(Logo of BankAmerica appears here)
$5,000,000,000
Medium-Term Notes, Series H
BankAmerica Corporation may offer to sell its unsecured Medium-Term Notes,
Series H from time to time. Specific terms of the notes are set prior to the
time of each sale and described in a separate pricing supplement. Terms
include:
<TABLE>
<CAPTION>
<S> <C>
o Priority: senior or subordinated. o Indexed Notes: payments of principal
o Maturity: nine months or more after or interest are linked to the price
issuance. or performance of one or more
o Interest Rate: fixed, floating, securities, currencies, goods or
original issue discount or amortizing. other indices.
o Base Floating Rates include: o Redemption and Repayment: subject to
CD rate redemption by us or repaid at the
Commercial paper rate holder's option.
LIBOR o Minimum Denominations: at least $1,000.
Federal Funds rate
Prime rate
Treasury rate
CMT rate
Eleventh District Cost of Funds rate
</TABLE>
You should read this prospectus supplement, the attached prospectus and the
related pricing supplement carefully before you invest. You should also
carefully read the "Risk Factors" section which begins on page S-3 for a
discussion of certain risks related to the notes.
We may offer the notes:
o Through agents who solicit offers to purchase the notes and receive a
commission ranging from 0.125% to 0.750% of the principal amount of the
notes offered.
o Through agents who purchase the notes as principal and act as underwriters or
dealers and receive a negotiated commission.
o Directly to investors.
The notes are not listed on any securities exchange.
- --------------------------------------------------------------------------------
The notes are not savings accounts, deposits or other obligations of a bank.
The notes are not guaranteed by any bank and are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency.
Neither the Securities and Exchange Commission, any state securities commission
nor the Commissioner of Insurance of the State of North Carolina has approved
or disapproved of these notes or passed upon the accuracy or adequacy of the
disclosures in the prospectus or this prospectus supplement. Any representation
to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
Our affiliates, including NationsBanc Montgomery Securities LLC, may use this
prospectus supplement, the attached prospectus and the related pricing
supplement to make offers and sales of the notes in the secondary market. These
affiliates may act as principal or agent in those transactions. Secondary
market sales by our affiliates are made at prices related to market prices at
the time of sale.
NationsBanc Montgomery Securities LLC
Bear, Stearns & Co. Inc.
Lehman Brothers
Merrill Lynch & Co.
Salomon Smith Barney
---------------
Prospectus Supplement to Prospectus dated May 21, 1998
November 16, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Page
Prospectus Supplement ----- Prospectus -----
<S> <C> <C> <C>
Additional Information ..................... S-2 Incorporation of Certain Documents by
About this Prospectus Supplement and the Reference ................................. 2
Pricing Supplements ..................... S-3 Available Information ........................ 2
Risk Factors ............................... S-3 NationsBank Corporation ...................... 3
Risks of Indexed Notes .................. S-3 General ................................... 3
Currency Risks .......................... S-4 Operations ................................ 3
BankAmerica Corporation .................... S-5 Government Supervision and Regulation ..... 4
General ................................. S-5 General ................................. 4
Business Segment Operations ............. S-5 Capital and Operational Requirements .... 5
Acquisitions and Sales .................. S-6 Distributions ........................... 6
Outstanding Debt ........................ S-6 Source of Strength ...................... 6
Description of Notes ....................... S-6 Use of Proceeds .............................. 6
General ................................. S-7 Ratios of Earnings to Fixed Charges .......... 7
Book-Entry System ....................... S-7 Plan of Distribution ......................... 7
Paying Agent, Security Registrar, Transfer Description of Debt Securities ............... 9
Agent and Calculation Agent ........... S-7 General ................................... 9
Payment of Principal and Interest ....... S-7 Conversion ................................ 11
Interest and Interest Rates ............. S-7 Exchange, Registration and Transfer ....... 11
General ............................... S-7 Payment and Paying Agents ................. 11
Fixed Rate Notes ...................... S-8 Subordination ............................. 12
Original Issue Discount Notes ......... S-8 Sale or Issuance of Capital Stock of Banks 13
Amortizing Notes ...................... S-8 Waiver of Covenants ....................... 13
Floating Rate Notes ................... S-8 Modification of the Indentures ............ 13
Change of Interest Rate ............. S-8 Meetings and Action by Securityholders .... 14
Date Interest Rate is Determined .... S-9 Defaults and Rights of Acceleration ....... 14
Payment of Interest ................. S-9 Collection of Indebtedness, etc. .......... 14
CD Rate Notes ....................... S-10 Notices ................................... 15
Commercial Paper Rate Notes ......... S-10 Concerning the Trustees ................... 15
LIBOR Notes ......................... S-11 Description of Warrants ...................... 15
Federal Funds Rate Notes ............ S-11 General ................................... 16
Prime Rate Notes .................... S-12 Modifications ............................. 16
Treasury Rate Notes ................. S-12 Enforceability of Rights of Warrantholders;
CMT Rate Notes ...................... S-13 Governing Law ........................... 17
Eleventh District Cost of Funds Rate Unsecured Obligations of the Corporation .. 17
Notes ........................................ S-14 Description of Units ......................... 17
Indexed Notes ........................... S-14 Registration and Settlement .................. 17
Renewable Notes ......................... S-15 DTC ....................................... 17
Extendible Notes ........................ S-15 Cedel Bank and Euroclear .................. 19
Warrants and Units ...................... S-16 Legal Opinions ............................... 21
Redemption .............................. S-16 Experts ...................................... 21
Repayment ............................... S-16
Repurchase .............................. S-16
United States Taxation ..................... S-16
United States Holders ................... S-17
Non-United States Holders ............... S-21
Backup Withholding and Information
Reporting ............................. S-22
State and Local Taxation ................ S-23
Plan of Distribution ....................... S-24
General ................................. S-24
Distribution through Agents ............. S-24
Distribution through Underwriters ....... S-24
Direct Sales ............................ S-24
General Information ..................... S-24
Glossary ................................... S-26
</TABLE>
ADDITIONAL INFORMATION
Our mailing address and telephone number are:
BankAmerica Corporation
100 North Tryon Street
Charlotte, North Carolina 28255
(704) 386-5000
If you want to call the Securities and Exchange Commission directly, you
may obtain information on the operation of the public reference room by calling
the SEC at 1-800-SEC-0330.
S-2
<PAGE>
ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS
We intend to use this prospectus supplement, the attached prospectus and a
related pricing supplement to offer our notes from time to time.
This prospectus supplement provides you with certain terms of the notes
and supplements the description of the Debt Securities contained in the
attached prospectus. If information in this prospectus supplement is
inconsistent with the prospectus, this prospectus supplement will supersede
that information in the prospectus.
Each time we issue notes, we will prepare a pricing supplement which will
contain additional terms of the offering and the specific description of the
notes being offered. The pricing supplement may also add, update or change
information in this prospectus supplement or the attached prospectus, including
provisions describing the calculation of interest and the method of making
payments under the terms of a note. A pricing supplement can be quite detailed
and always should be read carefully. The flexibility available to us to set or
negotiate individualized terms for notes means that there will be transactions,
particularly with Indexed Notes, that are quite complex. Often the terms of the
notes differ from the terms described in this prospectus supplement. Any
information in the pricing supplement that is inconsistent with this prospectus
supplement will supersede the information in this prospectus supplement.
---------------
RISK FACTORS
Risks of Indexed Notes
The trading price of Indexed Notes may vary considerably prior to the
maturity date due to, among other things, fluctuations in the level of the
indexed item, interest rate levels, and other events that cannot be predicted
and that are beyond our control. If you are considering purchasing Indexed
Notes, you should carefully consider with your advisors the suitability of an
investment in the notes prior to making an investment decision and those
additional risks not normally associated with conventional debt securities:
Principal Amount. If the principal amount of an Indexed Note is indexed,
then the principal amount that you will receive on the maturity date may be
greater than, equal to, or less than the original purchase price of the Indexed
Note. Some Indexed Notes may be "principal protected", which means that the
principal amount at maturity can only be greater than or equal to the original
purchase price of the Indexed Note. On the other hand, some Indexed Notes may
not be "principal protected", so the principal amount payable at maturity may
be less than the original purchase price of the Indexed Note, and it may be
possible that no principal will be paid at all.
Interest Payments. Indexed Notes with an indexed principal amount may not
pay any interest at all, or may pay interest at either a fixed rate or a
floating rate that is less than what you would have received had you purchased
a conventional debt security at the same time with the same maturity date. In
these cases, the extent to which an Indexed Note provides you with a yield that
is better or worse than that offered by a more conventional debt security will
depend on the principal amount that is paid to you on the maturity date. If the
interest rate of an Indexed Note is indexed (whether or not the principal
amount is indexed), then you may receive interest payments that are less than
what you would have received if you had purchased a conventional debt security
at the same time with the same maturity date.
Leverage. Certain Indexed Notes that we will offer may result in interest
and principal payments that increase or decrease at a rate greater than the
rate of a favorable or unfavorable movement in the indexed item. For example,
the formula for the Indexed Notes described in the pricing supplement could
provide that a 10% decline in the level of a referenced stock index may result
in a 20% reduction in the principal amount that you receive at maturity.
Factors Affecting the Trading Value of the Notes. The market value of
Indexed Notes will be affected by the level of the indexed item, the level of
interest rates, and by a number of other factors. Some of these factors will be
interrelated in complex ways; as a result, it is important to understand that
the effect of any one factor may be offset or magnified by the effect of
another factor. Other factors that can affect the market value of Indexed Notes
include the volatility of the indexed item, the time to maturity of
S-3
<PAGE>
the Indexed Notes, and the dividend rates and yields of any common stocks that
constitute the indexed item or a component of the indexed item. The market
value of Indexed Notes, just like the market value of conventional debt
securities, may be affected by real or anticipated changes in our credit
ratings.
Level of the Indexed Item. The level of the applicable indexed item will
depend on a number of interrelated factors over which we have no control,
including economic, financial, and political events. The historical experience
of the applicable indexed item should not be taken as an indication of future
performance of that indexed item during the term of the Indexed Notes.
Hedging Activities by the Corporation. At any time, we or our affiliates
may engage in hedging activity related to the Indexed Notes or the indexed item
which may in turn, increase or decrease the value of the Indexed Notes. In
addition, we or any of our affiliates may acquire a long or short position in
the Indexed Notes from time to time. All or a portion of these positions may be
liquidated at or about the time of the maturity date of the Indexed Notes. The
aggregate amount and the composition of such positions are likely to vary over
time. Although we have no reason to believe that any such activity will have a
material impact on the level of the indexed item, there can be no assurance
that our activities or our affiliates' activities will not affect such price.
Possible Illiquidity of the Secondary Market. Whether or not the Indexed
Notes are listed on any exchange, we cannot predict how the Indexed Notes will
trade in the secondary market or whether the secondary market for the Indexed
Notes will be liquid or illiquid. Although the agents intend under ordinary
market conditions to indicate prices for the Indexed Notes on request, we
cannot predict whether bids will be made in the future or the price at which
such bids would be made.
State Law Limits on Interest Paid. New York State laws govern the
Indentures and obligations such as the Indexed Notes. New York has certain
usury laws that limit the amount of interest that can be charged and paid on
loans, including debt securities like the Indexed Notes. Under present New York
law, the maximum rate of interest is 25% per annum on a simple interest basis.
This limit may not apply to debt securities in which $2,500,000 or more has
been invested. While we believe that New York law would be given effect by a
state or Federal court sitting outside of New York, many other states also have
laws that regulate the amount of interest that may be charged to and paid by a
borrower. We do not intend to voluntarily claim the benefits of any laws
concerning usurious rates of interest.
Tax Consequences. You should consider the tax consequences of investing in
Indexed Notes. Unless otherwise stated in the pricing supplement, you should
assume that there is no statutory, judicial or administrative authority that
directly addresses the characterization of the Indexed Notes or similar
instruments for United States federal or other income tax purposes. As a
result, significant aspects of the income tax consequences of an investment in
Indexed Notes will not be certain. We will not request a ruling from the
Internal Revenue Service (the "IRS") for any of the Notes and we cannot assure
you that the IRS will agree with our conclusions in this prospectus supplement
or in the pricing supplement.
Currency Risks
An investment in notes that are denominated in, or paid based upon, a
currency (the "Specified Currency") other than the currency (including a
composite currency) in which you conduct your business (the "Home Currency")
involves additional risks, due to, among other things, changes in exchange
rates and the imposition of governmental exchange controls, and other events
that cannot be predicted and are beyond our control. This prospectus supplement
does not describe all the risks of an investment in notes denominated in, or
paid based upon, a currency (including a composite currency) other than your
Home Currency. If you are considering purchasing these types of notes, you
should consider with your advisors the suitability of an investment in the
notes prior to making an investment decision.
Exchange Rates. The exchange rates for certain currencies have been, and
may continue to be, highly volatile. The depreciation of the Specified Currency
in which a note is payable against your Home Currency would result in a
decrease in the effective yield of the note below the stated rate of interest
and could result in a loss to you in your Home Currency of all or a portion of
the principal of the note.
Government Exchange Controls. From time to time, governments impose
exchange controls that influence exchange rates and could limit the
availability of the Specified Currency on an interest payment
S-4
<PAGE>
date or the maturity date of a note. It is possible that government exchange
controls could restrict or prohibit our payment of principal or interest in the
required currency. Even absent these exchange controls, it is possible that the
Specified Currency will not be available to us to make payment of interest and
principal when required.
BANKAMERICA CORPORATION
General
BankAmerica Corporation (the "Corporation") is the successor issuer to
NationsBank Corporation ("NationsBank"). On September 25, 1998, NationsBank was
reincorporated from North Carolina to Delaware. On September 30, 1998,
BankAmerica Corporation, a Delaware corporation, was merged with and into
NationsBank, with NationsBank as the surviving corporation in the Merger. Upon
completion of the merger, NationsBank changed its name to "BankAmerica
Corporation." After the merger, we announced that we will operate under the
"Bank of America" name.
The Corporation is a multi-bank holding company registered under the Bank
Holding Company Act of 1956. Our principal assets are the shares of stock of
our subsidiaries. Through our banking subsidiaries and our nonbanking
subsidiaries, we provide a diverse range of banking and nonbanking financial
services and products, primarily throughout the Mid-Atlantic (Maryland,
Virginia and the District of Columbia), Midwest (Illinois, Iowa, Kansas and
Missouri), Southeast (Florida, Georgia, North Carolina, South Carolina and
Tennessee), Southwest (Arizona, Arkansas, New Mexico, Oklahoma and Texas),
Northwest (Alaska, Oregon and Washington) and West (California, Idaho and
Nevada) regions of the U.S. and in selected international markets.
The Corporation and its subsidiaries are subject to supervision by various
U.S. federal and state banking and other regulatory authorities.
Business Segment Operations
The Corporation provides financial services and products through its
subsidiaries and reports its results through four business segments: (1)
Consumer Banking, (2) Commercial Banking, (3) Global Corporate and Investment
Banking, and (4) Wealth Management and Principal Investing.
Our Consumer Banking segment provides comprehensive retail banking
services to individuals and small businesses through multiple delivery
channels, including approximately 4,800 banking centers and 14,000 automated
teller machines. These banking centers and automated teller machines are
located throughout our franchise and serve 30 million households in 22 states
and the District of Columbia. This segment also provides specialized services
such as the origination and servicing of residential mortgage loans, issuance
and servicing of credit cards, direct banking via telephone and personal
computer, student lending and certain insurance services. The consumer finance
component provides personal, mortgage, home equity and automobile loans to
consumers, retail finance programs to dealers and lease financing to purchasers
of new and used cars.
Our Commercial Banking segment provides a wide range of commercial banking
services for businesses with annual revenues of up to $500 million. Services
provided include commercial lending, treasury and cash management services,
asset-backed lending, leasing and factoring. Also included in this segment are
our commercial finance operations which provide activities such as equipment
loans and leases, loans for debt restructuring, mergers and working capital,
real estate and health care financing and inventory financing to manufacturers,
distributors and dealers.
Our Global Corporate and Investment Banking segment provides a wide range
of financial and investment banking products such as capital-raising, trade
finance, treasury management, investment banking, capital markets and financial
advisory services to domestic and international corporations, financial
institutions and government entities. Clients are supported through offices in
37 countries in four distinct regions: U.S. and Canada; Asia; Europe, Middle
East and Africa; and Latin America. Products and services provided include loan
origination, cash management, foreign exchange, leasing, leveraged finance,
project finance, real estate, risk management, senior bank debt, structured
finance, and trade services. Through a separate subsidiary, NationsBanc
Montgomery Securities LLC, Global Corporate and Investment Banking
S-5
<PAGE>
is a primary dealer of U.S. Government Securities, underwrites and trades
municipal bonds, and underwrites, distributes and makes markets in high-grade
and high-yield debt securities and equity securities. Asset-backed
securitization, commercial paper distributions, debt and equity securities
research, loan syndications, mergers and acquisitions consulting and private
placements are also provided through NationsBanc Montgomery Securities LLC.
Additionally, our Global Corporate and Investment Banking segment is a market
maker in derivative products, including swap agreements, option contracts,
forward settlement contracts, financial futures and other derivative products
in certain interest rate, foreign exchange, commodity and equity markets. In
support of these activities, Global Corporate and Investment Banking takes
positions in securities to support client demands and trades for its own
account and for the accounts of its affiliates.
Our Wealth Management and Principal Investing segment includes the Private
Bank which provides asset management, banking and trust services for high net
worth clients both in the U.S. and internationally. The Wealth Management arm
of this segment provides full service and discount brokerage, investment
advisory and investment management, as well as advisory services for our own
family of mutual funds. The Principal Investing area includes direct equity
investments in businesses and investments in general partnership funds.
Acquisitions and Sales
As part of our operations, we regularly evaluate the potential acquisition
of, and hold discussions with, various financial institutions and other
businesses that are eligible for bank holding company ownership or control. In
addition, we regularly analyze the values of, and submit bids for, the
acquisition of customer-based funds and other liabilities and assets of
suitable financial institutions and other businesses. We also regularly
consider the potential sale of certain of our assets, branches, subsidiaries or
lines of business. As a general rule, we publicly announce any material
acquisitions or sales when a definitive agreement has been reached.
Outstanding Debt
At September 30, 1998, and after the completion of our merger with
BankAmerica Corporation, we had the following debt outstanding (in millions):
<TABLE>
<S> <C>
Senior debt
BankAmerica Corporation ...................... $18,381
Subsidiaries ................................. 12,180
-------
Total senior debt ............................ 30,561
-------
Subordinated debt
BankAmerica Corporation ...................... 15,860
Subsidiaries ................................. 642
-------
Total subordinated debt ...................... 16,502
-------
Total long-term debt ......................... $47,063
=======
Guaranteed Preferred Beneficial Interests in
Corporation's Junior Subordinated Notes ...... $ 4,918
</TABLE>
As of September 30, 1998, we had $3.8 billion of commercial paper and
other short-term notes payable outstanding. To support our commercial paper
program, we have commercial paper backup lines of credit totaling $1.2 billion
of which $671 million expires in October 1999 and $479 million expires in
October 2002. In addition, we have a $1.56 billion line of credit which expires
in May 2001. At September 30, 1998 there were no amounts outstanding under
these credit facilities.
DESCRIPTION OF NOTES
The following summary of certain terms of the notes is not complete. For
additional terms of the notes, you should also read the Indentures under which
the notes will be issued, which are exhibits to our shelf registration
statement (SEC Reg. No. 333-51367). The definitions of certain capitalized
terms used in this
S-6
<PAGE>
prospectus supplement are provided in the Glossary beginning on page S-26.
Other capitalized terms which are not defined in this prospectus supplement are
defined in the attached prospectus.
General
The notes are direct, unsecured obligations of the Corporation. The total
initial public offering price of Senior and Subordinated Medium-Term Notes,
Series H, that may be offered using this prospectus supplement is
$5,000,000,000.
Senior Notes are "Senior Debt Securities", as described in the attached
prospectus and rank equally with all unsecured senior debt of the Corporation.
Subordinated Notes are "Subordinated Debt Securities", as described in the
attached prospectus, and are junior in right of payment to all Senior
Indebtedness.
Holders of Subordinated Notes may not accelerate a principal payment if we
default in the payment of the notes or in the performance of any covenant
included in the Subordinated Indenture. Principal payments under a Subordinated
Note may be accelerated only in the event of our bankruptcy.
The Indentures do not limit the amount of our notes or other debt
obligations.
The notes are not subject to any sinking fund.
Book-Entry System
The notes will be issued in book-entry form only. This means that we will
not issue actual notes or certificates to each holder. Instead, the notes will
be in the form of a Global Note held in the name of The Depository Trust
Company ("DTC"). In order to own a beneficial interest in a note, you must be
an institution that has an account with DTC or have a direct or individual
account with such an institution.
Notes will not be issued in certificated form unless:
o DTC notifies us that it is unwilling or unable to continue as depository
or it otherwise ceases to be a qualified clearing agency and we do not
appoint a successor depository; or
o we make a decision to permit notes to be issued in certificated form and
notify the Trustee of that decision.
No service charge will be made for any registration of transfer or
exchange of notes issued in certificated form, but we may require payment of a
sum sufficient to cover any related tax or other governmental charge.
Paying Agent, Security Registrar, Transfer Agent and Calculation Agent
Until the notes are paid, we will maintain a Paying Agent, Security
Registrar, Transfer Agent and Calculation Agent for the notes. Initially, The
Bank of New York ("BNY") will serve in each of these capacities.
Payment of Principal and Interest
Principal of, premium, if any, and interest on notes in book-entry form
are paid in accordance with the arrangements then in place between the Paying
Agent and DTC or its nominee, as holder. Interest on notes in certificated form
generally are paid by check mailed to the holders of the notes on the
applicable record date at the address appearing in our records. Principal,
premium, if any, and interest payable at the maturity date of a note in
certificated form are paid by wire transfer of immediately available funds upon
surrender of the note at the corporate trust office of the applicable Trustee
or Paying Agent.
Interest and Interest Rates
General
Each note will begin to accrue interest on its issue date. The related
pricing supplement will specify each note as a Fixed Rate Note, a Floating Rate
Note, an Amortizing Note or an Indexed Note and describe the method of
determining the interest rate, including any Spread or Spread Multiplier. For
an Indexed Note, the related pricing supplement also will describe the method
for the calculation and
S-7
<PAGE>
payment of principal and interest. The pricing supplement for a Floating Rate
or Indexed Note may also specify a maximum and a minimum interest rate.
Fixed Rate Notes
The pricing supplement for Fixed Rate Notes will describe a fixed interest
rate payable semi-annually in arrears. Interest on Fixed Rate Notes is computed
on the basis of a 360-day year of twelve 30-day months. If the maturity date of
any note or an Interest Payment Date for any Fixed Rate Note is not a Business
Day, principal, premium, if any, and interest for that note is paid on the next
Business Day, and no interest will accrue from and after the maturity date or
Interest Payment Date.
Original Issue Discount Notes
We may issue original issue discount notes (including zero coupon notes)
("OID Notes") which are notes issued at a discount from the principal amount
payable at the maturity date. There may not be any periodic interest payments
on OID Notes. For these notes, interest normally accrues during the life of the
note and is paid at the maturity date or upon earlier redemption. Upon an
acceleration of the maturity of an OID Note, the amount payable is determined
in accordance with the terms of the note as described in the related pricing
supplement; that amount normally is less than the amount payable at the
maturity date.
Amortizing Notes
We may issue amortizing notes, which are Fixed Rate Notes for which
combined principal and interest payments are made in installments over the life
of each note ("Amortizing Notes"). Payments on Amortizing Notes are applied
first to interest due and then to the reduction of the unpaid principal amount.
The related pricing supplement for an Amortizing Note will include a table
setting forth repayment information.
Floating Rate Notes
Each Floating Rate Note will have an interest rate basis or formula. That
formula may be based on:
o the CD Rate;
o the Commercial Paper Rate;
o LIBOR;
o the Federal Funds Rate;
o the Prime Rate;
o the Treasury Rate;
o the CMT Rate;
o the Eleventh District Cost of Funds Rate; or
o another negotiated interest rate basis or formula.
Upon the request of the beneficial holder of any Floating Rate Note, the
Calculation Agent will provide the interest rate then in effect and, if
different, the interest rate that will become effective on the next Interest
Reset Date for that Floating Rate Note.
Change of Interest Rate. The interest rate on each Floating Rate Note may
be reset daily, weekly, monthly, quarterly, semi-annually, or annually. The
Interest Reset Date will be:
o for notes which reset daily, each Business Day;
o for notes (other than Treasury Rate Notes) which reset weekly, Wednesday
of each week;
o for Treasury Rate Notes which reset weekly, Tuesday of each week;
o for notes which reset monthly, the third Wednesday of each month;
S-8
<PAGE>
o for notes which reset quarterly, the third Wednesday of March, June,
September and December of each year;
o for notes which reset semi-annually, the third Wednesday of each of the
two months of each year indicated in the applicable pricing supplement;
and
o for notes which reset annually, the third Wednesday of the month of each
year indicated in the applicable pricing supplement.
The related pricing supplement describes the initial interest rate or
interest rate formula on each note. That rate is effective until the first
Interest Reset Date. Thereafter, the interest rate will be the rate determined
on each Interest Determination Date. Each time a new interest rate is
determined, it becomes effective on the subsequent Interest Reset Date.
However, no change will be made in the interest rate during the ten days prior
to the maturity date. If any Interest Reset Date is not a Business Day, then
the Interest Reset Date is postponed to the next Business Day. However, in the
case of a LIBOR Note, if the next Business Day is in the next calendar month,
the Interest Reset Date is the immediately preceding Business Day.
Date Interest Rate is Determined. The Interest Determination Date for all
Indexed Notes and Floating Rate Notes (except Treasury Rate Notes and Eleventh
District Cost of Funds Rate Notes) is the second Business Day before the
Interest Reset Date.
The Interest Determination Date for Treasury Rate Notes will be the day of
the week in which the Interest Reset Date falls on which Treasury bills of the
Index Maturity are auctioned. 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 Tuesday. However, the auction may be held on the
preceding Friday. If an auction is held on the preceding Friday, that day will
be the Interest Determination Date pertaining to the Interest Reset Date
occurring in the next week. If an auction date falls on any Interest Reset Date
then the Interest Reset Date will instead be the first Business Day immediately
following the auction date.
The Interest Determination Date for an Eleventh District Cost of Funds
Rate Note is the last Business Day of the month immediately preceding the
applicable Interest Reset Date in which the Federal Home Loan Bank of San
Francisco published the index.
Payment of Interest. Interest is paid as follows:
o for notes with interest payable monthly, on the third Wednesday of each
month;
o for notes with interest payable quarterly, on the third Wednesday of
March, June, September, and December of each year;
o for notes with interest payable semi-annually, on the third Wednesday of
each of the two months specified in the applicable pricing supplement;
o for notes with interest payable annually, on the third Wednesday of the
month specified in the applicable pricing supplement; and
o at maturity, redemption or repurchase.
Each interest payment on a Floating Rate Note will include interest
accrued from, and including, the issue date or the last Interest Payment Date,
as the case may be, to, but excluding, the Interest Payment Date or the
maturity date. However, interest payments on Floating Rate Notes which reset
daily or weekly will include interest accrued from, and excluding the last
Regular Record Date to and including the Regular Record Date for the applicable
Interest Payment Date, except that the first interest payment due will include
interest from the issue date and the interest payment due on the maturity date
will include interest accrued to but excluding the maturity date.
Interest on a note will be payable beginning on the first Interest Payment
Date after its issue date to holders of record on the corresponding Regular
Record Date. If interest is payable on a day which is not a Business Day,
payment will be postponed to the next Business Day and interest will continue
to accrue. However, for LIBOR Notes, if the next Business Day is in the next
calendar month, interest will be paid on
S-9
<PAGE>
the preceding Business Day. If the maturity date of any Floating Rate Note is
not a Business Day, principal, premium, if any, and interest for that note will
be paid on the next Business Day, and no interest will accrue from and after
the maturity date.
Accrued interest on a Floating Rate Note is calculated by multiplying the
principal amount of a note by an accrued interest factor. The accrued interest
factor is the sum of the interest factors calculated for each day in the period
for which accrued interest is being calculated. The interest factor for each
day is computed by dividing the interest rate in effect on that day by (1) the
actual number of days in the year, in the case of Treasury Rate Notes or CMT
Rate Notes, or (2) 360, in the case of other Floating Rate Notes. All
percentages resulting from any calculation are rounded to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward. For example, 9.876545% (or .09876545) will be
rounded to 9.87655% (or .0987655). Dollar amounts used in the calculation are
rounded to the nearest cent (with one-half cent being rounded upward).
CD Rate Notes. The "CD Rate" for any Interest Determination Date is the rate
on that date for negotiable certificates of deposit having the Index Maturity
described in the related pricing supplement, as published in H.15(519) prior
to 3:00 P.M., New York City time, on the Calculation Date for that Interest
Determination Date under the heading "CDs (Secondary Market)".
The following procedures will be followed if the CD Rate cannot be
determined as described above:
o If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the CD Rate will be the rate on that
Interest Determination Date for negotiable certificates of deposit of the
Index Maturity described in the pricing supplement as published in
Composite Quotations under the heading "Certificates of Deposit".
o If that rate is not published in Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date, then the Calculation Agent will
determine the CD Rate to be the average of the secondary market offered
rates as of 10:00 A.M., New York City time, on that Interest
Determination Date, quoted by three leading nonbank dealers of negotiable
U.S. dollar certificates of deposit in New York City for negotiable
certificates of deposit in a denomination of $5,000,000 of major United
States money-center banks of the highest credit standing (in the market
for negotiable certificates of deposit) with a remaining maturity closest
to the Index Maturity described in the pricing supplement. The
Calculation Agent will select the three dealers referred to above.
o If fewer than three dealers are quoting as mentioned above, the CD Rate
will remain the CD Rate then in effect on that Interest Determination
Date.
Commercial Paper Rate Notes. The "Commercial Paper Rate" for any Interest
Determination Date is the Money Market Yield of the rate on that date for
commercial paper having the Index Maturity described in the related pricing
supplement, as published in H.15(519) prior to 3:00 P.M., New York City time,
on the Calculation Date for that Interest Determination Date under the heading
"Commercial Paper -- Nonfinancial".
The following procedures will be followed if the Commercial Paper Rate
cannot be determined as described above:
o If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the Commercial Paper Rate will be the
Money Market Yield of the rate on that Interest Determination Date for
commercial paper having the Index Maturity described in the pricing
supplement, as published in Composite Quotations under the heading
"Commercial Paper".
o If that rate is not published in Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date, then the Calculation Agent will
determine the Commercial Paper Rate to be the Money Market Yield of the
average of the offered rates of three leading dealers of commercial paper
in New York City as of 11:00 A.M., New York City time, on that Interest
Determination Date for commercial paper having the Index Maturity
described in the pricing supplement placed
S-10
<PAGE>
for an industrial issuer whose bond rating is "AA", or the equivalent,
from a nationally recognized securities rating organization. The
Calculation Agent will select the three dealers referred to above.
o If fewer than three dealers selected by the Calculation Agent are
quoting as mentioned above, the Commercial Paper Rate will remain the
Commercial Paper Rate then in effect on that Interest Determination Date.
LIBOR Notes. On each Interest Determination Date, the Calculation Agent will
determine LIBOR as follows:
o If "LIBOR Telerate" is specified in the pricing supplement, LIBOR will
be the rate for deposits in the LIBOR Currency having the Index Maturity
described in the related pricing supplement on the applicable Interest
Determination Date, as such rate appears on the Designated LIBOR Page as
of 11:00 A.M., London time, on that Interest Determination Date.
o If "LIBOR Reuters" is described in the pricing supplement, LIBOR will be
the average of the offered rates for deposits in the LIBOR Currency
having the Index Maturity described in the related pricing supplement on
the applicable Interest Determination Date, as such rates appear on the
Designated LIBOR Page as of 11:00 A.M., London time, on that Interest
Determination Date, if at least two such offered rates appear on the
Designated LIBOR Page.
If the pricing supplement does not specify "LIBOR Telerate" or "LIBOR
Reuters," the LIBOR Rate will be LIBOR Telerate. In addition, if the
Designated LIBOR Page by its terms provides only for a single rate, that
single rate will be used regardless of the foregoing provisions requiring more
than one rate.
On any Interest Determination Date on which fewer than the required number of
applicable rates appear or no rate appears on the applicable Designated LIBOR
Page, the Calculation Agent will determine LIBOR as follows:
o LIBOR will be determined on the basis of the offered rates at which
deposits in the LIBOR Currency having the Index Maturity described in the
related pricing supplement on the Interest Determination Date and in a
principal amount that is representative of a single transaction in that
market at that time are offered by four major banks in the London
interbank market at approximately 11:00 A.M., London time, on the
Interest Determination Date to prime banks in the London interbank
market. The Calculation Agent will select the four banks and request the
principal London office of each of those banks to provide a quotation of
its rate. If at least two quotations are provided, LIBOR for that
Interest Determination Date will be the average of those quotations.
o If fewer than two quotations are provided as mentioned above, LIBOR will
be the average of the rates quoted by three major banks in the Principal
Financial Center selected by the Calculation Agent at approximately 11:00
A.M. in the Principal Financial Center, on the Interest Determination
Date for loans to leading European banks in the LIBOR Currency having the
Index Maturity designated in the pricing supplement on the Interest
Determination Date and in a principal amount that is representative for a
single transaction in that market at that time. The Calculation Agent
will select the three banks referred to above.
o If fewer than three banks selected by the Calculation Agent are quoting
as mentioned above, LIBOR will remain LIBOR then in effect on the
Interest Determination Date.
Federal Funds Rate Notes. The "Federal Funds Rate" for any Interest
Determination Date is the rate on that date for Federal Funds, as published in
H.15(519) prior to 3:00 P.M., New York City time, on the Calculation Date for
that Interest Determination Date under the heading "Federal Funds
(Effective)".
The following procedures will be followed if the Federal Funds Rate cannot
be determined as described above:
S-11
<PAGE>
o If the above rate is not published in H.15(519) by 3:00 P.M., New York
City time, on the Calculation Date, the Federal Funds Rate will be the
rate on that Interest Determination Date, as published in Composite
Quotations under the heading "Federal Funds/Effective Rate".
o If that rate is not published in Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date, then the Calculation Agent will
determine the Federal Funds Rate to be the average of the rates for the
last transaction in overnight Federal funds quoted by three leading
brokers of Federal Funds transactions in New York City as of 9:00 A.M.,
New York City time, on that Interest Determination Date. The Calculation
Agent will select the three brokers referred to above.
o If fewer than three brokers selected by the Calculation Agent are
quoting as mentioned above, the Federal Funds Rate will be the Federal
Funds Rate in effect on that Interest Determination Date.
Prime Rate Notes. The "Prime Rate" for any Interest Determination Date is the
prime rate or base lending rate on that date, as published in H.15(519) by
9:00 A.M., New York City time, on the Calculation Date for that Interest
Determination Date under the heading "Bank Prime Loan".
The following procedures will be followed if the Prime Rate cannot be
determined as described above:
o If the rate is not published in H.15(519) by 9:00 A.M., New York City
time, on the Calculation Date, then the Calculation Agent will determine
the Prime Rate to be the average of the rates of interest publicly
announced by each bank that appears on the Reuters screen designated as
"US Prime 1" as that bank's prime rate or base lending rate as in effect
for that Interest Determination Date.
o If at least one rate but fewer than four rates appear on the Reuters
screen US Prime 1 on the Interest Determination Date, then the Prime Rate
will be the average of the prime rates or base lending rates quoted (on
the basis of the actual number of days in the year divided by a 360-day
year) as of the close of business on the Interest Determination Date by
four major money center banks in the City of New York selected by the
Calculation Agent.
o If fewer than two rates appear on the Reuters screen as US Prime 1, then
the Prime Rate will be the average of the Prime Rates furnished in the
City of New York by the appropriate number of substitute banks or trust
companies (all organized under the United States or any of its states and
having total equity capital of at least $500,000,000) selected by the
Calculation Agent, on the Interest Determination Date.
o If the banks selected by the Calculation Agent are not quoting as
mentioned above, the Prime Rate will remain the Prime Rate then in effect
on the Interest Determination Date.
Treasury Rate Notes. The "Treasury Rate" for any Interest Determination Date
is the rate set at the auction of direct obligations of the United States
("Treasury bills") having the Index Maturity described in the related pricing
supplement, as published in H.15(519) by 3:00 P.M., New York City time, on the
Calculation Date for that Interest Determination Date under the heading "U.S.
Government Securities -- Treasury bills -- auction average (investment)".
The following procedures will be followed if the Treasury Rate cannot be
determined as described above:
o If the rate is not published in H.15(519) by 3:00 P.M., New York City
time, on the Calculation Date, the Treasury Rate will be 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 on
the Calculation Date.
o If the results of the most recent auction of Treasury bills having the
Index Maturity described in the pricing supplement are not published or
announced as described above by 3:00 P.M., New York City time, on the
Calculation Date, or if no auction is held on the Interest Determination
Date, then the Calculation Agent will determine the Treasury Rate to be a
yield to maturity (expressed
S-12
<PAGE>
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 average of the secondary
market bid rates, as of approximately 3:30 P.M., New York City time, on
the Interest Determination Date of three leading primary United States
government securities dealers for the issue of Treasury bills with a
remaining maturity closest to the Index Maturity described in the related
pricing supplement. The Calculation Agent will select the three dealers
referred to above.
o If fewer than three dealers selected by the Calculation Agent are
quoting as mentioned above, the Treasury Rate will remain the Treasury
Rate then in effect on that Interest Determination Date.
CMT Rate Notes. The "CMT Rate" for any Interest Determination Date is the rate
displayed on the Designated CMT Telerate Page by 3:00 P.M., New York City
time, on the Calculation Date for that Interest Determination Date under the
caption " . . . Treasury Constant Maturities . . . Federal Reserve Board
Release H.15 . . . Mondays Approximately 3:45 P.M.," under the column for the
Index Maturity described in the related pricing supplement for:
(i) if the Designated CMT Telerate Page is 7055, such Interest
Determination Date; or
(ii) if the Designated CMT Telerate Page is 7052, the week, or the month,
in the related pricing supplement, ended immediately preceding the week in
which the related Interest Determination Date occurs.
The following procedures will be used if the CMT Rate cannot be determined
as described above:
o If the rate is not displayed on the relevant page by 3:00 P.M., New York
City time, on the Calculation Date, then the CMT Rate will be the
Treasury constant maturity rate for the Index Maturity, as published in
H.15(519).
o If that rate is not published in H.15(519) by 3:00 P.M., New York City
time, on the Calculation Date, then the CMT Rate will be the Treasury
constant maturity rate (or other United States Treasury rate) for the
Index Maturity for the Interest Determination 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 H.15(519).
o If that information is not provided by 3:00 P.M., New York City time, on
the Calculation Date, then the Calculation Agent will determine the CMT
Rate to be a yield to maturity based on the average of the secondary
market closing offer side prices, as of approximately 3:30 P.M., New York
City time, on the 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.
The Calculation Agent will select five Reference Dealers and will
eliminate the highest quotation (or, in the event of equality, one of the
highest quotations) and the lowest quotation (or, in the event of
equality, one of the lowest quotations), for the most recently issued
direct noncallable fixed rate obligations of the United States ("Treasury
Notes") with an original maturity of approximately the Index Maturity and
a remaining term to maturity of not less than the Index Maturity minus
one year.
o If the Calculation Agent cannot obtain three Treasury Note quotations,
the Calculation Agent will determine the CMT Rate to be a yield to
maturity based on the average of the secondary market offer side prices
as of approximately 3:30 P.M., New York City time, on the Interest
Determination Date of three Reference Dealers in New York City (selected
using the same method described above) for Treasury Notes with an
original maturity of the number of years that is the next highest to the
Index Maturity and a remaining term to maturity closest to the Index
Maturity and in an amount of at least $100,000,000.
o If three or four but not five Reference Dealers are quoting as described
above, then the CMT Rate will be based on the average of the offered
rates obtained and neither the highest nor the lowest of those quotations
will be eliminated.
S-13
<PAGE>
o If fewer than three Reference Dealers selected by the Calculation Agent
are quoting as described above, the CMT Rate will remain the CMT Rate
then in effect on the Interest Determination Date.
Eleventh District Cost of Funds Rate Notes. The "Eleventh District Cost of
Funds Rate" for any Interest Determination Date is the rate equal to the
monthly weighted average cost of funds for the month preceding the Interest
Determination Date as displayed on the Telerate Page 7058 by 11:00 A.M., San
Francisco time, on the Calculation Date for that Interest Determination Date
under the caption "Eleventh District."
The following procedures will be used if the Eleventh District Cost of
Funds Rate cannot be determined as described above:
o If the rate is not displayed on the relevant page by 11:00 A.M., San
Francisco time, on the Calculation Date, then the Eleventh District Cost
of Funds Rate will be the monthly weighted average cost of funds paid by
member institutions, of the Eleventh Federal Home Loan Bank District as
announced by the Federal Home Loan Bank of San Francisco for the month
preceding the date of announcement.
o If no announcement was made relating to the month preceding the Interest
Determination Date, the Eleventh District Cost of Funds Rate will remain
the Eleventh District Cost of Funds Rate then in effect on the Interest
Determination Date.
Indexed Notes
We may issue notes for which the amount of interest or principal that you
will receive will not be known on your date of purchase. Interest or principal
payments for these types of notes, which we call "Indexed Notes", are
determined by reference to securities, financial or non-financial indices,
currencies, commodities, interest rates, or composites or baskets of any or all
of the above. Examples of indexed items that may be used include a published
stock index, the common stock price of a publicly traded company, the value of
the U.S. Dollar versus the Japanese Yen, or the price of a barrel of West Texas
intermediate crude oil. The formula for calculating the amount of interest or
principal payments, as well as the indexed item that will be used, will be
included in the pricing supplement.
The following are examples of some types of Indexed Notes that we may
offer:
o Notes with a maturity of seven years that pay zero interest, but provide
a principal payment at maturity equal to the face amount of the notes plus
an additional amount equal to (a) the face amount (or a specified portion
of the face amount) multiplied by (b) the percentage that the indexed item
has increased during the term of the notes.
o Notes with a maturity of five years and a face amount equal to the price
of the common stock of a publicly traded corporation on the issuance date.
You will receive a stated fixed rate of interest that will be
significantly higher than the dividend yield of the common stock as of the
date of issuance of the notes. At maturity, you will receive a principal
amount equal to the price of the common stock as of 5 business days prior
to the maturity date. That principal amount may be higher or lower than
the face amount of the notes. However, no matter how high the price of the
common stock has risen, the principal amount that you receive on the
maturity date may or may not be limited to a face amount of the notes.
o Notes with a maturity of five years that pay a rate of interest that is
40 basis points (0.40%) per year greater than the interest rate that you
would earn if at the same time you had purchased conventional notes issued
by us with the same maturity. In addition, the principal payment at
maturity will be equal to the face amount only if there is no default on
any of four investment grade, publicly traded corporate bonds (each with a
different issuer) that will be specified in the pricing supplement.
If you purchase an Indexed Note, you may receive a principal amount at
maturity that is greater than or less than the note's face amount, and an
interest rate that is greater than or less than the interest rate that you
would have earned if you had instead purchased a conventional debt security
issued by us at the
S-14
<PAGE>
same time with the same maturity. The amount of interest and principal that you
will receive will depend on the structure of the Indexed Note and the level of
the specified indexed item throughout the term of the Indexed Note and at
maturity. Specific information pertaining to the method of determining the
interest payments and the principal amount will be described in the pricing
supplement, as well as additional risk factors unique to the Indexed Note,
certain historical information for the specified indexed item and certain
additional United States federal tax considerations.
Renewable Notes
We may issue Renewable Notes ("Renewable Notes") which are notes which
will automatically renew at their maturity date unless the holder of the
Renewable Note elects to terminate the automatic extension feature by giving
notice in the manner described in the related pricing supplement.
The holder of the Renewable Note must give notice of termination at least
15 but not more than 30 days prior to the Renewal Date. The holder of a
Renewable Note may terminate the automatic extension for less than all of their
Renewable Notes only if the terms of the note specifically permit partial
termination. An election to terminate the automatic extension of any portion of
the Renewable Note is not revocable and will be binding on the holder of the
note. If the holder elects to terminate the automatic extension of the maturity
of the note, the holder will become entitled to the principal and interest
accrued up to the Renewal Date. The related pricing supplement will identify a
final maturity date beyond which the maturity date cannot be renewed.
If a note is represented by a Global Note, DTC or its nominee will be the
holder of the note and therefore will be the only entity that can exercise a
right to terminate the automatic extension of a note. In order to ensure that
DTC or its nominee will timely exercise a right to terminate the automatic
extension provisions of a particular note, the beneficial owner of the note
must instruct the broker or other DTC participant through which it holds an
interest in the note to notify DTC of its desire to terminate the automatic
extension of the note. Different firms have different cut-off times for
accepting instructions from their customers and, accordingly, each beneficial
owner should consult the broker or other participant through which it holds an
interest in a note to ascertain the cut-off time by which an instruction must
be given for delivery of timely notice to DTC or its nominee.
Extendible Notes
We may issue notes whose stated maturity date may be extended at our
option (an "Extendible Note") for one or more whole year periods (each an
"Extension Period"), up to but not beyond a final maturity date described in
the related pricing supplement.
We may exercise our option to extend the Extendible Note by notifying the
applicable Trustee (or any duly appointed Paying Agent) at least 45 but not
more than 60 days prior to the then effective maturity date. If we elect to
extend the Extendible Note, the Trustee (or Paying Agent) will mail (at least
40 days prior to the maturity date) to the registered holder of the Extendible
Note a notice ("Extension Notice") informing the holder of our election, the
new maturity date and any updated terms. Upon the mailing of the Extension
Notice, the maturity of such note will be extended automatically as set forth
in the Extension Notice.
However, we may, not later than 20 days prior to the maturity date of an
Extendible Note (or, if such date is not a Business Day, on the immediately
succeeding Business Day), at our option, establish a higher interest rate, in
the case of a Fixed Rate Note, or a higher Spread and/or Spread Multiplier, in
the case of a Floating Rate Note, for the Extension Period by mailing or
causing the applicable Trustee (or Paying Agent) to mail notice of such higher
interest rate or higher Spread and/or Spread Multiplier to the holder of the
note. The notice will be irrevocable.
If we elect to extend the maturity of an Extendible Note, the holder of
the note will have the option to instead elect repayment of the note by us on
the then effective maturity date. In order for an Extendible Note to be so
repaid on the maturity date, we must receive, at least 15 days but not more
than 30 days prior to the maturity date:
(1) the note with the form "Option to Elect Repayment" on the reverse of
the note duly completed; or
S-15
<PAGE>
(2) a telegram, telex, facsimile transmission or a letter from a member of
a national securities exchange or the National Association of Securities
Dealers, Inc. (the "NASD") or a commercial bank or trust company in the United
States 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, together with the duly completed form entitled "Option
to Elect Repayment" on the reverse of the note, will be received by the
applicable Trustee (or Paying Agent) not later than the fifth Business Day
after the date of the telegram, telex, facsimile transmission or letter;
provided, however, that the telegram, telex, facsimile transmission or letter
shall only be effective if the note and form duly completed are received by the
applicable Trustee (or Paying Agent) by that fifth Business Day. The option may
be exercised by the holder of an Extendible Note for less than the aggregate
principal amount of the note then outstanding if the principal amount of the
note remaining outstanding after repayment is an authorized denomination.
If a note is represented by a Global Note, DTC or its nominee will be the
holder of that note and therefore will be the only entity that can exercise a
right to repayment. To ensure that DTC or its nominee timely exercises a right
to repayment with respect to a particular note, the beneficial owner of that
note must instruct the broker or other participant through which it holds an
interest in the note to notify DTC 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 participant through which it holds an
interest in a note to determine the cut-off time by which an instruction must
be given for timely notice to be delivered to DTC or its nominee.
Warrants and Units
We may issue notes paired with Warrants and with Units (which may consist
of a combination of notes, other Debt Securities and Warrants). A description
of the Warrants and Units to be issued with notes will be included in the
related pricing supplement.
Redemption
The related pricing supplement will indicate whether we may redeem the
notes prior to their stated maturity date. If we may redeem the notes prior to
their stated maturity, the pricing supplement will describe the redemption
price and method.
Repayment
The related pricing supplement will indicate whether the notes can be
repaid at the holder's option prior to their stated maturity date. If the notes
may be repaid prior to maturity, the related pricing supplement will indicate
the cost to repay the notes.
Repurchase
We may purchase outstanding notes at any time on terms satisfactory to us.
At our discretion we may hold, resell, or surrender for cancellation any
repurchased notes.
UNITED STATES TAXATION
The following is a summary of the principal United States federal income
tax consequences relating to your purchase, ownership and sale of notes. It is
based upon the relevant laws and rules which are now in effect and as they are
currently interpreted. However, these laws and rules may be changed at any
time. This discussion does not deal with the federal tax consequences
applicable to all categories of investors. In particular, the discussion does
not deal with those of you who may be in special tax situations, such as
dealers in securities, insurance companies, financial institutions or
tax-exempt entities. It does not include any description of the tax laws of any
state or local governments, or of any foreign government, that may be
applicable to the notes or to you as holders of the notes. This summary also
may not apply to all forms of notes that we may issue. If the tax consequences
associated with a particular form of note are different than those described
below, they will be discussed in the pricing supplement relating to that note.
S-16
<PAGE>
The federal income tax discussion that appears below is included in this
prospectus supplement for your general information. Some or all of the
discussion may not apply to you depending upon your particular situation. You
should consult your tax advisor for the tax consequences to you of owning and
disposing of the notes, including the tax consequences under state, local,
foreign and other tax laws and the possible effects of changes in federal or
other tax laws.
This discussion is divided into four sections. The section captioned
"United States Holders," applies to you only if you are a "United States
person." If you are a United States person, you should read the section
captioned "United States Holders". If you are not a United States person, you
should read the section captioned "Non-United States Holders". All of you
should read the section captioned "Backup Withholding and Information
Reporting," and the section captioned "State and Local Taxation".
United States Holders.
Payment of Interest
Interest on a note generally is taxable to you as ordinary income at the
time you accrue or receive the interest in accordance with your accounting
method for tax purposes. However, special rules apply to the treatment of
interest on a note that is issued with "Original Issue Discount," or to
"Short-Term Notes." These special rules are described below in the subsections
entitled "Original Issue Discount," and "Short-Term Notes."
Purchase, Sale and Retirement of Notes
Upon the sale, exchange, retirement or other disposition of a note, you
will recognize gain or loss equal to the difference between the amount you
realize from the disposition and your tax basis in the note.
Your tax basis in a note initially is your cost for the note. This amount
is increased by any "original issue discount" or "market discount" previously
included by you in income for the note and is decreased by the amount of any
"bond premium" you previously amortized, and the amount of any payment (other
than a payment of "qualified stated interest") you have received for the note.
Gain or loss realized by you on the sale, exchange, retirement or other
disposition of a note generally will be a long-term capital gain or loss if the
note has been held for more than one year. However, any gain that represents
market discount that you have not previously included in income will instead be
ordinary income. The terms "market discount" and "bond premium" are defined in
the next two paragraphs. "Original issue discount" and "qualified stated
interest" are discussed in the subsection below entitled "Original Issue
Discount".
If your tax basis for a note is less than its principal amount, the note
may have "market discount." In general, if you realize gain on the disposition
or repayment of principal of a note, that gain is treated as ordinary income
rather than capital gain to the extent of the market discount accrued while you
held the note. However, you instead may elect to accrue market discount into
income on a current basis. If you elect to accrue market discount currently,
the election will apply to all market discount obligations you acquired during
the first taxable year for which you made the election. Once you make that
election, you may not revoke it without the consent of the Internal Revenue
Service (the "IRS"). Market discount will be treated as accruing on a
straight-line basis or, at your election, based on a constant interest method.
You should be aware that if you do not elect to include market discount on a
current basis, you may be required to defer the deduction of all or a portion
of the interest expense on any indebtedness you incur or purchase or carry any
note having market discount until the maturity date of the note, or until you
dispose of the note in a taxable transaction.
If your tax basis for a note is greater than its principal amount, the
note may have "bond premium." You may elect to amortize that bond premium as an
offset to the interest income you report over the remaining life of the note
under a constant interest method. However, if we may redeem the note at a price
greater than its principal amount, special rules would apply that could require
you to defer the amortization of some bond premium until later in the term of
the note. If you do not elect to amortize bond premium, the bond premium is a
capital loss when the bond matures or when you sell it.
If a note provides for contingent payments (as in the case of certain
Indexed Notes), special rules may apply to the treatment of the note. Under
those rules, any gain you realize when you sell or dispose of a note will be
ordinary income if the contingencies relating to the payments are unresolved at
the time of
S-17
<PAGE>
disposition and some or all of any loss may be ordinary. Different rules also
may apply to the treatment of market discount, premium and the calculation of
your tax basis for the note. If a note will provide for contingent payments,
these rules will be discussed in greater detail in the related pricing
supplement.
Original Issue Discount
Some of your notes may be issued with original issue discount ("OID"). For
tax purposes, OID is the excess of the "stated redemption price at maturity" of
a debt instrument over its "issue price", if that excess equals or exceeds 1/4
of 1% of the debt instrument's stated redemption price at maturity multiplied
by the number of complete years from its issue date to its maturity or weighted
average maturity in the case of installment obligations (the "OID de minimis
amount"). The "stated redemption price at maturity" of a note is the sum of all
payments required to be made on the note other than "qualified stated interest"
payments. The "issue price" of a note is generally the first offering price to
the public at which a substantial amount of the debt instrument is sold. The
term "qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer), or that is treated as constructively received, at least annually at a
single fixed rate or, under certain conditions discussed below in connection
with the special rules relating to Floating Rate Notes, at a variable rate. If
a note bears interest during any accrual period at a rate below the rate
applicable for the remaining term of the note (for example, notes with teaser
rates or interest holidays), and if the greater of either the reduction in
interest on that note or the excess of the stated principal amount over its
issue price exceeds the OID de minimis amount, then some or all of the stated
interest will not be qualified stated interest.
You are required to include qualified stated interest payments in income
as interest when you accrue or receive those payments (in accordance with your
accounting method for tax purposes). If you hold a note with OID (an "OID
Note") with a maturity of more than one year, you may be required to include
OID in income before you receive the associated cash payment, regardless of
your accounting method for tax purposes. If you are an initial purchaser of an
OID Note, the amount of the OID you should include in income is the sum of the
daily accruals of the OID for the note for each day during the taxable year (or
portion of the taxable year) in which you held the OID Note. The daily portion
is determined by allocating the OID for each day of the accrual period. An
accrual period may be of any length and the accrual periods may even vary in
length over the term of the OID Note, provided that each accrual period is no
longer than one year and each scheduled payment of principal or interest occurs
either on the first day of an accrual period or on the final day of an accrual
period. The amount of OID allocable to an accrual period is equal to the
difference between (1) the product of the "adjusted issue price" of the OID
Note at the beginning of the accrual period and its yield to maturity (computed
generally on a constant yield method and compounded at the end of each accrual
period, taking into account the length of the particular accrual period) and
(2) the amount of any qualified stated interest allocable to the accrual
period. The "adjusted issue price" of an OID Note at the beginning of any
accrual period is the sum of the issue price of the OID Note plus the amount of
OID allocable to all prior accrual periods reduced by any payments you received
on the note that were not qualified stated interest. Under these rules, you
will generally have to include in income increasingly greater amounts of OID in
successive accrual periods.
If you are not an initial purchaser of an OID Note and you purchase an OID
Note for greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the OID Note after the
purchase date other than payments of qualified stated interest, you will have
purchased the OID Note at an "acquisition premium." Under the acquisition
premium rules, the amount of OID which you must include in your gross income
for the note for any taxable year (or any portion of a taxable year in which
you hold the note) will be reduced (but not below zero) by the portion of the
acquisition premium allocated to the period.
Special rules described in the following three paragraphs apply to the
calculation of OID and qualified stated interest for Floating Rate Notes that
will qualify as "variable rate debt instruments". A Floating Rate Note
qualifies as a "variable rate debt instrument" if (1) its issue price does not
exceed the total noncontingent principal payments by more than a specified de
minimis amount; (2) it provides for stated interest, paid or compounded at
least annually, at current values of (a) one or more qualified floating rates,
(b) a single fixed rate and one or more qualified floating rates, (c) a single
objective rate or (d) a single fixed rate and a single objective rate that is a
qualified inverse floating rate; and (3) it does not provide for
S-18
<PAGE>
any principal payments that are contingent, except as provided in (1) above. A
"qualified floating rate" is any floating rate where changes in that rate can
reasonably be expected to measure current changes in the cost of newly borrowed
funds in the currency in which the Floating Rate Note is denominated. For
example, the CD Rate, the Commercial Paper Rate, the Federal Funds Rate, LIBOR,
the Prime Rate, the Treasury Rate, the CMT Rate or the Eleventh District Cost
of Funds Rate are qualified floating rates. Although a multiple of a qualified
floating rate will generally not be a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than 0.65 but not more than 1.35 will be a qualified floating rate. A
variable rate equal to the product of a qualified floating rate and a fixed
multiple that is greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate, will also be a qualified floating rate. In addition,
two or more qualified floating rates that can reasonably be expected to have
approximately the same values throughout the term of the Floating Rate Note
(for example, two or more qualified floating rates with values within 25 basis
points of each other as determined on the Floating Rate Note's issue date) will
be treated as a single qualified floating rate. However, a variable rate that
would otherwise constitute a qualified floating rate but which is subject to
one or more restrictions such as a maximum numerical limitation (a "cap") or a
minimum numerical limitation (a "floor") may, under certain circumstances, fail
to be treated as a qualified floating rate. An "objective rate" is a rate that
is not itself a qualified floating rate but which is determined using a single
formula and which is based upon objective financial or economic information.
Other variable interest rates may also be treated as objective rates if they
are designated by the IRS in the future. Despite these rules, a variable rate
of interest on a Floating Rate Note will not be an objective rate if it is
reasonably expected that the average value of that rate during the first half
of the Floating Rate Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Floating Rate Note's term, or if the rate is based on information that
is within our or a related party's control or unique to our or a related
party's circumstances. A "qualified inverse floating rate" is any objective
rate which is equal to a fixed rate minus a qualified floating rate, as long as
changes in the rate can reasonably be expected to inversely reflect current
changes in the qualified floating rate. If a Floating Rate Note provides for
stated interest at a fixed rate for an initial period of one year or less
followed by a variable rate that is either a qualified floating rate or an
objective rate and if the variable rate on the Floating Rate Note's issue date
is intended to approximate the fixed rate (that is, the value of the variable
rate on the issue date does not differ from the value of the fixed rate by more
than 25 basis points), then the fixed rate and the variable rate together will
be either a single qualified rate, or an objective rate.
If a Floating Rate Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout its term
qualifies as a "variable rate debt instrument," then any stated interest on
that note which is unconditionally payable in cash or property (other than debt
instruments of the issuer), or that is treated as constructively received, at
least annually will constitute qualified stated interest and will be taxed in
the manner described above. Thus, a Floating Rate Note that provides for stated
interest at either a single qualified floating rate or a single objective rate
throughout its term and that qualifies as a "variable rate debt instrument"
will generally not be treated as having been issued with OID unless the
Floating Rate Note is issued at a "true" discount (that is, at a price below
the note's stated principal amount) in excess of the OID de minimis amount. OID
on a Floating Rate Note arising from "true" discount is allocated to an accrual
period using the constant yield method described above by assuming that the
variable rate is a fixed rate equal to (1) in the case of a qualified floating
rate or qualified inverse floating rate, the value as of the issue date of the
qualified floating rate or qualified inverse floating rate, or (2) in the case
of an objective rate (other than a qualified inverse floating rate), a fixed
rate that reflects the yield that is reasonably expected for the Floating Rate
Note. The amount of qualified stated interest allocable to an accrual period is
increased (or decreased) if interest actually paid during an accrual period
exceeds (or is less than) the interest that is assumed to be paid under the
assumed fixed rate described above.
In general, any other Floating Rate Note that qualifies as a "variable
rate debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount of accrual of OID and
qualified stated interest on the Floating Rate Note. The Floating Rate Note
generally will be converted into an "equivalent" fixed rate debt instrument by
substituting any qualified floating rate or qualified inverse floating rate
provided for under the terms of the Floating Rate Note with a fixed rate equal
to the value of the qualified floating rate or qualified inverse floating rate,
as the case may be, as of
S-19
<PAGE>
the Floating Rate Note's issue date. Any objective rate (other than a qualified
inverse floating rate) provided for under the terms of the Floating Rate Note
is converted into a fixed rate that reflects the yield that is reasonably
expected for the Floating Rate Note. In the case of a Floating Rate Note that
qualifies as a "variable rate debt instrument" and provides for stated interest
at a fixed rate in addition to either one or more qualified floating rates or a
qualified inverse floating rate, the fixed rate is initially converted into a
qualified floating rate (or a qualified inverse floating rate, if the Floating
Rate Note provides for a qualified inverse floating rate). Under these
circumstances, the fair market value of the Floating Rate Note as of its issue
date must approximate the fair market value of an otherwise identical debt
instrument that provides for either the replacement qualified floating rate or
qualified inverse floating rate rather than the fixed rate. After converting
the fixed rate into either a qualified floating rate or a qualified inverse
floating rate, the Floating Rate Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Floating Rate Note is converted into an "equivalent" fixed rate
debt instrument, the amount of OID and qualified stated interest, if any, are
determined for the "equivalent" fixed rate debt instrument by applying the
general OID rules to the "equivalent" fixed rate debt instrument. In that case,
if you are a holder of the Floating Rate Note, for tax purposes you will
account for the amount of OID and qualified stated interest as if you held the
"equivalent" fixed rate debt instrument. Each accrual period, you must make
appropriate adjustments to the amount of qualified stated interest or OID
computed for the "equivalent" fixed rate instrument to reflect any difference
between those amounts and the actual amount of interest accrued or paid on the
Floating Rate Note during the accrual period.
If a Floating Rate Note does not qualify as a "variable rate debt
instrument," then the Floating Rate Note may be treated as a contingent payment
debt obligation subject to other special rules. Under these rules, OID is
calculated based on a projected payment schedule assuming the same yield for
the notes which would result for comparable fixed rate debt instruments issued
by us as of the issue date of the notes. The amount of accrued OID is adjusted
to reflect differences between actual and projected payments on the notes. If
applicable, these contingent payment debt rules will be discussed in greater
detail in the pricing supplement relating to the notes.
Terms of the notes which would subject those notes to special rules
include provisions making the notes:
o redeemable at our option prior to their stated maturity (a "call
option").
o repayable at your option prior to their stated maturity (a "put
option").
o automatically renewable, unless you elect otherwise; and
o extendible at our option.
Notes containing these features may be subject to rules that differ from
the general rules discussed above. If you are purchasing notes with any of
these features, you should consult your tax advisor because the OID
consequences will depend on the particular terms and features of the notes.
Instead of reporting under your normal accounting method, you may elect to
include in gross income all interest that accrues on a note by using the
constant yield method applicable to OID, subject to certain limitations and
exceptions. For purposes of this election, interest includes stated interest,
acquisition discount, OID, de minimis OID market discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium.
Short-Term Notes
Some of you (including banks, securities dealers, regulated investment
companies, certain electing taxpayers and all of you using the accrual method
of accounting) will be required to accrue into income on a current basis
qualified stated interest and any OID for notes having a fixed maturity of not
more than one year ("Short-Term Notes"). None of the stated interest on a
Short-Term Note is treated as qualified stated interest, but instead is treated
as part of the Short-Term Note's stated redemption price at maturity and gives
rise to OID. OID on a Short-Term Note generally accrues on a straight-line
basis or, at your election, on a constant interest basis. If you are a cash
method holder of a Short-Term Note, you may elect to accrue qualified stated
interest and OID into income on a current basis. If you don't make that
election,
S-20
<PAGE>
you may not be allowed to deduct all of the interest you paid or accrued on any
indebtedness you incur or purchase or carry the Short-Term Note until the
maturity date of the note or until you sell the note in a taxable transaction.
In addition, if you don't make that election, you will be required to treat any
gain realized on a sale, exchange or retirement of the Short-Term Note as
ordinary income to the extent the gain does not exceed the OID accrued for the
note during the period you held the Short-Term Note. In determining OID for
these purposes, OID generally accrues on a straight-line basis, or at your
election, on a constant interest basis.
If you hold a Short-Term Note, you can elect to apply the rules in the
preceding paragraph about the current accrual of OID and the deferral of
interest deductions by taking into account the amount of "acquisition
discount," if any, for the note (rather than the amount of OID, if any, for
that Short-Term Note). Acquisition discount is the excess of the remaining
stated redemption price at maturity of the Short-Term Note over your tax basis
in the Short-Term Note at the time of the acquisition. Acquisition discount
generally accrues on a straight-line basis or, at your election, on a constant
interest basis.
Your tax basis for a Short-Term Note initially is your purchase price for
the note. This amount is increased by any stated interest, OID or acquisition
discount that you accrue into income currently under the rules described above,
and is then decreased by the amount of any bond premium you previously
amortized for the note, the amount of any principal payment you received for
the note and, if you accrue interest into income currently for the note, the
amount of any stated interest payment you received for the note.
The market discount rules will not apply to a Short-Term Note.
Certain notes may be redeemable prior to their maturity date at either our
option or your option. This redemption feature may affect the determination of
whether a note is a Short-Term Note. If you purchase a redeemable note, you
should carefully read the related pricing supplement and consult your own tax
advisor.
Renewable Notes, Extendible Notes and Indexed Notes
Special United States federal income tax rules for Renewable Notes,
Extendible Notes or Indexed Notes will be discussed in the related pricing
supplements.
Non-United States Holders
This section discusses the principal United States tax consequences
applicable to Non-United States Holders of purchasing, owning and selling of
notes.
Principal (and premium, if any) and interest payments, including any OID,
that you receive from us or our agent generally will not be subject to United
States federal withholding tax. However, interest, including any OID, may be
subject to a 30% withholding tax (or less under an applicable treaty, if any)
if (1) you actually or constructively own 10% or more of the total combined
voting power of all classes of our stock entitled to vote, (2) you are a
controlled foreign corporation for United States tax purposes that is related
to us (directly or indirectly) through stock ownership or (3) either (A) you do
not certify to us or our agent, under penalties of perjury, that you are a
Non-United States person and provide your name and address, or (B) a securities
clearing organization, bank or other financial institution that holds customer
securities in the ordinary course of its trade or business (a "financial
institution") and holds the note does not certify to us or our agent under
penalties of perjury that a statement has been received from you by it or by a
financial institution and furnishes us with a copy of the statement. If a
Floating Rate Note is issued which bears interest at a rate other than a rate
determined by reference to a base rate explicitly referred to under "Floating
Rate Notes," the related pricing supplement will describe whether interest
(including OID) on that note will be subject to federal withholding tax.
If you are in a trade or business in the United States and interest,
including any OID, on the note is effectively connected with the conduct of
your trade or business, you may be subject to United States federal income tax
on that interest and any OID in the same manner as if you were a United States
person (although you will still be exempt from the withholding tax discussed in
the preceding paragraph if you deliver a properly executed IRS Form 4224). You
should also read Section A above, entitled "United States Holders," for a
description of the United States tax consequences. If you are a foreign
corporation,
S-21
<PAGE>
you may also be subject to a branch profits tax equal to 30% of your
effectively connected earnings and profits for the taxable year, subject to
certain adjustments. Instead of the certification described in the preceding
paragraph, if you have effectively connected interest income you must provide
the payer with a properly executed IRS Form 4224 to claim an exemption from
United States federal withholding tax.
New rules have been issued to consolidate and modify the current
certification requirements and means by which you may claim exemption from
United States federal income tax withholding and from backup withholding. These
rules will apply to payments made after December 31, 1999 and provide certain
presumptions regarding your tax status if you do not provide appropriate
documentation to make this determination. You must provide certification that
complies with the procedures in these new rules, where required, by the first
payment date after these rules come into effect. In some circumstances, the new
rules allow us to continue to rely on certificates you provided us before
January 1, 2000 for a transitional period. If you are claiming benefits under
an income tax treaty, you may be required to obtain a taxpayer identification
number and to certify your eligibility under the applicable treaty's
limitations on benefits articles in order to comply with the new rules. Because
these rules may apply differently to different holders, you are urged to
consult your own tax advisor regarding the application of these rules to you.
You will not be subject to United States federal income tax or withholding
taxes on any capital gain or market discount you realize upon retirement or
disposition of a note if (1) the gain is not effectively connected with a
United States trade or business carried on by you, and (2) if you are an
individual, you are not present in the United States for 183 days or more in
the taxable year of the retirement or disposition.
Backup Withholding and Information Reporting
The payment of principal and interest and the accrual of OID, if any, are
generally subject to information reporting and possibly to "backup withholding"
at a rate of 31%. Information reporting means that the payment is required to
be reported to you and to the IRS. Backup withholding means that the payor is
required to collect and deposit 31% of your payment with the IRS as a tax
payment on your behalf.
If you are a United States person (other than a corporation or certain
exempt organizations), you may be subject to backup withholding if you do not
supply an accurate taxpayer identification number and certify that your
taxpayer identification number is correct. You may also be subject to backup
withholding if the United States Secretary of the Treasury determines that you
have not reported all interest and dividend income required to be shown on your
federal income tax return or if you do not certify that you have not
underreported your interest and dividend income. If you are not a United States
person, backup withholding and information reporting will not apply to payments
made to you if you have provided required certification that you are not a
United States person as set forth in clause (3) in the second paragraph under
Section B, or you otherwise establish an exemption (provided that the payor
does not have actual knowledge that you are a United States person or that the
conditions of any exemption are not satisfied).
Under current rules, which are effective for payments made through
December 31, 1999, payments of the proceeds from the sale of a note to or
through a foreign office of a broker or the foreign office of a custodian,
nominee or other dealer acting on your behalf generally will not be subject to
information reporting or backup withholding. However, if the broker, custodian,
nominee or other dealer is a United States person, a controlled foreign
corporation for United States tax purposes or a foreign person 50% or more of
whose gross income for certain periods is effectively connected with a United
States trade or business, information reporting generally will be required for
payments made to you unless the broker, custodian, nominee or other dealer has
documentation of your foreign status and has no actual knowledge to the
contrary (or you otherwise establish an exemption from information reporting).
Under the new rules referred to above, these payments will also not be
subject to information reporting or backup withholding, except that if the
broker, custodian, nominee or other dealer is a United States person, the
government of the United States or the government of any State or political
subdivision of any State (or any agency or instrumentality of any of these
governmental units), a controlled foreign corporation for United States tax
purposes, a foreign partnership that is either engaged in a United States trade
or business or whose United States partners in the aggregate hold more than 50%
of the income or capital interest in the partnership, a foreign person 50% or
more of whose gross income for a certain period is
S-22
<PAGE>
effectively connected with a United States trade or business, or a United
States branch of a foreign bank or insurance company, information reporting
will generally be required with respect to payments made to you unless the
broker has documentation of your foreign status and the broker has no actual
knowledge to the contrary (or you otherwise establish an exemption from
information reporting).
Payment of the proceeds from a sale of a note to or through the United
States office of a broker is subject to information reporting and backup
withholding, unless you certify as to your non-United States status or
otherwise establish an exemption from information reporting and backup
withholding.
Any amounts withheld from your payment under the backup withholding rules
would be refundable or allowable as a credit against your United States federal
income tax liability.
State and Local Taxation
You may be subject to state or local taxation in various state or local
jurisdictions, including those in which you transact business or reside. It is
important that you consult your own tax advisor regarding the effect of state
and local tax laws on the purchase, ownership or sale of the notes.
S-23
<PAGE>
PLAN OF DISTRIBUTION
General
We may sell the notes (1) through agents who solicit offers to purchase
the notes, (2) through agents purchasing as principal and acting as
underwriters or dealers or (3) directly to investors.
Distribution Through Agents
We may sell the notes on a continuing basis through agents that become
parties to a Distribution Agreement, a form of which is filed as an exhibit to
the Registration Statement (the "Distribution Agreement"). Each agent's
obligations are separate and several from those of any other agent. Each agent
will use reasonable efforts when requested by us to solicit purchases of the
notes. We will pay each agent a commission to be negotiated at the time of
sale. The commission may range from .125% to .750% of the principal amount of
each note sold through that agent. We will receive from 99.875% to 99.250% of
the principal amount of each note, before deducting a portion of the aggregate
offering expenses of approximately $600,000.
Distribution Through Underwriters
We may also sell notes to any agent, acting as principal, for its own
account or for resale to one or more investors or other purchasers, including
other broker-dealers.
The agents may sell any notes they have purchased as principal to any
dealer at a discount. The discount allowed to any dealer will not be in excess
of the discount to be received by the agent from us. Any note sold to an agent
as principal is purchased by that agent at a price equal to 100% of the
principal amount of that note less a percentage ranging from .125% to .750% of
that principal amount. The notes may be resold by the agent to investors and
other purchasers from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale, or the notes may be resold to certain dealers
as described above. After the initial public offering of any notes, the public
offering price and discount may be changed.
Direct Sales
We may sell notes directly to investors, without the involvement of any
agent or underwriter. In this case, we would not be obligated to pay any
commission or discount in connection with the sale.
General Information
The name of any agents or other persons through which we sell any notes,
as well as any commissions or discounts payable to those agents or other
persons, will be set forth in the related pricing supplement. As of the date of
this prospectus supplement, the agents include NationsBanc Montgomery
Securities LLC ("NMS"), Bear, Stearns & Co. Inc., Lehman Brothers Inc., Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon
Smith Barney Inc.
We will have the sole right to accept offers to purchase notes and may, in
our absolute discretion, reject any proposed purchase of notes in whole or in
part. Each agent will have the right, in its discretion reasonably exercised,
to reject in whole or in part any proposed purchase of notes through it.
Any agent, underwriter or dealer that participates in the offering of the
notes may be an "underwriter" within the meaning of the Securities Act. We have
agreed to indemnify each agent and certain other persons against certain
liabilities, including liabilities under the Securities Act. We have also
agreed to reimburse the agents for certain expenses.
We may also accept offers to purchase notes through additional agents on
substantially the same terms and conditions (including commissions) as would
apply to purchases by agents under the Distribution Agreement.
The notes will not be listed on any securities exchange. The agents have
advised us that they may purchase and sell the notes in the secondary market
from time to time. However, no agent is obligated to do so and any agent may
discontinue making a market in the notes at any time without notice. No
assurance can be given as to the existence or liquidity of any secondary market
for the notes.
S-24
<PAGE>
The agents, as well as other agents to or through which we may sell notes,
may engage in transactions with us and perform services for us in the ordinary
course of business.
NMS is our wholly owned broker-dealer subsidiary. The offer and sale of
any notes by NMS will comply with the requirements of Rule 2720 of the Conduct
Rules of the NASD regarding a member firm's underwriting securities of an
affiliate. As required by Rule 2720, any such offer and sale will not be made
to any discretionary account without the prior approval of the customer.
This prospectus supplement, the attached prospectus and any related
pricing supplement may be used by our affiliates, including NMS, in connection
with offers and sales of the notes in the secondary market. These affiliates
may act as principal or agent in those transactions. Secondary market sales by
our affiliates will be made at prices related to market prices at the time of
sale.
In connection with certain offerings of the notes, the agents may engage
in overallotment, stabilizing transactions and syndicate covering transactions
in accordance with Regulation M under the 1934 Act. Overallotment involves
sales in excess of the offering size, which create a short position for the
agents. Stabilizing transactions involve bids to purchase the notes in the open
market for the purpose of pegging, fixing or maintaining the price of the
notes. Syndicate covering transactions involve purchases of the notes in the
open market after the distribution has been completed in order to cover short
positions. Stabilizing transactions and syndicate covering transactions may
cause the price of the notes to be higher than it would otherwise be in the
absence of those transactions. Those activities, if commenced, may be
discontinued at any time.
S-25
<PAGE>
GLOSSARY
Listed below are definitions of some of the terms used in this prospectus
supplement and not defined elsewhere herein or in the attached prospectus.
"Business Day" means any weekday that is (1) not a legal holiday in New
York, New York or Charlotte, North Carolina, (2) not a day on which banking
institutions in those cities are authorized or required by law or regulation to
be closed and (3) a London Banking Day if that note is a LIBOR Note.
"Calculation Agent" means the agent appointed by us to calculate interest
rates and other terms for Floating Rate and Indexed Notes.
"Calculation Date" means, with respect to any Interest Determination Date,
the date on which the Calculation Agent calculates an interest rate for a
Floating Rate or Indexed Note. The Calculation Date for any Interest
Determination Date is the earlier of (1) the tenth calendar day after that
Interest Determination Date or, if such day is not a Business Day, the next
Business Day, or (2) the Business Day preceding the applicable Interest Payment
Date or the maturity date (or the date of redemption or repayment, if any) of
that note.
"Composite Quotations" means the daily statistical release entitled
"Composite 3:30 P.M. Quotations for U.S. Government Securities," or any
successor publication, published by the Federal Reserve Bank of New York.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury Securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years)
specified in a pricing supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified, the Designated CMT Maturity Index
shall be two years.
"Designated CMT Telerate Page" means the display page on the Dow Jones
Telerate Service specified in a pricing supplement (or any other replacement
page displaying Treasury Constant Maturity as reported in H.15(519)). If no
such page is specified in the related pricing supplement, the Designated CMT
Telerate Page shall be 7052 for the most recent week.
"Designated LIBOR Page" means either (1) if "LIBOR Telerate" is designated
in the applicable pricing supplement, the display on the Dow Jones Telerate
Service for the purpose of displaying the London interbank offered rates of
major banks for the applicable LIBOR Currency, or (2) if "LIBOR Reuters" is
designated in the applicable pricing supplement, the display on the Reuters
Monitor Money Rates Service for the purpose of displaying the London interbank
offered rates of major banks for the applicable LIBOR Currency. If neither
LIBOR Telerate nor LIBOR Reuters is specified in the applicable pricing
supplement, LIBOR for the applicable LIBOR Currency is determined as if LIBOR
Telerate (and, if the U.S. dollar is the LIBOR Currency, Page 3750) had been
specified.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication of the Board of
Governors of the Federal Reserve System.
"Index Maturity" means the period to maturity of the instrument with
respect to which the interest rate basis is calculated.
"Interest Determination Date" means the date the interest rate for a
Floating Rate or Indexed Note is calculated for the following Interest Reset
Date and calculated on the corresponding Calculation Date (except in the case
of LIBOR which is calculated on the Interest Determination Date). The Interest
Determination Dates will be indicated in the pricing supplement.
"Interest Payment Date" means the date on which interest on a note (other
than payment at maturity) is paid. The Interest Payment Dates will be indicated
in the pricing supplement.
"Interest Reset Date" means the date on which a Floating Rate Note begins
to bear interest at the interest rate determined as of any Interest
Determination Date. The Interest Reset Dates will be indicated in the pricing
supplement.
S-26
<PAGE>
"LIBOR Currency" means the currency (including composite currencies)
specified in the related pricing supplement for which LIBOR will be calculated.
If no such currency is specified in the related pricing supplement, the LIBOR
Currency will be U.S. dollars.
"London Banking Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Money Market Yield" is a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C> <C>
Money Market D x 360
= x 100
Yield 360 - (D x M)
</TABLE>
where "D" refers to the annual rate for 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.
"Principal Financial Center" is generally the capital city of the country
of the specified LIBOR Currency, except that with respect to U.S. dollars,
Australian dollars, Canadian dollars, Deutsche marks, Italian lire and Swiss
francs, the Principal Financial Center is the City of New York, Sydney,
Toronto, Frankfurt, Milan and Zurich.
"Regular Record Date" means the date on which a note must be held for the
holder to receive an interest payment on the next Interest Payment Date. The
record date for any Interest Payment Date is the date 15 calendar days prior to
that Interest Payment Date.
"Reuters Screen US PRIME 1" means the display designated as page "US PRIME
1" on the Reuters Monitor Money Rates Service (or such other page as may
replace the US PRIME 1 page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
"Spread" means the amount, if any, added to, or subtracted from, the
interest rate index for a note.
"Spread Multiplier" means the percentage by which the interest rate index
for a note is multiplied.
"Telerate Page" means the display on the Dow Jones Telerate Service on
such page (or such other page as may replace such page on that service).
"United States person" means a citizen or resident of the United States, a
corporation or a partnership (or other entity treated as a corporation or
partnership for federal income tax purposes, including certain limited
liability companies) created or organized under the laws of the United States,
an estate the income of which is subject to United States federal income tax
regardless of its source, or a trust for which one or more United States
persons have the authority to control all substantial decisions and for which a
court of the United States can exercise primary supervision over the trust's
administration. A special rule may apply under which a trust which was in
existence on August 20, 1996, and which was treated as a United States person
on that date, may elect to continue to be treated as a United States person
even though it is not the type of United States trust referred to in the
preceding sentence.
S-27
<PAGE>
PROSPECTUS
- ----------
NationsBank [logo]
Debt Securities
Warrants
Units
---------------
NationsBank Corporation ("NationsBank" or the "Corporation") may offer
from time to time its unsecured debt securities, which may be either senior
(the "Senior Debt Securities") or subordinated (the "Subordinated Debt
Securities" and, together with the Senior Debt Securities, the "Debt
Securities"). The Senior Debt Securities will rank equally with all other
unsubordinated and unsecured indebtedness of the Corporation. The Subordinated
Debt Securities will be subordinate in right of payment to all existing and
future Senior Indebtedness (as defined herein) of the Corporation. NationsBank
also may issue and sell warrants to purchase Debt Securities ("Debt Warrants")
or to purchase or sell (i) securities of an entity unaffiliated with the
Corporation, a basket of such securities, an index or indices of securities or
any combination of the above, (ii) currencies or currency units or (iii)
commodities ("Universal Warrants", and together with Debt Warrants, the
"Warrants"), as set forth in the applicable Prospectus Supplement (as defined
below) on terms to be determined at the time of sale. The Corporation may
satisfy its obligations, if any, with respect to any Universal Warrants by
delivering underlying securities, currencies or commodities or, in the case of
underlying securities or commodities, the cash value thereof, as set forth in
the applicable Prospectus Supplement. Debt Securities and Warrants or any
combination thereof may be offered in the form of units ("Units"). Units may be
issued as Definitive Units or Book-Entry Units (each as defined herein). The
Debt Securities, Warrants and Units are collectively referred to herein as
"Securities".
NationsBank may sell up to $10,000,000,000 in aggregate initial offering
price of Securities (or the U.S. dollar equivalent thereof if any of the
Securities are denominated in a foreign currency or currency unit), which may
be offered, separately or together, in one or more series, in amounts, at
prices and on terms to be determined at the time of sale and set forth in an
accompanying supplement to this Prospectus (a "Prospectus Supplement").
Pursuant to the terms of the Registration Statement of which this Prospectus
constitutes a part, NationsBank may also offer and sell shares of its preferred
stock (the "Preferred Stock"), which may be represented by depositary shares
(the "Depositary Shares"), and shares of its common stock (the "Common Stock").
Any such Preferred Stock, Depositary Shares or Common Stock will be offered and
issued pursuant to the terms of a separate Prospectus contained in such
Registration Statement. The aggregate amount of Securities that may be offered
and sold pursuant hereto is subject to reduction as the result of the sale of
any Preferred Stock, Depositary Shares or Common Stock pursuant to such
separate Prospectus or at the Corporation's discretion.
The Securities may be sold for U.S. dollars, foreign denominated currency
or currency units; principal of and any interest on Debt Securities and cash
amounts payable with respect to Warrants or Units may likewise be payable in
U.S. dollars, foreign currencies or currency units, in each case, as the
Corporation specifically designates.The accompanying Prospectus Supplement will
set forth the specific terms of each series of Securities.
The Securities may be sold (i) through underwriting syndicates represented
by managing underwriters, or by underwriters without a syndicate, with such
underwriters to be designated at the time of sale; (ii) through agents
designated from time to time; or (iii) directly by the Corporation. The names
of any underwriters or agents of NationsBank involved in the sale or
remarketing of the Securities, the public offering price or purchase price and
any commissions or discounts will be set forth in the applicable Prospectus
Supplement or a pricing supplement thereto. Any such underwriters, agents or
remarketing agents may include NationsBanc Montgomery Securities LLC ("NMS"),
or other affiliates of the Corporation.
The net proceeds to the Corporation from such sale also will be set forth
in such Prospectus Supplement or pricing supplement.
Following the initial distribution of any such Securities, NMS or other
affiliates of the Corporation may offer and sell previously issued Securities
in the course of their business as a broker-dealer and may act as a principal
or agent in such transactions. This Prospectus and the accompanying Prospectus
Supplement may be used in connection with such transactions. Any such sales
will be made at negotiated prices relating to prevailing market prices at the
time of sale.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
---------------
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR BANK DEPOSITS, ARE NOT OBLIGATIONS
OF OR GUARANTEED BY ANY BANKING OR NONBANKING AFFILIATE OF NATIONSBANK, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY AND INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH
CAROLINA (THE "COMMISSIONER") OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION, THE COMMISSIONER 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 May 21, 1998
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by the Corporation with the
Securities and Exchange Commission (the "Commission") pursuant to Section 13 of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), are
incorporated herein by reference:
(a) The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997 as filed March 13, 1998;
(b) The Corporation's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 as filed May 15, 1998;
(c) The Corporation's Current Reports on Form 8-K filed January 14, 1998,
January 22, 1998, February 3, 1998, March 13, 1998, March 23, 1998, April
15, 1998, April 16, 1998, April 17, 1998 (as amended by Form 8-K/A-1 filed
April 24, 1998 and Form 8-K/A-2 filed May 18, 1998), May 6, 1998 and May
13, 1998; and
(d) The description of the Corporation's Common Stock contained in its
registration statement filed pursuant to Section 12 of the 1934 Act, as
modified by the Corporation's Current Report on Form 8-K filed on January
22, 1998.
All reports and any definitive proxy or information statements filed by
the Corporation with the Commission pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to
the later of (i) the termination of the offering of the Securities offered
hereby or (ii) the date on which NMS or any other affiliate of the Corporation
ceases offering and selling previously issued Securities shall be deemed to be
incorporated by reference in 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.
The Corporation will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other
than exhibits to such documents which are not specifically incorporated by
reference in such documents). Written requests for such copies should be
directed to John E. Mack, Senior Vice President and Treasurer, NationsBank
Corporation, NationsBank Corporate Center, Corporate Treasury Division,
Charlotte, North Carolina 28255. Telephone requests may be directed to (704)
386-5972.
AVAILABLE INFORMATION
NationsBank is subject to the informational requirements of the 1934 Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the following public reference
facilities maintained by the Commission: 450 Fifth Street, N.W., Washington,
D.C. 20549; 7 World Trade Center, Suite 1300, New York, New York 10048; and the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material may also be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, upon payment of prescribed rates. The Commission
maintains an Internet web site that contains reports, proxy and information
statements and other information regarding issuers who file electronically with
the Commission. The address of that site is http://www.sec.gov. In addition,
reports, proxy statements and other information concerning NationsBank may be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005 and at the offices of the Pacific Exchange Inc., 301
Pine Street, San Francisco, California 94104.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
DESCRIBED HEREIN. SPECIFICALLY, THE UNDERWRITERS OR AGENTS SPECIFIED IN THE
RELEVANT PROSPECTUS SUPPLEMENT OR PRICING SUPPLEMENT MAY OVERALLOT
2
<PAGE>
IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE SECURITIES
OR ANY SECURITIES THE PRICES OF WHICH MAY BE USED TO DETERMINE PAYMENTS ON THE
SECURITIES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN
OF DISTRIBUTION."
NATIONSBANK CORPORATION
General
NationsBank is a North Carolina corporation and a multi-bank holding
company registered under the Bank Holding Company Act of 1956, as amended (the
"Act"), with its principal assets being the stock of its subsidiaries. Through
its banking subsidiaries (the "Banks") and various nonbanking subsidiaries, the
Corporation provides banking and certain nonbanking financial services and
products primarily throughout the Mid-Atlantic (Maryland, Virginia and the
District of Columbia), the Midwest (Illinois, Iowa, Kansas and Missouri), the
Southeast (Florida, Georgia, Kentucky, North Carolina, South Carolina and
Tennessee) and the Southwest (Arkansas, New Mexico, Oklahoma and Texas). The
principal executive offices of the Corporation are located at NationsBank
Corporate Center in Charlotte, North Carolina 28255. The Corporation's
telephone number is (704) 386-5000.
Operations
The Corporation provides a diversified range of banking and certain
nonbanking financial services and products through its various subsidiaries.
Management reports the results of the Corporation's operations through four
business segments: Consumer Banking, Middle Market, Asset Management, and
Corporate Finance.
The Consumer Banking segment provides comprehensive retail banking
services through multiple delivery channels including approximately 3,000
banking centers and 7,000 automated teller machines providing fully-automated,
24-hour cash dispensing and deposit services. These delivery channels are
located throughout the Corporation's franchise and serve 16 million households
in 16 states and the District of Columbia. In addition, this segment provides
specialized services such as the origination and servicing of residential
mortgage loans, issuance and service of credit cards, direct banking via
telephone and personal computer, student lending and certain insurance
services. The consumer finance component provides personal, mortgage, home
equity and automobile loans to consumers, retail finance programs to dealers
and lease financing to purchasers of new and used cars. Consumer Banking also
provides commercial banking services to companies and other commercial entities
with annual revenues of less than $10 million.
The Middle Market segment provides a broad array of commercial banking
services for companies and other commercial entities with revenues between $10
million and $250 million annually including: commercial lending, treasury and
cash management services, asset-backed lending, leasing and factoring. Also
included in this segment is NationsCredit Commercial Corporation, which
provides commercial financing activities including: equipment loans and leases,
loans for debt restructuring, mergers and working capital, real estate and
health care financing and inventory financing to manufacturers, distributors
and dealers.
The Asset Management segment includes businesses that provide full service
and discount brokerage, investment advisory, investment management and advisory
services for the Nations Funds family of mutual funds. Within the Asset
Management segment, the Private Client Group provides asset management, banking
and trust services for wealthy individuals, business owners and corporate
executives and the private foundations established by them.
Corporate Finance provides a broad array of banking and investment banking
products and services to domestic and international corporations, institutions
and other customers through its Capital Markets, Real Estate and Transaction
Products units. The Corporate Finance segment serves as a principal lender and
investor, as well as an advisor, and manages treasury and trade transactions
for clients and customers. Loan origination and syndication, asset-backed
lending, project finance and mergers and acquisitions consulting are
representative of the services provided. These services are provided through
various domestic and international offices. Through its Section 20 subsidiary,
NMS, Corporate Finance is a primary dealer of U.S. Government Securities and
underwrites, distributes and makes markets in high-grade and high-yield debt
securities and equity securities. Additionally, Corporate Finance is a market
maker in derivative products which include swap agreements, option contracts,
forward settlement contracts, financial futures and other
3
<PAGE>
derivative products in certain interest rate, foreign exchange, commodity and
equity markets. In support of these activities, Corporate Finance takes
positions to support client demands and its own account. Major centers for the
above activities are Charlotte, Chicago, London, New York, San Francisco,
Singapore and Tokyo.
As part of its operations, the Corporation regularly evaluates the
potential acquisition of, and holds discussions with, various financial
institutions and other businesses of a type eligible for bank holding company
ownership or control. In addition, the Corporation regularly analyzes the
values of, and submits bids for, the acquisition of customer-based funds and
other liabilities and assets of such financial institutions and other
businesses. The Corporation also regularly considers the potential disposition
of certain of its assets, branches, subsidiaries or lines of businesses. As a
general rule, the Corporation publicly announces any material acquisitions or
dispositions when a definitive agreement has been reached.
Government Supervision and Regulation
General
As a registered bank holding company, the Corporation is subject to the
supervision of, and to regular inspection by, the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). The Banks are principally
organized as national banking associations, which are subject to regulation,
supervision and examination by the Office of the Comptroller of the Currency
(the "Comptroller"). The Banks are also subject to regulation by the Federal
Deposit Insurance Corporation (the "FDIC") and other federal and state
regulatory agencies. In addition to banking laws, regulations and regulatory
agencies, the Corporation and its subsidiaries and affiliates are subject to
various other laws and regulations and supervision and examination by other
regulatory agencies, all of which directly or indirectly affect the operations
and management of the Corporation and its ability to make distributions. The
following discussion summarizes certain aspects of those laws and regulations
that affect the Corporation.
The activities of the Corporation, and those of companies which it
controls or in which it holds more than 5% of the voting stock, are limited to
banking or managing or controlling banks or furnishing services to or
performing services for its subsidiaries, or any other activity which the
Federal Reserve Board determines to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In making
such determinations, the Federal Reserve Board is required to consider whether
the performance of such activities by a bank holding company or its
subsidiaries can reasonably be expected to produce benefits to the public such
as greater convenience, increased competition or gains in efficiency that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices. Generally, bank holding companies, such as the Corporation, are
required to obtain prior approval of the Federal Reserve Board to engage in any
new activity or to acquire more than 5% of any class of voting stock of any
company.
Bank holding companies are also required to obtain the prior approval of
the Federal Reserve Board before acquiring more than 5% of any class of voting
stock of any bank which is not already majority-owned by the bank holding
company. Pursuant to the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking and Branching Act"), a bank
holding company became able to acquire banks in states other than its home
state, beginning September 29, 1995, without regard to the permissibility of
such acquisitions under state law, but subject to any state requirement that
the bank to be acquired has been organized and operating for a minimum period
of time, not to exceed five years, and the requirement that the bank holding
company, prior to or following the proposed acquisition, controls no more than
10% of the total amount of deposits of insured depository institutions in the
United States and no more than 30% of such deposits in that state (or such
lesser or greater amount set by state law).
The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, thereby creating interstate branches. This provision, which
became effective June 1, 1997, allowed each state, prior to the effective date,
the opportunity to "opt out" of this provision, thereby prohibiting interstate
branching within that state. Of those states in which the Banks are located,
only Texas has adopted legislation purporting to "opt out" of the interstate
branching provisions (which Texas law currently expires on September 2, 1999).
Furthermore, pursuant to the Interstate Banking and Branching Act, a bank is
now able to open new
4
<PAGE>
branches in a state in which it does not already have banking operations if
such state enacts a law permitting such de novo branching. To the extent
permitted under these laws, the Corporation plans to consolidate its banking
subsidiaries (with the exception of NationsBank of Delaware, N.A.) into a
single bank as soon as practicable. The Corporation currently operates two
interstate banks (i.e., banks with banking centers in more than one state):
NationsBank, N.A., headquartered in Charlotte, North Carolina, with offices in
Arkansas, Florida, Georgia, Illinois, Iowa, Kansas, Maryland, Missouri, New
Mexico, North Carolina, Oklahoma, South Carolina, Texas, Virginia and the
District of Columbia; and Barnett Bank, N.A., headquartered in Jacksonville,
Florida (which the Corporation expects to merge into NationsBank, N.A. in the
fourth quarter of 1998), with offices in Florida and Georgia. Separate banks
continue to operate in Delaware, Florida, Kentucky (which the Corporation has
agreed to sell) and Tennessee. As previously described, the Corporation
regularly evaluates merger and acquisition opportunities, and it anticipates
that it will continue to evaluate such opportunities.
Proposals to change the laws and regulations governing the banking
industry are frequently introduced in Congress, in the state legislatures and
before the various bank regulatory agencies. The likelihood and timing of any
such proposals or bills and the impact they might have on the Corporation and
its subsidiaries cannot be determined at this time.
Capital and Operational Requirements
The Federal Reserve Board, the Comptroller and the FDIC have issued
substantially similar risk-based and leverage capital guidelines applicable to
United States banking organizations. In addition, those regulatory agencies may
from time to time require that a banking organization maintain capital above
the minimum levels, whether because of its financial condition or actual or
anticipated growth. The Federal Reserve Board risk-based guidelines define a
two-tier capital framework. Tier 1 capital consists of common and qualifying
preferred shareholders' equity, less certain intangibles and other adjustments.
Tier 2 capital consists of subordinated and other qualifying debt, and the
allowance for credit losses up to 1.25% of risk-weighted assets. The sum of
Tier 1 and Tier 2 capital less investments in unconsolidated subsidiaries
represents qualifying total capital, at least 50% of which must consist of Tier
1 capital. Risk-based capital ratios are calculated by dividing Tier 1 and
total capital by risk-weighted assets. Assets and off-balance sheet exposures
are assigned to one of four categories of risk-weights, based primarily on
relative credit risk. The minimum Tier 1 capital ratio is 4% and the minimum
total capital ratio is 8%. The Corporation's Tier 1 and total risk-based
capital ratios under these guidelines at March 31, 1998 were 6.80% and 11.19%,
respectively.
The leverage ratio is determined by dividing Tier 1 capital by adjusted
average total assets. Although the stated minimum ratio is 3%, most banking
organizations are required to maintain ratios of at least 100 to 200 basis
points above 3%. The Corporation's leverage ratio at March 31, 1998 was 5.64%.
Management believes that the Corporation meets its leverage ratio requirement.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective Federal regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines
could also subject a banking institution to capital raising requirements. An
"undercapitalized" bank must develop a capital restoration plan and its parent
holding company must guarantee that bank's compliance with the plan. The
liability of the parent holding company under any such guarantee is limited to
the lesser of 5% of the bank's assets at the time it became "undercapitalized"
or the amount needed to comply with the plan. Furthermore, in the event of the
bankruptcy of the parent holding company, such guarantee would take priority
over the parent's general unsecured creditors. In addition, FDICIA requires the
various regulatory agencies to prescribe certain non-capital standards for
safety and soundness relating generally to operations and management, asset
quality and executive compensation and permits regulatory action against a
financial institution that does not meet such standards.
The various regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA, using
the total risk-based capital, Tier 1 risk-based capital and leverage
5
<PAGE>
capital ratios as the relevant capital measures. Such regulations establish
various degrees of corrective action to be taken when an institution is
considered undercapitalized. Under the regulations, a "well capitalized"
institution must have a Tier 1 capital ratio of at least 6%, a total capital
ratio of at least 10% and a leverage ratio of at least 5% and not be subject to
a capital directive order. An "adequately capitalized" institution must have a
Tier 1 capital ratio of at least 4%, a total capital ratio of at least 8% and a
leverage ratio of at least 4%, or 3% in some cases. Under these guidelines,
each of the Banks is considered well capitalized.
Banking agencies have also adopted final regulations which mandate that
regulators take into consideration (i) concentrations of credit risk; (ii)
interest rate risk (when the interest rate sensitivity of an institution's
assets does not match the sensitivity of its liabilities or its
off-balance-sheet position); and (iii) risks from non-traditional activities,
as well as an institution's ability to manage those risks, when determining the
adequacy of an institution's capital. That evaluation will be made as a part of
the institution's regular safety and soundness examination. In addition, the
banking agencies have amended their regulatory capital guidelines to
incorporate a measure for market risk. In accordance with the amended
guidelines, the Corporation and any Bank with significant trading activity (as
defined in the amendment) must incorporate a measure for market risk in their
regulatory capital calculations effective for reporting periods after January
1, 1998. The revised guidelines are not expected to have a material impact on
the Corporation or the Banks' regulatory capital ratios or their well
capitalized status.
Distributions
The Corporation's funds for cash distributions to its shareholders are
derived from a variety of sources, including cash and temporary investments.
The primary source of such funds, however, is dividends received from the
Banks. Each of the Banks is subject to various general regulatory policies and
requirements relating to the payment of dividends, including requirements to
maintain capital above regulatory minimums. The appropriate federal regulatory
authority is authorized to determine under certain circumstances relating to
the financial condition of the bank or bank holding company that the payment of
dividends would be an unsafe or unsound practice and to prohibit payment
thereof.
In addition to the foregoing, the ability of the Corporation and the Banks
to pay dividends may be affected by the various minimum capital requirements
and the capital and non-capital standards established under FDICIA, as
described above. The right of the Corporation, its shareholders and its
creditors to participate in any distribution of the assets or earnings of its
subsidiaries is further subject to the prior claims of creditors of the
respective subsidiaries.
Source of Strength
According to Federal Reserve Board policy, bank holding companies are
expected to act as a source of financial strength to each subsidiary bank and
to commit resources to support each such subsidiary. This support may be
required at times when a bank holding company may not be able to provide such
support. Similarly, under the cross-guarantee provisions of the Federal Deposit
Insurance Act, in the event of a loss suffered or anticipated by the FDIC --
either as a result of default of a banking or thrift subsidiary of the
registrant or related to FDIC assistance provided to a subsidiary in danger of
default -- the other Banks may be assessed for the FDIC's loss, subject to
certain exceptions.
USE OF PROCEEDS
The net proceeds from the sale of the Securities will be used for general
corporate purposes, including the Corporation's working capital needs, the
funding of investments in, or extensions of credit to, its banking and
nonbanking subsidiaries, possible acquisitions of other financial institutions
or their assets or liabilities, possible acquisitions of or investments in
other businesses of a type eligible for bank holding companies and possible
reduction of outstanding indebtedness or repurchase of outstanding equity
securities of the Corporation. Pending such use, the Corporation may
temporarily invest the net proceeds. The Corporation may, from time to time,
engage in additional capital financings of a character and in amounts to be
determined by the Corporation in light of its needs at such time or times and
in light of prevailing market conditions. If the Corporation elects at the time
of issuance of Securities to make different or more specific use of proceeds
other than that set forth herein, such use will be described in the applicable
Prospectus Supplement.
6
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following are the Corporation's consolidated ratios of earnings to
fixed charges for the three months ended March 31, 1998 and for each of the
years in the five-year period ended December 31, 1997:
<TABLE>
<CAPTION>
Year Ended
December 31,
Three Months Ended --------------------------------------------
March 31, 1998 1997 1996 1995 1994 1993
------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding interest on deposits ...... 1.5 2.0 2.0 1.8 2.0 2.6
Including interest on deposits ...... 1.3 1.5 1.5 1.4 1.5 1.6
</TABLE>
For purposes of computing the consolidated ratios, earnings represent net
income of the Corporation plus applicable income taxes and fixed charges, less
capitalized interest and the equity in undistributed earnings of unconsolidated
subsidiaries and associated companies. Fixed charges represent interest expense
(exclusive of interest on deposits in one case and inclusive of such interest
in the other), capitalized interest, amortization of debt discount and
appropriate issuance costs and one-third (the amount deemed to represent an
appropriate interest factor) of net rent expense under all lease commitments.
PLAN OF DISTRIBUTION
The Corporation may offer and sell the Securities in one or more of the
following ways: (i) through underwriters or dealers; (ii) through agents; or
(iii) directly by the Corporation to one or more purchasers. Such underwriters,
dealers or agents may be NMS or other affiliates of NationsBank. The Prospectus
Supplement with respect to a particular offering of a series of Securities will
set forth the terms of the offering of such Securities, including the name or
names of any underwriters or agents with whom NationsBank has entered into
arrangements with respect to the sale of such Securities, the public offering
or purchase price of such Securities and the proceeds to the Corporation from
such sales, and any underwriting discounts, agency fees or commissions and
other items constituting underwriters' compensation, the initial public
offering price, any discounts or concessions to be allowed or reallowed or paid
to dealers and the securities exchange, if any, on which such Securities may be
listed.
If underwriters are used in the offer and sale of Securities, the
Securities will be acquired by the underwriters for their own account and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The Securities may be offered to the public either through
underwriting syndicates represented by managing underwriters, or by
underwriters without a syndicate, all of which underwriters in either case will
be designated in the applicable Prospectus Supplement. Unless otherwise set
forth in the applicable Prospectus Supplement, under the terms of the
underwriting agreement, the obligations of the underwriters to purchase
Securities will be subject to certain conditions precedent and the underwriters
will be obligated to purchase all the Securities if any are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Securities also may be offered and sold directly by the Corporation or
through agents designated by the Corporation from time to time. Any agent
involved in the offer or sale of the Securities with respect to which this
Prospectus is delivered will be named in, and any commissions payable by the
Corporation to such agent will be set forth in or calculable from, the
applicable Prospectus Supplement or a pricing supplement thereto. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be acting
on a best efforts basis for the period of its appointment.
Securities may also be offered and sold, if so indicated in the Prospectus
Supplement, in connection with a remarketing after their purchase, in
accordance with their terms, by one or more firms, including NMS or other
affiliates of the Corporation ("remarketing agents"), acting as principal for
their accounts or an agent for the Corporation. Any remarketing agent will be
identified and the terms of its agreement with the Corporation described in a
Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement relating to Debt
Securities, the Corporation may authorize underwriters, dealers or agents to
solicit offers by certain institutions to purchase Debt Securities from the
Corporation at the public offering price set forth in such Prospectus
Supplement pursuant to delayed
7
<PAGE>
delivery contracts ("Delayed Delivery Contracts") providing for payment and
delivery on the date or dates stated in the Prospectus Supplement. Each Delayed
Delivery Contract will be for an amount of Debt Securities not less than and,
unless the Corporation otherwise agrees, the aggregate amount of Debt
Securities sold pursuant to Delayed Delivery Contracts shall be not more than
the respective minimum and maximum amounts stated in the Prospectus Supplement.
Institutions with which Delayed Delivery Contracts, when authorized, may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies and educational and charitable institutions, but shall in
all cases be subject to the approval of the Corporation in its sole discretion.
The obligations of the purchaser under any Delayed Delivery Contract to pay for
and take delivery of Debt Securities will not be subject to any conditions
except that (i) the purchase of Debt Securities by such institution shall not
at the time of delivery be prohibited under the laws of the jurisdiction to
which such institution is subject; and (ii) any related sale of Debt Securities
to underwriters shall have occurred. A commission set forth in the Prospectus
Supplement will be paid to underwriters soliciting purchases of Debt Securities
pursuant to Delayed Delivery Contracts accepted by the Corporation. The
underwriters will not have any responsibility in respect of the validity or
performance of Delayed Delivery Contracts.
Any series of Securities offered and sold pursuant to this Prospectus and
the applicable Prospectus Supplement will be new issues of securities with no
established trading market. Any underwriters to whom Securities are sold by the
Corporation for public offering and sale may make a market in such Securities,
but such underwriters will not be obligated to do so and may discontinue any
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for any Securities.
Any underwriter, dealer or agent participating in the distribution of any
Securities may be deemed to be an underwriter, as that term is defined in the
Securities Act of 1933, as amended (the "1933 Act"), of the Securities so
offered and sold, and any discounts or commissions received by them from
NationsBank 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
1933 Act.
In order to facilitate the offering of the Securities, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Securities or any other securities the prices of which may be used
to determine payments on such Securities. Specifically, the underwriters may
overallot in connection with the offering, creating a short position in the
Securities for their own accounts. In addition, to cover overallotments or to
stabilize the price of the Securities or of any such other securities, the
underwriters may bid for, and purchase, the Securities or any such other
securities in the open market. Finally, in any offering of the Securities
through a syndicate of underwriters, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Securities in the offering if the syndicate repurchases previously distributed
Securities in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain
the market price of the Securities above independent market levels. The
underwriters are not required to engage in these activities, and may end any of
these activities at any time.
Under agreements entered into with the Corporation, underwriters, dealers,
agents and remarketing agents may be entitled to indemnification by the
Corporation against certain civil liabilities, including liabilities under the
1933 Act, or to contribution with respect to payments which the underwriters or
agents may be required to make in respect thereof.
NMS is a broker-dealer and a direct subsidiary of the Corporation. Each
initial offering and any remarketing of Securities involving NMS or any other
affiliate of the Corporation will be conducted in compliance with the
requirements of Rule 2720 of the National Association of Securities Dealers,
Inc. (the "NASD") regarding a NASD member firm's distribution of the securities
of an affiliate. Following the initial distribution of the Securities, NMS may
offer and sell such Securities in secondary markets transactions at negotiated
prices relating to prevailing prices at the time of sale or otherwise. NMS may
act as principal or agent in such transactions. This Prospectus and related
Prospectus Supplements may be used by NMS in connection with such transactions.
NMS will not execute a transaction in the Securities in a discretionary
account without the prior written specific approval of NMS's customer. NMS has
no obligation to make a market in the Securities and may discontinue its
market-making activities at any time without notice, at its sole discretion.
Futhermore, NMS
8
<PAGE>
may be required to discontinue its market-making activities during periods when
the Corporation is involved in a distribution of certain of its securities or
when NMS, by virtue of its affiliation with the Corporation, is aware of
material non-public information relating to the Corporation. In such instance,
NMS would not be able to recommence its market-making activities until such
distribution has been completed or such information has become publicly
available. It is not possible to determine the impact, if any, that any such
discontinuance may have on the market for the Securities. While other
broker-dealers may make a market in the Securities from time to time, there can
be no assurance that any broker-dealer will do so at any time when NMS
discontinues its market-making activities.
Underwriters, dealers and agents also may be customers of, engage in
transactions with, or perform other services for the Corporation in the
ordinary course of business.
DESCRIPTION OF DEBT SECURITIES
Any Senior Debt Securities offered hereby are to be issued under an
Indenture dated as of January 1, 1995 (such Indenture, as it may be amended
from time to time, the "Senior Indenture") between the Corporation and U.S.
Bank Trust National Association, as successor Trustee to BankAmerica National
Trust Company (the "Senior Trustee"). Any Subordinated Debt Securities offered
hereby are to be issued under an Indenture dated as of January 1, 1995 (such
Indenture, as it may be amended from time to time, the "Subordinated
Indenture") between the Corporation and The Bank of New York, Trustee (the
"Subordinated Trustee" and, together with the Senior Trustee, the "Trustees").
Each of the Senior Indenture and the Subordinated Indenture (each, an
"Indenture" and together, the "Indentures") is incorporated by reference in the
Registration Statement of which this Prospectus forms a part.
The following summaries of certain provisions of the Indentures do not
purport to be complete and are subject to and qualified in their entirety by
reference to the provisions of the applicable Indentures. Whenever particular
sections or defined terms of the Indentures are referred to, it is intended
that such sections or defined items shall be incorporated herein by reference.
Unless otherwise indicated, capitalized terms shall have the meanings ascribed
to them in the Indentures.
General
The respective Indentures provide that there is no limitation on the
amount of debt securities that may be issued thereunder from time to time. The
amount of Debt Securities that may be offered and sold pursuant to this
Prospectus, however, is limited to the aggregate initial offering price of the
securities registered under the Registration Statement of which this Prospectus
forms a part, subject to reduction as the result of the sale by the Corporation
of other securities under the Registration Statement.
The Debt Securities will be direct, unsecured obligations of the
Corporation. The Senior Debt Securities of each series will rank equally with
all unsecured senior debt of the Corporation. The Subordinated Debt Securities
of each series will be subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness (as hereinafter defined) of the
Corporation. See "DESCRIPTION OF DEBT SECURITIES -- Subordination."
The Debt Securities will be issued in fully registered form without
coupons. The Debt Securities may be denominated in U.S. dollars or in another
currency or currency unit. Unless otherwise set forth in the applicable
Prospectus Supplement, any Debt Securities that are denominated in U.S. dollars
will be issued in denominations of $1,000 or an integral multiple thereof. If
any of the Debt Securities are denominated in a foreign currency or currency
unit, or if principal of (or premium, if any, on) or any interest on any of the
Debt Securities is payable in any foreign currency or currency unit, the
authorized denominations, as well as any investment considerations,
restrictions, tax consequences, specific terms and other information with
respect to such issue of Debt Securities and such foreign currency or currency
unit, will be set forth in the Prospectus Supplement relating thereto.
The Debt Securities may be issued in one or more series with the same or
various maturities. Certain Debt Securities may be issued which provide for an
amount less than the principal amount thereof to be due and payable in the
event of an acceleration of the maturity thereof (each an "Original Issue
Discount Security"). Original Issue Discount Securities may bear no interest or
may bear interest at a rate which at the
9
<PAGE>
time of issuance is below market rates and will be sold at a discount (which
may be substantial) below their stated principal amount. Certain Debt
Securities may be issued or be deemed to be issued with original issue discount
for United States Federal income tax purposes. The Prospectus Supplement with
respect to any series of Debt Securities issued with such original issue
discount will contain a discussion of Federal income tax considerations with
respect thereto.
The particular terms of each series of Debt Securities to be offered and
sold will be described in the Prospectus Supplement relating to such series of
Debt Securities, including: (i) the designation of the particular series; (ii)
the aggregate principal amount of such series that may be authenticated and
delivered under the applicable Indenture; (iii) the person to whom any interest
on any Debt Security of the series shall be payable, if other than the person
in whose name the Debt Security (or one or more predecessor Debt Securities) is
registered at the close of business on the regular record date for such
interest; (iv) the date or dates on which the principal of the Debt Securities
of such series is payable; (v) the rate or rates, and if applicable the method
used to determine the rate, at which the Debt Securities of such series shall
bear interest, if any, the date or dates from which such interest shall accrue,
the date or dates on which such interest shall be payable and the record date
or dates for the interest payable on any Debt Securities on any interest
payment date; (vi) the place or places at which, subject to the provisions of
the applicable Indenture, the principal of (and premium, if any, on) and any
interest on Debt Securities of such series shall be payable, any Debt
Securities of the series may be surrendered for registration of transfer, and
notices and demands to or upon the Corporation in respect of the Debt
Securities of the series and the Indenture may be served; (vii) the obligation,
if any, of the Corporation to redeem or purchase Debt Securities of such
series, at the option of the Corporation or at the option of a holder thereof,
pursuant to any sinking fund or other redemption provisions and the period or
periods within which, the price or prices at which and the terms and conditions
upon which Debt Securities of the series may be so redeemed or purchased, in
whole or in part; (viii) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which any Debt Securities of such series
shall be issuable; (ix) if other than the principal amount thereof, the portion
of the principal amount of Debt Securities of such series which shall be
payable upon declaration of acceleration of the maturity thereof; (x) the
currency, currencies or currency units in which payment of the principal of
(and premium, if any, on) and any interest on any Debt Securities of the series
shall be payable if other than the currency of the United States of America and
the manner of determining the equivalent thereof in the currency of the United
States of America for purposes of the applicable Indenture; (xi) if the
principal of (and premium, if any, on) or any interest on the Debt Securities
of the series is to be payable, at the election of the Corporation or a holder
thereof, in one or more currencies or currency units, other than that or those
in which the Debt Securities are stated to be payable, the currency or
currencies in which payment of the principal of (and premium, if any, on) and
any interest on Debt Securities of such series as to which such election is
made shall be payable, and the periods within which and the terms and
conditions upon which such election is to be made; (xii) whether the amount of
payments of principal of (and premium, if any) or interest on such Debt
Securities may be determined with reference to an index, formula or other
method (which index, formula or method may be based on one or more currencies,
commodities, equity indices or other indices) and the manner in which such
amount shall be determined; (xiii) whether the Debt Securities will be issued
in book-entry only form; (xiv) the identification or method of selection of any
interest rate calculation agents, exchange rate calculation agents or other
agents with respect to Debt Securities of such series; (xv) if either or both
of Section 14.02 (defeasance) or Section 14.03 (covenant defeasance) of the
applicable Indenture do not apply to the Debt Securities of the series; (xvi)
any provisions relating to the extension of maturity of, or the renewal of,
Debt Securities of such series; and (xvii) any other terms of the Debt
Securities of such series (which terms shall not be inconsistent with the
provisions of the applicable Indenture).
The ability of NationsBank to make payments of principal of (and premium,
if any, on) and any interest on the Debt Securities may be affected by the
ability of the Banks to pay dividends. The ability of the Banks, as well as of
the Corporation, to pay dividends in the future currently is, and could be
further, influenced by bank regulatory requirements and capital guidelines. See
"NATIONSBANK CORPORATION -- Government Supervision and Regulation."
Neither the Senior Indenture nor the Subordinated Indenture contains
provisions that would provide protection to holders of Debt Securities against
a decline in credit quality resulting from takeovers, recapitalizations, the
incurrence of additional indebtedness or similar restructurings by the
Corporation. If credit
10
<PAGE>
quality declines as a result of such an event, or otherwise, the ratings of any
Debt Securities then outstanding may be withdrawn or downgraded.
Conversion
The Debt Securities of any series may be convertible, at the option of the
holder or the Corporation, into Preferred Stock, Depositary Shares, Common
Stock or other Debt Securities if the Prospectus Supplement relating to such
series of Debt Securities so provides. In such case, such Prospectus Supplement
will set forth (i) the period(s) during which such conversion may be elected;
(ii) the conversion price payable and the number of shares or amount of
Preferred Stock, Depositary Shares, Common Stock or other Debt Securities
purchasable upon conversion, and adjustments thereto, if any, in certain
events; (iii) the procedures for electing such conversion; and (iv) all other
terms for such conversion (which terms shall not be inconsistent with the
provisions of the applicable Indenture).
Exchange, Registration and Transfer
At the option of the holder, subject to the terms of the applicable
Indenture, Debt Securities of any series (other than Debt Securities issued in
book-entry form) will be exchangeable for other Debt Securities of the same
series and of an equal aggregate principal amount and tenor of any authorized
denominations.
Debt Securities of a series may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent of the Corporation designated
and maintained for such purpose with respect to such Debt Securities pursuant
to the terms of the applicable Indenture, as referred to in an applicable
Prospectus Supplement. Such transfer or exchange will be effected upon the
Security Registrar or transfer agent, as the case may be, being satisfied with
the documents of title and identity of the person making the request. No
service charge shall be made for any exchange or registration of transfer of
Debt Securities, but the Corporation may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith.
If a Prospectus Supplement refers to any transfer agents (in addition to
the Security Registrar) designated by the Corporation with respect to any
series of Debt Securities, the Corporation may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Corporation will be
required to maintain a transfer agent in each place of payment for such series.
The Corporation may at any time designate additional transfer agents with
respect to any series of Debt Securities.
The Corporation shall not be required to (i) issue, exchange or register
the transfer of any Debt Security of any series to be redeemed for a period of
15 days next preceding any selection of such Debt Securities to be redeemed; or
(ii) exchange or register the transfer of any Debt Security so selected, called
or being called for redemption, except the unredeemed portion of any Debt
Security being redeemed in part.
For a discussion of restrictions on the exchange, registration and
transfer of Global Securities (hereinafter defined), see "REGISTRATION AND
SETTLEMENT."
Payment and Paying Agents
Unless otherwise indicated in an applicable Prospectus Supplement,
principal of (and premium, if any, on) and any interest on Debt Securities will
be payable, subject to any applicable laws and regulations, at the offices of
such paying agents as the Corporation may designate from time to time pursuant
to the applicable Indenture, except that, at the option of the Corporation,
payment of any interest may be made by check mailed to the address of the
person entitled thereto as such address shall appear in the Security Register.
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
interest on a Debt Security on any interest payment date generally 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 interest payment date. For a
discussion of payment of principal and any premium or interest with respect to
Global Securities, see "REGISTRATION AND SETTLEMENT."
11
<PAGE>
The Corporation initially has designated the principal corporate trust
offices of the Senior Trustee and the Subordinated Trustee in the City of New
York as the places where the Senior Debt Securities and Subordinated Debt
Securities, respectively, may be presented for payment. The Corporation may at
any time designate additional paying agents or rescind the designation of any
paying agent or approve a change in the office through which any paying agent
acts. Any other paying agents designated by the Corporation for the Debt
Securities of each series will be named in an applicable Prospectus Supplement.
Subordination
The Subordinated Debt Securities are subordinate and subject, to the
extent and in the manner set forth in the Subordinated Indenture, in right of
payment to the prior payment in full of all Senior Indebtedness of the
Corporation. "Senior Indebtedness" is defined by the Subordinated Indenture as
any indebtedness for money borrowed (including all indebtedness of the
Corporation for borrowed and purchased money of the Corporation, all
obligations of the Corporation arising from off-balance sheet guarantees by the
Corporation and direct credit substitutes, and obligations of the Corporation
associated with derivative products such as interest and foreign exchange rate
contracts and commodity contracts) that is outstanding on the date of execution
of the Subordinated Indenture, or is thereafter created, incurred or assumed,
for the payment of which the Corporation is at the time of determination
responsible or liable as obligor, guarantor or otherwise, and all deferrals,
renewals, extensions and refundings of any such indebtedness or obligations,
other than the Subordinated Debt Securities or any other indebtedness as to
which, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that such indebtedness is subordinate
in right of payment to any other indebtedness of the Corporation. The
Prospectus Supplement relating to each series of Subordinated Debt Securities
will set forth the aggregate amount of then outstanding Senior Indebtedness of
the Corporation and any limitation on the issuance of additional Senior
Indebtedness.
No payment on account of principal of (and premium, if any, on) or any
interest on the Subordinated Debt Securities shall be made, and no Subordinated
Debt Securities shall be purchased, either directly or indirectly, by the
Corporation or any of its subsidiaries, if any default or event of default with
respect to any Senior Indebtedness shall have occurred and be continuing and
the Corporation and the Subordinated Trustee shall have received written notice
thereof from the holders of at least 10% in principal amount of any kind or
category of any Senior Indebtedness (or the representative or representatives
of such holders) or the Subordinated Trustee shall have received written notice
thereof from the Corporation.
In the event that any Subordinated Debt Security is declared due and
payable before the date specified therein as the fixed date on which the
principal thereof is due and payable pursuant to the Subordinated Indenture, or
upon any payment or distribution of assets of the Corporation of any kind or
character to creditors upon any dissolution or winding up or total or partial
liquidation or reorganization of the Corporation, all principal of (and
premium, if any, on) and any interest due or to become due upon all Senior
Indebtedness shall first be paid in full before the holders of the Subordinated
Debt Securities (the "Subordinated Debt Holders"), or the Subordinated Trustee,
shall be entitled to retain any assets (other than shares of stock of the
Corporation as reorganized or readjusted or securities of the Corporation or
any other corporation provided for by a plan of reorganization or readjustment,
the payment of which is subordinated, at least to the same extent as the
Subordinated Debt Securities, to the payment of all Senior Indebtedness which
may at the time be outstanding, provided that the rights of the holders of the
Senior Indebtedness are not altered by such reorganization or readjustment), so
paid or distributed in respect of the Subordinated Debt Securities (for
principal or interest, if any). Upon such dissolution or winding up or
liquidation or reorganization, any payment or distribution of assets of the
Corporation of any kind or character, whether in cash, property or securities
(other than shares of stock of the Corporation as reorganized or readjusted or
securities of the Corporation or any other corporation provided for by a plan
of reorganization or readjustment, the payment of which is subordinated, at
least to the same extent as the Subordinated Debt Securities, to the payment of
all Senior Indebtedness which may at the time be outstanding, provided that the
rights of the holders of the Senior Indebtedness are not altered by such
reorganization or readjustment), to which the Subordinated Debt Holders or the
Subordinated Trustee would be entitled, except for the subordination provisions
of the Subordinated Indenture, shall be paid by the Corporation or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the Subordinated Debt Holders or the
Subordinated Trustee if received by them or it, directly to the holders of the
Senior Indebtedness (pro rata to each such holder on the basis of the
respective amounts of Senior Indebtedness held by such holder)
12
<PAGE>
or their representatives, to the extent necessary to pay all Senior
Indebtedness in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness, before any payment
or distribution is made to the Subordinated Debt Holders or to the Subordinated
Trustee.
Subject to the payment in full of all Senior Indebtedness, the
Subordinated Debt Holders shall be subrogated (equally and ratably with the
holders of all indebtedness of the Corporation which, by its express terms,
ranks on a parity with the Subordinated Debt Securities and is entitled to like
rights of subrogation) to the rights of the holders of Senior Indebtedness to
receive payments or distributions of assets of the Corporation applicable to
the Senior Indebtedness until the Subordinated Debt Securities shall be paid in
full.
Sale or Issuance of Capital Stock of Banks
The Senior Indenture prohibits the issuance, sale or other disposition of
capital stock, or securities convertible into or options, warrants or rights to
acquire capital stock, of any Principal Subsidiary Bank (as defined below) or
of any subsidiary which owns shares of capital stock, or securities convertible
into or options, warrants or rights to acquire capital stock, of any Principal
Subsidiary Bank, with the following exceptions: (a) sales of directors'
qualifying shares; (b) sales or other dispositions for fair market value, if,
after giving effect to such disposition and to conversion of any shares or
securities convertible into capital stock of a Principal Subsidiary Bank, the
Corporation would own directly or indirectly not less than 80% of each class of
the capital stock of such Principal Subsidiary Bank (or any successor
corporation thereto); (c) sales or other dispositions made in compliance with
an order of a court or regulatory authority of competent jurisdiction; (d) any
sale by a Principal Subsidiary Bank (or any successor corporation thereto) of
additional shares of its capital stock to its shareholders at any price, so
long as (i) prior to such sale the Corporation owns, directly or indirectly,
shares of the same class and (ii) immediately after such sale, the Corporation
owns, directly or indirectly, at least as great a percentage of each class of
capital stock of such Principal Subsidiary Bank as it owned prior to such sale
of additional shares; (e) any sale by a Principal Subsidiary Bank (or any
successor corporation thereto) of additional securities convertible into shares
of its capital stock to its shareholders at any price, so long as (i) prior to
such sale the Corporation owns, directly or indirectly, securities of the same
class and (ii) immediately after such sale the Corporation owns, directly or
indirectly, at least as great a percentage of each class of such securities
convertible into shares of capital stock of such Principal Subsidiary Bank as
it owned prior to such sale of additional securities; (f) any sale by a
Principal Subsidiary Bank (or any successor corporation thereto) of additional
options, warrants or rights to subscribe for or purchase shares of its capital
stock to its shareholders at any price, so long as (i) prior to such sale the
Corporation owns, directly or indirectly, options, warrants or rights, as the
case may be, of the same class and (ii) immediately after such sale, the
Corporation owns, directly or indirectly, at least as great a percentage of
each class of such options, warrants or rights, as the case may be, to
subscribe for or purchase shares of capital stock of such Principal Subsidiary
Bank as it owned prior to such sale of additional options, warrants or rights;
or (g) any issuance of shares of capital stock, or securities convertible into
or options, warrants or rights to subscribe for or purchase shares of capital
stock, of a Principal Subsidiary Bank or any subsidiary which owns shares of
capital stock, or securities convertible into or options, warrants or rights to
acquire capital stock, of any Principal Subsidiary Bank, to the Corporation or
a wholly owned subsidiary of the Corporation.
A Principal Subsidiary Bank is defined in the Senior Indenture as any Bank
(other than NationsBank of Delaware, National Association) with total assets
equal to more than 10% of the Corporation's total consolidated assets.
Waiver of Covenants
Under the terms of either Indenture, compliance with certain covenants or
conditions of such Indenture may be waived by the holders of a majority in
principal amount of the Debt Securities of all series to be affected thereby
and at the time outstanding under that Indenture (including, in the case of
holders of Senior Debt Securities, the covenant described above).
Modification of the Indentures
Each Indenture contains provisions permitting the Corporation and the
applicable Trustee to modify such Indenture or the rights of the holders of
Debt Securities thereunder, with the consent of the holders of
13
<PAGE>
not less than 66 2/3% in aggregate principal amount of the Debt Securities of
all series at the time outstanding under that Indenture and to be affected
thereby (voting as one class), except that no such modification shall (a)
extend the fixed maturity of, reduce the principal amount or redemption
premium, if any, of, or reduce the rate of or extend the time of payment of
interest on, any Debt Security without the consent of the holder of each
security so affected, or (b) reduce the aforesaid percentage of Debt
Securities, the consent of holders of which is required for any such
modification, without the consent of the holders of all Debt Securities then
outstanding under that Indenture. Each Indenture also provides that the
Corporation and the respective Trustee may, from time to time, execute
supplemental indentures in certain limited circumstances without the consent of
any holders of outstanding Debt Securities.
Each Indenture provides that in determining whether the holders of the
requisite principal amount of the Debt Securities outstanding have given any
request, demand, authorization, direction, notice, consent or waiver
thereunder, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be outstanding shall be the amount of the principal
thereof that would be due and payable at such time upon an event of default,
and (ii) the principal amount of a Debt Security denominated in a foreign
currency or currency unit shall be the U.S. dollar equivalent on the date of
original issuance of such Debt Security.
Meetings and Action by Securityholders
Each Indenture contains provisions for convening meetings of the holders
of Debt Securities for certain purposes. A meeting may be called at any time by
the Trustee in its discretion and shall be called by the Trustee upon request
by the Corporation or the holders of at least 10% in aggregate principal amount
of the Debt Securities outstanding of such series, in any case upon notice
given in accordance with "Notices" below. Any resolution passed or decision
taken at any meeting of holders of Debt Securities of any series duly held in
accordance with the applicable Indenture, or such other action taken in
accordance with the terms of the applicable Indenture, will be binding on all
holders of Debt Securities of that series.
Defaults and Rights of Acceleration
An Event of Default is defined in the Subordinated Indenture generally as
bankruptcy of the Corporation under Federal bankruptcy laws. An Event of
Default is defined in the Senior Indenture generally as (i) the Corporation's
failure to pay principal (or premium, if any) when due on any securities of a
series; (ii) the Corporation's failure to pay interest on any securities of a
series, within 30 days after the same becomes due; (iii) the Corporation's
breach of any of its other covenants contained in the Senior Debt Securities or
the Senior Indenture, which breach is not cured within 90 days after written
notice to the Corporation by the Senior Trustee, or to the Corporation and the
Senior Trustee by the holders of at least 25% in principal amount of all Senior
Debt Securities then outstanding under the Senior Indenture and affected
thereby; and (iv) certain events involving the bankruptcy, insolvency or
liquidation of the Corporation.
Each Indenture provides that if an Event of Default under the respective
Indenture occurs and is continuing, either the respective Trustee or the
holders of 25% in principal amount (or, if any such Debt Securities are
Original Issue Discount Debt Securities, such lesser amounts as may be
described in an applicable Prospectus Supplement) of the Debt Securities then
outstanding under that Indenture (or, with respect to an Event of Default under
the Senior Indenture due to a default in the payment of principal (or premium,
if any) or interest or performance of any other covenant, the outstanding Debt
Securities of all series affected by such default) may declare the principal
amount of all of such Debt Securities to be due and payable immediately.
Payment of principal of the Subordinated Debt Securities may not be accelerated
in the case of a default in the payment of principal (or premium, if any) or
interest or the performance of any other covenant of the Corporation. Upon
certain conditions a declaration of an Event of Default may be annulled and
past defaults may be waived by the holders of a majority in principal amount of
the Debt Securities then outstanding (or of such series affected, as the case
may be).
Collection of Indebtedness, etc.
Each Indenture also provides that in the event of a failure by the
Corporation to make payment of principal of (and premium, if any, on) or any
interest on the Debt Securities (and, in the case of payment of interest, such
failure to pay shall have continued for 30 days) and upon the demand of the
respective Trustee, the Corporation will pay to such Trustee, for the benefit
of the holders of the Debt Securities, the amount then
14
<PAGE>
due and payable on the Debt Securities for principal and interest, with
interest on the overdue principal and, to the extent payment of interest shall
be legally enforceable, upon overdue installments of interest at the rate borne
by the Debt Securities. Each Indenture further provides that if the Corporation
fails to pay such amount forthwith upon such demand, the respective Trustee
may, among other things, institute a judicial proceeding for the collection
thereof. However, each Indenture provides that notwithstanding any other
provision of the Indenture, the holder of any Debt Security shall have the
right to institute suit for the enforcement of any payment of principal of (and
premium, if any, on) and any interest on such Debt Security on the respective
stated maturities expressed in such Debt Security and that such right shall not
be impaired without the consent of such holder.
The holders of a majority in principal amount of the Debt Securities then
outstanding under an Indenture shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
under that Indenture, provided that the holders shall have offered to the
Trustee reasonable indemnity against expenses and liabilities. Each Indenture
requires the annual filing by the Corporation with the respective Trustee of a
certificate as to the absence of default and as to compliance with the terms of
that Indenture.
Notices
Except as otherwise provided in the applicable Indenture, notices to
holders of Debt Securities will be given by first-class mail to the addresses
of such holders as they appear in the Security Register.
Concerning the Trustees
The Corporation and the Banks have from time to time maintained deposit
accounts and conducted other banking transactions with The Bank of New York and
U.S. Bank Trust National Association, and their affiliated entities in the
ordinary course of business. Each of the Trustees also serves as trustee for
certain series of the Corporation's outstanding indebtedness under other
indentures.
DESCRIPTION OF WARRANTS
The Corporation may issue, together with Debt Securities or separately,
Debt Warrants for the purchase of Debt Securities on terms to be determined at
the time of issuance. The Corporation may also issue Universal Warrants to
purchase or sell (i) securities of an entity unaffiliated with the Corporation,
a basket of such securities, an index or indices of such securities or any
combination of the above, (ii) currencies or currency units or (iii)
commodities, on terms to be determined at the time of sale. The Corporation may
satisfy its obligations, if any, with respect to any Universal Warrants by
delivering the underlying securities, currencies or commodities or, in the case
of underlying securities or commodities, the cash value thereof, as set forth
in the applicable Prospectus Supplement. Warrants may be offered separately or
together with one or more additional Warrants or Debt Securities or any
combination thereof in the form of Units, as set forth in the applicable
Prospectus Supplement. If Warrants are issued as part of a Unit, the
accompanying Prospectus Supplement will specify whether such Warrants may be
separated from the other Securities in such Unit prior to the Warrants'
expiration date.
The Warrants are to be issued under one or more Warrant Agreements (each,
a "Warrant Agreement") to be entered into between the Corporation and a bank or
trust company, as Warrant Agent (the "Warrant Agent"), and may be issued in one
or more series, all as shall be set forth in the Prospectus Supplement relating
thereto. The forms of Warrant Agreement for the Warrants are filed as exhibits
to the Registration Statement of which this Prospectus is a part. The following
summaries of certain provisions of the applicable Warrant Agreement and the
Warrants do not purport to be complete and such summaries are subject to the
detailed provisions of such Warrant Agreement to which reference is hereby made
for a full description of such provisions, including the definition of certain
terms used herein, and for other information regarding the Warrants. Wherever
particular provisions of the Warrant Agreement are referred to, such provisions
are incorporated by reference as a part of the statements made, and the
statements are qualified in their entirety by such reference.
15
<PAGE>
General
The particular terms of each series of Warrants to be offered and sold
will be described in the Prospectus Supplement relating to such series of
Warrants, including: (i) the specific designation and aggregate number of and
the price at which the Warrants will be issued; (ii) the currency or currency
unit for which the Warrants may be purchased; (iii) the date on which the right
to exercise the Warrants shall commence and the date (the "Warrant Expiration
Date") on which such right shall expire or, if the Warrants are not
continuously exercisable throughout such period, the specific date or dates on
which they will be exercisable (each, a "Warrant Exercise Date," which term
shall also mean, with respect to Warrants continuously exercisable for a period
of time, every date during such period); (iv) whether any Warrants will be
issued in global or definitive form or both; (v) any applicable United States
federal income tax consequences; (vi) the identity of the Warrant Agent in
respect of the Warrants and of any other depositaries, execution or paying
agents, transfer agents, registrars or determination or other agents; (vii) the
proposed listing, if any, of the Warrants or the securities purchasable upon
exercise thereof on any securities exchange; (viii) whether the Warrants are to
be sold separately or with other Securities as part of Units; and (ix) any
other terms of the Warrants.
The particular terms of each series of Debt Warrants will be described in
the Prospectus Supplement relating to such series of Debt Warrants, including:
(i) the designation, aggregate principal amount, currency or composite currency
unit and terms of the Debt Securities that may be purchased upon exercise of
the Warrants, (ii) if applicable, the designation and terms of the Debt
Securities with which the Warrants are issued and the number of the Debt
Warrants issued with each of such Debt Securities, (iii) if applicable, the
date on and after which the Securities and the related Debt Securities will be
separately transferable and (iv) the principal amount of Debt Securities
purchasable upon exercise of each Debt Warrant, the price at which and the
currency or currency unit in which such principal amount of Debt Securities may
be purchased upon such exercise and the method of such exercise.
The particular terms of each series of Universal Warrants will be
described in the Prospectus Supplement relating to such series of Universal
Warrants, including: (i) whether such Universal Warrants are put Warrants or
call Warrants; (ii) (a) the specific security, basket of securities, index or
indices of securities or combination of the above, (b) currencies or currency
units or (c) commodities (and, in each case, the amount thereof or the method
for determining the same) purchasable or saleable upon exercise of each
Universal Warrant; (iii) the price at which and the currency or currency unit
with which such underlying securities, currencies or commodities may be
purchased or sold upon such exercise (or the method of determining the same);
(iv) whether such exercise price may be paid in cash, by the exchange of any
other Security offered with such Universal Warrants or both and the method of
such exercise; and (v) whether the exercise of such Universal Warrants is to be
settled in cash or by delivery of the underlying securities or commodities or
both.
Warrants of each series will be evidenced by Warrant certificates
("Warrant Certificates") in registered form, which may be global Warrants or
definitive Warrants, as specified in the applicable Prospectus Supplement.
At the option of the holder upon request confirmed in writing, and subject
to the terms of the applicable Warrant Agreement, Warrants in definitive form
may be presented for exchange and for registration of transfer (with the form
of transfer endorsed thereon duly executed) at the corporate trust office of
the Warrant Agent for such series of Warrants (or any other office indicated in
the Prospectus Supplement relating to such series of Warrants) without service
charge and upon payment of any taxes and other governmental charges as
described in such Warrant Agreement. Such transfer or exchange will be effected
only if the Warrant Agent for such series of Warrants is satisfied with the
documents of title and identity of the person making the request.
Modifications
Each Warrant Agreement and the terms of the Warrants and the Warrant
Certificates may be amended by the Corporation and the 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
therein or in any other manner which the Corporation may deem necessary or
desirable and which will not adversely affect the interests of the affected
holders in any material respect.
The Corporation and any Warrant Agent may also modify or amend the Warrant
Agreement between them and the terms of the Warrants issued thereunder, with
the consent of the owners of not less than a
16
<PAGE>
majority in number of the then outstanding unexercised Warrants affected,
provided that no such modification or amendment that changes the exercise price
of the Warrants, reduces the amount receivable upon exercise, cancellation or
expiration, shortens the period of time during which the Warrants may be
exercised or otherwise materially and adversely affects the rights of the
owners of the Warrants or reduces the percentage of outstanding Warrants, the
consent of whose owners is required for modification or amendment of the
applicable Warrant Agreement or the terms of the Warrants issued thereunder,
may be made without the consent of the owners affected thereby.
Enforceability of Rights of Warrantholders; Governing Law
The Warrant Agents will act solely as agents of the Corporation in
connection with the Warrant Certificates and will not assume any obligation or
relationship of agency or trust for or with any holders of Warrant Certificates
or beneficial owners of Warrants. Any holder of Warrant Certificates and any
beneficial owner of Warrants may, without the consent of the Warrant Agent, any
other holder or beneficial owner, the relevant Trustee, the holder of any Debt
Securities or other securities issuable upon exercise of Warrants or, if
applicable, the Euroclear Operator (as defined below) enforce by appropriate
legal action, on its own behalf, its right to exercise the Warrants evidenced
by such Warrant Certificates, in the manner provided therein and in the
applicable Warrant Agreement. No holder of any Warrant Certificate or
beneficial owner of any Warrants shall be entitled to any of the rights of a
holder of the Debt Securities or other securities purchasable upon exercise of
such Warrants, including, without limitation, the right to receive the payment
of dividends, principal of or premium, if any, or interest, if any, on such
Debt Securities or other securities or to enforce any of the covenants or
rights in the relevant Indenture or any other similar agreement. The Warrants
and each Warrant Agreement will be governed by, and construed in accordance
with, the laws of the State of New York.
Unsecured Obligations of the Corporation
The Warrants are unsecured contractual obligations of the Corporation and
will rank pari passu with the Corporation's other unsecured contractual
obligations and with the Corporation's unsecured and unsubordinated debt. Most
of the assets of the Corporation are owned by its subsidiaries. Therefore, the
Corporation's rights and the rights of its creditors, including Warrantholders,
to participate in the distribution of assets of any subsidiary upon such
subsidiary's liquidation or recapitalization will be subject to the prior
claims of such subsidiary's creditors, except to the extent that the
Corporation may itself be a creditor with recognized claims against the
subsidiary. The ability of the Corporation to meet its obligations under the
Warrants may be affected by the ability of the Banks to pay dividends. The
ability of the Banks, as well as the Corporation, to pay dividends in the
future currently is, and could be further, influenced by bank regulatory
requirements and capital guidelines. See "NATIONSBANK CORPORATION -- Government
Supervision and Regulation."
DESCRIPTION OF UNITS
As specified in the applicable Prospectus Supplement, Units will consist
of one or more Warrants and Debt Securities or any combination thereof. The
particular terms of each series of Units will be described in the Prospectus
Supplement relating to such series of Units, including: (i) all terms of Units
and of the Warrants and Debt Securities, or any combination thereof, comprising
such Units, including whether and under what circumstances the Securities
comprising such Units may or may not be traded separately, (ii) a description
of the terms of any agreement (a "Unit Agreement") to be entered into between
the Corporation and a bank or trust company as Unit Agent (the "Unit Agent")
governing the Units and (iii) a description of the provisions for the payment,
settlement, transfer or exchange of the Units.
REGISTRATION AND SETTLEMENT
DTC
If so specified in an applicable Prospectus Supplement, all or any portion
of the Securities of a series may be issued in book-entry form represented by
one or more global Securities in registered form (each, a "Global Security").
Unless otherwise specified in such Prospectus Supplement, each such Global
Security will be held through The Depository Trust Company ("DTC"), as
depositary, and will be registered in the name of Cede & Co., as nominee of
DTC. Accordingly, Cede & Co. is expected to be the holder of record of the
Securities.
17
<PAGE>
Under the book-entry system of DTC, purchases of Securities of a series
represented by a Global Security must be made by or through persons that have
accounts with DTC ("DTC Participants") or persons that may hold interests
through DTC Participants ("Indirect Participants"). Upon the issuance and
deposit of a Global Security, DTC will credit, on its book-entry registration
and transfer system, the respective principal amounts of the individual
Securities represented by such Global Security to the accounts of DTC
Participants. The accounts to be credited will be designated by the
underwriters or agents of such Securities (or by the Corporation, if such
Securities are offered and sold directly by the Corporation). The 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 DTC
(with respect to interests of DTC Participants) and the records of DTC
Participants (with respect to interests of Indirect Participants) and Indirect
Participants. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. Such
limits and laws may impair the ability to own, transfer or pledge beneficial
interests in a Global Security.
So long as DTC or its nominee is the registered holder of a Global
Security, DTC or its nominee, as applicable, will be considered the sole owner
or holder of the Securities represented by such Global Security for all
purposes under the applicable Indenture, Warrant Agreement or Unit Agreement.
Except as provided below, owners of beneficial interests in a Global Security
will not be entitled to have Securities registered in their names, will not
receive or be entitled to receive physical delivery of such Securities in
certificated form and will not be considered the owners or holders thereof
under the applicable Indenture, Warrant Agreement or Unit Agreement.
Accordingly, in order to exercise any rights of a holder of the Securities
under the applicable Indenture, Warrant Agreement or Unit Agreement, each
person owning a beneficial interest in the Global Security representing such
Securities must rely on the procedures of DTC or, if such person is not a DTC
Participant, on the procedures of the DTC Participant and, if applicable, the
Indirect Participant, through which such person owns its interest.
So long as DTC or its nominee is the registered holder of a Global
Security, Securities of the series represented by such Global Security will
trade in DTC's Same Day Fund Settlement System, and secondary market trading
activity in such Securities will therefore be required by DTC to settle in
immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in such
Securities.
Except as otherwise provided herein, DTC or its nominee, as applicable, as
the registered holder of a Global Security shall be the only person entitled to
receive payments from the Corporation with respect to Securities of the series
represented by such Global Security. Accordingly, payments of principal of (and
premium, if any, on) and any interest on individual Debt Securities, and any
payments to holders with respect to Warrants or Units of the series represented
by such a Global Security will be made by the Corporation only to DTC or its
nominee, as applicable. DTC has advised the Corporation that it is DTC's
practice to credit DTC Participants' accounts on the payment date in accordance
with their respective holdings with respect to a Global Security as shown on
DTC's records, unless DTC has reason to believe that it will not receive
payment on such date. Payments by DTC Participants to beneficial owners are
governed by standing instructions and customary practices, as is the case with
securities held in "street name." Such instructions will be the responsibility
of such DTC Participant and not of DTC, the Corporation or any underwriter or
agent for the Securities of the series represented by such Global Security,
subject to any statutory or regulatory requirements as may be in effect from
time to time. The Corporation will in every case be discharged by payment to,
or to the order of, DTC or its nominee, as applicable, as the registered holder
of such Global Security, of the amount so paid. Each of the persons shown in
the records of DTC or its nominee as an owner of a beneficial interest in such
Global Security must look solely to DTC or its nominee, as the case may be, for
its share of any such payment so made by the Corporation. Neither the
Corporation, the Trustees, the Warrant Agents, the Unit Agents or any other
agent of the Corporation, agent of the Trustees or agent of the Warrant Agents
or Unit Agents will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial interests in the
Global Security representing such Securities or for maintaining, supervising or
reviewing any records relating to such beneficial interests.
DTC has advised the Corporation as follows: DTC is a limited-purpose trust
company organized under New York law, a "banking organization" within the
meaning of New York law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code as in effect in
18
<PAGE>
the State of New York and a "clearing agency" registered pursuant to the
provisions of Section 17A of the 1934 Act. DTC was created to hold securities
deposited by DTC Participants and to facilitate the clearance and settlement of
securities transactions among DTC Participants in such securities through
electronic computerized book-entry changes in accounts of the DTC Participants,
thereby eliminating the need for physical movement of securities certificates.
Direct Participants in DTC include securities brokers and dealers, banks
(including certain subsidiaries of the Corporation), trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) have ownership interests in DTC. DTC is owned by a number of
its Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the NASD. Access to DTC's book-entry system is also
available to Indirect Participants, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly. The rules applicable to DTC and DTC
Participants are on file with the Commission.
To facilitate subsequent transfers, all securities deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
securities with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of securities deposited with it; DTC's records reflect only the identity
of the DTC Participants to whose accounts such securities are credited, which
may or may not be the beneficial owners. The DTC Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC Participants, by
DTC Participants to Indirect Participants, and by DTC Participants and Indirect
Participants to beneficial owners, will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Neither DTC nor Cede & Co. will consent or vote with respect to
securities held by DTC. Under its usual procedures, DTC mails an omnibus proxy
to an issuer as soon as possible after the record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those DTC Participants to
whose accounts the securities are credited on the record date (identified in a
listing attached to the omnibus proxy).
DTC can act only on behalf of DTC Participants, who in turn act on behalf
of Indirect Participants. Owners of beneficial interests in a Global Security
that are not DTC Participants or Indirect Participants but desire to purchase,
sell or otherwise transfer ownership of such interests may do so only through
DTC Participants and Indirect Participants. In addition, the ability of owners
of beneficial interests in a Global Security to pledge such interests to
persons or entities that do not participate in the DTC system may be limited
due to the lack of certificates for the Debt Securities of the series
represented by such Global Security.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial interests in Global Securities among DTC Participants,
it is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time.
If DTC is at any time unwilling, unable or ineligible to continue as a
depositary with respect to Securities of a particular series and a successor
depositary is not appointed by the Corporation within 90 days, the Corporation
will issue Securities of the series in certificated form in exchange for
beneficial interests in the Global Security representing such Securities. In
addition, the Corporation may at any time determine not to have Securities of a
series represented by Global Securities and, in such event, will issue
Securities of the series in certificated form in exchange for beneficial
interests in the Global Security representing such Securities. Any Securities
issued in certificated form in exchange for such beneficial interests in the
Global Security will be registered in such name or names as DTC shall instruct
the relevant Trustee, Warrant Agent, Unit Agent or other relevant agent of the
Corporation, the Trustees, the Warrant Agents or the Unit Agents. It is
expected that such instructions will be based upon directions received by DTC
from participants with respect to ownership of beneficial interests in such
Global Security.
Cedel Bank and Euroclear
If so specified in the applicable Prospectus Supplement, Securities of a
series to be issued in book-entry form and to be sold or traded outside the
United States may be represented by one or more Global Securities held through
Cedel Bank, societe anonyme ("Cedel Bank") or Morgan Guaranty Trust Company of
New York, Brussels office, as operator of the Euroclear System (the "Euroclear
Operator" or "Euroclear"). Cedel
19
<PAGE>
Bank and Euroclear will hold omnibus positions on behalf of Cedel Bank
Participants and Euroclear Participants (each as defined herein), respectively,
on the books of their respective depositaries (each, a "Depositary"), which in
turn will hold such positions in customers' securities accounts in the
Depositaries' names on the books of DTC.
Transfers between Cedel Bank Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures. Cross-market transfers between persons holding directly
or indirectly through DTC in the United States, on the one hand, and directly
or indirectly through Cedel Bank Participants or Euroclear Participants, on the
other, will be effected by DTC in accordance with DTC rules on behalf of the
relevant European international clearing system by its Depositary; however,
cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Cedel Bank Participants and Euroclear Participants may not deliver
instructions directly to the Depositaries.
Because of time-zone differences, credits for securities in Cedel Bank or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, and will be dated the
business day following the DTC settlement date, and such credits or any
transactions in such securities settled during such processing will be reported
to the relevant Cedel Bank Participant or Euroclear Participant on such
business day. Cash received in Cedel Bank or Euroclear as a result of sales of
securities by or through a Cedel Bank Participant or a Euroclear Participant to
a DTC Participant will be received with value on the DTC settlement date but
will be available in the relevant Cedel Bank or Euroclear cash account only as
of the business day following settlement in DTC.
Cedel Bank is incorporated under the laws of Luxembourg as a professional
depository. Cedel Bank holds securities for its participating organizations
("Cedel Bank Participants") and facilitates the clearance and settlement of
securities transactions between Cedel Bank Participants through electronic
book-entry changes in accounts of Cedel Bank Participants, thereby eliminating
the need for physical movement of certificates. Transactions may be settled by
Cedel Bank in any of 28 currencies, including United States dollars. Cedel Bank
provides to its Cedel Bank Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel Bank interfaces with
domestic markets in several countries. As a professional depository, Cedel Bank
is subject to regulation by the Luxembourg Monetary Institute. Cedel Bank
Participants consist of recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations and may include the
underwriters or agents with respect to a particular series of Securities.
Indirect access to Cedel Bank is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Bank Participant, either directly or indirectly.
The Euroclear System (the "Euroclear System") was created in 1968 to hold
securities for participants of the Euroclear System ("Euroclear Participants")
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions now may be
settled by Euroclear in any of 32 currencies, including United States dollars.
The Euroclear System includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by the Euroclear Operator,
under contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters or agents with respect to a particular series
of Securities. Indirect access to the
20
<PAGE>
Euroclear System is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear Participant, either directly
or indirectly.
The Euroclear Operator is the Brussels branch of a New York banking
corporation that is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Federal Reserve Board and the New York State
Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within the Euroclear System,
withdrawal of securities and cash from the Euroclear System and receipts of
payments with respect to securities in the Euroclear System. All securities in
the Euroclear System are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants and has no record of or relations with persons holding through
Euroclear Participants.
Distributions with respect to Securities of a series held through Cedel
Bank or Euroclear will be credited to the cash accounts of Cedel Bank
Participants or Euroclear Participants in accordance with the relevant system's
rules and procedures, to the extent received by its respective Depositary. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. The applicable Prospectus Supplement
with respect to a series of Debt Securities held through Cedel Bank or
Euroclear will set forth certain income tax consequences to foreign investors.
Cedel Bank or the Euroclear Operator, as the case may be, will take any other
action permitted to be taken by a holder of Securities under the applicable
Indenture, Warrant Agreement or Unit Agreement on behalf of a Cedel Bank
Participant or a Euroclear Participant only in accordance with its relevant
rules and procedures and subject to its respective Depositary's ability to
effect such actions on its behalf through DTC.
Although Cedel Bank and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of applicable Securities among participants of
DTC, Cedel Bank and Euroclear, they are under no obligation to perform or
continue to perform such procedures, and such procedures may be discontinued at
any time.
LEGAL OPINIONS
The legality of the Securities will be passed upon for the Corporation by
Smith Helms Mulliss & Moore, L.L.P., Charlotte, North Carolina, and for the
underwriters or agents by Stroock & Stroock & Lavan LLP, New York, New York. As
of the date of this Prospectus, certain members of Smith Helms Mulliss & Moore,
L.L.P. beneficially own approximately 160,000 shares of the Corporation's
Common Stock.
EXPERTS
The consolidated financial statements of the Corporation incorporated in
this Prospectus by reference to the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1997 and the Corporation's Current Report on
Form 8-K filed April 16, 1998, have been so incorporated in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The consolidated financial statements of BankAmerica Corporation at
December 31, 1997 and 1996, and for the three years ended December 31, 1997,
incorporated herein by reference from the Corporation's Current Report on Form
8-K filed on April 17, 1998 (as amended by Form 8-K/A-1 filed April 24, 1998
and Form 8-K/A-2 filed May 18, 1998), have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated herein
in reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You should rely only on the information incorporated by reference or provided
in this prospectus supplement, the attached prospectus and the related pricing
supplement. We have not authorized anyone to provide you with different
information. We are not offering these securities in any state where the offer
is not permitted. You should not assume that the information in this prospectus
supplement, the attached prospectus or the related pricing supplement is
accurate as of any date other than the date on the front of the applicable
document.
Affiliates of the Corporation, including NationsBanc Montgomery Securities LLC,
will deliver this prospectus supplement, the attached prospectus and the
related pricing supplement for offers and sales in the secondary market.
(Logo of BankAmerica appears here)
$5,000,000,000
Medium-Term Notes, Series H
-----------------------------------
PROSPECTUS SUPPLEMENT
-----------------------------------
NationsBanc Montgomery Securities LLC
Bear, Stearns & Co. Inc.
Lehman Brothers
Merrill Lynch & Co.
Salomon Smith Barney
November 16, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
