<PAGE>
Filed Pursuant to Rule 424(B)(2)
Registration No. 33-58521
PROSPECTUS SUPPLEMENT
(To Prospectus Dated May 26, 1995)
$750,000,000
First Bank System, Inc.
LOGO MEDIUM-TERM NOTES, SERIES H (SENIOR)
MEDIUM-TERM NOTES, SERIES I (SUBORDINATED)
--------------
Due Nine Months or More From Date of Issue
--------------
First Bank System, Inc. (the "Company") may offer from time to time its
Medium-Term Notes which are issuable in one or more series. Although the
Medium-Term Notes, Series H (the "Series H Notes") and the Medium-Term Notes,
Series I (the "Series I Notes" and, together with the Series H Notes, the
"Notes") are not limited by series as to aggregate principal amount, the Notes
offered by this Prospectus Supplement will not exceed an aggregate principal
amount of $750,000,000, or the equivalent thereof in foreign currencies or
foreign currency units, subject to reduction as a result of the sale of other
Securities. See "Description of Notes--General" and "Plan of Distribution of
Notes". Except as otherwise specified in an applicable pricing supplement, the
Notes will bear interest at fixed rates (the "Fixed Rate Notes") or at
floating rates (the "Floating Rate Notes"). Each Note will mature on a day
nine months or more from its date of issue, as agreed to by the Company and
the purchaser. If so specified in the applicable pricing supplement to this
Prospectus Supplement (a "Pricing Supplement"), a Note may be redeemed by the
Company on the specified date or dates prior to maturity at the specified
price or prices. The Notes may be denominated, and payments of principal and
interest on the Notes may be made, in U.S. dollars or in such foreign
currencies or foreign currency units as may be designated by the Company in
the applicable Pricing Supplement ("Foreign Currency Notes").
--------------
The interest rate or rates and/or interest rate formula or formulas, if any,
issue price, stated maturity, and other variable terms of the Notes will be
established by the Company prior to the date of issuance of such Note and will
be specified in a Pricing Supplement. Interest rates and interest rate
formulas are subject to change by the Company but no such change will affect
any Note already issued or which the Company has agreed to issue. Each Note
that bears interest will bear interest for the specified Interest Periods
either at one or more fixed rates or at floating rates determined by reference
to the Commercial Paper Rate, the Federal Funds Rate, LIBOR, the Prime Rate,
the Eleventh District Cost of Funds Rate, the CD Rate, the Treasury Rate, the
J.J. Kenny Rate, the CMT Rate or one or more other interest rate formulas as
may be specified in the applicable Pricing Supplement, as adjusted by any
Spread and/or Spread Multiplier applicable to such Note. Notes may be issued
at a discount from the principal amount payable at maturity thereof and
constitute Original Issue Discount Notes. Zero Coupon Notes will not provide
for periodic payments of interest. See "Description of Notes" and "United
States Taxation--United States Noteholders--Original Issue Discount".
--------------
The Series H Notes will represent senior, unsubordinated debt of the Company
and will rank equally with all other unsecured and unsubordinated debt of the
Company. The Series I Notes will represent subordinated debt of the Company
and will rank junior to, and be subordinated to, all Senior Indebtedness.
Unless otherwise specified in an applicable Pricing Supplement, the
Subordinated Note Indenture (as defined herein) does not provide for any right
of acceleration of the payment of principal of the Series I Notes upon a
default in the payment of principal or interest on the Series I Notes or in
the performance of any covenant or agreement in the Series I Notes or the
Subordinated Note Indenture. See "Description of Debt Securities--
Subordination of Subordinated Notes" in the Prospectus.
--------------
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes is payable each February 1 and August 1 and at maturity or,
if applicable, upon redemption. Interest on Floating Rate Notes is payable on
the dates specified in such Notes and in the applicable Pricing Supplement.
See "Description of Notes--Floating Rate Notes".
--------------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND
ARE NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE
BANK INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE
CORPORATION.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
--------- -------------- -------------
<S> <C> <C> <C>
Per Note................ 100% .125%-.750% 99.875%-99.250%
Total(4)................ $750,000,000 $937,500-$5,625,000 $749,062,500-$744,375,000
</TABLE>
- -------
(1) Unless otherwise specified in a Pricing Supplement, Notes will be issued
at 100% of their principal amount.
(2) The Company will pay a commission to one or more Agents (as defined
herein) named in the applicable Pricing Supplement ranging from .125% to
.750% of the principal amount of any Note (unless otherwise specified in
the applicable Pricing Supplement), depending upon its maturity, sold
through any such Agent. The Company may also sell Notes to any Agent named
in the applicable Pricing Supplement at a discount for resale to one or
more investors or other purchasers at varying prices related to prevailing
market prices at the time of resale as determined by such Agent. Unless
otherwise specified in the applicable Pricing Supplement, any Note sold to
an Agent as principal will be purchased by such Agent at a price equal to
100% of the principal amount thereof less a percentage agreed upon by the
Company and such Agent, and may be resold by such Agent. See "Plan of
Distribution of Notes".
(3) Before deducting other expenses payable by the Company, estimated at up to
$875,000, including reimbursement of the Agents' expenses.
(4) Or the equivalent thereof in foreign currencies or foreign currency units.
--------------
MORGAN STANLEY & CO.
Incorporated
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J. P. MORGAN SECURITIES INC.
July 6, 1995
<PAGE>
(Continued from cover page)
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
be issued in fully registered form in denominations of $1,000 and any integral
multiple of $1,000 in excess thereof, or in the case of Foreign Currency Notes,
in the denominations indicated in the applicable Pricing Supplement. Each Note
will be represented either by a global security registered in the name of a
nominee of The Depository Trust Company, which will act as Depositary, or a
certificate issued in definitive form. Interests in Notes represented by a
global security will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary (with respect to its
participants' interests) and its participants. Except as described herein under
"Description of Notes--Book-Entry Notes", owners of beneficial interests in a
global security will not be considered the holders thereof and will not be
entitled to receive physical delivery of Notes in definitive form, and no
global security will be exchangeable except for another global security of like
denomination and terms to be registered in the name of the Depositary or its
nominee. See "Description of Notes".
The Notes are being offered on a continuing basis by the Company through the
Agents (as defined under "Plan of Distribution of Notes"), each of which will
have agreed to use its reasonable efforts to solicit offers to purchase the
Notes. The Company also may sell Notes to any Agent acting as principal for
resale to investors or other purchasers at varying prices related to prevailing
market prices at the time of resale, as determined by such Agent, and may sell
Notes directly to investors on its own behalf in jurisdictions where it is
authorized to do so. The Notes will not be listed on any securities exchange,
and there can be no assurance that the Notes offered by this Prospectus
Supplement will be sold or that there will be a secondary market for the Notes.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice. The Company or any Agent may reject any offer to
purchase Notes, in whole or in part. See "Plan of Distribution of Notes".
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT, A PRICING 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 AGENT. THIS PROSPECTUS
SUPPLEMENT, A PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY AND THEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT, A PRICING SUPPLEMENT OR THE PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THEIR RESPECTIVE DATES.
S-2
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The following description of the particular terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities set forth in the
accompanying Prospectus, to which description reference is hereby made. Unless
different terms or additional terms are specified in the applicable Pricing
Supplement, the Notes will have the terms described below. References to
interest payments and interest-related information do not apply to Zero Coupon
Notes (as defined below).
The Series H Notes will be issued pursuant to an Indenture dated as of
October 1, 1991 (the "Senior Note Indenture") between the Company and Citibank,
N.A., as Trustee and the Series I Notes will be issued pursuant to an Indenture
dated as of October 1, 1991, as amended by a First Supplemental Indenture dated
as of April 1, 1993 (as so amended, the "Subordinated Note Indenture" and,
together with the Senior Note Indenture, the "Indentures") between the Company
and Citibank, N.A., as Trustee. The Series H Notes will represent senior,
unsubordinated debt of the Company and will rank equally with all other
unsecured and unsubordinated debt of the Company. The Series I Notes will
represent subordinated debt of the Company and will rank junior to, and be
subordinated to, all Senior Indebtedness as defined in the Subordinated Note
Indenture. See "Description of Debt Securities--Subordination of Subordinated
Notes" in the Prospectus. The Series H Notes constitute a separate series for
purposes of the Senior Note Indenture, and the Series I Notes constitute a
separate series for purposes of the Subordinated Note Indenture. Neither series
of Notes is limited by series as to aggregate principal amount. However, the
Notes offered by this Prospectus Supplement will be limited to an aggregate
principal amount of $750,000,000, or the equivalent thereof in foreign
currencies or foreign currency units, subject to reduction as a result of the
sale of other Securities (as defined in the accompanying Prospectus). The
following summaries of certain provisions of the Indentures do not purport to
be complete and are subject to and are qualified in their entirety by reference
to, all of the provisions of the Indentures, including the definitions therein
of certain terms.
Unless previously redeemed, each Note will mature on a Business Day (as
defined below) from 9 months or more from its date of issue, as agreed to by
the Company and the purchaser and specified in the Note and the applicable
Pricing Supplement; provided, however, that no Commercial Paper Rate Note will
mature less than 9 months and 1 day from its date of issue. Unless otherwise
authorized by or pursuant to a resolution of the Board of Directors of the
Company, no Series I Note will mature less than 1 year and 1 day from its date
of issue. If the Maturity Date specified in the applicable Pricing Supplement
for any Note is a day that is not a Business Day, interest, principal and
premium, if any, will be paid on the next succeeding Business Day with the same
force and effect as if made on such specified Maturity Date, and no interest on
such payment will accrue for the period from and after such Maturity Date.
"Business Day" means, unless otherwise specified in the applicable Pricing
Supplement with respect to any Note, any day that is not a Saturday or Sunday
and that in the City of New York is not a day in which banking institutions
generally are authorized or obligated by law or executive order to close and,
in addition, with respect to LIBOR Notes is a day in which dealings in U.S.
dollars are transacted in the London interbank market.
The applicable Pricing Supplement will specify any redemption terms
applicable to the Notes. See "--Redemption" below.
Unless otherwise specified in the applicable Pricing Supplement, the Notes,
other than Foreign Currency Notes, will be issuable only in fully registered
form in denominations of $1,000 and integral multiples of $1,000 in excess
thereof. The authorized denominations of Foreign Currency Notes will be
indicated in the applicable Pricing Supplement.
Each Note will be represented either by a global security (a "Global
Security") registered in the name of a nominee of The Depository Trust Company,
as depositary (the "Depositary") (each such Note represented by a Global
Security being herein referred to as a "Book-Entry Note"), or by a Note issued
in definitive registered form, without coupons (a "Certificated Note"), as set
forth in the applicable Pricing Supplement.
S-3
<PAGE>
Except as set forth under "--Book-Entry Notes" below, Book-Entry Notes will not
be issuable in certificated form. So long as the Depositary or its nominee is
the registered holder of any Global Security, the Depositary or its nominee, as
the case may be, will be considered the sole registered holder of the Book-
Entry Note represented by such Global Security for all purposes under the
applicable Indenture and Note. For a further description of the respective
forms, denominations and transfer and exchange procedures with respect to any
such Global Security and Book-Entry Note, reference is made to "--Book-Entry
Notes" below and to the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement and except as
provided below under "--Book-Entry Notes", principal, premium (if any) and
interest (if any) will be payable, the transfer of any Notes will be
registrable and any Notes will be exchangeable for Notes bearing identical
terms and provisions at the corporate trust office of Citibank, N.A. (the
"Paying Agent"), in the Borough of Manhattan, The City of New York, provided
that payments of interest with respect to any Certificated Note, other than
interest at maturity or upon redemption, may be made at the option of the
Company by check mailed to the address of the person entitled thereto as it
appears on the registry books of the Company at the close of business on the
Regular Record Date (as defined below) corresponding to the relevant Interest
Payment Date. Unless otherwise specified in the applicable Pricing Supplement,
holders of $10,000,000 or more in aggregate principal amount of Certificated
Notes shall be entitled to receive payments of interest, other than interest at
maturity or upon redemption, by wire transfer of immediately available funds,
if appropriate wire transfer instructions have been given to the Paying Agent
in writing not later than the Regular Record Date.
Unless otherwise specified in the applicable Pricing Supplement, the
principal, premium (if any) and interest (if any) payable at maturity or upon
redemption on each Note will be paid in immediately available funds against
presentation of the Note at the corporate trust office of the Paying Agent.
The applicable Pricing Supplement will specify any additional terms
applicable to any Foreign Currency Note with respect to the payment of
principal and any premium or interest thereon.
Notes may be issued as Original Issue Discount Notes offered at a discount
from the principal amount thereof due at the stated maturity as specified in
the applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, the amount payable to the holder of Zero Coupon Notes and
certain of such interest bearing Notes issued as Original Issue Discount Notes
(as specified in the applicable Pricing Supplement) upon any acceleration of
the maturity thereof will be the Amortized Face Amount (as defined below)
thereof, and the amount payable to the holder of such Original Issue Discount
Note upon any redemption thereof will be the applicable percentage of the
Amortized Face Amount thereof specified in the applicable Pricing Supplement,
in each case as determined by the Company plus, in the case of any interest
bearing Note issued as an Original Issue Discount Note, any accrued but unpaid
"qualified stated interest" payments (as defined under "United States
Taxation--United States Noteholders--Original Issue Discount"). The "Amortized
Face Amount" of an Original Issue Discount Note is equal to the sum of (i) the
Issue Price (as defined below) of such Original Issue Discount Note and (ii)
that portion of the difference between the Issue Price and the principal amount
of such Original Issue Discount Note that has been amortized at the Stated
Yield (as defined below) of such Original Issue Discount Note (computed in
accordance with Section 1272(a)(4) of the Internal Revenue Code of 1986, as
amended, and Section 1.1275-1(b) of the Regulations (as defined under "United
States Taxation--United States Noteholders--Original Issue Discount"), in each
case as in effect on the issue date of such Original Issue Discount Note), at
the date as of which the Amortized Face Amount is calculated, but in no event
can the Amortized Face Amount exceed the principal amount of such Note due at
the stated maturity thereof. As used in the preceding sentence, the term "Issue
Price" means the principal amount of such Original Issue Discount Note due at
the stated maturity thereof less the "Original Issue Discount" of such Original
Issue Discount Note specified on the face thereof and in the applicable Pricing
Supplement. The term "Stated Yield" of such Original Issue Discount Note means
the "Yield to Maturity" specified on the face of such Original Issue Discount
Note and in the applicable Pricing Supplement for the period from the Original
Issue Date of such Original Issue Discount Note, as specified on the face of
such Original Issue Discount Note and in the applicable Pricing
S-4
<PAGE>
Supplement, to the stated maturity thereof based on its Issue Price and the
principal amount payable at the stated maturity thereof. See "United States
Taxation--United States Noteholders--Original Issue Discount".
Unless otherwise indicated in the applicable Pricing Supplement, neither
Indenture contains covenants specifically designed to protect Holders in the
event of a highly leveraged transaction involving the Company. Unless otherwise
indicated in the applicable Pricing Supplement, the Subordinated Note Indenture
does not provide for any right of acceleration of the payment of principal of
the Series I Notes upon a default in the payment of principal or interest or in
the performance of any covenant or agreement in the Series I Notes or the
Subordinated Note Indenture.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of the same series and bearing interest
(if any) at the same rate or pursuant to the same formula and having the same
date of issuance, redemption provisions (if any), Stated Maturity and other
terms will be represented by a single Global Security. Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depositary and will be registered in the name of the Depositary or a nominee of
the Depositary.
Upon the issuance of a Global Security, the Depositary will credit accounts
held with it with the respective principal or face amounts of the Book-Entry
Notes represented by such Global Security. The accounts to be credited shall be
designated initially by the Agent through which the Note was sold or, to the
extent that such Notes are offered and sold directly, by the Company. Ownership
of beneficial interests in a Global Security will be limited to institutions
that have accounts with the Depositary ("participants") and to persons that may
hold interests through participants. Ownership of beneficial interests by
participants in a Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by the
Depositary for such Global Security. Ownership of beneficial interests in such
Global Security by persons that hold through participants will be shown on, and
the transfer of that ownership interest within such participant will be
effected only through, records maintained by such participant.
Payment of principal of, premium (if any) and interest (if any) on Book-Entry
Notes represented by any such Global Security will be made to the Depositary or
its nominee, as the case may be, as the sole registered holder of the Book-
Entry Notes represented thereby for all purposes under the applicable
Indenture. None of the Company, the Trustee, the Paying Agent or any agent of
the Company or the Trustee will have any responsibility or liability for any
aspect of the Depositary's records relating to or payments made on account of
beneficial ownership interests in a Global Security representing any Book-Entry
Notes or for maintaining, supervising or reviewing any of the Depositary's
records relating to such beneficial ownership interests.
The Company has been advised by the Depositary that upon receipt of any
payment of principal of, premium (if any) or interest (if any) on any such
Global Security, the Depositary will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of the Depositary at the
close of business on the Business Day preceding such Interest Payment Date or
such maturity date. Payments by participants to owners of beneficial interests
in a Global Security held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held by such participants for customer accounts registered in
"street name", and will be the sole responsibility of such participants.
No Global Security may be transferred except as a whole by a nominee of the
Depositary to the Depositary or to another nominee of the Depositary, or by the
Depositary or any such nominee to a successor of the Depositary or a nominee of
such successor.
Unless otherwise specified in the applicable Pricing Supplement, a Global
Security representing Book-Entry Notes is exchangeable for Certificated Notes
of the same series and bearing interest (if any) at the same rate or pursuant
to the same formula, having the same date of issuance, redemption provisions
(if any), Stated Maturity and other terms and of differing authorized
denominations aggregating a like amount, only if (x)
S-5
<PAGE>
the Depositary notifies the Company that it is unwilling or unable to continue
as Depositary for such Global Security 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"), (y) the Company in its sole discretion
determines that such Global Security shall be exchangeable for Certificated
Notes or (z) there shall have occurred and be continuing an Event of Default
with respect to the Notes. Such Certificated Notes shall be registered in the
names of the owners of the beneficial interests in such Global Security as
provided by the Depositary's relevant participants (as identified by the
Depositary).
Except as provided above, owners of beneficial interests in a Global Security
will not be entitled to receive physical delivery of Notes in certificated form
and will not be considered the registered holders thereof for any purpose under
the applicable Indenture, and no Global Security representing Book-Entry Notes
shall be exchangeable or transferrable. Accordingly, each person owning a
beneficial interest in such a Global Security 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 interest, to exercise any
rights of a registered holder under the applicable Indenture. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
The Depositary, as the registered holder of each Global Security, may appoint
agents and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a registered holder is entitled to give or take under the applicable Indenture.
The Company understands that under existing industry practices, in the event
that the Company requests any action of registered holders or that an owner of
a beneficial interest in such a Global Security desires to give or take any
action which a registered holder is entitled to give or take under the
Indenture, the Depositary would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
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 under the Exchange Act. The Depositary was created to hold the
securities of its participants and to facilitate the clearance and settlement
of securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (including the
Agents), banks (including the Trustee), 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.
INTEREST AND INTEREST RATES
Each Note that bears interest will bear interest at either (a) in the case of
Fixed Rate Notes, a fixed rate or (b) in the case of Floating Rate Notes, a
floating rate determined by reference to one or more interest rate formulas,
which may be adjusted by any Spread and/or Spread Multiplier (each as defined
below), and, if so specified in the applicable Pricing Supplement with respect
to one or more Interest Periods (as defined below), one or more fixed rates.
Any Floating Rate Note may also have either or both of the following: (i) a
maximum interest rate limitation, or ceiling, on the rate of interest which may
accrue during any Interest Period; and (ii) a minimum interest rate limitation,
or floor, on the rate of interest which may accrue during any Interest Period.
The applicable Pricing Supplement may designate any of the following interest
rate formulas as applicable to one or more Interest Periods on each Floating
Rate Note: (a) the Commercial Paper Rate; (b) the Federal Funds Rate; (c)
LIBOR; (d) the Prime Rate; (e) the Eleventh District Cost of Funds Rate; (f)
the CD Rate; (g) the Treasury Rate; (h) the J.J. Kenny Rate; (i) the CMT Rate;
or (j) one or more other interest rate formulas.
S-6
<PAGE>
The interest rate on each Floating Rate Note for each Interest Period will be
determined by reference to (i) the applicable interest rate formula specified
in the applicable Pricing Supplement for such Interest Period, plus or minus
the applicable Spread, if any, or multiplied by the applicable Spread
Multiplier, if any, or (ii) the applicable fixed rate per annum specified in
the applicable Pricing Supplement for such Interest Period. The "Spread" is the
number of basis points specified in the applicable Pricing Supplement as being
applicable to such Floating Rate Note for such Interest Period, and the "Spread
Multiplier" is the percentage specified in the applicable Pricing Supplement as
being applicable to such Floating Rate Note for such Interest Period.
Each Note that bears interest will bear interest from and including its date
of issue or from and including the most recent Interest Payment Date (as
defined below) to which interest on such Note (or any predecessor Note) has
been paid or duly provided for (i) at the fixed rate per annum applicable to
the related Interest Period or Interest Periods, or (ii) at the rate per annum
determined pursuant to the interest rate formula applicable to the related
Interest Period or Interest Periods, in each case as specified therein and in
the applicable Pricing Supplement, until the principal thereof is paid or made
available for payment. Interest will be payable on each Interest Payment Date
and at maturity or upon redemption. Except as provided above under "--Book
Entry Notes", interest will be payable to the person in whose name a Note (or
any predecessor Note) is registered at the close of business on the Regular
Record Date (as defined below) next preceding each Interest Payment Date;
provided, however, that interest payable at maturity or upon redemption will be
payable to the person to whom principal shall be payable. Except as provided
above under "--Book Entry Notes", the first payment of interest on any Note
originally issued after a Regular Record Date and on or before an Interest
Payment Date will be made on the Interest Payment Date following the next
succeeding Regular Record Date to the registered holder on such next succeeding
Regular Record Date. Interest rates and interest rate formulas are subject to
change by the Company from time to time but no such change will affect any Note
theretofore issued or which the Company has agreed to issue. Unless otherwise
specified in the applicable Pricing Supplement, the "Interest Payment Dates"
and the "Regular Record Dates" for Fixed Rate Notes shall be as described below
under "--Fixed Rate Notes" and the "Interest Payment Dates" and the "Regular
Record Dates" for Floating Rate Notes shall be as described below under "--
Floating Rate Notes".
The interest rate on a Note for any Interest Period will in no event be
higher than the maximum rate permitted by New York law as the same may be
modified by United States law of general application. Under present New York
law, the maximum rate of interest is 25% per annum on a simple interest basis.
This limit may not apply to Notes in which $2,500,000 or more has been
invested.
The applicable Pricing Supplement will specify with respect to each Note that
bears interest: (i) the issue price, Interest Payment Dates and Regular Record
Dates; (ii) with respect to any Fixed Rate Note, the interest rate; (iii) with
respect to any Floating Rate Note, the Initial Interest Rate (as defined
below), the method (which may vary from Interest Period to Interest Period) of
calculating the interest rate applicable to each Interest Period (including, if
applicable, the fixed rate per annum applicable to one or more Interest
Periods, the period to maturity of any instrument on which the interest rate
formula for any Interest Period is based (the "Index Maturity"), any Spread or
Spread Multiplier, the Interest Determination Dates (as defined below), the
Interest Reset Dates (as defined below) and any minimum or maximum interest
rate limitations); (iv) whether such Note is an Original Issue Discount Note;
and (v) any other terms related to interest on the Notes.
FIXED RATE NOTES
Each Fixed Rate Note, whether or not issued as an Original Issue Discount
Note, will bear interest at the annual rate specified therein and in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, the Interest Payment Dates for the Fixed Rate Notes will be
on February 1 and August 1 of each year and at maturity or, if applicable, upon
redemption and the Regular Record Dates for the Fixed Rate Notes will be on the
fifteenth day (whether or not a Business Day) of the month next preceding each
Interest Payment Date. Unless otherwise specified in the applicable Pricing
Supplement, interest payments for Fixed Rate Notes shall be the amount of
interest accrued to, but excluding, the relevant
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Interest Payment Date. Interest on Fixed Rate Notes will be computed and paid
on the basis of a 360-day year of twelve 30-day months. In the event that any
Interest Payment Date on a Fixed Rate Note is not a Business Day, interest will
be paid on the next succeeding Business Day with the same force and effect as
if made on such Interest Payment Date, and no interest on such payment will
accrue for the period from and after such Interest Payment Date.
FLOATING RATE NOTES
The Interest Payment Dates for the Floating Rate Notes shall be as specified
in such Notes and in the applicable Pricing Supplement, and, unless otherwise
specified in the applicable Pricing Supplement, the Regular Record Dates for
the Floating Rate Notes will be the day (whether or not a Business Day) fifteen
calendar days preceding each Interest Payment Date. Unless otherwise specified
in the applicable Pricing Supplement and except as provided below, interest on
Floating Rate Notes will be payable on the following Interest Payment Dates: in
the case of Floating Rate Notes (other than Eleventh District Cost of Funds
Rate Notes) with a daily, weekly or monthly Interest Reset Date, on the third
Wednesday of each month or on the third Wednesday of March, June, September and
December of each year; in the case of Eleventh District Cost of Funds Rate
Notes (all of which reset monthly), on the first Business Day of each month or
on the first Business Day of March, June, September and December of each year,
all as specified in the applicable Pricing Supplement; in the case of Floating
Rate Notes with a quarterly Interest Reset Date, on the third Wednesday of
March, June, September and December of each year; in the case of Floating Rate
Notes with a semi-annual Interest Reset Date, on the third Wednesday of the two
months of each year specified in the applicable Pricing Supplement; and in the
case of Floating Rate Notes with an annual Interest Reset Date, on the third
Wednesday of the month of each year specified in the applicable Pricing
Supplement, and in each case at maturity or upon redemption. If any Interest
Payment Date for any Floating Rate Note would otherwise be a day that is not a
Business Day, the Interest Payment Date for such Floating Rate Note shall be
postponed to the next day that is a Business Day, except that in the case of a
LIBOR Note, if such Business Day is in the next succeeding calendar month, such
Interest Payment Date shall be the immediately preceding Business Day.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (the date on which each such
reset occurs, an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
the Interest Reset Date will be as follows: in the case of Floating Rate Notes
which are reset daily, each Business Day; in the case of Floating Rate Notes
(other than Treasury Rate Notes) which are reset weekly, the Wednesday of each
week; in the case of Treasury Rate Notes which are reset weekly, the Tuesday of
each week (except if the auction date falls on a Tuesday, then the next
Business Day, as provided below); in the case of Floating Rate Notes (other
than Eleventh District Cost of Funds Rate Notes) which are reset monthly, the
third Wednesday of each month; in the case of Eleventh District Cost of Funds
Rate Notes (all of which reset monthly), the first Business Day of each month;
in the case of Floating Rate Notes which are reset quarterly, the third
Wednesday of March, June, September and December of each year; in the case of
Floating Rate Notes which are reset semi-annually, the third Wednesday of the
two months of each year specified in the applicable Pricing Supplement; and in
the case of Floating Rate Notes which are reset annually, the third Wednesday
of the month of each year specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the interest
rate determined with respect to any Interest Determination Date will become
effective on and as of the next succeeding Interest Reset Date; provided,
however, that the interest rate in effect from the date of issue to the first
Interest Reset Date with respect to a Floating Rate Note (the "Initial Interest
Rate") will be as specified in the applicable Pricing Supplement. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date shall be postponed to the next day
that is a Business Day, except that in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, such Interest Reset Date
shall be the immediately preceding Business Day.
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As used herein, "Interest Determination Date" means the date as of which the
interest rate for a Floating Rate Note is to be determined, to be effective as
of the following Interest Reset Date and calculated on the related Calculation
Date (as defined below). Unless otherwise specified in the applicable Pricing
Supplement, the Interest Determination Date pertaining to any Interest Reset
Date for a Commercial Paper Rate Note, a Federal Funds Rate Note, a LIBOR
Note, a Prime Rate Note, a CD Rate Note, a J.J. Kenny Rate Note or a CMT Rate
Note (the "Commercial Paper Interest Determination Date", the "Federal Funds
Interest Determination Date", the "LIBOR Interest Determination Date", the
"Prime Interest Determination Date", the "CD Interest Determination Date", the
"J.J. Kenny Interest Determination Date" and the "CMT Interest Determination
Date", respectively) will be the second Business Day prior to such Interest
Reset Date. Unless otherwise specified in the applicable Pricing Supplement,
the Interest Determination Date pertaining to an Interest Reset Date for an
Eleventh District Cost of Funds Rate Note (the "Eleventh District Cost of
Funds Interest Determination Date") will be the last day of the month of the
District Bank (as defined below) preceding the Interest Reset Date on which
the District Bank is open for business and publishes the Index (as defined
below). Unless otherwise specified in the applicable Pricing Supplement, the
Interest Determination Date pertaining to an Interest Reset Date for a
Treasury Rate Note (the "Treasury Interest Determination Date") will be the
day of the week on which Treasury bills would normally be auctioned in the
week in which such Interest Reset Date falls. Treasury bills are usually sold
at auction on Monday of each week, unless that day is a legal holiday, in
which case the auction is usually held on the following Tuesday, except that
such auction may be held on the preceding Friday. If, as the result of a legal
holiday, an auction is so held on the preceding Friday, such Friday will be
the Treasury Interest Determination Date pertaining to the Interest Reset Date
occurring in the next succeeding week. If an auction date shall fall on any
Interest Reset Date for a Treasury Rate Note, then such Interest Reset Date
shall instead be the first Business Day immediately following such auction
date. The Interest Determination Date pertaining to a Floating Rate Note the
interest rate of which is determined by reference to two or more Interest Rate
Bases will be the latest Business Day which is at least two Business Days
prior to such Interest Reset Date for such Floating Rate Note on which each
Interest Rate Basis is determinable.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments on an Interest Payment Date for a Floating Rate Note will include
interest accrued from, and including, the next preceding Interest Payment Date
to which interest has been paid or duly provided for (or from, and including,
the date of issue if no interest has been paid or duly provided for with
respect to such Floating Rate Note) to, but excluding, such Interest Payment
Date (each such interest accrual period, an "Interest Period"). Accrued
interest from the date of issue or from the last date to which interest has
been paid or duly provided for to the date for which interest is being
calculated is calculated by multiplying the face amount of a Floating Rate
Note by the applicable accrued interest factor (the "Accrued Interest
Factor"). The Accrued Interest Factor is computed by adding together the
interest factors calculated for each day from the date of issue, or from the
last date to which interest has been paid or duly provided for to the date for
which accrued interest is being calculated. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day is
computed by dividing the per annum interest rate applicable to such day by 360
in the case of Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR
Notes, Prime Rate Notes, Eleventh District Cost of Funds Rate Notes, CD Rate
Notes and J.J. Kenny Rate Notes, or by the actual number of days in the year
in the case of Treasury Rate Notes and CMT Rate Notes. The interest rate in
effect on each day will be (i) if such day is an Interest Reset Date, the
interest rate with respect to the Interest Determination Date pertaining to
such Interest Reset Date or (ii) if such day is not an Interest Reset Date,
the interest rate with respect to the Interest Determination Date pertaining
to the next preceding Interest Reset Date, subject in either case to any
maximum or minimum interest rate limitation referred to above or in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Citibank,
N.A. will be the "Calculation Agent". On or before each Calculation Date, the
Calculation Agent will determine the interest rate as described below and
notify the Paying Agent. The Paying Agent will determine the Accrued Interest
Factor applicable to any such Floating Rate Note. The Paying Agent will, upon
the request of the holder of any Floating Rate
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Note, provide the interest rate then in effect and the interest rate which
will become effective as a result of a determination made with respect to the
most recent Interest Determination Date with respect to such Floating Rate
Note. The determinations of interest rates made by the Calculation Agent shall
be conclusive and binding, and neither the Trustee nor the Paying Agent shall
have the duty to verify determinations of interest rates made by the
Calculation Agent. The determinations of Accrued Interest Factors made by the
Paying Agent shall be conclusive and binding. Unless otherwise specified in
the applicable Pricing Supplement, the "Calculation Date", if applicable,
pertaining to any Interest Determination Date on a Floating Rate Note will be
the earlier of (i) the tenth calendar day after such Interest Determination
Date, or, if any such day is not a Business Day, the next succeeding Business
Day, and (ii) the Business Day immediately preceding the applicable Interest
Payment Date or Maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation on Floating Rate Notes will be
rounded, if necessary, to the nearest one hundred-thousandth of one percentage
point, with five one-millionths of one percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and 9.876544%
(or .09876544) being rounded to 9.87654% (or .0987654); all calculations of
the Accrued Interest Factor for any day on Floating Rate Notes will be
rounded, if necessary, to the nearest one hundred-millionth, with five one-
billionths rounded upward (e.g., .098765455 being rounded to .09876546 and
.098765454 being rounded to .09876545); and all dollar amounts used in or
resulting from such calculations on Floating Rate Notes will be rounded to the
nearest cent (with one-half cent being rounded upward).
COMMERCIAL PAPER RATE. Commercial Paper Rate Notes will bear interest at the
interest rates (calculated with reference to the Commercial Paper Rate and the
Spread or Spread Multiplier, if any) specified in the Commercial Paper Rate
Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Commercial Paper Interest Determination
Date, the Money Market Yield (calculated as described below) of the rate on
that date for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement as such rate is released by the Board of
Governors of the Federal Reserve System as reported on page 120 (or other
applicable page) of the Telerate Data Service, under the heading "Dealer
Commercial Paper". If by 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Commercial Paper Interest Determination Date such rate
is not so reported on the Telerate Data Service, then the Commercial Paper
Rate shall be the Money Market Yield of the rate on that Commercial Paper
Interest Determination Date for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement as published by the Federal
Reserve Bank of New York in its daily statistical release, "Composite 3:30
p.m. Quotations for U.S. Government Securities" (or any successor publication
published by the Federal Reserve Bank of New York) ("Composite Quotations")
under the heading "Commercial Paper". If by 3:00 p.m., New York City time, on
such Calculation Date such rate is not so published in Composite Quotations,
the Commercial Paper Rate for that Commercial Paper Interest Determination
Date shall be calculated by the Calculation Agent and shall be the Money
Market Yield of the arithmetic mean of the offered rates of three leading
dealers of commercial paper in The City of New York selected by the
Calculation Agent as of 11:00 a.m., New York City time, on that Commercial
Paper Interest Determination Date, for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA", or the equivalent, from a
nationally recognized securities rating agency; provided, however, that if
fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as specified in this sentence, the Commercial Paper Rate with respect
to such Commercial Paper Interest Determination Date will remain the
Commercial Paper Rate in effect on such Commercial Paper Interest
Determination Date.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D X 360
Money Market Yield = --------------- X 100
360 - (D X M)
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where "D" refers to the per annum rate for the commercial paper, quoted on a
bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
FEDERAL FUNDS RATE. Federal Funds Rate Notes will bear interest at the
interest rates (calculated with reference to the Federal Funds Rate and the
Spread or Spread Multiplier, if any) specified in the Federal Funds Rate Notes
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Interest Determination
Date, the rate on that day for Federal Funds as released by the Board of
Governors of the Federal Reserve System as reported on page 120 (or other
applicable page) of the Telerate Data Service, under the heading "Fed Funds
Effective" or, if not so reported on the Telerate Data Service by 3:00 p.m.,
New York City time, on the Calculation Date pertaining to such Federal Funds
Interest Determination Date, the Federal Funds Rate will be the rate on such
Federal Funds Interest Determination Date as published in Composite Quotations
under the heading "Federal Funds/Effective Rate". If such rate is not so
published by 3:00 p.m., New York City time, on the Calculation Date pertaining
to such Federal Funds Interest Determination Date, the Federal Funds Rate for
such Federal Funds Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight Federal Funds arranged by three leading dealers of
Federal Funds transactions in The City of New York selected by the Calculation
Agent as of 3:00 p.m., New York City time, on such Federal Funds Interest
Determination Date; provided, however, that if fewer than three dealers
selected as aforesaid by the Calculation Agent are quoting as specified in this
sentence, the Federal Funds Rate will remain the Federal Funds Rate in effect
on such Federal Funds Interest Determination Date.
LIBOR. LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified in
the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to a LIBOR Interest Determination Date, LIBOR will be
determined on the basis of the offered rates for deposits in United States
dollars having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second Business Day immediately following
that LIBOR Interest Determination Date, that appears as of 11:00 a.m.
London time on such LIBOR Interest Determination Date on page 3750 (or
other applicable page) of the Telerate Data Service, or such other service
or services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits. If no rate is reported by the Telerate Data Service, then LIBOR
in respect of that LIBOR Interest Determination Date will be determined as
described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which no rate
is reported by the Telerate Data Service as specified in (i) above, LIBOR
will be determined on the basis of the rates at which deposits in United
States dollars are offered by four major banks in the London interbank
market selected by the Calculation Agent (the "Reference Banks") at
approximately 11:00 a.m., London time, on that LIBOR Interest Determination
Date to prime banks in the London interbank market having the Index
Maturity designated in the applicable Pricing Supplement commencing on the
second Business Day immediately following such LIBOR Interest Determination
Date and in a principal amount, not less than United States $1,000,000,
that, in the judgment of the Calculation Agent, is representative for a
single transaction in such market at such time. The Calculation Agent will
request the principal London office of each of such Reference Banks to
provide a quotation of its rate. If at least two such quotations are
provided, LIBOR in respect of that LIBOR Interest Determination Date will
be the arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR in respect of that LIBOR Interest Determination Date will
be the arithmetic mean of the rates quoted by three major
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banks in The City of New York selected by the Calculation Agent at
approximately 11:00 a.m., New York City time, on that LIBOR Interest
Determination Date for loans in United States dollars to leading European
banks, having the Index Maturity specified in the applicable Pricing
Supplement, commencing on the second Business Day immediately following
that LIBOR Interest Determination Date and in a principal amount, not less
than United States $1,000,000, that, in the judgment of the Calculation
Agent, is representative for a single transaction in such market at such
time; provided, however, that if fewer than three banks in The City of New
York selected as aforesaid by the Calculation Agent are quoting as
specified in this sentence, LIBOR with respect to such LIBOR Interest
Determination Date will remain LIBOR in effect on such LIBOR Interest
Determination Date.
PRIME RATE. Prime Rate Notes will bear interest at the interest rates
(calculated with reference to the Prime Rate and the Spread or Spread
Multiplier, if any) specified in the Prime Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Prime Interest Determination Date, the arithmetic
mean of the prime rates or base rates for commercial loans quoted on the basis
of the actual number of days in the year divided by a 360-day year as of the
close of business on such Prime Interest Determination Date by three major
money center banks in The City of New York selected by the Calculation Agent
(after consultation with the Company). If fewer than three quotations are
provided, the Prime Rate shall be calculated by the Calculation Agent and shall
be determined as the arithmetic mean on the basis of the prime rates or base
rates for commercial loans quoted in The City of New York on such date by three
substitute banks or trust companies organized and doing business under the laws
of the United States, or any State thereof, having total equity capital of at
least $500,000,000 and being subject to supervision or examination by a federal
or state authority, selected by the Calculation Agent (after consultation with
the Company); provided, however, that if fewer than three banks or trust
companies selected as aforesaid by the Calculation Agent are quoting as
specified in this sentence, the Prime Rate will remain the Prime Rate in effect
on such Prime Interest Determination Date.
ELEVENTH DISTRICT COST OF FUNDS RATE. Eleventh District Cost of Funds Rate
Notes will bear interest at the interest rates (calculated with reference to
the Eleventh District Cost of Funds Rate and the Spread or Spread Multiplier,
if any) specified in the Eleventh District Cost of Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Eleventh District Cost
of Funds Interest Determination Date, the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Interest Determination Date falls, as reported
on page 7058 (or other applicable page) of the Telerate Data Service, under the
heading "11th District" as of 11:00 A.M., San Francisco time, on such Eleventh
District Cost of Funds Interest Determination Date. If such rate is not so
reported on the Telerate Data Service on any related Eleventh District Cost of
Funds Interest Determination Date, the Eleventh District Cost of Funds Rate for
such Eleventh District Cost of Funds Interest Determination Date shall be the
monthly weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District that was most recently announced (the
"Index") by the Federal Home Loan Bank of San Francisco (the "District Bank")
as such cost of funds for the calendar month immediately preceding the date of
such announcement. If the District Bank fails to announce such rate for the
calendar month immediately preceding such Eleventh District Cost of Funds
Interest Determination Date, then the Eleventh District Cost of Funds Rate
determined as of such Eleventh District Cost of Funds Interest Determination
Date will be the Eleventh District Cost of Funds Rate in effect on such
Eleventh District Cost of Funds Interest Determination Date.
CD RATE. CD Rate Notes will bear interest at the interest rates (calculated
with reference to the CD Rate and the Spread or Spread Multiplier, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity specified
in the applicable Pricing Supplement as such rate is released by the Board of
Governors of the Federal Reserve System as reported on page 120 (or other
applicable page) of the Telerate Data Service, under the heading "Certs of
Deposit". If by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such CD Interest Determination Date such rate is not so reported
on the Telerate Data Service, then the CD Rate shall be the rate on such CD
Interest Determination Date for negotiable certificates of deposit of the Index
Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Certificates of Deposit". If by 3:00
p.m., New York City time, on such Calculation Date such rate is not so
published in Composite Quotations, the CD Rate for that CD Interest
Determination Date shall be calculated by the Calculation Agent and shall be
the arithmetic mean of the secondary market offered rates as of 3:00 p.m., New
York City time, on such CD Interest Determination Date, of three leading
nonbank dealers in negotiable United States dollar certificates of deposit in
The City of New York selected by the Calculation Agent for negotiable
certificates of deposit of major United States money market banks which are
then rated A-1+ by Standard & Poor's Ratings Group and P-1 by Moody's Investors
Service with a remaining maturity closest to the Index Maturity specified in
the applicable Pricing Supplement in denominations of $5,000,000; provided,
however, that if fewer than three dealers selected as aforesaid by the
Calculation Agent are quoting as specified in this sentence, the CD Rate will
remain the CD Rate in effect on such CD Interest Determination Date.
TREASURY RATE. Treasury Rate Notes will bear interest at the interest rates
(calculated with reference to the Treasury Rate and the Spread or Spread
Multiplier, if any) specified in the Treasury Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable
Pricing Supplement as such rate is released by the Board of Governors of the
Federal Reserve System as reported on page 56 or 57 (or other applicable page)
of the Telerate Data Service, under the heading "Avge Invest Yield" or, if not
so reported on the Telerate Data Service by 3:00 p.m., New York City time, on
the Calculation Date pertaining to such Treasury Interest Determination Date,
such rate as published in "Statistical Release H.15(519), Selected Interest
Rates", or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)"), under the heading "U.S. Government Securities--
Treasury Bills--auction average (investment)" or, if not so published in
H.15(519) by 3:00 p.m., New York City time, on the Calculation Date pertaining
to such Treasury Interest Determination Date, the auction average rate
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the auction
of Treasury bills having the Index Maturity designated in the applicable
Pricing Supplement are not otherwise reported as provided above by 3:00 p.m.,
New York City time, on such Calculation Date or no such auction is held in a
particular week, then the Treasury Rate shall be calculated by the Calculation
Agent and shall be a yield to maturity (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) of the arithmetic mean of the secondary market bid rates, as of 3:30
p.m., New York City time, on such Treasury Interest Determination Date, of
three leading primary United States government securities dealers selected by
the Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement;
provided, however, that if fewer than three dealers selected as aforesaid by
the Calculation Agent are quoting as specified in this sentence, the Treasury
Rate with respect to such Treasury Interest Determination Date will remain the
Treasury Rate in effect on such Treasury Interest Determination Date.
J.J. KENNY RATE. J.J. Kenny Rate Notes will bear interest at the interest
rates (calculated with reference to the J.J. Kenny Rate and the Spread or
Spread Multiplier, if any) specified in the J.J. Kenny Rate Note and in the
applicable Pricing Supplement.
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Unless otherwise specified in the applicable Note or Pricing Supplement,
"J.J. Kenny Rate" means, with respect to any J.J. Kenny Interest Determination
Date, the rate in the high grade weekly index (the "Weekly Index") on such date
made available by Kenny Information Systems ("Kenny") to the Calculation Agent.
The Weekly Index is, and shall be, based upon 30-day yield evaluations at par
of bonds, the interest of which is exempt from Federal income taxation under
the Internal Revenue Code of 1986, as amended, of not less than five high grade
component issuers selected by Kenny which shall include, without limitation,
issuers of general obligation bonds. The specific issuers included among the
component issuers may be changed from time to time by Kenny in its discretion.
The bonds on which the Weekly Index is based shall not include any bonds on
which the interest is subject to a minimum tax or similar tax under the
Internal Revenue Code of 1986, as amended, unless all tax-exempt bonds are
subject to such tax. In the event Kenny ceases to make available such Weekly
Index, a successor indexing agent will be selected by the Calculation Agent,
such index to reflect the prevailing rate for bonds rated in the highest short-
term rating category by Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group in respect of issuers most closely resembling the high grade
component issuers selected by Kenny for its Weekly Index, the interest on which
is (A) variable on a weekly basis, (B) exempt from Federal income taxation
under the Internal Revenue Code of 1986, as amended, and (C) not subject to a
minimum tax or similar tax under the Internal Revenue Code of 1986, as amended,
unless all tax-exempt bonds are subject to such tax. If such successor indexing
agent is not available, the rate for the J.J. Kenny Interest Determination Date
shall be 67% of the rate determined if the Treasury Rate option had been
originally selected. The Calculation Agent shall calculate the J.J. Kenny Rate
in accordance with the foregoing.
CMT RATE. CMT Rate Notes will bear interest at the interest rates (calculated
with reference to the CMT Rate and the Spread or Spread Multiplier, if any)
specified in the CMT Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Note or Pricing Supplement, "CMT
Rate" means, with respect to any CMT Interest Determination Date, the rate
reported for the applicable Index Maturity on page 7055 (or other applicable
page) of the Telerate Data Service under the heading "Daily Treasury Constant
Maturities and Money Markets/Federal Reserve Board Release H.15 Monday's
Approx. 3:45 p.m. EDT," for the applicable CMT Interest Determination Date. If
such rate is not so available by 3:00 p.m., New York City time, on the
applicable Calculation Date, then the CMT Rate for such CMT Interest
Determination Date shall be calculated by the Calculation Agent and shall be
the bond equivalent yield to maturity of the arithmetic mean of the secondary
market bid rates, as of 3:00 P.M., New York City time, on the applicable CMT
Interest Determination Date, reported, according to their written records, by
three leading primary United States government securities dealers in The City
of New York (each, a "Reference Dealer") selected by the Calculation Agent, for
the most recently issued direct noncallable fixed rate Treasury Bills with an
original maturity approximately equal to the applicable Index Maturity;
provided, however, that if the Calculation Agent is not able to obtain such
quotations from at least three such Reference Dealers, the CMT Rate will remain
the CMT Rate then in effect on such CMT Interest Determination Date.
ZERO COUPON NOTES
Notes may be issued in the form of Original Issue Discount Notes that do not
provide any periodic payments of interest (the "Zero Coupon Notes"). The
specific terms of any Zero Coupon Notes will be set forth in the applicable
Pricing Supplement.
REDEMPTION
If so specified in the applicable Pricing Supplement, a Note will be
redeemable at the option of the Company on the date or dates prior to maturity
specified in the applicable Pricing Supplement at the price or prices specified
in the applicable Pricing Supplement (unless otherwise specified in such
Pricing Supplement, expressed as a percentage of the principal amount of such
Note or, in the case of Zero Coupon Notes or certain interest bearing Notes
issued as Original Issue Discount Notes (as specified in the applicable Pricing
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Supplement), as a percentage of the Amortized Face Amount of such Note),
together with accrued interest, if any, to the date of redemption determined as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, the Company may redeem any of the Notes
which are redeemable and remain outstanding either in whole or from time to
time in part upon not less than 30 nor more than 60 days' notice mailed by or
on behalf of the Company to the registered holder thereof. Unless otherwise
specified in the applicable Pricing Supplement, the Company will not be
obligated to redeem or purchase the Notes pursuant to any sinking fund or
analogous provision or at the option of any holder. If less than all of the
Notes of like tenor are to be redeemed, the Notes to be redeemed shall be
selected by the Trustee by such method as the Trustee shall deem fair and
appropriate. Upon any redemption of less than all of the principal of a Note
prior to maturity, a new Note of like tenor and of an authorized denomination
representing the unredeemed portion thereof will be issued to the registered
holder thereof.
FOREIGN CURRENCY NOTES
Unless otherwise specified in an applicable Pricing Supplement, Notes
denominated in other than United States dollars or ECUs will not be sold in, or
to residents of, the country issuing the Specified Currency in which particular
Notes are denominated. The information set forth in this Prospectus Supplement
is directed to prospective purchasers who are United States residents, and the
Company disclaims any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any matters
that may affect the purchase, holding or receipt of payments of principal of
and interest on the Notes. Such persons should consult their own financial and
legal advisors with regard to such matters. See "Foreign Currency Risks" in the
accompanying Prospectus.
UNITED STATES TAXATION--UNITED STATES NOTEHOLDERS
The following is a summary of the principal general federal income tax
consequences to a holder of Notes who is (i) a citizen or resident of the
United States, (ii) a domestic corporation or (iii) otherwise subject to United
States federal income taxation on a net basis (a "United States Noteholder")
and may not be authoritative in individual cases, where special rules may
apply. It deals only with Notes held as capital assets by initial purchasers at
the issue price who are United States Noteholders and not with special classes
of holders, such as dealers in securities or currencies, life insurance
companies, persons holding Notes as a hedge against or which are hedged against
currency risks, and persons whose functional currency is not the U.S. dollar. A
person considering the purchase of Notes should consult his or her own tax
adviser concerning these matters and as to the tax treatment under foreign,
state and local tax laws and regulations.
GENERAL
As a general rule, interest paid or accrued on the Notes, as well as original
issue discount, if any, will be treated as ordinary income to United States
Noteholders. A United States Noteholder using the accrual method of accounting
for federal income tax purposes is required to include interest paid or accrued
on the Notes in ordinary income as such interest accrues, while a United States
Noteholder using the cash receipts and disbursements method of accounting for
federal income tax purposes must include such interest in ordinary income when
payments are received (or made available for receipt) by such holder.
In the event that any of the Notes are determined to be "applicable high
yield discount obligations", under the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), additional information regarding the federal
income tax consequences associated with such Notes will be provided as part of
the Pricing Supplement for such Notes.
ORIGINAL ISSUE DISCOUNT
The Notes, including the Original Issue Discount Notes, may be issued with
"original issue discount". In general, in the hands of the original holder of a
Note, original issue discount is the difference between the
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"stated redemption price at maturity" of the Note and its "issue price". The
original issue discount with respect to a Note will be considered to be zero if
it is less than 1/4 of 1 percent of the Note's stated redemption price at
maturity multiplied by the number of complete years from the date of issue of
such Note to its maturity date. In addition, special rules described below
apply to Notes having a fixed maturity date not more than one year from the
date of issue.
The stated redemption price at maturity of a Note generally will be equal to
the sum of all payments, whether denominated as principal or interest, to be
made with respect thereto other than "qualified stated interest" payments.
Pursuant to Treasury Regulations regarding original issue discount (the
"Regulations"), qualified stated interest payments are interest payments based
on a single fixed rate of interest (or under certain circumstances, a variable
rate tied to an objective index) that is actually and unconditionally payable
at fixed periodic intervals of one year or less during the entire term of the
Note. Although, if so provided in a Pricing Supplement, the Notes may be
subject to optional redemption by the Company under certain circumstances for
an amount in excess of their principal amount, based on the Regulations, this
excess should not be considered when determining the stated redemption price at
maturity of a Note. In general, the issue price of a Note is the initial
offering price to the public at which a substantial amount of Notes are sold.
It is possible that Notes which are not denominated as Original Issue
Discount Notes may also be treated as issued at an original issue discount. For
example, Floating Rate Notes providing for one or more qualified floating rates
of interest, a single fixed rate and one or more qualified floating rates, a
single rate based on one or more qualified floating rates or a single rate
based on the price of actively traded property or an index of the prices of
such property, other than foreign currency (an "objective rate"), or a single
fixed rate and a single objective rate that is a qualified inverse floating
rate will also be deemed to have original issue discount unless such interest
is unconditionally payable at least annually during the term of the Note at a
single qualified floating rate or a single objective rate within the meaning of
the Regulations. If a Floating Rate Note provides for two or more qualified
floating rates that can reasonably be expected to have approximately the same
values throughout the term of the Note, the qualified floating rates together
constitute a single qualified floating rate. If interest on a debt instrument
is stated at a fixed rate for an initial period of less than 1 year followed by
a variable rate that is either a qualified floating rate or an objective rate
for a subsequent period, and the value of the variable rate on the issue date
is intended to approximate the fixed rate, the fixed rate and the variable rate
together constitute a single qualified floating rate or objective rate. Two or
more rates will be conclusively presumed to meet the requirements of the
preceding sentences if the values of the applicable rates on the issue date are
within 1/4 of 1 percent of each other. Special tax considerations (including
possible original issue discount) may arise with respect to Floating Rate Notes
providing for (i) one Base Rate followed by one or more Base Rates, (ii) a
single fixed rate followed by a qualified floating rate or (iii) a Spread
Multiplier. Purchasers of Floating Rate Notes with any of such features should
carefully examine the applicable Pricing Supplement and should consult their
tax advisors with respect to such a feature since the tax consequences will
depend, in part, on the particular terms of the purchased Note. Special rules
may also apply if a Floating Rate Note is subject to a cap, floor, governor or
similar restriction that is not fixed throughout the term of the Note and is
reasonably expected as of the issue date to cause the yield on the Note to be
significantly less or more than the expected yield determined without the
restriction.
In the case of Notes that are determined to be issued with original issue
discount ("Discount Notes"), a United States Noteholder must generally include
the original issue discount in ordinary gross income for federal income tax
purposes as it accrues in advance of the receipt of any cash attributable to
such income. The amount of original issue discount, if any, required to be
included in a Noteholder's ordinary gross income for federal income tax
purposes in any taxable year will be computed in accordance with Section
1272(a) of the Code and the Regulations. Under such Section and the
Regulations, original issue discount accrues on a daily basis under a constant
yield method that takes into account the compounding of interest. The daily
portions of original issue discount are determined by allocating to each day in
any "accrual period" a pro rata portion of the original issue discount for that
period. Accrual periods may be of any length and may vary in length over the
term of the Notes, provided that each accrual period is not longer than one
year and each scheduled payment of principal or interest occurs either on the
final day of an accrual period or on the
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first day of an accrual period. Original issue discount for any accrual period
will be the excess of (i) the product of the Note's "adjusted issue price" at
the beginning of such accrual period and its yield to maturity over (ii) any
qualified stated interest payments for that accrual period. The adjusted issue
price of a Note at the start of any accrual period is the sum of the issue
price and the accrued original issue discount for each prior accrual period.
One effect of this method is that United States Noteholders generally will have
to include in income increasingly greater amounts of original issue discount in
successive accrual periods.
Under the Regulations, a holder may make an election (the "Constant Yield
Election") to include in gross income all interest that accrues on a Note
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) in accordance with the foregoing constant yield method
that takes into account the compounding of interest.
Proposed regulations issued on December 15, 1994 address, among other things,
the accrual of original issue discount on, and the character of gain recognized
on the sale, exchange or retirement of, debt instruments providing for
contingent payments. These regulations would apply to contingent payment debt
instruments issued on or after 60 days after the date final regulations are
issued. Prospective holders of Floating Rate Notes that provide for contingent
payments should refer to the discussion regarding taxation in the applicable
Pricing Supplement.
The original issue discount provisions described above do not apply to Notes
having a fixed maturity date not more than one year from the date of issue.
Under the Regulations, such a "short-term" Note will be treated as having been
issued at an original issue discount equal to the excess of the total principal
and interest payments on the Note over its issue price. An individual or other
holder using the cash receipts and disbursements method of tax accounting will
not be required to include original issue discount in ordinary gross income for
federal income tax purposes on a daily basis unless an election to do so is
made. Holders of such short-term Notes who report income under the accrual
method of tax accounting and certain other holders including banks, regulated
investment companies and dealers in such securities are required to include
original issue discount in income on a daily basis pursuant to a straight-line
method, unless such holders make an election to accrue original issue discount
under the constant yield method described above but taking into account daily
compounding. In the case of holders of such short-term Notes not required and
not electing to include original issue discount in income currently, any gain
realized on the sale or maturity of such short-term Notes will be ordinary
gross income to the extent of the original issue discount accrued on a
straight-line basis (or, if elected on a constant yield method, based on daily
compounding) to the date of sale or maturity. Holders of such short-term Notes
not required and not electing to include the original issue discount in income
currently will be required to defer deductions for interest on indebtedness
incurred or continued to purchase or carry such short-term Notes in an amount
not exceeding the deferred income until the deferred income is realized.
The Regulations contain aggregation rules stating that in certain
circumstances if more than one type of Note is issued as part of the same
issuance of securities to a single holder, some or all of such Notes may be
treated together as a single debt instrument with a single issue price,
maturity date, yield to maturity and stated redemption price at maturity for
purposes of calculating and accruing any original issue discount. Unless
otherwise provided in the related Pricing Supplement, the Company does not
expect to treat any of the Notes as being subject to the aggregation rules for
purposes of computing original issue discount.
In addition to reporting interest paid on the Notes, the Company will report
annually to the Internal Revenue Service and holders of record of the Notes,
information with respect to the original issue discount accruing thereon.
OPTIONAL REDEMPTION
Under the Regulations, if the Company has an option to redeem a Note prior to
its stated maturity, such option will be presumed to be exercised if, by
utilizing any date on which such Note may be redeemed
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as the maturity date and the amount payable on such date in accordance with the
terms of such Note (the "redemption price") as the stated redemption price at
maturity, the yield on the Note would be lower than its yield to stated
maturity. If such option is not in fact exercised when presumed to be
exercised, the Note would be treated solely for original issue discount
purposes as if it were redeemed, and a new Note were issued, on the presumed
exercise date for an amount equal to the redemption price.
AMORTIZABLE BOND PREMIUM
In general, if a United States Noteholder purchases a Note at a premium
(i.e., an amount in excess of the amount payable upon the maturity thereof),
such Noteholder will be considered to have purchased such Note with
"amortizable bond premium" equal in amount to such excess. A United States
Noteholder may elect to deduct the amortizable bond premium as it accrues under
a constant yield method that is similar to the method used for the accrual of
original issue discount over the remaining term of the Note. A United States
Noteholder's tax basis in the Note will be reduced by the amount of the
amortizable bond premium deducted. United States Noteholders should consult
with their own tax advisers regarding special rules that apply for determining
the amount of and method for amortizing bond premium with respect to Notes that
may be redeemed in whole or in part prior to maturity.
SALE OF NOTES
If a Note is sold by a United States Noteholder or redeemed by the Company,
such holder will recognize gain or loss equal to the difference between the
amount realized from the sale and the holder's adjusted basis in such Note or
applicable portion thereof. Such adjusted basis generally will equal the cost
of such Note to such holder, increased by any original issue discount included
in such holder's ordinary gross income with respect to such Note and reduced by
any principal payments on the Note previously received by such holder
(including any interest payments on the Note that are not qualified stated
interest payments) and by any amortizable bond premium deducted by such holder.
Except as discussed with respect to short-term obligations, or to the extent
cash is received attributable to accrued interest, any gain or loss recognized
upon a sale, exchange, retirement or other disposition of a Note will be
capital gain or loss if the Note is held as a capital asset. If, however, it is
determined that the Company intended on the date of issue of the Notes to call
all or any portion of the Notes prior to their stated maturity, any gain
realized upon a sale, exchange, retirement or other disposition of a Note would
be considered, under Section 1271(a)(2)(A) of the Code, ordinary income, to the
extent it does not exceed the unrecognized portion of the original issue
discount, if any, with respect to the Note.
BACKUP WITHHOLDING AND REPORTING REQUIREMENTS
Interest payments, accrual of original issue discount and payments of
principal and any premium with respect to a Note will be reported to the extent
required by the Code to the United States Noteholders and the Internal Revenue
Service. A backup withholding tax at a rate of 31% will apply to such payments
if a United States Noteholder fails to supply the Company or its agent with
such Noteholder's taxpayer identification number or to report all interest and
dividends required to be shown on its federal income tax returns.
FOREIGN CURRENCY NOTES
The following summary relates to Notes that are denominated in a currency or
currency unit other than the U.S. dollar ("Foreign Currency Notes").
A United States Noteholder who uses the cash method of accounting and who
receives interest (other than original issue discount) in a foreign currency
with respect to a Foreign Currency Note will be required to include in income
the U.S. dollar value of the interest received (determined on the date such
interest is received) regardless of whether the interest payment is in fact
converted to U.S. dollars at that time, and such U.S. dollar value will be the
United States Noteholder's tax basis in the foreign currency.
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To the extent the above paragraph is not applicable, a United States
Noteholder who (i) uses the cash method of accounting and accrues original
issue discount or (ii) uses the accrual method of accounting will be required
to include in income the U.S. dollar value of the amount of interest income
(including original issue discount, but reduced by amortizable bond premium to
the extent applicable) that has accrued and is otherwise required to be taken
into account with respect to a Foreign Currency Note during an accrual period.
The U.S. dollar value of such accrued income will be determined by translating
such income at the average rate of exchange for the accrual period or, with
respect to an accrual period that spans two taxable years, at the average rate
for the partial period within the taxable year. Such United States Noteholder
will recognize ordinary income or loss with respect to accrued interest income
on the date such income is actually received. The amount of ordinary income or
loss recognized will equal the difference between the U.S. dollar value of the
foreign currency payment received (determined on the date such payment is
received) in respect of such accrual period and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above). A United States Noteholder may elect to translate interest income
(including original issue discount) into U.S. dollars at the spot rate on the
last day of the interest accrual period (or, in the case of a partial accrual
period, the spot rate on the last day of the taxable year) or, if the date of
receipt is within five business days of the last day of the interest accrual
period, the spot rate on the date of receipt. A United States Noteholder that
makes such an election must apply it consistently to all debt instruments from
year to year and cannot change the election without the consent of the Internal
Revenue Service.
Any loss realized on the sale, exchange or retirement of a Foreign Currency
Note with amortizable bond premium by a United States Noteholder who has not
elected to amortize such premium will be a capital loss to the extent of such
bond premium. If such an election is made, amortizable bond premium taken into
account on a current basis shall reduce interest income in units of the
relevant foreign currency. Exchange gain or loss is realized on such amortized
bond premium with respect to any period by treating the bond premium amortized
in such period as a return of principal.
A United States Noteholder's tax basis in a Foreign Currency Note, and the
amount of any subsequent adjustment to such holder's tax basis, will be the
U.S. dollar value of the foreign currency amount paid for such Foreign Currency
Note, or of the foreign currency amount of the adjustment, determined on the
date of such purchase or adjustment. A United States Noteholder who purchases a
Foreign Currency Note with previously owned foreign currency will recognize
ordinary income or loss in an amount equal to the difference, if any, between
such United States Noteholder's tax basis in the foreign currency and the U.S.
dollar fair market value of the Foreign Currency Note on date of purchase.
Gain or loss realized on the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates will equal
the difference between (i) the U.S. dollar value of the foreign currency
principal amount of such Note, and any payment with respect to accrued
interest, determined on the date such payment is received or such Note is
disposed of, and (ii) the U.S. dollar value of the foreign currency principal
amount of such Note, determined on the date such United States Noteholder
acquired such Note, and the U.S. dollar value of the accrued interest received,
determined by translating such interest at the average exchange rate for the
accrual period. Such foreign currency gain or loss will be recognized only to
the extent of the total gain or loss realized by a United States Noteholder on
the sale, exchange or retirement of the Foreign Currency Note. The source of
such foreign currency gain or loss will be determined by reference to the
residence of the holder or the "qualified business unit" of the holder on whose
books the Note is properly reflected. Any gain or loss realized by such a
holder in excess of such foreign currency gain or loss will be capital gain or
loss (except in the case of a short-term Discount Note, to the extent of any
original issue discount not previously included in the holder's income).
A United States Noteholder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a Foreign Currency Note equal
to the U.S. dollar value of such foreign currency, determined at the time of
such sale, exchange or retirement. Regulations issued under Section 988 of the
Code provide a special rule for purchases and sales of publicly traded Foreign
Currency Notes by a cash method taxpayer
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under which units of foreign currency paid or received are translated into U.S.
dollars at the spot rate on the settlement date of the purchase or sale.
Accordingly, no exchange gain or loss will result from currency fluctuations
between the trade date and the settlement of such purchase or sale. An accrual
method taxpayer may elect the same treatment required of cash method taxpayers
with respect to the purchase and sale of publicly traded Foreign Currency Notes
provided the election is applied consistently. Such election cannot be changed
without the consent of the Internal Revenue Service. Any gain or loss realized
by a United States Noteholder on a sale or other disposition of foreign
currency (including its exchange for U.S. dollars or its use to purchase
Foreign Currency Notes) will be ordinary income or loss.
UNITED STATES TAXATION--FOREIGN NOTEHOLDERS
The following summary describes the principal United States federal income
and estate tax consequences of ownership and disposition of the Notes by a
Foreign Noteholder (as defined below). This summary is based on the Code and
existing and proposed Treasury regulations, revenue rulings and judicial
decisions. This summary does not discuss all of the tax consequences that may
be relevant to holders in light of their particular circumstances or to holders
subject to special rules, such as persons other than Foreign Noteholders,
nonresident alien individuals that have lost their United States citizenship or
that have ceased to be treated as resident aliens, corporations that are
treated as foreign or domestic personal holding companies, controlled foreign
corporations, or passive foreign investment companies and Foreign Noteholders
that are owned or controlled by United States Noteholders. Persons considering
the purchase of Notes should consult with their own tax advisors with regard to
the application of the United States federal income and estate tax laws to
their particular situations as well as any tax consequences arising under the
laws of any state, local or foreign tax jurisdiction or under an applicable tax
treaty.
As used herein, the term "Foreign Noteholder" means a beneficial owner of a
Note that is for United States federal income tax purposes (i) a nonresident
alien individual, (ii) a corporation, partnership or other entity that was not
created or organized in or under the laws of the United States or any political
subdivision thereof or (iii) a nonresident alien or foreign fiduciary or
grantor of a trust or estate.
Under present United States federal tax law, and subject to the discussion
below concerning backup withholding:
(a) payments of principal, interest (including original issue discount,
if any) and premium on the Notes by the Company or any paying agent to any
Foreign Noteholder will not be subject to United States federal withholding
tax, provided that, in the case of interest, (i) such holder does not own,
actually or constructively, 10 percent or more of the total combined voting
power of all classes of stock of the Company entitled to vote, is not a
controlled foreign corporation related, directly or indirectly, to the
Company through stock ownership, and is not a bank receiving interest
described in Section 881(c)(3)(A) of the Code and (ii) the statement
requirement set forth in Section 871(h) or Section 881(c) of the Code has
been fulfilled with respect to the beneficial owner, as discussed below;
and
(b) a Foreign Noteholder will not be subject to United States federal
income tax on gain realized on the sale, exchange or other disposition of a
Note, unless (i) such holder is an individual who is present in the United
States for 183 days or more in the taxable year of disposition, and either
(a) such individual has a "tax home" (as defined in Code Section 911(d)(3))
in the United States (unless such gain is attributable to a fixed place of
business in a foreign country maintained by such individual and has been
subject to foreign tax of at least 10%) or (b) the gain is attributable to
an office or other fixed place of business maintained by such individual in
the United States or (ii) such gain is effectively connected with the
conduct by such holder of a trade or business in the United States.
Sections 871(h) and 881(c) of the Code require that, in order to obtain the
portfolio interest exemption from withholding tax described in paragraph (a)
above in the case of a Note issued in registered form, either the beneficial
owner of the Note or a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business (a "Financial Institution") and that
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is holding the Note on behalf of such beneficial owner, files a statement with
the withholding agent to the effect that the beneficial owner of the Note is
not a United States Noteholder. Under temporary United States Treasury
Regulations, such requirement will be fulfilled if the beneficial owner of a
Note certifies on Internal Revenue Service Form W-8, under penalties of
perjury, that it is not a United States Noteholder and provides its name and
address, and any Financial Institution holding the Note on behalf of the
beneficial owner files a statement with the withholding agent to the effect
that it has received such a statement from the holder (and furnishes the
withholding agent with a copy thereof). Recently enacted legislation provides
that the portfolio interest exemption from withholding tax described in
paragraph (a) above will not apply to contingent interest if the amount of such
interest is determined with reference to the profitability of the Company. The
Company does not expect any interest on the Notes to be subject to this
provision.
If a Foreign Noteholder is engaged in a trade or business in the United
States, and if interest (including original issue discount) on the Note is
effectively connected with the conduct of such trade or business, the Foreign
Noteholder, although exempt from the withholding tax discussed in the preceding
paragraph, will generally be subject to regular United States income tax on
interest (including any original issue discount) and on any gain realized on
the sale, exchange or other disposition of a Note in the same manner as if it
were a United States Noteholder. See "United States Taxation--United States
Noteholders" above. In lieu of the certificate described in the preceding
paragraph, such a holder will be required to provide to the Company a properly
executed Internal Revenue Service Form 4224 in order to claim an exemption from
withholding tax. In addition, if such Foreign Noteholder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or such
lower rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments. For
purposes of the branch profits tax, interest (including original issue
discount) on and any gain recognized on the sale, exchange or other disposition
of a Note will be included in the effectively connected earnings and profits of
such Foreign Noteholder if such interest or gain, as the case may be, is
effectively connected with the conduct by the Foreign Noteholder of a trade or
business in the United States.
Under Section 2105(b) of the Code, a Note held by an individual who is not a
citizen or resident of the United States at the time of his death will not be
subject to United States federal estate tax as a result of such individual's
death, provided that the individual does not own, actually or constructively,
10 percent or more of the total combined voting power of all classes of stock
of the Company entitled to vote and, at the time of such individual's death,
payments with respect to such Note would not have been effectively connected to
the conduct by such individual of a trade or business in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, a 31% backup withholding
tax and information reporting requirements apply to certain payments of
principal, premium and interest (including original issue discount) made to,
and to the proceeds of sale before maturity by, certain noncorporate United
States persons. Under current Treasury Regulations, backup withholding will not
apply to payments made on a Note issued in registered form if the
certifications required by Sections 871(h) and 881(c) are received, provided in
each case that the Company or such paying agent, as the case may be, does not
have actual knowledge that the payee is a United States person.
Under current Treasury Regulations, payments on the sale, exchange or other
disposition of a Note made to or through a foreign office of a broker generally
will not be subject to backup withholding. However, if such broker is a United
States person, a controlled foreign corporation for United States tax purposes
or a foreign person 50 percent or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting will be required unless the broker has in its
records documentary evidence that the beneficial owner is not a United States
person and certain other conditions are met or the beneficial owner otherwise
establishes an exemption. Under proposed Treasury Regulations, backup
withholding may apply to any payment which such broker is required to report if
such broker has actual knowledge that the payee is a United States person.
Payments to or through the United
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States office of a broker will be subject to backup withholding and information
reporting unless the holder certifies, under penalties of perjury, that it is
not a United States person or otherwise establishes an exemption.
Foreign Noteholders should consult their tax advisers regarding the
application of information reporting and backup withholding in their particular
situations, the availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if available. Any amounts withheld from a payment
to a Foreign Noteholder under the backup withholding rules will be allowed as a
credit against such holder's United States federal income tax liability and may
entitle such holder to a refund, provided that the required information is
furnished to the United States Internal Revenue Service.
PLAN OF DISTRIBUTION OF NOTES
The Company has entered into a Distribution Agreement with Morgan Stanley &
Co. Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation, Goldman,
Sachs & Co., Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, J.P. Morgan Securities Inc., Dain Bosworth
Incorporated and Piper Jaffray Inc., and may enter into similar agreements with
other agents (collectively, the "Agents"). Under the terms of such Distribution
Agreement and any such other similar agreements, the Notes will be offered on a
continuing basis by the Company through the Agents, each of which has agreed or
will have agreed to use its reasonable efforts to solicit purchases of the
Notes. The Company will pay each Agent a commission of from .125% to .750% (or
such other amount as may be specified in the applicable Pricing Supplement) of
the principal amount of each Note, depending on its maturity, sold through such
Agent. The Company will have the sole right to accept offers to purchase Notes
and may reject any offer, in whole or in part. Each Agent shall have the right
to reject any offer to purchase Notes received by it, in whole or in part. The
Company will also have the right to sell Notes to any Agent, acting as
principal, at a discount to be agreed upon at the time of sale, for resale to
one or more investors or other purchasers at varying prices related to
prevailing market prices at the time of such resale, as determined by such
Agent. In addition, such Agent may offer the Notes it has purchased as
principal to other dealers. Such Agent may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer will not be in excess of 66 2/3% of the
discount to be received by such Agent.
In the course of their respective businesses, certain of the affiliates of
J.P. Morgan Securities Inc., one of the Agents, have engaged and may in the
future engage in commercial banking transactions with the Company and
affiliates of the Company. Certain of the other Agents and their associates may
also be customers of, engage in transactions with and perform services for the
Company, including its subsidiaries, in the ordinary course of business.
The Notes may also be sold by the Company directly to investors in those
jurisdictions in which the Company is permitted to do so. No commission will be
paid on Notes sold directly by the Company.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in funds immediately
available in The City of New York.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 (the "Act"). The Company has agreed or will have agreed
to indemnify the Agents against and contribute toward certain liabilities,
including liabilities under the Act. The Company also has agreed or will have
agreed to reimburse the Agents for certain expenses in connection with the
offering of the Notes.
Each of the Agents may from time to time purchase and sell Notes in the
secondary market, but will not be obligated to do so, and there can be no
assurance that there will be a secondary market for the Notes or liquidity in
the secondary market if one develops. From time to time, each of the Agents may
make a market in the Notes.
The Company has authorized or will authorize the Agents to solicit offers by
certain institutions to purchase Notes pursuant to delayed delivery contracts.
See "Plan of Distribution" in the Prospectus.
S-22
<PAGE>
VALIDITY OF SECURITIES
The validity of the Notes has been passed upon for the Company by Dorsey &
Whitney P.L.L.P., Pillsbury Center South, 220 South Sixth Street, Minneapolis,
Minnesota 55402-1498, and for the Agents by Davis Polk & Wardwell, 450
Lexington Avenue, New York, New York 10017. Davis Polk & Wardwell has relied as
to all matters governed by Minnesota law on the opinions of Dorsey & Whitney
P.L.L.P. and Michael J. O'Rourke, General Counsel of the Company, and Dorsey &
Whitney P.L.L.P. has relied as to all matters governed by New York law on the
opinion of Davis Polk & Wardwell. The opinions of Dorsey & Whitney P.L.L.P. and
Davis Polk & Wardwell are conditioned upon, and subject to certain assumptions
regarding, future action required to be taken by the Company and the Trustee in
connection with the issuance and sale of any particular Note, the specific
terms of Notes and other matters which may affect the validity of Notes but
which cannot be ascertained on the date of such opinions. The Dorsey & Whitney
P.L.L.P. firm and certain of its members are indebted to and have other banking
and trust relationships with certain banking subsidiaries of the Company.
S-23
<PAGE>
PROSPECTUS
$1,325,000,000
FIRST BANK SYSTEM, INC.
LOGO
DEBT SECURITIES
AND
WARRANTS TO PURCHASE DEBT SECURITIES
----------------
First Bank System, Inc. ("FBS" or the "Company") may offer from time to time
its debt securities (the "Debt Securities") in an aggregate principal amount
not to exceed $1,325,000,000, or its equivalent (based on the applicable
exchange rate at the time of the offering) in such foreign currency or units of
two or more foreign currencies as may be designated by the Company at the time
of the offering, on terms to be determined at the time of sale. The Debt
Securities may be senior debt securities (the "Senior Notes") or subordinated
debt securities (the "Subordinated Notes"). The Company may also offer, alone
or with the Debt Securities, warrants to purchase Debt Securities ("Warrants"
and, together with the Debt Securities, the "Securities"). The specific
designation, aggregate principal amount, purchase price, maturity, any interest
rate or rates (which may be fixed or variable) and time of payment of any
interest, any redemption or extension terms and other specific terms of the
Debt Securities (including any Debt Securities purchasable upon exercise of
Warrants) and the principal amount of Debt Securities purchasable upon exercise
of each Warrant and the purchase price thereof, the date on or after which the
Warrants may be exercised, the expiration date and other specific terms of the
Warrants will be set forth in one or more supplements to this Prospectus (each
a "Prospectus Supplement"). As used herein, the term "Debt Securities" shall
include securities denominated in United States dollars or, if so specified in
the applicable Prospectus Supplement, in any other currency or currency units
or in amounts determined by reference to an index.
The Senior Notes, when issued, will rank on a parity with all other unsecured
and unsubordinated indebtedness of the Company. The Subordinated Notes, when
issued, will be subordinated as described herein under "Description of Debt
Securities--Subordination of Subordinated Notes."
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COM-
MISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------
The Securities may be sold to or through underwriters, dealers or agents for
public offering or directly to other purchasers pursuant to terms of offering
fixed at the time of sale. See "Plan of Distribution." Any underwriters,
dealers or agents participating in an offering of Securities will be named in
the accompanying Prospectus Supplement or Prospectus Supplements. Such
underwriters, dealers or agents may be deemed "underwriters" within the meaning
of the Securities Act of 1933.
----------------
THE DATE OF THIS PROSPECTUS IS MAY 26, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information filed by
the Company can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Regional Offices at Seven World Trade Center, 13th floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Reports, proxy statements and
other information concerning the Company can also be inspected at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form S-
3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby
made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1994;
(b) Quarterly Report on Form 10-Q for quarter ended March 31, 1995;
(c) Current Reports on Form 8-K filed March 3, 1995 (as amended by
Amendment No. 1 on Form 8-K/A filed March 7, 1995), April 13, 1995 and
April 25, 1995; and
(d) Current Report on Form 8-K/A filed February 13, 1995 (constituting
Amendment No. 4 to the Current Report on Form 8-K filed August 5, 1994).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Securities shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the respective dates of filing of such documents.
Any statement contained herein or in a document all or any portion of which is
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.
The Company will provide without charge to any person to whom this Prospectus
is delivered, upon the written or oral request of such person, a copy of any or
all of the foregoing documents incorporated herein by reference, other than
certain exhibits to such documents for which the Company may impose a copying
charge. Requests for such copies should be directed to Ann E. Underbrink, First
Bank System, Inc., First Bank Place, 601 Second Avenue South, Minneapolis,
Minnesota 55402-4302, telephone number (612) 973-1111.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$" or "dollars").
2
<PAGE>
FIRST BANK SYSTEM, INC.
GENERAL
FBS is a regional bank holding company headquartered in Minneapolis,
Minnesota. FBS is comprised of 8 banks, a savings association and other
financial companies with 343 offices, located primarily in the 11 states of
Minnesota, Colorado, North Dakota, South Dakota, Montana, Illinois, Wisconsin,
Iowa, Kansas, Nebraska, and Wyoming. Through its subsidiaries, FBS provides
commercial and agricultural finance, consumer banking, trust, capital markets,
treasury management, investment management, data processing, leasing, mortgage
banking and brokerage services. At December 31, 1994, FBS and its consolidated
subsidiaries had consolidated assets of $34.1 billion, consolidated deposits of
$24.3 billion and shareholders' equity of $2.6 billion.
The subsidiary banks of FBS engage in general commercial banking business,
principally in domestic markets, and provide banking and ancillary services to
individuals, businesses, institutional organizations, governmental entities and
other financial institutions. The largest subsidiary bank, First Bank National
Association ("FBNA"), had assets of $14.4 billion at December 31, 1994.
Effective January 24, 1995, the Company completed its merger with
Metropolitan Financial Corporation ("MFC"), a regional financial services
holding company headquartered in Minneapolis, Minnesota. At December 31, 1994,
MFC had $7.9 billion in assets, $5.5 billion in deposits and 211 offices
located principally in North Dakota, Minnesota, Nebraska, Iowa, Kansas, South
Dakota, Wisconsin and Wyoming. The merger with MFC was accounted for using the
pooling of interests method of accounting and, in accordance with the rules of
the Commission, the Company's financial statements have been restated for all
periods prior to the merger to include the accounts and operations of MFC. The
restated supplemental financial statements were filed with the Commission in
the Company's Current Report on Form 8-K dated March 3, 1995 and became the
Company's historical financial statements upon issuance of its earnings release
for the three months ended March 31, 1995. See "Incorporation of Certain
Documents by Reference." The historical financial information of FBS as of
December 31, 1994 set forth above includes MFC.
FBS is a legal entity separate and distinct from its banking and non-banking
affiliates. The principal sources of FBS' income are dividends, interest and
fees from FBNA and the other banking and non-banking affiliates. The bank
subsidiaries of FBS, including FBNA (the "Banks"), are subject to certain
restrictions imposed by federal law on any extensions of credit to, and certain
other transactions with, FBS and certain other affiliates, and on investments
in stock or other securities thereof. Such restrictions prevent FBS and such
other affiliates from borrowing from the Banks unless the loans are secured by
various types of collateral. Further, such secured loans, other transactions
and investments by any of the Banks are generally limited in amount as to FBS
and as to each of such other affiliates to 10% of such Bank's capital and
surplus and as to FBS and all of such other affiliates to an aggregate of 20%
of such Bank's capital and surplus. In addition, payment of dividends to FBS by
the subsidiary banks is subject to ongoing review by banking regulators and is
subject to various statutory limitations and in certain circumstances requires
approval by banking regulatory authorities.
FBS was incorporated under Delaware law in 1929 and has functioned as a
multi-bank holding company since that time. Its principal executive offices are
located at First Bank Place, 601 Second Avenue South, Minneapolis, Minnesota
55402-4302 (telephone (612) 973-1111). For further information concerning FBS,
see the FBS documents incorporated by reference herein as described under
"Incorporation of Certain Documents by Reference."
USE OF PROCEEDS
The net proceeds from the sale of the Securities will be used for general
corporate purposes, including repayment of outstanding indebtedness of the
Company, investments in, or extension of credit to, the Company's subsidiaries
and possible acquisitions. Specific allocations of the proceeds to such
purposes may
3
<PAGE>
not have been made at the date of the applicable Prospectus Supplement,
although management of the Company will have determined that funds should be
borrowed at that time in anticipation of future funding requirements. The
precise amount and timing of the application of such proceeds will depend upon
the funding requirements of the Company and the availability and cost of other
funds. Pending such application, such net proceeds may be temporarily invested
or applied to the reduction of short-term indebtedness.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of the
Company for the respective periods indicated. These ratios have been restated
for the merger with MFC described above.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Excluding interest on deposits......................... 1.19 2.12 2.71 4.09 2.69
Including interest on deposits......................... 1.05 1.21 1.33 1.68 1.57
</TABLE>
For purposes of computing these ratios, earnings represent income from
continuing operations before income taxes and cumulative effect of changes in
accounting principles and fixed charges (excluding capitalized interest). Fixed
charges, excluding interest on deposits, include interest (other than on
deposits but including capitalized interest) and the portion deemed
representative of the interest factor of rents. Fixed charges, including
interest on deposits, include all interest (including capitalized interest) and
the portion deemed representative of the interest factor of rents.
DESCRIPTION OF DEBT SECURITIES
The Senior Notes will be issued under an Indenture dated as of October 1,
1991 (the "Senior Note Indenture") between the Company and Citibank, N.A., as
Trustee (the "Senior Note Trustee"), and the Subordinated Notes will be issued
under an Indenture dated as of October 1, 1991, as amended by a First
Supplemental Indenture dated as of April 1, 1993 (as so amended, the
"Subordinated Note Indenture" and, together with the Senior Note Indenture, the
"Indentures") between the Company and Citibank, N.A., as Trustee (the
"Subordinated Note Trustee"). Copies of the Indentures have been filed as
exhibits to the Registration Statement of which this Prospectus is a part. The
following brief summaries of certain provisions of the Indentures do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the applicable Indenture. Certain
terms capitalized and not otherwise defined herein are defined in one or both
of the Indentures.
The Debt Securities may be issued from time to time in one or more series.
The terms of each series of Debt Securities will be established by or pursuant
to a resolution of the Board of Directors of the Company (a "Board Resolution")
and set forth or determined in the manner provided in an Officers' Certificate
or by a supplemental indenture. The particular terms of the Debt Securities
offered pursuant to any Prospectus Supplement or Prospectus Supplements will be
described in such Prospectus Supplement or Prospectus Supplements.
Because the Company is a holding company, its rights and the rights of its
creditors, including the holders of the Debt Securities offered hereby, to
participate in the assets of any subsidiary upon the latter's liquidation or
reorganization will be subject to the prior claims of such subsidiary's
creditors, except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary. Any capital loans by the Company to
any of the Banks would be subordinate in right of payment to deposits and to
certain other indebtedness of such Banks. Claims on the subsidiaries by
creditors other than the Company may include long-term and medium-term debt and
substantial obligations with respect to deposit liabilities, federal funds
purchased, securities sold under repurchase agreements and other short-term
borrowings.
4
<PAGE>
GENERAL
The Indentures do not limit the aggregate principal amount of Debt Securities
which may be issued thereunder nor the amount of other debt which may be issued
by the Company. The Debt Securities will be unsecured obligations of the
Company and those issued under the Senior Note Indenture will rank on a parity
with all other unsecured and unsubordinated indebtedness of the Company, while
those issued under the Subordinated Note Indenture will be subordinated as
hereinafter described under "Subordination of Subordinated Notes."
Unless otherwise indicated in the applicable Prospectus Supplement or
Prospectus Supplements, the Debt Securities of any series will be issued only
in fully registered form in denominations of $1,000 or any amount in excess
thereof which is an integral multiple of $1,000. (Section 302) Debt Securities
may be issuable in the form of one or more Global Securities, as described
below under "Global Securities." A Global Security will be issued in a
denomination equal to the aggregate principal amount of outstanding Debt
Securities of the series represented by such Global Security. The Debt
Securities (other than those issued in the form of a Global Security) are
exchangeable or transferable without charge therefor, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith and require the holders to furnish
appropriate endorsements and transfer documents. (Section 305)
Debt Securities may be issued as Original Issue Discount Debt Securities to
be sold at a substantial discount below their principal amount. Special Federal
income tax and other considerations applicable thereto and special Federal tax
and other considerations applicable to any Debt Securities which are
denominated in a currency or currency unit other than United States dollars
will be described in the Prospectus Supplement or Prospectus Supplements
relating thereto.
Unless otherwise indicated in the applicable Prospectus Supplement or
Prospectus Supplements, 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 principal corporate trust office of the applicable Trustee.
In addition, unless otherwise provided in the applicable Prospectus Supplement
or Prospectus Supplements, payment of interest may be made at the option of the
Company by check mailed to the address of the person entitled thereto as it
appears on the Security Register. (Sections 301, 305, 1001 and 1002)
The applicable Prospectus Supplement or Prospectus Supplements will describe
the terms of the Debt Securities offered thereby, including the following: (1)
the title of the offered Debt Securities; (2) whether the offered Debt
Securities are Senior Notes or Subordinated Notes; (3) any limit on the
aggregate principal amount of the offered Debt Securities; (4) the price or
prices (expressed as a percentage of the aggregate principal amount thereof) at
which the offered Debt Securities will be issued; (5) the date or dates on
which the offered Debt Securities will mature and any rights of extension; (6)
the rate or rates, if any (which may be fixed or variable), per annum at which
the offered Debt Securities will bear interest, if any, or the formula pursuant
to which such rate or rates shall be determined, and the date from which any
such interest will accrue; (7) the dates on which any such interest on the
offered Debt Securities will be payable and the regular record dates therefor;
(8) any mandatory or optional sinking fund or analogous provisions; (9) the
period or periods, if any, within which and the price or prices at which the
offered Debt Securities may be redeemed, pursuant to any redemption provisions,
at the option of the Company or of the holder thereof and other detailed terms
of any such optional redemption provision; (10) the currency or currency units,
including European Currency Units ("ECUs") or other composite currencies, for
the payment of principal of and any premium and interest payable on the offered
Debt Securities, if other than United States dollars; (11) the place or places
where the principal of and any premium and interest on the offered Debt
Securities will be payable; (12) any other event or events of default
applicable with respect to the offered Debt Securities in addition to or in
lieu of those described under "Events of Default"; (13) the denominations in
which any offered Debt Securities will be issuable, if other than denominations
of $1,000 or any amount in excess thereof which is an integral multiple of
$1,000; (14) whether such Debt Securities are to be issued in whole or in part
in the form of one or more Global Securities and, if so, the identity of the
Depositary for such Global Security
5
<PAGE>
or Securities and the circumstances under which any such Global Security may be
exchanged for Securities registered in the name of, and any transfer of such
Global Security may be registered to, a Person other than such Depositary or
its nominee; and (15) any other terms of the offered Debt Securities not
inconsistent with the provisions of the Indenture.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the form
of one or more Global Securities that will be deposited with, or on behalf of,
a Depositary identified in the applicable Prospectus Supplement or Prospectus
Supplements. Unless otherwise indicated in the applicable Prospectus Supplement
or Prospectus Supplements, Global Securities will be issued in registered form.
(Section 305) The specific terms of the depositary arrangement with respect to
a series of Debt Securities will be described in the applicable Prospectus
Supplement or Prospectus Supplements.
SUBORDINATION OF SUBORDINATED NOTES
The payment of the principal of and interest on the Subordinated Notes will,
to the extent set forth in the Subordinated Note Indenture, be subordinate in
right of payment to the prior payment in full of all Senior Indebtedness of the
Company. (Section 1301) In certain events of insolvency, the payment of the
principal of and interest on the Subordinated Notes will, to the extent set
forth in the Subordinated Note Indenture, also be effectively subordinated in
right of payment to the prior payment in full of all General Obligations. No
payment pursuant to the Subordinated Notes may be made and no Holder of the
Subordinated Notes shall be entitled to demand or receive any such payment
unless all amounts of principal of, premium, if any, and interest then due on
all Senior Indebtedness of the Company shall have been paid in full or duly
provided for and, at the time of such payment or immediately after giving
effect thereto, there shall not exist with respect to any such Senior
Indebtedness any event of default permitting the holders thereof to accelerate
the maturity thereof or any event which, with notice or lapse of time or both,
would become such an event of default. (Section 1302) Upon any payment or
distribution of the assets of the Company in connection with dissolution,
winding-up, liquidation or reorganization, the holders of Senior Indebtedness
of the Company will be entitled to receive payment in full of principal,
premium, if any, and interest in accordance with the terms of such Senior
Indebtedness before any payment is made on the Subordinated Notes. (Section
1303) If upon any such payment or distribution of assets to creditors, there
remains, after giving effect to such subordination provisions in favor of the
holders of Senior Indebtedness, any amount of cash, property or securities
available for payment or distribution in respect of Subordinated Notes (as
defined in the Subordinated Note Indenture, "Excess Proceeds") and if, at such
time, any creditors in respect of General Obligations have not received payment
in full of all amounts due or to become due on or in respect of such General
Obligations, then such Excess Proceeds shall first be applied to pay or provide
for the payment in full of such General Obligations before any payment or
distribution may be made in respect of the Subordinated Notes. (Section 1314)
"Senior Indebtedness" of the Company is defined in the Subordinated Note
Indenture to mean the principal of, premium, if any, and interest on (1) all
indebtedness of the Company for money borrowed, whether outstanding on the date
of execution of the Subordinated Note Indenture or thereafter created, assumed
or incurred (including, without limitation, any Senior Notes issued pursuant to
the Senior Note Indenture), except (a) such indebtedness as is by its terms
expressly stated to rank junior in the right of payment to the Subordinated
Notes or to rank pari passu with the Subordinated Notes and (b) the Company's
Subordinated Floating Rate Notes Due November 2010 and its Floating Rate
Subordinated Capital Notes Due 1996, and (2) any deferrals, renewals or
extensions of any such Senior Indebtedness. "General Obligations" of the
Company are defined in the Subordinated Note Indenture to mean all obligations
of the Company to make payment on account of claims of general creditors, other
than (1) obligations on account of Senior Indebtedness and (2) obligations on
account of the Subordinated Notes and indebtedness of the Company for money
borrowed ranking pari passu with or subordinate to the Subordinated Notes;
provided, however, that if the Board of Governors of the Federal Reserve System
(or other competent regulatory agency
6
<PAGE>
or authority) shall promulgate any rule or issue any interpretation defining or
describing the term "general creditor" or "general creditors" for purposes of
its criteria for the inclusion of subordinated debt of a bank holding company
in capital, the term "General Obligations" shall mean obligations to "general
creditors" as defined or described in such rule or interpretation, as from time
to time in effect, other than obligations described in clauses (1) and (2)
above. The term "claim" as used in the foregoing definition has the meaning
assigned thereto in Section 101(5) of the Bankruptcy Code of 1978, as amended
to April 1, 1993. The term "indebtedness of the Company for money borrowed" is
defined to mean any obligation of, or any obligation guaranteed by, the Company
for the repayment of money borrowed, whether or not evidenced by bonds,
debentures, notes or other written instruments, and any deferred obligation for
the payment of the purchase price of property or assets. (Section 101)
By reason of the subordination described above, in the event of the
bankruptcy, insolvency or reorganization of the Company, holders of Senior
Indebtedness of the Company may receive more, ratably, and Holders of the
Subordinated Notes may receive less, ratably, than creditors of the Company who
are not holders of Senior Indebtedness or of the Subordinated Notes. Such
subordination will not prevent the occurrence of any Event of Default in
respect of the Subordinated Notes. Unless otherwise specified in the applicable
Prospectus Supplement or Prospectus Supplements, the Subordinated Note
Indenture does not provide for any right of acceleration of the payment of
principal of the Subordinated Notes upon a default in the payment of principal
or interest or in the performance of any covenant or agreement in the
Subordinated Notes or the Subordinated Note Indenture. See "Events of Default"
below.
The subordination provisions of the Subordinated Note Indenture described
herein are provided for the benefit of the holders of Senior Indebtedness and
are not intended for the benefit of creditors in respect of General
Obligations. The Company and the Subordinated Note Trustee may amend the
Subordinated Note Indenture to reduce or eliminate the rights of creditors in
respect of General Obligations without the consent of such creditors or the
Holders of the Subordinated Notes. Upon (1) the promulgation of any rule or
regulation or the issuance of any interpretation by the Board of Governors of
the Federal Reserve System (or other competent regulatory agency or authority)
that (a) permits the Company to include the Subordinated Notes in its capital
if they were subordinated in right of payment to Senior Indebtedness without
regard to any other obligations of the Company, (b) otherwise eliminates the
requirement that subordinated debt of a bank holding company must be
subordinated in right of payment to its "general creditors" in order to be
included in capital or (c) causes the Subordinated Notes to be excluded from
capital notwithstanding the subordination provisions described above, or (2)
any event that results in the Company no longer being subject to capital
requirements of bank regulatory authorities, the provisions of the Subordinated
Note Indenture providing for subordination of the Subordinated Notes in favor
of creditors in respect of General Obligations shall immediately and
automatically be terminated without further action by the Company or the
Subordinated Note Trustee. (Section 1315)
RESTRICTIVE COVENANTS
Subject to the provisions described under "Consolidation, Merger and Sale of
Assets," the Senior Note Indenture prohibits the issuance, sale or other
disposition of shares of or securities convertible into, or options, warrants
or rights to subscribe for or purchase shares of, Voting Stock of a Principal
Subsidiary Bank, the merger or consolidation of a Principal Subsidiary Bank
with or into any other corporation or the sale or other disposition of all or
substantially all of the assets of a Principal Subsidiary Bank if, after giving
effect to any such transaction and the issuance of the maximum number of shares
of Voting Stock issuable upon the conversion or exercise of all such
convertible securities, options, warrants or rights, the Company would own,
directly or indirectly, 80% or less of the shares of Voting Stock of such
Principal Subsidiary Bank or the successor bank in such merger or consolidation
or the bank which acquires such assets, as the case may be. (Section 1007)
In the Senior Note Indenture the Company covenants that it will not create,
assume, incur or suffer 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
7
<PAGE>
Stock of a Principal Subsidiary Bank owned by the Company, directly or
indirectly, without making effective provision whereby the Senior Notes of all
series shall be equally and ratably secured, if, treating such pledge,
encumbrance or lien as a transfer to the secured party, and after giving effect
to the issuance of the maximum number of shares of Voting Stock issuable upon
conversion or exercise of such convertible securities, options, warrants or
rights, the Company would own, directly or indirectly, 80% or less of the
shares of Voting Stock of such Principal Subsidiary Bank. (Section 1008)
The term "Principal Subsidiary Bank" is defined in the Indentures as FBNA and
any successor.
Except as may be otherwise specified in the applicable Prospectus Supplement,
the Subordinated Note Indenture does not contain either of the restrictive
covenants set forth above with respect to the Senior Note Indenture nor does it
contain any other provision which restricts the Company from incurring or
becoming liable with respect to any Senior Indebtedness or any General
Obligations, whether secured or unsecured, or from paying dividends or making
other distributions on its capital stock or purchasing or redeeming its capital
stock or from creating any liens on its property for any purpose.
Except as may be otherwise specified in the applicable Prospectus Supplement,
neither Indenture contains covenants specifically designed to protect Holders
in the event of a highly leveraged transaction involving the Company.
EVENTS OF DEFAULT
The following events are defined in the Senior Note Indenture as "Events of
Default" with respect to any series of Senior Notes, unless otherwise provided
with respect to such series: (1) failure to pay any interest on any Senior Note
of that series when due and payable, continued for 30 days; (2) failure to pay
principal of or any premium on any Senior Note of that series when due and
payable; (3) failure to deposit any sinking fund payment, when due, in respect
of any Senior Note of that series; (4) failure to perform any other covenant of
the Company in the Senior Note Indenture (other than a covenant included in the
Senior Note Indenture solely for the benefit of a series of Senior Notes other
than that series), continued for 60 days after written notice as provided in
the Senior Note Indenture; (5) the occurrence of an event of default under any
indenture or instrument under which the Company or a Principal Subsidiary Bank
has or shall hereafter have outstanding indebtedness for borrowed money in
excess of $5,000,000 which has become due and payable by its terms and has not
been paid or whose maturity has been accelerated and such payment default has
not been cured or such acceleration has not been annulled within 60 days after
written notice as provided in the Senior Note Indenture; (6) certain events in
bankruptcy, insolvency or reorganization involving the Company or a Principal
Subsidiary Bank; and (7) any other Event of Default provided with respect to
Senior Notes of that series. The only events defined in the Subordinated Note
Indenture as "Events of Default" with respect to any series of Subordinated
Notes, unless otherwise provided with respect to such series, are (1) certain
events in bankruptcy, insolvency or reorganization involving the Company; (2)
certain events involving the receivership, conservatorship or liquidation of a
Principal Subsidiary Bank; and (3) any other Event of Default provided with
respect to Subordinated Notes of that series. (Section 501)
If an Event of Default with respect to any series of Debt Securities
Outstanding under either Indenture occurs and is continuing, then either the
applicable Trustee or the Holders of at least 25% in aggregate principal amount
of the Outstanding Debt Securities of that series by notice as provided in the
applicable Indenture may declare the principal amount (or, if any of the Debt
Securities of that series are Original Issue Discount Debt Securities, such
lesser portion of the principal amount of such Debt Securities as may be
specified in the terms thereof) of all of the Debt Securities of that series to
be due and payable immediately. At any time after a declaration of acceleration
with respect to Debt Securities of any series has been made, but before a
judgment or decree for payment of money has been obtained by the applicable
Trustee, the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration. (Section 502)
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Each Indenture provides that, subject to the duty of the applicable Trustee
during default to act with the required standard of care, such 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 such Trustee reasonable indemnity. (Sections
601, 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 applicable
Trustee, or exercising any trust or power conferred on such Trustee, with
respect to the Debt Securities of that series. (Section 512)
The Company is required to furnish to each Trustee annually a statement as to
the performance by the Company of certain of its obligations under the
applicable Indenture and as to any default in such performance. (Section 704)
MODIFICATION AND WAIVER
Modifications and amendments of the Indentures may be made by the Company and
the applicable Trustee with the consent of the Holders of not less than a
majority 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 affected thereby, (1) change the Stated Maturity
of the principal of, or any installment of principal of or interest on, any
Debt Security, (2) reduce the principal amount of, or premium or interest on,
any Debt Security, (3) change any obligation of the Company to pay additional
amounts, (4) reduce the amount of principal of an Original Issue Discount Debt
Security due and payable upon acceleration of the Maturity thereof, (5) change
the place of payment where or coin or currency in which the principal of, or
any premium or interest on, any Debt Security is payable, (6) impair the right
to institute suit for the enforcement of any payment on or with respect to any
Debt Security, (7) reduce the percentage in principal amount of Outstanding
Debt Securities of any series, the consent of the Holders of which is required
for modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the applicable Indenture or for waiver of certain
defaults, (8) modify the provisions of the Subordinated Note Indenture with
respect to the subordination of any Subordinated Notes in a manner adverse to
the Holders thereof, or (9) modify any of the above provisions. (Section 902)
The Holders of not less than a majority in aggregate principal amount of the
Outstanding Debt Securities of each series may, on behalf of the Holders of all
Debt Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the applicable
Indenture. (Section 1009) The Holders of not less than a majority in aggregate
principal amount of the Outstanding Debt Securities of each series may, on
behalf of the Holders of all Debt Securities of that series, waive any past
default under the applicable Indenture with respect to Debt Securities of that
series, except a default (1) in the payment of principal of, or any premium or
interest on, any Senior Notes, or (2) in respect of a covenant or provision of
the applicable Indenture which cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of such series
affected. (Section 513)
Each Indenture provides that, in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or whether a quorum is present at a meeting of Holders of Debt Securities, (1)
the principal amount of an Original Issue Discount Debt Security that will be
deemed to be Outstanding will be the amount of the principal thereof that would
be due and payable as of the date of such determination upon acceleration of
the Maturity thereof to such date, and (2) the principal amount of a Debt
Security denominated in a foreign currency or currency unit that will be deemed
to be Outstanding will be the United States dollar equivalent, determined as of
the date of original issuance of such Debt Security, of the principal amount of
such Debt Security (or, in the case of an Original Issue Discount Debt
Security, the United States dollar equivalent, determined as of the date of
original issuance of such Debt Security, of the amount determined as provided
in (1) above). (Section 101)
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CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Outstanding
Debt Securities under either Indenture, may consolidate or merge with or into,
or convey, transfer or lease its properties and assets substantially as an
entirety to, any Person which is a corporation, partnership or trust organized
and validly existing under the laws of any domestic jurisdiction, provided that
any successor Person assumes the Company's obligations on the Debt Securities
and under such Indenture, that after giving effect to the transaction no Event
of Default, and no event which, after notice or lapse of time, would become an
Event of Default, shall have occurred and be continuing under such Indenture
and that certain other conditions are met. (Section 801)
REGARDING CITIBANK, N.A.
The Company and certain of its subsidiaries maintain deposits with and
conduct other banking transactions with Citibank, N.A. in the ordinary course
of business.
DESCRIPTION OF WARRANTS
The Company may issue, together with Debt Securities or separately, Warrants
for the purchase of Debt Securities. The Warrants are to be issued under
Warrant Agreements (each a "Warrant Agreement") to be entered into between the
Company and a bank or trust company, as Warrant Agent (the "Warrant Agent"),
all as shall be set forth in the Prospectus Supplement relating to Warrants
being offered thereby. A copy of the form of Warrant Agreement, including the
form of Warrant Certificates representing the Warrants (the "Warrant
Certificates"), reflecting the alternative provisions to be included in the
Warrant Agreements that will be entered into with respect to particular
offerings of Warrants, has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The following brief summaries of
certain provisions of the Warrant Agreement and the Warrant Certificates do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the applicable Warrant Agreement and
Warrant Certificates, respectively, including the definitions therein of
certain terms capitalized and not otherwise defined herein.
GENERAL
The applicable Prospectus Supplement or Prospectus Supplements will describe
the terms of the Warrants offered thereby, the Warrant Agreement relating to
such Warrants and the Warrant Certificates representing such Warrants,
including the following: (1) the designation, aggregate principal amount and
terms of the Debt Securities purchasable upon exercise of such Warrants and the
procedures and conditions relating to the exercise of such Warrants; (2) the
designation and terms of any related Debt Securities with which such Warrants
are issued and the number of such Warrants issued with each such Debt Security;
(3) the date, if any, on and after which such Warrants and the related Debt
Securities will be separately transferable; (4) the principal amount of Debt
Securities purchasable upon exercise of each Warrant and the price at which
such principal amount of Debt Securities may be purchased upon such exercise;
(5) the date on which the right to exercise such Warrants shall commence and
the date on which such right shall expire (the "Expiration Date"); (6) if the
Debt Securities purchasable upon exercise of such Warrants are Original Issue
Discount Debt Securities, a discussion of Federal income tax considerations
applicable thereto; and (7) whether the Warrant Certificates representing such
Warrants will be issued in registered or bearer form, and, if registered, where
they may be transferred and registered.
Warrant Certificates will be exchangeable for new Warrant Certificates of
different authorized denominations and Warrants may be exercised at the
corporate trust office of the Warrant Agent or any other office indicated in
the applicable Prospectus Supplement or Prospectus Supplements. Prior to the
exercise of their Warrants, holders of Warrants will not have any of the rights
of holders of the Debt Securities purchasable upon such exercise and will not
be entitled to payments of principal of, and any premium or interest on, such
Debt Securities.
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EXERCISE OF WARRANTS
Each Warrant will entitle the Holder to purchase such principal amount of
Debt Securities at such exercise price as shall in each case be set forth in,
or be determinable as set forth in, the applicable Prospectus Supplement or
Prospectus Supplements. Warrants may be exercised during the period or periods
set forth in the applicable Prospectus Supplement or Prospectus Supplements.
After the close of business on the Expiration Date, unexercised Warrants will
become void.
Warrants may be exercised as set forth in the applicable Prospectus
Supplement or Prospectus Supplements. Upon receipt of payment of the exercise
price and the properly completed and duly executed purchase form set forth in
the Warrant Certificate at the corporate trust office of the Warrant Agent or
any other office indicated in the applicable Prospectus Supplement or
Prospectus Supplements, the Company will, as soon as practicable, forward the
Debt Securities purchasable upon such exercise to the person entitled thereto.
If less than all of the Warrants represented by such Warrant Certificates are
exercised, a new Warrant Certificate will be issued for the remaining amount of
Warrants.
FOREIGN CURRENCY RISKS
GENERAL
Debt Securities of a series may be denominated in and the principal of, and
any interest or premium on, such Debt Securities may be payable in such foreign
currencies or currency units as may be designated by the Company at the time of
offering (the "Foreign Currency Securities"). The following is a summary of
certain risks relating to Foreign Currency Securities. A description of
material risks relating to a particular series of Foreign Currency Securities
will be set forth in the applicable Prospectus Supplement or Prospectus
Supplements.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Securities entails significant risks that
are not associated with a similar investment in a security denominated in
United States dollars. Such risks include, without limitation, the possibility
of significant changes in the rate of exchange between the United States dollar
and the currency or currency unit designated in the applicable Prospectus
Supplement (the "Specified Currency") and the possibility of the imposition or
modification of foreign exchange controls by either the United States or
foreign governments. Such risks generally depend on economic and political
events over which the Company has no control. In recent years, rates of
exchange between the United States dollar and certain foreign currencies have
been highly volatile and such volatility may be expected in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations in the rate that may occur
during the term of any Foreign Currency Security. Depreciation of the Specified
Currency applicable to a Foreign Currency Security against the United States
dollar would result in a decrease in the United States dollar-equivalent yield
of such Debt Security (or the Debt Security purchasable upon exercise of any
Warrant), in the United States dollar-equivalent value of the principal
repayable at maturity of such Debt Security (or the Debt Security purchasable
upon exercise of such Warrant) and, generally, in the United States dollar-
equivalent market value of such Security.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls at or prior to a Foreign Currency
Security's maturity (or the maturity of the Debt Security issuable upon
exercise of a Warrant). Even if there are no exchange controls, it is possible
that the Specified Currency for any particular Foreign Currency Security would
not be available at such Debt Security's maturity (or the maturity of the Debt
Security issuable upon exercise of a Warrant) due to other circumstances beyond
the control of the Company.
JUDGMENTS
If an action based on Foreign Currency Securities were commenced in a court
of the United States, it is likely that such court would grant judgment
relating to such Securities only in United States dollars. It is not clear,
however, whether, in granting such judgment, the rate of conversion into United
States dollars would
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be determined with reference to the date of default, the date judgment is
rendered or some other date. Under current New York law, a state court in the
State of New York rendering a judgment on a Foreign Currency Security would be
required to render such judgment in the Specified Currency in which such
Foreign Currency Security is denominated, and such judgment would be converted
into United States dollars at the exchange rate prevailing on the date of entry
of the judgment. Holders of Foreign Currency Securities would bear the risk of
exchange rate fluctuations between the time the amount of the judgment is
calculated and the time the applicable Trustee converts United States dollars
to the Specified Currency for payment of the judgment.
LIMITED FACILITIES FOR CONVERSION
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. In addition, banks
generally do not offer non-U.S. dollar denominated checking or savings account
facilities in the United States. Accordingly, payments on Foreign Currency
Securities will, unless otherwise specified in the applicable Prospectus
Supplement or Prospectus Supplements, be made from an account with a bank
located in the country issuing the Specified Currency (or, with respect to
Foreign Currency Securities denominated in ECUs, Brussels).
PLAN OF DISTRIBUTION
The Company may sell Securities to one or more underwriters for public
offering and sale by them or may sell Securities to investors directly or
through agents. The applicable Prospectus Supplement or Prospectus Supplements
will set forth the terms of the offering of the Securities, including the name
or names of any agents, underwriters or dealers, the purchase price of the
Securities and the proceeds to be received by the Company from such sale, any
underwriting discounts and other items constituting underwriters' compensation
and any discounts and commissions allowed or reallowed or paid to dealers or
agents. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers or agents may be changed from time to
time.
In connection with the sale of Securities, underwriters or agents may be
deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of Securities for whom they may act as agent. Underwriters may sell
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
Underwriters, dealers and agents participating in the distribution of
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Securities
may be deemed to be underwriting discounts and commissions, under the
Securities Act of 1933, as amended. Such underwriters, dealers and agents may
be entitled under agreements which may be entered into by the Company to
indemnification by the Company against and contribution toward certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Securities may be distributed in one or more transactions from time to
time at a fixed price or prices, which may be changed, or from time to time at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Company also may offer
and sell the Securities in exchange for one or more of its outstanding issues
of debt or convertible debt securities.
If so indicated in the applicable Prospectus Supplement or Prospectus
Supplements, the Company will authorize dealers or other persons acting as the
Company's agents to solicit offers by certain institutions to purchase
Securities from the Company at the public offering price set forth in the
applicable Prospectus Supplement or Prospectus Supplements pursuant to delayed
delivery contracts ("Contracts") providing for
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payment and delivery on the date or dates stated in the applicable Prospectus
Supplement or Prospectus Supplements. There may be limitations on the minimum
amount which may be purchased pursuant to a Contract or on the aggregate amount
of Securities which may be sold pursuant to Contracts. Any such limitations
will be set forth in the applicable Prospectus Supplement or Prospectus
Supplements. Institutions with whom Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions, but will in all cases be subject to the approval of the Company.
The obligations of any purchaser under any Contract will not be subject to any
conditions except (1) 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
and (2) if Securities are being sold to underwriters, the Company shall have
sold to such underwriters the total principal amount of such Securities less
the principal amount thereof covered by Contracts.
The Securities will be a new issue of securities with no established trading
market. Any underwriters or agents to or through whom Securities are sold by
the Company for public offering and sale may make a market in such Securities,
but such underwriters and agents will not be 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 any Securities.
Certain of the underwriters, dealers and/or agents and their associates may
be customers of, engage in transactions with and perform services for the
Company, including its subsidiaries, in the ordinary course of business.
EXPERTS
The consolidated financial statements of the Company appearing in FBS'
Current Report on Form 8-K filed March 3, 1995 for the year ended December 31,
1994 have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Company by Dorsey
& Whitney P.L.L.P., 220 South Sixth Street, Minneapolis, Minnesota 55402 and
for any underwriters or agents by Davis Polk & Wardwell, 450 Lexington Avenue,
New York, New York 10017. Davis Polk & Wardwell will rely as to all matters
governed by Minnesota law on the opinions of Dorsey & Whitney P.L.L.P. and
Michael J. O'Rourke, General Counsel of the Company, and Dorsey & Whitney
P.L.L.P. will rely as to all matters governed by New York law on the opinion of
Davis Polk & Wardwell. The Dorsey & Whitney P.L.L.P. firm and certain of its
members are indebted to and have other banking and trust relationships with
certain banking subsidiaries of the Company.
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