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FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION STATEMENT NO. 333-15559 and
333-15559-02
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 5, 1996
450,000 PREFERRED SECURITIES
BANKAMERICA CAPITAL II
8% CUMULATIVE SEMI-ANNUAL INCOME PREFERRED SECURITIES,
SERIES 2
(LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
BANKAMERICA CORPORATION
---------------
The 8% Cumulative Semi-Annual Income Preferred Securities, Series 2 (the
"Series 2 Preferred Securities"), offered hereby represent beneficial
interests in BankAmerica Capital II, a trust created under the laws of the
State of Delaware (the "Series 2 Issuer Trust"). BankAmerica Corporation, a
Delaware corporation (the "Corporation"), will be the owner of all of the
beneficial interests represented by common securities of the Series 2 Issuer
Trust ("Series 2 Common Securities" and, collectively with the Series 2
Preferred Securities, the "Series 2 Securities"). Bankers Trust Company is the
Property Trustee of the Series 2 Issuer Trust. The Series 2 Issuer Trust
exists for the sole purpose of issuing the Series 2 Securities and investing
the proceeds thereof in 8% Junior Subordinated
(Continued on next page)
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE SERIES 2 PREFERRED SECURITIES.
---------------
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF
ANY BANK OR NONBANK SUBSIDIARY OF THE CORPORATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------
The Underwriters (as defined herein) have agreed to purchase the Series 2
Preferred Securities from the Series 2 Issuer Trust at $999.38 per Preferred
Security ($449,721,000 aggregate proceeds to the Series 2 Issuer Trust) plus
accrued Distributions, if any, from December 23, 1996, subject to the terms
and conditions set forth in the Underwriting Agreement. The Underwriters
propose to offer the Series 2 Preferred Securities from time to time for sale
in one or more negotiated transactions, or otherwise, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or negotiated prices. See "Underwriting."
In view of the fact that the proceeds of the sale of the Series 2 Preferred
Securities will be used to purchase the Series 2 Subordinated Debentures, the
Underwriting Agreement provides that the Corporation will pay to the
Underwriters as compensation for their arranging the investment therein of
such proceeds, $10.00 per Series 2 Preferred Security (or $4,500,000 in the
aggregate). See "Underwriting." Expenses of the offering, which are payable by
the Corporation, are estimated to be $400,000.
---------------
This Prospectus Supplement and the related Prospectus may be used by BA
Securities, Inc., an affiliate of the Corporation and the Series 2 Issuer
Trust, in connection with offers and sales related to secondary market
transactions in the Series 2 Preferred Securities. BA Securities, Inc. may act
as principal or agent in such transactions. Such sales will be made at prices
related to prevailing market prices at the time of sale or otherwise.
The Series 2 Preferred Securities offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and acceptance by
them and subject to their right to reject any order in whole or in part. It is
expected that the Series 2 Preferred Securities will be ready for delivery in
book-entry form only through the facilities of The Depository Trust Company in
New York, New York, on or about December 23, 1996, against payment therefor in
immediately available funds.
UBS SECURITIES MORGAN STANLEY & CO.
INCORPORATED
BA SECURITIES, INC. CHASE SECURITIES INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS DECEMBER 18, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2
PREFERRED SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER THE COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
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(cover page continued)
Deferrable Interest Debentures, Series 2 (the "Series 2 Subordinated
Debentures"), to be issued by the Corporation. The Series 2 Subordinated
Debentures will mature on December 15, 2026 (the "Stated Maturity"), The
Series 2 Preferred Securities will have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Series 2 Common Securities. See
"Description of Preferred Securities--Subordination of Common Securities" in
the accompanying Prospectus.
Holders of the Series 2 Preferred Securities will be entitled to receive
preferential cumulative cash distributions accumulating from the date of
original issuance and payable semi-annually in arrears on June 15 and December
15 of each year, commencing June 15, 1997, at the annual rate of 8% of the
Liquidation Amount of $1,000 per Series 2 Preferred Security
("Distributions"). The Distribution on June 15, 1997 will be $38.2222 per
Series 2 Preferred Security. The Corporation has the right to defer payment of
interest on the Series 2 Subordinated Debentures at any time or from time to
time for a period not exceeding 10 consecutive semi-annual periods with
respect to each deferral period (each, an "Extension Period"), provided that
no Extension Period may extend beyond the Stated Maturity of the Series 2
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all amounts then due, the Corporation may elect to begin a new
Extension Period subject to the requirements set forth herein. If interest
payments on the Series 2 Subordinated Debentures are so deferred,
Distributions on the Series 2 Preferred Securities will also be deferred and
the Corporation will not be permitted, subject to certain exceptions described
herein, to declare or pay any cash distributions with respect to the
Corporation's capital stock or debt securities of the Corporation that rank
pari passu in all respects with or junior to the Series 2 Subordinated
Debentures. During an Extension Period, interest on the Series 2 Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Series 2 Preferred Securities are entitled will accumulate) at
the rate of 8% per annum, compounded semi-annually, and holders of Series 2
Preferred Securities will be required to accrue interest income for United
States federal income tax purposes. See "Certain Terms of Series 2
Subordinated Debentures--Option to Extend Interest Payment Period" and
"Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount."
The Corporation has, through the Series 2 Guarantee, the Trust Agreement,
the Series 2 Subordinated Debentures, the Junior Subordinated Indenture and
the Expense Agreement (each as defined herein), taken together, fully,
irrevocably and unconditionally guaranteed all of the Series 2 Issuer Trust's
obligations under the Series 2 Preferred Securities. See "Relationship Among
the Preferred Securities, the Corresponding Junior Subordinated Debentures and
the Guarantees--Full and Unconditional Guarantee" in the accompanying
Prospectus. The Series 2 Guarantee of the Corporation guarantees the payment
of Distributions and payments on liquidation or redemption of the Series 2
Preferred Securities, but only in each case to the extent of funds held by the
Series 2 Issuer Trust, as described herein (the "Series 2 Guarantee"). See
"Description of Guarantees" in the accompanying Prospectus. If the Corporation
does not make interest payments on the Series 2 Subordinated Debentures held
by the Series 2 Issuer Trust, the Series 2 Issuer Trust will have insufficient
funds to pay Distributions on the Series 2 Preferred Securities. The Series 2
Guarantee does not cover payment of Distributions when the Series 2 Issuer
Trust does not have sufficient funds to pay such Distributions. In such event,
a holder of Series 2 Preferred Securities may institute a legal proceeding
directly against the Corporation to enforce payment of such Distributions to
such holder. See "Description of Junior Subordinated Debentures--Enforcement
of Certain Rights By Holders of Preferred Securities" in the accompanying
Prospectus. The obligations of the Corporation under the
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(cover page continued)
Series 2 Guarantee are subordinate and junior in right of payment to all
Senior Indebtedness (as defined in "Description of Junior Subordinated
Debentures--Subordination" in the accompanying Prospectus) of the Corporation.
The Series 2 Preferred Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Series 2 Subordinated Debentures at
their Stated Maturity or earlier redemption. Subject to the Corporation having
received prior approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve") to do so if then required under applicable
capital guidelines or policies of the Federal Reserve, the Series 2
Subordinated Debentures are redeemable prior to their Stated Maturity at the
option of the Corporation (i) on or after December 15, 2006, in whole at any
time or in part from time to time, or (ii) in whole (but not in part) prior to
December 15, 2006 and within 90 days following the occurrence of a Tax Event
or Capital Treatment Event (each as defined herein), in each case at the
applicable redemption price set forth herein plus the accrued and unpaid
interest on the Series 2 Subordinated Debentures so redeemed to the date fixed
for redemption. See "Certain Terms of Series 2 Preferred Securities--
Redemption."
The Corporation will have the right at any time to terminate the Series 2
Issuer Trust and, after satisfaction of liabilities to creditors of the Series
2 Issuer Trust as required by applicable law, cause the Series 2 Subordinated
Debentures to be distributed to the holders of the Series 2 Securities in
liquidation of the Series 2 Issuer Trust, subject to the Corporation having
received (i) an opinion of counsel to the effect that such distribution will
not be a taxable event to holders of the Series 2 Preferred Securities and
(ii) prior approval of the Federal Reserve to do so if then required under
applicable capital guidelines or policies of the Federal Reserve. See "Certain
Terms of Series 2 Preferred Securities--Liquidation of Series 2 Issuer Trust
and Distribution of Series 2 Subordinated Debentures to Holders."
The Series 2 Subordinated Debentures are unsecured and subordinated to all
Senior Indebtedness. See "Risk Factors--Ranking of Subordinated Obligations
Under the Series 2 Guarantee and the Series 2 Subordinated Debentures."
In the event of the termination of the Series 2 Issuer Trust, after
satisfaction of liabilities to creditors of the Series 2 Issuer Trust as
required by applicable law, the holders of the Series 2 Preferred Securities
will be entitled to receive a Liquidation Amount of $1,000 per Series 2
Preferred Security plus accumulated and unpaid Distributions thereon to the
date of payment, which may be in the form of a distribution of such amount in
Series 2 Subordinated Debentures, subject to certain exceptions. See
"Description of Preferred Securities--Liquidation Distribution Upon
Termination" in the accompanying Prospectus.
The Series 2 Preferred Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Series 2 Preferred Securities will be shown on,
and transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described in the accompanying Prospectus,
Series 2 Preferred Securities in certificated form will not be issued in
exchange for the global certificates. See "Book-Entry Issuance" in the
accompanying Prospectus.
The information in this Prospectus Supplement supplements and should be read
in conjunction with the information contained in the accompanying Prospectus.
As used herein, (i) the "Junior Subordinated Indenture" means the Junior
Subordinated Indenture, as amended and supplemented from time to time, between
the Corporation and Bankers Trust Company, as trustee (the "Debenture
Trustee"), and (ii) the "Trust Agreement" means the Amended and Restated Trust
Agreement relating to the Series 2 Issuer Trust among the Corporation, as
Depositor, Bankers Trust Company, as Property Trustee (the "Property
Trustee"), Bankers Trust (Delaware), as Delaware Trustee (the "Delaware
Trustee"), and the Administrative Trustees named therein (collectively, with
the Property Trustee and Delaware Trustee, the "Issuer Trustees"). Each of the
other capitalized terms used in this Prospectus Supplement and not otherwise
defined in this Prospectus Supplement has the meaning set forth in the
accompanying Prospectus.
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RISK FACTORS
Prospective purchasers of the Series 2 Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and
in the accompanying Prospectus and should particularly consider the following
matters.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES 2 GUARANTEE AND THE
SERIES 2 SUBORDINATED DEBENTURES
The obligations of the Corporation under the Series 2 Guarantee issued by
the Corporation for the benefit of the holders of Series 2 Preferred
Securities and under the Series 2 Subordinated Debentures are subordinate and
junior in right of payment to all Senior Indebtedness of the Corporation. At
September 30, 1996, the aggregate outstanding Senior Indebtedness of the
Corporation was approximately $17.1 billion. Because the Corporation is a
holding company, the right of the Corporation to participate in any
distribution of assets of any subsidiary, including Bank of America National
Trust and Savings Association, Bank of America Illinois and Bank of America
NW, National Association, upon such subsidiary's liquidation or reorganization
or otherwise (and thus the ability of holders of the Series 2 Preferred
Securities to benefit indirectly from such distribution), is subject to the
prior claims of creditors of that subsidiary, except to the extent that the
Corporation may itself be recognized as a creditor of that subsidiary. In
addition, there are also various legal limitations on the extent to which the
Corporation's depository subsidiaries may extend credit, pay dividends or
otherwise supply funds to the Corporation or various of its affiliates.
Accordingly, the Series 2 Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and holders of Series 2 Subordinated Debentures and the Series 2
Guarantee should look only to the assets of the Corporation for payments on
the Series 2 Subordinated Debentures and the Series 2 Guarantee. See
"BankAmerica Corporation." None of the Junior Subordinated Indenture, the
Series 2 Guarantee or the Trust Agreement places any limitation on the amount
of secured or unsecured debt, including Senior Indebtedness, that may be
incurred by the Corporation. See "Description of Guarantees--Status of the
Guarantees" and "Description of Junior Subordinated Debentures--Subordination"
in the accompanying Prospectus.
The ability of the Series 2 Issuer Trust to pay amounts due on the Series 2
Preferred Securities is solely dependent upon the Corporation making payments
on the Series 2 Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no Event of Default under the Junior Subordinated Indenture has
occurred or is continuing, the Corporation has the right under the Junior
Subordinated Indenture to defer the payment of interest on the Series 2
Subordinated Debentures at any time or from time to time for a period not
exceeding 10 consecutive semi-annual periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Series 2 Subordinated Debentures. As a consequence of any such
deferral, semi-annual Distributions on the Series 2 Preferred Securities by
the Series 2 Issuer Trust will be deferred (and the amount of Distributions to
which holders of the Series 2 Preferred Securities are entitled will
accumulate additional Distributions thereon at the rate of 8% per annum,
compounded semi-annually from the relevant payment date for such
Distributions) during any such Extension Period. During any such Extension
Period, the Corporation may not, and may not permit any subsidiary of the
Corporation to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Corporation's capital stock, (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including other Junior Subordinated Debentures)
that rank pari passu in all respects with or junior in interest to the Series
2 Subordinated Debentures or (iii) make any guarantee payments with respect to
any guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation if such guarantee ranks pari passu with or
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junior in interest to the Series 2 Subordinated Debentures (other than (a)
dividends or distributions in common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under any Guarantee or under any similar guarantee and (d)
purchases of common stock related to the issuance of common stock or rights
under any of the Corporation's (including its subsidiaries') benefit plans for
their directors, officers or employees). Prior to the termination of any such
Extension Period, the Corporation may further defer the payment of interest,
provided that no Extension Period may exceed 10 consecutive semi-annual
periods or extend beyond the Stated Maturity of the Series 2 Subordinated
Debentures. Upon the termination of any Extension Period and the payment of
all interest then accrued and unpaid (together with interest thereon at the
annual rate of 8%, compounded semi-annually, to the extent permitted by
applicable law), the Corporation may elect to begin a new Extension Period
subject to the above requirements. There is no limitation on the number of
times that the Corporation may elect to begin an Extension Period. See
"Certain Terms of Series 2 Preferred Securities--Distributions" and "Certain
Terms of Series 2 Subordinated Debentures--Option to Extend Interest Payment
Period."
Should an Extension Period occur, a holder of Series 2 Preferred Securities
will continue to accrue income (in the form of original issue discount, which
will include both stated interest and any de minimis original issue discount
on the Series 2 Subordinated Debentures) in respect of its pro rata share of
the Series 2 Subordinated Debentures held by the Series 2 Issuer Trust for
United States federal income tax purposes. As a result, a holder of Series 2
Preferred Securities will include such income in gross income for United
States federal income tax purposes in advance of the receipt of cash, and will
not receive the cash related to such income from the Series 2 Issuer Trust if
the holder disposes of the Series 2 Preferred Securities prior to the record
date for the payment of Distributions. See "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount" and "--Sales or
Redemption of Series 2 Preferred Securities."
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series 2
Subordinated Debentures. However, should the Corporation elect to exercise
such right in the future, the market price of the Series 2 Preferred
Securities is likely to be affected. A holder that disposes of its Series 2
Preferred Securities during an Extension Period, therefore, might not receive
the same return on its investment as a holder that continues to hold its
Series 2 Preferred Securities. In addition, as a result of the existence of
the Corporation's right to defer interest payments, the market price of the
Series 2 Preferred Securities (which represent preferred beneficial interests
in the Series 2 Issuer Trust) may be more volatile than the market prices of
other securities on which original issue discount accrues that are not subject
to such deferrals.
TAX EVENT OR CAPITAL TREATMENT EVENT REDEMPTION
Upon the occurrence and during the continuation of a Tax Event or Capital
Treatment Event, the Corporation has the right to redeem the Series 2
Subordinated Debentures in whole (but not in part) prior to December 15, 2006
and within 90 days following the occurrence of such Tax Event or Capital
Treatment Event and therefore cause a mandatory redemption of the Series 2
Preferred Securities. Any such redemption shall be at a price equal to the
Make-Whole Amount (as defined in "Certain Terms of Series 2 Preferred
Securities--Redemption"), together with accrued interest to but excluding the
date fixed for redemption. The exercise of such right is subject to the
Corporation having received prior approval of the Federal Reserve to do so if
then required under applicable capital guidelines or policies of the Federal
Reserve.
A "Tax Event" means the receipt by the Series 2 Issuer Trust of an opinion
of counsel to the Corporation experienced in such matters to the effect that,
as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the
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United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or decision is
announced on or after the date of issuance of the Series 2 Preferred
Securities under the Trust Agreement, there is more than an insubstantial risk
that (i) the Series 2 Issuer Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Series 2 Subordinated Debentures, (ii)
interest payable by the Corporation on the Series 2 Subordinated Debentures is
not, or within 90 days of such opinion, will not be, deductible by the
Corporation, in whole or in part, for United States federal income tax
purposes, or (iii) the Series 2 Issuer Trust is, or will be within 90 days of
the date of the opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
See "--Possible Tax Law Changes Affecting the Series 2 Preferred Securities"
for a discussion of certain legislative proposals that, if adopted, could give
rise to a Tax Event, which may permit the Corporation to cause a redemption of
the Series 2 Preferred Securities prior to December 15, 2006.
A "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision thereof or
therein, or as a result of any official or administrative pronouncement or
action or judicial decision interpreting or applying such laws or regulations,
which amendment or change is effective or such pronouncement, action or
decision is announced on or after the date of issuance of the Series 2
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that the Corporation will not be entitled to treat an
amount equal to the Liquidation Amount of the Series 2 Preferred Securities as
"Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital
adequacy guidelines of the Federal Reserve, as then in effect and applicable
to the Corporation.
EXCHANGE OF SERIES 2 SECURITIES FOR SERIES 2 SUBORDINATED DEBENTURES
The Corporation will have the right at any time to terminate the Series 2
Issuer Trust and after satisfaction of the liabilities of creditors of the
Series 2 Issuer Trust as provided by applicable law, cause the Series 2
Subordinated Debentures to be distributed to the holders of the Series 2
Securities in liquidation of the Series 2 Issuer Trust. The exercise of such
right is subject to the Corporation having received (i) an opinion of counsel
to the effect that such distribution will not be a taxable event to holders of
the Series 2 Preferred Securities and (ii) prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies of
the Federal Reserve. See "Certain Terms of Series 2 Preferred Securities--
Liquidation of Series 2 Issuer Trust and Distribution of Series 2 Subordinated
Debentures to Holders."
MARKET PRICES
There can be no assurance as to the market prices for Series 2 Preferred
Securities or Series 2 Subordinated Debentures that may be distributed in
exchange for Series 2 Preferred Securities if a liquidation of the Series 2
Issuer Trust occurs. Accordingly, the Series 2 Preferred Securities that an
investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Series 2 Subordinated Debentures that a holder of
Series 2 Preferred Securities may receive on liquidation of the Series 2
Issuer Trust, may trade at a discount to the price that the investor paid to
purchase the Series 2 Preferred Securities offered hereby. Because holders of
Series 2 Preferred Securities may receive Series 2 Subordinated Debentures on
termination of the Series 2 Issuer Trust, prospective purchasers of Series 2
Preferred Securities are also making an investment decision with regard to the
Series 2 Subordinated Debentures and should carefully review all the
information regarding the Series 2 Subordinated Debentures contained herein.
See "Certain Terms of the Series 2 Subordinated Debentures" in this Prospectus
Supplement and "Description of Junior Subordinated Debentures--Corresponding
Junior Subordinated Debentures" in the accompanying Prospectus.
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RIGHTS UNDER THE SERIES 2 GUARANTEE
The Series 2 Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Bankers Trust
Company will act as the indenture trustee under the Series 2 Guarantee (the
"Guarantee Trustee") for the purposes of compliance with the Trust Indenture
Act and will hold the Series 2 Guarantee for the benefit of the holders of the
Series 2 Preferred Securities. Bankers Trust Company will also act as
Debenture Trustee for the Series 2 Subordinated Debentures and as Property
Trustee and Bankers Trust (Delaware) will act as Delaware Trustee under the
Trust Agreement. The Series 2 Guarantee guarantees to the holders of the
Series 2 Preferred Securities the following payments, to the extent not paid
by the Series 2 Issuer Trust: (i) any accrued and unpaid Distributions
required to be paid on the Series 2 Preferred Securities, to the extent that
the Series 2 Issuer Trust has funds on hand available therefor at such time,
(ii) the Redemption Price with respect to any Series 2 Preferred Securities
called for redemption, to the extent that the Series 2 Issuer Trust has funds
on hand available therefor at such time, and (iii) upon a voluntary or
involuntary termination, winding-up or liquidation of the Series 2 Issuer
Trust (unless the Series 2 Subordinated Debentures are distributed to holders
of the Series 2 Preferred Securities), the lesser of (a) the aggregate of the
Liquidation Amount and all accrued and unpaid Distributions to the date of
payment to the extent that the Series 2 Issuer Trust has funds on hand
available therefor at such time and (b) the amount of assets of the Series 2
Issuer Trust remaining available for distribution to holders of the Series 2
Preferred Securities on liquidation of the Series 2 Issuer Trust. The Series 2
Guarantee is subordinate as described under "--Ranking of Subordinated
Obligations Under the Series 2 Guarantee and the Series 2 Subordinated
Debentures." The holders of not less than a majority in aggregate Liquidation
Amount of the Series 2 Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Series 2 Guarantee or to direct the
exercise of any trust power conferred upon the Guarantee Trustee under the
Series 2 Guarantee. Any holder of the Series 2 Preferred Securities may
institute a legal proceeding directly against the Corporation to enforce its
rights under the Series 2 Guarantee without first instituting a legal
proceeding against the Series 2 Issuer Trust, the Guarantee Trustee or any
other person or entity. If the Corporation were to default on its obligation
to pay amounts payable under the Series 2 Subordinated Debentures, the Series
2 Issuer Trust would lack funds for the payment of Distributions or amounts
payable on redemption of the Series 2 Preferred Securities or otherwise, and,
in such event, holders of the Series 2 Preferred Securities would not be able
to rely upon the Series 2 Guarantee for payment of such amounts. Instead, in
the event a Debenture Event of Default shall have occurred and be continuing
and such event is attributable to the failure of the Corporation to pay
interest or premium, if any, on or principal of the Series 2 Subordinated
Debentures on the payment date on which such payment is due and payable, then
a holder of Series 2 Preferred Securities may institute a legal proceeding
directly against the Corporation for enforcement of payment to such holder of
the principal of or interest or premium, if any, on such Series 2 Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Series 2 Preferred Securities of such holder (a "Direct Action"). In
connection with such Direct Action, the Corporation will have a right of set-
off under the Junior Subordinated Indenture to the extent of any payment made
by the Corporation to such holder of Series 2 Preferred Securities in the
Direct Action. Except as described herein, holders of Series 2 Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Series 2 Subordinated Debentures or assert directly any
other rights in respect of the Series 2 Subordinated Debentures. See
"Description of Junior Subordinated Debentures--Enforcement of Certain Rights
by Holders of Preferred Securities," "--Debenture Events of Default" and
"Description of Guarantees" in the accompanying Prospectus. The Trust
Agreement provides that each holder of Series 2 Preferred Securities by
acceptance thereof agrees to the provisions of the Series 2 Guarantee and the
Junior Subordinated Indenture.
LIMITED VOTING RIGHTS
Holders of Series 2 Preferred Securities will generally have limited voting
rights relating only to the modification of the Series 2 Preferred Securities
and the exercise of the Series 2 Issuer Trust's
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rights as holder of Series 2 Subordinated Debentures and the Series 2
Guarantee. Holders of Series 2 Preferred Securities will not be entitled to
vote to appoint, remove or replace the Property Trustee or the Delaware
Trustee, and such voting rights are vested exclusively in the holder of the
Series 2 Common Securities except upon the occurrence of certain events
described herein. The Property Trustee, the Administrative Trustees and the
Corporation may amend the Trust Agreement without the consent of holders of
Series 2 Preferred Securities to ensure that the Series 2 Issuer Trust will be
classified for United States federal income tax purposes as a grantor trust
unless such action materially and adversely affects the interests of such
holders. See "Description of Preferred Securities--Voting Rights; Amendment of
Each Trust Agreement" and "--Removal of Issuer Trustees" in the accompanying
Prospectus.
TRADING CHARACTERISTICS OF SERIES 2 PREFERRED SECURITIES
The Corporation does not intend to have the Series 2 Preferred Securities
listed on the New York Stock Exchange or any other securities exchange. The
Series 2 Preferred Securities may trade at prices that do not fully reflect
the value of accrued and unpaid interest with respect to the underlying Series
2 Subordinated Debentures. See "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount" and "--Sales or Redemption of
Series 2 Preferred Securities" for a discussion of the United States federal
income tax consequences that may result from a taxable disposition of the
Series 2 Preferred Securities.
POSSIBLE TAX LAW CHANGES AFFECTING THE SERIES 2 PREFERRED SECURITIES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"), the
revenue portion of President Clinton's budget proposal, was released. The Bill
would generally deny interest deductions for interest on an instrument, issued
by a corporation, that has a maximum term of more than 20 years and that is
not shown as indebtedness on the separate balance sheet of the issuer or,
where the instrument is issued to a related party (other than a corporation),
where the holder or some other related party issues a related instrument that
is not shown as indebtedness on the issuer's consolidated balance sheet. If
these provisions were to apply to the Series 2 Subordinated Debentures, the
Corporation would be unable to deduct interest on the Series 2 Subordinated
Debentures. On March 29, 1996, the Chairmen of the Senate Finance and House
Ways and Means Committees issued a joint statement to the effect that it was
their intention that the effective date of the President's legislative
proposals, if adopted, will be no earlier than the date of appropriate
Congressional action. Under current law, the Corporation will be able to
deduct interest on the Series 2 Subordinated Debentures. There can be no
assurance, however, that current or future legislative proposals or final
legislation will not affect the ability of the Corporation to deduct interest
on the Series 2 Subordinated Debentures. Such a change could give rise to a
Tax Event, which may permit the Corporation, upon approval of the Federal
Reserve if then required under applicable capital guidelines or policies of
the Federal Reserve, to cause a redemption of the Series 2 Preferred
Securities before December 15, 2006. See "Certain Terms of Series 2
Subordinated Debentures--Redemption" in this Prospectus Supplement and
"Description of Preferred Securities--Redemption" in the accompanying
Prospectus. See also "Certain Federal Income Tax Consequences--Possible Tax
Law Changes."
S-8
<PAGE>
BANKAMERICA CAPITAL II
BankAmerica Capital II is a statutory business trust created under Delaware
law pursuant to (i) the Trust Agreement executed by the Corporation, as
Depositor, Bankers Trust Company, as Property Trustee, Bankers Trust
(Delaware), as Delaware Trustee, and the Administrative Trustees named
therein, and (ii) the filing of a certificate of trust with the Delaware
Secretary of State on November 4, 1996. The Series 2 Issuer Trust's business
and affairs are conducted by the Issuer Trustees: Bankers Trust Company, as
Property Trustee, and Bankers Trust (Delaware), as Delaware Trustee, and three
individual Administrative Trustees who are employees or officers of or
affiliated with the Corporation. The Series 2 Issuer Trust exists for the
exclusive purposes of (i) issuing and selling the Series 2 Securities,
(ii) using the proceeds from the sale of Series 2 Securities to acquire Series
2 Subordinated Debentures issued by the Corporation and (iii) engaging in only
those other activities necessary or incidental thereto (such as registering
the transfer of the Series 2 Securities). Accordingly, the Series 2
Subordinated Debentures and the right to reimbursement of expenses under the
related Expense Agreement will be the sole assets of the Series 2 Issuer
Trust, and payments under the Series 2 Subordinated Debentures and the related
Expense Agreement will be the sole revenue of the Series 2 Issuer Trust. All
of the Series 2 Common Securities will be owned by the Corporation. The Series
2 Common Securities will rank pari passu, and payments will be made thereon
pro rata, with the Series 2 Preferred Securities, except that upon the
occurrence and continuance of an event of default under the Trust Agreement
resulting from an Event of Default under the Junior Subordinated Indenture,
the rights of the Corporation as holder of the Series 2 Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption
or otherwise will be subordinated to the rights of the holders of the Series 2
Preferred Securities. See "Description of Preferred Securities--Subordination
of Common Securities" in the accompanying Prospectus. The Corporation will
acquire Series 2 Common Securities in an aggregate liquidation amount equal to
3% of the total capital of the Series 2 Issuer Trust. The Series 2 Issuer
Trust has a term of 31 years, but may terminate earlier as provided in the
Trust Agreement. The principal executive office of the Series 2 Issuer Trust
is 555 California Street, San Francisco, California 94104, Attention:
Secretary, and its telephone number is (415) 622-3530. See "The Issuer Trusts"
in the accompanying Prospectus.
BANKAMERICA CORPORATION
The Corporation is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"), and was incorporated in the
State of Delaware in 1968. At September 30, 1996, the Corporation was one of
the three largest bank holding companies in the United States, based on total
assets.
The Corporation's largest subsidiaries, based on total assets, are Bank of
America National Trust and Savings Association ("Bank of America"), Bank of
America Illinois ("BAI"), and Bank of America NW, National Association,
formerly Seattle-First National Bank ("BANW").
Bank of America became a subsidiary of the Corporation in 1969. Bank of
America began business in San Francisco, California, as Bank of Italy in 1904
and adopted its present name in 1930. BAI, headquartered in Chicago, Illinois,
was acquired by the Corporation in 1994. BANW, the largest commercial bank in
Washington based on total assets at September 30, 1996, was acquired by the
Corporation in 1983.
The Corporation, through its network of subsidiaries, provides banking and
other financial services throughout the United States and in selected
international markets to consumers and business customers, including
corporations, governments and other institutions.
The Corporation's principal executive offices are located at 555 California
Street, San Francisco, California 94104 (telephone (415) 622-3530).
S-9
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the Corporation including its
consolidated subsidiaries is computed by dividing earnings by fixed charges.
Earnings consist primarily of income (loss) before income taxes adjusted for
fixed charges. Fixed charges consist primarily of interest expense on short-
and long-term borrowings and one-third (the portion deemed representative of
the interest factor) of net rents under long-term leases.
The following table sets forth the ratio of earnings to fixed charges for
the Corporation and its consolidated subsidiaries for the periods indicated
and reflects the effects of the merger of Continental Bank Corporation with
and into the Corporation subsequent to its consummation on August 31, 1994 and
the effects of the merger of Security Pacific Corporation with and into the
Corporation subsequent to its consummation on April 22, 1992.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------- ------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
RATIO OF EARNINGS TO FIXED CHARGES
Excluding interest on deposits.......... 2.72 2.75 2.77 3.26 3.55 3.18 3.25
Including interest on deposits.......... 1.60 1.61 1.61 1.74 1.79 1.53 1.34
</TABLE>
S-10
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation and its subsidiaries as of September 30, 1996 and as adjusted to
give effect to the consummation of the offering of the Series 2 Preferred
Securities and the offering of $450,000,000 of 8.07% Capital Securities,
Series A (the "Series A Securities") and $300,000,000 of 7.7% Capital
Securities, Series B (the "Series B Securities"), each of which was
consummated on November 27, 1996, and $300,000,000 of 7 3/4% Trust Originated
Preferred Securities, Series 1 (the "Series 1 Securities") which is expected
to be consummated on December 20, 1996. The following data should be read in
conjunction with the consolidated financial statements and notes thereto of
the Corporation and its subsidiaries incorporated in the accompanying
Prospectus by reference.
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
-----------------
AS
ACTUAL ADJUSTED
------- --------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C>
Long-Term Debt:
Senior Debt
The Corporation............................................. $ 8,244 $ 8,244
Subsidiary obligations...................................... 415 415
======= =======
8,659 8,659
------- -------
Subordinated Debt
The Corporation............................................. 5,986 5,986
Subsidiary obligations...................................... 454 454
------- -------
6,440 6,440
------- -------
Total Long-Term Debt...................................... 15,099 15,099
------- -------
Subordinated Capital Notes(a)................................. 355 355
------- -------
Corporation Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Solely Junior
Subordinated Deferrable Interest Debentures of the
Corporation(b)............................................... -- 1,500
Preferred Stock (authorized: 70,000,000 shares;
issued: 36,538,239 shares)................................... 2,242 2,242
------- -------
Common Stockholders' Equity:
Common stock, par value $1.5625 (authorized: 700,000,000
shares; issued: 387,291,562 shares)........................ 605 605
Additional paid-in capital.................................. 8,458 8,458
Retained earnings........................................... 10,989 10,989
Net unrealized loss on available-for-sale securities........ (27) (27)
Common stock in treasury, at cost (28,465,838 shares)....... (1,755) (1,755)
------- -------
Total Common Stockholders' Equity......................... 18,270 18,270
------- -------
Total Capitalization of the Corporation(c)............... $35,966 $37,466
======= =======
</TABLE>
- --------
(a) Issuances of common and preferred stock of $350 million have been
dedicated to retire or redeem subordinated capital notes.
(b) The Series 2 Preferred Securities are issued by the Series 2 Issuer Trust.
The sole assets of the Series 2 Issuer Trust consist of $463,918,000
principal amount of Series 2 Subordinated Debentures issued by the
Corporation to the Series 2 Issuer Trust and the Expense Agreement. The
Series 2 Subordinated Debentures will bear interest at the rate of 8% per
annum and will mature on December 15, 2026. The Corporation owns all of
the Series 2 Common Securities of the Series 2 Issuer Trust.
S-11
<PAGE>
The Series A Securities were issued by BankAmerica Institutional Capital A
(the "Series A Trust"). The sole assets of the Series A Trust consist of
$463,918,000 principal amount of 8.07% Junior Subordinated Deferrable
Interest Debentures, Series A (the "Series A Debentures") issued by the
Corporation to the Series A Trust and a related expense reimbursement
agreement issued by the Corporation. The Series A Debentures bear interest
at the rate of 8.07% per annum and will mature on December 31, 2026. The
Corporation owns all of the Common Securities of the Series A Trust.
The Series B Securities were issued by BankAmerica Institutional Capital B
(the "Series B Trust"). The sole assets of the Series B Trust consist of
$309,279,000 principal amount of 7.7% Junior Subordinated Deferrable
Interest Debentures, Series B (the "Series B Debentures") issued by the
Corporation to the Series B Trust. The Series B Debentures bear interest at
the rate of 7.7% per annum and will mature on December 31, 2026. The
Corporation owns all of the Common Securities of the Series B Trust.
The Series 1 Securities are to be issued by BankAmerica Capital I (the
"Series 1 Trust"). The sole assets of the Series 1 Trust consist of
$309,279,000 principal amount of 7 3/4% Junior Subordinated Deferrable
Interest Debentures, Series 1 (the "Series 1 Debentures") issued by the
Corporation to the Series 1 Trust and a related expense reimbursement
agreement issued by the Corporation. The Series 1 Debentures bear interest
at the rate of 7 3/4% per annum and will mature on December 31, 2026, which
date may be shortened to a date not earlier than December 20, 2001 or
extended to a date not later than December 31, 2045, in either case, if
certain conditions are met. The Corporation owns all of the Common
Securities of the Series 1 Trust.
(c) Subsequent to September 30, 1996, the capitalization of the Corporation
and its consolidated subsidiaries has been affected by various issuances,
redemptions, repurchases and maturities which are not reflected in this
table.
S-12
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Series 2 Issuer Trust will be treated
as a subsidiary of the Corporation and, accordingly, the accounts of the
Series 2 Issuer Trust will be included in the consolidated financial
statements of the Corporation. The Series 2 Preferred Securities will be
included in a separate line item in the consolidated balance sheets of the
Corporation, entitled "Corporation Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Solely Junior Subordinated Deferrable
Interest Debentures of the Corporation" and appropriate disclosures about the
Series 2 Preferred Securities, the Series 2 Guarantee and the Series 2
Subordinated Debentures will be included in the notes to the consolidated
financial statements. For financial reporting purposes, the Corporation will
record Distributions payable on the Series 2 Preferred Securities as an
expense in the consolidated statements of income.
The Corporation has agreed that future financial reports of the Corporation
will: (i) present the preferred securities issued by other trusts created by
the Corporation on the Corporation's balance sheet in the separate line item
entitled "Corporation Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trusts Holding Solely Junior Subordinated Deferrable Interest
Debentures of the Corporation"; (ii) include in a footnote to the financial
statements disclosure that the sole assets of the trusts are the junior
subordinated debentures and the related expense agreement (specifying as to
each trust the principal amount, interest rate and maturity date of junior
subordinated debentures held); and (iii) if Staff Accounting Bulletin 53
treatment is sought, include, in an audited footnote to the financial
statements, disclosure that (a) the trusts are wholly owned, (b) the sole
assets of the trusts are the junior subordinated debentures (specifying as to
each trust the principal amount, interest rate and maturity date of the junior
subordinated debentures held) and the related expense agreement, and (c) the
obligations of the Corporation under the junior subordinated debentures, the
relevant indenture, trust agreement and guarantee, in the aggregate,
constitute a full and unconditional guarantee by the Corporation of such
trust's obligations under the preferred securities issued by such trust.
CERTAIN TERMS OF SERIES 2 PREFERRED SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series 2
Preferred Securities supplements the description of the terms and provisions
of the Preferred Securities set forth in the accompanying Prospectus under the
heading "Description of Preferred Securities," to which description reference
is hereby made. This summary of certain terms and provisions of the Series 2
Preferred Securities, which describes the material provisions thereof, does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the Trust Agreement, to which reference is hereby made. The
form of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and accompanying Prospectus form
a part.
DISTRIBUTIONS
The Series 2 Preferred Securities represent beneficial interests in the
Series 2 Issuer Trust, and Distributions on each Series 2 Preferred Security
will be payable at the annual rate of 8% of the stated Liquidation Amount of
$1,000, payable semi-annually in arrears on June 15 and December 15 of each
year, to the holders of the Series 2 Preferred Securities at the close of
business on the relevant record dates. The record dates will be, for so long
as the Series 2 Preferred Securities remain in book-entry form, one Business
Day prior to the relevant Distribution payment date and, in the event the
Series 2 Preferred Securities are not in book-entry form, the 1st day of the
month in which the relevant Distribution payment date occurs. Distributions
will accumulate from the date of original
S-13
<PAGE>
issuance. The first Distribution payment date for the Series 2 Preferred
Securities will be June 15, 1997 and the Distribution will be $38.22222 per
Series 2 Preferred Security. The amount of Distributions payable for any
period less than a full Distribution period will be computed on the basis of a
360-day year of twelve 30-day months and the actual days elapsed in a partial
month in a period. Distributions payable for each full Distribution period
will be computed by dividing the rate per annum by two. In the event that any
date on which Distributions are payable on the Series 2 Preferred Securities
is not a Business Day, then payment of the Distributions payable on such date
will be made on the next succeeding day that is a Business Day (and without
any additional Distributions or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year,
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on the date such payment was
originally payable. See "Description of Preferred Securities--Distributions"
in the accompanying Prospectus.
So long as no Event of Default under the Junior Subordinated Indenture has
occurred and is continuing, the Corporation has the right under the Junior
Subordinated Indenture to defer the payment of interest on the Series 2
Subordinated Debentures at any time or from time to time for a period not
exceeding 10 consecutive semi-annual periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Series 2 Subordinated Debentures. As a consequence of any such
election, semi-annual Distributions on the Series 2 Preferred Securities will
be deferred by the Series 2 Issuer Trust during any such Extension Period.
Distributions to which holders of the Series 2 Preferred Securities are
entitled will accumulate additional Distributions thereon at the rate per
annum of 8% thereof, compounded semi-annually from the relevant payment date
for such Distributions, computed on the basis of a 360-day year of twelve 30-
day months and the actual days elapsed in a partial month in a period.
Additional Distributions payable for each full Distribution period will be
computed by dividing the rate per annum by two. The term "Distributions" as
used herein shall include any such additional Distributions. During any such
Extension Period, the Corporation may not, and may not permit any subsidiary
of the Corporation to, (i) declare or pay any dividends or distributions on,
or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Corporation's capital stock or (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including other Junior Subordinated Debentures)
that rank pari passu in all respects with or junior in interest to the Series
2 Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Corporation of the debt securities of any subsidiary of the
Corporation if such guarantee ranks pari passu with or junior in interest to
the Series 2 Subordinated Debentures (other than (a) dividends or
distributions in common stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto, (c) payments under any
Guarantee or any similar guarantee and (d) purchases of common stock related
to the issuance of common stock or rights under any of the Corporation's
(including its subsidiaries') benefit plans for their directors, officers or
employees). Prior to the termination of any such Extension Period, the
Corporation may further defer the payment of interest, provided that no
Extension Period may exceed 10 consecutive semi-annual periods or extend
beyond the Stated Maturity of the Series 2 Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due, the Corporation may elect to begin a new Extension Period. There is no
limitation on the number of times that the Corporation may elect to begin an
Extension Period. See "Certain Terms of Series 2 Subordinated Debentures--
Option to Extend Interest Payment Period" and "Certain Federal Income Tax
Consequences--Original Issue Discount."
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series 2
Subordinated Debentures.
S-14
<PAGE>
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series 2
Subordinated Debentures, whether at Stated Maturity or upon earlier redemption
as provided in the Junior Subordinated Indenture, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Series 2 Securities, upon not less than
30 nor more than 90 days notice prior to the date fixed for repayment or
redemption, at a redemption price, with respect to the Series 2 Securities
(the "Redemption Price"), equal to the aggregate Liquidation Amount of such
Series 2 Securities plus accumulated and unpaid Distributions thereon to but
excluding the date of redemption (the "Redemption Date") and the related
amount of premium, if any, paid by the Corporation upon the concurrent
redemption of such Series 2 Subordinated Debentures. See "Description of
Preferred Securities--Redemption" in the accompanying Prospectus. For a
description of the Stated Maturity and redemption provisions of the Series 2
Subordinated Debentures, see "Certain Terms of Series 2 Subordinated
Debentures--General" and "--Redemption."
The Corporation has the right to redeem the Series 2 Subordinated Debentures
(i) on or after December 15, 2006, in whole at any time or in part from time
to time, or (ii) in whole (but not in part) prior to December 15, 2006 and
within 90 days following the occurrence of a Tax Event or Capital Treatment
Event (each as defined below). A redemption of the Series 2 Subordinated
Debentures would cause a mandatory redemption of the Series 2 Preferred
Securities and Series 2 Common Securities.
The Redemption Price, in the case of a redemption under (i) above, shall
equal the following prices expressed in percentages of the Liquidation Amount
(as defined below) together with accrued Distributions to but excluding the
date fixed for redemption. If redeemed during the 12-month period beginning
December 15:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2006........................................................... 103.9690%
2007........................................................... 103.5721
2008........................................................... 103.1752
2009........................................................... 102.7783
2010........................................................... 102.3814
2011........................................................... 101.9845
2012........................................................... 101.5876
2013........................................................... 101.1907
2014........................................................... 100.7938
2015........................................................... 100.3969
</TABLE>
and at 100% on or after December 15, 2016.
The Redemption Price, in the case of a redemption following a Tax Event or
Capital Treatment Event as described under (ii) above, shall equal for each
Series 2 Preferred Security the Make-Whole Amount for a corresponding $1,000
principal amount of Series 2 Subordinated Debentures together with accrued
Distributions to but excluding the Redemption Date. The "Make-Whole Amount"
shall be equal to the greater of (i) 100% of the principal amount of such
Series 2 Subordinated Debentures or (ii) as determined by a Quotation Agent
(as defined below), the sum of the present values of the principal amount and
premium payable as part of the Redemption Price with respect to an optional
redemption of such Series 2 Subordinated Debentures on December 15, 2006,
together with scheduled payments of interest from the Redemption Date to
December 15, 2006 (the "Remaining Life"), in each case discounted to the
prepayment date on a semi-annual basis (assuming a 360-day year consisting of
30-day months) at the Adjusted Treasury Rate.
S-15
<PAGE>
"Adjusted Treasury Rate" means, with respect to any Redemption Date, the
Treasury Rate plus (i) 1.25% if such Redemption Date occurs on or before
December 15, 1997 or (ii) .50% if such Redemption Date occurs after December
15, 1997.
"Treasury Rate" means (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Remaining Life (if no
maturity is within three months before or after the Remaining Life, yields for
the two published maturities most closely corresponding to the Remaining Life
shall be determined and the Treasury Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding to the
nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Redemption Date. The Treasury
Rate shall be calculated on the third Business Day preceding the Redemption
Date.
"Comparable Treasury Issue" means with respect to any Redemption Date the
United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the Remaining Life that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing
new issues of corporate debt securities of comparable maturity to the
Remaining Life. If no United States Treasury security has a maturity which is
within a period from three months before to three months after December 15,
2006, the two most closely corresponding United States Treasury securities
shall be used as the Comparable Treasury Issue, and the Treasury Rate shall be
interpolated or extrapolated on a straight-line basis, rounding to the nearest
month using such securities.
"Quotation Agent" means UBS Securities LLC and their respective successors;
provided, however, that if the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"),
the Corporation shall substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any other
Primary Treasury Dealer selected by the Debenture Trustee after consultation
with the Corporation.
"Comparable Treasury Price" means (A) the average of five Reference Treasury
Dealer Quotations for such Redemption Date, after excluding the highest and
lowest such Reference Treasury Dealer Quotations, or (B) if the Debenture
Trustee obtains fewer than three such Reference Treasury Dealer Quotations,
the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any Redemption Date, the average, as determined by the
Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00
p.m., New York City time, on the third Business Day preceding such Redemption
Date.
"Like Amount" means (i) with respect to a redemption of Series 2 Securities,
Series 2 Securities having a Liquidation Amount (as defined below) equal to
that portion of the principal amount of Series 2 Subordinated Debentures to be
contemporaneously redeemed in accordance with the Junior Subordinated
Indenture, allocated to the Series 2 Common Securities and to the Series 2
Preferred Securities based upon the relative Liquidation Amounts of such
classes and the proceeds of which will be used to pay the Redemption Price of
the Series 2 Securities and (ii) with respect to a distribution of Series 2
Subordinated Debentures to holders of Series 2 Securities in connection with a
dissolution or liquidation of the Series 2 Issuer Trust, Series 2 Subordinated
Debentures having a principal amount
S-16
<PAGE>
equal to the Liquidation Amount of the Series 2 Securities of the holder to
whom such Series 2 Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $1,000 per Series 2
Security.
"Tax Event" means the receipt by the Series 2 Issuer Trust of an opinion of
counsel to the Corporation experienced in such matters to the effect that, as
a result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or
any political subdivision or taxing authority thereof or therein, or as a
result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change
is effective or which pronouncement or decision is announced on or after the
date of issuance of such Series 2 Preferred Securities under the Trust
Agreement, there is more than an insubstantial risk that (i) the Series 2
Issuer Trust is, or will be within 90 days of the date of such opinion,
subject to United States federal income tax with respect to income received or
accrued on the Series 2 Subordinated Debentures, (ii) interest payable by the
Corporation on the Series 2 Subordinated Debentures is not, or within 90 days
of the date of such opinion, will not be, deductible by the Corporation, in
whole or in part, for United States federal income tax purposes or (iii) the
Series 2 Issuer Trust is, or will be within 90 days of the date of such
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision thereof or
therein, or as a result of any official or administrative pronouncement or
action or judicial decision interpreting or applying such laws or regulations,
which amendment or change is effective or such pronouncement, action or
decision is announced on or after the date of issuance of the Series 2
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that the Corporation will not be entitled to treat an
amount equal to the Liquidation Amount of the Series 2 Preferred Securities as
"Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital
adequacy guidelines of the Federal Reserve, as then in effect and applicable
to the Corporation.
LIQUIDATION OF SERIES 2 ISSUER TRUST AND DISTRIBUTION OF SERIES 2 SUBORDINATED
DEBENTURES TO HOLDERS
The Corporation will have the right at any time to terminate the Series 2
Issuer Trust and cause the Series 2 Subordinated Debentures to be distributed
to the holders of the Series 2 Securities in liquidation of the Series 2
Issuer Trust. Such right is subject to the Corporation having received (i) an
opinion of counsel to the effect that such distribution will not be a taxable
event to the holders of Series 2 Preferred Securities and (ii) prior approval
of the Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve.
Under current United States federal income tax law and interpretations and
assuming, as expected, the Series 2 Issuer Trust is treated as a grantor
trust, a distribution of the Series 2 Subordinated Debentures should not be a
taxable event to holders of the Series 2 Preferred Securities.
LIQUIDATION VALUE
The amount payable on the Series 2 Preferred Securities in the event of any
liquidation of the Series 2 Issuer Trust is $1,000 per Series 2 Preferred
Security plus accumulated and unpaid Distributions, which may be in the form
of a distribution of such amount in Series 2 Subordinated Debentures, subject
to certain exceptions. See "Description of Preferred Securities--Liquidation
Distribution Upon Termination" in the accompanying Prospectus.
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REGISTRATION OF SERIES 2 PREFERRED SECURITIES
The Series 2 Preferred Securities will be represented by global certificates
registered in the name of DTC or its nominee. Beneficial interests in the
Series 2 Preferred Securities will be shown on, and transfers thereof will be
effected only through, records maintained by participants in DTC. Except as
described below and in the accompanying Prospectus, Series 2 Preferred
Securities in certificated form will not be issued in exchange for the global
certificates. See "Book-Entry Issuance" in the accompanying Prospectus.
A global security shall be exchangeable for Series 2 Preferred Securities
registered in the names of persons other than DTC or its nominee only if (i)
DTC notifies the Corporation that it is unwilling or unable to continue as a
depository for such global security and no successor depository shall have
been appointed, or if at any time DTC ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, at a time
when DTC is required to be so registered to act as such depository, (ii) the
Corporation in its sole discretion determines that such global security shall
be so exchangeable or (iii) there shall have occurred and be continuing an
Event of Default under the Junior Subordinated Indenture with respect to the
Series 2 Subordinated Debentures. Any global security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for definitive
certificates registered in such names as DTC shall direct. It is expected that
such instructions will be based upon directions received by DTC from its
Participants (as defined in the accompanying Prospectus) with respect to
ownership of beneficial interests in such global security. In the event that
Series 2 Preferred Securities are issued in definitive form, such Series 2
Preferred Securities will be in denominations of $1,000 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Series 2 Preferred Securities represented by a global security
will be made to DTC, as the depository for the Series 2 Preferred Securities.
In the event Series 2 Preferred Securities are issued in definitive form, the
Redemption Price and Distributions will be payable, the transfer of the Series
2 Preferred Securities will be registrable, and Series 2 Preferred Securities
will be exchangeable for Series 2 Preferred Securities of other denominations
of a like aggregate principal amount, at the corporate trust office of the
Property Trustee in New York, New York, or at the offices of any paying agent
or transfer agent appointed by the Administrative Trustees, provided that
payment of any Distribution may be made at the option of the Administrative
Trustees by check mailed to the address of the persons entitled thereto or by
wire transfer. In addition, if the Series 2 Preferred Securities are issued in
certificated form, the record dates for payment of Distributions will be the
1st day of the month in which the Distribution is made. For a description of
DTC and the terms of the depository arrangements relating to payments,
transfers, voting rights, redemptions and other notices and other matters, see
"Book-Entry Issuance" in the accompanying Prospectus.
CERTAIN TERMS OF SERIES 2 SUBORDINATED DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Series 2
Subordinated Debentures supplements the description of the terms and
provisions of the Corresponding Junior Subordinated Debentures set forth in
the accompanying Prospectus under the headings "Description of Junior
Subordinated Debentures" and "Description of Junior Subordinated Debentures--
Corresponding Junior Subordinated Debentures," to which description reference
is hereby made. The summary of certain terms and provisions of the Series 2
Subordinated Debentures set forth below, which describes the material terms
thereof, does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the Junior Subordinated Indenture, to which
reference is hereby made. The Junior Subordinated Indenture has been filed as
an exhibit to the Registration Statement of which this Prospectus Supplement
and the accompanying Prospectus form a part.
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Concurrently with the issuance of the Series 2 Preferred Securities, the
Series 2 Issuer Trust will invest the proceeds thereof, together with the
consideration paid by the Corporation for the Series 2 Common Securities, in
the Series 2 Subordinated Debentures issued by the Corporation. The Series 2
Subordinated Debentures will bear interest at the annual rate of 8% of the
principal amount thereof, payable semi-annually in arrears on June 15 and
December 15 of each year (each, an "Interest Payment Date"), commencing June
15, 1997, to the person in whose name each Series 2 Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. It is anticipated
that, until the liquidation, if any, of the Series 2 Issuer Trust, each Series
2 Subordinated Debenture will be held by the Property Trustee in trust for the
benefit of the holders of the Series 2 Securities. The amount of interest
payable for any period less than a full interest period will be computed on
the basis of a 360-day year of twelve 30-day months and the actual days
elapsed in a partial month in a period. The amount of interest payable for any
full interest period will be computed by dividing the rate per annum by two.
In the event that any date on which interest is payable on the Series 2
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment
was originally payable. Accrued interest that is not paid on the applicable
Interest Payment Date will bear additional interest on the amount thereof (to
the extent permitted by law) at the rate per annum of 8% thereof, compounded
semi-annually. The term "interest" as used herein shall include semi-annual
interest payments, interest on semi-annual interest payments not paid on the
applicable Interest Payment Date and Additional Sums (as defined below), as
applicable.
The Series 2 Subordinated Debentures will be issued as a series of junior
subordinated debentures under the Junior Subordinated Indenture. The Series 2
Subordinated Debentures will mature on December 15, 2026.
The Series 2 Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Indebtedness of the
Corporation. Because the Corporation is a holding company, the right of the
Corporation to participate in any distribution of assets of any subsidiary,
including Bank of America, BAI and BANW, upon such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of holders of the Series 2
Preferred Securities to benefit indirectly from such distribution), is subject
to the prior claims of creditors of that subsidiary, except to the extent that
the Corporation may itself be recognized as a creditor of that subsidiary. In
addition, there are also various legal limitations on the extent to which the
Corporation's depository subsidiaries may extend credit, pay dividends or
otherwise supply funds to the Corporation or various of its affiliates.
Accordingly, the Series 2 Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and holders of Series 2 Subordinated Debentures should look only
to the assets of the Corporation for payments on the Series 2 Subordinated
Debentures. See "BankAmerica Corporation." The Junior Subordinated Indenture
does not limit the incurrence or issuance of other secured or unsecured debt
of the Corporation, including Senior Indebtedness, whether under the Junior
Subordinated Indenture or any existing or other indenture that the Corporation
may enter into in the future or otherwise. See "Description of Junior
Subordinated Debentures--Subordination" in the accompanying Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default under the Junior Subordinated Indenture has
occurred and is continuing, the Corporation has the right under the Junior
Subordinated Indenture at any time during the term of the Series 2
Subordinated Debentures to defer the payment of interest at any time or from
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time to time for a period not exceeding 10 consecutive semi-annual periods
with respect to each Extension Period, provided that no Extension Period may
extend beyond the Stated Maturity of the Series 2 Subordinated Debentures. At
the end of such Extension Period, the Corporation must pay all interest then
accrued and unpaid (together with interest thereon at the annual rate of 8%,
compounded semi-annually and computed on the basis of a 360-day year of twelve
30-day months and the actual days elapsed in a partial month in a period, to
the extent permitted by applicable law). The amount of additional interest
payable for any full interest period will be computed by dividing the rate per
annum by two. During an Extension Period, interest will continue to accrue and
holders of Series 2 Subordinated Debentures (or holders of Series 2 Preferred
Securities while such series is outstanding) will be required to accrue
interest income for United States federal income tax purposes. See "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount."
During any such Extension Period, the Corporation may not, and may not
permit any subsidiary of the Corporation to, (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of the Corporation's capital stock or (ii) make
any payment of principal, interest or premium, if any, on or repay, repurchase
or redeem any debt securities of the Corporation (including other Junior
Subordinated Debentures) that rank pari passu in all respects with or junior
in interest to the Series 2 Subordinated Debentures or make any guarantee
payments with respect to any guarantee by the Corporation of the debt
securities of any subsidiary of the Corporation if such guarantee ranks pari
passu with or junior in interest to the Series 2 Subordinated Debentures
(other than (a) dividends or distributions in common stock of the Corporation,
(b) any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under any Guarantee or any similar guarantee and (d) purchases of
common stock related to the issuance of common stock or rights under any of
the Corporation's (including its subsidiaries') benefit plans for their
directors, officers or employees). Prior to the termination of any such
Extension Period, the Corporation may further defer the payment of interest,
provided that no Extension Period may exceed 10 consecutive semi-annual
periods or extend beyond the Stated Maturity of the Series 2 Subordinated
Debentures. Upon the termination of any such Extension Period and the payment
of all amounts then due on any Interest Payment Date, the Corporation may
elect to begin a new Extension Period subject to the above requirements. No
interest shall be due and payable during an Extension Period, except at the
end thereof. The Corporation must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election of
such Extension Period at least one Business Day prior to the earlier of (i)
the date the Distributions on the Series 2 Preferred Securities would have
been payable except for the election to begin such Extension Period or (ii)
the date the Administrative Trustees are required to give notice to the New
York Stock Exchange, the Nasdaq National Market or other applicable self-
regulatory organization or to holders of such Series 2 Preferred Securities of
the record date or the date such Distributions are payable, but in any event
not less than one Business Day prior to such record date. The Property Trustee
shall give notice of the Corporation's election to begin a new Extension
Period to the holders of the Series 2 Preferred Securities. There is no
limitation on the number of times that the Corporation may elect to begin an
Extension Period. See "Description of Junior Subordinated Debentures--Option
to Extend Interest Payment Date" in the accompanying Prospectus.
ADDITIONAL SUMS
In the event a Tax Event has occurred and is continuing and the Series 2
Issuer Trust is the holder of all of the Series 2 Subordinated Debentures, the
Corporation will pay Additional Sums, if any (as defined below), on the Series
2 Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions paid by the Series 2 Issuer Trust on the
outstanding Series 2 Preferred Securities and
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Series 2 Common Securities of the Series 2 Issuer Trust shall not be reduced
as a result of any additional taxes, duties and other governmental charges to
which the Series 2 Issuer Trust has become subject as a result of a Tax Event.
REDEMPTION
Subject to the Corporation having received prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies of
the Federal Reserve, the Series 2 Subordinated Debentures are redeemable prior
to maturity at the option of the Corporation (i) on or after December 15,
2006, in whole at any time or in part from time to time, or (ii) in whole (but
not in part) prior to December 15, 2006 and within 90 days following the
occurrence of a Tax Event or Capital Treatment Event (each as defined under
"Certain Terms of Series 2 Preferred Securities"), in each case at the
redemption price described below. The proceeds of any such redemption will be
used by the Series 2 Issuer Trust to redeem the Series 2 Securities.
The Redemption Price in the case of a redemption under (i) above shall equal
the following prices, expressed in percentages of the principal amount
together with accrued interest to but excluding the dated fixed for
redemption. If redeemed during the 12-month period beginning December 15:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2006......................................................... 103.9690%
2007......................................................... 103.5721
2008......................................................... 103.1752
2009......................................................... 102.7783
2010......................................................... 102.3814
2011......................................................... 101.9845
2012......................................................... 101.5876
2013......................................................... 101.1907
2014......................................................... 100.7938
2015......................................................... 100.3969
</TABLE>
and at 100% on or after December 15, 2016.
The Redemption Price, in the case of a redemption following a Tax Event or
Capital Treatment Event as described under (ii) above, shall equal the Make-
Whole Amount (as defined under "Certain Terms of Series 2 Preferred
Securities--Redemption"), together with accrued interest to but excluding the
date fixed for redemption.
DISTRIBUTION OF SERIES 2 SUBORDINATED DEBENTURES
As described under "Certain Terms of Series 2 Preferred Securities--
Liquidation of Series 2 Issuer Trust and Distribution of Series 2 Subordinated
Debentures to Holders," under certain circumstances involving the termination
of the Series 2 Issuer Trust, Series 2 Subordinated Debentures may be
distributed to the holders of the Series 2 Securities in liquidation of the
Series 2 Issuer Trust after satisfaction of liabilities to creditors of the
Series 2 Issuer Trust as provided by applicable law. If distributed to holders
of Series 2 Securities in liquidation, the Series 2 Subordinated Debentures
will initially be issued in the form of one or more global securities and DTC,
or any successor depository for the Series 2 Preferred Securities, will act as
depository for the Series 2 Subordinated Debentures. It is anticipated that
the depository arrangements for the Series 2 Subordinated Debentures would be
substantially identical to those in effect for the Series 2 Preferred
Securities. There can be no assurance as to the market price of any Series 2
Subordinated Debentures that may be distributed to the holders of Series 2
Preferred Securities.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income tax
consequences of the purchase, ownership and disposition of Series 2 Preferred
Securities. This summary only addresses the tax consequences to a person that
acquires Series 2 Preferred Securities on their original issue at their
original offering price and that is (i) an individual citizen or resident of
the United States, (ii) a corporation or partnership organized in or under the
laws of the United States or any state thereof or the District of Columbia or
(iii) an estate or trust the income of which is subject to United States
federal income tax regardless of source (a "United States Person"). This
summary does not address all tax consequences that may be applicable to a
United States Person that is a beneficial owner of Series 2 Preferred
Securities, nor does it address the tax consequences to (i) persons that are
not United States Persons, (ii) persons that may be subject to special
treatment under United States federal income tax law, such as banks, insurance
companies, thrift institutions, regulated investment companies, real estate
investment trusts, tax-exempt organizations and dealers in securities or
currencies, (iii) persons that will hold Series 2 Preferred Securities as part
of a position in a "straddle" or as part of a "hedging," "conversion" or other
integrated investment transaction for federal income tax purposes, (iv)
persons whose functional currency is not the United States dollar or (v)
persons that do not hold Series 2 Preferred Securities as capital assets.
The statements of law or legal conclusion set forth in this summary
constitute the opinion of Orrick, Herrington & Sutcliffe LLP, counsel to the
Corporation and the Series 2 Issuer Trust. This summary is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations,
Internal Revenue Service rulings and pronouncements and judicial decisions now
in effect, all of which are subject to change at any time. Such changes may be
applied retroactively in a manner that could cause the tax consequences to
vary substantially from the consequences described below, possibly adversely
affecting a beneficial owner of Series 2 Preferred Securities. In particular,
legislation has been proposed that could adversely affect the Corporation's
ability to deduct interest on the Series 2 Subordinated Debentures, which may
in turn permit the Corporation to cause a redemption of the Series 2 Preferred
Securities. See "--Possible Tax Law Changes." An opinion of counsel is not
binding on the Internal Revenue Service or the courts, and the authorities on
which this summary is based are subject to various interpretations. It is
therefore possible that the federal income tax treatment of the purchase,
ownership and disposition of Series 2 Preferred Securities may differ from the
treatment described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SERIES 2 PREFERRED SECURITIES,
AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE SERIES 2 ISSUER TRUST
In connection with the issuance of the Series 2 Preferred Securities,
Orrick, Herrington & Sutcliffe LLP will render its opinion to the effect that,
under then current law and assuming compliance with the terms of the Trust
Agreement, and based on certain facts and assumptions contained in such
opinion, the Series 2 Issuer Trust will be classified as a grantor trust and
not as an association taxable as a corporation for United States federal
income tax purposes. As a result, each beneficial owner of Series 2 Preferred
Securities (a "Securityholder") will be treated as owning an undivided
beneficial interest in the Series 2 Subordinated Debentures. Accordingly, each
Securityholder will be required to include in its gross income its pro rata
share of the items of income realized with respect to the Series 2
Subordinated Debentures whether or not cash is actually distributed to the
Securityholders. See "--Interest Income and Original Issue Discount." No
amount included in income with respect to the Series 2 Preferred Securities
will be eligible for the dividends-received deduction.
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INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Final Treasury Regulations issued on June 11, 1996 generally provide that
stated interest on a debt instrument is not "qualified stated interest" and,
therefore, will give rise to original issue discount ("OID") unless such
interest is unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually at a single fixed rate. Interest
is considered to be unconditionally payable only if reasonable legal remedies
exist to compel timely payment or the debt instrument otherwise provides terms
and conditions that make the likelihood of late payment (other than late
payment that occurs within a reasonable grace period) or non-payment a "remote
contingency."
Under the Junior Subordinated Indenture, the Corporation has the right, at
any time and from time to time during the term of the Series 2 Subordinated
Debentures to defer payments of interest by extending the interest payment
period for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period. Unless the likelihood of exercise of such
right to defer is remote, the Series 2 Subordinated Debentures would be issued
with OID. During any Extension Period, (a) the Corporation will not be
permitted to declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of its
capital stock, and (b) the Corporation will not be permitted to make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Corporation
that rank pari passu with or junior to the Series 2 Subordinated Debentures
(although these restrictions will not apply to dividends or distributions in
common stock of the Corporation and in certain other limited situations). See
"Certain Terms of Series 2 Subordinated Debentures--Option to Extend Interest
Payment Period." The Corporation currently believes that the adverse impact
that the imposition of such restrictions would have on the Corporation and the
value of the equity securities of the Corporation makes the likelihood of the
Corporation exercising its right to defer payments of interest on the Series 2
Subordinated Debentures remote. Accordingly, the Corporation believes that the
stated interest on the Series 2 Subordinated Debentures should be considered
unconditionally payable for purposes of the OID provisions of the Code and
that the Series 2 Subordinated Debentures should not be considered to have
been issued with OID (other than de minimis OID, if any). As a result, each
Securityholder will be required to include interest payments in taxable income
at the time accrued or received in accordance with its own method of
accounting. There can be no assurance, however, that the Internal Revenue
Service will agree with such determination.
However, if the Corporation does exercise its right to defer payments of
interest thereon, the Series 2 Subordinated Debentures will be considered to
be retired and reissued for their adjusted issue price at such time, and the
Series 2 Subordinated Debentures thereafter will be considered to have been
issued with OID. In such case, all the interest payments thereafter payable
will be treated as OID. If the payments were treated as OID (either because
the Corporation exercises the right to defer interest payments or because the
exercise of such right was not remote at the time of issuance), holders must
include that discount in income on an economic accrual basis before the
receipt of cash attributable to the interest, regardless of their method of
tax accounting. The amount of OID that accrues in any semi-annual period will
approximately equal the amount of the interest that accrues in that semi-
annual period at the stated interest rate and any de minimis OID allocated to
such period. In the event that the interest payment period is extended,
holders will continue to accrue OID approximately equal to the amount of the
interest payment due at the end of the extended interest payment period and
any de minimis OID allocated to such period on an economic accrual basis over
the length of the extended interest period. A Securityholder that disposes of
the Series 2 Preferred Securities during an Extension Period may suffer a loss
because the market value of the Series 2 Preferred Securities likely will fall
if the Corporation exercises its option to defer payments of interest on the
Series 2 Subordinated Debentures. To the extent the selling price is less than
the Securityholder's adjusted tax basis (which will include all accrued but
unpaid interest), a Securityholder will recognize a capital loss.
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DISTRIBUTION OF SERIES 2 SUBORDINATED DEBENTURES TO HOLDERS OF SERIES 2
PREFERRED SECURITIES
Under current law, a distribution by the Series 2 Issuer Trust of the Series
2 Subordinated Debentures, as described under the caption "Certain Terms of
Series 2 Preferred Securities-- Liquidation of Series 2 Issuer Trust and
Distribution of Series 2 Subordinated Debentures to Holders," will be non-
taxable and will result in the Securityholder receiving directly his pro rata
share of the Series 2 Subordinated Debentures previously held indirectly
through the Series 2 Issuer Trust, with a holding period and aggregate tax
basis equal to the holding period and aggregate tax basis such Securityholder
had in its Series 2 Preferred Securities before such distribution.
SALES OR REDEMPTION OF SERIES 2 PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Series 2
Preferred Securities (including a redemption for cash) in an amount equal to
the difference between the amount realized and the Securityholder's adjusted
tax basis in the Series 2 Preferred Securities sold or so redeemed. A
Securityholder's adjusted tax basis in the Series 2 Preferred Securities will
be increased by any OID included in gross income and decreased by any interest
payments not treated as "qualified stated interest." See "--Interest Income
and Original Issue Discount." Gain or loss recognized by a Securityholder on
Series 2 Preferred Securities held for more than one year generally will be
taxable as long-term capital gain or loss. Amounts attributable to accrued
interest with respect to a Securityholder's pro rata share of the Series 2
Subordinated Debentures not previously included in income will be taxable as
ordinary income.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest paid or OID accrued on the Series 2 Preferred
Securities held of record by United States Persons (other than corporations
and other exempt Securityholders) will be reported to the Internal Revenue
Service. "Backup" withholding at a rate of 31% will apply to payments of
interest to non-exempt United States Persons unless the Securityholder
furnishes its taxpayer identification number in the manner prescribed in
applicable Treasury Regulations, certifies that such number is correct,
certifies as to no loss of exemption from backup withholding and meets certain
other conditions.
Payment of the proceeds from the disposition of Series 2 Preferred
Securities to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner establishes an exemption from information reporting and backup
withholding.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information
is furnished to the Internal Revenue Service.
It is anticipated that income on the Series 2 Preferred Securities will be
reported to holders on Form 1099 and mailed to holders of the Series 2
Preferred Securities by January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"), the
revenue portion of President Clinton's budget proposal, was released. The Bill
would generally deny interest deductions for interest on an instrument issued
by a corporation that has a maximum term of more than 20 years and that is not
shown as indebtedness on the separate balance sheet of the issuer or, where
the instrument is issued to a related party (other than a corporation), where
the holder or some other related party issues a related instrument that is not
shown as indebtedness on the issuer's
S-24
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consolidated balance sheet. For purposes of determining the weighted average
maturity or the term of an instrument, any right to extend would be treated as
exercised. The above-described provisions of the Bill were proposed to be
effective generally for instruments issued on or after December 7, 1995. If
these provisions were to apply to the Series 2 Subordinated Debentures, the
Corporation would be unable to deduct interest on the Series 2 Subordinated
Debentures. However, on March 29, 1996, the Chairmen of the Senate Finance and
House Ways and Means Committees issued a joint statement to the effect that it
was their intention that the effective date of the President's legislative
proposals, if adopted, will be no earlier than the date of appropriate
Congressional action. Under current law, the Corporation will be able to
deduct interest on the Series 2 Subordinated Debentures. There can be no
assurance, however, that current or future legislative proposals or final
legislation will not affect the ability of the Corporation to deduct interest
on the Series 2 Subordinated Debentures. Such a change could give rise to a
Tax Event, which may permit the Corporation to cause a redemption of the
Series 2 Preferred Securities, as described more fully in the accompanying
Prospectus under "Description of Preferred Securities--Redemption" and "--
Distribution of Corresponding Junior Subordinated Debentures."
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an
investment in the Series 2 Preferred Securities. Accordingly, among other
factors, the fiduciary should consider whether the investment would satisfy
the prudence and diversification requirements of ERISA and would be consistent
with the documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as
individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or
"disqualified persons" under the Code ("Parties in Interest") with respect to
such Plan. A violation of these "prohibited transaction" rules may result in
an excise tax or other liabilities under ERISA and/or Section 4975 of the Code
for such persons, unless exemptive relief is available under an applicable
statutory or administrative exemption. Employee benefit plans that are
governmental plans (as defined in Section 3(32) of ERISA), certain church
plans (as defined in Section 3(33) of ERISA) and foreign plans (as described
in Section 4(b)(5) of ERISA) are not subject to the requirements of ERISA or
Section 4975 of the Code.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Series 2 Issuer Trust would
be deemed to be "plan assets" of a Plan for purposes of ERISA and Section 4975
of the Code if "plan assets" of the Plan were used to acquire an equity
interest in the Series 2 Issuer Trust and no exception were applicable under
the Plan Assets Regulation. An "equity interest" is defined under the Plan
Assets Regulation as any interest in an entity other than an instrument which
is treated as indebtedness under applicable local law and which has no
substantial equity features and specifically includes a beneficial interest in
a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the assets
of the Series 2 Issuer Trust would not be deemed to be "plan assets" of
investing Plans if the Series 2 Preferred Securities are "publicly-offered
securities"--that is, if they are (1) widely held (i.e., owned upon completion
of this offering by more than 100 investors who are independent of the
Corporation and one another, (2) freely transferable and (3) sold as part of
an offering pursuant to an effective registration statement under the
Securities Act and then timely registered under Section 12(b) or 12(g)
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of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). It is
expected that the Series 2 Preferred Securities will meet the criteria for
qualification as "publicly-offered securities" listed above. The Underwriters
expect that the Series 2 Preferred Securities will be held by at least 100
independent investors at the conclusion of this offering; there are no
restrictions imposed on the transfer of the Series 2 Preferred Securities; and
the Series 2 Preferred Securities will be sold as part of an offering pursuant
to an effective registration statement under the Securities Act and then will
be timely registered under the Exchange Act.
Certain transactions involving the Series 2 Issuer Trust could be deemed to
constitute direct or indirect prohibited transactions under ERISA and Section
4975 of the Code with respect to a Plan if the Series 2 Preferred Securities
were acquired with "plan assets" of such Plan and assets of the Series 2
Issuer Trust were deemed to be "plan assets" of Plans investing in the Series
2 Issuer Trust because such Securities failed to qualify as "publicly-offered
securities." For example, if the Corporation is a Party in Interest with
respect to an investing Plan (either directly or by reason of its ownership of
Bank of America, BAI, BANW and other subsidiaries), extensions of credit
between the Corporation and the Series 2 Issuer Trust (as represented by the
Series 2 Subordinated Debentures and the Series 2 Guarantee) would likely be
prohibited by Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the
Code, unless exemptive relief were available under an applicable
administrative exemption (see below).
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief for direct or indirect prohibited
transactions resulting from the purchase or holding of the Series 2 Preferred
Securities, even if assets of the Series 2 Issuer Trust were deemed to be
"plan assets" of Plans investing in the Series 2 Issuer Trust (see above).
Those class exemptions are PTCE 96-23 (for certain transactions determined by
in-house asset managers), PTCE 95-60 (for certain transactions involving
insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain
transactions involving insurance company separate accounts), and PTCE 84-14
(for certain transactions determined by independent qualified asset managers).
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is important
that fiduciaries or other persons considering purchasing the Series 2
Preferred Securities on behalf of or with "plan assets" of any Plan consult
with their counsel regarding the potential consequences under ERISA of the
acquisition and ownership of the Series 2 Preferred Securities. The
Corporation and certain of its bank or other affiliates may be Parties in
Interest with respect to certain Plans, such as Plans for which Bank of
America serves as trustee. Special caution should be exercised by any
fiduciary who proposes to cause a Plan to purchase the Series 2 Preferred
Securities.
S-26
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Corporation and the Series 2 Issuer Trust have agreed that the Series 2
Issuer Trust will sell to UBS Securities LLC, Morgan Stanley & Co.
Incorporated, BA Securities, Inc. and Chase Securities Inc. (the
"Underwriters"), and the Underwriters have agreed to purchase from the Series
2 Issuer Trust, at a price of $999.38 per Series 2 Preferred Security the
respective number of Series 2 Preferred Securities set forth opposite their
names below. UBS Securities LLC and Morgan Stanley & Co. Incorporated are
acting as joint lead managers with respect to this offering. In the
Underwriting Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Series 2 Preferred
Securities offered hereby if any of the Series 2 Preferred Securities are
purchased. In the event of default by an Underwriter, the Underwriting
Agreement provides that, in certain circumstances, the purchase commitments of
the nondefaulting Underwriters may be increased or the Underwriting Agreement
may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
SERIES 2
PREFERRED
SECURITIES
UNDERWRITER ----------
<S> <C>
UBS Securities LLC............................................. 175,000
Morgan Stanley & Co. Incorporated.............................. 175,000
BA Securities, Inc. ........................................... 50,000
Chase Securities Inc. ......................................... 50,000
-------
Total...................................................... 450,000
=======
</TABLE>
In view of the fact that the proceeds from the sale of the Series 2
Preferred Securities will be used to purchase the Series 2 Subordinated
Debentures issued by the Corporation, the Underwriting Agreement provides that
the Corporation will pay as Underwriters' Compensation for the Underwriters'
arranging the investment therein of such proceeds an amount of $10 per Series
2 Preferred Security for the accounts of the several Underwriters.
The distribution of the Series 2 Preferred Securities by the Underwriters is
being effectuated from time to time in negotiated transactions or otherwise at
varying prices to be determined at the time of each sale. In connection with
the sale of any Series 2 Preferred Securities, the Underwriters may be deemed
to have received additional compensation from the Corporation equal to the
difference between the amount received by the Underwriters upon the sale of
such Series 2 Preferred Securities and the price at which the Underwriters
purchased such Series 2 Preferred Securities from the Series 2 Issuer Trust.
In addition, the Underwriters may sell Series 2 Preferred Securities to or
through certain dealers, and dealers may receive compensation in the form of
concessions or commissions from the Underwriters.
Prior to this offering, there has been no public market for the Series 2
Preferred Securities. The Underwriters have advised the Corporation that they
intend to make a market in the Series 2 Preferred Securities, but are not
obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for the Series 2 Preferred Securities.
The Corporation and the Series 2 Issuer Trust have agreed to indemnify the
several Underwriters against, or contribute to payments that the Underwriters
may be required to make in respect of, certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Act").
Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the Series 2 Preferred Securities offered hereby as interests
in a direct participation program, the offering is being made in compliance
with Rule 2810 of the NASD's Rules of Conduct. Offers and sales of
S-27
<PAGE>
Series 2 Preferred Securities will be made only to (i) "qualified
institutional buyers", as defined in Rule 144A under the Act; (ii)
institutional "accredited investors", as defined in Rule 501(a)(1)-(3) of
Regulation D under the Act or (iii) investors for whom an investment in non-
convertible investment grade preferred securities is appropriate. The
Underwriters may not confirm sales to any accounts over which they exercise
discretionary authority without the prior written approval of the transaction
by the customer.
BA Securities, Inc. ("BASI") is a wholly-owned subsidiary of the Corporation
and an affiliate of the Series 2 Issuer Trust. Accordingly, any offer and sale
of the Series 2 Preferred Securities will comply with Rule 2720 of the Rules
of Conduct of the NASD regarding underwriting securities of an affiliate. No
NASD member participating in the offering of the Series 2 Preferred Securities
will execute a transaction in the Series 2 Preferred Securities in a
discretionary account without the prior written specific approval of the
member's customer.
This Prospectus Supplement and the accompanying Prospectus may be used by
BASI in connection with offers and sales related to secondary market
transactions in the Series 2 Preferred Securities. BASI may act as principal
or agent in such transactions. Such sales will be made at prices related to
prevailing market prices at the time of sale or otherwise.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment, general financing and
banking services to the Corporation and its affiliates, for which such
Underwriters or their affiliates have received or will receive customary fees
and commissions.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series 2
Preferred Securities, the enforceability of the Trust Agreement and the
creation of the Series 2 Issuer Trust will be passed upon by Richards, Layton
& Finger, special Delaware Counsel to the Corporation and the Series 2 Issuer
Trust. The validity of the Series 2 Guarantee and the Series 2 Subordinated
Debentures will be passed upon for the Corporation by Orrick, Herrington &
Sutcliffe LLP, San Francisco, California and for the Underwriters by Sullivan
& Cromwell, Los Angeles, California. Orrick, Herrington & Sutcliffe LLP and
Sullivan & Cromwell will rely on the opinion of Richards, Layton & Finger as
to matters of Delaware law. Certain matters relating to United States federal
income tax considerations will be passed upon for the Corporation by Orrick,
Herrington & Sutcliffe LLP.
S-28
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION, THE ISSUER TRUSTS OR BY THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE CORPORATION OR THE ISSUER TRUSTS SINCE THE DATE HEREOF. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Risk Factors.............................................................. S-4
BankAmerica Capital II.................................................... S-9
BankAmerica Corporation................................................... S-9
Ratio of Earnings to Fixed Charges........................................ S-10
Capitalization............................................................ S-11
Accounting Treatment...................................................... S-13
Certain Terms of Series 2 Preferred Securities............................ S-13
Certain Terms of Series 2 Subordinated Debentures......................... S-18
Certain Federal Income Tax Consequences................................... S-22
Certain ERISA Considerations.............................................. S-25
Underwriting.............................................................. S-27
Validity of Securities.................................................... S-28
<CAPTION>
PROSPECTUS
<S> <C>
Available Information .................................................... 4
Incorporation of Certain Documents by Reference........................... 5
BankAmerica Corporation................................................... 6
The Issuer Trusts......................................................... 8
Use of Proceeds........................................................... 9
Description of Junior Subordinated Debentures............................. 9
Description of Preferred Securities....................................... 22
Description of Guarantees................................................. 33
Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debentures and the Guarantees............................... 36
Description of Debt Securities............................................ 38
Book-Entry Issuance....................................................... 48
Plan of Distribution...................................................... 50
Validity of Securities.................................................... 51
Experts................................................................... 51
</TABLE>
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450,000 PREFERRED SECURITIES
BANKAMERICA CAPITAL II
8% CUMULATIVE SEMI-ANNUAL INCOME
PREFERRED SECURITIES,
SERIES 2
FULLY AND UNCONDITIONALLY GUARANTEED,
TO THE EXTENT DESCRIBED HEREIN, BY
[LOGO OF BANKAMERICA CORPORATION]
UBS SECURITIES
MORGAN STANLEY & CO.
INCORPORATED
BA SECURITIES, INC.
CHASE SECURITIES INC.
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[LOGO OF RECYCLED PAPER]
