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RULE NO. 424(B)3
REGISTRATION NO. 33-50333
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 8, 1993)
$450,000,000
THE BANK OF NEW YORK COMPANY, INC.
RETAIL MEDIUM-TERM NOTE SM SECURITIES
SUBORDINATED RETAIL MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
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The Bank of New York Company, Inc., a New York corporation (the "Company"),
may offer from time to time up to $450,000,000 aggregate initial public
offering price of Retail Medium-Term Note SM securities as a class of its debt
securities entitled the Subordinated Retail Medium-Term Notes Due Nine Months
or More From Date of Issue (the "Notes" or the "Retail Medium-Term Notes").
Each Note will mature nine months or longer from its date of issue, as agreed
to by the purchaser and the Company. The payment of the principal of and
interest on the Notes will, to the extent set forth in the Indenture, be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness (as defined in the Indenture). The Company's obligations under
the Notes shall rank pari passu in right of payment with other Subordinated
Debt Securities and with the Existing Subordinated Indebtedness, subject to
the obligations of the Holders of Notes to pay over any Excess Proceeds to
Entitled Persons in respect of Other Financial Obligations as provided in the
Indenture (see "Description of Debt Securities--Subordination of Subordinated
Debt Securities" in the Prospectus). Indebtedness of the Company senior to the
Notes, at June 30, 1995, totalled approximately $791,035,000. Unless otherwise
indicated in the applicable Pricing Supplement to this Prospectus Supplement
(a "Pricing Supplement"), a Note may not be redeemed at the option of the
Company or be repaid at the option of the registered holder thereof prior to
its stated maturity. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will be issued in denominations of $1,000 or integral
multiples thereof (see "Description of Retail Medium-Term Notes--General" in
this Prospectus Supplement).
Unless otherwise indicated in the applicable Pricing Supplement, interest on
the Notes will be payable monthly on the 15th day of each month and at the
Maturity Date. Payment of principal of the Notes may be accelerated only in
case of the bankruptcy, insolvency or reorganization of the Company. There is
no right of acceleration of the payment of principal of the Notes upon a
default in the payment of principal of or interest on such Notes or in the
performance of any covenant of the Company contained in the Indenture (as
hereinafter defined). See "Description of Debt Securities--Subordination of
Subordinated Debt Securities" in the Prospectus.
(continued on next page)
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THE NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR
NON-BANK SUBSIDIARY OF THE COMPANY AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
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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, THE PROSPECTUS OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
PRICE TO AGENT'S DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(2)(3)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note. 100% .20%-3.00% 99.80%-97.00%
--------------------------------------------------------------------------------
Total.... $450,000,000 $900,000-$13,500,000 $449,100,000-$436,500,000
================================================================================
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, each Note
will be issued at 100% of its principal amount.
(2) The Company will pay Smith Barney Inc., as agent (the "Agent"), a
commission (or grant a discount) ranging from .20% to 3.00% of the
principal amount of any Note, depending on its maturity, sold through the
Agent (or sold to the Agent as principal in circumstances in which no
other discount is agreed). The Company also may sell Notes to the Agent,
as principal, for resale to one or more investors and other purchasers at
varying prices relating to prevailing market prices at the time of resale,
as determined by the Agent, or if so agreed, at a fixed public offering
price.
(3) Before deducting expenses payable by the Company estimated at $100,000.
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SMITH BARNEY INC.
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August 1, 1995
SM Servicemark of Smith Barney Inc.
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(continued from previous page)
The interest rate or interest rate formula for each Note will be established
by the Company at the time of issuance of such Note (the "Original Issue Date")
and will be set forth therein and specified in a Pricing Supplement. Interest
rates and interest rate formulas are subject to change by the Company, but no
change will affect any Note already issued or as to which an offer to purchase
has been accepted by the Company. Unless otherwise indicated in the applicable
Pricing Supplement, each Note will bear interest at a fixed rate ("Fixed Rate
Notes"), or at a floating rate ("Floating Rate Notes"). See "Description of
Retail Medium-Term Notes" in this Prospectus Supplement and "Description of
Debt Securities" in the Prospectus.
The Notes will be issued in fully registered form and will be represented by
a global security registered in the name of a nominee of The Depository Trust
Company ("DTC"). Beneficial interests in Notes in book-entry form will be shown
on, and transfers thereof will be effected only through, records maintained by
DTC. Except as described in "Description of Retail Medium-Term Notes--Book-
Entry Notes" in this Prospectus Supplement, owners of beneficial interests in
Notes issued in book-entry form will not be entitled to physical delivery of
Notes in certificated form and will not be considered the holders thereof.
In addition to the offering of the Notes made hereby, the Company may offer
other series of its Medium-Term Notes or other Debt Securities, and the sale of
such Medium-Term Notes or other Debt Securities may reduce the amount of Notes
that may be sold hereunder.
The Notes are being offered on a continuous basis by the Company through the
Agent. The Company may also sell Notes directly to investors and other
purchasers on its own behalf in those jurisdictions where it is authorized to
do so. The Notes will not be listed on any securities exchange, and there can
be no assurance that the Notes offered by this Prospectus Supplement will be
sold or that there will be a secondary market for the Notes. The Company
reserves the right to withdraw, cancel or modify any offer to sell Notes
without notice and may reject orders in whole or in part whether placed
directly with the Company or through the Agent. The Agent will have the right,
in its discretion reasonably exercised, to reject, in whole or in part, any
offer to purchase Notes received by it on an agency basis. See "Plan of
Distribution of Retail Medium-Term Notes" in this Prospectus Supplement. The
Agent, whether acting as agent or principal, may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933, as amended.
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RECENT DEVELOPMENTS
The Company has agreed to purchase the securities processing business of J.P.
Morgan & Co. Incorporated and BankAmerica Corporation. The J.P. Morgan
securities processing business includes global custody, securities lending and
domestic custody business in the United States and the United Kingdom. The
BankAmerica acquisition includes U.S. and global custody, as well as securities
lending, securities clearance and master trust. Both transactions are expected
to close during the second half of 1995. The business acquired from J.P. Morgan
has approximately $800 billion in custody assets and the business acquired from
BankAmerica Corporation has approximately $462 billion in custody assets while
the Company has $1.65 trillion in custody assets. The Company has also agreed
to acquire the corporate trust business of NationsBank Corp. (the
"Transaction"). This acquisition involves the transfer to The Bank of New York
(the "Bank") of approximately 11,500 bond trustee and agency accounts,
representing over $167 billion in outstanding securities, and is expected to be
completed by year end 1995. As a consequence, the Company intends to replace
NationsBank of Georgia, National Association as trustee under the Indenture
prior to the closing of the Transaction. The pro forma effect of these
acquisitions on the Company's 1994 income is not material.
On June 1, 1995, The Bank of New York National Association converted from a
national bank to a New Jersey state chartered bank and became a member of the
Federal Reserve System. On the same day the name of the bank was changed to The
Bank of New York (NJ) ("BNYNJ").
In the second quarter of 1995, the Company's subsidiary, ARCS Mortgage, Inc.
("ARCS") sold its mortgage servicing portfolio. ARCS has also completed the
closing of its mortgage origination offices on the west coast and in other
parts of the U.S. However, the Company will continue to originate residential
mortgages through a newly formed subsidiary of the Bank which will retain 11
offices in New York, New Jersey and Connecticut.
CERTAIN REGULATORY CONSIDERATIONS
The Company's principal assets and sources of income are its investments in
its bank subsidiaries, and it is a legal entity separate and distinct from its
insured banks and other subsidiaries. There are various legal limitations on
the extent to which these banks and other subsidiaries can finance or otherwise
supply funds to the Company and certain of its affiliates.
DIVIDENDS
The Bank is subject to dividend limitations under the Federal Reserve Act and
the New York Banking Law. BNYNJ is subject to dividend limitations under the
Federal Reserve Act and applicable New Jersey banking law. Under these
statutes, prior regulatory approval is required for dividends in any year that
would exceed the net profits of the bank declaring the dividend for such year
combined with retained net profits for the prior two years. Also, both banks
are prohibited from paying a dividend in an amount greater than "undivided
profits then on hand" less "bad debts" (generally loans six months or more past
due).
Under the first of these two standards, in 1995 the Bank could declare
dividends of approximately $513 million plus net profits earned in 1995 and
BNYNJ could declare dividends of approximately $117 million plus net profits
earned in 1995. As of June 30, 1995, neither bank was restrained from paying
dividends under the second of the two standards discussed above.
In addition to these statutory tests, each bank's primary federal regulator
(the Federal Reserve Board), could prohibit a dividend if it determined that
the payment would constitute an unsafe or unsound banking practice. The Federal
Reserve Board has indicated that, generally, dividends should be paid by banks
only to the extent of earnings from continuing operations.
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The dividend policy of The Bank of New York (Delaware) is to declare
dividends that, at a minimum, allow it to meet capital guidelines established
by the Federal Deposit Insurance Corporation ("FDIC").
Consistent with its policy regarding bank holding companies serving as a
source of financial strength for their subsidiary banks, the Federal Reserve
Board has stated that, as a matter of prudent banking, a bank holding company
generally should not maintain a rate of cash dividends unless its net income
available to common stockholders has been sufficient to fully fund the
dividends, and the prospective rate of earnings retention appears consistent
with the bank holding company's capital needs, asset quality and overall
financial condition. In the first six months of 1995, the Company's net income
available to common stockholders was $433 million and it declared common stock
dividends totaling $121 million.
CAPITAL ADEQUACY
The Federal bank regulators have adopted risk-based capital guidelines for
bank holding companies and banks. The minimum ratio of qualifying total capital
("Total Capital") to risk-weighted assets (including certain off-balance sheet
items) is 8% At least half of the Total Capital is to be comprised of common
stock, retained earnings, noncumulative perpetual preferred stock, minority
interests, and for bank holding companies, a limited amount of qualifying
cumulative perpetual preferred stock, less certain intangibles including
goodwill ("Tier 1 capital"). The remainder may consist of other preferred
stock, certain other instruments, and limited amounts of subordinated debt and
the loan and lease loss allowance.
In addition, the Federal Reserve Board has established minimum Leverage Ratio
(Tier 1 capital to average total assets) guidelines for bank holding companies
and banks and the FDIC has established substantially identical minimum leverage
requirements for state chartered, FDIC-insured, non-member banks. The Federal
Reserve Board's guidelines provide for a minimum Leverage Ratio of 3% for bank
holding companies and banks that meet certain specified criteria, including
having the highest regulatory rating. All other banking organizations will be
required to maintain a Leverage Ratio of at least 3% plus an additional cushion
of 100 to 200 basis points. The guidelines also provide that banking
organizations experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels, without significant reliance on intangible assets.
Furthermore, the guidelines indicate that the Federal Reserve Board will
continue to consider a "Tangible Tier 1 Leverage Ratio" in evaluating proposals
for expansion or new activities. The Tangible Tier 1 Leverage Ratio is the
ratio of Tier 1 Capital, less intangibles not deducted from Tier 1 capital, to
average total assets. As of June 30, 1995 the Federal Reserve Board has not
advised the Company of any specific minimum Leverage Ratio applicable to it.
Federal bank regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations. The Federal Reserve Board has
recently added an interest rate risk component to risk-based capital
requirements.
Certain consolidated ratios of the Company are included in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
FDICIA
In addition to the effects of the provisions described above, the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") substantially
revised the depository institution regulatory and funding provisions of the
Federal Deposit Insurance Act ("FDIA") and made revisions to several other
federal banking statutes.
Among other things, FDICIA requires the federal banking regulators to take
prompt corrective action in respect of FDIC-insured depository institutions
that do not meet minimum capital requirements. FDICIA establishes five capital
tiers: "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly
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undercapitalized" and "critically undercapitalized." A depository institution's
capital tier will depend upon how its capital levels compare to various
relevant capital measures and certain other factors, as established by
regulation. Under applicable regulations, an FDIC-insured bank is defined to be
well capitalized if it maintains a Leverage Ratio of at least 5%, a Tier 1
Capital Ratio of at least 6% and a Total Capital Ratio of at least 10% and is
not otherwise in a "troubled condition" as specified by its appropriate federal
regulatory agency. A bank is generally considered to be adequately capitalized
if it is not defined to be well capitalized but meets all of its minimum
capital requirements, i.e., if it has a Total Capital Ratio of 8% or greater, a
Tier 1 Capital Ratio of 4% or greater and a Leverage Ratio of 4% or greater. A
bank will be considered undercapitalized if it fails to meet any minimum
required measure, significantly undercapitalized if it is significantly below
such measure and critically undercapitalized if it maintains a level of
tangible equity capital equal to or less than 2% of total assets. A bank may be
deemed to be in a capitalization category that is lower than is indicated by
its actual capital position if it receives an unsatisfactory rating.
FDICIA generally prohibits an FDIC-insured depository institution from making
any capital distribution (including payment of dividends) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions are
subject to growth limitations and are required to submit a capital restoration
plan. The federal banking agencies may not accept a capital plan without
determining, among other things, that the plan is based on realistic
assumptions and is likely to succeed in restoring the depository institution's
capital. In addition, for an undercapitalized depository institution's capital
restoration plan to be acceptable, its holding company must guarantee the
capital plan up to an amount equal to the lesser of 5% of the depository
institution's assets at the time it became undercapitalized or the amount of
the capital deficiency when the institution fails to comply with the plan. In
the event of the parent holding company's bankruptcy, such guarantee would take
priority over the parent's general unsecured creditors. If a depository
institution fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator.
At June 30, 1995, the Bank, The Bank of New York (Delaware) and BNYNJ were
well capitalized. At June 30, 1995, the Bank had a leverage ratio of 7.38%, a
risk-based total capital ratio of 11.97% and a risk-based Tier 1 capital ratio
of 8.08%; The Bank of New York (Delaware) had a leverage ratio of 8.30%, a
risk-based total capital ratio of 12.05% and a risk-based Tier 1 capital ratio
of 8.08% and BNYNJ had a leverage ratio of 9.66%, a risk-based total capital
ratio of 20.08% and a risk-based Tier 1 capital ratio of 18.81%.
FDIA
Under the FDIA, a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC after August 9, 1989 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. "Default" is defined 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.
RECENT BANKING LEGISLATION
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("IBBEA") will permit bank holding companies, with Federal Reserve Board
approval, to acquire banks located in states other than the bank holding
company's home state without regard to whether the transaction is prohibited
under state law, beginning September 29, 1995. In addition, commencing June 1,
1997, national banks and state banks with
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different home states will be permitted to merge across state lines, with the
approval of the appropriate federal banking agency, unless the home state of a
participating bank passes legislation between the date of enactment of IBBEA
and May 31, 1997 expressly prohibiting interstate mergers. IBBEA further
provides that states may enact laws permitting interstate bank merger
transactions prior to June 1, 1997. A bank may establish and operate a de novo
branch in a state in which the bank does not maintain a branch if that state
expressly permits de novo branching. Once a bank has established branches in a
state through an interstate merger transaction, the bank may establish and
acquire additional branches at any location in the state where any bank
involved in the interstate merger transaction could have established or
acquired branches under applicable federal or state law. A bank that has
established a branch in a state through de novo branching may establish and
acquire additional branches in such state in the same manner and to the same
extent as a bank having a branch in such state as a result of an interstate
merger. If a state opts out of interstate branching within the specified time
period, no bank in any other state may establish a branch in the state which
has opted out, whether through an acquisition or de novo.
OTHER
The Federal Reserve Act limits amounts of, and requires collateral on,
extensions of credit by the Company's insured bank subsidiaries to the Company
and, with certain exceptions, its nonbank affiliates; also, there are
restrictions on the amounts of investment by such banks in stock and other
securities of the Company and such affiliates, and restrictions on the
acceptance of their securities as collateral for loans by such banks.
Extensions of credit by insured bank subsidiaries to each of the Company and
such affiliates are limited to 10% of such bank subsidiary's capital and
surplus, and in the aggregate for the Company and all such affiliates to 20%.
PROPOSED LEGISLATION
Various bills have been introduced into the United States Congress that would
repeal, in some respects, the provisions of the Glass-Steagall Act prohibiting
certain banking organizations from engaging in certain securities activities
and the provisions of the Bank Holding Company Act of 1956, prohibiting
affiliations between banking organizations and nonbanking organizations. The
Company cannot determine the ultimate effect that potential legislation, if
enacted, or implementing regulations, would have upon its financial condition
or results of operations.
Other proposals to change the laws and regulations governing the banking
industry are frequently introduced in Congress, in the state legislatures and
before the various bank regulatory agencies. The likelihood and timing of any
such changes and the impact such changes might have on the Company and its
subsidiaries, however, cannot be determined at this time.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges for the six months ended
June 30, 1995 and the year ended December 31, 1994 were 3.40 and 3.75,
respectively, excluding interest on deposits and 1.76 and 1.94, respectively,
including interest on deposits.
DESCRIPTION OF RETAIL MEDIUM-TERM NOTES
The following description of the particular terms of the Notes supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of the Debt Securities (as defined in the
Prospectus) set forth under the heading "Description of Debt Securities" in the
Prospectus, to which description reference is hereby made. The following
description will apply to each Note unless otherwise specified in the
applicable Pricing Supplement. Certain terms not defined in this Prospectus
Supplement are defined in the Prospectus.
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GENERAL
The Notes will constitute a single series to be issued under an Indenture
dated as of October 1, 1993 (the "Indenture"), between the Company and
NationsBank of Georgia, National Association (the "Trustee"). At the date
hereof, the maximum aggregate amount of Notes authorized for issuance is
$450,000,000. This Prospectus Supplement, together with the Prospectus and any
Pricing Supplement, may be used in connection with the offer and sale of Notes
in an aggregate initial public offering price of up to $450,000,000, subject to
reduction as a result of future sales of the Company's other securities.
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provides that Debt Securities may
be issued in one or more series up to the aggregate principal amount that may
be authorized from time to time by the Company. Debt Securities of any series
need not all be issued at the same time, and a series may be reopened either
for issuances of additional Debt Securities of such series or to establish
additional terms of such series. The Company may concurrently offer other
series of its Medium-Term Notes having different interest rates and variable
terms and such offers may depend upon the aggregate principal amount subject to
purchase in any single transaction.
Indebtedness of the Company senior to the Notes, at June 30, 1995, totalled
approximately $791,035,000. The Indenture does not limit or prohibit the
incurrence of additional Senior Indebtedness. See "Description of Debt
Securities--Subordination of Subordinated Debt Securities" in the Prospectus.
Payment of principal of the Notes may be accelerated only in case of the
bankruptcy, insolvency or reorganization of the Company. There is no right of
acceleration of the payment of principal of the Notes upon a default in the
payment of principal of or interest on such Notes or in the performance of any
covenant of the Company contained in the Indenture. See "Description of Debt
Securities--Defaults--The Subordinated Indenture" in the Prospectus.
The Notes will be offered on a continuous basis and will mature on any day
nine months or longer from the date of issue, as agreed to by the purchaser and
the Company.
Unless otherwise indicated in the Pricing Supplement, the Notes will bear
interest at a fixed rate, or at floating rates determined by reference to an
interest rate index or formula which will be set forth in the applicable
Pricing Supplement, or any combination of fixed and floating rates until the
principal thereof is paid or made available for payment. See "Fixed Rate Notes"
and "Floating Rate Notes" below. Notes may be issued as discounted securities
(bearing no interest or interest at rates which at the time of issuance are
below market rates), at prices below their stated principal amounts, which
securities will provide that upon redemption or acceleration of the maturity
thereof amounts less than the principal amounts thereof shall become due and
payable, or as other Notes which for United States Federal income tax purposes
would be considered to have original issue discount ("Original Issue Discount
Notes"). See "United States Taxation" in this Prospectus Supplement.
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 in the accompanying Prospectus under "Description of
Debt Securities--Subordination of Subordinated Debt Securities", the amount of
principal due and payable with respect to such Note shall be its Amortized Face
Amount (as hereinafter defined). See "Optional Redemption and Optional
Repayment" below.
Interest, if any, will be payable as specified under "Fixed Rate Notes" and
"Floating Rate Notes" below. Interest payable and punctually paid or duly
provided for on any date on which interest is payable (an "Interest Payment
Date") and on the stated maturity date or upon earlier redemption or repayment
(such
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stated maturity date or date of redemption or repayment, as the case may be,
being collectively hereinafter referred to as the "Maturity Date"), or on a
later date on which payment may be made hereunder in respect of such Interest
Payment Date, will be paid to the person in whose name a Note is registered at
the close of business on the Regular Record Date (as hereinafter defined) next
preceding such Interest Payment Date; provided, however, that the first payment
of interest on any Note with an Original Issue Date (as set forth in the
Pricing Supplement) between a Regular Record Date and an Interest Payment Date
or on an Interest Payment Date will be made on an Interest Payment Date
following the next succeeding Regular Record Date to the registered holder on
such next succeeding Regular Record Date; provided, further, that interest
payable at maturity or upon earlier redemption or repayment will be payable to
the person to whom principal shall be payable.
The Notes will be issued in denominations of $1,000 or integral multiples
thereof. The minimum denomination of each Note will be $1,000.
The Company will pay any administrative costs imposed by banks in connection
with transmitting payments of principal, interest or premium, by wire transfer,
but any tax, assessment or governmental charge imposed upon payments will be
borne by owners of beneficial interests in Notes issued in book-entry form in
respect of which payments are made.
All references herein to "registered holders" or "holders" will be to DTC or
its nominee and not to owners of beneficial interests in such Notes, except as
otherwise provided. See "Book-Entry Notes" below.
BOOK-ENTRY NOTES
The Notes will be represented by one or more permanent global Notes
(collectively, the "Global Note") registered in the name of a nominee of The
Depository Trust Company, as Depositary under the Indenture ("DTC"). The
provisions set forth under "Description of Securities--Permanent Global Debt
Securities" in the Prospectus will be applicable to the Notes. Accordingly,
beneficial interests in the Notes will be shown on, and transfers thereof will
be effected only through, records maintained by DTC and its participants.
Owners of beneficial interests in the Global Note will not be entitled to
receive Notes in definitive form and will not be considered Holders of Notes
unless (i) DTC notifies the Company in writing that it is no longer willing or
able to act as a depositary or if DTC ceases to be a clearing agency registered
under the Securities Exchange Act of 1934 (the "Exchange Act"), (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Notes in definitive form or (iii) any event shall have happened
and be continuing which, after notice or lapse of time, or both, would
constitute an Event of Default with respect to the Notes. In such
circumstances, upon surrender by DTC or a successor depositary of the Global
Note, Notes in definitive form will be issued to each person that DTC or a
successor depositary identifies as the beneficial owner of the related Notes.
Upon such issuance, the Trustee is required to register such Notes in the name
of, and cause the same to be delivered to, such person or persons (or the
nominee thereof). Such Notes would be issued in fully registered form without
coupons, in denominations of $1,000 and integral multiples thereof.
DTC has advised the Company and the Agent as follows: DTC is a limited-
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered under
the Exchange Act. DTC was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. DTC's participants include securities
brokers and dealers (including the Agent), banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own DTC. Access to DTC'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
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participant, either directly or indirectly. DTC agrees with and represents to
its participants that it will administer its book-entry system in accordance
with its rules and by-laws and requirements of law.
Principal and interest payments on the Notes registered in the name of DTC's
nominee will be made to DTC's nominee as the registered owner of the Global
Note. Under the terms of the Indenture, the Company and the Trustee will treat
the persons in whose names the Notes are registered as the owners of such Notes
for the purpose of receiving payment of principal and interest on such Notes
and for all other purposes whatsoever. Therefore, neither the Company, the
Trustee nor any paying agent has any direct responsibility or liability for the
payment of principal or interest on the Notes to owners of beneficial interests
in the Global Note. DTC has advised the Company and the Trustee that its
current practice is to credit the accounts of the participants with payments of
principal and interest on the date payable in amounts proportionate to their
respective holdings in principal amount of beneficial interests in the Global
Note as shown in the records of DTC, unless DTC has reason to believe that it
will not receive payment on such date. DTC's current practice is to credit such
accounts, as to interest, in next-day funds and, as to principal, in same-day
funds. Payments by participants and indirect participants to owners of
beneficial interests in the Global Note will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name" and
will be the responsibility of the participants or indirect participants.
PAYING AGENT, REGISTRAR AND TRANSFER AGENT
The initial Paying Agent, Registrar and Transfer Agent is the Bank, acting
through its principal corporate trust offices in The City of New York. The
Company reserves the right at any time to vary or terminate the appointment of
the Paying Agent, Registrar and the Transfer Agent and to appoint additional
Paying Agents, Registrars and Transfer Agents and to approve any change in the
office through which the Paying Agent, Registrar or Transfer Agent acts,
provided that, so long as any Notes remain outstanding, there will at all times
be a Paying Agent in The City of New York and the Company will maintain in The
City of New York one or more offices or agencies where Notes may be presented
for registration of transfer and exchange.
OPTIONAL REDEMPTION AND OPTIONAL REPAYMENT
If set forth in the applicable Pricing Supplement, the Notes will be subject
to redemption by the Company on and after the initial redemption date fixed at
the time of sale (the "Initial Redemption Date"). If no Initial Redemption Date
is indicated with respect to a Note, such Note will not be redeemable prior to
the stated maturity date. On and after the Initial Redemption Date with respect
to any Note, such Note will be redeemable in whole or in part in increments of
$1,000 (provided that any remaining principal amount of such Note shall be at
least $1,000) at the option of the Company at a redemption price (the
"Redemption Price") determined in accordance with the following paragraph,
together with interest thereon payable to the date of redemption, on notice
given to a holder of a Note not less than 30 nor more than 60 days prior to the
date of redemption.
The Redemption Price for each Note subject to redemption may initially be
equal to a certain premium (the "Initial Redemption Percentage") in excess of
100% of the principal amount of such Note to be redeemed, which may decline at
each anniversary of the Initial Redemption Date with respect to such Note by a
percentage (the "Annual Redemption Percentage Reduction") of the principal
amount to be redeemed until the Redemption Price equals 100% of such principal
amount. Any Initial Redemption Percentage and any Annual Redemption Percentage
Reduction with respect to each Note subject to redemption prior to the stated
maturity date will be fixed at the time of sale and set forth in the applicable
Pricing Supplement and in the applicable Note.
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If set forth in the applicable Pricing Supplement, the Notes will be subject
to repayment at the option of the holders thereof in accordance with the terms
of the Notes on their respective optional repayment dates fixed at the time of
sale (each, an "Optional Repayment Date"). If no Optional Repayment Date is
indicated with respect to a Note, such Note will not be repayable at the option
of the holder thereof prior to the stated maturity date. On any Optional
Repayment Date with respect to any Note, such Note will be repayable in whole
or in part in increments of $1,000 (provided that any remaining principal
amount of such Note shall be at least $1,000) at the option of such holder at a
price equal to 100% of the principal amount to be repaid, together with
interest thereon accrued to the date of repayment, on notice to the Paying
Agent, given not less than 30 nor more than 60 days prior to the Optional
Repayment Date.
While the Notes are represented by the Global Note and registered in the name
of DTC or its nominee, the option for repayment may be exercised by a DTC
Participant, on behalf of the beneficial owners of the Global Note, by
delivering a written notice to the Paying Agent at its corporate trust office
(or such other address of which the Company shall from time to time notify the
Holders), not less than 30 nor more than 60 days prior to the date of
repayment. Notices of elections from DTC Participants on behalf of beneficial
owners of the Global Note to exercise their option to have such Book-Entry
Notes repaid must be received by the Paying Agent by 5:00 P.M., New York City
time, on the last day for giving such notice. In order to ensure that a notice
is received by the Paying Agent on a particular day, the beneficial owner of
the Global Note must direct its DTC Participant before such DTC Participant's
deadline for accepting instructions for that day. Different DTC Participants
may have different deadlines for accepting instructions from their customers.
Accordingly, beneficial owners of the Global Note should consult the DTC
Participant through which they own their interest therein for the respective
deadlines for such DTC Participant. All notices shall be executed by a duly
authorized officer of such DTC Participant (with signature guaranteed) and
shall be irrevocable. In addition, beneficial owners of the Global Note shall
effect delivery by causing the applicable DTC Participant to transfer such
beneficial owner's interest in the Global Note, on DTC's records, to the Paying
Agent. See "Book-Entry Notes" in this Prospectus Supplement.
If applicable, the Company will comply with the requirements of Rule 14a-1
under the Securities Exchange Act of 1934, as amended, and any other securities
laws or regulations in connection with any such repayment.
The Company may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by the Company may be held or resold
or, at the discretion of the Company, may be surrendered to the Trustee for
cancellation.
Notwithstanding anything in this Prospectus Supplement to the contrary, if a
Note is an Original Issue Discount Note, the amount payable on such Note in the
event of redemption or repayment prior to the stated maturity date shall be the
Amortized Face Amount of such Note as of the date of redemption or the date of
repayment, as the case may be. The "Amortized Face Amount" of an Original Issue
Discount Note shall be the amount equal to (i) the issue price set forth in the
applicable Pricing Supplement plus (ii) that portion of the difference between
the issue price and the principal amount of such Note that has accrued at the
yield to maturity (computed in accordance with generally accepted United States
bond yield computation principles) by such date of redemption or repayment, as
calculated by the Calculation Agent (as hereinafter defined), but in no event
shall the Amortized Face Amount of an Original Issue Discount Note exceed its
principal amount.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the Original Issue Date at the
rate per annum stated on the face thereof (which may be zero) until the
principal amount thereof is paid or duly made available for payment. Unless
otherwise provided in the applicable Pricing Supplement, interest on Fixed Rate
Notes will
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be computed on the basis of a 360-day year consisting of twelve 30-day months.
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable on the 15th day of each month during the term
of the Notes (each an "Interest Payment Date") and on the Maturity Date. Unless
otherwise provided in the applicable Pricing Supplement, the "Regular Record
Date" for Fixed Rate Notes will be the first day of each month or if the
Interest Payment Dates are other than the 15th day of the month, the calendar
day fifteen days preceding each Interest Payment Date whether or not such day
is a Business Day (as hereinafter defined). If any Interest Payment Date or the
Maturity Date on a Fixed Rate Note falls on a day that is not a Business Day,
the payment shall be made on the next succeeding day that is a Business Day as
if it were made on the date such payment was due and no additional interest
will accrue on the amount so payable for the period from and after such
Interest Payment Date or the Maturity Date, as the case may be. Interest
payments will be in the amount of interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has been paid or
duly provided for (or from and including the Original Issue Date if no interest
has been paid or duly provided for with respect to such Note) to but excluding
the Interest Payment Date or the Maturity Date, as the case may be.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the Original Issue Date at
the interest rate index or formula which will be set forth in the applicable
Pricing Supplement until the principal amount thereof is paid or duly made
available for payment. The interest rate on each Floating Rate Note will be
calculated by reference to the specified interest rate index or formula plus or
minus the Spread and/or multiplied by the Spread Multiplier, if any. The
interest rate index or formula will be based upon the Index Maturity (as
hereinafter defined) and adjusted by a Spread and/or Spread Multiplier, if any,
as specified in the applicable Pricing Supplement. The "Spread" is the number
of basis points above or below the interest rate applicable to such Floating
Rate Note, and the "Spread Multiplier" is the percentage applicable to the
interest rate for such Floating Rate Note. The "Index Maturity" is the period
to maturity of the instrument or obligation with respect to which the interest
rate index or formula is calculated. The Spread, Spread Multiplier, Index
Maturity and other variable terms of the Floating Rate Notes are subject to
change by the Company from time to time, but no such change will affect any
Floating Rate Note theretofore issued or as to which an offer to purchase has
been accepted by the Company.
The applicable Pricing Supplement will specify for each Floating Rate Note
the following terms: Original Issue Date, the interest rate index or formula,
Initial Interest Rate (as hereinafter defined), Initial Interest Rate Reset
Date, Interest Payment Dates, Index Maturity, Maturity Date, Maximum Interest
Rate (as hereinafter defined) and/or Minimum Interest Rate (as hereinafter
defined), if any, Spread and/or Spread Multiplier, if any, Initial Redemption
Date, if any, Initial Redemption Percentage, if any, Annual Redemption
Percentage Reduction, if any, defeasance provisions, if any, and Optional
Repayment Dates, if any. Unless otherwise specified in the applicable Pricing
Supplement, the "Regular Record Date" for Floating Rate Notes with respect to
any Interest Payment Date will be the fifteenth calendar day, whether or not
such day is a Business Day, prior to such Interest Payment Date.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (each, an "Interest Rate Reset
Date"), as specified in the applicable Pricing Supplement. If any Interest Rate
Reset Date for any Floating Rate Note would be a day that is not a Business
Day, such Interest Rate Reset Date will be postponed to the next succeeding day
that is a Business Day. Unless otherwise specified in the applicable Pricing
Supplement, "Business Day" means any day other than a Saturday, Sunday, legal
holiday or other day on which banking institutions in The City of New York are
authorized or required by law, regulation or executive order to close.
A Floating Rate Note may also have either or both of the following: (i) a
maximum limit, or ceiling (the "Maximum Interest Rate"), on the rate of
interest that may accrue during any period; and (ii) a minimum limit, or floor
(the "Minimum Interest Rate"), on the rate of interest which may accrue during
any period. Notwithstanding any Maximum Interest Rate which may be applicable
to any Floating Rate Note pursuant
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to the above provisions, the interest rate on Floating Rate Notes will in no
event be higher than the maximum rate permitted by New York law as the same may
be modified by United States law of general application. Under present New York
law, the maximum rate of interest, subject to certain exceptions, for any loan
in an amount less than $250,000, is 16%, and for any loan in the amount of
$250,000 or more but less than $2,500,000, is 25%, per annum on a simple
interest basis. These limits do not apply to loans of $2,500,000 or more.
Unless otherwise indicated in the applicable Pricing Supplement, the interest
rate in effect with respect to a Floating Rate Note during the period
commencing on an Interest Rate Reset Date will be the rate determined on the
second Business Day preceding such Interest Rate Reset Date (the "Interest
Determination Date").
Unless otherwise indicated in the applicable Pricing Supplement, the interest
rate in effect with respect to a Floating Rate Note on each day that is not an
Interest Rate Reset Date will be the interest rate determined as of the
Interest Determination Date pertaining to the immediately preceding Interest
Rate Reset Date, and the interest rate in effect on any day that is an Interest
Rate Reset Date will be the interest rate determined as of the Interest
Determination Date pertaining to such Interest Rate Reset Date, subject in
either case to any Maximum or Minimum Interest Rate limitation referred to
above; provided, however, that the interest rate in effect with respect to a
Floating Rate Note for the period from the Original Issue Date to the Initial
Interest Rate Reset Date (the "Initial Interest Rate") will be specified in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, interest
payments will be in the amount of interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has been paid or
duly provided for (or from and including the Original Issue Date if no interest
has been paid or duly provided for with respect to such Note) to but excluding
the Interest Payment Date or the Maturity Date, as the case may be.
Unless otherwise indicated in the applicable Pricing Supplement, if any
Interest Payment Date for any Floating Rate Note (other than an Interest
Payment Date that occurs on the Maturity Date) would otherwise fall on a day
that is not a Business Day with respect to such Note, such Interest Payment
Date shall be the next succeeding day that is a Business Day. If the Maturity
Date of any Floating Rate Note shall fall on a day that is not a Business Day
with respect to such Note, the payment of interest, principal or premium (if
any) due on such date shall be made on the next succeeding day that is a
Business Day and no additional interest on such amounts shall accrue from the
Maturity Date to and including the date on which any such payment is required
to be made.
Unless otherwise indicated in the applicable Pricing Supplement, the Bank
will be the Calculation Agent. Upon the request of the holder of a Floating
Rate Note, the Calculation Agent will provide the interest rate then in effect
and, if determined, the interest rate that will become effective as a result of
a determination made for the next Interest Rate Reset Date with respect to such
Floating Rate Note. The Calculation Agent will also make certain calculations,
specified below, on or prior to the "Calculation Date." Unless otherwise
specified in the applicable Pricing Supplement, the "Calculation Date," where
applicable, pertaining to any Interest Determination Date will be the earlier
of (i) the tenth calendar day after such Interest Determination Date or, if any
such day is not a Business Day, the next succeeding Business Day, or (ii) the
Business Day next preceding the applicable Interest Payment Date or Maturity
Date, as the case may be.
Unless otherwise indicated in the applicable Pricing Supplement, accrued
interest on any Floating Rate Note will be determined by multiplying the face
amount of such Floating Rate Note by an accrued interest factor. Such accrued
interest factor will be computed by adding the interest factor calculated for
each day from and including the Original Issue Date, or from but excluding the
last date to which interest has been paid, as the case may be, to and including
the date for which accrued interest is being calculated. Unless
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otherwise indicated in the applicable Pricing Supplement, the interest factor
for each such day will be computed by dividing the interest rate applicable to
such day by 360.
Unless otherwise indicated in the applicable Pricing Supplement, all
percentages resulting from any calculation of the rate of interest on Floating
Rate Notes will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) will be rounded upward to 9.87655% (or
.0987655)), and to the nearest cent (with one-half cent being rounded upward).
GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in accordance
with, the laws of the State of New York.
UNITED STATES TAXATION
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax
laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the Notes arising under the laws of any
other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any
other person whose income or gain in respect of a Note is effectively connected
with the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting).
Original Issue Discount. The following summary is a general discussion of the
United States Federal income tax consequences to U.S. Holders of the purchase,
ownership and disposition of Original Issue Discount Notes. The following
summary is based upon final Treasury regulations (the "OID Regulations")
released by the Internal Revenue Service ("IRS") on January 27, 1994 under the
original issue discount provisions of the Internal Revenue Code of 1986, as
amended (the "Code").
For United States Federal income tax purposes, original issue discount is the
excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of
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complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as hereinafter defined) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in an issue of Notes
equals the first price at which a substantial amount of such Notes has been
sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note other than "qualified stated interest"
payments. The term "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate. In
addition, under the OID Regulations, if a Note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such Note (e.g., Notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on such Note or any "true"
discount on such Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
stated interest on the Note would be treated as original issue discount rather
than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of an Original Issue Discount Note must include
original issue discount in income as ordinary interest for United States
Federal income tax purposes as it accrues under a constant yield method in
advance of receipt of the cash payments attributable to such income, regardless
of such U.S. Holder's regular method of tax accounting. In general, the amount
of original issue discount included in income by the initial U.S. Holder of an
Original Issue Discount Note is the sum of the daily portions of original issue
discount with respect to such Original Issue Discount Note for each day during
the taxable year (or portion of the taxable year) on which such U.S. Holder
held such Original Issue Discount Note. The "daily portion" of original issue
discount on any Original Issue Discount Note is determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Original Issue
Discount Note, provided that each accrual period is no longer than one year and
each scheduled payment of principal or interest occurs either on the final day
of an accrual period or on the first day of an accrual period. The amount of
original issue discount allocable to each accrual period is generally equal to
the difference between (i) the product of the Original Issue Discount Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and appropriately adjusted to take into account the length of the
particular accrual period) and (ii) the amount of any qualified stated interest
payments allocable to such accrual period. The "adjusted issue price" of an
Original Issue Discount Note at the beginning of any accrual period is the sum
of the issue price of the Original Issue Discount Note plus the amount of
original issue discount allocable to all prior accrual periods minus the amount
of any prior payments on the Original Issue Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases an Original Issue Discount Note for an amount
that is greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the Original Issue Discount
Note after the purchase date other than payments of qualified stated interest,
will be considered to have purchased the Original Issue Discount Note at an
"acquisition premium." Under the acquisition premium rules, the amount of
original issue discount which such U.S. Holder must include in its gross income
with respect to such Original Issue Discount Note for any taxable year (or
portion thereof in which the U.S. Holder holds the Original Issue Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes are subject to special rules
whereby a Floating Rate Note will qualify as a "variable rate debt instrument"
if (a) its issue price does not exceed the total noncontingent principal
payments due under the Floating Rate Note by more than a specified de minimis
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amount and (b) it provides for stated interest, paid or compounded at least
annually, at current values of (i) one or more qualified floating rates, (ii) a
single fixed rate and one or more qualified floating rates, (iii) a single
objective rate, or (iv) a single fixed rate and a single objective rate that is
a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Floating Rate Note is denominated. Although a multiple of a qualified floating
rate will generally not itself constitute a qualified floating rate, a variable
rate equal to the product of a qualified floating rate and a fixed multiple
that is greater than zero but not more than 1.35 will constitute a qualified
floating rate. A variable rate equal to the product of a qualified floating
rate and a fixed multiple that is greater than zero but not more than 1.35,
increased or decreased by a fixed rate, will also constitute a qualified
floating rate. In addition, under the OID Regulations, two or more qualified
floating rates that can reasonably be expected to have approximately the same
values throughout the term of the Floating Rate Note (e.g., two or more
qualified floating rates with values within 25 basis points of each other as
determined on the Floating Rate Note's issue date) will be treated as a single
qualified floating rate. Notwithstanding the foregoing, a variable rate that
would otherwise constitute a qualified floating rate but which is subject to
one or more restrictions such as a maximum numerical limitation (i.e., a cap)
or a minimum numerical limitation (i.e., a floor) may, under certain
circumstances, fail to be treated as a qualified floating rate under the OID
Regulations unless such cap or floor is fixed throughout the term of the Note.
An "objective rate" is a rate that is not itself a qualified floating rate
but which is determined using a single fixed formula and which is based upon
(i) one or more qualified floating rates, (ii) one or more rates where each
rate would be a qualified floating rate for a debt instrument denominated in a
currency other than the currency in which the Floating Rate Note is
denominated, (iii) either the yield or changes in the price of one or more
items of actively traded personal property (other than stock or debt of the
issuer or a related party) or (iv) a combination of objective rates. The OID
Regulations also provide that other variable interest rates may be treated as
objective rates if so designated by the IRS in the future. Despite the
foregoing, a variable rate of interest on a Floating Rate Note will not
constitute an objective rate if it is reasonably expected that the average
value of such rate during the first half of the Floating Rate Note's term will
be either significantly less than or significantly greater than the average
value of the rate during the final half of the Floating Rate Note's term. A
"qualified inverse floating rate" is any objective rate where such rate is
equal to a fixed rate minus a qualified floating rate, as long as variations in
the rate can reasonably be expected to inversely reflect contemporaneous
variations in the cost of newly borrowed funds. The OID Regulations also
provide that if a Floating Rate Note provides for stated interest at a fixed
rate for an initial period of less than one year followed by a variable rate
that is either a qualified floating rate or an objective rate and if the
variable rate on the Floating Rate Note's issue date is intended to approximate
the fixed rate (e.g., the value of the variable rate on the issue date does not
differ from the value of the fixed rate by more than 25 basis points), then the
fixed rate and the variable rate together will constitute either a single
qualified floating rate or objective rate, as the case may be.
If a Floating Rate Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Floating Rate Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
and that qualifies as a "variable rate debt instrument" under the OID
Regulations will generally not be treated as having been issued with original
issue discount unless the Floating Rate Note is issued at a "true" discount
(i.e., at a price below the Note's stated principal amount) in excess of a
specified de minimis amount. Original issue discount on such a Floating Rate
Note arising from "true" discount is allocated to an accrual period using the
constant yield method described above by assuming that the variable rate is a
fixed rate equal to (i) in the case of a qualified floating
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rate or qualified inverse floating rate, the value as of the issue date, of the
qualified floating rate or qualified inverse floating rate, or (ii) in the case
of an objective rate (other than a qualified inverse floating rate), a fixed
rate that reflects the yield that is reasonably expected for the Floating Rate
Note.
In general, any other Floating Rate Note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of original issue
discount and qualified stated interest on the Floating Rate Note. The OID
Regulations generally require that such a Floating Rate Note be converted into
an "equivalent" fixed rate debt instrument by substituting any qualified
floating rate or qualified inverse floating rate provided for under the terms
of the Floating Rate Note with a fixed rate equal to the value of the qualified
floating rate or qualified inverse floating rate, as the case may be, as of the
Floating Rate Note's issue date. Any objective rate (other than a qualified
inverse floating rate) provided for under the terms of the Floating Rate Note
is converted into a fixed rate that reflects the yield that is reasonably
expected for the Floating Rate Note. In the case of a Floating Rate Note that
qualifies as a "variable rate debt instrument" and provides for stated interest
at a fixed rate in addition to either one or more qualified floating rates or a
qualified inverse floating rate, the fixed rate is initially converted into a
qualified floating rate (or a qualified inverse floating rate, if the Floating
Rate Note provides for a qualified inverse floating rate). Under such
circumstances, the qualified floating rate or qualified inverse floating rate
that replaces the fixed rate must be such that the fair market value of the
Floating Rate Note as of the Floating Rate Note's issue date is approximately
the same as the fair market value of an otherwise identical debt instrument
that provides for either the qualified floating rate or qualified inverse
floating rate rather than the fixed rate. Subsequent to converting the fixed
rate into either a qualified floating rate or a qualified inverse floating
rate, the Floating Rate Note is then converted into an "equivalent" fixed rate
debt instrument in the manner described above.
Once the Floating Rate Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Floating Rate Note will account for tax purposes for such original issue
discount and qualified stated interest as if the U.S. Holder held the
"equivalent" fixed rate debt instrument. Each accrual period, appropriate
adjustments will be made to the amount of qualified stated interest or original
issue discount assumed to have been accrued or paid with respect to the
"equivalent" fixed rate debt instrument in the event that such amounts differ
from the actual amount of interest accrued or paid on the Floating Rate Note
during the accrual period.
U.S. Holders should be aware that on December 15, 1994, the IRS released
proposed amendments to the OID Regulations which would broaden the definition
of an objective rate and would further clarify certain other provisions
contained in the OID Regulations. If ultimately adopted, these amendments to
the OID Regulations generally would be effective for debt instruments issued 60
days or more after the date on which such proposed amendments are finalized.
If a Floating Rate Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Floating Rate Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Floating Rate Note would be taxed if such Note were treated as a
contingent payment debt obligation. The proper United States Federal income tax
treatment of Floating Rate Notes that are treated as contingent payment debt
obligations will be more fully described in the applicable Pricing Supplement.
Furthermore, any other special United States Federal income tax considerations
not otherwise discussed herein, which are applicable to any particular issue of
Notes will be discussed in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company prior
to their stated maturity (a "call option") and/or (ii) may be repayable at the
option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax
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advisors, since the original issue discount consequences will depend, in part,
on the particular terms and features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects
to do so. If such an election is not made, any gain recognized by the U.S.
Holder on the sale, exchange or maturity of the Short-Term Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis, or upon election under the constant yield method (based on
daily compounding), through the date of sale or maturity, and a portion of the
deductions otherwise allowable to the U.S. Holder for interest on borrowings
allocable to the Short-Term Note will be deferred until a corresponding amount
of income is realized. U.S. Holders who report income for United States Federal
income tax purposes under the accrual method, and certain other holders
including banks and dealers in securities, are required to accrue original
issue discount on a Short-Term Note on a straight-line basis unless an election
is made to accrue the original issue discount under a constant yield method
(based on daily compounding).
Market Discount. If a U.S. Holder purchases a Note, other than an Original
Issue Discount Note, for an amount that is less than its issue price (or, in
the case of a subsequent purchaser, its stated redemption price at maturity)
or, in the case of an Original Issue Discount Note, for an amount that is less
than its adjusted issue price as of the purchase date, such U.S. Holder will be
treated as having purchased such Note at a "market discount," unless such
market discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of an Original Issue Discount Note,
any payment that does not constitute qualified stated interest) on, or any gain
realized on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the lesser of (i) the amount of such payment
or realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such Note at the time of
such payment or disposition. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
the Note, unless the U.S. Holder elects to accrue market discount on the basis
of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to
the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the taxable year to which such election applies and may be revoked only
with the consent of the IRS.
Premium. If a U.S. Holder purchases a Note for an amount that is greater than
the sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining
S-17
<PAGE>
term of the Note and may offset interest otherwise required to be included in
respect of the Note during any taxable year by the amortized amount of such
excess for the taxable year. However, if the Note may be optionally redeemed
after the U.S. Holder acquires it at a price in excess of its stated redemption
price at maturity, special rules would apply which could result in a deferral
of the amortization of some bond premium until later in the term of the Note.
Any election to amortize bond premium applies to all taxable debt obligations
then owned and thereafter acquired by the U.S. Holder and may be revoked only
with the consent of the IRS.
Disposition of a Note. Except as discussed above, upon the sale, exchange or
retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any original issue discount included in income (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income) and decreased by the amount of any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such Note. Such gain or loss generally will be long-term
capital gain or loss if the Note were held for more than one year.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater stockholder of the Company, a controlled foreign
corporation related to the Company or a bank receiving interest described in
Section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a non-
U.S. Holder (the "Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (i) is signed by the beneficial owner of the
Note under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution. The Treasury
Department is considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is related to
holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater stockholder of the
Company or, at the time of such individual's death, payments in respect of the
Notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to beneficial owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the beneficial owner's taxpayer identification number) in the required
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<PAGE>
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the beneficial
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION OF RETAIL MEDIUM-TERM NOTES
The Notes are being offered on a continuous basis for sale by the Company
through Smith Barney Inc. (the "Agent"). If agreed to by the Company and the
Agent, the Agent may utilize its best efforts on an agency basis to solicit
offers to purchase the Notes at 100% of the principal amount thereof, unless
otherwise specified in an applicable Pricing Supplement. The Company will pay
the Agent a commission which, depending on the maturity of the Notes, will
range from .20% to 3.00% of the principal amount of any Note sold through the
Agent. Commissions and discounts with respect to Notes with maturities in
excess of 30 years will be negotiated between the Company and the Agent at the
time of such sale. The Company may also sell Notes directly to investors and
other purchasers on its own behalf in those jurisdictions where it is
authorized to do so.
In addition, the Agent may offer the Notes it has purchased as principal to
other dealers for resale to investors, and may allow any portion of the
discount received in connection with such purchases from the Company to such
dealers. After the initial public offering of Notes to be resold to investors
and other purchasers, the public offering price (in the case of Notes to be
resold on a fixed public offering price basis), concession and discount may be
changed.
The Company reserves the right to withdraw, cancel or modify any offer to
sell Notes without notice and may reject orders in whole or in part whether
placed directly with the Company or through the Agent. The Agent will have the
right, in its discretion reasonably exercised, to reject, in whole or in part,
any offer to purchase Notes received by it on an agency basis.
Unless otherwise provided in a Pricing Supplement, payment of the purchase
price of the Notes will be required to be made in immediately available funds
in The City of New York on the date of settlement.
The Agent, whether acting as agent or principal, may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). The Company has agreed to indemnify the Agent against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments that the Agent may be required to make in respect
thereof. The Agent may engage in transactions with, or perform services for,
the Company in the ordinary course of business.
S-19
<PAGE>
The Agent may from time to time purchase and sell Notes in the secondary
market, but it is not obligated to do so, and there can be no assurance that
there will be a secondary market for the Notes or liquidity in the secondary
market if one develops. From time to time, the Agent may make a market in the
Notes, but the Agent is not obligated to do so and may discontinue any market-
making at any time.
In addition to Notes being offered through the Agent as described herein,
other series of notes (including other series of Medium-Term Notes) that may
have terms identical or similar to the terms of the Notes may be concurrently
offered by the Company on a continuous basis both inside and outside the United
States pursuant to one or more separate distribution agreements with the Agent
or other agents. Pursuant to such agreements, such agents may also purchase
notes as principal for their own account or for resale, and the Company may
make direct sales of notes on its own behalf. Any notes so offered and sold in
excess of certain amounts will reduce correspondingly the maximum aggregate
principal amount of Notes that may be offered by this Prospectus Supplement and
the accompanying Prospectus.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries,
incorporated in this prospectus by reference from the Company's Annual Report
on Form 10-K for the year ended December 31, 1994, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of National Community Banks, Inc. and
its subsidiary for the year ended December 31, 1992, incorporated in this
prospectus by reference from the Company's Annual Report on Form 10-K, for the
year ended December 31, 1994, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto which has been so incorporated in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.
LEGAL OPINIONS
The validity of the Notes is being passed upon for the Company by Paul A.
Immerman, Esq., Senior Counsel to the Company, and on behalf of the Agent by
Brown & Wood, New York, New York.
S-20
<PAGE>
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NO DEALER, SALESMAN OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING
SUPPLEMENT) AND THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE AGENT. THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING
SUPPLEMENT) AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
(INCLUDING ANY PRICING SUPPLEMENT) AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS NOT BEEN ANY CHANGE IN THE FACTS CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) OR THE
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Recent Developments....................................................... S-3
Certain Regulatory Considerations......................................... S-3
Consolidated Ratios of Earnings to Fixed Changes.......................... S-6
Description of Retail Medium-Term Notes................................... S-6
Governing Law............................................................. S-13
United States Taxation.................................................... S-13
Non-U.S. Holders.......................................................... S-18
Plan of Distribution of Retail Medium-Term Notes.......................... S-19
Experts................................................................... S-20
Legal Opinions............................................................ S-20
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by
Reference................................................................ 2
The Company............................................................... 3
Certain Regulatory Considerations......................................... 3
Use of Proceeds........................................................... 7
Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed
Charges and Preferred Stock Dividend
Requirements............................................................. 7
Description of Debt Securities............................................ 8
Description of Preferred Stock............................................ 17
Description of Depository shares.......................................... 21
Description of Common Stock............................................... 24
Description of Capital Securities......................................... 24
Description of Preferred Stock Purchase Rights............................ 25
Validity of Securities.................................................... 26
Experts................................................................... 26
Plan of Distribution...................................................... 27
</TABLE>
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$450,000,000
THE BANK OF NEW YORK COMPANY, INC.
RETAIL MEDIUM-TERM NOTE (SM)
SECURITIES
SUBORDINATED RETAIL MEDIUM-TERM NOTES
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PROSPECTUS SUPPLEMENT
AUGUST 1, 1995
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SMITH BARNEY INC.
(SM) Servicemark of Smith Barney Inc.
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