<PAGE>
Filed Pursuant to Rule 424(b)(5)
PROSPECTUS SUPPLEMENT Registration Statement Nos. 333-15559 and
(TO PROSPECTUS DATED DECEMBER 5, 1996) 333-15559-03
$400,000,000
BANKAMERICA CAPITAL III
FLOATING RATE CAPITAL SECURITIES, SERIES 3
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
BANKAMERICA CORPORATION
---------------
The Floating Rate Capital Securities, Series 3 (the "Series 3 Capital
Securities") offered hereby, which will pay Distributions (as defined herein)
at a rate per annum reset quarterly equal to 3-month LIBOR (as defined herein)
plus .57%, represent beneficial interests in BankAmerica Capital III, a trust
created under the laws of the State of Delaware (the "Series 3 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 3 Issuer Trust ("Series 3 Common Securities" and, collectively
with the Series 3 Capital Securities, the "Series 3 Securities"). Bankers
Trust Company is the Property Trustee of the Series 3 Issuer Trust. The
Series 3 Issuer Trust exists for the sole purpose of issuing the Series 3
Securities and investing the proceeds thereof in Floating Rate Junior
Subordinated Deferrable Interest Debentures, Series 3 (the "Series 3
Subordinated Debentures"), to be issued by the Corporation. The Series 3
Subordinated Debentures will mature on January 15, 2027 (the "Stated
Maturity"). The Series 3
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE SERIES 3 CAPITAL SECURITIES.
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF
ANY BANK OR ANY 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.
================================================================================
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING THE SERIES 3
OFFERING PRICE(1) COMMISSION(2) ISSUER TRUST(3)(4)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Capital Security......... $999.00 (3) $999.00
- --------------------------------------------------------------------------------
Total........................ $399,600,000 (3) $399,600,000
================================================================================
</TABLE>
(1) Plus accrued Distributions, if any, from January 22, 1997.
(2) The Series 3 Issuer Trust and the Corporation have each agreed to
indemnify the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) In view of the fact that the proceeds of the sale of the Series 3 Capital
Securities will be invested in the Series 3 Subordinated Debentures, the
Corporation has agreed to pay to the Underwriters as compensation
("Underwriters' Compensation") for their arranging the investment therein
of such proceeds $10.00 per Series 3 Capital Security ($4,000,000 in the
aggregate). See "Underwriting."
(4) Expenses of the offering, which are payable by the Corporation, are
estimated to be $375,000.
---------------
This Prospectus Supplement and the related Prospectus may be used by
BancAmerica Securities, Inc., an affiliate of the Corporation and the Series 3
Issuer Trust, in connection with offers and sales related to secondary market
transactions in the Series 3 Capital Securities. BancAmerica 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 3 Capital 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 3 Capital 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 January 22, 1997, against payment therefor in
immediately available funds.
---------------
MERRILL LYNCH & CO. BANCAMERICA SECURITIES, INC.
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
J.P. MORGAN & CO.
HSBC SECURITIES, INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SBC WARBURG
---------------
The date of this Prospectus Supplement is January 15, 1997.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 3
CAPITAL 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.
---------------
(cover page continued)
Capital Securities will have a preference under certain circumstances with
respect to cash distributions and amounts payable on liquidation, redemption
or otherwise over the Series 3 Common Securities. The Series 3 Capital
Securities constitute Preferred Securities for purposes of the accompanying
Prospectus. See "Description of Preferred Securities--Subordination of Common
Securities" in the accompanying Prospectus.
Holders of the Series 3 Capital Securities will be entitled to receive
preferential cumulative cash distributions ("Distributions") accumulating from
the date of original issuance and payable quarterly in arrears on January 15,
April 15, July 15 and October 15 of each year, commencing April 15, 1997, in
respect of the Liquidation Amount of $1,000 per Series 3 Capital Security at a
rate per annum reset quarterly equal to 3-month LIBOR (as defined herein) plus
.57% (the "Distribution Rate"). The Corporation has the right to defer payment
of interest on the Series 3 Subordinated Debentures at any time or from time
to time for a period not exceeding 20 consecutive quarterly 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 3
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 3 Subordinated Debentures are so deferred,
Distributions on the Series 3 Capital 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 3 Subordinated
Debentures. During an Extension Period, interest on the Series 3 Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Series 3 Capital Securities are entitled will accumulate) at
the applicable periodic Distribution Rate, compounded quarterly, and holders
of Series 3 Capital Securities will be required to accrue interest income for
United States federal income tax purposes. See "Certain Terms of Series 3
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 3 Guarantee, the Trust Agreement,
the Series 3 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 3 Issuer Trust's
obligations under the Series 3 Capital 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 3 Guarantee of the Corporation guarantees the payment of
Distributions and payments on liquidation or redemption of the Series 3
Capital Securities, but only in each case to the extent of funds held by the
Series 3 Issuer Trust, as described herein (the "Series 3 Guarantee"). See
"Description of Guarantees" in the accompanying Prospectus. If the Corporation
does not make interest payments on the Series 3 Subordinated Debentures held
by the Series 3 Issuer Trust, the Series 3 Issuer Trust will have insufficient
funds to pay Distributions on the Series 3 Capital Securities. The Series 3
Guarantee does not cover payment of Distributions when the Series 3 Issuer
Trust does not have sufficient funds to pay such Distributions. In such event,
a holder of Series 3 Capital 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 Series 3 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.
S-2
<PAGE>
(cover page continued)
The Series 3 Capital Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Series 3 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 3
Subordinated Debentures are redeemable prior to their Stated Maturity at the
option of the Corporation (i) on or after January 15, 2002, in whole at any
time or in part from time to time, or (ii) in whole (but not in part) prior to
January 15, 2002 and within 90 days following the occurrence of a Tax Event or
Capital Treatment Event (each as defined herein), in each case at a price
equal to 100% of the principal amount of the Series 3 Subordinated Debentures
so redeemed plus the accrued and unpaid interest on the Series 3 Subordinated
Debentures so redeemed to the date fixed for redemption. See "Certain Terms of
Series 3 Capital Securities--Redemption."
The Corporation will have the right at any time to terminate the Series 3
Issuer Trust and, after satisfaction of liabilities to creditors of the Series
3 Issuer Trust as required by applicable law, cause the Series 3 Subordinated
Debentures to be distributed to the holders of the Series 3 Securities in
liquidation of the Series 3 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 3 Capital 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 3 Capital Securities--Liquidation of Series 3 Issuer Trust and
Distribution of Series 3 Subordinated Debentures to Holders."
The Series 3 Subordinated Debentures are unsecured and subordinated to all
Senior Indebtedness. See "Risk Factors--Ranking of Subordinated Obligations
Under the Series 3 Guarantee and the Series 3 Subordinated Debentures."
In the event of the termination of the Series 3 Issuer Trust, after
satisfaction of liabilities to creditors of the Series 3 Issuer Trust as
required by applicable law, the holders of the Series 3 Capital Securities
will be entitled to receive a Liquidation Amount of $1,000 per Series 3
Capital 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 3 Subordinated Debentures, subject to certain exceptions. See
"Description of Preferred Securities--Liquidation Distribution Upon
Termination" in the accompanying Prospectus.
The Series 3 Capital 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 3 Capital 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 3 Capital 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 3 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.
S-3
<PAGE>
RISK FACTORS
Prospective purchasers of the Series 3 Capital 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 3 GUARANTEE AND THE
SERIES 3 SUBORDINATED DEBENTURES
The obligations of the Corporation under the Series 3 Guarantee issued by
the Corporation for the benefit of the holders of Series 3 Capital Securities
and under the Series 3 Subordinated Debentures are subordinate and junior in
right of payment to all Senior Indebtedness of the Corporation. At December
31, 1996, the aggregate outstanding Senior Indebtedness of the Corporation was
approximately $18.6 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
and Bank of America Illinois, upon such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of holders of the Series 3
Capital 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 3 Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and holders of Series 3 Subordinated Debentures and the Series 3
Guarantee should look only to the assets of the Corporation for payments on
the Series 3 Subordinated Debentures and the Series 3 Guarantee. See
"BankAmerica Corporation." None of the Junior Subordinated Indenture, the
Series 3 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 3 Issuer Trust to pay amounts due on the Series 3
Capital Securities is solely dependent upon the Corporation making payments on
the Series 3 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 3
Subordinated Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarterly periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Series 3 Subordinated Debentures. As a consequence of any such
deferral, quarterly Distributions on the Series 3 Capital Securities by the
Series 3 Issuer Trust will be deferred (and the amount of Distributions to
which holders of the Series 3 Capital Securities are entitled will accumulate
additional Distributions thereon at the applicable periodic Distribution Rate,
compounded quarterly 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 3 Subordinated
Debentures or (iii) make any guarantee payments with respect to any guarantee
by the Corporation of the debt securities of any
S-4
<PAGE>
subsidiary of the Corporation if such guarantee ranks pari passu with or
junior in interest to the Series 3 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 20 consecutive quarterly periods
or extend beyond the Stated Maturity of the Series 3 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 Distribution
Rate, compounded quarterly, 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 3 Capital Securities--Distributions" and "Certain Terms of Series 3
Subordinated Debentures--Option to Extend Interest Payment Period."
Should an Extension Period occur, a holder of Series 3 Capital 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 3 Subordinated Debentures) in respect of its pro rata share of
the Series 3 Subordinated Debentures held by the Series 3 Issuer Trust for
United States federal income tax purposes. As a result, a holder of Series 3
Capital 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 3 Issuer Trust if the
holder disposes of the Series 3 Capital 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 3 Capital 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 3
Subordinated Debentures. However, should the Corporation elect to exercise
such right in the future, the market price of the Series 3 Capital Securities
is likely to be affected. A holder that disposes of its Series 3 Capital
Securities during an Extension Period, therefore, might not receive the same
return on its investment as a holder that continues to hold its Series 3
Capital Securities. In addition, as a result of the existence of the
Corporation's right to defer interest payments, the market price of the Series
3 Capital Securities (which represent preferred beneficial interests in the
Series 3 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 3
Subordinated Debentures in whole (but not in part) prior to January 15, 2002
and within 90 days following the occurrence of such Tax Event or Capital
Treatment Event and therefore cause a mandatory redemption of the Series 3
Capital Securities. Any such redemption shall be at a price equal to the
principal amount of the Series 3 Subordinated Debentures, 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 3 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
S-5
<PAGE>
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 3 Capital Securities
under the Trust Agreement, there is more than an insubstantial risk that (i)
the Series 3 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 3 Subordinated Debentures, (ii) interest
payable by the Corporation on the Series 3 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 3 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 3 Capital 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 3 Capital Securities prior to January 15, 2002.
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 3 Capital
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 3 Capital 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 3 SECURITIES FOR SERIES 3 SUBORDINATED DEBENTURES
The Corporation will have the right at any time to terminate the Series 3
Issuer Trust and after satisfaction of the liabilities of creditors of the
Series 3 Issuer Trust as provided by applicable law, cause the Series 3
Subordinated Debentures to be distributed to the holders of the Series 3
Securities in liquidation of the Series 3 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 3 Capital 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 3 Capital Securities--
Liquidation of Series 3 Issuer Trust and Distribution of Series 3 Subordinated
Debentures to Holders."
MARKET PRICES
There can be no assurance as to the market prices for Series 3 Capital
Securities or Series 3 Subordinated Debentures that may be distributed in
exchange for Series 3 Capital Securities if a liquidation of the Series 3
Issuer Trust occurs. Accordingly, the Series 3 Capital Securities that an
investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Series 3 Subordinated Debentures that a holder of
Series 3 Capital Securities may receive on liquidation of the Series 3 Issuer
Trust, may trade at a discount to the price that the investor paid to purchase
the Series 3 Capital Securities offered hereby. Because holders of Series 3
Capital Securities may receive Series 3 Subordinated Debentures on termination
of the Series 3 Issuer Trust, prospective purchasers of Series 3 Capital
Securities are also making an investment decision with regard to the Series 3
Subordinated Debentures and should carefully review all the information
regarding the Series 3 Subordinated Debentures contained herein. See "Certain
Terms of the Series 3 Subordinated Debentures" in this Prospectus Supplement
and "Description of Junior Subordinated Debentures--Corresponding Junior
Subordinated Debentures" in the accompanying Prospectus.
S-6
<PAGE>
RIGHTS UNDER THE SERIES 3 GUARANTEE
The Series 3 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 3 Guarantee (the
"Guarantee Trustee") for the purposes of compliance with the Trust Indenture
Act and will hold the Series 3 Guarantee for the benefit of the holders of the
Series 3 Capital Securities. Bankers Trust Company will also act as Debenture
Trustee for the Series 3 Subordinated Debentures and as Property Trustee and
Bankers Trust (Delaware) will act as Delaware Trustee under the Trust
Agreement. The Series 3 Guarantee guarantees to the holders of the Series 3
Capital Securities the following payments, to the extent not paid by the
Series 3 Issuer Trust: (i) any accrued and unpaid Distributions required to be
paid on the Series 3 Capital Securities, to the extent that the Series 3
Issuer Trust has funds on hand available therefor at such time, (ii) the
Redemption Price with respect to any Series 3 Capital Securities called for
redemption, to the extent that the Series 3 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 3 Issuer Trust (unless
the Series 3 Subordinated Debentures are distributed to holders of the Series
3 Capital 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 3 Issuer Trust has funds on hand available therefor at
such time and (b) the amount of assets of the Series 3 Issuer Trust remaining
available for distribution to holders of the Series 3 Capital Securities on
liquidation of the Series 3 Issuer Trust. The Series 3 Guarantee is
subordinate as described under "--Ranking of Subordinated Obligations Under
the Series 3 Guarantee and the Series 3 Subordinated Debentures." The holders
of not less than a majority in aggregate Liquidation Amount of the Series 3
Capital 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 3 Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Series 3 Guarantee. Any holder
of the Series 3 Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Series 3 Guarantee
without first instituting a legal proceeding against the Series 3 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 3
Subordinated Debentures, the Series 3 Issuer Trust would lack funds for the
payment of Distributions or amounts payable on redemption of the Series 3
Capital Securities or otherwise, and, in such event, holders of the Series 3
Capital Securities would not be able to rely upon the Series 3 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 3 Subordinated Debentures on the payment date on which such
payment is due and payable, then a holder of Series 3 Capital 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 3 Subordinated Debentures having a principal amount equal to
the aggregate Liquidation Amount of the Series 3 Capital 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 3 Capital Securities in the Direct Action. Except as described
herein, holders of Series 3 Capital Securities will not be able to exercise
directly any other remedy available to the holders of the Series 3
Subordinated Debentures or assert directly any other rights in respect of the
Series 3 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 3 Capital Securities by acceptance thereof agrees to the provisions of
the Series 3 Guarantee and the Junior Subordinated Indenture.
LIMITED VOTING RIGHTS
Holders of Series 3 Capital Securities will generally have limited voting
rights relating only to the modification of the Series 3 Capital Securities
and the exercise of the Series 3 Issuer Trust's rights as
S-7
<PAGE>
holder of Series 3 Subordinated Debentures and the Series 3 Guarantee. Holders
of Series 3 Capital 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 3 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 3 Capital Securities to
ensure that the Series 3 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 3 CAPITAL SECURITIES
The Corporation does not intend to have the Series 3 Capital Securities
listed on the New York Stock Exchange or any other securities exchange. The
Series 3 Capital Securities may trade at prices that do not fully reflect the
value of accrued and unpaid interest with respect to the underlying Series 3
Subordinated Debentures. See "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount" and "--Sales or Redemption of
Series 3 Capital Securities" for a discussion of the United States federal
income tax consequences that may result from a taxable disposition of the
Series 3 Capital Securities.
POSSIBLE TAX LAW CHANGES AFFECTING THE SERIES 3 CAPITAL 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 3 Subordinated Debentures, the
Corporation would be unable to deduct interest on the Series 3 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 3 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 3 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 3 Capital Securities
before January 15, 2002. See "Certain Terms of Series 3 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 III
BankAmerica Capital III 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 3 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 3 Issuer Trust exists for the
exclusive purposes of (i) issuing and selling the Series 3 Securities,
(ii) using the proceeds from the sale of Series 3 Securities to acquire Series
3 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 3 Securities). Accordingly, the Series 3
Subordinated Debentures and the right to reimbursement of expenses under the
related Expense Agreement will be the sole assets of the Series 3 Issuer
Trust, and payments under the Series 3 Subordinated Debentures and the related
Expense Agreement will be the sole revenue of the Series 3 Issuer Trust. All
of the Series 3 Common Securities will be owned by the Corporation. The Series
3 Common Securities will rank pari passu, and payments will be made thereon
pro rata, with the Series 3 Capital 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 3 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 3
Capital Securities. See "Description of Preferred Securities--Subordination of
Common Securities" in the accompanying Prospectus. The Corporation will
acquire Series 3 Common Securities in an aggregate liquidation amount equal to
3% of the total capital of the Series 3 Issuer Trust. The Series 3 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 3 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 December 31, 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") and Bank of
America Illinois ("BAI"). On January 1, 1997, Bank of America NW, National
Association, formerly Seattle-First National Bank ("BANW"), a wholly-owned
subsidiary of the Corporation, was merged with and into Bank of America.
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.
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>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
RATIO OF EARNINGS TO FIXED CHARGES
Excluding interest on deposits......................... 2.67 2.77 3.26 3.55 3.18
Including interest on deposits......................... 1.58 1.61 1.74 1.79 1.53
</TABLE>
S-10
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation and its subsidiaries as of December 31, 1996 and as adjusted to
give effect to the consummation of the offering of the Series 3 Capital
Securities. 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>
DECEMBER 31,
1996
-----------------
AS
ACTUAL ADJUSTED
------- --------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C>
Long-Term Debt:
Senior Debt
The Corporation............................................. $ 8,067 $ 8,067
Subsidiary obligations...................................... 741 741
------- -------
8,808 8,808
------- -------
Subordinated Debt
The Corporation............................................. 6,160 6,160
Subsidiary obligations...................................... 462 462
------- -------
6,622 6,622
------- -------
Total Long-Term Debt...................................... 15,430 15,430
------- -------
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 1,900
------- -------
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: 387,296,287 shares)........................ 605 605
Additional paid-in capital.................................. 8,467 8,467
Retained earnings........................................... 11,500 11,500
Net unrealized gain on available-for-sale securities........ 32 32
Common stock in treasury, at cost (32,029,392 shares)....... (2,133) (2,133)
------- -------
Total Common Stockholders' Equity......................... 18,471 18,471
------- -------
Total Capitalization of the Corporation(c)............... $37,998 $38,398
======= =======
</TABLE>
- --------
(a) Issuances of common and preferred stock of $350 million have been
dedicated to retire or redeem subordinated capital notes.
S-11
<PAGE>
(b) The Series 3 Capital Securities are issued by the Series 3 Issuer Trust.
The sole assets of the Series 3 Issuer Trust consist of $412,372,000
principal amount of Series 3 Subordinated Debentures issued by the
Corporation to the Series 3 Issuer Trust and the Expense Agreement. The
Series 3 Subordinated Debentures will bear interest at a floating rate and
will mature on January 15, 2027. The Corporation owns all of the Series 3
Common Securities of the Series 3 Issuer Trust.
$450,000,000 of 8.07% Capital Securities, Series A (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.
$300,000,000 of 7.7% Capital Securities, Series B (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 and a related expense reimbursement
agreement issued by the Corporation. 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.
$300,000,000 of 7 3/4% Trust Originated Preferred Securities, Series 1 (the
"Series 1 Securities") were 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.
$450,000,000 of the 8% Cumulative Semi-Annual Income Preferred Securities,
Series 2 (the "Series 2 Securities") were issued by BankAmerica Capital II
(the "Series 2 Trust"). The sole assets of the Series 2 Trust consist of
$463,918,000 principal amount of 8% Junior Subordinated Deferrable Interest
Debentures, Series 2 (the "Series 2 Debentures") issued by the Corporation
to the Series 2 Trust and a related expense reimbursement agreement issued
by the Corporation. The Series 2 Debentures bear interest at the rate of 8%
per annum and will mature on December 15, 2026. The Corporation owns all of
the Common Securities of the Series 2 Trust.
(c) Subsequent to December 31, 1996, the consolidated capitalization of the
Corporation and its 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 3 Issuer Trust will be treated
as a subsidiary of the Corporation and, accordingly, the accounts of the
Series 3 Issuer Trust will be included in the consolidated financial
statements of the Corporation. The Series 3 Capital 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 3 Capital Securities, the Series 3 Guarantee and the Series 3
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 3 Capital 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 3 CAPITAL SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series 3
Capital 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 3
Capital 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 3 Capital Securities represent beneficial interests in the Series
3 Issuer Trust, and Distributions on each Series 3 Capital Security will be
payable at a rate per annum reset quarterly equal to 3-month LIBOR (as defined
below) plus .57% (the "Distribution Rate") of the stated Liquidation Amount of
$1,000, payable quarterly in arrears on January 15, April 15, July 15 and
October 15 of each year (each a "Distribution Date"), to the holders of the
Series 3 Capital Securities at the close of business on the relevant record
dates. The record dates will be, for so long as the Series 3 Capital
Securities remain in book-entry form, one Business Day prior to the relevant
Distribution payment date and, in the event the Series 3 Capital Securities
are not in book-entry form,
S-13
<PAGE>
the 1st day of the month in which the relevant Distribution payment date
occurs. Distributions will accumulate from the date of original issuance. The
first Distribution payment date for the Series 3 Capital Securities will be
April 15, 1997. The "Distribution Period" with respect to a Series 3 Capital
Security is each successive period from and including a Distribution Date (or
January 22, 1997 in the case of the initial Distribution Period) to but
excluding the next Distribution Date or the Stated Maturity, as the case may
be; provided, however, if such Distribution Date would not be a Business Day,
then such Distribution Date and the first day of the next succeeding
Distribution Period will be the next succeeding Business Day, except that if
such Business Day is in the next succeeding calendar month, such Distribution
Date and the first day of the next succeeding Distribution Period will be the
immediately preceding Business Day. The "Determination Date" for a
Distribution Period is two London Banking Days (as defined below) preceding
the first day of such Distribution Period. See "Description of Preferred
Securities--Distributions" in the accompanying Prospectus.
The Distribution Rate on the Series 3 Capital Securities for any
Distribution Period will be effective as of the first day of such Distribution
Period. The Distribution Rate on the Series 3 Capital Securities for each
Distribution Period will be determined on the Determination Date for such
Distribution Period and will be a per annum rate equal to three-month U.S.
dollar LIBOR (determined as set forth below) plus .57%. Distributions will be
computed on the basis of a 360-day year and the actual number of days in the
applicable Distribution Period.
LIBOR, with respect to a Determination Date, will be the rate (expressed as
a percentage per annum) for deposits in U.S. dollars for a three-month period
commencing on the second London Banking Day immediately following that
Determination Date that appears on Telerate Page 3750 (as defined below) as of
11:00 a.m. (London time) on that Determination Date. If such rate does not
appear on Telerate Page 3750 on such Determination Date, LIBOR will be
determined on the basis of the rates at which deposits in U.S. dollars for a
three-month period commencing on the second London Banking Day immediately
following that Determination Date and in a principal amount equal to an amount
of not less than U.S. $1 million that is representative for a single
transaction in such market at such time, are offered to prime banks in the
London interbank market by four major banks in the London interbank market
selected by the Calculation Agent (as defined below), after consultation with
the Corporation, at approximately 11:00 a.m., London time, on that
Determination Date.
The Calculation Agent will request the principal London office of each of
such banks to provide a quotation of its rate. If at least two such quotations
are provided, LIBOR in respect of that Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are provided,
LIBOR in respect of that Determination Date will be the arithmetic mean of the
rates quoted by three major money center banks in The City of New York
selected by the Calculation Agent (after consultation with the Corporation) at
approximately 11:00 a.m., New York City time, on that Determination Date for
loans in U.S. dollars to leading European banks for a three-month period
commencing on the second London Banking Day immediately following that
Determination Date and in a principal amount equal to an amount of not less
than U.S. $1 million that is representative for a single transaction in such
market at such time; provided, however, that if the banks selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR for the applicable period will be the same as LIBOR as
determined on the previous Determination Date.
As used herein:
"Business Day" means any day which is not a Saturday or Sunday, or a day
on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or a day on which the
Corporate Trust Office of the Property Trustee or the Debenture Trustee is
closed for business.
"Calculation Agent" means Bankers Trust Company.
S-14
<PAGE>
"London Banking Day" means a day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service (or such other page as may replace Page 3750 on
that service or such other service or services as may be nominated by the
British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollars deposits).
All percentages resulting from any calculations on the Series 3 Capital
Securities will be rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point, with five one-millionths of a percentage
point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655%
(or .0987655)), and all dollar amounts used in or resulting from such
calculation will be rounded to the nearest cent (with one-half cent being
rounded upward).
The Calculation Agent will, upon the request of the holder of any Series 3
Capital Securities, provide the Distribution Rate then in effect. All
calculations made by the Calculation Agent in the absence of manifest error
shall be conclusive for all purposes and binding on the Corporation and the
holders of the Series 3 Capital Securities.
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 3
Subordinated Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarterly periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Series 3 Subordinated Debentures. As a consequence of any such
election, quarterly Distributions on the Series 3 Capital Securities will be
deferred by the Series 3 Issuer Trust during any such Extension Period.
Distributions to which holders of the Series 3 Capital Securities are entitled
will accumulate additional Distributions thereon at the then applicable
periodic Distribution Rate compounded quarterly from the relevant payment date
for such Distributions. 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 3
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 3 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 20 consecutive quarterly periods or extend beyond
the Stated Maturity of the Series 3 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 3 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 3
Subordinated Debentures.
S-15
<PAGE>
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series 3
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 3 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 3 Securities
(the "Redemption Price"), equal to the aggregate Liquidation Amount of such
Series 3 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 3 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 3
Subordinated Debentures, see "Certain Terms of Series 3 Subordinated
Debentures--General" and "--Redemption."
The Corporation has the right to redeem the Series 3 Subordinated Debentures
(i) on or after January 15, 2002, in whole at any time or in part from time to
time, or (ii) in whole (but not in part) prior to January 15, 2002 and within
90 days following the occurrence of a Tax Event or Capital Treatment Event
(each as defined below) in each case at a redemption price equal to the
accrued and unpaid interest on the Series 3 Subordinated Debentures so
redeemed to but excluding the date fixed for redemption, plus 100% of the
principal amount thereof. A redemption of the Series 3 Subordinated Debentures
would cause a mandatory redemption of the Series 3 Capital Securities and
Series 3 Common Securities.
"Like Amount" means (i) with respect to a redemption of Series 3 Securities,
Series 3 Securities having a Liquidation Amount (as defined below) equal to
that portion of the principal amount of Series 3 Subordinated Debentures to be
contemporaneously redeemed in accordance with the Junior Subordinated
Indenture, allocated to the Series 3 Common Securities and to the Series 3
Capital 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 3 Securities and (ii) with respect to a distribution of Series 3
Subordinated Debentures to holders of Series 3 Securities in connection with a
dissolution or liquidation of the Series 3 Issuer Trust, Series 3 Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Series 3 Securities of the holder to whom such Series 3 Subordinated
Debentures are distributed.
"Liquidation Amount" means the stated amount of $1,000 per Series 3
Security.
"Tax Event" means the receipt by the Series 3 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 3 Capital Securities under the Trust
Agreement, there is more than an insubstantial risk that (i) the Series 3
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 3 Subordinated Debentures, (ii) interest payable by the
Corporation on the Series 3 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 3 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
S-16
<PAGE>
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 3 Capital 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 3 Capital 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 3 ISSUER TRUST AND DISTRIBUTION OF SERIES 3 SUBORDINATED
DEBENTURES TO HOLDERS
The Corporation will have the right at any time to terminate the Series 3
Issuer Trust and cause the Series 3 Subordinated Debentures to be distributed
to the holders of the Series 3 Securities in liquidation of the Series 3
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 3 Capital 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 3 Issuer Trust is treated as a grantor
trust, a distribution of the Series 3 Subordinated Debentures should not be a
taxable event to holders of the Series 3 Capital Securities.
LIQUIDATION VALUE
The amount payable on the Series 3 Capital Securities in the event of any
liquidation of the Series 3 Issuer Trust is $1,000 per Series 3 Capital
Security plus accumulated and unpaid Distributions, which may be in the form
of a distribution of such amount in Series 3 Subordinated Debentures, subject
to certain exceptions. See "Description of Preferred Securities--Liquidation
Distribution Upon Termination" in the accompanying Prospectus.
REGISTRATION OF SERIES 3 CAPITAL SECURITIES
The Series 3 Capital Securities will be represented by global certificates
registered in the name of DTC or its nominee. Beneficial interests in the
Series 3 Capital 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 3 Capital
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 3 Capital 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 3 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 3 Capital Securities are issued in definitive form, such Series 3
Capital Securities will be in denominations of $1,000 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
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Payments on Series 3 Capital Securities represented by a global security
will be made to DTC, as the depository for the Series 3 Capital Securities. In
the event Series 3 Capital Securities are issued in definitive form, the
Redemption Price and Distributions will be payable, the transfer of the Series
3 Capital Securities will be registrable, and Series 3 Capital Securities will
be exchangeable for Series 3 Capital Securities of other denominations of a
like aggregate Liquidation 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 3 Capital 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 3 SUBORDINATED DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Series 3
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 3
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.
Concurrently with the issuance of the Series 3 Capital Securities, the
Series 3 Issuer Trust will invest the proceeds thereof, together with the
consideration paid by the Corporation for the Series 3 Common Securities, in
the Series 3 Subordinated Debentures issued by the Corporation. The Series 3
Subordinated Debentures will bear interest at the rate per annum reset
quarterly equal to three-month U.S. dollar LIBOR (as described under "Certain
Terms of Series 3 Capital Securities--Distribution") plus .57% (the "Interest
Rate") of the principal amount thereof, payable quarterly in arrears on
January 15, April 15, July 15 and October 15 of each year (each, an "Interest
Payment Date"), commencing April 15, 1997, to the person in whose name each
Series 3 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 3 Issuer Trust, each Series 3 Subordinated Debenture will be held by
the Property Trustee in trust for the benefit of the holders of the Series 3
Securities. 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 Interest Rate, compounded quarterly. The term
"interest" as used herein shall include quarterly interest payments, interest
on quarterly interest payments not paid on the applicable Interest Payment
Date and Additional Sums (as defined below), as applicable.
The Interest Rate, the Interest Period and the Interest Payment Dates and
amount of interest payable will be calculated or determined in the same manner
as the Distribution Rate, Distribution Period, Distribution Dates and amount
of Distributions payable, respectively, as described under "Certain Terms of
Series 3 Capital Securities--Distribution"). The Calculation Agent will also
be Bankers Trust Company.
The Series 3 Subordinated Debentures will be issued as a series of junior
subordinated debentures under the Junior Subordinated Indenture. The Series 3
Subordinated Debentures will mature on January 15, 2027.
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The Series 3 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 and BAI, upon such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of holders of the Series 3
Capital 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 3 Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and holders of Series 3 Subordinated Debentures should look only
to the assets of the Corporation for payments on the Series 3 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 3
Subordinated Debentures to defer the payment of interest at any time or from
time to time for a period not exceeding 20 consecutive quarterly periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity of the Series 3 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 applicable periodic Interest
Rate, compounded quarterly). During an Extension Period, interest will
continue to accrue and holders of Series 3 Subordinated Debentures (or holders
of Series 3 Capital 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 3 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 3 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 20 consecutive quarterly periods
or extend beyond the Stated Maturity of the Series 3 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
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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 3
Capital 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 any applicable self-regulatory organization or to
holders of such Series 3 Capital 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 3 Capital 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 3
Issuer Trust is the holder of all of the Series 3 Subordinated Debentures, the
Corporation will pay Additional Sums, if any (as defined below), on the Series
3 Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions paid by the Series 3 Issuer Trust on the
outstanding Series 3 Capital Securities and Series 3 Common Securities of the
Series 3 Issuer Trust shall not be reduced as a result of any additional
taxes, duties and other governmental charges to which the Series 3 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 3 Subordinated Debentures are redeemable prior
to maturity at the option of the Corporation (i) on or after January 15, 2002,
in whole at any time or in part from time to time, or (ii) in whole (but not
in part) prior to January 15, 2002 and within 90 days following the occurrence
of a Tax Event or Capital Treatment Event (each as defined under "Certain
Terms of Series 3 Capital Securities"), in each case at a redemption price
equal to the accrued and unpaid interest on the Series 3 Subordinated
Debentures so redeemed to but excluding the date fixed for redemption, plus
100% of the principal amount thereof. The proceeds of any such redemption will
be used by the Series 3 Issuer Trust to redeem the Series 3 Securities. See
"Description of Junior Subordinated Debentures--Redemption" in the
accompanying Prospectus.
DISTRIBUTION OF SERIES 3 SUBORDINATED DEBENTURES
As described under "Certain Terms of Series 3 Capital Securities--
Liquidation of Series 3 Issuer Trust and Distribution of Series 3 Subordinated
Debentures to Holders," under certain circumstances involving the termination
of the Series 3 Issuer Trust, Series 3 Subordinated Debentures may be
distributed to the holders of the Series 3 Securities in liquidation of the
Series 3 Issuer Trust after satisfaction of liabilities to creditors of the
Series 3 Issuer Trust as provided by applicable law. If distributed to holders
of Series 3 Securities in liquidation, the Series 3 Subordinated Debentures
will initially be issued in the form of one or more global securities and DTC,
or any successor depository for the Series 3 Capital Securities, will act as
depository for the Series 3 Subordinated Debentures. It is anticipated that
the depository arrangements for the Series 3 Subordinated Debentures would be
substantially identical to those in effect for the Series 3 Capital
Securities. There can be no assurance as to the market price of any Series 3
Subordinated Debentures that may be distributed to the holders of Series 3
Capital 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 3 Capital
Securities. This summary only addresses the tax consequences to a person that
acquires Series 3 Capital 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 3 Capital 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 3 Capital 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 3 Capital
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 3 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 3 Capital Securities. In particular,
legislation has been proposed that could adversely affect the Corporation's
ability to deduct interest on the Series 3 Subordinated Debentures, which may
in turn permit the Corporation to cause a redemption of the Series 3 Capital
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 3 Capital 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 3 CAPITAL SECURITIES, AS
WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE SERIES 3 ISSUER TRUST
In connection with the issuance of the Series 3 Capital 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 3 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 3 Capital
Securities (a "Securityholder") will be treated as owning an undivided
beneficial interest in the Series 3 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 3
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 3 Capital 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. 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 3 Subordinated
Debentures to defer payments of interest by extending the interest payment
period for a period not exceeding 20 consecutive quarterly periods with
respect to each Extension Period. Unless the likelihood of exercise of such
right to defer is remote, the Series 3 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 3 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 3 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 3
Subordinated Debentures remote. Accordingly, the Corporation believes that the
stated interest on the Series 3 Subordinated Debentures should be considered
unconditionally payable for purposes of the OID provisions of the Code and
that the Series 3 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 3 Subordinated Debentures will be considered to
be retired and reissued for their adjusted issue price at such time, and the
Series 3 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 quarterly period will
approximately equal the amount of the interest that accrues in that quarterly
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 3 Capital Securities during an Extension Period may suffer a loss
because the market value of the Series 3 Capital Securities likely will fall
if the Corporation exercises its option to defer payments of interest on the
Series 3 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 3 SUBORDINATED DEBENTURES TO HOLDERS OF SERIES 3
CAPITAL SECURITIES
Under current law, a distribution by the Series 3 Issuer Trust of the Series
3 Subordinated Debentures, as described under the caption "Certain Terms of
Series 3 Capital Securities-- Liquidation of Series 3 Issuer Trust and
Distribution of Series 3 Subordinated Debentures to Holders," will be non-
taxable and will result in the Securityholder receiving directly his pro rata
share of the Series 3 Subordinated Debentures previously held indirectly
through the Series 3 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 3 Capital Securities before such distribution.
SALES OR REDEMPTION OF SERIES 3 CAPITAL SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Series 3
Capital 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 3 Capital Securities sold or so redeemed. A
Securityholder's adjusted tax basis in the Series 3 Capital 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 3 Capital 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 3
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 3 Capital
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 3 Capital 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 3 Capital Securities will be
reported to holders on Form 1099 and mailed to holders of the Series 3 Capital
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
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consolidated balance sheet. 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 3 Subordinated
Debentures, the Corporation would be unable to deduct interest on the Series 3
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 3 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 3 Subordinated Debentures. Such a change could give
rise to a Tax Event, which may permit the Corporation to cause a redemption of
the Series 3 Capital 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 3 Capital 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 3 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 3 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 3 Issuer Trust would not be deemed to be "plan assets" of
investing Plans if the Series 3 Capital 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) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). It is
expected that the Series 3 Capital Securities will meet the criteria for
qualification as "publicly-offered securities" listed above. The Underwriters
expect that the Series 3 Capital Securities will be held by at least 100
independent investors at the conclusion of this offering; there are no
restrictions imposed on the
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transfer of the Series 3 Capital Securities; and the Series 3 Capital
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 3 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 3 Capital Securities
were acquired with "plan assets" of such Plan and assets of the Series 3
Issuer Trust were deemed to be "plan assets" of Plans investing in the Series
3 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 and other subsidiaries), extensions of credit between the
Corporation and the Series 3 Issuer Trust (as represented by the Series 3
Subordinated Debentures and the Series 3 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 3 Capital
Securities, even if assets of the Series 3 Issuer Trust were deemed to be
"plan assets" of Plans investing in the Series 3 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 3 Capital
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 3 Capital 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 3 Capital Securities.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Corporation and the Series 3 Issuer Trust have agreed that the Series 3
Issuer Trust will sell to Merrill Lynch, Pierce, Fenner & Smith Incorporated,
BancAmerica Securities, Inc., Chase Securities Inc., Citicorp Securities,
Inc., J.P. Morgan Securities Inc., HSBC Securities, Inc., PaineWebber
Incorporated, Prudential Securities Incorporated and SBC Warburg Inc. (the
"Underwriters"), and the Underwriters have agreed to purchase from the Series
3 Issuer Trust, at a price of $999.00 per Series 3 Capital Security the
respective number of Series 3 Capital Securities set forth opposite their
names below. In the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
the Series 3 Capital Securities offered hereby if any of the Series 3 Capital
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 3
CAPITAL
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................... 100,000
BancAmerica Securities, Inc. .................................. 50,000
Chase Securities Inc. ......................................... 50,000
Citicorp Securities, Inc. ..................................... 50,000
J.P. Morgan Securities Inc. ................................... 50,000
HSBC Securities, Inc. ......................................... 25,000
PaineWebber Incorporated....................................... 25,000
Prudential Securities Incorporated............................. 25,000
SBC Warburg Inc. .............................................. 25,000
-------
Total..................................................... 400,000
=======
</TABLE>
In view of the fact that the proceeds from the sale of the Series 3 Capital
Securities will be used to purchase the Series 3 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 $10.00 per
Series 3 Capital Security for the accounts of the several Underwriters.
The Underwriters propose initially to offer the Series 3 Capital Securities
to the public at the public offering price set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a concession
not in excess of $6.00 per Series 3 Capital Security. The Underwriters may
allow, and such dealers may reallow, a discount not in excess of $3.00 per
Series 3 Capital Security to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
Prior to this offering, there has been no public market for the Series 3
Capital Securities. The Underwriters have advised the Corporation that they
intend to make a market in the Series 3 Capital 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 3 Capital Securities.
The Corporation and the Series 3 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").
S-26
<PAGE>
Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the Series 3 Capital 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 Series 3
Capital 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.
BancAmerica Securities, Inc. ("BASI") is a wholly-owned subsidiary of the
Corporation and an affiliate of the Series 3 Issuer Trust. Accordingly, any
offer and sale of the Series 3 Capital 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 3
Capital Securities will execute a transaction in the Series 3 Capital
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 3 Capital 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 banking, 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 3
Capital Securities, the enforceability of the Trust Agreement and the creation
of the Series 3 Issuer Trust will be passed upon by Richards, Layton & Finger,
special Delaware Counsel to the Corporation and the Series 3 Issuer Trust. The
validity of the Series 3 Guarantee and the Series 3 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-27
<PAGE>
================================================================================
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 III................................................... 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 3 Capital Securities.............................. S-13
Certain Terms of Series 3 Subordinated Debentures......................... S-18
Certain Federal Income Tax Consequences................................... S-21
Certain ERISA Considerations.............................................. S-24
Underwriting.............................................................. S-26
Validity of Securities.................................................... S-27
<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>
================================================================================
================================================================================
$400,000,000
BANKAMERICA CAPITAL III
FLOATING RATE
CAPITAL SECURITIES,
SERIES 3
FULLY AND UNCONDITIONALLY GUARANTEED,
TO THE EXTENT DESCRIBED HEREIN, BY
LOGO
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
MERRILL LYNCH & CO.
BANCAMERICA SECURITIES, INC.
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
J.P. MORGAN & CO.
HSBC SECURITIES, INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SBC WARBURG
JANUARY 15, 1997
================================================================================
LOGO
