<PAGE> 1
Filed Pursuant to Rule 424(b)2)
Registration No. 333-3377
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST 13, 1996
$150,000,000
FIRST SECURITY LOGO
6 7/8% Senior Notes due November 15, 2006
Interest payable May 15 and November 15
------------------
The 6 7/8% Senior Notes due November 15, 2006 (the "Senior Notes") will rank
equally with all other unsubordinated and unsecured indebtedness of First
Security Corporation (the "Company"). The Senior Notes will not be
redeemable or repayable prior to maturity and will not be
subject to any sinking fund. The Senior Notes will be
issued only in fully registered form in denominations
of $1,000 and integral multiples thereof. See
"Description of Senior Notes."
The Senior Notes will be represented by one or more Global Securities (as
defined herein) registered in the name of the nominee of The Depository
Trust Company (the "Depositary"). Except as provided herein -- and
in the accompanying Prospectus -- Senior Notes in definitive
form will not be issued. See "Description of
Senior Notes -- Book-Entry Notes."
------------------
THE SENIOR NOTES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF ANY INSURED DEPOSITORY INSTITUTION OR OTHER SUBSIDIARY
OF THE COMPANY AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions Company(1)(2)
---------------------------------------------------------
<S> <C> <C> <C>
Per Note..................................... 99.819% .65% 99.169%
Total........................................ $149,728,500 $975,000 $148,753,500
</TABLE>
(1) Plus accrued interest, if any, from November 22, 1996.
(2) Before deducting offering expenses payable by the Company, estimated at
$150,000.
------------------
The Senior Notes are offered by the Underwriter when, as and if issued by
the Company, 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
Senior Notes, in book-entry form, will be made through the facilities of the
Depositary on or about November 22, 1996, against payment in immediately
available funds.
CS First Boston
The date of this Prospectus Supplement is November 19, 1996.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
RECENT OPERATING RESULTS
Summary
The Company earned record net income totaling $126.6 million for the first
nine months of 1996, up $15.4 million or 13.9% from $111.2 million earned in the
corresponding year-to-date 1995 period. This net income generated a 1.32% return
on average assets ("ROAA") and a 16.03% return on average equity ("ROAE") for
year-to-date 1996 on the Company's strong average equity to assets ratio of
8.25%, compared with a 1.23% ROAA and a 15.35% ROAE for the 1995 period. Fully
diluted earnings per share were $1.63 for year-to-date 1996, up $0.17 or 11.6%
from $1.46 for the year-ago period. Adjusting for amortization of intangibles on
a year-to-date basis, the tangible ROAA was 1.47%, the tangible ROAE was 20.62%,
and tangible fully diluted earnings per share were $1.79.
Net income was $47.4 million for the third quarter of 1996, up $8.1 million
or 20.5% from $39.3 million earned in the third quarter of 1995. This net income
generated a 1.43% ROAA and a 17.55% ROAE for the quarter, compared with a 1.28%
ROAA and 15.46% ROAE for the year-ago quarter. Fully diluted earnings per share
were $0.61 for the quarter, up $0.10 or 19.6% from $0.51 for the year-ago
quarter. The tangible ROAA was 1.60%, the tangible ROAE was 22.67%, and tangible
fully diluted earnings per share were $0.67.
The Company's risk-based capital ratios at September 30, 1996, compared
with September 30, 1995, and December 31, 1995, respectively, were:
* Tier 1 ("well capitalized" = 6.00% or above) at 10.10%, compared
with 10.52% one year ago, and 10.35% at year end.
* Total Capital ("well capitalized" = 10.00% or above) at 13.37%,
compared with 14.06% one year ago, and 13.86% at year end.
* Leverage ("well capitalized" = 5.00% or above) at 7.34%, compared
with 7.32% one year ago, and 7.12% at year end.
USE OF PROCEEDS
The net proceeds from the sale of the Senior Notes offered hereby will be
added to the Company's general corporate funds and may be used for any lawful
corporate purpose.
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<PAGE> 3
CONSOLIDATED SUMMARY FINANCIAL DATA
The following consolidated summary historical financial data should be read
in conjunction with and is qualified in its entirety by the detailed financial
and other information included in the documents incorporated herein by
reference. See "Incorporation of Certain Documents by Reference" in the
Prospectus, including the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, and the Company's Quarterly Report on Form 10-Q for the
nine months ended September 30, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------------- ---------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ---------- ----------
(UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest Income............ $ 724,411 $ 688,202 $ 934,859 $ 773,517 $ 644,732 $ 656,448 $ 710,831
Interest Expense........... 345,733 340,759 459,868 315,415 240,794 280,499 388,022
Net Interest Income........ 378,678 347,443 474,991 458,102 403,938 375,949 322,809
Provision for Possible Loan
Losses................... 28,751 13,177 21,082 825 11,684 30,277 66,393
Noninterest Income......... 214,587 199,996 266,492 197,548 167,159 144,036 137,822
Noninterest Expense........ 366,689 358,122 530,205 433,648 386,146 339,456 306,504
Income Before Taxes........ 197,825 176,140 190,196 221,177 173,267 150,252 87,734
Applicable Income Taxes.... 71,211 64,964 70,191 81,043 59,211 49,909 28,322
Net Income................. 126,614 111,176 120,005 140,134 114,056 100,343 59,412
PER COMMON SHARE DATA
Net Income (primary)....... $ 1.64 $ 1.46 $ 1.57 $ 1.87 $ 1.59 $ 1.44 $ 0.96
Net Income (fully
diluted)................. 1.63 1.46 1.57 1.87 1.58 1.44 0.91
Cash Dividends Declared.... 0.63 0.57 0.75 0.69 0.59 0.45 0.40
Book Value per Common
Share.................... 14.46 13.57 13.71 11.95 11.49 10.54 9.62
BALANCE SHEET ITEMS --
PERIOD END
Loans, Net of Unearned
Income................... $ 8,948,196 $ 8,303,049 $ 8,315,095 $ 8,173,678 $ 6,561,021 $5,616,624 $5,432,951
Reserve for Possible Loan
Losses................... (133,853) (131,878) (129,982) (133,855) (134,848) (127,847) (126,887)
Total Assets............... 13,739,324 12,675,014 13,034,607 12,148,982 10,211,689 8,895,673 8,290,168
Deposits................... 9,088,404 8,689,087 8,773,642 8,053,344 7,503,707 6,868,453 6,514,692
Long-Term Debt............. 821,932 856,550 720,521 685,426 224,836 127,203 87,516
Shareholders' Equity....... 1,093,331 1,019,270 1,030,263 889,474 835,731 722,447 635,173
PROFITABILITY RATIOS:
Return on average assets... 1.32% 1.23% 0.98% 1.26% 1.24% 1.18% 0.74%
Return on average
stockholders' equity..... 16.03 15.35 12.17 16.13 14.54 14.62 10.26
Net interest margin FTE.... 4.47 4.32 4.39 4.64 4.95 5.02 4.59
Net interest spread, FTE... 3.75 3.60 3.65 4.05 4.33 4.31 3.75
Operating expense ratio:
(noninterest
expenses/FTE net
interest income plus
noninterest
income).............. 61.26 64.71 70.71 65.36 66.72 64.10 65.07
Productivity ratio:
(noninterest
expenses/average
assets).............. 3.83 3.96 4.33 3.89 4.19 4.00 3.81
CAPITAL RATIOS:
Stockholders' equity to
assets................... 7.96% 8.04% 7.90% 7.32% 8.18% 8.12% 7.66%
Tangible common equity
ratio.................... 6.86 6.97 6.84 6.03 8.07 7.96 7.51
Risk-based capital ratios:
Tier 1................. 10.10 10.52 10.35 9.84 11.82 11.32 10.61
Tier 1 + Tier 2........ 13.36 14.06 13.86 11.98 14.15 13.78 11.84
Leverage................... 7.34 7.32 7.12 6.88 8.08 7.99 7.53
ASSET QUALITY RATIOS:
Reserve for loan losses at
end of period to:
Total loans............ 1.50% 1.59% 1.56% 1.64% 2.06% 2.28% 2.34%
Nonaccruing and
renegotiated loans... 400.75 519.59 579.06 560.81 370.93 159.87 112.91
Nonperforming assets at end
of period to:
Total loans and ORE.... 0.43 0.36 0.32 0.33 0.80 1.90 2.75
Total assets........... 0.28 0.24 0.20 0.22 0.52 1.21 1.82
Total equity........... 3.51 2.93 2.58 3.06 6.32 14.87 23.73
Total equity +
loan-loss reserve.... 3.13 2.59 2.29 2.66 5.44 12.64 19.78
Net loans charged off to
average loans............ 0.39 0.25 0.30 0.10 0.20 0.60 1.09
RATIO OF EARNINGS TO FIXED
CHARGES:
Excluding interest on
deposits................. 2.76x 2.48x 2.19x 3.02x 4.62x 4.55x 2.28x
Including interest on
deposits................. 1.57x 1.52x 1.41x 1.70x 1.72x 1.54x 1.23x
</TABLE>
- ---------------
"FTE" -- Fully Taxable Equivalent.
Note: Figures have been restated where applicable to reflect 3-for-2 stock
splits in the form of 50% stock dividends paid in June 1991, May 1992, and
February, 1996, the November 19, 1993 pooling-of-interests merger with First
National Financial Corporation (New Mexico), and the retroactive adoption of
SFAS 109 -- "Accounting for Income Taxes."
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<PAGE> 4
CAPITALIZATION
The following table sets forth the unaudited historical capitalization of
the Company as of September 30, 1996, and as adjusted to give effect to the
issuance of the Senior Notes offered hereby.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------------------------------
ACTUAL ADJUSTMENTS(1) AS ADJUSTED(1)
---------- -------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
LONG-TERM DEBT
Parent Company:
Floating Rate Notes due 1999............................ $ 6,984 $ 6,984
Medium Term Notes due 1998-2003......................... 32,750 32,750
7.875% Senior Notes due 1999............................ 98,962 98,962
7.5% Subordinated Notes due 2002........................ 75,000 75,000
7.0% Subordinated Notes due 2005........................ 125,000 125,000
Senior Notes Offered Hereby............................. $150,000 150,000
Subsidiaries:
Bank Notes & FHLB Borrowings (2,3)...................... 482,243 482,243
Non-Bank................................................ 993 993
---------- -------------- ---------------
Total long-term debt......................................... 821,932 150,000 971,932
---------- -------------- ---------------
STOCKHOLDERS' EQUITY
Series "A," $3.15 Cumulative Convertible Preferred
Stock: (10,459 shares outstanding)......................... 549 549
Common Stock (par value $1.25, authorized 300,000,000 shares,
issued and outstanding 76,171,674 shares)(4)............... 95,213 95,213
Paid-in surplus......................................... 126,089 126,089
Retained earnings....................................... 889,551 889,551
Net unrealized loss on securities available for sale.... (8,051) (8,051)
---------- ---------------
Subtotal................................................ 1,102,782 1,102,782
---------- ---------------
Less: common treasury stock at cost (573,820 shares).... (10,000) (10,000)
---------- ---------------
Total common stockholders' equity....................... 1,092,782 1,092,782
---------- ---------------
Total stockholders' equity................................... 1,093,331 1,093,331
---------- ---------------
Total long-term debt and stockholders' equity................ $2,015,263 $150,000 $ 2,065,263
========= =========== ===========
</TABLE>
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(1) Reflects the issuance of $150,000,000 of Senior Notes offered hereby.
(2) These obligations are direct obligations of subsidiaries of the Company, and
as such, constitute claims against such subsidiaries ranking prior to the
Company's equity therein.
(3) Federal Home Loan Bank borrowings mature in 1996-2000.
(4) Shares issued and outstanding and as adjusted exclude 3,890,610 shares
reserved for issuance upon exercise of outstanding employee stock options,
190,615 shares reserved for issuance upon exercise of conversion rights of
preferred stock, 1,152,000 shares reserved for issuance under the dividend
reinvestment and stock purchase plan, 2,869,447 shares reserved for issuance
under the Company's Comprehensive Management Incentive Plan, 1,257,000
shares reserved for issuance under the 1994 Employee Stock Purchase Plan,
and 669,000 shares reserved for issuance under the Company's Nonemployee
Director Stock Option Plan.
In addition to the capitalization described in the above table, the Company
and its subsidiaries employ a variety of other sources of funds in the operation
of their businesses. At September 30, 1996 funding sources for the subsidiary
banks included demand deposits of $1.95 billion, interest bearing deposits of
$7.14 billion (including $718 million of certificates of deposit over $100,000),
Federal funds purchased and securities sold under agreements to repurchase of
$2.16 billion and U.S. Treasury demand notes of $38 million.
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<PAGE> 5
DESCRIPTION OF SENIOR NOTES
The following description of the terms of the Senior Notes offered hereby
(referred to in the accompanying Prospectus as the "Senior Debt Securities")
supplements the description of the general terms of Debt Securities set forth in
the Prospectus, to which description reference is hereby made. The following
summary of the Senior Notes is qualified in its entirety by reference thereto
and to the Indenture referred to therein.
General
The Senior Notes offered hereby will be limited to $150,000,000 aggregate
principal amount, will constitute a series of Senior Debt Securities of the
Company, and are to be issued under the Senior Indenture as defined in the
accompanying Prospectus. They will bear interest from November 22, 1996, payable
semiannually on each May 15 and November 15, beginning May 15, 1997. Interest
shall be paid to the person in whose name such Note is registered at the close
of business on May 1, or November 1, as the case may be, preceding each interest
payment. The Senior Notes will bear interest at a rate of 6 7/8% per annum.
The Senior Notes will mature on November 15, 2006 and are not redeemable
prior to maturity. The Senior Notes do not provide for any sinking fund.
Book-Entry Notes
Upon issuance, all Senior Notes will be represented by one or more global
securities (the "Global Notes"). Each Global Note representing the Senior Notes
will be deposited with, or on behalf of, the Depositary, and will be registered
only in the name of the Depositary or a nominee of the Depositary.
Ownership of the Senior Notes will be limited to institutions that have
accounts with such Depositary or its nominee (each, a "participant" and
collectively the "participants") or persons that may hold interests through
participants. In addition, ownership of the Senior Notes by participants will
only be evidenced by, and transfers of such ownership interest will be effected
only through, records maintained by the Depositary (or its successor or nominee)
and its participants. Ownership of the Senior Notes by persons that hold through
participants will only be evidenced by, and transfers of such ownership interest
within such participants will be effected only through, records maintained by
such participants. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such laws may impair the ability to transfer the Senior Notes.
The Company has been advised by the Depositary that upon the issuance of a
Global Note representing the Senior Notes, and the deposit of such Global Note
with the Depositary, the Depositary will immediately credit, on its book-entry
registration and transfer system, the respective principal amounts of the Senior
Notes represented by such Global Note to the accounts of participants. The
accounts to be credited will be designated by the Underwriters.
Payment of principal of, and any premium and interest on the Senior Notes
represented by any Global Note registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner and holder of the Global Note representing
such Senior Notes. None of the Company, the Subordinated Trustee or any agent of
the Company or the Subordinated Trustee will have any responsibility or
liability for any aspect of the Depositary's records or any participant's
records relating to, or payments made on account of, the Senior Notes or for
maintaining, supervising or reviewing any of the Depositary's records or any
participant's records relating to such Senior Notes.
The Company has been advised by the Depositary that upon receipt of any
payment of principal, premium or interest in respect of a Global Note, the
Depositary will immediately credit, on its book-entry registration and transfer
system, accounts of participants with payments in the amounts proportionate to
their respective beneficial interest in the principal amount of such Global Note
or as shown on the records of the Depositary. Payments by participants to owners
of Senior Notes held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name", and will be the
responsibility of such participants.
No Global Note described above may be transferred except as a whole by the
Depositary for such Global Note to a nominee of the Depositary or by a nominee
of the Depositary to another nominee of the Depositary.
Senior Notes represented by a Global Note are exchangeable for definitive
Senior Notes in registered form, of like tenor and of an equal aggregate
principal amount, only if (x) the Depositary notifies the Company that it is
unwilling or
S-5
<PAGE> 6
unable to continue as Depositary for such Global Note or if at any time the
Depositary ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and a successor
depositary is not appointed by the Company within 60 days, (y) the Company in
its sole discretion determines that such Senior Notes shall be exchangeable for
definitive Senior Notes in registered form or (z) any event shall have happened
and be continuing which, after notice or lapse of time, or both, would become an
Event of Default with respect to the Senior Notes. Any Global Note representing
the Senior Notes that is exchangeable pursuant to the preceding sentence shall
be exchangeable in whole for definitive Senior Notes in registered form, of like
tenor and of an equal aggregate principal amount, in denominations of $1,000 and
integral multiples thereof. Such definitive Senior Notes shall be registered in
the name or names of such person or persons as the Depositary shall instruct the
Senior Trustee. It is expected that such instructions may be based upon
directions received by the Depositary from its participants with respect to
ownership of the Senior Notes.
Except as provided above, owners of the Senior Notes will not be entitled
to receive physical delivery of Senior Notes in definitive form and no Global
Note representing the Senior Notes shall be exchangeable, except for another
Global Note of like denomination and tenor to be registered in the name of the
Depositary or its nominee. Accordingly, each person owning a Note must rely on
the procedures of the Depositary and, if such person is not a participant, on
the procedures of the participant through which such person owns its beneficial
interest, to exercise any rights of a holder under the Senior Notes. The Company
understands that under existing industry practices, in the event that the
Company requests any action of holders or an owner of a Note desires to give or
take any action a holder is entitled to give or take under the Senior Notes, the
Depositary would authorize the participants owning the relevant Senior Notes to
give or take such action, and such participants would authorize beneficial
owners owning through such participants to give or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
The Depositary has advised the Company that the Depositary 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 Section 17A of the Exchange Act. The Depositary was
created to hold securities of its participants and to facilitate the clearance
and settlement of securities transactions among its participants through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movements of securities certificates. The
Depositary's participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
S-6
<PAGE> 7
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement, dated November 19, 1996 (the "Underwriting Agreement"), CS First
Boston Corporation (the "Underwriter") has agreed to purchase from the Company
all of the Senior Notes offered hereby.
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 of the Senior Notes offered hereby if any are
purchased. The Company has been advised by the Underwriter that the Underwriter
proposes to offer the Senior Notes 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 0.40% of the principal amount
per Senior Note and that the Underwriter and such dealers may allow a discount
of 0.25% of such principal amount per Senior Note on sales to certain other
dealers. After the initial public offering, the public offering price and
concession and discount to dealers may be changed by the Underwriter.
In addition, the Company has an arrangement with the Capital Markets
Division of First Security Bank, N.A. under which it may act as a selling agent
for the Senior Notes at the same prices, concessions and discounts to dealers
applicable to the Underwriter.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, or to
contribute payments which the Underwriters may be required to make in respect
thereof.
The Senior Notes are a new issue of securities with no established trading
market. The Underwriter has advised the Company that it initially intends to act
as a market maker for the Senior Notes. 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 Senior Notes.
The Underwriter is a customer of, engages in transactions with or performs
services for the Company and certain of its subsidiaries in the ordinary course
of business.
VALIDITY OF THE SENIOR NOTES
The validity of the Senior Notes offered hereby will be passed upon for the
Company by Ray, Quinney & Nebeker, 79 South Main Street, Salt Lake City, Utah
84111, and for the Underwriter by Sullivan & Cromwell, Los Angeles, California.
With respect to matters of New York law, Ray Quinney & Nebeker will rely on the
opinions of Sullivan & Cromwell. Sullivan & Cromwell also performs legal
services for the Company from time to time.
Alonzo W. Watson, who is Assistant Secretary of the Company, is a member of
the firm of Ray, Quinney & Nebeker. A daughter of the Chairman and Chief
Executive Officer of the Company is also a member of Ray Quinney & Nebeker. At
September 30, 1996, attorneys at Ray Quinney & Nebeker, together with their
immediate families, beneficially owned less than 5% of the outstanding shares of
Common Stock of the Company.
S-7
<PAGE> 8
PROSPECTUS
$600,000,000
[First Security logo]
Debt Securities, Preferred Stock, Common Stock,
and Warrants to Purchase Common Stock
First Security Corporation (the "Company") may from time to time issue and offer
(a) its notes, debentures or other unsecured evidences of indebtedness in one or
more series ("Debt Securities"), which may be either senior ("Senior Debt
Securities") or subordinated ("Subordinated Debt Securities") in priority of
payment; (b) shares of one or more series of its Preferred Stock ("Preferred
Stock"); (c) shares of its Common Stock (par value $1.25) ("Common Stock"); and
(d) warrants to acquire Common Stock ("Common Stock Warrants") either directly
or in conversion or exchange for other securities. (When appropriate, all of the
foregoing types of securities are referred to herein as "the Securities".)
THE SECURITIES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY
BANK OR NONBANK SUBSIDIARY OF THE COMPANY AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, BANK INSURANCE FUND OR ANY OTHER GOVERNMENT
AGENCY.
The Senior Debt Securities will rank equally with all other unsubordinated and
unsecured indebtedness of the Company. The Subordinated Debt Securities will be
subordinated to all of the Company's existing and future Senior Debt, as
defined. See "Description of Debt Securities."
The Company may offer the Securities up to an aggregate initial offering price
not to exceed US$600,000,000 or, as to Debt Securities, its equivalent based on
the applicable exchange rate at the time of offering in such foreign currencies
or units of two or more currencies thereof as may be designated by the Company
at the time of such an offering. Debt Securities or Preferred Stock of each
series will be offered on terms determined at the time of sale. When any of the
Securities is offered, a supplement to this Prospectus (the "Prospectus
Supplement") setting forth certain terms of the offered Securities will be
delivered together with this Prospectus. With regard to Debt Securities or
Preferred Stock in respect of which this Prospectus is being delivered, the
Prospectus Supplement will set forth, if applicable, the specific designation,
aggregate principal amount or redemption value, rate (or method of calculation)
or dividend and time of payment of any interest or dividend, maturity, initial
public offering price, place or places of payment of interest or dividends,
redemption terms and other terms of such Securities.
The Securities may be sold to underwriters for public offering pursuant to the
terms of offering fixed at the time of sale, or any or all of the Securities may
be sold to the public by the Company directly or through agents or dealers. Such
underwriters will be J.P. Morgan Securities Inc. and CS First Boston
Corporation, or a group of underwriters represented by such firms. J.P. Morgan
Securities Inc. and CS First Boston Corporation may also act as agent for the
Company. If any underwriters or agents are involved in the sale of any
Securities, their names and any applicable fee, commission, purchase price or
discount arrangements with them will be set forth, or will be calculated from
the information set forth, in a Prospectus Supplement. See "Plan of
Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF ANY SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
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.
J.P. MORGAN & CO. CS FIRST BOSTON
The date of this prospectus is August 13, 1996.
<PAGE> 9
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Prospectus or any Prospectus
Supplement in connection with the offer made by this Prospectus and any such
Prospectus Supplement and, if given or made, such information or representation
must not be relied upon as having been authorized by the Company or any
Underwriter. Neither this Prospectus nor any Prospectus Supplement constitutes
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 or any
Prospectus Supplement nor any sale made hereunder shall, under any
circumstances, create an 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 Company since such date.
FOR NORTH CAROLINA RESIDENTS:
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED OR
DISAPPROVED THIS OFFERING, NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (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 copies obtained at the offices of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; at
Public Reference Facilities at the Chicago Regional Office, Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and at the New York
Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can be obtained upon written request from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
The Company has filed with the Commission in Washington, D.C. a Registration
Statement under the Securities Act of 1933 (the "Securities Act") with respect
to the Securities. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all the information set forth in the
Registration Statement, including the exhibits thereto, which may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference the following documents of the
Company heretofore filed by it with the Commission:
(a) Annual Report on Form 10-K for the year ended December 31, 1995; and
(b) Proxy Statement dated as of March 15, 1996; and
(c) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996
and June 30, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities made hereby are incorporated
herein by reference, and such documents shall be deemed to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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<PAGE> 10
The Company will provide without charge to each person to whom this Prospectus
is delivered, upon request of any such person, a copy of any or all of the
foregoing documents incorporated herein by reference (other than the exhibits to
such documents). Written requests should be directed to:
Scott C. Ulbrich
Executive Vice President
First Security Corporation
79 South Main Street
Salt Lake City, Utah 84111
Telephone requests may be directed to (801) 246-5706.
FIRST SECURITY CORPORATION
GENERAL
The Company is a Delaware incorporated multi-bank holding company headquartered
in Salt Lake City, Utah. At December 31, 1995, the Company and its subsidiaries
had total consolidated assets and shareholders' equity of $13 billion and $1
billion, respectively.
The principal banking subsidiaries of the Company, until June 21, 1996, were
First Security Bank of Utah, N.A. ("First Security Utah"), First Security Bank
of Idaho, N.A. ("First Security Idaho"), and First Security Bank of New Mexico,
N.A. ("First Security New Mexico"), all of which are commercial banking
institutions providing a broad range of banking, fiduciary, financial and other
services. The Company also operates banks in Wyoming ("First Security Wyoming"),
Oregon ("First Security Oregon") and Nevada ("First Security Nevada") (all of
the Company's banking subsidiaries will be referred to hereafter as "the
Banks"). Nonbank subsidiaries owned by the Company include a leasing company, a
mortgage company, a securities broker-dealer, an investment adviser, an
insurance agency, a credit life insurance company and a management and services
company.
Effective as of June 21, 1996, First Security Utah changed its name to First
Security Bank, N.A. ("First Security"), and immediately thereafter First
Security Idaho was merged with and into First Security, with First Security
being the surviving national banking association. All of the offices of First
Security Idaho are now operated as branches of First Security. This merger was
effected in accordance with the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking Act"), the Utah Financial
Institutions Act and the Idaho Interstate Branching Act, all of which provide
for interstate bank mergers and branching.
A substantial portion of the Company's cash flow is typically derived from
dividends directly from its bank and nonbank subsidiaries, and from interest on
loans to the Company's nonbank subsidiaries. Various statutory provisions limit
the amount of dividends subsidiary Banks and certain nonbank subsidiaries can
pay to the Company without regulatory approval. In addition, because any
obligations issued by the Company hereunder will only be obligations of the
Company, not of any of its subsidiary Banks or nonbanking operations, the
holders of obligations issued by the Company hereunder will be subordinated to
certain prior claims by creditors of the Company's subsidiaries. See
"Supervision and Regulation."
The Company maintains its principal executive offices at 79 South Main Street,
Salt Lake City, Utah 84111, telephone 801-246-6000.
COMPETITION
Based on deposits, at September 30, 1995, First Security Utah was the largest
bank in the State of Utah, First Security Idaho was the second largest bank in
the State of Idaho, and First Security New Mexico was the second largest bank in
the Albuquerque area and the third largest bank in New Mexico. In Nevada,
Wyoming and Oregon, FSC's banks are smaller, more localized competitors. First
Security Oregon, at March 31, 1995, was the 12th largest bank in Oregon. First
Security Wyoming, at December 31, 1995, was the 18th largest bank in Wyoming.
The Company's banks compete with other banking organizations in the states in
which they operate on the basis of price, service and convenience. Other types
of financial institutions, such as savings banks, savings and loan associations
and credit unions
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<PAGE> 11
offer a wide range of deposit and loan services (including commercial loans)
and, in some instances, fiduciary services. The Company's subsidiaries also
compete with brokerage firms, insurance companies and mutual fund companies
which provide investment products and, in many cases, the substantial equivalent
of checking accounts, credit cards and similar products traditionally provided
by commercial banks. Major retailers compete with the Company's lending
operations by offering credit cards and retail installment contracts. It is
anticipated that competition from nonbank organizations will continue to grow.
Under the Interstate Banking Act, Congress eliminated previously existing
restrictions on interstate bank acquisitions and a bank holding company may now
acquire a bank anywhere in the nation, irrespective of state laws. The
Interstate Banking Act also authorizes interstate bank mergers effective June 1,
1997, subject to earlier "opt-in" or "opt-out" action by individual states, and
allows branch acquisitions and new branch activity by out-of-state banks if
permitted by the host state. Utah, Idaho and New Mexico adopted early "opt-in"
legislation allowing interstate bank mergers effective as of June 1, 1995, July
1, 1995 and June 1, 1996, respectively. Oregon and Nevada also adopted early
"opt-in" legislation effective as of February 17, 1995 and September 28, 1995
respectively. As of this date, Wyoming has taken no action to either "opt-in" or
"opt-out" under the Interstate Banking Act. The new legislation has not yet had
any significant effect on acquisition or branching activity in the regions in
which the Company operates. However, management expects the level of bank
competition to remain high, and potentially increase, in the Company's marketing
area in the future.
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
For the fiscal years ended December 31, 1995, 1994, 1993, 1992 and 1991 the
Company's consolidated ratios of earnings to combined fixed charges and
preferred stock dividends, and its ratio of earnings to fixed charges, excluding
interest on deposits were 2.19, 3.02, 4.62, 4.54 and 2.28, respectively; and
such ratios including interest on deposits were 1.41, 1.70, 1.72, 1.54 and 1.23,
respectively. For purposes of computing the consolidated ratio of earnings to
combined fixed charges and preferred stock dividends, earnings represent net
income plus income taxes and fixed charges. Fixed charges, excluding interest on
deposits, include interest expense (except interest paid on deposits),
capitalized interest, an amount equal to the pretax earnings required to meet
applicable preferred stock dividend requirements and the interest factor
included in rents. Fixed charges, including interest on deposits, include all
interest expense, capitalized interest, an amount equal to the pretax earnings
required to meet applicable preferred stock dividend requirements and the
interest factor included in rents.
SUPERVISION AND REGULATION
References in this section to applicable statutes and regulations are brief
summaries only, and do not purport to be complete. The reader should consult
such statutes and regulations themselves for a full understanding of the details
of their operation.
Bank Holding Company Regulation
The Company is a bank holding company registered under Bank Holding Company of
1956 (the "BHC Act"), and is subject to supervision and regulation by the
Federal Reserve Board. Federal laws subject bank holding companies to particular
restrictions on the types of activities in which they may engage, and to a range
of supervisory requirements and activities, including regulatory enforcement
actions for violation of laws and policies. In addition, Utah law authorizes the
state bank regulators to supervise and regulate under limited circumstances a
holding company controlling a Utah domiciled bank.
Activities "Closely Related" to Banking. The BHC Act prohibits a bank holding
company, with certain limited exceptions, from acquiring direct or indirect
ownership or control of any voting shares of any company which is not a bank or
from engaging in any activities other than those of banking, managing or
controlling banks and certain other subsidiaries, or furnishing services to or
performing services for its subsidiaries. One principal exception to these
prohibitions allows the acquisition of interests in companies whose activities
are found by the Federal Reserve Board to be so closely related to banking,
managing, or controlling banks as to be a proper incident thereto. Such
activities include making or servicing loans, performing certain data processing
services, acting as an investment or financial advisor to certain investment
trusts and investment companies, and providing securities brokerage services.
Securities Activities. The Federal Reserve Board has approved applications by
bank holding companies to engage, through nonbank subsidiaries, in certain
securities underwriting activities, provided that the affiliates would not be
"principally engaged" in such activities for purposes of Section 20 of the
Glass-Steagall Act. Subject to various limitations, holding companies have
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<PAGE> 12
been permitted to underwrite and deal in corporate debt and equity securities
through such subsidiaries. The Company has not organized such a subsidiary to
date.
Safe and Sound Banking Practices. Bank holding companies are not permitted to
engage in unsafe and unsound banking practices. The Federal Reserve Board may
order a bank holding company to terminate an activity or control of a nonbank
subsidiary if such activity or control constitutes a significant risk to the
financial safety, soundness or stability of a subsidiary bank and is
inconsistent with sound banking principles.
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") expanded the Federal Reserve Board's authority to prohibit activities
of bank holding companies and their nonbanking subsidiaries which represent
unsafe and unsound banking practices or which constitute violations of laws or
regulations. Notably, FIRREA increased the amount of monetary penalties which
the Federal Reserve Board can assess for such practices or violations to as high
as $1 million per day. FIRREA also expanded the scope of individuals and
entities against which such penalties may be assessed.
Anti-Tying Restrictions. Bank holding companies and their bank and nonbank
affiliates are prohibited from tying the provision of certain services, such as
extensions of credit, to other services offered by a holding company or its
affiliates.
Annual Reporting; Examinations. The Company is required to file an annual report
with the Federal Reserve Board and such additional information as the Federal
Reserve Board may require pursuant to the BHC Act. The Federal Reserve Board may
examine a bank holding company or any of its subsidiaries, and charge the
company for the cost of such an examination.
Capital Adequacy Requirements. The Federal Reserve Board monitors the capital
adequacy of bank holding companies. The Federal Reserve Board uses a combination
of risk-based guidelines and leverage ratios to evaluate capital adequacy. The
Federal Reserve Board has adopted a system based upon the Basle Accord, an
international standard for risk-based capital guidelines, to evaluate the
capital adequacy of bank holding companies. Under the risk-based capital
guidelines, different categories of assets are assigned different risk weights,
based generally on the perceived credit risk of the asset. These risk weights
are multiplied by corresponding asset balances to determine a "risk-weighted"
asset base. Certain off-balance sheet items, which previously were not expressly
considered in capital adequacy computations, are added to the risk-weighted
asset base by converting them to a balance sheet equivalent and assigning to
them the appropriate risk weight. Total capital is defined as the sum of "Tier
1" and "Tier 2" capital elements, with "Tier 2" being limited to 100% of "Tier
1." For bank holding companies, "Tier 1" capital includes, with certain
restrictions, common stockholders' equity, retained earnings, non-cumulative
perpetual preferred stock and minority interests in consolidated subsidiaries
less certain intangibles. "Tier 2" capital includes, with certain limitations,
certain forms of non-qualifying perpetual preferred stock, maturing capital
instruments (such as qualifying convertible and/or subordinated debt), the
reserve for possible loan losses and specified levels of certain intangibles.
In addition to the risk-based capital guidelines, the Federal Reserve Board has
adopted the use of a leverage ratio as an additional tool to evaluate the
capital adequacy of banks and bank holding companies. The leverage ratio is a
company's "Tier 1" capital divided by its adjusted total assets. This leverage
ratio must be at least 3.0% for institutions with the Federal Reserve's highest
asset rating, called "CAMEL 1". Institutions which are not CAMEL 1 rated are
expected to maintain a leverage ratio of 4.0% to 5.0%, and institutions planning
acquisitions are expected to maintain higher ratios.
The following table sets forth the current regulatory requirements for capital
ratios of bank holding companies as compared with the Company's capital ratios
at December 31, 1995:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TIER 1 TOTAL
CAPITAL TO CAPITAL TO
LEVERAGE RISK-WEIGHTED RISK-WEIGHTED
RATIO ASSETS(1) ASSETS(2)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Regulatory Minimum........................................ 4.00 - 5.00% 4.00% 8.00%
- -----------------------------------------------------------------------------------------------------------
The Company's Actual...................................... 7.12% 10.35% 13.86%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Shareholders' equity less goodwill (Tier 1 capital) divided by risk-weighted
assets.
(2) Tier 1 capital plus reserve for possible loan losses (limited to 1.25% of
total risk-weighted assets) plus qualified subordinated and convertible debt
(Tier 2 capital) divided by risk-weighted assets.
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<PAGE> 13
Bank regulators continue to indicate their desire to raise capital requirements
applicable to banking organizations beyond their current levels. Management
cannot predict whether these capital requirements will change or whether they
will materially affect the Company's financial position or operating ability.
Audit Reports. Federal law requires insured depository institutions with $500
million or more in total assets, such as the Company and each of First Security
(the new combined First Security Utah and First Security Idaho) and First
Security New Mexico, to submit annual audit reports prepared by independent
auditors to federal and state regulators. In most cases, the audit report of the
institution's holding company can be used to satisfy this requirement. The
annual audit report shall include financial statements prepared in accordance
with generally accepted accounting principles, statements concerning
management's responsibility for the financial statements, internal controls and
compliance with legal requirements designated by the FDIC, and an attestation by
the auditor regarding the statements of management. Federal law also requires
that independent audit committees be formed, consisting of outside directors
only. The committees of institutions with assets of $3 billion or more, such as
the Company, must include members with experience in banking or financial
management, must have access to outside counsel, and must not include
representatives of large customers. The Company's Board of Directors includes an
independent audit committee which complies with these requirements.
Acquisitions by Bank Holding Companies. The BHC Act requires every bank holding
company to obtain the prior approval of the Federal Reserve Board before it may
acquire all or substantially all of the assets of any bank, or ownership or
control of any voting shares of any bank, if after such acquisition it would own
or control, directly or indirectly, more than 5% of the voting shares of such
bank.
The Federal Reserve Board may allow the acquisition by a bank holding company of
an interest in a bank located in another state if the bank holding company is
adequately capitalized and adequately managed regardless of the law of the state
in which the target bank is located. Utah banking laws permit, in certain
circumstances, out-of-state bank holding companies to acquire certain existing
banks and bank holding companies in Utah.
In addition, FDICIA has eased restrictions on cross-industry mergers between
commercial banks and savings institutions. Members of the Bank Insurance Fund
("BIF"), such as the Company, and the Savings Association Insurance Fund are
generally allowed to merge, assume each other's deposits, and transfer assets in
exchange for an assumption of deposit liabilities.
Subsidiary Bank Regulation
Two (formerly three) of the Company's bank subsidiaries are national banks,
which are subject to regulation and supervision by the Office of the Comptroller
of the Currency (the "Comptroller"). The other banks are each subject to
regulation by regulators in their respective states and the FDIC. Bank
regulations on both the federal and state levels are broad in their scope and
materially affect the business of the Company and its banks.
All of the Company's subsidiary banks are subject to the requirements and
restrictions under federal and state law, including requirements to maintain
reserves against deposits, restrictions on the types and amounts of loans that
may be granted and the interest that may be charged thereon, and limitations on
the types of investments that may be made and the types of services that may be
offered. Various consumer laws and regulations also affect the operations of the
banks. In addition to the impact of regulation, commercial banks are affected
significantly by actions of the Federal Reserve Board as it attempts to control
the money supply and credit availability.
Restrictions on Transactions With Affiliates. Section 23A of the Federal Reserve
Act imposes quantitative and qualitative limits on loan transactions between a
bank and its affiliates, and also requires certain levels of collateral for such
loans. It also limits the amount of advances to third parties which are
collateralized by the securities or obligations of the Company or its
subsidiaries. Section 23B of the Federal Reserve Act requires that certain
transactions between the Company's subsidiary banks and their affiliates must be
on terms at least as favorable to the Company or its subsidiaries as those
prevailing for comparable transactions with other nonaffiliated companies. In
the absence of such comparable transactions, any transaction between the Company
and its affiliates must be on terms and under circumstances, including credit
standards, that in good faith would be offered to or would apply to
nonaffiliated companies. The Company is currently in material compliance with
the requirements of Sections 23A and 23B.
Restrictions on Subsidiary Bank Dividends. The Federal Reserve Board, the
Comptroller and the FDIC have each issued policy statements to the effect that
bank holding companies and member banks, national banks and state banks should
generally only pay dividends out of current operating earnings. The prior
approval of the Comptroller is required if the total of all dividends
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<PAGE> 14
declared by the board of directors of a national bank, such as First Security
and First Security New Mexico, in any calendar year will exceed the aggregate of
the bank's net profits (as defined by regulatory authorities) for that year and
its retained net profits for the preceding two years. Certain generally similar
restrictions govern the other banking subsidiaries of the Company. In addition,
national banks can pay dividends only to the extent that retained net profits
exceed "bad debts", which are generally defined to include the principal amount
of loans that are in arrears as to interest by nine months or more and that are
not secured and that are not in the process of collection. As of December 31,
1995, the Company's banks could have declared additional dividends to the
Company of approximately $210 million without regulatory approval or
restriction. Federal banking regulators also may prohibit federally insured
banks from paying dividends if the payment of such dividend would leave the bank
"undercapitalized" as defined in FDICIA and the implementing regulations, or the
payment of dividends would, in light of the financial condition of such bank,
constitute an unsafe or unsound practice. Applicable Nevada, Wyoming and Oregon
law place similar restrictions on the payment of dividends by the Company's
banks organized under the laws of those states.
Examinations. The FDIC periodically examines and evaluates insured banks. Based
upon such an evaluation, the FDIC may revalue the assets of an insured
institution and require that it establish specific reserves to compensate for
the difference between the FDIC-determined value and the book value of such
assets. FDICIA requires that these on-site examinations be conducted every 12
months, except that certain well capitalized banks may be examined every 18
months. The rules and regulations of the Comptroller, which regulates the
Company's national banks, and the various state banking authorities regulating
the Company's state-chartered banks also provide for periodic examinations by
those agencies.
Current Regulatory Structure. The laws and regulations affecting banks and bank
holding companies are under continual review. For example, recent federal
legislative proposals include bills which would consolidate all banking
regulators into one or two regulatory agencies and others which would permit
bank holding companies to affiliate with investment banking firms. The rules and
the regulatory agencies in this area have changed significantly over recent
years, and there is reason to expect that similar changes, including changes
which may materially affect the Company's operations, will continue in the
future.
USE OF PROCEEDS
Unless otherwise set forth in the Prospectus Supplement, the net proceeds from
the sale of the Securities will be applied to the Company's general funds to be
utilized for such corporate purposes as may be determined by management,
including payment of cash amounts due upon completion of acquisitions, funding
of investments in or extensions of credit to the Company's subsidiaries, and
repayment of borrowings. Except as otherwise described in the Prospectus
Supplement, specific allocations of the proceeds to such purposes will not have
been made at the date of the Prospectus Supplement, although management of the
Company will have determined that funds should be raised at that time in
anticipation of future funding requirements. The precise amounts and timing of
payments due upon completion of acquisitions, of investments in and extensions
of credit to the subsidiaries, and the repayment of borrowings will depend upon
funding requirements and the availability of other funds. Pending such
application, net proceeds may be temporarily invested or applied to the
reduction of short-term indebtedness.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth certain
general terms and provisions of the Debt Securities to which any Prospectus
Supplement may relate. The particular terms of the Debt Securities offered by a
Prospectus Supplement and the extent, if any, to which such general provisions
may not apply thereto will be described in the Prospectus Supplement relating to
such Debt Securities.
The Debt Securities may be Senior Debt Securities or Subordinated Debt
Securities (both including but not limited to Medium-Term Notes). The Senior
Debt Securities will be issued under an Indenture dated as of March 1, 1994 (the
"Senior Indenture") between the Company and The First National Bank of Chicago,
as Trustee (together with its successor trustee, if any, the "Senior Trustee"),
and the Subordinated Debt Securities will be issued under an Indenture dated as
of March 1, 1994 (the "Subordinated Indenture") between the Company and The
First National Bank of Chicago, as Trustee (together with its successor trustee,
if any, the "Subordinated Trustee"). The Senior Indenture and the Subordinated
Indenture are collectively referred to herein as the "Indentures," copies of the
forms of which are filed as exhibits to the Registration Statement of which this
Prospectus is a part. References to the "Trustee" below shall mean the Senior
Trustee or the Subordinated Trustee. The following summaries of the material
provisions of the Indenture are not complete restatements of the provisions
themselves, and
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<PAGE> 15
are subject to, and qualified in their entirety by reference to, the provisions
of the Indenture applicable to a particular series of Debt Securities (the
"Applicable Indenture"), including the definitions therein of certain terms.
Wherever particular sections, articles or defined terms of the Indentures are
referred to, it is intended that such sections, articles or defined terms shall
be incorporated herein by reference. Section and article references used herein
are references to the Applicable Indenture. Capitalized terms not otherwise
defined herein shall have the meaning given them in the Applicable Indenture.
GENERAL
Neither Indenture limits the amount of Debt Securities which may be issued
thereunder, and 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. Neither the Indentures nor the Debt Securities will limit or otherwise
restrict the amount of other indebtedness which may be incurred or the other
securities which may be issued by the Company or any of its Subsidiaries. The
Debt Securities will be unsecured direct obligations of the Company.
Because the Company is a holding company, its rights and the rights of its
creditors, including the holders of the Debt Securities, to participate in the
assets of any Subsidiary upon the latter's liquidation or recapitalization would
be subject to the prior claims of such Subsidiary's creditors except to the
extent that the Company may itself be a creditor with claims against the
Subsidiary that are recognized by a court having jurisdiction over such claims.
Unless otherwise indicated in the Prospectus Supplement, principal of and any
premium and interest on the Debt Securities will be payable, and the transfer of
the Debt Securities will be registrable, at the currently designated office of
the Trustee at One First National Plaza, Chicago, Illinois 60670. In addition,
payment of interest on Debt Securities may, at the option of the Company, be
made by check mailed to the address of the person entitled thereto as it appears
on the Security Register. (Sections 301, 305 and 1002). Acting in accordance
with each Indenture, the Company intends also to designate the principal office
of First Security Utah as an office where principal, premium, and interest may
be paid and the transfer of the Debt Securities may be registered. (Sections
301, 305 and 1002)
Unless otherwise indicated in the Prospectus Supplement, the Debt Securities
will be issued only in fully registered form, without coupons, in denominations
of $1,000 and any integral multiple thereof. (Section 302) No service charge
will be made for any registration of transfer or exchange of the Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. (Section 302)
The Indentures also provide that the Debt Securities of any series, if so
specified with respect to a particular series, may be issued in permanent global
form. See "Global Debt Securities."
Reference is made to the Prospectus Supplement for a description of the
following terms, where applicable, of each series of Debt Securities in respect
of which this Prospectus is being delivered: (1) the title of the Debt
Securities of the series; (2) any limit on the aggregate principal amount of the
Debt Securities of the series; (3) the date or dates on which the principal of
the Debt Securities of the series will be payable; (4) the rate or rates (which
may be fixed or variable) at which the Debt Securities of the series will bear
interest, if any, the date or dates from which such interest shall accrue, the
Interest Payment Dates on which such interest will be payable, and the Regular
Record Dates for such Interest Payment Dates; (5) the place or places where the
principal of, premium, if any, and interest on the Debt Securities of the series
shall be payable; (6) the period or periods within which, the price or prices at
which and the terms and conditions upon which the series of Debt Securities may
be redeemed, in whole or in part, at the option of the Company; (7) the
obligation, if any, of the Company to redeem or purchase the Debt Securities of
the series pursuant to any sinking fund or analogous provision or at the option
of the Holders thereof and the period or periods within which, the price or
prices at which and the terms and conditions upon which Debt Securities of the
series shall be redeemed or purchased, in whole or in part, pursuant to such
obligation; (8) the denomination or denominations in which such Debt Securities
are authorized to be issued; (9) the currency of payment of principal of,
premium, if any, and interest on the Debt Securities of the series; (10) any
index or formula used to determine the amount of payment of principal of,
premium, if any, and interest on the Debt Securities of the series; (11) if
other than the principal amount thereof, the portion of the principal amount of
Debt Securities of the series which shall be payable upon declaration of
acceleration of the Maturity thereof; (12) whether the Debt Securities of the
series shall be issued in whole or in part in the form of one or more Global
Securities and, if so, the Depositary for such Global Security or Securities;
(13) the portion of the principal amount of such Debt Securities which will be
payable upon declaration of acceleration of the Maturity thereof, if other than
the principal thereof; (14) any additional Events of Default or, in the case of
Subordinated Debt Securities, Default, solely with respect to the Debt
Securities; (15) whether the provisions of the applicable Indenture described
under "Defeasance and Covenant Defeasance"
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<PAGE> 16
will be applicable to such Debt Securities; (16) any additional restrictive
covenants included solely for the benefit of the Debt Securities; (17) if the
Debt Securities are Subordinated Debt Securities, whether the provisions in the
Subordinated Indenture described under "Subordination of Subordinated Debt
Securities" or other subordination provisions will be applicable to such
Subordinated Debt Securities; and (18) any other terms of the series of Debt
Securities not inconsistent with the provisions of the Applicable Indenture.
The Debt Securities may be issued as Original Issue Discount Debt Securities, to
be offered and sold at a discount below their stated principal amount. Any such
Original Issue Discount Debt Securities will be described in the Prospectus
Supplement related thereto, which description will include a discussion of the
material federal income tax consequences and other special considerations
applicable to any such Original Issue Discount Debt Securities. An "Original
Issue Discount Security" is generally a Debt Security which provides for an
amount less than the principal amount thereof to be due and payable upon the
declaration of acceleration of the Maturity thereof upon the occurrence of an
Event of Default and the continuation thereof.
CONVERSION AND EXCHANGE
The terms, if any, on which Debt Securities of any series are convertible into
or exchangeable for shares of Common Stock, Preferred Stock or Warrants will be
set forth in the Prospectus Supplement related 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 the number of shares of Common
Stock, Preferred Stock or Warrants to be received by the holders of Debt
Securities would be calculated according to the market price of Common Stock,
Preferred Stock or Warrants as of a time stated in the Prospectus Supplement.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
The payment of the principal of and interest on the Subordinated Debt Securities
will, to the extent set forth in the Subordinated Indenture, be subordinated in
right of payment to the prior payment in full of all Senior Indebtedness (as
defined in the Subordinated Indenture). In certain events of insolvency, the
payment of the principal of and interest on the Subordinated Debt Securities
will, to the extent set forth in the Subordinated Indenture, also be effectively
subordinated in right of payment to the prior payment in full of all Other
Financial Obligations (as defined in the Subordinated Indenture and defined
below). Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of all Senior Indebtedness will first be
entitled to receive payment in full of all amounts due or to become due thereon
before the Holders of the Subordinated Debt Securities will be entitled to
receive any payment in respect of the principal of or interest on the
Subordinated Debt Securities. If upon any such payment or distribution of assets
to creditors, there remain, after giving effect to such subordination provisions
in favor of the holders of Senior Indebtedness, any amounts of cash, property or
securities available for payment or distribution in respect of Subordinated Debt
Securities (as defined in the Subordinated Indenture and defined below, "Excess
Proceeds") and if, at such time, any Entitled Persons in respect of Other
Financial Obligations have not received payment in full of all amounts due or to
become due on or in respect of such Other Financial Obligations, then such
Excess Proceeds shall first be applied to pay or provide for the payment in full
of such Other Financial Obligations before any payment or distribution may be
made in respect of the Subordinated Debt Securities. In the event of the
acceleration of the maturity of any Debt Securities, the holders of all Senior
Indebtedness will first be entitled to receive payment in full of all amounts
due thereon before the Holders of the Subordinated Debt Securities will be
entitled to receive any payment upon the principal of or interest on the
Subordinated Debt Securities. No payments on account of principal of or interest
on the Subordinated Debt Securities or on account of the purchase or acquisition
of Subordinated Debt Securities may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior Indebtedness, or if
any judicial proceeding shall be pending with respect to any such default.
(Article Thirteen of the Subordinated Indenture)
By reason of such subordination in favor of the holders of Senior Indebtedness,
in the event of insolvency, creditors of the Company who are not holders of
Senior Indebtedness or of the Subordinated Debt Securities may recover less,
ratably, than Holders of Senior Indebtedness and may recover more, ratably, than
the Holders of the Subordinated Debt Securities. By reason of the obligation of
the Holders of Subordinated Debt Securities to pay over any Excess Proceeds to
Entitled Persons in respect of Other Financial Obligations, in the event of
insolvency, holders of Existing Subordinated Indebtedness (as defined in the
Subordinated Indenture and defined below) may recover less, ratably, than
Entitled Persons in respect of Other Financial Obligations and may recover more,
ratably, than the Holders of Subordinated Debt Securities.
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Unless otherwise specified in the Prospectus Supplement relating to the
particular series of Subordinated Debt Securities offered thereby, Senior
Indebtedness is defined in the Subordinated Indenture as (a) the principal of
(and premium, if any), and interest on all indebtedness of the Company for money
borrowed, whether outstanding on the date of execution of the Subordinated
Indenture or thereafter created, assumed or incurred, except (i) such
indebtedness as is by its terms expressly stated to be junior in right of
payment to the Subordinated Debt Securities and (ii) such indebtedness as is by
its terms expressly stated to rank pari passu with the Subordinated Debt
Securities and (b) any deferrals, renewals or extensions of any such Senior
Indebtedness; provided, however, that Senior Indebtedness shall not include
Existing Subordinated Indebtedness. (Section 101 of the Subordinated Indenture)
The term "indebtedness for money borrowed" when used with respect to the Company
is defined to mean any obligation of, or any obligation guaranteed by, the
Company for the repayment of borrowed money, whether or not evidenced by bonds,
debentures, notes or other written instruments, and any deferred obligation of,
or any such obligation guaranteed by, the Company for the payment of the
purchase price of property or assets. (Section 101 of the Subordinated
Indenture)
Unless otherwise specified in the Prospectus Supplement relating to the
particular series of Subordinated Debt Securities offered thereby, Existing
Subordinated Indebtedness means the Company's 7.50% Subordinated Notes due 2002
issued under an Indenture, dated as of August 1, 1991, between the Company and
Norwest Bank Minnesota, N.A., as trustee; and the Company's 7.00% Subordinated
Notes Due 2005 issued under an Indenture, dated as of March 1, 1994, between the
Company and First National Bank of Chicago, as trustee.
Unless otherwise specified in the Prospectus Supplement relating to the
particular series of Subordinated Debt Securities offered thereby, Other
Financial Obligations means (a) obligations of the Company under direct credit
substitutes, (b) obligations of, or any such obligation directly or indirectly
guaranteed by, the Company for purchased money or funds, (c) any deferred
obligation of, or any such obligation directly or indirectly guaranteed by, the
Company for the payment of the purchase price of property or assets, (d) any
obligation of, or any such obligation directly or indirectly guaranteed by, the
Company for the payment of rent or other amounts under a lease of property or
assets which obligation is required to be classified and accounted for as a
capitalized lease on the balance sheet of the Company under generally accepted
accounting principles, and (e) all obligations of the Company to make payment
pursuant to the terms of financial instruments, such as (i) securities contracts
and foreign currency exchange contracts, (ii) derivative instruments, such as
swap agreements (including interest rate and foreign exchange rate swap
agreements), cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange rate agreements, options, commodity futures
contracts, commodity option contracts and (iii) in the case of both (i) and (ii)
above, similar financial instruments, other than (A) obligations on account of
Senior Indebtedness and (B) obligations on account of indebtedness for money
borrowed ranking pari passu with or subordinate to the Subordinated Debt
Securities. Unless otherwise specified in the Prospectus Supplement relating to
the particular series of Subordinated Debt offered thereby, Entitled Persons
means any person who is entitled to payment pursuant to the terms of Other
Financial Obligations. (Section 101 of the Subordinated Indenture)
Indebtedness of the Company senior to the Subordinated Debt Securities, at March
31, 1996, totalled approximately $475 million ($200 million if the currently
outstanding subordinated debt securities are ranked pari passu with the new
Subordinated Debt Securities).
The Company's obligations under the Subordinated Debt Securities shall rank pari
passu in right of payment with each other and with the Existing Subordinated
Indebtedness, subject to the obligations of the Holders of Subordinated Debt
Securities to pay over any Excess Proceeds to Entitled Persons in respect of
Other Financial Obligations as provided in the Subordinated Indenture.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Indebtedness, which may include indebtedness that is senior to
the Subordinated Debt Securities, but subordinate to other obligations of the
Company, including obligations of the Company in respect of Other Financial
Obligations. The Senior Debt Securities, when issued, will constitute Senior
Indebtedness.
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
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CERTAIN COVENANTS IN THE SENIOR INDENTURE
Restrictions on Certain Dispositions of Major Constituent Banks. The Senior
Indenture provides that, except as described below under "Consolidation, Merger
and Sale of Assets", the Company will not (a) sell, assign, transfer, or
otherwise dispose of any shares of, or securities convertible into, or options,
warrants or rights to subscribe for or purchase shares of, Voting Stock of a
Major Constituent Bank (as defined below) (or a Subsidiary owning Voting Stock
of a Major Constituent Bank) or permit a Major Constituent Bank (or a Subsidiary
owning Voting Stock of a Major Constituent Bank) to issue any shares of, or
securities convertible into or options, warrants or rights to subscribe for or
purchase shares of such Voting Stock, if, in each case, after giving effect to
any such transaction and to the issuance of the maximum number of shares of
Voting Stock of such Major Constituent Bank (or Subsidiary) issuable upon the
exercise of all such convertible securities, options, warrants or rights, the
Major Constituent Bank would cease to be a Controlled Subsidiary, or (b) permit
a Major Constituent Bank (or a Subsidiary owning Voting Stock of a Major
Constituent Bank) to (i) merge or consolidate with or into any other
corporation, unless the surviving corporation is, or upon consummation of the
merger or consolidation will become, a Controlled Subsidiary; or (ii) lease,
sell or transfer all or substantially all of its properties and assets to any
Person, except to a Controlled Subsidiary or a Person that, upon such lease,
sale or transfer, will become a Controlled Subsidiary. The Senior Indenture,
however, provides that any such sale or other disposition of securities, any
such merger or consolidation or any such lease, sale or transfer of properties
and assets will not be prohibited (i) if required by any law or any rule,
regulation or order of any governmental agency or authority, (ii) if required as
a condition imposed by any law or rule, regulation or order of any governmental
agency or authority to the acquisition by the Company, directly or indirectly,
of any Person, provided that, after giving effect to such other prohibited
transaction and such acquisition, (A) such Person will be a Controlled
Subsidiary and (B) the Consolidated Banking Assets (as defined below) of the
Company will be at least equal to the Consolidated Banking Assets of the Company
prior thereto, or (iii) if the proceeds from such otherwise prohibited
transaction are within 180 days after such transaction, or such longer period of
time as may be necessary to obtain regulatory approval in connection therewith,
invested by the Company, pursuant to an understanding or agreement in principle
reached at the time of such otherwise prohibited transaction, in one or more
Controlled Subsidiaries (including any Person which upon such investment becomes
a Controlled Subsidiary) engaged in the banking business or any other business
then legally permissible for bank holding companies. (Section 1008)
"Major Constituent Bank" means, as of June 30, 1996, First Security and First
Security New Mexico or (ii) any Subsidiary Bank the consolidated banking assets
of which constitute 20% or more of the aggregate consolidated banking assets of
all Subsidiary Banks. "Controlled Subsidiary" means any Subsidiary more than 80%
of the outstanding shares of the Voting Stock of which is at the time owned
directly or indirectly by the Company or by one or more Controlled Subsidiaries
or by the Company and one or more Controlled Subsidiaries. "Consolidated banking
assets" of a Subsidiary Bank means all assets owned directly or indirectly by
such Subsidiary Bank and reflected on the Company's consolidated balance sheet
prepared in accordance with generally accepted accounting principles. (Section
101)
Restrictions on Liens on Voting Stock of Major Constituent Banks. The Senior
Indenture provides that the Company will not create, assume, incur or suffer to
be created, assumed or incurred or to exist any pledge, encumbrance or lien, as
security for indebtedness for borrowed money, upon any shares of, or securities
convertible into or options, warrants or rights to subscribe for or purchase
shares of, Voting Stock of a Major Constituent Bank now or hereafter owned by
the Company, directly or indirectly, without making effective provision whereby
any Debt Securities shall be equally and ratably secured with any and all such
indebtedness if, treating such pledge, encumbrance or lien as a transfer of the
shares of, or securities convertible into or options, warrants, or rights to
subscribe for or purchase shares of, Voting Stock subject thereto to the secured
party and after giving effect to the issuance of the maximum number of shares of
Voting Stock of such Major Constituent Bank issuable upon the exercise of all
such convertible securities, options, warrants or rights, the Major Constituent
Bank would not continue to be a Controlled Subsidiary. (Section 1009)
Neither the Senior Indenture nor the Subordinated Indenture contain any
restriction on the Company's ability to enter into a highly leveraged
transaction or any provision affording any special protection to Holders in the
event that the Company engages in a highly leveraged transaction.
CONSOLIDATION, MERGER, AND SALE OF ASSETS
The Indenture provides that the Company, without the consent of the holders of
any of the Outstanding Debt Securities, may consolidate with or merge into, or
convey, transfer, or lease its properties and assets substantially as an
entirety to, any Person, provided that (a) the successor is a Person organized
under the laws of any domestic jurisdiction and assumes the Company's
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obligations on the Debt Securities and under the Indenture, (b) after giving
effect to the transaction there exists no Event of Default or, in the case of
the Subordinated Indenture, Default, and no event which, after notice or lapse
of time would become an Event of Default or, in the case of the Subordinated
Indenture, Default, shall have occurred and be continuing, and (c) certain other
conditions are met. (Section 801)
GLOBAL DEBT SECURITIES
If any Debt Securities of a series are to be issued in permanent global form,
the Prospectus Supplement relating thereto will describe the circumstances, if
any, under which beneficial owners of interests in any such permanent global
Debt Security may exchange such interests for certificated Debt Securities of
such series and of like tenor and principal amount in any authorized form and
denomination. Principal of and any premium and interest on a permanent global
Debt Security will be payable in the manner described in the Prospectus
Supplement relating thereto. (Section 205).
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide under Article 13 (for the Senior Indenture) and Article
14 (for the Subordinated Indenture), if such provision is made applicable to the
particular Debt Securities of any series pursuant to Section 301 of the
Applicable Indenture (which will be indicated in the Prospectus Supplement
applicable thereto), that the Company may elect either (A) to defease and be
discharged from any and all obligations with respect to such Debt Securities
then outstanding (including, in the case of Subordinated Debt Securities, the
provisions described under "Subordination of Subordinated Debt Securities" and
except for the obligations to register the transfer or exchange of such Debt
Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt
Securities, to maintain an office or agency in respect of the Debt Securities
and to hold moneys for payment in trust) ("defeasance") or (B) to be released
from its obligations with respect to such Debt Securities then outstanding under
Sections 1006 through Section 1009 of the Senior Indenture and Sections 1006 and
1007 of the Subordinated Indenture (and any other sections applicable to such
Debt Securities that are determined pursuant to Section 301 to be subject to
covenant defeasance), the occurrence of an event of default specified in, in the
case of Senior Debt Securities, Section 501(4) of the Senior Indenture, and in
the case of Subordinated Debt Securities, Section 503(C) of the Subordinated
Indenture (with respect to Sections 1006 through Section 1009 of the Senior
Indenture and Sections 1006 and 1007 of the Subordinated Indenture or any other
section applicable to such Debt Securities that are determined pursuant to
Section 301 to be subject to covenant defeasance), or, in the case of Senior
Debt Securities, Section 501(5) of the Senior Indenture, and in the case of
Subordinated Debt Securities, Section 503(D) of the Subordinated Indenture
(Section 1006 of the Indentures containing the covenant to maintain properties,
Section 1007 of the Indentures containing the covenant to pay taxes and other
claims, Section 1008 of the Senior Indenture containing the restrictions
described under "Restrictions on Certain Dispositions of Major Constituent
Banks", Section 1009 of the Senior Indenture containing the restrictions
described under "Restriction on Liens on Voting Stock of Major Constituent
Banks" and Sections 501(4) and 501(5) of the Senior Indenture and Sections
503(C) and 503(D) of the Subordinated Indenture containing the provisions
described under "Defaults" relating to covenant defaults and cross-defaults,
respectively) and, in the case of Subordinated Debt Securities, the provisions
described under "Subordination of Subordinated Debt Securities" ("covenant
defeasance"), upon the deposit with the Senior Trustee or Subordinated Trustee
(or other qualifying trustee), in trust for such purpose, of money, and/or U.S.
Government Obligations which through the payment of principal and interest in
accordance with their terms will provide money, in an amount sufficient, without
reinvestment, to pay the principal of (and premium, if any) and interest on such
Debt Securities to maturity or redemption, as the case may be, and any mandatory
sinking fund or analogous payments thereon. As a condition to defeasance or
covenant defeasance, the Company must deliver to the Senior Trustee or
Subordinated Trustee an Opinion of Counsel (as specified in the Applicable
Indenture) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for Federal income tax purposes as a result of
such defeasance or covenant defeasance and will be subject to Federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred. Such
opinion, in the case of defeasance under clause (A) above, must refer to and be
based upon a ruling of the Internal Revenue Service issued to the Company or
published as a revenue ruling or upon a change in applicable Federal income tax
law, in any such case after the date of the Applicable Indenture.
Under current Federal income tax law, defeasance would likely be treated as a
taxable exchange of Debt Securities to be defeased for interests in the
defeasance trust. As a consequence a holder would recognize gain or loss equal
to the difference between the holder's cost or other tax basis for such Debt
Securities and the value of the holder's proportionate interest in the
defeasance trust, and thereafter would be required to include in income a
proportionate share of the income, gain and loss of the defeasance
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trust. Under current Federal income tax law, covenant defeasance would
ordinarily not be treated as a taxable exchange of such Debt Securities.
Purchasers of such Debt Securities should consult their own advisors with
respect to the tax consequences to them of such defeasance and covenant
defeasance, including the applicability and effect of tax laws other than the
Federal income tax law.
The Company may exercise its defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its defeasance option, payment of such Debt Securities
may not be accelerated because of an Event of Default. If the Company exercises
its covenant defeasance option, payment of such Debt Securities may not be
accelerated by reference to the covenants noted under clause (B) above. However,
if such an acceleration were to occur, the realizable value at the acceleration
date of the money and U.S. Government Obligations in the defeasance trust could
be less than the principal and interest then due on such Debt Securities, in
that the required deposit in the defeasance trust is based upon scheduled cash
flows rather than market value, which will vary depending upon interest rates
and other factors. (Article 13 and Article 14 of the Senior Indenture and the
Subordinated Indenture, respectively).
The Prospectus Supplement may further describe the provisions, if any,
applicable to defeasance or covenant defeasance with respect to the Debt
Securities of a particular series.
DEFAULT
The Senior Indenture
The following are Events of Default under the Senior Indenture with respect to
Senior Debt Securities of any series: (1) failure to pay principal of or
premium, if any, on any Debt Securities of that series when due; (2) failure to
pay any interest on any Senior Debt Securities of that series, when due,
continued for 30 days; (3) failure to deposit any sinking fund payment, when
due, in respect of any Senior Debt Securities of that series; (4) failure to
perform any other covenant of the Company in the Senior Indenture (other than a
covenant included in the Senior Indenture solely for the benefit of series of
Senior Debt Securities other than that series), continued for 60 days after
written notice as provided in the Senior Indenture; (5) failure to pay when due
the principal of or the acceleration of any indebtedness for borrowed money by
the Company or any Major Constituent Bank, in any individual instance or in the
aggregate in the principal amount in excess of $1,000,000, if such indebtedness
is not discharged or such acceleration is not annulled within 10 days after
written notice as provided in the Senior Indenture; (6) certain events in
bankruptcy, insolvency, or reorganization of the Company or any Major
Constituent Bank; and (7) any other Event of Default provided in any
supplemental indenture entered into with respect to Senior Debt Securities of a
particular series as described in the Prospectus Supplement. (Section 501)
If an Event of Default with respect to Senior Debt Securities of any series
shall occur and be continuing, either the Trustee or the Holders of at least 25%
in aggregate principal amount of the Outstanding Senior Debt Securities of that
series by notice as provided in the Indenture may declare the principal amount
to be due and payable immediately. At any time after a declaration of
acceleration with respect to Senior Debt Securities of any series has been made,
but before a judgment or decree for payment of money has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of outstanding
Senior Debt Securities of that series may, under certain circumstances, rescind
and annul such acceleration. (Sections 502 and 503)
The Subordinated Indenture
The Subordinated Indenture defines an Event of Default with respect to any
series of Subordinated Debt Securities as being certain events involving the
bankruptcy, insolvency or reorganization of the Company or any other Event of
Default provided with respect to Securities of any series. (Section 501) If any
Event of Default with respect to Subordinated Debt Securities of any series at
the time Outstanding occurs and is continuing, either the Trustee or the Holders
of not less than 25% in principal amount of the Outstanding Subordinated Debt
Securities of that series may declare the principal amount of all Subordinated
Debt Securities of that series to be due and payable immediately (provided that
no such declaration is required upon certain events of bankruptcy, insolvency or
reorganization), but upon certain conditions such declaration may be annulled
and past defaults (except, unless theretofore cured, a default in payment of
principal of (or premium, if any), or interest on the Subordinated Debt
Securities of that series and certain other specified defaults) may be waived by
the Holders of a majority in principal amount of the Outstanding Subordinated
Debt Securities of that series on behalf of the Holders of all Subordinated Debt
Securities of that series. (Sections 502 and 513)
The Subordinated Indenture does not provide for any right of acceleration of the
payment of principal of a series of Subordinated Debt Securities upon a default
in the payment of principal or interest or in the performance of any covenant or
agreement in the
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Subordinated Debt Securities of the particular series or in the Subordinated
Indenture. The Subordinated Indenture defines a Default with respect to
Subordinated Debt Securities of any series as any one of the following events:
(1) an Event of Default; (2) failure to pay any interest on any Subordinated
Debt Securities of that series, when due, continued for 30 days; (3) failure to
pay principal of (or premium, if any), on any Subordinated Debt Securities of
that series when due; (4) failure to deposit any sinking fund payment, when due,
in respect of any Subordinated Debt Securities of that series; (5) failure to
perform any other covenant of the Company in the Subordinated Indenture (other
than a covenant included in the Subordinated Indenture solely for the benefit of
a series of Subordinated Debt Securities other than that series) continued for
60 days after written notice as provided in the Subordinated Indenture; (6)
failure to pay when due the principal of or the acceleration on any indebtedness
for borrowed money by the Company or a Major Constituent Bank, in any individual
instance or in the aggregate in the principal amount in excess of $3,000,000, if
such indebtedness is not discharged or such acceleration is not annulled within
10 days after written notice as provided in the Subordinated Indenture; and (7)
any other Default with respect to Subordinated Debt Securities of a particular
series as described in the Prospectus Supplement. In case a Default shall occur
and be continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders by appropriate judicial
proceeding as the Trustee deems most effectual. (Section 503)
The Senior and Subordinated Indentures
Reference is made to the Prospectus Supplement for the particular provisions
relating to acceleration of the Maturity of any portion of the principal amount
of a series of Debt Securities upon the occurrence of an Event of Default and
the continuation thereof.
Each Indenture provides that, subject to the duty of the Trustee during default
to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the applicable
Indenture at the request or direction of any of the Holders unless such Holders
shall have offered to the Trustee reasonable indemnity. (Section 603) Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of any
series will have the right to direct the time, method, and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee, with respect to the Debt Securities of that
series. (Series 512)
Under each Indenture the Company is required to furnish annually to the Trustee
a statement as to the performance by the Company of certain of its obligations
under such Indenture and as to any default in such performance. (Section 1004)
MODIFICATION OF INDENTURES AND WAIVER OF CONDITIONS
Modifications and amendments of each Indenture may be made by the Company and
the Trustee with the consent of the Holders of 66 2/3% in aggregate principal
amount of the Outstanding Debt Securities of each series affected by such
modification or amendment, provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security of each series affected thereby, (1) change the stated maturity date of
the principal of, or any installment of principal of or interest on, any Debt
Securities; (2) reduce the principal amount of, the rate of interest on or any
premium payable upon the redemption of any Debt Securities; (3) reduce the
amount of the principal of any Original Issue Discount Security that would be
due and payable upon a declaration of acceleration of the Maturity thereof; (4)
change any Place of Payment where, or the coin or currency in which, payment of
principal of, or any premium or interest on, any Debt Securities may be made;
(5) impair the right to institute suit for the enforcement of any payment on or
with respect to any Debt Securities; or (6) in the case of the Subordinated
Indenture, modify the provisions thereof with respect to the subordination of
the Subordinated Debt Securities in a manner adverse to the Holders thereof; or
(7) reduce the percentage in principal amount of Outstanding Debt Securities of
any series, the consent of whose Holders is required for modification or
amendment of the applicable Indenture or for waiver of compliance with certain
provisions of the applicable Indenture or for waiver of certain defaults.
(Section 902)
Each Indenture provides that the Holders of 66 2/3% in aggregate principal
amount of the Outstanding Debt Securities of any series may, on behalf of all
Holders of Debt Securities of that series, waive, insofar as that series is
concerned, compliance by the Company with certain restrictive provisions of the
applicable Indenture with respect to the Debt Securities of such series.
(Section 1010 of the Senior Indenture, Section 1008 of the Subordinated
Indenture) The Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of any series may, on behalf of all Holders of Debt
Securities of that series, waive any past default under the applicable Indenture
with respect to the Debt Securities of such series except a default in the
payment of principal or any premium or interest with respect to the Debt
Securities of such series or in respect of a covenant or
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provision of the applicable Indenture which cannot be modified or amended
without the consent of the Holders of each Outstanding Debt Security of such
series. (Section 513)
REGARDING THE TRUSTEE
The First National Bank of Chicago is the Senior Trustee under the Senior
Indenture and the Subordinated Trustee under the Subordinated Indenture. Certain
of the Company's subsidiaries now, or in the future may, maintain deposit
accounts and/or other banking relationships with the Trustee.
DESCRIPTION OF PREFERRED STOCK
The following statements are brief summaries of the material provisions relating
to the Company's Preferred Stock and are qualified in their entirety by the
provisions of the Company's Certificate of Incorporation and Bylaws which have
been filed with the Commission.
Series A Preferred Stock. The Company's Certificate of Incorporation authorizes
the issuance of 400,000 shares of preferred stock with no par value. On December
31, 1995, there were 10,872 shares of $3.15 Cumulative Convertible Preferred
Stock, Series "A" (the "Series A Preferred Stock") outstanding. Holders of
Series A Preferred Stock have the right to receive semi-annual dividends at the
annual rate of $3.15 per share. Such right is cumulative and such dividends are
payable before dividends may be paid on the Company's Common Stock. Each shares
of Series A Preferred Stock is convertible into 18.225 shares of the Company's
Common Stock. This conversion right is subject to adjustment in certain events
to protect against dilution of the conversion rights attached to the Series A
Preferred Stock. In the event of a liquidation, dissolution or winding up of the
Company, the holders of Series A Preferred Stock are entitled to receive cash
value of $52.50 per share plus unpaid accumulated preferred dividends before any
distribution is made to holders of the Company's Common Stock. The Company may,
at the option of the Board of Directors, redeem all or any part of the
outstanding Series A Preferred Stock at the redemption price of $52.50 per share
plus unpaid accumulated preferred dividends. The Series A Preferred Stock is
currently not publicly traded.
Holders of the Company's Series A Preferred Stock are entitled to one vote per
share on all matters submitted to a vote of stockholders. Voting for the
election of directors is not cumulative. If at any time four or more semi-annual
dividends on the Series A Preferred Stock are in default, in whole or in part,
the holders of the Series A Preferred Stock as a class will be entitled to elect
four directors and the holders of the Company's Common Stock will be entitled to
elect the remaining directors. Holders of any additional Preferred Stock
hereafter issued may have such full or limited voting rights as are provided by
the Board of Directors.
Junior Series B Preferred Stock. 75,133 shares of the Company's Preferred Stock
are reserved under the Rights Agreement between the Company and First Security
Bank of Utah, N.A., in connection with the Rights associated with the Company's
Common Stock. (See "DESCRIPTION OF COMMON STOCK -- Rights Plan")
Additional Series of Preferred Stock. The Board of Directors of the Company is
authorized by the Certificate of Incorporation to provide, without further
shareholder action, for the issuance of one or more series of preferred stock.
The Board of Directors has the power to fix various terms with respect to each
series, including voting powers, designations, preferences and relative,
participating, optional or other special rights, qualifications, limitations,
restrictions and redemption, conversion or exchangeability provisions. Holders
of any series of preferred stock issued hereunder will have no pre-emptive
rights.
The applicable Prospectus Supplement will set forth the following specific terms
regarding the series of Preferred Stock offered thereby: (i) the designation,
number of shares and liquidation preference per share; (ii) the initial public
offering price; (iii) the dividend rate or rates; (iv) the index, if any, upon
which the amount of dividends, if any, is determined; (v) the dates on which
dividends, if any, will accrue and be payable and the designated record dates
for determining the holders entitled to such dividends; (vi) any redemption or
sinking fund provisions; (vii) any conversion or exchange provisions; (viii)
provisions for issuance of global securities; (ix) the currency (which may be
composite currency) in which payment of dividends, if any, shall be payable if
other than United States dollars; (x) voting rights; and (xi) any additional
terms, preferences or rights.
Under regulations adopted by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), if the holders of shares of any series of
preferred stock of the Company become entitled to vote for the election of
directors because the Board of Directors of the Company has failed to declare or
pay dividends on such series, such series may then be deemed a class
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of "voting securities" and a holder of 25 percent or more of such series (or a
holder of five percent or more if it otherwise exercises a "controlling
influence" over the Company) may then be subject to regulation as a bank holding
company in accordance with the Bank Holding Company Act of 1956, as amended. In
addition, at such time as such series is deemed a class of voting securities,
any other bank holding company may be required to obtain the prior approval of
the Federal Reserve Board to acquire five percent or more of such series and any
person other than a bank holding company may be required to obtain the prior
approval of the Federal Reserve Board to acquire ten percent or more of such
series.
The shares of Preferred Stock will, when issued, be fully paid and nonassessable
and will have no pre-emptive rights.
The transfer agent, registrar, dividend disbursing agent and redemption agent
for the Preferred Stock will be specified in the Prospectus Supplement relating
thereto.
Because the Company is a holding company, its rights, the rights of its
creditors and of its stockholders, including the holders of any shares of
Preferred Stock, to participate in any distribution of assets of any subsidiary
upon the latter's liquidation or recapitalization will be subject to the prior
claims of the subsidiary's creditors, except to the extent that the Company may
itself be a creditor with recognized claims against the subsidiary. The
principal sources of the Company's revenues are dividends received from its
subsidiary Banks. Various statutory provisions limit the amount of dividends the
Company's subsidiary Banks and certain nonbank subsidiaries can pay without
regulatory approval, and various regulations can also restrict the payment of
dividends. Certain proposed regulations could further limit the ability of the
Company's subsidiary Banks to pay dividends to the Company, and federal statutes
limit the ability of subsidiary Banks to make loans to the Company. See
"Supervision and Regulation."
Dividends
The holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
legally available therefor, cumulative or non-cumulative cash or other dividends
at such rate or rates and on such dates as will be set forth in the Prospectus
Supplement relating to such series. Such rates may be fixed or variable or both.
If variable, the formula used for determining the dividend rate for each
dividend period will be set forth in the Prospectus Supplement. Dividends will
be payable to the holders of record as they appear on the stock books of the
Company on such record dates as will be fixed by the Board of Directors of the
Company and specified in the Prospectus Supplement. If the Board of Directors of
the Company fails to declare a dividend payable on a dividend payment date on
any series of the Preferred Stock for which dividends are noncumulative
("Noncumulative Preferred Stock"), then the holders of such series of the
Preferred Stock will have no right to receive a dividend in respect of the
dividend period ending on such dividend payment date, and the Company will have
no obligation to pay a dividend for such period, whether or not dividends on
such series are declared payable on any future dividend payment dates.
No dividends may be declared in respect of any dividend period on any other
series or class of preferred stock ranking on a parity as to dividends unless
full cumulative dividends on all outstanding shares of each series of Preferred
Stock on which dividends are cumulative shall have been paid in full or
contemporaneously are declared and paid through the most recent dividend payment
date, unless otherwise indicated in the Prospectus Supplement. In the event that
full cumulative dividends on such Preferred Stock have not been declared and
paid or set apart when due, the Company may not declare or pay any dividends on,
or make other distributions on or make any payment on account of the purchase,
redemption, or other retirement, of its Common Stock or any other stock of the
Company ranking as to dividends or upon liquidations junior to such Preferred
Stock (other than, in the case of dividends or distributions, dividends or
distributions paid in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Common Stock or such other junior ranking stock), unless
full cumulative dividends on such Preferred Stock are made or set apart for
payment, unless otherwise indicated in the Prospectus Supplement.
Redemption
The shares of any series of Preferred Stock may be provided to be redeemable at
the option of the Company and may be provided to be subject to mandatory
redemption pursuant to a sinking fund or otherwise, in each case upon the terms,
on the date or dates and at the redemption price or prices set forth in the
Prospectus Supplement related to such series. If fewer than all shares of
Preferred Stock are to be redeemed, the shares to be redeemed shall be selected
by the Company pro rata or by lot, or by any other method determined by the
Board of Directors to be equitable. Under regulations of the Federal Reserve
Board, any perpetual preferred stock redeemable at the option of the Company may
qualify as Tier 1 or Tier 2 capital only if the redemption is subject to prior
approval of the Federal Reserve Board. Therefore, any redemption of Preferred
Stock at the option of the Company will require the prior approval of the
Federal Reserve Board in order for the Preferred Stock to qualify as capital for
bank regulatory purposes.
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If any dividends on shares of any series of Preferred Stock are in arrears, no
shares of Common Stock or shares of capital stock ranking junior to or on parity
with the Preferred Stock shall be redeemed and no shares of such series of
Preferred Stock shall be redeemed unless all outstanding shares of such series
are simultaneously redeemed, and the Company shall not purchase or otherwise
acquire any shares of such series; provided, however, that the foregoing shall
not prevent the purchase or acquisition of shares of such series pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of such series.
Any notice of redemption shall be given by mailing to each record holder of the
shares to be redeemed, not less than 40 days nor more than 70 days prior to the
date fixed for the redemption thereof, to the respective addresses of such
holders as the same shall appear on the Company's stock books. Each such notice
shall state: (i) the redemption date; (ii) the number of shares and series of
the Preferred Stock to be redeemed; (iii) the redemption price and the manner in
which such redemption price is to be paid and delivered; (iv) the place or
places where certificates for such shares of Preferred Stock are to be
surrendered for payment of the redemption price; and (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date. If fewer
than all shares of any series of the Preferred Stock held by any holder are to
be redeemed, the notice mailed to such holder shall also specify the number of
shares to be redeemed from such holder.
If notice of redemption has been given, from and after the redemption date for
the shares of the series of the Preferred Stock called for redemption (unless
default shall have occurred by the Company in providing money for the payment of
the redemption price of the shares so called for redemption), dividends on the
shares of Preferred Stock so called for redemption will cease to accrue, any
right to convert the shares of Preferred Stock will terminate, such shares will
no longer be deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Company (except the right to receive the redemption price)
will cease. Upon surrender in accordance with such notice of the certificates
representing any shares so redeemed (properly endorsed or assigned for transfer,
if the Board of Directors of the Company will so require and the notice shall so
state), the redemption price set forth above will be paid out of funds provided
by the Company. If fewer than all of the shares represented by any such
certificate are redeemed, a new certificate will be issued representing the
unredeemed shares without cost to the holder thereof.
Liquidation Preference
Upon any liquidation, dissolution or winding up of the Company, the holders of
shares of each series of Preferred Stock shall be entitled to receive out of the
assets of the Company available for distribution to stockholders, before any
distribution of assets is made to or set apart for the holders of Common Stock
or of any other shares of stock of the Company ranking as to such a distribution
junior to the shares of such series, with respect to the Preferred Stock, an
amount described in the Prospectus Supplement relating to such series of
Preferred Stock. If, in any case of any such liquidation, dissolution or winding
up of the Company, the assets of the Company or the proceeds thereof shall be
insufficient to pay in full the amounts payable with respect to shares of each
series of Preferred Stock, and any other shares of stock of the Company ranking
as to any such distribution on a parity therewith, the holders of shares of such
series of Preferred Stock and of such other shares will share ratably in any
such distribution of assets of the Company in proportion to the full respective
preferential amounts to which they are entitled. After payment to the holders of
shares of such series of Preferred Stock of the full preferential amounts to
which they are entitled, the holders of shares of such series of Preferred Stock
will not be entitled to any further participation in any distribution of assets
by the Company, unless otherwise provided in the Prospectus Supplement. A
consolidation or merger of the Company with one or more corporations shall not
be deemed to be a liquidation, dissolution or winding up of the Company.
The terms, if any, on which shares of any series of Preferred Stock are
convertible into or exchangeable for Debt Securities or Common Stock 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 the number of shares of Common
Stock to be received by the holders of Preferred Stock would be calculated
according to the market price of Common Stock as of a time stated in the
Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
The following description of the Common Stock sets forth certain general terms
and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Stock will be
issuable in conversion of or exchange for Debt Securities or Preferred Stock
issued by the Company. The statements below describing the
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Common Stock are in general terms and are in all respects subject to and
qualified in their entirety by reference to the applicable provisions of the
Company's Certificate of Incorporation and By-laws.
General
The Company is currently authorized to issue 300,000,000 shares of Common Stock
with a par value of $1.25 per share. As of December 31, 1995, there were
outstanding 75,133,000 shares (net of shares held as Treasury Stock) of the
Company's Common Stock, as restated for a 3-for-2 stock split in the form of a
50% stock dividend paid in February 1996. At such date, there were an additional
1,181,000 shares reserved for issuance under the Company's Comprehensive
Management Incentive Plan as stock bonuses and other awards; 1,268,000 shares
reserved for issuance under the Company's Dividend Reinvestment Plan; 198,000
shares reserved for issuance upon the conversion of the Company's Series A
Preferred Stock, and 3,708,000 shares reserved for issuance upon exercise of
outstanding stock options.
The Company's Common Stock has no pre-emptive or conversion rights.
The Company's Common Stock is not subject to redemption by the Company, and
there is no restriction on the repurchase by the Company of shares of the
Company's Common Stock except for certain regulatory limits.
Voting
The holders of the Company's Common Stock are entitled to voting rights for the
election of directors and for other purposes, subject to the voting rights of
the holders of Preferred Stock conferred by law and to the specific voting
rights granted to each series of Preferred Stock and to voting rights which may
in the future be granted to subsequently created series of Preferred Stock.
Dividends
Dividends will be determined by the Company's Board of Directors in light of
circumstances existing at the time, including the earnings and financial
condition of the Company, and there is no assurance that dividends will continue
to be paid at current levels. No material restrictions have been imposed on the
Company's ability to pay dividends from its earned surplus by bank regulations
or applicable law. As of December 31, 1995, approximately $288 million could be
applied to dividend payments to its shareholders and certain other payments
without impairing capital to inadequate levels under federal regulatory
requirements. Payment of dividends on the Company's Common Stock is also subject
to the prior rights of the Company's outstanding Preferred Stock.
Rights Plan
As of August 28, 1989, the Company adopted a Shareholder Rights Agreement (the
"Plan") and the Board of Directors of the Company on that date (a) declared a
dividend of one "Right" for each share of the Company's Common Stock held of
record as of the close of business on September 8, 1989, and (b) authorized the
issuance of one Right in respect of each share of the Company's Common Stock
issued after September 8, 1989 and prior to the occurrence of certain events
described in the Plan, primarily involving the acquisition of target levels of
the Company's shares by persons not then holding such amounts. Each Right
entitles the registered holder to purchase from the Company a unit consisting of
one-thousandth of a share of Junior Series B Preferred Stock at a purchase price
of $29.63 per unit. The Rights are attached to all shares of the Company's
Common Stock that were outstanding on September 8, 1989 or have been issued
since that date, and no separate Rights Certificates have been or will be
distributed until the occurrence of certain events described in the Rights
Agreement. Until the occurrence of such events, no Right may be exercised or
traded separately from the Company's Common Stock. Following separation, the
Rights may, depending upon the occurrence of certain events described in the
Rights Agreement, entitle the holders thereof to either purchase or receive
additional shares of the Company's Common Stock. The Rights will expire at the
close of business on August 28, 1999, unless earlier redeemed by the Company,
which may be done at $0.01 per Right, in accordance with the terms of the Plan.
The Plan is designed to protect the Company's stockholders' interests in the
event of an unsolicited attempt to acquire the Company, including a gradual
accumulation of shares in the open market. The Company believes that the Plan
provides protection against a partial or two-tier tender offer that does not
treat all stockholders equally and against other coercive takeover tactics which
could impair the Company's Board of Directors' ability to represent the
Company's stockholders fully. Management believes that the Rights should also
deter any attempt by a controlling stockholder to take advantage of the Company
through self-dealing transactions. The Plan is not intended to prevent a
takeover of the Company. Issuing the Rights has no dilutive effect,
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does not affect reported earnings per share, and does not change the way in
which the Company's shares are traded. However, the exercise of Rights by some
but not all of the Company's stockholders would have a dilutive effect on
nonexercising stockholders. Moreover, some may argue that the Plan has the
potential for "entrenching" current management by allowing current voting
stockholders to increase their voting shares, thus making a tender offer more
difficult and costly.
Supermajority Vote Requirement
The Company's Certificate of Incorporation provides that, in general, an
affirmative vote of not less than 80% of the outstanding shares of the Company's
Common Stock is required to approve or authorize certain major corporate
transactions involving the Company and holders of more than 15% of the Company's
Common Stock (including certain mergers, substantial dispositions of assets,
liquidation or dissolution, or recapitalization). The 80% vote is not required
in some such circumstances, including certain transactions which have been
approved in advance by a majority of the Board of Directors, or where holders of
the Company's Common Stock receive a price per share that satisfies the fairness
criteria set forth in the Certificate of Incorporation.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 ("Section 203") of the Delaware General Corporation Law (the "DGCL")
applies to Delaware corporations with a class of voting stock listed on a
national securities exchange, authorized for quotation on an inter-dealer
quotation system or held of record by 2,000 or more persons. In general, Section
203 prevents an "interested stockholder" (defined generally as any person
owning, or who is an affiliate or associate of the corporation and has owned in
the preceding three years, 15% or more of a corporation's outstanding voting
stock and the affiliates and associates of such person) from engaging in a
"business combination" (as defined) with a Delaware corporation for three years
following the date such person became an interested stockholder, unless (i)
before such person became an interested stockholder, the board of directors of
the corporation approved either the business combination or the transaction in
which the interested stockholder became an interested stockholder; (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with the
right to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer); or (iii) on or subsequent to the
date such person became an interested stockholder, the business combination is
approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors.
Section 203 could have the effect of delaying, deferring or preventing a change
of control of the Company.
LIMITATION OF DIRECTORS' LIABILITY
The DGCL authorizes corporations to limit or eliminate the personal liability of
directors, to the corporation and its stockholders, for monetary damages in
connection with the breach of a director's fiduciary duty of care. The duty of
care requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitation authorized by the Delaware
statute, directors could be accountable to corporations and their stockholders
for monetary damages for conduct that does not satisfy such duty of care.
Although the statute does not change a director's duty of care, it enables
corporations to limit available relief to equitable remedies such as injunction
or rescission. The Company's Certificate of Incorporation limits the liability
of the Company's directors to the Company or its stockholders to the fullest
extent permitted by the Delaware statute as in effect from time to time.
Specifically, directors of the Company will not be personally liable for
monetary damages for breach of a director's fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit.
The inclusion of this provision in the Certificate of Incorporation may have the
effect of reducing the likelihood of derivative litigation against directors and
may discourage or deter stockholders or management from bringing a lawsuit
against directors for
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breach of their duty of care, even though such an action, if successful, might
otherwise have benefitted the Company and its stockholders. This provision does
not affect a director's responsibilities under certain other laws such as the
federal securities laws or state or federal environmental laws.
OFFICER AND DIRECTOR INDEMNIFICATION
The Company's Bylaws require indemnification of the Company's directors and
executive officers to the full extent permitted by the DGCL, except in
connection with an action initiated by such officer or director or in an action
against the Company, its directors, officers, employees or agents, unless (i)
such indemnification is expressly required by law, (ii) the proceeding in
question was authorized by the Board of Directors or (iii) such indemnification
is otherwise authorized by the DGCL. The Company's Bylaws provide that the
Company shall have the power, but shall not be required, to indemnify its other
officers, employees and agents as set forth in the DGCL.
The Company provides liability insurance for its officers and directors for
certain losses arising from claims or charges which may be made against them
while acting in their capacities as directors or officers of the Company.
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of a particular
series of Common Stock. The Common Stock Warrants are to be issued under warrant
agreements (each a "Common Stock Warrant Agreement") to be entered into between
the Company and First Security Bank, Utah, N.A., as warrant agent (the "Common
Stock Warrant Agent"), all as set forth in the Prospectus Supplement relating to
the particular issue of Common Stock Warrants (the "Offered Common Stock
Warrants"). A copy of the Common Stock Warrant Agreement, including the form of
common stock warrant certificate (the "Common Stock Warrant Certificate")
representing the Common Stock Warrants, substantially in the form in which it
will be executed, is filed as an exhibit to the Registration Statement. The
following summaries of certain provisions of the Common Stock Warrant Agreement
and Common Stock Warrant Certificates do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Common Stock Warrant Agreement and the Common Stock Warrant
Certificates, respectively, including the definitions therein of certain terms.
GENERAL
If Common Stock Warrants are offered, the Prospectus Supplement will describe
the terms of the Offered Common Stock Warrants, and the Common Stock Warrant
Agreement relating to the Offered Common Stock Warrants and the Common Stock
Warrant Certificates representing the Offered Common Stock Warrants including
the following:
(i) the number of shares of Common Stock purchasable upon exercise of
Common Stock Warrants and the price at which such number of shares of
Common Stock may be purchased upon such exercise;
(ii) the date on which the right to exercise such Common Stock Warrants
shall commence and the date (the "Expiration Date") on which such right
shall expire;
(iii) United States Federal income tax consequences applicable to such
Common Stock Warrants; and
(iv) any other terms of such Common Stock Warrants.
Common Stock Warrants for the purchase of Common Stock will be offered and
exercisable for U.S. dollars only. Common Stock Warrants will be issued in
registered form only. The exercise price for Common Stock Warrants will be
subject to adjustment in accordance with the applicable Prospectus Supplement.
EXERCISE OF COMMON STOCK WARRANTS
Each Common Stock Warrant will entitle the holder to purchase for cash such
number of shares (as applicable) of Common Stock, at such exercise price as
shall in each case be set forth in, or calculable from, the Prospectus
Supplement relating to the Offered Common Stock Warrants, which exercise price
may be subject to adjustment upon the occurrence of certain events as set forth
in such Prospectus Supplement. Offered Common Stock Warrants may be exercised at
any time up to the close of business of the Expiration Date set forth in the
Prospectus Supplement relating to the Offered Common Stock Warrants. After the
close of business on the Expiration Date (or such later date to which such
Expiration Date may be extended by the Company),
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unexercised Common Stock Warrants will become void. The place or places where,
and the manner in which, Common Stock Warrants may be exercised shall be
specified in the Prospectus Supplement relating to such Common Stock Warrants.
Prior to the exercise of any Common Stock Warrants to purchase Common Stock,
holders of such Common Stock Warrants will not have any rights of holders of the
Common Stock purchasable upon such exercise, including the right to receive
payments of dividends, if any, on the Common Stock purchasable upon such
exercise or to exercise any applicable right to vote.
PLAN OF DISTRIBUTION
The Company may sell the Securities (i) through agents, (ii) through
underwriters, (iii) through dealers and (iv) directly to purchasers.
Securities may be offered and sold through agents designated by the Company from
time to time. Any such agent involved in the offer or sale of the Securities
will be named, and any commissions payable by the Company to such agent will be
set forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment. Any such agent may be deemed to be an
underwriter, as that term is defined in the Securities Act of 1933, as amended,
of the Securities so offered and sold. Agents may be entitled under agreements
which may be entered into with the Company to indemnification by the Company
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
As and when the Offered Securities are offered in an underwritten offering, an
underwriting agreement concerning the Offered Securities will be executed and
delivered by the Company and by J.P. Morgan Securities Inc. and CS First Boston
Corporation, and the text of that agreement will be placed on file with the
Commission as an exhibit to the registration statement of which this Prospectus
is a part. If an underwriter or underwriters are utilized in the sale of the
Offered Securities, J.P. Morgan Securities Inc. and CS First Boston Corporation
will act as such underwriters or as lead underwriters for a syndicate to be
assembled by them. Any such arrangements and any special terms of the
transaction, including compensation of the underwriters and dealers, if any,
will be set forth in the Prospectus Supplement which will be used by the
underwriters to make resales of the Securities. Underwriters will acquire
Securities for their own account and may resell such Securities from time to
time in one or more transactions, including negotiated transactions, at fixed
public offering prices or at varying prices determined at the time of sale.
Securities may be offered to the public either through underwriting syndicates
represented by managing underwriters, or directly by the managing underwriters.
The underwriters may be entitled, under the relevant underwriting agreement, to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. If an underwriter is
utilized in the sale of the Securities, the underwriting agreement will provide
that the obligations of the underwriter is subject to certain conditions
precedent and that the underwriter with respect to a sale of Securities will be
obligated to purchase all such Securities if any are purchased.
If a dealer is utilized in the sale of the Securities, the Company will sell
such Securities to the dealer, as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. Any such dealer may be deemed to be an underwriter, as such
term is defined in the Securities Act of 1933, as amended, of the Securities so
offered and sold. Dealers may be entitled, under agreements which may be entered
into with the Company, to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The name of the dealer and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
Offers to purchase Securities may be solicited directly by the Company and sales
thereof may be made by the Company directly to institutional investors or
others, who may be deemed to be underwriters within the meaning of the
Securities Act of 1933, as amended, with respect to any sale thereof. The terms
of any such sales will be described in the Prospectus Supplement relating
thereto.
The Company may authorize agents and underwriters to solicit offers by certain
institutions to purchase the Securities from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the date stated in
the Prospectus Supplement. Each Contract will be for an amount not less than,
and, unless the Company otherwise agrees, the aggregate principal amount of
Securities sold pursuant to Contracts shall be not less nor more than, the
respective amounts stated in the Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds,
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investment companies, educational and charitable institutions and other
institutions but shall in all cases be subject to the approval of the Company.
Contracts will not be subject to any conditions except that any related sale of
Securities to underwriters shall have occurred and the purchase by an
institution of the Securities covered by its Contract shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject. A commission indicated in the Prospectus
Supplement will be paid to underwriters and agents soliciting purchases of
Offered Securities pursuant to Contracts accepted by the Company.
The place and time of delivery of the Securities are set forth in the
accompanying Prospectus Supplement.
Certain of the underwriters or agents and their associates may be customers of,
engage in transactions with, and perform services for, the Company in the
ordinary course of business.
EXPERTS
The consolidated financial statements as of December 31, 1995 and 1994, and for
each of the three years in the period ended December 31, 1995 incorporated in
this Prospectus by reference from the Company's Annual Report on Form 10-K have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
VALIDITY OF SECURITIES
The validity of the Securities offered hereby will be passed upon for the
Company by Ray, Quinney & Nebeker, 79 South Main Street, Salt Lake City, Utah
84111; and for any underwriters by Sullivan & Cromwell, 444 South Flower Street,
Los Angeles, California 90071. Alonzo W. Watson, a shareholder and director of
Ray, Quinney & Nebeker, is an officer of the Company. As of June 30, 1995, Ray,
Quinney & Nebeker attorneys, together with their immediate families,
beneficially owned less than 4% of the then outstanding Common Stock of the
Company. From time to time, Sullivan & Cromwell has performed legal services for
the Company.
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<PAGE> 30
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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
COMPANY OR ANY 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 COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
Recent Operating Results.............. S-2
Use of Proceeds....................... S-2
Consolidated Summary Financial
Information......................... S-3
Capitalization........................ S-4
Description of Senior Notes........... S-5
Underwriting.......................... S-7
Validity of Senior Notes.............. S-7
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
First Security Corporation............ 3
Use of Proceeds....................... 7
Description of Debt Securities........ 7
Description of Preferred Stock........ 15
Description of Common Stock........... 17
Description of Common Stock
Warrants............................ 20
Plan of Distribution.................. 21
Experts............................... 22
Validity of the Securities............ 22
</TABLE>
[FIRST SECURITY LOGO]
$150,000,000
6 7/8% Senior Notes
due November 15, 2006
PROSPECTUS SUPPLEMENT
[CS FIRST BOSTON LOGO]
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