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RULE NO. 424(b)(2)
REGISTRATION NO.333-36587
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 8, 1997)
$3,000,000,000
FIRST CHICAGO NBD CORPORATION
MEDIUM-TERM NOTES, SERIES H
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Due More Than Nine Months From Date of Issue
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First Chicago NBD Corporation (the "Company") may offer from time to time
its Medium-Term Notes, Series H (the "Notes") which are issuable in one or
more series. The Notes offered by this Prospectus Supplement are offered in an
aggregate initial offering price of up to $3,000,000,000, or the equivalent
thereof in other currencies, including composite currencies such as the
European Currency Unit (the "Specified Currency"). See "Important Currency
Exchange Information." Such aggregate principal amount is subject to reduction
as a result of the sale of other Debt Securities, as defined below. See
"Description of Notes--General" and "Plan of Distribution" herein. The
interest rate on each Note will be either a fixed rate established by the
Company at the date of issue of such Note, which may be zero in the case of
certain Original Issue Discount Securities, or a floating rate as set forth
therein and specified in the applicable Pricing Supplement. A Note may be
issued as an amortizing note (an "Amortizing Note") on which a portion or all
the principal amount is payable prior to Stated Maturity in accordance with a
schedule, by application of a formula, or by reference to an index.
The Notes may be issued as Senior Securities or Subordinated Securities.
Subordinated Securities will be subordinated as described under "Subordinated
Securities" in the Prospectus.
Unless otherwise indicated in the applicable Pricing Supplement, interest on
Fixed Rate Notes is payable semi-annually on each March 15 and September 15
and at maturity. Interest on Floating Rate Notes is payable on the dates
indicated herein and in the applicable Pricing Supplement. Amortizing Notes
will pay principal and interest as set forth in the applicable Pricing
Supplement. See "Description of Notes--Interest and Interest Rates." Each Note
will mature on any day more than nine months from the date of issue, as set
forth in the applicable Pricing Supplement. See "Description of Notes." Unless
otherwise specified in the applicable Pricing Supplement, the Notes may not be
redeemed by the Company or repaid at the option of the holder prior to
maturity and will be issued in fully registered form in denominations of
$1,000 (or, in the case of Notes not denominated in U.S. dollars, the
equivalent thereof in the Specified Currency, rounded to the nearest 1,000
units of the Specified Currency) or any amount in excess thereof which is an
integral multiple of $1,000 (or, in the case of Notes not denominated in U.S.
dollars, 1,000 units of the Specified Currency). Any terms relating to Notes
being denominated in foreign currencies or composite currencies will be as set
forth in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, each Note
will be issued only in book-entry form, subject to certain limitations listed
herein, and will be represented by a global security registered in the name of
a nominee of The Depository Trust Company, as Depositary, or other depositary
(a "Book-Entry Note"). Beneficial interests in Book-Entry Notes will be shown
on, and transfers thereof will be effected only through, records maintained by
the Depositary's participants.
THE NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
GOVERNMENTAL AGENCY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2)(3) COMPANY(2)(4)
--------- ----------------- -------------
<S> <C> <C> <C>
Per Note................ 100% .125% - .750% 99.875% - 99.250%
Total(5)................ $3,000,000,000 $3,750,000 - $22,500,000 $2,996,250,000 - $2,977,500,000
</TABLE>
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(1) Unless otherwise indicated in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount. If the Company issues any
Note at a discount from or at a premium over its principal amount, the
Price to Public of any Note issued at a discount or premium will be as set
forth in the applicable Pricing Supplement.
(2) The commission payable to an Agent for each Note sold through such Agent
shall range from .125% to .750% of the principal amount of such Note,
provided, however, that commissions with respect to Notes maturing in
thirty years or greater will be negotiated. The Company may also sell
Notes to an Agent, as principal at negotiated discounts, for resale to
investors and other purchasers at varying prices related to the prevailing
market prices at the time of resale as determined by such Agent or, if so
agreed, at a fixed public offering price. See "Plan of Distribution."
(3) The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933. The Company has agreed to indemnify the Agents and
Underwriters against and contribute toward certain liabilities, including
liabilities under applicable securities law.
(4) Before deducting other expenses payable by the Company estimated at up to
$600,000.
(5) Or the equivalent thereof in other currencies including composite
currencies.
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Offers to purchase the Notes are being solicited from time to time by Morgan
Stanley & Co. Incorporated, First Chicago Capital Markets, Inc., Bear, Stearns
& Co. Inc., Chase Securities Inc., Credit Suisse First Boston Corporation,
Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc., and Salomon
Brothers Inc (individually, an "Agent" and collectively, the "Agents"), on
behalf of the Company. The Agents have agreed to use reasonable efforts to
solicit purchases of such Notes. The Company also may sell Notes to an Agent
acting as principal for its own account or otherwise, to be determined by such
Agent. The Company may also sell Notes directly to investors on its own behalf
in jurisdictions where it is authorized to do so. No termination date for the
offering of the Notes has been established. Unless otherwise specified in the
applicable Pricing Supplement, 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, if it receives
the offer, may reject any offer to purchase Notes, in whole or in part. See
"Plan of Distribution." This Prospectus Supplement and Prospectus may be used
by First Chicago Capital Markets, Inc. ("FCCM"), a wholly owned subsidiary of
the Company, in connection with offers and sales related to secondary market
transactions in the Notes. FCCM may act as principal or agent in such
transactions. Such sales will be made at prices related to prevailing market
prices at the time of sale.
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MORGAN STANLEY DEAN WITTER FIRST CHICAGO CAPITAL MARKETS, INC.
BEAR, STEARNS & CO. INC. CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON LEHMAN BROTHERS
MERRILL LYNCH & CO. J.P. MORGAN & CO. SALOMON BROTHERS INC
October 28, 1997
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SPECIFICALLY,
THE AGENTS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND
PURCHASE, THE NOTES IN THE OPEN MARKET. IN ADDITION, THE AGENTS MAY ENGAGE IN
PASSIVE MARKET MAKING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION."
IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Notes in U.S. dollars, and payments
of principal, premium, if any, and interest on the Notes will also be made in
U.S. dollars, unless the applicable Pricing Supplement provides that
purchasers are instead required to pay for the Notes in a Specified Currency
and/or that payments of principal, premium, if any, and interest on such Notes
will be made in a Specified Currency. Currently, there are limited facilities
in the United States for the conversion of U.S. dollars into foreign
currencies and vice versa. In addition, most banks do not currently offer non-
U.S. dollar denominated checking or savings account facilities in the United
States. Accordingly, unless otherwise specified in a Pricing Supplement or
unless alternative arrangements are made, payment of principal, premium, if
any, and interest on Notes in a Specified Currency other than U.S. dollars
will be made to an account at a bank outside the United States. See
"Description of Notes" and "Foreign Currency Risks."
If the applicable Pricing Supplement provides for payments of principal of
and interest on a non-U.S. dollar denominated Note to be made in U.S. dollars
or for payments of principal of and interest on a U.S. dollar denominated Note
to be made in a Specified Currency other than U.S. dollars, the conversion of
the Specified Currency into U.S. dollars or U.S. dollars into the Specified
Currency, as the case may be, will be handled by the Exchange Rate Agent
identified in the Pricing Supplement. Any Agent may act, from time to time, as
Exchange Rate Agent. The costs of such conversion will be borne by the holder
of a Note through deductions from such payments.
Reference herein to "U.S. dollars" or "U.S. $" or "$" are to the currency of
the United States of America.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Debt Securities",
the "Senior Securities" or the "Subordinated Securities", as applicable)
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities, Senior
Securities and Subordinated Securities set forth in the Prospectus, to which
description reference is hereby made. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will have the terms described below,
except that references to interest payments and interest-related information
do not apply to certain Original Issue Discount Securities.
If any Note is not to be denominated in U.S. dollars, then certain
provisions with respect thereto will be as set forth in the applicable pricing
supplement hereto ("Pricing Supplement"). The applicable Pricing Supplement
will specify the currency or currencies, including composite currencies such
as the European Currency Unit ("ECU"), in which the principal, premium, if
any, and interest, if any, with respect to such Note are to be paid, along
with any other terms relating to the non-U.S. dollar denomination, including
exchange rates for the Specified Currency as against the U.S. dollar at
selected times during the last five years, and any exchange controls affecting
such Specified Currency. See "Foreign Currency Risks."
GENERAL
The Notes may be Senior Securities or Subordinated Securities. The Notes
constituting Senior Securities will be issued under the Indenture dated as of
October 1, 1997, between the Company and First Security Bank, National
Association, as Trustee (such Indenture, the "Senior Indenture"). The Notes
constituting Subordinated Securities will be issued under the Indenture dated
as of October 1, 1997, between the Company and First Trust National
Association, as Trustee (such Indenture, the "Subordinated Indenture").
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Notes issued under the Senior Indenture will rank pari passu with all
outstanding senior indebtedness of the Company. Notes issued under the
Subordinated Indenture will rank pari passu with all other subordinated debt
of the Company and will constitute New Subordinated Securities. As New
Subordinated Securities, such Notes will be subordinated in right of payment
to the prior payment in full of the Senior Indebtedness of the Company and
will also be effectively subordinated in right of payment to the prior payment
in full of all General Obligations. See "Subordinated Securities" in the
Prospectus for a description of the terms of the New Subordinated Securities
and the relationship between the New Subordinated Securities and other
subordinated debt previously issued by the Company. As of June 30, 1997, the
aggregate amount of Senior Indebtedness and General Obligations was
approximately $2.58 billion.
The Notes may be Fixed Rate Notes or Floating Rate Notes. The following
summaries of certain provisions of the Indentures do not purport to be
complete, are subject to, and are qualified in their entirety by reference to,
all the provisions of the Indentures, including the definitions therein of
certain terms.
The Notes may be issued from time to time in an aggregate principal amount
of up to $3,000,000,000 or the equivalent thereof in one or more foreign or
composite currencies, subject to reduction as a result of the sale by the
Company of other Debt Securities as referred to in the accompanying
Prospectus. For the purpose of this Prospectus Supplement (other than "Certain
U.S. Federal Income Tax Considerations"), (i) the principal amount of any
Original Issue Discount Security (as defined herein) means the Issue Price (as
defined herein) of such Note and (ii) the principal amount of any Note issued
in a foreign currency or composite currency means the U.S. dollar equivalent
on the date of issue of the Issue Price of such Note.
Each Note will mature on a day more than nine months from its date of issue,
as selected by the initial purchaser and agreed to by the Company, and may be
subject to redemption or repayment prior to maturity at the price or prices
specified in the applicable Pricing Supplement. The Notes will not be subject
to any sinking fund.
Except as may be specified for Notes denominated in foreign or composite
currencies or as otherwise provided in the applicable Pricing Supplement, the
Notes will be issued only in fully registered form in denominations of U.S.
$1,000 or any amount in excess thereof which is an integral multiple of U.S.
$1,000. Unless otherwise provided in the applicable Pricing Supplement, Notes
denominated in a Specified Currency other than U.S. dollars will be issued in
denominations of the equivalent of U.S. $1,000 (rounded to an integral
multiple of 1,000 units of such Specified Currency), or any amount in excess
thereof which is an integral multiple of 1,000 units of such Specified
Currency, as determined by reference to the noon dollar buying rate in New
York City for cable transfers of such Specified Currency published by the
Federal Reserve Bank of New York (the "Market Exchange Rate") on the Business
Day (as defined below) immediately preceding the date of issuance; provided,
however, that in the case of ECU's, the Market Exchange Rate shall be the rate
of exchange determined by the Commission of the European Communities (or any
successor thereto) as published in the Official Journal of the European
Communities, or any successor publication, on the Business Day immediately
preceding the date of issuance.
The Notes will be offered on a continuing basis. Unless otherwise provided
in an applicable Pricing Supplement, each Note will be issued as a Book-Entry
Note registered in the name of the nominee of the Depositary. So long as the
Depositary or its nominee is the registered owner of such Book-Entry Notes,
the Depositary or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes for all purposes under the applicable
Indenture. Except as set forth under "Description of Notes--Book-Entry
System", Book-Entry Notes will not be issuable in certificated form.
Interest on the Notes will be payable at the office of The First National
Bank of Chicago, the Company's Paying Agent and Note Registrar, currently
located at One First National Plaza, Chicago, Illinois 60670, provided that
payment of interest, other than interest at maturity or upon earlier
redemption or repayment, 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 Note
Register at the close of business on the Regular Record Date corresponding to
the relevant Interest Payment
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Date. The principal, interest and premium, if any, payable at maturity or upon
earlier redemption or repayment in respect of each Note will be paid in
immediately available funds against presentation of the Note at the office of
The First National Bank of Chicago, One First National Plaza, Chicago,
Illinois 60670. In the case of Global Securities representing Book-Entry
Notes, such payments of principal, interest and premium, if any, will be made
to the Depositary or its nominee. Payments to beneficial owners of Book-Entry
Notes will be made through the Depositary and its participants. See
"Description of Debt Securities--General--Global Securities" in the
Prospectus.
Notes may be issued in the form of Original Issue Discount Securities which
will be offered at a discount from the principal amount thereof due at the
stated maturity of such Notes. There may not be any periodic payments of
interest on Original Issue Discount Securities. In the event of an
acceleration of the maturity of any Original Issue Discount Security, the
amount payable to the holder of such Original Issue Discount Security upon
such acceleration will be determined in accordance with the Pricing Supplement
and the terms of such security, but will be an amount less than the amount
payable at the maturity of the principal of such Original Issue Discount
Security. For Federal income tax considerations with respect to Original Issue
Discount Securities, see "Certain U.S. Federal Income Tax Considerations--U.S.
Holders--Original Issue Discount" in this Prospectus Supplement.
The Pricing Supplement relating to each Note will describe the following
terms: (1) the specified currency with respect to such Note (and, if such
currency is other than U.S. dollars, certain other terms relating to such
Note, including the authorized denominations); (2) whether such Note is a
Senior Security or a Subordinated Security; (3) whether such Note is a Fixed
Rate Note or a Floating Rate Note; (4) the price (expressed as a percentage of
the aggregate principal amount thereof) at which such Note will be issued (the
"Issue Price"); (5) the date on which such Note will be issued; (6) the date
on which such Note will mature; (7) if such Note is a Fixed Rate Note, the
rate per annum at which such Note will bear interest, if any; (8) if such Note
is a Floating Rate Note, the interest rate basis, the Initial Interest Rate,
the Interest Reset Dates, the Interest Payment Dates, the Index Maturity, the
maximum interest rate and the minimum interest rate, if any, and the Spread
and/or Spread Multiplier, if any, (all as defined below) and any other terms
relating to the particular method of calculating the interest rate for such
Note; (9) whether such Note may be redeemed or repaid prior to the maturity
date, and, if so, the provisions relating to such redemption payment; and (10)
any other terms of such Notes not inconsistent with the provisions of the
related Indenture.
PAYMENT CURRENCY
If the applicable Pricing Supplement provides for payments of interest and
principal on a non-U.S. dollar denominated Note to be made, at the option of
the holder of such Note, in U.S. dollars, conversion of the Specified Currency
into U.S. dollars will be based on the highest bid quotation in The City of
New York received by the Exchange Rate Agent at approximately 11:00 a.m., New
York City time, on the second Business Day preceding the applicable payment
date from three recognized foreign exchange dealers (one of which may be the
Exchange Rate Agent) for the purchase by the quoting dealer of the Specified
Currency for U.S. dollars for settlement on such payment date in the aggregate
amount of the Specified Currency payable to the holders of Notes and at which
the applicable dealer commits to execute a contract. If such bid quotations
are not available, payments will be made in the Specified Currency. All
currency exchange costs will be borne by the holders of Notes by deductions
from such payments.
Except as set forth below, if the principal of, premium, if any, or interest
on, any Note is payable in a Specified Currency other than U.S. dollars and
such Specified Currency is not available to the Company for making payments
thereof due to the imposition of exchange controls or other circumstances
beyond the control of the Company or is no longer used by the government of
the country issuing such currency or for the settlement of transactions by
public institutions within the international banking community, then the
Company will be entitled to satisfy its obligations to holders of the Notes by
making such payments in U.S. dollars on the basis of the Market Exchange Rate
on the date of such payment or, if the Market Exchange Rate is not available
on such
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date, as of the most recent practicable date. Any payment made under such
circumstances in U.S. dollars where the required payment is in a Specified
Currency other than U.S. dollars will not constitute an Event of Default.
If payment in respect of a Note is required to be made in ECUs and ECUs are
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control or are no longer used in the European Monetary
System, then all payments in respect of such Note shall be made in U.S.
dollars until ECUs are again available or so used. The amount of each payment
in U.S. dollars shall be computed on the basis of the equivalent of the ECU in
U.S. dollars, determined as described below, as of the second Business Day
prior to the day on which such payment is due.
The equivalent of the ECU in U.S. dollars as of any date shall be determined
by the Company or the Exchange Rate Agent on the following basis. The
component currencies of the ECU for this purpose (the "Components") shall be
the currency amounts that were components of the ECU as of the last date on
which the ECU was used in the European Monetary System. The equivalent of the
ECU in U.S. dollars shall be calculated by aggregating the U.S. dollar
equivalents of the Components. The U.S. dollar equivalent of each of the
Components shall be determined by the Company or the Exchange Rate Agent on
the basis of the most recently available Market Exchange Rates for such
Components.
If the official unit of any Component is altered by way of combination or
subdivision, the number of units of that currency as a Component shall be
divided or multiplied in the same proportion. If two or more Components are
consolidated into a single currency, the amounts of those currencies as
Components shall be replaced by an amount in such single currency equal to the
sum of the appropriate amounts of the consolidated component currencies
expressed in such single currency. If any Component is divided into two or
more currencies, the amount of the original component currency shall be
replaced by the appropriate amounts of such two or more currencies, the sum of
which shall be equal to the amount of the original component currency.
All determinations referred to above made by the Company or its agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.
INTEREST AND INTEREST RATES
Each Note will bear interest at either (a) a fixed rate (the "Fixed Rate
Notes") or (b) a floating rate determined by reference to an interest rate
formula (the "Floating Rate Notes"), which may be adjusted by a Spread and/or
Spread Multiplier (each as defined below). 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 will designate one or more of the following interest rate bases as
applicable to each Note: (a) a fixed rate per annum, in which case such Note
will be a "Fixed Rate Note"; (b) the Commercial Paper Rate, in which case such
Note will be a "Commercial Paper Rate Note"; (c) the Federal Funds Rate, in
which case such Note will be a "Federal Funds Rate Note"; (d) the Certificate
of Deposit Rate, in which case such Note will be a "CD Rate Note", (e) the
Constant Maturity Treasury Rate, in which case such Note will be a "CMT Rate
Note"; (f) LIBOR, in which case such Note will be a "LIBOR Note"; (g) the
Treasury Rate, in which case such Note will be a "Treasury Rate Note"; (h) the
Prime Rate, in which case such Note will be a "Prime Rate Note"; or (i) such
other interest rate basis or formula as is set forth in such Pricing
Supplement.
The interest rate on each Note will be equal to (a) in the case of a Fixed
Rate Note, a fixed rate; or (b) in the case of a Floating Rate Note, either
(i) the interest rate, determined by reference to the specified interest rate
formula (as specified in the applicable Pricing Supplement)(the "Base Rate")
plus or minus the Spread, if any, and/or (ii) the Base Rate, multiplied by the
Spread Multiplier, if any. The "Spread" is the number of basis points
specified in the applicable Pricing Supplement as being applicable to such
Floating Rate Note, and the "Spread
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Multiplier" is the percentage specified in the applicable Pricing Supplement
as being applicable to such Floating Rate Note.
Each Note will bear interest from its date of issue or from the most recent
Interest Payment Date to which interest on such Note has been paid or duly
provided for until the principal thereof is paid or made available for
payment. Interest on each Note will accrue at the annual rate or at a rate
determined pursuant to an interest rate formula, stated therein and in the
applicable Pricing Supplement. Interest will be payable on each Interest
Payment Date and at maturity or upon earlier redemption or repayment (each
such date, a "Maturity"). 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 next preceding the Interest Payment Date (which in the
case of Global Securities representing Book-Entry Notes, will be the
Depositary or the nominee of the Depositary); provided, however, that interest
payable at Maturity will be payable to the person to whom principal shall be
payable. The first payment of interest on any Note originally issued between a
Regular Record Date and an Interest Payment Date will be made on the Interest
Payment Date following the next succeeding Regular Record Date to the
registered owner on such next 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 indicated 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". The Interest
Payment Dates for Floating Rate Notes shall be as indicated in the applicable
Pricing Supplement and in such Note, and unless otherwise specified in the
applicable Pricing Supplement, each Regular Record Date for a Floating Rate
Note will be the fifteenth day (whether or not a Business Day) next preceding
each Interest Payment Date.
If any Interest Payment Date, other than at Maturity, for any Floating Rate
Note would otherwise be a day that is not a Business Day, such Interest
Payment 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 Payment Date shall be the immediately
preceding Business Day. If the Maturity for any Fixed Rate Note or Floating
Rate Note or an Interest Payment Date for any Fixed Rate Note falls on a day
which is not a Business Day, payment of principal, premium, if any, and
interest with respect to such Note will be paid on the next succeeding
Business Day with the same force and effect as if made on such date and no
interest on such payment will accrue from and after such date. Unless
otherwise specified in the applicable Pricing Supplement, interest payments in
respect of Fixed Rate Notes and Floating Rate Notes will equal the amount of
interest accrued from and including the immediately preceding Interest Payment
Date in respect of which interest has been paid or duly made available for
payment (or from and including the date of issue, if no interest has been paid
or duly made available for payment) to, but excluding, the applicable Interest
Payment Date or the Maturity, as the case may be.
"Business Day" means any day (other than a Saturday or Sunday) on which
banking institutions in The City of New York and the City of Chicago, Illinois
are open for business (and, (i) with respect to LIBOR Notes, which is also a
London Banking Day, and (ii) with respect to Notes denominated in a Specified
Currency other than U.S. dollars, on which banking institutions in the
principal financial center of the country of the Specified Currency are open
for business).
Unless otherwise specified in a Pricing Supplement, all percentages
resulting from any calculation on Floating Rate Notes will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or
.09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or
.09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts
used in or resulting from such calculation on Floating Rate Notes will be
rounded to the nearest cent (with one-half cent being rounded upward).
The interest rate on the Notes will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States
law of general application. Under present New York
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law, the maximum rate of interest, subject to certain exceptions, for any loan
in an amount less than $250,000 is 16% per annum and for any loan in the
amount of $250,000 or more but less than $2,500,000 is 25% per annum on a
simple interest basis. This limit may not apply to loans of $2,500,000 or
more.
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of the
Notes purchased in any single transaction.
FIXED RATE NOTES
Each Fixed Rate 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 March 15 and September 15 of each year and the Regular Record
Dates will be on March 1 and September 1 of each year. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest
on any Fixed Rate Note originally issued between a Regular Record Date and an
Interest Payment Date shall be made on the Interest Payment Date following the
succeeding Regular Record Date. Unless otherwise specified in the applicable
Pricing Supplement, interest on Fixed Rate Notes will be computed and paid on
the basis of a 360-day year of twelve 30-day months.
FLOATING RATE NOTES
Except as provided below and unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset
Date (as defined below) on the third Wednesday of each month or on the third
Wednesday of March, June, September and December, as specified in the
applicable Pricing Supplement; 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 two months of each
year, as 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 one month of each year, as specified in the applicable Pricing Supplement
(each, an "Interest Payment Date") and, in each case, at Maturity.
The applicable Pricing Supplement will specify the Issue Price, the interest
rate basis, the interest payment period, the Spread and/or Spread Multiplier,
if any, and the maximum or minimum interest rate limitation, if any,
applicable to each Floating Rate Note. In addition, such Pricing Supplement
will define or particularize for each Note the following terms, if applicable:
the period to maturity of the instrument or obligation on which the interest
rate formula is based (the "Index Maturity"), Initial Interest Rate, Interest
Payment Dates, Regular Record Dates and Interest Reset Dates with respect to
such Note.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually, as specified in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, the date or dates on which interest will be reset (each an
"Interest Reset Date") will be, in the case of Floating Rate Notes that reset
daily, each Business Day; in the case of Floating Rate Notes (other than
Treasury Rate Notes) that reset weekly, the Wednesday of each week; in the
case of any Treasury Rate Notes that reset weekly, the Tuesday of each week
(except as provided below); in the case of Floating Rate Notes that reset
monthly, the third Wednesday of each month; in the case of Floating Rate Notes
that reset quarterly, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes that reset semi-annually, the
third Wednesday of two months of each year, as specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes that reset
annually, the third Wednesday of one month of each year, as specified in the
applicable Pricing Supplement; provided, however, that the interest rate in
effect from the date of issue to the first Interest Reset Date with respect to
a Floating Rate Note (the "Initial Interest Rate") will be as set forth in the
applicable Pricing Supplement. If the Interest Reset Date for any Floating
Rate Note would otherwise be a day that is not a Business Day, the Interest
Reset 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
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Business Day is in the next succeeding calendar month, such Interest Reset
Date shall be the immediately preceding Business Day.
The interest determination date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note, a Federal Funds Rate Note, a CD Rate Note, a CMT
Rate Note or a Prime Rate Note (the "Commercial Paper Interest Determination
Date", the "Federal Funds Interest Determination Date", the "CD Interest
Determination Date", the "CMT Interest Determination Date" and the "Prime
Interest Determination Date", respectively) will be the second Business Day
prior to the Interest Reset Date. The interest determination date pertaining
to an Interest Reset Date for a LIBOR Note (the "LIBOR Interest Determination
Date") will be the second London Banking Day preceding such Interest Reset
Date. The interest determination date pertaining to an Interest Reset Date for
a Treasury Rate Note (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.
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
in respect of which interest has been paid (or from and including the date of
issue if no interest has been paid with respect to such Floating Rate Note)
to, but excluding, such Interest Payment Date or Maturity, as the case may be.
Accrued interest from the date of issue or from the last date to which
interest has been paid will be calculated by multiplying the face amount of a
Note by an accrued interest factor. This accrued interest factor will be
computed by adding together the interest factors calculated for each day in
the period for which accrued interest is being calculated. Unless otherwise
specified in the applicable Pricing Supplement, the interest factor for each
such day will be computed by dividing the interest rate applicable to such day
by 360, in the case of Commercial Paper Rate Notes, Federal Funds Rate Notes,
CD Rate Notes, Prime Rate Notes, and LIBOR Notes, or by the actual number of
days in the year, in the case of CMT Rate Notes and Treasury Rate Notes. The
interest rate in effect on each day for a Floating Rate Note will be (a) if
such day is an Interest Reset Date, the interest rate (calculated with
reference to the Spread and/or Spread Multiplier, if any) with respect to the
interest determination date pertaining to such Interest Reset Date or, (b) if
such day is not an Interest Reset Date, the interest rate (calculated with
reference to the Spread and/or Spread Multiplier, if any) with respect to the
interest determination date pertaining to the next preceding Interest Reset
Date. Notwithstanding the foregoing, the interest rate in effect on any
Floating Rate Note shall be subject to any maximum or minimum interest rate
limitation referred to above.
The applicable Pricing Supplement shall specify a calculation agent (the
"Calculation Agent") with respect to any issue of Floating Rate Notes. The
Calculation Agent for each Interest Reset Date will determine the interest
rate as described below. The Company will notify the Paying Agent of each
determination of the interest rate applicable to any such Floating Rate Note
promptly after such determination is made. The Paying Agent will, upon the
request of the holder of any Floating Rate Note, provide the interest rate
then in effect and, if determined, the interest rate which will become
effective as a result of a determination made on the most recent interest
determination date with respect to such Note. Unless otherwise specified in
the applicable Pricing Supplement, the "Calculation Date", where applicable,
pertaining to any interest determination date will be the earlier of (i) the
tenth calendar day after such interest determination date, or, if any such day
is not a Business Day, the next succeeding Business Day, or (ii) the Business
Day preceding the applicable Interest Payment Date or the Maturity, as the
case may be.
Commercial Paper Rate Notes. Commercial Paper Rate Notes will bear interest
at the interest rates (calculated with reference to the Commercial Paper Rate
and the Spread and/or Spread Multiplier, if any) specified in the Commercial
Paper Rate Notes and in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any 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 designated in the
applicable Pricing Supplement as such rate is published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication of the Board of
Governors of the Federal Reserve System ("H.15(519)"), under the heading
"Commercial Paper--Nonfinancial". In the event that such rate is not published
by 9:00 a.m., New York City time, on the Calculation Date pertaining to such
Commercial Paper Interest Determination Date, 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" ("Composite Quotations") under the heading
"Commercial Paper". If by 3:00 p.m., New York City time, on such Calculation
Date such rate is not yet 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 designated 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 the dealers selected as aforesaid by
the Calculation Agent are not quoting as mentioned in this sentence, the
Commercial Paper Rate with respect to such Commercial Paper Interest
Determination Date will be 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:
DX360
Money Market Yield= ----------- X100
360-(D x M)
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 Notes. Federal Funds Rate Notes will bear interest at the
interest rates (calculated with reference to the Federal Funds Rate and the
Spread and/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 published in H.15(519) under
the heading "Federal Funds (Effective)" or, if not so published by 9:00 a.m.,
New York City time, on the Calculation Date pertaining to such 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 yet
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 9:00 a.m., New York City time, on such Federal Funds Interest
Determination Date; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Federal Funds Rate will be the Federal Funds Rate in effect on
such Federal Funds Interest Determination Date.
CD Rate Notes. CD Rate Notes will bear interest at the interest rates
(calculated with reference to the CD Rate and the Spread and/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
designated in the applicable Pricing Supplement as published in H.15(519)
under the heading "CDs (Secondary Market)", or, if not so published by 9:00
a.m., New York City time, on the Calculation Date pertaining to such CD
Interest Determination Date, the CD Rate will be the rate on such CD Interest
Determination Date for negotiable certificates of deposit of the Index
Maturity designated in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Certificates of Deposit." If such rate
is not yet published in either H.15(519) or the Composite Quotations by 3:00
P.M., New York City time, on the Calculation Date pertaining to such CD
Interest Determination Date, the CD Rate on such CD Interest Determination
Date will be calculated by the Calculation Agent and will be the arithmetic
mean of the secondary market offered rates as of 10:00 a.m., New York City
time, on such CD Interest Determination Date for certificates of deposit in an
amount that is representative for a single transaction at that time with a
remaining maturity closest to the Index Maturity designated in the Pricing
Supplement of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit of major United States money
center banks; provided, however, that if the dealers selected as aforesaid by
the Calculation Agent are not quoting as set forth above, the CD Rate will be
the CD Rate in affect on such CD Interest Determination Date.
CMT Rate Notes. CMT Rate Notes will bear interest at the interest rates
(calculated with reference to the CMT Rate and the Spread and/or Spread
Multiplier, if any) specified in the CMT Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Interest Determination Date, the rate displayed
on the Designated CMT Telerate Page (as defined below) under the caption
". . . Treasury Constant Maturities. . . Federal Reserve Board Release H.15
. . . Mondays Approximately 3:45 p.m.," under the column for the Designated
CMT Maturity Index (as defined below) for (i) if the Designated CMT Telerate
Page is 7055, the rate on such CMT Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week or the month, as specified in
the applicable Pricing Supplement, ended immediately preceding the week or
month, as applicable, in which the related CMT Interest Determination Date
occurs. If such rate is no longer displayed on the relevant page, or if not
displayed by 3:00 p.m., New York City time, on the related Calculation Date,
then the CMT Rate for such CMT Interest Determination Date will be such
Treasury Constant Maturity rate for the Designated CMT Maturity Index as
published in the relevant H.15(519). If such rate is no longer published, or,
if not published by 3:00 p.m., New York City time, on the related Calculation
Date, then the CMT Rate for such CMT Interest Determination Date will be such
Treasury Constant Maturity rate for the Designated CMT Maturity Index (or
other United States Treasury rate for the Designated CMT Maturity Index) for
the CMT Interest Determination Date with respect to such Interest Reset Date
as may then be published by either the Board of Governors of the Federal
Reserve System or the United States Department of the Treasury that the
Calculation Agent determines to be comparable to the rate formerly displayed
on the Designated CMT Telerate Page and published in the relevant H.15(519).
If such information is not provided by 3:00 p.m., New York City time, on the
related Calculation Date, then the CMT Rate for the CMT Interest Determination
Date will be calculated by the Calculation Agent and will be a yield to
maturity, based on the arithmetic mean of the secondary market closing offer
side prices as of approximately 3:30 p.m., New York City time on the CMT
Interest Determination Date reported, according to their written records, by
three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York (which may include the Agents or
their affiliates) selected by the Calculation Agent (from five such Reference
Dealers selected by the Calculation Agent, after consultation with the
Company, and eliminating the highest quotation (or, in the event of equality,
one of the highest) and the lowest quotation (or, in the event of equality,
one of the lowest)), for the most recently issued direct noncallable fixed
rate obligations of the United States ("Treasury notes") with an original
maturity of approximately the Designated CMT Maturity Index and remaining term
to maturity of not less than such Designated CMT Maturity Index minus one
year. If the Calculation Agent cannot obtain three such Treasury notes
quotations, the CMT Rate for
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such CMT Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity based on the arithmetic mean of the
secondary market offer side prices as of approximately 3:30 p.m., New York
City time, on the CMT Interest Determination Date of three Reference Dealers
in The City of New York (from five such Reference Dealers selected by the
Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100,000,000. If three or four (and not
five) of such Reference Dealers are quoting as described above, then the CMT
Rate will be based on the arithmetic mean of the offer prices obtained and
neither the highest nor the lowest of such quotes will be eliminated;
provided, however, that if fewer than three Reference Dealers selected by the
Calculation Agent are quoting as described herein, the CMT Rate will be the
CMT Rate in effect on such CMT Interest Determination Date. If two Treasury
notes with an original maturity as described in the second preceding sentence
have remaining terms to maturity equally close to the Designated CMT Maturity
Index, the quotes for the Treasury note with the shorter remaining term to
maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in an applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519).
If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" shall be the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in an applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
LIBOR Notes. LIBOR Notes will bear interest at the interest rates
(calculated with reference to LIBOR and the Spread and/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
either: (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page (as defined below) by its terms provides only for a
single rate, in which case such single rate shall be used) for deposits in
the Index Currency having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the Interest Reset Date, that appear on
the Designated LIBOR Page as of 11:00 a.m., London time, on that LIBOR
Interest Determination Date, if at least two such offered rates appear
(unless, as aforesaid, only a single rate is required) on such Designated
LIBOR Page, or (b) if "LIBOR Telerate" is specified in the applicable
Pricing Supplement, the rate for deposits in the Index Currency having the
Index Maturity designated in the applicable Pricing Supplement, commencing
on the Interest Reset Date, that appears on the Designated LIBOR Page as of
11:00 a.m., London time, on that LIBOR Interest Determination Date. If
fewer than two offered rates appear (if "LIBOR Reuters" is specified in the
applicable Pricing Supplement) or no rate appears (if "LIBOR Telerate" is
specified in the applicable Pricing Supplement), LIBOR in respect of the
related Interest Determination Date will be determined as if the parties
had specified the rate described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear (if "LIBOR Reuters" is specified in the
applicable Pricing Supplement) or no rate appears (if "LIBOR Telerate" is
specified in the applicable Pricing Supplement), the Calculation Agent will
request the principal London offices of each of four major reference banks
in the London interbank market, as selected by the
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Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity designated in the applicable Pricing Supplement, commencing on the
second London Banking Day immediately following such LIBOR Interest
Determination Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such LIBOR Interest Determination
Date and in a principal amount of not less than $1,000,000 (or the
equivalent in the Index Currency, if the Index Currency is not the U.S.
dollar) that is representative for a single transaction in such Index
Currency in such market at such time. If at least two such quotations are
provided, LIBOR determined on such LIBOR Interest Determination Date will
be the arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR determined on such LIBOR Interest Determination Date will
be the arithmetic mean of the rates quoted at approximately 11:00 a.m. (or
such other time specified in the applicable Pricing Supplement), in the
applicable principal financial center for the country of the Index Currency
on such LIBOR Interest Determination Date, by three major banks in such
principal financial center selected by the Calculation Agent for loans in
the Index Currency to leading European banks, having the Index Maturity
designated in the applicable Pricing Supplement and in a principal amount
of not less than $1,000,000 commencing on the second London Banking Day
immediately following such LIBOR Interest Determination Date (or the
equivalent in the Index Currency, if the Index Currency is not the U.S.
dollar) that is representative for a single transaction in such Index
Currency in such market at such time; provided, however, that if the banks
so selected by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR with respect to such LIBOR Interest Determination Date will
be LIBOR in effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable
Pricing Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Pricing Supplement, the display designated in the applicable
Pricing Supplement on the Reuters Monitor Money Rates Service for the purpose
of displaying the London interbank rates of major banks for the applicable
Index Currency, or (b) if "LIBOR Telerate" is designated in the applicable
Pricing Supplement, the display designated in the applicable Pricing
Supplement on the Dow Jones Telerate Service for the purpose of displaying the
London interbank rates of major banks for the applicable Index Currency. If
neither LIBOR Reuters nor LIBOR Telerate is specified in the applicable
Pricing Supplement, LIBOR for the applicable Index Currency will be determined
as if LIBOR Telerate (and, if the U.S. dollar is the Index Currency, Page
3750) had been specified.
"London Banking Day" means any day on which dealings in deposits in the
Index Currency are transacted in the London interbank market.
Prime Rate Notes. Prime Rate Notes will bear interest at the interest rate
(calculated with reference to the Prime Rate and Spread and/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 rate
set forth in H.15(519) for such date opposite the caption "Bank Prime Loan."
If such rate is not yet published by 9:00 a.m., New York City time, on the
Calculation Date pertaining to such Prime Interest Determination Date, the
Prime Rate for such Prime Interest Determination Date will be the arithmetic
mean of the rates of interest publicly announced by each bank that appears on
the Reuters Screen USPRIME1 (as defined below) as such bank's prime rate or
base lending rate as in effect for such Prime Interest Determination Date. If
fewer than four such rates, but more than one such rate, appear on the Reuters
Screen USPRIME1 for such Prime Interest Determination Date, the rate shall be
the arithmetic mean of the prime rates quoted on the basis of the actual
number of days in the year divided by 360 as of the close of business on such
Prime Interest Determination Date by four major money center banks in The City
of New York selected by the Calculation Agent from which quotations are
requested. If fewer than two such rates appear on the Reuters
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Screen USPRIME1, the Prime Rate shall be calculated by the Calculation Agent
as of the close of business on the Prime Interest Determination Date, on the
basis of the prime rates, as of the close of business on the Prime Interest
Determination Date, furnished in The City of New York by the appropriate
number of substitute banks or trust companies organized and doing business
under the laws of the United States, or any State thereof, in each case having
total equity capital of at least U.S. $500 million and being subject to
supervision or examination by federal or state authority, selected by the
Calculation Agent to quote such rate or rates; provided, however, that if the
banks or trust companies selected as aforesaid by the Calculation Agent are
not quoting as set forth above, the Prime Rate will be the Prime Rate in
effect on such Prime Interest Determination Date. "Reuters Screen USPRIME1"
means the display designated as Page "USPRIME1" on the Reuters Monitor Money
Rates Services (or such other page as may replace the USPRIME1 page on that
service for the purpose of displaying prime rates or base lending rates of
major United States banks).
Treasury Rate Notes. Treasury Rate Notes will bear interest at the interest
rates (calculated with reference to the Treasury Rate and the Spread and/or
Spread Multiplier, if any) specified in the Treasury Rate Note 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 designated in the applicable
Pricing Supplement as published in H.15(519) under the heading "Treasury
bills--auction average (investment)" or, if not so published by 9:00 a.m., New
York City time, on the Calculation Date pertaining to such 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 the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Treasury
Rate with respect to such Treasury Interest Determination Date will be the
Treasury Rate in effect on such Treasury Interest Determination Date.
RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable notes
(the "Renewable Notes") that will bear interest at the interest rate
(calculated with reference to a Base Rate and the Spread and/or Spread
Multiplier, if any) specified in the Renewable Notes and in the applicable
Pricing Supplement.
The Renewable Notes will mature on an Interest Payment Date as specified in
the applicable Pricing Supplement (the "Initial Maturity Date"), unless the
maturity of all or any portion of the principal amount thereof is extended in
accordance with the procedures described below. On the Interest Payment Dates
in March and September in each year (unless different Interest Payment Dates
are specified in the applicable Pricing Supplement) (each such Interest
Payment Date, an "Election Date"), the maturity of the Renewable Notes will be
extended to the Interest Payment Date occurring twelve months after such
Election Date, unless the holder thereof elects to terminate the automatic
extension of the maturity of the Renewable Notes or of any portion thereof
having a principal amount of $1,000 or any multiple of $1,000 in excess
thereof by delivering a notice to such effect to the Paying Agent not less
than nor more than a number of days to be specified in the applicable Pricing
Supplement prior to such Election Date. Such option may be exercised with
respect to less than the entire
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principal amount of the Renewable Notes; provided that the principal amount
for which such option is not exercised is at least $1,000 or any larger amount
that is an integral multiple of $1,000. Notwithstanding the foregoing, the
maturity of the Renewable Notes may not be extended beyond the Final Maturity
Date, as specified in the applicable Pricing Supplement (the "Final Maturity
Date"). If the holder elects to terminate the automatic extension of the
maturity of any portion of the principal amount of the Renewable Notes and
such election is not revoked as described below, such portion will become due
and payable on the Interest Payment Date falling six months (unless another
period is specified in the applicable Pricing Supplement) after the Election
Date prior to which the holder made such election.
An election to terminate the automatic extension of maturity may be revoked
as to any portion of the Renewable Notes having a principal amount of $1,000
or any multiple of $1,000 in excess thereof by delivering a notice to such
effect to the Paying Agent on any day following the effective date of the
election to terminate the automatic extension of maturity and prior to the
date 15 days before the date on which such portion would otherwise mature.
Such a revocation may be made for less than the entire principal amount of the
Renewable Notes for which the automatic extension of maturity has been
terminated; provided that the principal amount of the Renewable Notes for
which the automatic extension of maturity has been terminated and for which
such a revocation has not been made is at least $1,000 or any larger amount
that is an integral multiple of $1,000. Notwithstanding the foregoing, a
revocation may not be made during the period from and including a Record Date
to but excluding the immediately succeeding Interest Payment Date.
An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent
holder.
The Renewable Notes may be redeemed in whole or in part at the option of the
Company on the Interest Payment Dates in each year specified in the applicable
Pricing Supplement, commencing with the Interest Payment Date specified in the
applicable Pricing Supplement, at a redemption price as stated in the
applicable Pricing Supplement, together with accrued and unpaid interest to
the date of redemption. Notwithstanding anything to the contrary in this
Prospectus Supplement, notice of redemption will be provided by mailing a
notice of such redemption to each holder by first class mail, postage prepaid,
at least 180 days prior to the date fixed for redemption.
INDEXED NOTES
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date more than nine months from the date of original issue
(the "Stated Maturity") and/or on which the amount of interest payable on an
Interest Payment Date will be determined by reference to currencies, currency
units, commodity prices, financial or non-financial indices or other factors
(the "Indexed Notes"), as indicated in the applicable Pricing Supplement.
Holders of Indexed Notes may receive a principal amount at maturity that is
greater than or less than the face amount of such Notes depending upon the
fluctuation of the relative value, rate or price of the specified index.
Specific information pertaining to the method for determining the principal
amount payable at maturity, a historical comparison of the relative value,
rate or price of the specified index and the face amount of the Indexed Note
and certain additional United States federal tax considerations will be
described in the applicable Pricing Supplement.
AMORTIZING NOTES
The Company may from time to time offer Notes ("Amortizing Notes") on which
a portion or all the principal amount is payable prior to Stated Maturity in
accordance with a schedule, by application of a formula, or by reference to an
index. Further information concerning additional terms and conditions of any
Amortizing Notes, including terms for repayment thereof, will be set forth in
the applicable Pricing Supplement.
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EXTENSION OF MATURITY
The Pricing Supplement relating to certain Notes (other than an Amortizing
Note) may provide that the Company has the option to extend the maturity of
such Notes for one or more periods of one or more whole years (each an
"Extension Period") up to but not beyond the date (the "Final Maturity Date")
set forth in such Pricing Supplement. If the Company has such option with
respect to any such Note (an "Extendible Note"), the following procedures will
apply, unless modified as set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to an Extendible Note by
notifying the Paying Agent of such exercise at least 45 but not more than 60
days prior to the maturity date originally in effect with respect to such Note
(the "Original Maturity Date") or, if the maturity date of such Note has
already been extended, prior to the maturity date then in effect (an "Extended
Maturity Date"). No later than 38 days prior to the Original Maturity Date or
an Extended Maturity Date, as the case may be (each, a "Maturity Date"), the
Paying Agent will mail to the holder of such Note a notice (the "Extension
Notice") relating to such Extension Period, by first class mail, postage
prepaid, setting forth (a) the election of the Company to extend the maturity
of such Note; (b) the new Extended Maturity Date; (c) the interest rate
applicable to the Extension Period (which, in the case of a Floating Rate
Note, will be calculated with reference to a Base Rate and the Spread and/or
Spread Multiplier, if any); and (d) the provisions, if any, for redemption
during the Extension Period, including the date or dates on which, the period
or periods during which and the price or prices at which such redemption may
occur during the Extension Period. Upon the mailing by the Paying Agent of an
Extension Notice to the holder of an Extendible Note, the maturity of such
Note shall be extended automatically, and, except as modified by the Extension
Notice and as described in the next paragraph, such Note will have the same
terms it had prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 a.m., New York City
time, on the twentieth calendar day prior to the Maturity Date then in effect
for an Extendible Note (or, if such day is not a Business Day, not later than
10:00 a.m., New York City time, on the immediately succeeding Business Day),
the Company may, at its option, revoke the interest rate provided for in the
Extension Notice and establish a higher interest rate (or, in the case of a
Floating Rate Note, a higher Spread and/or Spread Multiplier, if any) for the
Extension Period by causing the Paying Agent to send notice of such higher
interest rate (or, in the case of a Floating Rate Note, a higher Spread and/or
Spread Multiplier, if any) to the holder of such Note by first class mail,
postage prepaid, or by such other means as shall be agreed between the Company
and the Paying Agent. Such notice shall be irrevocable. All Extendible Notes
with respect to which the Maturity Date is extended in accordance with an
Extension Notice will bear such higher interest rate (or, in the case of a
Floating Rate Note, a higher Spread and/or Spread Multiplier, if any) for the
Extension Period, whether or not tendered for repayment.
If the Company elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to require the Company to repay such
Note on the Maturity Date then in effect at a price equal to the principal
amount thereof plus any accrued and unpaid interest to such date. In order for
an Extendible Note to be repaid on such Maturity Date, the holder thereof must
follow the procedures set forth below under "Repayment and Repurchase" for
optional repayment, except that the period for delivery of such Note or
notification to the Paying Agent shall be at least 25 but not more than 35
days prior to the Maturity Date then in effect and except that a holder who
has tendered an Extendible Note for repayment pursuant to an Extension Notice
may, by written notice to the Paying Agent, revoke any such tender for
repayment until 3:00 p.m., New York City time, on the twentieth calendar day
prior to the Maturity Date then in effect (or if such day is not a Business
Day, until 3:00 p.m., New York City time, on the immediately succeeding
Business Day).
REDEMPTION
Although Notes will not generally be redeemable prior to maturity, the
Company in the Pricing Supplement relating to a Note may specify that such
Note will be redeemable at the option of the Company on a date or
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dates specified prior to maturity at a price or prices, set forth in the
applicable Pricing Supplement, together with accrued interest to the date of
redemption. The Notes will not be subject to any sinking fund. 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. If less than all of the Notes with like tenor and terms are to
be redeemed, the Notes to be redeemed shall be selected by the applicable Note
Registrar by such method as such Note Registrar shall deem fair and
appropriate.
REPAYMENT AND REPURCHASE
Although Notes will not generally be repayable at the option of the holder
prior to maturity, the Company in the Pricing Supplement relating to a Note
may specify that such Note will be repayable at the option of the holder on a
date or dates specified prior to maturity at a price or prices set forth in
the applicable Pricing Supplement, together with accrued interest to the date
of repayment.
Unless otherwise specified in the applicable Pricing Supplement, in order
for a Note to be repaid, the Paying Agent must receive at least 30, but not
more than 45, days, prior to the repayment date (i) the Note with the form
entitled "Option to Elect Repayment" on the reverse of the Note duly completed
or (ii) a telegram, telex, facsimile transmission or a letter from a member of
a national securities exchange or the National Association of Securities
Dealers, Inc. or a commercial bank or trust company in the United States of
America setting forth the name of the holder of the Note, the principal amount
of the Note, the principal amount of the Note to be repaid, the certificate
number or a description of the tenor and terms of the Note, a statement that
the option to elect repayment is being exercised thereby and a guarantee that
the Note to be repaid with the form entitled "Option to Elect Repayment" on
the reverse of the Note duly completed will be received by the Paying Agent
not later than five Business Days after the date of such telegram, telex,
facsimile transmission or letter and such Note and form duly completed are
received by the Paying Agent by such fifth Business Day. Except in the case of
Renewable Notes or Extendible Notes, and unless otherwise specified in the
applicable Pricing Supplement, exercise of the repayment option by the holder
of a Note shall be irrevocable. The repayment option may be exercised by the
holder of a Note for less than the entire principal amount of the Note
provided that the principal amount of the Note remaining outstanding after
repayment is an authorized denomination.
If a Note is represented by a Global Security, the Depositary's nominee will
be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's
nominee will timely exercise a right to repayment with respect to a particular
Note, the beneficial owner of such Note must instruct the broker or other
direct or indirect participant through which it holds an interest in such Note
to notify the Depositary of its desire to exercise a right to repayment.
Different firms have different cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other direct or indirect participant through which it holds an
interest in a Note in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to the
Depositary.
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may be held or resold or, at
the discretion of the Company, may be surrendered to the applicable Trustee
for cancellation.
BOOK-ENTRY SYSTEM
Upon issuance, all Book-Entry Notes denominated in the same currency and
having the same issue date, rank (senior or subordinated), maturity date,
redemption provisions, repayment provisions, Interest Payment Dates and, in
the case of Fixed Rate Notes, interest rate or, in the case of Floating Rate
Notes, interest rate basis, Initial Interest Rate, Index Maturity, Interest
Reset Dates, Spread or Spread Multiplier, if any, minimum interest rate, if
any, and maximum interest rate, if any, will be represented by a single Global
Security. Each Global
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Security representing Book-Entry Notes will be deposited with, or on behalf
of, The Depository Trust Company, New York, New York (the "Depositary") or
such other depositary as is specified in the Pricing Supplement, and
registered in the name of a nominee of the Depositary. Book-Entry Notes will
not be exchangeable for certificated Notes and, except under the circumstances
described below, will not otherwise be issuable in definitive form.
The Depositary has advised the Company and the Agents as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants 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, 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.
If the Depositary is at any time unwilling, unable or ineligible to continue
as depositary and a successor depositary is not appointed by the Company
within 90 days, the Company will issue individual Notes in definitive form in
exchange for Book-Entry Notes. In addition, the Company may at any time
determine not to have Notes represented by one or more Book-Entry Notes, and,
in such event, will issue individual Notes in definitive form in exchange for
each Book-Entry Note representing all such Notes. In either instance, an owner
of a beneficial interest in a Book-Entry Note will be entitled to physical
delivery of Notes in definitive form equal in principal amount to such
beneficial interest and to have such Notes registered in its name. Individual
Notes so issued in definitive form will be issued in denominations of $1,000
and integral multiples of $1,000 in excess thereof and will be issued in
registered form only, without coupons.
A further description of the Depositary's procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the Prospectus under
"Description of Debt Securities--General--Global Securities". The Depositary
has confirmed to the Company, the Agents and the Trustees that it intends to
follow such procedures.
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FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
Any investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility of the imposition or modification of exchange controls by either
the U.S. or a foreign government. Such risks generally depend on economic and
political events over which the Company has no control. In recent years, rates
of exchange between U.S. dollars and certain foreign currencies have been
highly volatile and such volatility may be expected to continue in the future.
Fluctuations in any particular exchange rate that have occurred in the past
are not necessarily indicative, however, of fluctuations in such rate that may
occur during the term of any Note. Depreciation against the U.S. dollar of the
currency in which a Note is payable would result in a decrease in the
effective yield of such Note below its coupon rate and, in certain
circumstances, could result in a loss to the investor on a U.S. dollar basis.
In addition, depending on the specific terms of a currency-linked Note,
changes in exchange rates relating to any of the currencies involved may
result in a decrease in its effective yield and, in certain circumstances,
could result in a loss of all or a substantial portion of the principal of a
Note to the investor.
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A FOREIGN CURRENCY OR
A COMPOSITE CURRENCY AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS
TO THE RISKS ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED IN, OR THE PAYMENT
OF WHICH IS RELATED TO THE VALUE OF, SPECIFIED CURRENCIES OTHER THAN U.S.
DOLLARS. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Except as set forth below in "Certain U.S. Federal Income Tax
Considerations-Non-U.S. Holders," 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, premium, if any, and interest on the Notes. Such
persons should consult their own counsel with regard to such matters.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the
availability of a specified foreign currency at the time of payment of
principal of, premium, if any, or interest on a Note. Even if there are no
actual exchange controls, it is possible that the Specified Currency for any
particular Note not denominated in U.S. dollars would not be available when
payments on such Note are due. In that event, the Company would make required
payments in U.S. dollars on the basis of the Market Exchange Rate on the date
of such payment, or if such rate of exchange is not then available, on the
basis of the Market Exchange Rate as of the most recent practicable date. See
"Description of Notes--Payment Currency."
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable currency
exchange controls, if any, and historic exchange rate information on such
currency or currency unit.
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The information contained therein shall constitute a part of this Prospectus
Supplement and is furnished as a matter of information only and should not be
regarded as indicative of the range of or trends in fluctuations in currency
exchange rates that may occur in the future.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. In the event an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a court in the
United States, it is likely that such court would grant judgment relating to
the Notes only in U.S. dollars. If an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a New York court,
however, such court should render or enter a judgment or decree in the
Specified Currency. Such judgment should then be converted into U.S. dollars
at the rate of exchange prevailing on the date of entry of the judgment or
decree.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal U.S. Federal tax consequences
resulting from the beneficial ownership of Notes by certain persons. This
summary does not purport to consider all the possible U.S. Federal tax
consequences of the purchase, ownership or disposition of the Notes and is not
intended to reflect the individual tax position of any beneficial owner. It
deals only with Notes and currencies or composite currencies other than U.S.
dollars ("Foreign Currency") held as capital assets. Moreover, except as
expressly indicated, it addresses initial purchasers and does not address
beneficial owners with a special tax status or special tax situations, such as
dealers in securities or currencies, Notes (or Foreign Currency) held as a
hedge against currency risks or as part of a straddle with other investments
or as part of a "synthetic security" or other integrated investment (including
a "conversion transaction") comprised of a Note and one or more other
investments, or situations in which the functional currency of the beneficial
owner is not the U.S. dollar. Except to the extent discussed below under "Non-
U.S. Holders", this summary is not applicable to non-United States persons not
subject to U.S. Federal income tax on their worldwide income. This summary is
based upon the U.S. Federal tax laws and regulations as now in effect and as
currently interpreted and does not take into account possible changes in such
tax laws or such interpretations, any of which may be applied retroactively.
It does not include any description of the tax laws of any state, local or
foreign governments that may be applicable to the Notes or holders thereof.
Persons considering the purchase of Notes should consult their own tax
advisors concerning the application of the U.S. Federal tax laws to their
particular situations as well as any consequences to them under the laws of
any other taxing jurisdictions.
U.S. HOLDERS
Payments of Interest
In general, interest on a Note, whether payable in U.S. dollars or a Foreign
Currency (other than certain payments on a Discount Note, as defined and
described below under "Original Issue Discount"), will be taxable to a
beneficial owner who or which is (i) a citizen or resident of the United
States, (ii) a corporation created or organized under the laws of the United
States or any State thereof (including the District of Columbia) or (iii) a
person otherwise subject to United States Federal income taxation on its
worldwide income (a "U.S. Holder") as ordinary income at the time it is
received or accrued, depending on the holder's method of accounting for tax
purposes. If an interest payment is denominated in or determined by reference
to a Foreign Currency, then special rules, described below under "Foreign
Currency Notes", apply.
Original Issue Discount
The following discussion summarizes the United States Federal income tax
consequences to holders of Notes issued with original issue discount ("OID").
The basic rules for reporting OID are contained in the
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Internal Revenue Code of 1986, as amended (the "Code"). On February 2, 1994,
the Treasury Department issued final regulations (the "OID Regulations"),
which expand and illustrate the rules provided by the Code.
Special rules apply to OID on a Discount Note that is denominated in Foreign
Currency. See "Foreign Currency Notes--Foreign Currency Discount Notes".
General. A Note will be treated as issued with OID (a "Discount Note") if
the excess of the Note's "stated redemption price at maturity" over its issue
price is greater than a de minimis amount (set forth in the Code and the OID
Regulations). Generally, the issue price of a Note (or any Note that is part
of an issue of Notes) will be the first price at which a substantial amount of
Notes that are part of such issue of Notes are sold. Under the OID
Regulations, the "stated redemption price at maturity" of a Note is the sum of
all payments provided by the Note that are not payments of "qualified stated
interest". A "qualified stated interest" payment includes any stated interest
payment on a Note that is unconditionally payable at least annually at a
single fixed rate (or at certain floating rates) that appropriately takes into
account the length of the interval between stated interest payments. The
Pricing Supplement will state whether a particular issue of Notes will
constitute an issue of Discount Notes.
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is de minimis, then such excess constitutes "de minimis
OID". Under the OID Regulations, unless the election described below under
"Election to Treat All Interest as Original Issue Discount" is made, such a
Note will not be treated as issued with OID (in which case the following
paragraphs under "Original Issue Discount" will not apply) and a U.S. Holder
of such a Note will recognize capital gain with respect to such de minimis OID
as stated principal payments on the Note are made. The amount of such gain
with respect to each such payment will equal the product of the total amount
of the Note's de minimis OID and a fraction, the numerator of which is the
amount of the principal payment made and the denominator of which is the
stated principal amount of the Note.
In certain cases, Notes that bear stated interest and are issued at par may
be deemed to bear OID for Federal income tax purposes, with the result that
the inclusion of interest in income for Federal income tax purposes may vary
from the actual cash payments of interest made on such Notes, generally
accelerating income for cash method taxpayers. Under the OID Regulations, a
Note may be a Discount Note where, among other things, (i) a Note bearing
interest at a floating rate (a "Floating Rate Note") provides for a maximum
interest rate or a minimum interest rate that is reasonably expected as of the
issue date to cause the yield on the debt instrument to be significantly less,
in the case of a maximum rate, or more, in the case of a minimum rate, than
the expected yield determined without the maximum or minimum rate, as the case
may be; (ii) a Floating Rate Note provides for significant front-loading or
back-loading of interest; or (iii) a Note bears interest at a floating rate in
combination with one or more floating or fixed rates. Notice will be given in
the applicable Pricing Supplement when the Company determines that a
particular Note will be a Discount Note. Unless specified in the applicable
Pricing Supplement, Floating Rate Notes will not be Discount Notes.
The Code and the OID Regulations provide rules that require a U.S. Holder of
a Discount Note having a maturity of more than one year from its date of issue
to include OID in gross income before the receipt of cash attributable to such
income, without regard to the holder's method of accounting for tax purposes.
The amount of OID includible in gross income by a U.S. Holder of a Discount
Note is the sum of the "daily portions" of OID with respect to the Discount
Note for each day during the taxable year or portion of the taxable year in
which the U.S. Holder holds such Discount Note ("accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. Under the OID
Regulations, accrual periods with respect to a Note may be any set of periods
(which may be of varying lengths) selected by the U.S. Holder as long as (i)
no accrual period is longer than one year and (ii) each scheduled payment of
interest or principal on the Note occurs on the first day or final day of an
accrual period.
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The amount of OID allocable to an accrual period equals the excess of (a)
the product of the Discount Note's adjusted issue price at the beginning of
the accrual period and the Discount Note's yield to maturity (determined on
the basis of compounding at the close of each accrual period and properly
adjusted for the length of the accrual period) over (b) the sum of any
payments of qualified stated interest on the Discount Note allocable to the
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of the first accrual period is the issue price and at the beginning of any
accrual period thereafter is (x) the sum of the issue price of such Discount
Note, the accrued OID for each prior accrual period (determined without regard
to the amortization of any acquisition premium or bond premium, which are
discussed below), and the amount of any qualified stated interest on the Note
that has accrued prior to the beginning of the accrual period but is not
payable until a later date, less (y) any prior payments on the Discount Note
that were not qualified stated interest payments. If a payment (other than a
payment of qualified stated interest) is made on the first day of an accrual
period, then the adjusted issue price at the beginning of such accrual period
is reduced by the amount of the payment. If a portion of the initial purchase
price of a Note is attributable to interest that accrued prior to the Note's
issue date, the first stated interest payment on the Note is to be made within
one year of the Note's issue date and such payment will equal or exceed the
amount of pre-issuance accrued interest, then the U.S. Holder may elect to
decrease the issue price of the Note by the amount of pre-issuance accrued
interest, in which case a portion of the first stated interest payment will be
treated as a return of the excluded pre-issuance accrued interest and not as
an amount payable on the Note.
The OID Regulations contain certain special rules that generally allow any
reasonable method to be used in determining the amount of OID allocable to a
short initial accrual period (if all other accrual periods are of equal
length) and require that the amount of OID allocable to the final accrual
period equal the excess of the amount payable at the maturity of the Note
(other than any payment of qualified stated interest) over the Note's adjusted
issue price as of the beginning of such final accrual period. In addition, if
an interval between payments of qualified stated interest on a Note contains
more than one accrual period, then the amount of qualified stated interest
payable at the end of such interval is allocated pro rata (on the basis of
their relative lengths) between the accrual periods contained in the interval.
U.S. Holders of Discount Notes generally will have to include in income
increasingly greater amounts of OID over the life of the Note.
Acquisition Premium. A U.S. Holder that purchases a Note at its original
issuance for an amount in excess of its issue price but less than its stated
redemption price at maturity (any such excess being "acquisition premium"),
and that does not make the election described below under "Original Issue
Discount--Election To Treat All Interest as Original Interest Discount", is
permitted to reduce the daily portions of OID by a fraction, the numerator of
which is the excess of the U.S. Holder's purchase price for the Note over the
issue price, and the denominator of which is the excess of the sum of all
amounts payable on the Note after the purchase date, other than payments of
qualified stated interest, over the Note's issue price. Alternatively, a U.S.
Holder may elect to compute OID accruals as described under "Original Issue
Discount--General" above, treating the U.S. Holder's purchase price as the
issue price.
Optional Redemption. If the Company has an option to redeem a Note, or the
Holder has an option to cause a Note to be repurchased, prior to the Note's
stated maturity, such option will be presumed to be exercised if, by utilizing
any date on which such Note may be redeemed or repurchased 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 (i) in the case of an option of the Company, lower
than its yield to stated maturity, or (ii) in the case of an option of the
Holder, higher 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 OID purposes as if it were redeemed or repurchased, and a new Note were
issued, on the presumed exercise date for an amount equal to the Note's
adjusted issue price on that date.
Short-Term Notes. Under the Code, special rules apply with respect to OID on
Notes that mature one year or less from the date of its issuance ("Short-Term
Notes"). In general, a cash basis U.S. Holder of a Short-Term
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Note is not required to include OID in income as it accrues for United States
Federal income tax purposes unless it elects to do so. Accrual basis U.S.
Holders and certain other U.S. Holders, including banks, regulated investment
companies, dealers in securities and cash basis U.S. Holders who so elect, are
required to include OID in income as it accrues on Short-Term Notes on either
a straight-line basis or under the constant yield method (based on daily
compounding), at the election of the U.S. Holder. In the case of a U.S.
Holders not required and not electing to include OID in income currently, any
gain realized on the sale or retirement of Short-Term Notes will be ordinary
income to the extent of the OID accrued on a straight-line basis (unless an
election is made to accrue the original issue discount under the constant
yield method) through the date of sale or retirement. U.S. Holders who are not
required and do not elect to include OID on Short-Term Notes in income as it
accrues will be required to defer deductions for interest on borrowings
allocable to Short-Term Notes in an amount not exceeding the deferred income
until the deferred income is realized.
Any U.S. Holder of a Short-Term Note can elect to apply the rules in the
preceding paragraph taking into account the amount of "acquisition discount",
if any, with respect to the Note (rather than the OID with respect to such
Note). Acquisition discount is the excess of the stated redemption price at
maturity of the Short-Term Note over the U.S. Holder's purchase price.
Acquisition discount will be treated as accruing on a ratable basis or, at the
election of the U.S. Holder, on a constant-yield basis.
For purposes of determining the amount of OID subject to these rules, the
OID Regulations provide that no interest payments on a Short-Term Note are
qualified stated interest, but instead such interest payments are included in
the Short-Term Note's stated redemption price at maturity.
Notes Purchased at a Premium
Under the Code, a U.S. Holder that purchases a Note for an amount in excess
of its principal amount will not be subject to the OID rules and may elect to
treat such excess as "amortizable bond premium", in which case the amount of
qualified stated interest required to be included in the U.S. Holder's income
each year with respect to interest on the Note will be reduced by the amount
of amortizable bond premium allocable (based on the Note's yield to maturity)
to such year. Any election to amortize bond premium shall apply to all bonds
(other than bonds the interest on which is excludible from gross income) held
by the U.S. Holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the U.S. Holder, and may not be
revoked without the consent of the Internal Revenue Service ("IRS"). See also
"Original Issue Discount--Election to Treat All Interest as Original Issue
Discount".
Notes Purchased at a Market Discount
A Note, other than a Short-Term Note, will be treated as issued at a market
discount (a "Market Discount Note") if the amount for which a U.S. Holder
purchased the Note is less than the Note's issue price, subject to a de
minimis rule similar to the rule relating to de minimis OID described under
"Original Issue Discount--General".
In general, any partial payment of principal on, or gain recognized on the
maturity or disposition of a Market Discount Note will be treated as ordinary
income to the extent that such gain does not exceed the accrued market
discount on such Note. Alternatively, a U.S. Holder of a Market Discount Note
may elect to include market discount in income currently over the life of the
Market Discount Note. Such an election applies to all debt instruments with
market discount acquired by the electing U.S. Holder on or after the first day
of the first taxable year to which the election applies and may not be revoked
without the consent of the IRS.
Market discount accrues on a straight-line basis unless the U.S. Holder
elects to accrue such market discount on a constant yield to maturity basis.
Such an election shall apply only to the Note with respect to which it is made
and is irrevocable. A U.S. Holder of a Market Discount Note who does not elect
to include market discount in income currently generally will be required to
defer deductions for interest on borrowings allocable to such Note in an
amount not exceeding the accrued market discount on such Note until the
maturity or disposition of such Note.
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The market discount rules do not apply to a Short-Term Note.
Election to Treat All Interest as Original Issue Discount
Any U.S. Holder may elect to include in gross income all interest that
accrues on a Note using the constant yield method described above under the
heading "Original Issue Discount--General," with the modifications described
below. For purposes of this election, interest includes stated interest, OID,
de minimis OID, market discount (described above under "Notes Purchased at a
Market Discount"), acquisition discount, de minimis market discount and
unstated interest, as adjusted by any amortizable bond premium (described
above under "Notes Purchased at a Premium") or acquisition premium.
In applying the constant yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
U.S. Holder's adjusted basis in the Note immediately after its acquisition,
the issue date of the Note will be the date of its acquisition by the electing
U.S. Holder, and no payments on the Note will be treated as payments of
qualified stated interest. This election will generally apply only to the Note
with respect to which it is made and may not be revoked without the consent of
the IRS. If this election is made with respect to a Note with amortizable bond
premium, then the electing U.S. Holder will be deemed to have elected to apply
amortizable bond premium against interest with respect to all debt instruments
with amortizable bond premium (other than debt instruments the interest on
which is excludible from gross income) held by such electing U.S. Holder as of
the beginning of the taxable year in which the Note with respect to which the
election is made is acquired or thereafter acquired. The deemed election with
respect to amortizable bond premium may not be revoked without the consent of
the IRS.
If the election described above to apply the constant yield method to all
interest on a Note is made with respect to a Market Discount Note, as defined
above, then the electing U.S. Holder will be treated as having made the
election discussed above under "Notes Purchased at a Market Discount" to
include market discount in income currently over the life of all debt
instruments held or thereafter acquired by such U.S. Holder.
Purchase, Sale and Retirement of the Notes
General. A U.S. Holder's tax basis in a Note will generally be its U.S.
dollar cost (which, in the case of a Note purchased with a foreign currency,
will be the U.S. dollar value of the purchase price on the date of purchase),
increased by the amount of any OID or market discount (or acquisition
discount, in the case of a Short-Term Note) included in the U.S. Holder's
income with respect to the Note and the amount, if any, of income attributable
to de minimis OID included in the U.S. Holder's income with respect to the
Note, and reduced by the sum of (i) the amount of any payments that are not
qualified stated interest payments, and (ii) the amount of any amortizable
bond premium applied to reduce interest on the Note. A U.S. Holder generally
will recognize gain or loss on the sale or retirement of a Note equal to the
difference between the amount realized on the sale or retirement and the tax
basis of the Note. The amount realized on a sale or retirement for an amount
in foreign currency will be the U.S. dollar value of such amount on the date
of sale or retirement. Except to the extent described above under "Original
Issue Discount--Short Term Notes" or "Market Discount" or below under "Foreign
Currency Notes--Exchange Gain or Loss", and except to the extent attributable
to accrued but unpaid interest, gain or loss recognized on the sale or
retirement of a Note will be capital gain or loss and will be long-term
capital gain or loss if the Note was held for more than one year.
Foreign Currency Notes
Interest Payments. If an interest payment is denominated in or determined by
reference to a Foreign Currency, the amount of income recognized by a cash
basis U.S. Holder will be the U.S. dollar value of the interest payment, based
on the exchange rate in effect on the date of receipt, regardless of whether
the payment is in fact converted into U.S. dollars. Accrual basis U.S. Holders
may determine the amount of income recognized with respect to such interest
payment in accordance with either of two methods. Under the first
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method, the amount of income recognized will be based on the average exchange
rate in effect during the interest accrual period (or, with respect to an
accrual period that spans two taxable years, the partial period within the
taxable year). Upon receipt of an interest payment (including a payment
attributable to accrued but unpaid interest upon the sale or retirement of a
Note) determined by reference to a Foreign Currency, an accrual basis U.S.
Holder will recognize ordinary income or loss measured by the difference
between such average exchange rate and the exchange rate in effect on the date
of receipt, regardless of whether the payment is in fact converted into U.S.
dollars. Under the second method, an accrual basis U.S. Holder may elect to
translate interest income into U.S. dollars at the spot exchange rate in
effect on the last day of the accrual period or, in the case of an accrual
period that spans two taxable years, at the exchange rate in effect on the
last day of the partial period within the taxable year. Additionally, if a
payment of interest is actually received within 5 business days of the last
day of the accrual period or taxable year, an accrual basis U.S. Holder
applying the second method may instead translate such accrued interest into
U.S. dollars at the spot exchange rate in effect on the day of actual receipt
(in which case no exchange gain or loss will result). Any election to apply
the second method will apply to all debt instruments held by the U.S. Holder
at the beginning of the first taxable year to which the election applies or
thereafter acquired by the U.S. Holder and may not be revoked without the
consent of the IRS.
Exchange of Amounts in Other than U.S. Dollars. Foreign Currency received as
interest on a Note or on the sale or retirement of a Note will have a tax
basis equal to its U.S. dollar value at the time such interest is received or
at the time of such sale or retirement, as the case may be. Foreign Currency
that is purchased will generally have a tax basis equal to the U.S. dollar
value of the Foreign Currency on the date of purchase. Any gain or loss
recognized on a sale or other disposition of a Foreign Currency (including its
use to purchase Notes or upon exchange for U.S. dollars) will be ordinary
income or loss.
Foreign Currency Discount Notes. OID for any accrual period on a Discount
Note that is denominated in a Foreign Currency will be determined in the
Foreign Currency and then translated into U.S. dollars in the same manner as
stated interest accrued by an accrual basis U.S. Holder. Upon receipt of an
amount attributable to original issue discount (whether in connection with a
payment of interest or the sale or retirement of a Note), a U.S. Holder may
recognize ordinary income or loss.
Amortizable Bond Premium. In the case of a Note that is denominated in a
Foreign Currency, bond premium will be computed in units of Foreign Currency,
and amortizable bond premium will reduce interest income in units of the
Foreign Currency. At the time amortized bond premium offsets interest income,
a U.S. Holder may realize ordinary income or loss, measured by the difference
between exchange rates at that time and at the time of the acquisition of the
Notes.
Market Discount. Market discount is determined in units of the Foreign
Currency. Accrued market discount that is required to be taken into account on
the maturity or upon disposition of a Note is translated into U.S. dollars at
the exchange rate on the maturity or the disposition date, as the case may be
(and no part is treated as exchange gain or loss), accrued market discount
currently includible in income by an electing U.S. Holder is translated into
U.S. dollars at the average exchange rate for the accrual period (or the
partial accrual period during which the U.S. Holder held the Note), and
exchange gain or loss is determined on maturity or disposition of the Note (as
the case may be) in the manner described above under "Foreign Currency Notes--
Interest Payments" with respect to the computation of exchange gain or loss on
the receipt of accrued interest by an accrual method holder.
Exchange Gain or Loss. Gain or loss recognized by a U.S. Holder on the sale
or retirement of a Note that is attributable to changes in exchange rates will
be treated as ordinary income or loss. However, exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction.
INDEXED NOTES
The applicable Pricing Supplement will contain a discussion of any special
United States Federal income tax rules with respect to currency indexed notes
or other indexed Notes.
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NON-U.S. HOLDERS
Subject to the discussion of backup withholding below, payments of principal
(and premium, if any) and interest (including OID) by the Company or any agent
of the Company (acting in its capacity as such) to any holder of a Note that
is not a U.S. Holder (a "Non-U.S. Holder") will not be subject to U.S. Federal
withholding tax, provided, in the case of interest (including OID), that (i)
the Non-U.S. Holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, (ii) the Non-U.S. Holder is not a controlled foreign corporation for
U.S. tax purposes that is related to the Company (directly or indirectly)
through stock ownership and (iii) either (A) the Non-U.S. Holder certifies to
the Company or its agent under penalties of perjury that it is not a United
States person and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Note certifies to the Company or its agent under
penalties of perjury that such statement has been received from the Non-U.S.
Holder by it or by another financial institution and furnishes the payor with
a copy thereof. Recently finalized regulations would modify the certification
requirements for payments of interest effective January 1, 1999.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest (including OID) on the Note is effectively connected with the
conduct of such trade or business, the Non-U.S. Holder, although exempt from
the withholding tax discussed in the preceding paragraph, may be subject to
U.S. Federal income tax on such interest (or OID) in the same manner as if it
were a U.S. Holder. In addition, if the Non-U.S. Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits for the taxable year, subject to
certain adjustments. For purposes of the branch profits tax, interest
(including OID) on a Note will be included in the earnings and profits of such
holder if such interest (or OID) is effectively connected with the conduct by
such holder of a trade or business in the United States. In lieu of the
certificate described in the preceding paragraph, such a holder must provide
the payor with a properly executed IRS Form 4224 to claim an exemption from
U.S. Federal withholding tax.
Any capital gain, market discount or exchange gain realized on the sale,
exchange, retirement or other disposition of a Note by a Non-U.S. Holder will
not be subject to U.S. Federal income or withholding taxes if (i) such gain is
not effectively connected with a U.S. trade or business of the Non-U.S. Holder
and (ii) in the case of an individual, such Non-U.S. Holder (A) is not present
in the United States for 183 days or more in the taxable year of the sale,
exchange, retirement or other disposition or (B) does not have a tax home (as
defined in Section 911(d)(3) of the Code) in the United States in the taxable
year of the sale, exchange, retirement or other disposition and the gain is
not attributable to an office or other fixed place of business maintained by
such individual in the United States.
Notes held by an individual who is neither a citizen nor a resident of the
United States for U.S. Federal tax purposes at the time of such individual's
death will not be subject to U.S. Federal estate tax, provided that the income
from such Notes was not or would not have been effectively connected with a
U.S. trade or business of such individual and that such individual qualified
for the exemption from U.S. Federal withholding tax (without regard to the
certification requirements) described above.
PURCHASERS OF NOTES WHO ARE NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE POSSIBLE APPLICABILITY OF UNITED STATES
WITHHOLDING AND OTHER TAXES UPON INCOME REALIZED IN RESPECT OF THE NOTES.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Notes are outstanding, the Company is
required to provide the IRS with certain information, including the holder's
name, address and taxpayer identification number (either the holder's Social
Security number or its employer identification number, as the case may be),
the aggregate amount of principal and interest paid (including OID, if any) to
that holder during the calendar year and the amount of tax withheld, if any.
This obligation, however, does not apply with respect to certain U.S. Holders,
including corporations, tax-exempt organizations, qualified pension and profit
sharing trusts and individual retirement accounts.
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In the event that a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number in
the manner required by applicable law or underreports its tax liability, the
Company, its agents or paying agents or a broker may be required to "backup"
withhold a tax equal to 31% of each payment of interest (including OID) and
principal (and premium, if any) on the Notes. This backup withholding is not
an additional tax and may be credited against the U.S. Holder's U.S. Federal
income tax liability, provided that the required information is furnished to
the IRS.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by the Company or any agent thereof
(in its capacity as such) to a Non-U.S. Holder of a Note if such holder has
provided the required certification that it is not a United States person as
set forth in clause (iii) in the first paragraph under "Non-U.S. Holders"
above, or has otherwise established an exemption (provided that neither the
Company nor its agent has actual knowledge that the holder is a United States
person or that the conditions of any exemption are not in fact satisfied).
Payment of the proceeds from the sale of a Note to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding, except that if the 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 from all sources for the three-year
period ending with the close of its taxable year preceding the payment was
effectively connected with a U.S. trade or business, information reporting may
apply to such payments. Payment of the proceeds from a sale of a Note to or
through the U.S. office of a broker is subject to information reporting and
backup withholding unless the holder or beneficial owner certifies as to its
taxpayer identification number or otherwise establishes an exemption from
information reporting and backup withholding.
Recently finalized Treasury Regulations would modify the application of
information reporting requirements and the backup withholding tax to Non-U.S.
Holders, effective January 1, 1999. However, compliance with the certification
procedures described in the preceding section would generally continue the
exemption (from information reporting requirements and the backup withholding
tax) for Non-U.S. Holders who are exempt recipients.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through the
Agents, who have agreed to use reasonable efforts to solicit offers to
purchase Notes. The Company will have the sole right to accept offers to
purchase Notes and may reject any offer to purchase Notes in whole or in part.
An Agent will have the right to reject any offer to purchase Notes solicited
by it in whole or in part. Payment of the purchase price of the Notes will be
required to be made in immediately available funds. The Company will pay an
Agent, in connection with sales of Notes, resulting from a solicitation made
or an offer to purchase received by such Agent, a commission ranging from
.125% to .750% of the principal amount of Notes to be sold, provided, however,
that commissions with respect to Notes maturing in thirty years or greater
will be negotiated at the time of issuance.
The Company may also sell Notes to an Agent as principal for its own account
at discounts to be agreed upon at the time of sale. Such Notes may be resold
to investors and other purchasers at prevailing market prices, or prices
related thereto at the time of such resale, as determined by the Agent or, if
so agreed, at a fixed public offering price. In addition, the Agents may offer
the Notes they have purchased as principal to other dealers. The Agents may
sell Notes to any dealer at a discount and, unless otherwise specified in the
applicable Pricing Supplement, such discount allowed to any dealer will not be
in excess of the discount to be received by such Agent from the Company.
Unless otherwise specified in the applicable Pricing Supplement, any Note sold
to an Agent as principal will be purchased by the Agent at a price equal to
100% of the principal amount thereof less a percentage of the principal amount
equal to the commission applicable to an agency sale of a Note of identical
maturity. After the initial public offering of Notes to be resold to investors
and other purchasers, the public
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offering price (in the case of Notes to be resold at a fixed public offering
price) concession and discount may be changed.
In order to facilitate the offering of the Notes, the Agents may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Agents may overallot in connection with the offering,
creating a short position in the Notes for their own account. In addition, to
cover overallotments or to stabilize the price of the Notes, the Agents may
bid for, and purchase, the Notes, in the open market. Finally, the Agents may
reclaim selling concessions allowed to any agent or a dealer for distributing
the Notes in the offering, if the Agents repurchase previously distributed
Notes in transactions to cover syndicate short positions, in stabilization.
The Company has reserved the right to sell, and may solicit and accept
offers to purchase, Notes directly to investors from time to time on its own
behalf in those jurisdictions in which it is permitted to do so. The Company
may accept (but not solicit) offers to purchase Notes through additional
agents and may appoint additional agents for the purpose of soliciting offers
to purchase Notes, in either case on terms substantially identical to the
terms contained in the Distribution Agreement. Such other agents, if any, will
be named in the applicable Pricing Supplement.
The Company reserves the right to withdraw, cancel or modify the offer
without notice.
An Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company and the
Agents have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
made in respect thereof. The Company has also agreed to reimburse the Agents
for certain expenses.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange. The Company has been advised by the Agents that
the Agents intend to make a market in the Notes, as permitted by applicable
laws and regulations. The Agents are not obligated to do so, however, and the
Agents may discontinue making a market at any time without notice. No
assurance can be given as to the liquidity of any trading market for the
Notes.
Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Debt Securities pursuant to the Indentures
referred to herein.
The Agents and/or certain of their affiliates may engage in transactions
with and perform services for the Company and certain of its affiliates in the
ordinary course of business. One of the Agents, First Chicago Capital Markets,
Inc. ("FCCM"), is an affiliate of the Company. The participation of FCCM in
the offer and sale of the Notes as described herein complies and will comply
with Rule 2720 of the Rules of Conduct of the National Association of
Securities Dealers, Inc. (the "NASD") regarding the offer and sale of
securities of an affiliate. No NASD member participating in offers and sales
of securities will execute a transaction in the Notes in a discretionary
account without the prior specific written approval of the member's customer.
Any obligations of FCCM are the sole obligations of FCCM and do not create any
obligations on the part of the Company or any other affiliate of FCCM.
This Prospectus Supplement and Prospectus may be used by FCCM in connection
with offers and sales related to secondary market transactions in the Notes.
FCCM may act as principal or agent in such transactions. Such sales will be
made at prices related to prevailing market prices at the time of sale.
In addition to offering Notes through the Agents as described herein, Debt
Securities which are medium-term notes and which may have terms substantially
similar to the terms of the Notes offered hereby may be offered concurrently
with the offering of the Notes, on a continuing basis outside the United
States by the Company or its agents. Any such Debt Securities sold by the
Company or its agents outside the United States will reduce the principal
amount of Notes which may be offered by this Prospectus Supplement and the
Prospectus.
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LEGAL OPINIONS
The validity of the Notes will be passed upon for the Company by Sherman I.
Goldberg, Esq., Executive Vice President, General Counsel and Secretary of the
Company and for the Agents by Cravath, Swaine & Moore, Worldwide Plaza, 825
Eighth Avenue, New York, New York 10019. Cravath, Swaine & Moore has
represented and continues to represent the Company from time to time in other
matters.
As of September 30, 1997, Sherman I. Goldberg was the record and beneficial
owner of 226,663 shares of common stock of the Company and held options to
purchase 170,329 shares of common stock of the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Securities
and Exchange Commission (the "Commission") pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), are
incorporated herein by reference:
(i) The Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(ii) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997; and
(iii) The Company's Current Reports on Form 8-K dated January 13, 1997,
January 15, 1997, February 7, 1997, April 14, 1997, July 14, 1997,
October 10, 1997 and October 14, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus Supplement
and prior to the termination of the offering of the Notes shall be deemed to
be incorporated by reference into this Prospectus Supplement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus
Supplement 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 such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus Supplement.
ANY PERSON RECEIVING A COPY OF THIS PROSPECTUS SUPPLEMENT MAY OBTAIN WITHOUT
CHARGE, UPON WRITTEN OR ORAL REQUEST, A COPY OF ANY OF THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN, EXCEPT FOR THE EXHIBITS TO SUCH DOCUMENTS.
REQUESTS SHOULD BE ADDRESSED TO FIRST CHICAGO NBD CORPORATION, ONE FIRST
NATIONAL PLAZA, CHICAGO, ILLINOIS 60670, ATTENTION: INVESTOR RELATIONS, (312)
732-4812.
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PROSPECTUS
FIRST CHICAGO NBD CORPORATION
DEBT SECURITIES AND WARRANTS TO PURCHASE DEBT SECURITIES
FOREIGN CURRENCY WARRANTS, STOCK-INDEX WARRANTS AND OTHER WARRANTS
PREFERRED STOCK, DEPOSITARY SHARES AND PREFERRED STOCK WARRANTS
COMMON STOCK WARRANTS
First Chicago NBD Corporation (the "Company") may issue from time to time,
together or separately, (i) in one or more series, its unsecured debt
securities ("Debt Securities"), which may be either senior (the "Senior
Securities") or subordinated (the "Subordinated Securities") in priority of
payment, both of which may be convertible or exchangeable into common stock,
par value $1.00 per share, of the Company ("Common Stock"), preferred stock of
the Company ("Preferred Stock"), other Debt Securities, Debt Warrants, Common
Stock Warrants, Preferred Stock Warrants or Depositary Shares (each as defined
herein); (ii) warrants ("Debt Warrants") to purchase Debt Securities; (iii)
options, warrants or other rights relating to the exchange of certain
currencies ("Currency Warrants"); (iv) options, warrants or other rights
entitling the holder to receive an amount in cash determined by reference to
increases ("Stock-Index Call Warrants") and decreases ("Stock-Index Put
Warrants" and, collectively with Stock-Index Call Warrants, being referred to
herein as the "Stock-Index Warrants") in the level of a specified stock-index
which may be based on one or more U.S. or foreign stocks or a combination
thereof; (v) options, warrants or other rights relating to other items or
indices ("Other Warrants"); (vi) shares of Preferred Stock which may be
convertible into shares of Common Stock or exchangeable for Debt Securities;
(vii) shares of Preferred Stock represented by depositary shares ("Depositary
Shares"); (viii) warrants to purchase shares of Preferred Stock ("Preferred
Stock Warrants"); and (ix) warrants to purchase shares of Common Stock
("Common Stock Warrants"), in amounts, at prices and on terms to be determined
at the time of the offering. The Debt Warrants, Currency Warrants, Stock-Index
Warrants, Other Warrants, Preferred Stock Warrants and Common Stock Warrants
are collectively referred to herein as the "Warrants"; and the Debt
Securities, Warrants, shares of Preferred Stock and Depositary Shares are
collectively referred to herein as the "Securities".
The Company may issue Securities for proceeds up to an aggregate of
$3,000,000,000, or the equivalent thereof if any of the Securities are
denominated in a foreign currency or a foreign currency unit, including the
European Currency Unit ("ECU"). The Securities of each series will be offered
on terms determined at the time of sale. The Securities may be sold for U.S.
dollars, foreign currencies or foreign currency units, and the principal of,
and any interest on, the Debt Securities may be payable in U.S. dollars,
foreign currencies or foreign currency units.
The Senior Securities will rank equally with all other unsubordinated and
unsecured indebtedness of the Company. The Subordinated Securities will be
unsecured and subordinated as described under "Subordinated Securities".
Unless otherwise specified in the Prospectus Supplement relating to
Subordinated Securities, payment of the principal of Subordinated Securities
may be accelerated only in the case of certain events involving the bankruptcy
or insolvency of the Company, and no right of acceleration will exist in the
case of default in the payment of principal or interest or in the performance
of any covenant.
When a particular series of Securities, in respect of which this Prospectus
is being delivered, is offered, a supplement to this Prospectus (the
"Prospectus Supplement") setting forth certain terms of the offered Securities
will be delivered together with this Prospectus. The applicable Prospectus
Supplement, among other things and where applicable, will include: (i) with
regard to Debt Securities, the specific designation, priority, aggregate
principal amount, currency or currency unit, rate (or method of calculation)
and time of payment of any interest, authorized denominations, maturity,
offering price, place or places of payment, redemption terms, terms of any
repayment at the option of the holder, special provisions relating to Debt
Securities in bearer form, terms for sinking fund payments, terms for
conversion or exchange into other securities, provisions regarding original
issue discount securities and other terms of such Debt Securities; (ii) with
regard to Warrants, where applicable, the duration, aggregate amount, offering
price, exercise price, and detachability; (iii) with regard to Debt Warrants,
Preferred Stock Warrants and Common Stock Warrants, the applicable type and
amount of Securities covered thereby; (iv) with regard to Stock-Index Warrants
or Other Warrants, the applicable securities index or other items or indices
with respect to which such warrants shall apply and the method of determining
the cash value payable in connection with the exercise of such warrants; (v)
with regard to Currency Warrants, the currency to which U.S. Dollars will be
compared, the method of determining the cash value payable in connection with
the exercise of such Currency Warrants, the manner in which such Currency
Warrants may be exercised and any restrictions on exercise of such Currency
Warrants; (vi) with regard to Preferred Stock, the specific number of shares,
title, stated value and liquidation preference of each share, issuance price,
dividend rate or method of calculation, dividend periods, dividend payment
dates, any redemption or sinking fund provisions, any conversion or exchange
provisions, whether fractional interests in shares of Preferred Stock will be
offered through depositary arrangements and other specific terms of each
series of Preferred Stock; and (vii) in the case of Depositary Shares, the
fraction of a share of Preferred Stock which each such Depositary Share will
represent.
The Prospectus Supplement will also contain information, where applicable,
about certain U.S. federal income tax considerations relating to, and any
listing on a securities exchange of, the Securities covered by the Prospectus
Supplement.
The Securities may be sold by the Company directly, through agents
designated from time to time, through underwriting syndicates led by one or
more managing underwriters or through one or more underwriters acting alone.
If any agent of the Company, or any underwriter, is involved in the sale of
the Securities, the name of such agent or underwriter, the principal or stated
amount to be purchased by it, any applicable commissions or discounts and the
net proceeds to the Company from such sale will be set forth in, or may be
calculated from, the Prospectus Supplement. The aggregate net proceeds to the
Company from the sale of all the Securities will be the public offering or
purchase price of the Securities sold less the aggregate of such commissions
and discounts and other expenses of issuance and distribution. An affiliate of
the Company may from time to time act as an agent or underwriter in connection
with the sale of Securities to the extent permitted by applicable law. See
"Plan of Distribution".
This Prospectus and applicable Prospectus Supplement may be used by First
Chicago Capital Markets, Inc. ("FCCM"), a wholly owned subsidiary of the
Company, in connection with offers and sales related to secondary market
transactions in the Securities to the extent permitted by applicable law. FCCM
may act as principal or agent in such transactions. Such sales will be made at
prices related to the prevailing market prices at the time of sale.
THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A
BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is October 8, 1997.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING MADE
HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANOTHER PERSON.
THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN
SUCH JURISDICTION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Information, as of particular dates, concerning
directors and executive officers, their compensation, options granted to them,
the principal holders of securities of the Company and any material interest
of such persons in transactions with the Company is disclosed in proxy
statements distributed to stockholders of the Company and filed with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the Public Reference Room of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and the Commission's Regional
Offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center (13th Floor), New York, New York 10048. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such reports and other information may also be accessed through the
Commissions' electronic data gathering, analysis and retrieval system
("EDGAR") via electronic means, including the Commission's homepage on the
Internet (http://www.sec.gov). In addition, such reports, proxy statements and
other material concerning the Company can be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York; the Chicago
Stock Exchange, 440 South LaSalle Street, Chicago, Illinois; and the Pacific
Stock Exchange, 301 Pine Street, San Francisco, California.
The Company has filed with the Commission a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities being offered by this Prospectus. This Prospectus does not contain
all the information set forth in the Registration Statement, certain portions
of which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
Securities, reference is made to the Registration Statement, including the
exhibits thereto. The Registration Statement may be inspected by anyone
without charge at the principal office of the Commission in Washington, D.C.
and copies of all or any part of it may be obtained from the Commission upon
payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to Section 13 of the Exchange Act are incorporated herein by
reference:
(i) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(ii) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997;
(iii) The Company's Current Reports on Form 8-K dated January 13, 1997,
January 15, 1997, February 7, 1997, April 14, 1997 and July 14, 1997; and
2
<PAGE>
(iv) The description of the Company's common stock set forth in the
registration statement filed by NBD Bancorp, Inc. ("NBD") pursuant to
Section 12 of the Exchange Act and any amendment or report filed with the
Commission for the purpose of updating such description.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a 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 such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
ANY PERSON RECEIVING A COPY OF THIS PROSPECTUS MAY OBTAIN WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, A COPY OF ANY OF THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN, EXCEPT FOR THE EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS).
REQUESTS SHOULD BE ADDRESSED TO FIRST CHICAGO NBD CORPORATION, ONE FIRST
NATIONAL PLAZA, CHICAGO, ILLINOIS 60670, ATTENTION: INVESTOR RELATIONS (312)
732-4812.
FIRST CHICAGO NBD CORPORATION
GENERAL
The Company is a multi-bank holding company registered under the Bank
Holding Company Act, as amended ("the "BHC Act"), which was incorporated under
the laws of the State of Delaware in 1972. The Company is the surviving
corporation resulting from the merger (the "Merger"), effective December 1,
1995, of First Chicago Corporation, a Delaware corporation ("First Chicago")
and registered bank holding company, with and into NBD, a Delaware corporation
and registered bank holding company. The Company's lead bank is The First
National Bank of Chicago ("FNBC"). The Company also is the parent corporation
of NBD Bank, Detroit, Michigan ("NBD Michigan"), American National Bank and
Trust Company of Chicago ("ANB"), FCC National Bank ("FCCNB"), NBD Bank, N.A.,
Indianapolis, Indiana ("NBD Indiana"), NBD Bank (Florida) and several other
bank subsidiaries. FCCNB is a Delaware-based national banking association
primarily engaged in the issuance of VISA and MasterCard credit cards.
Through its banking subsidiaries, the Company provides consumer and
corporate banking products and services. In addition, the Company, directly or
indirectly, owns the stock of various nonbank companies engaged in businesses
related to banking and finance.
In addition to its equity investment in subsidiaries, the Company, directly
or indirectly, raises funds principally to finance the operations of its
nonbank subsidiaries. A substantial portion of the Company's annual income
typically has been derived from dividends from its subsidiaries, and from
interest on loans, some of which are subordinated, to its subsidiaries.
The Company engages primarily in three lines of business--regional banking,
which includes retail banking and middle market banking; corporate and
institutional banking and corporate investments; and credit card. Each of
these businesses is conducted through the Company's bank and nonbank
subsidiaries.
Because the Company is a holding company, its rights and the rights of its
creditors, including the holders of the Debt Securities, to participate in the
assets of any subsidiary upon the subsidiary's liquidation or recapitalization
would be subject to the prior claims of such subsidiary's creditors except to
the extent that the Company may itself be a creditor with recognized claims
against the subsidiary.
3
<PAGE>
The Company's executive offices are located at One First National Plaza,
Chicago, Illinois 60670, and the telephone number is (312) 732-4000.
SUPERVISION AND REGULATION
The operations of financial institutions may be affected by legislative
changes and by the policies of various regulatory authorities. In particular,
bank holding companies and their subsidiaries are affected by the credit
policies of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") through its regulation of the national supply of bank credit.
Among the instruments of monetary policy used by the Federal Reserve Board to
implement its objectives are open market operations in U.S. Government
securities, changes in the discount rate on bank borrowings and changes in
reserve requirements on bank deposits.
Bank holding companies, banks and financial institutions generally are
highly regulated, with numerous federal and state laws and regulations
governing their activities. As a bank holding company, the Company is subject
to regulation under the BHC Act and is subject to examination and supervision
by the Federal Reserve Board. Under the BHC Act, the Company is prohibited,
with certain exceptions, from acquiring or retaining direct or indirect
ownership or control of voting shares of any company which is not a bank or
bank holding company, and from engaging in activities other than those of
banking or of managing or controlling banks, other than subsidiary companies
and activities which the Federal Reserve Board determines to be so closely
related to the business of banking as to be a proper incident thereto. The
acquisition of direct or indirect ownership or control of a bank or bank
holding company by the Company is also subject to certain restrictions under
the BHC Act and applicable state laws.
The Company is a legal entity separate and distinct from the Company's
banking subsidiaries (the "Banks") and the Company's other affiliates.
Investors should be aware of the various legal limitations on the extent to
which the Banks can finance or otherwise supply funds to the Company or
various of its affiliates. In particular, the Banks are subject to certain
restrictions imposed by the laws of the United States on any extensions of
credit to the Company or, with certain exceptions, other affiliates, on
investments in stock or other securities thereof, on the taking of such
securities as collateral for loans, and on the terms of transactions between
the Banks and other subsidiaries. The Company and its subsidiaries, including
the Banks, are also subject to certain restrictions with respect to engaging
in the issuance, flotation, underwriting, public sale or distribution of
securities.
Various federal and state laws govern the operations of the Banks. The
national bank subsidiaries of the Company, including FNBC, ANB, FCCNB and NBD
Indiana, are supervised, examined and regulated by the Office of the
Comptroller of the Currency (the "Comptroller") under the National Bank Act,
as amended. Since national banks are also members of the Federal Reserve
System and their deposits are insured by the Federal Deposit Insurance
Corporation (the "FDIC"), they are also subject to the applicable provisions
of the Federal Reserve Act, as amended, and the Federal Deposit Insurance Act,
as amended, and, in certain respects, to state laws applicable to financial
institutions. NBD Michigan and the other state-chartered bank subsidiaries of
the Company are, in general, subject to the same or similar restrictions and
regulations, but with more extensive regulation and examination by state
banking departments, the Federal Reserve Board for state banks which are
members of the Federal Reserve System, and the FDIC for state banks which are
not members of the Federal Reserve System. In addition, the Banks' operations
in other countries are subject to various restrictions imposed by the laws of
such countries.
Federal law prohibits the Company and certain of its affiliates from
borrowing from the Banks without the prior approval of the respective Bank's
Board of Directors and unless such loans are secured by U.S. Treasury or other
specified obligations. Further, such secured loans and investments by any of
the Banks are limited in amount as to the Company or any other such affiliate
to 10% of the respective Bank's capital and surplus and as to the Company and
all such affiliates to an aggregate 20% of the respective Bank's capital and
surplus. Under Federal Reserve Board policy, the Company is expected to act as
a source of financial strength to each Bank and to commit resources to support
such Bank in circumstances where it might not do so absent such policy. In
addition, 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 Bank.
4
<PAGE>
Additionally, there are certain federal and state regulatory limitations on
the payment of dividends to the Company by the Banks. Dividend payments by
national banks are limited to the lesser of (i) the level of undivided profits
and (ii) absent regulatory approval, an amount not in excess of net income for
the current year combined with retained net income for the preceding two
years. As of January 1, 1997, the Banks could have declared additional
dividends of approximately $0.9 billion without the approval of banking
regulatory agencies. The payment of dividends by any Bank may also be affected
by other factors, such as the maintenance of adequate capital for such Bank.
Bank regulatory agencies have the authority to prohibit the banking
organizations they supervise from paying dividends if, in the bank regulator's
opinion, the payment of dividends would, in light of the financial condition
of such bank, constitute an unsafe or unsound practice.
As a bank holding company, the Company and its subsidiaries generally are
prohibited from engaging in certain tie-in arrangements in connection with
extensions of credit or providing property or services.
CAPITAL ADEQUACY
The Federal Reserve Board has adopted risk-based capital guidelines for bank
holding companies that require bank holding companies to maintain a minimum
ratio of total capital to risk-weighted assets (including certain off-balance-
sheet items, such as standby letters of credit) of 8%. At least half of total
capital must be composed of common stockholders' equity, minority interest,
noncumulative perpetual preferred stock and a limited amount of cumulative
perpetual preferred stock, less disallowed intangibles and other adjustments
("Tier I capital"). The remainder ("Tier II capital") may consist of
subordinated debt, other preferred stock, certain other instruments and a
limited amount of loan loss reserves. At June 30, 1997 the Company's
consolidated Tier I capital and total capital ratios were 8.6% and 12.4%,
respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio of Tier I capital to total average assets (the "leverage ratio")
of 3% for bank holding companies that meet certain specified criteria,
including those having the highest regulatory rating. All other bank holding
companies generally are required to maintain a leverage ratio of at least 3%
plus an additional cushion of 100 to 200 basis points. The Company's leverage
ratio at June 30, 1997, was 8.6%. The guidelines also provide that bank
holding companies experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve Board has indicated that it will consider a
"tangible Tier I capital leverage ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
Each of the Banks is subject to similar risk-based and leverage capital
requirements adopted by its applicable federal banking agency. Each of the
Company's Banks was in compliance with the applicable minimum capital
requirements as of June 30, 1997. Neither the Company nor any of the Banks has
been advised by any federal banking agency of any specific minimum leverage
ratio requirement applicable to it.
Failure to meet capital requirements could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described below
under "FDICIA and FIRREA".
FDICIA AND FIRREA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
significantly expanded the regulatory and enforcement powers of federal
banking regulators, in particular the FDIC, and has important consequences for
the Company, the Banks and other depository institutions located in the United
States.
A major feature of FDICIA is the comprehensive directions it gives to
federal banking regulators to promptly direct or require the correction of
problems at inadequately capitalized banks in the manner that is least costly
to the federal deposit insurance funds. The degree of corrective regulatory
involvement in the operations
5
<PAGE>
and management of banks and their holding companies is, under FDICIA, largely
determined by the actual or anticipated capital positions of the subject
institution.
FDICIA established five tiers of capital measurement for regulatory purposes
ranging from "well capitalized" to "critically undercapitalized." Under
regulations adopted by the federal banking agencies, a depository institution
is well capitalized if it significantly exceeds the minimum level required by
regulation for each relevant capital measure, adequately capitalized if it
meets such measure, undercapitalized if it fails to meet any such measure,
significantly undercapitalized if it is significantly below such measure and
critically undercapitalized if its tangible equity is not greater than 2% of
total tangible assets. A depository institution may be deemed to be in a
capitalization category lower than is indicated by its actual capital position
if it receives an unsatisfactory examination rating. FDICIA requires banking
regulators to take increasingly strong corrective steps, based on the capital
tier of any subject bank, to cause such bank to achieve and maintain capital
adequacy. Even if a bank is adequately capitalized, however, the banking
regulators are authorized to apply corrective measures if the bank is
determined to be in an unsafe or unsound condition or engaging in an unsafe or
unsound activity.
Depending on the level of capital of an insured depository institution, the
banking regulatory agencies' corrective powers can include: requiring a
capital restoration plan; placing limits on asset growth and restrictions on
activities; requiring the institution to reduce total assets; requiring the
institution to issue additional stock (including voting stock) or to be
acquired; placing restrictions on transactions with affiliates; restricting
the interest rate the institution may pay on deposits; ordering a new election
for the institution's board of directors; requiring that certain senior
executive officers or directors be dismissed; prohibiting the institution from
accepting deposits from correspondent banks; requiring the institution to
divest certain subsidiaries; prohibiting the payment of principal or interest
on subordinated debt; prohibiting the institution's parent bank holding
company from making capital distributions without prior regulatory approval;
and, ultimately, appointing a receiver for the institution.
If the insured depository institution is undercapitalized, the parent bank
holding company is required to guarantee that the institution will comply with
any capital restoration plan submitted to, and approved by, the appropriate
federal banking agency in an amount equal to the lesser of (i) 5% of the
institution's total assets at the time the institution became undercapitalized
or (ii) the amount which is necessary (or would have been necessary) to bring
the institution into compliance with all applicable capital standards as of
the time the institution fails to comply with the capital restoration plan. If
such parent bank holding company guarantee is not obtained, the capital
restoration plan may not be accepted by the banking regulators. As a result,
such institution would be subject to the more severe restrictions imposed on
significantly undercapitalized institutions. Further, the failure of such a
depository institution to submit an acceptable capital plan is grounds for the
appointment of a conservator or receiver.
FDICIA also contains a number of other provisions affecting depository
institutions, including additional reporting and independent auditing
requirements, the establishment of safety and soundness standards, the
changing of FDIC insurance premiums from flat amounts to the system of risk-
based assessments described below under "FDIC Insurance," a review of
accounting standards, and supplemental disclosures and limits on the ability
of all but well capitalized depository institutions to acquire brokered
deposits.
Since FDICIA was enacted, Congress has enacted the Riegle Community
Development and Regulatory Improvement Act of 1994, the Economic Growth and
Regulatory Paperwork Reduction Act of 1996 and other legislation, which
contain a number of specific provisions easing to some extent the regulatory
burden on banks and bank holding companies, including some FDICIA-imposed
requirements, and which are intended to make the bank regulatory system more
efficient. When required, federal banking regulators are taking actions to
implement these provisions.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), among other things, provides generally that, upon the default of
any bank of a multi-unit holding company, the FDIC may
6
<PAGE>
assess an affiliated insured depository institution for the estimated losses
incurred by the FDIC. Specifically, FIRREA provides that a depository
institution insured by the FDIC can be held liable for any loss incurred by,
or reasonably expected to be incurred ~by, the FDIC, in connection with (i)
the default of a commonly controlled FDIC-insured depository institution or
(ii) any assistance provided by the FDIC to a commonly controlled FDIC-insured
depository institution in danger of a default. "Default" is defined generally
as the appointment of a~ conservator or receiver. "In danger of a default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. All of the
Banks are FDIC-insured depository institutions.
FDIC INSURANCE
The Banks are subject to FDIC deposit insurance assessments. Under the
FDIC's risk-based assessment system, the assessment rate is based on
classification of a depository institution in one of nine risk assessment
categories. Such classification is based upon the institution's capital level
and upon certain supervisory evaluations of the institution by its primary
regulator. The assessment rate schedule, effective January 1, 1997, creates a
spread in assessment rates ranging from 0.27% per annum on the amount of
domestic deposits for banks classified as weakest by the FDIC down to no
annual assessment for banks classified as strongest by the FDIC.
INTERSTATE BANKING AND BRANCHING
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Riegle-Neal Act") significantly revised prior laws applicable to interstate
acquisitions of banks and bank holding companies and the branching powers of
national banks. Prior to the Riegle-Neal Act, the Federal Reserve Board was
not permitted to approve an application to acquire shares of a bank located
outside the state in which the operations of the applicant's bank subsidiaries
were principally conducted unless the acquisition were specifically authorized
by a statute of the acquired bank's state. The Federal Reserve Board is now
authorized to approve an application of an adequately capitalized and
adequately managed bank holding company to acquire control of a bank located
in another state without regard to whether such transaction is prohibited
under the law of such state. The Federal Reserve Board may not, however,
approve such an application if, following the acquisition, the applicant would
control either (1) more than 10% of all insured depository institution
deposits in the United States or (2) under certain circumstances, 30% or more
of all insured depository institution deposits in any state where either the
applicant or the acquired bank is located. The 30% limit on aggregate deposits
that may be controlled by an applicant can be adjusted by the states on a non-
discriminatory basis.
The Riegle-Neal Act also revises the rules applicable to mergers between
insured banks located in different states. Before passage of the Riegle-Neal
Act, such mergers generally were not authorized. Commencing June 1, 1997,
however, adequately capitalized and adequately managed insured banks in
different states may merge without regard to whether the merger is authorized
under the law of any state. States may elect to prohibit interstate bank
mergers or may elect to permit early interstate bank mergers by adopting,
prior to June 1, 1997, legislation that expressly so provides, and that
applies on equal terms to all out-of-state banks. The Riegle-Neal Act provides
that an interstate merger involving the acquisition of a branch (as
distinguished from an entire bank) or the de novo establishment of a national
bank branch in another state may be approved only if the law of the host state
expressly permits such action. Generally, an interstate merger may not be
approved if, following the merger, the resulting bank would control (1) more
than 10% of all insured depository institution deposits in the United States
or (2) under certain circumstances, 30% or more of all insured depository
institution deposits in any state where the resulting bank will be located.
The 30% limit on aggregate deposits that may be controlled by the resulting
bank can be adjusted by the states on a non-discriminatory basis. The laws of
the host state regarding community reinvestment, consumer protection, fair
lending and the establishment of intrastate branches will apply to any out-of-
state branch of a national bank unless preempted by federal law or the
Comptroller determines that application of such laws would have a
discriminatory effect on the national bank.
The Riegle-Neal Act contains a number of other provisions related to banks
and bank holding companies, including: authorization of interstate branching
by foreign banks; additional branch closing notice requirements for interstate
banks proposing to close a branch in a low or moderate income area; amendments
to the
7
<PAGE>
Community Reinvestment Act of 1977 to require separate written evaluations of
an insured depository institution for each state in which it maintains
branches; a prohibition on interstate banks maintaining out-of-state deposit
production offices; and authorization for a bank subsidiary of a bank holding
company to receive deposits, renew time deposits, close and service loans and
receive payments on loans as agent for a depository institution affiliate of
such bank.
The extent to, and terms on, which full interstate branching and certain
other actions authorized under the Riegle-Neal Act are implemented will depend
on the actions of entities other than the Company and the Banks, including the
legislatures of the various states. Further developments by state and federal
authorities, including legislation, with respect to matters covered by the
Riegle-Neal Act reasonably can be anticipated to occur in the future. In
addition, there may be new, significant banking legislation enacted or
introduced in the current Congress related to bank holding companies and their
powers; the likelihood of passage and effect, if any, of such legislation on
the Company and the Banks cannot be predicted.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for the Company, which are computed
on the basis of the total enterprise (as defined by the Commission) by
dividing earnings before fixed charges and income taxes by fixed charges, are
set forth below for the periods indicated. Also set forth below are the ratios
of earnings to combined fixed charges and preferred stock dividends, which are
computed on the basis of the total enterprise by dividing earnings before
fixed charges and income taxes by fixed charges and preferred stock dividend
requirements for the periods indicated. Fixed charges consist principally of
interest expense on all long- and short-term borrowings, excluding or
including interest on deposits as indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- ----------
1996 1995 1994 1993 1992 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding interest expense on
deposits............................ 2.2x 1.8x 2.2x 3.0x 1.3x 2.5x
Including interest expense on
deposits............................ 1.5x 1.4x 1.6x 1.8x 1.1x 1.6x
Earnings to Combined Fixed Charges and
Preferred Dividends:
Excluding interest expense on
deposits............................ 2.1x 1.7x 2.1x(1) 2.7x 1.2x 2.4x
Including interest expense on
deposits............................ 1.5x 1.3x 1.5x(1) 1.7x 1.1x 1.6x
</TABLE>
- --------
(1) For 1994, preferred dividends include a $4.5 million premium related to
the redemption of the 10% Cumulative Preferred Stock, Series D of First
Chicago.
USE OF PROCEEDS
Unless otherwise provided in the Prospectus Supplement, the Company will use
the net proceeds from the sale of the Securities for general corporate
purposes, including the funding of investments in, or extensions of credit to,
the Company's subsidiaries. Pending the uses described above, the Company may
temporarily invest the net proceeds from the sale of the Securities in various
short-term securities or apply the net proceeds to reduce short-term
indebtedness. Based upon the historic and anticipated future growth of the
Company and the financial needs of its subsidiaries, the Company anticipates
that it will, on a recurrent basis, engage in additional financings in
character and amount to be determined.
8
<PAGE>
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will constitute either Senior Securities or Subordinated
Securities. The Senior Securities will be issued under an Indenture dated as
of October 1, 1997 (the "Senior Indentures"), between the Company and First
Security Bank, National Association, as Trustee ("First Security"). The
Subordinated Securities will be issued under an Indenture dated as of October
1, 1997 (the "Subordinated Indenture"), between the Company and First Trust
National Association, as Trustee ("First Trust"). The Senior Indenture and the
Subordinated Indenture are collectively referred to herein as the
"Indentures". References to the "Trustee" shall mean First Security or First
Trust, as applicable. The statements under this caption are brief summaries of
certain provisions contained in the Indentures, do not purport to be complete
and are qualified in their entirety by reference to the applicable Indenture,
copies of which are exhibits to the Registration Statement. Whenever defined
terms are used but not defined herein, such terms shall have the meanings
ascribed to them in the applicable Indenture, it being intended that such
defined terms shall be incorporated herein by reference.
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of any Debt Securities
and the extent, if any, to which such general provisions may apply to such
Debt Securities will be described in the Prospectus Supplement relating to
such Debt Securities.
None of the Indentures limits the amount of Debt Securities which may be
issued thereunder, and each Indenture provides that Debt Securities of any
series may be issued thereunder up to the aggregate principal amount which may
be authorized from time to time by the Company and may be denominated in any
currency or currency unit designated by the Company. Neither the Indentures
nor the Debt Securities will limit or otherwise restrict the amount of other
indebtedness which may be incurred or the other securities which may be issued
by the Company or any of its subsidiaries.
Debt Securities of a series may be issuable in registered form without
coupons ("Registered Securities"), in bearer form with or without coupons
attached ("Bearer Securities") or in the form of one or more global securities
in registered or bearer form (each a "Global Security"). Bearer Securities, if
any, will be offered only to non-United States persons and to offices located
outside the United States of certain United States financial institutions.
Reference is made to the Prospectus Supplement for a description of the
following terms, where applicable, of each series of Debt Securities in
respect of which this Prospectus is being delivered: (1) the title of such
Debt Securities; (2) the limit, if any, on the aggregate principal amount or
aggregate initial public offering price of such Debt Securities; (3) the
priority of payment of such Debt Securities; (4) the price or prices (which
may be expressed as a percentage of the aggregate principal amount thereof) at
which the Debt Securities will be issued; (5) the date or dates on which the
principal of the Debt Securities will be payable; (6) the rate or rates (which
may be fixed or variable) per annum at which such Debt Securities will bear
interest, if any, or the method of determining the same; (7) the date or dates
from which such interest, if any, on the Debt Securities will accrue, the date
or dates on which such interest, if any, will be payable, the date or dates on
which payment of such interest, if any, will commence and the Regular Record
Dates for such Interest Payment Dates; (8) the extent to which any of the Debt
Securities will be issuable in temporary or permanent global form, or the
manner in which any interest payable on a temporary or permanent global Debt
Security will be paid; (9) each office or agency where, subject to the terms
of the applicable Indenture, the Debt Securities may be presented for
registration of transfer or exchange; (10) the place or places where the
principal of (and premium, if any) and interest, if any, on the Debt
Securities will be payable; (11) the date or dates, if any, after which such
Debt Securities may be redeemed or purchased in whole or in part, at the
option of the Company or mandatorily pursuant to any sinking, purchase or
analogous fund or may be required to be purchased or redeemed at the option of
the holder, and the redemption or repayment price or prices thereof; (12) the
denomination or denominations in which such Debt Securities are authorized to
be issued; (13) the currency, currencies or units (including ECU) based on or
related
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to currencies for which the Debt Securities may be purchased and the currency,
currencies or currency units (including ECU) in which the principal of,
premium, if any, and any interest on such Debt Securities may be payable; (14)
any index used to determine the amount of payments of principal of, premium,
if any, and interest on the Debt Securities; (15) whether any of the Debt
Securities are to be issuable as Bearer Securities and/or Registered
Securities, and if issuable as Bearer Securities, any limitations on issuance
of such Bearer Securities and any provisions regarding the transfer or
exchange of such Bearer Securities (including exchange for registered Debt
Securities of the same series); (16) the payment of any additional amounts
with respect to the Debt Securities; (17) whether any of the Debt Securities
will be issued as Original Issue Discount Securities (as defined below); (18)
information with respect to book-entry procedures, if any; (19) the terms, if
any, upon which the Debt Securities may be convertible into or exchanged for
Common Stock, Preferred Stock (which may be represented by Depositary Shares),
other Debt Securities, Debt Warrants, Common Stock Warrants or Preferred Stock
Warrants or any other securities of the Company and the terms and conditions
upon which such conversion or exchange will be effected, including the initial
conversion or exchange price or rate, the conversion or exchange period and
any other provision in addition to or in lieu of those described herein; (20)
any additional covenants or Events of Default not currently set forth in the
applicable Indenture; and (21) any other terms of such Debt Securities not
inconsistent with the provisions of the applicable Indenture.
If any of the Debt Securities are sold for one or more foreign currencies or
foreign currency units or if the principal of, premium, if any, or interest on
any series of Debt Securities is payable in one or more foreign currencies or
foreign currency units, the restrictions, elections, tax consequences,
specific terms and other information with respect to such issue of Debt
Securities and such currencies or currency units will be set forth in the
Prospectus Supplement relating thereto.
Debt Securities may be issued as original issue discount Debt Securities
(bearing no interest or interest at a rate which at the time of issuance is
below market rates) ("Original Issue Discount Securities"), to be sold at a
substantial discount below the stated principal amount thereof due at the
stated maturity of such Debt Securities. There may not be any periodic
payments of interest on Original Issue Discount Securities as defined herein.
In the event of an acceleration of the maturity of any Original Issue Discount
Security, the amount payable to the holder of such Original Issue Discount
Security upon such acceleration will be determined in accordance with the
Prospectus Supplement, the terms of such security and the Indenture, but will
be an amount less than the amount payable at the maturity of the principal of
such Original Issue Discount Security. Federal income tax considerations with
respect to Original Issue Discount Securities will be set forth in the
Prospectus Supplement relating thereto.
REGISTRATION AND TRANSFER
Unless otherwise indicated in the applicable Prospectus Supplement, Debt
Securities will be issued only as Registered Securities. If Bearer Securities
are issued, the United States Federal income tax consequences and other
special considerations, procedures and limitations applicable to such Bearer
Securities will be described in the Prospectus Supplement relating thereto.
Debt Securities issued as Registered Securities will be without coupons.
Debt Securities issued as Bearer Securities shall have interest coupons
attached, unless issued as zero coupon securities.
Registered Securities (other than a Global Security) may be presented for
transfer (with the form of transfer endorsed thereon duly executed) or
exchanged for other Debt Securities of the same series at the office of the
Note Registrar specified according to the terms of the applicable Indenture.
The Company has agreed in each of the Indentures that, with respect to
Registered Securities having The City of New York as a place of payment, the
Company will appoint a Note Registrar or Co-Note Registrar located in The City
of New York for such transfer or exchange. Such transfer or exchange shall be
made without service charge, but the Company may require payment of any taxes
or other governmental charges as described in the applicable Indenture.
Provisions relating to the exchange of Bearer Securities for other Debt
Securities of the same series (including, if applicable, Registered
Securities) will be described in the applicable Prospectus Supplement. In no
event, however, will Registered Securities be exchangeable for Bearer
Securities.
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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 (the "Depositary") identified in the Prospectus
Supplement relating to such series. Global Securities may be issued in either
registered or bearer form and in either temporary or permanent form. Unless
and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a Global Security may not be transferred
except as a whole by the Depositary for such Global Security to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or
another nominee of such Depositary or by the Depositary or any nominee to a
successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities and certain limitations and restrictions relating to a series
of Bearer Securities in the form of one or more Global Securities, will be
described in the Prospectus Supplement relating to such series. The Company
anticipates that the following provisions will generally apply to depositary
arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit, on its book-entry registration and
transfer system, the respective principal amounts of the individual Debt
Securities represented by such Global Security to the accounts of persons that
have accounts with such Depositary. Such accounts shall be designated by the
underwriters or agents with respect to such Debt Securities. Ownership of
beneficial interests in a Global Security will be limited to persons that have
accounts with the applicable Depositary ("participants") or persons that may
hold interests through participants. Ownership of beneficial interests in such
Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the applicable Depositary or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global
Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture governing such Debt Securities. Except as provided below, owners of
beneficial interests in a Global Security will not be entitled to have any of
the individual Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of any such Debt Securities of such series in definitive
form and will not be considered the owners or holders thereof under the
Indenture governing such Debt Securities.
Payments of principal of, premium, if any, and interest, if any, on
individual Debt Securities represented by a Global Security registered in the
name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Security
representing such Debt Securities. Neither the Company, the Trustee for such
Debt Securities, any Paying Agent, nor the Note Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Security for such Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Subject to certain restrictions relating to Bearer Securities, the Company
expects that the Depositary for a series of Debt Securities or its nominee,
upon receipt of any payment of principal, premium or interest in respect of a
permanent Global Security representing any of such Debt Securities will credit
participants' accounts immediately with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such Global
Security for such Debt Securities as shown on the records of such Depositary
or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Security held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street
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name". Such payments will be the responsibility of such participants. With
respect to owners of beneficial interests in a temporary Global Security
representing Bearer Securities, receipt by such beneficial owners of payments
of principal, premium or interest in respect thereof will be subject to
additional restrictions.
If the Depositary for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is
not appointed by the Company within 90 days, the Company will issue individual
Debt Securities of such series in definitive form in exchange for the Global
Security representing such series of Debt Securities. In addition, the Company
may at any time and in its sole discretion, subject to any limitations
described in the Prospectus Supplement relating to such Debt Securities,
determine not to have any Debt Securities of a series represented by one or
more Global Securities and, in such event, will issue individual Debt
Securities of such series in definitive form in exchange for the Global
Security or Securities representing such series of Debt Securities. Further,
if the Company so specifies with respect to the Debt Securities of a series,
an owner of a beneficial interest in a Global Security representing Debt
Securities of such series may, on terms acceptable to the Company, Trustee and
the Depositary for such Global Security, receive Debt Securities of such
series in definitive form in exchange for such beneficial interests, subject
to any limitations described in the Prospectus Supplement relating to such
Debt Securities. In any such instance, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in definitive form of
Debt Securities of the series represented by such Global Security equal in
principal amount to such beneficial interest and to have such Debt Securities
registered in its name (if the Debt Securities of such series are issuable as
Registered Securities). Debt Securities of such series so issued in definitive
form will be issued (a) as Registered Securities in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof
if the Debt Securities of such series are issuable as Registered Securities,
(b) as Bearer Securities in the denomination, unless otherwise specified by
the Company, of $5,000 if the Debt Securities of such series are issuable as
Bearer Securities or (c) as either Registered or Bearer Securities, if the
Debt Securities of such series are issuable in either form. Certain
restrictions may apply, however, on the issuance of a Bearer Security in
definitive form in exchange for an interest in a Global Security.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, premium, if any, and any interest on Registered Securities
will be made at the office of such Paying Agent or Paying Agents as the
Company may designate from time to time, except that, at the option of the
Company, payment of any interest may be made (i) by check mailed to the
address of the person entitled thereto as such address shall appear in the
applicable Note Register or (ii) by wire transfer to an account maintained by
the person entitled thereto as specified in the applicable Note Register.
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
any installment of interest on Registered Securities will be made to the
person in whose name such Debt Security is registered at the close of business
on the Regular Record Date for such payment.
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, premium, if any, and any interest on Bearer Securities will
be payable, subject to any applicable laws and regulations, at the offices of
such Paying Agents outside the United States as the Company may designate from
time to time, at the option of the Holder, by check or by transfer to an
account maintained by the payee with a bank located outside the United States.
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
interest on Bearer Securities will be made only against surrender of the
coupon relating to such Interest Payment Date. No payment with respect to any
Bearer Security will be made at any office or agency of the Company in the
United States or by check mailed to any address in the United States or by
transfer to an account maintained with a bank located in the United States.
LEVERAGED AND OTHER TRANSACTIONS
Each Indenture and the Debt Securities do not contain, among other things,
provisions which would afford holders of the Debt Securities protection in the
event of a highly leveraged or other transaction involving the Company which
could adversely affect the holders of Debt Securities.
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MODIFICATION OF THE INDENTURE; WAIVER OF COVENANTS
Each Indenture provides that, with the consent of the holders of not less
than a majority in aggregate principal amount of the outstanding Debt
Securities of each affected series, modifications and alterations of such
Indenture may be made which affect the rights of the holders of such Debt
Securities; provided, however, that no such modification or alteration may be
made without the consent of the holder of each Debt Security so affected which
would, among other things, (i) change the maturity of the principal of, or of
any installment of interest (or premium, if any) on, any Debt Security issued
pursuant to such Indenture, or reduce the principal amount thereof or any
premium thereon, or change the method of calculation of interest or the
currency of payment of principal or interest (or premium, if any) on, or
reduce the minimum rate of interest thereon, or impair the right to institute
suit for the enforcement of any such payment on or with respect to any such
Debt Security, or reduce the amount of principal of an Original Issue Discount
Security that would be due and payable upon an acceleration of the maturity
thereof; or (ii) reduce the above-stated percentage in principal amount of
outstanding Debt Securities required to modify or alter such Indenture.
CONVERTIBLE DEBT SECURITIES
Certain Debt Securities (the "Convertible Debt Securities") may be
convertible into other Securities of the Company. The holders of such
Convertible Debt Securities of a specified series may be entitled or, if so
provided in the applicable Prospectus Supplement, may be required at such time
or times specified in the applicable Prospectus Supplement, subject to prior
redemption, repayment or repurchase, to convert any Convertible Debt
Securities of such series (in denominations set forth in the applicable
Prospectus Supplement) into Common Stock, Preferred Stock, Common Stock
Warrants, Preferred Stock Warrants, another series of Debt Securities, Debt
Warrants or Depositary Shares, as the case may be, (collectively, the
foregoing securities into which the Convertible Debt Securities may convert
are referred to herein as "Conversion Securities") at the conversion price set
forth in the applicable Prospectus Supplement, subject to adjustment as
described below, and in the applicable Prospectus Supplement. The relevant
provisions for each series of Convertible Debt Securities will be set forth in
the applicable Prospectus Supplement. Except as described below or in the
applicable Prospectus Supplement, no adjustment will be made upon conversion
of any Convertible Debt Securities for interest accrued thereon or for
dividends on any Conversion Securities issued. If any Convertible Debt
Securities not called for redemption are converted between a Regular Record
Date for the payment of interest and the next succeeding Interest Payment
Date, such Convertible Debt Securities must be accompanied by funds equal to
the interest payable on such succeeding Interest Payment Date on the principal
amount so converted. The Company is not required to issue fractional shares of
Common Stock or Preferred Stock upon conversion of Convertible Debt Securities
that are convertible into Common Stock or Preferred Stock, respectively, and,
in lieu thereof, will pay a cash adjustment, in the case of Convertible Debt
Securities convertible into Common Stock, based upon the market value of the
Common Stock, and in the case of Convertible Debt Securities convertible into
Preferred Stock, based upon the liquidation preference of such series of
Preferred Stock, unless otherwise specified in the Prospectus Supplement. In
the case of Convertible Debt Securities convertible into securities other than
Common Stock or Preferred Stock, such adjustment will be based on such method
as is set forth in the Prospectus Supplement.
The conversion price for a series of Convertible Debt Securities that are
convertible into Common Stock is subject to adjustment upon the occurrence of
certain events under formulas that will be set forth in the applicable
Prospectus Supplement.
In the event of a taxable distribution to holders of Common Stock or
Preferred Stock (or other transaction) which results in any adjustment of the
conversion price of Convertible Debt Securities that are convertible into
Common Stock or Preferred Stock, the holders of such Convertible Debt
Securities may, in certain circumstances, be deemed to have received a
distribution subject to United States Federal income tax as a dividend; in
certain other circumstances, the absence of such an adjustment may result in a
taxable dividend to the holders of Common Stock or Preferred Stock acquired
upon conversion of such Convertible Debt Securities.
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CONSOLIDATION, MERGER OR SALE OF ASSETS
Each Indenture provides that the Company may, without the consent of the
holders of any of the Debt Securities outstanding under the applicable
Indenture, consolidate with, merge into or transfer its assets substantially
as an entirety to any person, provided that (i) any such successor assumes the
Company's obligations on the applicable Debt Securities and under the
applicable Indenture, (ii) after giving effect thereto, no Event of Default
(as defined in the Senior Indenture) in the case of the Senior Securities, or
Default (as defined in the Subordinated Indenture) in the case of the
Subordinated Securities, shall have happened and be continuing and (iii)
certain other conditions under the applicable Indenture are met. Accordingly,
any such consolidation, merger or transfer of assets substantially as an
entirety, which meets the conditions described above, would not create any
Event of Default or Default which would entitle holders of the Debt
Securities, or the Trustee on their behalf, to take any of the actions
described below under "Senior Securities--Events of Default, Waivers, etc." or
"Subordinated Securities--Events of Default, Waivers, etc."
SENIOR SECURITIES
The Senior Securities will be direct, unsecured obligations of the Company
and will rank pari passu with all outstanding unsecured senior indebtedness of
the Company.
EVENTS OF DEFAULT, WAIVERS, ETC.
An Event of Default with respect to Senior Securities of any series is
defined in the Senior Indenture as (i) default in the payment of principal of
or premium, if any, on any of the Senior Securities of that series outstanding
under the Senior Indenture when due; (ii) default in the payment of interest
on any of the Senior Securities of that series outstanding under the Senior
Indenture when due and continuance of such default for 30 days; (iii) default
in the performance of any other covenant of the Company in the Senior
Indenture with respect to Senior Securities of such series and continuance of
such default for 60 days after written notice; (iv) due acceleration of any
indebtedness for borrowed money in principal amount in excess of $1,000,000 of
the Company under the terms of the instrument under which such indebtedness is
issued or secured, if such acceleration is not rescinded or annulled or such
indebtedness is not discharged within 30 days after written notice; (v)
certain events of bankruptcy, insolvency or reorganization of the Company; and
(vi) any other event that may be specified in a Prospectus Supplement with
respect to any series of Senior Securities. If an Event of Default with
respect to any series of Senior Securities for which there are Senior
Securities outstanding under the Senior Indenture occurs and is continuing,
either the applicable Trustee or the holders of not less than 25% in aggregate
principal amount of the Senior Securities of such series outstanding may
declare the principal amount (or if such Senior Securities are Original Issue
Discount Securities, such portion of the principal amount as may be specified
in the terms of that series) of all Senior Securities of that series to be
immediately due and payable. The holders of a majority in aggregate principal
amount of the Senior Securities of any series outstanding under the Senior
Indenture may waive an Event of Default resulting in acceleration of such
Senior Securities, but only if all Events of Default with respect to Senior
Securities of such series have been remedied and all payments due (other than
those due as a result of acceleration) have been made. If an Event of Default
occurs and is continuing, the applicable Trustee may, in its discretion, and
at the written request of holders of not less than a majority in aggregate
principal amount of the Senior Securities of any series outstanding under the
Senior Indenture and upon reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request and subject to
certain other conditions set forth in the Senior Indenture shall, proceed to
protect the rights of the holders of all the Senior Securities of such series.
Prior to acceleration of maturity of the Senior Securities of any series
outstanding under the Senior Indenture, the holders of a majority in aggregate
principal amount of such Senior Securities may waive any past default under
the Senior Indenture except a default in the payment of principal of, premium,
if any, or interest on the Senior Securities of such series.
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The Senior Indenture provides that upon the occurrence of an Event of
Default specified in clauses (i) or (ii) of the immediately preceding
paragraph, the Company will, upon demand of the applicable Trustee, pay to it,
for the benefit of the holder of any such Senior Security, the whole amount
then due and payable on such Senior Securities for principal, premium, if any,
and interest. The Senior Indenture further provides that if the Company fails
to pay such amount forthwith upon such demand, such Trustee may, among other
things, institute a judicial proceeding for the collection thereof.
A judgment for money damages by courts in the United States, including a
money judgment based on an obligation expressed in a foreign currency, will
ordinarily be rendered only in U.S. dollars. New York statutory law provides
that a court shall render a judgment or decree in the foreign currency of the
underlying obligation and that the judgment or decree shall be converted into
U.S. dollars at the exchange rate prevailing on the date of entry of the
judgment or decree.
The Senior Indenture also provides that notwithstanding any other provision
of the Senior Indenture, the holder of any Senior Security of any series shall
have the right to institute suit for the enforcement of any payment of
principal of, premium, if any, and interest on such Senior Securities when due
and that such right shall not be impaired without the consent of such holder.
The Company is required to file annually with the Trustee a written
statement of officers as to the existence or non-existence of defaults under
the Senior Indenture or the Senior Securities.
REGARDING FIRST SECURITY
First Security, the Trustee under the Senior Indenture, has its principal
corporate trust office at 79 South Main Street, Salt Lake City, Utah 84111.
The Company has normal banking relationships with First Security.
SUBORDINATED SECURITIES
The Subordinated Securities will be direct, unsecured obligations of the
Company and will be subject to the subordination provisions described below.
The Subordinated Securities will be subordinated to the senior indebtedness
and general obligations of the Company.
SUBORDINATION
It is the intent of the Company that Subordinated Securities issued by the
Company be treated as capital for calculation of regulatory capital ratios.
The Federal Reserve Board ~ has issued interpretations of its capital
regulations indicating, among other things, that subordinated debt of bank
holding companies issued on or after September 4, 1992, is includable in
capital for calculation of regulatory capital ratios only if the subordination
of the debt meets certain criteria and if the debt may be accelerated only for
bankruptcy, insolvency and similar matters (the "Subordination
Interpretations"). Accordingly, the Subordinated Indenture contains
subordination and acceleration provisions for the Subordinated Securities
which are intended to be consistent with the Subordination Interpretations.
Subordinated debt of the Company (including subordinated debt issued prior to
the Merger by First Chicago and NBD) issued after September 4, 1992, which
meets the Subordination Interpretations are referred to herein as "New
Subordinated Securities". Unless otherwise specified in the Prospectus
Supplement relating to a particular series of Subordinated Securities offered
thereby, Subordinated Securities offered pursuant to this Prospectus will
constitute New Subordinated Securities. See "Events of Default, Defaults,
Waivers, etc." below.
Upon any distribution of assets of the Company upon any dissolution, winding
up, liquidation or reorganization, the payment of the principal of, premium,
if any, and interest on the Subordinated Securities is to be subordinated in
right of payment, to the extent provided in the Subordinated Indenture, to the
prior payment in full of all Senior Indebtedness. In certain events of
bankruptcy or insolvency, the payment of the principal of and interest on the
Subordinated Securities will, to the extent provided in the Subordinated
Indenture, also be effectively subordinated in right of payment to the prior
payment in full of all General Obligations.
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Upon any distribution of assets of the Company upon any dissolution, winding
up, liquidation or reorganization, the holders of Senior Indebtedness will
first be entitled to receive payment in full of all amounts due or to become
due before the holders of the Subordinated Securities will be entitled to
receive any payment in respect of the principal of, premium, if any, or
interest on the Subordinated Securities. If upon any such payment or
distribution of assets there remain, after giving effect to such subordination
provisions in favor of the holders of Senior Indebtedness, any amounts of
cash, property or securities available for payment or distribution in respect
of the Subordinated Securities ("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 Securities. The
other New Subordinated Securities issued prior to the date of this Prospectus
contain similar provisions subordinating any payment or distribution on such
New Subordinated Securities to the payment of amounts due or to become due on
or in respect of general obligations of the Company.
In addition, no payment may be made of the principal of, premium, if any, or
interest on the Subordinated Securities, or in respect of any redemption,
retirement, purchase or other acquisition of any of the Subordinated
Securities, at any time when (i) there is a default in the payment of the
principal of, premium, if any, interest on or otherwise in respect of any
Senior Indebtedness or (ii) any event of default with respect to any Senior
Indebtedness has occurred and is continuing, or would occur as a result of
such payment on the Subordinated Securities or any redemption, retirement,
purchase or other acquisition of any of the Subordinated Securities,
permitting the holders of such Senior Indebtedness to accelerate the maturity
thereof. Except as described above, the obligation of the Company to make
payment of the principal of, premium, if any, or interest on the Subordinated
Securities will not be affected.
By reason of such subordination in favor of the holders of Senior
Indebtedness, in the event of a distribution of assets upon any dissolution,
winding up, liquidation or reorganization, certain creditors of the Company
who are not holders of Senior Indebtedness or of the Subordinated Securities
may recover less, ratably, than holders of Senior Indebtedness and may recover
more, ratably, than holders of the Subordinated Securities. By reason of the
subordination of payments and distributions on the New Subordinated Securities
to creditors in respect of general obligations, in the event of a distribution
of assets upon any dissolution, winding up, liquidation or reorganization,
holders of Old Subordinated Indebtedness (as defined herein) may recover less,
ratably, than creditors in respect of general obligations and may recover
more, ratably, than the holders of New Subordinated Securities.
Subject to payment in full of all Senior Indebtedness, the rights of the
holders of Subordinated Securities will be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Company applicable to Senior Indebtedness.
Subject to payment in full of all General Obligations, the rights of the
holders of the Subordinated Securities will be subrogated to the rights of the
creditors in respect of General Obligations to receive payments or
distributions of cash, property or securities of the Company applicable to
such creditors in respect of General Obligations.
"Senior Indebtedness" is defined in the Subordinated Indenture as the
principal of, premium, if any, and interest on (i) all of the Company's
indebtedness for money borrowed (but excluding trade accounts payable arising
in the ordinary course of business), other than (x) the Subordinated
Securities, the Company's 9 7/8% Subordinated Notes Due July 1999, the
Company's 9% Subordinated Notes Due June 15, 1999, the Company's 9 7/8%
Subordinated Notes Due August 15, 2000, the Company's 11 1/4% Subordinated
Notes Due February 20, 2001, the Company's 10 1/4% Subordinated Notes Due May
1, 2001, the Company's 9 1/4% Subordinated Notes Due November 15, 2001, the
Company's 8 7/8% Subordinated Notes Due March 15, 2002, the Company's 8 1/4%
Subordinated Notes Due June 15, 2002, the Company's 9 1/5% Subordinated Notes
Due December 17, 2001, the Company's 7 5/8% Subordinated Notes Due January 15,
2003 (the "January 2003 Notes"), the Company's 6 7/8% Subordinated Notes Due
June 15, 2003 (the "June 2003 Notes"), the Company's Floating Rate
Subordinated Notes Due July 28, 2003 (the "July 2003 Notes"), the Company's 6
3/8% Subordinated Notes Due January 30, 2009 (the "January 2009 Notes"), the
Company's 7 1/8% Subordinated Notes Due 2007 (the "2007 Notes"), the
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Company's 7 1/4% Subordinated Debentures Due 2004 (the "2004 Notes"), the
Company's 8.10% Subordinated Notes Due 2002, the Company's 7.40% Subordinated
Debenture due May 10, 2023 (the "2023 Debentures"), the Company's Floating
Rate Subordinated Notes Due 2005, the Company's 6 1/8% Subordinated Notes Due
February 15, 2006 (the "February 2006 Notes") and the subordinated notes
issued pursuant to the Company's Medium-Term Note Program, Series G (the "MTN
Notes") (collectively, all of the foregoing notes and debentures are
hereinafter referred to as the "Existing Subordinated Indebtedness") and (y)
Junior Subordinated Indebtedness, whether outstanding on the date of execution
of the Subordinated Indenture or thereafter created, assumed or incurred,
except such indebtedness as is by its terms expressly stated to be not
superior in right of payment to the Subordinated Securities or the Existing
Subordinated Indebtedness or to rank pari passu with the Subordinated
Securities or the Existing Subordinated Indebtedness; and (ii) any deferrals,
renewals or extensions of any such Senior Indebtedness. The term "indebtedness
for money borrowed" as used in the prior sentence includes, without
limitation, any obligation of, or any obligation guaranteed by, the Company
for the repayment of borrowed money, whether or not evidenced by bonds,
debentures, notes or other written instruments, and any deferred obligation
for the payment of the purchase price of property or assets. The Subordinated
Indenture contains no limitation on the issuance of additional Senior
Indebtedness of the Company.
The January 2003 Notes, the June 2003 Notes, the July 2003 Notes, the
January 2009 Notes, the 2007 Notes, the 2023 Debentures, the February 2006
Notes and the MTN Notes all constitute New Subordinated Securities; all other
Existing Subordinated Indebtedness constitutes Old Subordinated Securities.
The Subordinated Securities rank and will rank pari passu with the Existing
Subordinated Indebtedness, subject to the obligations of the holders of
Subordinated Securities (and, generally, holders of other New Subordinated
Securities) to pay over any proceeds remaining after payments and
distributions to holders of Senior Indebtedness to creditors in respect of
general obligations. Thus, in the event of a distribution of assets of the
Company upon any dissolution, winding up, liquidation or reorganization, the
holders of the New Subordinated Securities (including holders of the
Subordinated Securities offered hereby) may receive less, ratably, than
holders of Old Subordinated Securities. The Subordinated Securities rank and
will rank senior to any Junior Subordinated Indebtedness of the Company.
Unless otherwise specified in the Prospectus Supplement relating to a
particular series of Subordinated Securities offered thereby, "General
Obligations", with respect to the Subordinated Securities, means all
obligations of the Company to make payment on account of claims in respect of
derivative products such as interest and foreign exchange rate contracts,
commodity contracts and similar arrangements, other than (i) obligations on
account of Senior Indebtedness, (ii) obligations on account of indebtedness
for money borrowed ranking pari passu with or subordinate to the Subordinated
Securities (including, but not limited to, Junior Subordinated Indebtedness)
and (iii) obligations which by their terms are expressly stated not to be
superior in right of payment to the Subordinated Securities or to rank on
parity with the Subordinated Securities; provided, however, that
notwithstanding the foregoing, in the event that any rule, guideline or
interpretation promulgated or issued by the Federal Reserve Board (or other
competent regulatory agency or authority), as from time to time in effect,
establishes or specifies criteria for the inclusion in regulatory capital of
subordinated debt of a bank holding company requiring that such subordinated
debt be subordinated to obligations to creditors in addition to those set
forth above, then the term "General Obligations" shall also include such
additional obligations to creditors, as from time to time in effect pursuant
to such rules, guidelines or interpretations. For purposes of this definition,
"claim" shall have the meaning assigned thereto in Section 101(4) of the
Bankruptcy Code 1978, as amended to the date of the Subordinated Indenture.
Unless otherwise specified in the Prospectus Supplement relating to a
particular series of Subordinated Securities offered thereby, "Junior
Subordinated Indebtedness", with respect to the Subordinated Securities, means
the principal of, premium, if any, and interest on all of the Company's
indebtedness for money borrowed (but excluding trade accounts payable arising
in the ordinary course of business) whether outstanding on the date of
execution of the Subordinated Indenture or thereafter created, assumed or
incurred and any deferrals, renewals or extensions of such debt provided such
debt (i) is by its terms subordinated to the Subordinated Securities, (ii) is
between or among the Company and certain affiliated financing entities
including all debt securities and guarantees in respect of those debt
securities issued to certain financing entities or a trustee of a financing
entity
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sponsored by the Company, (iii) is evidenced by securities issued under one of
the indentures dated either as of November 15, 1996 or as of January 1, 1997,
each between the Company and The Chase Manhattan Bank, as trustee (unless such
securities are by their terms senior in right of payment to the securities
heretofore issued under said indentures), or (iv) is a guarantee of the
Company on a subordinated basis under certain guarantee agreements dated
December 3, 1996, December 5, 1996 or January 31, 1997, relating to securities
issued by certain financing entities affiliated with the Company. The term
"indebtedness for money borrowed" as used in the prior sentence includes,
without limitation, any obligation of, or any obligation guaranteed by, the
Company for the repayment of borrowed money, whether or not evidenced by
bonds, debentures, notes or other written instruments, and any deferred
obligation for the payment of the purchase price of property or assets.
As of June 30, 1997, the aggregate amount of Senior Indebtedness and General
Obligations of the Company was approximately $2.58 billion.
LIMITED RIGHTS OF ACCELERATION
Unless otherwise specified in the Prospectus Supplement relating to any
series of Subordinated Securities, payment of principal of the Subordinated
Securities may be accelerated only in case of the bankruptcy or reorganization
of the Company. There is no right of acceleration in the case of a default in
the payment of principal of, premium, if any, or interest on the Subordinated
Securities or the performance of any other covenant of the Company in the
Subordinated Indenture. Payment of principal of the Old Subordinated
Securities may be accelerated in the case of the bankruptcy, insolvency or
reorganization of the Company. Such payment may also be accelerated in the
case of certain events of insolvency or receivership of FNBC or NBD Michigan,
as the case may be.
EVENTS OF DEFAULT, DEFAULTS, WAIVERS, ETC.
An Event of Default with respect to Subordinated Securities of any series is
defined in the Subordinated Indenture as certain events involving the
bankruptcy or reorganization of the Company and any other Event of Default
provided with respect to Subordinated Securities of that series. A Default
with respect to Subordinated Securities of any series is defined in the
Subordinated Indenture as (i) an Event of Default with respect to such series,
(ii) default in the payment of the principal of or premium, if any, on any
Subordinated Security of such series when due, (iii) default in the payment of
interest upon any Subordinated Security of such series when due and the
continuance of such default for a period of 30 days, (iv) default in the
performance of any other covenant or agreement of the Company in the
Subordinated Indenture with respect to Subordinated Securities of such series
and continuance of such default for 60 days after written notice, or (v) any
other Default provided with respect to Subordinated Securities of any series.
If an Event of Default with respect to any series of Subordinated Securities
for which there are Subordinated Securities outstanding under the Subordinated
Indenture occurs and is continuing, either the Trustee or the holders of not
less than 25% in aggregate principal amount of the Subordinated Securities of
such series may declare the principal amount (or if such Subordinated
Securities are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all
Subordinated Securities of that series to be immediately due and payable. The
holders of a majority in aggregate principal amount of the Subordinated
Securities of any series outstanding under the Subordinated Indenture may
waive an Event of Default resulting in acceleration of such Subordinated
Securities, but only if all Defaults have been remedied and all payments due
(other than those due as a result of acceleration) have been made. If a
Default occurs and is continuing, the Trustee may in its discretion, and at
the written request of holders of not less than a majority in aggregate
principal amount of the Subordinated Securities of any series outstanding
under the Subordinated Indenture and upon reasonable indemnity against the
costs, expenses and liabilities to be incurred in compliance with such request
and subject to certain other conditions set forth in the Subordinated
Indenture shall, proceed to protect the rights of the holders of all the
Subordinated Securities of such series. Prior to acceleration of maturity of
the Subordinated Securities of any series outstanding under the Subordinated
Indenture, the holders of a majority in aggregate principal amount of such
Subordinated Securities may waive any past default under the Subordinated
Indenture except a default in the payment of principal of, premium, if any, or
interest on the Subordinated Securities of such series.
The Subordinated Indenture provides that in the event of a Default specified
in clauses (ii) or (iii) of the immediately preceding paragraph in payment of
principal of, premium, if any, or interest on any Subordinated
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Security of any series, the Company will, upon demand of the Trustee, pay to
it, for the benefit of the holder of any such Subordinated Security, the whole
amount then due and payable on such Subordinated Security for principal,
premium, if any, and interest. The Subordinated Indenture further provides
that if the Company fails to pay such amount forthwith upon such demand, the
Trustee may, among other things, institute a judicial proceeding for the
collection thereof.
The Subordinated Indenture also provides that notwithstanding any other
provision of the Subordinated Indenture, the holder of any Subordinated
Security of any series shall have the right to institute suit for the
enforcement of any payment of principal of, premium, if any, and interest on
such Subordinated Security on the respective Stated Maturities (as defined in
the Subordinated Indenture) expressed in such Subordinated Security and that
such right shall not be impaired without the consent of such holder.
The Company is required to file annually with the Trustee a written
statement of officers as to the existence or non-existence of defaults under
the Subordinated Indenture or the Subordinated Securities.
REGARDING FIRST TRUST
First Trust, the Trustee under the Subordinated Indenture, has a corporate
trust office at One Illinois Center, 111 East Wacker Drive, Chicago, Illinois
60601. The Company has normal banking relationships with First Trust.
DESCRIPTION OF DEBT WARRANTS
The Company may issue Debt Warrants for the purchase of Debt Securities.
Debt Warrants may be issued independently or together with any Debt Securities
offered by any Prospectus Supplement and may be attached to or separate from
such Debt Securities. The Debt Warrants are to be issued under warrant
agreements (each a "Debt Warrant Agreement") to be entered into between the
Company and a warrant agent which will be designated in the applicable
Prospectus Supplement (the "Debt Warrant Agent"), all as set forth in the
Prospectus Supplement relating to the particular issue of Debt Warrants (the
"Offered Debt Warrants"). The Debt Warrant Agent will act solely as an agent
of the Company in connection with the Debt Warrants and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of Debt Warrants. The following summaries of certain
provisions of the form of Debt Warrant Agreement and the warrant certificates
representing the Debt Warrants (the "Debt Warrant Certificates"), if any, do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Debt Warrant Agreement and
the Debt Warrant Certificates, respectively, including the definitions therein
of certain terms, which Agreement and Certificates will be filed as exhibits
to or incorporated by reference in the Registration Statement of which this
Prospectus forms a part.
If Debt Warrants are offered, the Prospectus Supplement will describe the
terms of the Offered Debt Warrants, the Debt Warrant Agreement relating to the
Offered Debt Warrants and the Debt Warrant Certificates representing the
Offered Debt Warrants, if any, including the following: (1) the offering
price; (2) the currency or currency unit in which the price for the Offered
Debt Warrants may be payable; (3) the designation, aggregate principal amount
and terms of the Debt Securities purchasable upon exercise of the Offered Debt
Warrants; (4) if applicable, the designation and terms of the Debt Securities
with which the Offered Debt Warrants are issued and the number of Offered Debt
Warrants issued with each such Debt Security; (5) if the Debt Securities
purchasable upon exercise of Offered Debt Warrants are denominated in a
currency or currency unit other than U.S. dollars, the denomination of such
Debt Securities and the currency or units based on or relating to currencies
(including ECU) in which the principal of, premium, if any, and interest on
such Debt Securities will be payable; (6) if applicable, the date on and after
which the Offered Debt Warrants and the related Debt Securities will be
separately transferable; (7) the principal amount of Debt Securities
purchasable upon exercise of an Offered Debt Warrant and the price at which,
and currency or currency units based on or relating to currencies (including
ECU) in which, such principal amount of Debt Securities may be purchased upon
such exercise; (8) the date on which the right to exercise the Offered Debt
Warrants shall commence and the date on which such right shall expire; (9) if
applicable, a discussion of certain Federal income tax, accounting and other
special considerations, procedures and limitations; (10) whether the Debt
Warrants represented by the Debt Warrant Certificates will be issued as
Registered Securities or Bearer Securities; and (11) any other terms of the
Offered Debt Warrants, including terms, procedures and limitations relating to
the exchange and exercise of the Offered Debt Warrants.
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DESCRIPTION OF CURRENCY WARRANTS
The Company may issue Currency Warrants which, upon exercise at a permitted
time or times in the future, entitle any holder thereof to receive the Cash
Settlement Value (as defined below) of two designated currencies. Currency
Warrants may be issued independently or together with any Debt Securities
offered by any Prospectus Supplement and may be attached to or separate from
such Debt Securities. The Currency Warrants are to be issued under warrant
agreements (each a "Currency Warrant Agreement") to be entered into between
the Company and a warrant agent which will be designated in the applicable
Prospectus Supplement (the "Currency Warrant Agent"), all as set forth in the
Prospectus Supplement relating to the particular issue of Currency Warrants
(the "Offered Currency Warrants"). The Currency Warrant Agent will act solely
as an agent of the Company in connection with the Currency Warrants and will
not assume any obligation or relationship of agency or trust for or with any
holder or beneficial owners of Currency Warrants. The following summaries of
certain provisions of the form of Currency Warrant Agreement do not purport to
be complete and are subject to and are qualified in their entirety by
reference to all the provisions of the Currency Warrant Agreement and the form
of certificate, if any, representing the Currency Warrants (the "Currency
Warrant Certificates"), respectively, including the definitions therein of
certain terms which Agreement and Certificate, if any, will be filed as an
exhibit to or incorporated by reference in the Registration Statement of which
this Prospectus forms a part.
The Currency Warrants will not require, or entitle, any holder thereof to
sell any foreign currency to the Company. The Company will make only a U.S.
dollar cash settlement upon exercise of a Currency Warrant and will not be
obligated to purchase or take delivery of any foreign currency from any holder
of a Currency Warrant.
The "Cash Settlement Value" of an exercised Currency Warrant will be an
amount stated in U.S. dollars which is the greater of (i) zero and (ii) an
amount equal to (a) the nominal amount of such Currency Warrant, minus (b) an
amount equal to the nominal amount of such Currency Warrant times a fraction,
the numerator of which is the Strike Price of such Currency Warrant and the
denominator of which is the Spot Rate of such Currency Warrant on the Exercise
Date. The "nominal amount" of a Currency Warrant refers to the principal
amount, expressed in U.S. dollars, of a currency (the "Base Currency") which
is to be compared to another currency (the "Second Currency") upon exercise of
such Currency Warrant. Unless otherwise specified in the applicable Prospectus
Supplement, the Base Currency shall be U.S. dollars. The "Strike Price" is the
designated rate of exchange of the Base Currency for the Second Currency which
the Company will specify in the Prospectus Supplement relating to the Offered
Currency Warrants. The "Spot Rate" refers to the floating rate of exchange of
the Base Currency for the Second Currency on any given date, as quoted by a
reference bank or banks or other institution at a designated time of day, such
source of quotations and time to be specified in the applicable Prospectus
Supplement. The "Exercise Date" refers to the effective date on which the
holder of a Currency Warrant exercises such Currency Warrant.
If Currency Warrants are offered, the Prospectus Supplement will describe
the terms of the Offered Currency Warrants, the Currency Warrant Agreement
relating to the Offered Currency Warrants and, if applicable, Currency Warrant
Certificates, including the following: (1) the aggregate number of Offered
Currency Warrants; (2) the Nominal Amount of each Offered Currency Warrant;
(3) the price of the Offered Currency Warrants; (4) the Base Currency and the
Second Currency; (5) the Strike Price for the Offered Currency Warrants; (6)
the reference bank or banks or other institution and time of day to be used to
determine the Spot Rate; (7) the date on which the right to exercise the
Offered Currency Warrants shall begin and the date on which such right shall
terminate; (8) if applicable, the minimum or maximum amount of Offered
Currency Warrants which may be exercised at any one time; (9) the place or
places at which payment of the Cash Settlement Value is to be made by the
Company; (10) whether the Offered Currency Warrants will be represented by
certificates or issued in book-entry form; (11) the method by which the
Offered Currency Warrants are to be exercised; (12) the Federal income tax
consequences and other special considerations, procedures and limitations
applicable to such Offered Currency Warrants; and (13) any other terms of the
Offered Currency Warrants, including risk factors specifically relating to the
Base Currency or Second Currency and Currency Warrants relating to such
currencies.
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DESCRIPTION OF STOCK-INDEX WARRANTS
The Company may issue Stock Index Warrants which, upon exercise at a
permitted time or times in the future, entitle any holder thereof to receive
an amount of cash determined by references to increases and/or decreases in
the level of a specified stock index. Stock-Index Warrants may be issued
independently or together with other Securities offered by any Prospectus
Supplement and may be attached to or separate from such other Securities. The
Stock-Index Warrants are to be issued under one or more warrant agreements
(each a "Stock-Index Warrant Agreement") to be entered into between the
Company and a bank or trust company, as stock-index warrant agent which will
be designated in the applicable Prospectus Supplement (the "Stock-Index
Warrant Agent"), all as set forth in the Prospectus Supplement relating to the
particular issue of Stock-Index Warrants. The Stock-Index Warrant Agent will
act solely as an agent of the Company in connection with the Stock-Index
Warrants and will not assume any obligation or relationship of agency or trust
for or with any holder or beneficial owners of Stock-Index Warrants. The
following summaries of certain provisions of the form of Stock-Index Warrant
Agreement and form of certificate, if any, representing the Stock-Index
Warrants (the "Stock-Index Warrant Certificates") do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Stock-Index Warrant Agreement and the Stock-
Index Warrant Certificates, respectively, including the definitions therein of
certain terms which Agreement and Certificate, if any, will be filed as an
exhibit to or incorporated by reference in the Registration Statement of which
this Prospectus forms a part.
The Company may issue Stock-Index Warrants either in the form of Stock-Index
Put Warrants entitling the holders thereof to receive from the Company the
Stock-Index Cash Settlement Value (as described in the applicable Prospectus
Supplement) in U.S. dollars, which amount will be determined by reference to
the amount, if any, by which the Stock-Index Exercise Price (as described in
the applicable Prospectus Supplement) exceeds the closing value of the Index
on the valuation date (the "Index Value") at the time of exercise, or in the
form of Stock-Index Call Warrants entitling the holders thereof to receive
from the Company the Stock-Index Cash Settlement Value in U.S. dollars, which
amount will be determined by reference to the amount, if any, by which the
Index Value at the time of exercise exceeds the Stock-Index Exercise Price.
The Prospectus Supplement for an issue of Stock-Index Warrants will set
forth the formula pursuant to which the Stock-Index Cash Settlement Value will
be determined. In addition, if so specified in the applicable Prospectus
Supplement, following the occurrence of a Market Disruption Event (as defined
therein), the Stock-Index Cash Settlement Value may be determined on a
different basis than under normal exercise of a Stock-Index Warrant.
Unless otherwise indicated in the Prospectus Supplement, a Stock-Index
Warrant will be settled only in cash and, accordingly, will not require or
entitle a holder thereof to sell, deliver, purchase or take delivery of any
shares of any underlying stock or any other securities. The holders will not
be entitled to any of the rights of the holders of any underlying stock.
If Stock-Index Warrants are offered, the Prospectus Supplement will describe
the terms of Stock-Index Warrants offered thereby, including the following:
(1) whether such Stock-Index Warrants are Stock-Index Put Warrants, Stock-
Index Call Warrants or both; (2) the aggregate amount of such Stock-Index
Warrants; (3) the offering price; (4) the stock index for such Stock-Index
Warrants, which may be based on one or more U.S. or foreign stocks or a
combination thereof and may be a preexisting U.S. or foreign stock index
compiled and published by a third party or an index based on one or more
underlying stock or stocks selected by the Company solely in connection with
the issuance of such Stock-Index Warrants, and certain information regarding
such stock index and the underlying stock or stocks; (5) the date on which the
right to exercise such Stock-Index Warrants commences and the date on which
such right expires (the "Stock-Index Warrant Expiration Date"); (6) the
procedures and conditions relating to exercise; (7) the circumstances, if any,
which will cause the Stock-Index Warrants to be deemed to be automatically
exercised; (8) the minimum number, if any, of Stock-Index Warrants to be
exercised at any one time other than upon automatic exercise and any other
restrictions on
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exercise; (9) the maximum number, if any, of such Stock-Index Warrants that
may, subject to the Company's election, be exercised by all owners (or by any
person or entity) on any day; (10) the method of providing for a substitute
index or otherwise determining the amount payable in connection with the
exercise of such Stock-Index Warrants if the stock index changes or ceases to
be made available by its publisher, which determination will be made by an
independent expert; (11) the national securities exchange on which the Stock-
Index Warrants will be listed, if any; (12) whether the Stock-Index Warrants
will be issued in certificated or book-entry form; (13) the place or places at
which payment of the Stock-Index Cash Settlement Value is to be made by the
Company; (14) information with respect to book-entry procedures, if any; (15)
the plan of distribution of such Stock-Index Warrants; (16) the identity of
the Stock-Index Warrant Agent; (17) any provisions permitting a holder of a
Stock-Index Warrant to condition a stock-index exercise notice on the absence
of certain specified changes in the Index Value after the Stock-Index Warrant
Exercise Date; and (18) any other terms of such Stock-Index Warrants,
including risk factors specifically relating to fluctuations in the applicable
stock index and possible illiquidity in the secondary market.
Prospective purchasers of Stock-Index Warrants should be aware that special
U.S. Federal income tax, accounting and other considerations may be applicable
to instruments such as Stock-Index Warrants. The Prospectus Supplement
relating to any issue of Stock-Index Warrants will describe such
considerations.
DESCRIPTION OF OTHER WARRANTS
The Company may issue Other Warrants, if permitted under applicable law, to
buy or sell debt securities of or guaranteed by the United States, to buy or
sell a commodity or a unit of a commodity index or to buy or sell some other
item or unit of an index other than indices covered by Stock-Index Warrants
(collectively, "Exercise Items"). Owners of Other Warrants will be entitled to
receive from the Company the cash settlement value in U.S. dollars of the
right to buy or sell the Exercise Items (the "Other Warrant Cash Settlement
Value"). An Owner of Other Warrants will receive a cash payment upon exercise
only if the Other Warrants have an Other Warrant Cash Settlement Value in
excess of zero at that time.
Other Warrants may be issued independently or together with other Securities
offered by any Prospectus Supplement and may be attached to or separate from
such other Securities. The Other Warrants are to be issued under one or more
other warrant agreements (the "Other Warrant Agreements") to be entered into
between the Company and a bank or trust company, as warrant agent which will
be designated in the applicable Prospectus Supplement (the "Other Warrant
Agent"), all as set forth in the Prospectus Supplement relating to the
particular issue of Other Warrants. The Other Warrant Agent will act solely as
an agent of the Company in connection with the Other Warrants and will not
assume any obligation or relationship of agency or trust for or with any
holder or beneficial owners of the Other Warrants. The following summaries of
certain provisions of the form of Other Warrant Agreement and form of
certificate, if any, representing the Other Warrants (the "Other Warrant
Certificates") do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the Other
Warrant Agreement and the Other Warrant Certificates, respectively, including
the definitions therein of certain terms which Agreement and Certificate, if
any, will be filed as an exhibit to or incorporated by reference in the
Registration Statement of which this Prospectus forms a part.
Unless otherwise indicated in the Prospectus Supplement, an Other Warrant
will be settled only in cash, in U.S. dollars, and accordingly, will not
require or entitle an owner thereof to sell, deliver, purchase or take
delivery of any Exercise Items.
If Other Warrants are offered, the applicable Prospectus Supplement will
describe the terms of such Other Warrants, including, where applicable, the
following: (1) the title and aggregate number of such Other Warrants; (2) the
offering price; (3) the Exercise Items that such Other Warrants represent the
right to buy or sell; (4) the procedures and conditions relating to exercise;
(5) the date on which the right to exercise the Other Warrants shall commence
and the date such right shall expire (the "Other Warrant Expiration Date");
(6) the method of
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determining the Other Warrant Cash Settlement Value; (7) whether such Other
Warrants will be issued in certificated or book-entry form; (8) whether such
Other Warrants will be listed on a national securities exchange; (9)
information with respect to book-entry procedures, if any; (10) the identity
of the Other Warrant Agent; and (11) any other terms of such Other Warrants,
including risk factors relating to significant fluctuations in the market for
the applicable Exercise Item, the potential illiquidity of the secondary
market and the risk that the Other Warrants may expire worthless.
Prospective purchasers of Other Warrants should be aware that special U.S.
Federal income tax, accounting and other considerations may be applicable to
instruments such as Other Warrants. The Prospectus Supplement relating to any
issue of Other Warrants will describe such considerations.
DESCRIPTION OF THE PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of any series of
Preferred Stock offered by any Prospectus Supplement will be specified in the
applicable Prospectus Supplement. If so specified in the applicable Prospectus
Supplement, the terms of any series of Preferred Stock may differ from the
terms set forth below. The description of the terms of the Preferred Stock set
forth below and in any Prospectus Supplement does not purport to be complete
and is subject to and qualified in its entirety by reference to the
Certificate of Designation relating to the applicable series of Preferred
Stock, which Certificate will be filed as an exhibit to or incorporated by
reference in the Registration Statement of which this Prospectus forms a part.
GENERAL
Pursuant to the Company's Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), the Board of Directors of the Company
has the authority, without further stockholder action, to issue from time to
time a maximum of 10,000,000 shares of preferred stock, without par value, in
one or more series and for such consideration, as may be fixed from time to
time by the Board of Directors of the Company, and to fix before the issuance
of any shares of preferred stock of a particular series, the designation of
such series, the number of shares to comprise such series, the dividend rate
or rates payable with respect to the shares of such series, the redemption
price or prices, if any, and the terms and conditions of the redemption, the
voting rights, any sinking fund provisions for the redemption or purchase of
the shares of such series, the terms and conditions upon which the shares are
convertible, if they are convertible, and any other relative rights,
preferences and limitations pertaining to such series. As of June 30, 1997,
there were issued and outstanding 1,191,000 shares of the Company's Preferred
Stock with Cumulative and Adjustable Dividends, Series B ($100 stated value)
(the "Series B Preferred Stock"), 713,800 shares of the Company's Preferred
Stock with Cumulative and Adjustable Dividends, Series C ($100 stated value)
(the "Series C Preferred Stock"), and 160,000 shares of the Company's 8.45%
Cumulative Preferred Stock, Series E ($625 stated value) (the "Series E
Preferred Stock") (collectively, the "Existing Preferred Stock"). In addition,
the Company has issued 6,000,000 preferred share purchase units ("Preferred
Purchase Units") which may require the holder of which to purchase, no later
than 2023, the Company's 7 1/2% Cumulative Preferred Stock (the "7 1/2%
Preferred Stock"). See "Description of Existing Preferred Stock and Preferred
Purchase Units" herein.
As described under "Description of Depositary Shares" below, the Company
may, at its option, elect to offer depositary shares ("Depositary Shares")
evidenced by depositary receipts, each representing a fraction (to be
specified in the Prospectus Supplement relating to the particular series of
Preferred Stock) of a share of the particular series of the Preferred Stock
issued and deposited with a depositary, in lieu of offering full shares of
such series of the Preferred Stock.
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Under interpretations adopted by the Federal Reserve Board, if the holders
of Preferred Stock of any series become entitled to vote for the election of
directors because dividends on such series are in arrears as described under
"Voting Rights" below, such series may then be deemed a "class of voting
securities" and a holder of 25% or more of such series (or a holder of 5% or
more if it otherwise exercises a "controlling influence" over the Company) may
then be subject to regulation as a bank holding company in accordance with the
Bank Holding Company Act of 1956, as amended. In addition, at such time as
such series is deemed a class of voting securities, any other bank holding
company may be required to obtain the prior approval of the Federal Reserve
Board to acquire 5% or more of such series, and any person other than a bank
holding company may be required to obtain the prior approval of the Federal
Reserve Board to acquire 10% or more of such series.
The Preferred Stock shall have the dividend, liquidation, redemption, voting
and conversion rights set forth below unless otherwise specified in the
applicable Prospectus Supplement. Reference is made to the Prospectus
Supplement relating to the particular series of Preferred Stock offered
thereby for specific terms, including: (1) the designation, stated value and
liquidation preference of such Preferred Stock and the number of shares
offered; (2) the initial public offering price at which such shares will be
issued; (3) the dividend rate or rates (or method of calculation), the
dividend periods, the date on which dividends shall be payable and whether
such dividends shall be cumulative or noncumulative and, if cumulative, the
dates from which dividends shall commence to cumulate; (4) any redemption or
sinking fund provisions; (5) any conversion provisions; (6) whether the
Company has elected to offer Depositary Shares as described below under
"Description of Depositary Shares"; and (7) any additional dividend,
liquidation, redemption, sinking fund and other rights, preferences,
privileges, limitations and restrictions of such Preferred Stock.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the applicable Prospectus Supplement, the shares
of each series of Preferred Stock will upon issuance rank on a parity in all
respects with the Company's Existing Preferred Stock, described below, and
each other then outstanding series of preferred stock of the Company. The
Preferred Stock will have no preemptive rights to subscribe for any additional
securities which may be issued by the Company. Unless otherwise specified in
the applicable Prospectus Supplement, First Chicago Trust Company of New York
will be the transfer agent and registrar for the Preferred Stock.
Because the Company is a holding company, its rights and the rights of
holders of its securities, including the holders of Preferred Stock, to
participate in the assets of any Company subsidiary upon the latter's
liquidation or recapitalization will be subject to the prior claims of such
subsidiary's creditors and preferred shareholders, except to the extent the
Company may itself be a creditor with recognized claims against such
subsidiary or a holder of preferred shares of such subsidiary.
DIVIDENDS
The holders of the Preferred Stock will be entitled to receive, when, as and
if declared by the Board of Directors of the Company, out of funds legally
available therefor, dividends at such rates and on such dates as will be
specified in the applicable Prospectus Supplement. Such rates may be fixed or
variable or both. If variable, the formula used for determining the dividend
rate for each dividend period will be specified in the applicable Prospectus
Supplement. Dividends will be payable to the holders of record as they appear
on the stock books of the Company (or, if applicable, the records of the
Depositary referred to below under "Description of Depositary Shares") on such
record dates as will be fixed by the Board of Directors of the Company.
Dividends may be paid in the form of cash, Preferred Stock (of the same or a
different series) or Common Stock of the Company, in each case as specified in
the applicable Prospectus Supplement.
Dividends on any series of Preferred Stock may be cumulative or
noncumulative, as specified in the applicable Prospectus Supplement. If the
Board of Directors of the Company fails to declare a dividend payable on a
dividend payment date on any Preferred Stock for which dividends are
noncumulative ("Noncumulative Preferred Stock"), then the holders of such
Preferred Stock will have no right to receive a dividend in respect of the
dividend period relating to such dividend payment date, and the Company will
have no obligation to pay the dividend accrued for such period, whether or not
dividends on such Preferred Stock are declared or paid on any future dividend
payment dates.
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The Company shall not declare or pay or set apart for payment any dividends
on any series of its preferred shares ranking, as to dividends, on a parity
with or junior to the outstanding Preferred Stock of any series unless (i) if
such Preferred Stock has a cumulative dividend ("Cumulative Preferred Stock"),
full cumulative dividends have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for such
payment on such Preferred Stock for all dividend periods terminating on or
prior to the date of payment of any such dividends on such other series of
preferred shares of the Company, or (ii) if such Preferred Stock is
Noncumulative Preferred Stock, full dividends for the then-current dividend
period on such Preferred Stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
such payment. When dividends are not paid in full upon Preferred Stock of any
series and any other shares of preferred stock of the Company ranking on a
parity as to dividends with such Preferred Stock, all dividends declared upon
such Preferred Stock and any other preferred shares of the Company ranking on
a parity as to dividends with such Preferred Stock shall be declared pro rata
so that the amount of dividends declared per share on such Preferred Stock and
such other shares shall in all cases bear to each other the same ratio that
the accrued dividends per share on such Preferred Stock (which shall not, if
such Preferred Stock is Noncumulative Preferred Stock, include any
accumulation in respect of unpaid dividends for prior dividend periods) and
such other preferred shares bear to each other. Except as set forth in the
preceding sentence, unless full dividends on the outstanding Cumulative
Preferred Stock of any series have been paid for all past dividend periods and
full dividends for the then-current dividend period on the outstanding
Noncumulative Preferred Stock of any series have been declared and paid or
declared and a sum sufficient for the payment thereof set apart for such
payment, no dividends (other than in Common Stock of the Company or other
shares of the Company ranking junior to such Preferred Stock as to dividends
and upon liquidation) shall be declared or paid or set aside for payment, nor
shall any other distribution be made on the Common Stock of the Company or on
any other shares of the Company ranking junior to or on a parity with such
Preferred Stock as to dividends or upon liquidation. Unless full dividends on
the Cumulative Preferred Stock of any series have been paid for all past
dividend periods and full dividends for the then-current dividend period on
the Noncumulative Preferred Stock of any series have been declared and paid or
declared and a sum sufficient for the payment thereof set apart for such
payment, no Common Stock or any other shares of the Company ranking junior to
or on a parity with such Preferred Stock as to dividends or upon liquidation
shall be redeemed, purchased or otherwise acquired for any consideration (or
any moneys be paid or made available for a sinking fund for the redemption of
any such shares) by the Company or any subsidiary of the Company except by
conversion into or exchange for shares of the Company ranking junior to such
Preferred Stock as to dividends and upon liquidation.
REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or in part, at
the option of the Company, and may be subject to mandatory redemption pursuant
to a sinking fund or otherwise, in each case upon terms, at the times and at
the redemption prices specified in the applicable Prospectus Supplement and
subject to the rights of holders of other securities of the Company. Preferred
Stock redeemed by the Company will be restored to the status of authorized but
unissued preferred shares.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if such Preferred Stock is Noncumulative Preferred Stock,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash or other property, as specified in the applicable Prospectus Supplement.
If the redemption price for Preferred Stock of any series is payable only from
the net proceeds of the issuance of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such capital stock shall have
been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into shares
of the applicable capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
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If fewer than all the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined in
a manner designated by the Board of Directors of the Company and such shares
shall be redeemed pro rata from the holders of record of such shares in
proportion to the number of such shares held by such holders (with adjustments
to avoid redemption of fractional shares) or by lot or by any other method as
may be determined by the Board of Directors of the Company.
Notwithstanding the foregoing, if any dividends, including any accumulation,
on Cumulative Preferred Stock of any series are in arrears, no Preferred Stock
of such series shall be redeemed unless all outstanding Preferred Stock of
such series is simultaneously redeemed, and the Company shall not purchase or
otherwise acquire any Preferred Stock of such series; provided, however, that
the foregoing shall not prevent the purchase or acquisition of Preferred Stock
of such series pursuant to a purchase or exchange offer provided such offer is
made on the same terms to all holders of the Preferred Stock of such series.
Notice of redemption shall be given by mailing the same to each record
holder of the Preferred Stock to be redeemed, not less than 30 nor more than
60 days prior to the date fixed for redemption thereof, to the respective
addresses of such holders as the same shall appear on the stock books of the
Company. Each notice shall state: (i) the redemption date; (ii) the number of
shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock
are to be surrendered for payment of the redemption price; (v) that dividends
on the shares to be redeemed will cease to accrue on such redemption date; and
(vi) the date upon which the holder's conversion rights, if any, as to such
shares, shall terminate. If fewer than all the shares of Preferred Stock of
any series held by any holder are to be redeemed, the notice mailed to such
holder shall also specify the number of shares of Preferred Stock to be
redeemed from such holder.
If notice of redemption of any shares of Preferred Stock has been given,
from and after the redemption date for such shares (unless default shall be
made by the Company in providing money for the payment of the redemption price
of such shares), dividends on such shares shall cease to accrue and such
shares shall no longer be deemed to be outstanding, and all rights of the
holders thereof as shareholders of the Company (except the right to receive
the redemption price) shall cease. Upon surrender in accordance with such
notice of the certificates representing any such shares (properly endorsed or
assigned for transfer, if the Board of Directors of the Company shall so
require and the notice shall so state), the redemption price set forth above
shall be paid out of the funds provided by the Company. If fewer than all the
shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the holder
thereof.
CONVERSION RIGHTS
The Prospectus Supplement relating to a series of the Preferred Stock that
is convertible will state the terms on which shares of such series are
convertible into the Company's Common Stock, or another series of Preferred
Stock.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of Preferred Stock shall be entitled to
receive out of the assets of the Company available for distribution to
shareholders, before any distribution of assets is made to holders of Common
Stock or any other class or series of shares ranking junior to such Preferred
Stock upon liquidation, liquidating distributions in the amount of the
liquidation preference of such Preferred Stock plus accrued and unpaid
dividends (which shall not, if such Preferred Stock is Noncumulative Preferred
Stock, include any accumulation in respect of unpaid dividends for prior
dividend periods). If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company the amounts payable with respect to
Preferred Stock of any series and any other shares of the Company ranking as
to any such distribution on a parity with such Preferred Stock are not paid in
full, the holders of such Preferred Stock and of such other shares will share
ratably in any such distribution of assets of the Company in proportion to the
full respective preferential amounts to which they are entitled. After payment
of the full amount of the liquidating distribution to which they are entitled,
the holders of Preferred Stock of any series will not be entitled to any
further participation in any distribution of assets by the Company.
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VOTING RIGHTS
Except as indicated below or in the applicable Prospectus Supplement, or
except as expressly required by applicable law, the holders of the Preferred
Stock will not be entitled to vote. In the event the Company issues full
shares of any series of Preferred Stock, each such share will be entitled to
one vote on matters on which holders of such series of the Preferred Stock are
entitled to vote. However, as more fully described under "Description of
Depositary Shares" below, if the Company elects to issue Depositary Shares
representing a fraction of a share of a series of Preferred Stock, each such
Depositary Share will, in effect, be entitled to such fraction of a vote,
rather than a full vote, per Depositary Share. Since each full share of any
series of Preferred Stock of the Company shall be entitled to one vote, the
voting power of such series, on matters on which holders of such series and
holders of other series of Preferred Stock are entitled to vote as a single
class, shall depend on the number of shares in such series, not the aggregate
stated value, liquidation preference or initial offering price of the shares
of such series of Preferred Stock.
If the equivalent of six quarterly dividends payable on any series of
Preferred Stock are in default, the number of directors of the Company will be
increased by two and the holders of all outstanding series of Preferred Stock,
voting as a single class without regard to series, will be entitled to elect
such additional two directors until all dividends in default have been paid or
declared and set apart for payment.
The affirmative vote or consent of the holders of at least 66 2/3 percent of
the outstanding shares of Preferred Stock of any series, voting as a class,
will be required for any amendment to the Company's Certificate of
Incorporation (or any certificate supplemental thereto) that will adversely
affect the powers, preferences, privileges or rights of the Preferred Stock of
such series. The affirmative vote or consent of the holders of at least 66 2/3
percent of the outstanding shares of Preferred Stock of any series and any
other series of preferred shares of the Company ranking on a parity with the
Preferred Stock of such series as to dividends or upon liquidation, voting as
a single class without regard to series, will be required to authorize, effect
or validate the creation, authorization or issue of any shares of any class of
stock of the Company ranking prior to the Preferred Stock of such series as to
dividends or upon liquidation, or the reclassification of any authorized stock
of the Company into any such prior shares, or the creation, authorization or
issue of any obligation or security convertible into or evidencing the right
to purchase any such prior shares.
Subject to such affirmative vote or consent of the holders of the
outstanding shares of Preferred Stock of any series, the Company may, by
resolution of its Board of Directors or as otherwise permitted by law, from
time to time alter or change the preferences, rights or powers of the
Preferred Stock of such series. The holders of the Preferred Stock of such
series shall not be entitled to participate in any such vote if, at or prior
to the time when any such alteration or change is to take effect, provision is
made for the redemption of all the Preferred Stock of such series at the time
outstanding. Nothing in this section shall be taken to require a class vote or
consent in connection with the authorization, designation, increase or
issuance of any shares of any class or series (including additional Preferred
Stock of any series) that rank junior to or on a parity with the Preferred
Stock of such series as to dividends and liquidation rights or in connection
with the authorization, designation, increase or issuance of any bonds,
mortgages, debentures or other obligations of the Company.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may, at its option, elect to offer fractional shares of
Preferred Stock, rather than full shares of Preferred Stock. In the event such
option is exercised, the Company will issue to the public receipts for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock)
of a share of a particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
the Company and a bank or trust company selected by the Company having its
principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary"). Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock
represented by such Depositary Share, to all the rights and preferences of the
Preferred Stock represented thereby (including dividend, voting, redemption,
conversion and liquidation rights).
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The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. Copies of the
forms of Deposit Agreement and Depositary Receipt will be filed as exhibits
to, or incorporated by reference in, the Registration Statement of which this
Prospectus is a part, and the following summary is qualified in its entirety
by reference to such exhibits.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts
but not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will
be exchangeable for definitive Depositary Receipts at the Company's expense.
Upon surrender of Depositary Receipts at the principal office of the
Depositary (unless the related Depositary Shares have previously been called
for redemption), the owner of the Depositary Shares evidenced thereby is
entitled to delivery at such office, to or upon his order, of the number of
whole shares of Preferred Stock and any money or other property represented by
such Depositary Shares. Partial shares of Preferred Stock will not be issued.
If the Depositary Receipts delivered by the holder evidence a number of
Depositary Shares in excess of the number of Depositary Shares representing a
number of whole shares of Preferred Stock to be withdrawn, the Depositary will
deliver to such holder at the same time a new Depositary Receipt evidencing
such excess number of Depositary Shares. Holders of shares of Preferred Stock
thus withdrawn will not thereafter be entitled to deposit such shares under
the Deposit Agreement or to receive Depositary Shares therefor. The Company
does not expect that there will be any public trading market for withdrawn
shares of Preferred Stock.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Shares relating to such Preferred Stock in proportion to the
numbers of such Depositary Shares owned by such holders. The Depository shall
distribute only such amount, however, as can be distributed without
attributing to any holder of Depositary Shares a fraction of one cent, and any
balance not so distributed shall be added to and treated as part of the next
sum received by the Depositary for distribution to record holders of
Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
REDEMPTION OF DEPOSITARY SHARES
If a series of Preferred Stock represented by Depositary Shares is subject
to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of Preferred Stock held by the Depositary. The Depositary shall
mail notice of redemption not less than 30 nor more than 60 days prior to the
date fixed for redemption to the record holders of the Depositary Shares to be
so redeemed at their respective addresses appearing in the Depositary's books.
The redemption price per Depositary Share will be equal to the applicable
fraction of the redemption price per share payable with respect to such series
of the Preferred Stock. Whenever the Company redeems shares of Preferred Stock
held by the Depositary, the Depositary will redeem as of the same redemption
date the number of Depositary Shares representing shares of Preferred Stock so
redeemed. If less than all the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by lot or pro rata as may be
determined by the Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to
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receive the moneys payable upon such redemption and any money or other
property to which the holders of such Depositary Shares were entitled upon
such redemption upon surrender to the Depositary of the Depositary Receipts
evidencing such Depositary Shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Shares
relating to such Preferred Stock. Each record holder of such Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Stock) will be entitled to instruct the Depositary as to the
exercise of the voting rights pertaining to the amount of the Preferred Stock
represented by such holder's Depositary Shares. The Depositary will endeavor,
insofar as practicable, to vote the amount of the Preferred Stock represented
by such Depositary Shares in accordance with such instructions, and the
Company will agree to take all action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of the Preferred Stock to the extent it does not
receive specific instructions from the holders of Depositary Shares
representing such Preferred Stock.
TAXATION
Owners of the Depositary Shares will be treated for Federal income tax
purposes as if they were owners of the series of Preferred Stock represented
by such Depositary Shares and, accordingly, will be entitled to take into
account for Federal income tax purposes income and deductions to which they
would be entitled if they were holders of such series of Preferred Stock. In
addition, (i) no gain or loss will be recognized for Federal income tax
purposes upon the withdrawal of Preferred Stock in exchange for Depositary
Shares as provided in the Deposit Agreement, (ii) the tax basis of each share
of Preferred Stock to an exchanging owner of Depositary Shares will, upon such
exchange, be the same as the aggregate tax basis of the Depositary Shares
exchanged therefor and (iii) the holding period for shares of the Preferred
Stock in the hands of an exchanging owner of Depositary Shares who held such
Depositary Shares as a capital asset at the time of the exchange thereof for
Preferred Stock will include the period during which such person owned such
Depositary Shares.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which
materially and adversely alters the rights of the holders of Depositary Shares
will not be effective unless such amendment has been approved by the holders
of at least a majority of the Depositary Shares then outstanding. The Deposit
Agreement may be terminated by the Company or the Depositary only if (i) all
outstanding Depositary Shares have been redeemed or (ii) there has been a
final distribution in respect of the Preferred Stock in connection with any
liquidation, dissolution or winding up of the Company and such distribution
has been distributed to the holders of Depositary Receipts.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of
the Preferred Stock and any redemption of the Preferred Stock. Holders of
Depositary Receipts will pay other transfer and other taxes and governmental
charges and such other charges as are expressly provided in the Deposit
Agreement to be for their accounts.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Shares all reports
and communications from the Company which are delivered to the Depositary and
which the Company is required to furnish to the holders of the Preferred
Stock.
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Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares
or Preferred Stock unless satisfactory indemnity is furnished. They may rely
upon written advice of counsel or accountants, or information provided by
persons presenting Preferred Stock for deposit, holders of Depositary Receipts
or other persons believed to be competent and on documents believed to be
genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
DESCRIPTION OF EXISTING PREFERRED STOCK AND PREFERRED PURCHASE UNITS
The outstanding Series B Preferred Stock and Series C Preferred Stock of the
Company were issued as of December 1, 1995 as part of the Merger in exchange
for two similar series of preferred stock of First Chicago outstanding at the
effective time of the Merger. The First Chicago preferred stock was originally
issued in February 1983, and February 1984, respectively. The dividend rate on
each series is adjusted quarterly, based on a formula that considers the
interest rates for selected short- and long-term U.S. Treasury securities
prevailing at the time the rate is set. The Company's Series E Preferred
Stock, which also was issued on December 1, 1995 in connection with the
Merger, replaces a similar series of preferred stock of First Chicago which
was originally issued in November 1992. The Series E Preferred Stock has a
fixed dividend rate. The Existing Preferred Stock ranks prior to the Company's
Common Stock, both as to dividends and upon liquidation, but has no general
voting rights (except as described under "Description of the Preferred Stock--
Voting Rights"). Each series of the Existing Preferred Stock ranks pari passu
with each other series of the Existing Preferred Stock with respect to
dividends and liquidation rights.
The Series B Preferred Stock is subject to a minimum and maximum annual
dividend rate of 6.00 percent and 12.00 percent, respectively. The annualized
dividend rate for the quarterly period ended November 30, 1997, is 6.00
percent. Shares of this series are redeemable, at the option of the Company,
at their stated value of $100 per share plus accrued and unpaid dividends.
Shares of this series are not convertible into other securities of the
Company.
The Series C Preferred Stock is subject to a minimum and maximum annual
dividend rate of 6.50 percent and 12.50 percent, respectively. The annualized
dividend rate for the quarterly period ended November 30, 1997, is 6.50
percent. Shares of this series are redeemable, at the option of the Company,
at their stated value of $100 per share plus accrued and unpaid dividends.
Shares of this series are not convertible into other securities of the
Company.
The Series E Preferred Stock is represented by depositary shares with each
depositary share representing a one-twenty-fifth interest in a share of Series
E Preferred Stock. The Series E Preferred Stock has an annual dividend rate
equal to $52.8125 ($2.1125 per depositary share), or 8.45 percent, which was
fixed at the date of issue. Shares of this series are redeemable, at the
option of the Company, at any time on or after November 16, 1997 at a
redemption price of $625 per share ($25 per depositary share). Shares of this
series are not convertible into other securities of the Company.
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The shares of the outstanding Existing Preferred Stock (or with respect to
the Series E Preferred Stock, the outstanding depositary shares representing
such stock), are listed on the New York Stock Exchange. First Chicago Trust
Company of New York serves as transfer agent, registrar and dividend
disbursing agent for shares of the Existing Preferred Stock and the depositary
shares representing such stock. The First National Bank of Chicago also serves
as depositary for the shares of Existing Preferred Stock represented by
depositary shares.
In addition, on May 11, 1993, the Company issued 6,000,000 Preferred
Purchase Units each of which consisted of a 30-year subordinated debenture and
a purchase contract requiring the purchase by the holder thereof on May 10,
2023 (or earlier at the Company's election) of the Company's 7 1/2% Preferred
Stock at a purchase price of $25 per share. The Company may redeem any or all
of the Preferred Purchase Units at anytime after May 10, 1998, at par, and, as
a result, some or all of the 7 1/2% Preferred Stock may not be issued by the
Company. The 7 1/2% Preferred Stock would rank prior to the Company's Common
Stock, but would have no voting rights except if the Preferred Purchase Units
were in default or the Certificate of Incorporation was proposed to be amended
in a manner adverse to the holders of the 7 1/2% Preferred Stock. The 7 1/2%
Preferred Stock would rank pari passu with each other series of Existing
Preferred Stock with respect to dividends and liquidation rights. The 7 1/2%
Preferred Stock, if issued, would not be convertible into other securities of
the Company. The shares of preferred stock which could be issued pursuant to
the purchase contracts have been reserved by the Company on its stock records.
DESCRIPTION OF PREFERRED STOCK WARRANTS
The Company may issue Preferred Stock Warrants for the purchase of Preferred
Stock. Preferred Stock Warrants may be issued independently or together with
other Securities offered by any Prospectus Supplement and may be attached to
or separate from such other Securities. Each series of Preferred Stock
Warrants will be issued under one or more warrant agreements (each a
"Preferred Stock Warrant Agreement") to be entered into between the Company
and a bank or trust company, as preferred stock warrant agent which will be
designated in the applicable Prospectus Supplement (the "Preferred Stock
Warrant Agent"), all as set forth in the Prospectus Supplement relating to the
particular issue of Preferred Stock Warrants. The Preferred Stock Warrant
Agent will act solely as an agent of the Company in connection with the
Preferred Stock Warrants and will not assume any obligation or relationship of
agency or trust for or with any holders of Preferred Stock Warrant
Certificates or beneficial owners of Preferred Stock Warrants. The following
summaries of certain provisions of the form of Preferred Stock Warrant
Agreement and form of certificate representing the Preferred Stock Warrants
(the "Preferred Stock Warrant Certificates") do not purport to be complete and
are subject to and are qualified in their entirety by reference to, all the
provisions of the Preferred Stock Warrant Agreement and the Preferred Stock
Warrant Certificates which Agreement and Certificate will be filed as an
exhibit to or incorporated by reference in the Registration Statement of which
this Prospectus forms a part.
GENERAL
If Preferred Stock Warrants are offered, the applicable Prospectus
Supplement will describe the terms of such Preferred Stock Warrants, including
the following, where applicable: (1) the offering price; (2) the designation,
aggregate number and terms of the series of Preferred Stock purchasable upon
exercise of such Preferred Stock Warrants and minimum number of Preferred
Stock Warrants that are exercisable; (3) the designation and terms of the
series of Preferred Stock with which such Preferred Stock Warrants are being
offered and the number of such Preferred Stock Warrants being offered with
each such Preferred Stock; (4) the date on and after which such Preferred
Stock Warrants and the related series of Preferred Stock will be transferable
separately; (5) the number and stated values of the series of Preferred Stock
purchasable upon exercise of each such Preferred Stock Warrant and the price
at which such number of shares of Preferred Stock of such series may be
purchased upon such exercise; (6) the date on which the right to exercise such
Preferred Stock Warrants shall commence and the date on which such right shall
expire (the "Preferred Stock Warrant Expiration Date"); (7) whether the
Preferred Stock Warrants represented by the Preferred Stock Warrant
Certificates will be issued in registered or bearer form; (8) information with
respect to book-entry procedures, if any; and (9) any other terms of such
Preferred Stock Warrants for the purchase of shares of Preferred Stock.
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Preferred Stock Warrant Certificates may be exchanged for new Preferred
Stock Warrant Certificates of different denominations, may (if in registered
form) be presented for registration of transfer, and may be exercised at the
corporate trust office of the Preferred Stock Warrant Agent or any other
office indicated in the applicable Prospectus Supplement. Prior to the
exercise of any Preferred Stock Warrant, a holder thereof shall have no rights
of a holder of shares of the Preferred Stock purchasable upon such exercise,
including the right to receive payment of dividends, if any, on the underlying
Preferred Stock or the right to vote such underlying Preferred Stock.
Prospective purchasers of Preferred Stock Warrants should be aware that
special U.S. Federal income tax, accounting and other considerations may be
applicable to instruments such as Preferred Stock Warrants. The Prospectus
Supplement relating to any issue of Preferred Stock Warrants will describe
such considerations.
EXERCISE OF PREFERRED STOCK WARRANTS
Each Preferred Stock Warrant will entitle the holder thereof to purchase
such number of shares of Preferred Stock at such exercise price as shall be
set forth in, or calculable from, the Prospectus Supplement relating to the
offered Preferred Stock Warrants. After the close of business on the Preferred
Stock Warrant Expiration Date (or such later date to which such Preferred
Stock Warrant Expiration Date may be extended by the Company), unexercised
Preferred Stock Warrants will become void.
Preferred Stock Warrants may be exercised by delivery to the Preferred Stock
Warrant Agent of payment as provided in the applicable Prospectus Supplement
of the amount required to purchase the shares of Preferred Stock purchasable
upon such exercise together with certain information set forth on the reverse
side of the Preferred Stock Warrant Certificate. Preferred Stock Warrants will
be deemed to have been exercised upon receipt of the exercise price, subject
to the receipt, within five business days, of the Preferred Stock Warrant
Certificate evidencing such Preferred Stock Warrants. Upon receipt of such
payment and the Preferred Stock Warrant Certificate properly completed and
duly executed at the corporate trust office of the Preferred Stock Warrant
Agent or any other office indicated in the applicable Prospectus Supplement,
the Company will, as soon as practicable, issue and deliver the shares of
Preferred Stock purchasable upon such exercise. If fewer than all of the
Preferred Stock Warrants represented by such Preferred Stock Warrant
Certificate are exercised, a new Preferred Stock Warrant Certificate will be
issued for the remaining number of Preferred Stock Warrants.
MODIFICATIONS
The Preferred Stock Warrant Agreement and the terms of the Preferred Stock
Warrants may be amended by the Company and the Preferred Stock Warrant Agent,
without the consent of the holders, for the purpose of curing any ambiguity,
or of curing, correcting or supplementing any defective or inconsistent
provision contained therein, or in any other manner which the Company may deem
necessary or desirable and which will not materially and adversely affect the
interests of the owners.
The Company and the Preferred Stock Warrant Agent also may modify or amend
the Preferred Stock Warrant Agreement and the terms of the Preferred Stock
Warrants, with the consent of the holders of not less than a majority in
number of the then outstanding unexercised Preferred Stock Warrants affected,
provided that no such modification or amendment that shortens the period of
time during which the Preferred Stock Warrants may be exercised, increases the
exercise price of such Preferred Stock Warrants or otherwise materially and
adversely affects the exercise rights of the holders of the Preferred Stock
Warrants or reduces the number of outstanding Preferred Stock Warrants the
consent of whose holders is required for modification or amendment of the
Preferred Stock Warrant Agreement or the terms of the Preferred Stock Warrants
may be made without the consent of the holders affected thereby.
MERGER, CONSOLIDATION, SALE OR OTHER DISPOSITIONS
If at any time there shall be a merger, consolidation, sale, transfer,
conveyance or other disposition of substantially all of the assets of the
Company, then the successor or assuming corporation shall succeed to and be
substituted for the Company in, and the Company will be relieved of any
further obligation under, the Preferred Stock Warrant Agreement or the
Preferred Stock Warrants.
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DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with
other Securities offered by any Prospectus Supplement and may be attached to
or separate from such Securities. Each series of Common Stock Warrants will be
issued under one or more warrant agreements (each a "Common Stock Warrant
Agreement") to be entered into between the Company and a bank or trust
company, as common stock warrant agent which will be designated in the
applicable Prospectus Supplement (the "Common Stock Warrant Agent"), all as
set forth in the Prospectus Supplement relating to the particular issue of
Common Stock Warrants. The Common Stock Warrant Agent will act solely as an
agent of the Company in connection with the Common Stock Warrants and will not
assume any obligation or relationship of agency or trust for or with any
holders or beneficial owners of Common Stock Warrants. The following summaries
of certain provisions of the form of Common Stock Warrant Agreement and
certificate representing Common Stock Warrants (the "Common Stock Warrant
Certificates") do not purport to be complete and are subject to and are
qualified in their entirety by reference to, all the provisions of the Common
Stock Warrant Agreement and the Common Stock Warrant Certificate which
Agreement and Certificate will be filed as an exhibit to or incorporated by
reference in the Registration Statement which this Prospectus forms a part of.
GENERAL
If Common Stock Warrants are offered, the related Prospectus Supplement will
describe the terms of such Common Stock Warrants, including the following,
where applicable: (1) the offering price; (2) the aggregate number of shares
of Common Stock purchasable upon exercise of such Common Stock Warrants and
minimum number of Common Stock Warrants that are exercisable; (3) the number
of shares of Common Stock with which such Common Stock Warrants are being
offered and the number of such Common Stock Warrants being offered with each
such share of Common Stock; (4) the date on and after which such Common Stock
Warrants and the related shares of Common Stock will be transferable
separately; (5) the number of shares of Common Stock purchasable upon exercise
of each such Common Stock Warrant and the price at which such number of shares
of Common Stock may be purchased upon such exercise; (6) the date on which the
right to exercise such Common Stock Warrants shall commence and the date on
which such right shall expire (the "Common Stock Warrant Expiration Date");
(7) whether the Common Stock Warrants represented by the Common Stock Warrant
Certificates will be issued in registered or bearer form; (8) information with
respect to book-entry procedures, if any; and (9) any other terms of such
Common Stock Warrants for the purchase of shares of Common Stock which shall
not be inconsistent with the provisions of the Common Stock Warrant
Agreements.
Common Stock Warrant Certificates may be exchanged for new Common Stock
Warrant Certificates of different denominations, may (if in registered form)
be presented for registration of transfer, and may be exercised at the
corporate trust office of the Common Stock Warrant Agent or any other office
indicated in the applicable Prospectus Supplement. Prior to the exercise of
any Common Stock Warrants to purchase Common Stock, holders of such Common
Stock Warrants will not have any rights of holders of shares of the Common
Stock purchasable upon such exercise, including the right to receive payments
of dividends, if any, on the Common Stock purchasable upon such exercise or to
exercise any applicable right to vote.
Prospective purchasers of Common Stock Warrants should be aware that special
U.S. Federal income tax, accounting and other considerations may be applicable
to instruments such as Common Stock Warrants. The Prospectus Supplement
relating to any issue of Common Stock Warrants will describe such
considerations.
EXERCISE OF COMMON STOCK WARRANTS
Each Common Stock Warrant will entitle the holder thereof to purchase such
number of shares of Common Stock at such exercise price as shall be set forth
in, or calculable from, the Prospectus Supplement relating to the Common Stock
Warrants. After the close of business on the Common Stock Warrant Expiration
Date (or such later date to which such Common Stock Warrant Expiration Date
may be extended by the Company), unexercised Common Stock Warrants will become
void.
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Common Stock Warrants may be exercised by delivery to the Common Stock
Warrant Agent of payment as provided in the applicable Prospectus Supplement
of the amount required to purchase the shares of Common Stock purchasable upon
such exercise together with certain information set forth on the reverse side
of the Common Stock Warrant Certificate. Common Stock Warrants will be deemed
to have been exercised upon receipt of the exercise price, subject to the
receipt, within five business days, of the Common Stock Warrant Certificate
evidencing such Common Stock Warrants. Upon receipt of such payment and the
Common Stock Warrant Certificate properly completed and duly executed at the
corporate trust office of the Common Stock Warrant Agent or any other office
indicated in the applicable Prospectus Supplement, the Company will, as soon
as practicable, issue and deliver the shares of Common Stock purchasable upon
such exercise. If fewer than all of the Common Stock Warrants represented by
such Common Stock Warrant Certificate are exercised, a new Common Stock
Warrant Certificate will be issued for the remaining amount of Common Stock
Warrants.
MODIFICATIONS
The Common Stock Warrant Agreement and the terms of the Common Stock
Warrants may be amended by the Company and the Common Stock Warrant Agent,
without the consent of the holders, for the purpose of curing any ambiguity,
or of curing, correcting or supplementing any defective or inconsistent
provision contained therein, or in any other manner which the Company may deem
necessary or desirable and which will not materially and adversely affect the
interests of the owners.
The Company and the Common Stock Warrant Agent also may modify or amend the
Common Stock Warrant Agreement and the terms of the Common Stock Warrants,
with the consent of the holders of not less than a majority in number of the
then outstanding unexercised Common Stock Warrants affected, provided that no
such modification or amendment that shortens the period of time during which
the Common Stock Warrants may be exercised, increases the exercise price of
such Common Stock Warrants or otherwise materially and adversely affects the
exercise rights of the holders of the Common Stock Warrants or reduces the
number of outstanding Common Stock Warrants the consent of whose holders is
required for modification or amendment of the Common Stock Warrant Agreement
or the terms of the Common Stock Warrants may be made without the consent of
the holders affected thereby.
COMMON STOCK WARRANT ADJUSTMENTS
Unless otherwise indicated in the applicable Prospectus Supplement, the
exercise price of, and the number of shares of Common Stock covered by a
Common Stock Warrant, will be subject to adjustment in certain events,
including: (i) dividends (and other distributions) payable in the Common Stock
on any class of capital stock of the Company; (ii) subdivision, combinations
and reclassifications of Common Stock; (iii) the issuance to all holders of
Common Stock of certain rights or warrants entitling them to subscribe for or
purchase Common Stock, at less than the current market price (as defined in
the Common Stock Warrant Agreement for such series of Common Stock Warrants);
and (iv) the distribution to all holders of Common Stock of evidences of
indebtedness or assets of the Company (including securities, but excluding
those dividends and distributions referred to above and dividends and
distributions paid in cash out of surplus or retained earnings of the Company)
or rights or warrants (excluding those referred to above) of the Company,
subject to the limitation that all adjustments by reason of any of the
foregoing need not be made until they result in a cumulative change in the
exercise price of at least 1%.
In the event that the Company shall distribute or shall have distributed any
rights or warrants to acquire capital stock pursuant to clause (iv) of the
preceding paragraph ("Capital Stock Rights"), pursuant to which separate
certificates representing such Capital Stock Rights are distributed subsequent
to the initial distribution of such Capital Stock Rights (whether or not such
distribution shall have occurred prior to the date of the issuance of a series
of Common Stock Warrants), the subsequent distribution shall be deemed to be
the distribution of such Capital Stock Rights; provided, however, that the
Company may, in lieu of making any adjustment in the exercise price of, and
the number of shares of Common Stock covered by, a Common Stock Warrant upon a
distribution of separate certificates representing such Capital Stock Rights,
make proper
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provision so that each holder of such a Common Stock Warrant who exercises
such Common Stock Warrant (or any portion thereof) (a) on or before the record
date for such distribution of separate certificates shall be entitled to
receive upon such exercise shares of Common Stock issued with Capital Stock
Rights and (b) after such record date and prior to the expiration, redemption
or termination of such Capital Stock Rights shall be entitled to receive upon
such exercise, in addition to the shares of Common Stock issuable upon such
exercise, the same number of such Capital Stock Rights as would a holder of
the number of shares of Common Stock that such Common Stock Warrant so
exercised would have entitled the holder thereof to acquire in accordance with
the terms and provisions applicable to the Capital Stock Rights if such Common
Stock Warrant were exercised immediately prior to the record date for such
distribution. Common Stock owned by or held for the account of the Company or
any majority owned subsidiary shall not be deemed outstanding for the purpose
of any adjustment.
In the event the Company shall effect any capital reorganization or
reclassification of its shares or shall consolidate, merge or engage in a
statutory share exchange with or into any other corporation (other than a
consolidation, merger or share exchange into which the Company is the
surviving corporation) or shall sell or transfer substantially all its assets
to any other corporation for a consideration consisting in whole or in part of
equity securities of such other corporation, the holders of the Common Stock
Warrants then outstanding will be entitled thereafter to exercise such Common
Stock Warrants to acquire the kind and amount of stock and other securities,
cash or property which they would have received in connection with such
transaction had such Common Stock Warrants been exercised immediately prior to
such transaction.
MERGER, CONSOLIDATION, SALE OR OTHER DISPOSITIONS
If at any time there shall be a merger, consolidation, sale, transfer,
conveyance or other disposition of substantially all of the assets of the
Company, then the successor or assuming corporation shall succeed to and be
substituted for the Company in, and the Company will be relieved of any
further obligation under, the Common Stock Warrant Agreement or the Common
Stock Warrants.
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DESCRIPTION OF THE COMPANY'S COMMON STOCK
GENERAL
The Company is authorized to issue 750,000,000 shares of Common Stock. As of
June 30, 1997, there were outstanding 302,064,635 shares of the Company's
Common Stock.
Holders of the Company's Common Stock are entitled to receive dividends
when, as and if declared by the Board of Directors out of any funds legally
available therefor, and are entitled upon liquidation, after claims of
creditors and preferences of the Company's preferred stock and any other
series of preferred stock hereafter authorized, to receive pro rata the net
assets of the Company.
The holders of the Common Stock are entitled to one vote for each share held
and are vested with all of the voting power except as the Board of Directors
of the Company has provided with respect to the outstanding shares of the
Company's preferred stock or may provide, in the future, with respect to any
other series of preferred stock which it may hereafter authorize.
The shares of Common Stock have non-cumulative voting rights, which means
that the holders of more than 50% of the shares of Common Stock voting for the
election of directors can elect 100% of the directors standing for election at
any meeting if they choose to do so and, in such event, the holders of the
remaining shares voting for the election of directors will not be able to
elect any person or persons to the Board of Directors of the Company at that
meeting.
The Company's Certificate of Incorporation contains specific provisions with
respect to the election of directors, which include the provision that the
Board of Directors of the Company is divided into three classes, each having a
number of directors as nearly equal as possible, and each class being elected
for a three-year term, with one class being elected each year. The Certificate
of Incorporation also includes specific provisions with respect to mergers and
other business combinations. In general, these provisions require that, in the
case of a proposed merger or other business combination involving the Company
and an Interested Stockholder (as defined therein), the approving vote of the
holders of at least a majority of the voting power of all shares of voting
stock held by persons who are not Interested Stockholders or persons
affiliated with Interested Stockholders is required, unless the business
combination has been approved by a majority of directors not affiliated with
the Interested Stockholder or unless certain conditions regarding minimum
price and procedural protections are met with respect to each class of the
Company's then outstanding voting stock. The provisions of the Certificate of
Incorporation also require that the Board of Directors will not approve a
proposal for a business combination or a tender offer until the Board of
Directors has evaluated the proposal in light of its effect on the
stockholders and employees of the Company and the communities served by the
Company. These provisions of the Certificate of Incorporation could be used to
make more difficult a change in control of the Company.
The holders of the Company's Common Stock do not have any preemptive rights
to subscribe for additional shares of capital stock of the Company. The
holders of Common Stock have no conversion rights, the Common Stock is not
subject to redemption by either the Company or a stockholder, and there is no
restriction on the purchase by the Company of shares of Common Stock except
for certain regulatory limits.
The Company's Common Stock is listed on the New York, Chicago and Pacific
Stock Exchanges. First Chicago Trust Company of New York is the transfer
agent, registrar and dividend disbursing agent for the Common Stock.
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PLAN OF DISTRIBUTION
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed 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. Each
Prospectus Supplement will describe the method of distribution of the
Securities offered therein.
The Company may sell Securities directly, through agents designated from
time to time, through underwriting syndicates led by one or more managing
underwriters or through one or more underwriters acting alone. Each Prospectus
Supplement will set forth the terms of the Securities to which such Prospectus
Supplement relates, including the name or names of any underwriters or agents
with whom the Company has entered into arrangements with respect to the sale
of such Securities, the public offering or purchase price of such Securities
and the net proceeds to the Company from such sale, any underwriting discounts
and other items constituting underwriters' compensation, any discounts and
commissions allowed or paid to dealers, if any, any commissions allowed or
paid to agents, and the securities exchange or exchanges, if any, on which
such Securities will be listed. Dealer trading may take place in certain of
the Securities, including Securities not listed on any securities exchange.
Securities may be purchased to be reoffered to the public through
underwriting syndicates led by one or more managing underwriters, or through
one or more underwriters acting alone. The underwriter or underwriters with
respect to each underwritten offering of Securities will be named in the
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth
on the cover page of such Prospectus Supplement. Unless otherwise set forth in
the applicable Prospectus Supplement, the obligations of the underwriters to
purchase the Securities will be subject to certain conditions precedent and
each of the underwriters with respect to a sale of Securities will be
obligated to purchase all of its Securities if any are purchased. Any initial
public offering price and any discounts or concession allowed or reallowed or
paid to dealers may be changed from time to time.
Securities may be offered and sold by the Company through agents designated
by the Company from time to time. Any agent involved in the offer and sale of
any Securities will be named, and any commissions payable by the Company to
such agent will be set forth, in the Prospectus Supplement relating to such
offering. Unless otherwise indicated in such Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its
appointment.
Offers to purchase Securities may be solicited directly by the Company and
sales thereof may be made by the Company directly to institutional investors
or others who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto.
The anticipated place and time of delivery of Securities will be set forth
in the applicable Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or agents to solicit offers by certain institutions to
purchase Securities from the Company pursuant to delayed delivery contracts
providing for payment and delivery at a future date. Institutions with which
such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved
by the Company. Unless otherwise set forth in the applicable Prospectus
Supplement, the obligations of any purchaser under any such contract will not
be subject to any conditions except that (i) the purchase of the Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject, and (ii) if the Securities
are also being sold to underwriters acting as principals for their own
account, the underwriters shall have purchased such Securities not sold for
delayed delivery. The underwriters and such other persons will not have any
responsibility in respect of the validity or performance of such contracts.
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Any underwriter or agent participating in the distribution of the Securities
may be deemed to be an underwriter, as that term is defined in the Securities
Act, of the Securities so offered and sold and any discounts or commissions
received by them from the Company and any profit realized by them on the sale
or resale of the Securities may be deemed to be underwriting discounts and
commissions under the Securities Act.
Underwriters and agents may be entitled, under agreements entered into with
the Company, to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which such underwriters or agents may be
required to make in respect thereof. Certain of any such underwriters and
agents, including their associates, may be customers of, engage in
transactions with and perform services for, the Company and its subsidiaries
in the ordinary course of business.
First Chicago Capital Markets, Inc. ("FCCM"), an affiliate of the Company,
may from time to time act as an agent or underwriter in connection with the
sale of Securities to the extent permitted by applicable law. The
participation of FCCM in the offer and sale of the Securities will comply with
Rule 2720 of the Rules of Conduct of the National Association of Securities
Dealers, Inc. (the "NASD") regarding the offer and sale of securities of an
affiliate. No NASD member participating in offers and sales of securities will
execute a transaction in the Securities in a discretionary account without the
prior written specific approval of the member's customer.
This Prospectus and related Prospectus Supplements may be used by FCCM in
connection with offers and sales related to secondary market transactions in
Securities. FCCM, to the extent permitted by law, may act as principal or
agent in such transactions. Such sales will be made at prices related to
prevailing market prices at the time of sale.
LEGAL OPINIONS
Certain legal matters relating to the Securities offered hereby will be
passed upon for the Company by its General Counsel and for any underwriters,
selling agents and certain other purchasers by Cravath, Swaine & Moore,
Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019. Cravath, Swaine
& Moore has represented and continues to represent the Company from time to
time in other matters.
EXPERTS
The consolidated financial statements of the Company included in the Annual
Report on Form 10-K for the year ended December 31, 1996, incorporated herein
by reference have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm
as experts in accounting and auditing in giving said report.
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