<PAGE>
FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-15253
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 10, 1996.
$150,000,000
WELLS FARGO CAPITAL II
Floating Rate Capital Securities
(Liquidation Amount $1,000 per Capital Security)
Fully and Unconditionally Guaranteed as Described
Herein by
WELLS FARGO & COMPANY
------------
The Floating Rate Capital Securities (the "Capital Securities") offered hereby
represent beneficial ownership interests in Wells Fargo Capital II, a business
trust created under the laws of the State of Delaware (the "Issuer"). Wells
Fargo & Company, a Delaware corporation (the "Company"), will be the owner of
all the common securities (the "Common Securities" and, collectively with the
Capital Securities, the "Trust Securities") of the Issuer. The First National
Bank of Chicago is the Property Trustee of the Issuer. The Issuer exists for
the sole purpose of issuing Capital Securities and Common Securities and
investing the proceeds thereof in Floating Rate Junior Subordinated Deferrable
Interest Debentures, (the "Subordinated Debentures"), to be issued by the
Company. The Subordinated Debentures will mature on January 30, 2027 (the
"Stated Maturity"). The Capital Securities will have a preference under
certain
(continued on next page)
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE CAPITAL SECURITIES, SEE "RISK FACTORS" ON PAGE S-5
HEREIN.
THESE SECURITIES ARE NOT DEPOSITS OR SAVINGS ACCOUNTS OR OTHER OBLIGATIONS OF
A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Discounts
Price to and Proceeds to the
Public(1) Commissions Issuer(1)(2)(3)
------------ ------------ ---------------
<S> <C> <C> <C>
Per Capital Security....................... $990.25 (2) $990.25
Total...................................... $148,537,500 (2) $148,537,500
</TABLE>
(1) Plus accrued distributions, if any, from January 30, 1997.
(2) In view of the fact that the proceeds of the sale of the Capital
Securities will be used to purchase the Company's Subordinated Debentures,
the Underwriting Agreement provides that the Company will pay to the
Underwriter as compensation for arranging the investment therein of such
proceeds, $10 per Capital Security (or $1,500,000 in the aggregate). See
"Underwriting."
(3) Expenses of the offering to be paid by the Company are estimated to be
$250,000.
The Capital Securities are offered by the Underwriter when, as and if issued
by the Issuer, delivered to and accepted by the Underwriter and subject to its
right to reject orders in whole or in part. It is expected that delivery of
the Capital Securities in book-entry form will be made through the facilities
of The Depository Trust Company on or about January 30, 1997 against payment
in immediately available funds.
CREDIT SUISSE FIRST BOSTON
Prospectus dated January 23, 1997.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CAPITAL
SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
(Continued from previous page)
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities. See
"Description of Preferred Securities -- Subordination of Common Securities" in
the accompanying Prospectus. The Common Securities, like the Capital
Securities, will have a Liquidation Amount of $1,000 per security, and the
Company will acquire Common Securities in an aggregate Liquidation Amount of
$4.65 million, which is equal to 3% of the total capital of the Issuer
(rounded up to the nearest $50,000).
Holders of the Capital Securities will be entitled to receive preferential
cumulative cash distributions accumulating from January 30, 1997 and payable
quarterly in arrears on the thirtieth day of January, April, July and October
of each year, commencing April 30, 1997, at a variable annual rate of LIBOR
(as defined herein) plus 0.5% on the Liquidation Amount of $1,000 per Capital
Security ("Distributions"). The Distribution rate and the Distribution payment
dates and other payment dates of the Capital Securities will correspond to the
interest rate and interest payment dates and other payment dates on the
Subordinated Debentures, which will be the sole assets of the Issuer. Subject
to certain exceptions described herein, the Company has the right to defer
payment of interest on the Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarterly periods with respect
to each deferral period (each, an "Extension Period"), provided that no
Extension Period may extend beyond the Stated Maturity. Upon the termination
of any such Extension Period and the payment of all amounts then due, the
Company may elect to begin a new Extension Period subject to the requirements
set forth herein. If interest payments on the Subordinated Debentures are so
deferred, Distributions on the Capital Securities will also be deferred and
the Company will not be permitted, subject to certain exceptions described
herein, to declare or pay any cash distributions with respect to the Company's
capital stock or debt securities of the Company that rank pari passu with or
junior to the Subordinated Debentures. During an Extension Period, interest on
the Subordinated Debentures will continue to accrue (and the amount of
Distributions to which holders of the Capital Securities are entitled will
accumulate) at the annual rate of LIBOR plus 0.5% (calculated quarterly
without regard to any Extension Period), compounded quarterly, and holders of
Capital Securities will be required to accrue interest income for United
States federal income tax purposes. See "Certain Terms of Subordinated
Debentures -- Option to Defer Interest Payments" and "Certain Federal Income
Tax Consequences -- Interest Income and Original Issue Discount."
The Company has, through the Guarantee Agreement, the Trust Agreement, the
Subordinated Debentures, the Indenture and the Expense Agreement (each as
defined herein), taken together, fully, irrevocably and unconditionally
guaranteed on a subordinated basis all of the Issuer's obligations under the
Capital Securities. See "Relationship Among the Preferred Securities, the
Corresponding Junior Subordinated Debentures and the Guarantees--Full and
Unconditional Guarantee" in the accompanying Prospectus. The Guarantee of the
Company guarantees the payment of Distributions and payments on liquidation or
redemption of the Capital Securities, but only in each case to the extent of
funds held by the Issuer, as described herein (the "Guarantee"). See
"Description of Guarantees" in the accompanying Prospectus. If the Company
does not make interest payments on the Subordinated Debentures held by the
Issuer, the Issuer will have insufficient funds to pay Distributions on the
Capital Securities. The Guarantee does not cover payment of Distributions when
the Issuer does not have sufficient funds to pay such Distributions. In the
event of an Event of Default (as defined herein) under the Indenture
attributable to the failure of the Company to make required payments on the
Subordinated Debentures, a holder of Capital Securities may institute a legal
proceeding directly against the Company to enforce payment of a pro-rata
portion of the payment due on the Subordinated Debentures. See "Description of
Subordinated Debentures--Enforcement of Certain Rights By Holders of Preferred
Securities" in the
S-2
<PAGE>
(Continued from previous page)
accompanying Prospectus. The obligations of the Company under the Guarantee
and the Subordinated Debentures are unsecured and are subordinate and junior
in right of payment to all Senior Indebtedness (as defined in "Description of
Subordinated Debentures--Subordination" in the accompanying Prospectus) of the
Company. At December 31, 1996, the aggregate outstanding Senior Indebtedness
of the Company was approximately $5.0 billion. None of the Indenture, the
Guarantee or the Trust Agreement places any limitation on the amount of
additional Senior Indebtedness that may be incurred by the Company.
The Capital Securities are subject to mandatory redemption (i) at the Stated
Maturity upon repayment of the Subordinated Debentures, (ii) in whole but not
in part, contemporaneously with the prepayment of the Subordinated Debentures
upon the occurrence and continuation of a Tax Event, Investment Company Event
or Capital Treatment Event (each as defined herein) and (iii) in whole or in
part on or after January 30, 2007 contemporaneously with the optional
prepayment by the Company in whole or in part of the Subordinated Debentures,
in each case at a redemption price equal to the principal amount of, plus
accrued interest to the date of payment on, the Like Amount (as defined in the
accompanying Prospectus) of the Subordinated Debentures subject to prepayment.
See "Certain Terms of Capital Securities--Redemption." Subject to the Company
having received prior approval of the Board of Governors of the Federal
Reserve System (the "Federal Reserve") to do so if then required under
applicable capital guidelines or policies, the Subordinated Debentures are
prepayable prior to the Stated Maturity at the option of the Company (i) on or
after January 30, 2007, in whole or in part at any time or (ii) at any time,
in whole but not in part, upon the occurrence and continuation of a Tax Event,
Investment Company Event or Capital Treatment Event (each as defined herein),
in each case at a prepayment price equal to the principal amount thereof plus
accrued interest thereon to the date of prepayment. See "Certain Terms of
Subordinated Debentures--Optional Prepayment" and "--Tax Event, Investment
Company Event and Capital Treatment Event Prepayment."
The Company will have the right at any time to terminate the Issuer and, after
satisfaction of liabilities to creditors of the Issuer as required by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Capital Securities in liquidation of the Issuer, subject to the
Company having received prior approval of the Federal Reserve to do so if then
required under applicable capital guidelines or policies. See "Certain Terms
of Capital Securities--Liquidation of Issuer and Distribution of Subordinated
Debentures to Holders."
In the event of the termination of the Issuer, after satisfaction of
liabilities to creditors of the Issuer as required by applicable law, the
holders of the Capital Securities will be entitled to receive a Liquidation
Amount of $1,000 per Capital Security plus accumulated and unpaid
Distributions thereon to the date of payment, which may be in the form of a
distribution of such amount in Subordinated Debentures, subject to certain
exceptions. See "Description of Preferred Securities--Liquidation Distribution
Upon Termination" in the accompanying Prospectus.
The Capital Securities will be issued in the form of one or more global
certificates in fully registered form deposited with a custodian for, and
registered in the name of a nominee of, The Depository Trust Company ("DTC").
Beneficial interests in the Capital Securities will be represented on, and
transfers thereof will be effected only through, book-entry accounts of
financial institutions that are direct or indirect participants in DTC, acting
on behalf of the beneficial owners. Investors may elect to hold interests in
the Capital Securities through DTC, Cedel Bank, societe anonyme ("Cedel") or
Morgan Guaranty Trust Company of New York, Brussels office, as operator of the
Euroclear System ("Euroclear") if they are participants in such systems, or
indirectly through organizations which are participants in such systems. Cedel
and Euroclear will hold interests on behalf of their participants through
their respective U.S. depositaries, which in turn will hold such interests in
book-entry accounts as participants in DTC.
S-3
<PAGE>
(Continued from previous page)
Except in the limited circumstances described herein and in the accompanying
Prospectus, owners of beneficial interests in the Capital Securities will not
be entitled to have Capital Securities registered in their names and will not
receive or be entitled to receive certificates for Capital Securities. See
"Clearing and Settlement" herein and "Book-Entry Issuance" in the accompanying
Prospectus.
IT IS EXPECTED THAT THE DELIVERY OF THE CAPITAL SECURITIES IN BOOK-ENTRY FORM
WILL BE MADE AGAINST PAYMENT THEREFOR ON OR ABOUT THE DATE SPECIFIED IN THE
LAST PARAGRAPH OF THE COVER PAGE OF THIS PROSPECTUS SUPPLEMENT, WHICH IS THE
FIFTH BUSINESS DAY FOLLOWING THE DATE HEREOF (SUCH SETTLEMENT CYCLE BEING
HEREIN REFERRED TO AS "T+5"). PURCHASERS OF THE CAPITAL SECURITIES SHOULD NOTE
THAT TRADING OF THE CAPITAL SECURITIES ON THE DATE HEREOF AND THE NEXT
SUCCEEDING BUSINESS DAY MAY BE AFFECTED BY THE T+5 SETTLEMENT. SEE
"UNDERWRITING."
The information in this Prospectus Supplement supplements and should be read
in conjunction with the information contained in the accompanying Prospectus.
As used herein, (i) the "Indenture" means the Indenture dated as of November
27, 1996, as amended and supplemented from time to time between the Company
and The First National Bank of Chicago, as trustee (the "Debenture Trustee"),
(ii) the "Trust Agreement" means the Amended and Restated Trust Agreement
dated as of January 30, 1997 relating to the Issuer executed by the Company,
as Depositor. The First National Bank of Chicago, as Property Trustee (the
"Property Trustee"), First Chicago Delaware Inc., as Delaware Trustee (the
"Delaware Trustee"), and the Administrative Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees") and (iii) the "Guarantee Agreement" means the Guarantee Agreement
dated as of January 30, 1997 between the Company and the First National Bank
of Chicago, as Guarantee Trustee. The Trust Agreement provides that each
holder of Capital Securities by acceptance of the Capital Securities agrees to
the provisions of the Trust Agreement, the Guarantee Agreement and the
Indenture. Each of the other capitalized terms used in this Prospectus
Supplement and not otherwise defined in this Prospectus Supplement has the
meaning set forth in the accompanying Prospectus.
IF THE PURCHASER IS USING FOR ITS PURCHASE OF THE CAPITAL SECURITIES THE
ASSETS OF AN EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR OF A PLAN OR
INDIVIDUAL RETIREMENT ACCOUNT SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE" AND ANY SUCH EMPLOYEE BENEFIT PLAN, PLAN
OR INDIVIDUAL RETIREMENT ACCOUNT, AN "ERISA PLAN"), THE PURCHASE SHALL
CONSTITUTE A REPRESENTATION BY SUCH PERSON AS TO CERTAIN MATTERS RELATING,
GENERALLY, TO THE RELATIONSHIP OF THE COMPANY TO THE ERISA PLAN AND THE
AVAILABILITY OF AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES UNDER ERISA
AND THE CODE. SEE "ERISA CONSIDERATIONS."
S-4
<PAGE>
RISK FACTORS
Prospective purchasers of the Capital Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following
matters. Because holders of Capital Securities may receive Subordinated
Debentures on termination of the Issuer, prospective purchasers of Capital
Securities are also making an investment decision with regard to the
Subordinated Debentures and should carefully review all the information
regarding the Subordinated Debentures contained herein.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE SUBORDINATED
DEBENTURES
The obligations of the Company under the Subordinated Debentures are
unsecured and rank subordinate and junior in right of payment to all Senior
Indebtedness of the Company. The obligations of the Company under the
Guarantee are unsecured and rank subordinate and junior in right of payment to
all liabilities of the Company other than any liabilities which expressly by
their terms are made pari passu or subordinate to the obligations of the
Company under the Guarantee. At December 31, 1996, the aggregate outstanding
Senior Indebtedness of the Company was approximately $5.0 billion. None of the
Indenture, the Guarantee or the Trust Agreement places any limitation on the
amount of additional secured or unsecured debt, including Senior Indebtedness,
that may be incurred by the Company. See "Description of Guarantees -- Status
of the Guarantees" and "Description of Junior Subordinated Debentures --
Subordination" in the accompanying Prospectus. The Company is a legal entity
separate and distinct from its principal subsidiary, Wells Fargo Bank,
National Association (the "Bank"), and its other affiliates. There are various
legal limitations on the extent to which the Bank may extend credit, pay
dividends or otherwise supply funds to the Company or various of its
affiliates. Since the Company is a holding company, the right of the Company
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability
of holders of the Capital Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of that subsidiary,
except to the extent that the Company may itself be a creditor of that
subsidiary. Claims on the Company's subsidiaries by creditors other than the
Company include long-term debt and substantial obligations in respect of
federal funds purchased, securities sold under repurchase agreements and
certain other short-term borrowings, as well as deposit liabilities.
Accordingly, the Subordinated Debentures will be effectively subordinated to
all existing and future liabilities of the Company's subsidiaries, and holders
of Subordinated Debentures should look only to the assets of the Company for
payments on the Subordinated Debentures. See "Wells Fargo & Company."
The ability of the Issuer to pay amounts due on the Capital Securities is
solely dependent upon the Company making payments on the Subordinated
Debentures as and when required.
OPTION TO DEFER INTEREST PAYMENTS; TAX CONSEQUENCES; MARKET PRICE CONSEQUENCES
So long as no Event of Default under the Indenture has occurred or is
continuing, the Company has the right under the Indenture to defer the payment
of interest on the Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarterly periods with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Subordinated Debentures. As a consequence of any such
deferral, quarterly Distributions on the Capital Securities by the Issuer will
be deferred (and the amount of Distributions to which holders of the Capital
Securities are entitled will accumulate additional Distributions thereon at
the annual rate of LIBOR plus 0.5% (calculated quarterly without regard to any
Extension Period), compounded quarterly from the relevant payment date for
such Distributions) during any such Extension Period. During any such
Extension Period, the Company may not, and may not permit any subsidiary of
the Company to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Company's capital stock or (ii) make any payment of principal, interest
or premium, if any, on or repay, repurchase or redeem any debt securities of
the Company (including other Junior Subordinated Debentures) that rank pari
passu with or junior in interest to the Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the
S-5
<PAGE>
debt securities of any subsidiary of the Company if such guarantee ranks pari
passu with or junior in interest to the Subordinated Debentures (other than
(a) dividends or distributions in common stock of the Company, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee and any other guarantee by the Company of
distributions on the capital securities of other business trusts formed by the
Company that purchase debentures under the Indenture and (d) purchases of
common stock related to the issuance of common stock or rights under any of
the Company's benefit plans for its directors, officers or employees). Prior
to the termination of any such Extension Period, the Company may further defer
the payment of interest, provided that no Extension Period may exceed 20
consecutive quarterly periods or extend beyond the Stated Maturity of the
Subordinated Debentures. Upon the termination of any Extension Period and the
payment of all interest then accrued and unpaid (together with interest
thereon at the annual rate of LIBOR plus 0.5%, compounded quarterly, to the
extent permitted by applicable law), the Company may elect to begin a new
Extension Period subject to the above requirements. There is no limitation on
the number of times that the Company may elect to begin an Extension Period.
See "Certain Terms of Capital Securities -- Distributions" and "Certain Terms
of Subordinated Debentures -- Option to Extend Interest Payment Period."
Should an Extension Period occur, a holder of Capital Securities will
continue to accrue income for United States federal income tax purposes (in
the form of original issue discount) in respect of its pro rata share of the
Subordinated Debentures held by the Issuer. As a result, a holder of Capital
Securities will include such income in gross income for United States federal
income tax purposes in advance of the receipt of cash, and will not receive
the cash related to such income from the Issuer if the holder disposes of the
Capital Securities prior to the record date for the payment of Distributions.
See "Certain Federal Income Tax Consequences -- Interest Income and Original
Issue Discount" and "-- Sales or Redemption of Capital Securities."
The Company believes that the likelihood of its exercising its right to
defer payments of interest is remote. However, should the Company elect to
exercise such right in the future, the market price of the Capital Securities
is likely to be affected. A holder that disposes of its Capital Securities
during an Extension Period, therefore, might not receive the same return on
its investment as a holder that continues to hold its Capital Securities. In
addition, as a result of the existence of the Company's right to defer
interest payments, the market price of the Capital Securities (which represent
preferred beneficial interests in the Issuer) may be more volatile than the
market prices of other securities on which original issue discount accrues
that are not subject to such deferrals.
TAX EVENT, CAPITAL TREATMENT EVENT OR INVESTMENT COMPANY EVENT -- REDEMPTION
Upon the occurrence and continuation of a Tax Event, Capital Treatment Event
or Investment Company Event, the Company has the right to prepay the
Subordinated Debentures in whole (but not in part) within 90 days following
the occurrence of such Tax Event, Capital Treatment Event or Investment
Company Event and thereby cause a mandatory redemption of the Capital
Securities at the Liquidation Amount thereof plus the accumulated
Distributions thereon before, as well as on or after, January 30, 2007. The
exercise of such redemption right is subject to the Company having received
prior approval from the Federal Reserve to do so if then required under
applicable capital guidelines or policies. An "Investment Company Event" means
the receipt by the Issuer of an opinion of counsel experienced in such matters
to the effect that, as a result of the occurrence of a change in law or
regulation or change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), the Issuer is or will be considered an investment
company that is required to be registered under the Investment Company Act of
1940, as amended, which Change in 1940 Act Law becomes effective on or after
the date of original issuance of the Capital Securities.
The term "Capital Treatment Event" means the reasonable determination by the
Company that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision thereof or
therein, or as a result of any official or administrative pronouncement or
action or judicial decision interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement, action or
decision is announced
S-6
<PAGE>
on or after the date of issuance of the Capital Securities, there is more than
an insubstantial risk that the Company will not be entitled to treat an amount
equal to the aggregate Liquidation Amount of the Capital Securities as "Tier 1
Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Company.
A "Tax Event" means the receipt by the Issuer of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment
to, or change (including any announced prospective change) in, the laws (or
any regulations thereunder) of the United States or any political subdivision
or taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying
such laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Capital Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Issuer is, or will be within 90 days of the
date of such opinion, subject to United States Federal income tax with respect
to income received or accrued on the Subordinated Debentures, (ii) interest
payable by the Company on the Subordinated Debentures is not, or within 90
days of such opinion, will not be, deductible by the Company, in whole or in
part, for United States Federal income tax purposes, or (iii) the Issuer is,
or will be within 90 days of the date of the opinion, subject to more than a
de minimis amount of other taxes, duties or other governmental charges.
See "Risk Factors -- Possible Tax Law Changes Affecting the Capital
Securities" for a discussion of certain legislative proposals that, if
adopted, could give rise to a Tax Event, which may permit the Company to cause
a redemption of the Capital Securities prior to January 30, 2007.
EXCHANGE OF CAPITAL SECURITIES FOR SUBORDINATED DEBENTURES
The Company will have the right at any time to terminate the Issuer and,
after satisfaction of liabilities to creditors of the Issuer as required by
applicable law, cause the Like Amount of the Subordinated Debentures to be
distributed to the holders of the Capital Securities in exchange therefor upon
liquidation of the Issuer. The exercise of such right is subject to the
Company having received prior approval of the Federal Reserve if then required
under applicable capital guidelines or policies. See "Certain Terms of the
Capital Securities -- Liquidation of Issuer and Distribution of Subordinated
Debentures to Holders."
Under current law, and assuming, as expected, the Issuer is treated as a
grantor trust, a distribution by the Issuer of the Subordinated Debentures as
described under the caption "Certain Terms of Capital Securities --
Liquidation of Issuer and Distribution of Subordinated Debentures to Holders"
will be non-taxable and will result in the holder of Capital Securities
receiving directly his pro rata share of the Subordinated Debentures
previously held indirectly through the Issuer, with a holding period and
aggregate tax basis equal to the holding period and aggregate tax basis such
holder of Capital Securities had in its Capital Securities before such
distribution. A holder of Capital Securities will accrue interest in respect
of Subordinated Debentures received from the Issuer in the manner described
below under "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount." However, if there should be a change in law
(including a change in legal interpretation), a distribution of Subordinated
Debentures could be a taxable event to the holders of Capital Securities.
MARKET PRICES
There can be no assurance as to the market prices for Capital Securities or
Subordinated Debentures that may be distributed in exchange for Capital
Securities if a liquidation of the Issuer occurs. Accordingly, the Capital
Securities that an investor may purchase, whether pursuant to the offer made
hereby or in the secondary market, or the Subordinated Debentures that a
holder of Capital Securities may receive on liquidation of the Issuer, may
trade at a discount to the price that the investor paid to purchase the
Capital Securities offered hereby. As a result of the existence of the
Company's right to defer interest payments, the market price of the Capital
Securities (which represent beneficial ownership interests in the Issuer) may
be more volatile than the market prices of other debt securities that are not
subject to such optional deferrals.
S-7
<PAGE>
RIGHTS UNDER THE GUARANTEE
The Guarantee Agreement will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The First
National Bank of Chicago will act as the indenture trustee under the Guarantee
Agreement (the "Guarantee Trustee") for the purposes of compliance with the
Trust Indenture Act and will hold the Guarantee for the benefit of the holders
of the Capital Securities. The First National Bank of Chicago will also act as
Debenture Trustee for the Subordinated Debentures, as Property Trustee under
the Trust Agreement and as Calculation Agent under the Indenture and its
affiliate First Chicago Delaware Inc. will act as Delaware Trustee under the
Trust Agreement. The Guarantee guarantees to the holders of the Capital
Securities the following payments, to the extent not paid by the Issuer: (i)
any accumulated and unpaid Distributions required to be paid on the Capital
Securities, to the extent that the Issuer has funds on hand available therefor
at such time, (ii) the redemption price with respect to any Capital Securities
called for redemption, to the extent that the Issuer has funds on hand
available therefor at such time, and (iii) upon a voluntary or involuntary
termination, winding-up or liquidation of the Issuer (unless the Subordinated
Debentures are distributed to holders of the Capital Securities), the lesser
of (a) the aggregate of the Liquidation Amount and all accrued and unpaid
Distributions to the date of payment to the extent that the Issuer has funds
on hand available therefor at such time and (b) the amount of assets of the
Issuer remaining available for distribution to holders of the Capital
Securities.
The holders of not less than a majority in aggregate Liquidation Amount of
the Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Guarantee. Any holder of the
Capital Securities may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Issuer, the Guarantee Trustee or any other person
or entity. If the Company were to default on its obligation to pay amounts
payable under the Subordinated Debentures, the Issuer would lack funds for the
payment of Distributions or amounts payable on redemption of the Capital
Securities or otherwise, and, in such event, holders of the Capital Securities
would not be able to rely upon the Guarantee for payment of such amounts.
Instead, in the event a Debenture Event of Default shall have occurred and be
continuing and such event is attributable to the failure of the Company to pay
interest on or principal of the Subordinated Debentures on the applicable
payment date, then a holder of Capital Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or interest on such Subordinated Debentures having
a principal amount equal to the aggregate Liquidation Amount of the Capital
Securities of such holder (a "Direct Action"). In connection with such Direct
Action, the Company will have a right of set-off under the Indenture to the
extent of any payment made by the Company to such holder of Capital Securities
in the Direct Action. Except as described herein, holders of Capital
Securities will not be able to exercise directly any other remedy available to
the holders of the Subordinated Debentures or assert directly any other rights
in respect of the Subordinated Debentures. See "Description of Junior
Subordinated Debentures --Enforcement of Certain Rights of Holders of
Preferred Securities," "Description of Junior Subordinated Debentures --
Debenture Events of Default" and "Description of Guarantees" in the
accompanying Prospectus. The Trust Agreement provides that each holder of
Capital Securities by acceptance thereof agrees to the provisions of the
Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities, removal and
appointment of Issuer Trustees and the exercise of the Guarantee and of the
Issuer's rights as holder of Subordinated Debentures. The Property Trustee,
the Administrative Trustees and the Company may amend the Trust Agreement
without the consent of holders of Capital Securities to ensure that the Issuer
will be classified for United States federal income tax purposes as a grantor
trust even if such action adversely affects the interests of such holders. See
"Removal of Issuer Trustees; Appointment of Successors" in this Prospectus
Supplement and "Description of Preferred Securities -- Voting Rights;
Amendment of Each Trust Agreement" and "-- Removal of Issuer Trustees" in the
accompanying Prospectus.
S-8
<PAGE>
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET FOR CAPITAL SECURITIES
It is not possible to predict how the Capital Securities will trade in the
secondary market or whether such market will be liquid or illiquid. There is
currently no secondary market for the Capital Securities. The Capital
Securities are not expected to be listed on any securities exchange or
automated inter-dealer quotation system. The Underwriter currently intends,
but is not obligated, to make a market in the Capital Securities. There can be
no assurance that a secondary market will develop or, if a secondary market
does develop, that it will provide the holders of the Capital Securities with
liquidity of investment or that it will continue for the life of the Capital
Securities.
POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill")
proposed by the Clinton administration was released. The Bill would, among
other things, generally deny interest deductions for interest on an instrument
issued by a corporation that has a maximum term of more than 20 years and that
is not shown as indebtedness on the separate balance sheet of the issuer or,
where the instrument is issued to a related party (other than a corporation),
where the holder or some other related party issues a related instrument that
is not shown as indebtedness on the issuer's consolidated balance sheet. If
the provision were to apply to the Subordinated Debentures, the Company would
be unable to deduct interest on the Subordinated Debentures. However, on March
29, 1996, the Chairmen of the Senate Finance and House Ways and Means
Committees issued a joint statement to the effect that it was their intention
that the effective date of the President's legislative proposals, if adopted,
will be no earlier than the date of appropriate Congressional action on the
proposals. The proposals were not enacted in the recently concluded session of
Congress and, under current law, the Company is able to deduct interest on the
Subordinated Debentures. There can be no assurance, however, that final
legislation similar to the Bill or future legislative proposals, future
regulations or official administrative pronouncements, or future judicial
decisions will not affect the ability of the Company to deduct interest on the
Subordinated Debentures. Such a change could give rise to a Tax Event, which
may permit the Company, upon approval of the Federal Reserve if then required
under applicable capital guidelines or policies, to cause a redemption of the
Capital Securities before, as well as after, January 30, 2007. See "Certain
Terms of Subordinated Debentures -- Redemption" in this Prospectus Supplement
and "Description of Preferred Securities -- Redemption or Exchange -- Tax
Event Redemption" in the accompanying Prospectus. See also "Certain Federal
Income Tax Consequences -- Possible Tax Law Changes."
S-9
<PAGE>
WELLS FARGO CAPITAL II
Wells Fargo Capital II (the "Issuer") is a statutory business trust created
under Delaware law pursuant to (i) a Trust Agreement executed by the Company,
as Depositor, and an initial Delaware trustee and (ii) the filing of a
certificate of trust and a restated certificate of trust with the Delaware
Secretary of State on October 30, 1996 and November 20, 1996, respectively.
Under the Trust Agreement (the "Trust Agreement"), the Issuer's business and
affairs are conducted by the Issuer Trustees: the Property Trustee, the
Delaware Trustee, and three individual Administrative Trustees who are
employees or officers of or affiliated with the Company. The Issuer exists for
the exclusive purposes of (i) issuing and selling the Capital Securities and
Common Securities, (ii) using the proceeds from the sale of Capital Securities
and Common Securities to acquire Subordinated Debentures issued by the Company
and (iii) engaging in only those other activities necessary, advisable or
incidental thereto (such as registering the transfer of the Trust Securities).
Accordingly, the Subordinated Debentures will be the sole assets of the
Issuer, and payments by the Company under the Subordinated Debentures and the
related Expense Agreement will be the sole revenue of the Issuer. All of the
Common Securities will be owned by the Company. The Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Capital
Securities, except that upon the occurrence and continuance of an event of
default under the Trust Agreement resulting from an Event of Default under the
Indenture, the rights of the Company as holder of the Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption
or otherwise will be subordinated to the rights of the holders of the Capital
Securities. See "Description of Preferred Securities -- Subordination of
Common Securities" in the accompanying Prospectus. The Company will acquire
Common Securities in an aggregate liquidation amount of $4.65 million, which
is equal to 3% of the total capital of the Issuer, rounded up to the nearest
$50,000. The Issuer has a term of 31 years, but may terminate earlier as
provided in the Trust Agreement. The principal executive office of the Issuer
is 420 Montgomery Street, San Francisco, California 94163, and its telephone
number is (415) 477-1000. See "The Issuers" in the accompanying Prospectus.
The Company anticipates that the Issuer will not be subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
WELLS FARGO & COMPANY
Wells Fargo & Company is a bank holding company registered under the Bank
Holding Company Act of 1956, as amended. On April 1, 1996, the Company
completed its acquisition of First Interstate Bancorp ("First Interstate"). On
the basis of assets as of December 31, 1996, the Company was the eighth
largest bank holding company in the United States. As of December 31, 1996,
the Company had loans of $67.4 billion, total assets of $108.9 billion, total
deposits of $81.8 billion and stockholders' equity of $14.1 billion. Its
principal subsidiary is Wells Fargo Bank, National Association (the "Bank").
The Bank is primarily engaged in retail, commercial and corporate banking,
real estate lending and trust and investment services.
The Company is a legal entity separate and distinct from the Bank and its
other affiliates. There are various legal limitations on the extent to which
the Bank may extend credit, pay dividends or otherwise supply funds to the
Company or various of its affiliates. The executive offices of the Company are
located at 420 Montgomery Street, San Francisco, California 94163. The
Company's telephone number is (415) 477-1000.
Since the Company is a holding company, the rights of the Company to
participate in any distribution of assets of any subsidiary upon its
liquidation or reorganization or otherwise (and thus the ability of holders of
the Subordinated Debentures to benefit indirectly from such distribution) are
subject to the prior claims of creditors of that subsidiary, except to the
extent that the Company may itself be a creditor of that subsidiary. Claims on
the Company's subsidiaries by creditors other than the Company include long-
term debt and substantial obligations in respect of federal funds purchased,
securities sold under repurchase agreements and certain other short-term
borrowings, as well as deposit liabilities.
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<PAGE>
Wells Fargo Capital A, Wells Fargo Capital B, Wells Fargo Capital C and
Wells Fargo Capital I (each a Delaware business trust all of whose common
securities are owned by the Company) have recently issued an aggregate of
$1.15 billion of capital securities under a structure similar to the structure
of the Capital Securities, albeit on different terms. The capital securities
issued by Wells Fargo Capital A, Wells Fargo Capital B, Wells Fargo Capital C
and Wells Fargo Capital I, and the related junior subordinated deferrable
interest debentures and guarantee of the Company, will rank pari passu with
the Capital Securities, Subordinated Debentures and Guarantee, respectively.
All of such capital securities are expected to qualify for Tier 1 capital
treatment by the Company. See "Regulatory Capital Benefits to Wells Fargo &
Company" in the accompanying Prospectus.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following sets forth the consolidated historical ratios of earnings to
fixed charges and the consolidated historical ratios of earnings to fixed
charges and preferred stock dividends of the Company for the periods
indicated:
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, ------------------------
1996 1996 1995 1994 1993 1992 1991
------------- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Ratios of
Earnings to
Fixed Charges (1)(3)
Including interest on
deposits............. 2.02 2.13 2.19 2.20 1.90 1.33 1.02
Excluding interest on
deposits............. 5.34 5.46 4.56 5.04 4.53 2.56 1.10
Consolidated Ratios of
Earnings to
Fixed Charges and
Preferred Stock
Dividends (1)(2)(3)
Including interest on
deposits............. 1.91 2.02 2.09 2.07 1.77 1.26 1.00
Excluding interest on
deposits............. 4.28 4.48 3.99 4.18 3.51 2.02 1.01
</TABLE>
- --------
(1) For purposes of computing these ratios, earnings represent income before
income tax expense plus fixed charges. Fixed charges represent interest
expense plus the estimated interest component of net rental expense.
(2) The preferred stock dividends are increased to amounts representing the
pretax earnings required to cover such dividends.
(3) These computations are included herein in compliance with Securities and
Exchange Commission regulations. However, management believes the fixed
charges ratios are not meaningful measures for the business of the Company
because of two factors. First, even if there were no change in net income,
the ratios would decline with an increase in the proportion of income
which is tax-exempt or, conversely, they would increase with a decrease in
the proportion of income which is tax-exempt. Second, even if there were
no change in net income, the ratios would decline if interest income and
interest expense increase by the same amount due to an increase in the
level of interest rates or, conversely, they would increase if interest
income and interest expense decrease by the same amount due to a decrease
in the level of interest rates.
S-11
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Issuer will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Issuer will be included
in the consolidated financial statements of the Company. The assets of the
Issuer consist solely of the Subordinated Debentures and the right under the
Expense Agreement to reimbursement by the Company of the Issuer's operating
expenses. The Subordinated Debentures have a principal amount of $154.65
million, an annual interest rate of LIBOR plus 0.5% and mature on January 30,
2027.
The Capital Securities will be presented as a separate line item in the
consolidated balance sheet of the Company, which will be entitled "Guaranteed
Preferred Beneficial Interests in Company's Subordinated Debentures," and
appropriate disclosures about the Capital Securities, the Guarantee and the
Subordinated Debentures will be included in the notes to the consolidated
financial statements. For financial reporting purposes, the Company will
record Distributions payable on the Capital Securities as an expense in the
consolidated statement of income.
The Company has agreed that future financial reports of the Company will:
(i) present the Capital Securities and any other Preferred Securities of
Issuers (each as defined in the accompanying Prospectus) on the Company's
balance sheet as a separate line item, which will be entitled "Guaranteed
Preferred Beneficial Interests in Company's Subordinated Debentures;" (ii)
include, in an audited note to the financial statements, disclosure that the
sole assets of the Issuers are the Junior Subordinated Debentures (as defined
in the accompanying Prospectus) (specifying as to each Issuer the principal
amount, interest rate and maturity date of Junior Subordinated Debentures
held); and (iii) if Staff Accounting Bulletin 53 treatment is sought, include,
in an audited note to the financial statements, disclosure that (a) the common
securities of the Issuers are wholly owned by the Company, (b) the sole assets
of the Issuers are the Junior Subordinated Debentures (specifying as to each
Issuer the principal amount, interest rate and maturity date of Junior
Subordinated Debentures held) and (c) the obligations of the Company under the
Junior Subordinated Debentures, the Indenture, the relevant trust agreement
and the Guarantees, in the aggregate, constitute a full and unconditional
guarantee by the Company on a subordinated basis of the Issuers' obligations
under the Preferred Securities issued by each Issuer.
CERTAIN TERMS OF CAPITAL SECURITIES
GENERAL
The following summary of certain terms and provisions of the Capital
Securities supplements the description of the terms and provisions of the
Preferred Securities set forth in the accompanying Prospectus under the
heading "Description of Preferred Securities," to which description reference
is hereby made. This summary of certain terms and provisions of the Capital
Securities does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the Trust Agreement. The form of the Trust
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus Supplement and accompanying Prospectus form a part.
DISTRIBUTIONS
The Capital Securities represent beneficial ownership interests in the
Issuer, and Distributions on each Capital Security will be payable at the
annual rate of LIBOR plus 0.5% on the stated Liquidation Amount of $1,000,
payable quarterly in arrears on January 30, April 30, July 30 and October 30
of each year, to the holders of the Capital Securities on the relevant record
dates. The record dates will be, for so long as the Capital Securities remain
in book-entry form, one Business Day (as defined in the accompanying
Prospectus) prior to the relevant Distribution payment date and, in the event
the Capital Securities are not in book-entry form, the fifteenth day of the
month in which the relevant Distribution payment date occurs. Distributions
will accumulate from January 30, 1997. The first Distribution payment date for
the Capital Securities will be April 30, 1997. The amount of Distributions
payable for any period will be computed on the basis of the actual number of
days elapsed in a year of twelve 30-day months. In the event that any date on
which Distributions are payable on the
S-12
<PAGE>
Capital Securities is not a Business Day, then payment of the Distributions
payable on such date will be made on the next succeeding day that is a
Business Day (and without any additional Distributions or other payment in
respect of any such delay), in each case with the same force and effect as if
made on the date such payment was originally payable. The Distribution rate
and the Distribution payment dates and other payment dates of the Capital
Securities will correspond to the interest rate and interest payment dates and
other payment dates on the Subordinated Debentures. See "Description of
Preferred Securities --Distributions" in the accompanying Prospectus.
So long as no Debenture Event of Default has occurred and is continuing, the
Company has the right under the Indenture to defer the payment of interest on
the Subordinated Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarterly periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Subordinated Debentures. As a consequence of any such
deferral, quarterly Distributions on the Capital Securities by the Issuer will
also be deferred during any such Extension Period. Distributions to which
holders of the Capital Securities are entitled will accumulate additional
Distributions thereon at the annual rate of LIBOR plus 0.5% (calculated
quarterly without regard to any Extension Period), compounded quarterly from
the relevant payment date for such Distributions. The term "Distributions" as
used herein shall include any such additional Distributions. During any such
Extension Period, the Company may not, and may not permit any subsidiary of
the Company to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Company's capital stock or (ii) make any payment of principal, interest
or premium, if any, on or repay, repurchase or redeem any debt securities of
the Company (including other series of Junior Subordinated Debentures (as
defined in the accompanying Prospectus)) that rank pari passu with or junior
in interest to the Subordinated Debentures or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company if such guarantee ranks pari passu or junior in
interest to the Subordinated Debentures (other than (a) dividends or
distributions in common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee and any other guarantee by the Company of distributions on the
capital securities of other business trusts formed by the Company that
purchase debentures under the Indenture, and (d) purchases of common stock
related to the issuance of common stock or rights under any of the Company's
benefit plans for its directors, officers or employees). Prior to the
termination of any such Extension Period, the Company may further defer the
payment of interest, provided that no Extension Period may exceed 20
consecutive quarterly periods or extend beyond the Stated Maturity of the
Subordinated Debentures. Following the termination of any such Extension
Period and the payment of all amounts then due, the Company may elect to begin
a new Extension Period. There is no limitation on the number of times that the
Company may elect to begin an Extension Period. See "Certain Terms of
Subordinated Debentures -- Option to Defer Interest Payments" and "Certain
Federal Income Tax Consequences -- Interest Income and Original Issue
Discount."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures.
REDEMPTION
The Company will have the right to prepay the Subordinated Debentures (i) on
or after January 30, 2007, in whole at any time or in part from time to time,
and (ii) at any time, in whole (but not in part) upon the occurrence of a Tax
Event, Investment Company Event or Capital Treatment Event, in each case
subject to receipt of prior approval by the Federal Reserve if then required
under applicable capital guidelines or policies. The prepayment price shall
equal the principal amount of the Subordinated Debentures subject to such
prepayment, plus accrued interest thereon to the date of prepayment. Upon the
repayment in full at the Stated Maturity or prepayment in whole or in part of
the Subordinated Debentures, the proceeds from such repayment or prepayment
shall be applied by the Property Trustee to redeem a Like Amount of Trust
Securities upon not less than 15 nor more than 60 days' notice of a date of
redemption (the "Redemption Date"). See "Certain Terms of Subordinated
Debentures -- Optional Prepayment."
S-13
<PAGE>
Under regulations of the Federal Reserve, any perpetual preferred securities
with a feature permitting redemption at the option of the issuer can qualify
as Tier 1 capital only if the redemption is subject to prior approval of the
Federal Reserve. Therefore, any prepayment of the Subordinated Debentures and
consequent redemption of the Capital Securities will be subject to the prior
approval of the Federal Reserve if such regulations have not been revised.
Under current policies, the Federal Reserve may grant approval of a redemption
without a formal application or notice if (1) the redemption, together with
other redemptions and repurchases of securities in the preceding 12 months,
constitutes less than 10% of the bank holding company's net worth or (2) both
before and after the redemption, the bank holding company is well-capitalized
and highly-rated.
LIQUIDATION OF ISSUER AND DISTRIBUTION OF SUBORDINATED DEBENTURES TO HOLDERS
The Company will have the right at any time to terminate the Issuer and,
after satisfaction of liabilities to creditors of the Issuer as required by
applicable law, cause the Like Amount of the Subordinated Debentures to be
distributed to the holders of Capital Securities in exchange therefor upon
liquidation of the Issuer. Such right is subject to the Company having
received prior approval of the Federal Reserve if then required under
applicable capital guidelines or policies.
Under current United States Federal income tax law and interpretations and
assuming, as expected, the Issuer is treated as a grantor trust, a
distribution of the Subordinated Debentures in exchange for Capital Securities
should not be a taxable event to holders of the Capital Securities. Should
there be a change in law, a change in legal interpretation, a Tax Event or
other circumstances, however, the distribution could be a taxable event to
holders of the Capital Securities. See "Certain Federal Income Tax
Consequences--Distribution of Subordinated Debentures to Holders of Capital
Securities." If the Company elects neither to redeem the Subordinated
Debentures prior to maturity nor to liquidate the Issuer and distribute the
Like Amount of the Subordinated Debentures to holders of the Capital
Securities, the Capital Securities will remain outstanding until the repayment
of the Subordinated Debentures.
LIQUIDATION VALUE
The amount payable on the Capital Securities in the event of any liquidation
of the Issuer is $1,000 per Capital Security plus accumulated and unpaid
Distributions, which amount may be paid in the form of a distribution of such
amount in Subordinated Debentures, subject to certain exceptions. See
"Description of Preferred Securities--Liquidation Distribution Upon
Termination" in the accompanying Prospectus.
REMOVAL OF ISSUER TRUSTEES; APPOINTMENT OF SUCCESSORS
The holders of a majority in Liquidation Amount of Capital Securities may
remove any Issuer Trustee for cause or, if a Debenture Event of Default has
occurred and is continuing, with or without cause. If an Issuer Trustee is
removed by the holders of Capital Securities, the successor may be appointed
by the holders of at least 25% in Liquidation Amount of Capital Securities. If
an Issuer Trustee resigns, such Trustee shall appoint its successor. If the
Issuer Trustee fails to appoint a successor, the holders of at least 25% in
Liquidation Amount of Capital Securities may appoint a successor. If a
successor has not been appointed by the holders, any holder of Capital
Securities or Common Securities or the Property Trustee may petition a court
in the State of Delaware to appoint a successor. Any Delaware Trustee must
meet the applicable requirements of Delaware Law. Any Property Trustee must be
a national or state-chartered bank and at the time of appointment have
securities rated in one of the three highest rating categories by a nationally
recognized statistical rating organization and have capital and surplus of a
least $50,000,000. Each Administrative Trustee shall be a current officer of
the Company. No resignation or removal of an Issuer Trustee and no appointment
of a successor trustee shall be effective until acceptance of appointment by
the successor trustee in accordance with the provisions of the Trust
Agreement. This section replaces in its entirety the section entitled
"Description of Preferred Securities--Removal of Issuer Trustees" in the
accompanying Prospectus.
S-14
<PAGE>
RATINGS
The Capital Securities are expected to be rated "a1" by Moody's Investors
Service, Inc. and "BBB" by Standard & Poor's Ratings Services. A security
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the assigning rating
organization.
CLEARING AND SETTLEMENT
Links have been established among DTC, Cedel and Euroclear to facilitate the
initial issuance of the Capital Securities and cross-market transfers of the
Capital Securities associated with secondary market trading.
Although DTC, Euroclear and Cedel have agreed to the procedures provided
below in order to facilitate transfers of Capital Securities among their
participants, they are under no obligation to perform or continue to perform
such procedures and such procedures may be modified or discontinued at any
time. Neither the Issuer nor the Company will have any responsibility for the
performance by DTC. Euroclear, Cedel or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
DTC, Euroclear and Cedel have advised the Issuer as follows:
THE CLEARING SYSTEMS
DTC. 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 New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of transactions between its
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. DTC participants include certain of the Underwriter, the
Property Trustee, securities brokers and dealers, banks, trust companies and
clearing corporations and may in the future include certain other
organizations. Indirect access to the DTC system is also available to others
that clear through or maintain a custodial relationship with a DTC
participant, either directly or indirectly. Transfers of ownership or other
interests in Capital Securities in DTC may be made only through DTC
participants. In addition, beneficial owners of Capital Securities in DTC will
receive all Distributions with respect to the Capital Securities through such
DTC participant.
Cedel. Cedel is incorporated under the laws of Luxembourg as a professional
depositary. Cedel holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between
its participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Cedel provides to its participants, among other things, services
for safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Cedel interfaces with
domestic markets in several countries. As a professional depositary, Cedel is
subject to regulation by the Luxembourg Monetary Institute. Cedel participants
are financial institutions around the world, including securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the Underwriter. Indirect access to Cedel is
also available to others that clear through or maintain a custodial
relationship with a Cedel participant either directly or indirectly.
Distributions with respect to Capital Securities held beneficially through
Cedel will be credited to cash accounts of Cedel participants in accordance
with its rules and procedures to the extent received by the U.S. depositary
for Cedel.
Euroclear. Euroclear was created in 1968 to hold securities for its
participants and to clear and settle transactions between its participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Euroclear provides
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. Euroclear is operated
by the Brussels, Belgium office of Morgan Guaranty Trust Company of New York
(the "Euroclear Operator") under contract
S-15
<PAGE>
with Euro-Clear Clearance Systems, S.C., a Belgian cooperative corporation
(the "Cooperative"). All operations are conducted by the Euroclear Operator,
and all Euroclear securities clearance accounts and Euroclear cash accounts
are accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for Euroclear on behalf of Euroclear participants.
Euroclear participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include the Underwriter. Indirect access to Euroclear is also available to
others that clear through or maintain a custodial relationship with a
Euroclear participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions
govern transfers of securities and cash within Euroclear, withdrawals of
securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear participants, and has no record of or relationship
with persons holding through Euroclear participants.
Distributions with respect to Capital Securities held beneficially through
Euroclear will be credited to the cash accounts of Euroclear participants in
accordance with the Terms and Conditions, to the extent received by the U.S.
depositary for Euroclear.
INITIAL SETTLEMENT
Initial settlement for the Capital Securities will be made in immediately
available funds.
Investors electing to hold their Capital Securities through DTC (other than
through accounts at Euroclear or Cedel) will follow the settlement practices
applicable to U.S. corporate debt obligations. The securities custody accounts
of investors will be credited with their holding against payment in same-day
funds on the settlement date.
Investors electing to hold their Capital Securities through Euroclear or
Cedel accounts will follow the settlement procedures applicable to
conventional eurobonds in registered form. Capital Securities will be credited
to the securities custody accounts of Euroclear and Cedel holders on the
business day following the settlement date against payment for value on the
settlement date.
SECONDARY MARKET TRADING
Because the purchaser determines the place of delivery, it is important to
establish at the time of trading of any Capital Securities where both the
purchaser's and seller's accounts are located to ensure that settlement can be
made on the desired value date.
Trading between DTC participants. Secondary market trading between DTC
participants will occur in the ordinary way in accordance with DTC rules and
will be settled using the procedures applicable to U.S. corporate debt
obligations in same-day funds using DTC's Same-Day Funds Settlement System.
Trading between Euroclear and/or Cedel participants. Secondary market
trading between Euroclear participants and/or Cedel participants will occur in
the ordinary way in accordance with the applicable rules and operating
procedures of Cedel and Euroclear and will be settled using the procedures
applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Euroclear or Cedel purchaser. When Capital
Securities are to be transferred from the account of a DTC participant (other
than U.S. depositaries) to the account of a Euroclear participant or a Cedel
participant, the purchaser must send instructions to Euroclear or Cedel
through a participant at least one business day prior to settlement. Euroclear
or Cedel, as the case may be, will instruct the
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relevant U.S. depositary to receive the Capital Securities against payment.
Payment will then be made by such U.S. depositary to the DTC participant's
account against delivery of the Capital Securities. After settlement has been
completed, the Capital Securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the Euroclear participant's or Cedel participant's account. Credit for the
Capital Securities will appear on the next day (European time) and cash debt
will be back-valued to, and the Distributions on the Capital Securities will
accumulate from, the value date (which would be the preceding day when
settlement occurs in New York). If settlement is not completed on the intended
value date (i.e., the trade fails), the Euroclear or Cedel cash debit will be
valued instead as of the actual settlement date.
Euroclear participants or Cedel participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as the
participants would do for any pre-settlement occurring within Euroclear or
Cedel. Under this approach, such participants may take on credit exposure to
Euroclear or Cedel until the Capital Securities are credited to their accounts
one day later.
As an alternative, if Euroclear or Cedel has extended a line of credit to
them, participants can elect not to pre-position funds and allow that credit
line to be drawn upon to finance settlement. Under the procedure, Euroclear
participants or Cedel participants purchasing Capital Securities would incur
overdraft charges for one day, assuming they cleared the overdraft when the
Capital Securities were credited to their accounts. However, Distributions on
the Capital Securities would accumulate from the value date. Therefore, in
many cases, the investment income on Capital Securities earned during the one-
day period may substantially reduce or offset the amount of such overdraft
charges, although the result will depend on each participants' particular cost
of funds.
Because the settlement is taking place during the New York business hours,
DTC participants can employ their usual procedures in sending Capital
Securities to the relevant U.S. depositary for the benefit of Euroclear
participants or Cedel participants. The sale proceeds will be available to the
DTC seller on the settlement date. Thus, to the DTC participant, a cross
market transaction will settle no differently than a trade between two DTC
participants.
Finally, day traders that use Euroclear or Cedel and that purchase Capital
Securities from DTC participants for credit to Euroclear participants or Cedel
participants should note that these trades would automatically fail on the
sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(1) borrowing through Euroclear or Cedel for one day (until the purchase
side of the day trade is reflected in their Euroclear account or Cedel
account) in accordance with the clearing system's customary procedures;
(2) borrowing the Capital Securities in the United States from a DTC
participant no later than one day prior to settlement, which would give the
Capital Securities sufficient time to be reflected in the borrower's
Euroclear account or Cedel account in order to settle the sale side of the
trade; or
(3) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at least
one day prior to the value date for the sale to the Euroclear participant
or Cedel participant.
Trading between Euroclear or Cedel seller and DTC purchaser. Due to the time
zone differences in their favor, Euroclear participants or Cedel participants
may employ their customary procedures for transactions in which Capital
Securities are to be transferred by the respective clearing system through the
relevant U.S. depositary to another DTC participant. The seller must send
instructions to Euroclear or Cedel through a participant at least one business
day prior to settlement. In these cases, Euroclear or Cedel will instruct its
U.S. depositary to credit the Capital Securities to the DTC participant's
account against payment. The payment will then be reflected in the account of
the Euroclear participant or Cedel participant the following day, and receipt
of the cash proceeds in the Euroclear participant's or Cedel participant's
account will be back-valued to the value
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date (which would be the preceding day, when settlement occurs in New York).
If the Euroclear participant or Cedel participant has a line of credit with
its respective clearing system and elects to draw on such line of credit in
anticipation of receipt of the sale proceeds in its account, the back-
valuation may substantially reduce or offset any overdraft charges incurred
over the one-day period. If settlement is not completed on the intended value
date (i.e., the trade fails), receipt of the cash proceeds in the Euroclear
participant's or Cedel participant's account would instead be valued as of the
actual settlement date.
CERTAIN TERMS OF SUBORDINATED DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Subordinated
Debentures supplements the description of the terms and provisions of the
Corresponding Junior Subordinated Debentures set forth in the accompanying
Prospectus under the headings "Description of Junior Subordinated Debentures"
and "Description of Junior Subordinated Debentures -- Corresponding Junior
Subordinated Debentures," to which description reference is hereby made. The
summary of certain terms and provisions of the Subordinated Debentures set
forth below does not purport to be complete and is subject to, and qualified
in its entirety by reference to, the Indenture. The Indenture has been filed
as an exhibit to the Registration Statement of which this Prospectus
Supplement and accompanying Prospectus form a part.
Concurrently with the issuance of the Capital Securities, the Issuer will
invest the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in the Subordinated Debentures issued by
the Company. The Subordinated Debentures will bear interest at the annual rate
of LIBOR plus 0.5% on the principal amount thereof, payable quarterly in
arrears on January 30, April 30, July 30 and October 30 of each year (each, an
"Interest Payment Date"), commencing April 30, 1997, to the person in whose
name each Subordinated Debenture is registered, subject to certain exceptions,
at the close of business on the Business Day next preceding such Interest
Payment Date. It is anticipated that, until the liquidation, if any, of the
Issuer, all Subordinated Debentures will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Capital Securities. The
amount of interest payable for any period will be computed on the basis of the
actual number of days elapsed in a year of twelve 30-day months. In the event
that any date on which interest is payable on the Subordinated Debentures is
not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), in each case with the
same force and effect as if made on the date such payment was originally
payable. Accrued interest that is not paid on the applicable Interest Payment
Date (for reasons other than such date not being a Business Day) will bear
additional interest on the amount thereof (to the extent permitted by law) at
the annual rate of LIBOR plus 0.5% (calculated quarterly without regard to any
Extension Period), compounded quarterly. The term "interest" as used herein
shall include quarterly interest payments, interest on quarterly interest
payments not paid on the applicable Interest Payment Date and Additional Sums
(as defined below), as applicable.
The Subordinated Debentures will be issued as a series of junior
subordinated debentures under the Indenture. The Subordinated Debentures will
mature on January 30, 2027.
The Subordinated Debentures will be unsecured and will rank junior and be
subordinate in right of payment to all Senior Indebtedness of the Company. At
December 31, 1996, the aggregate outstanding Senior Indebtedness of the
Company was approximately $5.0 billion. Since the Company is a holding
company, the right of the Company to participate in any distribution of assets
of any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise (and thus the ability of holders of the Capital Securities to
benefit indirectly from such distribution) is subject to the prior claims of
creditors of that subsidiary, except to the extent that the Company may itself
be a creditor of that subsidiary. Claims on the Company's subsidiaries by
creditors other than the Company include long-term debt and substantial
obligations in respect of federal funds purchased, securities sold under
repurchase agreements and certain other short-term borrowings, as well as
deposit liabilities. Accordingly, the Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the
Company's subsidiaries, and holders of Subordinated Debentures should look
only to the assets of the Company for payments on the Subordinated Debentures.
The Indenture does not limit the incurrence or issuance
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of other secured or unsecured debt of the Company, including Senior
Indebtedness, whether under the Indenture or any existing or other indenture
that the Company may enter into in the future or otherwise, including the
Company's Senior and Subordinated Indentures entered into with The Chase
Manhattan Bank (formerly known as Chemical Bank) and Marine Midland Bank,
respectively. See "Description of Junior Subordinated Debentures --
Subordination" in the accompanying Prospectus.
INTEREST RATE
The First National Bank of Chicago, as Calculation Agent (the "Calculation
Agent"), will calculate the interest rate for each quarterly interest period
(including the initial interest period commencing January 30, 1997) based on
LIBOR determined as of two London Business Days (defined as any day, other
than a Saturday or Sunday, on which banks are open for business in London)
prior to the first day of such interest period (each, a "Determination Date").
"LIBOR" means, with respect to a quarterly interest period beginning on an
Interest Payment Date (without regard to any Extension Period) in the
following order of priority;
(1) The rate (expressed as a percentage per annum) for Eurodollar
deposits having a three-month maturity that appears on Telerate Page 3750
as of 11:00 a.m. (London time) on the related Determination Date. "Telerate
Page 3750" means the display designated as page "3750" on the Telerate
Service (or such other page as may replace the 3750 page on that service or
such other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered rates
for U.S. dollar deposits).;
(2) If such rate does not appear on Telerate Page 3750 as of 11:00 a.m.,
(London time) on the related Determination Date, LIBOR will be the
arithmetic mean (if necessary rounded upwards to the nearest whole multiple
of 0.00001%) of the rates (expressed as percentages per annum) for
Eurodollar deposits having a three-month maturity that appear on Reuters
Monitor Money Rates Page LIBO ("Reuters Page LIBO") as of 11:00 a.m.
(London time) on such Determination Date;
(3) If such rate does not appear on Reuters Page LIBO as of 11:00 a.m.
(London time) on the related Determination Date, the Calculation Agent will
request the principal London offices of four leading banks in the London
interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for
Eurodollar deposits having a three-month maturity as of 11:00 a.m. (London
time) on such Determination Date. If at least two quotations are provided,
LIBOR will be the arithmetic mean (if necessary rounded upwards to the
nearest whole multiple of 0.00001%) of such quotations;
(4) If fewer than two such quotations are provided as requested in clause
(3) above, the Calculation Agent will request four major New York City
banks to provide such banks' offered quotations (expressed as percentages
per annum) to leading European banks for loans in Eurodollars having a
three-month maturity as of 11:00 a.m. (London time) on such Determination
Date. If at least two such quotations are provided, LIBOR will be the
arithmetic mean (if necessary rounded upwards to the nearest whole multiple
of 0.00001%) of such quotations; and
(5) If fewer than two such quotations are provided as requested in clause
(4) above, LIBOR will be LIBOR as determined on the previous Determination
Date.
If the rate for Eurodollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 or Reuters Page LIBO, as the case may
be, as of 11:00 a.m. (London time) on the related Determination Date is
superseded on Telerate Page 3750 or Reuters Page LIBO, as the case may be, by
a corrected rate before 12:00 noon (London time) on such Determination Date,
the corrected rate as so substituted on the applicable page will be the
applicable LIBOR for such Determination Date.
Absent manifest error, the Calculation Agent's determination of LIBOR and
its calculation of the applicable interest rate for each interest period will
be final and binding. Holders of the Capital Securities may obtain the
interest rates for the current and preceding interest period by writing or
calling the Calculation Agent at The First National Bank of Chicago, One North
State Street, 9th Floor, Chicago, Illinois 60602 (telephone (800) 524-9472).
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OPTION TO DEFER INTEREST PAYMENTS
So long as no Event of Default under the Indenture has occurred or is
continuing, the Company has the right under the Indenture to defer the payment
of interest on the Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarterly periods with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Subordinated Debentures. At the end of such Extension
Period, the Company must pay all interest then accrued and unpaid on the
Subordinated Debentures (together with interest thereon at the annual rate of
LIBOR plus 0.5% (calculated quarterly without regard to such Extension
Period), compounded quarterly, to the extent permitted by applicable law).
During an Extension Period, interest will continue to accrue and holders of
Subordinated Debentures (and holders of Capital Securities while such series
is outstanding) will be required to accrue interest income for United States
federal income tax purposes. See "Certain Federal Income Tax Consequences --
Original Issue Discount."
During any such Extension Period, the Company may not, and may not permit
any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock or (ii) make any payment
of principal, interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company (including other series of Junior
Subordinated Debentures) that rank pari passu with or junior in interest to
the Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu with or junior in interest to the
Subordinated Debentures (other than (a) dividends or distributions in common
stock of the Company, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, with the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee and any other
guarantee by the Company of distrubitions on the capital securities of other
business trusts formed by the Company that purchase debentures under the
Indenture, and (d) purchases of common stock related to the issuance of common
stock or rights under any of the Company's benefit plans for its directors,
officers or employees). Prior to the termination of any such Extension Period,
the Company may further defer the payment of interest on the Subordinated
Debentures, provided that no Extension Period may exceed 20 consecutive
quarterly periods or extend beyond the Stated Maturity of the Subordinated
Debentures. Following the termination of any such Extension Period and the
payment of all amounts then due on the Subordinated Debentures, the Company
may elect to begin a new Extension Period subject to the above requirements.
No interest shall be due and payable during an Extension Period, except at the
end thereof. The Company must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election to begin such
Extension Period at least one Business Day prior to the earlier of (i) the
date the Distributions on the Capital Securities would have been payable
except for the election to begin such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to the New York Stock
Exchange, the Nasdaq National Market or other applicable self-regulatory
organization or to holders of such Capital Securities of the record date. The
Debenture Trustee shall give notice of the Company's election to begin an
Extension Period to the holders of the Subordinated Debentures, and the
Administrative Trustees shall give notice of the Company's election to the
holders of the Capital Securities. There is no limitation on the number of
times that the Company may elect to begin an Extension Period. See
"Description of Junior Subordinated Debentures -- Option to Extend Interest
Payment Date" in the accompanying Prospectus.
ADDITIONAL SUMS
If the Issuer is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Subordinated Debentures such amounts as shall be
required so that the Distributions payable by the Issuer shall not be reduced
as a result of any such additional taxes, duties or other governmental
charges.
OPTIONAL PREPAYMENT
The Subordinated Debentures will be prepayable, in whole or in part, at the
option of the Company at any time on or after January 30, 2007, subject to the
Company having received prior approval of the Federal Reserve
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if then required under applicable capital guidelines or policies, at a
prepayment price equal to the outstanding principal amount of the Subordinated
Debentures being redeemed plus accrued interest thereon to the date of
prepayment:
TAX EVENT, INVESTMENT COMPANY EVENT OR CAPITAL TREATMENT EVENT PREPAYMENT
If a Tax Event, Investment Company Event or Capital Treatment Event (as
defined below) shall occur and be continuing, the Company may, at its option
and subject to receipt of prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies, prepay the
Subordinated Debentures in whole (but not in part) at any time within 90 days
of the occurrence of such Tax Event, Investment Company Event or Capital
Treatment Event, at a prepayment price equal to the outstanding principal
amount of the Subordinated Debentures plus accrued interest thereon to the
date of prepayment. Such a prepayment may occur before, as well as on or
after, January 30, 2007.
"Tax Event" means the receipt by the Issuer of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment
to, or change (including any announced prospective change) in, the laws (or
any regulations thereunder) of the United States or any political subdivision
or taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying
such laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the Issue Date, there is
more than an insubstantial risk that (i) the Issuer is, or will be within 90
days of the date of such opinion, subject to United States Federal income tax
with respect to income received or accrued on the Subordinated Debentures,
(ii) interest payable by the Company on the Subordinated Debentures is not, or
within 90 days of the date of such opinion, will not be, deductible by the
Company, in whole or in part, for United States Federal income tax purposes,
or (iii) the Issuer is, or will be within 90 days of the date of such opinion,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
"Capital Treatment Event" means the reasonable determination by the Company
that, as a result of the occurrence of any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such pronouncement, action or decision is announced on
or after the date of issuance of the Capital Securities under the Trust
Agreement, there is more than an insubstantial risk that the Company will not
be entitled to treat an amount equal to the Liquidation Amount of the Capital
Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes
of the capital adequacy guidelines of the Federal Reserve, as then in effect
and applicable to the Company.
"Investment Company Event" means the receipt by the Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), the Issuer is or
will be considered an investment company that is required to be registered
under the Investment Company Act of 1940, as amended, which Change in 1940 Act
Law becomes effective on or after the date of original issuance of the Capital
Securities.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Subordinated Debentures
to be prepaid at its registered address. Unless the Company defaults in
payment of the prepayment price, on and after the prepayment date interest
ceases to accrue on such Subordinated Debentures called for prepayment.
If the Issuer is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will also pay any
Additional Sums on the Subordinated Debentures.
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DISTRIBUTION OF SUBORDINATED DEBENTURES
As described under "Certain Terms of Capital Securities -- Liquidation of
Issuer and Distribution of Subordinated Debentures to Holders," under certain
circumstances involving the termination of the Issuer, the Like Amount of the
Subordinated Debentures may be distributed to the holders of the Capital
Securities in exchange therefor upon liquidation of the Issuer, after
satisfaction of liabilities to creditors of the Issuer as provided by
applicable law. If distributed to holders of Capital Securities in
liquidation, the Subordinated Debentures will initially be issued in the form
of one or more global securities and DTC, or any successor depositary for the
Capital Securities, will act as depositary for the Subordinated Debentures. It
is anticipated that the depositary arrangements for the Subordinated
Debentures would be substantially identical to those in effect for the Capital
Securities. There can be no assurance as to the market price of any
Subordinated Debentures that may be distributed to the holders of Capital
Securities.
REGISTRATION OF SUBORDINATED DEBENTURES
The Subordinated Debentures will be represented by one or more certificates
registered in the name of The First National Bank of Chicago, as Property
Trustee of the Trust. If distributed to holders of Capital Securities in
exchange therefor upon liquidation of the Issuer, the Subordinated Debentures
will be represented by global certificates registered in the name of DTC or
its nominee. Beneficial interests in the Subordinated Debentures will be shown
on, and transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described below and in the accompanying
Prospectus, Subordinated Debentures in definitive certificated form will not
be issued in exchange for the global certificates. See "Clearing and
Settlement" above.
A global security shall be exchangeable for Subordinated Debentures
registered in the names of persons other than DTC or its nominee only if (i)
DTC notifies the Company that it is unwilling or unable to continue as a
depository for such global security and no successor depository shall have
been appointed, or if at any time DTC ceases to be a "clearing agency"
registered under the Exchange Act at a time when DTC is required to be so
registered to act as such depository, (ii) the Company in its sole discretion
determines that such global security shall be so exchangeable, or (iii) there
shall have occurred and be continuing an Event of Default under the Indenture
with respect to the Subordinated Debentures. Any global security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
definitive certificates registered in such names as DTC shall direct. It is
expected that such instructions will be based upon directions received by DTC
from its Participants (as defined in the accompanying Prospectus) with respect
to ownership of beneficial interests in such global security. In the event
that Subordinated Debentures are issued in definitive form, such Subordinated
Debentures will be in denominations of $1,000 and integral multiples thereof
and may be transferred or exchanged at the offices described below.
Payments on Subordinated Debentures represented by a global security will be
made to DTC, as the depositary for the Subordinated Debentures. In the event
Subordinated Debentures are issued in certificated form, principal and
interest will be payable, the transfer of the Subordinated Debentures will be
registrable, and Subordinated Debentures will be exchangeable for Subordinated
Debentures of other denominations of a like aggregate principal amount, at the
corporate trust offices of the Debenture Trustee in Chicago, Illinois, New
York, New York, or at the offices of any paying agent or transfer agent
appointed by the Company, provided that payment of interest may be made at the
option of the Company by check mailed to the address of the persons entitled
thereto or by wire transfer. In addition, if the Subordinated Debentures are
issued in certificated form, the record dates for payment of interest will be
the first day of June and December. For a description of DTC and the terms of
the depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Clearing and Settlement"
above and "Book-Entry Issuance" in the accompanying Prospectus.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income tax
consequences of the purchase, ownership and disposition of Capital Securities.
The statements of law and legal conclusions set forth in this summary
regarding the tax consequences to the beneficial owners of Capital Securities
(the "Securityholders") represent the opinion of Brobeck, Phleger & Harrison
LLP, counsel to the Company and the Issuer. This summary and the tax opinion
of counsel only address the tax consequences to a person that acquires Capital
Securities on their original issue at their original offering price. This
summary does not address all tax consequences that may be applicable to a
Securityholder, nor does it address the tax consequences to (i) persons that
may be subject to special treatment under United States federal income tax
law, such as banks, insurance companies, thrift institutions, regulated
investment companies, real estate investment trusts, tax-exempt organizations
and dealers in securities or currencies, (ii) persons that will hold Capital
Securities as part of a position in a "straddle" or as part of a "hedging,"
"conversion" or other integrated investment transaction for federal income tax
purposes, (iii) persons that do not hold Capital Securities as capital assets,
or (iv) "Non-U.S. Holders" (as defined below), except as described under "--
Income Tax Withholding from Non-U.S. Holders."
This summary is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations, Internal Revenue Service (the "Service")
rulings and pronouncements and judicial decisions now in effect, all of which
are subject to change at any time. Such changes may be applied retroactively
in a manner that could cause the tax consequences to vary substantially from
the consequences described below, possibly adversely affecting a beneficial
owner of Capital Securities. In particular, legislation has been proposed that
could adversely affect the Company's ability to deduct interest on the
Subordinated Debentures, which may in turn permit the Company to cause a
redemption of the Capital Securities. See "-- Possible Tax Law Changes."
The authorities on which this summary is based (including authorities
distinguishing debt from equity) are subject to various interpretations, and
it is therefore possible that the federal income tax treatment of the Capital
Securities may differ from the treatment described below. No ruling has been
received from the Service regarding the tax consequences of the Capital
Securities. Counsel's opinion regarding such tax consequences represents only
counsel's best legal judgment based on current authorities and is not binding
on the Service or the courts.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF CAPITAL SECURITIES, AS WELL AS
THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE ISSUER
In the opinion of Brobeck, Phleger & Harrison LLP, under current law and
assuming compliance with the terms of the Trust Agreement, the Issuer will be
classified as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes. As a result, each
Securityholder will be treated as owning an undivided beneficial interest in
the Subordinated Debentures. Accordingly, each Securityholder will be required
to include in its gross income its pro rata share of the interest income,
including original issue discount, paid or accrued with respect to the
Subordinated Debentures whether or not cash is actually distributed to the
Securityholders. See "-- Interest Income and Original Issue Discount." No
amount included in income with respect to the Capital Securities will be
eligible for the dividends-received deduction.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations applicable to debt instruments
issued on or after August 13, 1996 (the "Regulations"), a "remote" contingency
that stated interest will not be timely paid will be ignored in determining
whether a debt instrument is issued with original issue discount ("OID"). The
Company believes that the likelihood of its exercising its option to defer
payments of interest is remote. Based on the foregoing, and because the
difference between the Subordinated Debentures' stated redemption price at
maturity and their issue price is less than a statutorily defined de minimis
amount (i.e., 1/4 of 1 percent of the stated redemption
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price at maturity multiplied by the number of complete years to maturity), the
Company believes that the Subordinated Debentures will not be considered to be
issued with OID at the time of their original issuance and, accordingly, a
Securityholder should include in gross income such Securityholder's allocable
share of interest on the Subordinated Debentures in accordance with such
Securityholder's method of tax accounting.
Under the Regulations, if the Company should exercise its option to defer
any payment of interest, the Subordinated Debentures would at that time be
treated as issued with OID. Accordingly, as long as the Subordinated
Debentures remained outstanding, a Securityholder of Capital Securities
(regardless of its method of tax accounting) would be required to accrue
income as OID in accordance with the Regulations. Consequently, a
Securityholder would be required to include in gross income OID in accordance
with the Regulations even though the Company would not make any actual cash
payments during an Extension Period.
The Regulations have not been addressed in any rulings or other
interpretations by the Internal Revenue Service (the "IRS"), and it is
possible that the IRS could take a position contrary to the interpretation
herein.
DISTRIBUTION OF SUBORDINATED DEBENTURES TO HOLDERS OF CAPITAL SECURITIES
Under current law, and assuming, as expected, the Issuer is treated as a
grantor trust, a distribution by the Issuer of the Subordinated Debentures as
described under the caption "Certain Terms of Capital Securities--Liquidation
of Issuer or Distribution of Subordinated Debentures to Holders" will be non-
taxable and will result in the Securityholder receiving directly his pro rata
share of the Subordinated Debentures previously held indirectly through the
Issuer, with a holding period and aggregate tax basis equal to the holding
period and aggregate tax basis such Securityholder had in its Capital
Securities before such distribution. A Securityholder will accrue interest in
respect of Subordinated Debentures received from the Issuer in the manner
described above under "-- Interest Income and Original Issue Discount."
However, if there should be a change in law (including a change in legal
interpretation), a distribution of Subordinated Debentures could be a taxable
event to the Securityholders.
SALES OR REDEMPTION OF CAPITAL SECURITIES
A Securityholder that sells (including a redemption for cash) Capital
Securities will recognize gain or loss equal to the difference between its
adjusted tax basis in the Capital Securities and the amount realized on the
sale of such Capital Securities. Assuming that the Company does not exercise
its option to defer payment of interest on the Subordinated Debentures, and
the Capital Securities are not considered to be issued with OID, a
Securityholder's adjusted tax basis in the Capital Securities generally will
be its initial purchase price. If the Subordinated Debentures are deemed to be
issued with OID as a result of the Company's deferral of any interest payment,
a Securityholder's tax basis in the Capital Securities generally will be its
initial purchase price, increased by OID previously includable in such
Securityholder's gross income to the date of disposition and decreased by
distributions or other payments received on the Capital Securities since and
including the date of the first Extension Period. Such gain or loss generally
will be a capital gain or loss (except to the extent of any accrued interest
with respect to such Securityholder's pro rata share of the Subordinated
Debentures required to be included in income) and generally will be a long-
term capital gain or loss if the Capital Securities have been held for more
than one year.
Should the Company exercise its option to defer any payment of interest on
the Subordinated Debentures, the Capital Securities may trade at a price that
does not accurately reflect the value of accrued but unpaid interest with
respect to the underlying Subordinated Debentures. In the event of such a
deferral, a Securityholder that disposes of its Capital Securities between
record dates for payments of distributions thereon will be required to include
in income as ordinary income accrued but unpaid interest on the Subordinated
Debentures to the date of disposition, and to add such amount to its adjusted
tax basis in its pro rata share of the underlying Subordinated Debentures
deemed disposed of. To the extent the selling price is less than the
Securityholder's adjusted tax basis, such Securityholder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax
purposes.
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<PAGE>
INCOME TAX WITHHOLDING FROM NON-U.S. HOLDERS
For purposes of this discussion, a "Non-U.S. Holder" is any corporation,
individual partnership, estate or trust that is as to the United States, a
foreign corporation, a non-resident alien individual, a foreign partnership or
a non-resident fiduciary of a foreign estate or trust.
Under present United States federal income tax law
(i) payments by the Trust or any of its paying agents to any holder of
Capital Securities who or which is a Non-U.S. Holder will not be subject to
United States withholding tax, provided that (a) the beneficial owner of the
Capital Securities does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote, (b) the beneficial owner of the Capital Securities is not a
controlled foreign corporation that is related to the Company through stock
ownership, and (c) either (A) the beneficial owner of the Capital Securities
certifies to the Trust or its agent, under penalties of perjury, that it is
not a United States holder and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
(a "Financial Institution") and holds the Capital Securities certifies to the
Trust or its agent under penalties of perjury that such statement has been
received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and furnishes the Trust or its agent with
a copy thereof; and
(ii) A Non-U.S. Holder of Capital Securities will not be subject to United
States withholding tax on any gain realized upon the sale or other
disposition of Capital Securities.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest paid and any OID accrued on the Capital Securities
(other than Capital Securities held by corporations and other exempt
Securityholders) will be reported to the Internal Revenue Service. "Backup"
withholding at a rate of 31% will apply to payments of interest to a non-
exempt Securityholder unless the Securityholder furnishes its taxpayer
identification number in the manner prescribed in applicable Treasury
Regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions.
Payment of the proceeds from the disposition of Capital Securities to or
through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
Compliance with the certification procedures described above under "Income
Tax Withholding from Non-U.S. Holders" would generally establish an exemption
from backup withholding for Non-U.S. Holders.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information
is furnished to the Internal Revenue Service.
It is anticipated that income on the Capital Securities will be reported to
holders on Form 1099 and mailed to holders of the Capital Securities by
January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
The Revenue Reconciliation Bill of 1996 (the "Bill"), the revenue portion of
President Clinton's budget proposal released on March 19, 1996, would, among
other things, generally deny interest deductions for interest on an instrument
issued by a corporation that has a maximum term of more than 20 years and that
is not shown as indebtedness on the separate balance sheet of the issuer or,
where the instrument is issued to a related party (other than a corporation),
where the holder or some other related party issues a related instrument that
is not shown as indebtedness on the issuer's consolidated balance sheet. The
above-described provision of the Bill was proposed to be effective generally
for instruments issued on or after December 7, 1995. If the provision were to
apply to the Subordinated Debentures, the Company would be unable to deduct
interest on the Subordinated
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<PAGE>
Debentures. However, on March 29, 1996, the Chairmen of the Senate Finance and
House Ways and Means Committees issued a joint statement to the effect that it
was their intention that the effective date of the President's legislative
proposals, if adopted, will be no earlier than the date of appropriate
Congressional action on the proposals.
The above-described provision of the Bill was not enacted in the recently-
concluded session of Congress and, under current law, the Company is able to
deduct interest on the Subordinated Debentures. There can be no assurance that
future legislation similar to the Bill, future regulations or official
administrative pronouncements or future judicial decisions will not affect the
ability of the Company to deduct interest on the Subordinated Debentures. Such
a change could give rise to a Tax Event, which may permit the Company, upon
approval of the Federal Reserve if then required under applicable capital
guidelines or policies, to cause a redemption of the Capital Securities, as
described more fully in the accompanying Prospectus under "Description of
Preferred Securities --Redemption or Exchange -- Tax Event, Capital Treatment
Event or Investment Company Event Redemption."
ERISA CONSIDERATIONS
GENERAL
A fiduciary of an employee benefit plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") should consider
fiduciary standards under ERISA in the context of the particular circumstances
of such plan before authorizing an investment in the Capital Securities. Such
fiduciary should consider whether the investment satisfies ERISA's
diversification and prudence requirements, whether the investment constitutes
unauthorized delegation of fiduciary authority and whether the investment is
in accordance with the documents and instruments governing the plan. In
addition, ERISA and the Code prohibit a wide range of transactions
("Prohibited Transactions") involving the assets of a plan subject to ERISA or
the assets of an individual retirement account or plan subject to Section 4975
of the Code (hereinafter an "ERISA Plan") and persons who have certain
specified relationships to the ERISA Plan ("parties in interest," within the
meaning of ERISA, and "disqualified persons," within the meaning of the Code).
Such transactions may require "correction" and may cause the ERISA Plan
fiduciary to incur certain liabilities and the parties in interest or
disqualified persons to be subject to excise taxes.
If the purchaser is using for its purchase of the Capital Securities the
assets of an ERISA plan, the purchase shall constitute a representation by
such person that (i) if the Company is a "party in interest" or a
"disqualified person" with respect to such ERISA Plan, then such security is
being acquired pursuant to an exemption from the prohibited transaction rules
under ERISA and the Code; (ii) the Company is not a "fiduciary," within the
meaning of Section 3(21) of ERISA and the regulations thereunder, with respect
to such person's interest in the Capital Securities or the Subordinated
Debentures; and (iii) in purchasing the Capital Securities the purchaser
approves the purchase of the Subordinated Debentures and the appointment of
the Property Trustee. If the purchaser is relying on a prohibited transaction
class exemption ("PTCE") other than PTCE 96-23, 95-60, 91-38, 90-1 or 84-14,
the Company or the Issuer of the Capital Securities may require a satisfactory
opinion of counsel or other evidence with respect to the availability of such
exemption for the purchaser's purchase and holding of the Capital Securities.
Governmental plans and certain church plans (each as defined under ERISA)
are not subject to the Prohibited Transaction rules. Such plans may, however,
be subject to federal, state or local laws or regulations which may affect
their investment in the Capital Securities. Any fiduciary of such a
governmental or church plan considering an investment in the Capital
Securities should determine the need for, and the availability, if necessary,
of any exemptive relief under such laws or regulations.
THE DISCUSSION HEREIN OF ERISA IS GENERAL IN NATURE AND IS NOT INTENDED TO
BE ALL INCLUSIVE. ANY FIDUCIARY OF AN ERISA PLAN, GOVERNMENTAL PLAN OR CHURCH
PLAN CONSIDERING AN INVESTMENT IN THE CAPITAL SECURITIES SHOULD CONSULT WITH
ITS LEGAL ADVISORS REGARDING THE CONSEQUENCES OF SUCH INVESTMENT.
S-26
<PAGE>
PROHIBITED TRANSACTIONS
The Company may be a party in interest or a disqualified person with respect
to an ERISA Plan investing in the Capital Securities, and, therefore, such
investments by an ERISA Plan may give rise to a Prohibited Transaction.
Consequently, before investing in the Capital Securities, any person who is,
or who in acquiring such securities is using the assets of, an ERISA Plan
should determine that either a statutory or an administrative exemption from
the Prohibited Transaction rules discussed below or otherwise available is
applicable to such person's investment in the Capital Securities, or that its
investment in such securities will not result in a Prohibited Transaction.
Certain statutory or administrative exemptions from the Prohibited
Transaction rules under ERISA and the Code may be available to an ERISA Plan
which is investing in the Capital Securities. Included among these exemptions
are: PTCE 90-1, regarding investments by insurance company pooled separate
accounts; PTCE 91-38, regarding investments by bank collective investment
funds; PTCE 84-14, regarding transactions effected by qualified professional
asset managers; PTCE 96-23, regarding transactions effected by in-house asset
managers; or PTCE 95-60, regarding investments by insurance company general
accounts.
TRUST ASSETS AS "PLAN ASSETS"
The Department of Labor has issued final regulations (the "Labor
Regulations") as to what constitutes assets of an employee benefit plan ("plan
asset") under ERISA. The Labor Regulations provide that, as a general rule,
when an ERISA Plan acquires an equity interest in an entity and such interest
does not represent a "publicly offered security" nor a security issued by an
investment company registered under the Investment Company Act of 1940, the
ERISA Plan's assets include both the equity interest and an undivided interest
in each of the underlying assets of the entity, unless it is established
either that the entity is an operating company or that equity participation in
the entity by "benefit plan investors" is not "significant." For purposes of
the Labor Regulations, the Issuer will not be an investment company nor an
operating company and there is no assurance that the Capital Securities will
constitute a "publicly offered security."
Under the Labor Regulations, equity participation by benefit plan investors
will not be considered "significant" on any date only if, immediately after
the most recent acquisition of Capital Securities, the aggregate interest in
the Capital Securities held by benefit plan investors will be less than 25% of
the value of the Capital Securities. Although it is possible that the equity
participation by benefit plan investors on any date will not be "significant"
for purposes of the Labor Regulations, such result cannot be assured.
Consequently, if ERISA Plans or investors using plan assets of ERISA Plans
purchase the Capital Securities, the Issuer's assets could be deemed to be
"plan assets" of such ERISA Plans for purposes of the fiduciary responsibility
provisions of ERISA and the Code. Under ERISA, any person who exercises any
authority or control respecting the management or disposition of the assets of
an ERISA Plan is considered to be a fiduciary of such ERISA Plan. For example,
the Property Trustee could therefore become a fiduciary of the ERISA Plans
that invest in the Capital Securities and be subject to the general fiduciary
requirements of ERISA in exercising its authority with respect to the
management of the assets of the Issuer. However, the Property Trustee will
have only limited discretionary authority with respect to the Issuer's assets
and the remaining functions and responsibilities performed by the Property
Trustee will be for the most part custodial and ministered in nature. Inasmuch
as the Property Trustee or another person with authority or control respecting
the management or disposition of the Issuer's assets may become a fiduciary
with respect to the ERISA Plans that will purchase the Capital Securities,
there may be an improper delegation by such ERISA Plans of the responsibility
to manage plan assets.
S-27
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated January 23, 1997 (the "Underwriting Agreement"), Credit Suisse
First Boston Corporation (the "Underwriter") has agreed to purchase from the
Issuer all of the Capital Securities.
In view of the fact that the proceeds of the sale of the Capital Securities
will be used to purchase the Subordinated Debentures, the Underwriting
Agreement provides that the Company will pay to the Underwriter as
compensation for arranging the investment therein of such proceeds, $10 per
Capital Security.
The Underwriting Agreement provides that the obligations of the Underwriter
are subject to certain conditions precedent and that the Underwriter will be
obligated to purchase all the Capital Securities if any of the Capital
Securities are purchased.
The Company and the Issuer have been advised by the Underwriter that it
proposes to offer the Capital Securities to the public initially at the public
offering price set forth on the cover page of this Prospectus Supplement and
to certain dealers at such price less a concession of $6 per Capital Security,
and the Underwriter and such dealers may allow a discount of $2 per Capital
Security on sales to certain other dealers. After the initial public offering
of the Capital Securities, the public offering price and concession and
discount to dealers may be changed by the Underwriter.
The Capital Securities are a new issue of securities with no established
trading market. The Underwriter has advised the Issuer that it intends to act
as a market maker for the Capital Securities. However, the Underwriter is not
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for the Capital Securities.
The Company and the Issuer have agreed that during the period beginning on
the date hereof and continuing to and including January 30, 1997, they will
not offer, sell, contract to sell, announce their intention to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
(the "Securities Act") relating to, any securities substantially identical to
the Capital Securities or the Subordinated Debentures without the prior
written consent of the Underwriter.
The Company and the Issuer have agreed to indemnify the Underwriter against
certain liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriter may be required to make in
respect thereof.
The Underwriter has provided from time to time, and expects to provide in
the future, investment or commercial banking services for the Company and its
affiliates for which the Underwriter has received or will receive fees and
customary commissions.
It is expected that delivery of the Capital Securities will be made against
payment therefor on or about the date specified in the last paragraph of the
cover page of this Prospectus, which is the fifth business day following the
date hereof. Under Rule 15c6-1 of the U.S. Securities and Exchange Commission
under the Exchange Act, trades in the secondary market generally are required
to settle in three business days, unless the parties to any such trade
expressly agree otherwise. Accordingly, purchasers who wish to trade Capital
Securities on the date hereof or the next succeeding business day will be
required, by virtue of the fact that the Capital Securities initially will
settle in T+5, to specify an alternate settlement cycle at the time of any
such trade to prevent a failed settlement. Purchasers of Capital Securities
who wish to trade Capital Securities on the date hereof or the next succeeding
business day should consult their own advisor.
S-28
<PAGE>
$750,000,000
WELLS FARGO & COMPANY
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
WELLS FARGO CAPITAL I
WELLS FARGO CAPITAL II
WELLS FARGO CAPITAL III
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED HEREIN, BY
WELLS FARGO & COMPANY
Wells Fargo & Company, a Delaware corporation (the "Company"), may from time
to time offer in one or more series or issuances its junior subordinated
deferrable interest debentures (the "Junior Subordinated Debentures"). The
Junior Subordinated Debentures will be unsecured and subordinate and junior in
right of payment to Senior Indebtedness (as defined in "Description of Junior
Subordinated Debentures -- Subordination") of the Company. If provided in an
accompanying Prospectus Supplement, the Company will have the right to defer
payments of interest on any series of Junior Subordinated Debentures by
extending the interest payment period thereon at any time or from time to time
for such number of consecutive interest payment periods (which shall not
extend beyond the Stated Maturity (as defined herein) of the Junior
Subordinated Debentures) with respect to each deferral period as may be
specified in such Prospectus Supplement (each, an "Extension Period"). See
"Description of Junior Subordinated Debentures -- Option to Defer Interest
Payment Date".
Wells Fargo Capital I, Wells Fargo Capital II and Wells Fargo Capital III,
each a business trust created under the laws of the State of Delaware (each,
an "Issuer," and collectively, the "Issuers"), may severally offer, from time
to time, preferred securities (the "Preferred Securities") representing
preferred beneficial ownership interests in such Issuer. The Company will be
the owner of the common securities (the "Common Securities" and, together with
the Preferred Securities, the "Trust Securities") representing common
beneficial ownership interests in such Issuer. The payment of periodic cash
distributions ("Distributions") with respect to the Preferred Securities of
each Issuer and payments on liquidation or redemption with respect to such
Preferred Securities, in each case out of funds held by such Issuer, are each
irrevocably guaranteed by the Company to the extent described herein (each, a
"Guarantee"). See "Description of Guarantees". The obligations of the Company
under each Guarantee will be subordinate and junior in right of payment to all
liabilities of the Company, other than any liabilities which expressly by
their terms are made pari passu or subordinate to the obligations of the
Company under the Guarantee. Concurrently with the issuance by an Issuer of
its Preferred Securities, such Issuer will invest the proceeds thereof and any
contributions made in respect of the Common Securities in a corresponding
series of the Company's Junior Subordinated Debentures (the "Corresponding
Junior Subordinated Debentures") with terms corresponding to the terms of that
Issuer's Preferred Securities (the "Related Preferred Securities"). The
Corresponding Junior Subordinated Debentures will be the sole assets of each
Issuer, and payments under the Corresponding Junior Subordinated Debentures
and the related Expense Agreement (as defined herein) will be the only revenue
of each Issuer. If provided in the accompanying Prospectus Supplement, the
Company may, upon receipt of approval of the Federal Reserve (if such approval
is then required), redeem the Corresponding Junior Subordinated Debentures
(and cause the redemption of the Trust Securities) or may terminate each
Issuer and cause the Corresponding Junior Subordinated Debentures to be
distributed to the holders of Preferred Securities in liquidation of their
interests in such Issuer. See "Description of Preferred Securities --
Liquidation Distribution Upon Termination".
(continued on next page)
---------------
THE PREFERRED SECURITIES AND THE JUNIOR SUBORDINATED DEBENTURES ARE NOT
DEPOSITS OR SAVINGS ACCOUNTS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is December 10, 1996.
<PAGE>
(continued from previous page)
Holders of the Preferred Securities will be entitled to receive preferential
cumulative cash Distributions accumulating from the date of original issuance
and payable periodically as specified in an accompanying Prospectus
Supplement. If provided in an accompanying Prospectus Supplement, the Company
will have the right to defer payments of interest on any series of
Corresponding Junior Subordinated Debentures by extending the interest payment
period thereon at any time or from time to time for one or more Extension
Periods (which shall not extend beyond the Stated Maturity of the
Corresponding Junior Subordinated Debentures). If interest payments are so
deferred, Distributions on the Related Preferred Securities will also be
deferred and the Company will not be permitted, subject to certain exceptions
set forth herein, to declare or pay any cash distributions with respect to the
Company's capital stock or debt securities that rank pari passu with or junior
to the Corresponding Junior Subordinated Debentures. During an Extension
Period, Distributions will continue to accumulate (and the Preferred
Securities will accumulate additional Distributions thereon at the rate per
annum set forth in the related Prospectus Supplement). See "Description of
Preferred Securities -- Distributions".
Taken together, the Company's obligations under each series of Junior
Subordinated Debentures, the Indenture, the related Trust Agreement, the
related Expense Agreement and the related Guarantee (each, as defined herein),
in the aggregate, provide a full, irrevocable and unconditional guarantee on a
subordinated basis of payments of distributions and other amounts due on the
related series of Preferred Securities. See "Relationship Among the Preferred
Securities, the Corresponding Junior Subordinated Debentures and the
Guarantees -- Full and Unconditional Guarantee".
The Junior Subordinated Debentures and Preferred Securities may be offered
in amounts, at prices and on terms to be determined at the time of offering;
provided, however, the aggregate initial public offering price of all Junior
Subordinated Debentures (other than Corresponding Junior Subordinated
Debentures) and Preferred Securities (including the Corresponding Junior
Subordinated Debentures) issued pursuant to the Registration Statement of
which this Prospectus forms a part shall not exceed $750,000,000. Certain
specific terms of the Junior Subordinated Debentures or Preferred Securities
in respect of which this Prospectus is being delivered will be described in an
accompanying Prospectus Supplement, including without limitation and where
applicable and to the extent not set forth herein, (a) in the case of Junior
Subordinated Debentures, the specific designation, aggregate principal amount,
denominations, Stated Maturity (including any provisions for the shortening or
extension thereof), interest payment dates, interest rate (which may be fixed
or variable) or method of calculating interest, if any, applicable Extension
Period or interest deferral terms, if any, place or places where principal,
premium, if any, and interest, if any, will be payable, any terms of
redemption, any sinking fund provisions, terms for any conversion or exchange
into other securities, initial offering or purchase price, methods of
distribution and any other special terms, and (b) in the case of Preferred
Securities, the identity of the Issuer, specific title, aggregate amount,
stated liquidation preference, number of securities, Distribution rate or
method of calculating such rate, applicable Extension Period or Distribution
deferral terms, if any, place or places where Distributions will be payable,
any terms of redemption, exchange, initial offering or purchase price, methods
of distribution and any other special terms.
The Prospectus Supplement also will contain information, as applicable,
about certain United States Federal income tax consequences relating to the
Junior Subordinated Debentures or Preferred Securities.
The Junior Subordinated Debentures and Preferred Securities may be sold to
or through underwriters, through dealers, remarketing firms or agents or
directly to purchasers. See "Plan of Distribution". The names of any
underwriters, dealers, remarketing firms or agents involved in the sale of
Junior Subordinated Debentures or Preferred Securities in respect of which
this Prospectus is being delivered and any applicable fee, commission or
discount arrangements with them will be set forth in a Prospectus Supplement.
The Prospectus Supplement will state whether the Junior Subordinated
Debentures or Preferred Securities will be listed on any national securities
exchange or automated quotation system. If the Junior Subordinated Debentures
or Preferred Securities are not listed on any national securities exchange or
automated quotation system, there can be no assurance that there will be a
secondary market for the Junior Subordinated Debentures or Preferred
Securities.
2
<PAGE>
This Prospectus may not be used to consummate sales of Junior Subordinated
Debentures or Preferred Securities unless accompanied by a Prospectus
Supplement.
No dealer, salesperson or other person has been authorized to give any
information or make any representations, other than those contained in this
Prospectus and the applicable Prospectus Supplement, and if given or made such
information or representations must not be relied upon as having been
authorized by the Company or any agent, underwriter or dealer. This Prospectus
and the applicable Prospectus Supplement do not constitute an offer of any
securities other than those to which they relate, or an offer to sell or a
solicitation of an offer to buy those to which they relate, in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The delivery of this Prospectus and/or the
applicable Prospectus Supplement at any time does not imply that the
information herein or therein is correct as of any time subsequent to its
date.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov. In addition,
such reports, proxy statements and other information can be inspected at the
offices of the New York and Pacific Stock Exchanges on which certain of the
Company's securities are listed.
The Company and the Issuers have filed with the Commission a Registration
Statement on Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the
rules and regulations of the Commission. For further information with respect
to the Company and the securities offered hereby, reference is made to the
Registration Statement and the exhibits and the financial statements, notes
and schedules filed as a part thereof or incorporated by reference therein,
which may be inspected at the public reference facilities of the Commission,
at the addresses set forth above or through the Commission's Internet home
page. Statements made in this Prospectus concerning the contents of any
documents referred to herein are not necessarily complete, and in each
instance are qualified in all respects by reference to the copy of such
document filed as an exhibit to the Registration Statement.
No separate financial statements of any Issuer have been included herein.
The Company and the Issuers do not consider that such financial statements
would be material to holders of the Preferred Securities because each Issuer
is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Corresponding Junior
Subordinated Debentures of the Company and issuing the Trust Securities. See
"The Issuers", "Description of Preferred Securities", "Description of Junior
Subordinated Debentures -- Corresponding Junior Subordinated Debentures" and
"Description of Guarantees". In addition, the Company does not expect that any
of the Issuers will be filing reports under the Exchange Act with the
Commission.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following reports filed with the Commission pursuant to Section 13 of the
Exchange Act: (i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, (ii) the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30 and September 30, 1996; (iii) the Company's
Current Reports on Form 8-K filed on January 16, January 24, January 31,
February 29, April 1, April 5, April 10, April 16, July 16, August 9,
September 20, September 23, October 15 and November 15, 1996; and (iv) the
consolidated financial statements of First Interstate Bancorp ("First
Interstate") as of December 31, 1995 and 1994 and for each of the years in the
three-year period ended December 31, 1995, as contained in First Interstate's
Annual Report on Form 10-K for the year ended December 31, 1995. All documents
filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Offered Securities 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 person receiving a copy of this Prospectus may obtain without charge,
upon oral or written request, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents unless such
exhibits are specifically incorporated by reference into the information that
the Prospectus incorporates. Requests should be directed to Wells Fargo &
Company, Investor/Public Relations, MAC #0163-029, 343 Sansome Street, San
Francisco, California 94163, telephone (415) 396-0560.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
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WELLS FARGO & COMPANY
Wells Fargo & Company is a bank holding company registered under the Bank
Holding Company Act of 1956, as amended. On April 1, 1996, the Company
completed its acquisition of First Interstate Bancorp ("First Interstate"). On
the basis of assets as of September 30, 1996, the Company was the eighth
largest bank holding company in the United States. As of September 30, 1996,
the Company had loans of $69.2 billion, total assets of $109.2 billion, total
deposits of $83.7 billion and stockholders' equity of $14.9 billion. Its
principal subsidiary is Wells Fargo Bank, National Association (the "Bank").
The Bank is primarily engaged in retail, commercial and corporate banking,
real estate lending and trust and investment services.
The Company is a legal entity separate and distinct from the Bank and its
other affiliates. There are various legal limitations on the extent to which
the Bank may extend credit, pay dividends or otherwise supply funds to the
Company or various of its affiliates. The executive offices of the Company are
located at 420 Montgomery Street, San Francisco, California 94163. The
Company's telephone number is (415) 477-1000.
Since the Company is a holding company, the rights of the Company to
participate in any distribution of assets of any subsidiary upon its
liquidation or reorganization or otherwise (and thus the ability of holders of
the Junior Subordinated Debentures to benefit indirectly from such
distribution) are subject to the prior claims of creditors of that subsidiary,
except to the extent that the Company may itself be a creditor of that
subsidiary. Claims on the Company's subsidiaries by creditors other than the
Company include long-term debt and substantial obligations in respect of
federal funds purchased, securities sold under repurchase agreements and
certain other short-term borrowings, as well as deposit liabilities.
REGULATORY CAPITAL BENEFITS TO WELLS FARGO & COMPANY
The Company is required by the Board of Governors of the Federal Reserve
System ("Federal Reserve Board") to maintain certain levels of capital for
bank regulatory purposes. For these purposes, different capital instruments
are classified as either Tier 1 or Tier 2 capital, with Tier 1 being the more
favorable classification. The Federal Reserve Board has recently stated that
long-term cumulative preferred instruments issued by a special-purpose
subsidiary of a bank holding company and structured in the manner in which the
Preferred Securities are structured normally will be accorded Tier 1 capital
treatment. The Company believes that the Preferred Securities will qualify for
Tier 1 capital treatment. Such treatment, together with the Company's ability
to deduct, for income tax purposes, the interest payable on the Junior
Subordinated Debentures, will provide the Company with a more cost-effective
means of obtaining capital for regulatory purposes than if the Company itself
were to issue additional preferred stock.
As of the date of this Prospectus, the Company had five series of Preferred
Stock outstanding which constitute Tier 1 Capital, consisting of 1,500,000
shares of Adjustable Rate Cumulative Preferred Stock, Series B ("Adjustable
Rate Preferred Stock"), 477,500 shares of 9% Preferred Stock, Series C ("9%
Preferred Stock") represented by 9,550,000 Depositary Shares each representing
a one-twentieth interest in a share of 9% Preferred Stock, 350,000 shares of 8
7/8% Preferred Stock, Series D (the "8 7/8% Preferred Stock" and together with
the 9% Preferred Stock, the "Fixed Rate Preferred Stock") represented by
7,000,000 Depositary Shares each representing a one-twentieth interest in a
share of 8 7/8% Preferred Stock, 750,000 shares of 9% Preferred Stock, Series
G ("9% Series G Preferred Stock") represented by 6,000,000 Depositary Shares
each representing a one-eighth interest in a share of 9% Series G Preferred
Stock and 4,000,000 shares of Fixed/Adjustable Rate Noncumulative Preferred
Stock, Series H (the "Fixed/Adjustable Rate Preferred Stock"). The Adjustable
Rate Preferred Stock has a liquidation preference of $50, the Fixed Rate
Preferred Stock has a liquidation preference of $500 per share or $25 per
Depositary Share, the 9% Series G Preferred Stock has a liquidation preference
of $200 per share or $25 per Depositary share and the Fixed/Adjustable Rate
Preferred Stock has a liquidation preference of $50 per share. The 9%
Preferred Stock has been called for redemption by the Company on December 31,
1996. The Company may call the other series of Preferred Stock for redemption
on dates from the date of this Prospectus to October 1, 2001.
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THE ISSUERS
Each Issuer is a statutory business trust created under Delaware law
pursuant to (i) a trust agreement executed by the Company, as Depositor of the
Issuer, and an initial Delaware trustee and (ii) the filing of a certificate
of trust and restated certificate of trust with the Delaware Secretary of
State. Each trust agreement will be amended and restated in its entirety
(each, as so amended and restated, a "Trust Agreement") substantially in the
form filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each Trust Agreement will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Each Issuer exists for the exclusive purposes of (i) issuing
and selling its Trust Securities, (ii) using the proceeds from the sale of
such Trust Securities to acquire a corresponding series of Corresponding
Junior Subordinated Debentures issued by the Company, and (iii) engaging in
only those other activities necessary, convenient or incidental thereto.
Accordingly, the Corresponding Junior Subordinated Debentures and the right to
reimbursement of operating expenses under the related Expense Agreement will
be the sole assets of each Issuer, and payments under the Corresponding Junior
Subordinated Debentures and the related Expense Agreement will be the sole
revenue of each Issuer.
All of the Common Securities of each Issuer will be owned by the Company.
The Common Securities of an Issuer will rank pari passu, and payments will be
made thereon pro rata, with the Preferred Securities of such Issuer, except
that upon the occurrence and continuance of an event of default under a Trust
Agreement resulting from a Debenture Event of Default (as defined herein), the
rights of the Company as holder of the Common Securities to payment in respect
of Distributions and payments upon liquidation, redemption or otherwise will
be subordinated to the rights of the holders of the Preferred Securities of
such Issuer. See "Description of Preferred Securities -- Subordination of
Common Securities". The Company will acquire Common Securities in an aggregate
liquidation amount equal to not less than 3% of the total capital of each
Issuer.
Unless otherwise specified in the applicable Prospectus Supplement, each
Issuer has a term of approximately 55 years, but may terminate earlier as
provided in the applicable Trust Agreement. Each Issuer's business and affairs
are conducted by its trustees, each appointed by the Company as holder of the
Common Securities. Under the Trust Agreement, the trustees for each Issuer
will be the First National Bank of Chicago, as the Property Trustee (the
"Property Trustee"), First Chicago Delaware Inc. as the Delaware Trustee (the
"Delaware Trustee"), and three individual trustees (the "Administrative
Trustees") who are employees or officers of or affiliated with the Company
(collectively, the "Issuer Trustees"). The Property Trustee will act as sole
indenture trustee under each Trust Agreement for purposes of compliance with
the Trust Indenture Act. The First National Bank of Chicago will also act as
trustee under the Guarantees and the Indenture (each as defined herein). See
"Description of Guarantees" and "Description of Junior Subordinated
Debentures". The holder of the Common Securities of an Issuer, or the holders
of a majority in liquidation preference of the Related Preferred Securities if
a Debenture Event of Default under the Trust Agreement for such Issuer has
occurred and is continuing, will be entitled to appoint, remove or replace the
Property Trustee and/or the Delaware Trustee for such Issuer. In no event will
the holders of the Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees; such voting rights are vested
exclusively in the holder of the Common Securities. The duties and obligations
of each Issuer Trustee are governed by the applicable Trust Agreement. The
Company will pay all fees and expenses related to each Issuer and the offering
of the Preferred Securities and will pay, directly or indirectly, all ongoing
costs, expenses and liabilities of each Issuer.
Pursuant to the Expense Agreement entered into by the Company under each
Trust Agreement (the "Expense Agreement"), the Company will irrevocably and
unconditionally guarantee to each person or entity to whom the Issuer becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the Issuer, other than obligations of the Issuer to pay to the holders of any
Preferred Securities or other similar interests in the Issuer the amounts due
such holders pursuant to the terms of the Preferred Securities or such other
similar interests, as the case may be.
The principal executive office of each Issuer is 420 Montgomery Street, San
Francisco, California 94163, and its telephone number is (415) 477-1000.
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USE OF PROCEEDS
All of the proceeds from the sale of Preferred Securities will be invested
by the Issuer in Junior Subordinated Debentures. The net proceeds from the
sale of the Junior Subordinated Debentures will be used by the Company for
general corporate purposes. Specific allocations of the proceeds to such
purposes have not been determined. The net proceeds may be used to reduce
outstanding commercial paper and other debt of the Company. Based upon the
anticipated future funding requirements of the Company and its subsidiaries,
the Company expects that it will, from time to time, engage in additional
financings of a character and in amounts to be determined and that its
commercial paper borrowings and other short-term debt may be increased above
the level prevailing after the initial use of proceeds.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more series
under an indenture dated as of November 27, 1996, as supplemented from time to
time (as so supplemented, the "Indenture") between the Company and The First
National Bank of Chicago, as Trustee (the "Debenture Trustee"). This summary
of certain terms and provisions of the Junior Subordinated Debentures,
Corresponding Junior Subordinated Debentures and the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Indenture, which is filed as an exhibit to the Registration
Statement of which this prospectus forms a part, and the Trust Indenture Act.
The Indenture is qualified under the Trust Indenture Act. Whenever particular
defined terms of the Indenture (as supplemented or amended from time to time)
are referred to herein or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference.
GENERAL
The Indenture does not limit the amount of debt securities which can be
issued thereunder and provides that debt securities of any series may be
issued thereunder up to the aggregate principal amount which may be authorized
from time to time by the Company. The Indenture does not limit the amount of
other indebtedness or securities which may be issued by the Company. The
Junior Subordinated Debentures may be issued at various times with different
maturity dates and different principal repayment provisions, may bear interest
at different rates, may be payable in currencies other than United States
dollars, in composite currencies or in amounts determined by reference to an
index and may otherwise vary, all as provided in the Indenture.
The Prospectus Supplement will set forth the following specific terms
regarding the series of Junior Subordinated Debentures offered thereby: (i)
the designation and aggregate principal amount of Junior Subordinated
Debentures of such series; (ii) the percentage of their principal amount at
which such Junior Subordinated Debentures will be issued; (iii) the date or
dates (if any) on which such Junior Subordinated Debentures will mature; (iv)
the rate per annum or the method of determining the rate or rates per annum,
if any, at which such Junior Subordinated Debentures will bear interest; (v)
the dates from and on which such interest, if any, will accrue and be payable
and the designated record dates for such interest payments; (vi) the place or
places where the Junior Subordinated Debentures may be presented for payment,
if other than as described under "-- Payment and Paying Agents"; (vii) any
redemption terms; (viii) any conversion or exchange provisions; (ix)
provisions for issuance of global securities; (x) the terms and conditions of
any obligation or right of the Company or a holder to convert or exchange the
Junior Subordinated Debentures into Preferred Securities; (xi) the form of
Trust Agreement and Guarantee Agreement, if applicable; (xii) the relative
degree, if any, to which such Junior Subordinated Debentures of the series
shall be senior to or be subordinated to other series of such Junior
Subordinated Debentures or other indebtedness of the Company in right of
payment, whether such other series of Junior Subordinated Debentures or other
indebtedness are outstanding or not; and (xiii) any other terms of the Junior
Subordinated Debentures not inconsistent with the provisions of the Indenture.
If so indicated in the applicable Prospectus Supplement, the terms of the
Junior Subordinated Debentures offered thereby may differ from those set forth
herein.
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Some of the Junior Subordinated Debentures may be issued as discounted
Junior Subordinated Debentures (bearing no interest or interest at a rate
which at the time of issuance is below market rates) to be sold at a discount
below their stated principal amount. Federal income tax consequences and other
special considerations applicable to such discounted Junior Subordinated
Debentures will be described in the Prospectus Supplement relating thereto.
Interest on the Junior Subordinated Debentures of any series will be payable
to the persons in whose names the Junior Subordinated Debentures are
registered at the close of business on the record date designated for an
interest payment date. The Junior Subordinated Debentures may be presented for
the payment of principal and interest, if any, transfer and exchange at the
offices or agencies of the appropriate Securities Registrar maintained for
such purposes in Chicago and New York City. Payment of any installment of
interest may be made at the option of the Company by check, mailed to the
address of the person entitled thereto as it appears on the Register of the
Junior Subordinated Debentures of such series. The initial Securities
Registrar will be The First National Bank of Chicago. The Junior Subordinated
Debentures will be issued in fully registered form, without coupons, in
denominations of $25 unless different authorized denominations are stated in
the Prospectus Supplement. No service charge will be made for any exchange or
registration of transfer of a Junior Subordinated Debenture, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge. The Indenture provides that if a series of Junior Subordinated
Debentures is denominated in a currency other than United States dollars or in
a composite currency, in the absence of a contrary provision in the Junior
Subordinated Debentures any action or distribution under the Indenture will be
based on the relative amount of United States dollars that could be obtained
on such reasonable basis of exchange on such date as is specified by the
Company to the Debenture Trustee.
In the event of any redemption, neither the Company nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of a series during a period beginning at the
opening of business 15 days before the day of selection for redemption of
Junior Subordinated Debentures of that series and ending at the close of
business on the day of mailing of the relevant notice of redemption or
(ii) transfer or exchange any Junior Subordinated Debentures so selected for
redemption, except, in the case of any Junior Subordinated Debentures being
redeemed in part, any portion thereof not to be redeemed.
All of the Junior Subordinated Debentures will be unsecured general
obligations of the Company. Since the Company is a holding company, the rights
of the Company to participate in any distribution of assets of any subsidiary
upon its liquidation or reorganization or otherwise (and thus the ability of
holders of the Junior Subordinated Debentures to benefit indirectly from such
distribution) are subject to the prior claims of creditors of that subsidiary,
except to the extent that the Company may itself be a creditor of that
subsidiary. Claims on the Company's subsidiaries by creditors other than the
Company include long-term debt and substantial obligations in respect of
federal funds purchased, securities sold under repurchase agreements and
certain other short-term borrowings, as well as deposit liabilities.
Accordingly, the Junior Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of the Junior Subordinated Debentures should look
only to the assets of the Company for payments on the Junior Subordinated
Debentures. Unless otherwise set forth in the applicable Prospectus
Supplement, neither the Indenture nor the Junior Subordinated Debentures
contain provisions which would afford holders of the Junior Subordinated
Debentures protection in the event of a takeover, recapitalization or similar
restructuring involving the Company which could adversely affect the Junior
Subordinated Debentures.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole or in
part in the form of one or more global securities ("Global Security") that may
be deposited with, or on behalf of, a depositary identified in the Prospectus
Supplement relating to such series. Global Securities will be issued in
registered form and in either temporary or definitive form. Unless and until
it is exchanged in whole or in part for Junior Subordinated Debentures in
definitive form, a Global Security may not be transferred except as a whole by
the depositary for such Global Security to a nominee of such depositary or by
a nominee of such depositary to such depositary or
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another nominee of such depositary or by such depositary or any such nominee
to a successor of such depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any Junior
Subordinated Debentures of a series will be described in the Prospectus
Supplement relating to such series. The Company anticipates that the following
provisions will apply to all depositary arrangements.
Upon the issuance of a Global Security, the depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Junior Subordinated Debentures represented
by such Global Security to the accounts of institutions that have accounts
with such depositary ("Participants"). The accounts to be credited shall be
designated by the underwriters of such Junior Subordinated Debentures, by
certain agents of the Company or by the Company, if such Junior Subordinated
Debentures are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to Participants or
persons that may hold interests through Participants. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the depositary
with respect to Participants' interests in such Global Security or by
Participants or by persons that hold through Participants with respect to
beneficial owners' interests. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such ownership limits and such laws may impair the ability to
transfer beneficial interests in a Global Security.
So long as the depositary for a Global Security, or its nominee, is the
holder of such Global Security, such depositary or such nominee, as the case
may be, will be considered the sole owner or holder of the Junior Subordinated
Debenture represented by such Global Security for all purposes under the
Indenture governing such Junior Subordinated Debentures. Except as set forth
below, owners of beneficial interests in a Global Security will not be
entitled to have Junior Subordinated Debentures of a series represented by
such Global Security registered in their names, will not receive or be
entitled to receive physical delivery of Junior Subordinated Debentures of
such series in definitive form and will not be considered the owners or
holders thereof under the Indenture governing such Junior Subordinated
Debentures.
Principal and interest payments on Junior Subordinated Debentures registered
in the name of or held by a depositary or its nominee will be made to the
depositary or its nominee, as the case may be, as the registered owner of the
Global Security representing such Junior Subordinated Debentures. The Company
expects that the depositary for Junior Subordinated Debentures of a series,
upon receipt of any payment of principal or interest in respect of a Global
Security, will immediately credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the
principal amount of such Global Security as shown on the records of such
depositary. The Company also expects that payments by Participants or persons
who hold interests through Participants to owners of beneficial interests in
such Global Security held through such Participants or persons 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 such
Participants or persons. None of the Company, the Debenture Trustee, any
paying agent or any registrar for such Junior Subordinated Debentures will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in a Global
Security for such Junior Subordinated Debentures or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
If a depositary for Junior Subordinated Debentures of a series is at any
time unwilling or unable to continue as depositary and a successor depositary
is not appointed by the Company within 90 days, the Company will issue Junior
Subordinated Debentures of such series in definitive form in exchange for the
Global Security or Securities representing the Junior Subordinated Debentures
of such series. In addition, the Company may at any time and in its sole
discretion determine not to have any Junior Subordinated Debentures of a
series represented by one or more Global Securities and, in such event, will
issue Junior Subordinated Debentures of such series in
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definitive form in exchange for the Global Security or Securities representing
such Junior Subordinated Debentures.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Junior Subordinated
Debentures will be made at the offices of The First National Bank of Chicago,
as paying agent in the City of Chicago or New York, or at the offices of such
other paying agent or paying agents as the Company may designate from time to
time in the applicable Prospectus Supplement, except that at the option of the
Company payment of any interest may be made (i), except in the case of Global
Junior Subordinated Debentures, by check mailed to the address of the Person
entitled thereto as such address shall appear in the Securities Register or
(ii) by transfer to an account maintained by the Person entitled thereto as
specified in the Securities Register, provided that proper transfer
instructions have been received by the Regular Record Date. Unless otherwise
indicated in the applicable Prospectus Supplement, payment of any interest on
Junior Subordinated Debentures will be made to the Person in whose name such
Junior Subordinated Debenture is registered at the close of business on the
Regular Record Date for such interest, except in the case of Defaulted
Interest. The Company may at any time designate additional paying agents or
rescind the designation of any paying agent; however the Company will at all
times be required to maintain a paying agent in Chicago or New York for each
series of Junior Subordinated Debentures.
Any monies deposited with the Debenture Trustee or any Paying Agent, or then
held by the Company in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any)
or interest has become due and payable shall, at the request of the Company,
be repaid to the Company and the holder of such Junior Subordinated Debenture
shall thereafter look, as a general unsecured creditor, only to the Company
for payment thereof.
OPTION TO DEFER INTEREST PAYMENTS
The Company shall have the right at any time and from time to time during
the term of any series of Junior Subordinated Debentures to defer payment of
interest for such number of consecutive interest payment periods as may be
specified in the applicable Prospectus Supplement (each, an "Extension
Period") on the terms described in the applicable Prospectus Supplement,
provided that such Extension Period may not extend beyond the Stated Maturity
of such series of Junior Subordinated Debentures. Certain United States
Federal income tax consequences and special considerations applicable to any
such Junior Subordinated Debentures will be described in the applicable
Prospectus Supplement.
REDEMPTION
Junior Subordinated Debentures will not be subject to any sinking fund
unless otherwise indicated in the applicable Prospectus Supplement.
The Company may, at its option and subject to receipt of prior approval by
the Board of Governors of the Federal Reserve System (the "Federal Reserve")
if then required under applicable capital guidelines or policies, redeem the
Junior Subordinated Debentures of any series in whole at any time or in part
from time to time, unless otherwise indicated in the applicable Prospectus
Supplement. If the Junior Subordinated Debentures of any series are so
redeemable only on or after a specified date or upon the satisfaction of
additional conditions, the applicable Prospectus Supplement will specify such
date or describe such conditions. Junior Subordinated Debentures in
denominations larger than $25 may be redeemed in part but only in integral
multiples of $25. The redemption price for any Junior Subordinated Debenture
so redeemed shall equal any accrued and unpaid interest thereon to the
redemption date, plus the principal amount thereof, unless otherwise indicated
in the applicable Prospectus Supplement. The Company may not redeem a series
of Corresponding Junior Subordinated Debentures in part unless all accrued and
unpaid interest has been paid in full on all outstanding Corresponding Junior
Subordinated Debentures of such series for all interest periods terminating on
or prior to the Redemption Date.
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If a Tax Event, Capital Treatment Event or Investment Company Event (as
defined below) in respect of a series of Junior Subordinated Debentures shall
occur and be continuing, the Company may, at its option and subject to receipt
of prior approval by the Federal Reserve if then required under applicable
capital guidelines or policies, redeem such series of Junior Subordinated
Debentures in whole (but not in part) at any time within 90 days of the
occurrence of such Tax Event or Investment Company Event, at a redemption
price equal to 100% of the principal amount of such Junior Subordinated
Debentures then outstanding plus accrued and unpaid interest to the date fixed
for redemption unless otherwise indicated in the applicable Prospectus
Supplement.
"Tax Event" means the receipt by the applicable Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance
of the applicable series of Junior Subordinated Debentures under the
Indenture, there is more than an insubstantial risk that (i) the Issuer is, or
will be within 90 days of the date of such opinion, subject to United States
Federal income tax with respect to income received or accrued on the Junior
Subordinated Debentures, (ii) interest payable by the Company on such series
of Junior Subordinated Debentures is not, or within 90 days of the date of
such opinion will not be, deductible by the Company, in whole or in part, for
United States Federal income tax purposes, or (iii) the Issuer is, or will be
within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
"Capital Treatment Event" means the reasonable determination by the Company
that, as a result of the occurrence of any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or which pronouncement, action or decision is announced on
or after the date of issuance of the applicable Preferred Securities, there is
more than an insubstantial risk that the Company will not be entitled to treat
an amount equal to the aggregate Liquidation Amount of the Preferred
Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes
of the capital adequacy guidelines of the Federal Reserve, as then in effect
and applicable to the Company.
"Investment Company Event" means the receipt by the applicable Issuer of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act
Law"), the applicable Issuer is or will be considered an "investment company"
that is required to be registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), which Change in 1940 Act Law becomes
effective on or after the date of original issuance of the series of Preferred
Securities issued by the Issuer.
Notice of any redemption will be mailed at least 15 days but not more than
60 days before the redemption date to each Holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Company
defaults in payment of the redemption price, on and after the redemption date
interest ceases to accrue on such Junior Subordinated Debentures or portions
thereof called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
The Company will also covenant, as to each series of Junior Subordinated
Debentures, that it will not, and will not permit any subsidiary of the
Company to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay or repurchase or redeem any debt securities of
the Company (including other Junior Subordinated Debentures) that rank pari
passu with or junior in interest to the Junior Subordinated Debentures or make
any guarantee payments with respect to any guarantee by the
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Company of the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debentures (other than (a) dividends or distributions in common
stock of the Company, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under any Guarantee with respect to the
series of Related Preferred Securities and (d) purchases of common stock
related to the issuance of common stock or rights under any of the Company's
benefit plans for its directors, officers or employees), if at such time
(i) there shall have occurred any event of which the Company has actual
knowledge that (a) with the giving of notice or the lapse of time, or both,
would constitute an "Event of Default" under the Indenture with respect to the
Junior Subordinated Debentures of such series and (b) in respect of which the
Company shall not have taken reasonable steps to cure, (ii) if such Junior
Subordinated Debentures are held by an Issuer of a series of Related Preferred
Securities, the Company shall be in default with respect to its payment of any
obligations under the Guarantee relating to such Related Preferred Securities
or (iii) the Company shall have given notice of its election of an Extension
Period as provided in the Indenture with respect to the Junior Subordinated
Debentures of such series and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
MODIFICATION OF INDENTURE
From time to time, the Company and the Debenture Trustee may, without the
consent of the holders of any series of Junior Subordinated Debentures, amend,
waive or supplement the Indenture for specified purposes, including, among
other things, curing ambiguities, defects or inconsistencies (provided that
any such action does not materially adversely affect the interest of the
holders of any series of Junior Subordinated Debentures or, in the case of
Corresponding Junior Subordinated Debentures, the holders of Related Preferred
Securities so long as they remain outstanding) and qualifying, or maintaining
the qualification of, the Indenture under the Trust Indenture Act. In
addition, the Company and the Debenture Trustee may execute, without the
consent of any holder of Junior Subordinated Debentures, any supplemental
indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
The Indenture contains a provision permitting the Company and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Junior Subordinated Debentures of all series then
outstanding under such Indenture affected by such supplemental indenture
(voting as one class), to execute supplemental indentures adding any
provisions to or changing or eliminating any of the provisions of such
Indenture or modifying the rights of the holders of Junior Subordinated
Debentures of each such series, provided that no such supplemental indenture
may, without the consent of the holder of each Junior Subordinated Debenture
so affected, (i) change the fixed maturity of any Junior Subordinated
Debentures, or reduce the rate or extend the time of payment of any interest
thereon or on any overdue principal amount, or reduce the principal amount
thereof, or reduce any amount payable upon any redemption thereof, or change
the currency of payment of principal or of any interest thereon or on any
overdue principal amount, (ii) reduce the aforesaid percentage of Junior
Subordinated Debentures, the holders of which are required to consent to any
such supplemental indenture, (iii) modify certain provisions of the Indenture
relating to modification or waiver except to increase the required percentage
or (iv) modify the provisions with respect to the subordination of outstanding
Junior Subordinated Debentures of any series in a manner adverse to the
holders thereof; provided further that, in the case of Corresponding Junior
Subordinated Debentures, so long as any of the Related Preferred Securities
remain outstanding, no such modification may be made that adversely affects
the holders of such Preferred Securities in any material respect, and no
termination of the Indenture may occur, and no waiver of any Event of Default
or compliance with any covenant under the Indenture may be effective, without
the prior consent of the holders of at least a majority of the aggregate
liquidation preference of such Related Preferred Securities unless and until
the principal of the Corresponding Junior Subordinated Debentures and all
accrued and unpaid interest thereon have been paid in full and certain other
conditions are satisfied.
The Indenture provides that the Company may omit in any particular instance
to comply with any covenant or condition specifically contained in such
Indenture for the benefit of one or more series of Junior Subordinated
Debentures if before the time for such compliance the holders of a majority in
principal amount of the Junior
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Subordinated Debentures of all series then outstanding under such Indenture
affected by the omission (voting as one class) waive such compliance in such
instance, but such waiver shall not extend to or affect such covenant or
condition except to the extent so expressly waived.
DEBENTURE EVENTS OF DEFAULT
A Debenture Event of Default with respect to any series of Junior
Subordinated Debentures is defined in the Indenture as being: (a) default for
30 days in payment of any installment of interest on Junior Subordinated
Debentures of such series (subject to the deferral of any due date in the case
of an Extension Period); (b) default in payment of any principal or premium,
if any, on Junior Subordinated Debentures of such series; (c) default by the
Company in performance in any material respect of any of the covenants or
agreements in the Indenture specifically contained therein for the benefit of
the Junior Subordinated Debentures of such series which shall not have been
remedied for a period of 90 days after written notice to the Company by the
Debenture Trustee or to the Company and the Debenture Trustee by the holders
of not less than 25% in principal amount of the Junior Subordinated Debentures
of such series and all other series so benefited (all such series voting as
one class) then outstanding; or (d) certain events of bankruptcy, insolvency
or reorganization of the Company or the Bank. No Debenture Event of Default
described in clause (a), (b) or (c) above with respect to a particular series
of Junior Subordinated Debentures necessarily constitutes a Debenture Event of
Default with respect to any other series of Junior Subordinated Debentures.
The Indenture provides that if a Debenture Event of Default under clause
(a), (b) or (c) above shall have occurred and be continuing (but, in the case
of clause (c), only if the Debenture Event of Default is with respect to less
than all series of Junior Subordinated Debentures then outstanding under the
Indenture), either the Debenture Trustee or the holders of not less than 25%
in principal amount of the then outstanding Junior Subordinated Debentures of
the series as to which the Debenture Event of Default has occurred (each such
series voting as a separate class in the case of a Debenture Event of Default
under clause (a) or (b), and all such series voting as one class in the case
of a Debenture Event of Default under clause (c)) may declare the principal
(or portion thereof specified in the terms of such series) of all the Junior
Subordinated Debentures of such series, or of all such series in the case of a
Debenture Event of Default under clause (c) above, in each case together with
any accrued interest, to be due and payable immediately. In the case of
Corresponding Junior Subordinated Debentures, should the Debenture Trustee or
holders of such Corresponding Junior Subordinated Debentures fail to make such
declaration, the holders of at least 25% in aggregate liquidation preference
of the Related Preferred Securities shall have such right. The Indenture also
provides that if a Debenture Event of Default under clause (c) or (d) above
shall have occurred and be continuing (but, in the case of clause (c), only if
the Debenture Event of Default is with respect to all Junior Subordinated
Debentures then outstanding under the Indenture), either the Debenture Trustee
or the holders of not less than 25% in principal amount of all the Junior
Subordinated Debentures then outstanding (voting as one class) may declare the
principal (or portion thereof specified in the terms of any series) of all the
Junior Subordinated Debentures, together with any accrued interest, to be due
and payable immediately. In the case of Corresponding Junior Subordinated
Debentures, should the Debenture Trustee or such holders of such Corresponding
Junior Subordinated Debentures fail to make such declaration, the holders of
at least 25% in aggregate liquidation preference of the Related Preferred
Securities shall have such right. Upon certain conditions, (including a
declaration caused by a default in the payment of principal or interest, the
payment for which has subsequently been provided) such declaration may be
annulled by the holders of a majority in principal amount of the Junior
Subordinated Debentures of the series then outstanding as were entitled to
declare such default (such series or all series voting as one class, if more
than one series is so entitled). In the case of Corresponding Junior
Subordinated Debentures, should the holders of such Corresponding Junior
Subordinated Debentures fail to annul such declaration and waive such default,
the holders of a majority in aggregate liquidation preference of the Related
Preferred Securities shall have such right. In addition, past defaults may be
waived by the holders of a majority in principal amount of the Junior
Subordinated Debentures of all series then outstanding (all series voting as
one class), except a default in the payment of principal of or interest on the
Junior Subordinated Debentures or in respect of a covenant or provision of the
Indenture which cannot be modified or amended without the consent of the
holder of each Junior Subordinated Debenture so affected. In the case of
Corresponding Junior Subordinated Debentures, should the holders of such
Corresponding
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Junior Subordinated Debentures fail to waive such default, the holders of a
majority in aggregate liquidation preference of the Related Preferred
Securities shall have such right.
In case a Debenture Event of Default shall occur and be continuing as to a
series of Corresponding Junior Subordinated Debentures, the Property Trustee
will have the right, as the holder of such Corresponding Junior Subordinated
Debentures, to declare the principal of and the interest on such Corresponding
Junior Subordinated Debentures, and any other amounts payable under the
Indenture, to be immediately due and payable and to enforce its other rights
with respect to such Corresponding Junior Subordinated Debentures.
The Indenture contains a provision entitling the Debenture Trustee, subject
to the duty of the Debenture Trustee during default to act with the required
standard of care, to be indemnified by the holders of Junior Subordinated
Debentures issued under the Indenture before proceeding to exercise any right
or power under the Indenture at the request of such holders. The Indenture
also provides that the holders of a majority in principal amount of the
outstanding Junior Subordinated Debentures issued thereunder of all series
affected (voting as one class) may direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee,
or exercising any trust or power conferred on the Debenture Trustee, with
respect to the Securities of such series.
The Indenture contains a covenant that the Company will file annually with
the Debenture Trustee a certificate as to the absence of any default or
specifying any default that exists.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default with respect to a series of Corresponding
Junior Subordinated Debentures has occurred and is continuing and such event
is attributable to the failure of the Company to pay interest or principal on
such Corresponding Junior Subordinated Debentures on the date such interest or
principal is due and payable, a holder of Related Preferred Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of the principal of or interest on such Corresponding
Junior Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Related Preferred Securities of such
holder (a "Direct Action"). The Company may not amend the Indenture to remove
the foregoing right to bring a Direct Action without the prior written consent
of the holders of all of the Preferred Securities outstanding. If the right to
bring a Direct Action is removed, the applicable Issuer may become subject to
reporting obligations under the Exchange Act. The Company shall have the right
under the Indenture to set-off any payment made to such holder of Preferred
Securities by the Company in connection with a Direct Action.
The holders of the Preferred Securities will not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an Event of Default under the Trust Agreement. See
"Description of Preferred Securities --Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company may not merge or consolidate or sell
or convey all or substantially all of its assets unless (i) the successor
entity (if other than the Company) is a U.S. entity and expressly assumes the
Company's obligations under such Indenture and on the Junior Subordinated
Debentures issued under such Indenture; (ii) immediately after giving effect
to such transaction, the Company or the successor would not be in default
under such Indenture; (iii) in the case of Corresponding Junior Subordinated
Debentures, such transaction is permitted under the related Trust Agreement or
Guarantee and does not give rise to any breach or violation of the related
Trust Agreement and Guarantee; and (iv) certain other conditions as prescribed
by the Indenture are met.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at their Stated Maturity within one year, and the Company deposits or
causes to be deposited with the Debenture Trustee trust funds, in trust, for
the purpose and in an amount in the currency or currencies in which
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the Junior Subordinated Debentures are payable sufficient to pay and discharge
the entire indebtedness on the Junior Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation, for the principal (and
premium, if any) and interest to the date of the deposit or to the Stated
Maturity, as the case may be, then the Indenture will cease to be of further
effect (except as to the Company's obligations to pay all other sums due
pursuant to the Indenture and to provide the officers' certificates and
opinions of counsel described therein), and the Company will be deemed to have
satisfied and discharged the Indenture.
CONVERSION OR EXCHANGE
The terms, if any, on which Junior Subordinate Debentures of any series are
convertible or exchangeable into Preferred Securities or other securities will
be set forth in the Prospectus Supplement relating thereto. Such terms may
include provisions for conversion or exchange, either mandatory, at the option
of the holder, or at the option of the Company, in which case the number of
shares of Preferred Securities or other securities to be received by the
holders of Junior Subordinated Debentures would be calculated as of a time and
in the manner stated in the Prospectus Supplement relating thereto.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that the obligations
of the Company to make any payment of or on account of the principal of and
interest on the Junior Subordinated Debentures of any series will be
subordinate and junior in right of payment to the Company's obligations to the
holders of Senior Indebtedness of the Company to the extent described in the
next two paragraphs. Senior Indebtedness of the Company with respect to the
Junior Subordinated Debentures will include the existing and future senior
notes, senior subordinated notes and subordinated notes of the Company and
means (i) any indebtedness of the Company for borrowed or purchased money,
whether or not evidenced by bonds, debentures, notes or other written
instruments, (ii) obligations under letters of credit, (iii) any indebtedness
or other obligations of the Company with respect to commodity contracts,
interest rate and currency swap agreements, cap, floor and collar agreements,
currency spot and forward contracts, and other similar agreements or
arrangements designed to protect against fluctuations in currency exchange or
interest rates, and (iv) any guarantees, endorsements (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business) or other similar contingent obligations in respect of obligations of
others of a type described in (i), (ii) or (iii) above, whether or not such
obligation is classified as a liability on a balance sheet prepared in
accordance with generally accepted accounting principles, in each case listed
in (i), (ii), (iii) and (iv) above, whether outstanding on the date of
execution of the Indenture or thereafter incurred, other than obligations
"ranking on a parity" with the Junior Subordinated Debentures or "ranking
junior" to the Junior Subordinated Debentures (as those terms are defined in
the Supplemental Indenture); provided, however, that the Junior Subordinated
Debentures of any series will not be subordinate and junior in right of
payment to any trade creditors. As of September 30, 1996, there was $5.4
billion of Senior Indebtedness of the Company outstanding. The Indenture does
not limit the amount of future increase in Senior Indebtedness of the Company.
The Company expects from time to time to issue additional indebtedness
constituting Senior Indebtedness.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Junior Subordinated Debentures may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Indebtedness, or an event of default with respect to any Senior
Indebtedness resulting in the acceleration of the maturity thereof, or if any
judicial proceeding shall be pending with respect to any such default.
In the case of any insolvency, receivership, conservatorship,
reorganization, readjustment of debt, marshalling of assets and liabilities or
similar proceedings or any liquidation or winding-up of or relating to the
Company as a whole, whether voluntary or involuntary, all obligations of the
Company to holders of Senior Indebtedness of the Company shall be entitled to
be paid in full before any payment shall be made on account of the principal
of or interest on the Junior Subordinated Debentures. In the event of any such
proceeding, after payment in full of all sums owing with respect to Senior
Indebtedness of the Company, the holders of the Junior Subordinated
Debentures, together with the holders of any obligations of the Company
ranking on a parity with the Junior Subordinated Debentures, shall be entitled
to be paid from the remaining assets of the Company the
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amount at the time due and owing on account of unpaid principal of and
interest on the Junior Subordinated Debentures before any payment or other
distribution, whether in cash, property or otherwise, shall be made on account
of any capital stock or any obligations of the Company ranking junior to the
Junior Subordinated Debentures. By reason of such subordination, in the event
of the insolvency of the Company, holders of Senior Indebtedness of the
Company may receive more, ratably, and holders of the Junior Subordinated
Debentures having a claim pursuant to the Junior Subordinated Debentures may
receive less, ratably, than the other creditors of the Company. Such
subordination will not prevent the occurrence of any Event of Default in
respect of the Junior Subordinated Debentures.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of California.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Debenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Junior Subordinated Debentures,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
The Corresponding Junior Subordinated Debentures may be issued in one or
more series of Junior Subordinated Debentures under the Indenture with terms
corresponding to the terms of a series of Related Preferred Securities. In
that event, concurrently with the issuance of each Issuer's Preferred
Securities, such Issuer will invest the proceeds thereof and the consideration
paid by the Company for the Common Securities in a series of Corresponding
Junior Subordinated Debentures issued by the Company to such Issuer. Each
series of Corresponding Junior Subordinated Debentures will be in the
principal amount equal to the aggregate stated Liquidation Amount of the
Related Preferred Securities and the Common Securities of such Issuer and will
rank pari passu with all other series of Junior Subordinated Debentures.
Holders of the Related Preferred Securities for a series of Corresponding
Junior Subordinated Debentures will have the rights in connection with
modifications to the Indenture or upon occurrence of Debenture Events of
Default described under "-- Modification of Indenture" and "-- Debenture
Events of Default", unless provided otherwise in the Prospectus Supplement for
such Related Preferred Securities.
Unless otherwise specified in the applicable Prospectus Supplement, if a Tax
Event in respect of an Issuer of Related Preferred Securities shall occur and
be continuing, the Company may, at its option and subject to prior approval of
the Federal Reserve (if then so required under applicable guidelines or
policies), redeem the Corresponding Junior Subordinated Debentures at any time
within 90 days of the occurrence of such Tax Event, in whole but not in part,
subject to the provisions of the Indenture and whether or not such
Corresponding Junior Subordinated Debentures are then otherwise redeemable at
the option of the Company. The redemption price for any Corresponding Junior
Subordinated Debentures shall be equal to 100% of the principal amount of such
Corresponding Junior Subordinated Debentures then outstanding plus accrued and
unpaid interest to the date fixed for redemption. For so long as the
applicable Issuer is the holder of all the outstanding series of Corresponding
Junior Subordinated Debentures, the proceeds of any such redemption will be
used by the Issuer to redeem the corresponding Trust Securities in accordance
with their terms.
The Company will covenant in the Indenture as to each series of
Corresponding Junior Subordinated Debentures, that if and so long as (i) the
Issuer of the related series of Trust Securities is the holder of all such
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Corresponding Junior Subordinated Debentures, (ii) a Tax Event in respect of
such Issuer has occurred and is continuing and (iii) the Company has elected,
and has not revoked such election, to pay Additional Sums (as defined under
"Description of Preferred Securities -- Redemption or Exchange") in respect of
such Trust Securities, the Company will pay to such Issuer such Additional
Sums. The Company will also covenant, as to each series of Corresponding
Junior Subordinated Debentures, (i) to maintain directly or indirectly 100%
ownership of the Common Securities of the Issuer to which Corresponding Junior
Subordinated Debentures have been issued, provided that certain successors
which are permitted pursuant to the Indenture may succeed to the Company's
ownership of the Common Securities, (ii) not to voluntarily terminate, wind-up
or liquidate any Issuer, except (a) in connection with a distribution of
Corresponding Junior Subordinated Debentures to the holders of the Preferred
Securities in liquidation of such Issuer, or (b) in connection with certain
mergers, consolidations or amalgamations permitted by the related Trust
Agreement, and (iii) to use its reasonable efforts, consistent with the terms
and provisions of the related Trust Agreement, to cause such Issuer to remain
classified as a grantor trust and not as an association taxable as a
corporation for United States Federal income tax purposes.
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement for each Issuer, the Issuer
Trustees on behalf of such Issuer will issue the Preferred Securities and the
Common Securities. The Preferred Securities of a particular issue will
represent preferred beneficial ownership interests in the Issuer and the
holders thereof will be entitled to a preference in certain circumstances with
respect to Distributions and amounts payable on redemption or liquidation over
the Common Securities of such Issuer, as well as other benefits as described
in the corresponding Trust Agreement. This summary of certain provisions of
the Preferred Securities and each Trust Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of each Trust Agreement, including the definitions therein
of certain terms, and the Trust Indenture Act. Wherever particular defined
terms of a Trust Agreement (as amended or supplemented from time to time) are
referred to herein or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference. The form of the Trust Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each of the Issuers is a legally separate entity and
the assets of one are not available to satisfy the obligations of any of the
others.
GENERAL
The Preferred Securities of an Issuer will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of that Issuer
except as described under "-- Subordination of Common Securities." Legal title
to the Corresponding Junior Subordinated Debentures will be held by the
Property Trustee in trust for the benefit of the holders of the related
Preferred Securities and Common Securities. Each Guarantee Agreement executed
by the Company for the benefit of the holders of an Issuer's Preferred
Securities (the "Guarantee" for such Preferred Securities) will be a guarantee
on a subordinated basis with respect to the related Preferred Securities but
will not guarantee payment of Distributions or amounts payable on redemption
or liquidation of such Preferred Securities when the related Issuer does not
have funds on hand available to make such payments. See "Description of
Guarantees."
DISTRIBUTIONS
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such
dates as specified in the applicable Prospectus Supplement. In the event that
any date on which Distributions are payable on the Preferred Securities is not
a Business Day (as defined below), payment of the Distribution payable on such
date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect to any such delay) except
that, if such Business Day is in the next succeeding calendar year, payment of
such Distribution shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date (each
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date on which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). A "Business Day" shall mean any day other than a
Saturday or a Sunday, or a day on which banking institutions in The City of
New York and San Francisco are authorized or required by law or executive
order to remain closed or a day on which the corporate trust office of the
Property Trustee or the Debenture Trustee is closed for business.
Each Issuer's Preferred Securities represent preferred beneficial ownership
interests in the applicable Issuer, and the Distributions on each Preferred
Security will be payable at a rate specified in the Prospectus Supplement for
such Preferred Securities. The amount of Distributions payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months unless
otherwise specified in the applicable Prospectus Supplement. Distributions to
which holders of Preferred Securities are entitled will accumulate additional
Distributions at the rate per annum if and as specified in the applicable
Prospectus Supplement. The term "Distributions" as used herein includes any
such additional Distributions unless otherwise stated.
If provided in the applicable Prospectus Supplement, the Company has the
right under the Indenture, pursuant to which it will issue the Corresponding
Junior Subordinated Debentures, to defer the payment of interest at any time
or from time to time on any series of the Corresponding Junior Subordinated
Debentures for a period which will be specified in such Prospectus Supplement
relating to such series (each, an "Extension Period"), provided that no
Extension Period may extend beyond the Stated Maturity of the Corresponding
Junior Subordinated Debentures. As a consequence of any such deferral,
Distributions on the Related Preferred Securities would be deferred (but would
continue to accumulate additional Distributions thereon at the rate per annum
set forth in the Prospectus Supplement for such Preferred Securities) by the
Issuer of such Preferred Securities during any such Extension Period. During
such Extension Period the Company may not, and may not permit any subsidiary
of the Company to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any
of the Company's capital stock (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu with or junior in interest to the Corresponding
Junior Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Company of debt securities of any subsidiary
of the Company if such guarantee ranks pari passu with or junior in interest
to the Corresponding Junior Subordinated Debentures (other than (a) dividends
or distributions in common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights
plans, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c) payments
under any Guarantee with respect to such Related Preferred Securities and (d)
purchases of common stock or rights related to the issuance of common stock
under any of the Company's benefit plans for its directors, officers or
employees).
The revenue of each Issuer available for distribution to holders of its
Preferred Securities will be limited to payments under the Corresponding
Junior Subordinated Debentures in which the Issuer will invest the proceeds
from the issuance and sale of its Trust Securities. See "Description of Junior
Subordinated Debentures -- Corresponding Junior Subordinated Debentures." If
the Company does not make interest payments on such Corresponding Junior
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Related Preferred Securities. The payment of
Distributions (if and to the extent the Issuer has funds legally available for
the payment of such Distributions and cash sufficient to make such payments)
is guaranteed by the Company on a limited basis as set forth herein under
"Description of Guarantees".
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of such Issuer on the relevant record
dates, which, as long as the Preferred Securities remain in book-entry form,
will be one Business Day prior to the relevant Distribution Date. Subject to
any applicable laws and regulations and the provisions of the applicable Trust
Agreement, each such payment will be made as described under "Book-Entry
Issuance." In the event any Preferred Securities are not in book-entry form,
the relevant record date for such Preferred Securities shall be the date at
least 15 days prior to the relevant Distribution Date, as specified in the
applicable Prospectus Supplement.
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REDEMPTION OR EXCHANGE
Mandatory Redemption. Upon the repayment or redemption, in whole or in part,
of any Corresponding Junior Subordinated Debentures, whether at maturity or
upon earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 15
nor more than 60 days notice, at a redemption price (the "Redemption Price")
equal to the aggregate Liquidation Amount of such Trust Securities plus
accumulated but unpaid Distributions thereon to the date of redemption (the
"Redemption Date") and the related amount of the premium, if any, paid by the
Company upon the concurrent redemption of such Corresponding Junior
Subordinated Debentures. See "Description of Junior Subordinated Debentures --
Redemption". If less than all of any series of Corresponding Junior
Subordinated Debentures are to be repaid or redeemed on a Redemption Date,
then the proceeds from such repayment or redemption shall be allocated to the
redemption pro rata of the related Preferred Securities and the Common
Securities. The amount of premium, if any, paid by the Company upon the
redemption of all or any part of any series of any Corresponding Junior
Subordinated Debentures to be repaid or redeemed on a Redemption Date shall be
allocated to the redemption pro rata of the Related Preferred Securities and
the Common Securities.
The Company will have the right to redeem any series of Corresponding Junior
Subordinated Debentures (i) on or after such date as may be specified in the
applicable Prospectus Supplement, in whole at any time or in part from time to
time, (ii) at any time, in whole (but not in part), upon the occurrence of a
Tax Event, a Capital Treatment Event or an Investment Company Event (each as
defined below) or (iii) as may be otherwise specified in the applicable
Prospectus Supplement, in each case subject to receipt of prior approval by
the Federal Reserve if then required under applicable capital guidelines or
policies.
Distribution of Corresponding Junior Subordinated Debentures. Subject to the
Company having received prior approval of the Federal Reserve to do so if then
required under applicable capital guidelines or policies, the Company has the
right to terminate any Issuer, and, after satisfaction of the liabilities of
creditors of such Issuer as provided by applicable law, cause such
Corresponding Junior Subordinated Debentures in respect of the Preferred
Securities and Common Securities issued by such Issuer to be distributed to
the holders of such Preferred Securities and Common Securities in liquidation
of the Issuer.
Tax Event, Capital Treatment Event or Investment Company Event
Redemption. If a Tax Event, Capital Treatment Event or Investment Company
Event in respect of a series of Preferred Securities and Common Securities
shall occur and be continuing, the Company has the right to redeem the
Corresponding Junior Subordinated Debentures in whole (but not in part) and
thereby cause a mandatory redemption of such Preferred Securities and Common
Securities in whole (but not in part) at the Redemption Price within 90 days
following the occurrence of such Tax Event, Capital Treatment Event or
Investment Company Event. In the event a Tax Event, Capital Treatment Event or
Investment Company Event in respect of a series of Preferred Securities and
Common Securities has occurred and is continuing, and the Company does not
elect to redeem the Corresponding Junior Subordinated Debentures and thereby
cause a mandatory redemption of such Preferred Securities and Common
Securities or to terminate the related Issuer and after satisfaction of the
liabilities of creditors of such Issuer as required by applicable law cause
the Corresponding Junior Subordinated Debentures to be distributed to holders
of such Preferred Securities and Common Securities in liquidation of the
Issuer as described above, such Preferred Securities will remain outstanding
and Additional Sums (as defined below) may be payable on the Corresponding
Junior Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by an Issuer on the
outstanding Preferred Securities and Common Securities of the Issuer shall not
be reduced as a result of any additional taxes, duties and other governmental
charges to which such Issuer has become subject as a result of a Tax Event.
"Investment Company Event" means the receipt by the applicable Issuer of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or a
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change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), the applicable Issuer is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which Change
in 1940 Act Law becomes effective on or after the date of original issuance of
the series of Preferred Securities issued by the Issuer.
"Like Amount" means (i) with respect to a redemption of any series of Trust
Securities, Trust Securities of such series having a Liquidation Amount (as
defined below) equal to that portion of the principal amount of Corresponding
Junior Subordinated Debentures to be contemporaneously redeemed in accordance
with the Indenture, allocated to the Common Securities and to the Preferred
Securities based upon the relative Liquidation Amounts of such classes and the
proceeds of which will be used to pay the Redemption Price of such Trust
Securities, and (ii) with respect to a distribution of Corresponding Junior
Subordinated Debentures to holders of any series of Trust Securities in
connection with a dissolution or liquidation of the related Issuer,
Corresponding Junior Subordinated Debentures having a principal amount equal
to the Liquidation Amount of the Trust Securities of the holder to whom such
Corresponding Junior Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Tax Event" means the receipt by the applicable Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance
of the Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) such Issuer is, or will be within 90 days of the
date of such opinion, subject to United States Federal income tax with respect
to income received or accrued on the corresponding series of Corresponding
Junior Subordinated Debentures, (ii) interest payable by the Company on such
series of Corresponding Junior Subordinated Debentures is not, or within 90
days of the date of such opinion, will not be, deductible by the Company, in
whole or in part, for United States Federal income tax purposes, or (iii) such
Issuer is, or will be within 90 days of the date of such opinion, subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
"Capital Treatment Event" means the reasonable determination by the Company
that, as a result of the occurrence of any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or which pronouncement, action or decision is announced on
or after the date of issuance of the applicable Preferred Securities, there is
more than an insubstantial risk that the Company will not be entitled to treat
an amount equal to the aggregate Liquidation Amount of the Preferred
Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes
of the capital adequacy guidelines of the Federal Reserve, as then in effect
and applicable to the Company.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debentures for any series of Preferred Securities (i) such
series of Preferred Securities will no longer be deemed to be outstanding,
(ii) The Depository Trust Company ("DTC") or its nominee, as the record holder
of such series of Preferred Securities, will receive a registered global
certificate or certificates representing the Corresponding Junior Subordinated
Debentures to be delivered upon such distribution and (iii) any certificates
representing such series of Preferred Securities not held by DTC or its
nominee will be deemed to represent the Corresponding Junior Subordinated
Debentures having a principal amount equal to the stated liquidation
preference of such series of Preferred Securities, and bearing accrued and
unpaid interest in an amount equal to the accrued and unpaid Distributions on
such series of Preferred Securities until such certificates are presented to
the Administrative Trustees or their agent for transfer or reissuance.
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There can be no assurance as to the market prices for the Preferred
Securities or the Corresponding Junior Subordinated Debentures that may be
distributed in exchange for Preferred Securities if a dissolution and
liquidation of an Issuer were to occur. Accordingly, the Preferred Securities
that an investor may purchase, or the Corresponding Junior Subordinated
Debentures that the investor may receive on dissolution and liquidation of an
Issuer, may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated Debentures. Redemptions of
the Preferred Securities shall be made and the Redemption Price shall be
payable on each Redemption Date only to the extent that the related Issuer has
funds on hand available for the payment of such Redemption Price. See also "--
Subordination of Common Securities".
If an Issuer gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
to the extent funds are available, the Property Trustee will deposit
irrevocably with DTC funds sufficient to pay the applicable Redemption Price
and will give DTC irrevocable instructions and authority to pay the Redemption
Price to the holders of such Preferred Securities. See "Book-Entry Issuance".
If such Preferred Securities are no longer in book-entry form, the Property
Trustee, to the extent funds are available, will irrevocably deposit with the
paying agent for such Preferred Securities funds sufficient to pay the
applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing such Preferred Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Preferred Securities called for redemption shall be
payable to the holders of such Preferred Securities on the relevant record
dates for the related Distribution Dates. If notice of redemption shall have
been given and funds deposited as required, then upon the date of such
deposit, all rights of the holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such Preferred Securities will cease to be outstanding.
In the event that any date fixed for redemption of Preferred Securities is not
a Business Day, then payment of the Redemption Price payable on such date will
be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Preferred Securities called for redemption is
improperly withheld or refused and not paid either by the Issuer or by the
Company pursuant to the Guarantee as described under "Description of
Guarantees", Distributions on such Preferred Securities will continue to
accrue at the then applicable rate, from the Redemption Date originally
established by the Issuer for such Preferred Securities to the date such
Redemption Price is actually paid, in which case the actual payment date will
be the date fixed for redemption for purposes of calculating the Redemption
Price.
Subject to applicable law (including, without limitation, United States
Federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Corresponding Junior Subordinated Debentures to holders of
Preferred Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Preferred Securities on the Redemption
Date.
If less than all of the Preferred Securities and Common Securities issued by
an Issuer are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata to the Preferred Securities and the
Common Securities based upon the relative Liquidation Amounts of such classes.
The particular Preferred Securities to be redeemed shall be selected on a pro
rata basis not more than 60 days prior to the Redemption Date by the Property
Trustee
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from the outstanding Preferred Securities not previously called for
redemption, by such method as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $25 or an integral multiple of $25 in excess thereof) of the
Liquidation Amount of Preferred Securities of a denomination larger than $25.
The Property Trustee shall promptly notify the trust registrar in writing of
the Preferred Securities selected for redemption and, in the case of any
Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of each Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the aggregate
Liquidation Amount of Preferred Securities which has been or is to be
redeemed.
Notice of any redemption will be mailed at least 15 days but not more than
60 days before the Redemption Date to each Holder of Trust Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the Redemption Price on the Corresponding Junior Subordinated Debentures, on
and after the Redemption Date interest will cease to accrue on such Junior
Subordinated Debentures or portions thereof (and distributions) will cease to
accrue on the Related Preferred Securities or portions thereof) called for
redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Issuer's
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of such Preferred Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date a Debenture Event of Default shall have occurred and be continuing, no
payment of any Distribution on, or Redemption Price of, any of the Issuer's
Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions on
all of the Issuer's outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all of the
Issuer's outstanding Preferred Securities then called for redemption, shall
have been made or provided for, and all funds available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Issuer's Preferred Securities
then due and payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, the Company as holder of such Issuer's Common Securities will be
deemed to have waived any right to act with respect to any such Event of
Default under the applicable Trust Agreement until the effect of all such
Events of Default with respect to such Preferred Securities have been cured,
waived or otherwise eliminated. Until any such Events of Default under the
applicable Trust Agreement with respect to the Preferred Securities have been
so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of such Preferred Securities and not on behalf
of the Company as holder of the Issuer's Common Securities, and only the
holders of such Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Issuer shall automatically terminate
upon expiration of its term and shall terminate on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company; (ii)
the distribution of a Like Amount of the Corresponding Junior Subordinated
Debentures to the holders of its Trust Securities, if the Company, as
Depositor, has given written direction to the Property Trustee to terminate
such Issuer (which direction is optional and wholly within the discretion of
the Company, as Depositor and subject to the Company having received prior
approval of the Federal Reserve if so required under applicable capital
guidelines and policies); (iii) redemption of all of the Issuer's Preferred
Securities as described under "Description of Preferred Securities --
Redemption or Exchange -- Mandatory Redemption"; and (iv) the entry of an
order for the dissolution of the Issuer by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv)
above, the Issuer shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer Trustees determine to be possible by distributing, after
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satisfaction of liabilities to creditors of such Issuer as provided by
applicable law, to the holders of such Trust Securities a Like Amount of the
Corresponding Junior Subordinated Debentures, unless such distribution is
determined by the Property Trustee not to be practical, in which event such
holders will be entitled to receive out of the assets of the Issuer available
for distribution to holders, after satisfaction of liabilities to creditors of
such Issuer as provided by applicable law, an amount equal to, in the case of
holders of Preferred Securities, the aggregate of the Liquidation Amount plus
accrued and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"). If such Liquidation Distribution can be
paid only in part because such Issuer has insufficient assets available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by such Issuer on its Preferred Securities shall be paid on a pro
rata basis. The holder(s) of such Issuer's Common Securities will be entitled
to receive distributions upon any such liquidation pro rata with the holders
of its Preferred Securities, except that if a Debenture Event of Default has
occurred and is continuing, the Preferred Securities shall have a priority
over the Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under each
Trust Agreement (an "Event of Default") with respect to the Preferred
Securities issued thereunder (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the Indenture
(see "Description of Junior Subordinated Debentures -- Debenture Events of
Default"); or
(ii) default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of
30 days; or
(iii) default by the Trust in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Trustees by the holders of at least 25% in aggregate Liquidation
Amount of the outstanding Preferred Securities of the applicable Issuer, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under such
Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer's Preferred
Securities, the Administrative Trustees and the Company, as Depositor, unless
such Event of Default shall have been cured or waived. The Company, as
Depositor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under each Trust
Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities upon
termination of each Issuer as described above. See "-- Liquidation
Distribution Upon Termination". The existence of an Event of Default does not
entitle the holders of Preferred Securities to accelerate the maturity
thereof.
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REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing,
the Property Trustee and the Delaware Trustee may be removed at such time by
the holders of a majority in Liquidation Amount of the outstanding Preferred
Securities. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Company as the holder of the
Common Securities. No resignation or removal of an Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
applicable Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property
may at the time be located, the Company, as the holder of the Common
Securities, and the Administrative Trustees shall have power to appoint one or
more persons either to act as a co-trustee, jointly with the Property Trustee,
of all or any part of such Trust Property, or to act as separate trustee of
any such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the applicable Trust Agreement. In case a
Debenture Event of Default has occurred and is continuing, the Property
Trustee alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any entity into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
entity succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under each Trust
Agreement, provided such entity shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATION OR REPLACEMENTS OF THE ISSUERS
An Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any entity, except as described below or as
otherwise indicated in the Prospectus Supplement. An Issuer may, at the
request of the Company, with the consent of the Administrative Trustees and
without the consent of the holders of the Preferred Securities, merge with or
into, consolidate, amalgamate, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to a trust organized as
such under the laws of any State; provided, that (i) such successor entity
either (a) expressly assumes all of the obligations of such Issuer with
respect to the Preferred Securities or (b) substitutes for the Preferred
Securities other securities having substantially the same terms as the
Preferred Securities (the "Successor Securities"), so long as the Successor
Securities rank the same as the Preferred Securities rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Company expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee as the
holder of the Corresponding Junior Subordinated Debentures, (iii) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization,
(iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Preferred Securities (including any Successor
Securities) in any material respect, (v) such successor entity has a purpose
substantially identical to that of the Issuer, (vi) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Company has received an opinion from independent counsel to the Issuer
experienced in such matters to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including
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any Successor Securities) in any material respect, and (b) following such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, neither the Issuer nor such successor entity will be required to
register as an investment company under the Investment Company Act and (vii)
the Company or any permitted successor or assignee owns all of the Common
Securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, an Issuer shall not,
except with the consent of holders of 100% in Liquidation Amount of the
Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or
lease would cause the Issuer or the successor entity to be classified as other
than a grantor trust for United States Federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
Except as provided below and under "Description of Guarantees -- Amendments
and Assignment" and as otherwise required by law and the applicable Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
Each Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent
with any other provision, or to make any other provisions with respect to
matters or questions arising under such Trust Agreement, which shall not be
inconsistent with the other provisions of such Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of such Trust Agreement to such
extent as shall be necessary to ensure that the Issuer will be classified for
United States Federal income tax purposes as a grantor trust at all times that
any Trust Securities are outstanding or to ensure that the Issuer will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of any holder of Trust
Securities, and any amendments of such Trust Agreement shall become effective
when notice thereof is given to the holders of Trust Securities. Each Trust
Agreement may be amended by the Issuer Trustees and the Company with (i) the
consent of holders representing not less than a majority (based upon
Liquidation Amounts) of the outstanding Trust Securities, and (ii) receipt by
the Issuer Trustees of an opinion of counsel to the effect that such amendment
or the exercise of any power granted to the Issuer Trustees in accordance with
such amendment will not affect the Issuer's status as a grantor trust for
United States Federal income tax purposes or the Issuer's exemption from
status as an "investment company" under the Investment Company Act, provided
that without the consent of each holder of Trust Securities, such Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount
of any Distribution required to be made in respect of the Trust Securities as
of a specified date or (ii) restrict the right of a holder of Trust Securities
to institute suit for the enforcement of any such payment on or after such
date.
So long as any Corresponding Junior Subordinated Debentures are held by the
Property Trustee, the Issuer Trustees shall not (i) direct the time, method
and place of conducting any proceeding for any remedy available to the
Debenture Trustee, or executing any trust or power conferred on the Property
Trustee with respect to such Corresponding Junior Subordinated Debentures,
(ii) waive any past default that is waivable under the Indenture, (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Junior Subordinated Debentures shall be due and payable or (iv) consent to
any amendment, modification or termination of the Indenture or such
Corresponding Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders
of a majority in aggregate Liquidation Amount of all outstanding Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Corresponding Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of the corresponding
Preferred Securities. The Issuer Trustees shall not revoke any action
previously authorized or approved by a vote of the holders of the Preferred
Securities except by subsequent vote of the holders of the Preferred
Securities. The
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Property Trustee shall notify each holder of Preferred Securities of any
notice of default with respect to the Corresponding Junior Subordinated
Debentures. In addition to obtaining the foregoing approvals of the holders of
the Preferred Securities, prior to taking any of the foregoing actions, the
Issuer Trustees shall obtain an opinion of counsel experienced in such matters
to the effect that the Issuer will not be classified as an association taxable
as a corporation for United States Federal income tax purposes on account of
such action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be given to each holder of record of Preferred Securities in the
manner set forth in each Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for an Issuer to redeem and cancel its Preferred Securities in accordance with
the applicable Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Company, the Issuer Trustees or any affiliate
of the Company or any Issuer Trustees, shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of a series may be issued in whole or in part in
the form of one or more Global Preferred Securities that will be deposited
with, or on behalf of, the Depositary identified in the Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable
Prospectus Supplement for such series, the Depositary will be DTC. Global
Preferred Securities may be issued only in fully registered form and in either
temporary or permanent form. Unless and until it is exchanged in whole or in
part for the individual Preferred Securities represented thereby, a Global
Preferred Security may not be transferred except as a whole by the Depositary
for such Global Preferred Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by the Depositary or any nominee to a successor Depositary or
any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Preferred Securities will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Preferred Security, and the deposit of such
Global Preferred Security with or on behalf of the Depositary, the Depositary
for such Global Preferred Security or its nominee will credit, on its book-
entry registration and transfer system, the respective aggregate Liquidation
Amounts of the individual Preferred Securities represented by such Global
Preferred Securities to the accounts of Participants. Such accounts shall be
designated by the dealers, underwriters or agents with respect to such
Preferred Securities or by the Company if such Preferred Securities are
offered and sold directly by the Company. Ownership of beneficial interests in
a Global Preferred Security will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global Preferred Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the applicable
Depositary or its nominee (with respect to interests of Participants) and the
records of Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests
in a Global Preferred Security.
So long as the Depositary for a Global Preferred Security, or its nominee,
is the registered owner of such Global Preferred Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder
of the Preferred Securities represented by such Global Preferred Security for
all purposes under the Indenture governing such Preferred Securities. Except
as provided below, owners of beneficial interests in a
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Global Preferred Security will not be entitled to have any of the individual
Preferred Securities of the series represented by such Global Preferred
Security registered in their names, will not receive or be entitled to receive
physical delivery of any such Preferred Securities of such series in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Preferred Securities represented by a Global Preferred Security registered in
the name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Preferred
Security representing such Preferred Securities. None of the Company, the
Property Trustee, any Paying Agent, or the Securities Registrar for such
Preferred Securities will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
The Company expects that the Depositary for a series of Preferred Securities
or its nominee, upon receipt of any payment of Liquidation Amount, premium or
Distributions in respect of a permanent Global Preferred Security representing
any of such Preferred Securities, immediately will credit Participants'
accounts with payments in amounts proportionate to their respective beneficial
interest in the aggregate Liquidation Amount of such Global Preferred Security
for such Preferred Securities as shown on the records of such Depositary or
its nominee. The Company also expects that payments by Participants to owners
of beneficial interests in such Global Preferred Security held through such
Participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Preferred Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is
not appointed by the Issuer within 90 days, the Issuer will issue individual
Preferred Securities of such series in exchange for the Global Preferred
Security representing such series of Preferred Securities. In addition, the
Issuer may at any time and in its sole discretion, subject to any limitations
described in the Prospectus Supplement relating to such Preferred Securities,
determine not to have any Preferred Securities of such series represented by
one or more Global Preferred Securities and, in such event, will issue
individual Preferred Securities of such series in exchange for the Global
Preferred Security or Securities representing such series of Preferred
Securities. Further, if the Issuer so specifies with respect to the Preferred
Securities of a series, an owner of a beneficial interest in a Global
Preferred Security representing Preferred Securities of such series may, on
terms accepable to the Issuer, the Property Trustee and the Depositary for
such Global Preferred Security, receive individual Preferred Securities of
such series in exchange for such beneficial interests, subject to any
limitations described in the Prospectus Supplement relating to such Preferred
Securities. In any such instance, an owner of a beneficial interest in a
Global Preferred Security will be entitled to physical delivery of individual
Preferred Securities of the series represented by such Global Preferred
Security equal in principal amount to such beneficial interest and to have
such Preferred Securities registered in its name. Individual Preferred
Securities of such series so issued will be issued in denominations, unless
otherwise specified by the Issuer, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any Issuer's Preferred Securities are not
held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. Unless otherwise specified in the applicable Prospectus Supplement,
the paying agent (the "Paying Agent") shall initially be the Property Trustee
and any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Company. The Paying Agent shall be permitted
to resign as Paying Agent upon 30 days' written notice to the Property Trustee
and the Company. In the event that the Property Trustee shall no longer be the
Paying Agent, the Administrative Trustees shall appoint a successor (which
shall be a bank or trust company acceptable to the Administrative Trustees and
the Company) to act as Paying Agent.
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REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of each Issuer, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Issuers will not be required to register or cause to be
registered the transfer of their Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically
set forth in each Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision,
the Property Trustee is under no obligation to exercise any of the powers
vested in it by the applicable Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the applicable Trust Agreement or is unsure of the application of any
provision of the applicable Trust Agreement, and the matter is not one on
which holders of Preferred Securities are entitled under such Trust Agreement
to vote, then the Property Trustee shall take such action as is directed by
the Company and if not so directed, shall take such action as it deems
advisable and in the best interests of the holders of the Trust Securities and
will have no liability except for its own bad faith, negligence or willful
misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuers in such a way that no Issuer will be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a
corporation for United States Federal income tax purposes and so that the
Corresponding Junior Subordinated Debentures will be treated as indebtedness
of the Company for United States Federal income tax purposes. In this
connection, the Company and the Administrative Trustees are authorized to take
any action, not inconsistent with applicable law, the certificate of trust of
each Issuer or each Trust Agreement, that the Company and the Administrative
Trustees determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not materially adversely affect the
interests of the holders of the related Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Issuer may borrow money or issue debt or mortgage or pledge any of its
assets.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Preferred Securities
and the Junior Subordinated Debentures, unless otherwise referred to in the
Prospectus Supplement relating to an offering of Preferred Securities or
Junior Subordinated Debentures. The Preferred Securities and the Junior
Subordinated Debentures will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more fully-
registered global certificates will be issued for the Preferred Securities of
each Issuer and the Junior Subordinated Debentures, representing in the
aggregate the total number of such Issuer's Preferred Securities or aggregate
principal balance of Junior Subordinated Debentures, respectively, and will be
deposited with DTC.
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DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. "Direct Participants" include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants
are on file with the Commission.
Purchases of Preferred Securities or Junior Subordinated Debentures within
the DTC system must be made by or through Direct Participants, which will
receive a credit for the Preferred Securities or Junior Subordinated
Debentures on DTC's records. The ownership interest of each actual purchaser
of each Preferred Security and each Junior Subordinated Debenture ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
their purchases, but Beneficial Owners are expected to receive written
confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Preferred Securities or Junior
Subordinated Debentures.
Transfers of ownership interests in the Preferred Securities or Junior
Subordinated Debentures are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Preferred
Securities or Junior Subordinated Debentures, except in the event that use of
the book-entry system for the Preferred Securities of such Issuer or Junior
Subordinated Debentures is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities or Junior Subordinated Debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Preferred
Securities or Junior Subordinated Debentures are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Preferred Securities or Junior Subordinated Debentures. If less than all
of an Issuer's Preferred Securities or the Junior Subordinated Debentures are
being redeemed, DTC's current practice is to determine by lot the amount of
the interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Preferred
Securities or Junior Subordinated Debentures, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities or Junior Subordinated Debentures. Under its
usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
relevant Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts such Preferred Securities or Junior Subordinated Debentures
are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
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Distribution payments on the Preferred Securities or the Junior Subordinated
Debentures will be made by the relevant Trustee to DTC. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the relevant Trustee, the Issuer thereof or the
Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of Distributions to DTC is the
responsibility of the relevant Trustee, disbursement of such payments to
Direct Participants is the responsibility of DTC, and disbursements of such
payments to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Preferred Securities or the Junior Subordinated
Debentures at any time by giving reasonable notice to the relevant Trustee and
the Company. In the event that a successor securities depositary is not
obtained, definitive Preferred Security or Junior Subordinated Debenture
certificates representing such Preferred Securities or Junior Subordinated
Debentures are required to be printed and delivered. The Company, at its
option, may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary). After a Debenture Event of Default,
the holders of a majority in liquidation preference of Preferred Securities or
aggregate principal amount of Junior Subordinated Debentures may determine to
discontinue the system of book-entry transfers through DTC. In any such event,
definitive certificates for such Preferred Securities or Junior Subordinated
Debentures will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and the Company believe to be
accurate, but the Issuers and the Company assume no responsibility for the
accuracy thereof. Neither the Issuers nor the Company has any responsibility
for the performance by DTC or its Participants of their respective obligations
as described herein or under the rules and procedures governing their
respective operations.
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Company concurrently with
the issuance by each Issuer of its Preferred Securities for the benefit of the
holders from time to time of such Preferred Securities. The First National
Bank of Chicago will act as indenture trustee ("Guarantee Trustee") under each
Guarantee for the purposes of compliance with the Trust Indenture Act and each
Guarantee will be qualified as an Indenture under the Trust Indenture Act.
This summary of certain provisions of the Guarantees does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of each Guarantee Agreement, including the definitions
therein of certain terms, and the Trust Indenture Act. The form of the
Guarantee has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Reference in this summary to Preferred
Securities means that Issuer's Preferred Securities to which a Guarantee
relates. The Guarantee Trustee will hold each Guarantee for the benefit of the
holders of the related Issuer's Preferred Securities.
GENERAL
The Company will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to
the holders of the Preferred Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that such Issuer may have or assert
other than the defense of payment. The following payments with respect to the
Preferred Securities, to the extent not paid by or on behalf of the related
Issuer (the "Guarantee Payments"), will be subject to the Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on such Preferred
Securities, to the extent that such Issuer has funds on hand available
therefor at such time, (ii) the Redemption Price with respect to any Preferred
Securities called for redemption, to the extent that such Issuer has funds on
hand available therefor at such time, or (iii) upon a voluntary or involuntary
termination, winding up or liquidation of such Issuer (unless the
Corresponding Junior Subordinated Debentures are distributed to holders of
such Preferred Securities in exchange therefor), the lesser
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of (a) the Liquidation Distribution and (b) the amount of assets of such
Issuer remaining available for distribution to holders of Preferred Securities
after satisfaction of liabilities to creditors of such Issuer as required by
applicable law. The Company's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Company to the
holders of the applicable Preferred Securities or by causing the Issuer to pay
such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Issuer's obligations under the Preferred Securities, but will
apply only to the extent that such related Issuer has funds sufficient to make
such payments, and is not a guarantee of collection. If the Company does not
make interest payments on the Corresponding Junior Subordinated Debentures
held by the Issuer, the Issuer will not be able to pay Distributions on its
Preferred Securities and will not have funds legally available therefor. In
such event, holders of the Issuer's Preferred Securities would not be able to
rely on the Guarantee for such payments.
Each Guarantee will rank subordinate and junior in right of payment to all
liabilities of the Company, other than any liabilities which expressly by
their terms are made pari passu or subordinate to the obligations of the
Company under the Series A Guarantee. See "-- Status of the Guarantees". Since
the Company is a holding company, the right of the Company to participate in
any distribution of assets of any subsidiary upon such subsidiary's
liquidation or reorganization or otherwise is subject to the prior claims of
creditors of that subsidiary, except to the extent that the Company may itself
be a creditor of that subsidiary. Claims on the Company's subsidiaries by
creditors other than the Company include long-term debt and substantial
obligations in respect of federal funds purchased, securities sold under
repurchase agreements and certain other short-term borrowings, as well as
deposit liabilities. There are various legal limitations on the extent to
which the Bank, which is the Company's principal subsidiary, may extend
credit, pay dividends or otherwise supply funds to the Company or its
affiliates. Accordingly, the Company's obligations under the Guarantees will
be effectively subordinated to all existing and future liabilities of the
Company's subsidiaries, and claimants should look only to the assets of the
Company for payments thereunder. See "Wells Fargo & Company". Except as
otherwise provided in the applicable Prospectus Supplement, the Guarantees do
not limit the incurrence or issuance of other secured or unsecured debt of the
Company, including Senior Indebtedness, whether under the Indenture, any other
indenture that the Company may enter into in the future or otherwise. See the
Prospectus Supplement relating to any offering of Preferred Securities.
Taken together, the Company's obligations under each series of Junior
Subordinated Debentures, the Indenture, the related Trust Agreement, the
related Expense Agreement and the related Guarantee provide, in the aggregate,
a full, irrevocable and unconditional guarantee on a subordinated basis of all
of the Issuer's obligations under the Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer's obligations under the Preferred
Securities. See "Relationship Among the Preferred Securities, the
Corresponding Junior Subordinated Debentures and the Guarantee".
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all liabilities of the
Company (including obligations under the Junior Subordinated Debentures), with
the exception of any liabilities which expressly by their terms are made pari
passu or subordinate to the obligations of the Company under the Series A
Guarantee.
Each Guarantee will rank pari passu with all other Guarantees issued by the
Company. Each Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Guarantor to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). Each Guarantee will be held for the benefit of the holders of the
related Preferred Securities. Each Guarantee will not be discharged except by
payment of the Guarantee
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Payments in full to the extent not paid by the Issuer or upon distribution to
the holders of the Preferred Securities of the Corresponding Junior
Subordinated Debentures. None of the Guarantees places a limitation on the
amount of additional Senior Indebtedness that may be incurred by the Company.
The Company expects from time to time to incur additional indebtedness
constituting Senior Indebtedness.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related Preferred Securities (in which case no
vote will be required), no Guarantee may be amended without the prior approval
of the holders of not less than a majority of the aggregate Liquidation Amount
of such outstanding Preferred Securities. The manner of obtaining any such
approval will be as set forth under "Description of the Preferred
Securities -- Voting Rights; Amendment of Each Trust Agreement". All
guarantees and agreements contained in each Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the holders of the related Preferred
Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
related Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of such Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under such Guarantee.
Any holder of the Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under such Guarantee
without first instituting a legal proceeding against the Issuer, the Guarantee
Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Company in performance of any Guarantee, undertakes to perform
only such duties as are specifically set forth in each Guarantee and, after
default with respect to any Guarantee, must exercise the same degree of care
and skill as a prudent person would exercise or use in the conduct of his or
her own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by any Guarantee at the
request of any holder of any Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Preferred Securities, upon
full payment of the amounts payable upon liquidation of the related Issuer or
upon distribution of Corresponding Junior Subordinated Debentures to the
holders of the related Preferred Securities. Each Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of the related Preferred Securities must restore payment of any sums
paid under such Preferred Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the laws
of the State of California.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of Guarantees." Taken together, the Company's
obligations under each series of Junior Subordinated Debentures, the
Indenture, the related Trust Agreement, the related Expense Agreement, and the
related Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee on a subordinated basis of payments of Distributions
and other amounts due on the related series of Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation
of these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer's obligations under the Preferred
Securities. If and to the extent that the Company does not make payments on
any series of Corresponding Junior Subordinated Debentures, the related Issuer
will not have funds to pay Distributions or other amounts due on the Related
Preferred Securities. The Guarantees do not cover payment of Distributions
when the related Issuer does not have sufficient funds to pay such
Distributions. In such event, the remedy of a holder of a series of Preferred
Securities is to institute a legal proceeding directly against the Company for
enforcement of payment of a pro-rata portion of the payment due on the
Corresponding Junior Subordinated Debentures.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on each
series of Corresponding Junior Subordinated Debentures, such payments will be
sufficient to cover Distributions and other payments due on the related
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to
the sum of the aggregate stated Liquidation Amount of the Related Preferred
Securities and related Common Securities; (ii) the interest rate and interest
and other payment dates on each series of Corresponding Junior Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the related Preferred Securities; (iii) under the Expense Agreement,
the Company shall pay for all and any costs, expenses and liabilities of such
Issuer except the Issuer's obligations to holders of its Preferred Securities
under such Preferred Securities; and (iv) each Trust Agreement further
provides that the Issuer will not engage in any activity that is not
consistent with the limited purposes of such Issuer.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the related Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any related Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the related Guarantee
without first instituting a legal proceeding against the Guarantee Trustee,
the related Issuer or any other person or entity.
A default or event of default under any Senior Indebtedness of the Company
would not constitute an Event of Default. However, in the event of payment
defaults under, or acceleration of, Senior Indebtedness of the Company, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Corresponding Junior Subordinated Debentures until such
Senior Indebtedness has been paid in full or any payment default thereunder
has been cured or waived. Failure to make required payments on any series of
Corresponding Junior Subordinated Debentures would constitute an Event of
Default.
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LIMITED PURPOSE OF ISSUERS
Each Issuer's Preferred Securities evidence a beneficial interest in such
Issuer, and each Issuer exists for the sole purpose of issuing its Preferred
Securities and Common Securities and investing the proceeds thereof in
Corresponding Junior Subordinated Debentures. A principal difference between
the rights of a holder of a Preferred Security and a holder of a Corresponding
Junior Subordinated Debenture is that a holder of a Corresponding Junior
Subordinated Debenture is entitled to receive from the Company the principal
amount of and interest accrued on Corresponding Junior Subordinated Debentures
held, while a holder of Preferred Securities is entitled to receive
Distributions from such Issuer (or from the Company under the applicable
Guarantee) if and to the extent such Issuer has funds available for the
payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Issuer involving the liquidation of the Corresponding Junior Subordinated
Debentures, after satisfaction of the liability of creditors as required by
applicable law, the holders of the Related Preferred Securities will be
entitled to receive, out of assets held by such Issuer, the Liquidation
Distribution in cash. See "Description of Preferred Securities -- Liquidation
Distribution Upon Termination." Upon any voluntary or involuntary liquidation
or bankruptcy of the Company, the Property Trustee, as holder of the
Corresponding Junior Subordinated Debentures, would be a subordinated creditor
of the Company, subordinated in right of payment to all Senior Indebtedness as
set forth in the Indenture, but entitled to receive payment in full of
principal and interest, before any stockholders of the Company receive
payments or distributions. Since the Company is the guarantor under each
Guarantee and has agreed under the Expense Agreement to pay for all costs,
expenses and liabilities of each Issuer (other than the Issuer's obligations
to the holders of its Preferred Securities), the positions of a holder of such
Preferred Securities and a holder of such Corresponding Junior Subordinated
Debentures relative to other creditors and to stockholders of the Company in
the event of liquidation or bankruptcy of the Company are expected to be
substantially the same.
PLAN OF DISTRIBUTION
The Junior Subordinated Debentures or the Preferred Securities may be sold
in a public offering to or through underwriters or dealers designated from
time to time. The Company and each Issuer may sell its Junior Subordinated
Debentures or Preferred Securities as soon as practicable after effectiveness
of the Registration Statement of which this Prospectus is a part. The names of
any underwriters or dealers involved in the sale of the Junior Subordinated
Debentures or Preferred Securities in respect of which this Prospectus is
delivered, the amount or number of Junior Subordinated Debentures and
Preferred Securities to be purchased by any such underwriters and any
applicable commissions or discounts will be set forth in the Prospectus
Supplement.
Underwriters may offer and sell Junior Subordinated Debentures or Preferred
Securities at a fixed price or prices, which may be changed, or from time to
time at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. In connection with the
sale of Preferred Securities, underwriters may be deemed to have received
compensation from the Company and/or the applicable Issuer in the form of
underwriting discounts or commissions and may also receive commissions.
Underwriters may sell Junior Subordinated Debentures or Preferred Securities
to or through dealers, and such dealers may receive compensation in the form
of discounts, concessions or commissions from the underwriters.
Any underwriting compensation paid by the Company and/or the applicable
Issuer to underwriters in connection with the offering of Junior Subordinated
Debentures or Preferred Securities, and any discounts, concessions or
commissions allowed by such underwriters to participating dealers, will be
described in a Prospectus Supplement. Underwriters and dealers participating
in the distribution of Junior Subordinated Debentures or Preferred Securities
may be deemed to be underwriters, and any discounts and commissions received
by them and any profit realized by them on resale of such Junior Subordinated
Debentures or Preferred Securities may be deemed to be underwriting discounts
and commissions, under the Securities Act. Underwriters
34
<PAGE>
and dealers may be entitled, under agreement with the Company and the
applicable Issuer, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act, and to
reimbursement by the Company for certain expenses.
In connection with the offering of the Preferred Securities of any Issuer,
such Issuer may grant to the underwriters an option to purchase additional
Preferred Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set
forth in the accompanying Prospectus Supplement. If such Issuer grants any
over-allotment option, the terms of such over-allotment option will be set
forth in the Prospectus Supplement for such Preferred Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, the Company and/or the applicable Issuer and/or any of their
affiliates in the ordinary course of business.
The Junior Subordinated Debentures and the Preferred Securities will be new
issues of securities and will have no established trading market. Any
underwriters to whom Junior Subordinated Debentures or Preferred Securities
are sold for public offering and sale may make a market in such Junior
Subordinated Debentures and Preferred Securities, but such underwriters will
not be obligated to do so and may discontinue any market making at any time
without notice. Such Junior Subordinated Debentures or Preferred Securities
may or may not be listed on a national securities exchange or the Nasdaq
National Market. No assurance can be given as to the liquidity of or the
existence of trading markets for any Junior Subordinated Debentures or
Preferred Securities.
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, certain
legal matters will be passed upon for the Company and the Issuers by Brobeck,
Phleger & Harrison LLP, San Francisco, California, counsel to the Company and
for the Issuers by Richards, Layton & Finger, special Delaware counsel to the
Issuers and the Company. Certain legal matters will be passed upon for the
Underwriters by Davis Polk & Wardwell, New York City. Brobeck, Phleger &
Harrison LLP will rely on the opinion of Richards, Layton & Finger as to
matters of Delaware law. Certain matters relating to United States federal
income tax considerations will be passed upon for the Company by Brobeck,
Phleger & Harrison LLP.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1995
and 1994 and for each of the years in the three-year period ended December 31,
1995 incorporated by reference in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 incorporated by reference herein and
elsewhere in the Registration Statement have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The consolidated financial statements of First Interstate as of December 31,
1995 and 1994 and for each of the three years in the period ended December 31,
1995 incorporated by reference herein have been incorporated by reference
herein in reliance upon the report of Ernst & Young LLP, independent auditors,
incorporated by reference herein, given upon the authority of said firm as
experts in accounting and auditing.
35
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUER, THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS 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 TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER OR THE COMPANY
SINCE SUCH DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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PROSPECTUS SUPPLEMENT
<S> <C>
Risk Factors............................................................. S-5
Wells Fargo Capital II................................................... S-10
Wells Fargo & Company.................................................... S-10
Consolidated Ratios of Earnings to Fixed Charges......................... S-11
Accounting Treatment..................................................... S-12
Certain Terms of Capital Securities...................................... S-12
Clearing and Settlement.................................................. S-15
Certain Terms of Subordinated Debentures................................. S-18
Certain Federal Income Tax Consequences.................................. S-23
ERISA Considerations..................................................... S-26
Underwriting............................................................. S-28
PROSPECTUS
Available Information.................................................... 3
Incorporation of Certain Documents by Reference.......................... 4
Wells Fargo & Company.................................................... 5
Regulatory Capital Benefits to Wells Fargo & Company..................... 5
The Issuers.............................................................. 6
Use of Proceeds.......................................................... 7
Description of Junior Subordinated Debentures............................ 7
Description of Preferred Securities...................................... 17
Book-Entry Issuance...................................................... 28
Description of Guarantees................................................ 30
Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debentures and the Guarantees.............................. 33
Plan of Distribution..................................................... 34
Validity of Securities................................................... 35
Experts.................................................................. 35
</TABLE>
WELLS FARGO CAPITAL II
$150,000,000
Floating Rate Capital Securities
(Liquidation Amount $1,000 per Capital Security)
Fully and Unconditionally Guaranteed as Described Herein by
WELLS FARGO & COMPANY
PROSPECTUS SUPPLEMENT
CREDIT SUISSE FIRST BOSTON
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