any interest period ("Minimum
Interest Rate"). In addition to any Maximum Interest Rate that may be
applicable to any Floating Rate Note pursuant to the above provisions, the
interest rate on a Floating Rate Note will in no event be higher than the
maximum rate permitted by New York law, as the same may be modified by United
States law of general application.
Unless otherwise specified in the applicable Pricing Supplement, the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (such period being the "Interest Reset
Period~" for such Note, and the first day of each Interest Reset Period being
an "Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the Pricing Supplement, the Interest Reset Date
will be, in the case of Floating Rate Notes which reset daily, each Business
Day; in the case of Floating Rate Notes (other than Treasury Rate Notes) which
reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes
which reset weekly, the Tuesday of each week, except as provided below; in the
case of Floating Rate Notes which reset monthly, the third Wednesday of each
month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December; in the case of Floating Rate
Notes which reset semiannually, the third Wednesday of two months of each
year, as specified in the applicable Pricing Supplement; and in the case of
Floating Rate Notes which reset annually, the third Wednesday of one month of
each year, as specified in the applicable Pricing Supplement; provided,
however, that the interest rate in effect from the date of issue to the first
Interest Reset Date with respect to a Floating Rate Note will be the initial
interest rate set forth in the applicable Pricing Supplement (the "Initial
Interest Rate"). If any Interest Reset Date for any Floating Rate
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Note would otherwise be a day that is not a Business Day, such Interest Reset
Date shall be postponed to the next succeeding Business Day, except that in the
case of a LIBOR Note, if such Business Day is in the next succeeding calendar
month, such Interest Reset Date shall be the next preceding Business Day.
Except as provided below and unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset
Date, on the third Wednesday of each month or on the third Wednesday of March,
June, September and December, as specified in the applicable Pricing
Supplement; (ii) in the case of Floating Rate Notes with a quarterly Interest
Reset Date, on the third Wednesday of March, June, September and December;
(iii) in the case of Floating Rate Notes with a semiannual Interest Reset Date,
on the third Wednesday of the two months specified in the applicable Pricing
Supplement; and (iv) in the case of Floating Rate Notes with an annual Interest
Reset Date, on the third Wednesday of the month specified in the applicable
Pricing Supplement and, in each case, at maturity. If any Interest Payment Date
for any Floating Rate Note would fall on a day that is not a Business Day with
respect to such Floating Rate Note, such Interest Payment Date will be the
following day that is a Business Day with respect to such Floating Rate Note,
except that, in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Payment Date shall be the immediately
preceding day that is a Business Day with respect to such LIBOR Note. If the
maturity date or any earlier redemption or repayment date of a Floating Rate
Note would fall on a day that is not a Business Day, the payment of principal,
premium, if any, and interest will be made on the next succeeding Business Day,
and no interest on such payment shall accrue for the period from and after such
maturity, redemption or repayment date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes shall be the amount of interest accrued from,
and including, the date of issue or from, and including, the last date to which
interest has been paid to or duly provided for, to, but excluding, the Interest
Payment Date.
With respect to a Floating Rate Note, accrued interest shall be calculated by
multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless otherwise specified in the applicable Pricing Supplement,
the interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of CD Rate Notes, Commercial Paper
Rate Notes, Federal Funds Rate Notes, LIBOR Notes, the 11th District Cost of
Funds Rate Notes and Prime Rate Notes or by the actual number of days in the
year, in the case of CMT Rate Notes and Treasury Rate Notes.
The interest rate in effect on any Interest Reset Date will be the applicable
rate as reset on such date. The interest rate applicable to any other day is
the interest rate from the immediately preceding Interest Reset Date (or, if
none, the Initial Interest Rate).
All percentages used in or resulting from any calculation of the rate of
interest on a Floating Rate Note will be rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward, and all dollar amounts used in or resulting
from such calculation on Floating Rate Notes will be rounded to the nearest
cent, with one-half cent rounded upward.
Unless otherwise specified in the applicable Pricing Supplement, Society
National Bank will be the calculation agent (the "Calculation Agent") with
respect to any issue of Floating Rate Notes. Upon the request of the holder of
any Floating Rate Note, the Calculation Agent will provide the interest rate
then in effect and, if determined, the interest rate that will become effective
on the next Interest Reset Date with respect to such Floating Rate Note.
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Determination Date" pertaining to an Interest Reset Date for CD Rate
Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, CMT Rate Notes,
the 11th District Cost of Funds Rate Notes and Prime Rate Notes will be the
second Business Day next preceding such Interest Reset Date. The Interest
Determination Date pertaining to an
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Interest Reset Date for a LIBOR Note will be the second London Banking Day
preceding such Interest Reset Date. The Interest Determination Date pertaining
to an Interest Reset Date for a Treasury Rate Note will be the day of the week
in which such Interest Reset Date falls on which Treasury bills would normally
be auctioned. Treasury bills are normally sold at auction on Monday of each
week, unless that day is a legal holiday, in which case the auction is normally
held on the following Tuesday, but such auction may be held on the preceding
Friday. If, as the result of a legal holiday, an auction is so held on the
preceding Friday, such Friday will be the Interest Determination Date
pertaining to the Interest Reset Date occurring in the next succeeding week. If
an auction falls on a day that is an Interest Reset Date, such Interest Reset
Date will be the next following Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date", where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if any such day is not a Business Day, the next
succeeding Business Day or, (ii) the Business Day preceding the applicable
Interest Payment Date or Stated Maturity, as the case may be.
Interest rates will be determined (which determination, in the absence of
manifest error, will be conclusive and binding) by the Calculation Agent as
follows:
CD Rate Notes
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)," or, if
not so published by 9:00 a.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release
"Composite 3:30 p.m. Quotations for U.S. Government Securities" (the "Composite
Quotations") under the heading "Certificates of Deposit." If such rate is not
yet published in either H.15(519) or the Composite Quotations by 3:00 p.m., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 a.m., New York City time, on such
Interest Determination Date for certificates of deposit in the denomination of
$5,000,000 with a remaining maturity closest to the Index Maturity designated
in the Pricing Supplement of three leading nonbank dealers in negotiable U.S.
dollar certificates of deposit in The City of New York (which may include one
or more of the Agents) selected by the Calculation Agent for negotiable
certificates of deposit of major United States money center banks of the
highest credit standing in the market for negotiable certificates of deposit;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as set forth above, the CD Rate in effect for the
applicable period will be the same as the CD Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Rate Period, the rate
of interest payable on the CD Rate Notes for which such CD Rate is being
determined shall be the Initial Interest Rate).
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes and
in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on such date for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement, as
such rate shall be published in H.15(519), under the heading "Commercial
Paper." In the event that such rate is not published by 9:00 a.m., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, then the Commercial Paper Rate shall be the Money Market Yield of the
rate on such Interest Determination Date for commercial paper of the specified
Index Maturity as published in Composite Quotations under the heading
"Commercial Paper." If by 3:00 p.m., New York City time, on such Calculation
Date such rate is not yet available in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate shall be the Money Market Yield of
the arithmetic mean of the offered rates as of 11:00 a.m., New York City time,
on such Interest Determination Date of three leading dealers of commercial
paper in The City of New York (which may include one or more of the Agents)
selected by the Calculation Agent for commercial paper of the specified Index
Maturity, placed for an industrial issuer whose bond rating is "AA," or the
equivalent, from a nationally recognized rating agency; provided, however, that
if the dealers selected as aforesaid by the Calculation Agent are not quoting
offered rates as mentioned in this sentence, the Commercial Paper Rate in
effect for the applicable period will be the same as the Commercial Paper Rate
for the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the Commercial Paper
Rate Notes for which such Commercial Paper Rate is being determined shall be
the Initial Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D X 360 X 100
-------------
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rate (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate on
such date for Federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)," or, if not so published by 9:00 a.m., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, the Federal Funds Rate will be the rate on such Interest Determination
Date published in the Composite Quotations under the heading "Federal
Funds/Effective Rate." If such rate is not yet published in either H.15(519) or
the Composite Quotations by 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, the Federal Funds Rate for
such Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the rates for the last transaction in
overnight Federal funds, as of 11:00 a.m., New York City time, on such Interest
Determination Date, arranged by three leading brokers of Federal funds
transactions in The City of New York (which may include one or more of the
Agents) selected by the Calculation Agent; provided, however, that if the
brokers selected as aforesaid by the Calculation Agent are not quoting as set
forth above, the Federal Funds Rate in effect for the applicable period will be
the same as the Federal Funds Rate for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of interest
payable on the Federal Funds Rate Notes for which such Federal Funds Rate is
being determined shall be the Initial Interest Rate).
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LIBOR Notes
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and subject
to the Minimum Interest Rate and the Maximum Interest Rate, if any) specified
in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" for
each Interest Determination Date will be determined by the Calculation Agent as
follows:
(i) The rate for deposits in U.S. dollars of the Index Maturity specified
in the applicable Pricing Supplement, commencing on the second Business Day
immediately following such Interest Determination Date, that appears on the
Telerate Page 3750 as of 11:00 a.m., London time, on such Interest
Determination Date ("LIBOR Telerate"). "Telerate Page 3750" means the
display designated as page "3750" on the Telerate Service (or such other
page as may replace the page 3750 on that service or such other service or
services as may be designated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits).
(ii) As of the Interest Determination Date, the Calculation Agent will
determine the arithmetic mean of the offered rates for deposits in U.S.
dollars for the period of the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second Business Day immediately
following such Interest Determination Date which appear on the Reuters
Screen LIBO Page at approximately 11:00 a.m., London time, on such Interest
Determination Date ("LIBOR Reuters"). "Reuters Screen LIBO Page" means the
display designated as Page "LIBO" on the Reuters Monitor Money Rates
Service (or such other page as may replace the LIBO page on that service
for the purpose of displaying London interbank offered rates of major
banks).
If neither LIBOR Telerate nor LIBOR Reuters is specified in the
applicable LIBOR Note, LIBOR will be determined as if LIBOR Telerate had
been specified.
(iii) If (a) in the case where paragraph (i) above applies, no rate
appears on the Telerate Page 3750 or (b) in the case where paragraph (ii)
above applies, fewer than two offered rates appear on the Reuters Screen
LIBO Page, the Calculation Agent will request the principal London offices
of each of four major banks in the London interbank market, as selected by
the Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in United States dollars for the period of the
specified Index Maturity to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such Interest Determination Date
and in a principal amount equal to an amount of not less than U.S. $1
million that is representative of a single transaction in such market at
such time. If at least two such quotations are provided, LIBOR will be the
arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR in respect of such Interest Determination Date will be the
arithmetic mean of rates quoted by three major banks in The City of New
York selected by the Calculation Agent (after consultation with the
Corporation) at approximately 11:00 a.m., New York City time, on such
Interest Determination Date for loans in U.S. dollars to leading European
banks, for the period of the specified Index Maturity and in a principal
amount of not less than U.S. $1 million that is representative of a single
transaction in such market at such time; provided however, that if fewer
than three banks selected as aforesaid by the Calculation Agent are quoting
rates as mentioned in this sentence, "LIBOR" for such Interest Reset Period
will be the same as LIBOR for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of
interest payable on the LIBOR Notes for which LIBOR is being determined
shall be the Initial Interest Rate).
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date, the rate set forth
H.15(519) for such date opposite the caption "Bank Prime
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Loan." If such rate is not yet published by 9:00 a.m., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, the Prime
Rate for such Interest Determination Date will be the arithmetic mean of the
rates of interest publicly announced by each bank named on the Reuters Screen
NYMF Page (as defined below) as such bank's prime rate or base lending rate as
in effect for such Interest Determination Date as quoted on the Reuters Screen
NYMF Page on such Interest Determination Date, or, if fewer than four such
rates appear on the Reuters Screen NYMF Page for such Interest Determination
Date, the rate shall be the arithmetic mean of the prime rates quoted on the
basis of the actual number of days in the year divided by 360 as of the close
of business on such Interest Determination Date by at least two of the three
major money center banks in The City of New York selected by the Calculation
Agent from which quotations are requested. If fewer than two quotations are
provided, the Prime Rate shall be calculated by the Calculation Agent and shall
be determined as the arithmetic mean on the basis of the prime rates in The
City of New York by the appropriate number of substitute banks or trust
companies organized and doing business under the laws of the United States, or
any State thereof, in each case having total equity capital of at least U.S.
$500 million and being subject to supervision or examination by federal or
state authority, selected by the Calculation Agent to quote such rate or rates.
"Reuters Screen NYMF Page" means the display designated as Page "NYMF" on the
Reuters Monitor Money Rates Services (or such other page as may replace the
NYMF Page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
If in any month or two consecutive months the Prime Rate is not published in
H.15(519) and the banks or trust companies selected as aforesaid are not
quoting as mentioned in the preceding paragraph, the "Prime Rate" for such
Interest Reset Period will be the same as the Prime Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest payable on the Prime Rate Notes for which the
Prime Rate is being determined shall be the Initial Interest Rate). If this
failure continues over three or more consecutive months, the Prime Rate for
each succeeding Interest Determination Date until the maturity or redemption or
repayment of such Prime Rate Notes or, if earlier, until this failure ceases,
shall be LIBOR determined as if such Prime Rate Notes were LIBOR Notes with an
Index Maturity specified in the applicable Pricing Supplement, and the Spread,
if any, shall be the number of basis points specified in the applicable Pricing
Supplement as the "Alternative Rate Event Spread."
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Treasury Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such date of direct obligations of the United
States ("Treasury Bills") having the Index Maturity designated in the
applicable Pricing Supplement, as published in H.15(519) under the heading
"Treasury Bills--auction average (investment)" or, if not so published by 9:00
a.m., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination
Date (expressed as a bond equivalent, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. In the event that the results of
the auction of Treasury Bills having the Index Maturity designated in the
applicable Pricing Supplement are not published or reported are provided above
by 3:00 p.m., New York City time, on such Calculation Date or if no such
auction is held on such Interest Determination Date, then the Treasury Rate
shall be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) calculated using the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 p.m., New York City
time, on such Interest Determination Date, of three leading primary United
States government securities dealers in the City of New York (which may include
one or more of the Agents) selected by the Calculation Agent for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not
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quoting bid rates as mentioned in this sentence, the Treasury Rate for the
applicable period will be the same as the Treasury Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest payable on the Treasury Rate Notes for which the
Treasury Rate is being determined shall be the Initial Interest Rate).
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and Maximum Interest Rate, if any),
specified on the face of the CMT Rate Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determinate Date, the rate displayed on the
Designated CMT Telerate Page under the caption ". . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately
3:45 P.M.," under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7055, the rate on such Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
rate for the week, or the month, as applicable, ended immediately preceding the
week in which the related Interest Determination Date occurs. If such rate is
no longer displayed on the relevant page, or if not displayed by 3:00 P.M., New
York City time, on the related Interest Calculation Date, then the CMT Rate for
such Interest Determination Date will be such Treasury Constant Maturity rate
for the Designated CMT Maturity Index as published in the relevant H.15(519).
If such rate is no longer published, or if not published by 3:00 P.M., New York
City time, on the related Interest Calculation Date, then the CMT Rate for such
Interest Determination Date will be such Treasury Constant Maturity rate for
the Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the Interest Determination Date with respect
to such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Interest Calculation Date, then the CMT Rate for the
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity, based on the arithmetic mean (rounded to the
nearest one hundred-thousandth of a percentage point) of the secondary market
closing offer side prices as of approximately 3:30 P.M., New York City time, on
the Interest Determination Date reported, according to their written records,
by three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York (which may include one or more of
the Agents) selected by the Calculation Agent (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury Note") with
an original maturity of approximately the Designated CMT Maturity Index and a
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent cannot obtain three such Treasury Note
quotations, the CMT Rate for such Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean (rounded to the nearest one hundred-thousandth of a
percentage point) of the secondary market offer side prices as of approximately
3:30 P.M., New York City time, on the Interest Determination Date of three
Reference Dealers in The City of New York (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for Treasury Notes with an original
maturity of the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least $100 million. If three or four (and
not five) of such Reference Dealers are quoting as described above, then the
CMT Rate will be based on the arithmetic mean (rounded to the nearest one
hundred-thousandth of a percentage point) of the offer prices
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obtained and neither the highest nor lowest of such quotes will be eliminated;
provided, however, that if fewer than three Reference Dealers in the City of
New York (which may include one or more of the Agents) selected by the
Calculation Agent are quoting as described herein, the CMT Rate will be the CMT
Rate in effect on such Interest Determination Date. If two Treasury Notes with
an original maturity as described in the third preceding sentence have
remaining terms to maturity equally close to the Designated CMT Maturity Index,
the quotes for the CMT Rate Note with the shorter remaining term to maturity
will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on the service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement as the Index Maturity with respect to
which the CMT Rate will be calculated. If no such maturity is specified in the
applicable Pricing Supplement, the Designated CMT Maturity Index shall be 2
years.
11th District Cost of Funds Rate Notes
Each 11th District Cost of Funds Rate Note will bear interest at the interest
rate (calculated with reference to the 11th District Cost of Funds Rate and the
Spread and/or Spread Multiplier, if any and subject to the Minimum Interest
Rate and Maximum Interest Rate, if any) specified in the applicable 11th
District Cost of Funds Rate Notes.
Unless otherwise indicated in the applicable 11th District Cost of Funds Rate
Note, "11th District Cost of Funds Rate" means, with respect to any Interest
Determination Date, the monthly 11th District Cost of Funds Index (the "11th
District Cost of Funds Index") normally published by the Federal Home Loan Bank
of San Francisco (the "FHLB of San Francisco") during the month immediately
preceding the Interest Reset Date to which such Interest Determination Date
applies.
The 11th District Cost of Funds Index is normally published by the FHLB of
San Francisco on the last day on which the FHLB of San Francisco is open for
business in each month and represents the monthly weighted average cost of
funds for savings institutions in the 11th District (Arizona, California and
Nevada) of the Federal Home Loan Bank System for the month preceding the month
in which the 11th District Cost of Funds Index is published. Currently, the
11th District Cost of Funds Index is computed by the FHLB of San Francisco for
each month by dividing the cost of funds (interest paid during the month by
11th District savings institutions on checking and savings deposits, advances
and other borrowings) by the average of the total amount of those funds
outstanding at the end of that month and the prior month and annualizing and
adjusting the result to reflect the actual number of days in the particular
month. If necessary, before these calculations are made, the component figures
are adjusted by the FHLB of San Francisco to neutralize the effect of events
such as member institutions leaving the 11th District or acquiring institutions
outside the 11th District. Receipt by mail of Information Bulletins announcing
11th District Cost of Funds Index changes may be arranged by contacting the
FHLB of San Francisco.
If the FHLB of San Francisco shall fail in any month to publish the 11th
District Cost of Funds Index (each such failure being referred to herein as an
"Alternative Rate Event"), then the 11th District Cost of Funds Rate for the
Interest Determination Date after the Alternate Rate Event shall be calculated
on the basis of the 11th District Cost of Funds Index most recently published
prior to such Interest Determination Date. If an Alternate Rate Event occurs in
the month immediately following a month in which a prior Alternate Rate Event
occurred, then the 11th District Cost of Funds Rate for the Interest
Determination
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Date immediately following the second Alternate Rate Event shall be calculated
on the basis of the 11th District Cost of Funds Index most recently published
prior to such Interest Determination Date and, thereafter, the 11th District
Cost of Funds Rate for each succeeding Interest Determination Date shall be
LIBOR, determined as though the Interest Rate Basis were LIBOR with an Index
Maturity equal to one month and the Spread shall be plus or minus the number of
basis points specified in the applicable 11th District Cost of Funds Rate Note
at the "Alternate Rate Event Spread," if any.
In determining that the FHLB of San Francisco has failed in any month to
publish the 11th District Cost of Funds Index, the Calculation Agent may rely
conclusively on any written advice from the FHLB of San Francisco to such
effect.
Indexed Notes
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on the Stated Maturity and/or on which the amount of interest
payable on an Interest Payment Date and/or any premium payable will be
determined by reference to prices, changes in prices, or differences between
prices, of securities, currencies, currency units, composite currencies,
intangibles, goods, articles, or commodities or other objective price, economic
or other measures (the "Indexed Notes"), as indicated in the applicable Pricing
Supplement. Holders of Indexed Notes may receive a principal amount at maturity
that is greater than or less than the face amount of such Notes depending upon
the fluctuation of the relative value, rate or price of the specified index.
Specific information pertaining to the method for determining the principal
amount payable at maturity, a historical comparison of the relative value, rate
or price of the specified index and the face amount of the Indexed Note and
certain additional United States federal tax and other relevant considerations
will be described in the applicable Pricing Supplement.
Extension of Maturity
The Pricing Supplement relating to each Fixed Rate Note (other than an
Amortizing Note) will indicate whether the Corporation has the option to extend
the maturity of such Fixed Rate Note for one or more periods specified in the
applicable Pricing Supplement (each an "Extension Period") up to but not beyond
the date (the "Final Maturity Date") set forth in such Pricing Supplement. If
the Corporation has such option with respect to any such Fixed Rate Note (an
"Extendible Note"), the following procedures will apply, unless modified as set
forth in the applicable Pricing Supplement.
The Corporation may exercise such option with respect to an Extendible Note
by notifying the Paying Agent of such exercise at least 50 but not more than 60
days prior to the maturity date originally in effect with respect to such Note
(the "Original Maturity Date") or, if the maturity date of such Note has
already been extended, prior to the maturity date then in effect (an "Extended
Maturity Date"). No later than 40 days prior to the Original Maturity Date or
an Extended Maturity Date, as the case may be (each, a "Maturity Date"), the
Paying Agent will mail to the holder of such Note a notice (the "Extension
Notice") relating to such Extension Period, by first class mail, postage
prepaid, setting forth (a) the election of the Corporation to extend the
maturity of such Note; (b) the new Extended Maturity Date; (c) the interest
rate applicable to the Extension Period; and (d) the provisions, if any, for
redemption during the Extension Period, including the date or dates on which,
the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the mailing by the
Paying Agent of an Extension Notice to the holder of an Extendible Note, the
maturity of such Note shall be extended automatically, and, except as modified
by the Extension Notice and as described in the next paragraph, such Note will
have the same terms it had prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 a.m , New York City time,
on the twentieth calendar day prior to the Maturity Date then in effect for an
Extendible Note (or, if such day is not a Business Day, not later than 10:00
a.m., New York City time, on the immediately succeeding Business Day), the
Corporation may, at its option, revoke the interest rate provided for in the
Extension Notice and establish a higher interest rate for the Extension Period
by causing the Paying Agent to send notice of such higher interest rate to the
holder of such Note by first class mail, postage prepaid, or by such other
means as shall
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be agreed between the Corporation and the Paying Agent. Such notice shall be
irrevocable. All Extendible Notes with respect to which the Maturity Date is
extended in accordance with an Extension Notice will bear such higher interest
rate for the Extension Period, whether or not tendered for repayment.
If the Corporation elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to require the Corporation to repay
such Note on the Maturity Date then in effect at a price equal to the principal
amount thereof plus any accrued and unpaid interest to such date. In order for
an Extendible Note to be repaid on such Maturity Date, the holder thereof must
follow the procedures set forth below under "Repayment at the Noteholders'
Option" for optional repayment, except that the period for delivery of such
Note or notification to the Paying Agent shall be at least 25 but not more than
35 days prior to the Maturity Date then in effect and except that a holder who
has tendered an Extendible Note for repayment pursuant to an Extension Notice
may, by written notice to the Paying Agent, revoke any such tender for
repayment until 3:00 p.m., New York City time, on the tenth calendar day prior
to the Maturity Date then in effect (or, if such day is not a Business Day,
until 3:00 p.m., New York City time, on the next succeeding Business Day).
Renewable Notes
The Company may also issue from time to time variable rate renewable notes
(the "Renewable Notes") that will bear interest at the interest rate
(calculated with reference to a Base Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Renewable Notes and in the applicable
Pricing Supplement.
The Renewable Notes will mature on an Interest Payment Date as specified in
the applicable Pricing Supplement (the "Initial Maturity Date"), unless the
maturity of all or any portion of the principal amount thereof is extended in
accordance with the procedures described below. On the Interest Payment Dates
in June and December in each year (unless different Interest Payment Dates are
specified in the applicable Pricing Supplement) (each such Interest Payment
Date, an "Election Date"), the maturity of the Renewable Notes will be extended
to the Interest Payment Date occurring twelve months after such Election Date,
unless the holder thereof elects to terminate the automatic extension of the
maturity of the Renewable Notes or of any portion thereof having a principal
amount of $100,000 or any multiple of $100,000 in excess thereof by delivering
a notice to such effect to the Paying Agent not less than nor more than a
number of days to be specified in the applicable Pricing Supplement prior to
such Election Date. Such option may be exercised with respect to less than the
entire principal amount of the Renewable Notes; provided that the principal
amount for which such option is not exercised is at least $100,000 or any
larger amount that is an integral multiple of $100,000. Notwithstanding the
foregoing, the maturity of the Renewable Notes may not be extended beyond the
Final Maturity Date, as specified in the applicable Pricing Supplement (the
"Final Maturity Date"). If the holder elects to terminate the automatic
extension of the maturity of any portion of the principal amount of the
Renewable Notes and such election is not revoked as described below, such
portion will become due and payable on the Interest Payment Date falling six
months (unless another period is specified in the applicable Pricing
Supplement) after the Election Date prior to which the holder made such
election.
An election to terminate the automatic extension of maturity may be revoked
as to any portion of the Renewable Notes having a principal amount of $100,000
or any multiple of $100,000 in excess thereof by delivering a notice to such
effect to the Paying Agent or any day following the effective date of the
election to terminate the automatic extension of maturity and prior to the date
15 days before the date on which such portion would otherwise mature. Such a
revocation may be made for less than the entire principal amount of the
Renewable Notes for which the automatic extension of maturity has been
terminated; provided that the principal amount of the Renewable Notes for which
the automatic extension of maturity has been terminated and for which such a
revocation has not been made is at least $100,000 or any larger amount that is
an integral multiple of $100,000. Notwithstanding the foregoing, a revocation
may not be made during the period from and including a Record Date to but
excluding the immediately succeeding Interest Payment Date.
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An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent Holder, will be binding upon such subsequent
holder.
The Renewable Notes may be redeemed in whole or in part at the option of the
Company on the Interest Payment Date for the year specified in the applicable
Pricing Supplement, commencing with the Interest Payment Date specified in the
applicable Pricing Supplement, at a redemption price as stated in the
applicable Pricing Supplement, together with accrued and unpaid interest to
the date of redemption. Notwithstanding anything to the contrary in this
Prospectus Supplement, notice of redemption will be provided by mailing a
notice of such redemption to each holder by first class mail, postage prepaid,
at least 180 days prior to the date fixed for redemption.
Book-Entry System
Unless otherwise indicated in the applicable Pricing Supplement, upon
issuance, all Fixed Rate Book-Entry Notes having the same Issue Date, interest
rate, if any, amortization schedule, if any, maturity date and other terms, if
any, will be represented by one or more Global Securities, and all Floating
Rate Book-Entry Notes having the same Issue Date, Initial Interest Rate, Base
Rate, Interest Reset Period, Interest Payment Dates, Index Maturity, Spread
and/or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, maturity date and other terms, if any, will be
represented by one or more Global Securities. Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depository, and registered in the name of a nominee of the Depository.
Certificated Notes will not be exchangeable for Book-Entry Notes. Book-Entry
Notes will not be exchangeable for Certificated Notes and will not otherwise
be issuable as Certificated Notes, except under the circumstances described in
the Prospectus under "Description of Debt Securities--Book-Entry Procedures."
Settlement for the Book-Entry Notes will be made in immediately available
funds. The Book-Entry Notes will trade in the Depositary's Same-Day Funds
Settlement System until maturity, and therefore the Depositary will require
secondary trading activity in the Book-Entry 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 trading activity in the Book-
Entry Notes.
A further description of the Depository~'s procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the accompanying
Prospectus under "Description of Debt Securities--Book-Entry Procedures." The
Depository has confirmed to the Corporation, each Agent and the Trustee that
it intends to follow such procedures.
Optional Redemption
Unless otherwise indicated in the applicable Pricing Supplement, Notes may
not be redeemed by the Corporation prior to maturity. If so specified in the
applicable Pricing Supplement, the Notes will be redeemable prior to maturity
at the option of the Corporation on the terms specified therein. Unless
otherwise indicated in the applicable Pricing Supplement, notice of redemption
will be provided by mailing a notice of such redemption to each holder by
first class mail, postage prepaid, at least 30 days and not more than 60 days
prior to the date fixed for redemption to the respective address of each
holder as that address appears upon the books maintained by the Paying Agent.
Repayment at the Noteholders' Option
Unless otherwise indicated in the applicable Pricing Supplement, Notes may
not be redeemed at the option of the holders thereof prior to maturity. If so
specified in the applicable Pricing Supplement, a Note will be repayable at
the option of the holder on a date or dates specified prior to its maturity
date and, unless otherwise specified in such Pricing Supplement, at the
Repayment Price together with accrued interest to the Repayment Date, each as
specified in the applicable Pricing Supplement.
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Unless otherwise indicated in the applicable Pricing Supplement, in order for
such a Note to be repaid, the Paying Agent must receive at least 30 days but
not more than 45 days prior to the Repayment Date the Note with the form
entitled "Option to Elect Repayment" on the reverse of the Note duly completed.
Except in the case of Extendible Notes, and unless otherwise specified in the
applicable Pricing Supplement, exercise of the repayment option by the holder
of a Note will be irrevocable. On any Repayment Date with respect to any Note,
such Note will be repayable in whole or in part in increments of $1,000
(provided that any remaining principal amount of such Note will not be less
than the minimum authorized denomination of such Note) at the option of the
holder thereof at a Repayment Price specified in the applicable Pricing
Supplement together with interest accrued thereon to the Repayment Date.
If a Note is represented by a Global Security, the Depository's nominee will
be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depository's nominee
will timely exercise a right to repayment with respect to a particular Note,
the beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depository of its desire to exercise a right to repayment. Different firms
have different cut-off times for accepting instructions from their customers
and, accordingly, each beneficial owner should consult the broker or other
direct or indirect participant through which it holds an interest in a Note in
order to ascertain the cut-off time by which such an instruction must be given
in order for timely notice to be delivered to the Depository.
Repurchase
The Corporation may purchase Notes at any price in the open market or
otherwise. Notes so purchased by the Corporation may, at the discretion of the
Corporation, be held or resold or surrendered to the relevant Trustee for
cancellation.
FOREIGN CURRENCY RISKS
Exchange Rate and Exchange Controls
Any investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies or currency
units) and the possibility of the imposition or modification of exchange
controls by either the U.S. or foreign governments. Such risks generally depend
on economic and political events over which the Corporation has no control. In
recent years, rates of exchange between U.S. dollars and certain foreign
currencies have been highly volatile and such volatility may be expected to
continue in the future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of fluctuations
in such rate that may occur during the term of any Note. Depreciation against
the U.S. dollar of the currency in which a Note is payable would result in a
decrease in the effective yield of such Note below its coupon rate and, in
certain circumstances, could result in a loss to the investor on a U.S. dollar
basis. In addition, depending on the specific terms of a currency linked Note,
changes in exchange rates relating to any of the currencies involved may result
in a decrease in its effective yield and, in certain circumstances, could
result in a loss of all or a substantial portion of the principal of a Note to
the investor.
THIS PROSPECTUS SUPPLEMENT, THE ATTACHED PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A FOREIGN CURRENCY OR A
COMPOSITE CURRENCY AND THE CORPORATION DISCLAIMS
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ANY RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST
AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME
TO TIME. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED IN, OR
THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, SPECIFIED CURRENCIES OTHER
THAN U.S. DOLLARS. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS
WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Except as set forth below under "United States Federal Income Taxation--Non-
United States Holders," the information set forth in this Prospectus Supplement
is directed to prospective purchasers who are United States residents, and the
Corporation disclaims any responsibility to advise prospective purchasers who
are residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal, premium, if any, and interest on the Notes. Such persons should
consult their own counsel with regard to such matters.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal of,
premium, if any, or interest on a Note. Even if there are no actual exchange
controls, it is possible that the Specified Currency for any particular Note
not denominated in U.S. dollars would not be available when payments on such
Note are due. In that event, the Corporation would make required payments in
U.S. dollars on the basis of the Market Exchange Rate on the date of such
payment, or if such rate of exchange is not then available, on the basis of the
Market Exchange Rate as of the most recent practicable date. See "Description
of Notes--Payment Currency."
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable current exchange
controls, if any, and historic exchange rate information on such currency or
currency unit. The information contained therein shall constitute a part of
this Prospectus Supplement and is furnished as a matter of information only and
should not be regarded as indicative of the range of or trends in fluctuations
in currency exchange rates that may occur in the future.
Governing Law and Judgments
The Notes will be governed by and construed in accordance with the laws of
the State of New York. In the event an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a Federal or State
court in the United States, it is likely that such court would grant judgment
relating to the Notes only in U.S. dollars. The date used to determine the rate
of conversion of a Specified Currency into United States dollars will depend
upon various factors, including which court renders the judgment. In the event
of an action based on Notes denominated in a Specified Currency other than U.S.
dollars in a state court in the State of New York, such court would be required
to render such judgment in the Specified Currency in which the Note is
denominated, and such judgment would be converted into U.S. dollars at the
exchange rate prevailing on the date of entry of the judgment.
UNITED STATES FEDERAL INCOME TAXATION
In the opinion of Thompson, Hine and Flory, counsel to the Company, the
following summary accurately describes certain material United States federal
income tax statutory and regulatory provisions which may pertain to the
purchase, ownership and disposition of Notes as of the date hereof. Except
where noted, it deals only with Notes held as capital assets by United States
Holders (defined below) and does not deal with special tax situations, such as
those of dealers in securities or currencies, financial institutions, insurance
companies, persons holding Notes as a hedge against, or which are hedged
against, currency or
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interest rate risks or as a position in a "straddle" for tax purposes or United
States Holders whose "functional currency" is not the U.S. dollar. Except as
otherwise provided, it also does not deal with Holders other than original
purchasers of Notes. Furthermore, the discussion below is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and
Treasury regulations (including proposed and temporary Treasury regulations),
rulings and judicial decisions all as in effect on the date hereof, and all of
which are subject to change possibly, with retroactive effect, or to different
interpretation which could result in federal income tax consequences different
from those discussed below. Additional tax considerations or consequences may
result from the particular terms established in any applicable Pricing
Supplement or any Note. Persons considering the purchase, ownership or
disposition of Notes should consult their own tax advisors concerning the
federal income tax consequences in light of the terms of their particular Notes
and their particular situations, as well as any consequences arising under the
law of any state, local or foreign taxing jurisdiction.
United States Holders
As used herein, a "United States Holder" of a Note means a Holder that is a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, an estate or trust the income of which is
subject to United States federal income taxation regardless of its source, or
otherwise subject to United States federal income taxation on a net income
basis in respect of a Note. As used herein, the term "Non-United States Holder"
means any holder of a Note that is not a United States Holder.
Payments of Interest
Except as set forth below, interest on a Note generally will be taxable to a
United States Holder as ordinary income from domestic sources at the time it is
paid or accrued in accordance with the United States Holder's method of
accounting for tax purposes.
Original Issue Discount
The following is a general summary of the material United States federal
income tax consequences of the ownership of Original Issue Discount Notes (as
defined below) by United States Holders. This summary is based upon Treasury
regulations which were published in the Federal Register on February 2, 1994
(the "OID Regulations") and which became effective as final regulations on
April 4, 1994. The following discussion addresses only Notes providing for
fixed payments or Notes providing for contingent payments that bear qualified
stated interest, as defined below.
Under the OID Regulations, the "issue price" of each Note in a particular
offering will be the first price at which a substantial amount of that
particular offering is sold to the public. A Note with an "issue price" that is
less than its stated redemption price at maturity (which amount is equal to the
sum of all payments to be made on the Note other than "qualified stated
interest", as defined below) will be issued with original issue discount if
such difference is at least 0.25 percent of the stated redemption price at
Maturity multiplied by the number of complete years to Maturity. Notes issued
with original issue discount ("OID") are referred to as "Original Issue
Discount Notes". Notice will be given in the applicable Pricing Supplement when
the Corporation determines that a particular Note will be an Original Issue
Discount Note.
"Qualified stated interest" with respect to a Fixed Rate Note 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.
Interest is payable at a single fixed rate only if the rate appropriately takes
into account the length of the interval between payments. Notes other than
Fixed Rate Notes will also be treated as bearing qualified stated interest if
they qualify as "variable rate debt instruments."
In general, a Note will be treated as a "variable rate debt instrument" for
purposes of the OID regulations if the Note is issued for an amount that does
not exceed the total of principal payments unconditionally payable by more than
an amount equal to the lesser of (i) 0.015 multiplied by the product of the
total principal unconditionally payable and the number of complete years to
maturity from the issue date; or (ii) 15 percent of the total principal
payments unconditionally payable. In addition, to be a variable rate
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debt instrument, the Note must bear stated interest at (i) one or more
qualified floating rates, (ii) a single fixed rate and one or more qualified
floating rates, (iii) a single objective rate or (iv) a single fixed rate and a
single objective rate that is a "qualified inverse floating rate". A qualified
floating rate generally is a rate the variations in the value of which can
reasonably be expected to measure contemporaneous variations in the cost of
newly borrowed funds in the currency in which the Note is denominated. An
objective rate is a rate (other than a qualified floating rate) that it
determined using a single fixed formula and that is based on: (i) one or more
qualified floating rates, (ii) one or more rates that would be qualified
floating rates for a debt obligation denominated in a different currency, (iii)
the yield or change in the price of one or more items of actively traded
personal property, other than the stock or debt of the issuer or a related
party or (iv) a combination of the rates described in (i)-(iii) herein. A
"qualified inverse floating rate" is a rate that is equal to a fixed rate minus
a qualified floating rate and the variations in which can reasonably be
expected to inversely reflect contemporaneous variations in the cost of newly
borrowed funds, disregarding certain restrictions on such rate such as caps,
floors or governors.
In the case of a Note issued with de minimis OID (i.e., original issue
discount that is not considered OID because it is less than 0.25 percent of the
stated redemption price at maturity multiplied by the number of complete years
to maturity), the United States Holder generally must include such de minimis
OID in income as stated principal payments are made on the Notes, in proportion
to the amount of principal paid. Any amount of de minimis OID that has not been
included in income prior to sale, exchange or retirement of a Note shall be
treated as capital gain.
The OID Regulations provide that if Notes may be redeemed in whole or in part
prior to their Stated Maturity, then such Notes will be treated as having a
maturity date for federal income tax purposes on such redemption date if such
redemption would result in a lower yield to maturity in the case of a
redemption at the issuer's option or a higher yield to maturity in the case of
a redemption at the holder's option. Notice will be given in the applicable
Pricing Supplement when the Corporation determines that a particular Note will
be deemed to have a maturity date for federal income tax purposes prior to its
Stated Maturity.
Generally, United States Holders of Original Issue Discount Notes with a
fixed Maturity of more than one year must include OID in income in advance of
the receipt of some or all of the related cash payments. The amount of OID
includable in income by the initial United States Holder of an Original Issue
Discount Note is the sum of the "daily portions" of OID with respect to the
Note for each day during the taxable year or portion of the taxable year in
which such United States Holder held such Note ("accrued OID"). The daily
portion of OID is determined by allocating to each day in any "accrual period"
a ratable portion of the OID allocable to that accrual period. The "accrual
period" for an Original Issue Discount Note may be of any length and may vary
in length over the term of the Note, provided that each such accrual period is
no longer than one year and each scheduled payment of principal or interest
occurs on the first day or the final day of such accrual period. In general,
the computation of OID is simplest if accrual periods correspond to the
intervals between payment dates provided by the terms of a Note. The amount of
OID allocable to any accrual period is an amount equal to the excess, if any,
of (a) the product of the Note's adjusted issue price at the beginning of such
accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and properly adjusted for the
length of the accrual period) over (b) the amount of any qualified stated
interest allocable to such accrual period. In determining OID allocable to an
accrual period, if an interval between payments of qualified stated interest
contains more than one accrual period, the amount of qualified stated interest
payable at the end of the interval (including any qualified stated interest
that is payable on the first day of the accrual period immediately following
the interval) is allocated on a pro rata basis to each accrual period in the
interval and the adjusted issue price at the beginning of each accrual period
in the interval must be increased by the amount of any qualified stated
interest that has accrued prior to the first day of the accrual period but is
not payable until the end of the interval. The amount of OID allocable to a
final accrual period is the difference between the amount payable at maturity
(other than a payment of qualified stated interest) and the adjusted issue
price of the Note at the
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beginning of the final accrual period. If all accrual periods are of equal
length, except for either an initial shorter accrual period or an initial and a
final shorter accrual period, the amount of OID allocable to the initial
accrual period may be computed under any reasonable method. The "adjusted issue
price" of a Note at the beginning of any accrual period is equal to its issue
price increased by the accrued OID for each prior accrual period (determined
without regard to the amortization of any acquisition or bond premium, as
described below) and reduced by any prior payments, or any payments made on the
first day of the accrual period with respect to such Note, other than payments
of qualified stated interest. Under these rules, a United States Holder may
have to include in income increasingly greater amounts of OID in successive
accrual periods. The Corporation is required to provide information returns
stating the amount of OID accrued on Notes held of record by persons other than
corporations and other exempt holders.
In the case of certain variable rate debt instruments that are issued with
OID and that bear interest at a single qualified floating rate or a qualified
inverse floating rate, the accrual of OID is to be determined by assuming that
the rate is fixed upon issuance at the initial value of the interest rate. In
the case of certain variable rate debt instruments that are issued with OID and
that bear an objective interest rate (other than a qualified inverse floating
rate), the accrual of OID is calculated by assuming that the Note bears
interest at a fixed rate that reflects the yield that is reasonably expected
for the Note. The method for determining OID on Notes that do not bear interest
at a qualified floating rate, at a qualified inverse floating rate or an
objective rate will be provided in the applicable Pricing Supplement for such
Note.
United States Holders may elect to treat all interest on any Note as OID and
calculate the amount includable in gross income under the constant yield method
described above. For the purposes of this election, interest includes stated
interest, acquisition discount, OID, de minimis OID, market discount, de
minimis market discount and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium. If a United States Holder makes this
election for a Note with market discount or amortizable bond premium, the
United States holder is considered to have also made an election under the
market discount or amortizable bond premium provisions, described below, and
the electing United States Holder will be required to amortize bond premium or
include market discount in income currently for all of the holder's other debt
instruments which have market discount or amortizable bond premium. The
election is to be made for the taxable year in which the United States Holder
acquired the Note, and may not be revoked without the consent of the Internal
Revenue Service (the "IRS").
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
generally will be deemed to have been issued with OID (generally, the excess of
the Short-Term Note's principal amount, including all interest payable on the
Note, over the Note's purchase price). In general, an individual or other cash
method United States Holder is not required to accrue OID on a Short-Term Note
unless the holder elects to do so. If such an election is not made, any gain
recognized by the United States Holder on a taxable disposition (including the
maturity) of the Short-Term Note will be ordinary income to the extent of the
OID accrued on a straight-line basis, or upon election, on a constant yield
method (based on daily compounding) through the date of sale or maturity, and a
portion of the deductions otherwise allowable to the United States Holder for
interest on borrowing allocable to the Short-Term Note will be deferred until a
corresponding amount of income is realized. United States Holders who report
income for federal income tax purposes under the accrual method, and certain
other holders, including banks and dealers in securities, are required to
accrue OID on a Short-Term Note on a straight line basis unless an election is
made to accrue the OID under a constant yield method (based on daily
compounding).
Market Discount
If a United States Holder purchases a Note, other than an Original Issue
Discount Note, for an amount that is less than its stated redemption price at
Maturity, or in the case of an Original Issue Discount Note, for an amount that
is less than its "revised issue price" (defined as the sum of the issue price
of the Note (as defined above) and the aggregate amount of the OID includible
in gross income by all prior holders for all
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periods before the acquisition of the Note by the United States Holder, if any,
without regard to the rules for acquisition premium discussed below), the
amount of the difference will be treated as "market discount" for federal
income tax purposes, unless such difference is less than a specified de minimis
amount. Under the market discount rules, a United States Holder will be
required to treat any principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the extent of
the market discount which has not previously been included in income and is
treated as having accrued on such Note at the time of such payment or
disposition. In addition, the United States Holder may be required to defer,
until the maturity of the Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the
United States Holder elects to accrue on a constant interest rate method. A
United States Holder of a Note may elect to include market discount in income
currently as it accrues (on either a ratable or constant interest rate method),
in which case the rule described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first taxable year to which the election applies, and may not be
revoked without the consent of the IRS.
Acquisition Premium; Amortizable Bond Premium
A United States Holder who purchases a Note for an amount that is greater
than its adjusted issue price but equal to or less than the sum of all amounts
payable on the Note after the purchase date other than payments of qualified
stated interest will be considered to have purchased such Note at an
"acquisition premium". Under the acquisition premium rules, the amount of OID
which such United States Holder must include in its gross income with respect
to such Note for any taxable year (or portion thereof in which the United
States Holder holds the Note) will be reduced (but not below zero) by the
portion of such acquisition premium properly allocable to such year.
A United States Holder who purchases a Note for an amount in excess of the
sum of all amounts payable on the Note after the purchase date other than
qualified stated interest will be considered to have purchased the Note at a
"premium" and will not be required to include any OID in income. A United
States Holder generally may elect to amortize the premium over the remaining
term of the Note on a constant yield method. The amount amortized in any year
will be treated as a reduction of the United States Holder's interest income
from the Note. However, if the Note may be optionally redeemed after the United
States Holder acquires it at a price in excess of its stated redemption price
at maturity, special rules may apply which could result in a deferral of the
amortization of some bond premium until later in the term of the Note. Bond
premium on a Note held by a United States Holder that does not make such an
election will decrease the gain or increase the loss otherwise recognized upon
a disposition of the Note. The election to amortize premium on a constant yield
method once made applies to all debt obligations held or subsequently acquired
by the electing United States Holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS.
Sale, Exchange and Retirement of Notes
A United States Holder's tax basis in a Note will, in general, be the United
States Holder's cost therefor, increased by OID, market discount, or any
discount with respect to a Short-Term Note, previously included in income by
the United States Holder and reduced by the amount of any amortized premium and
any cash payments on the Note other than payments of qualified stated interest.
Upon the sale, exchange or retirement of a Note, a United States Holder will
recognize gain or loss equal to the difference between the amount realized upon
the sale, exchange or retirement (less, in the case of a cash-method taxpayer,
any portion of the proceeds allocable to accrued qualified stated interest) and
the adjusted tax basis of the Note. Except as described above with respect to
certain Short-Term Notes or with respect to market discount, such gain or
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loss generally will be capital gain or loss and will be long-term capital gain
or loss if at the time of sale, exchange or retirement the Note has been held
for more than one year. Under current law, net capital gains of individuals
are, under certain circumstances, taxed at lower rates than items of ordinary
income. The deductibility of capital losses is subject to limitations.
Non-United States Holders
Under present United States federal income and estate tax law, and subject to
the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be required
with respect to the payment by the Corporation or any Paying Agent of
principal or interest (which for purposes of this discussion includes OID)
on a Note owned by a Non-United States Holder, provided that (i) the
beneficial owner does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Corporation
entitled to vote, (ii) the beneficial owner is not a controlled foreign
corporation that is related to the Corporation through stock ownership,
(iii) the beneficial owner is not a bank whose receipt of interest on a
Note is described in section 881(c)(3)(A) of the Code and (iv) the
beneficial owner satisfies the statement requirement (described generally
below) set forth in section 871(h) and section 881(c) of the Code and the
regulations thereunder;
(b) any amount realized by a Non-United States Holder upon the sale,
exchange or retirement of a Note will not be subject to United States
withholding taxes and any capital gain (which gain would not include
accrued interest or OID) realized on the sale, exchange, retirement or any
other disposition of a Note by a Non-United States Holder will be exempt
from United States federal income tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the Non-United States Holder and (ii) in the case of an
individual, the Non-United States Holder is not present in the United
States for 183 days or more in the taxable year of such sale or disposition
or certain other conditions are not met; and
(c) a Note beneficially owned by an individual who at the time of death
is a Non-United States Holder will not be subject to United States federal
estate tax as a result of such individual's death, provided that such
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Corporation entitled
to vote within the meaning of section 871(h)(3) of the Code and provided
that the interest payments with respect to such Note would not have been,
if received at the time of such individual's death, effectively connected
with the conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial owner
of such Note, or a financial institution holding the Note on behalf of such
owner, must provide, in accordance with specified procedures, the Corporation
or its Paying Agent with a statement to the effect that the beneficial owner is
not a United States person, citizen or resident. Pursuant to current temporary
Treasury regulations, these requirements will be met if (1) the beneficial
owner provides its name and address, and certifies, under penalties of perjury,
that it is not a United States person, citizen or resident (which certification
may be made on an Internal Revenue Service Form W-8 (or successor form)) or (2)
a financial institution holding the Notes on behalf of the beneficial owner
certifies, under penalties of perjury, that such statement has been received by
it and furnishes the Corporation or its Paying Agent with a copy thereof.
Payments to Non-United States Holders not meeting the requirements of
paragraph (a) above and thus subject to withholding of United States federal
income tax may nevertheless be exempt from such withholding if the beneficial
owner of the Note provides the Corporation with a properly executed (1)
Internal Revenue Service Form 1001 (or successor form) claiming an exemption
from withholding under the benefit of a tax treaty or (2) Internal Revenue
Service Form 4224 (or successor form) stating that interest paid on the Note is
not subject to withholding tax because it is effectively connected with the
owner's conduct of a trade or business in the United States, in which case,
however, such interest will be subject to United States federal income tax on a
net income basis at the applicable federal income tax rate.
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Foreign Currency Notes
The following discussion summarizes the material United States federal income
tax consequences to a holder subject to United States federal income tax of the
ownership and disposition of Notes (other than Notes, the principal or interest
on which is determined by reference to one or more currencies or currency
units, as described in "Indexed Notes" above) which are denominated in a
Specified Currency other than the U.S. dollar or the payments of interest or
principal on which are payable in a currency or currency unit other than the
U.S. dollar (a "Foreign Currency Note").
A holder who uses the cash method of accounting and who receives a payment of
interest (including qualified stated interest) in foreign currency with respect
to a Note (other than with respect to an Original Issue Discount Note, except
to the extent any qualified stated interest is received) will be required to
include in income the U.S. dollar value of the foreign currency payment
(determined based on the "spot" exchange rate in effect on the date such
payment is received) regardless of whether the payment is in fact converted to
U.S. dollars at that time, and such U.S. dollar value will be the holder's tax
basis in the foreign currency.
A holder (to the extent the preceding paragraph is not applicable) will be
required to include in income the U.S. dollar value of the amount of interest
income (including original issue discount) that has accrued and is otherwise
required to be taken into account with respect to a Foreign Currency Note
during an accrual period. The U.S. dollar value of such accrued interest income
will be determined by translating such income at the average rate of exchange
for the accrual period or, with respect to an interest accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. The average rate of exchange for the interest accrual period (or
partial period) is the simple average of the "spot" exchange rates for each
business day of such period or other average exchange rate for the period if
such rate is reasonably derived and consistently applied by the taxpayer. Such
holder may elect to determine the U.S. dollar value of any interest income
accrued in a foreign currency under an alternative method, as described below
under "Spot Rate Convention Election." Such holder will recognize ordinary
income or loss with respect to foreign currency relating to accrued interest
income on the date such income is actually received. The amount of ordinary
income or loss recognized on the date such interest is actually received will
equal the difference between the U.S. dollar value of the foreign currency
payments received (determined by using the "spot" exchange rate in effect on
the date such payment is received) in respect of such accrual period and the
U.S. dollar value of the interest income that has accrued during such accrual
period as determined by using one of the two conventions described above.
A holder will have a tax basis in any foreign currency received on the sale,
exchange or retirement of a Foreign Currency Note equal to the U.S. dollar
value of such foreign currency, determined by using the "spot" exchange rate in
effect at the time of such sale, exchange or retirement. Any gain or loss
realized by a holder on a sale or other disposition of foreign currency
(including its exchange for U.S. dollars or its use to purchase Foreign
Currency Notes) will be ordinary income or loss.
A holder's tax basis in a Foreign Currency Note, and the amount of any
subsequent adjustment to such holder's tax basis, will be the U.S. dollar value
of the foreign currency amount paid for such Foreign Currency Note, or of the
foreign currency amount of the adjustment, determined on the date of such
purchase or adjustment. A holder who converts U.S. dollars to a foreign
currency and immediately uses that currency to purchase a Foreign Currency Note
denominated in the same currency ordinarily will not recognize gain or loss in
connection with such conversion and purchase. However, a holder who purchases a
Foreign Currency Note with previously owned foreign currency will recognize
ordinary income or loss in an amount equal to the difference, if any, between
such holder's tax basis in the foreign currency and the U.S. dollar fair market
value of the Foreign Currency Note on the date of purchase.
Gain or loss realized with respect to principal upon the sale, exchange or
retirement of a Foreign Currency Note will be ordinary income or loss to the
extent it is attributable to fluctuations in currency exchange rates. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the foreign currency principal amount of such
Note, determined by using the "spot" exchange rate in effect on the date such
payment is received or such Note is disposed of and the U.S. dollar
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value of the foreign currency principal amount of such Note, determined by
using the "spot" exchange rate in effect on the date such Holder acquired such
Note. The foreign currency principal amount of a Foreign Currency Note
generally equals the issue price in foreign currency of such Note. Such foreign
currency gain or loss will be recognized only to the extent of the total gain
or loss recognized by a holder on the sale, exchange or retirement of the
Foreign Currency Note. The source of exchange gain or loss will be determined
by reference to the residence of the holder or the "qualified business unit" of
the holder on whose books the Note is properly reflected. Any gain or loss
recognized by such a holder in excess of such foreign currency gain or loss
will be capital gain or loss (except in the case of a original issue Discount
Note, to the extent of any accrued original issue discount), and generally will
be long-term capital gain or loss if the holding period of the Foreign Currency
Notes exceeds one year.
Any gain or loss which is treated as ordinary income or loss, as described
above, generally will not be treated as interest income or expense except to
the extent provided by administrative pronouncements of the Internal Revenue
Service.
The amount of OID on a Foreign Currency Note is determined in the relevant
foreign currency. The amount of such OID that is taken into account currently
under general rules applicable to Notes other than Foreign Currency Notes is to
be determined for any accrual period in the relevant foreign currency and then
translated into U.S. dollars on the basis of the average exchange rate in
effect during such accrual period (or, with respect to an accrual period that
spans two taxable years, the partial period within the taxable year) unless the
holder elects to use the alternative method, as described below under "Spot
Rate Convention Election."
Spot Rate Convention Election
For taxable years beginning after March 17, 1992, a United States Holder may
elect to translate foreign currency OID (and, in the case of an accrual basis
United States Holder, accrued interest) into U.S. dollars at the exchange rate
in effect on the last day of an accrual period for such OID or interest, or in
the case of the accrual period that spans two taxable years, at the exchange
rate in effect on the last day of the partial period within the taxable year.
Additionally, if a payment of OID or interest is actually received within five
business days of the last day of the accrual period or partial accrual period
within the taxable year, an electing United States Holder may instead translate
such OID or accrued interest into U.S. dollars at the exchange rate in effect
on the date of such receipt. Any such election will apply to all debt
instruments 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 will be irrevocable without the consent of the Internal
Revenue Service.
Amortizing Notes, Extendible Notes, Renewable Notes and Indexed Notes
The applicable Pricing Supplement will contain a discussion of special United
States federal income tax rules with respect to Amortizing Notes, Extendible
Notes, Renewable Notes and Indexed Notes, payments on which are determined by
reference to any index (other than interest payments determined by reference to
a Qualified Floating Rate or Objective Rate). The applicable Pricing Supplement
also will contain a discussion of any special United States federal income tax
rules with respect to Floating Rate Notes that provide for one Base Rate
followed by a different Base Rate, a Base Rate followed by a fixed rate, or a
fixed rate followed by a Base Rate.
Backup Withholding and Information Reporting
The "backup" withholding and information reporting requirements may apply to
certain payments of principal, premium, if any, and interest (including OID) on
a Note and to certain payments of proceeds of
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the sale or retirement of a Note. The Corporation, its agent, a broker, or any
paying agent, as the case may be, will be required to withhold tax from any
payment that is subject to backup withholding at a rate of 31% of such payment
if the holder fails to furnish and certify its taxpayer identification number,
to certify that such holder is not subject to backup withholding, or to
otherwise comply with the applicable requirements of the backup withholding
rules. Certain holders (including, among others, all corporations) are not
subject to the backup withholding and reporting requirements.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by the Corporation or any agent
thereof (in its capacity as such) to a holder of a Note who has provided the
required certification under penalties of perjury that it is not a United
States person as set forth in clause (a)(iv) described above under "Non-United
States Holders" or has otherwise established an exemption (provided that
neither the Corporation nor such agent has actual knowledge that the holder is
a United States person or that the conditions of any other exemption are not in
fact satisfied).
Any amounts withheld under the backup withholding rules from a payment to a
holder may be claimed as a credit against such holder's United States federal
income tax liability.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the Corporation through
CS First Boston Corporation, Goldman, Sachs & Co., Kidder, Peabody & Co.
Incorporated, J.P. Morgan Securities Inc. and Salomon Brothers Inc (the
"Agents"), each of which will agree to use its reasonable efforts to solicit
offers to purchase Notes. The Corporation will have the sole right to accept
offers to purchase Notes and may reject any offer to purchase Notes in whole or
in part. An Agent will have the right to reject any offer to purchase Notes
solicited by it in whole or in part. Payment of the purchase price of the Notes
will be required to be made in immediately available funds. Unless otherwise
specified in the applicable Pricing Supplement, with respect to Notes with a
Stated Maturity of 30 years from the date of issue, the Company will pay each
Agent a commission, in the form of a discount ranging from .125% to .750% of
the principal amount of each Note, depending upon the Stated Maturity, sold
through such Agent. With respect to Notes with a Stated Maturity that is longer
than 30 years from the date of issue sold through any Agent, the rate of
commission will be negotiated at the time of sale and will be specified in the
applicable Pricing Supplement. The Corporation may appoint additional agents to
solicit sales of the Notes or accept (but not solicit) offers from additional
agents for the sale of Notes; provided that any such solicitation and sale of
the Notes shall be on the same terms and conditions as the Agents have agreed
to. The Corporation may also sell Notes directly to investors on its own
behalf. In the case of sales made directly by the Corporation, no commission
will be payable.
The Corporation may also sell Notes to an Agent as principal for its own
account or to a group of underwriters for whom an Agent acts as representative
at discounts or premiums to be agreed upon at the
S-29
<PAGE>
time of sale. Such Notes may be resold to investors and other purchasers at
prevailing market prices, or prices related thereto at the time of such resale,
at negotiated prices or otherwise, as determined by the Agent. In addition, the
Agents may offer the Notes they have purchased as principal to other dealers.
The Agents may sell Notes to any dealer at a discount and, unless otherwise
specified in the applicable Pricing Supplement, such discount allowed to any
dealer will not be in excess of the discount received by such Agent from the
Corporation unless otherwise specified in the applicable Pricing Supplement.
After the initial public offering of Notes to be resold to investors and other
purchasers on a fixed public offering price basis, the public offering price,
concession and discount may be changed.
An Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Corporation and
the Agents have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
made in respect thereof. The Corporation has also agreed to reimburse the
Agents for certain expenses, including the fees and expenses of counsel.
The Corporation does not intend to apply for the listing of the Notes on any
national or regional securities exchange. The Corporation has been advised by
the Agents that the Agents intend to make a market in the Notes, as permitted
by applicable laws and regulations. The Agents are not obligated to do so,
however, and the Agents may discontinue making a market at any time without
notice. No assurance can be given as to the liquidity of any trading market for
the Notes.
Concurrently with the offering of Notes through the Agents as described
herein, the Corporation may issue other Securities as described in the
accompanying Prospectus.
In the ordinary course of their respective businesses, certain of the Agents
and their affiliates have engaged, and may in the future engage, in investment
banking and commercial banking transactions with the Corporation and certain of
its affiliates.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for the Corporation by any
Senior Managing Counsel to the Corporation authorized to render an opinion in
the State of Ohio or by Thompson, Hine and Flory, Cleveland, Ohio, and for the
Agents by Shearman & Sterling, New York, New York. The Senior Managing Counsel
to the Corporation or Thompson, Hine and Flory, as the case may be, will rely
as to all matters of New York law upon the opinion of Shearman & Sterling.
Shearman & Sterling will rely as to all matters of Ohio law upon the opinion
rendered on behalf of the Corporation.
The opinion of the Senior Managing Counsel to the Corporation or Thompson,
Hine and Flory and Shearman & Sterling will be conditioned upon, and subject to
certain assumptions regarding, future action required to be taken by the
Corporation and the Trustee in connection with the issuance and sale of Notes,
the specific terms of Notes and other matters which may affect the validity of
Notes but which cannot be ascertained on the date of such opinions. As of
August 1, 1994, attorneys at Thompson, Hine and Flory owned an aggregate of
approximately 60,400 common shares of the Corporation. In addition, as of
August 1, 1994, the Senior Managing Counsel to the Corporation currently
authorized to render the opinion on behalf of the Corporation owned
approximately 2,700 common shares of the Corporation and options to purchase
4,000 common shares of the Corporation which were exercisable within sixty days
of such date.
S-30
<PAGE>
PROSPECTUS
[LOGO OF KEYCORP APPEARS HERE]
Debt Securities Debt Warrants
Preferred Stock Preferred Stock Warrants
Depositary Shares Depositary Share Warrants
Common Shares Common Share Warrants
Capital Securities
KeyCorp, an Ohio corporation (the "Corporation"), intends to issue from time
to time, either separately or together, (i) one or more series of its unsecured
debt securities, which may be either senior debentures, notes, bonds, and/or
other evidences of indebtedness (the "Senior Debt Securities") or subordinated
debentures, notes, bonds, and/or other evidences of indebtedness which may be
convertible at the option of a holder or the Corporation into Capital
Securities (as described herein) of the Corporation (the "Subordinated Debt
Securities" and, together with the Senior Debt Securities, the "Debt
Securities"), (ii) warrants to purchase Debt Securities (the "Debt Warrants"),
(iii) shares of Preferred Stock, with a par value of $1 each (the "Preferred
Stock") which may be convertible, at the option of the holder, into Common
Shares or any other class or series of Capital Securities of the Corporation or
convertible at the option of the Corporation into Capital Securities or other
debt securities of the Corporation, (iv) shares of Preferred Stock represented
by depositary shares ("Depositary Shares"), (v) warrants to purchase shares of
Preferred Stock (the "Preferred Stock Warrants"), (vi) warrants to purchase
Depositary Shares (the "Depositary Share Warrants"), (vii) Common Shares, with
a par value of $1 each (the "Common Shares"), together with the related rights
to purchase Common Shares (the "Rights"), and (viii) warrants to purchase
Common Shares, together with the Rights, (the "Common Share Warrants," and
together with the Debt Warrants, the Preferred Stock Warrants, and the
Depositary Share Warrants, being collectively referred to herein as the
"Securities Warrants") in amounts, at prices, and on terms to be determined at
the time of the offering. The Debt Securities, Securities Warrants, Preferred
Stock, Depositary Shares, and Common Shares offered hereby, together with the
Capital Securities, are collectively referred to herein as the "Securities."
The Securities offered pursuant to this Prospectus may be offered separately
or together in one or more series up to an aggregate initial public offering
price of $750,000,000 or the equivalent thereof in one or more foreign
currencies or units of one or more foreign currencies or composite currencies
(such as European Currency Units), at individual prices and on terms to be set
forth in one or more supplements to this Prospectus (each, a "Prospectus
Supplement"). The particular terms of the Securities offered by any Prospectus
Supplement will be described in the Prospectus Supplement relating to such
Securities (an "Applicable Prospectus Supplement").
The Senior Debt Securities, when issued, will rank equally with all other
unsubordinated and unsecured indebtedness of the Corporation. The Subordinated
Debt Securities will be subordinate to all existing and future Senior
Indebtedness (as defined herein) of the Corporation and, in certain events
involving the insolvency of the Corporation, to Other Senior Obligations (as
defined herein) of the Corporation. See "Description of Debt Securities--
Subordination of Subordinated Debt Securities." The Debt Securities of any
series may be issued with Securities Warrants, and, in the case of the
Subordinated Debt Securities, may be convertible into Capital Securities of the
Corporation. Unless otherwise indicated in a Prospectus Supplement, the
maturity of the Subordinated Debt Securities will be subject to acceleration
only in the event of certain events of bankruptcy, insolvency, or
reorganization of the Corporation or upon receivership of a Major Bank (as
defined herein). See "Description of Debt Securities--Subordination of
Subordinated Debt Securities".
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in a Prospectus Supplement and, among other
things, will include, where applicable, (i) in the case of Debt Securities, the
specific designation, aggregate principal amount, currency, denomination,
maturity, priority, premium, if any, rate of interest (which may be variable or
fixed), time of payment of interest, terms for optional redemption or repayment
by the Corporation or any holder and for sinking fund payments, terms for
conversion, the initial public offering price, any special provisions related
to Debt Securities denominated in a foreign currency or issued as medium-term
notes, original issue discount securities, or with other special terms, and the
designation of any applicable trustee, security registrar, or paying agent,
(ii) in the case of shares of Preferred Stock, the specific title and stated
value, number of shares or fractional interests therein, any dividend,
liquidation, redemption, voting, and other rights, the terms for conversion,
the initial public offering price, and whether such shares are to be issued as
Depositary Shares, and, if so, the fraction of a share to be represented by
each Depositary Share and the designation of the Depositary (as defined
herein), (iii) in the case of Common Shares, the aggregate number of shares
offered and the initial offering price, and (iv) in the case of Securities
Warrants, where applicable, the applicable type and amount of securities
covered thereby, and, where applicable, the aggregate amount, duration,
offering price, exercise price, and detachability.
A Prospectus Supplement will also contain information, where applicable,
about certain U.S. Federal income tax, accounting, and other considerations
relating to, and any listing on a securities exchange of, the Securities
covered by the Prospectus Supplement.
The Securities will be obligations of the Corporation, are not and will not
be savings accounts, deposits, or other obligations of any bank or nonbank
subsidiary of the Corporation, and are not insured by the Federal Deposit
Insurance Corporation, the Bank Insurance Fund, the Savings Association
Insurance Fund, or any other government 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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
The Securities may be sold to underwriters pursuant to the terms of the
offering fixed at the time of sale, directly by the Corporation, or through
dealers or agents designated from time to time by the Corporation, which agents
may be affiliates of the Corporation. Each Prospectus Supplement will set forth
the names of the underwriters, dealers, or agents, if any, and any applicable
fees, commissions, or discounts and the net proceeds to the Corporation from
such sale together with the terms of the offering. The Corporation may also
issue contracts under which the counterparty may be required to purchase Debt
Securities, Preferred Stock, or Depositary Shares. Such contracts would be
issued with the Debt Securities, Preferred Stock, Depositary Shares, and/or
Securities Warrants in amounts, at prices, and on terms to be set forth in a
Prospectus Supplement. See "Plan of Distribution."
The date of this Prospectus is August 10, 1994.
<PAGE>
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements, and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements, and other information filed by the Corporation can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at The Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, Thirteenth Floor, New York, New York 10048. Copies of such material can
be obtained by mail from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain
securities of the Corporation are listed on the New York Stock Exchange, and
such reports, proxy statements, and other information concerning the
Corporation also may be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes part of a registration statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Corporation with the Commission under the Securities
Act. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted from this Prospectus
in accordance with the rules and regulations of the Commission. Reference is
made to the Registration Statement and to the exhibits thereto for further
information pertaining to the Corporation and the Securities offered hereby.
The Registration Statement (and exhibits thereto) 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the following
documents and information heretofore filed by the Corporation with the
Commission pursuant to Sections 12 or 13 of the Exchange Act:
1. The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1993;
2. The Corporation's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994 (as amended by Amendment No. 1 to Form 10-Q on Form 10-Q/A
filed on June 7, 1994);
3. The Corporation's Current Reports on Form 8-K, filed on January 21,
March 16, (as amended by Amendment No. 1 to Form 8-K on Form 8-K/A filed on
May 4, 1994), April 12, April 20, (including as exhibits in the case of the
Form 8-K filed on April 20, 1994 (i) Management's Discussion and Analysis
of Financial Condition and Results of Operations; (ii) Report of Ernst &
Young, Independent Auditors; (iii) Consolidated Financial Statements for
the fiscal year ended December 31, 1993; (iv) Notes to Consolidated
Financial Statements; and (v) descriptions of the Corporation's business
(including a discussion of regulatory and supervisory matters) and
properties, all of which reflect old KeyCorp and Society (as each is
defined below), on a combined basis giving effect to their March 1, 1994
merger), July 19, and July 26, 1994 (as amended by Amendment No. 1 to Form
8-K on Form 8-K/A filed on August 10, 1994);
4. The description of the Corporation's Common Shares and the Rights to
purchase Common Shares contained in the Corporation's Registration
Statement on Form 8-A dated July 31, 1992 as amended by Form 8-A/A filed on
February 25, 1994 under Section 12 of the Exchange Act; and
5. The description of the Corporation's 10% Cumulative Preferred Stock,
Class A (the "10% Cumulative Preferred Stock") and the Depositary Shares
representing one-fifth of one share of 10% Cumulative Preferred Stock
contained in the Corporation's Registration Statement on Form 8-A, filed on
February 23, 1994 under Section 12 of the Exchange Act.
All reports subsequently filed by the Corporation pursuant to Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act prior to the termination of the
offering of the Securities offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained 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
2
<PAGE>
statement contained herein or in a Prospectus Supplement, or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Corporation will provide upon request and without charge to each person
to whom this Prospectus is delivered a copy of any or all of the foregoing
documents incorporated herein by reference (other than exhibits to such
documents which are not specifically incorporated therein by reference).
Written requests should be directed to Carter B. Chase, Executive Vice
President, General Counsel, and Secretary, KeyCorp, 127 Public Square,
Cleveland, Ohio 44114-1306 (telephone (216) 689-3000).
No dealer, salesman, or other person has been authorized to give any
information or to make any representation not contained in this Prospectus or
the accompanying Prospectus Supplement and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Corporation or any underwriter or agent. This Prospectus may not be used to
consummate sales of the Securities unless accompanied by a Prospectus
Supplement. This Prospectus and the accompanying Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the registered securities to which they relate and do not constitute
an offer to sell or a solicitation of an offer to buy any of the Securities in
any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus or
any Prospectus Supplement nor any sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Corporation since the date hereof or thereof or that the
information contained or incorporated by reference herein or therein is correct
as of any time subsequent to such date.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in U.S. dollars ("$," "dollars," "U.S.
dollars," or "U.S. $").
3
<PAGE>
THE CORPORATION
On March 1, 1994, KeyCorp ("old KeyCorp"), a New York corporation and a
financial services holding company headquartered in Albany, New York, with
approximately $33 billion in assets at year-end 1993, merged with and into
Society Corporation ("Society"), an Ohio corporation and a financial services
holding company headquartered in Cleveland, Ohio with approximately $27 billion
in assets at year-end 1993, pursuant to an Agreement and Plan of Merger, and a
related Supplemental Agreement to Agreement and Plan of Merger, each dated as
of October 1, 1993, and each as amended. In the merger, Society was the
surviving corporation, but changed its name to KeyCorp (also referred to herein
as the "Corporation"). All financial data of the Corporation set forth in this
Prospectus has been restated to give effect to the merger of old KeyCorp with
and into Society.
The merger of old KeyCorp with and into Society created a financial services
holding company which traces its roots back to 1825, when the first predecessor
of old KeyCorp was organized. The merger of old KeyCorp and Society created the
"new" KeyCorp, a financial services company, which at June 30, 1994, was one of
the largest bank holding companies in the United States with consolidated
assets of approximately $63.4 billion.
The Corporation is a legal entity separate and distinct from its banking and
other subsidiaries. Accordingly, the right of the Corporation, its
securityholders and its creditors to participate in any distribution of the
assets or earnings of its banking and other subsidiaries is necessarily subject
to the prior claims of the respective creditors of such banking and other
subsidiaries, except to the extent that claims of the Corporation in its
capacity as a creditor of such banking and other subsidiaries may be
recognized.
The address of the Corporation's principal office is 127 Public Square,
Cleveland, Ohio, 44114-1306 and its telephone number is (216) 689-6300.
Banking Subsidiaries
As a result of the merger of old KeyCorp and Society, KeyCorp provides
banking and other financial services across much of country's northern tier and
in Florida through a network of subsidiaries operating 1,275 full-service
banking offices in 13 states, as of June 30, 1994, making KeyCorp the fifth
largest bank holding company in the nation in terms of domestic branches.
KeyCorp's primary banking subsidiaries include Society National Bank,
headquartered in Cleveland, Ohio, the largest bank in Ohio and one of the
nation's major regional banks with $23.2 billion in total assets and 291 full-
service banking offices at June 30, 1994; Key Bank of New York, headquartered
in Albany, New York with $14.5 billion in total assets and 330 full-service
banking offices at June 30, 1994; Key Bank of Washington, headquartered in
Tacoma, Washington with $7.4 billion in total assets and 191 full-service
banking offices at June 30, 1994; and Society National Bank, Indiana,
headquartered in South Bend, Indiana with $3.2 billion in total assets and 82
full-service banking offices at June 30, 1994. In addition, the Corporation
operates banking subsidiaries in Alaska, Colorado, Florida, Idaho, Maine,
Michigan, Oregon, Utah, and Wyoming.
The Corporation's banking subsidiaries provide a wide range of banking,
fiduciary and other financial services to their corporate, individual and
institutional customers located throughout the country. In addition to the
customary banking services of accepting funds for deposit and making loans, the
Corporation's banking subsidiaries provide specialized services tailored to
specific markets, including investment management services, personal and
corporate trust services, personal financial services, customer access to money
market and other mutual funds, cash management services, investment banking
services, and international banking services.
Other Financial Services Subsidiaries
In addition to the services provided through its banking offices, KeyCorp
engages in a wide range of other financial services through subsidiaries,
including mortgage banking, investment management, mutual
4
<PAGE>
fund advisory, and trust services. At June 30, 1994, through its banking and
other companies, KeyCorp serviced approximately $27 billion in mortgage loans,
managed approximately $32 billion in assets (excluding corporate trust assets)
in its investment management and trust operations, and, among bank holding
companies, operated the nation's thirteenth largest bank mutual fund business.
The Corporation engages in the mortgage banking business through KeyCorp
Mortgage Inc. ("Key Mortgage"), a mortgage banking subsidiary of Key Bank of
New York. Key Mortgage originates, services, packages, and sells residential
mortgage loans, and, to a lesser extent, services commercial and income
property loans. Its business activities are conducted throughout all of the
geographic areas in which the banking subsidiaries of the Corporation are
located except Florida (Alaska, Colorado, Idaho, Indiana, Maine, Michigan, New
York, Ohio, Oregon, Utah, Washington, and Wyoming) and in Arizona and New
Jersey, where the Corporation's subsidiary banks do not maintain any branches.
The Corporation engages in the investment management business through its
bank and trust company subsidiaries as noted above and also through two
registered investment adviser subsidiaries owned by Society National Bank.
Through these entities, the Corporation provides investment management services
to institutional and individual clients, including large corporate and public
retirement plans, Taft-Hartley plans, foundations and endowments, and high net
worth individuals. The Corporation's bank and investment management
subsidiaries also serve as investment advisers to the Corporation's proprietary
mutual funds.
Through its nonbanking subsidiaries, the Corporation provides additional
financial services both in and outside of its primary banking markets. These
include personal and corporate trust services, investment management,
reinsurance of credit life and accident and health insurance on loans made by
subsidiary banks, venture capital and small business investment financing
services, equipment lease financing, community development financing, stock
transfer agent, and other financial services. The Corporation is also a
participant in a joint venture with a number of other unaffiliated bank holding
companies in Electronic Payment Services, Inc., which through its subsidiary,
Money Access Service Inc., is the largest processor of automatic teller machine
transactions in the United States. Money Access Service Inc., which is more
commonly known as the MAC (R) network, is available to bank customers
throughout much of the United States.
5
<PAGE>
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The Corporation's ratio of earnings to fixed charges and ratio of earnings to
combined fixed charges and preferred stock dividends are set forth below for
the periods indicated:
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
--------------- -----------------------------
1994 1993 1993 1992 1991 1990 1989
------- ------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on
Deposits..................... 4.11x 4.39x 4.15x 3.67x 2.07x 1.57x 1.74x
Including Interest on
Deposits..................... 1.79x 1.72x 1.69x 1.48x 1.18x 1.10x 1.16x
Earnings to Combined Fixed
Charges and Preferred Stock
Dividends:
Excluding Interest on
Deposits..................... 3.88x 4.04x 3.84x 3.31x 1.96x 1.54x 1.71x
Including Interest on
Deposits..................... 1.77x 1.69x 1.66x 1.45x 1.17x 1.10x 1.15x
</TABLE>
For purposes of computing the above ratios, earnings represent consolidated
income before income taxes plus fixed charges. Fixed charges include interest
expense (excluding or including interest on deposits, as the case may be) and
the proportion deemed representative of the interest factor of rental expense,
net of income from subleases. Pre-tax earnings required for preferred stock
dividends were computed using the effective tax rate for the applicable year.
SUPERVISION AND REGULATION
General
As a bank holding company, the Corporation is subject to the regulation and
supervision of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). Under the BHCA, bank holding companies may not, in general,
directly or indirectly acquire the ownership or control of more than 5% of the
voting shares or substantially all of the assets of any company, including a
bank, without the prior approval of the Federal Reserve Board. In addition,
bank holding companies are generally prohibited under the BHCA from engaging in
nonbanking (i.e. commercial or industrial) activities, subject to certain
exceptions. As a result of the 1993 acquisition of the institution that is now
known as Society First Federal Savings Bank ("Society First Federal"), the
Corporation is also subject to the regulation and supervision of the Office of
Thrift Supervision (the "OTS") as a savings and loan holding company registered
under the Home Owners' Loan Act of 1933, as amended (the "HOLA").
The banking and savings association subsidiaries (collectively, the "banking
subsidiaries" or "subsidiary banks") of the Corporation are subject to
extensive supervision, examination, and regulation by applicable Federal and
state banking agencies. Society National Bank, Society National Bank, Indiana,
and Key Bank USA N.A. are national banking associations with full banking
powers, subject to regulation, supervision, and examination by the Office of
the Comptroller of the Currency (the "OCC"). Two other national banking
subsidiaries of the Corporation operate under charters that limit their banking
powers to trust-related activities. These entities are also subject to the
regulation, supervision, and examination of the OCC, although they are not
regulated as banks for purposes of the BHCA. All of the other banking
subsidiaries of the Corporation, other than Society First Federal, are state-
chartered banks that are subject to supervision, examination, and regulation by
the applicable state banking authority in the state in which each such
institution is chartered. In addition, the Corporation's state-chartered banks
are not members of the Federal Reserve System (and are therefore so-called
"nonmember banks"), and, accordingly, are subject to the regulation,
supervision, and examination of the Federal Deposit Insurance Corporation (the
"FDIC"). Because each of the Corporation's banking subsidiaries is insured by
the FDIC, the FDIC also has regulatory
6
<PAGE>
and supervisory authority over the banking subsidiaries in that capacity. The
OTS is charged with regulation of Federal savings associations such as Society
First Federal, presently the Corporation's only such institution. Depository
institutions are affected significantly by the actions of the Federal Reserve
Board as it attempts to control the money supply and credit availability in
order to influence the economy. The regulatory regime applicable to bank
holding companies and their subsidiaries is not intended generally for the
protection of investors but is directed toward protecting the interests of
depositors, the FDIC deposit insurance funds, and the U.S. banking system as a
whole.
The Corporation also has nonbanking subsidiaries that are subject to
supervision, regulation, and examination by the Federal Reserve Board, as well
as other applicable regulatory agencies. For example, the Corporation's
insurance subsidiaries are subject to regulation by the insurance regulatory
authorities of the various states, and the Corporation's state chartered trust
company subsidiaries (which are considered nonbanking companies for purposes of
the BHCA) are subject to regulation by state banking authorities. Other
nonbanking subsidiaries are subject to other laws and regulations of both the
Federal government and the various states in which they are authorized to do
business. For example, the Corporation's discount brokerage and investment
adviser subsidiaries are subject to supervision and regulation by the
Commission, the National Association of Securities Dealers, Inc., and state
securities regulators.
The following references to certain statutes and regulations are brief
summaries thereof. The references are not intended to be complete and are
qualified in their entirety by reference to the statutes and regulations
themselves. In addition there are numerous other statutes and regulations not
summarized below that apply to and regulate the operation of the Corporation
and its banking and nonbanking subsidiaries. A change in applicable law or
regulation may have a material effect on the business of the Corporation.
Dividend Restrictions
The Corporation is a legal entity separate and distinct from its banking and
other subsidiaries. The principal source of cash flow of the Corporation,
including cash flow to pay dividends on the Corporation's common and preferred
shares and debt service on the Corporation's debt, is dividends from its
banking and other subsidiaries. Various Federal and state statutory and
regulatory provisions limit the amount of dividends that may be paid to the
Corporation by its banking subsidiaries without regulatory approval. No such
limits apply to the amount of dividends that may be paid to the Corporation by
its other, nonbanking subsidiaries.
The approval of the OCC is required for the payment of any dividend by a
national bank if the total of all dividends declared by the board of directors
of such bank in any calendar year would exceed the total of (i) the bank's net
profits (as defined and interpreted by regulation) for the current year plus
(ii) the retained net profits (as defined and interpreted by regulation) for
the preceding two years, less any required transfers to surplus or a fund for
the retirement of any preferred stock. In addition, a national bank can pay
dividends only to the extent that retained net profits (including the portion
transferred to surplus) exceed bad debts (as defined and interpreted by
regulation). Three of the Corporation's banking subsidiaries, Society National
Bank, Society National Bank, Indiana, and Key Bank USA N.A., and the
Corporation's trust company subsidiaries which are national banks, are subject
to these restrictions.
The Corporation's state nonmember banks are also subject to various
restrictions on the payment of dividends under state laws. A number of the
Corporation's banking subsidiaries, representing approximately 50% of its
banking assets (other than assets under management for customers) are state
nonmember banks, which are restricted as to the payment of dividends by the
laws and regulations of their respective state chartering authority.
In addition, OTS regulations impose limitations upon all capital
distributions by savings associations. These limitations are applicable only to
Society First Federal.
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In addition, if, in the opinion of the applicable Federal banking agency, a
depository institution under its jurisdiction is engaged in or is about to
engage in an unsafe or unsound practice, which, depending on the financial
condition of the institution, could include the payment of dividends, the
agency may require, after notice and hearing, that such institution cease and
desist from such practice. Also, the Federal Reserve Board, the OCC, the FDIC,
and the OTS have issued policy statements which provide that insured depository
institutions and their holding companies should generally pay dividends only
out of current operating earnings.
Under all of the laws, regulations, and other restrictions applicable to the
Corporation's banking subsidiaries, management estimates that, as of June 30,
1994, the Corporation's banking and thrift subsidiaries could have declared
dividends estimated to be $595.4 million in the aggregate, without obtaining
prior regulatory approval, not including dividends that may be payable by the
Corporation's trust company subsidiaries, Society First Federal and certain
other financial service subsidiaries.
Holding Company Structure
Transactions Involving Banking Subsidiaries. Transactions involving the
Corporation's banking subsidiaries are subject to Federal Reserve Act
restrictions which limit the transfer of funds from such subsidiaries to the
Corporation and (with certain exceptions) to the Corporation's nonbanking
subsidiaries (together, "affiliates") in so-called "covered transactions," such
as loans and other extensions of credit, investments, or asset purchases.
Unless an exemption applies, each such transaction by a banking subsidiary with
one of its non-banking affiliates is limited in amount to 10% of that banking
subsidiary's capital and surplus and, with respect to all such transfers to
affiliates, in the aggregate, to 20% of that banking subsidiary's capital and
surplus. Furthermore, loans and extensions of credit are required to be secured
in specified amounts. "Covered transactions" also include the acceptance of
securities issued by the banking subsidiary as collateral for a loan and the
issuance of a guarantee, acceptance, or letter of credit for the benefit of the
Corporation or any of its affiliates. In addition, a bank holding company and
its banking subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property, or furnishing of services.
Source of Strength/Commonly Controlled Banking Subsidiaries. Under Federal
Reserve Board policy, a bank holding company is expected to serve as a source
of financial and managerial strength to each of its subsidiary banks and, under
appropriate circumstances, to commit resources to support each such subsidiary
bank. This support may be required by the Federal Reserve Board at times when
the Corporation may not have the resources to provide it or, for other reasons,
would not otherwise be inclined to provide it. Certain loans by a bank holding
company to any of its subsidiary banks are subordinate in right of payment to
deposits in, and certain other indebtedness of, the subsidiary bank. In
addition, the Crime Control Act of 1990 provides that in the event of a bank
holding company's bankruptcy, any commitment by a bank holding company to a
Federal bank regulatory agency to maintain the capital of a subsidiary bank
will be assumed by the bankruptcy trustee and entitled to a priority of
payment.
Under Federal law, a depository institution, the deposits of which are
insured by the FDIC, can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC in connection with (i) the default of a
commonly controlled FDIC-insured depository institution or (ii) any assistance
provided by the FDIC to a commonly controlled FDIC-insured depository
institution in danger of default (the so-called "cross guaranty" provision).
"Default" is defined under the FDIC's regulations generally as the appointment
of a conservator or receiver and "in danger of default" is defined generally as
the existence of certain conditions indicating that a "default" is likely to
occur in the absence of regulatory assistance.
Capital Requirements
The Federal Reserve Board, the FDIC, and the OCC have issued substantially
similar risk-based and leverage capital guidelines for United States banking
organizations. The minimum ratio of total capital to risk-adjusted assets
(including certain off-balance sheet items, such as standby letters of credit)
required by
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the Federal Reserve Board for bank holding companies is currently 8%. At least
one-half of the total capital must be comprised of common equity, retained
earnings, qualifying non-cumulative, perpetual preferred stock, a limited
amount of qualifying cumulative, perpetual preferred stock, and minority
interests in the equity accounts of consolidated subsidiaries, less goodwill
and certain other intangible assets ("Tier I capital"). The remainder may
consist of hybrid capital instruments, perpetual debt, mandatory convertible
debt securities, a limited amount of subordinated debt, other preferred stock,
and a limited amount of loan and lease loss reserves ("Tier II capital"). As of
June 30, 1994, the Corporation's Tier I and total capital to risk-adjusted
assets ratios were 8.77% and 12.03%, respectively.
In addition, the Corporation is subject to guidelines relating to its minimum
leverage ratio (Tier I capital to total consolidated quarterly average assets
less goodwill and certain other intangible assets for the relevant period).
These guidelines provide for a minimum leverage ratio of 3% for bank holding
companies that meet certain specified criteria, such as having the highest
supervisory rating. All other bank holding companies are required to maintain
leverage ratios which are at least 100 to 200 basis points higher (i.e., a
leverage ratio of at least 4% to 5%). Neither the Corporation nor any of its
banking subsidiaries has been advised by its appropriate Federal regulatory
agency of any specific leverage ratio applicable to it. As of June 30, 1994,
the Corporation's Tier I leverage ratio was 6.76%. Federal Reserve Board policy
provides that banking organizations generally, and, in particular, those that
are experiencing internal growth or actively making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels, without significant reliance on intangible assets.
Furthermore, the guidelines indicate that the Federal Reserve Board will
continue to consider a "tangible Tier I leverage ratio" in evaluating proposals
for expansion or new activities. The tangible Tier I leverage ratio is the
ratio of a banking organization's Tier I capital less all intangible assets to
total consolidated quarterly average assets less all intangible assets. For
purposes of this calculation, purchased mortgage servicing rights are not
considered to be intangible assets. As of June 30, 1994, the Corporation's
tangible Tier I leverage ratio was 6.68%.
Each of the Corporation's banking subsidiaries is also subject to capital
requirements adopted by applicable Federal regulatory agencies which are
substantially similar to those imposed by the Federal Reserve Board on bank
holding companies. These requirements also include minimum Tier I, total
capital and leverage ratios. As of June 30, 1994, each of the Corporation's
banking subsidiaries had capital in excess of all minimum regulatory
requirements.
All of the Federal banking agencies have proposed regulations that would add
an additional capital requirement based upon the amount of an institution's
exposure to interest rate risk. The OTS recently adopted its final rule adding
an interest rate component to its risk-based capital rule. Under the final OTS
rule, a savings association with a greater than "normal" level of interest rate
risk exposure will be subject to a deduction from total capital for purposes of
calculating its risk-based capital ratio. The new OTS rule was effective
January 1, 1994, except for limited provisions which are effective July 1,
1994. The other Federal banking agencies have yet to adopt their final rules on
the interest rate risk component of risk-based capital.
In December 1993, the federal banking regulatory agencies issued proposed
rules that would amend the leverage and risk-based capital standards to conform
with the provisions in the recently issued Statement of Financial Accounting
Standards No. 115 ("SFAS No. 115") which requires banks and bank holding
companies to report securities classified as "available for sale" at their fair
value, with the unrealized gains and losses excluded from operating results and
reported as a separate component of stockholder's equity. Prior to the adoption
of SFAS No. 115, banks and bank holding companies were only required to
recognize net unrealized losses on marketable equity securities as a separate
component of stockholder's equity. Although the proposal to recognize SFAS No.
115 adjustments for the purpose of determining regulatory capital will not
affect reported earnings, it may, if adopted, result in more volatility in the
amount of regulatory capital as the amount of unrealized gains and losses on
the securities in the "available for sale" category can be expected to change
over time. Effective January 1, 1994, the Corporation adopted SFAS No. 115.
Approximately $4.2 billion of securities were classified as available for sale
at June 30, 1994, and shareholders' equity was reduced by $82.3 million,
representing the net unrealized loss on these securities, net of deferred
income taxes.
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Significant Amendments to the Federal Deposit Insurance Act
The Federal Deposit Insurance Corporation Improvement Act of 1991, enacted
December 19, 1991, amended several Federal banking statutes, including the
Federal Deposit Insurance Act (the "FDIA"), and, among other things, increased
the FDIC's borrowing authority to resolve bank failures, mandated least-cost
resolutions and prompt regulatory action with regard to undercapitalized
institutions, expanded consumer protection, and mandated increased supervision
of domestic depository institutions and the U.S. operations of foreign
depository institutions. The 1991 amendments to the FDIA required the Federal
banking agencies to promulgate regulations and specify standards in numerous
areas of bank operations, including interest rate exposure, asset growth,
internal controls, credit underwriting, executive officer and director
compensation, real estate construction financing, additional review of capital
standards, interbank liabilities, and other operational and managerial
standards as the agencies determine appropriate. In general, management
believes that these regulations have increased, and may continue to increase,
the cost of and the regulatory burden associated with the banking business.
Prompt Corrective Action. Effective in December 1992, the OCC, the Federal
Reserve Board, the FDIC, and the OTS adopted new regulations to implement the
so-called "prompt corrective action" provisions of the FDIA. The regulations
group FDIC-insured depository institutions into five broad categories based on
their capital ratios. The five categories are "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized," as follows:
. An institution is "well capitalized" if it has a total risk-based capital
ratio (total capital to risk-adjusted assets) of 10% or greater, a Tier I
risk-based capital ratio (Tier I capital to risk-adjusted assets) of 6%
or greater, and a Tier I leverage capital ratio (Tier I capital to
average total assets) of 5% or greater, and it is not subject to a
regulatory order, agreement, or directive to meet and maintain a specific
capital level for any capital measure;
. An institution is "adequately capitalized" if it has a total risk-based
capital ratio of 8% or greater, a Tier I risk-based capital ratio of 4%
or greater, and (generally) a Tier I leverage capital ratio of 4% or
greater, and the institution does not meet the definition of a "well
capitalized" institution;
. An institution is "undercapitalized" if the relevant capital ratios are
less than those specified in the definition of an "adequately
capitalized" institution;
. An institution is "significantly undercapitalized" if it has a total
risk-based capital ratio of less than 6%, a Tier I risk-based capital
ratio of less than 3%, or a Tier I leverage capital ratio of less than
3%; and
. An institution is "critically undercapitalized" if it has a ratio of
tangible equity (as defined in the regulations) to total assets of 2% or
less.
An institution may be downgraded to, or be deemed to be in, a capital
category that is lower than is indicated by its actual capital position if it
is determined to be in an unsafe or unsound condition or if it receives an
unsatisfactory examination rating with respect to certain matters.
The capital-based prompt corrective action provisions of the FDIA and their
implementing regulations apply to FDIC insured depository institutions such as
all of the Corporation's banking subsidiaries, but they are not applicable to
holding companies, such as the Corporation, which control such institutions.
However, both the Federal Reserve Board and the OTS have indicated that, in
regulating holding companies, they will take appropriate action at the holding
company level based on their assessment of the effectiveness of supervisory
actions imposed upon subsidiary depository institutions pursuant to such
provisions and regulations. Although the capital categories defined under the
prompt corrective action regulations are not directly applicable to the
Corporation under existing laws and regulations, based upon its ratios the
Corporation would qualify, and its subsidiary banks do qualify, as well-
capitalized as of June 30, 1994. However, an institution's capital category, as
determined by applying the prompt corrective action provisions
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of the law, may not constitute an accurate representation of the overall
financial condition or prospects of the Corporation or its banking
subsidiaries, and should be considered in conjunction with other available
information regarding the Corporation's financial condition and results of
operations.
The FDIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the institution would thereafter be undercapitalized.
Undercapitalized depository institutions are also subject to restrictions on
borrowing from the Federal Reserve System, increased monitoring by the
appropriate Federal banking agency and limitations on growth, and are required
to submit a capital restoration plan to their primary Federal regulatory
agency. The Federal banking agencies may not accept a capital plan without
determining, among other things, that the plan is based on realistic
assumptions and is likely to succeed in restoring the institution's capital. In
addition, for a capital restoration plan to be acceptable, the depository
institution's parent holding company must guarantee that the institution will
comply with such capital restoration plan. The aggregate liability of the
parent holding company with respect to such a guarantee is limited to the
lesser of: (a) an amount equal to 5% of the depository institution's total
assets at the time that it became undercapitalized or (b) the amount which is
necessary (or would have been necessary) to bring the institution into
compliance with all capital standards applicable to it as of the time it failed
to comply with the plan. If a depository institution fails to submit an
acceptable plan, it is treated as if it were significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of additional requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized and requirements to
reduce total assets, and are prohibited from receiving deposits from
correspondent banks. "Critically undercapitalized" institutions are subject to
the appointment of a receiver or conservator.
FDIC Insurance. Under the risk-related insurance assessment system adopted in
final form effective beginning with the January 1, 1994 assessment period, a
bank or savings association is required to pay an annual assessment ranging
from $.23 to $.31 per $100 of deposits based on the institution's risk
classification. The risk classification is based on an assignment of the
institution by the FDIC to one of three capital groups and to one of three
supervisory subgroups. The capital groups are "well capitalized," "adequately
capitalized," and "undercapitalized." The three supervisory subgroups are Group
"A" (for financially solid institutions with only a few minor weaknesses),
Group "B" (for those institutions with weaknesses which, if uncorrected, could
cause substantial deterioration of the institution and increase the risk to the
deposit insurance fund), and Group "C" (for those institutions with a
substantial probability of loss to the fund absent effective corrective
action). For the period commencing on July 1, 1994 through December 31, 1994,
insurance premiums on deposits of all of the Corporation's banking subsidiaries
were assessed at the rate of $.23 per $100 of deposits.
Interstate Banking Legislation
On August 8, 1994, the U.S. House of Representatives passed the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act")
as reported by the House and Senate Conferees. The Interstate Act generally
authorizes bank holding companies to acquire banks located in any state
commencing one year after its enactment. In addition, it generally authorizes
national and state chartered banks to merge across state lines (and to thereby
create interstate branches) commencing June 1, 1997. Under the provisions of
the Interstate Act, states are permitted to opt-out of this latter interstate
branching authority by taking action prior to the commencement date. States may
also "opt-in" early (i.e. prior to June 1, 1997) to the interstate merger
provisions. The Senate is scheduled to vote during the month of August on the
Interstate Act. The Corporation cannot predict whether the bill will become
law. The Corporation does not currently have any plans generally to consolidate
its banking subsidiaries or to take any other actions that would be contingent
on the enactment of this legislation.
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Depositor Preference Statute
In August 1993, Federal legislation was enacted providing that insured and
uninsured deposits and certain claims for administrative expenses and employee
compensation against an insured depository institution would be afforded a
priority over other general unsecured claims against such an institution,
including Federal funds and letters of credit, in the "liquidation or other
resolution" of such an institution by any receiver. Under this new legislation,
if an insured depository institution fails, insured and uninsured depositors
along with the FDIC will be placed ahead of all unsecured, nondeposit creditors
in order of priority of payment.
Implications of Being a Savings and Loan Holding Company
By reason of its ownership of Society First Federal, the Corporation is a
savings and loan holding company within the meaning of the HOLA. With certain
exceptions, a savings and loan holding company must obtain prior written
approval from the OTS (as well as the Federal Reserve Board, or other Federal
agencies whose approval may be required, depending upon the structure of the
acquisition transaction) before acquiring control of a savings association or
savings and loan holding company through the acquisition of stock or through a
merger or some other business combination. The HOLA prohibits the OTS from
approving an acquisition by a savings and loan holding company which would
result in the holding company controlling savings associations in more than one
state unless (a) the holding company is authorized to do so by the FDIC as an
emergency acquisition, (b) the holding company controls a savings association
which operated an office in the additional state or states on March 5, 1987, or
(c) the statutes of the state in which the savings association to be acquired
is located specifically permit a savings association chartered by such state to
be acquired by an out-of-state savings association or savings and loan holding
company.
A Federal savings association, however, including one controlled by a savings
and loan holding company, is permitted, subject to certain restrictions, to
branch on a nationwide basis. Thus, a Federal savings association may generally
also acquire the assets and liabilities or the stock of other Federal savings
associations and operate them as branches, whether or not they are located in a
state that would otherwise have permitted the acquiring institution's holding
company to operate a savings association in that state.
Control Acquisitions
The Change in Bank Control Act (the "CBCA") prohibits a "person" (as defined
in the CBCA and the regulations thereunder) or group of persons from acquiring
"control" (as defined in the CBCA and the regulations thereunder) of a bank
holding company unless the Federal Reserve Board has been given 60 days prior
written notice of the proposed acquisition and within that time period the
Federal Reserve Board has not issued a notice disapproving the proposed
acquisition or extending for up to another 30 days the period during which such
a disapproval may be issued. An acquisition may be made prior to the expiration
of the disapproval period if the Federal Reserve Board issues written notice of
its intention not to disapprove the action. Under a rebuttable presumption
established by the Federal Reserve Board, the acquisition of 10% or more of a
class of voting stock of a bank holding company with a class of securities
registered under Section 12 of the Exchange Act, such as the Corporation,
would, under the circumstances set forth in the presumption, constitute the
acquisition of control.
In addition, any "company" (as defined in the CBCA and the regulations
thereunder) is required to obtain the approval of the Federal Reserve Board
under the BHCA before acquiring 25% (5% in the case of an acquiror that is a
bank holding company) or more of the outstanding Common Shares of the
Corporation, or otherwise obtaining control over the Corporation.
USE OF PROCEEDS
Unless otherwise set forth in the Applicable Prospectus Supplement, the
Corporation intends to use the net proceeds from the sale of the Securities for
general corporate purposes, including investments in and advances to the
Corporation's banking and nonbanking subsidiaries, reduction of short-term
borrowings, investments, and financing possible future acquisitions including,
without limitation, the acquisition of banking and nonbanking companies and
financial assets and liabilities.
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DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities are to be issued under an Indenture, dated as of
June 10, 1994, (the "Senior Indenture"), between the Corporation and Bankers
Trust Company, as Trustee. The Subordinated Debt Securities are to be issued
under an Indenture, dated as of June 10, 1994 (the "Subordinated Indenture"),
also between the Corporation and Bankers Trust Company, as Trustee. Copies of
the Senior Indenture and the Subordinated Indenture have been filed with the
Commission as exhibits to the Registration Statement of which this Prospectus
is a part. The Senior Indenture and the Subordinated Indenture are sometimes
referred to collectively herein as the "Indentures". Bankers Trust Company is
hereinafter referred to as the "Senior Trustee" when referring to it in its
capacity as trustee under the Senior Indenture, as the "Subordinated Trustee"
when referring to it in its capacity as trustee under the Subordinated
Indenture, and as the "Trustee" when referring to it in its capacity as trustee
under both of the Indentures. The following summaries of certain provisions of
the Senior Debt Securities, the Subordinated Debt Securities, and 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 Debt Securities
and the Indenture applicable to a particular series of Debt Securities (the
"Applicable Indenture"), including the definitions therein of certain terms.
Wherever particular Sections, Articles, or defined terms of the Applicable
Indenture are referred to, it is intended that such Sections, Articles, or
defined terms shall be incorporated herein by reference. Article and Section
references used herein are references to the Applicable Indenture. Capitalized
terms not otherwise defined herein shall have the meaning given to them in the
Applicable Indenture. The following sets forth certain general terms and
provisions of the Debt Securities offered hereby.
General Terms
The Indentures provide that the Debt Securities issued thereunder may be
issued without limit as to aggregate principal amount and provide that Debt
Securities may be issued thereunder from time to time in one or more series.
The Senior Debt Securities will rank equally with all other unsecured and
unsubordinated indebtedness of the Corporation which is not accorded a priority
under applicable law. The Subordinated Debt Securities will rank equally with
all other unsecured indebtedness of the Corporation, but, as described below,
will be subordinated in right of payment to the prior payment in full of the
Senior Indebtedness of the Corporation and, in certain events involving the
insolvency of the Corporation, Other Senior Obligations of the Corporation. The
Debt Securities will be unsecured obligations of the Corporation.
Unless otherwise indicated in the Applicable Prospectus Supplement, principal
of (and premium, if any), or interest, if any, on the Debt Securities will be
payable, and the transfer of the Debt Securities will be registrable, at the
office or agency of the Corporation in the Borough of Manhattan, the City of
New York, maintained for such purpose and at any other office or agency
maintained by the Corporation for such purpose, except that, at the option of
the Corporation, interest may be paid by mailing a check to the address of the
person entitled thereto as it appears on the register for the Debt Securities
or by transfer to an account maintained with a bank located in the United
States. (Sections 301, 305, and 1002) Debt Securities of a series may be
issuable solely as Registered Securities, solely as Bearer Securities or as
both Registered Securities and Bearer Securities (both as defined in the
Indentures). Unless otherwise provided in the Applicable Prospectus Supplement,
Debt Securities denominated in U.S. dollars are issuable in denominations of
$1,000 and integral multiples of $1,000 (in the case of Registered Securities)
and in denominations of $5,000 (in the case of Bearer Securities). The
Indentures also provide that Debt Securities of a series may be issuable in
global form, which may be of any denomination. See "Book-Entry Procedures".
Unless otherwise indicated in the Applicable Prospectus Supplement, Bearer
Securities will have interest coupons attached. (Sections 201 and 302) No
service charge will be made for any registration of transfer or exchange of the
Debt Securities, but the Corporation may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith.
(Section 305)
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The Applicable Prospectus Supplement will describe the following terms of the
Debt Securities offered thereby:
(1) The title of such Debt Securities and whether such Debt Securities
will be Senior Debt Securities or Subordinated Debt Securities.
(2) The aggregate principal amount of such Debt Securities and any limit
on the aggregate principal amount of Debt Securities of such series.
(3) If other than the principal amount thereof, the portion of the
principal amount thereof payable upon declaration of acceleration of the
maturity thereof or the method by which such portion shall be determined.
(4) The date or dates, or the method by which such date or dates will be
determined or extended, on which the principal of such Debt Securities will
be payable.
(5) The rate or rates at which such Debt Securities will bear interest,
if any, or the method by which such rate or rates will be determined, the
calculation agent, if any, the date or dates from which any interest will
accrue or the method by which such date or dates will be determined, the
date or dates on which such interest, if any, will be payable and the
regular record date or dates, if any, for the interest payable on any
registered security on any interest payment date, or the method by which
any such date will be determined, and the basis upon which interest will be
calculated if other than that of a 360-day year of twelve 30-day months.
(6) The period or periods within which, the price or prices at which, the
currency or currencies, currency unit or units or composite currency or
currencies in which, and the other terms and conditions upon which, such
Debt Securities may be redeemed in whole or in part at the option of the
Corporation, if the Corporation is to have that option.
(7) The obligation, if any, of the Corporation to redeem, repay, or
purchase such Debt Securities in whole or in part, pursuant to any sinking
fund or analogous provision or at the option of a holder thereof and the
period or periods within which or the date or dates on which, the price or
prices at which, the currency or currencies, currency unit or units or
composite currency or currencies in which and the other terms and
conditions upon which, such Debt Securities will be so redeemed, repaid, or
purchased.
(8) Whether such Debt Securities are to be issuable as Registered
Securities, Bearer Securities, or both, any restrictions applicable to the
offer, sale, or delivery of Bearer Securities and the terms, if any, upon
which Bearer Securities of the series may be exchanged for Registered
Securities of the series and vice versa (if permitted by applicable laws
and regulations), whether such Debt Securities will be issuable initially
in temporary global form, whether any such Debt Securities will be issuable
in permanent global form with or without coupons and, if so, whether
beneficial owners of interests in any such permanent global security may
exchange such interests for Debt Securities of such series and of like
tenor of any authorized form and denomination and the circumstances under
which any such exchanges may occur, if other than in the manner provided in
the Applicable Indenture, and, if Registered Securities are to be issuable
as a global security, the identity of the depository for such Debt
Securities.
(9) If other than U.S. dollars, the currency or currencies, currency unit
or units or composite currency or currencies in which payments of the
principal of (and premium, if any) or interest, if any, on such Debt
Securities will be payable or in which such Debt Securities will be
denominated.
(10) Whether the amount of payments of principal of (and premium, if any)
and/or interest, if any, on such Debt Securities may be determined with
reference to an index, formula, or other method and the manner in which
such amounts will be determined.
(11) Whether the Corporation or a holder may elect payment of the
principal of (and premium, if any), or interest, if any, on such Debt
Securities in one or more currency or currencies, currency unit or units or
composite currency or currencies, other than that in which such Debt
Securities are denominated or stated to be payable, the period or periods
within which, and the terms and conditions upon which, such election may be
made, and the time and manner of determining the exchange rate
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between the currency or currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are denominated or
stated to be payable and the currency or currencies in which such Debt
Securities are to be so payable.
(12) The place or places, if any, other than or in addition to the City
of New York, where the principal of (and premium, if any) or interest, if
any, on such Debt Securities will be payable, where any Registered
Securities may be surrendered for registration of transfer, where Debt
Securities may be surrendered for conversion and where notices or demands
to or upon the Corporation in respect of such Debt Securities and the
Applicable Indenture may be served.
(13) The denomination or denominations in which such Debt Securities will
be issuable, if other than $1,000 or any integral multiple thereof in the
case of Registered Securities and $5,000 or any integral multiple thereof
in the case of Bearer Securities.
(14) If other than the applicable Trustee, the identity of each Security
Registrar and/or Paying Agent.
(15) The date as of which any Bearer Securities of the series and any
temporary Debt Security issued in global form representing outstanding
Securities of the series will be dated if other than the date of original
issuance of the first Debt Security of the series to be issued.
(16) The applicability, if at all, to such Debt Securities of the
provisions of Article Thirteen of the respective Indenture described under
"Defeasance and Covenant Defeasance" and any provisions in modification of,
in addition to or in lieu of any of the provisions of such Article.
(17) The person to whom any interest on any Registered Security of the
series shall be payable, if other than the person in whose name such
Registered Security (or one or more predecessor 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 will 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 Debt Security issued in global form will be paid in other than in
the manner provided in the applicable Indenture.
(18) If such Debt Securities are to be issuable in definitive form
(whether upon original issue or upon exchange of a temporary Debt Security
of such series) only upon receipt of certain certificates or other
documents or satisfaction of other conditions, the form and/or terms of
such certificates, documents or conditions.
(19) If such Debt Securities will be issuable upon the conversion of
other Securities or upon the exercise of Debt Warrants, the time, manner,
and place for such Debt Securities to be authenticated and delivered.
(20) The provisions, if any, granting special rights to the holders of
such Debt Securities upon the occurrence of such events as may be
specified.
(21) Any deletions from, modifications of or additions to the Events of
Default and in the case of the Subordinated Debt Securities, the Defaults,
or covenants of the Corporation with respect to such Debt Securities,
whether or not such Events of Default, Defaults, or covenants are
consistent with the Events of Default, Defaults, or covenants set forth in
the general provisions of the Applicable Indenture.
(22) The designation of the initial Exchange Rate Agent, if any.
(23) Whether such Subordinated Debt Securities will be convertible into
Capital Securities of the Corporation and, if so, the terms and conditions
upon which such Subordinated Debt Securities will be so convertible.
(24) Any other terms of such Debt Securities not inconsistent with the
provisions of the Applicable Indenture.
The Corporation may be required to pay Additional Amounts, as contemplated by
Section 1004 of each Indenture, to any holder of Debt Securities who is not a
U.S. person (including any modification to the
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definition of such term as contained in the Applicable Indenture as originally
executed) in respect of certain taxes, assessments, or governmental charges
and, if so, the Corporation may have the option to redeem such Debt Securities
rather than pay such Additional Amounts (and the terms of any such option). The
Indentures provide that "Additional Amounts" means any additional amounts which
are required by the Debt Securities or by or pursuant to a resolution of the
Board of Directors to be paid by the Corporation in respect of certain taxes
imposed on such non-U.S. persons and which are owing to such holders. If the
terms of any series of Debt Securities provide that the Corporation must pay
Additional Amounts in respect thereof, for purposes of this Prospectus, any
reference to the payment of (or premium, if any, on) or interest, if any, on
such Debt Securities will be deemed to include mention of the payment of
Additional Amounts provided for by the terms of such Debt Securities.
Debt Securities may provide for an amount less than the entire principal
amount thereof to be due and payable upon declaration of acceleration of the
maturity thereof ("Original Issue Discount Securities"). (Section 101) Certain
Federal income tax and other considerations pertaining to any such Original
Issue Discount Securities will be described in the Applicable Prospectus
Supplement.
The Debt Securities may be issued under the Indentures as Original Issue
Discount Securities to be offered and sold at a substantial discount from the
principal amount thereof and may also be issued under the Indentures upon
exercise of Debt Warrants issued by the Corporation. See "Description of
Securities Warrants."
Unless otherwise indicated in the Applicable Prospectus Supplement, the
covenants contained in the Indentures and the Debt Securities will not afford
holders protection in the event of a sudden decline in credit rating that might
result from a recapitalization, restructuring, or other highly leveraged
transaction.
Book-Entry Procedures
Upon issuance, the Debt Securities may be issued in the form of one or more
fully registered global securities (the "Global Securities"). Each such Global
Security will be deposited with, or on behalf of, The Depository Trust Company,
as depository, (the "Depository") and registered in the name of the Depository
or a nominee thereof. Unless and until it is exchanged in whole or in part for
Debt Securities in definitive form, no Global Security may be transferred
except as a whole by the Depository to a nominee of such Depository or by a
nominee of such Depository to such Depository.
The Depository has advised the Corporation as follows: The Depository is a
limited-purpose trust company organized under the Banking Law 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 Depository was created to hold securities of its participating
organizations ("Participants") and to facilitate the clearance and settlement
of 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 Depository's
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations, some of which (and/or
their representatives) own the Depository. Access to the Depository'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. The rules applicable to the
Depository and its Participants are on file with the Commission.
Ownership of beneficial interests in the Debt Securities will be limited to
Participants or persons that may hold interests through Participants
("Beneficial Owners"). The Depository has advised the Corporation that upon the
issuance of Global Securities representing the Debt Securities, the Depository
will credit, on its book-entry registration and transfer system, the
Participants' accounts with the respective principal amounts of the Debt
Securities beneficially owned by such Participants. Ownership of beneficial
interests in the Debt
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Securities represented by such Global Securities will be shown on, and the
transfer of such ownership interests will be effected only through, records
maintained by the Depository (with respect to interests of Participants) and on
the records of Participants (with respect to interests of Beneficial Owners).
The laws of some states may require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to own, transfer, or pledge beneficial interests in Debt Securities
represented by Global Securities.
So long as the Depository, or its nominee, is the registered owner of a
Global Security, the Depository or its nominee, as the case may be, will be
considered the sole owner or holder of the Debt Securities represented by such
Global Security for all purposes under the Applicable Indenture. Except as
provided below, Beneficial Owners will not be entitled to have the Debt
Securities represented by Global Securities registered in their names, will not
receive or be entitled to receive physical delivery of the Debt Securities in
definitive form, and will not be considered the owners or holders thereof under
the Applicable Indenture. Accordingly, each Participant must rely on the
procedures of the Depository and, if such person is a Beneficial Owner, on the
procedures of the Participant through which such Beneficial Owner owns its
interest, to exercise any rights of a holder under the Applicable Indenture.
The Corporation understands that under existing industry practices, in the
event that the Corporation requests any action of holders, or a Beneficial
Owner desires to give or take any action which a holder is entitled to give or
take under the Applicable Indenture, the Depository would authorize the
Participants holding the relevant beneficial interests to give or take such
action, and such Participants would authorize Beneficial Owners owning through
such Participants to give or take such action or would otherwise act upon the
instructions of Beneficial Owners holding through them.
Payment of principal of (premium, if any) and interest, if any, owing on Debt
Securities registered in the name of the Depository or its nominee will be made
to the Depository or its nominee, as the case may be, as the holder of such
Debt Securities represented by the Global Securities. None of the Corporation,
the Trustee, or any other agent of the Corporation or agent of the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Corporation expects that the Depository, upon receipt of any
payment of principal, premium, if any, or interest in respect of Debt
Securities represented by Global Securities, will credit the accounts of the
Participants with payment in amounts proportionate to their respective
beneficial interests in the Debt Securities represented by such Global
Securities as shown on the records of the Depository. The Corporation also
expects that payments by Participants to Beneficial Owners will be governed by
standing customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Participants subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payment of principal (premium, if any) and interest to the Depository is the
responsibility of the Corporation, disbursement of such payments to
Participants is the responsibility of the Depository, and disbursement of such
payments to the Beneficial Owners is the responsibility of the Participants.
If (a) the Depository notifies the Corporation that it is at any time
unwilling or unable to continue as depository for the Global Securities or the
Depository ceases to be a clearing agency registered under the Exchange Act,
(b) the Corporation executes and delivers to the Trustee an order of the
Corporation to the effect that the Global Securities shall be transferable and
exchangeable, or (c) an Event of Default has occurred and is continuing with
respect to the Debt Securities, or any event which after notice or lapse of
time, or both, would constitute an Event of Default has occurred and is
continuing, the Global Securities will be transferable or exchangeable for Debt
Securities in definitive form of like tenor and of an equal aggregate principal
amount, in denominations of $1,000 and integral multiples thereof. Such
definitive Debt Securities shall be registered in such name or names as the
Depository shall instruct the Trustee. It is expected that such instructions
may be based upon directions received by the Depository from Participants with
respect to ownership of beneficial interests in Debt Securities represented by
such Global Securities.
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In the event of an issuance of Global Securities, procedures for initial
settlement and secondary trades will be set forth in the Applicable Prospectus
Supplement.
Subordination of Subordinated Debt Securities
Unless otherwise indicated in the Applicable Prospectus Supplement, the
following provisions shall apply to the Subordinated Debt Securities and the
Subordinated Indenture.
In 1992 the Federal Reserve Board issued an interpretation of its capital
adequacy regulations, and a clarification of such interpretation (collectively,
the "Interpretation"), that imposed additional restrictions on subordinated
debt securities in order for such securities to qualify as Tier II capital and
which provided that subordinated debt of bank holding companies issued on or
after September 4, 1992 cannot qualify as Tier II capital unless the
subordination of the debt meets certain criteria, the subordinated debt is not
subject to covenants and other provisions inconsistent with safe and sound
banking practices and the subordinated debt may be accelerated only upon the
bankruptcy of the bank holding company or the receivership of a major banking
subsidiary. See "Supervision and Regulation--Capital Requirements." Since the
Federal Reserve Board issued the Interpretation, the Corporation has not issued
any subordinated debt securities, but in part in response to the
Interpretation, the Corporation and the Subordinated Trustee have entered into
a new Subordinated Indenture to permit the Corporation to issue Subordinated
Debt Securities that would qualify as Tier II capital, subject to the limits
thereon. As of June 30, 1994, all of the Old KeyCorp Subordinated Indebtedness
(as defined below) and the Society Subordinated Indebtedness (as defined
below), which was incurred by old KeyCorp and Society, respectively, prior to
the issuance of the Interpretation, continued to constitute, and be treated by
the Corporation as, Tier II capital.
The Subordinated Debt Securities will be direct unsecured subordinated
obligations of the Corporation and the indebtedness evidenced by the
Subordinated Debt Securities and the payment of the principal of, premium, if
any, and interest, if any, on the Subordinated Debt Securities will be
subordinated in right of payment to the extent described below to the prior
payment in full of all Senior Indebtedness. (Section 1601) In addition, no
payments shall be made by the Corporation on account of the Subordinated Debt
Securities if there shall have occurred and be continuing a default in any
payment with respect to any Senior Indebtedness, or an event of default with
respect to any Senior Indebtedness permitting the holders thereof to accelerate
the maturity thereof, or if any judicial proceeding shall be pending with
respect to any such default or event of default. (Section 1603) In certain
circumstances relating to an insolvency, bankruptcy, reorganization or similar
proceedings of or relating to the Corporation, or any liquidation, dissolution
or winding-up, or any assignment for the benefit of creditors or marshalling of
assets and liabilities, of the Corporation (an "insolvency event"), the payment
of the principal of, premium, if any, and interest, if any, on the Subordinated
Debt Securities also will be subordinated in right of payment to the extent
described below to the prior payment in full of all Other Senior Obligations
(as defined below). (Section 1614)
The Subordinated Indenture provides that "Senior Indebtedness" shall mean the
principal of (and premium, if any) and interest on (a) all indebtedness of the
Corporation for money borrowed, whether outstanding on the date of execution of
the Subordinated Indenture or thereafter created, assumed, incurred or
guaranteed, except (i) indebtedness on account of all Subordinated Debt
Securities issued under the Subordinated Indenture, indebtedness on account of
all Existing Subordinated Indebtedness (as defined below) and all indebtedness
which specifically by its terms ranks equally with and not prior to the
Subordinated Debt Securities or the Existing Subordinated Indebtedness in right
of payment upon an insolvency event and (ii) indebtedness which specifically by
its terms ranks junior to and not equally with or prior to indebtedness
referred to in clause (i) above in right of payment upon an insolvency event
and (b) any renewals, extensions, modifications and refundings of any such
Senior Indebtedness. The term "indebtedness of the Corporation for money
borrowed" shall mean the principal of (and premium, if any) and interest, if
any, on all (a) indebtedness of the Corporation (including indebtedness of
others guaranteed by the Corporation), whether outstanding on the date of the
Subordinated Indenture or thereafter created, incurred,
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assumed or guaranteed, which is for money borrowed and (b) any renewals,
extensions, modifications and refundings of any such indebtedness. (Section
101) As of June 30, 1994, the Corporation had outstanding approximately $523.2
million aggregate principal amount of Senior Indebtedness.
The Subordinated Indenture provides that "Other Senior Obligations" shall
mean any obligation of the Corporation to its creditors, whether outstanding on
the date of execution of the Subordinated Indenture or thereafter created,
assumed, incurred or guaranteed, except (i) Senior Indebtedness, (ii)
indebtedness on account of all Subordinated Debt Securities issued under the
Subordinated Indenture, indebtedness on account of all Existing Subordinated
Indebtedness and all indebtedness which specifically by its terms ranks equally
with and not prior to the Subordinated Debt Securities or the Existing
Subordinated Indebtedness in right of payment upon the happening of an
insolvency event and (iii) indebtedness which specifically by its terms ranks
junior to and not equally with or prior to indebtedness referred to in clause
(ii) above in right of payment upon any insolvency event. (Section 101) As of
June 30, 1994, the Corporation had $263.0 million of Other Senior Obligations
outstanding.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Indebtedness or Other Senior Obligations, and additional
Senior Indebtedness may include indebtedness of the Corporation for money
borrowed that is senior to the Subordinated Debt Securities, but subordinate to
other obligations of the Corporation. The Senior Debt Securities, if issued,
will constitute Senior Indebtedness.
The Subordinated Indenture provides that "Existing Subordinated Indebtedness"
shall include all indebtedness for borrowed money of the Corporation under its
8.40% Subordinated Capital Notes due April 1, 1999 (originally issued by old
KeyCorp and assumed by the Corporation), 8.125% Subordinated Notes due June 15,
2002 (originally issued by Society), 8.00% Subordinated Notes due July 1, 2004
(also originally issued by old KeyCorp and assumed by the Corporation), Medium-
Term Notes Series IV due 1998, 2000, 2002, and 2003 (originally issued by old
KeyCorp and assumed by the Corporation), and any renewals, extensions,
modifications and refundings of any such indebtedness. All of the Existing
Subordinated Indebtedness originally issued by old KeyCorp and assumed by the
Corporation as a result of the merger on March 1, 1994 is referred to herein as
"Old KeyCorp Subordinated Indebtedness" and all of the Existing Subordinated
Indebtedness originally issued by Society is referred to herein as "Society
Subordinated Indebtedness." As of June 30, 1994, the Corporation had
outstanding $565.0 million aggregate principal amount of Existing Subordinated
Indebtedness, which included $365.0 million aggregate principal amount of Old
KeyCorp Subordinated Indebtedness and $200.0 million aggregate principal amount
of Society Subordinated Indebtedness.
The Society Subordinated Indebtedness is subordinated and subject in right of
payment, by its terms, to the prior payment in full of all "senior
indebtedness" (as defined in the indenture relating to the Society Subordinated
Indebtedness, generally, as indebtedness of the Corporation whenever created,
guaranteed, incurred, or assumed, for borrowed money, but excluding the Society
Subordinated Indebtedness and any other indebtedness as to which it is provided
in the instrument evidencing or creating such indebtedness that such
indebtedness is not superior in right of payment to the Society Subordinated
Indebtedness). The Old KeyCorp Subordinated Indebtedness is subordinate and
junior in right of payment, by its terms, to all "senior indebtedness" (as
defined in the indentures relating to the Old KeyCorp Subordinated
Indebtedness, generally, as any obligations of the Corporation to its
creditors, whenever incurred, other than Old KeyCorp Subordinated Indebtedness
and any obligation as to which, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligation is not "senior indebtedness". Because the Old KeyCorp Subordinated
Indebtedness and the Society Subordinated Indebtedness were issued by old
KeyCorp and Society, respectively, prior to the merger of old KeyCorp and
Society, the relationship between the Old KeyCorp Subordinated Indebtedness and
the Society Subordinated Indebtedness is not expressly provided for in the
respective indentures relating to such indebtedness.
The Subordinated Indenture excludes Existing Subordinated Indebtedness from
the definition of Senior Indebtedness and, accordingly, the Subordinated Debt
Securities will not be subordinated in right of payment
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to Existing Subordinated Indebtedness. The Subordinated Indenture also provides
that the Subordinated Debt Securities are not superior in right of payment to
any of the Existing Subordinated Indebtedness and do not constitute "senior
indebtedness" as defined in the indentures governing the Society Subordinated
Indebtedness and the Old KeyCorp Subordinated Indebtedness and, accordingly,
the Subordinated Debt Securities will not have the benefit of the subordination
provisions contained in such indentures.
Upon any payment or distribution of assets to creditors upon an insolvency
event relating to the Corporation, the holders of all Senior Indebtedness will
first be entitled to receive payment in full of all amounts due on or in
respect of all Senior Indebtedness before the holders of the Subordinated Debt
Securities will be entitled to receive any payment on account of the principal
of, premium, if any, or interest, if any, on the Subordinated Debt Securities
(Section 1602) or before the holders of Existing Subordinated Indebtedness will
be entitled to receive any payment on account of the principal of and interest
on such Existing Subordinated Indebtedness. In addition, upon any payment or
distribution of assets to creditors upon an insolvency event, the holders of
all Other Senior Obligations will first be entitled to receive payment in full
of all amounts due on or in respect of such Other Senior Obligations before the
holders of the Old KeyCorp Subordinated Indebtedness will be entitled to
receive any payment on account of the principal of and interest on the Old
KeyCorp Subordinated Indebtedness. If upon any such payment or distribution of
assets to creditors, after giving effect to such subordination provisions
applicable to the Subordinated Debt Securities and the Existing Subordinated
Indebtedness in favor of the holders of Senior Indebtedness and also, in the
case of the Old KeyCorp Subordinated Indebtedness, in favor of the holders of
Other Senior Obligations, there remain any amounts of cash, property, or
securities available for payment or distribution in respect of Subordinated
Debt Securities ("Excess Proceeds") and if, at such time, any Entitled Persons
(as defined below) in respect of Other Senior Obligations have not received
payment in full of all amounts due on or in respect of such Other Senior
Obligations, then such Excess Proceeds shall first be applied to pay or provide
for the payment in full of such Other Senior Obligations before any payment or
distribution may be made in respect of the Subordinated Debt Securities.
(Section 1614) "Entitled Persons" means persons who are entitled to payment
pursuant to the terms of Other Senior Obligations. (Section 101)
By reason of the subordination of the Subordinated Debt Securities in favor
of the holders of Senior Indebtedness and Other Senior Obligations, in the
event of a distribution of assets upon an insolvency event involving the
Corporation, the holders of the Subordinated Debt Securities may recover less
than the holders of Senior Indebtedness and the holders of Other Senior
Obligations, and as a result of the differences among the subordination
provisions applicable to the Society Subordinated Indebtedness, the Old KeyCorp
Subordinated Indebtedness and the Subordinated Debt Securities, including
differences in the definitions of senior indebtedness in the various
indentures, in an insolvency event involving the Corporation, any distribution
of assets among the holders of Society Subordinated Indebtedness, Old KeyCorp
Subordinated Indebtedness and the Subordinated Debt Securities may not be
ratable.
Ownership of Voting Stock of Significant Banks
The Senior Indenture provides that the Corporation will not sell or otherwise
dispose of, or grant a security interest in, or permit a Significant Bank (as
defined below) to issue, any shares of voting stock of such Significant Bank
(as defined below), unless the Corporation will own free of any security
interest at least 80% of the issued and outstanding voting stock of such
Significant Bank; provided, however, that the foregoing will not apply to (i)
any sale or disposition where the proceeds are invested, within 90 days
thereof, in any subsidiary (including any corporation which upon such
investment becomes a subsidiary) engaged in a banking business or any business
legally permissible for bank holding companies; provided, however, that if the
proceeds are so invested in any subsidiary engaged in a business legally
permissible for bank holding companies other than a banking business, the
Corporation shall be prohibited from selling or otherwise disposing of, or
granting a security interest in, or permitting such subsidiary to issue, any
shares of voting stock of such subsidiary to the same extent as if such
subsidiary were a Significant Bank if, upon making such investment, the assets
of or held for the account of such subsidiary constitutes 10% or more of the
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consolidated assets of the Corporation, or (ii) any disposition in exchange for
stock of any bank. (Section 1009) The term "Significant Bank" is defined in the
Senior Indenture as any directly or indirectly owned banking subsidiary of the
Corporation the assets of which constitute 10% or more of the consolidated
assets of the Corporation (currently Society National Bank, Key Bank of New
York and Key Bank of Washington.) (Section 101)
The Subordinated Indenture does not contain a similar restriction on the
Corporation's ability to sell or otherwise dispose of or grant a security
interest in, or permit a Significant Bank to issue any shares of voting stock
of any Significant Bank because inclusion of such a provision, under the
Interpretation, would result in the Subordinated Debt Securities issued
thereunder not qualifying as Tier II capital. The holders of Society
Subordinated Indebtedness have the benefit of a covenant in the subordinated
indenture relating thereto substantially similar to the covenant described
above and the holders of Old KeyCorp Subordinated Indebtedness have the benefit
of a covenant in the subordinated indentures relating thereto that restricts
the sale, issuance or disposition of shares of stock of, or mergers or asset
sales involving, certain banking subsidiaries. In order to conform to the
Interpretation, the Subordinated Indenture does not contain either such
covenant.
Events of Default
The Senior Indenture. The Senior Indenture defines an "Event of Default"
(with respect to any series of Senior Debt Securities) as any one of the
following events: (a) default in the payment of any interest upon any Senior
Debt Security when such interest becomes due and payable, and continuance of
such default for a period of 30 days; (b) default in the payment of the
principal of (or premium, if any, on) any Senior Debt Security when due and
payable at its maturity; (c) default in the deposit any sinking fund payment
when and as due; (d) failure to perform, or default in the performance or
breach of, any other covenant, warranty, or agreement of the Corporation in the
Senior Indenture (other than a default in the performance or breach of a
covenant or warranty or agreement included in the Senior Indenture solely for
the benefit of a series of Senior Debt Securities thereunder other than that
series) and continuance of such default or breach for a period of 60 days after
the holders of at least 25% in principal amount of the outstanding Senior Debt
Securities of such series have given written notice as provided in the Senior
Indenture; (e) acceleration of any indebtedness for borrowed money in an
aggregate principal amount exceeding $20 million of the Corporation or a
Significant Bank if such acceleration is not annulled within 10 days after
written notice is given by the holders of at least 25% in principal amount of
the outstanding Senior Debt Securities of such series requiring the Corporation
to cause such acceleration to be annulled as provided in the Senior Indenture;
(f) certain events involving the bankruptcy, insolvency, or reorganization of
the Corporation or the receivership or conservatorship of any Significant Bank
and (g) any other Event of Default with respect to Senior Debt Securities of
that series. (Section 501) Under certain circumstances not involving a default
in the payment of principal of (premium, if any), or interest, if any, owing on
the Senior Debt Securities of any series, or in the payment of any sinking fund
installment, the Senior Trustee shall be protected in withholding notice to the
holders of the Senior Debt Securities of such series of a default if the Senior
Trustee in good faith determines that the withholding of such notice is in the
interests of such holders and the Senior Trustee shall withhold such notice for
certain defaults for a period of 60 days. (Section 601)
If an Event of Default described in clauses (a), (b), (c), (d), (e), or (g)
above with respect to Senior Debt Securities of any series at the time
outstanding occurs and is continuing, either the Senior Trustee or the holders
of at least 25% in principal amount of the outstanding Senior Debt Securities
of that series may declare the principal amount (or, if the Senior Debt
Securities of that series are Original Issue Discount Debt Securities or
Indexed Securities, such portion of the principal amount as may be specified in
the terms thereof) of all the Senior Debt Securities of that series to be due
and payable immediately. If an Event of Default described in clause (f) above
occurs and is continuing, either the Senior Trustee or the holders of at least
25% in principal amount of all outstanding Senior Debt Securities then
outstanding may declare the principal amount (or, if the Senior Debt Securities
of any series are Original Issue Discount Debt Securities or Indexed
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Securities, such portion of the principal amount as may be specified in the
terms thereof) of all the Senior Debt Securities to be due and payable
immediately. At any time after a declaration of acceleration with respect to
Senior Debt Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained, the holders of a
majority in principal amount of outstanding Senior Debt Securities of that
series may, under certain circumstances, rescind and annul such acceleration.
(Section 502)
The Subordinated Indenture. The Subordinated Indenture defines an "Event of
Default" (with respect to any series of Subordinated Debt Securities) as
certain (a) events involving the bankruptcy, insolvency, or reorganization of
the Corporation or the receivership of a Major Bank (as defined below) and (b)
any other Event of Default provided with respect to Subordinated Debt
Securities of that series. (Section 501). The term "Major Bank" is defined in
the Subordinated Indenture as any directly or indirectly owned banking
subsidiary of the Corporation, the consolidated assets of which constitute 75%
or more of the consolidated assets of the Corporation. As of the date of this
Prospectus, no banking subsidiary of the Corporation constitutes a Major Bank.
If an Event of Default described in clause (a) above occurs and is continuing,
either the Subordinated Trustee or the holders of not less than 25% in
principal amount of the outstanding Subordinated Debt Securities may declare
the principal amount (or, if the Subordinated Debt Securities of any series are
Original Issue Discount Debt Securities or Indexed Securities, such portion of
the principal amount as may be specified in the terms of that series) of all
Subordinated Debt Securities to be due and payable immediately. If an Event of
Default described in clause (b) above with respect to Subordinated Debt
Securities of any series at the time outstanding occurs and is continuing,
either the Subordinated Trustee or the holders of not less than 25% in
principal amount of the outstanding Subordinated Debt Securities of that series
may declare the principal amount (or, if the Subordinated Debt Securities of
that series are Original Issue Discount Debt Securities or Indexed Securities,
such portion of the principal amount as may be specified in the terms of that
series) of all Subordinated Debt Securities of that series to be due and
payable immediately. At any time after a declaration of acceleration with
respect to Subordinated Debt Securities of any series has been made and before
a judgment or decree for payment of the money due has been obtained, the
holders of a majority in principal amount of the outstanding Subordinated Debt
Securities of that series may, under certain circumstances, rescind and annul
such acceleration. (Section 502)
Unless otherwise provided in the terms of a series of Subordinated Debt
Securities, there will be no right of acceleration of the payment of principal
of a series of Subordinated Debt Securities upon a default in the payment of
principal of (premium, if any), or interest, if any, owing on, or in the
performance of any covenant or agreement in, the Subordinated Debt Securities
of the particular series, or in the Subordinated Indenture.
In case a Default (as defined below) shall occur and be continuing, the
Subordinated Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the holders of Subordinated Debt Securities by
appropriate judicial proceeding as the Subordinated Trustee deems most
effective. The Subordinated Indenture defines a "Default" (with respect to any
series of Subordinated Debt Securities) as any one of the following events: (a)
an Event of Default; (b) default in the payment of any installment of interest,
if any, on any Subordinated Debt Security when such interest becomes due and
payable, and the continuance of such default for a period of 30 days (whether
or not such payment is prohibited by the subordination provisions); (c) default
in payment of principal of (or premium, if any, on) any Subordinated Debt
Security at its maturity (whether or not such payment is prohibited by the
subordination provisions); (d) failure to deposit any sinking fund payment when
due; (e) failure to perform any other covenants or warranties of the
Corporation in the Subordinated Indenture (other than a covenant or warranty
included in the Subordinated Indenture solely for the benefit of a series of
Subordinated Debt Securities other than that series) continued for a period of
60 days after holders of at least 25% in principal amount of outstanding
Subordinated Debt Securities have given written notice as provided in the
Subordinated Indenture; and (f) any other Default specified in the Subordinated
Indenture with respect to Subordinated Debt Securities of that series. (Section
503) Under certain circumstances not involving a default in the payment of
principal of (premium, if any), or interest, if any, owing on the Subordinated
Debt Securities of any series, or in the payment of any sinking fund
installment, the Subordinated Trustee shall be protected in withholding notice
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to the holders of the Subordinated Debt Securities of such series of a default
if the Subordinated Trustee in good faith determines that the withholding of
such notice is in the interests of such holders and the Subordinated Trustee
shall withhold such notice for certain defaults for a period of 60 days.
(Section 601)
In comparison to the Events of Default provided for in the Subordinated
Indenture and the subordinated indenture relating to the Old Key Subordinated
Indebtedness, the holders of Society Subordinated Indebtedness have the benefit
of broader events of default and related acceleration rights in the
subordinated indenture relating thereto, including, without limitation, any one
of the following "events of default" as defined in the subordinated indenture:
(a) default in the payment of any interest upon the Society Subordinated
Indebtedness when such interest becomes due and payable; (b) default in the
payment of principal of (or premium, if any, on) any Society Subordinated
Indebtedness when due and payable at its maturity; (c) default in the
performance, or breach, of any covenant or warranty of the Corporation; and (d)
acceleration of any indebtedness for borrowed money of the Corporation or a
principal bank (as defined in such subordinated indenture). In order to conform
to the Interpretation, the Subordinated Indenture does not contain any of such
events of default or acceleration rights.
Senior and Subordinated Indentures. Subject to the duty of the Trustee during
default to act with the required standard of care, under both the Senior
Indenture and the Subordinated Indenture, the applicable Trustee will be under
no obligation to exercise any of the rights or powers vested in it by the
Applicable Indenture at the request or direction of any of the holders of Debt
Securities of any series, unless such holders shall have offered to the Trustee
security or indemnity reasonably satisfactory to the Trustee. (Section 602)
Subject to such provisions for the indemnification of the Trustee and to
certain other conditions, the holders of a majority in aggregate principal
amount of outstanding Senior Debt Securities or outstanding Subordinated Debt
Securities of any series will have the right, subject to certain limitations,
to direct the time, method, and place of conducting any proceeding for any
remedy available to the Senior Trustee or Subordinated Trustee, respectively,
or exercising any trust or power conferred on the Senior Trustee or
Subordinated Trustee, respectively. (Section 512)
No holder of any series of Debt Securities will have any right to institute
any proceeding with respect to the Applicable Indenture, or for the appointment
of a receiver or trustee, or for any remedy thereunder, unless such holder
shall have previously given to the Trustee under the Applicable Indenture
written notice of a continuing Event of Default (in the case of Senior Debt
Securities) or a continuing Event of Default or Default (in the case of
Subordinated Debt Securities) and unless 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 security or indemnity reasonably satisfactory
to the Trustee, to such Trustee to institute such proceeding as trustee, and
such Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Debt Securities of that series a
direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. (Section 507) However, such limitations do not
apply to a suit instituted by a holder of a Debt Security for enforcement of
payment of the principal of (premium, if any,) or subject to certain
conditions, or interest, if any, on or after the respective due dates expressed
in such Debt Security. (Section 508)
The Corporation is required to furnish to the Trustee annually a statement as
to the performance by the Corporation of certain of its obligations under the
Indentures and as to any default in such performance. (Section 1005)
Modification and Waiver
Modifications and amendments of each of the Senior Indenture and the
Subordinated Indenture may be made by the Corporation and the Trustee under the
Applicable Indenture with the consent of the holders of not less than 66 2/3%
in principal amount of the outstanding Debt Securities of each series issued
under such Indenture and affected by the modification or amendment; provided,
however, that no such modification or amendment may, without the consent of the
holders of each outstanding Debt Security of the series affected
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thereby, (1) change the stated maturity of any principal of (or premium, if
any), or any installment of principal of or interest, if any, on, any Debt
Security of such series; (2) reduce the principal amount of, the rate of
interest on, or any premium payable upon the redemption of any, Debt Security
of such series; (3) change any obligation of the Corporation to pay Additional
Amounts in respect of any Debt Security of such series; (4) reduce the portion
of principal of an Original Issue Discount Security or Indexed Security that
would be due and payable upon a declaration of acceleration of the maturity
thereof or provable in bankruptcy; (5) adversely affect any right of repayment
at the option of the holder of any Debt Security of such series; (6) change the
place or currency or currencies of payment of principal of or any premium or
interest on any Debt Security of such series; (7) impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption or repayment, on or after any Redemption
Date or Repayment Date, as the case may be); (8) adversely affect the right to
convert any Debt Security of such series as may be provided pursuant to the
Applicable Indenture; (9) in the case of the Subordinated Indenture, modify the
subordination provisions in a manner adverse to the holders of the Subordinated
Debt Securities of such series; (10) reduce the percentage in principal amount
of the outstanding Debt Securities, the consent of whose holders is required
for modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indentures or for waiver of certain defaults; (11)
reduce the requirements for voting or quorum relating to Bearer Securities; or
(12) modify any of the provisions relating to supplemental indentures requiring
the consent of holders, relating to the waiver of past defaults or relating to
the waiver of certain covenants, except to increase the percentage of such
Outstanding Securities required for such actions or to provide that certain
other provisions of such Indenture cannot be modified or waived without the
consent of the holder of each Outstanding Security affected thereby. (Section
902)
In addition, under the Subordinated Indenture, no modification or amendment
thereof may adversely affect the rights of any holder of Senior Indebtedness or
Other Senior Obligations under Article Sixteen of such Indenture (described
under the caption "Subordination of Subordinated Debt Securities") without the
consent of such holder of Senior Indebtedness or Other Senior Obligations.
(Subordinated Indenture Section 907)
The holders of at least 66 2/3% in principal amount of the outstanding Senior
Debt Securities of any series or outstanding Subordinated Debt Securities of
any series may, on behalf of all holders of the outstanding Senior Debt
Securities of that series or outstanding Subordinated Debt Securities of that
series, respectively, waive compliance by the Corporation with certain
restrictive provisions of the Applicable Indenture. (Senior Indenture Section
1010; Subordinated Indenture Section 1009). The holders of not less than 66
2/3% in aggregate principal amount of the outstanding Senior Debt Securities of
any series or the outstanding Subordinated Debt Securities of any series may,
on behalf of all holders of the outstanding Senior Debt Securities of that
series or the outstanding Subordinated Debt Securities of that series,
respectively, waive any past default under the Applicable Indenture, except a
default in the payment of principal (or premium, if any), or interest, if any,
or in the performance of certain covenants. (Section 513)
Satisfaction and Discharge, Defeasance and Covenant Defeasance
The Corporation may discharge certain obligations to holders of Debt
Securities of a series that have not already been delivered to the applicable
Trustee for cancellation and that either have become due and payable or are by
their terms due and payable within one year (or scheduled for redemption within
one year) by irrevocably depositing with the applicable Trustee, in trust,
funds in an amount sufficient to pay the entire indebtedness on such Debt
Securities for principal (and premium, if any) and interest, with respect
thereto, to the date of such deposit (if such Debt Securities have become due
and payable) or to the Stated Maturity or Redemption Date, as the case may be.
(Section 401)
Each Indenture provides that, if the provisions of Article Thirteen are made
applicable to the Debt Securities of or within a series pursuant to Section 301
thereunder, the Corporation may elect either (i) to defease and be discharged
from any and all obligations with respect to such Debt Securities (except for
the obligations to pay Additional Amounts, if any; to register the transfer or
exchange of such Debt Securities;
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to replace temporary or mutilated, destroyed, lost or stolen Debt Securities;
to maintain one or more offices or agencies in respect of such Debt
Securities; and to hold moneys for payment in trust) ("defeasance") or (ii) to
be released (a) in the case of any such Debt Securities that are Senior Debt
Securities, from its obligations under Section 1009 of such Indenture or (b)
in the case of any such Debt Securities (whether they are Senior Debt
Securities or Subordinated Debt Securities), if so provided in the Applicable
Prospectus Supplement, from its obligations with respect to any other covenant
and, in the case of either (a) or (b) above, any omission to comply with such
obligations will not constitute a Default or an Event of Default with respect
to such Debt Securities ("covenant defeasance"), in either case upon the
irrevocable deposit by the Corporation with the applicable Trustee (or other
qualifying trustee), in trust, of (1) an amount, in the currency or currencies
in which such Debt Securities are then specified as payable at Stated
Maturity, (2) Government Obligations (as defined in the Indenture) applicable
to such Debt Securities (with such applicability being determined on the basis
of the currency in which such Debt Securities are then specified as payable at
Stated Maturity) that, through the payment of principal and interest in
accordance with their terms, will provide money in an amount, or (3) a
combination thereof in an amount, sufficient to pay the principal of (and
premium, if any, on) and interest, if any, on such Debt Securities, and any
mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor.
Such a trust may only be established if, among other things, the Corporation
has delivered to the applicable Trustee an opinion of counsel to the effect
that the holders of such Debt Securities to be defeased will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to U.S. federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such defeasance or covenant defeasance had not occurred,
and such opinion of counsel, in the case of defeasance under clause (i) above,
must refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable U.S. federal income tax law occurring after the date of
the Applicable Indenture. (Article Thirteen)
Unless otherwise provided in the Applicable Prospectus Supplement, if, after
the Corporation has deposited funds, Government Obligations, or both to effect
defeasance or covenant defeasance with respect to Debt Securities of a series,
(a) the holder of a Debt Security of such series is entitled to, and does,
elect pursuant to the terms of such Debt Security to receive payment in a
currency or currency unit other than that in which such deposit has been made
in respect of such Debt Security or (b) a Currency Conversion Event (as
defined in the applicable Indenture) occurs, then the indebtedness represented
by such Debt Security will be deemed to have been, and will be, fully
discharged and satisfied through the payment of the principal of (and premium,
if any) and interest, if any, on such Debt Security as they become due out of
the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency in which such Debt Security becomes payable as
a result of such election or such Currency Conversion Event based on the
applicable Market Exchange Rate. (Section 1305) Unless otherwise provided in
the Applicable Prospectus Supplement, all payments of principal of (and
premium, if any) and interest, if any, on any Debt Security that is payable in
a foreign currency with respect to which a Currency Conversion Event occurs
shall be made in U.S. dollars. (Section 312)
In the event the Corporation effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because
of the occurrence of any Event of Default other than the Event of Default
described in clause (d) under "Events of Default" with respect to the
obligations described under "Ownership of Voting Stock of Significant Banks"
above (which obligations would no longer be applicable to such Debt
Securities) or described in clause (d) or (g) under "Events of Default" with
respect to any other covenant with respect to which there has been defeasance,
the amount in such currency in which such Debt Securities are payable, and
Government Obligations on deposit with the applicable Trustee will be
sufficient to pay amounts due on such Debt Securities at the time of their
Stated Maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such Event of
Default. However, the Corporation would remain liable to make payment of such
amounts due at the time of acceleration.
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If the applicable Trustee or any Paying Agent is unable to apply any money in
accordance with the applicable Indenture by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Corporation's obligations under such
Indenture, until such time as such Trustee or Paying Agent is permitted to
apply all such money in accordance with such Indenture; provided, however,
that, if the Corporation makes any payment of principal of (or premium, if any)
or interest on any such Debt Security or coupon following the reinstatement of
its obligations, the Corporation shall be subrogated to the rights of the
holders of such Debt Securities to receive such payment from the money held by
such Trustee or Paying Agent.
The Applicable Prospectus Supplement may further describe the provisions, if
any, permitting defeasance or covenant defeasance, including any modifications
to the provisions described above, with respect to the Debt Securities of or
within a particular series and any related coupons.
Consolidation, Merger, and Sale of Assets
The Corporation, without the consent of the holders of any of the Debt
Securities under the Indentures, may consolidate with or merge into any other
person, may convey, transfer, or lease its assets substantially as an entirety
to any person, or may permit any person to merge into or consolidate with the
Corporation or convey, transfer or lease its property and assets substantially
as an entirety to the Corporation, provided that: (1) any successor or
purchaser is a corporation organized under the laws of any domestic
jurisdiction; (2) any such successor or purchaser assumes the Corporation's
obligations on such Debt Securities and under the Indentures; (3) after giving
effect to the transaction, with respect to any Senior Debt Securities, no Event
of Default and no event which, after notice of or lapse of time or both would
become an Event of Default or, with respect to any Subordinated Debt
Securities, no Default and no event that, after notice or lapse of time, would
become an Event of Default or a Default, shall have occurred and be continuing;
(4) with respect to the Senior Indenture, if, as a result of any such
consolidation or merger or such conveyance, transfer or lease, shares of voting
stock of any Significant Bank would become subject to a security interest not
permitted under the Senior Indenture, the Corporation or successor, as the case
may be, shall take such steps as shall be necessary effectively to secure the
Senior Debt Securities equally and ratably with (or prior to) all indebtedness
secured thereby; and (5) certain other conditions are met. (Section 801)
Conversion
The holders of Subordinated Debt Securities of a specified series that are
convertible into Capital Securities ("Subordinated Convertible Debt
Securities") may be entitled or, if so provided in the Applicable Prospectus
Supplement, may be required at such time or times specified in the Applicable
Prospectus Supplement relating to such Subordinated Convertible Debt
Securities, subject to prior redemption, repayment, or repurchase, to convert
any Subordinated Convertible Debt Securities of such series into Capital
Securities, at the conversion price set forth in such Applicable Prospectus
Supplement, subject to adjustment and to such other terms as are set forth in
such Applicable Prospectus Supplement. No separate consideration will be
received for any Capital Securities issued upon conversion of Subordinated
Convertible Debt Securities.
Risk Factors of Debt Securities Denominated in Foreign Currencies
Debt Securities denominated or payable in foreign currencies may entail
significant risks. These risks include, without limitation, the possibility of
significant fluctuations in the foreign currency market, the imposition of
foreign exchange controls, and potential illiquidity in the secondary market.
These risks will vary depending upon the currency involved. These risks may be
more fully described in the Applicable Prospectus Supplement.
Concerning the Trustee
Bankers Trust Company is Trustee under both the Senior Indenture and the
Subordinated Indenture. The Corporation and certain of its subsidiaries
maintain deposit accounts and conduct other banking transactions with Bankers
Trust Company in the ordinary course of business. Bankers Trust Company also
serves as trustee under a senior indenture of Old KeyCorp.
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DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the shares of Preferred Stock,
which sets forth certain general terms and provisions of the Preferred Stock to
which any Prospectus Supplement may relate, does not purport to summarize any
particular series of Preferred Stock. Certain terms of any offered series of
Preferred Stock will be described in the Applicable Prospectus Supplement
relating to such series of Preferred Stock. If so indicated in the Applicable
Prospectus Supplement, the terms of any series may differ from the terms set
forth below. The description of certain provisions of the Preferred Stock set
forth below does not purport to be complete and is subject to and qualified in
its entirety by reference to the Amended and Restated Articles of Incorporation
(the "Articles") and the Certificate of Amendment of the Amended and Restated
Articles of Incorporation of the Corporation that relates to a particular
series of Preferred Stock (the "Certificate") which will be filed with the
Secretary of State of the State of Ohio at or prior to the time of the sale of
the related series of Preferred Stock and which will be filed as an exhibit to
or incorporated by reference in the Registration Statement.
General
The Corporation is authorized by its Articles to issue from time to time up
to 25,000,000 shares of Preferred Stock, with a par value of $1 each. All
shares of Preferred Stock must be of equal rank and the express terms thereof
must be identical, except in respect of the terms that may be fixed by the
Board of Directors as described below, and each share of each series shall be
identical with all other shares of such series, except that in the case of a
series as to which dividends are cumulative, the dates from which dividends are
cumulative may vary to reflect differences in the dates of issue. The Preferred
Stock will, when issued against payment therefor, be fully paid and
nonassessable. The Corporation currently has issued and outstanding 1,280,000
shares of 10% Cumulative Preferred Stock. See "Preferred Stock Outstanding"
below for a discussion of the 10% Cumulative Preferred Stock.
The Board of Directors is authorized by the Articles to cause shares of
Preferred Stock to be issued in one or more series and with respect to each
such series to fix: (1) the designation of the series, which may be by
distinguishing number, letter, or title; (2) the authorized number of shares of
such series, which number the Board of Directors may, except to the extent
otherwise provided in the creation of the series, from time to time, increase
or decrease, but not below the number of shares thereof then outstanding; (3)
the dividend rate or rates (which may be fixed or adjustable) of the shares of
the series; (4) the dates on which dividends, if declared, shall be payable
and, in the case of series on which dividends are cumulative, the dates from
which dividends shall be cumulative; (5) the redemption rights and price or
prices, if any, for shares of the series, (6) the amount, terms, conditions,
and manner of operation of any retirement or sinking fund to be provided for
the purchase or redemption of shares of the series; (7) the amounts payable on
shares of the series in the event of any liquidation, dissolution, or winding
up of the affairs of the Corporation; (8) whether the shares of the series
shall be convertible into Common Shares or shares of any other series or class,
and, if so, the specification of such other class or series, the conversion
price or prices or rate or rates, any adjustment thereof, and all other terms
and conditions upon which such conversion may be made; and (9) the
restrictions, if any, upon the issue of any additional shares of the same
series or of any other class or series. The Board of Directors is authorized to
amend from time to time the Articles fixing, with respect to any unissued
shares of Preferred Stock, the matters described in clauses (1) through (9).
Each series of Preferred Stock will be offered on such of the above terms and
at such offering price as specified in the Applicable Prospectus Supplement.
As described under "Depositary Shares" below, the Corporation may, at its
option, elect to offer Depositary Shares (evidenced by depositary receipts)
which will represent a fraction to be specified in the Applicable Prospectus
Supplement relating to the particular series of Preferred Stock of a share of
the particular series of Preferred Stock issued and deposited with the
Depositary (as defined below), in lieu of offering full shares of such series
of the Preferred Stock.
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Certain Definitions
For the purposes of this Description of Preferred Stock:
Whenever reference is made to shares "ranking prior to the Preferred Stock,"
such reference shall mean and include all shares of the Corporation in respect
of which the rights of the holders thereof either as to the payment of
dividends or as to distribution in the event of a liquidation, dissolution, or
winding up of the Corporation are given preference over the rights of the
holders of Preferred Stock.
Whenever reference is made to shares "on a parity with the Preferred Stock,"
such reference shall mean and include all shares of the Corporation in respect
of which the rights of the holders thereof as to the payment of dividends or as
to distributions in the event of a liquidation, dissolution, or winding up of
the Corporation rank on an equality or parity with the rights of the holders of
Preferred Stock.
Whenever reference is made to shares "ranking junior to the Preferred Stock,"
such reference shall mean and include all shares of the Corporation in respect
of which the rights of the holders thereof as to the payment of dividends and
as to distributions in the event of a liquidation, dissolution, or winding up
of the Corporation are junior or subordinate to the rights of the holders of
Preferred Stock.
Dividends
The holders of Preferred Stock of each series, in preference to the holders
of Common Shares and of any other class of shares of the Corporation ranking
junior to the Preferred Stock shall be entitled to receive, out of any funds
legally available for the payment of dividends and when and as declared by the
Board of Directors, cash dividends at the rates set forth in the Applicable
Prospectus Supplement, and no more, payable on the dividend payment dates fixed
for such series set forth therein (each, a "Dividend Payment Date"). If any
date specified as a Dividend Payment Date is not a business day, dividends, if
declared, on the Preferred Stock will be paid on the immediately succeeding
business day, without interest. Such rates may be fixed or variable. If
variable, the formula used for determining the dividend rate for each dividend
period will be set forth in the Applicable Prospectus Supplement. Dividends on
the Preferred Stock may be cumulative or non-cumulative as provided in the
Applicable Prospectus Supplement.
No full dividends may be paid upon, declared, or set apart for the payment of
dividends on shares ranking on a parity with or junior to the Preferred Stock
unless dividends shall have been paid or set apart for payment on the Preferred
Stock.
Redemption
A series of Preferred Stock may be redeemable at any time, in whole or in
part, at the option of the Corporation or the holder thereof upon terms and at
the redemption prices set forth in the Applicable Prospectus Supplement
relating to such series.
Rights Upon Liquidation
The holders of shares of Preferred Stock of any series shall, in case of
liquidation, dissolution, or winding up of the Corporation, be entitled to
receive in full out of the assets of the Corporation, including its capital,
before any amount shall be paid or distributed among the holders of Common
Shares or any other shares ranking junior to the Preferred Stock, the amounts
set forth in the Applicable Prospectus Supplement with respect to shares of
such series, plus all accrued and unpaid dividends for such series, in
accordance with the terms set forth in the Applicable Prospectus Supplement.
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Conversion
The holders of specified series of Preferred Stock may be entitled or, if so
provided in the Applicable Prospectus Supplement, may be required, to convert
such shares into Common Shares or any other class or series of Capital
Securities or, in the case of Preferred Stock that is convertible at the option
of the Corporation, other debt securities of the Corporation, at such
conversion price or prices and on such other terms as may be set forth in the
Applicable Prospectus Supplement relating to such series of Preferred Stock.
Voting Rights
The holders of Preferred Stock shall not be entitled to vote upon matters
presented to the shareholders, except as provided herein or as required by law.
If the Corporation shall fail to pay full cumulative dividends on any series
of Preferred Stock or the 10% Cumulative Preferred Stock (if then outstanding)
for six quarterly dividend payment periods, whether or not consecutive, the
number of directors will be increased by two, and the holders of all
outstanding series of Preferred Stock and the 10% Cumulative Preferred Stock,
voting as a single class without regard to series, will be entitled to elect
such additional two directors until full cumulative dividends for all past
dividend payment periods on all series of Preferred Stock and the 10%
Cumulative Preferred Stock have been paid or declared and set apart for payment
or until non-cumulative dividends have been paid regularly for at least one
full year. Such right to vote separately as a class to elect directors shall,
when vested, be subject, always, to the same provisions for the vesting of such
right to elect directors separately as a class in the case of future dividend
defaults. At any time when such right to elect directors separately as a class
shall have so vested, the Corporation may, and upon the written request of the
holders of record of not less than twenty percent of the total number of shares
of the Preferred Stock and 10% Cumulative Preferred Stock of the Corporation
then outstanding shall, call a special meeting of shareholders for the election
of such directors. In the case of such a written request, such special meeting
shall be held within ninety days after the delivery of such request and, in
either case, at the place and upon the notice provided by law and in the
Regulations of the Corporation, provided that the Corporation shall not be
required to call such a special meeting if such request is received less than
120 days before the date fixed for the next ensuing annual meeting of
shareholders of the Corporation. Directors elected as aforesaid shall serve
until the next annual meeting of shareholders of the Corporation or until their
respective successors shall be elected and qualify. If, prior to the end of the
term of any director elected as aforesaid, a vacancy in the office of such
director shall occur during the continuance of a default in dividends on any
series of Preferred Stock by reason of death, resignation, or disability, such
vacancy shall be filled for the unexpired term by the appointment by the
remaining director or directors elected as aforesaid of a new director for the
unexpired term of such former director.
Under existing interpretations of the Federal Reserve Board and the OTS, if
the holders of any series of Preferred Stock (including, in this case, the 10%
Cumulative Preferred Stock) become entitled to vote for the election of
directors because dividends on such series are in arrears, such series may then
be deemed a "class of voting securities" and a holder of 25% or more of such
series (or a holder of 5% or more if such holder otherwise exercises a
"controlling influence" over the Corporation) may then be subject to regulation
as a bank holding company in accordance with the BHCA, and as a savings and
loan holding company in accordance with the HOLA. In addition, at such time,
(i) any bank holding company or foreign bank with a U.S. presence may be
required to obtain the approval of the Federal Reserve Board under the BHCA to
acquire or retain 5% or more of such series and (ii) any person other than a
bank holding company may be required to obtain the approval of the Federal
Reserve Board and the OTS under the CBCA to acquire or retain 10% or more of
such series.
The affirmative vote or consent of the holders of at least two-thirds of the
then outstanding shares of Preferred Stock, given in person or by proxy, either
in writing or at a meeting called for the purpose at which the holders of
Preferred Stock shall vote separately as a class, shall be necessary to effect
any amendment, alteration, or repeal of any of the provisions of the
Corporation's Articles or the Regulations of the
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Corporation which would be substantially prejudicial to the voting powers,
rights, or preferences of the holders of Preferred Stock (but so far as the
holders of Preferred Stock are concerned, such action may be effected with such
vote or consent); provided, however, that neither the amendment of the
Corporation's Articles to authorize or to increase the authorized or
outstanding number of shares of any class ranking junior to or on a parity with
the Preferred Stock, nor the amendment of the Regulations so as to change the
number of directors of the Corporation shall be deemed to be substantially
prejudicial to the voting powers, rights, or preferences of the holders of
Preferred Stock (and any such amendment referred to in this proviso may be made
without the vote or consent of the holders of the Preferred Stock); and
provided further that if such amendment, alteration, or repeal would be
substantially prejudicial to the rights or preferences of one or more but not
all then outstanding series of Preferred Stock, the affirmative vote or consent
of the holders of at least two-thirds of the then outstanding shares of the
series so affected shall be required.
The affirmative vote or consent of the holders of at least two-thirds of the
then outstanding shares of Preferred Stock and, if the holders of 10%
Cumulative Preferred Stock are entitled to vote on such matter pursuant to
Section 5 of Part A of Article IV of the Articles, the 10% Cumulative Preferred
Stock, given in person or by proxy, either in writing or at a meeting called
for the purpose at which the holders of Preferred Stock and, if applicable, 10%
Cumulative Preferred Stock shall vote as a single class shall be necessary to
effect any one or more of the following:
(a) The authorization of, or the increase in the authorized number of,
any shares of any class ranking prior to the Preferred Stock; or
(b) The purchase or redemption for sinking fund purposes or otherwise of
less than all of the then outstanding Preferred Stock except in accordance
with a purchase offer made to all holders of record of Preferred Stock,
unless all dividends on all Preferred Stock then outstanding for all
previous dividend periods shall have been declared and paid or declared and
funds therefor set apart and all accrued sinking fund obligations
applicable thereto shall have been complied with.
Preemptive Rights
No holder of Preferred Stock is entitled as a matter of right to subscribe
for or purchase any part of any issue of shares of the Corporation, of any
class whatsoever, or any part of any issue of securities convertible into
shares of the Corporation, of any class whatsoever, and whether issued for
cash, property, services, or otherwise.
Repurchase of Shares
Subject to the express terms of any series of Preferred Stock or the 10%
Cumulative Preferred Stock, the Corporation, by action of its Board of
Directors and without action by its shareholders, is authorized by its Articles
to purchase any shares of any series of Preferred Stock from time to time in
accordance with the provisions of the Ohio General Corporation Law. Such
purchases may be made either in the open market, or at public or private sales,
in such manner and amounts and at such price as the directors shall, from time
to time determine.
Preferred Stock Outstanding
The Corporation has issued and outstanding 1,280,000 shares of the 10%
Cumulative Preferred Stock, which is the only class or series of Preferred
Stock of the Corporation currently outstanding. Dividends, which are
cumulative, are payable on the 10% Cumulative Preferred Stock quarterly on
March 31, June 30, September 30, and December 31 of each year at the rate per
annum equal to 10% of the liquidation preference of $125, or $12.50, per share.
The 10% Cumulative Preferred Stock ranks prior to the Common Shares as to
payment of dividends and upon distribution in the event of a liquidation,
dissolution, or winding up of the Corporation. Unless full cumulative dividends
on the 10% Cumulative Preferred Stock have been paid for all past dividend
payment periods, no dividends (other than in Common Shares or another stock
ranking
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junior to the 10% Cumulative Preferred Stock as to dividends and upon
liquidation) shall be declared or paid or set aside for payment nor shall any
other distribution be made upon the Common Shares or on any other stock of the
Corporation ranking junior to or on a parity with the 10% Cumulative Preferred
Stock as to dividends or upon liquidation. Except as expressly required by
applicable law, the holders of shares of 10% Cumulative Preferred Stock are not
entitled to vote on matters presented to shareholders except under certain
circumstances, including (a) if the Corporation fails to pay full cumulative
dividends on the 10% Cumulative Preferred Stock or on any class of Preferred
Stock for six quarterly dividend periods, whether or not consecutive, in which
case the number of directors of the Corporation will be increased by two and
the holders of all outstanding shares of 10% Cumulative Preferred Stock,
together with the holders of all other outstanding classes of Preferred Stock,
will be entitled to vote separately as a single class without regard to series
to elect such additional two Directors until full cumulative dividends for all
past dividend payment periods on all classes of Preferred Stock and the 10%
Cumulative Preferred Stock have been paid or declared and set apart for
payment, and (b) the adoption of any amendment to the Corporation's Articles
that would adversely affect the powers, preferences, privileges, or rights of
the shares of the 10% Cumulative Preferred Stock, subject to certain
exceptions.
The holders of shares of 10% Cumulative Preferred Stock have no preemptive
rights to acquire any additional shares of the Corporation.
The 10% Cumulative Preferred Stock is not redeemable prior to June 30, 1996.
On and after such date, the 10% Cumulative Preferred Stock will be redeemable
in cash at the option of the Corporation, in whole or in part, from time to
time upon not less than 30 nor more than 60 days' notice, with the prior
approval of the Federal Reserve Board (if such approval is required), at $125
per share plus all accrued and unpaid dividends to the date fixed for
redemption. Shares of the 10% Cumulative Preferred Stock that are redeemed will
be deemed retired.
The 10% Cumulative Preferred Stock is not convertible into shares of any
other class or series of the capital stock of the Corporation.
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation, the holders of shares of 10% Cumulative
Preferred Stock will be entitled to receive out of the assets of the
Corporation available for distribution to shareholders, before any distribution
of assets is made to holders of Common Shares or any other class of stock of
the Corporation ranking junior to the 10% Cumulative Preferred Stock upon
liquidation, liquidating distributions in the amount of $125 per share plus
accrued and unpaid dividends. If, upon any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation the amounts payable
with respect to the 10% Cumulative Preferred Stock and any other shares of
stock of the Corporation ranking as to any such distribution on a parity with
the 10% Cumulative Preferred Stock are not paid in full, the holders of shares
of the 10% Cumulative Preferred Stock and of such other shares will share
ratably in any such distribution of assets of the Corporation in proportion to
the full respective preferential amounts to which they are entitled.
The 10% Cumulative Preferred Stock is evidenced by depositary shares, each of
which represents a one-fifth interest in a share of 10% Cumulative Preferred
Stock. The 10% Cumulative Preferred Stock is deposited under a Deposit
Agreement, dated July 27, 1991 between the Corporation and Society National
Bank, successor to The Chase Manhattan Bank, as depositary.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares and Depositary Receipts (as defined below) does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
forms of Deposit
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Agreement and Depositary Receipt relating to each series of the Preferred
Stock, which are filed with the Commission as exhibits to the Registration
Statement of which this Prospectus is a part, copies of which may be obtained
from the Corporation upon request.
General
The Corporation may elect to offer fractional shares of Preferred Stock
rather than full shares of Preferred Stock. In such event, the Corporation will
cause depositary receipts ("Depositary Receipts") to be issued for Depositary
Shares, each of which will represent a fraction (to be set forth in the
Applicable Prospectus Supplement relating to a particular series of Preferred
Stock) of a share of a particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
the Corporation and a bank or trust company selected by the Corporation having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000, and any successor as depositary (the
"Depositary"). Subject to the terms of the Deposit Agreement, each owner of a
Depositary Share will be entitled, in proportion to the applicable fraction of
a share of Preferred Stock represented by such Depositary Share, to all the
rights, preferences, and privileges of the Preferred Stock represented thereby,
including any and all dividend, voting, redemption, conversion, and liquidation
rights provided for in the Certificate.
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement. Depositary Receipts will be distributed to
those persons purchasing the fractional shares of Preferred Stock in accordance
with the terms of the offering.
Pending the preparation of definitive Depositary Receipts, the Depositary
will, upon the written order of the Corporation or any holder of Preferred
Stock, execute and deliver temporary Depositary Receipts which are
substantially identical to, and entitle the holders thereof to all the benefits
pertaining to, the definitive Depositary Receipts. Definitive Depositary
Receipts will be prepared thereafter without unreasonable delay, and temporary
Depositary Receipts will be exchangeable for definitive Depositary Receipts
upon surrender of the temporary Depositary Receipts at the Depositary's
principal office or such other office or offices, if any, as the Depositary may
designate, at the Corporation's expense and without charge to the holder.
Dividends and Other Distributions
The Depositary will distribute cash dividends or other cash distributions
received in respect of the deposited shares of Preferred Stock, including any
cash received upon redemption of any shares of Preferred Stock, to the record
holders of Depositary Receipts relating to such Preferred Stock in such amounts
as are, as nearly as practicable, in proportion to the numbers of Depositary
Shares evidenced by the Depositary Receipts held by such holders.
In the event of a distribution other than in cash on the deposited shares of
Preferred Stock, the Depositary will distribute property received by it to the
record holders of Depositary Receipts in such amounts as are, as nearly as
practicable, in proportion to the numbers of such Depositary Shares evidenced
by the Depositary Receipts held by such holders, in any manner that the
Depositary and the Corporation may deem equitable and practicable for
accomplishing such distribution. If the Depositary, after consultation with the
Corporation, determines that such distribution cannot be made proportionately
or that it is otherwise not feasible to make such distribution, it may, with
the approval of the Corporation, adopt such method as it deems equitable and
practicable for the purpose of effecting such distribution, including the
public or private sale of the property received. The Depositary will distribute
or make available for distribution the net proceeds of any such sale to the
holders entitled thereto.
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Redemption of Preferred Stock
A series of Preferred Stock may be redeemable at any time, in whole or in
part, at the option of the Corporation or the holder thereof, as set forth in
the Applicable Prospectus Supplement relating to such series of Preferred
Stock. Whenever the Corporation elects to redeem shares of Preferred Stock held
by the Depositary, the Depositary will redeem as of the same redemption date
the number of Depositary Shares representing shares of Preferred Stock so
redeemed, provided the Corporation shall have paid in full to the Depositary
the redemption price of the Preferred Stock to be redeemed. In the event of
such a redemption at the option of the Corporation, the Depositary Shares will
be redeemed from the proceeds received by the Depositary resulting from the
redemption of such Preferred Stock held by the Depositary. If fewer than all
the outstanding Depositary Shares are to be redeemed, the Depositary Shares to
be redeemed will be selected by the Depositary by lot or pro rata or by any
other equitable method, in each case as may be determined by the Corporation.
In addition, although Depositary Shares, as such, are not redeemable at the
option of the holder of Depositary Receipts evidencing Depositary Shares, such
holder may, if so specified in the Applicable Prospectus Supplement relating to
an offering of Depositary Shares, surrender Depositary Receipts with written
instructions to the Depositary to instruct the Corporation to cause the
redemption of any specified number of whole or fractional shares of Preferred
Stock represented by the Depositary Shares evidenced by such Depositary
Receipts. The Corporation will thereafter cause the redemption of the Preferred
Stock at the redemption price utilizing the same procedures as those provided
for delivery of Preferred Stock to effect such redemption.
In the event of redemption at the option of either the Corporation or the
holders of Depositary Receipts, the redemption price per Depositary Share will
be equal to the applicable fraction of the redemption price per share paid in
respect of the shares of the deposited Preferred Stock so redeemed, plus any
other money and other property, if any, represented by each such Depositary
Share, including an amount equal to any accrued and unpaid dividends thereon to
the date of such redemption.
Unless the Corporation defaults in the payment of the redemption price of any
Preferred Stock called for redemption by the Corporation or the holder thereof
and unless otherwise specified in the Certificate, (i) from and after the
redemption date, all dividends in respect of the shares of Preferred Stock
called for redemption will cease to accrue, the Depositary Shares so called for
redemption shall no longer be deemed outstanding, and, except as set forth in
clause (ii) below, all rights of holders of such Depositary Shares shall
terminate except for the right to receive the redemption price thereof, and
(ii) in the case of any redemption at the option of the Corporation or at the
option of the holder, any rights of conversion in respect of such shares of
Preferred Stock shall terminate on the close of business on the redemption
date.
Conversion of Preferred Stock at the Option of the Corporation
The holders of Depositary Shares may be obligated at any time or upon
maturity of the Preferred Stock represented by the Depositary Shares to convert
the Depositary Shares for the number of whole shares of Capital Securities or
other debt securities of the Corporation (as the case may be, in accordance
with the terms of such series of Preferred Stock) in proportion to the number
of shares of Preferred Stock represented by the Depositary Shares. Whenever the
Corporation exercises its option to convert shares of Preferred Stock held by
the Depositary in whole or in part, the Depositary will convert as of the same
conversion date the number of Depositary Shares representing shares of
Preferred Stock so converted provided the Corporation shall have issued and
deposited with the Depositary the Capital Securities or other debt securities
for the Preferred Stock to be converted and paid in full to the Depositary any
accrued and unpaid dividends thereon. In the event of such conversion at the
option of the Corporation, the Depositary Shares will be converted at a
conversion rate per Depositary Share equal to the applicable fraction of the
conversion rate per share then in effect in respect of the shares of deposited
Preferred Stock so converted as such conversion rate may be adjusted from time
to time as provided in the Certificate of Amendment, plus any other money and
other
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property, if any, represented by each such Depositary Share, including all
amounts paid by the Corporation in respect of dividends which on the conversion
date have accrued on the shares of Preferred Stock to be so converted and have
not theretofore been paid. If fewer than all the outstanding Depositary Shares
are to be converted, the Depositary Shares to be converted will be selected by
the Depositary by lot or pro rata or by any other equitable method, in each
case as may be determined by the Corporation.
From and after the dated fixed for conversion, all dividends in respect of
the shares of Preferred Stock called for conversion shall cease to accrue to
the extent set forth in the Certificate, any rights of conversion or redemption
at the option of the holders of the Depositary Shares represented by Depositary
Receipts evidencing the shares of Preferred Stock called for conversion shall
terminate at the close of business on such conversion date to the extent set
forth in the Certificate, the Depositary Shares called for conversion will no
longer be deemed to be outstanding, and all rights of the holders of the
Depositary Receipts evidencing the Depositary Shares will cease, except the
right to receive the securities payable upon such conversion and any money and
other property, if any, to which the holders of such Depositary Shares were
entitled upon such conversion upon surrender to the Depositary of the
Depositary Receipts evidencing such Depositary Shares.
Conversion of Preferred Stock at the Option of the Holder
The Depositary Shares, as such, are not convertible at the option of the
holder thereof into Common Shares or any other securities or property of the
Corporation. Nevertheless, if so specified in the Applicable Prospectus
Supplement relating to an offering of Depositary Shares, any holder of
Depositary Shares representing any series of Preferred Stock which is
convertible at the option of the holder, upon surrender of the Depositary
Receipts therefor and delivery of instructions to the Depositary, may cause the
Corporation to convert any specified number of shares of Preferred Stock
represented by the Depositary Shares evidenced by such Depositary Receipts into
the number of whole Common Shares or whole number of shares of any other class
or series of Capital Securities of the Corporation (as the case may be, in
accordance with the terms of such series of the Preferred Stock) as are
issuable, as provided in the Certificate upon conversion of such shares of
Preferred Stock at the conversion rate (as such term is defined in the
Certificate) then in effect, as such conversion rate may be adjusted by the
Corporation from time to time as provided in the Certificate. In the event that
a holder delivers Depositary Receipts to the Depositary for conversion which in
the aggregate are convertible either into less than one whole Common Share or
one whole share of any other class or series of Capital Securities or into any
number of whole Common Shares or whole shares of any other class or series of
Capital Securities plus an excess constituting less than one whole Common Share
or one whole share of any other class or series of Capital Securities, the
holder shall receive payment in lieu of such fractional Common Shares or
fractional shares of such Capital Securities.
Withdrawal of Preferred Stock
Any holder of Depositary Receipts may, upon surrender of such Depositary
Receipts therefor to the Depositary (unless the related Preferred Stock has
previously been called for redemption or conversion at the option of the
Corporation), receive the number of whole shares of the related series of
Preferred Stock and any money and other property represented by such Depositary
Receipts. Holders of Depositary Receipts making such withdrawals will be
entitled to receive whole shares of Preferred Stock on the basis set forth in
the Applicable Prospectus Supplement for such series of Preferred Stock, but
holders of such whole shares of Preferred Stock will not thereafter be entitled
to deposit such Preferred Stock under the Deposit Agreement or to receive
Depositary Shares therefor. If the Depositary Shares represented by the
Depositary Receipts surrendered by the holder in connection with such
withdrawal exceed the number of Depositary Shares that represent the number of
whole shares of Preferred Stock to be withdrawn, the Depositary will deliver to
such holder at the same time a new Depositary Receipt evidencing such excess
number of Depositary Shares.
Voting the Preferred Stock
Upon receipt of notice of any meeting at which the holders of shares of the
Preferred Stock are entitled to vote, the Depositary will, as soon as
practicable thereafter, mail the information contained in such notice
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of meeting to the record holders of the Depositary Receipts representing the
Depositary Shares relating to such Preferred Stock. Each record holder of such
Depositary Receipt on the record date (which will be the same date as the
record date of the Preferred Stock) will be entitled to instruct the Depositary
as to the exercise of the voting rights pertaining to the amount of Preferred
Stock represented by such holder's Depositary Shares. Upon the written request
of a record holder of such Depositary Receipt, the Depositary will, insofar as
practicable, vote or cause to be voted the amount of Preferred Stock
represented by such Depositary Shares evidenced by such Depositary Receipt in
accordance with such instructions, and the Corporation will agree to take all
reasonable actions which may be deemed necessary by the Depositary in order to
enable the Depositary to do so. The Depositary will abstain from voting shares
of the Preferred Stock to the extent it does not receive specific instructions
from the holder of Depositary Receipts evidencing the Depositary Shares
representing such Preferred Stock. The Depositary will not be required to
exercise discretion in voting any Preferred Stock represented by the Depositary
Shares evidenced by such Receipts.
Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time and from time to time be
amended by agreement between the Corporation and the Depositary in any respect
that they may deem necessary or desirable. However, any amendment which
materially and adversely alters the rights of the holders of Depositary
Receipts or which would be materially and adversely inconsistent with the
rights granted to the holders of the Preferred Stock will not be effective
unless such amendment has been approved by the holders of at least a majority
of the Depositary Shares then outstanding.
The Deposit Agreement automatically terminates if (i) all outstanding
Depositary Shares have been redeemed, converted, or withdrawn; (ii) each share
of Preferred Stock has been converted into Common Shares or shares of any other
class or series of Capital Securities; or (iii) there has been a final
distribution in respect of the Preferred Stock in connection with any
liquidation, dissolution, or winding up of the Corporation and such
distribution has been distributed to the holders of Depositary Receipts. The
Deposit Agreement also may be terminated by the Corporation at any time upon
not less than 60 days prior written notice to the Depositary, in which case the
Depositary will, upon a date not later than 30 days after the date of such
notice, deliver to the record holders, upon surrender of the Depositary
Receipts, such number of whole shares of Preferred Stock as are represented by
such Depositary Receipts. In the event that such Depositary Receipts represent
a fractional number of shares of Preferred Stock, the Depositary will aggregate
all interests in such fractional shares, and, with the approval of the
Corporation, adopt such method as it deems equitable and practicable for the
purpose of effecting the distribution of such interests, including the public
or private sale of the whole number of shares of Preferred Stock so aggregated,
or any part thereof, after which the Depositary will distribute or make
available for distribution to the holders of such Depositary Receipts, as the
case may be, the net proceeds of any such sale.
Charges of Depositary and other Taxes and Charges
The Corporation will pay all fees and expenses of the Depositary, and all
charges of the Depositary in connection with the initial deposit of the
Preferred Stock and the initial issuance of the Depositary Shares evidenced by
the Depositary Receipts, all withdrawals of shares of Preferred Stock by
holders of Depositary Shares, any redemption or conversion of the Preferred
Stock at the option of such holder and any redemption or conversion of the
Preferred Stock at the option of the Corporation. The Corporation will pay all
transfer and other taxes and governmental charges arising solely from the
existence of the depositary arrangements. Holders of Depositary Shares will pay
such other transfer and other taxes and governmental charges as are expressly
provided in the Deposit Agreement to be for their accounts.
Resignation and Removal of Depositary
The Depositary may resign at any time by delivering to the Corporation notice
of its election to do so, and the Corporation may at any time remove the
Depositary by notice of such removal delivered to the
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Depositary, any such resignation or removal to take effect upon the appointment
of a successor Depositary and its acceptance of such appointment. Such
successor Depositary must be appointed within 60 days after delivery of the
notice of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000.
Miscellaneous
The Depositary will forward to the holders of Depositary Receipts all notices
and reports from the Corporation which are delivered to the Depositary in its
capacity as holder of Preferred Stock and which the Corporation is required to
furnish to the holders of the Preferred Stock.
Neither the Depositary nor the Corporation will be liable to any holder of
any Depositary Receipt if it is prevented or delayed by reason of any present
or future law or regulation of the United States or of any other governmental
authority, or by reason of any present or future provision of the Articles or
the Certificate or by any other circumstance beyond its control in performing
its obligations under the Deposit Agreement or by reason of any exercise of, or
failure to exercise, any discretion provided for in the Deposit Agreement. The
obligations and liabilities of the Corporation to holders of Depositary
Receipts and the Depositary under the Deposit Agreement or any Depositary
Receipt will be limited to performance in good faith of such duties as are
specifically set forth in the Deposit Agreement and the Corporation and the
Depositary will not be obligated to appear in, prosecute, or defend any action,
suit, or other proceeding in respect of deposited shares of Preferred Stock,
Depositary Shares, or Depositary Receipts that in its opinion may subject it to
expense or liability unless satisfactory indemnity is furnished. The Depositary
and the Corporation may rely upon the written advice of counsel and the written
advice of and information provided by any accountant, any holders of Depositary
Receipts and any other persons believed by it in good faith to be competent to
give such advice or information and upon documents believed by it to be genuine
and to have been signed or presented by the proper party or parties.
In the event the Depositary shall receive conflicting claims, requests, or
instructions from any holders of Depositary Receipts, on the one hand, and the
Corporation, on the other hand, the Depositary shall be entitled to act on such
claims, requests, or instructions received from the Corporation.
DESCRIPTION OF COMMON SHARES
The description of certain provisions of the Common Shares set forth below
does not purport to be complete and is subject to and qualified in its entirety
by reference to the Articles and the Regulations (i.e. by-laws) of KeyCorp
which are exhibits to the Registration Statement.
General
The Corporation's Common Shares as of June 30, 1994 consisted of 900,000,000
authorized shares, with a par value of $1 each, of which there were 244,246,444
shares outstanding (exclusive of treasury shares). The Common Shares are traded
on the New York Stock Exchange. The transfer agent and registrar for the Common
Shares is Society National Bank.
Common Shares of the Corporation may be issued from time to time, in such
amounts and proportion and for such consideration as may be fixed by the Board
of Directors of the Corporation. No holder of Common Shares has any preemptive
or preferential rights to purchase or to subscribe for any shares of capital
stock or other securities which may be issued by the Corporation. The Common
Shares have no redemption or sinking fund provisions applicable thereto. Common
Shares do not have any conversion rights. The rights of holders of Common
Shares will be subject to, and may be adversely affected by, the rights of
holders of any Preferred Stock that may be issued in the future.
The Corporation may issue authorized but unissued Common Shares in connection
with several employee benefit and stock option and incentive plans maintained
by the Corporation or its subsidiaries, and the Corporation's Automatic
Dividend Reinvestment and Cash Payment Plan.
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The outstanding Common Shares are fully paid and non-assessable and future
issuances of Common Shares, when fully paid for, will be non-assessable except
that in both cases Section 1701.95 of the Ohio General Corporation Law provides
that a shareholder who knowingly receives any dividend, distribution, or
payment made contrary to law or the articles of a corporation shall be liable
to the Corporation for the amount received by him that is in excess of the
amount that could have been paid or distributed without violation of law or the
articles.
Dividends
When, as, and if dividends, payable in cash, stock, or other property, are
declared by the Board of Directors of the Corporation out of funds legally
available therefor, the holders of Common Shares are entitled to share equally,
share for share, in such dividends. The payment of dividends on the Common
Shares is subject to the prior payment of dividends on the Preferred Stock and
on the 10% Cumulative Preferred Stock.
Voting
Except as described under "Outstanding Preferred Stock" above, holders of
Common Shares have exclusive voting rights of the Corporation and are entitled
to one vote for each share on all matters voted upon by the shareholders.
Holders of Common Shares do not have the right to cumulate their voting power.
Liquidation
In the event of any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common Shares
are entitled to receive, on a share for share basis, any assets or funds of the
Corporation which are distributable to its holders of Common Shares upon such
events, subject to the prior rights of creditors of the Corporation and holders
of the Corporation's outstanding Preferred Stock and the 10% Cumulative
Preferred Stock.
Shareholder Rights Plan
In August 1989, the Corporation's Board of Directors declared a dividend
consisting of Rights to Purchase Common Shares ("Rights"). One of the Rights
was distributed with respect to each Common Share outstanding on September 12,
1989. Rights have been and will continue to be issued in respect to all Common
Shares that are issued after September 12, 1989 but before the earlier of the
expiration or redemption of the Rights or the occurrence of a Triggering Event
(as defined below), or upon the exercise of any employee stock option granted
prior to a Triggering Event. The description and terms of the Rights are set
forth in the Rights Agreement, dated as of August 25, 1989, between the
Corporation and First Chicago Trust Company of New York, as Rights Agent, as
amended by the First Amendment to Rights Agreement, dated as of February 21,
1991, between the Corporation and the First Chicago Trust Company of New York,
as Rights Agent, a Second Amendment to Rights Agreement, dated as of September
12, 1991, between the Corporation and First Chicago Trust Company of New York,
as Rights Agent, a letter of resignation of First Chicago Trust Company of New
York, dated June 26, 1992, a letter of the Corporation, dated June 26, 1992, to
Ameritrust Texas National Association (now Society National Bank), and a Third
Amendment to Rights Agreement, dated as of October 1, 1993, between the
Corporation and Society National Bank, as Rights Agent (such documents being
hereinafter collectively referred to as "Rights Agreement" which is filed as an
exhibit to the Registration Statement). The Rights are designed to protect the
interests of the Corporation and its shareholders against coercive takeover
tactics. The purpose of the Rights Agreement is to encourage potential
acquirors to negotiate with the Corporation's Board of Directors prior to
attempting a takeover and to give the Board leverage in negotiating on behalf
of all shareholders the terms of any proposed takeover. The Rights Agreement
may, but is not intended to, deter takeover proposals.
Each of the Rights initially represents the right to purchase one Common
Share for $65 (the "Purchase Price"). The Rights will become exercisable 20
days after the earlier of (1) the commencement of a tender offer or exchange
offer that would result in a person or group becoming an Acquiring Person (as
defined below), or (2) a public announcement that a person or group has become
the beneficial owner of 15% or more of the outstanding Common Shares (such
person or group being an "Acquiring Person").
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Until the Rights become exercisable, they will trade with the Common Shares,
and any transfer of Common Shares will also constitute a transfer of the
associated Rights. When the Rights become exercisable, they will begin to trade
separate and apart from the Common Shares. At that time, separate certificates
representing the Rights will be mailed to holders.
Twenty days after certain events occur ("Flip-in Events"), each of the Rights
will become the right to purchase one Common Share for the then par value per
share (now $1.00 per share), and the Rights beneficially owned by an Acquiring
Person will become void. The Flip-in Events are (1) the beneficial ownership by
a person or group of 15% or more of the outstanding Common Shares, unless the
Common Shares are acquired in a tender or exchange offer for all of the Common
Shares at a price and on other terms approved in advance by the Corporation's
Board of Directors, (2) certain self-dealing transactions between the
Corporation and an Acquiring Person, and (3) a reclassification or
recapitalization of the Corporation that has the effect of increasing by more
than 1% the percentage of the Common Shares owned by an Acquiring Person.
If, after a person or group becomes an Acquiring Person, the Corporation is
acquired in a merger or other business combination or 50% or more of its assets
or earning power is sold, each of the Rights will "flip-over" and become the
right to purchase common shares of the acquiror (a "Flip-over Event"). The
holder (other than the Acquiring Person) of each Right would, upon the
occurrence of a Flip-over Event, be entitled to purchase for the then par value
of a Common Share (now $1.00) the number of common shares of the acquiror
having a market price equal to the market price of a Common Share.
The Purchase Price and/or the number of Common Shares (or common shares of an
acquiror) to be purchased upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution in the event the Corporation: (1)
declares a dividend on the Common Shares payable in Common Shares, (2)
subdivides or combines the outstanding Common Shares, (3) issues any shares
other than Common Shares in a reclassification of the Common Shares or (4)
makes a distribution to all holders of Common Shares, of debt securities,
subscription rights, warrants, or other assets (except regular cash dividends).
With certain exceptions, no adjustment will be required until a cumulative
adjustment of at least 1% is required. The Corporation is not required to issue
fractional shares and, instead, may make a cash payment based on the market
price of the Common Shares.
The Corporation's Board of Directors may redeem the Rights for 1/2c each (the
"Redemption Price") at any time before a "Triggering Event" (which is defined
as the occurrence of a Flip-over Event or the 20th day after a Flip-in Event).
However, the Rights may not be redeemed while there exists an Acquiring Person
unless (1) Continuing Directors, as defined below, constitute a majority of the
Board of Directors and (2) a majority of the Continuing Directors approves the
redemption. "Continuing Directors" are defined as directors who were in office
prior to a person or group becoming an Acquiring Person or whose election to
office was recommended by a majority of the Continuing Directors and who are
not affiliated with the Acquiring Person. The Rights will expire on September
12, 1999, unless they are redeemed before that date.
Until the Rights are exercised, the holders of the Rights, as such, will have
no rights as shareholders of the Corporation, including the right to vote or
receive dividends. Upon exercise of the Rights, the holder of the Common Share
received upon the exercise thereof will be entitled to all the rights of any
other holder of Common Shares.
The provisions of the Rights Agreement may be amended by the Corporation's
Board of Directors to cure any ambiguity or correct any defect or inconsistency
or, prior to a Triggering Event, to make other changes that the Board of
Directors deems to be desirable and not adverse to the interests of the
Corporation and its shareholders.
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<PAGE>
DESCRIPTION OF CAPITAL SECURITIES
The following description of Capital Securities is included in this
Prospectus because a Prospectus Supplement may provide that Capital Securities
will be issuable upon conversion at the option of the Corporation of a series
of Subordinated Debt Securities or Preferred Stock. Whenever Capital Securities
are issued upon conversion of Subordinated Debt Securities, the Corporation
will be obligated to deliver Capital Securities with a Market Value (as defined
below) equal to the principal amount of such Subordinated Debt Securities. In
addition, the Corporation will unconditionally undertake to sell the Capital
Securities in a sale (the "Secondary Offering") on behalf of any holders who
elect to receive cash for the Capital Securities in which event the Corporation
will bear all expenses of the Secondary Offering, including underwriting
discounts and commissions. There can be no assurance, however, that there will
be a market for the Capital Securities when issued or at any time thereafter.
If the Corporation fails to deliver any Capital Securities when required to be
delivered, the Trustee may institute judicial proceedings for (i) specific
performance, (ii) money damages equal to the principal amount of the
Subordinated Debt Securities for which Capital Securities were to be converted
or (iii) any other proper remedy. If the Corporation fails to effect the
Secondary Offering, it will deliver to the holders Capital Securities and not
cash, upon exchange of the Subordinated Debt Securities. In such event, the
Corporation will have no specifically enforceable obligation to effect the
Secondary Offering, but will not be relieved of any liability for money damages
it would have for breach of its obligation to effect a Secondary Offering of
sufficient amounts of Capital Securities. The "Market Value" of any Capital
Securities means their sale price in the Secondary Offering. If the Corporation
does not effect the Secondary Offering, the Market Value of such Capital
Securities shall be their fair value when exchanged as determined by three
independent nationally recognized investment banking firms selected by the
Corporation.
Whenever Preferred Stock is convertible at the option of the Corporation into
Capital Securities, the Corporation will be obligated to deliver Capital
Securities in an amount either based upon a conversion price or with a required
conversion value. The conversion value will be determined by then market
prices, by an auction or bidding procedure or by such other method as set forth
in the Applicable Prospectus Supplement.
The staff of the Commission has advised that Rules 13e-4 and 14e-1 of the
Commission's rules and regulations relating to tender offers by issuers, as
currently in effect and interpreted, would be applicable to the conversion of
Capital Securities for Subordinated Debt Securities of any series and the
Secondary Offering. If, at the time of the conversion of Capital Securities for
Subordinated Debt Securities of any series and the Secondary Offering, Rule
13e-4 or Rule 14e-1 (or any successor rule or rules) applies to such
transactions, the Corporation will comply with such rule (or any successor rule
or rules) and will afford holders of such Subordinated Securities all rights
and will make all filings required by such rule (or successor rule or rules).
Rule 13e-4 and Rule 14e-1 may also be deemed to apply to Preferred Stock that
is convertible at the option of the Corporation.
The Capital Securities may consist of Common Shares or Preferred Stock. All
Capital Securities which will be issuable upon conversion of Subordinated Debt
Securities or Preferred Stock will, upon issuance, be duly authorized, validly
issued and, if applicable, fully paid and non-assessable.
Any shares of Preferred Stock to be so issued will have such designations,
preferences, dividend, and other rights, qualifications, limitations, and
restrictions as may be determined by the Corporation and approved by the Board
of Directors.
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<PAGE>
DESCRIPTION OF SECURITIES WARRANTS
The Corporation may issue, separately or together with any Debt Securities,
Preferred Stock, Common Shares, or Depositary Shares, Securities Warrants for
the purchase of other Debt Securities, Preferred Stock, Common Shares, or
Depositary Shares (collectively, the "Underlying Securities"). The Securities
Warrants will be issued under a warrant agreement (a "Securities Warrant
Agreement") to be entered into between the Corporation and a bank or trust
company, as warrant agent (the "Securities Warrant Agent"), all as set forth in
the Applicable Prospectus Supplement relating to the particular issue of
Securities Warrants. The form of Securities Warrant Agreement, including the
form of certificates representing the Securities Warrants ("Securities Warrant
Certificates"), reflecting the alternative provisions to be included in the
Securities Warrant Agreements that will be entered into with respect to
particular offerings of Securities Warrants, is filed as an exhibit to the
Registration Statement. The following summaries of certain provisions of the
Securities Warrant Agreement and the Securities Warrant Certificates, which are
filed as exhibits to the Registration Statement, do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Securities Warrant Agreement and the Securities Warrant
Certificates, respectively, including the definitions therein of certain terms.
Wherever defined terms of the Securities Warrant Agreement are referred to, it
is intended that such defined terms shall be incorporated herein by reference.
General
The Applicable Prospectus Supplement relating to the particular issue of
Securities Warrants offered thereby will describe the terms of the offered
Securities Warrants, the Securities Warrant Agreement relating to the offered
Securities Warrants, and the Securities Warrant Certificates representing the
offered Securities Warrants, including the following where applicable: (1) if
the Securities Warrants are offered for separate consideration, the offering
price and the currency for which Securities Warrants may be purchased; (2) the
title, aggregate principal amount, currency, and terms of the series of Debt
Securities purchasable upon exercise of the Debt Warrants and the price at
which such Debt Securities may be purchased upon such exercise; (3) the title,
number of shares, stated value, and terms (including, without limitation,
liquidation, dividend, conversion, redemption, and voting rights) of the series
of Preferred Stock purchasable upon exercise of Preferred Stock Warrants and
the price at which such number of shares of Preferred Stock of such series may
be purchased upon such exercise; (4) the number of Common Shares purchasable
upon the exercise of Common Share Warrants and the price at which such number
of Common Shares may be purchased upon such exercise; (5) the number of
Depositary Shares purchasable upon the exercise of Depositary Share Warrants,
the terms of the Preferred Stock which the Depositary Shares represent and the
price at which such number of Depositary Shares may be purchased upon such
exercise; (6) the date, if any, on and after which the offered Securities
Warrants and the related Debt Securities, Preferred Stock, Common Shares and/or
Depositary Shares will be separately transferable; (7) the time or times at
which, or period or periods during which, the offered Securities Warrants may
be exercised and the final date on which the offered Securities Warrants may be
exercised (the "Expiration Date"); (8) a discussion of the specific United
States Federal income tax, accounting, and other considerations applicable to
the Securities Warrants; (9) the location where the offered Securities Warrants
represented by the Securities Warrant Certificates may be transferred and
registered; and (10) any other terms of the offered Securities Warrants.
Securities Warrant Certificates will be exchangeable on the terms specified
in the Applicable Prospectus Supplement for new Securities Warrant Certificates
of different denominations evidencing the same aggregate number of Warrants of
the same title, and may be transferred in whole or in part on the terms
specified in the Applicable Prospectus Supplement.
Prospective purchasers of Securities Warrants should be aware that special
U.S. federal income tax, accounting and other considerations may be applicable
to instruments such as Securities Warrants. The Applicable Prospectus
Supplement relating to any issue of Securities Warrants will describe such
considerations.
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<PAGE>
Exercise of Warrants
Each Securities Warrant will entitle the holder to purchase the principal
amount of or number of Underlying Securities provided for therein, at such
exercise price as shall in each case be set forth in, or be determinable from,
the Applicable Prospectus Supplement relating to the Securities Warrants, by
payment of such exercise price (the "Warrant Price") in full in the currency
and in the manner specified in the Applicable Prospectus Supplement. Securities
Warrants may be exercised at any time at or before 5:00 P.M., New York City
time on the Expiration Date (or such later date to which such Expiration Date
may be extended by the Corporation), and unexercised Securities Warrants will
become void at such time. Securities Warrants may be exercised at the corporate
trust office of the Securities Warrant Agent or any other office indicated in
the Applicable Prospectus Supplement relating to the Securities Warrants.
Upon receipt at the corporate trust office of the Securities Warrant Agent or
any other office indicated in the Applicable Prospectus Supplement of (i)
payment of the Warrant Price and (ii) the form of election to purchase set
forth on the reverse side of the Securities Warrant Certificate properly
completed and duly executed, the Corporation will, as soon as practicable,
issue the Underlying Securities purchasable upon such exercise. If fewer than
all of the Securities Warrants represented by such Securities Warrant
Certificate are exercised, a new Securities Warrant Certificate will be issued
for the remaining number of unexercised Securities Warrants.
Modifications
The Warrant Agreement may be supplemented or amended by the Corporation and
the Warrant Agent from time to time, without the approval of any Holder (as
defined in the Warrant Agreement), in order to cure any ambiguity, to correct
or supplement any defective or inconsistent provision contained therein, or to
make any other provision in regard to matters or questions arising thereunder
that the Corporation and the Warrant Agent may deem necessary or desirable and
which will not adversely affect the interests of the Holders.
The Corporation and the Warrant Agent may also modify or amend the Warrant
Agreement and the Securities Warrant Certificates with the consent of the
Holders of not fewer than a majority in number of the then outstanding
unexercised Warrants affected by such modification or amendment, for any
purpose, provided that no such modification or amendment that shortens the
period of time during which the Warrants may be exercised, or otherwise
materially and adversely affects the exercise rights of the Holders or reduces
the percentage of Holders of outstanding Warrants the consent of which is
required for modification or amendment of the Warrant Agreement or the Warrants
may be made without the consent of each Holder affected thereby.
Common Share Warrant Adjustments
The terms and conditions on which the Warrant Price of and/or the number of
Common Shares covered by a Warrant to purchase Common Shares (a "Common Share
Warrant") are subject to adjustment will be set forth in the Warrant Agreement
and the Applicable Prospectus Supplement. Such terms will include provisions
for adjusting the Warrant Price and/or the number of Common Shares covered by
such Common Share Warrant; the events requiring such adjustment; the events
upon which the Corporation may, in lieu of making such adjustment, make proper
provision so that the holder of such Common Share Warrant, upon exercise
thereof, would be treated as if such holder had exercised such Common Share
Warrant prior to the occurrence of such events; and provisions affecting
exercise in the event of certain events affecting the Common Shares.
Merger, Consolidation, Sale, or Other Dispositions
If at any time there shall be a merger, consolidation, sale, conveyance,
transfer, lease, or other disposition of substantially all of the assets of the
Corporation, then the successor or assuming corporation shall succeed
41
<PAGE>
to and be substituted for the Corporation in, and the Corporation will be
relieved of any further obligation under, the Warrant Agreement or the
Warrants.
Enforceability of Rights of Holders
The Warrant Agent will act solely as an agent of the Corporation in acting
under the Warrant Agreement and in connection with any Warrant Certificate. The
Warrant Agent shall have no duty or responsibility in case of any default by
the Corporation in the performance of its covenants or agreements contained in
the Warrant Agreement or in any Warrant Certificate. Each Holder may, without
the consent of the Warrant Agent, enforce by appropriate legal action, on its
own behalf, the Holder's right to exercise its Warrants in the manner provided
in the Warrant Agreement and its Warrant Certificate.
No Rights As Holders of Underlying Securities
Prior to the exercise of any Securities Warrants to purchase Underlying
Securities, holders of such Securities Warrants will not have any of the rights
of holders of the Underlying Securities purchasable upon such exercise,
including, without limitation, the right to receive the payment of principal
of, or premium on, if any, or interest, if any, dividends or distributions of
any kind, if any, on Underlying Securities, the right to enforce any of the
covenants in the Indentures, if applicable, or the right to exercise any voting
rights.
PLAN OF DISTRIBUTION
The Corporation may sell Securities to one or more underwriters for public or
private offering and sale by them or may sell Securities to investors directly
or through agents (which agents may be affiliates of the Corporation) that
solicit or receive offers on behalf of the Corporation or through dealers or
through a combination of any such methods of sale.
The Applicable Prospectus Supplement will set forth the terms of the offering
of the particular series of Securities to which such Applicable Prospectus
Supplement relates, including (i) the name or names of any underwriters or
agents with whom the Corporation has entered into arrangements with respect to
the sale of such series of Securities, (ii) the initial public offering or
purchase price of such series of Securities, (iii) any underwriting discounts,
commissions, and other items constituting underwriters' compensation from the
Corporation and any other discounts, concessions, or commissions allowed or
reallowed or paid by any underwriters to other dealers, (iv) any commissions
paid to any agents, (v) the net proceeds to the Corporation and (vi) the
securities exchanges, if any, on which such series of Securities will be
listed.
Unless otherwise set forth in the Applicable Prospectus Supplement relating
to a particular series of Securities, the obligations of the underwriters to
purchase such series of Securities will be subject to certain conditions
precedent and each of the underwriters with respect to such series of
Securities will be obligated to purchase all of the Securities of such series
allocated to it if any such Securities are purchased. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
The Securities may be offered and sold by the Corporation directly or through
agents designated by the Corporation from time to time. Unless otherwise
indicated in the Applicable Prospectus Supplement, each such agent will be
acting on a reasonable efforts basis for the period of its appointment. Any
agent participating in the distribution of Securities may be deemed to be an
"underwriter," as that term is defined in the Securities Act, of the Securities
so offered and sold. The Securities also may be sold to dealers at the
applicable price to the public set forth in the Applicable Prospectus
Supplement relating to a particular series of Securities who later resell to
investors. Such dealers may be deemed to be "underwriters" within the meaning
of the Securities Act.
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<PAGE>
Underwriters, dealers, and agents may be entitled, under agreements entered
into with the Corporation, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act.
The Corporation may also issue contracts under which the counterparty may be
required to purchase Debt Securities, Preferred Stock, or Depositary Shares.
Such contracts would be issued with Debt Securities, Preferred Stock, or
Depositary Shares and/or Securities Warrants in amounts, at prices and on terms
to be set forth in a Prospectus Supplement.
If so indicated in the Applicable Prospectus Supplement, the Corporation will
authorize underwriters, dealers, or agents to solicit offers by certain
institutions to purchase Securities of a series from the Corporation at the
public offering price set forth in the Prospectus Supplement pursuant to
delayed delivery contracts (each a "Contract") providing for payment and
delivery at a future date. Each Contract will be subject only to those
conditions set forth in the Applicable Prospectus Supplement and the Applicable
Prospectus Supplement will set forth the commission payable for solicitation of
such offers.
Any of the underwriters, dealers, and agents of the Corporation and their
associates may be customers of, engage in transactions with, and perform
services for the Corporation in the ordinary course of business.
The place and time of delivery of the Securities will be set forth in the
Applicable Prospectus Supplement.
LEGAL OPINIONS
The validity of the Securities offered hereby will be passed upon for the
Corporation, as shall be indicated in the Applicable Prospectus Supplement, by
either the General Counsel or a Senior Managing Counsel to the Corporation or
by Thompson, Hine and Flory, 1100 National City Bank Building, Cleveland, Ohio
44114, and for the Underwriters by Shearman & Sterling, 599 Lexington Avenue,
New York, New York 10022. Shearman & Sterling will rely as to all matters of
Ohio law on the opinion rendered on behalf of the Corporation. The General
Counsel or a Senior Managing Counsel to the Corporation or Thompson, Hine and
Flory, as the case may be, will rely as to all matters of New York law on the
opinion of Shearman & Sterling. As of August 1, 1994, attorneys at Thompson,
Hine and Flory owned an aggregate of approximately 60,400 common shares of the
Corporation. In the event that either the General Counsel or a Senior Managing
Counsel to the Corporation renders the opinion on behalf of the Corporation,
the aggregate number of shares owned by such General Counsel or Senior Managing
Counsel will be set forth in the Applicable Prospectus Supplement.
EXPERTS
The following consolidated financial statements have been audited by Ernst &
Young, independent auditors, as set forth in their reports thereon, included
therein and incorporated herein by reference in reliance upon such reports
given upon the authority of such firms as experts in accounting and auditing:
(a) consolidated financial statements for the year ended December 31, 1993
of KeyCorp, as restated to give effect to the March 1, 1994 merger of
old KeyCorp and Society Corporation, which was accounted for as a
pooling of interests, such financial statements are included in and
incorporated by reference into the Corporation's Current Report on Form
8-K filed with the Commission on April 20, 1994;
(b) consolidated financial statements for the year ended December 31, 1993
of old KeyCorp (the combining company), which on March 1, 1994 merged
with Society Corporation, subsequently renamed KeyCorp, included in the
Corporation's Current Report on Form 8-K filed with the Commission on
March 16, 1994; and
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(c) supplemental consolidated financial statements for the year ended
December 31, 1993 of KeyCorp (the combined entity) included in
KeyCorp's Annual Report on Form 10-K filed with the Securities and
Exchange Commission. The supplemental consolidated financial statements
became the historical financial statements of KeyCorp upon the filing
of the Corporation's Current Report on Form 8-K with the Commission on
April 20, 1994.
In addition, the consolidated financial statements for the year ended
December 31, 1993 of Society included in KeyCorp's Annual Report on Form 10-K
filed with the Securities and Exchange Commission have been audited by Ernst &
Young, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing. Society
Corporation's consolidated financial statements subsequently have been restated
to give effect to the March 1, 1994 merger of old KeyCorp and Society.
With respect to the unaudited consolidated interim financial information for
the three-month periods ended March 31, 1994 and March 31, 1993, incorporated
by reference in this Prospectus, Ernst & Young have reported that they have
applied limited procedures in accordance with professional standards for a
review of such information. However, their separate report, included in
KeyCorp's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994,
and incorporated herein by reference, states that they did not audit and they
do not express an opinion on that interim financial information. Accordingly,
the degree of reliance on their report on such information should be restricted
in light of the limited nature of the review procedures applied. The
independent auditors are not subject to the liability provisions of Section 11
of the Securities Act of 1933, as amended, for their report on the unaudited
interim financial information because that report is not a "report" or a "part"
of the Registration Statement prepared or certified by the auditors within the
meaning of Sections 7 and 11 of the Act.
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus Supplement or
the Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized. This Prospectus Supplement and
the Prospectus do not constitute an offer to sell or the solicitation of an
offer to buy any securities other than the securities described in this
Prospectus Supplement or an offer to sell or the solicitation of an offer to
buy such securities in any circumstances in which such offer or solicitation
is unlawful. Neither the delivery of this Prospectus Supplement or the
Prospectus nor any sale made hereunder or thereunder shall, under any
circumstances, create any implication that the information contained herein or
therein is correct as of any time subsequent to the date of such information.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement
Selected Consolidated Financial Data...................................... S-2
Recent Acquisition Activity............................................... S-3
Description of Notes...................................................... S-4
Foreign Currency Risks.................................................... S-20
United States Federal Income Taxation..................................... S-21
Plan of Distribution...................................................... S-29
Validity of the Notes..................................................... S-30
Prospectus
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Corporation........................................................... 4
Consolidated Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends..................... 6
Supervision and Regulation................................................ 6
Use of Proceeds........................................................... 12
Description of Debt Securities............................................ 13
Description of Preferred Stock............................................ 27
Description of Depositary Shares.......................................... 31
Description of Common Shares.............................................. 36
Description of Capital Securities......................................... 39
Description of Securities Warrants........................................ 40
Plan of Distribution...................................................... 42
Legal Opinions............................................................ 43
Experts................................................................... 43
</TABLE>
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$750,000,000
Senior Medium-Term Notes, Series B
Subordinated Medium-Term Notes,
Series A
Due Nine Months or More From Date of Issue
---------------
[LOGO OF KEYCORP APPEARS HERE]
---------------
CS First Boston
Goldman, Sachs & Co.
Kidder, Peabody & Co.
Incorporated
J.P. Morgan Securities Inc.
Salomon Brothers Inc
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